Document:

exhibit4-1.htm

    EXHIBIT 4.1 

     

    

    

     

     

    CREDIT AGREEMENT

     

    DATED AS OF JANUARY 20,
2010

     

    AMONG 

     

    SHOE CARNIVAL, INC.,

    AS BORROWER, 

     

    THE FINANCIAL INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS

    “BANKS,” 

     

    AND 

     

    WACHOVIA BANK, NATIONAL
ASSOCIATION,

    AS AGENT 

     

     

     

    

    

    

    
    

    
Table of
Contents 

     

    
    

     

    
      	ARTICLE 1 - DEFINITIONS	1
	         	SECTION 1.1	       	Definitions	1
	
            	SECTION 1.2	
            	Accounting Terms and
      Determinations	11
	
            	SECTION 1.3	
            	Terms Generally	12
	ARTICLE 2 - THE
      CREDITS SECTION	 12
	
            	SECTION 2.1	
            	Loans and Letters of Credit	12
	
            	SECTION 2.2	
            	Method of Borrowing	12
	
            	SECTION 2.3	
            	Notes	16
	
            	SECTION 2.4	
            	Duration of Interest Periods and
      Selection of Interest Rates	16
	
            	SECTION 2.5	
            	Interest Rates	17
	
            	SECTION 2.6	
            	Unused Fee	18
	
            	SECTION 2.7	
            	Termination or Reduction of Commitment	18
	
            	SECTION 2.8	
            	Voluntary and Mandatory Payments Prior
      to Maturity	19
	
            	SECTION 2.9	
            	General Provisions as to Payments	19
	
            	SECTION 2.10	
            	Funding Losses	20
	
            	SECTION 2.11	
            	Computation of Interest and Fees	20
	
            	SECTION 2.12	
            	Accordion Feature	21
	
            	SECTION 2.13	
            	Letters of Credit	21
	
            	SECTION 2.14	
            	Erroneous Information	24
	ARTICLE 3 - CONDITIONS TO BORROWINGS	24
	
            	SECTION 3.1	
            	All Extensions of Credit	24
	
            	SECTION 3.2	
            	First Extension of Credit	25
	ARTICLE 4 - REPRESENTATIONS AND WARRANTIES	27
	
            	SECTION 4.1	
            	Representations and Warranties	27
	ARTICLE 5 - COVENANTS	32
	
            	SECTION 5.1	
            	Covenants of Borrower	32
	
            	SECTION 5.2	
            	Negative Covenants of Borrower	38
	
            	SECTION 5.3	
            	Use of Proceeds	42
	
            	SECTION 5.4	
            	Certain Provisions Relating to Existing
      Letters of Credit	43
	ARTICLE 6 - DEFAULTS	43
	
            	SECTION 6.1	
            	Events of Default	43
	
            	SECTION 6.2	
            	Remedies	45
	
            	SECTION 6.3	
            	Post-Default Allocation of
      Payments	45
	ARTICLE 7 - CHANGE IN CIRCUMSTANCES AFFECTING LIBOR
      LOANS	46
	
            	SECTION 7.1	
            	Basis for Determining Interest Rate
      Inadequate or Unfair	46
	
            	SECTION 7.2	
            	Illegality	47
	
            	SECTION 7.3	
            	Increased Cost	47
	
            	SECTION 7.4	
            	Prime Loans Substituted for Affected LIBOR Loans	48
	ARTICLE 8 - THE AGENT	48
	
            	SECTION 8.1	
            	Appointment, Authority, and Duties of Agent;
Professionals	48

    

    

    
    

    
      	         	SECTION 8.2	       	Agreements Regarding Certain Reports,
      Etc.	49
	
            	SECTION 8.3	
            	Reliance By Agent	49
	
            	SECTION 8.4	 	Action Upon Default	50
	 	SECTION 8.5	
            	Indemnification of Agent Indemnitees	50
	
            	SECTION 8.6	
            	Limitation on Responsibilities of
      Agent	50
	
            	SECTION 8.7	
            	Successor Agent and Co-Agents	51
	
            	SECTION 8.8	
            	Due Diligence and Non-Reliance	51
	
            	SECTION 8.9	
            	Remittance of Payments	52
	
            	SECTION 8.10	
            	Agent in its Individual
    Capacity	52
	
            	SECTION 8.11	
            	No Third Party Beneficiaries	53
	ARTICLE 9 - MISCELLANEOUS	53
	
            	SECTION 9.1	
            	Notices; Electronic Communications	53
	
            	SECTION 9.2	
            	No Waivers	54
	
            	SECTION 9.3	
            	Expenses; Documentary Taxes	55
	
            	SECTION 9.4	
            	Environmental Indemnity	55
	
            	SECTION 9.5	
            	General Indemnity	55
	
            	SECTION 9.6	
            	Participations	56
	
            	SECTION 9.7	
            	Assignments	56
	
            	SECTION 9.8	
            	Right of Setoff	57
	
            	SECTION 9.9	
            	Amendments and Waivers	57
	
            	SECTION 9.10	
            	Successors and Assigns	58
	
            	SECTION 9.11	
            	Severability	58
	
            	SECTION 9.12	
            	Replacement of Defaulting Bank	58
	
            	SECTION 9.13	
            	Authority to Act	59
	
            	SECTION 9.14	
            	Banks’ Books and Records	59
	
            	SECTION 9.15	
            	GOVERNING LAW; CHOICE OF FORUM; WAIVER OF JURY TRIAL	59
	
            	SECTION 9.16	
            	Resurrection of Obligations	59
	
            	SECTION 9.17	
            	Counterparts; Fax or other Transmission; Section References;
      Effectiveness	60

    

    ii 

     

    

    
    

    
      	SCHEDULES:
	 
	Schedule 2.13	        	Existing Letters of Credit
	Schedule 4.1(e)	
            	Litigation
	Schedule 4.1(f)	
            	ERISA
	Schedule 4.1(j)	 	Subsidiaries
	Schedule 4.1(l)	
            	Existing Debt
	Schedule 4.1(r)	
            	Environmental Matters
	Schedule 5.2(b)(ii)	
            	Liens
	 
	 
	EXHIBITS:
	 
	Exhibit A:	
            	Form of Promissory Note
	Exhibit B:	
            	Form of Swingline Note
	Exhibit C:	
            	Form of Notice of Borrowing
	Exhibit D:	
            	Compliance Certificate
	Exhibit E:	
            	Borrowing Base Certificate
	Exhibit F:	
            	Assignment Agreement

    

    iii 

     

    

    
    

    CREDIT AGREEMENT 

     

         This CREDIT AGREEMENT (the “Agreement”) is
made and entered into as of January 20, 2010, by and among SHOE CARNIVAL, INC.,
an Indiana corporation (“Borrower”), the financial institutions from time to
time party hereto (collectively, the “Banks” and each, a “Bank”), and WACHOVIA
BANK, NATIONAL ASSOCIATION, a national banking association, as agent for the
Banks (together with its successors and assigns in such capacity, “Agent”).

     

         The parties hereto agree as follows:

     

    ARTICLE 1 -
DEFINITIONS 

     

         SECTION 1.1 Definitions. The following terms, as used herein, have
the following meanings: 

     

         “Agent” shall have the meaning
ascribed thereto in the preamble to this Agreement. 

     

         “Agent Indemnitees” shall mean Agent and its
officers, directors, employees, affiliates, agents, consultants, and attorneys.

     

         “Agent Professionals” shall mean attorneys,
accountants, appraisers, auditors, business valuation experts, environmental
engineers or consultants, turnaround consultants, and other professionals and
experts retained by Agent. 

     

         “Anti-Terrorism Laws” shall mean any
applicable laws relating to terrorism or money laundering, including Executive
Order No. 13224 and the USA Patriot Act. 

     

         “Attorneys’ Fees” shall mean (a) the
reasonable value of the services (and costs, charges and expenses related
thereto) of the attorneys (and all paralegals, accountants and other staff
employed by such attorneys) employed by Agent (including, without limitation,
attorneys and paralegals who are employees of Agent or are employees of any
affiliate of Agent) from time to time in connection with the negotiation,
preparation, execution, workout, restructuring, and/or administration of this
Agreement and/or any of the other Loan Documents and (b) the reasonable value of
the services (and costs, charges and expenses related thereto) of the attorneys
(and all paralegals, accountants and other staff employed by such attorneys)
employed by Agent or any Bank (including, without limitation, attorneys and
paralegals who are employees of Agent or any Bank or are employees of any
affiliate of Agent or any Bank) (i) in connection with the preparation,
negotiation or execution of any amendment, modification, extension, renewal
and/or restatement of, and/or any waiver or consent with respect to, this
Agreement or any of the other Loan Documents, (ii) in connection with the
enforcement of this Agreement and/or any of the other Loan Documents, (iii) in
connection with any Default or Event of Default under this Agreement, (iv) to
represent Agent or any Bank in any litigation, contest, dispute, suit or
proceeding, or to commence, defend or intervene in any litigation, contest,
dispute, suit or proceeding, or to file any petition, complaint, answer, motion
or other pleading or to take any other action in or with respect to any
litigation, contest, dispute, suit or proceeding (whether instituted by Agent,
any Bank, Borrower or any other Person and whether in bankruptcy or otherwise)
in any way or respect relating to this Agreement or any of the other Loan
Documents, Borrower, any other Obligor or any Subsidiary (but excluding any such
fees, costs, charges and/or expenses incurred with respect to a dispute between
Agent and any one or more Banks or with respect to disputes between one or more
Banks), and/or (v) to enforce any of the rights and/or remedies of Agent or any
Banks to collect any of the Obligations; provided, that all such Attorneys’ Fees shall be
determined on the basis of rates then generally applicable to the attorneys (and
all paralegals, accountants and other staff employed by such attorneys) employed
by Agent or Banks, which may be higher than the rates such attorneys (and all
paralegals, accountants and other staff employed by such attorneys) charge Agent
or Banks in certain matters.

     

    

    
    

         “Banks” shall have the meaning ascribed
thereto in the preamble to this Agreement and shall include, where appropriate,
Agent in making Swingline Loans. 

     

         “Bank Product Provider” means Agent or any
Bank, together with any of their respective Affiliates. 

     

         “Bank Products” means all bank, banking,
financial, and other similar or related products, services, and facilities
offered or provided by any Bank Product Provider to Borrower or any Subsidiary,
including (a) merchant card services, credit or stored value cards, and
corporate purchasing cards; (b) cash management, treasury, and related products
and services, including depository and checking services, deposit accounts
(whether operating, money market, investment, collections, payroll, trust,
disbursement, or other deposit accounts), automated clearinghouse (“ACH”)
transfers of funds and any other ACH services, remote deposit capture,
lockboxes, account reconciliation and information reporting, controlled
disbursements, wire and other electronic funds transfers, e-payable, overdraft
protection, and stop payment services; and (c) securities and commodities
accounts, bankers’ acceptances, drafts, letters of credit (and the issuance,
amendment, renewal, or extension thereof), documentary services, foreign
currency exchange services; and (d) Hedging Agreements.

     

         “Bank Product Obligations” means Debt and
other obligations and liabilities of Borrower or any Subsidiary arising from
Bank Products. 

     

         “Borrower” shall mean Shoe Carnival, Inc., an
Indiana corporation, and its successors and assigns. 

     

         “Borrowing” shall mean a borrowing hereunder
consisting of Loans of the same interest rate and, if applicable, Interest
Period made to Borrower pursuant to the terms hereof. 

     

         “Borrowing Base” shall mean, at any time of
determination, an amount equal to 50% of the value (determined at the lower of
cost, excluding any capitalized overhead cost allocated to any such inventory,
or market) of Eligible Inventory. Absent manifest error, the Borrowing Base at
any time shall be the Borrowing Base shown in the most recently delivered
Borrowing Base Certificate and such Borrowing Base shall be and remain the
Borrowing Base until the next Borrowing Base Certificate is required to be
delivered to Agent, at which time the Borrowing Base shall be the amount shown
in such subsequent Borrowing Base Certificate. 

     

         “Borrowing Base Certificate” shall have the
meaning given such term in Section 5.1(a)(iv).

     

    2 

     

    

    
    

         “Capital Expenditure” shall mean any
expenditure which, in accordance with generally accepted accounting principles
consistently applied, is or should be capitalized on the balance sheet of the
Person making the same. 

     

         “Capitalized Lease” shall mean any lease
which, in accordance with generally accepted accounting principles consistently
applied, is or should be capitalized on the balance sheet of the lessee.

     

         “Change of Control” shall mean the
occurrence of either of the following circumstances: (a) any “Person” or “Group”
(within the meaning of Sections 13(d) and 14(d) under the Securities Exchange
Act of 1934) is or shall (i) be the “beneficial owner” (as so defined in Rules
13(d)-3 and 13(d)-5 under the Exchange Act) of more than 50% (determined on a
fully diluted basis) of the voting interest in Borrower’s Equity Interests or
(ii) have obtained the power (whether or not exercised) to elect a majority of
Borrower's directors; or (b) Borrower’s board of directors shall cease to
consist of a majority of (i) directors who were directors on the Effective Date
and (ii) directors whose nomination to become a director was recommended by a
majority of the board of directors. 

     

         “Code” shall mean the Internal Revenue Code of
1986, as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed to also refer to any successor
sections. 

     

         “Commitment” shall mean, with respect to each
Bank, the obligation of such Bank to make Loans to Borrower and to participate
in Swingline Loans and Letters of Credit in an aggregate principal amount not
exceeding the amount set forth with respect to such Bank on the signature pages
to this Agreement, or, in the case of a Person becoming a Bank after the
Effective Date, the amount of the assigned or accepted “Commitment” as provided
in the assignment and acceptance or similar agreement executed by such Person as
an assignee or in acceptance of such Commitment. The term “Commitments” shall
mean, at any time of determination, the aggregate Commitment of all Banks. As of
the date hereof, the Commitments equal $50,000,000. 

     

         “Compliance Certificate” shall have
the meaning given such term in Section 5.1(a)(iii).

     

         “Contractual Obligation” of any Person shall
mean any provision of any security issued by such Person or of any agreement,
instrument or undertaking under which such Person is obligated or by which it or
any of the property owned by it is bound. 

     

         “Debt” of any Person shall mean at any date,
without duplication, to the extent obligations and liabilities of such type are
required to be disclosed in such Person’s financial statements according to
generally accepted accounting principles, consistently applied, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services (other than accounts payable in the ordinary course of business on
customary terms), (d) all obligations of such Person as lessee under leases
capitalized or required to be capitalized in accordance with generally accepted
accounting principles, consistently applied, but excluding any obligations as
lessee under any operating leases, (e) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person
(provided that for purposes of this clause (e) the amount of any such Debt shall
be deemed not to exceed the higher of the market value or the net book value of
such asset), (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance, or otherwise),
letters of credit, bankers’ acceptances, drafts or similar documents or
instruments issued for such Person’s account, and (g) all other obligations and
liabilities required to be disclosed on such Person’s financial statements
according to generally accepted accounting principles, consistently
applied.

     

    3 

     

    

    
    

         “Default” shall mean any condition or event
which constitutes an Event of Default or which with the giving of notice or
lapse of time or both would, unless cured or waived, become an Event of
Default.

     

         “Default Rate” has the meaning given
such term in Section 2.5(d).

     

         “Distribution” shall mean, in
respect of any Person:

     

         (a) Dividends or other
distributions on account of any Equity Interests issued by such Person;
and

     

         (b) The redemption,
repurchase, or other acquisition of such Equity Interests or of warrants, rights
or other options to purchase such Equity Interests (except when solely in
exchange for such Equity Interests with the same or lower priority).

     

         “Domestic Business Day” shall mean any day
except a Saturday, Sunday or legal holiday observed by Agent or any Bank.

     

         “EBITDA” shall have the meaning
given such term in Section 5.1(e).

     

         “Effective Date” shall mean the date on which
this Agreement shall become effective in accordance with Section 9.17.

     

         “Eligible Inventory” shall mean that portion
of Borrower’s inventory which (a) consists of finished goods less than one year
old; (b) does not violate the negative covenants and provisions of this
Agreement and does satisfy the affirmative covenants and provisions of this
Agreement; (c) is not obsolete; and (d) Agent has in good faith determined, in
accordance with Agent’s customary business practices, is not unacceptable due to
age, type, category, or quantity.

     

         “Environmental Laws” shall mean the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called “Superfund” or “Superlien” law,
the Toxic Substances Act and any other Federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Materials or
any other hazardous, toxic or dangerous waste, substance or constituent or other
substance, whether solid, liquid or gas, as now or at any time hereafter in
effect.

     

    4

     

    

    
    

         “Environmental Lien” shall have the
meaning ascribed thereto in Section 5.1(i)(vii).

     

         “Equity Interest” means the interest of any
(a) shareholder in a corporation; (b) partner in a partnership (whether general,
limited, limited liability, or joint venture); (c) member in a limited liability
company; or (d) other Person having any other form of equity security or
ownership interest in any other Person.

     

         “ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended, and any successor statute of similar
import, together with the regulations thereunder, in each case as in effect from
time to time. References to sections of ERISA shall be construed to also refer
to any successor sections.

     

         “ERISA Affiliate” shall mean any Person
(including, without limitation, any corporation, trade, or business) that is,
along with Borrower, a member of a controlled group of corporations or a
controlled group of trades or businesses or an affiliated service group, as
described in Sections 414(b), 414(c), 414(m), and 414(o) of the Code.

     

         “Eurocurrency Business Day” means any Domestic
Business Day on which commercial banks are open for international business in
London. 

     

         “Event of Default” shall have the
meaning ascribed thereto in Section 6.1. 

     

         “Executive Officer” shall mean, with respect
to any Person, the Chief Executive Officer, President, Secretary, Chief
Financial Officer, Executive Vice President, Treasurer, any Assistant Treasurer,
and any other individual holding comparable offices or duties. 

     

         “Existing Letters of Credit” shall mean each
of the letters of credit listed on Schedule 2.13 attached hereto. 

     

         “Federal Funds Rate” shall mean, for any
period, a fluctuating interest rate per annum equal, for each day during such
period, to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Domestic
Business Day, for the next preceding Domestic Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Domestic Business Day, the average of the quotations at approximately 12:00
p.m. for such day on such transactions received by Agent from three Federal
Funds brokers of recognized standing selected by it in its discretion.

     

         “Fee Letter” shall have the meaning
ascribed thereto in Section 3.2(f).

     

         “Funded Debt” means, with respect to any
Person and without duplication, its (a) Debt arising from the lending of money
by another Person to such Person (regardless of whether the same is with or
without recourse to the credit of such Person); (b) Debt evidenced by notes,
drafts, bonds, debentures, credit documents, or similar instruments; (c) Debt
which accrues interest or is of a type upon which interest or finance charges
are customarily paid (excluding trade payables owing in the ordinary course of
business); (c) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty; (d) all
obligations, contingent or otherwise, of such Person in respect of bankers’
acceptances; (e) the amount owing under any Hedging Agreements; (f) all
mandatory obligations of such Person to purchase, redeem, retire, defease, or
otherwise make any payment in respect of any capital stock of such Person; (g)
Debt which was issued or assumed as full or partial payment for real or personal
property or services; (h) the principal and interest portions of all rental
obligations of such Person under any synthetic lease, tax retention operating
lease, off-balance sheet loan, or similar off-balance sheet financing where such
transaction is considered Debt for borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP; and (i) Guarantees by
such Person of any Debt of the foregoing types owing by another
Person.

     

    5 

     

    

    
    

         “Guarantee” by any Person shall mean any
obligation, contingent or otherwise, of such Person guaranteeing any Debt of any
other Person or in any manner providing for the payment of any Debt of any other
Person or otherwise protecting the holder of such Debt against loss (whether by
agreement to keep-well, to purchase assets, goods, securities or services, or to
take-or-pay or otherwise); provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term “Guarantee” used as a verb has a correlative meaning. 

     

         “Guarantor” shall mean each Subsidiary of
Borrower that from time to time executes a Subsidiary Guaranty Agreement (or
joinder thereto) and each other Person that at any time executes a guaranty
agreement in favor of Agent (on behalf of Banks) to Guarantee the obligations of
Borrower hereunder. 

     

         “Hazardous Materials” shall mean any
hazardous, toxic, or dangerous waste, substance, or material, the generation,
handling, storage, disposal, treatment, or omission of which is subject to any
Environmental Law. 

     

         “Hedging Agreement” has the meaning for swap
agreement as defined in 11 U.S.C. § 101, as in effect from time to time, or any
successor statute, and includes, without limitation, any rate swap agreement,
forward rate agreement, commodity swap, commodity option, interest rate option,
forward foreign exchange agreement, spot foreign exchange agreement, rate cap
agreement, rate floor agreement, rate collar agreement, currency swap agreement,
cross-currency rate swap agreement, currency option and any other similar
agreement, in each case, as the same may be amended, restated, supplemented, or
otherwise modified from time to time.

     

         “Insolvency Proceeding” shall mean any case or
proceeding commenced by or against a Person under any state, federal, or foreign
law for, or any agreement of such Person to, (a) the entry of an order for
relief under Title 11 of the United States Code, or any other insolvency, debtor
relief or debt adjustment law; (b) the appointment of a receiver, trustee,
liquidator, administrator, conservator, or other custodian for such Person or
any part of its Property; or (c) an assignment or trust mortgage for the benefit
of creditors. 

     

         “Interest Differential” shall mean that sum
equal to the greater of zero (0) or the financial loss incurred by a Bank
resulting from prepayment, calculated as the difference between the amount of
interest such Bank would have earned (from like investments in the Money Markets
as of the first day of the applicable LIBOR Loan(s)) had prepayment not occurred
and the interest such Bank will actually earn (from like investments in the
Money Markets as of the date of prepayment) as a result of the redeployment of
funds from the prepayment.” 

     

    6 

     

    

    
    

         “Interest Period” shall mean, with respect to
any LIBOR Loan, the period commencing on the advance date of the applicable
LIBOR Loan and ending on the numerically corresponding day l, 2, 3 or 6 months
thereafter matching the interest rate term selected by Borrower; provided, however, (i) if any Interest Period would otherwise
end on a day which is not a Eurodollar Business Day, then the Interest Period
shall end on the next succeeding Eurodollar Business Day unless the next
succeeding Eurodollar Business Day falls in another calendar month, in which
case the Interest Period shall end on the immediately preceding Eurodollar
Business Day; or (ii) if any Interest Period begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of the Interest Period), then
the Interest Period shall end on the last Eurodollar Business Day of the
calendar month at the end of such Interest Period. 

     

         “Letter(s) of Credit” shall mean each standby
Letter of Credit or commercial Letter of Credit issued by Agent pursuant to
Section 2.13. 

     

         “Letter of Credit Obligations” means, at any
time of determination, the aggregate undrawn and unreimbursed amount of all
Letters of Credit. 

     

         “LIBOR” shall mean, for any applicable
Interest Period with respect to any LIBOR Loan, the rate per annum for deposits
in U.S dollars for a period equal to such Interest Period appearing on the
display designated as Page 3750 on the Dow Jones Markets Service (or such other
page on that service or such other service designated by the British Banker’s
Association for the display of such Association’s Interest Settlement Rates for
Dollar deposits) as of 11:00 a.m. (London, England, time) on the day that is two
Business Days prior to the first day of the Interest Period or if such Page 3750
is unavailable for any reason at such time, the rate which appears on the
Reuters Screen ISDA Page as of such date and such time; provided, that if the Agent determines that the
relevant foregoing sources are unavailable for the relevant Interest Period,
LIBOR shall mean the rate of interest determined by the Agent to be the average
(rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per
annum at which deposits in Dollars are offered to the Agent two (2) Business
Days preceding the first day of such Interest Period by leading banks in the
London interbank market as of 10:00 a.m. for delivery on the first day of such
Interest Period, for the number of days comprised therein and in an amount
comparable to the amount of the applicable LIBOR Loan.

     

         “LIBOR Loans” shall mean any Revolving Loan
bearing interest based on the LIBOR Rate. 

     

         “LIBOR Margin” shall have the
meaning ascribed thereto in Section 2.5(b). 

     

         “LIBOR Rate” shall mean, with respect to each
Interest Period for a LIBOR Borrowing, the rate per annum obtained by dividing
(a) LIBOR for such Interest Period by (ii) a percentage equal to 1.00 minus the
LIBOR Reserve Percentage. 

     

         “LIBOR Reserve Percentage” shall mean the
aggregate of the maximum reserve percentages (including, without limitation, any
emergency, supplemental, special, or other marginal reserves) expressed as a
decimal (rounded upwards to the next 1/100th of 1%) in effect on any day to
which the Agent is subject with respect to the Adjusted LIBO Rate pursuant to
regulations issued by the Board of Governors of the Federal Reserve System (or
any Governmental Authority succeeding to any of its principal functions) with
respect to eurocurrency funding (currently referred to as “eurocurrency
liabilities” under Regulation D). LIBOR Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions, or offsets that may be available
from time to time to any Bank under Regulation D. The Eurodollar Reserve
Percentage shall be adjusted automatically on and as of the effective date of
any change in any reserve percentage.

     

    7 

     

    

    
    

         “Lien” shall mean, with respect to any asset,
any mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such asset. For the purposes of this Agreement, Borrower shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.

     

         “Loan Documents” shall mean, collectively,
this Agreement, the Notes, all Notices of Borrowing, all Notices of Swingline
Borrowing, the Subsidiary Guaranty Agreement, all certificates delivered in
connection herewith or pursuant hereto, and any and all other instruments,
agreements, documents, and writings executed in connection with any of the
foregoing, in each case as the same may be amended, restated, supplemented, or
otherwise modified from time to time. 

     

         “Loans” shall mean Revolving Loans and
Swingline Loans, in the aggregate or any of them, as the context shall require.

     

         “London Interbank Offered Rate” has
the meaning set forth in Section 2.5(b).

     

         “Majority Banks” shall mean (a) so long as the
Commitments have not been terminated, (i) at any time that more than five
Persons are Banks hereunder, Banks whose Commitments exceed 50% of the
Commitments and (ii) at all other times, Banks whose Commitments exceed 66-2/3%
of the Commitments and (b) if the Commitments have been terminated, (i) at any
time that more than five Persons are Banks hereunder, Banks whose aggregate
outstanding principal of their Loans (other than Swingline Loans) exceeds 50% of
the aggregate outstanding principal amount of all Loans (other than Swingline
Loans) and (ii) at all other times, Banks whose aggregate outstanding principal
of their Loans (other than Swingline Loans) exceeds 66-2/3% of the aggregate
outstanding principal amount of all Loans (other than Swingline
Loans).

     

         “Material Adverse Effect” shall mean, with
respect to any event, act, condition, or occurrence of whatever nature
(including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singly or in conjunction with
any other event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, a material adverse change in, or a material
adverse effect on, (a) the business, results of operations, financial condition,
assets, or liabilities (actual or contingent) of Borrower and its Subsidiaries,
taken as a whole, (b) the ability of the Obligors to perform any of their
respective obligations under the Loan Documents, (c) the rights and remedies of
Agent and the Banks under any of the Loan Documents or (d) the legality,
validity, or enforceability of any of the Loan Documents. 

     

    8 

     

    

    
    

         “Money Market” shall mean one or more
wholesale funding markets available to and selected by a Bank, including
negotiable certificates of deposit, commercial paper, eurodollar deposits, bank
notes, federal funds, interest rate swaps or others. 

     

         “Multiemployer Plan” shall mean a
“multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is
maintained for employees of Borrower or any ERISA Affiliate. 

     

         “Net Worth” of any Person shall mean, at any
date, the stockholders’ equity of such Person determined in accordance with
generally accepted accounting principles, consistently applied. 

     

         “Notes” shall mean (a) each
promissory note of Borrower made to a Bank in the form of Exhibit A, attached hereto and made a part hereof,
evidencing the obligation of Borrower to repay the Loans and (b) the Swingline
Note. 

     

         “Notice of Borrowing” shall mean a notice of
borrowing substantially in the form of Exhibit C, attached hereto, pursuant to which Borrower
may request a Revolving Loan or a Swingline Loan, as applicable. 

     

         “Notice of Swingline Borrowing” shall have the
meaning ascribed thereto in Section 2.2.C. 

     

         “Obligations” shall mean (a) any and all
indebtedness, liabilities and obligations of Borrower and the Guarantors to
Agent or any of the Banks under the Notes, Letters of Credit, this Agreement, or
any of the other Loan Documents, now or hereafter executed and delivered by
Borrower or any Guarantor to Agent or any of the Banks, including without
limitation, all principal of the Loans, all Letter of Credit Obligations and
other obligations of the Borrower and Guarantors with respect to Letters of
Credit, interest, expenses, fees, and other sums payable by Borrower or
Guarantor under this Agreement or the other Loan Documents (including any
interest on pre-petition Obligations accruing after the commencement of any
Insolvency Proceeding by or against Borrower or any Guarantor, whether or not
allowable in such Insolvency Proceeding) and (b) all Bank Product Obligations,
in each of the foregoing cases, whether now existing or hereafter arising,
absolute or contingent, joint and/or several, secured or unsecured, direct or
indirect, expressed or implied in law, contractual or tortious, liquidated or
unliquidated, at law or in equity, or otherwise, and whether created directly or
acquired by such Bank by assignment or otherwise, and any and all indemnities
arising thereunder and all costs of collection and/or Attorneys’ Fees incurred
or to be incurred in connection therewith. 

     

         “Obligor” shall mean Borrower, each Guarantor,
and each other Person who is or shall at any time hereafter become primarily or
secondarily liable on any of the Obligations or who grants any Bank a Lien upon
any of the Property or assets of such Person as security for any of the
Obligations. 

     

         “Occupational Safety and Health Laws” shall
mean the Occupational Safety and Health Act of 1970, as amended, and any other
Federal, state or local statute, law, ordinance, code, rule, regulation, order
or decree regulating, relating to or imposing liability or standards of conduct
concerning employee health and/or safety, as now or at any time hereafter in
effect. 

     

    9 

     

    

    
    

         “OFAC” shall mean the Office of
Foreign Assets Control of the United States Department of the
Treasury.

     

         “PBGC” shall mean the Pension
Benefit Guaranty Corporation and any entity succeeding to any or all of its
functions under ERISA. 

     

         “Pension Plan” shall mean any
“pension plan,” as such term is defined in Section 3(2) of ERISA, which is
established or maintained by Borrower or any ERISA Affiliate, other than a
Multiemployer Plan. 

     

         “Person” shall mean an individual, a
corporation, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof. 

     

         “Prime Loan” shall mean any
Revolving Loan bearing interest based on the Prime Rate. 

     

         “Prime Rate” shall mean the lesser
of (a) the interest rate announced from time to time by Agent as its “prime
rate” on commercial loans (which rate shall fluctuate as and when said “prime
rate” shall change, and which rate may not be Agent’s best or lowest rate or a
favored rate, and any statement, representation or warranty in that regard or to
that respect is expressly disclaimed by Agent and Banks) and (b) the Federal
Funds Rate in effect on such day plus 1/2 %. 

     

         “Pro Rata Share” shall mean, with
respect to any Bank and at any time of determination, a fraction, expressed as a
percentage, equal to such Bank’s Commitment, divided by the Commitments or, if
the Commitments have been terminated, the aggregate principal amount of such
Bank’s Loans (excluding Swingline Loans), divided by the aggregate principal
amount of all Banks’ Loans (excluding Swingline Loans). 

     

         “Property” shall mean any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible. For purposes of this Agreement, Borrower shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, financing lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
for security purposes. 

     

         “Regulation D” shall mean Regulation
D of the Board of Governors of the Federal Reserve System, as amended.

     

         “Related Party” shall mean any
Person (a) which directly or indirectly through one or more intermediaries
controls, or is controlled by or is under common control with, Borrower, (b)
which beneficially owns or holds twenty-five percent (25%) or more of the equity
interest of Borrower or (c) twenty-five percent (25%) or more of the equity
interest of which is beneficially owned or held by Borrower. The term “control”
shall mean the possession, directly or indirectly, of the power to vote
twenty-five percent (25%) or more of the Equity Interests of any Person or the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. 

     

         “Rental Expense” shall have the
meaning given such term in Section 5.1(e). 

     

    10 

     

    

    
    

         “Replacement Bank” shall have the
meaning ascribed thereto in Section 9.12. 

     

         “Replacement Event” shall have the
meaning ascribed thereto in Section 9.12. 

     

         “Reportable Event” shall have the
meaning ascribed thereto in Section 4043 of ERISA.

     

         “Revolving Loans” means each Loan
made by the Banks pursuant to Section 2.1. 

     

         “Subsidiary” shall mean with respect
to any Person any corporation of which more than 50% of the issued and
outstanding Equity Interests entitled to vote for the election of directors is
at the time owned directly or indirectly by such Person. Any unqualified
reference to a Subsidiary or Subsidiaries shall constitute a reference to a
Subsidiary of, or the Subsidiaries of, Borrower. 

     

         “Subsidiary Guaranty Agreement”
shall mean that certain Subsidiary Guaranty Agreement dated on or about the
Effective Date and executed by (a) SCLC, Inc., a Delaware corporation and (b)
SCHC, Inc., a Delaware corporation, together with any other joinder pursuant to
which any additional Subsidiary becomes party thereto, as the same may be
amended, restated, supplemented, or otherwise modified from time to time.

     

         “Swingline Commitment” shall mean
the commitment of Agent to make Swingline Loans in an aggregate principal amount
at any time outstanding not to exceed $10,000,000, as such amount may be reduced
from time to time in accordance with Section 2.7. 

     

         “Swingline Loan” shall mean each
loan made to Borrower by Agent under the Swingline Commitment.

     

         “Swingline Note” shall mean the
promissory note of Borrower payable to the order of Agent in the principal
amount of the Swingline Commitment, substantially the form of Exhibit B, attached hereto and made a part
hereof. 

     

         “Term” shall mean the period from
the Effective Date up to and including April 30, 2013, except that (a) all, but
not less than all, of the Banks may, in their sole discretion, extend such Term
for additional one-year periods by notifying Borrower of each such extension at
least twelve (12) months prior to the expiration of the then current Term and of
their intention to extend the Term by an additional year; (b) Agent may
terminate the Banks’ obligations hereunder at any time prior to stated maturity
date or any extension thereof pursuant to Article 6 herein; and (c) Borrower may
terminate the facility as provided in Section 2.7. 

     

         “Working Capital Obligations” means,
at any time of determination, the sum of the aggregate outstanding principal
amount of all Loans and the Letter of Credit Obligations.

     

         SECTION 1.2 Accounting Terms and
Determinations.
Except as otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes approved by
Borrower’s independent public accountants) with the most recent audited
financial statements of Borrower delivered to Banks.

     

    11 

     

    

    
    

         SECTION 1.3 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”. In the computation of periods of time from a specified date to a
later specified date, the word “from” means “from and including” and the word
“to” means “to but excluding”. Unless the context requires otherwise (i) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as it was originally executed or as it may from time to time be amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include such Person’s successors and
permitted assigns, (iii) the words “hereof,” “herein,” and “hereunder” and words
of similar import shall be construed to refer to this Agreement as a whole and
not to any particular provision hereof, and (iv) all references to Articles,
Sections, Exhibits, and Schedules shall be construed to refer to Articles,
Sections, Exhibits, and Schedules to this Agreement. All times set forth herein
shall be deemed to be the local time of Jacksonville,
Florida.

     

    ARTICLE 2 - THE CREDITS
SECTION

     

         SECTION 2.1 Loans and Letters of
Credit. During
the Term hereof, each Bank agrees, severally but not jointly, on the terms and
conditions set forth in this Agreement, to lend to Borrower from time to time
its Pro Rata Share of Revolving Loans requested by Borrower; provided, however, that no Bank shall have any
obligation to make any Revolving Loan under this Section 2.1 if, after giving
effect thereto (i) the Working Capital Obligations would exceed the lesser of
the Commitments and the Borrowing Base or (ii) such Bank’s Pro Rata Share of the
Working Capital Obligations would exceed its Commitment. Borrower may borrow
under this Section, prepay under Section 2.8 and reborrow at any time during the
Term hereof under this Section subject to the terms of this Agreement.

     

         SECTION 2.2 Method of
Borrowing.

     

         A. Revolving Loans.

     

              (a) With respect to any Revolving Loan,
Borrower shall give a Notice of Borrowing to Agent (1) by 1:00 p.m. on the day
of each Prime Loan, and (2) by 11:00 a.m. at least three Eurocurrency Business
Days before each LIBOR Loan, specifying:

     

              (i) The date of such Revolving Loan,
which shall be a Domestic Business Day in the case of a Prime Loan or a
Eurocurrency Business Day in the case of a LIBOR Loan, 

     

              (ii) The aggregate principal amount of
such Revolving Loan, provided that, if a Prime Loan is requested, then such Loan
shall be in a minimum amount of $100,000 or more with any greater amount being
in $25,000 increments, and if such Revolving Loan is a LIBOR Loan, it shall be
in a minimum amount of $1,000,000 or more with any such greater amount being in
$100,000 increments,

     

    12 

     

    

    
    

              (iii) Whether such Revolving Loan is to be
a Prime Loan or a LIBOR Loan, and 

     

              (iv) In the case of a LIBOR Loan, the
duration of the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period. 

     

              (b) A Notice of Borrowing shall not be
required in connection with a Prime Loan made in substitution of, or in
replacement of, any LIBOR Loan pursuant to Article 7. Subject to Section 9.1,
any Notice of Borrowing for a LIBOR Loan or a Prime Loan may be telephonic, in
writing, or via email. A Notice of Borrowing shall not be revocable by Borrower.
Upon receipt of a Notice of Borrowing, Agent shall promptly notify each Bank of
the contents thereof and of such Bank’s Pro Rata Share of such Revolving Loan.

     

              (c) Not later than 3:00 p.m. on the date
of each Revolving Loan during the Term hereof, each Bank shall (except as
provided in subsections (d) or (e) of this Section) make available its Pro Rata
Share of such Revolving Loan, in federal or other funds immediately available in
Charlotte, North Carolina, to Agent at the address specified in Section 2.9(a).
Unless any Bank shall notify Agent prior to 3:00 p.m. on the date any Revolving
Loan is to be made to Borrower hereunder that such Bank shall not advance its
Pro Rata Share of such Revolving Loan, Agent may presume that each such Bank has
advanced its Pro Rata Share of such Loan as provided hereunder and may rely on
such presumption in advancing the proceeds of such Loan to Borrower. Unless
Agent has actual knowledge that any applicable condition specified in Article 3
has not been satisfied, Agent will make available to Borrower such Revolving
Loan in federal or other funds immediately available by crediting such funds to
a demand deposit account (or such other account mutually agreed upon in writing
between Agent and Borrower) of Borrower with Agent. In the event any Bank shall
fail to deliver its Pro Rata Share of any Revolving Loan requested hereunder by
Borrower on or before 4:00 p.m. on the date such Loan is to be made and Agent
has funded such Bank’s Pro Rata Share thereof, then Borrower shall repay to
Agent ON DEMAND the amount of such Bank’s Pro Rata Share of such Loan, together
with interest thereon from the date disbursed until repaid, at the rate
applicable to such Loan.

     

              (d) Agent shall give each Bank prompt
notice of each payment by Borrower and each request by Borrower for a Revolving
Loan, and Agent shall transfer to each Bank in immediately available funds such
Bank’s Pro Rata Share of such payment, or if a request for a Revolving Loan,
each Bank shall transfer to Agent in immediately available funds its Pro Rata
Share of such Loan, which funds shall be received by such party no later than
3:00 p.m. on the date of such Loan or payment or two (2) hours after a Bank
receives such notice from Agent (whichever occurs later). Except as otherwise
expressly provided herein, in no event shall a Bank be obligated to make any
such transfer to Agent which would cause such Bank’s Pro Rata Share of the
Working Capital Obligations to exceed its Commitment.

     

              (e) If Borrower requests a Revolving
Loan hereunder on a day on which Borrower is required to or has elected to repay
all or any part of an outstanding Loan or repay a draw under any Letter of
Credit, each Bank shall apply the proceeds of such requested Loan to make such
repayment and only an amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made available by Banks to
Agent for delivery to Borrower as provided in subsection (c) of this
Section.

     

    13 

     

    

    
    

              (f) All Borrowings shall be made by the
Banks on the basis of their respective Pro Rata Shares. No Bank shall be
responsible for any default by any other Bank in its obligations hereunder, and
each Bank shall be obligated to make its Revolving Loans provided to be made by
it hereunder, regardless of the failure of any other Bank to make its Loans
hereunder. 

     

              (g) In the event that a Bank for any
reason fails or refuses to fund its portion of a Revolving Loan in violation of
this Agreement or make payment of any amount such Bank is required to pay to
Agent under Section 2.13 with respect to Letters of Credit, Agent under Section
2.2. C, or Agent under any other applicable term hereof or the other Loan
Documents (each such Bank, a “Defaulting Bank”), then, until such time as such
Defaulting Bank has funded its portion of such Revolving Loan or other amount,
or all other Banks, and Agent, as applicable, have received payment in full
(whether by repayment or prepayment) of the principal and interest due in
respect of such Borrowing or amount: 

     

              (i) such Defaulting Bank shall not (A)
have the right to vote regarding any issue on which voting is required or
advisable under this Agreement or any other Loan Document (it being understood
and agreed that this provision takes precedence over any other provision in this
Agreement or the other Loan Documents which, on its face, may require the
consent of all Banks) and, with respect to any such Bank, the amount of such
Bank’s Commitment shall not be counted as outstanding for purposes of
determining “Majority Banks” hereunder and (B) be entitled to receive any
payments of principal, interest, or fees from Borrower or Agent (or the other
Banks) in respect of its Loans; 

     

              (ii) except as otherwise provided in
Section 3.1(c), Agent shall have no obligation to make any Swingline Loan and
Agent shall have no obligation to issue any Letter of Credit; and

     

              (iii) Borrower shall have the right to
replace such Defaulting Bank with a Replacement Bank in accordance with Section
9.12. 

     

         B. [Intentionally
Omitted].

     

         C. Swingline
Commitment.

     

              (a) Subject to the terms and conditions
set forth herein, Agent agrees to make Swingline Loans to Borrower, from time to
time during the Term, so long as the making of such Swingline Loan will not (i)
cause the aggregate principal amount of all Swingline Loans to exceed the
Swingline Commitment then in effect or (ii) cause the Working Capital
Obligations to exceed the lesser of the Borrowing Base and the Commitments;
provided, that Agent shall not be required
to make a Swingline Loan to refinance an outstanding Swingline Loan. Borrower
shall be entitled to borrow, repay, and reborrow Swingline Loans in accordance
with the terms and conditions of this Agreement. 

     

    14 

     

    

    
    

              (b) Procedure for Swingline Borrowing;
Etc. (i)
Borrower shall give Agent written notice (or telephonic notice promptly
confirmed in writing) of each Swingline Borrowing (“Notice of Swingline
Borrowing”) prior to 2:00 p.m. on the requested date of each Swingline
Borrowing; provided, however, that, subject to Section 9.1, any Notice of
Swingline Borrowing may be telephonic, in writing, or via email. All Swingline
Borrowings shall be in a minimum amount of $100,000 or more with any greater
amount being in $100,000 increments. Each Notice of Swingline Borrowing shall be
irrevocable and shall specify (A) the principal amount of such Swingline Loan,
(B) the date of such Swingline Loan (which shall be a Domestic Business Day),
and (C) the deposit account of Borrower to which the proceeds of such Swingline
Loan should be credited. Agent will make the proceeds of each Swingline Loan
available to Borrower in U.S. dollars in immediately available funds at the
account specified by Borrower in the applicable Notice of Swingline Borrowing
not later than 5:00 p.m. on the requested date of such Swingline Loan. All
Swingline Loans shall be Prime Loans.

     

              (c) Agent shall at such times as it may
determine, on behalf of Borrower (which hereby irrevocably authorizes and
directs Agent to act on its behalf), give a Notice of Borrowing requesting the
Banks to make Revolving Loans in an amount equal to the unpaid principal amount
of any Swingline Loan based on the Banks’ Pro Rata Share. Such Revolving Loans
shall be Prime Rate Loans. Each Bank will make the proceeds of such Borrowing
available to Agent for its account, which will be used solely for the repayment
of such Swingline Loan. 

     

              (d) If for any reason a Prime Rate
Borrowing may not be (as determined in the sole discretion of Agent), or is not,
made in accordance with the foregoing provisions, then each Bank (other than
Agent) shall purchase an undivided participating interest in such Swingline Loan
in an amount equal to its Pro Rata Share thereof on the date that such Prime
Rate Borrowing should have occurred. On the date of such required purchase, each
Bank shall promptly transfer, in immediately available funds, the amount of its
participating interest to Agent for its account. 

     

              (e) Each Bank’s obligation to make a
Revolving Loan pursuant to Section 2.2. C(c) or to purchase the participating
interests pursuant to Section 2.2. C(d) shall be absolute and unconditional and
shall not be affected by any circumstance, including without limitation (i) any
setoff, counterclaim, recoupment, defense, or other right that such Bank or any
other Person may have or claim against Agent, Borrower, or any other Person for
any reason whatsoever, (ii) the existence of a Default or an Event of Default or
the termination of any Bank’s Commitment, (iii) the existence (or alleged
existence) of any event or condition which has had or could reasonably be
expected to result in a Material Adverse Effect, (iv) any breach of this
Agreement or any other Loan Document by Borrower, Agent, or any Bank, or (v) any
other circumstance, happening, or event whatsoever, whether or not similar to
any of the foregoing. If such amount is not in fact made available to Agent by
any Bank, Agent shall be entitled to recover such amount on demand from such
Bank, together with accrued interest thereon for each day from the date of
demand thereof at the Federal Funds Rate in effect on each such day. Until such
time as such Bank makes its required payment, Agent shall be deemed to continue
to have outstanding Swingline Loans in the amount of the unpaid participation
for all purposes of this Agreement and the other Loan Documents. In addition,
such Bank shall be deemed to have assigned any and all payments made of
principal and interest on its Loans and any other amounts due to it hereunder,
to Agent to fund the amount of such Bank’s participation interest in such
Swingline Loans that such Bank failed to fund pursuant to this Section, until
such amount has been purchased in full.

     

    15 

     

    

    
    

         SECTION 2.3 Notes. 

     

              (a) Borrower’s obligations to each Bank
shall be evidenced by a Note payable to the order of such Bank in the amount of
such Bank’s Commitment. Each Bank may record appropriate notations to evidence
the date and amount of each Revolving Loan made and the date and amount of each
payment of principal made by Borrower with respect thereto. Each Bank is hereby
irrevocably authorized by Borrower so to endorse its Note and to attach to and
make a part of any such Note a continuation of any such schedule as and when
required; provided, however, that the failure to make such
annotations shall not relieve Borrower of its obligations to make payments as
set forth in this Agreement and the other Loan Documents. The books and records
of Agent and the Banks showing the account among Agent, the Banks, and Borrower
shall be admissible in evidence in any action or proceeding and shall constitute
prima facie proof of the items therein set forth. 

     

              (b) Borrower’s obligations to Agent for
the Swingline Loans shall be evidenced by a Swingline Note payable to the order
of Agent in the amount of the Swingline Commitment. Agent may record appropriate
notations to evidence the date and amount of each Swingline Loan made and the
date and amount of each payment of principal made by Borrower with respect
thereto. Agent is hereby irrevocably authorized by Borrower so to endorse the
Swingline Note and to attach to and make a part of any such Swingline Note a
continuation of any such schedule as and when required; provided, however, that the failure to make such
annotations shall not relieve Borrower of its obligations to make payments as
set forth in this Agreement and the other Loan Documents. The books and records
of Agent showing the account among Agent and Borrower with respect to Swingline
Loans shall be admissible in evidence in any action or proceeding and shall
constitute prima facie proof of the items therein set forth.

     

         SECTION 2.4 Duration of Interest Periods and
Selection of Interest Rates.

     

              (a) The duration of the initial Interest
Period for each LIBOR Loan shall be as specified in the applicable Notice of
Borrowing. Borrower shall elect the duration of each subsequent Interest Period
applicable to such LIBOR Loan and the interest rate to be applicable during such
subsequent Interest Period (and Borrower shall have the option, in the case of
any Prime Loan, to elect that such Loan become a LIBOR Loan and the Interest
Period to be applicable thereto, and (ii) in the case of any LIBOR Loan and the
Interest Period to be applicable thereto, and (ii) in the case of any LIBOR
Loan, to elect that such Loan become a Prime Loan), by giving notice of such
election to Agent by 1:00 p.m. on the Domestic Business Day of, in the case of
the election of the Prime Rate, and by 11:00 a.m. at least three Eurodollar
Business Days before, in the case of the election of the LIBOR Rate, the end of
the immediately preceding Interest Period applicable thereto, if any;
provided, however, that notwithstanding the
foregoing, in addition to and without limiting the rights and remedies of Agent
and Banks under Section 6 of this Agreement, so long as any Default or Event of
Default under this Agreement has occurred and is continuing, Borrower shall not
be permitted to renew any LIBOR Loan as a LIBOR Loan or to convert any Prime
Loan into a LIBOR Loan; provided, further, however, that the number of outstanding
Borrowings of LIBOR Loans with different Interest Periods shall not at any time
exceed 15.

     

    16

     

    

    
    

              (b) If Agent does not receive a notice
of election for any LIBOR Loan pursuant to this Section 2.4(a) within the
applicable time limits specified herein, Agent may at the end of the Interest
Period thereof convert such LIBOR Loan to a Prime Loan. 

     

              (c) [Intentionally Omitted].

     

              (d) Notwithstanding the foregoing, the
duration of each Interest Period shall be subject to the provisions of the
definition of Interest Period. 

     

         SECTION 2.5 Interest Rates. 

     

              (a) Each Prime Loan and each Swingline
Loan shall bear interest on the outstanding principal amount thereof, for each
day from the date such Loan is made until it becomes due or is repaid, at a rate
per annum equal to the Prime Rate plus 1%. Such interest shall be payable
quarterly in arrears on the first day of each calendar quarter ending after the
Effective Date and at the end of the Term. 

     

              (b) Each LIBOR Loan shall bear interest
on the outstanding principal amount thereof for each Interest Period applicable
thereto at an annual rate equal to the LIBOR Rate, plus the LIBOR Margin. Except in the
case of an acceleration of payment by Agent under Section 6.1 (when interest
shall be paid with the principal amount repaid), interest shall be payable for
each Interest Period on the last day thereof, unless the duration of the
applicable Interest Period exceeds three months, in which case such interest
shall be payable on the last day of the third month of such Interest Period and
on the last day of such Interest Period. 

     

              “LIBOR Margin” shall mean, at any
time of determination, the percentage determined by reference to the following
table as adjusted on a quarterly basis simultaneously with the delivery of the
Compliance Certificate required by Section 5.1(a)(iii) for any fiscal quarter
and based on the ratio of Funded Debt to EBITDA determined as of the last day of
the immediately preceding fiscal quarter for the four fiscal quarters then
ending: 

     

    
      	Level	Funded Debt to EBITDA	LIBOR Margin
	1	Greater than
      1.50 to 1.00	3.75%
	2	Greater than
      1.25 to 1.00 but less than or equal to 1.50 to 1.00	3.25%
	3	Greater than
      1.00 to 1.00 but less than or equal to 1.25 to 1.00	2.75%
	4	Less than 1.00
      to 1.00	2.25%

    

              The LIBOR Margin applicable to LIBOR
Loans on the Effective Date through and including the date of Borrower’s
delivery of the first Compliance Certificate required by Section 5.1(a)(iii)
shall be 2.25%. 

     

              (c) Agent shall determine each interest
rate applicable to the Loans as provided above. Agent shall give prompt notice
to Borrower by telephone, telecopy, telex, electronic mail, or cable of each
rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error.

     

    17 

     

    

    
    

              (d) While an Event of Default exists (at
the option of Agent or upon the written instructions of the Majority Banks) and
at all times after the Obligations have been or have been deemed to have been
accelerated, Borrower shall pay interest (“Default Interest”) with respect to
all LIBOR Loans at the rate otherwise applicable for the then-current Interest
Period plus an additional 2% per annum until the last day of such Interest
Period, and thereafter, and with respect to all Prime Loans and Swingline Loans
and all other Obligations hereunder (other than Loans and Letter of Credit fees
specified in Section 2.13), at an all-in rate in effect for Prime Rate Loans,
plus an additional 2% per annum. 

     

         SECTION 2.6 Unused Fee. On the first day of each calendar
quarter ending after the Effective Date and on the date on which the Commitments
are terminated, Borrower shall pay to Agent for the benefit of Banks a
nonrefundable unused fee for the immediately preceding calendar quarter or
portion thereof. The unused fee shall be calculated for each day based on the
percentage per annum applicable to such day determined by reference to the
following table (as adjusted on a quarterly basis simultaneously with the
delivery of the Compliance Certificate required by Section 5.1(a)(iii) for any
fiscal quarter based on the ratio of Funded Debt to EBITDA determined as of the
last day of the immediately preceding fiscal quarter for the four fiscal
quarters then ending), times the amount by which the Commitment
exceeded the Working Capital Obligations on such day: 

     

    
      	Level	Funded Debt to
      EBITDA	Unused Fee
	1	Greater than
      1.50 to 1.00	0.55%
	2	Greater than
      1.25 to 1.00 but less than or equal to 1.50 to 1.00	0.50%
	3	Greater than
      1.00 to 1.00 but less than or equal to
      1.25 to 1.00	0.45%
	4	Less than 1.00
      to 1.00	0.40%

    

         

         Upon Agent’s receipt of the unused
fee payable under this Section 2.6, Agent shall promptly deliver to each Bank
its Pro Rata Share of such unused fee actually received by Agent.

     

         SECTION 2.7 Termination or Reduction of
Commitment.

     

              (a) Borrower may, by thirty (30) days’
prior written notice to Agent, which notice Agent shall promptly deliver to
Banks, terminate entirely or reduce from time to time by an aggregate amount of
$1,000,000 or any larger multiple of $1,000,000, the Commitments; provided, however, that at no time shall the
Commitments be reduced to a figure less than the Working Capital Obligations or
$1,000,000, except in connection with the complete termination of the
Commitments.

     

              (b) Any reduction in the Commitment
shall result in a proportionate reduction in the Swingline Commitment;
provided, however, that to the extent any such
reduction causes the aggregate principal amount of the Swingline Loans to exceed
the Swingline Commitment as so reduced, then Borrower shall repay such excess
amount simultaneously with the effectiveness of such reduction.

     

    18 

     

    

    
    

              (c) The respective Commitments of each
of the Banks shall be reduced by such Bank’s Pro Rata Share of the aggregate
reduction made by Borrower. Any reduction of any Commitment by Borrower under
this Section 2.7 shall be irrevocable, and in the event any such Commitment
reduction requires the repayment of any LIBOR Loan prior to the end of its then
current Interest Period, Borrower agrees to pay with respect to such Loan any
amounts required under Section 2.10 hereunder in addition to the principal and
interest being repaid on such LIBOR Loan. 

     

         SECTION 2.8 Voluntary and Mandatory Payments
Prior to Maturity. 

     

              (a) Borrower may, upon notice to Agent
specifying that it is paying its Prime Loans and Swingline Loans, pay without
penalty or premium its Prime Loans and Swingline Loans in whole or in part at
any time, or from time to time. 

     

              (b) Borrower may, upon at least three
Eurocurrency Business Days’ notice to Agent, in the case of LIBOR Loans, pay
without penalty or premium on the last day of any Interest Period its LIBOR
Loans to which such Interest Period applies, in whole, or in part, by paying the
principal amount to be paid together with accrued interest thereon to the date
of payment. A notice of payment given to Agent pursuant to this subsection (b)
shall not thereafter be revocable by Borrower. Borrower shall not be permitted
to prepay any LIBOR Loan on any day other than the last day of an Interest
Period, provided, however, that in the event any payment of
principal on any LIBOR Loan is made on a day prior to the last day in the
applicable Interest Period, Borrower agrees to pay such breakage amount or
funding loss incurred by any Bank as required under Section 2.10 herein.

     

              (c) If and to the extent the Working
Capital Obligations at any time exceed the lesser of the Commitments and the
Borrowing Base, Borrowers shall immediately prepay (without demand or notice of
any kind from Agent or Banks, all of which are hereby expressly waived by
Borrower) the Loans in the amount of such excess and provide cash collateral
with respect to the Letters of Credit such that, after giving effect to such
prepayments and cash collateral, the Working Capital Obligations (net of such
cash collateral) do not exceed the lesser of the Borrowing Base and the
Commitments. 

     

              (d) Agent shall promptly notify each of
the Banks of its receipt of any notice of prepayment under Section 2.8(a) or
2.8(b) above. 

     

         SECTION 2.9 General Provisions as to
Payments.

     

              (a) All payments to be made by Borrower
under this Agreement shall be made to Agent for value on the due date and in
immediately available funds to the account of Agent at 1525 W. WT Harris
Boulevard, Mail Code NC0680, Charlotte, North Carolina, 28262, or to the account
of Agent as Agent may from time to time designate. All payments of interest and
principal, whether voluntary or involuntary, from whatever source, including
payments by reason of liquidation or collateral, setoff, bankruptcy proceedings
or otherwise, and whether received by Agent or any of the Banks, shall be shared
between the Banks in accordance with their respective Pro Rata
Shares.

     

    19 

     

    

    
    

              (b) Whenever any payment of principal
of, or interest on, Prime Loans or Swingline Loans or of fees shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, LIBOR Loans shall be due on a day which is not a
Eurocurrency Business Day, the date for payment thereof shall be extended to the
next succeeding Eurocurrency Business Day, except that if the next succeeding
Eurocurrency Business Day falls within a different calendar month, such payment
shall be made on the next preceding Eurocurrency Business Day. If the date for
any payment of principal is extended by operation of law or otherwise, interest
thereon, at the then applicable rate, shall be payable for such extended time.

     

              (c) All payments to be made by Borrower
under this Agreement shall be made without setoff or counterclaim and without
deduction for or on account of any present or future taxes or other charges
unless Borrower is compelled by law to make payment subject to such tax or other
charge. All such taxes or other charges shall be paid by Borrower for its own
account prior to the date on which penalties attach thereto. Borrower will
indemnify Agent and each of the Banks in respect of all such taxes and other
charges. Should any such payment be subject to any tax or other charge, and the
above provisions either cannot be effected or do not result in Agent or the
Banks actually receiving and remaining beneficially entitled to and in
possession of an amount equal to the full amount provided for hereunder,
Borrower shall pay to Agent, for itself or for the benefit of the Banks, as the
case may be, such additional amounts as may be necessary to ensure that Agent
and each of the Banks receive and remain in possession of and beneficially
entitled to (free from any liability in respect of any deduction, withholding or
payment other than in respect of any tax on the overall net income of Agent or
the Banks) a net amount equal to the full amount which it would have received
and retained had payment not been subject to such tax or other charge. Borrower
shall send to Agent or the Banks such certificates or certified copy receipts as
Agent or Banks shall reasonably require as proof of the payment by Borrower of
any taxes or other charges payable by Borrower as a result of the provisions of
this Section 2.9(c). 

     

         SECTION 2.10 Funding Losses. Notwithstanding any provision
contained in this Agreement to the contrary, if (a) Borrower shall make any
payment of principal with respect to any LIBOR Loan on any day other than the
last day of the Interest Period applicable thereto, whether as a result of a
scheduled payment, a voluntary prepayment, a mandatory prepayment, maturity,
acceleration, or otherwise, (b) any LIBOR Loan is converted to a Prime Loan on
any day other than the last day of the Interest Period applicable thereto or (c)
Borrower fails to borrow or pay any LIBOR Loan after notice has been given to by
Borrower to Agent in accordance with Section 2.2, 2.4, 2.8(b), or otherwise,
contemporaneously with each such payment, conversion, or failure to borrow or
pay, Borrower shall reimburse each Bank on demand for any Interest Differential.

     

         SECTION 2.11 Computation of Interest and
Fees. Interest
on Prime Loans and Swingline Loans hereunder shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed (including the
first day but excluding the last day). Interest on LIBOR Loans shall be computed
on the basis of a year of 360 days and paid for the actual number of days
elapsed, calculated as to each Interest Period from and including the first day
hereof to but excluding the last day hereof. The unused fee and all periodic
fees for Letters of Credit shall be computed on the basis of a year of 360 days
and paid for the actual number of days elapsed.

     

    20 

     

    

    
    

         SECTION 2.12 Accordion Feature. The Commitments may be increased
by up to an additional $25,000,000, without the consent of any Bank; provided
that (a) no Bank shall be required to increase its respective Commitment, (b)
Agent, Borrower, and each Person making any such new Commitment shall execute
and deliver to Agent an acceptance agreement in form and substance satisfactory
to Agent setting forth, among other things, the new Commitment of such Person,
such Person’s Pro Rata Share of the Commitments, and certain representations and
warranties of Borrower and such Person, (c) no Default or Event of Default shall
then be in existence, and (d) all other terms and conditions related to the
increased commitment shall be satisfactory to Agent in its discretion. Upon any
agreement to increase the Commitments as contemplated by this Section 2.12,
Borrower agrees to (i) execute any and all documents required by Agent in
connection therewith and (ii) reimburse Agent and the Banks for any and all
costs and expenses as which may be occasioned on account of the reallocation of
any Loans among the Banks based on their new Pro Rata Shares (including, without
limitation, any amounts payable under Section 2.10). Borrower shall not be
required to pay any arranging or similar fees on account of its exercise of its
rights under this Section 2.12, except to the extent Agent and Borrower have
otherwise expressly agreed in writing to the payment of such
fees.

     

         SECTION 2.13 Letters of Credit. 

     

              (a) Issuance of Letters of
Credit. Agent
agrees to issue Letters of Credit from time to time on the terms set forth in
this Agreement, including the following:

     

              (i) Agent shall have no obligation to
issue any Letter of Credit unless each of the following conditions precedent
have been satisfied: 

     

         (A) after giving effect to such Letter
of Credit, the Working Capital Obligations will not exceed the lesser of the
Borrowing Base and the Commitments; 

     

         (B) such Letter of Credit has an
expiration date less than or equal to 12 months; 

     

         (C) the expiration date of such Letter
of Credit shall not extend past the last day of the stated
Term;

     

         (D) all conditions precedent set forth
in Article 3 shall have been satisfied; and 

     

         (E) Borrower shall have executed and
delivered all applications and other agreements and documents as Agent shall
have requested, each of which shall be in form and substance satisfactory to
Agent. 

     

              (ii) If Agent determines that any
condition precedent to the issuance of any Letter of Credit is not satisfied or
receives written notice from a Bank at least five Business Days before issuance
of a Letter of Credit that any such condition precedent has not been satisfied,
Agent shall have no obligation to issue the requested Letter of Credit (or any
other Letter of Credit) until such notice is withdrawn in writing by Agent or
such Bank or until the Majority Banks have waived the applicable condition
precedent in accordance with this Agreement. Before receipt of any such notice,
Agent shall not be deemed to have knowledge of any failure to satisfy any such
condition precedent.

     

    21 

     

    

    
    

              (iii) The renewal or extension of any
Letter of Credit shall be treated as the issuance of a new Letter of Credit,
except that the Borrower need not deliver a new letter of credit application
unless requested to do so by Agent. 

     

              (iv) In connection with its
administration of and enforcement of rights or remedies under any Letters of
Credit or any documents executed and delivered in connection therewith, Agent
shall be entitled to act, and shall be fully protected in acting, upon any
certification, documentation, or communication in whatever form believed by
Agent, in good faith, to be genuine and correct and to have been signed, sent,
or made by a proper Person. Agent may consult with and employ legal counsel,
accountants, and other experts to advise it concerning its obligations, rights,
and remedies with respect to the issuance and administration of Letters of
Credit and such documents and shall be entitled to act (or refuse to act) upon,
and shall be fully protected in any action taken (or refused to be taken) in
good faith reliance upon, any advice given by such Persons. Agent may employ
agents and attorneys-in-fact in connection with any matter relating to Letters
of Credit or any documents executed and delivered in connection therewith and
shall not be liable for the negligence or misconduct of agents and
attorneys-in-fact selected with reasonable care. 

     

              (b) Reimbursement;
Participations.

     

              (i) On the date Agent honors any draw
under a Letter of Credit (each such date, a “Reimbursement Date”), Borrower
shall reimburse Agent the amount paid by Agent on account of such draw, together
with interest from the Reimbursement Date until paid by Borrower (at the
interest rate for Prime Loans). The obligation of Borrower to reimburse Agent
for any draw made under a Letter of Credit is absolute, unconditional, and
irrevocable, and Borrower shall make such reimbursement without regard to any
lack of validity or enforceability of such Letter of Credit or the existence of
any claim, setoff, defense, or other right Borrower may have at any time against
the beneficiary of such Letter of Credit. On each Reimbursement Date, Borrower
shall be deemed to have requested a Prime Loan in an amount necessary to pay the
amounts due to Agent on such date for such draw (regardless of whether Borrower
submits a Notice of Borrowing therefor), and each Bank shall fund its Pro Rata
Share of such Borrowing, without offset, counterclaim, or other defense and
regardless of whether the Commitments have terminated, the Working Capital
Obligations would exceed the Borrowing Base, or any condition precedent to the
making of Loans has not been satisfied. 

     

              (ii) Upon the issuance of a Letter of
Credit, each Bank shall be deemed to have irrevocably and unconditionally
purchased from Agent, without recourse or warranty, an undivided interest and
participation in all Letter of Credit Obligations relating to such Letter of
Credit in an amount equal to such Bank’s Pro Rata Share thereof. If Agent honors
any draw under a Letter of Credit and Borrowers do not reimburse the amount
thereof on the Reimbursement Date, Agent (at Agent’s request) shall promptly
notify Banks, and each Bank shall promptly (within one Business Day) and
unconditionally pay to Agent, for the benefit of Agent, such Bank’s Pro Rata
Share of such draw. Upon request by a Bank, Agent shall furnish such Bank with
copies of any Letters of Credit and any related documents in its possession at
such time.

     

    22 

     

    

    
    

              (iii) The obligations of each Bank to make
payments to Agent for the account of Agent in connection with Agent’s honoring
any draw under a Letter of Credit are absolute, unconditional, and irrevocable
and are not subject to any counterclaim, setoff, defense, qualification, or
exception, and such Bank shall perform such obligations, as applicable, (A)
irrespective of any lack of validity or unenforceability of any Loan Documents;
(B) regardless of whether the Commitments have been terminated, the Working
Capital Obligations would exceed the Borrowing Base, any condition precedent to
the making of any Loan has not been satisfied; (C) regardless of whether any
draft, certificate, or other document presented under a Letter of Credit is
determined to be forged, fraudulent, invalid, or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect; and (D)
regardless of the existence of any setoff or defense that Borrower or any
Guarantor may have with respect to any of the Obligations. Agent assumes no
responsibility for any failure or delay in performance or any breach by Borrower
or other Person of any obligations under any of the documents executed or
delivered in connection with any Letter of Credit. Agent is not responsible for
(A) any recitals, statements, information, representations, or warranties
contained in, or for the execution, validity, genuineness, effectiveness, or
enforceability of, any documents executed and delivered in connection with any
Letter of Credit or (B) the assets, liabilities, financial condition, results of
operations, business, creditworthiness, or legal status of Borrower or any
Obligor. 

     

              (iv) No Agent Indemnitee shall be liable
to any Bank or any other Person for any action taken or omitted to be taken in
connection with any documents executed or delivered in connection with any
Letter of Credit except as a result of its actual gross negligence or willful
misconduct. Agent shall have no liability to any Bank if Agent refrains from
taking any action, or refuses to take any action, under any Letter of Credit or
any of such documents until it receives written instructions from the Majority
Banks. 

     

              (c) Cash Collateral. If any Letter of Credit
Obligations, whether or not then due or payable, shall for any reason be
outstanding at any time after the Commitments are terminated, then Borrower
shall, at Agent’s request, provide cash collateral for the Letter of Credit
Obligations in an amount equal to 105% thereof. If Borrowers fail to provide
such collateral as required herein, Banks may (and, upon written request of
Agent, shall) advance, as Prime Loans, the amount of the cash collateral
required (regardless of whether the Commitments have terminated, the Working
Capital Obligations would exceed the Borrowing Base, or any condition precedent
to the making of any Loan has not been satisfied).

     

    23 

     

    

    
    

              (d) Letter of Credit
Fees. Borrower
agrees to pay Agent for the benefit of Banks in respect of each commercial
Letter of Credit issued by Agent at Borrower’s request, a quarterly commercial
Letter of Credit fee equal to 1.25% (plus, at all times that the Default
Interest is in effect under Section 2.5(d), 2.00%) per annum of the sum of the
daily undrawn face amounts of all commercial Letters of Credit outstanding
during such quarter divided by the number of days in such
quarter and multiplied by a fraction with a numerator equal to the number of
days in such quarter and a denominator of 360. Such commercial Letter of Credit
fee shall be payable quarterly in arrears on the first day of each
calendar quarter for the immediately preceding calendar quarter and on the date
on which the Commitments are terminated. Agent shall retain one-fifth of each
such quarterly commercial Letter of Credit fee for its own account as issuer of
the commercial Letters of Credit, and the remainder of each such quarterly
commercial letter of credit fee shall be distributed by Agent to the Banks in
accordance with their Pro Rata Shares of the risk thereunder. Borrower further
agrees to pay Agent upon issuance in respect of each standby Letter of Credit
issued by Agent at Borrower’s request, a nonrefundable Letter of Credit
commission equal to the LIBOR Margin currently in effect with respect to LIBOR
Loans per annum of the face amount of such standby Letter of Credit based upon a
360 day year. Agent shall retain one-fifth of each such Letter of Credit
commission for its own account as issuer of the standby Letter of Credit, and
the remainder of such Letter of Credit commission shall be distributed by Agent
to the Banks in accordance with their Pro Rata Shares of the risk thereunder.
Borrower agrees to pay Agent, for its own account, such additional documentary,
issuance, amendment, and other fees in respect of each Letter of Credit and any
draft presented for payment or acceptance in respect thereof as Agent
customarily charges in its Letter of Credit business as from time to time
amended by Agent. 

     

         SECTION 2.14 Erroneous
Information. For
up to one year after the full and final payment in cash and performance of the
Obligations and the termination of Agent’s and Banks’ obligations to make
extensions of credit to Borrower hereunder, if any financial statement or
certificate required by this Agreement is shown to be inaccurate (regardless of
whether this Agreement or the Commitments are in effect when such inaccuracy is
discovered), and such inaccuracy, if corrected, would have led to the
application of a higher LIBOR Margin (under Section 2.5(d)) or unused fee (under
Section 2.6) for any period (an “Applicable Period”) than the LIBOR Margin or
such unused fee applied for such Applicable Period, then (a) Borrower shall
immediately deliver to Agent a corrected certificate for such Applicable Period,
(ii) the LIBOR Margin and unused fee for such Applicable Period shall be
determined by reference to such certificate, and (iii) Borrower shall pay Agent
on demand, the accrued additional interest or unused fee owing as a result of
such increased Applicable Margin for such Applicable Period, which payment shall
be promptly paid over by Agent to the Banks in accordance with their respective
Pro Rata Shares in accordance with the terms hereof. 

     

    ARTICLE 3 - CONDITIONS TO BORROWINGS

     

         The obligations of each of the Banks
to make Loans and Agent’s agreement to issue Letters of Credit are subject to
the performance by Borrower of all of its obligations under this Agreement and
to the satisfaction of the following further conditions as determined by Agent:

     

         SECTION 3.1 All Extensions of
Credit. In the
case of each Borrowing or issuance of a Letter of Credit hereunder:

     

              (a) With respect to each Loan, Agent
shall have received a Notice of Borrowing as required by Section 2.2. A or
Section 2.2. C, as applicable;

     

              (b) With respect to each Letter of
Credit, Agent shall have received the applicable applications and other
documents which Agent reasonably requests as required by Section
2.13;

     

    24 

     

    

    
    

              (c) With respect to the issuance of any
Letter of Credit or the making of any Swingline Loan, there is no Defaulting
Bank at the time such Letter of Credit is to be issued or such Swingline Loan is
to be made, unless (i) for the issuance of any Letter of Credit, arrangements
satisfactory to Agent have been made with respect to the undivided interest and
participation of such Defaulting Bank in and to such Letter of Credit, which
arrangements may include, but shall not be limited to, Borrower’s posting of
cash collateral with Agent in an amount equal to such Defaulting Bank’s
participation therein on terms satisfactory to the Issuer and (ii) for the
making of any Swingline Loan, arrangements satisfactory to Agent have been made
with respect to the Defaulting Bank’s obligations under Section 2.2. C with
respect to such Swingline Loan (and all other Swingline Loans then outstanding),
which arrangements may include, but shall not be limited to, Borrower’s posting
of cash collateral with Agent in an amount equal to such Defaulting Bank’s
participation therein on terms satisfactory to Agent; and 

     

              (d) On the date of, and as a result of
such Borrowing or issuance of any Letter of Credit, no Default or Event of
Default shall have occurred and be continuing;

     

              (e) On the date of, and as a result of
such Borrowing or issuance of any Letter of Credit, no material adverse change
in the business, financial position or results of operation, of Borrower has
occurred since the Effective Date and is continuing, and no legal or
administrative proceedings or other regulatory proceedings have been commenced
or threatened against Borrower which, in the sole judgment of Agent, could
reasonably be expected to result in a Material Adverse Effect;
and

     

              (f) The representations and warranties
of Borrower contained in this Agreement shall be true on and as of the date of
such Borrowing or issuance of any Letter of Credit.

     

    Each
Borrowing or request for the issuance of any Letter of Credit by Borrower
hereunder shall be deemed to be a representation and warranty by Borrower on the
date of such Borrowing or request as to the facts specified in clauses (d), (e)
and (f) of this Section.

     

         SECTION 3.2 First Extension of
Credit. In the
case of the initial Borrowings to be made pursuant to, or Letters of Credit to
be issued under, this Agreement, the following additional conditions must be met
as determined by Agent: 

     

              (a) Agent shall have received duly
executed copies of this Agreement and the other Loan Documents each in form and
substance satisfactory to Agent and the Banks; 

     

              (b) Each Bank shall have received the
duly executed Note of Borrower payable to the order of such Bank in the amount
of such Bank’s Commitment, dated on or before the date of the first Borrowing;

     

              (c) Agent shall have received the duly
executed Swingline Note of Borrower payable to the order of such Bank in the
amount of the Swingline Commitment, dated on or before the date of the first
Swingline Borrowing; 

     

              (d) With respect to each Loan, Agent
shall have received a Notice of Borrowing as required by Section 2.2. A;

     

    25 

     

    

    
    

              (e) With respect to each Letter of
Credit, Agent shall have received an application for such Letter of Credit as
required by Section 2.13; 

     

              (f) Agent shall have received, for its
own account and the account of the Banks, as applicable, payment of the “Upfront
Fees” and the “Administrative Fee” set forth in that certain letter regarding
Fee Letter—Commitment for Arrangement of Senior Credit Facility dated as of
November 30, 2009, by Agent and Wells Fargo Securities, LLC, as sole lead
arranger, to, and acknowledged and accepted by, Borrower (the “Fee Letter”);

     

              (g) Agent shall have received an opening
Borrowing Base Certificate in form and substance reasonably satisfactory to
Agent; 

     

              (h) Agent shall have received all
documents it may reasonably request relating to the existence of each of
Borrower and the Guarantors (including without limitation certified copies of
the Articles of Incorporation and Bylaws, and any amendments thereto), the
corporate authority for and the validity of the Loan Documents to which it will
be a party (including without limitation certified copies of corporate
resolutions of the Board of Directors of Borrower and the Guarantors and
incumbency certificates), and any other matters relevant hereto, all in form and
substance satisfactory to Agent and each of the Banks; 

     

              (i) There shall not have occurred a
material adverse change since January 31, 2009, in the business, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of Borrower and its Subsidiaries taken as a whole or in
the facts and information regarding such entities as represented to date;

     

              (j) There shall not have occurred any
action, suit, investigation, or proceeding pending or threatened in any court or
before any arbitrator or governmental authority that purports to materially and
adversely affect (i) Borrower or any of its Subsidiaries, taken as a whole, (ii)
any transaction contemplated hereby, or (iii) the ability of Borrower or any of
its Subsidiaries or any other Obligor under any Guarantee to perform its
respective obligations under the Loan Documents; 

     

              (k) Receipt and review, with results
satisfactory to Agent and its counsel, of such information as Agent may
reasonably request regarding litigation, tax, accounting, labor, insurance,
pension liabilities (actual or contingent), real estate leases, material
contracts, debt agreements, property ownership, environmental matters,
contingent liabilities and management of Borrower and its Subsidiaries,
including, without limitation, the results of Uniform Commercial Code lien
searches and other litigation searches deemed necessary by Agent;

     

              (l) Receipt of an opinion letter from
each Obligors’ counsel, addressed to Agent and the Banks, and covering such
matters as Agent shall require, all in form and substance satisfactory to
Agent;

     

              (m) Receipt of a payoff letter regarding
termination of Borrower’s credit facility agented by U.S. Bank, National
Association, in form and substance satisfactory to Agent; and

     

    26 

     

    

    
    

              (n) Satisfactory review of all documents
relating to Borrower’s Funded Debt, if any, including, without limitation, the
obtaining of any necessary amendments to, or consents and waivers under, such
documents, each in form and substance satisfactory to Agent.

     

    ARTICLE 4 - REPRESENTATIONS AND
WARRANTIES

     

         SECTION 4.1 Representations and
Warranties.
Borrower represents and warrants that:

     

              (a) Corporate Existence and
Power. Each
Borrower and Subsidiary: (a) is duly incorporated or organized, as applicable,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation; (b) has all requisite corporate or limited liability
company, as applicable, powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure to so qualify could reasonably be expected to result in a Material
Adverse Effect. 

     

              (b) Corporate and Governmental
Authorization; Contravention. The execution, delivery and
performance by Borrower of this Agreement, the Notes and the other documents
contemplated hereby are within the corporate powers of Borrower, have been duly
authorized by all necessary corporate action and require no action by or in
respect of, or filing with, any governmental body, agency or official. The
execution, delivery, and performance by Borrower of this Agreement, the Notes
and the other documents contemplated hereby do not conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default under
or result in any violation of, and Borrower is not now in default under or in
violation of, (i) the terms of the Articles of Incorporation or Bylaws of
Borrower, (ii) any applicable law, any rule, regulation, order, writ, judgment
or decree of any court or government agency or instrumentality which could
reasonably be expected to result in a Material Adverse Effect, or (iii) any
material agreement or instrument to which Borrower is a party or by which it is
bound or to which it is subject. 

     

              (c) Binding Effect. This Agreement has been duly
executed and delivered and constitutes a legal, valid and binding agreement of
Borrower enforceable in accordance with its terms, and the Notes and the other
documents contemplated hereby, when executed and delivered in accordance with
this Agreement, will constitute legal, valid and binding obligations of
Borrower, enforceable in accordance with their terms, except as may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors’ rights in general. 

     

              (d) Financial
Information.

     

              (i) The consolidated balance sheet of
Borrower and its Subsidiaries as of January 31, 2009, and the related statements
of income, retained earnings and changes in financial position for the fiscal
year then ended, audited by Deloitte & Touche, copies of which have been
provided to Agent and the Banks, fairly present, in conformity with generally
accepted accounting principles, consistently applied, the financial position of
Borrower and its Subsidiaries as of such date and the results of operations and
changes in financial position for such fiscal year.

     

    27 

     

    

    
    

              (ii) The unaudited consolidated and consolidating balance sheet of Borrower
and its Subsidiaries as of November 28, 2009, and the related unaudited internal
statements of income for the period then ended, copies of which have been
provided to Agent and the Banks, present, substantially in conformity with
generally accepted accounting principles applied on a basis consistent with the
financial statements referred to in paragraph (d)(i) of this Section, the
financial position of Borrower and its Subsidiaries as of such date and the
results of operations for such period (subject to normal year end adjustments).

     

              (iii) Since January 31, 2009, there has been no material adverse change in the
business, financial position or results of operations of Borrower and its
Subsidiaries on a cumulative basis. 

     

              (e) Litigation. Except as disclosed in Schedule 4.1(e), there are no actions, suits or proceedings
pending or threatened against or affecting Borrower or any of its Subsidiaries,
at law or in equity, or before or by any Federal, State or municipal court or
arbitrator or any other governmental department, commission, board, bureau,
agency, official or instrumentality, domestic or foreign, which are reasonably
likely to result, either individually or collectively, in any material adverse
change in the business, properties, operations or condition, financial or other,
of Borrower and its Subsidiaries taken as a whole, or in which there is a
reasonable likelihood of recovery of an uninsured amount that exceeds
$1,500,000. 

     

              (f) Pension and Welfare Plans.

     

              (i) As of the Effective Date, none of Borrower nor any Subsidiary has any
Pension Plan subject to Title IV of ERISA.

     

              (ii) If and to the extent any Borrower or Subsidiary has any Pension Plan,
each such Pension Plan complies in all material respects with all applicable
statutes and governmental rules and regulations; no Reportable Event has
occurred and is continuing with respect to any such Pension Plan; neither
Borrower, any Subsidiary, nor any ERISA Affiliate of Borrower has withdrawn from
any Multiemployer Plan in a “complete withdrawal” or a “partial withdrawal” as
defined in Sections 4203 or 4205 of ERISA, respectively; no condition exists or
event or transaction has occurred in connection with any such Pension Plan or
Multiemployer Plan which could result in the incurrence by Borrower, any
Subsidiary, or any ERISA Affiliate of any material liability, fine, or penalty;
and neither Borrower nor any ERISA Affiliate is a “contributing sponsor” as
defined in Section 4001(a)(13) of ERISA of a “single-employer plan” as defined
in Section 4001(a)(15) of ERISA which has two or more contributing sponsors at
least two of whom are not under common control. Except as disclosed on
Schedule 4.1(f) attached hereto, neither Borrower nor any
Subsidiary has any contingent liability with respect to any “employee welfare
benefit plan,” as such term is defined in Section 3(1) of ERISA, which covers
retired employees and their beneficiaries. 

     

              (g) Tax Returns and Payment. Borrower and each Subsidiary has filed all
federal and state income tax returns and all other material tax returns which
are required to be filed and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by Borrower or any Subsidiary, except for
the filing of such returns, if any, in respect of which an extension of time for
filing is in effect and except for such taxes, if any, as are being contested in
good faith and as to which adequate reserves have been provided. The charges,
accruals and reserves on the books of Borrower and its Subsidiaries in respect
of any taxes or other governmental charges are, in the opinion of Borrower,
adequate.

     

    28

     

    

    
    

              (h) Investment Company Act of
1940. Borrower is not an
“investment company” as that term is defined in, and is not otherwise subject to
regulation under, the Investment Company Act of 1940, as amended. 

     

              (i) [Intentionally Omitted] 

     

              (j) Subsidiaries. Borrower has no Subsidiaries other than
those described on Schedule 4.1(j) attached hereto. 

     

              (k) Compliance With Other Instruments; None
Burdensome. Neither
Borrower nor any Subsidiary is a party to any contract or agreement or subject
to any charter or other corporate restriction which materially and adversely
affects its business, Property or financial condition and which is not disclosed
on such Person’s financial statements heretofore submitted to Agent; none of the
execution and delivery by Borrower of this Agreement, the Notes, or the other
Loan Documents, the consummation of the transactions therein contemplated or the
compliance with the provisions thereof will violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Borrower, or any
of the provisions of Borrower’s Articles of Incorporation or Bylaws or any of
the provisions of any indenture, agreement, document, instrument or undertaking
to which Borrower is a party or subject, or by which it or its Property is
bound, or conflict with or constitute a default thereunder or result in the
creation or imposition of any Lien pursuant to the terms of any such indenture,
agreement, document, instrument or undertaking. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental, regulatory, administrative or public
body or authority, or any subdivision thereof, is required to authorize, or is
required in connection with, the execution, delivery or performance of, or the
legality, validity, binding effect or enforceability of, any of the Loan
Documents. 

     

              (l) Other Loans and Guarantees. Schedule 4.1(l) attached hereto lists all outstanding Funded
Debt of Borrower and the Subsidiaries as of the Effective Date and after giving
effect to the transactions contemplated herein. There exists no default under
the provisions of any instrument evidencing or securing Debt of Borrower or any
Subsidiary or of any agreement otherwise relating thereto which has had or could
reasonably be expected to result in a Material Adverse Effect. Except as
disclosed on Schedule 4.1(l), neither Borrower nor any Subsidiary is a
party to any loan transaction or Guarantee (other than the Subsidiary Guaranty
Agreement) nor has any other existing Funded Debt. 

     

              (m) Labor Matters.

     

              (i) No labor contract to
which Borrower or any Subsidiary is subject is scheduled to expire during the
Term of this Agreement.

     

    29 

     

    

    
    

              (ii) On the date of this Agreement (A) neither Borrower nor any Subsidiary is
a party to any labor dispute and (B) there are no strikes or walkouts relating
to any labor contract to which Borrower or any Subsidiary is subject.

     

              (n) Title to Property. Each of Borrower and the Subsidiaries is the
sole and absolute owner of, or has the legal right to use and occupy, all
Property it claims to own or which is necessary for such Person to conduct its
business. Neither Borrower nor any Subsidiary has signed any financing
statements, security agreements or chattel mortgages with respect to any of its
Property, has not granted or permitted any Liens with respect to any of its
Property or has any knowledge of any Liens with respect to any of its Property,
except for Liens permitted by Section 5.2(b). 

     

              (o) Regulation U. Neither Borrower nor any Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of The Board of Governors of the Federal Reserve
System, as amended) and no part of the proceeds of any Loan will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately (i) to purchase or carry margin stock (except for Borrower’s
repurchase of its own Equity Interests pursuant to Section 5.2 below) or to
extend credit to others for the purpose of purchasing or carrying margin stock,
or to refund or repay Debt originally incurred for such purpose or (ii) for any
purpose which entails a violation of, or which is inconsistent with, the
provisions of any of the Regulations of The Board of Governors of the Federal
Reserve System, including, without limitation, Regulations U, T or X thereof, as
amended. If requested by Agent or any Bank, Borrower shall furnish to Banks a
statement in conformity with the requirements of Federal Reserve Form U-I
referred to in Regulation U. 

     

              (p) Multiemployer Pension Plan Amendments Act of
1980. To the extent of
Borrower’s and its Subsidiaries’ Pension Plans and Multiemployer Plans (if any),
Borrower and each Subsidiary is in compliance with the Multiemployer Pension
Plan Amendments Act of 1980, as amended (“MEPPAA”) and has no liability for
pension contributions pursuant to MEPPAA. 

     

              (q) Patents, Licenses, Trademarks,
Etc. Borrower (either as
owner or as licensee) possesses all necessary patents, licenses, trademarks,
trademark rights, trade names, trade name rights and copyrights to conduct its
business without conflict with any patent, license, trademark, trade name or
copyright of any other Person. 

     

              (r) Environmental and Safety and Health
Matters. Except as
disclosed on Schedule 4.1(r) attached hereto: (i) the operations of
Borrower and each Subsidiary comply with (A) all applicable Environmental Laws
and (B) all applicable Occupational Safety and Health Laws; (ii) none of the
operations of Borrower or any Subsidiary are subject to any judicial,
governmental, regulatory or administrative proceeding is alleging the violation
of any Environmental Law or Occupational Safety and Health Law; (iii) none of
the operations of Borrower or any Subsidiary is the subject of any Federal or
state investigation evaluating whether any remedial action is needed to respond
to (A) any spillage, disposal or release into the environment of any Hazardous
Material or any other hazardous, toxic or dangerous waste, substance or
constituent or other substance, or (B) any unsafe or unhealthful condition at
any premises of Borrower or any Subsidiary; (iv) neither Borrower nor any
Subsidiary has filed any notice under any Environmental Law or Occupational
Safety and Health Law indicating or reporting (A) any past or present spillage,
disposal or release into the environment of, or treatment, storage or disposal
of, any Hazardous Material or any other hazardous, toxic or dangerous waste,
substance or constituent or other substance or (B) any unsafe or unhealthful
condition at any premises of Borrower or any Subsidiary; and (v) neither
Borrower nor any Subsidiary has any known contingent liability in connection
with (A) any spillage, disposal or release into the environment of, or otherwise
with respect to, any Hazardous Material or any other hazardous, toxic or
dangerous waste, substance or constituent or other substance or (B) any unsafe
or unhealthful condition at any premises of Borrower or any
Subsidiary.

     

    30 

     

    

    
    

              (s) Disclosure. Borrower and each other Obligor has
disclosed to Agent and the Banks all agreements, instruments, and corporate or
other restrictions to which Borrower or any of its Subsidiaries is subject and
all other matters known to any of them that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. None of the
reports (including without limitation all reports that Borrower is required to
file with the Securities and Exchange Commission), financial statements,
certificates, or other information furnished by or on behalf of Borrower to
Agent or any Bank in connection with the negotiation or syndication of this
Agreement or any other Loan Document or delivered hereunder or thereunder (as
modified or supplemented by any other information so furnished) contain any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, taken as a whole, in light of the circumstances
under which they were made, not misleading; provided that, with respect to projected financial
information, Borrower represents only that such information was prepared in good
faith based upon assumptions believed to be reasonable at the time.

     

              (t) Compliance with Anti-Terrorism
Laws.

     

              (i) None of Borrower nor any
of its Related Parties or Subsidiaries is in violation of any Anti-Terrorism Law
or 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. 

     

              (ii) Executive Order No. 13224. Neither Borrower nor any of its Related
Parties or Subsidiaries is any of the following (each a “Blocked Person”): 

     

                   (A) a Person that is listed
in the annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224;

     

                   (B) 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, Executive Order No.
13224;

     

                   (C) a Person or entity with
which any bank or other financial institution is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law; 

     

    31

     

    

    
    

                   (D) a Person or entity that
commits, threatens or conspires to commit or supports “terrorism” as defined in
Executive Order No. 13224;

     

                   (E) a Person or entity that
is named as a “specially designated national” on the most current list published
by OFAC at its official website or any replacement website or other replacement
official publication of such list; or

     

                   (F) a Person or entity who is
affiliated with a Person or entity listed above. 

     

              (iii) Certain Activities. Neither Borrower nor any of its Related
Parties or Subsidiaries (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to Executive
Order No. 13224. 

     

              (iv) OFAC. Neither Borrower nor any of its Related
Parties or Subsidiaries is in violation of any rules or regulations promulgated
by OFAC or of any economic or trade sanctions or engages in administered and
enforced by OFAC 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 rules or regulations promulgated by OFAC.

     

              (u) Insurance. Borrower and each Subsidiary maintains
insurance with respect to its properties and businesses, with financially sound
and reputable insurers, having coverage against losses or damages of the kinds
customarily insured against by reputable companies in the same or similar
businesses, such insurance being the types, and in amounts no less than those
amounts which are, customary for such companies under similar circumstances.
Borrower and each Subsidiary has
paid all insurance premiums now due and owing with respect to such insurance
policies and coverage, and such policies and coverage are in full force and
effect. 

     

    ARTICLE 5 - COVENANTS 

     

         SECTION 5.1 Covenants of Borrower. Borrower agrees that, so long as any Bank
has any Commitment hereunder and until all the Obligations have been full and
finally paid in cash and performed or any Letter of Credit remains outstanding:

     

              (a) Information. Borrower will deliver to Agent:

     

              (i) As soon as available and
in any event within 120 days after the end of each fiscal year of Borrower, (A)
a consolidated balance sheet of Borrower and its Subsidiaries as of the end of
such fiscal year and the related consolidated and consolidating statements of
income, retained earnings and cash flow for such fiscal year, prepared in
accordance with generally accepted accounting principles, consistently applied,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by and accompanied by the unqualified opinion of
Deloitte & Touche or other firm of independent public accountants of
nationally recognized standing acceptable to Agent and (B) an unaudited,
consolidating balance sheet of Borrower and its Subsidiaries for the same
period;

     

    32 

     

    

    
    

              (ii) As soon as available and
in any event within 45 days after the end of each fiscal quarter, a consolidated
and consolidating balance sheet of Borrower and its Subsidiaries as of the end
of such fiscal quarter and the related consolidated and consolidating statements
of income, retained earnings and cash flow for such fiscal quarter and for the
portion of Borrower’s fiscal year ended at the end of such fiscal quarter,
setting forth in each case in comparative form, the figures for the
corresponding fiscal quarter and the corresponding portion of Borrower’s
previous fiscal year, all certified (subject to normal year-end adjustments) as
to fairness of presentation, generally accepted accounting principles and
consistency by the chief financial officer or principal accounting officer of
Borrower; 

     

              (iii) As soon as available and
in any event within 45 days after the end of each fiscal quarter, a compliance
certificate of the chief financial officer or principal accounting officer of
Borrower, in the form attached hereto and made a part hereof as Exhibit D (each, a “Compliance Certificate”),
accompanied by supporting financial work sheets where appropriate, and stating
whether there exists on the date of such certificate any Default or Event of
Default and, if any Default or Event of Default then exists, setting forth the
details thereof and the action which Borrower is taking or proposes to take with
respect thereto; 

     

              (iv) As soon as available and
in any event within 20 days after the end of each fiscal quarter, a Borrowing
Base Certificate, dated as of the end of such fiscal quarter, in the form of
Exhibit E attached hereto (each a “Borrowing Base
Certificate”), all certified (subject to normal year-end adjustments) as to
fairness of presentation, generally accepted accounting principles, and
consistency by the president, chief financial officer, or principal accounting
officer of Borrower; 

     

              (v) [Intentionally Omitted]; 

     

              (vi) Within 30 days after the
end of each fiscal year of Borrower during the Term hereof, a financial budget
for Borrower’s upcoming fiscal year prepared in reasonable detail; 

     

              (vii) Forthwith upon the
occurrence of any Default or Event of Default, and in any event within five days
after knowledge of such occurrence, a certificate of an officer of Borrower
setting forth the details thereof and the action which Borrower is taking or
proposes to take with respect thereto; 

     

              (viii) Promptly upon the mailing
thereof to the shareholders of Borrower generally, and in any event within ten
days after such mailing, copies of all financial statements, reports, proxy
statements and other material information so mailed; 

     

              (ix) From time to time, with
reasonable promptness, upon being informed by Agent or Banks of the purpose of
the inquiry, such further information regarding the business, affairs and
financial position of Borrower and the Subsidiaries as Agent or Banks may
reasonably request. 

     

    33

     

    

    
    

    Agent agrees to promptly furnish to each of the
Banks the information provided to Agent by Borrower under this Section 5.1(a).
The Agent and the Banks acknowledge and agree that so long as Borrower is a
publicly reporting company, filings with respect to its financial statements
submitted to the U.S. Securities and Exchange Commission within the time periods
required by subsections 5.1(a)(i)(A), (a)(ii), and (a)(viii) above shall be
deemed to satisfy the requirements for the delivery of such financial statements
in subsections 5.1(a)(i), (a)(ii), and (a)(viii) above.

     

              (b) Payment of Debt; Compliance with Contractual
Obligations. Borrower will
pay any and all Debt payable or Guaranteed by Borrower, and any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in accordance with the agreement or
instrument relating to such Debt or Guarantee, except that Borrower may pay up
to twenty-five percent (25%) of its aggregate trade Debt at any point in time
within ninety (90) days after the date such trade Debt is due and payable.
Borrower will comply in all material respects, and will cause its Subsidiaries
to comply in all material respects, with all material Contractual Obligations of
such Person. 

     

             
(c) Consultations and
Inspections.

     

              (i) Prior to the occurrence
of a Default, Borrower shall permit, and cause each of its Subsidiaries to
permit, any representative of Agent and any Bank at such Person’s expense after
reasonable notice during regular business hours to visit and inspect, in the
company of any of the Executive Officers or their designees or their independent
public accountants, any of their respective properties, and to examine and make
abstracts from any of their respective books and records and to discuss with any
of the Executive Officers the respective affairs, finances and accounts of
Borrower and its Subsidiaries. 

     

              (ii) After the occurrence of a
Default, Borrower shall permit, and cause each of its Subsidiaries to permit,
any representative of Agent and any Bank at Borrower’s expense to visit and
inspect, in the company of any of the Executive Officers or their designees and
their independent public accountants, any of their respective properties, and to
examine and make abstracts from any of their respective books and records and to
discuss with any of the Executive Officers the respective affairs, finances and
accounts of Borrower and its Subsidiaries. 

     

              (iii) Borrower shall cooperate
and assist, and cause each of its Subsidiaries to cooperate and assist, in such
visits and inspections set forth in paragraphs (i) and (ii) above in this
Section, in each case at such reasonable times and as often as may reasonably be
desired. 

     

              (d) Payment of Taxes; Corporate Existence;
Maintenance of Properties; Insurance. Borrower will, and will cause each of its
Subsidiaries to: 

     

              (i) Pay and discharge
promptly all taxes, assessments and other governmental charges imposed upon it
or any of its property; provided, however, that neither Borrower nor any Subsidiary
shall be required to pay any such tax, assessment or other governmental charge
the payment of which is being contested in good faith and by appropriate
proceedings and for which adequate reserves have been provided, except that
Borrower will, and will cause each of the Subsidiaries to, pay or cause to be
paid all such taxes, assessments and governmental charges forthwith upon the
commencement of proceedings to foreclose any Lien which is attached as security
therefor, unless such foreclosure is stayed by the filing of an appropriate
bond;

     

    34 

     

    

    
    

              (ii) Do all things necessary
to preserve and keep in full force and effect its corporate or limited liability
company existence, rights and franchise and to be duly qualified to do business
in all jurisdictions where the nature of its business requires such
qualification; 

     

              (iii) Maintain and keep its
properties as a whole in good repair, working order and condition; provided, however, that nothing in this subsection (iii) shall
prevent any abandonment of any of its properties which is not disadvantageous in
any material respect to Banks and which, in the opinion of the management of
Borrower, is in the best interests of Borrower and the Subsidiaries; and

     

              (iv) Insure with responsible
and reputable insurance companies its assets and business in such manner and to
such extent as is customary with similar business enterprises of comparable size
and subject to comparable hazards. 

     

              (e) Financial Covenants. Borrower will: 

     

              (i) Have, as of the end of
each fiscal quarter, a Net Worth of not less than the amount shown as Borrower’s
Net Worth on its most recent fiscal year end financial statements delivered
pursuant to Section 5.1(a)(i), provided that Net Worth for any fiscal year end
shall not in any event be less than the Net Worth for the previous fiscal year
end. For purposes of determining compliance with the foregoing covenant, the
impact of any repurchase of Borrower’s common Equity Interests will be included
in the calculation of Net Worth. 

     

              (ii) Have a ratio of (A) the
sum of (1) Funded Debt plus (2) three times Borrower’s Rental Expense (as
defined below), to (B) the sum of (1) EBITDA (as defined below) plus (2)
Borrower’s Rental Expense of not more than 2.5 to 1.0 at each fiscal quarter-end
during the Term hereof. As used herein, the term “EBITDA” shall mean Borrower’s
net income before taxes, plus interest expense, plus depreciation, plus
amortization, as determined in accordance with generally accepted accounting
principles consistently applied, for the four fiscal quarter period ending on
the date of such calculation. As used herein, the term “Rental Expense” shall
mean Borrower’s base minimum rental expense under all real property leases for
the four fiscal quarter period ending on the date of such calculation as
determined in accordance with generally accepted accounting principles
consistently applied. 

     

              (iii) [Intentionally Omitted]. 

     

              (iv) Deliver a certificate of
the chief financial officer or principal accounting officer of Borrower,
containing the financial ratio calculations required in clauses 5.1(e)(i) and
(ii) above and of the Distributions paid under Section 5.2(e), simultaneously
with the Compliance Certificate referred to in Section 5.1(a)(iii).

     

              (f) Maintenance of Books and
Records. Borrower will,
and will cause its Subsidiaries to, maintain its books and records in accordance
with generally accepted accounting principles, consistently applied.

     

    35

     

    

    
    

              (g) Compliance with Law. Borrower will, and will cause its
Subsidiaries to, comply with any and all laws, ordinances and governmental rules
and regulations to which it is subject and obtain any and all licenses, permits,
franchises and other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, which violation or failure to
obtain could reasonably be expected to result in a Material Adverse Effect.

     

              (h) ERISA Compliance. At all times when Borrower or any Subsidiary
has any Pension Plan, Borrower shall, and shall cause its Subsidiaries to,
comply with all requirements of ERISA relating to such plan. Without limiting
the generality of the foregoing, Borrower will not, nor will it permit any
Subsidiary to: 

     

              (i) permit any Pension Plan
maintained by it to engage in any nonexempt “prohibited transaction,” as such
term is defined in Section 4975 of the Code; 

     

              (ii) permit any Pension Plan
maintained by it to fail to satisfy, if applicable, the “minimum funding
standard,” as such term is defined in Section 302 of ERISA, 29 U.S.C. § 1082,
whether or not waived; 

     

              (iii) terminate any such
Pension Plan in a manner which could result in the imposition of a Lien on any
Property of Borrower or any Subsidiary pursuant to Section 4068 of ERISA, 29
U.S.C. § 1368; or 

     

              (iv) take any action which
would constitute a complete or partial withdrawal from a Multiemployer Plan
within the meaning of Sections 4203 and 4205 of Title IV of ERISA. 

     

         Notwithstanding any provision contained in
this Section 5.1(h) to the contrary, an act by Borrower or any Subsidiary shall
not be deemed to constitute a violation of subparagraphs (i) through (iv) hereof
unless the Majority Banks determine in good faith that said action, individually
or cumulatively with other acts of Borrower and the Subsidiaries, does have or
is likely to cause a significant adverse financial effect upon Borrower.

     

         Borrower shall have the affirmative obligation
hereunder to report to Banks any of those acts identified in subparagraphs (i)
through (iv) hereof, regardless of whether said act does or is likely to cause a
significant adverse financial effect upon Borrower, and failure by Borrower to
report such act promptly upon Borrower’s becoming aware of the existence thereof
shall constitute an Event of Default hereunder. 

     

              (i) Notices. Borrower will notify Agent and Banks in
writing of any of the following immediately upon learning of the occurrence
thereof, describing the same and, if applicable, the steps being taken by the
Person(s) affected with respect thereto: 

     

              (i) Default. Borrower or any Subsidiary shall fail to
make any payment in respect of outstanding Debt (other than the Obligations)
having an aggregate outstanding principal amount in excess of $2,500,000
(determined singly or in the aggregate with other Debt) or more when due after
the expiration of any applicable grace period, or any event or condition shall
occur which results in the acceleration of the maturity of such Debt (including
any required mandatory prepayment or “put” of such Debt to any such Person) or
enables (or, with the giving of notice or passing of time or both, would enable)
the holders of such Debt or a commitment related to such Debt (or any Person
acting on such holders’ behalf) to accelerate the maturity thereof or terminate
any such commitment before its normal expiration (including any required
mandatory prepayment or “put” of such Debt to such Person);

     

    36

     

    

    
    

              (ii) Litigation. The institution of any litigation,
arbitration proceeding or governmental or regulatory proceeding affecting
Borrower or any Subsidiary, whether or not considered to be covered by
insurance, where (A) the prayer for relief in the complaint or petition
concerning such proceeding is, in the aggregate, greater than $2,500,000 or (B)
if the amount of such prayer is unstated or unliquidated, such proceeding is
reasonably likely to result in a judgment against Borrower or such Subsidiary in
an aggregate amount greater than $2,500,000; 

     

              (iii) Judgment. The entry of any judgment or decree against
Borrower or any Subsidiary in an aggregate amount in excess of $2,500,000;

     

              (iv) Pension Plans. The occurrence of a Reportable Event with
respect to any Pension Plan of any Borrower, Subsidiary, or any ERISA Affiliate;
the filing of a notice of intent to terminate a Pension Plan by Borrower, any
Subsidiary, or any ERISA Affiliate; the institution of proceedings to terminate
a Pension Plan by the PBGC or any other Person; the withdrawal in a “complete
withdrawal” or a “partial withdrawal” as defined in Sections 4203 and 4205,
respectively, of ERISA by Borrower, any Subsidiary, or any ERISA Affiliate from
any Multiemployer Plan; or the incurrence of any material increase in the
contingent liability of Borrower or any Subsidiary with respect to any “employee
welfare benefit plan” as defined in Section 3(1) of ERISA which covers retired
employees and their beneficiaries; 

     

              (v) Change of Name. Any change in the name of Borrower or any
Subsidiary; 

     

              (vi) Change in Place(s) of
Business. Any opening,
closing or other change of Borrower’s corporate headquarters or of any
distribution facility; 

     

              (vii) Environmental Matters. Receipt of any notice that the operations of
Borrower or any Subsidiary are not in full compliance with any of the
requirements of any applicable Environmental Law or Occupational Safety and
Health Law; receipt of notice that Borrower or any Subsidiary is subject to any
Federal, state or local investigation evaluating whether any remedial action is
needed to respond to the release of any Hazardous Materials into the
environment; or receipt of notice that any of the Properties or assets of
Borrower or any Subsidiary are subject to an “Environmental Lien.” For purposes
of this Section 5.l(i)(vii), “Environmental Lien” shall mean a Lien in favor of
any governmental or regulatory agency, entity, authority or official for (A) any
liability under Environmental Laws or (B) damages arising from or costs incurred
by any such governmental or regulatory agency, entity, authority or official in
response to a release of any Hazardous Materials into the
environment; 

     

              (viii) Material Adverse Change. The occurrence of any material adverse
change in the business, operations or condition, financial or otherwise, of
Borrower or any Subsidiary; 

     

              (ix) Change in Line(s) of
Business. Any material
change in Borrower’s line(s) of business; and 

     

    37

     

    

    
    

              (x) Other Notices. Any notices required to be provided pursuant
to other provisions of this Agreement and notice of the occurrence of such other
events as Bank may from time to time reasonably specify. 

     

              (j) Subsidiaries. Except to the extent set forth in Section
5.2(l), Borrower will cause any Person that becomes, through whatever means, a
Subsidiary after the date of this Agreement to become a Guarantor by executing
and delivering to Bank a counterpart of the Subsidiary Guaranty Agreement or
such other documents as Bank shall deem appropriate for such purpose;
provided, however, that, subject to Section 5.2(l), Shoe
Carnival Ventures, LLC, shall not be required to become a Guarantor of the
Obligations. 

     

              (k) Further Assurances. Borrower shall take such further action and
provide to Agent and Banks such further assurances as may be reasonably
requested to ensure compliance with the intent of this Agreement and the other
Loan Documents. 

     

              (l) Certain Primary
Relationships. Borrower
will maintain its primary deposit accounts and cash management services at
Agent, and ensure that Agent is the primary issuer of all commercial letters of
credit. 

     

         SECTION 5.2 Negative Covenants of
Borrower. Borrower
covenants and agrees that, so long as any Bank has any Commitment hereunder and
until all of the Obligations have been fully and finally paid in cash and
performed or any Letter of Credit remains outstanding: 

     

              (a) Limitation on Debt. Borrower will not, and will not permit any
Subsidiary to, incur or be obligated on any Debt, either directly or indirectly,
by way of Guarantee, suretyship or otherwise, other than: 

     

              (i) the Obligations; 

     

              (ii) Unsecured trade accounts
payable incurred in the ordinary course of business; 

     

              (iii) Debt representing loans
against life insurance policies of Borrower in an amount not to exceed the
aggregate cash surrender value of such life insurance policies; 

     

              (iv) Other unsecured Debt in
an aggregate outstanding principal amount not to exceed at any one time
$3,000,000; 

     

              (v) Other Debt consisting of
purchase money Debt (including, without limitation, Debt incurred for purposes
of purchasing real property and fixtures and the construction of improvements
thereon, but not including capitalized leases) in an aggregate principal amount
not to exceed at any one time $5,000,000;

     

              (vi) Capitalized leases in an
amount not to exceed $3,000,000 in the aggregate at any one time outstanding;

     

              (vii) Existing Letters of Credit; 

     

    38

     

    

    
    

              (viii) Debt described on
Schedule 4.1(l) attached hereto, but only to the extent such
Debt is not otherwise permitted under this Section 5.2(a); and

     

              (ix) Intercompany Debt (A)
between Borrower and any directly or indirectly, wholly owned Subsidiary which
is a Guarantor; (B) between any directly or indirectly, wholly owned
Subsidiaries of Borrower which are Guarantors; (C) between any directly or
indirectly, wholly owned Subsidiaries of Borrower which are not Guarantors; and
(D) between Borrower and Shoe Carnival Ventures, LLC, in an amount not to exceed
$1,500,000 in the aggregate at any one time outstanding.

     

              (b) Limitations on Liens. Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien on any of its
Property, assets, or revenues other than: 

     

              (i) Liens presently in
existence which are described on Schedule 5.2(b)(i) attached hereto; 

     

              (ii) Pledges or deposits in
connection with or to secure workmen’s compensation, unemployment insurance,
pension or other employee benefits; 

     

              (iii) Subject to Section 5.1(d)(i), Liens for taxes, assessments or governmental
charges or levies on Property of Borrower or a Subsidiary if the same are being
contested in good faith and by appropriate proceedings diligently conducted and
for which adequate reserves in form and amount satisfactory to Banks are
provided on Borrower’s or such Subsidiary’s financial statements; 

     

              (iv) Liens provided by statute
for unpaid rent in favor of any landlord of Borrower or any Subsidiary under
real property leases; 

     

              (v) Liens securing purchase
money security interests to secure purchase money Debt permitted under Section
5.2(a)(v) above, provided that the Lien shall secure only the purchase money
Debt incurred which shall not exceed the purchase price of the asset being
acquired and shall attach only to the asset purchased with the proceeds of such
purchase money Debt;

     

              (vi) Liens filed for any
equipment leases permitted under Section 5.2(a)(vi) above, provided that such
Liens shall attach only to the equipment being leased and shall secure only the
obligations under such leases; and

     

              (vii) Liens on cash collateral
pledged to secure any obligations under Existing Letters of Credit, but only to
the extent such cash collateral does not exceed, in nominal amount, 105% of the
undrawn and unreimbursed amounts of the Existing Letters of Credit.

     

              (c) Sale of Property. Borrower will not, and will not permit any
Subsidiary to, (i) sell, lease, transfer or otherwise dispose of any Property or
assets of Borrower or any Subsidiary, whether now owned or hereafter acquired,
except for sales of assets in the ordinary course of business or other sales,
transfers, or disposals of assets during any fiscal year which have an aggregate
book value of not more than $5,000,000, nor (ii) sell or transfer any Property
or assets of Borrower or any Subsidiary, real or personal, whether now owned or
hereafter acquired, and thereafter rent or lease such Property or other Property
which Borrower or such Subsidiary intends to use for substantially the same
purpose or purposes as the Property being sold or transferred.

     

    39

     

    

    
    

              (d) Mergers, Consolidations and
Acquisitions. Borrower
will not, and will not permit any Subsidiary to, merge or consolidate with any
other Person or acquire any other Person, except that: 

     

              (i) Borrower may consolidate
with or merge into any Person or permit any other Person to merge into Borrower,
provided that immediately after giving effect thereto: (1) Borrower shall be the
surviving entity of such merger; (2) Borrower shall be in compliance with all
provisions of this Agreement; and (3) Borrower and the acquired Person, on a
consolidated basis as determined after giving effect to said acquisition, have a
net worth of not less than 100% of Borrower’s net worth determined immediately
prior to said acquisition; 

     

              (ii) Any Subsidiary may (A)
merge into Borrower (provided Borrower is the surviving entity of such
merger) or another wholly-owned Subsidiary (provided, however, if one or more of such Subsidiaries is an
Obligor, the surviving entity of such merger shall be an Obligor) or (B) sell,
transfer or lease all or any part of its assets to Borrower or to another
wholly-owned Subsidiary (provided, however, that, if such Subsidiary is an Obligor, it
may sell, transfer, or lease its assets only to an Obligor) or (iii) merge into
any Person which, as a result of such merger, concurrently becomes a
wholly-owned Subsidiary (provided, however, if such Subsidiary is an Obligor, such
Person shall be an Obligor); and 

     

              (iii) Borrower may, and may
permit its Subsidiaries which are Obligors to, make acquisitions of any Persons
or their assets during any 12-month period during the Term of this Agreement
which in the aggregate do not exceed $5,000,000, provided that after giving
effect to any such acquisition, Borrower shall be in compliance with all of the
provisions of this Agreement. 

     

              (e) Stock Redemptions and
Distributions. With
respect to its common Equity Interests, Borrower will not declare or make any
Distribution to its shareholders (excluding any stock split or stock dividend)
unless, immediately after giving effect to the proposed Distribution, (i) the
aggregate amount of such Distributions does not exceed 30% of Borrower’s
consolidated net income for the immediately preceding fiscal year; (ii) no
default or event of default exists or would result therefrom; (iii) each such
Distribution is lawful; (iv) Borrower has demonstrated (in a writing delivered
to Agent at least 10 days before such dividend or Distribution is to be made) to
Agent’s satisfaction pro forma compliance with the financial covenants set forth
in Section 5.1(e), after giving effect to such Distribution. Borrower may, with
the consent of Agent and the Majority Banks, repurchase Borrower’s common Equity
Interests. No Subsidiary shall make any Distribution except to Borrower or a
wholly owned Subsidiary, in an amount agreed to by Agent and the Majority
Banks.

     

              (f) Transactions with Related
Parties. Borrower will not
engage in any material transaction with any affiliated, related or parent
company or any Subsidiary (except any wholly-owned Subsidiary of Borrower which
is an Obligor) or any shareholder, director, officer, or beneficiary of a trust
that is a shareholder of Borrower unless such transaction is upon fair market
terms and is not otherwise prohibited by the terms of this Agreement or the
other Loan Documents.

     

    40

     

    

    
    

              (g) Fiscal Year. Borrower will not, and will not permit any
Subsidiary to, change its fiscal year without prior notice to Banks;
provided, however, that Borrower, Agent and Banks agree that
prior to the effective date of any such change in Borrower’s fiscal year,
Borrower, Agent and Banks shall agree to amend this Agreement to adjust the
financial covenants set forth herein in accordance with such new fiscal year.

     

              (h) Loans and Investments. Borrower will not, and will not permit any
Subsidiary to, make any loans or advances or extensions of credit to (other than
extensions of credit in the ordinary course of business or otherwise permitted
under this Agreement), purchase any Equity Interests, bonds, notes, debentures
or other securities of, make any expenditures on behalf of, or in any manner
assume liability (direct, contingent or otherwise) for the Debt of any Person,
except that: 

     

              (i) Borrower or any
Subsidiary may acquire and own Equity Interests, obligations or securities
received in settlement of debts (created in the ordinary course of business)
owing to Borrower or such Subsidiary, 

     

              (ii) [Reserved] 

     

              (iii) Borrower may make other
loans, advances or extensions of credit not to exceed $200,000 in the aggregate
at any one time outstanding, 

     

              (iv) Borrower or any
Subsidiary may make investments of its excess cash in repurchase agreements with
maturities not greater than seven days, which repurchase agreements may be made
only with any of the Banks or any other financial institution satisfying the
requirements of subparts (v) or (viii) of this Section 5.2(h), 

     

              (v) Borrower or such
Subsidiary may make investments of its excess cash in municipal bonds or other
securities rated “AAA” or better by either Standard & Poor’s Corporation or
Moody’s Investor Service, Inc., 

     

              (vi) Borrower or such
Subsidiary may make investments of its excess cash in money market mutual funds
having assets in excess of $1,000,000,000, 

     

              (vii) Borrower or such
Subsidiary may invest its excess cash in any readily marketable direct
obligations of the United States government or any agency thereof which are
backed by the full faith and credit of the United States, 

     

              (viii) Borrower or such
Subsidiary may invest its excess cash in preferred Equity Interests or in any
commercial paper of any corporation which at the time of acquisition has the
highest commercial paper rating obtainable from either Standard & Poor’s
Corporation or Moody’s Investor Service, Inc.,

     

    41

     

    

    
    

              (ix) Borrower may repurchase
its own Equity Interests to the extent allowed under Section 5.2(e),

     

              (x) Borrower or such
Subsidiary may invest its excess cash in short-term market accounts, of one-year
or less in duration, located at one or more Banks,

     

              (xi) Borrower and each
Subsidiary may continue to have the investments each of them has as of the
Effective Date in their respective Subsidiaries, 

     

              (xii) Any Obligor may make
investments in the form of intercompany Debt to the extent permitted by Section
5.2(a)(ix), and 

     

              (xiii) Borrower and its
Subsidiaries may make other investments in any form in an aggregate original
amount not to exceed $5,000,000 in any fiscal year or any consecutive 12-month
period.

     

              (i) Dissolution or Liquidation. Borrower will not, and will not permit any
Subsidiary to, seek or permit the dissolution or liquidation of Borrower or any
Subsidiary in whole or in part. 

     

              (j) Change in Nature of
Business. Borrower will
not, and will not permit any Subsidiary to, make any material change in the
nature of its business or any material change in or discontinue its present
line(s) of business. 

     

              (k) Pension Plans. To the extent Borrower or any Subsidiary has
any Pension Plan or Multiemployer Plan, Borrower shall not, and will not permit
any Subsidiary to, (i) permit any condition to exist in connection with any
Pension Plan which would constitute grounds for the PBGC to institute
proceedings to have such Pension Plan terminated or a trustee appointed to
administer such Pension Plan or (ii) engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension Plan which
could result in the incurrence by Borrower or any Subsidiary of any material
liability, fine or penalty. Borrower shall not, and will not permit any
Subsidiary to, become obligated to contribute to any Pension Plan or
Multiemployer Plan other than any such plan or plans in existence on the date
hereof. 

     

              (l) Subsidiaries. Borrower shall not permit more than 20% of
the total assets of Borrower and its Subsidiaries to be owned, at any time, by
Subsidiaries which do not constitute Obligors (which will include, for purposes
of this Section 5.2(l), Subsidiaries which become Obligors simultaneously upon
their becoming (through whatever means) Subsidiaries). 

     

              (m) Additional Negative Pledges. Borrower shall not, and shall not permit any
Subsidiary to, create or otherwise cause or suffer to exist or become effective,
directly or indirectly, any prohibition or restriction on the creation or
existence of any Lien upon any Property or asset of Borrower or such Subsidiary,
other than the prohibitions and restrictions contained in this Agreement, unless
such Property or asset is subject to a Lien permitted pursuant to this Agreement
and such prohibition or restriction is limited to such asset. 

     

         SECTION 5.3 Use of Proceeds. Borrower agrees that none of the proceeds of
any Loan or Letter of Credit will be used in violation of any applicable law or
regulation; and except as permitted in Section 5.2(e)(ii) herein, Borrower will
not engage principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying “margin stock”
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended from time to time.

     

    42 

     

    

    
    

         SECTION 5.4 Certain Provisions Relating to Existing
Letters of Credit. Without
Agent’s prior written consent, Borrower shall not (a) extend or renew any
Existing Letter of Credit or (b) consent to or seek any amendment or supplement
to, or any modification of, any Existing Letter of Credit if the effect of such
amendment, supplement, or modification would be to increase the amount available
for drawing thereunder or extend the time available for making draws thereunder.

     

    ARTICLE 6 - DEFAULTS 

     

         SECTION 6.1 Events of Default. Each of the following shall be an “Event of
Default” hereunder, if the same shall occur for any reason whatsoever, whether
voluntary or involuntary, pursuant to any judgment or order of any court or any
order, rule, or regulation of any governmental authority, or otherwise

     

              (a) Borrower shall fail to
pay (i) any principal payments when due or (ii) any other Obligation within
three (3) business days following when such payment is due; or 

     

              (b) Borrower shall violate or
fail to perform any of its covenants or agreements contained in Sections 5.1(b)
through (i) or Section 5.2; or 

     

              (c) Borrower shall fail to
deliver to Agent any of the information or financial statements required under
Section 5.1(a) herein and such failure shall continue for 15 days after the date
such information or financial statements were required to be delivered under the
terms of such Section; or 

     

              (d) Borrower or any Obligor
shall fail to perform any term, covenant or agreement herein contained (other
than those specified in clause (a) or (b)) for 30 days after the earlier of (i)
written notice of Default is given to Borrower by Agent or any Bank, or (ii) the
date the chief executive officer or chief financial officer of Borrower has
knowledge of such Default; or 

     

              (e) Borrower or any Obligor
shall have made or be deemed to have made any representation or warranty in or
pursuant to this Agreement, or in any certificate or document delivered pursuant
hereto, which shall have been materially incorrect, false or misleading when
made or deemed made; or 

     

              (f) Borrower or any
Subsidiary shall fail (and such failure shall not have been cured or waived) to
(i) make any payment of principal of or premium, if any, or interest on any Debt
owed to a trade supplier or trade creditor which causes more than twenty-five
percent (25%) of Borrower’s or such Subsidiary’s aggregate trade Debt then
outstanding to be more than 90 days past due, or to make any payment of
principal of or premium, if any, or interest on any other Debt when due (whether
at schedule maturity or by required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such Debt, or (ii)
perform or observe any other provision, term or condition of, or any other
default shall occur under, any agreement or instrument relating to any Debt
outstanding; in either case if the effect of such failure or default is to cause
or permit such Debt to be declared to be due and payable or otherwise
accelerated, or to be required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof;
or

     

    43 

     

    

    
    

              (g) A judgment, order, or
award for the payment of money shall be entered against Borrower or any
Subsidiary in an amount which exceeds, individually or cumulatively with all
unsatisfied judgments, orders, or awards against Borrower and any Subsidiaries,
$2,500,000 in excess of insurance coverage therefor (as provided by an
underwriter acceptable to Agent, where such underwriter has admitted coverage in
writing) and the same shall remain undischarged, undismissed, and unstayed for
more than 30 days; or 

     

              (h) Borrower or any
Subsidiary shall (i) commence a voluntary case or other proceeding or file any
petition seeking liquidation, reorganization or other relief under any federal,
state or foreign bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a custodian, trustee, receiver, liquidator,
or other similar official of it or any substantial part of its property, (ii)
consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or petition described in Section 6.1(i), (iii) apply for
or consent to the appointment of a custodian, trustee, receiver, liquidator or
other similar official for Borrower or any such Subsidiary or for a substantial
part of its assets, (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, or (vi) take any action for the purpose of
effecting any of the foregoing; or

     

              (i) An involuntary proceeding
shall be commenced or an involuntary petition shall be filed seeking (i)
liquidation, reorganization or other relief in respect of Borrower or any
Subsidiary or its debts, or any substantial part of its assets, under any
federal, state or foreign bankruptcy, insolvency or other similar law now or
hereafter in effect or (ii) the appointment of a custodian, trustee, receiver,
liquidator or other similar official for Borrower or any Subsidiary or for a
substantial part of its assets, and in any such case, such proceeding or
petition shall remain undismissed for a period of 60 days or an order or decree
approving or ordering any of the foregoing shall be entered; or 

     

              (j) The occurrence of a
Reportable Event with respect to any Pension Plan; the institution of
proceedings to terminate a Pension Plan by the PBGC; the withdrawal in a
“complete withdrawal” or a “partial withdrawal” as defined in Sections 4203 and
4205, respectively, of ERISA by Borrower, any Subsidiary, or any ERISA Affiliate
from any Multiemployer Plan; or the incurrence of any material increase in the
contingent liability of Borrower or any Subsidiary with respect to any “employee
welfare benefit plan” as defined in Section 3(1) of ERISA which covers retired
employees and their beneficiaries; or 

     

              (k) The institution by
Borrower, any Subsidiary, or any ERISA Affiliate of steps to terminate any
Pension Plan if, in order to effectuate such termination, Borrower, such
Subsidiary, or such ERISA Affiliate, as the case may be, would be required to
make a contribution to such Pension Plan, or would incur a liability or
obligation to such Pension Plan, in excess of $2,500,000; or the institution by
the PBGC of steps to terminate any Pension Plan; or 

     

    44 

     

    

    
    

              (l) A Change of Control shall
occur or Borrower shall cease to own and control, directly or indirectly, 100%
(on a fully diluted basis) of the Equity Interests of each of its Subsidiaries
existing from time to time; 

     

              (m) There shall exist or
occur any “Event of Default” or event of default as provided under the terms of
any other Loan Document, or any Loan Document ceases to be in full force and
effect, or the validity or enforceability thereof is disaffirmed by or on behalf
of Borrower or any other Obligor, as applicable, or at any time it is or becomes
unlawful for Borrower or any other Obligor, as applicable, to perform or comply
with its obligations under any Loan Document, or the obligations of Borrower or
any other Obligor, as applicable, under any Loan Document are not or cease to be
legal, valid, and binding on Borrower or any such Obligor. 

     

              (n) An attachment or similar
action shall be made on or taken against any of the assets of Borrower or any
Subsidiary of Borrower with an aggregate value (based upon the greater of the
book value of such assets as established in accordance with GAAP or the fair
market value of such assets as determined in good faith by Borrower or such
Subsidiary) exceeding $1,500,000 in aggregate and is not removed, suspended or
enjoined within 45 days of the same being made or any suspension or injunction
being lifted. 

     

         SECTION 6.2 Remedies. Upon the occurrence of an Event of Default,
and at any time thereafter if any Event of Default shall then be continuing,
Agent may, and upon the written (including telecopied) request of the Majority
Banks, shall, by written notice to Borrower, take any or all of the following
actions, without prejudice to the rights of Agent or any Bank to enforce its
claims against Borrower or any other Obligor: (i) declare the principal of and
any accrued interest on the Loans and all other Obligations owing under this
Agreement and the Loan Documents, to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are expressly waived, anything in this Agreement or
the Loan Documents to the contrary and (ii) exercise any and all rights or
remedies available under this Agreement, the Loan Documents or at law or in
equity, all of which shall be cumulative; provided, that, if an Event of Default specified in
Section 6.1(h) or 6.1(i) shall occur, the result which would occur
upon the giving of written notice by Agent to any Obligor, as specified in
clause (i) above, shall occur automatically without the giving of any such
notice. 

     

         SECTION 6.3 Post-Default Allocation of
Payments. Notwithstanding
anything herein to the contrary, during an Event of Default, monies to be
applied to the Obligations, whether arising from payments by Borrower, Guarantor
or any other Person, setoff, or otherwise, shall be allocated as follows:

     

              (a) first, to all costs and expenses owing to Agent;

     

              (b) second, to all amounts owing to Agent on Swingline
Loans; 

     

    45 

     

    

    
    

              (c) third, to all amounts owing to Agent with respect
to that portion of the Letter of Credit Obligations which constitutes
unreimbursed draws under Letters of Credit; 

     

              (d) fourth, to all Obligations constituting fees
accruing hereunder and under the other Loan Documents; 

     

              (e) fifth, to all Obligations constituting interest
accruing hereunder and under the other Loan Documents; 

     

              (f) sixth, to the cash collateralization of that
portion of the Letter of Credit Obligations constituting undrawn amounts under
outstanding Letters of Credit (up to 105% thereof); 

     

              (g) seventh, to all other Obligations, other than Bank
Product Obligations; and 

     

              (h) last, to Bank Product Obligations. 

     

    ARTICLE 7 - CHANGE IN CIRCUMSTANCES AFFECTING

LIBOR LOANS 

     

         SECTION 7.1 Basis for Determining Interest Rate Inadequate
or Unfair. If with respect
to any Interest Period: 

     

              (a) By reason of circumstances affecting the London interbank Eurocurrency
market, adequate and fair means do not exist for ascertaining the rate of
interest payable pursuant to Section 2.5(b) in respect of such LIBOR Loan for
such Interest Period; or 

     

              (b) Agent determines that deposits in Dollars (in the applicable amounts) are
not being offered to any Bank in the relevant London interbank Eurocurrency
market for such Interest Period, or 

     

              (c) Agent determines that the London Interbank Offered Rate will not
adequately and fairly reflect the cost to any Bank of maintaining or funding the
LIBOR Loans for such Interest Period, 

     

    Agent shall forthwith
give notice thereof to Borrower, whereupon until Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, (a) the
obligations of Banks to make LIBOR Loans shall be suspended, and (b) Borrower
shall repay in full then outstanding principal amount of each of its LIBOR
Loans, together with accrued interest thereon, on the last day of then current
Interest Period applicable to such Loan. Concurrently with repaying each such
LIBOR Loan pursuant to this Section, Borrower shall borrow a Prime Loan in an
equal principal amount from Banks, and Banks shall make such a Prime Loan,
unless Borrower notifies Agent at least one Domestic Business Day before the
date of such repayment that it elects not to borrow any Prime Loans on such
date. 

     

    46 

     

    

    
    

         SECTION 7.2 Illegality. If the adoption of any applicable law, rule
or regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency shall make it
unlawful or impossible for any Bank to make, maintain or fund its LIBOR Loans to
Borrower, such Bank shall forthwith give notice thereof to Agent and Agent shall
give notice thereof to Borrower. Upon receipt of such notice, Borrower shall
repay in full then outstanding principal amount of each of its LIBOR Loans,
together with accrued interest thereon, on either (a) the last day of then
current Interest Period applicable to such LIBOR Loan if such Bank may lawfully
continue to maintain and fund such LIBOR Loan to such day or (b) immediately if
such Bank may not lawfully continue to fund and maintain such LIBOR Loan to such
day. Concurrently with repaying each LIBOR Loan of Bank, Borrower shall borrow a
Prime Loan in an equal principal amount from Banks, and Banks shall make such a
Prime Loan. 

     

         SECTION 7.3 Increased Cost. 

     

              (a) If (i) Regulation D or (ii) after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency (a “Regulatory Change”): 

     

                   (A) shall subject any Bank to any tax, duty or other charge with respect to
its LIBOR Loans, its Note or its obligation to make LIBOR Loans or shall change
the basis of taxation of payments to any Bank of the principal of or interest on
its LIBOR Loans or any other amounts due under this Agreement in respect of its
LIBOR Loans or its obligation to make LIBOR Loans (except for changes in the
rate of tax on the overall net income of any such Bank imposed by the
jurisdiction in which such Bank’s principal executive office is located); or

     

                   (B) shall impose, modify or deem applicable any reserve (including, without
limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit, capital or similar requirement against assets of,
deposits with or for the account of, or credit extended or committed to be
extended by, any Bank or shall impose on any Bank or on the United States market
for certificates of deposit or the interbank market for Eurocurrency deposits
any other condition affecting any Bank’s Loans, its Note or its obligation to
make Loans; 

     

    and the result of any
of the foregoing is to increase the cost to (or in the case of Regulation D, to
impose a cost on) any Bank of making or maintaining any LIBOR Loan or to reduce
the amount of any sum received or receivable by any Bank under this Agreement or
under its Note with respect thereto, by an amount deemed by such Bank to be
material, and if such Bank is not otherwise fully compensated for such cost or
reduction by virtue of the inclusion of the reference to “LIBOR Reserve
Percentage” in the calculation of the interest rate applicable to LIBOR Loans,
then, within 15 days after demand by such Bank, Borrower shall pay for the
account of such Bank as additional interest, such additional amount or amounts
as will compensate such Bank for such increased cost or reduction. Any Bank will
promptly notify Agent, who in turn shall promptly notify Borrower of any event
of which it has knowledge, occurring after the date hereof, which will entitle
such Bank to compensation pursuant to this Section. A certificate of such Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. Upon reasonable request of Borrower, each Bank claiming
additional compensation under this Section shall provide to Borrower additional
information with respect to the determination of such additional amount or
amounts. In determining such amount or amounts, Bank may use any reasonable
averaging and attribution methods.

     

    47 

     

    

    
    

              (b) If any Bank demands compensation under this Section, Borrower may at any
time, upon at least two Eurocurrency Business Days’ prior notice to Agent, repay
in full its then outstanding LIBOR Loans from such Bank, together with accrued
interest thereon to the date of prepayment and any other amounts due under
Section 2.10. Concurrently with repaying such LIBOR Loans, Borrower may borrow a
Prime Loan in an amount equal to the aggregate principal amount of such LIBOR
Loans, and such Bank shall make such a Prime Loan. 

     

         SECTION 7.4 Prime Loans Substituted for Affected LIBOR
Loans. If notice has been
given by any Bank pursuant to Section 7.2 or by Borrower pursuant to Section 7.3
requiring LIBOR Loans to be repaid, then, unless and until such Bank or Agent
notifies Borrower that the circumstances giving rise to such repayment no longer
apply: 

     

              (a) All Loans which would otherwise be made as LIBOR Loans shall be made
instead as Prime Loans, and 

     

              (b) After each of the LIBOR Loans to Borrower has been so repaid, all
payments and prepayments of principal which would otherwise be applied to repay
such LIBOR Loans shall be applied to repay its Prime Loans instead.

     

    Agent shall notify
Borrower if and when the circumstances giving rise to such repayment no longer
apply. 

     

    ARTICLE 8 - THE AGENT 

     

         SECTION 8.1 Appointment, Authority, and Duties of Agent;
Professionals.

     

              (a) Appointment and Authority. Each Bank irrevocably appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement, the Notes, and the other Loan Documents as are
delegated to Agent by the terms hereof or thereof, together with all such powers
as are reasonably incidental thereto. 

     

              (b) Duties; Delegation. The duties of Agent shall be ministerial and
administrative in nature and Agent shall not have any duties or obligations
except those expressly set forth in this Agreement or the other Loan Documents.
Agent shall not have a fiduciary relationship with any Bank or other Person, by
reason of this Agreement or any other Loan Document or any transaction relating
hereto or thereto, regardless of whether a Default or Event of Default exists.
The conferral upon Agent of any right shall not imply a duty on Agent’s part to
exercise such right, unless instructed to do so by the Majority Banks in
accordance with this Agreement. Agent may perform its duties through agents and
employees and may consult with and employ Agent Professionals, and shall be
entitled to act upon, and shall be fully protected in any action taken in good
faith reliance upon, any advice given by any Agent Professional. Agent shall not
be responsible for the negligence or misconduct of any agents, employees, or
Agent Professionals selected by it with reasonable care.

     

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              (c) Instructions of Majority
Banks. The rights and
remedies conferred upon Agent under the Loan Documents may be exercised without
the necessity of joinder of any other party, unless required by applicable law.
Agent may request instructions from Majority Banks with respect to any act
(including the failure to act) in connection with this Agreement or any other
Loan Document, and may seek assurances to its satisfaction from Banks of their
indemnification obligations under Section 8.5 against all claims which could be
incurred by Agent in connection with any act (or failure to act). Agent shall be
entitled refrain from any act until it has received such instructions or
assurances, and Agent shall not incur liability to any Person by reason of so
refraining. Instructions of the Majority Banks shall be binding upon all Banks,
and no Bank or any other Person shall have any right of action whatsoever
against Agent as a result of Agent’s acting or refraining from acting in
accordance with the instructions of the Majority Banks. The Majority Banks,
without the prior written consent of each Bank, may not direct Agent to
accelerate and demand payment of Loans held by one Bank without accelerating and
demanding payment of all other Loans or terminate the Commitments of one Bank
without terminating the Commitments of all Bank. Agent shall not be required to
take any action which, in its opinion, is contrary to applicable law or any Loan
Document or could subject any Agent Indemnitee to liability. 

     

         SECTION 8.2 Agreements Regarding Certain Reports,
Etc. Agent shall promptly
forward to each Bank (upon any such Person’s request therefor), when complete, copies
of any field audit, field examination, or appraisal report prepared by or for
Agent with respect to any Obligor or Subsidiary (each, a “Report”). Each Bank
agrees (i) that neither Wachovia Bank, National Association, nor Agent makes any
representation or warranty as to the accuracy or completeness of any Report and
shall not be liable for any information contained in or omitted from any Report;
(ii) that the Reports are not intended to be comprehensive audits or
examinations of any Person, thing, or matter and that Agent or any other Person
performing any such audit, examination, or appraisal will inspect only specific
information regarding the subject matter thereof and will rely significantly
upon the books and records, as well as upon representations of, the Persons (and
their officers and employees) subject to such audit, examination, or appraisal;
and (iii) to keep all Reports confidential and strictly for such Bank’s internal
use and not to distribute any Report (or the contents thereof) to any Person
(except to such Person’s attorneys and accountants) or use any Report in any
manner other than administration of the Loans and other Obligations. Each Bank
agrees to indemnify and hold harmless Agent and any other Person preparing a
Report from any action such Bank may take as a result of or any conclusion it
may draw from any Report, as well as from any claims arising in connection with
any third parties that obtain any information contained in a Report through such
Bank. 

     

         SECTION 8.3 Reliance By Agent. 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, facsimile, Internet or intranet website
posting, or other distribution), or any statement made to it orally or by
telephone believed by it to be genuine and to have been made, signed, sent, or
otherwise authenticated, as applicable, by the proper Person. In determining
compliance with any condition hereunder to the making of a Loan, or the issuance
of a Letter of Credit, that by its terms must be fulfilled to the satisfaction
of a Bank, Agent may presume that such condition is satisfactory to such Bank
unless Agent shall have received notice to the contrary from such bank prior to
the making of such Loan or the issuance of such Letter of Credit.

     

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         SECTION 8.4 Action Upon Default. Agent shall be entitled to assume that no
Default or Event of Default has occurred and is continuing and shall not be
deemed to have knowledge of any Default or Event of Default unless, in its
capacity as a Bank it has actual knowledge thereof, or it has received written
notice from any other Bank or Borrower specifying the occurrence and nature
thereof. If any Bank acquires knowledge of a Default or Event of Default, it
shall promptly notify Agent and the other thereof in writing specifying in
detail the nature thereof. Each Bank agrees that, except as otherwise provided
in any Loan Documents or with the written consent of Agent and Majority Banks,
it will not take any enforcement action, accelerate the Obligations, or exercise
any right that it might otherwise have under applicable law to credit bid at
foreclosure sales, UCC sales, or other similar dispositions of collateral.
Notwithstanding the foregoing, however, a Bank may take action to preserve or
enforce its rights against Borrower where a deadline or limitation period is
applicable that would, absent such action, bar enforcement of the Obligations
held by such Bank, including the filing of proofs of claim in an insolvency
proceeding. 

     

         SECTION 8.5 Indemnification of Agent
Indemnitees. EACH BANK
SHALL INDEMNIFY AND HOLD HARMLESS AGENT INDEMNITEES, TO THE EXTENT NOT
REIMBURSED BY BORROWER (BUT WITHOUT LIMITING THE INDEMNIFICATION OBLIGATIONS OF
BORROWER UNDER ANY LOAN DOCUMENTS), ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT
MAY BE INCURRED BY OR ASSERTED AGAINST ANY AGENT INDEMNITEE, PROVIDED SUCH CLAIM RELATES TO OR ARISES FROM AN AGENT
INDEMNITEE’S ACTING AS OR FOR AGENT (IN ITS CAPACITY AS AGENT). If Agent is sued
by any receiver, bankruptcy trustee, debtor-in-possession, or other Person for
any alleged preference or fraudulent transfer, then any monies paid by Agent in
settlement or satisfaction of such proceeding, together with all interest,
costs, and expenses (including attorneys’ fees) incurred in the defense of same,
shall be reimbursed to Agent by each Bank to the extent of its pro rata share.
All payment obligations under this Section 8.5 shall be due and payable
ON DEMAND. 

     

         SECTION 8.6 Limitation on Responsibilities of
Agent. Agent shall not be
liable for any action taken or not taken by it under any Loan Document (a) with
the consent or at the request of the Majority Banks (or such other number or
percentage of the Banks as shall be necessary, or as Agent shall believe in good
faith shall be necessary, under the circumstances as provided in Section 9.9) or
(b) in the absence of its own gross negligence or willful misconduct. Agent does
not assume any responsibility for any failure or delay in performance or any
breach by Borrower or any Bank of any obligations under the Loan Documents.
Agent does not make to Banks any express or implied warranty, representation, or
guarantee with respect to the Obligations, collateral, Loan Documents, or
Borrower. No Agent Indemnitee shall be responsible to Banks for (a) any
recitals, statements, information, representations, or warranties contained in
any Loan Documents; (b) the execution, validity, genuineness, effectiveness, or
enforceability of any Loan Documents; (c) the genuineness, enforceability,
collectibility, value, sufficiency, location, or existence of any collateral, or
the validity, extent, perfection or priority of any Lien therein; (d) the
validity, enforceability or collectibility of the Obligations; or (e) the
assets, liabilities, financial condition, results of operations, business,
creditworthiness, or legal status of Borrower. No Agent Indemnitee shall have
any obligation to any Bank to ascertain or inquire into the existence of any
Default or Event of Default, the observance or performance by any Borrower of
any terms of the Loan Documents, or the satisfaction of any conditions precedent
contained in any Loan Documents.

     

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         SECTION 8.7 Successor Agent and
Co-Agents. 

     

              (a) Resignation; Successor
Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, Agent may
resign at any time by giving at least thirty (30) days prior written notice
thereof to Banks and Borrower. Upon receipt of such notice, the Majority Bank
shall have the right to appoint a successor Agent which shall be (i) a Bank or
an affiliate of a Bank or (ii) a commercial bank that is organized under the
laws of the United States or any state or district thereof, has a combined
capital surplus of at least $200,000,000, and (provided no Default or Event of
Default exists) is reasonably acceptable to Borrower. If no successor agent is
appointed prior to the effective date of the resignation of Agent, then Agent
may appoint a successor agent meeting the qualifications set forth above,
provided that if Agent shall notify Borrower and Banks that no qualifying Person
has accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents (except that in the case of any collateral security held by Agent on
behalf of the Banks under any of the Loan Documents the retiring Agent shall
continue to hold such collateral security until such time as a successor Agent
is appointed) and (2) all payments, communications, and determinations provided
to be made by, to or through Agent shall instead be made by or to each Bank
directly, until such time as the Majority Banks appoint a successor Agent as
provided for above in this paragraph. Upon acceptance by a successor Agent of an
appointment to serve as Agent hereunder, such successor Agent shall thereupon
succeed to and become vested with all the powers and duties of the retiring
Agent without further act, and the retiring Agent shall be discharged from its
duties and obligations under the Loan Documents (if not already discharged
therefrom as provided above in this paragraph) but shall continue to have the
benefits of the indemnification set forth in Section 8.5. Notwithstanding any
Agent’s resignation, the provisions of this Section 8 shall continue in effect
for its benefit with respect to any actions taken or omitted to be taken by it
while Agent. Any successor to Wachovia Bank, National Association, by merger or
acquisition of Equity Interests or its Loans hereunder shall continue to be
Agent hereunder without further act on the part of the parties hereto, unless
such successor resigns as provided above. 

     

         SECTION 8.8 Due Diligence and Non-Reliance. Each
Bank acknowledges and agrees that it has, independently and without reliance
upon Agent or any other Bank, and based upon such documents, information, and
analyses as it has deemed appropriate, made its own credit analysis of Borrower
and its own decision to enter into this Agreement and to fund Loans hereunder.
Each Bank has made such inquiries concerning the Loan Documents, and Borrower as
such Bank feels necessary. Each Bank further acknowledges and agrees that the
other Banks and Agent have made no representations or warranties concerning any
Obligor or Subsidiary, or the legality, validity, sufficiency, or enforceability
of any Loan Documents or Obligations. Each Bank will, independently and without
reliance upon the other Banks or Agent, and based upon such financial
statements, documents, and information as it deems appropriate at the time,
continue to make and rely upon its own credit decisions in making Loans and
participating in Letters of Credit and in taking or refraining from any action
under any Loan Documents. Except as expressly required hereby and except for
notices, reports, and other information expressly requested by a Bank, Agent
shall have no duty or responsibility to provide any Bank with any notices,
reports, or certificates furnished to Agent by any Obligor or Subsidiary or any
credit or other information concerning the affairs, financial condition,
business, or Properties of any Obligor or Subsidiary which may come into
possession of Agent or any of its affiliates.

     

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         SECTION 8.9 Remittance of Payments.

     

              (a) Remittances Generally. All payments by any Bank to Agent shall be
made by the time and on the day set forth in this Agreement, in immediately
available funds. If no time for payment is specified or if payment is due on
demand by Agent and request for payment is made by Agent by 11:00 a.m. on a
Domestic Business Day, payment shall be made by Bank not later than 2:00 p.m. on
such day, and if request is made after 11:00 a.m., then payment shall be made by
11:00 a.m. on the next Domestic Business Day. Payment by Agent to any Bank shall
be made by wire transfer, in the type of funds received by Agent. Any such
payment shall be subject to Agent’s right of offset for any amounts due from
such Bank under the Loan Documents. 

     

              (b) Failure to Pay. If any Bank fails to pay any amount when due
by it to Agent pursuant to the terms hereof, such amount shall bear interest
from the due date until paid at the rate determined by Agent as customary in the
banking industry for interbank compensation. In no event shall Borrower be
entitled to receive credit for any interest paid by a Bank to Agent.

     

              (c) Recovery of Payments. If Agent pays any amount to a Bank in the
expectation that a related payment will be received by Agent from Borrower and
such related payment is not received, then Agent may recover such amount from
each Bank that received it. If Agent determines at any time that an amount
received under any Loan Document must be returned to Borrower or paid to any
other Person pursuant to applicable law or otherwise, then, notwithstanding any
other term of any Loan Document, Agent shall not be required to distribute such
amount to any Bank. If any amounts received and applied by Agent to any
Obligations are later required to be returned by Agent pursuant to applicable
law, each Bank shall pay to Agent, on demand, such Bank’s Pro Rata Share of the
amounts required to be returned. 

     

         SECTION 8.10 Agent in its Individual
Capacity. As a Bank,
Wachovia Bank, National Association, shall have the same rights and remedies
under the other Loan Documents as any other Bank, and the terms “Banks,”
“Majority Banks,” or any similar term shall include Wachovia Bank, National
Association, in its capacity as a Bank. Each of Wachovia Bank, National
Association, and its affiliates may accept deposits from, maintain deposits or
credit balances for, invest in, lend money to, provide bank products and
services to, act as trustee under indentures of, serve as financial or other
advisor to, and generally engage in any kind of business with, Borrower and it’s
affiliates, as if Wachovia Bank, National Association, were any other bank,
without any duty to account therefor (including any fees or other consideration
received in connection therewith) to the other Banks. In their individual
capacity, Wachovia Bank, National Association, and its affiliates may receive
information regarding Borrower, its Related Parties, and its account debtors
(including information subject to confidentiality obligations), and each Bank
agrees that Wachovia Bank, National Association, and it’s affiliates shall be
under no obligation to provide such information to Banks if acquired in such
individual capacity and not as Agent hereunder.

     

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         SECTION 8.11 No Third Party
Beneficiaries. This
Article 8 is an agreement solely among Agent and Banks and shall survive payment
in full of the obligations. This Article 8 does not confer any rights or
benefits upon Borrower or any other Person, and Borrower shall not have any
standing to enforce this Article 8. As between Borrower and Agent, any action
that Agent may take under any Loan Documents or with respect to any of
Obligations shall be conclusively presumed to have been authorized and directed
by the Banks, as applicable. 

     

    ARTICLE 9 - MISCELLANEOUS

     

         SECTION 9.1 Notices; Electronic
Communications.

     

              (a) Notices Generally. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telecopy or similar writing) and shall be given to such party at its address or
telecopy number set forth on the signature pages hereof or such other address or
telecopy number as such party may hereafter specify for the purpose by notice to
Agent or Borrower as the case may be. Each such notice, request or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section, (ii) if given by
mail, 72 hours after such communication is deposited in the mails with
appropriate first class, certified or registered postage prepaid, addressed as
aforesaid, or (iii) if given by any other means, when delivered at the address
specified in this Section; provided that notices to Agent and/or the Banks under
Section 2.2, 2.4, 2.7, 2.8 or Article 7 shall not be effective until received.

     

              (b) Telephonic and Electronic
Communications.

     

              (i) Loan Mechanics. Borrower authorizes Agent and the Banks to
extend, convert, or continue Loans, issue Letters of Credit, effect selections
of interest rates, and transfer funds to or on behalf of Borrowers based on
instructions sent telephonically or by electronic mail. Borrower shall confirm
each such request by prompt delivery to Agent of a Notice of Borrowing, a Notice
of Swingline Borrowing, or other request or notice, if applicable, but if the
foregoing differs in any material respect from the action taken by Agent or
Banks, the records of Agent and Banks shall govern.

     

              (ii) Routine Communications. Electronic mail and internet websites may be
used for delivery of financial statements, Borrowing Base Certificates, and
other information required by Section 5.1(a) (other than notices),
administrative matters, and distribution of Loan Documents for execution,
pursuant to procedures approved by Agent or as otherwise determined by Agent.
Anything herein to the contrary notwithstanding, except as expressly provided
Section 9.1(a), notices delivered telephonically or by electronic mail may not
be used as effective notice under the Loan Documents.

     

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              (iii) Privacy; Receipt. Agent and the Banks make no assurances as to
the privacy and security of telephonic or electronic communications. Unless
Agent otherwise requires, (A) communications sent to an electronic 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 communication is not sent during the normal business hours of the
recipient, such communication shall be deemed to have been sent at the opening
of business on the next Business Day for the recipient and (B) 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 (A) of notification that such communications is available
and identifying the website address therefor. 

     

              (iv) Limitation of Liability;
Indemnification. Neither
Agent nor any Bank shall have any liability for any loss suffered by Borrower as
a result of Agent or any Bank’s acting upon its understanding of telephonic or
electronic mail requests or instructions from a person believed in good faith by
such Person to be a person authorized to give such requests or instructions on
Borrower’s behalf. Borrower shall indemnify Agent and the Bank’s and hold
harmless each of them harmless from any claims arising from any telephonic or
electronic communication purportedly given by or on behalf of Borrower.

     

              (v) Suspension of Telephonic and Electronic
Communications. Borrower
acknowledges that communication by telephone or electronic mail as provided in
this section is a courtesy extended by Agent to Borrower and, therefore, Agent
may, in its discretion and upon notice to Borrower, (A) cease or suspend any
actual or implied obligation it may have to act based on such telephonic or
electronic communications and (B) thereafter, disregard any such telephonic or
electronic communications. 

     

              (vi) Non-Conforming
Communications. Agent and
each Bank may rely upon any notices purportedly given by or on behalf of
Borrower even if such notices were not made in a manner specified in this
Agreement or any other applicable Loan Document, were incomplete, or were not
confirmed or if the terms thereof, as understood by the recipient, varied from a
later confirmation. 

     

         SECTION 9.2 No Waivers. No failure or delay by Agent or any of the
Banks in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other right, power or privilege. The rights and remedies
provided herein and in the other documents contemplated hereby shall be
cumulative and not exclusive of any rights or remedies provided by law.

     

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         SECTION 9.3 Expenses; Documentary Taxes.
Borrower agrees, whether or not any Loan
is made or Letter of Credit issued hereunder, to pay Banks upon demand: (a) all
out-of-pocket costs and expenses and all Attorneys’ Fees of Banks in connection
with the preparation, negotiation, execution and administration of this
Agreement, the Notes, and the other Loan Documents, (b) all out-of-pocket costs
and expenses and all Attorneys’ Fees of Banks in connection with the preparation
of any waiver or consent hereunder or any amendment hereof or any Event of
Default or alleged Event of Default hereunder, (c) if an Event of Default
occurs, all out-of-pocket costs and expenses and all Attorneys’ Fees incurred by
any Bank in connection with such Event of Default and collection and other
enforcement proceedings resulting therefrom, and (d) all other Attorneys’ Fees
incurred by Bank relating to or arising out of or in connection with this
Agreement or any of the other Loan Documents. Borrower further agrees to pay or
reimburse Banks for any stamp or other taxes which may be payable with respect
to the execution, delivery, recording and/or filing of this Agreement, the
Notes, or any of the other Loan Documents. All of the obligations of Borrower
under this Section 9.3 shall survive the satisfaction and payment of the
Obligations and the termination of this Agreement.

     

         SECTION 9.4 Environmental Indemnity. Borrower hereby agrees to indemnify Agent
and Banks and hold Agent and Banks harmless from and against any and all losses,
liabilities, damages, injuries, costs, expenses and claims of any and every kind
whatsoever (including, without limitation, court costs and Attorneys’ Fees)
which at any time or from time to time may be paid, incurred or suffered by, or
asserted against, Agent or any Bank for, with respect to or as a direct or
indirect result of the violation by Borrower or any Subsidiary of any
Environmental Laws; or with respect to, or as a direct or indirect result of the
presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission or release from, properties utilized by Borrower or any Subsidiary in
the conduct of its respective business into or upon any land, the atmosphere or
any watercourse, body of water or wetland, of any Hazardous Materials or any
other hazardous or toxic waste, substance or constituent or other substance
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under the Environmental Laws);
provided that Borrower shall have no obligation to an Indemnitee hereunder with
respect to indemnified liabilities to the extent arising from the gross
negligence or willful misconduct of such Indemnitee as determined by a court of
competent jurisdiction in a final non-appealable order. The provisions of and
undertakings and indemnification set out in this Section 9.4 shall survive the
satisfaction and payment of the Obligations and the termination of this
Agreement.

     

         SECTION 9.5 General Indemnity. In addition to the payment of expenses
pursuant to Section 9.3, whether or not the transactions contemplated hereby
shall be consummated, Borrower hereby agrees to indemnify, pay and hold Agent
and Banks and any holder(s) of the Notes, and the officers, directors,
employees, agents and affiliates of Agent, Banks and such holder(s)
(collectively, the “Indemnitees”) harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitees
shall be designated a party thereto), that may be imposed on, incurred by or
asserted against the Indemnitees, in any manner relating to or arising out of
this Agreement or any other agreement, document or instrument executed and
delivered by Borrower or any other Obligor in connection herewith, the
statements contained in any commitment letters delivered by Agent or any Bank,
Banks’ agreements to make the Loans and issue Letters of Credit hereunder or the
use or intended use of any Letter of Credit or of the proceeds of any Loan
hereunder (collectively, the “indemnified liabilities”); provided that Borrower
shall have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of that
Indemnitee as determined by a court of competent jurisdiction. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or any
of them. The provisions of the undertakings and indemnification set out in this
Section 9.5 shall survive satisfaction and payment of the Obligations and the
termination of this Agreement.

     

    55

     

    

    
    

         SECTION 9.6 Participations. Each Bank may sell to one or more other
Persons a participation in all or any part of its Commitment and any Loan and
Letter of Credit risk held by it, in which event each such participant shall be
entitled to all rights and benefits under this Agreement and the Notes (except
with respect to voting rights as set forth below) to the extent of its
participation in such Loan and Letter of Credit risk or such Bank’s Commitment,
as the case may be, as if (and Borrower shall be directly obligated to such
participant under such provision as if) such participant were a “Bank” except
only to the extent otherwise provided under the Participation Agreement between
such selling Bank and such participant(s). The Banks agree to notify Borrower of
any participation sold by delivering a copy of such Participation Agreement to
Borrower. No participant shall have the right to vote on any matter requiring
the consent of the Majority Banks except the following: (a) the increase or
extension of the Term, or the extension of the time or waiver of any requirement
for the reduction or termination, of the Commitment of the Bank that sold the
participation, (b) the extension of any date fixed for the payment of principal
of or interest on the related Loan or Loans, any Letter of Credit reimbursement
obligation or fee, or of the commitment fee, (c) the reduction of any payment of
principal thereof, (d) the reduction of the rate at which either interest is
payable thereon or (if the participant is entitled to any part thereof) the
commitment fee is payable hereunder to a level below the rate at which the
participant is entitled to receive interest or such fee (as the case may be) in
respect of such participation, or (e) the release of any Obligor from its
obligations to the Banks hereunder or under any other Loan Document or agreement
related hereto. 

     

         SECTION 9.7 Assignments. Each Bank may, upon prior notice to and
consent of Borrower and Agent, which consent shall not be unreasonably withheld
or delayed and which consent of Borrower shall not be required after the
occurrence of a Default or an Event of Default hereunder, from time to time sell
and assign a pro rata part of all of the Debt evidenced by the Note then owned
by it together with an equivalent proportion of its obligation to make Revolving
Loans hereunder and the credit risk incidental to the Letters of Credit and
Swingline Loans pursuant to an assignment and acceptance substantially in the
form of Exhibit F attached hereto, executed by the assignor,
the assignee, Agent, and, so long as no Default or Event of Default is in
existence, Borrower (which consent by Borrower shall not be unreasonably
withheld or delayed) (each an “Assignment and Acceptance”); provided that no
assignment under this Section 9.7 shall be made by any Bank to Borrower or to
any Subsidiary, Related Party or other affiliate of Borrower. The Assignment and
Acceptance shall specify in each instance the portion of the Debt evidenced by
the assignor’s Note which is to be assigned to each such assignee and the
portion of the Commitment of the assignor and the credit risk incidental to the
Letters of Credit (which portions shall be equivalent) to be assumed by the
assignee, provided that nothing herein contained shall restrict, or be deemed to
require any consent as a condition to, or require payment of any fee in
connection with, any sale, discount or pledge by any Bank of any Note or other
obligation hereunder to a federal reserve bank. Any such portion of the Debt
assigned by any Bank pursuant to this Section 9.7 shall not be less than
$5,000,000 unless it shall constitute all Debt owing to the assignor. Upon the
execution of each Assignment and Acceptance by the assignor, the assignee and,
if required, Borrower and consent thereto by Agent (i) such assignee shall
thereupon become a “Bank” for all purposes of this Agreement with a Commitment
in the amount set forth in such Assignment and Acceptance and with all the
rights, powers and obligations afforded a Bank hereunder, (ii) the assignor
shall have no further liability for funding the portion of its Commitment
assumed by such other Bank, (iii) the address for notices to such new Bank shall
be as specified in the Assignment and Acceptance, and (iv) Borrower shall, in
exchange for the cancellation of the Note held by the assignor Bank, execute and
deliver a Note to the assignee Bank in the amount of its Commitment and new Note
to the assignor Bank in the amount of its Commitment after giving effect to the
reduction occasioned by such assignment, all such Notes to constitute “Notes”
for all purposes of this Agreement. There shall be paid to Agent, as a condition
to each such assignment, an administration fee of $3,500 plus any out-of-pocket
costs and expenses incurred by it in effecting such assignment, such fee to be
paid by the assignor or the assignee as they may mutually agree, but under no
circumstances shall any portion of such fee be payable by or charged to
Borrower. Agent and each of the Banks are hereby authorized to deliver a copy of
any financial statement or other information made available by Borrower to any
proposed assignee or participant in any portion of any Bank’s Loans and
Commitment hereunder.

     

    56 

     

    

    
    

         SECTION 9.8 Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, each Bank is hereby authorized at any time
and from time to time, without notice to Borrower (any such notice being
expressly waived by Borrower) and to the fullest extent permitted by law, to
setoff and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by such Bank and any and all other Debt
at any time owing by such Bank to or for the credit or account of Borrower
against any and all of the Obligations irrespective of whether or not such Bank
shall have made any demand hereunder or under any of the other Loan Documents
and although such obligations may be contingent or unmatured. Each offsetting
Bank agrees to promptly notify Borrower after any such setoff and application
made by such Bank, provided, however, that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of Banks
under this Section 9.8 are in addition to any other rights and remedies
(including, without limitation, other rights of setoff) which Banks may have. As
among themselves, each of the Banks hereby agrees that in the event any Bank
shall at any time receive payments against any Obligations from any source,
whether by setoff or otherwise, and the effect of such payments is to cause such
Bank to receive more than its Pro Rata Share of the total principal payments
made to all Banks in the aggregate, then such Bank agrees to purchase from the
other Bank or Banks participating in the Obligations hereunder a participating
interest in such Bank’s loans to the extent necessary to restore each Bank to
its Pro Rata Share of the Obligations hereunder. 

     

         SECTION 9.9 Amendments and Waivers. Any provision of this Agreement, the Notes
or any of the other Loan Documents may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by Borrower, Agent, and the
Majority Banks; provided that no such amendment or waiver shall, without the
written consent of each Bank affected thereby, (i) increase the Commitment of
any Bank, (ii) change the Pro Rata Share of any of the Banks as to the
Commitments or of the aggregate unpaid principal amount of any Loan, (iii)
reduce the principal of or rate of interest on any Loan hereunder or any other
amount payable hereunder, (iv) postpone the date fixed for any payment of any
principal of, or interest on, any Loan or interest thereon or any fees hereunder
or reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date for the termination or reduction of any Commitment, (v) amend
Section 9.8 or this Section 9.9, (vi) make any change in the Borrowing Base or
its calculation, (vii) waive compliance with or otherwise amend the financial
covenants contained in Sections 5.1 (e)(i) and (ii), (viii) amend the definition
of Majority Banks, or (ix) release all or substantially all of the Guarantors or
other Obligors or substantially limit the liability of any such Guarantor or
other Obligor under any Subsidiary Guaranty Agreement or other applicable
agreement.

     

    57 

     

    

    
    

         NOTICE: ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER, AGENT AND THE BANKS
FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS BORROWER, AGENT AND THE
BANKS REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER, AGENT AND
THE BANKS, EXCEPT AS BORROWER, AGENT AND THE BANKS MAY LATER AGREE IN WRITING TO
MODIFY SUCH AGREEMENT. 

     

         SECTION 9.10 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that Borrower may not assign or otherwise
transfer any of its rights or obligations under this Agreement or the Notes.

     

         SECTION 9.11 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.

     

         SECTION 9.12 Replacement of Defaulting
Bank. In the event that a
Replacement Event occurs and is continuing with respect to any Bank, Borrower
may designate another financial institution (such financial institution being
herein called a “Replacement Bank”) acceptable to Agent, and which is not
Borrower or Related Party of Borrower, to assume such Bank’s Commitment
hereunder, to purchase the Loans and participations of such Bank and such Bank’s
rights hereunder and (if such Bank is the Issuer) to issue Letters of Credit in
substitution for all outstanding Letters of Credit issued by such Bank, without
recourse to or representation or warranty by, or expense to, such Bank for a
purchase price equal to the outstanding principal amount of the Loans payable to
such Bank plus any accrued but unpaid interest on such Loans and accrued but
unpaid unused fees and letter of credit fees owing to such Bank plus amounts
necessary to cash collateralize any Letters of Credit issued by such Bank, and
upon such assumption, purchase, and substitution, and subject to the execution
and delivery to Agent by the Replacement Bank of documentation satisfactory to
Agent (pursuant to which such Replacement Bank shall assume the obligations of
such original Bank under this Agreement), the Replacement Bank shall succeed to
the rights and obligations of such Bank hereunder and such Bank shall no longer
be a party hereto or have any rights hereunder provided that the obligations of
Borrower to indemnify such Bank with respect to any event occurring or
obligations arising before such replacement shall survive such replacement.
“Replacement Event” shall mean, with respect to any Bank, (a) the commencement
of or the taking of possession by, a receiver, custodian, conservator, trustee
or liquidator of such Bank, or the declaration by the appropriate regulatory
authority that such Bank is insolvent, (b) such Bank’s becoming a Defaulting
Bank, or (c) such Bank’s failure to consent to any amendment, waiver, or consent
as to which the consent of all Banks is required, but only if Majority Banks
shall have agreed to such amendment, waiver, or consent.

     

    58 

     

    

    
    

         SECTION 9.13 Authority to Act. Agent and the Banks shall be entitled to act
on any notices and instructions (telephonic or written) believed by Agent or
such Bank to have been delivered by any person authorized to act on behalf of
Borrower pursuant hereto, regardless of whether such notice or instruction was
in fact delivered by a person authorized to act on behalf of Borrower, and
Borrower hereby agrees to indemnify Agent and each Bank and hold Agent and each
Bank harmless from and against any and all losses and expenses, if any, ensuing
from any such action. 

     

         SECTION 9.14 Banks’ Books and Records. The Agent’s and each Bank’s books and
records showing the account between Borrower and such Bank shall be admissible
in evidence in any action or proceeding and shall constitute prima facie proof
thereof. 

     

         SECTION 9.15 GOVERNING LAW; CHOICE OF FORUM; WAIVER
OF JURY TRIAL. This Agreement and the other Loan Documents
shall be construed in accordance with and be governed by the law (without giving
effect to the conflict of law principles thereof) of the State of New York. TO
INDUCE AGENT AND THE BANKS TO ACCEPT THIS AGREEMENT, BORROWER, IRREVOCABLY,
AGREES THAT ANY ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT ARISING OUT
OF OR FROM OR RELATED TO THIS AGREEMENT AND THE NOTE MAY BE LITIGATED IN COURTS
HAVING SITUS WITHIN NEW YORK CITY, STATE OF NEW YORK. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT IN ACCORDANCE WITH THIS
SECTION. BORROWER AND BANK IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY ACTION IN WHICH BORROWER, AGENT OR ANY OF THE BANKS ARE PARTIES.

     

         SECTION 9.16 Resurrection of Obligations. To the extent that any Bank receives any
payment on account of Borrower’s liabilities, and any such payment(s) or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, then, to the extent of such payment(s) received,
Borrower’s liabilities, or part thereof intended to be satisfied, shall be
revived and continue in full force and effect, as if such payment(s) had not
been received by such Bank and applied on account of Borrower’s liabilities.

     

    59 

     

    

    
    

     

         SECTION 9.17 Counterparts; Fax or other Transmission;
Section References; Effectiveness.

     

              (a) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
This Agreement may be executed by each party on separate copies, which copies,
when combined so as to include the signatures of all parties, shall constitute a
single counterpart of the Agreement. 

     

              (b) Delivery by one or more parties hereto of an executed counterpart of this
Agreement via facsimile, telecopy, or other electronic method of transmission
pursuant to which the signature of such party can be seen (including, without
limitation, Adobe Corporation’s Portable Document Format) shall have the same
force and effect as the delivery of an original executed counterpart of this
Agreement. Any party delivering an executed counterpart of this Agreement by
facsimile or other electronic method of transmission shall also deliver an
original executed counterpart, but the failure to do so shall not affect the
validity, enforceability, or binding effect of this Agreement. 

     

              (c) Section titles and references used in this Agreement shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreements among the parties hereto evidenced hereby. 

     

              (d) This Agreement shall become effective when Agent shall have received
counterparts hereof signed by each of the parties hereto. 

     

    [Signatures on
following page.]

     

    60 

     

    

    
    

         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.

     

    
      	
            	SHOE CARNIVAL,
      INC. 
	
            	
            	 
	
            	
            	 
	
            	By: 	/s/ W. Kerry
      Jackson 	 
	
            	
            	W. Kerry Jackson
	
            	
            	Executive Vice President &
    CFO
	
            	
            	7500 East Columbia Street
	
            	
            	Evansville, Indiana 47715
	
            	
            	Telecopy Number:
  812-471-9859

    

    - 61
-

     

    

    
    

    
      	Commitment:	WACHOVIA BANK, NATIONAL
      ASSOCIATION, as Agent
	 
	$30,000,000 (60.0%)	 	 
	
            	By:  	/s/ Linda D.
      Coley	 
	
            	 	Linda D. Coley
	
            	 	Senior Vice President
	
            	 	Commercial Banking MAC
    Z3055-022
	
            	 	Wachovia Bank, National
      Association
	
            	 	A Wells Fargo Company
	
            	 	225 Water Street, 2nd Floor
	
            	 	Jacksonville, FL 32202
	
            	 	Telecopy Number: (904)
  489-3130

    

    - 62
-

     

    

    
    

    
      	Commitment:	FIFTH
      THIRD BANK 
	  
	$20,000,000 (40%) 	  
	
            	By:   	/s/ Dwight
    Hamilton 	 
	
            	 	Dwight Hamilton 
	
            	 	Senior Vice President 
	
            	 	20 NW Third Street
  47708 
	
            	 	Post Office Box 778 
	
            	 	Evansville, Indiana
      47705-0778 
	
            	 	Telephone: (812)
  456-3394 
	
            	 	Telecopy Number: (812)
      456-4060 

    

    - 63 -

     

    

    
    

    EXHIBIT
A

     

    FORM OF
PROMISSORY NOTE

     

    
      	US $[______________] 	January [_],
  2010

    

         FOR VALUE RECEIVED, the undersigned, Shoe
Carnival, Inc., an Indiana corporation (the “Borrower”), hereby promises to pay to
the order of [______________] (hereinafter, together with its successors
and assigns, the “Bank”), at the office of the Agent (as
defined below), in immediately available funds, the principal sum of
[________________________and ___]/100 DOLLARS ($[______________]) of United
States funds, or, if less, so much thereof as may from time to time be advanced
as Revolving Loans by the Bank to the Borrower hereunder, plus interest as
hereinafter provided.

     

         The Borrower further agrees to pay interest at
said office, in like money, on the unpaid principal amount owing hereunder from
time to time outstanding from the date of disbursement on the dates and at the
rates specified in Section 2.5 of the Credit Agreement (as defined
herein).

     

         If any payment on this promissory note becomes
due and payable on a day other than a Domestic Business Day, the maturity
thereof shall be extended to the next succeeding Domestic Business Day, and with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. 

     

         This Promissory Note is one of the Notes
referred to in Section 2.3(a) of that certain Credit Agreement dated as of
January 20, 2010 (as amended, restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”), by and among the
Borrower, the financial institutions from time to time party thereto (the “Banks”), and Wachovia Bank, National
Association (together with its successors and assigns, the “Agent”), as Agent for the
Banks.

     

         This Promissory Note is entitled to the
benefits of, and evidences Obligations incurred under, the Credit Agreement, to
which reference is made for a statement of the terms and conditions on which
Borrower is permitted and required to make prepayments and repayments of
principal of the Obligations evidenced by this Promissory Note and on which such
Obligations may be declared immediately due and payable.

     

         Upon the occurrence of any one or more of the
Events of Default specified in the Credit Agreement, the Agent and the Banks may
exercise such rights and remedies described in Article 6 of the Credit Agreement
and otherwise available under applicable law and at equity.

     

         Borrower hereby waives all requirements as to
diligence, presentment, demand of payment, protest, and (except as required by
the Credit Agreement) notice of any kind with respect to this Promissory
Note.

     

    [Remainder of this page intentionally left
blank.]

     

    

    
    

         THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
PROMISSORY NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).

     

     

     

    
      	SHOE CARNIVAL,
      INC.   
	 
	By:	 

    

    
      	Name:	 
	Title:	 
	 
	 	(SEAL)

    

    

    
    

    EXHIBIT B

     

    FORM OF SWINGLINE
NOTE

     

    
      	$10,000,000.00	January [_], 2010

    

         FOR VALUE RECEIVED, the undersigned (the
“Borrower”) promises to pay to the order of WACHOVIA BANK,
NATIONAL ASSOCIATION (together with its successors and assigns, the
“Agent”), at the office of the Agent in lawful money of the
United States of America and in immediately available funds, the principal
amount of Ten Million Dollars ($10,000,000.00), or such lesser amount as may
then constitute the unpaid aggregate principal amount of all Swing Loans made by
the Agent to the Borrower pursuant to the Credit Agreement (as defined below),
at the times set forth in the Credit Agreement.

     

         The Borrower further agrees to pay interest at said
office, in like money, on the unpaid principal amount owing hereunder from time
to time outstanding from the date of disbursement on the dates and at the rates
specified in Section 2.5 of the Credit Agreement (as defined
herein).

     

         If any payment on this promissory note becomes due
and payable on a day other than a Domestic Business Day, the maturity thereof
shall be extended to the next succeeding Domestic Business Day, and with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. 

     

         This promissory note is the Swingline Note referred
to in Section 2.3(b) of that certain Credit Agreement dated as of January 20,
2010 (as amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”), by and among the Borrower, the financial
institutions from time to time party thereto (the “Banks”), and Agent. All capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement except to
the extent such capitalized terms are otherwise defined or limited
herein.

     

         This Swingline Note is entitled to the benefits of,
and evidences Obligations incurred under, the Credit Agreement, to which
reference is made for a statement of the terms and conditions on which Borrower
is permitted and required to make prepayments and repayments of principal of the
Obligations evidenced by this Swingline Note and on which such Obligations may
be declared immediately due and payable.

     

         Upon the occurrence of any one or more of the Events
of Default specified in the Credit Agreement, the Agent and the Banks may
exercise such rights and remedies described in Article 6 of the Credit Agreement
and otherwise available under applicable law and at equity.

     

         Borrower hereby waives all requirements as to
diligence, presentment, demand of payment, protest, and (except as required by
the Credit Agreement) notice of any kind with respect to this Swingline
Note.

     

    [Remainder of
this page intentionally left blank.]

     

    

    
    

         THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
PROMISSORY NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).

     

     

     

    
      	SHOE CARNIVAL,
      INC.   
	 
	By:	 

    

    
      	Name:	 
	Title:	 
	 
	 	(SEAL)

    

    

    
    

    EXHIBIT
C

     

    FORM OF
NOTICE OF BORROWING

     

    January [_], 20__

     

    Wachovia Bank, National Association
A Wells
Fargo Company
Commercial Banking MAC Z3055-022
225 Water Street, 2nd
Floor
Jacksonville, FL 32202
Attention: Linda Coley
Telephone:
904-489-3140
Facsimile: 904-489-3130

     

    Ladies and Gentlemen:

     

         The undersigned, SHOE CARNIVAL, INC., an
Indiana corporation (the “Borrower”) party to that certain Credit
Agreement dated as of January 20, 2010, among the Borrower, certain other
financial institutions for time to time party thereto (the “Banks”), and Wachovia Bank, National
Association (together with its successors and assigns, the “Agent”), as Agent for the Banks (as
amended, restated, supplemented, or otherwise modified from time to time, the
“Credit Agreement”;
capitalized terms used herein but not defined herein shall have the meanings
given such terms in the Credit Agreement), hereby gives you notice, irrevocably,
pursuant to Section 2.2 of the Credit
Agreement that the Borrower hereby requests Borrowings under the Credit
Agreement, and in that connection sets forth below the information relating to
such Borrowings (the “Proposed Borrowings”) as required by
Section 2.2 of the Credit
Agreement:

     

    
      	
            	
            	
            	
            	If LIBOR Loan –
      Select
	Date of	 	Swingline Loan
      or	[Prime Loan1 or
    LIBOR	Interest Period (1,2,3
      or
	Borrowing	Amount	Revolving
    Loan	Loan]	6 months)
	
            	
            	
            	 	
            
	
            	
            	
            	 	
            
	
            	
            	
            	 	
            
	
            	
            	
            	 	
            

    

         All Loans shall be disbursed in the
manner set forth on Schedule A.

     

         The Borrower hereby certifies that the
following statements are true on the date hereof, and will be true on the date
of the Proposed Borrowing:

     

    
      	____________________
	1 All Swingline
      Loans must be Prime Loans

    

    

    
    

         (A) the representations and warranties contained in
the Credit Agreement are true and correct;

     

         (B) no Default or Event of Default has occurred, is
continuing, or will occur as a result of the Proposed
Borrowing;

     

         (C) no material adverse change in the business,
financial position or results of operation, of Borrower has occurred since the
Effective Date and is continuing, and no legal or administrative proceedings
have been commenced or threatened against Borrower which would be likely to have
a Material Adverse Effect;

     

         (D) all of the other conditions to the Proposed
Borrowings set forth in Sections 2.2 and 3.1 of
the Credit Agreement have been fulfilled; and

     

         (E) the Proposed Borrowings satisfy all limitations
set forth in the Credit Agreement (including, without limitation, availability
under the Borrowing Base).

     

    

    
    

    
      	SHOE CARNIVAL, INC.  
	 
	By:	 

    

    
      	Name:	 
	Title:	 

    

    

    
    

    SCHEDULE
A

     

    
      	
            	Account
      Payee and Wiring Instructions	Amount
	1	
            	$[______]

    

    

    
    

    EXHIBIT
D

     

    FORM OF
COMPLIANCE CERTIFICATE

     

         This Certificate is issued pursuant to
Sections 5.1(a)(iii) and 5.1(e)(iv) of that certain Credit Agreement dated as of
January 20, 2010, by and among Shoe Carnival, Inc., an Indiana corporation (the
“Borrower”), the financial institutions
from time to time party thereto (the “Banks”), and Wachovia Bank, National
Association (together with its successors and assigns, the “Agent”), as Agent for the Banks (as
amended, restated, supplemented, or otherwise modified from time to time, the
“Credit Agreement”). Capitalized terms
used herein but not defined herein shall have the meanings assigned to such
terms in the Credit Agreement.

     

         Pursuant to Sections 5.1(a)(iii) and
5.1(e)(iv) of the Credit Agreement, the undersigned chief financial officer or
principal accounting officer of Borrower, hereby certifies, represents, and
warrants to Agent and Banks as follows:

     

              (i) As of the date hereof, no Default or Event
of Default has occurred under the Credit Agreement or is
continuing;

     

              (ii) Borrower is in compliance with the
financial covenants set forth in Section 5.1(a)(iii) and Section 5.1(e)(iv) of
the Credit Agreement, as demonstrated by the financial calculations attached
hereto as Schedule 1 and made a part hereof;
and

     

              (iii)
As of ____________________,
20__, the financial calculations contained in Schedule 1 hereto are true, correct,
and complete.

     

         Dated as of [____________].

     

    [SIGNATURE TO FOLLOW]

     

    

    
    

    
      	SHOE CARNIVAL,
      INC.   
	 
	By:	 

    

    
      	Title:	  

    

    

    
    

    SCHEDULE
1

     

    [ATTACH
FINANCIAL CONSENT CALCULATIONS]

     

    

    
    

    EXHIBIT
E

     

    FORM OF
BORROWING BASE CERTIFICATE

     

    Shoe Carnival,
Inc.

     

    Borrowing Base
Certificate

     

    This Borrowing Base
Certificate is delivered pursuant to the terms of the Credit Agreement dated
January 20, 2010, by and between Shoe Carnival, Inc., Wachovia Bank, National
Association, as agent, and the Banks named therein. All capitalized terms used
and not otherwise defined herein shall have the respective meanings ascribed to
them in the Credit Agreement.

     

    Borrower hereby
represents and warrants to Banks that the following information is true and
correct as of "Date"

     

    
      	1.	       	Inventory at Cost	
            	0 	 
	2.	
            	less
      Capitalized Overhead Costs	
            	0 	
            
	3.	
            	Subtotal (1-2)	
            	0 	
            
	4.	
            	Goods
      in Transit (not included above)	
            	0 	
            
	5.	
            	Sub-Total (3+4)	
            	0 	
            
	6.	
            	Shoe
      Carnival Book Reserve	0 	
            	
            
	
            	 	(excluding capitalized overhead costs	
            	
            	
            
	
            	
            	contained in Book
      Reserve           $0	
            	
            	
            
	7.	
            	Inventory More Than 1 Year Old	0	 	
            
	8.	
            	Ineligible Inv (Greater of 6 or 7)	
            	0 	
            
	9.	
            	Eligible Inventory (5-8)	
            	0 	
            
	10.	
            	Inventory Availability (NTE $50,000,000)	 	50.00% 	0 
	 
	11.	
            	Aggregate Principal Amount of Outstanding Loans	
            	0 	
            
	 
	12.	
            	Borrowing Base Availability (Deficit) (10-11)	
            	
            	
            
	
            	
            	(Negative Amount Represents Mandatory Repayment)	
            	
            	0 
	 	 	 	 	 	 

    

    If Item 12 above is
negative, this Borrowing Base Certificate is accompanied by the mandatory
repayments required under the Credit Agreement.

     

    

    
    

    This Borrowing Base
Certificate is dated the _______ day of ____________________
2010.  

     

    Shoe Carnival, Inc.

     

    
      	By:	    	 
    	 
	
            	
            	 
	Title:    	
            	Executive Vice President & Chief Financial
  Officer

    

    

    
    

    EXHIBIT
F

     

    FORM OF
ASSIGNMENT AND ACCEPTANCE

     

         This Assignment and Acceptance (the
“Assignment and Acceptance”) is dated as
of the Effective Date set forth below and is entered into by and between the
Assignor identified in item 1 below (the “Assignor”) and the Assignee identified
in item 2 below the “Assignee”). Capitalized terms used but
not defined herein shall have the meanings given to them in the Credit Agreement
identified below (as amended, restated, supplemented, or otherwise modified from
time to time, the “Credit Agreement”), receipt of a copy
of which is hereby acknowledged by the Assignee. The Standard Terms and
Conditions set forth in Annex 1 attached hereto (the “Standard Terms and Conditions”) are
hereby agreed to and incorporated herein by reference and made a part of this
Assignment and Acceptance as if set forth herein in full.

     

         For an agreed consideration, the
Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee
hereby irrevocably purchases and assumes from the Assignor, subject to and in
accordance with the Standard Terms and Conditions and the Credit Agreement, as
of the Effective Date inserted by the Agent as contemplated below (i) all of the
Assignor’s rights and obligations in its capacity as a Bank under the Credit
Agreement and any other documents or instruments delivered pursuant thereto to
the extent related to the amount and percentage interest identified below of all
of such outstanding rights and obligations of the Assignor under the respective
facilities identified below (including, without limitation, any letters of
credit, guarantees, and swingline loans included in such facilities) and (ii) to
the extent permitted to be assigned under applicable law, all claims, suits,
causes of action, and any other right of the Assignor (in its capacity as a
Bank) against any Person, whether known or unknown, arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby, or in any
way based on or related to any of the foregoing, including, but not limited to,
contract claims, tort claims, malpractice claims, statutory claims, and all
other claims at law or in equity related to the rights and obligations sold and
assigned pursuant to clause (i) above (the rights and obligations sold and
assigned by the Assignor to the Assignee pursuant to clauses (i) and (ii) above
being referred to herein collectively as the “Assigned Interest”). Each such sale and
assignment is without recourse to the Assignor and, except as expressly provided
in this Assignment and Acceptance, without representation or warranty by the
Assignor.

     

    
      	1.	       	Assignor:	[______________________________]. 
	
            	
            	 	
            
	2.	
            	Assignee:	[______________________________]. 
	
            	
            	 	
            
	3.	 	Borrower:	Shoe
      Carnival, Inc., an Indiana corporation.
	
            	
            	 	
            
	4.	
            	Agent:	Wachovia Bank, National Association, a national banking
      association.
	
            	
            	 	
            
	5.	
            	Credit
      Agreement:         
    	Credit
      Agreement dated as of January 20, 2010, by and among the Borrower, the
      financial institutions from time to time party thereto, and
      Agent. 

    

    

    
    

    6.       Assigned
Interest:

     

    
      	
            	
            	
            	Aggregate	Amount of	Percentage
	
            	
            	
            	Amount
      of	Commitment /	Assigned of
	Assignor	Assignee	Facility Assigned	Commitment /	Loans	Commitment /
	
            	
            	
            	Loans	Assigned	Loans
	 	
            	
            	for all Banks	
            	
            
	[_____]	[_____]	Revolving
      Loan	$[_____]	$[_____]	[_____]%

    

     

    7.       Trade
Date:                 [__________], 20[__].

     

    8.       Effective
Date:            [__________], 20[__]. [TO BE INSERTED BY AGENT AND
WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]

     

    [SIGNATURES ON
FOLLOWING PAGES.]

     

    

    
    

         The terms set forth in this Assignment and Acceptance
are hereby agreed to:

     

    
      	ASSIGNOR:
	[NAME OF ASSIGNOR]
	 

    

    
      	 
	By:  	 

    

    
      	       Name:  	 

    

    
      	       Title:  	 

    

    
      	 
	 
	ASSIGNEE:
	[NAME OF ASSIGNEE]
	 

    

    
      	 
	By:  	 

    

    
      	       Name:  	 

    

    
      	       Title:  	 

    

    
      	Consented to and
      Accepted:
	 
	WACHOVIA BANK,
      NATIONAL
	ASSOCIATION, as
    Agent
	 

    

    
      	 
	By:  	 

    

    
      	       Name:  	 

    

    
      	       Title:  	 

    

    
      	 
	 
	Consented to: [IF
      REQUIRED] 
	 
	SHOE CARNIVAL,
    INC.
	 
	By:  	 

    

    
      	       Name:  	 

    

    
      	       Title:  	 

    

    

    
    

    ANNEX 1 TO
ASSIGNMENT AND ACCEPTANCE

     

    STANDARD
TERMS AND CONDITIONS FOR
ASSIGNMENT AND ACCEPTANCE

     

         1. Representations and
Warranties.

     

              (a) Assignor. The Assignor (i) represents
and warrants that (A) it is the legal and beneficial owner of the Assigned
Interest, (B) the Assigned Interest is free and clear of any lien, encumbrance,
or other adverse claim, and (C) it has full power and authority, and has taken
all action necessary, to execute and deliver this Assignment and Acceptance and
to consummate the transactions contemplated hereby; and (ii) assumes no
responsibility with respect to (A) any statements, warranties, or
representations made in or in connection with the Credit Agreement or any other
Loan Document, (B) the execution, legality, validity, enforceability,
genuineness, sufficiency, or value of the Loan Documents or any collateral
thereunder, (C) the financial condition of the Borrower, any of its Subsidiaries
or affiliates or any other Person obligated in respect of any Loan Document, or
(D) the performance or observance by the Borrower, any of its Subsidiaries or
affiliates or any other Person of any of their respective obligations under any
Loan Document.

     

              (b) Assignee. The Assignee (i) represents
and warrants that (A) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Acceptance and to
consummate the transactions contemplated hereby and to become a Bank under the
Credit Agreement, (B) it meets all the requirements to be an assignee under
Section 9.7 of the Credit Agreement (subject to such consents, if any, as may be
required under Section 9.7 of the Credit Agreement), (C) from and after the
Effective Date, it shall be bound by the provisions of the Credit Agreement as a
Bank thereunder and, to the extent of the Assigned Interest, shall have the
obligations of a Bank thereunder, (D) it is sophisticated with respect to
decisions to acquire assets of the type represented by the Assigned Interest and
either it, or the Person exercising discretion in making its decision to acquire
the Assigned Interest, is experienced in acquiring assets of such type, (E) it
has received a copy of the Credit Agreement, and has received or has been
accorded the opportunity to receive copies of the most recent financial
statements delivered pursuant to Section 5.1 thereof, as applicable, and such
other documents and information as it deems appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance and to
purchase the Assigned Interest, and (F) it has, independently and without
reliance upon the Agent or any other Bank and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Assignment and Acceptance and to purchase the
Assigned Interest; and (ii) agrees that (A) it will, independently and without
reliance upon the Agent, the Assignor, or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents and (B) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Bank.

     

        
2. Payments. From and after the Effective
Date, the Agent shall make all payments in respect of the Assigned Interest
(including, without limitation, payments of principal, interest, fees, and
other amounts) to the Assignor for amounts which have accrued to but excluding
the Effective Date and to the Assignee for amounts which have accrued from and
after the Effective Date.

     

    

    
    

         3. General Provisions.

     

              (a) This
Assignment and Acceptance shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and
assigns.

     

              (b) This
Assignment and Acceptance may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
This Assignment and Acceptance may be executed by each party on separate copies,
which copies, when combined so as to include the signatures of all parties,
shall constitute a single counterpart of the Assignment and
Acceptance.

     

              (c)
Delivery by one or more parties hereto of an executed counterpart of this
Assignment and Acceptance via facsimile, telecopy, or other electronic method of
transmission pursuant to which the signature of such party can be seen
(including, without limitation, Adobe Corporation’s Portable Document Format)
shall have the same force and effect as the delivery of an original executed
counterpart of this Assignment and Acceptance. Any party delivering an executed
counterpart of this Assignment and Acceptance by facsimile or other electronic
method of transmission shall also deliver an original executed counterpart, but
the failure to do so shall not affect the validity, enforceability, or binding
effect of this Assignment and Acceptance.

     

              (e) Section
titles and references used in this Assignment and Acceptance shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreements among the parties hereto evidenced hereby.

     

              (f) The
Assignee agrees to take such further actions as the Agent shall reasonably
request in connection herewith to evidence the agreements set forth
herein

     

              (g) THE
VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS ASSIGNMENT AND ACCEPTANCE SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW)f8k011810ex10i_fund.htm

    Exhibit
10.1

     

    FUND.COM
INC.

    14 Wall
Street

    New York,
New York 10004

    

    

    December 28, 2009

    

    IP
GLOBAL INVESTORS LTD.

    499 N.
Canon

    Beverly
Hills, CA 90210

    Attn:  Meghann
McEnroe, President

    

    EQUITIES
MEDIA ACQUISITION CORP., INC.

    Via
Lugano 11

    6982
Agno-Lugano

    Switzerland

    

    Re:           Class B
Common Stock and Note of Fund.com Inc.

    

    Gentlemen:

    

    Reference
is made to the revolving credit loan agreement, dated as of July 27, 2009 (the
“Loan
Agreement”), among Fund.com Inc. (“Fund.com”) and IP Global Investors Ltd
(“IPG”) and
Equities Media Acquisition
Corp. Inc. (“EMAC” and with IPG,
collectively, the “Lenders”).  This
will confirm that through and including the date hereof, the Lenders have paid
in cash to Fund.com the aggregate sum of $2,500,000 which sum is evidenced by a
$2,500,000 one year senior secured convertible note of Fund.com issued in August
2009 (the “Note”).

    

    This
letter agreement (“Agreement”) will
acknowledge that:

    

    (a)           
Fund.com.: (i) is currently unable to pay the Note, when due, (ii) is currently
in default under the terms of the Note, (iii) requires additional working
capital; and (iv) is seeking additional third party financing to enable it to
make a potential investment in Weston Capital LLC;

    

    (b)           the
Lenders or their assigns have the right to convert the Note, at a conversion
price of $0.21 per share, into an aggregate of 11,904,761 shares of the Class B
Common Stock of Fund.com (the “Class B Common
Stock”);

     

          
    (c)           EMAC
is the record and beneficial owner of 6,387,665 shares of Class B Common
Stock;

    

    (d)           the
holders of Class B Common Stock have the right to convert each such share of
Class B Common Stock into ten (10) shares of Class A Common Stock of Fund.com
(the “Class A Common
Stock”);

    

    (e)           as
at the date hereof, the average closing market prices of Fund.com Class A Common
Stock, as traded on the FINRA Over-the-counter Bulletin Board (“OTCBB”) during the
ten (10) trading days prior to December 28, 2009 is approximately $0.905 per
share;

     

     

    
      
        
        

      

      
        - 1
-

        
          

        

      

      
        
        

      

    

    
 

    (f)           the
Lenders have advised Fund.com that IPG has assigned a total of $694,050 original
principal amount of the Note to (i) Recovery Capital, Inc. - $315,000 principal
amount of the Note, (ii) TAG Virgin Islands, Inc. - $189,000, principal amount
of the Note, (iii) Bleecker Holdings LLC - $91,476 principal amount of the Note,
(iv) Kingwood Capital Partners LLC - $91,476 principal amount of the Note, (v)
the Feiner Family Trust - $5,250 principal amount of the Note; and (vi) Adam
Levin, or his Affiliate $1,848 principal amount of the Note (collectively, the
“Note
Assignees”); and

    

    (g)           All
unpaid interest and fees that has accrued on the original $2,500,000 principal
amount of the Note has not been assigned to any of the Note Assignees, and is
retained exclusively by the Lenders.

    

    The Lenders have advised that: (i)
Recovery Capital, Inc. will convert its $315,000 principal amount of assigned
Note into an aggregate of 15,000,000 shares of Class A Common Stock of Fund.com;
(ii) TAG Virgin Islands, Inc. will convert its $189,000 principal amount of
assigned Note into an aggregate of 9,000,000 shares of Class A Common Stock of
Fund.com; and (iii) the Feiner Family Trust will convert its $5,250 principal
amount of assigned Note into an aggregate of 250,000 shares of Class A Common
Stock of Fund.com.  By its execution of this Agreement, Fund.com does
hereby agree, upon receipt of conversion notices by such Note Assignees, it will
promptly cause to be issued the appropriate number of shares of Class A Common
Stock to such Note Assignees.

    

    Fund.com has been advised by potential
investors that the existence of one or more events of default under the Note,
which is secured by substantial assets of Fund.com, would have a material
adverse effect on the value of the public market price of Fund.com Class A
Common Stock, and represent a material detriment to any such investor(s)
agreeing to provide additional capital to Fund.com through the purchase of
additional equity or equity type securities.

    

    Accordingly, Fund.com has requested
that each of IPG, EMAC and certain of the Note Assignees who have executed this
Agreement (collectively, the “Noteholder Parties”),
agree to the terms and conditions set forth in this Agreement.  By
their execution of this Agreement, each of the Noteholder Parties do hereby
covenant and agree to the following terms and conditions:

    

    1.           EMAC
Conversion. EMAC hereby agrees that, without the prior written
consent of the board of directors of Fund.com (the “Board of Directors”),
EMAC shall not convert any of its shares of Class B Common Stock into Class A
Common Stock,  until December 31, 2011.

    

    2.           Exchange of
Notes.

    

    (a)           On
or before January 15, 2010, those Noteholder Parties set forth in Section 3(b) below
shall exchange an aggregate of $840,000 principal amount of the Notes for
400,000 shares of Fund.com Series A convertible preferred stock (the “Fund.com Series A Preferred
Stock”).  Such Fund.com Series A Preferred Stock
shall:

    

    (i)            not
pay a dividend;

    

    (ii)           have
a stated or liquidation value of $100.00 per share;

    

    (iii)          be
convertible by the holder(s) at any time at a conversion price of $1.50 per
share;

    

    (iv)          vote,
together with the Class B Common Stock on an “as converted basis;
and

     

     

    
      
        
        

      

      
        - 2
-

        
          

        

      

      
        
        

      

    

     

    
 

    (v)           contain
the other rights privileges and designations, including anti-dilution
adjustments as are set forth in the Certificate of Designations, annexed hereto
as Exhibit A
and made a part hereof.

    

    (b)           The
aggregate $840,000 original principal amount of Notes exchanged for 400,000
shares of Fund.com Series A Preferred Stock (the “Exchange Notes”)
shall be exchanged, as follows:

    

    (i)            IPG
shall exchange $655,200 original principal amount of the Exchange Notes, or 78%
of such Exchange Notes;

    

    (ii)           Bleecker
Holdings LLC shall exchange $91,476 original principal amount of the Exchange
Notes, or 10.89% of such Exchange Notes;

     
 

    (iii)          Kingswood
Capital Partners LLC shall exchange $91,476 original principal amount of the
Exchange Notes, or 10.89% of such Exchange Notes; and

    

    (iv)         
Adam Levin or his affiliate shall exchange $1,848 original principal amount of
the Exchange Notes, or 0.22% of such Exchange Notes.

    

    (c)           Except
in connection with a sale of all or substantially all of the assets or
securities of Fund.com to any unaffiliated third person, firm or corporation
(whether by merger, asset sale, tender offer, consolidation or like combination)
in any one or a series of transactions (a “Sale of Control”),
without the prior written consent of the Board of Directors, prior to December
31, 2011, the Noteholder Parties shall not convert more than twenty-five percent
(25%) of the remaining $1,150,750 principal amount of the Note and any interest
and fees accrued thereon (the “Remaining Balance”),
into shares of Class A Common Stock of Fund.com; provided, that the Noteholders
may convert all or any portion of the Remaining Balance into shares of Class B
Common Stock of Fund.com at any time or from time to time prior to December 31,
2011.

    

    3.           Waiver of Prior Defaults and
Extension of Maturity Date.

    

    (a)           By
their execution of this Agreement, each of the Lenders and each of the Lenders
do hereby agree to waive all prior defaults by Fund.com under the Notes and the
Loan Agreement; provided that such waivers shall not constitute a waiver of any
subsequent default or other event that may occur following the date hereof,
which default or event, with the giving of notice, the passage to time or both,
would constitute a default or event of default under the Note or the Loan
Agreement.

    

    (b)           By
their execution of this Agreement, each of the Lenders do hereby agree to extend
the Maturity Date of the Remaining Balance of the Notes to December 31,
2011.

    

    4.           Issuance of Fund.com Series
A Preferred Stock.  The 400,000 shares of Fund.com Series A
Preferred Stock shall be issued as follows:

    

    (a)           IPG
shall receive 312,000 shares of Fund.com Series A Preferred Stock, or 78% of
such shares;

    

    (b)           Bleecker
Holdings LLC shall receive 43,560 shares of Fund.com Series A Preferred Stock,
or 10.89% of such shares;

    

    (c)           Kingswood
Partners LLC shall receive 43,560 shares of Fund.com Series A Preferred Stock,
or 10.89% of such shares; and

     

     

    
      
        
        

      

      
        - 3
-

        
          

        

      

      
        
        

      

    

    
 

    (d)           Adam
Levin or his affiliate shall receive 880 shares of Fund.com Series A Preferred
Stock, or 0.22% of such shares

    

    5.           Additional agreement of the
Parties.  Each of Fund.com, the Lenders, and the other parties
signatories hereto (collectively, the “Parties”) do hereby
agree, as follows:

    

    5.1           Waivers.  The
waiver of a breach of this agreement or the failure of any Party hereto to
exercise any right under this agreement shall in no way constitute waiver as to
future breach whether similar or dissimilar in nature or as to the exercise of
any further right under this agreement.

    

    5.2           Amendment.  This
agreement may be amended or modified only by an instrument of equal formality
signed by the Parties or the duly authorized representatives of the respective
parties.

    

    5.3           Assignment.  This
agreement is not assignable except by operation of law or agreement of the
Parties.

    

    5.4           Notice.  Until
otherwise specified in writing, the mailing addresses and fax numbers of the
parties of this agreement shall be made to the addresses set forth in this
Agreement.  Any notice or statement given under this agreement shall
be deemed to have been given if sent by registered mail addressed to the other
party at the address indicated above or at such other address which shall have
been furnished in writing to the addressor.

    

    5.5           Governing
Law.  This agreement shall be construed, and the legal
relations between the parties determined, in accordance with the laws of the
State of Delaware, thereby precluding any choice of law rules which may direct
the application of the laws of any other jurisdiction.

    

    5.6           Publicity.  No
publicity release or announcement concerning this agreement or the transactions
contemplated hereby shall be issued by either party hereto at any time from the
signing hereof without advance approval in writing of the form and substance by
the other party.

    

    5.7           Entire
agreement.  This Agreement contains the entire agreement among
the Parties with respect to the transactions contemplated hereby, and supersedes
all prior agreements, written or oral, with respect hereof.

    

    5.8           Headings.  The
headings in this agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.

    

    5.9           Severability of
Provisions.  The invalidity or unenforceability of any term,
phrase, clause, paragraph, restriction, covenant, agreement or provision of this
agreement shall in no way affect the validity or enforcement of any other
provision or any part thereof.

    

    5.10           Counterparts.  This
agreement may be executed in any number of counterparts, each of which when so
executed, shall constitute an original copy hereof, but all of which together
shall consider but one and the same document.

    

    5.11           Binding
Effect.  This Agreement shall be binding upon the Parties
hereto and inure to the benefit of the Parties, their respective heirs,
administrators, executors, successors and assigns.

     

    [the
balance of this page intentionally left blank – signature pages
follow]

     

     

    
      
        
        

      

      
        - 4
-

        
          

        

      

      
        
        

      

    

     

     

    If the
foregoing accurately represents the substance of our mutual agreement and
understanding, please so indicate by executing and returning a copy of this
agreement in the space provided below.

    

    Very
truly yours,

    

    FUND.COM
INC.

    

    

    By: /s/
Gregory Webster____________________

    Gregory Webster

    President and CEO

    

    IP
GLOBAL INVESTORS LTD.

    

    

    

    By: /s/
Meghann McEnroe__________________

    Meghann McEnroe, President

    

    EQUITIES
MEDIA ACQUISITION CORP. INC.

    

    

    By: /s/ Arie
Jan van Roon___________________

    Arie Jan van Roon,
President

    

    BLEECKER
HOLDINGS LLC

    

    

    By: /s/
Joseph J. Bianco______________________

    Joseph J. Bianco,
Member/Manager

    

    KINGSWOOD
CAPITAL PARTNERS LLC

    

    

    By: /s/ Jean
Moore Weiss____________________

    Jean Moore Weiss,
Manager/Member

    

    

    

    /s/ Adam
Levin_____________________________

    Adam Levin

     

    - 5
-

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