Document:

Exhibit 4.1

Exhibit 4.1

 

STANLEY FURNITURE COMPANY, INC.

$10,000,000 8.44% SENIOR NOTES DUE MAY 3, 2011

$25,000,000 8.23% SERIES AA SENIOR NOTES DUE MAY 3, 2017

 

SECOND AMENDED AND RESTATED

NOTE PURCHASE AND PRIVATE SHELF AGREEMENT

 

Dated May 11, 2010

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	1. AMENDMENT AND RESTATEMENT; AUTHORIZATION OF ISSUE OF SHELF NOTES
	 	 	2	 
	 
	 	 	 	 
	1A. Amendment and Restatement
	 	 	 2	 
	1B. Authorization of Issue of Shelf Notes
	 	 	 2	 
	 
	 	 	 	 
	2. PURCHASE AND SALE OF NOTES
	 	 	3	 
	 
	 	 	 	 
	2A. Purchase and Sale of 2001 Notes and Series AA Notes
	 	 	 3	 
	2B. Purchase and Sale of Shelf Notes
	 	 	 3	 
	2B(1). Facility
	 	 	3	 
	2B(2). Issuance Period
	 	 	3	 
	2B(3). Request for Purchase
	 	 	4	 
	2B(4). Rate Quotes
	 	 	4	 
	2B(5). Acceptance
	 	 	5	 
	2B(6). Market Disruption
	 	 	5	 
	2B(7). Facility Closings
	 	 	5	 
	2B(8). Fees
	 	 	6	 
	2B(8)(i). Intentionally Omitted
	 	 	6	 
	2B(8)(ii). Issuance Fee
	 	 	6	 
	2B(8)(iii). Delayed Delivery Fee
	 	 	6	 
	2B(8)(iv). Cancellation Fee
	 	 	7	 
	 
	 	 	 	 
	3. CONDITIONS OF EFFECTIVENESS
	 	 	7	 
	 
	 	 	 	 
	3A. Execution and Delivery of Documents
	 	 	 7	 
	3B. Prepayment of Notes; Payment of Expenses
	 	 	10	 
	 
	 	 	 	 
	4. PREPAYMENTS
	 	 	10	 
	 
	 	 	 	 
	4A. Required Prepayments of Series AA Notes
	 	 	10	 
	4B. Required Prepayments of Shelf Notes
	 	 	10	 
	4C. Optional Prepayment With Yield-Maintenance Amount
	 	 	10	 
	4D. Notice of Optional Prepayment
	 	 	11	 
	4E. Application of Required Prepayments
	 	 	11	 
	4F. Retirement of Notes
	 	 	11	 
	4G. Prepayment of Notes on Agreement Effective Date
	 	 	11	 
	 
	 	 	 	 
	5. AFFIRMATIVE COVENANTS
	 	 	13	 
	 
	 	 	 	 
	5A. Reporting Requirements
	 	 	13	 
	5A(1). General Information
	 	 	13	 
	5A(2). Quarterly Officer’s Certificates
	 	 	15	 
	5A(3). Annual Accountant’s Letter
	 	 	15	 
	5A(4). Special Information
	 	 	15	 
	5B. Inspection of Property
	 	 	16	 
	5C. Subsidiary Guarantees; Security Documents
	 	 	16	 
	5D. Pledge of After Acquired Property
	 	 	17	 
	5E. Maintenance of Insurance
	 	 	19	 
	5F. Maintenance of Corporate Existence/Compliance with Law/Preservation of Property
	 	 	19	 
	5G. Compliance with Environmental Laws
	 	 	19	 
	5H. No Integration
	 	 	20	 
	5I. Financial Records
	 	 	20	 
	5J. Cash Balance
	 	 	20	 
	5K. Further Assurances
	 	 	20	 

 

i

 

	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	6. NEGATIVE COVENANTS
	 	 	20	 
	 
	 	 	 	 
	6A. Fixed Charge Coverage and Debt Limits
	 	 	20	 
	6B. Reserved
	 	 	21	 
	6C. Liens, Debt and Other Restrictions
	 	 	21	 
	6C(1). Liens
	 	 	21	 
	6C(2). Debt
	 	 	22	 
	6C(2). Debt. TC
	 	 	22	 
	6C(3). Merger or Consolidation
	 	 	22	 
	6C(4). Sale or Discount of Receivables
	 	 	22	 
	6C(5). Change in Business
	 	 	22	 
	6C(6). Transactions with Related Party
	 	 	22	 
	6C(7). Investments
	 	 	23	 
	6D. Sale of Property
	 	 	23	 
	6E. Subsidiary Stock and Debt
	 	 	24	 
	6F. ERISA
	 	 	25	 
	6G. Environmental Matters
	 	 	25	 
	6H. Specified Laws
	 	 	25	 
	 
	 	 	 	 
	7. EVENTS OF DEFAULT
	 	 	25	 
	 
	 	 	 	 
	7A. Acceleration
	 	 	25	 
	7B. Rescission of Acceleration
	 	 	29	 
	7C. Notice of Acceleration or Rescission
	 	 	29	 
	7D. Other Remedies
	 	 	29	 
	 
	 	 	 	 
	8. REPRESENTATIONS AND WARRANTIES
	 	 	30	 
	 
	 	 	 	 
	8A. Organization
	 	 	30	 
	8B. Financial Statements
	 	 	30	 
	8C. Actions Pending
	 	 	31	 
	8D. Outstanding Debt
	 	 	31	 
	8E. Title to Properties
	 	 	31	 
	8F. Taxes
	 	 	31	 
	8G. Conflicting Agreements and Other Matters
	 	 	31	 
	8H. Offering of Notes
	 	 	32	 
	8I. Use of Proceeds
	 	 	32	 
	8J. ERISA
	 	 	32	 
	8K. Governmental Consent
	 	 	33	 
	8L. Environmental Compliance
	 	 	33	 
	8M. Disclosure
	 	 	34	 
	8N. Hostile Tender Offers
	 	 	34	 
	8O. Absence Of Foreign Or Enemy Status
	 	 	34	 
	8P. Solvency
	 	 	34	 
	 
	 	 	 	 
	9. REPRESENTATIONS OF THE PURCHASERS
	 	 	34	 
	 
	 	 	 	 
	9A. Nature of Purchase
	 	 	34	 
	 
	 	 	 	 
	9B. Source of Funds
	 	 	35	 
	 
	 	 	 	 
	10. DEFINITIONS
	 	 	36	 
	10A. Yield-Maintenance Terms
	 	 	36	 
	10B. Other Terms
	 	 	37	 
	10C. Accounting Principles, Terms and Determinations
	 	 	49	 
	 
	 	 	 	 
	11. MISCELLANEOUS
	 	 	50	 
	 
	 	 	 	 
	11A. Note Payments
	 	 	50	 
	11B. Expenses
	 	 	50	 
	11C. Consent to Amendments
	 	 	51	 
	11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes
	 	 	52	 
	11E. Persons Deemed Owners; Participations
	 	 	52	 
	11F. Survival of Representations and Warranties; Entire Agreement 
	 	 	53	 

 

ii

 

	 	 	 	 	 
	 	 	Page	 
	11G. Successors and Assigns; Transfer Provisions
	 	 	53	 
	11H. Disclosure to Other Persons; Confidentiality
	 	 	53	 
	11I. Notices
	 	 	54	 
	11J. Payments Due on Non-Business Days
	 	 	54	 
	11K. Satisfaction Requirement
	 	 	55	 
	11L. Independence of Covenants
	 	 	55	 
	11M. Governing Law
	 	 	55	 
	11N. Severability
	 	 	55	 
	11O. Descriptive Headings
	 	 	55	 
	11P. Counterparts
	 	 	55	 

EXHIBITS

Exhibit A-1 —  Form of 2001 Note

Exhibit A-2  —  Form of Series AA Note

SCHEDULES

Information Schedule

Purchaser Schedule

Schedule 8A —  Subsidiaries

Schedule 8B — Changes to Business

Schedule 8D —  Debt

Schedule 8G —  Other Agreements

Schedule 8L —  Environmental

 

iii

 

STANLEY FURNITURE COMPANY, INC.

P.O. Box 30

Route 57

Stanleytown, Virginia 24168

As of May 11, 2010

The Prudential Insurance Company

    of America (“Prudential”)

Hartford Life Insurance Company (“Hartford”)

Medica Health Plans (“Medica”)

Pruco Life Insurance Company of New Jersey (“Pruco”)

Prudential Retirement Insurance and Annuity Company (“PRIAC”)

Mutual of Omaha Insurance Company (“Mutual of Omaha”)

Each Prudential Affiliate (as hereinafter defined)

which becomes bound by certain provisions of this

Agreement as hereinafter provided (together with

Prudential, Hartford, Medica, Pruco, PRIAC

and Omaha, the “Purchasers”)

c/o Prudential Capital Group

1170 Peachtree St., NW, Suite 500

Atlanta, GA 30309

Ladies and Gentlemen:

Stanley Furniture Company (the “Company”) and the Purchasers are parties to that certain
Amended and Restated Note Purchase and Private Shelf Agreement, dated as of January 26, 2007, as
amended or modified prior to the date hereof (the “Original Agreement”), pursuant to which, among
other things, the Company authorized and issued $10,000,000 in aggregate principal amount of its
8.44% Senior Notes due 2011 in the form of Exhibit A-1 (collectively, the “2001 Notes”), of
which $1,428,571 remains outstanding on the date hereof and $25,000,000 in aggregate principal
amount of its 8.23% Series AA Senior Notes due 2017 in the form of Exhibit A-2
(collectively, the “Series AA Notes”). The Purchasers together hold 100% of the aggregate
principal amount of the 2001 Notes and the Series AA Notes.

The Company has requested that the Purchasers agree to certain modifications to the Original
Agreement, and subject to the terms and conditions hereto, the Purchasers are willing to do so; the
parties wish to affect such changes by amending and restating the Original Agreement on the terms
contained herein.

 

 

 

Therefore, the parties agree that the Original Agreement is amended and restated in its
entirety as follows:

1. AMENDMENT AND RESTATEMENT; AUTHORIZATION OF ISSUE OF SHELF NOTES.

1A. Amendment and Restatement. Effective upon satisfaction of the conditions set forth in
paragraph 3, this Agreement amends, restates, supersedes and replaces the Original Agreement in its
entirety, except (i) that the Original Agreement shall evidence the terms pursuant to which the
2001 Notes and Series AA Notes were originally issued and (ii) the Exhibits to the Original
Agreement shall remain in effect except that references therein to the Note Agreement shall mean
and be a reference to this restated Agreement. This Agreement constitutes an amendment and
restatement of the Original Agreement and is not, and is not intended by the parties to be, a
novation of the Original Agreement or the Notes. All rights and obligations of the parties shall
continue in effect, except as otherwise expressly set forth herein. Upon this Agreement becoming
effective, the provisions of Section 6A hereof shall be deemed effective as of April 1, 2010 so
that no Default or Event of Default shall have occurred as a result of failure to comply with the
provisions of Section 6A of the Original Agreement. All references in the other Note Documents to
the Agreement shall be deemed to refer to and mean this Agreement, as the same may be further
amended, supplemented, and restated from time to time. The 2001 Notes and the Series AA Notes
shall be governed by the terms of this Agreement from and after the date hereof. As of the date
hereof the Available Facility Amount is $0 (as described in greater detail in paragraph 1B and
2B(1) below).

1B. Authorization of Issue of Shelf Notes. The Company may authorize the issue of its
additional senior promissory notes (the “Shelf Notes”) in such aggregate principal amount that
Company and Prudential may mutually agree (in their sole and absolute discretion) as set forth in a
written amendment to this Agreement expressly referring to this paragraph. To the extent the
Company and Prudential shall agree on the issuance of additional Shelf Notes, then such Shelf Note
shall be dated the date of issue thereof, to mature no more than ten years after the date of
original issuance thereof, to have an average life of no more than ten years after the date of
original issuance thereof, to bear interest on the unpaid balance thereof from the date thereof at
the rate per annum, and to have such other particular terms, as shall be set forth, in the case of
each Shelf Note so issued, in the Confirmation of Acceptance with respect to such Shelf Note
delivered pursuant to paragraph 2B(6) and to be substantially in the form of Exhibit B attached to
the Original Agreement. The terms “Shelf Note” and “Shelf Notes” as used herein shall include each
Shelf Note delivered pursuant to any provision of this Agreement and each Shelf Note delivered in
substitution or exchange for any such Shelf Note pursuant to any such provision. The terms “Note”
and “Notes” as used herein shall include each 2001 Note, each Series AA Note and each Shelf Note
delivered pursuant to any provision of this Agreement and each Note delivered in substitution or
exchange for any such Note pursuant to any such provision. Notes which have (i) the same final
maturity, (ii) the same principal prepayment dates, (iii) the same principal prepayment amounts (as
a percentage of the original principal amount of each Note), (iv) the same interest rate, (v) the
same interest payment periods and (vi) the same date of issuance (which, in the case of a Note
issued in exchange for another Note, shall be deemed for these purposes the date on which such
Note’s ultimate predecessor Note was issued), are herein called a “Series” of Notes.

 

2

 

2. PURCHASE AND SALE OF NOTES.

2A. Purchase and Sale of 2001 Notes and Series AA Notes. The Company has previously sold, and
certain of the Purchasers (as described in more detail in the Purchaser Schedules applicable
thereto) have purchased, the 2001 Notes and the Series AA Notes.

2B. Purchase and Sale of Shelf Notes.

2B(1). Facility. Prudential is willing to consider, in its sole discretion and within
limits which may be authorized for purchase by Prudential and Prudential Affiliates from time to
time, the purchase of Shelf Notes pursuant to this Agreement. The willingness of Prudential to
consider such purchase of Shelf Notes is herein called the “Facility”. At any time, the aggregate
principal amount of Shelf Notes stated in paragraph 1B, minus the aggregate principal amount of
Shelf Notes purchased and sold pursuant to this Agreement prior to such time, minus the aggregate
principal amount of Accepted Notes (as hereinafter defined) which have not yet been purchased and
sold hereunder prior to such time is herein called the “Available Facility Amount” at such time.
NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF SHELF NOTES, THIS AGREEMENT
IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE
SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE SHELF NOTES, OR TO QUOTE RATES, SPREADS OR
OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES OF SHELF NOTES, AND THE FACILITY SHALL IN NO WAY BE
CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.

2B(2). Issuance Period. Shelf Notes may be issued and sold pursuant to this Agreement
until the earlier of:

(i) the third anniversary of the date of this Agreement (or if any such anniversary is
not a Business Day, the Business Day next preceding such anniversary),

(ii) the thirtieth day after Prudential shall have given to the Company, or the Company
shall have given to Prudential, a notice stating that it elects to terminate the issuance
and sale of Shelf Notes pursuant to this Agreement (or if such thirtieth day is not a
Business Day, the Business Day next preceding such thirtieth day),

(iii) The last Closing Day after which there is no Available Facility Amount,

(iv) The termination of the Facility under paragraph 7, and

(v) The acceleration of any Note under paragraph 7A of this Agreement.

The period during which Shelf Notes may be issued and sold pursuant to this Agreement is herein
called the “Issuance Period”.

 

3

 

2B(3). Request for Purchase. The Company may from time to time during the Issuance Period
make requests for purchases of Shelf Notes (each such request being herein called a
“Request for Purchase”). Each Request for Purchase shall be made to Prudential by telecopy or
overnight delivery service, and shall:

(i) specify the aggregate principal amount of Shelf Notes covered thereby, which shall
not be less than $5,000,000 and not be greater than the Available Facility Amount at the
time such Request for Purchase is made,

(ii) specify the principal amounts, final maturities (which shall be no more than ten
years from the date of issuance), principal prepayment dates and amounts and interest
payment periods (quarterly or semi-annual in arrears) of the Shelf Notes covered thereby,

(iii) specify the use of proceeds of such Shelf Notes,

(iv) specify the proposed day for the closing of the purchase and sale of such Shelf
Notes, which shall be a Business Day during the Issuance Period not less than 10 days and
not more than 25 days after the making of such Request for Purchase (the “Closing Day”),

(v) specify the number of the account and the name and address of the depository
institution to which the purchase prices of such Shelf Notes are to be transferred on the
Closing Day for such purchase and sale,

(vi) certify that the representations and warranties contained in paragraph 8 are true
on and as of the date of such Request for Purchase and that there exists on the date of such
Request for Purchase no Event of Default or Default,

(vii) specify the Designated Spread for such Shelf Notes, and

(viii) be substantially in the form of Exhibit C attached to the Original Agreement.
Each Request for Purchase shall be in writing and shall be deemed made when received by
Prudential.

2B(4). Rate Quotes. Not later than five Business Days after the Company shall have given
Prudential a Request for Purchase pursuant to paragraph 2B(3), Prudential may, but shall be under
no obligation to, provide to the Company by telephone or telecopier, in each case between 9:30 A.M.
and 1:30 P.M. New York City local time (or such later time as Prudential may elect) interest rate
quotes for the several principal amounts, maturities, principal prepayment schedules, and interest
payment periods of Shelf Notes specified in such Request for Purchase. Each quote shall represent
the interest rate per annum payable on the outstanding principal balance of such Shelf Notes at
which Prudential or a Prudential Affiliate would be willing to purchase such Shelf Notes at 100% of
the principal amount thereof.

 

4

 

2B(5). Acceptance. Within 30 minutes after Prudential shall have provided any interest rate
quotes pursuant to paragraph 2B(4) or such shorter period as Prudential may specify to the Company
(such period herein called the “Acceptance Window”), the Company may, subject to paragraph 2B(6),
elect to accept such interest rate quotes as to not less than $5,000,000 aggregate principal amount
of the Shelf Notes specified in the related Request for Purchase. Such election
shall be made by an Authorized Officer of the Company notifying Prudential by telephone or
telecopier within the Acceptance Window (but not earlier than 9:30 a.m. or later than 2:00 p.m.,
New York City local time) that the Company elects to accept such interest rate quotes, specifying
the Shelf Notes (each such Shelf Note being herein called an “Accepted Note”) as to which such
acceptance (herein called a “Acceptance”) relates. The day the Company notifies Prudential of an
Acceptance with respect to any Accepted Notes is herein called the “Acceptance Day” for such
Accepted Notes. Any interest rate quotes as to which Prudential does not receive an Acceptance
within the Acceptance Window shall expire, and no purchase or sale of Shelf Notes hereunder shall
be made based on such expired interest rate quotes. Subject to paragraph 2B(6) and the other terms
and conditions hereof, the Company agrees to sell to Prudential or a Prudential Affiliate, and
Prudential agrees to purchase, or to cause the purchase by a Prudential Affiliate of, the Accepted
Notes at 100% of the principal amount of such Notes. As soon as practicable following the
Acceptance Day, the Company, Prudential and each Prudential Affiliate which is to purchase any such
Accepted Notes will execute a confirmation of such Acceptance substantially in the form of Exhibit
D attached to the Original Agreement (herein called a “Confirmation of Acceptance”). If the Company
should fail to execute and return to Prudential within three Business Days following receipt
thereof a Confirmation of Acceptance with respect to any Accepted Notes, Prudential may at its
election at any time prior to its receipt thereof cancel the closing with respect to such Accepted
Notes by so notifying the Company in writing.

2B(6). Market Disruption. Notwithstanding the provisions of paragraph 2B(5), if Prudential
shall have provided interest rate quotes pursuant to paragraph 2B(4) and thereafter prior to the
time an Acceptance with respect to such quotes shall have been notified to Prudential in accordance
with paragraph 2B(5) the domestic market for U.S. Treasury securities or derivatives shall have
closed or there shall have occurred a general suspension, material limitation, or significant
disruption of trading in securities generally on the New York Stock Exchange or in the domestic
market for U.S. Treasury securities or derivatives, then such interest rate quotes shall expire,
and no purchase or sale of Shelf Notes hereunder shall be made based on such expired interest rate
quotes. If the Company thereafter notifies Prudential of the Acceptance of any such interest rate
quotes, such Acceptance shall be ineffective for all purposes of this Agreement, and Prudential
shall promptly notify the Company that the provisions of this paragraph 2B(6) are applicable with
respect to such Acceptance.

2B(7). Facility Closings. Not later than 11:30 A.M. (New York City local time) on the
Closing Day for any Accepted Notes, the Company will deliver to each Purchaser listed in the
Confirmation of Acceptance relating thereto, and at the place specified in the applicable Purchaser
Schedule for such Series of Notes, the Accepted Notes to be purchased by such Purchaser in the form
of one or more Notes in authorized denominations as such Purchaser may request for each Series of
Accepted Notes to be purchased on the Closing Day, dated the Closing Day and registered in such
Purchaser’s name (or in the name of its nominee), against payment of the purchase price thereof by
transfer of immediately available funds for credit to the Company’s account specified in the
Request for Purchase of such Notes. If the Company fails to tender to any Purchaser the Accepted
Notes to be purchased by such Purchaser on the scheduled Closing Day for such Accepted Notes as
provided above in this paragraph 2B(7), or any of the conditions specified in paragraph 3 shall not
have been fulfilled by the time required on such scheduled

 

5

 

Closing Day, the Company shall, prior to
1:00 P.M., New York City local time, on such scheduled Closing Day notify Prudential (which notification shall be deemed received by each
Purchaser) in writing whether (i) such closing is to be rescheduled (such rescheduled date to be a
Business Day during the Issuance Period not less than one Business Day and not more than 10
Business Days after such scheduled Closing Day (the “Rescheduled Closing Day”) and certify to
Prudential (which certification shall be for the benefit of each Purchaser) that the Company
reasonably believes that it will be able to comply with the conditions set forth in paragraph 3 on
such Rescheduled Closing Day and that the Company will pay the Delayed Delivery Fee in accordance
with paragraph 2B(8)(iii) or (ii) such closing is to be canceled. In the event that the Company
shall fail to give such notice referred to in the preceding sentence, Prudential (on behalf of each
Purchaser) may at its election, at any time after 1:00 P.M., New York City local time, on such
scheduled Closing Day, notify the Company in writing that such closing is to be canceled.
Notwithstanding anything to the contrary appearing in this Agreement, the Company may elect to
reschedule a closing with respect to any given Accepted Notes on not more than one occasion, unless
Prudential shall have otherwise consented in writing.

2B(8). Fees.

2B(8)(i). Intentionally Omitted.

2B(8)(ii). Issuance Fee. The Company will pay to Prudential in immediately available funds a
fee (herein called the “Issuance Fee”) on each Closing Day (other than the Series AA Closing Day)
in an amount equal to 0.125% of the aggregate principal amount of Notes sold on such Closing Day.

2B(8)(iii). Delayed Delivery Fee. If the closing of the purchase and sale of any Accepted
Note is delayed for any reason beyond the original Closing Day for such Accepted Note, the Company
will pay to Prudential (a) on the Cancellation Date or actual closing date of such purchase and
sale and (b) if earlier, the next Business Day following 90 days after the Acceptance Day for such
Accepted Note and on each Business Day following 90 days after the prior payment hereunder, a fee
(herein called the “Delayed Delivery Fee”) calculated as follows:

(BEY - MMY) X DTS/360 X PA

where “BEY” means Bond Equivalent Yield, i.e., the bond equivalent yield per annum of such Accepted
Note, “MMY” means Money Market Yield, i.e., the yield per annum on a commercial paper investment of
the highest quality selected by Prudential on the date Prudential receives notice of the delay in
the closing for such Accepted Note having a maturity date or dates the same as, or closest to, the
Rescheduled Closing Day or Rescheduled Closing Days (a new alternative investment being selected by
Prudential each time such closing is delayed); “DTS” means Days to Settlement, i.e., the number of
actual days elapsed from and including the original Closing Day with respect to such Accepted Note
(in the case of the first such payment with respect to such Accepted Note) or from and including
the date of the next preceding payment (in the case of any subsequent delayed delivery fee payment
with respect to such Accepted Note) to but excluding the date of such payment; and “PA” means
Principal Amount, i.e., the principal amount of the Accepted Note for which such calculation is
being made. In no case shall the Delayed Delivery Fee be less than zero. Nothing contained herein
shall obligate any Purchaser to
purchase any Accepted Note on any day other than the Closing Day for such Accepted Note, as the
same may be rescheduled from time to time in compliance with paragraph 2B(7).

 

6

 

2B(8)(iv). Cancellation Fee. If the Company at any time notifies Prudential in writing that
the Company is canceling the closing of the purchase and sale of any Accepted Note, or if
Prudential notifies the Company in writing under the circumstances set forth in the last sentence
of paragraph 2B(5) or the penultimate sentence of paragraph 2B(7) that the closing of the purchase
and sale of such Accepted Note is to be canceled, or if the closing of the purchase and sale of
such Accepted Note is not consummated on or prior to the last day of the Issuance Period (the date
of any such notification, or the last day of the Issuance Period, as the case may be, being herein
called the “Cancellation Date”), the Company will pay the Purchasers in immediately available funds
an amount (the “Cancellation Fee”) calculated as follows:

PI X PA

where “PI” means Price Increase, i.e., the quotient (expressed in decimals) obtained by dividing
(a) the excess of the ask price (as determined by Prudential) of the Hedge Treasury Note(s) on the
Cancellation Date over the bid price (as determined by Prudential) of the Hedge Treasury Notes(s)
on the Acceptance Day for such Accepted Note by (b) such bid price; and “PA” has the meaning
ascribed to it in paragraph 2B(8)(iii). The foregoing bid and ask prices shall be as reported by
Telerate Systems, Inc. (or, if such data for any reason ceases to be available through Telerate
Systems, Inc., any publicly available source of similar market data). Each price shall be based on
a U.S. Treasury security having a par value of $100.00 and shall be rounded to the second decimal
place. In no case shall the Cancellation Fee be less than zero.

2C. Increase in Interest Rate. The per annum stated interest rate on the outstanding Series AA
Notes shall automatically be increased to 8.23% per annum, and the per annum stated interest rate
on the outstanding 2001 Notes shall automatically be increased to 8.44% per annum, in each case
commencing on January 1, 2010.

3. CONDITIONS OF EFFECTIVENESS. This Agreement shall not become effective until each of the
following conditions is satisfied on the Agreement Effective Date:

3A. Execution and Delivery of Documents. The Purchasers shall have received the following,
each of which shall be originals, or telecopies or other electronically transmitted copies as
agreed to by the Purchasers (in each case followed promptly by originals), and unless otherwise
specified, each properly executed by a Responsible Officer of the signing Credit Party and dated
the Agreement Effective Date (or, in the case of certificates of governmental officials, a recent
date before the Agreement Effective Date) and each in form and substance satisfactory to the
Purchasers:

(i) duly executed counterparts of this Agreement and the Guaranty Agreement, duly
executed by all parties thereto, sufficient in number for distribution to each Purchaser and
the Company;

(ii) The Notes, amended in the form of Exhibit A-1 and Exhibit A-2
hereto;

 

7

 

(iii) duly executed counterparts of the Security Agreement, together with:

(A) proper financing statements (as defined in the UCC) in form appropriate for
filing under the UCC of all jurisdictions that the Purchasers may deem necessary or
desirable in order to perfect the Liens created under the Security Agreement,
covering the Collateral described in the Security Agreement.

(B) completed requests for information, dated on or before the Agreement
Effective Date, listing all effective financing statements filed that name any
Credit Party as debtor (including any legal name of the Credit Parties used during
the past five (5) years) filed with the appropriate UCC filing office in any
jurisdiction reasonable requested by the Purchasers, together with copies of such
financing statements.

(C) Certificates, if any, representing all equity interests of the Credit
Parties accompanied by undated stock powers executed in blank or registered in the
name of such nominee or nominees as the Collateral Agent shall specify, as the
Purchasers may request.

(D) originals of all instruments required by the Security Agreement, together
with duly executed undated endorsements in blank affixed thereto, as the Purchasers
may request,

(E) evidence that all other actions, recordings and filings required by the
Security Agreement, or that the Purchasers may deem necessary or desirable in order
to perfect or protect the Liens created under the Security Agreement have been taken
(including, without limitation, receipt of duly executed payoff letters, UCC-3
termination statements, and filings or recordings with the United States Copyright
Officer or the United States Patent and Trademark Office);

(iv) Mortgages covering all owned real property of the Credit Parties
(other than real property located in the Commonwealth of Virginia and the residential
home located at 901 Johnson Street, High Point, North Carolina 27261), duly executed by the
appropriate Credit Party, together with (A) evidence that counterparts of the Mortgages have
been duly executed, acknowledged and delivered and are in form suitable for filing or
recording in all filing or recording offices that the Purchasers may deem necessary or
desirable in order to create a valid first and subsisting Lien on the property described
therein in favor of the Collateral Agent for the benefit of the holders of the Notes and
that all filing, documentary, stamp, intangible and recording taxes and fees have been paid,
and (B) the Mortgaged Property Support Documents;

(v) such certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Credit Party as the Purchasers may
require evidencing the identity, authority and capacity of each Responsible Officer thereof
authorized to act as a Responsible Officer in connection with this Agreement and the other
Note Documents to which such Credit Party is a party or is to be a party;

 

8

 

(vi) such documents and certifications as the Purchasers may reasonably require to
evidence that each Credit Party is duly organized or formed, and that each Credit Party is
validly existing, in good standing and qualified to engage in business in each jurisdiction
where its ownership, lease or operation of properties or the conduct of its business
requires such qualification, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect;

(vii) favorable opinions of counsel to the Credit Parties, addressed to the Purchasers,
addressing such matters concerning the Credit Parties and the Note Documents as the
Purchasers may reasonably request, including without limitation the enforceability of the
Note Documents, and the creation and perfection of Liens contemplated by this Agreement.
The Company hereby directs each such counsel to deliver such opinion, and understands and
agrees that each Purchaser will and hereby is authorized to rely on such opinion;

(viii) a certificate of a Responsible Officer of each Credit Party (A) either (1)
attaching copies of all consents, licenses and approvals required in connection with the
consummation by such Credit Party of the transactions contemplated hereby and the execution,
delivery and performance by such Credit Party and the validity against such Credit Party of
the Note Documents to which it is a party, and such consents, licenses and approvals shall
be in full force and effect, or (2) stating that no such consents, licenses or approvals are
so required, and (B) certifying that no action, suit, investigation or proceeding is pending
or, to the knowledge of such Credit Party, threatened in any court or before any arbitrator
or governmental authority which could reasonably be expected to result in any material
adverse change in the business, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole;

(ix) a certificate signed by a Responsible Officer of the Company certifying (A) the
representations and warranties contained in paragraph 8 shall be true on and as of the
Agreement Effective Date in all material respects; (B) there shall exist no Event of Default
or Default on the Agreement Effective Date after giving effect to the provisions of this
Agreement; and (C) that, except as set forth on Schedule 8B, there shall have been no event
or circumstance since the date of the audited financial statements of the Company delivered
pursuant to paragraph 5A that has had or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect;

(x) evidence that all insurance required to be maintained pursuant to the Note
Documents has been obtained and is in effect, together with the certificates of insurance,
naming the Purchasers as additional insureds under liability insurance policies and the
Collateral Agent, on behalf of the holders of the Notes, as an additional insured or loss
payee, as the case may be, under all insurance casualty and property policies maintained
with respect to the assets and properties of the Credit Parties that constitute Collateral;

(xi) evidence that any Liens on the Collateral, other than Liens permitted under
paragraph 6C(1), shall have been terminated and released;

 

9

 

(xii) duly executed counterparts of the Collateral Agency Agreement appointing the
Collateral Agent; and

(xiii) such other assurances, certificates, documents, consents or opinions as the
Purchasers reasonably may require.

3B. Prepayment of Notes; Payment of Expenses. The Company shall have prepaid $11,428,571.43
of the Notes, together with accrued and unpaid interest thereon, to the holders of the Notes to be
applied in accordance with paragraph 4G below. The Company shall have paid or reimbursed the
Purchasers for their costs and expenses incurred in connection with this Agreement (including
reasonable fees, charges and disbursements of the Collateral Agent and of King & Spalding LLP,
counsel to the holders of Notes).

4. PREPAYMENTS. The 2001 Notes shall be subject to required prepayment as and to the extent
set forth in the Notes of such Series. The Series AA Notes and any Shelf Notes shall be subject to
required prepayment as and to the extent provided in paragraphs 4A and 4B, respectively. The Notes
shall also be subject to prepayment under the circumstances set forth in paragraph 4C. Any
prepayment made by the Company pursuant to any other provision of this paragraph 4 shall not reduce
or otherwise affect its obligation to make any required prepayment as specified in the 2001 Notes
or in paragraphs 4A or 4B.

4A. Required Prepayments of Series AA Notes. Until the Series AA Notes shall be paid in full,
the Company shall apply to the prepayment of the Series AA Notes, without Yield-Maintenance Amount,
the sum of $3,571,428.57 on May 3rd of each year, commencing on May 3, 2011, and such principal
amounts of the Series AA Notes, together with interest thereon to the payment dates, shall become
due on such payment dates. The remaining unpaid principal amount of the Series AA Notes, together
with interest accrued thereon, shall become due on the maturity date of the Series AA Notes.

4B. Required Prepayments of Shelf Notes. Each Series of Shelf Notes shall be subject to
required prepayments, if any, set forth in the Notes of such Series.

4C. Optional Prepayment With Yield-Maintenance Amount. The Notes of each Series shall be
subject to prepayment, in whole at any time or from time to time in part (in integral multiples of
$100,000 and in a minimum amount of $1,000,000), at the option of the Company, at 100% of the
principal amount so prepaid plus interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect to each such Note. Any partial prepayment of a Series of the Notes
pursuant to this paragraph 4C shall be applied in satisfaction of required payments of principal in
inverse order of their scheduled due dates.

 

10

 

4D. Notice of Optional Prepayment. The Company shall give the holder of each Note of a Series
to be prepaid pursuant to paragraph 4C irrevocable written notice of such prepayment not less than
5 Business Days prior to the prepayment date, specifying such prepayment date, the aggregate
principal amount of the Notes of such Series to be prepaid on such date, the principal amount of
the Notes of such Series held by such holder to be prepaid on that date and that such prepayment is
to be made pursuant to paragraph 4C. Notice of prepayment having been given as
aforesaid, the principal amount of the Notes specified in such notice, together with interest
thereon to the prepayment date and together with the Yield-Maintenance Amount, if any, herein
provided, shall become due and payable on such prepayment date. The Company shall use reasonable
efforts, on or before the day on which it gives written notice of any prepayment pursuant to
paragraph 4C, to give telephonic notice of the principal amount of the Notes to be prepaid and the
prepayment date to each Significant Holder which shall have designated a recipient for such notices
in the Purchaser Schedule attached hereto or the applicable Confirmation of Acceptance or by notice
in writing to the Company.

4E. Application of Required Prepayments. In the case of each prepayment of less than the
entire unpaid principal amount of all outstanding Notes of any Series pursuant to paragraphs 4A, 4B
or 4C, the amount to be prepaid shall be applied pro rata to all outstanding Notes of such Series
(including, for the purpose of this paragraph 4E only, all Notes of such Series prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates other than by prepayment pursuant to paragraph 4A, 4B or 4C) according to the respective
unpaid principal amounts thereof.

4F. Retirement of Notes. The Company shall not, and shall not permit any of its Subsidiaries
or Affiliates to, prepay or otherwise retire in whole or in part prior to their stated final
maturity (other than by prepayment pursuant to paragraphs 4A, 4B or 4C or upon acceleration of such
final maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly or indirectly,
Notes of any Series held by any holder unless the Company or such Subsidiary or Affiliate shall
have offered to prepay or otherwise retire or purchase or otherwise acquire, as the case may be,
the same proportion of the aggregate principal amount of Notes of such Series held by each other
holder of Notes of such Series at the time outstanding upon the same terms and conditions. Any
Notes so prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates shall not be deemed to be outstanding for any purpose under this
Agreement, except as provided in paragraph 4E.

4G. Prepayment of Notes on Agreement Effective Date. As a condition to this Agreement
becoming effective, the Company shall prepay $11,428,571.43 of the Notes, together with accrued and
unpaid interest thereon, on the Agreement Effective Date, to be applied ratably to all outstanding
Notes and to installments thereof in inverse order of maturity. The Purchasers waive any Yield
Maintenance Amount otherwise payable under paragraph 4C in connection with the prepayment of
principal contemplated by this paragraph 4G; provided that the foregoing waiver of Yield
Maintenance Amount shall not apply to any other prepayment of principal of the Notes made pursuant
to paragraph 4C after the Agreement Effective Date.

 

11

 

4H. Offer to Prepay Notes in the Event of an Asset Disposition or Recovery Event

(a) Notice of Asset Disposition or Recovery Event. Upon the occurrence of any Asset
Disposition or Recovery Event, the Company will give written notice of such Asset
Disposition or Recovery Event to each holder of Notes. Such notice shall contain and
constitute an offer to prepay the outstanding Notes as described in Paragraph 4H(b) and
shall be accompanied by the certificate described in
Paragraph 4H(e). Within thirty (30)
days of a Recovery Event, the Company shall notify each holder of the Notes of its
determination (the “Recovery Determination Notice”) as to whether or not to replace,
rebuild or restore the affected property. If the Company decides to replace, rebuild
or restore such property, then any such replacement, rebuilding or restoration must be (A)
commenced within six (6) months of the date of the Recovery Event, and (B) substantially
completed within twelve (12) months of such commencement date, with such casualty insurance
proceeds and other net proceeds and other funds available to the Company or the appropriate
Subsidiaries for replacement, rebuilding or restoration of such property.

(b) Offer to Prepay Notes. The offer to prepay the Notes contemplated by the foregoing
clause (a) shall be an offer to prepay, in accordance with and subject to this Paragraph 4H,
a portion of the Notes equal to the Net Cash Proceeds from such Asset Disposition or
Recovery Event, as the case may be, to be allocated ratably to the Notes held by each holder
(in this case only, “holder” in respect of any Note registered in the name of a nominee for
a disclosed beneficial owner shall mean such beneficial owner), on a date specified in such
offer (the “Proposed 4H Prepayment Date”). Such Proposed 4H Prepayment Date shall be not
less than 10 days and not more than 30 days after the date of such offer (if the Proposed 4H
Prepayment Date shall not be specified in such offer, the Proposed 4H Prepayment Date shall
be the 20th day after the date of such offer).

(c) Acceptance; Rejection. A holder of Notes may reject the offer to prepay made
pursuant to this Paragraph 4H by causing a notice of such rejection to be delivered to the
Company on or before the fifth day prior to the Proposed 4H Prepayment Date. A failure by a
holder of Notes to respond to an offer to prepay made pursuant to this Paragraph 4H on or
before such date shall be deemed to constitute an acceptance of such offer by such holder.

(d) Prepayment. Prepayment of the Notes to be prepaid pursuant to this Paragraph 4H
shall be at 100% of the principal amount of such Notes, together with interest accrued to
the date of prepayment and the Yield-Maintenance Amount, if any, with respect to each such
Note. The prepayment shall be made on the Proposed 4H Prepayment Date.

(e) Officer’s Certificate. Each offer to prepay the Notes pursuant to this Paragraph
4H shall be accompanied by a certificate, executed by an Authorized Officer of the Company
and dated the date of such offer, specifying: (i) the Proposed 4H Prepayment Date; (ii)
that such offer is made pursuant to this Paragraph 4H; (iii) the principal amount of each
Note offered to be prepaid; (iv) the interest that would be due on each Note offered to be
prepaid, accrued to the Proposed 4H Prepayment Date; (v) that the conditions of this
Paragraph 8.8 have been fulfilled; and (vi) in reasonable detail, the nature and date of the
Asset Disposition or Recovery Event that has occurred.

 

12

 

5. AFFIRMATIVE COVENANTS.

5A. Reporting Requirements.

5A(1). General Information. The Company covenants that it will deliver to each Significant
Holder in triplicate:

(i) as soon as practicable and in any event within 45 days after the end of each
quarterly period (other than the fourth quarterly period) in each fiscal year,

(1) Consolidated statements of income, stockholders’ equity and cash flows for
the period from the beginning of the current fiscal year to the end of such
quarterly period, and

(2) a Consolidated balance sheet as at the end of such quarterly period,
setting forth in each case in comparative form figures for the corresponding period
in the preceding fiscal year, all in reasonable detail and satisfactory in form to
the Required Holder(s) and certified by an authorized financial officer of the
Company as fairly presenting, in all material respects, the financial condition of
the Company and its Consolidated Subsidiaries as of the end of such period and the
results of their operations for the period then ended in accordance with generally
accepted accounting principles, subject to changes resulting from normal year-end
adjustments and the inclusion of abbreviated footnotes; provided, however, that
delivery pursuant to clause (iii) below of copies of the Quarterly Report on Form
10-Q of the Company for such quarterly period filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause (i);

(ii) as soon as practicable and in any event within 90 days after the end of each
fiscal year,

	 	(1)	 	Consolidated statements of income,
stockholders’ equity and cash flows for such year, and

	 	(2)	 	a Consolidated balance sheet as at the end of
such year,

setting forth in each case in comparative form corresponding Consolidated figures from the
preceding annual audit, all in reasonable detail and satisfactory in scope to the Required
Holder(s) and reported on by independent public accountants of recognized standing selected
by the Company whose report shall be without limitation as to the scope of the audit and
reasonably satisfactory in substance to the Required Holder(s); provided, however, that
delivery pursuant to clause (iii) below of copies of the Annual Report on Form 10-K of the
Company for such year filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (ii);

(iii) promptly upon transmission thereof, copies of all such financial statements,
proxy statements, notices and reports as it shall send to its public stockholders and copies
of all registration statements (without exhibits) and all reports (other than any
registration statement filed on Form S-8) which it files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the functions of the Securities
and Exchange Commission);

 

13

 

(iv) promptly upon receipt thereof, a copy of each other report (including, without
limitation, management letters) submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary;

(v) promptly upon receipt thereof, a copy of each report, survey, study, evaluation,
assessment or other document prepared by any consultant, engineer, Environmental Authority
or other Person relating to compliance by the Company or any Subsidiary with any
Environmental Requirements, if the cost of remediation, repair or compliance may be
reasonably expected to exceed $500,000 in any one case or in the aggregate,

(vi) with reasonable promptness, upon the request of the holder of any Note, provide
such holder, and any qualified institutional buyer designated by such holder, such financial
and other information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the Securities Act in
connection with the resale of Notes, except at such times as the Company is subject to the
reporting requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this
clause (vii), the term “qualified institutional buyer” shall have the meaning specified in
Rule 144A under the Securities Act;

(vii) as soon as available, but in any event no later than (x) June 30, 2010 for the
2010 fiscal year and (y) at least 15 days before the end of each subsequent fiscal year of
the Company, an annual business plan and budget of the Company and its Subsidiaries on a
consolidated basis, including forecasts prepared by management of the Company, in form
satisfactory to the Required Holders, of consolidated balance sheets and statements of
income or operations and cash flows of the Company and its Subsidiaries on a quarterly basis
for such fiscal year and on an annual basis for each year thereafter (including the 2015
fiscal year);

(viii) as soon as available, but in any event within 30 days after the end of each
fiscal year of the Company, a report summarizing the insurance coverage (specifying type,
amount and carrier) in effect for each Credit Party and its Subsidiaries and containing such
additional information as the holders of the Notes may reasonably specify;

(ix) no later than May 11 of every other year after the Series A Closing Day, beginning
with the year 2012, an opinion of independent outside counsel to the Company, which is
acceptable to the Required Holders, stating that, in the opinion of such counsel, all action
(if any is required) has been taken with respect to the recording, filing, registering,
re-recording, refiling and re-registering of all UCC-1 financing statements in respect of
all Collateral as is necessary under the laws of each State in which such UCC-1 financing
statements are filed under applicable law to maintain the perfection of the Lien in respect
of such Collateral (as to which perfection may be obtained by the filing of such financing
statements) (including, without limitation, to the extent provided for therein and herein on
any Property acquired by the Company or any Subsidiary after the date of Closing), and
reciting the details of such action (if any), and
stating that, in the opinion of such counsel, based upon the facts and circumstances
existing at the time such opinion is rendered, no additional action is, or will become,
during the thirty (30) months following the date of such opinion, necessary for such
purpose, or, if any such additional action is necessary, what such action is and when it
must be taken; and

 

14

 

(x) with reasonable promptness, such other financial data and other information as a
Significant Holder may reasonably request.

5A(2). Quarterly Officer’s Certificates. Together with each delivery of financial statements
required by clauses 5A(1)(i) and (ii) above, the Company will deliver to each Significant Holder an
Officer’s Certificate demonstrating (with computations in reasonable detail) compliance with the
provisions of paragraphs, 6A, 6B and 6D and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company has taken, is taking or proposes to take with respect
thereto;

5A(3). Annual Accountant’s Letter. Together with each delivery of financial statements
required by clause 5A(1)(ii) above, the Company will deliver to each Significant Holder a
certificate of the independent public accountants giving the report on such financial statements
stating that, in making the audit necessary for their report, they have obtained no knowledge of
any Event of Default or Default, or, if they have obtained knowledge of any Event of Default or
Default, specifying the nature and period of existence thereof. The accountants, however, shall not
be liable to anyone as a result of this provision by reason of their failure to obtain knowledge of
any Event of Default or Default which would not be disclosed in the course of an audit conducted in
accordance with generally accepted auditing standards;

5A(4). Special Information. The Company also covenants that within 5 Business Days after any
Responsible Officer obtains knowledge of:

(a) an Event of Default or Default,

(b) a material adverse change in the financial condition, business or operations of the
Company and its Subsidiaries, taken as a whole,

(c) legal proceedings filed against the Company and/or any Subsidiary, which reasonably
could be expected to have a material adverse effect on the financial condition, business or
operations of the Company and its Subsidiaries, taken as a whole, or which in any manner
draws into question the validity of or reasonably could be expected to impair the ability of
the Company to perform its obligations under this Agreement or the Notes;

(d) a default under any agreement or note evidencing Debt for which the Company or any
Subsidiary is liable, which individually or in the aggregate with all other agreements and
notes in default for which the Company or any Subsidiary is liable, exceeds $5,000,000;

(e) the occurrence of any other event that reasonably could be expected to impair the
ability of the Company to meet its obligations hereunder;

 

15

 

(f) any (i) Environmental Liabilities, (ii) pending, threatened or anticipated
Environmental Proceedings, (iii) Environmental Notices, (iv) Environmental Judgments and
Orders, or (v) Environmental Releases at, on, in, under or in any way affecting the
Properties which reasonably could be expected to have a material adverse effect on the
business, operations or financial condition of the Company and its Subsidiaries, taken as a
whole; or

(g) with respect to any Plan that is subject to the funding requirements of Section 302
of ERISA or Section 412 of the Code, the Company (i) has given or is required to give notice
to the Pension Benefit Guaranty Corporation that a material reportable event has occurred
with respect to such Plan, (ii) has delivered notice to the Pension Benefit Guaranty
Corporation of any intent to withdraw from or terminate any such Plan, or (iii) has failed
to make timely a contribution to any such Plan;

the Company will deliver to each Significant Holder an Officer’s Certificate specifying the nature
and period of existence thereof and what action the Company or the Subsidiary has taken, is taking
or proposes to take with respect thereto.

5B. Inspection of Property. The Company covenants that, at such reasonable times and as often
as a Significant Holder may reasonably request, it will permit any Person designated by a
Significant Holder in writing, at such Significant Holder’s expense unless a Default has occurred
and is continuing in which case at the Company’s expense, to:

(i) visit and inspect any of the properties of the Company and any Subsidiary;

(ii) examine the corporate books and financial records of the Company and its
Subsidiaries and make copies thereof or extracts therefrom; and

(iii) discuss the affairs, finances and accounts of any of such corporations with the
principal officers of the Company or any Subsidiary and independent public accountants to
the Company.

5C. Subsidiary Guarantees; Security Documents. Upon the formation or acquisition of any new
direct or indirect Subsidiary of the Company, then the Company shall, at its expense:

(i) Description of New Subsidiary Property. Within 10 days after such
formation or acquisition, furnish to the holders of the Notes and the Collateral Agent a
description of the real and personal properties of such Subsidiary, in detail satisfactory
to the Required Holders;

(ii) Guaranty. Within 30 days after such formation or acquisition, cause such
Subsidiary, and cause each direct and indirect parent of such Subsidiary (if it has not
already done so) to become a Guarantor by duly executing and delivering to the holders of
the Notes a joinder, supplement or other guaranty agreement as the Required Holders may
request, as specified by in form and substance satisfactory to the Required Holders;

 

16

 

(iii) Security Agreement. Within 30 days after such formation or acquisition,
cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not
already done so) to (i) become a “Grantor” under the Security Agreement by duly executing
and delivering to the Collateral Agent (with copies thereof to the holders of the Notes) a
joinder, supplement or other security agreement as the Required Holders may request, as
specified by in form and substance satisfactory to the Required Holders;

(iv) Mortgages. As the Required Holders may request in their sole discretion
(A) within 30 days after such formation or acquisition, cause such Subsidiary to duly
execute and deliver to the Collateral Agent a Mortgage with respect to each parcel of real
property owned by such Subsidiary, as specified by and in form and substance satisfactory to
the Required Holders, and (B) as promptly as practicable after such formation or
acquisition, cause such Subsidiary to deliver to the Collateral Agent the Mortgaged Property
Support Documents, each in scope, form and substance satisfactory to the Required Holders,
provided, however, that to the extent that such Subsidiary (or any Credit
Party) shall have otherwise received any of the foregoing items with respect to such real
property, such items shall, promptly after the receipt thereof, be delivered to the holders
of the Notes;

(v) Organizational Documents; Opinions; Further Assurances. Within 30 days
after such formation or acquisition, cause such Subsidiary and each direct and indirect
parent of such Subsidiary (if it has not already done so) to (i) deliver to the holders of
the Notes (A) such certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of such Subsidiary as the Required Holders
may require evidencing the identity, authority and capacity of each Responsible Officer
thereof authorized to act as a Responsible Officer in connection with the Note Documents to
which such Credit Party is a party or is to be a party, (B) such documents and
certifications as the Required Holders may reasonably require to evidence that such
Subsidiary is duly organized or formed, validly existing, in good standing and qualified to
engage in business in each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification, except to the extent
that failure to do so could not reasonably be expected to have a Material Adverse Effect,
and (C) a signed copy of a favorable opinion, addressed to the holders of the Notes and the
Collateral Agent, of counsel for the Company or such Subsidiary acceptable to the Required
Holders as to the matters contained in this paragraph 5C, and as to such other matters as
the Required Holders may reasonably request, and (ii) take whatever other action is required
by the Collateral Documents (including any Collateral Document entered into pursuant to this
paragraph 5C) as may be necessary or advisable in the opinion of the Required Holders to
vest in the Collateral Agent (or in any representative of the Collateral Agent designated by
it) valid and subsisting perfected first priority Liens on the properties purported to be
subject to such Collateral Documents (subject only to Liens permitted to exist and have
priority by paragraph 6C hereof), enforceable against all third parties in accordance with
their terms;

 

17

 

5D. Pledge of After Acquired Property. Upon the acquisition of any property by any Credit
Party, if such property, in the judgment of the Required Holders, shall not already be
subject to a perfected first priority Lien in favor of the Collateral Agent for the benefit of
the holders of the Notes, then the Company shall, or shall cause such other Credit Party to, at the
Company’s expense:

(i) Description of Acquired Property. Within 10 days after such acquisition,
furnish to the holders of the Notes a description of the property so acquired in detail
satisfactory to the Required Holders;

(ii) Collateral Documents. (A) Within 30 days after such acquisition, cause
the applicable Credit Party to duly execute and deliver to the Collateral Agent security
agreements, security agreement supplements, pledge agreements, or pledge agreement
supplements as the Required Holders may request, as specified by and in form and substance
satisfactory to the Required Holders, securing payment of all the Obligations of the
applicable Credit Party under the Note Documents and constituting Liens on all such
properties, (B) at the request of the Required Holders in their sole discretion, within 30
days after the acquisition of real property, duly execute and deliver to the Collateral
Agent such Mortgages with respect to such real property, and (C) at the request of the
Required Holders in their sole discretion, as promptly as practicable after any such
acquisition of real property, cause such Credit Party to deliver to the Collateral Agent the
Mortgaged Property Support Documents, each in scope, form and substance satisfactory to the
Required Holders, provided, however, that to the extent that such Credit
Party shall have otherwise received any of the foregoing items with respect to such real
property, such items shall, promptly after the receipt thereof, be delivered to the holders
of the Notes;

(iii) Further Assurances. Within 30 days after such acquisition, cause
applicable Credit Party to take whatever other action is required by the Collateral
Documents (including any Collateral Document entered into pursuant to this paragraph 5D) as
may be necessary or advisable in the opinion of the Collateral Agent or Required Holders to
vest in the Collateral Agent (or in any representative of the Collateral Agent designated by
it) valid and subsisting perfected first priority Liens on the properties purported to be
subject to such Collateral Documents (subject only to Liens permitted to exist and have
priority by paragraph 6C hereof), enforceable against all third parties in accordance with
their terms; and

(iv) Legal Opinion. Within 30 days after such acquisition, deliver to the
holders of the Notes and the Collateral Agent, upon the request of the Required Holders in
their sole discretion, a signed copy of a favorable opinion, addressed to the holders of the
Notes and the Collateral Agent, of counsel for the Credit Parties acceptable to the Required
Holders and the Collateral Agent as to the matters contained in this paragraph 5D and as to
such other matters as the Required Holders or the Collateral Agent may reasonably request.

 

18

 

5E. Maintenance of Insurance. The Company covenants that it and each Subsidiary will maintain,
with responsible insurers, insurance with respect to its properties and business against such
casualties and contingencies (including, but not limited to, public liability, larceny,
embezzlement or other criminal misappropriation) and in such amounts as is customary in the
case of similarly situated corporations engaged in the same or similar businesses and
providing for not less than 30 days’ prior notice to the holders of the Notes of termination, lapse
or cancellation of such insurance, and in any event, with respect to each Credit Party, otherwise
comply with the requirements of Section 3.2(h) of the Security Agreement.

5F. Maintenance of Corporate Existence/Compliance with Law/Preservation of Property. The
Company covenants that, except as permitted under paragraph 6C(3) and 6D, it and each Subsidiary
will do or cause to be done all things necessary to:

(i) preserve, renew and keep in full force and effect the corporate existence of the
Company and its Subsidiaries (other than those Subsidiaries not material to the financial
condition, business or operations of the Company and its Subsidiaries taken as a whole);

(ii) comply with all laws and regulations (including, without limitation, laws and
regulations relating to equal employment opportunity and employee safety) applicable to it
and any Subsidiary except where the failure to comply could not reasonably be expected to
have a material adverse effect on the business, operations or financial condition of the
Company and its Subsidiaries, taken as a whole;

(iii) maintain, preserve and protect all material intellectual property of the Company
and its Subsidiaries, and

(iv) preserve all the remainder of its property used or useful in the conduct of its
business and keep the same in good repair, working order and condition excluding normal wear
and tear.

5G. Compliance with Environmental Laws. The Company covenants that it and each Subsidiary
will, comply in a timely fashion with, or operate pursuant to valid waivers of the provisions of,
all applicable Environmental Requirements, including, without limitation, the emission of
wastewater effluent, solid and hazardous waste and air emissions together with any other applicable
Environmental Requirements for conducting, on a timely basis, periodic tests and monitoring for
contamination of ground water, surface water, air and land and for biological toxicity of the
aforesaid, and all applicable regulations of the Environmental Protection Agency or other relevant
federal, state or local governmental authority, except where the failure to comply could not
reasonably be expected to have a material adverse effect on the business, operations or financial
condition of the Company and its Subsidiaries, taken as a whole. The Company agrees to indemnify
and hold you, your officers, agents and employees (each an
“Indemnified Person”) harmless from any
loss, liability, claim or expense that you may incur or suffer as a result of a breach by the
Company or any Subsidiary, as the case may be, of this covenant other than as a result of the gross
negligence or willful misconduct of such Indemnified Person. The Company shall not be deemed to
have breached or violated this paragraph 5G if the Company or any Subsidiary is challenging in good
faith by appropriate proceedings diligently pursued the application or enforcement of such
Environmental Requirements for which adequate reserves have been established in accordance with
generally accepted accounting principles.

 

19

 

5H. No Integration. The Company covenants that it has taken and will take all necessary action
so that the issuance of the Notes does not and will not require registration under the Securities
Act. The Company covenants that no future offer and sale of debt securities of the Company of any
class will be made if there is a reasonable possibility that such offer and sale would, under the
doctrine of “integration”, subject the issuance of the Notes to you to the registration
requirements of the Securities Act.

5I. Financial Records. The Company covenants that it and each Subsidiary will, keep proper
books of record and account in which full and correct entries (subject to normal year end
adjustments and, as to interim statements, the absence of footnotes) will be made of the business
and affairs of the Company or such Subsidiary under generally accepted accounting principles
consistently applied (except for changes disclosed in the financial statements furnished to you
pursuant to paragraph 5A and concurred in by the independent public accountants referred to in
paragraph 5A).

5J. Further Assurances. Promptly upon request by any holder of the Notes, (a) correct any
material defect or error that may be discovered in any Note Document or in the execution,
acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any and all such further acts, deeds,
certificates, assurances and other instruments as any holder of the Notes, may reasonably require
from time to time in order to (i) carry out more effectively the purposes of the Note Documents,
(ii) to the fullest extent permitted by applicable law, subject any Credit Party’s or any of its
Subsidiaries’ properties, assets, rights or interests to the Liens now or hereafter intended to be
covered by any of the Collateral Documents, (iii) perfect and maintain the validity, effectiveness
and priority of any of the Collateral Documents and any of the Liens intended to be created
thereunder and (iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more
effectively unto the holders of the Notes and the Collateral Agent the rights granted or now or
hereafter intended to be granted to the holders of the Notes and the Collateral Agent under any
Note Document or under any other instrument executed in connection with any Note Document to which
any Credit Party or any of its Subsidiaries is or is to be a party, and cause each of its
Subsidiaries to do so.

6. NEGATIVE COVENANTS. Unless the Required Holders otherwise agree in writing, the Company
shall not, and shall not permit any Subsidiary, to take any of the following actions or permit the
occurrence or existence of any of the following events or conditions:

6A. Asset Coverage Ratio; Other Financial Covenants. The Company covenants that it will not at
any time permit:

(i) the sum of (A) 70% of accounts receivable of the Company and its Subsidiaries, plus
(B) 35% of finished goods inventory of the Company and its Subsidiaries, in each case
measured on a consolidated basis in accordance with GAAP to be less than Consolidated Debt
at any time; or

(ii) The amount of the Company’s unrestricted cash on hand to be less than $5,000,000
before the end of the Company’s first fiscal quarter of 2011; or

 

20

 

(iii) Consolidated Operating Income to be less than 200% of Consolidated Fixed Charges;
or

(iv) Consolidated Debt to exceed 55% of Consolidated Capitalization

(v) Consolidated Priority Debt to exceed 10% of Consolidated Net Worth; or

(vi) the ratio of Consolidated Debt to Consolidated EBITDA to exceed 2.75:1.00;

provided, however that subsections 6A(iii), 6A(iv), 6A(v) and 6A(vi) shall be suspended and have no
force or effect for the Company’s first fiscal quarter of 2010 through and including the Company’s
first fiscal quarter of 2011, after which the foregoing covenants shall be in full force and
effect.

6B. Minimum Earnings. The Company covenants that it will not permit Consolidated EBITDA (i)
for the fiscal quarter period ending October 2, 2010 to be less than ($5,000,000), (ii) for the two
fiscal quarter period ending on December 31, 2010 to be less than ($10,000,000) and (iii) for the
three fiscal quarter period ending on April 2, 2011 to be less than ($10,000,000).

6C. Liens, Debt and Other Restrictions. The Company covenants that it will not and will not
permit any Subsidiary to:

6C(1). Liens. Create, assume or suffer to exist any Lien upon any of its property or assets,
whether now owned or hereafter acquired (whether or not provision is made for the equal and ratable
securing of the Notes pursuant to paragraph 5C), except:

(i) Liens for taxes (including ad valorem and property taxes) and assessments or
governmental charges or levies not yet due or which are being actively contested in good
faith by appropriate proceedings;

(ii) other Liens incidental to the conduct of its business or the maintenance,
operation, construction or ownership of its property and assets (including pledges or
deposits in connection with workers’ compensation and social security taxes, assessments and
charges, and landlords, mechanics and materialmen Liens and survey exceptions or
encumbrances, easements or reservations, rights-of-way, or zoning restrictions) provided
that (A) such Liens were not incurred in connection with the borrowing of money, or the
obtaining of advances or credit or the payment of the deferred purchase price of property
and (B) the existence of such Lien does not materially detract from the value of such
property or assets to the Company or any Subsidiary or unreasonably interfere with the
ordinary conduct of business;

(iii) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the
ordinary course of business to secure (or to obtain letters of credit that secure) the
performance of tenders, statutory obligations, surety and appeal bonds, bids, leases,
performance bonds, purchase, construction or sales contracts and other similar obligations,
in each case not incurred or made in connection with Debt;

 

21

 

(iv) Liens securing purchase money Debt or Capitalized Lease Obligations permitted
under paragraph 6D(2)(iii), so long as any such Lien is confined solely to the item or items
of property and, if required by the terms of the instrument originally creating such Lien,
other property which is an improvement to or for specific use with such acquired property
(with respect to purchase money Debt) and the property subject to such leases (with respect
to Capitalized Lease Obligations);

(v) any right of set off or banker’s lien (whether by common law, statute, contract or
otherwise) in favor of any Person to whom neither the Company nor Subsidiary owes any Debt;
and

(vi) Liens securing the Notes.

6C(2). Debt. Create, incur, assume or suffer to exist any Debt, except:

(i) Debt of the Company owed to any Guarantor, and Debt of any Guarantor
owed to the Company or any other Guarantor;

(ii) the Notes;

(iii) purchase money Debt and Capitalized Lease Obligations in an amount
not to exceed $2,500,000; and

(iv) letters of credit issued in the ordinary course of business of the Company
under its line of credit with Branch Banking & Trust in an aggregate amount not to
exceed $4,000,000.

6C(3). Merger or Consolidation. Merge, consolidate or exchange shares with any other Person,
except that:

(i) any Subsidiary may merge or consolidate with the Company or any Guarantor;
provided, in the case of a Guarantor, it remains a Guarantor after the merger or
consolidation; and

(ii) the Company may merge or consolidate with any other corporation (including a
Subsidiary) if the continuing or surviving corporation is the Company and immediately after
such merger or consolidation, no Default or Event of Default shall have occurred or exist.

6C(4). Sale or Discount of Receivables. Sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.

6C(5). Change in Business. Enter into any business which is substantially different from the
manufacturing of home furnishings.

6C(6). Transactions with Related Party. Effect any transaction with any Affiliate or
Subsidiary (other than a Guarantor) by which any assets or services of the Company or a Subsidiary
of the Company is transferred to such Affiliate or Subsidiary (other than a
Guarantor), or from such Affiliate or Subsidiary (other than a Guarantor) or enter into any
other transaction with an Affiliate or Subsidiary (other than a Guarantor), on terms more favorable
than would be reasonably expected to be given in a similar transaction with an unrelated entity.

 

22

 

6C(7). Investments. Make, or permit to remain, an Investment except:

(i) any Investment in a Guarantor or an entity that becomes a Guarantor simultaneously
with such Investment,

(ii) any evidence of debt, maturing not more than one year after the date of issue,
issued by the United States of America, or any instrumentality or agency thereof and
guaranteed fully as to principal, interest and premium, if any, by the United States of
America,

(iii) any repurchase agreement or certificate of deposit, maturing not more than one
year after the date of purchase, issued by Wachovia Bank, National Association, or a
commercial bank, bank holding company or trust company which is located within the United
States of America, organized under the laws of the United States of America or the laws of
any State thereof, is a member of the Federal Reserve System, has a Thompson Bank Watch
Rating (or if no longer available, a comparable rating system), at the time of
determination, of “B” (or higher), and has a combined capital and surplus and undivided
profits of at least $500,000,000,

(iv) commercial paper, maturing not more than 270 days after the date of purchase,
issued by a corporation (other than the Company or any Subsidiary or Affiliate) organized
and existing under the laws of any state within the United States of America with a rating,
at the time as of which any determination thereof is to be made, of “P-1” (or higher)
according to Moody’s Investors Service (or if no longer available, a comparable rating
system), or “A-1” (or higher) according to Standard & Poor’s Corporation (or if no longer
available, a comparable rating system),

(v) money market mutual or similar funds having assets in excess of $100,000,000, at
least 95% of the assets of which are comprised of assets specified in clauses (ii) through
(iv) above or of municipal money market securities,

(vi) property or assets acquired solely in exchange for capital stock of the Company,
and

(vii) any other Investment of the Company or any Guarantor so long as the amount of all
such Investments, other than investments specified in clauses (i) through (vi) above shall
not exceed $2,500,000.

6D. Sale of Property. The Company will not, and will not permit any Subsidiary to, Dispose of
any property or assets, except:

(i) The Company or any Subsidiary may sell inventory in the ordinary course of business
for Fair Market Value;

 

23

 

(ii) any Subsidiary may Dispose of its assets to the Company or a Guarantor;

(iii) the Company or any Subsidiary may Dispose of assets (whether or not leased back)
so long as, immediately after giving effect to such proposed Disposition:

(A) the consideration for such assets represents the Fair Market Value of such
assets (as determined in good faith by the Company’s Board) at the time of such
Disposition;

(B) the net book value of all assets so Disposed of by the Company and its
Subsidiaries during the term of this Agreement does not exceed $10,000,000; and

(D) no Default or Event of Default shall exist.

For purposes of this paragraph 6D:

(i) “Disposition” means the sale, lease, transfer or other disposition of property, and
“Disposed of” has a corresponding meaning to Disposition;

(ii) Calculation of net book value. The net book value of any assets shall be
determined as of the respective date of Disposition of those assets; and

(iii) Sales of less than all the stock of a Subsidiary. In the case of the sale or
issuance of the stock of a Subsidiary, the amount of Consolidated Assets contributed by the
stock Disposed of shall be assumed to be the percentage of outstanding stock sold or to be
sold.

6E. Subsidiary Stock and Debt. The Company will not:

(i) directly or indirectly sell, assign, pledge or otherwise dispose of any Debt of or
any shares of stock of (or warrants, rights or options to acquire stock of) any Subsidiary
except to a Guarantor;

(ii) permit any Subsidiary directly or indirectly to sell, assign, pledge or otherwise
dispose of any Debt of the Company or any other Subsidiary, or any shares of stock of (or
warrants, rights or options to acquire stock of) any other Subsidiary, except to the Company
or a Guarantor;

(iii) permit any Subsidiary to have outstanding any shares of Preferred Stock other
than Preferred Stock owned by the Company or a Guarantor;

(iv) permit any Subsidiary directly or indirectly to issue or sell any shares of its
stock (or warrants, rights or options to acquire its stock) except to the Company or a
Guarantor; or

 

24

 

(v) permit any Subsidiary to enter into or otherwise be bound by or subject to any
contract or agreement (including, without limitation, any provision of its certificate
or articles of incorporation or bylaws) that restricts its ability to pay dividends or
other distributions on account of its stock.

6F. ERISA. The Company covenants that it will not nor permit any Subsidiary to:

(i) terminate or withdraw from any Plan resulting in the incurrence of any material
liability to the Pension Benefit Guaranty Corporation;

(ii) engage in or permit any Person to engage in any prohibited transaction (as defined
in Section 4975 of the Code) involving any Plan (other than a Multiemployer Plan) which
would subject the Company or any Subsidiary to any material tax, penalty or other liability;

(iii) incur or suffer to exist any material accumulated funding deficiency (as defined
in section 302 of ERISA and section 412 of the Code), whether or not waived, involving any
Plan (other than a Multiemployer Plan); or

(iv) allow or suffer to exist any risk or condition which presents a risk of incurring
a material liability to the Pension Benefit Guaranty Corporation.

6G. Environmental Matters. The Company covenants that it will not, and will not permit any
Third Party to, use, produce, manufacture, process, generate, store, dispose of, manage at, or ship
or transport to or from the Properties any Hazardous Materials except for Hazardous Materials used,
produced, released or managed in the ordinary course of business in compliance with all applicable
Environmental Requirements except where the failure to do so could not reasonably be expected to
have a material adverse effect on the business, operations or financial condition of the Company
and its Subsidiaries taken as a whole and except for Hazardous Materials released in amounts which
do not require remediation pursuant to applicable Environmental Requirements or if remediation is
required, such remediation could not reasonably be expected to have a material adverse effect on
the business, operations or financial condition of the Company and its Subsidiaries taken as a
whole.

6H. Specified Laws. Neither the Company nor any agent acting on its behalf will take any
action which could reasonably be expected to cause this Agreement or the Notes to violate
Regulation U, Regulation T or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Exchange Act, in any case as in effect now or as the same may hereafter be
in effect. At no time shall more than twenty-five percent (25%) of the Company’s Consolidated
Assets subject to the restrictions set forth in paragraph 6(C)(1) be represented by “margin stock”,
as such term is defined in Regulation U.

7. EVENTS OF DEFAULT.

7A. Acceleration. If any of the following events shall occur and be continuing for any reason
whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or otherwise):

(i) the Company defaults in the payment of any principal of or Yield-Maintenance Amount
payable with respect to any Note when the same shall become due, either by the terms thereof
or otherwise as herein provided; or

 

25

 

(ii) the Company defaults in the payment of any interest on any Note for more than 5
calendar days after the date due; or

(iii) the Company or any Subsidiary defaults (whether as primary obligor or as
guarantor or other surety) in any payment of principal of or interest on any other
obligation for money borrowed (or any Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any obligation (other than a current
trade payable which does not constitute Debt) issued or assumed as full or partial payment
for property whether or not secured by a purchase money mortgage or any obligation under
notes payable or drafts accepted representing extensions of credit) beyond any period of
grace provided with respect thereto; or the Company or any Subsidiary fails to perform or
observe any other agreement, term or condition contained in any agreement under which any
such obligation is created (or if any other event thereunder or under any such agreement
shall occur and be continuing) and the effect of such failure or other event is to cause, or
to permit the holder or holders of such obligation (or a trustee on behalf of such holder or
holders) to cause, such obligation to become due (or to be repurchased by the Company or any
Subsidiary) prior to any stated maturity, provided that the aggregate amount of all
obligations as to which such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration (or resale to the Company or any
Subsidiary) shall occur and be continuing exceeds $2,500,000; or

(iv) any representation or warranty made by the Company herein or by the Company or any
of its officers in any writing furnished in connection with or pursuant to this Agreement
shall be false in any material respect on the date as of which made; or

(v) the Company fails to perform or observe any agreement contained in paragraphs, 5L
and paragraph 6 (other than paragraphs 6C(6), 6F, 6G and 6H and solely to the extent that a
commercial bank, bank holding company or trust company shall fail to meet the standards
specified in clause (iii) of paragraph 6C(7) after the date of an Investment by the Company
under such clause (iii), paragraphs 6C(7)(iii) and solely to the extent a corporation shall
fail to meet the standards specified in clause (iv) of paragraph 6C(7) after the date of an
Investment by the Company under such clause (iv), paragraph 6C(7)(iv)); or

(vi) the Company or any Subsidiary fails to perform or observe any other agreement
contained herein or in any other Note Document and such failure shall not be remedied within
30 days after any Responsible Officer obtains actual knowledge thereof or after receipt by
the Company of written notice from a holder of a Note of such failure; or

(vii) the Company or any Subsidiary makes an assignment for the benefit of creditors or
is generally not paying its debts as such debts become due; or

 

26

 

(viii) any decree or order for relief in respect of the Company or any Subsidiary is
entered under any bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law, whether now or hereafter in
effect (herein called the “Bankruptcy Law”), of any jurisdiction; or

(ix) the Company or any Subsidiary petitions or applies to any tribunal for, or
consents to, the appointment of, or taking possession by, a trustee, receiver, custodian,
liquidator or similar official of the Company or any Subsidiary, or of any substantial part
of the assets of the Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Subsidiary) relating to the Company or any
Subsidiary under the Bankruptcy Law of any other jurisdiction; or

(x) any such petition or application is filed, or any such proceedings are commenced,
against the Company or any Subsidiary and the Company or such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein; or an order,
judgment or decree is entered appointing any such trustee, receiver, custodian, liquidator
or similar official, or approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than 60 days; or

(xi) any order, judgment or decree is entered in any proceedings against the Company
decreeing the dissolution of the Company and such order, judgment or decree remains unstayed
and in effect for more than 60 days; or

(xii) any order, judgment or decree is entered in any proceedings against the Company
or any Subsidiary decreeing a split-up of the Company or such Subsidiary which requires the
divestiture of assets representing a substantial part (being an amount equal to 15% of
Consolidated Assets), or the divestiture of the stock of a Subsidiary whose assets represent
a substantial part, of the Consolidated Assets of the Company and its Subsidiaries
(determined in accordance with generally accepted accounting principles) or which requires
the divestiture of assets, or stock of a Subsidiary, which shall have contributed at least
15% of Consolidated Operating Income for any of the three fiscal years then most recently
ended, and such order, judgment or decree remains unstayed and in effect for more than 60
days; or

(xiii) a final judgment or judgments in an amount in excess of $2,500,000, individually
or in the aggregate, shall be rendered against the Company or any Subsidiary (for which no
insurer has acknowledged, in writing, responsibility for liability, subject to customary
deductible) and, within 60 days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment is not discharged; or

(xiv) the Company or any ERISA Affiliate, in its capacity as an employer under a
Multiemployer Plan, makes a complete or partial withdrawal from such Multiemployer Plan
resulting in the incurrence by such withdrawing employer of a withdrawal liability in an
amount exceeding $2,500,000;

 

27

 

(xv) any guaranty agreement contemplated by paragraph 3A or paragraph 5C shall cease to
be in full force and effect (other than in accordance with its terms) or shall be declared
by any court or governmental authority of competent jurisdiction to be void, voidable or
unenforceable against the guarantor thereunder; (ii) the validity or enforceability of any
such guaranty agreement against the guarantor thereunder shall be contested by such
guarantor, the Company or any Subsidiary; (iii) any guarantor, the Company or any Subsidiary
shall deny that such guarantor has any liability or obligation under the guaranty agreement
to which it is a party; provided that no such denial made on the grounds that a guarantor’s
obligations under its guaranty agreement have been satisfied in accordance with its terms
(e.g., such obligations have been fully paid or properly released) shall constitute an Event
of Default; or (iv) any Subsidiary shall default in the performance of any obligation under
any such guaranty agreement to which it is a party;

(xvi) any Collateral Document shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared by any court or other governmental authority
of competent jurisdiction to be void, voidable or unenforceable against the grantor
thereunder; (ii) the validity or enforceability of any Collateral Document against the
grantor thereunder shall be contested by such grantor; or (iii) any grantor under any
Collateral Document shall deny that it has any liability or obligation under such Collateral
Document; provided that no such denial made on the grounds that such grantor’s obligations
under such Collateral Document have been satisfied in accordance with its terms (e.g., such
obligations have been fully paid or properly released) shall constitute an Event of Default;

then:

(a) if such event is an Event of Default specified in clause (i) or (ii) of this
paragraph 7A, the holder of any Note (other than the Company or any Subsidiary or Affiliate)
may at its option, by written notice to the Company, terminate the Facility and/or declare
such Note to be, and such Note shall thereupon be and become, immediately due and payable at
par together with interest accrued and unpaid thereon, without presentment, demand, protest
or other notice of any kind (including, without limitation, notice of intent to accelerate),
all of which are hereby waived by the Company,

(b) if such event is an Event of Default specified in any of clauses (vii), (viii),
(ix) or (x) of this paragraph 7A with respect to the Company, the Facility shall
automatically terminate and all of the Notes at the time outstanding shall automatically
become immediately due and payable at par together with interest accrued and unpaid thereon,
without presentment, demand, protest or notice of any kind (including, without limitation,
notice of intent to accelerate and notice of acceleration of maturity), all of which are
hereby waived by the Company, and

 

28

 

(c) if such event is any Event of Default other than specified in clauses (vii) (viii),
(ix) or (x) of this paragraph 7A with respect to the Company, the Required Holder(s) may, at
its or their option, by written notice to the Company, terminate the
Facility and declare all of the Notes to be, and all of the Notes shall thereupon be
and become, immediately due and payable, together with interest accrued and unpaid thereon
and, to the extent permitted by applicable law, the Yield-Maintenance Amount, if any, with
respect to each Note, without presentment, demand, protest or other notice of any kind
(including, without limitation, notice of intent to accelerate), all of which are hereby
waived by the Company, and instruct the Collateral Agent to exercise all rights and remedies
under the Collateral Documents.

7B. Rescission of Acceleration. At any time after any or all of the Notes shall have been
declared immediately due and payable pursuant to paragraph 7A, the Required Holder(s) may, by
notice in writing to the Company, rescind and annul such declaration and its consequences if:

(i) the Company shall have paid all accrued and unpaid overdue interest on the Notes,
the principal of and Yield-Maintenance Amount, if any, payable with respect to any Notes
which have become due otherwise than by reason of such declaration, and accrued and unpaid
interest on such overdue interest and overdue principal and Yield-Maintenance Amount at the
rate specified in the Notes,

(ii) the Company shall not have paid any amounts which have become due solely by reason
of such declaration,

(iii) all Events of Default and Defaults, other than non-payment of amounts which have
become due solely by reason of such declaration, shall have been cured or waived pursuant to
paragraph 11C, and

(iv) no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Notes or this Agreement.

No such rescission or annulment shall extend to or affect any subsequent Event of Default or
Default or impair any right arising therefrom.

7C. Notice of Acceleration or Rescission. Whenever any Note shall be declared immediately due
and payable pursuant to paragraph 7A or any such declaration shall be rescinded and annulled
pursuant to paragraph 7B, the Company shall forthwith give written notice thereof to the holder of
each Note of each Series at the time outstanding.

7D. Other Remedies. If any Event of Default or Default shall occur and be continuing, the
holder of any Note may proceed to protect and enforce its rights under this Agreement and such Note
by exercising such remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in the Note Documents or in aid of the exercise of any power
granted in the Note Documents, and may direct the Collateral Agent in accordance to exercise on
behalf of the holders of the Notes all rights and remedies available to the holders of the Notes
under the Collateral Documents. No remedy conferred in this Agreement upon the holder of any Note
is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative
and shall be in addition to every other remedy conferred herein or now or hereafter existing at law
or in equity or by statute or otherwise.

 

29

 

7E. Application of Proceeds. After the exercise of remedies provided for in this paragraph 7
(or after the Notes have automatically become immediately due and payable), any amounts received by
the holders of the Notes shall be applied ratably to the Obligations.

8. REPRESENTATIONS AND WARRANTIES. To induce each Purchaser to enter into this Agreement, and
thereby amend and restate the Original Agreement, the Company warrants and represents as follows:

8A. Organization. The Company is a corporation duly organized and existing in good standing
under the laws of the State of Delaware, and each Subsidiary is duly organized and existing in good
standing under the laws of the jurisdiction in which it is organized. Schedule 8A hereto is an
accurate and complete list of all Subsidiaries as of the Date of Closing, including the
jurisdiction of organization and ownership of all such Subsidiaries. The Company and each
Subsidiary has the organizational power to own its respective properties and to carry on its
respective businesses as now being conducted and is duly qualified and authorized to do business in
each other jurisdiction in which the character of its respective properties or the nature of its
respective businesses require such qualification or authorization except where the failure to be so
qualified or authorized could not reasonably be expected to have a material adverse effect on the
business, operations or financial condition of the Company and its Subsidiaries, taken as a whole.
The execution, delivery and performance by the Company of this Agreement (i) are within the
Company’s power and authority and (ii) have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered for the benefit of or on behalf of the Company
and constitutes a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.

8B. Financial Statements. The Company has furnished you with the following financial
statements, identified by a principal financial officer of the Company a Consolidated balance sheet
as at the last day of the fiscal year in each of the years 2006 to 2009, inclusive, a Consolidated
statement of income for each such year, and Consolidated statements of stockholder’s equity and
cash flows for 2006 to and including 2009, all reported on by PriceWaterhouseCoopers. Those
financial statements (including any related schedules and/or notes) fairly present in all material
respects (subject, as to interim statements, to the absence of footnotes or to changes resulting
from normal year-end adjustments) the financial condition of the Company and have been prepared in
accordance with generally accepted accounting principles consistently applied throughout the
periods involved and show all liabilities, direct and contingent, of the Company and its
Subsidiaries required to be shown in accordance with such principles. The balance sheets fairly
present, in all material respects, the Consolidated financial condition of the Company and its
Subsidiaries as at the dates thereof, and the statements of income, stockholders’ equity and cash
flows fairly present, in all material respects, the Consolidated results of the operations of the
Company and its Subsidiaries, the changes in the Company’s stockholders’ equity and their
Consolidated cash flows for the periods indicated. Except as set forth on Schedule 8B, there has
been no material adverse change in the business, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole since December 31, 2009.

 

30

 

8C. Actions Pending. There is no action, suit, investigation or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary, or any
properties or rights of the Company or any Subsidiary, by or before any court, arbitrator or
administrative or governmental body which could reasonably be expected to result in any material
adverse change in the business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole.

8D. Outstanding Debt. Neither the Company nor any Subsidiary has any Debt outstanding except
permitted by paragraph 6C(2). There is no default under the provisions of any instrument
evidencing any Debt or of any agreement relating thereto. Schedule 8D hereto is an accurate and
complete list of Debt of the Company and its Subsidiaries on the Date of Closing.

8E. Title to Properties. The Company and each Subsidiary have good and indefeasible title to
their respective real properties (other than leased properties or which individually or in the
aggregate are not material to the Company) and good title to all of their other respective
properties and assets, including the properties and assets reflected in the balance sheet as at
December 31, 2009 referred to in paragraph 8B (other than properties and assets disposed of in the
ordinary course of business or which individually or in the aggregate are not material to the
Company), subject to no Lien of any kind except Liens permitted by paragraph 6C(1). All leases
necessary in any material respect for the conduct of the respective business of the Company and its
Subsidiaries are valid and subsisting and are in full force and effect.

8F. Taxes. The Company has and each Subsidiary has filed all federal, state and other income
tax returns which, to the best knowledge of the Responsible Officers of the Company, are required
to be filed (giving effect to any extensions granted), and each has paid all taxes as shown on such
returns and on all assessments received by it to the extent that such taxes have become due
(including any extensions granted), except such taxes as are being contested in good faith by
appropriate proceedings for which adequate reserves have been established in accordance with
generally accepted accounting principles.

8G. Conflicting Agreements and Other Matters. Neither the Company 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 assets, or financial condition of the
Company and its Subsidiaries taken as a whole. Neither the execution nor delivery of this Agreement
or the Notes, nor the offering, issuance and sale of the Notes, nor fulfillment of nor compliance
with the terms and provisions hereof and of the Notes will 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, or result in the creation of any Lien upon any of the properties or assets of the Company or
any Subsidiary pursuant to, the charter or by-laws of the Company or any Subsidiary, any award of
any arbitrator or any agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Company or any Subsidiary is
subject. Neither the Company nor any Subsidiary is a party to, or otherwise subject to any
provision contained in, any instrument evidencing Debt of the Company or such Subsidiary, any
agreement relating thereto or any other contract or agreement (including its charter) which limits
the amount of, or otherwise imposes restrictions on the incurring of, Debt of the Company of the
type to be evidenced by the Notes except as set forth in the agreements listed in Schedule 8G
attached hereto.

 

31

 

8H. Offering of Notes. Neither the Company nor any agent acting on its behalf has, directly or
indirectly, offered the Notes or any similar security of the Company for sale to, or solicited any
offers to buy the Notes or any similar security of the Company from, or otherwise approached or
negotiated with respect thereto with, any Person other than accredited investors, and neither the
Company nor any agent acting on its behalf has taken any action which would reasonably be expected
to subject the issuance or sale of the Notes to the provisions of section 5 of the Securities Act
or to the provisions of any securities or Blue Sky law of any applicable jurisdiction. The Company
hereby represents and warrants to you that, within the preceding twelve months, neither the Company
nor any other Person acting on behalf of the Company has offered or sold to any Person (other than
accredited investors) any Notes, or any securities of the same or a similar class as the Notes, or
any other substantially similar securities of the Company.

8I. Use of Proceeds. Neither the Company nor any Subsidiary owns (other than margin stock of
insignificant amounts received by the Company as payment for accounts receivable or otherwise held
by the Company) or has any present intention of acquiring any “margin stock” as defined in
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve System (herein
called “margin stock”), other than shares of the Company’s common stock repurchased by the Company
which are immediately thereafter cancelled and are not held as treasury stock. The proceeds of sale
of the Notes will be used for the repurchase of the Company’s common stock and for general
corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any Debt which was originally incurred to purchase or
carry any stock that is currently a margin stock or for any other purpose which might constitute
this transaction a “purpose credit” within the meaning of such Regulation U, other than for the
repurchase by the Company of its common stock, which stock is immediately thereafter cancelled and
is not held as treasury stock. Neither the Company nor any agent acting on its behalf has taken any
action which might cause this Agreement or the Notes to violate Regulation U, Regulation T or any
other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange
Act.

8J. ERISA. No accumulated funding deficiency (as defined in section 302 of ERISA and section
412 of the Code), whether or not waived, exists with respect to any Plan (other than a
Multiemployer Plan). No liability to the Pension Benefit Guaranty Corporation has been or is
expected by the Company or any ERISA Affiliate to be incurred with respect to any Plan (other than
a Multiemployer Plan) by the Company, any Subsidiary or any ERISA Affiliate which is or would be
materially adverse to the business, condition (financial or otherwise) or operations of the Company
and its Subsidiaries taken as a whole. Neither the Company, any Subsidiary or any ERISA Affiliate
has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan which is or would be materially adverse to the business,
condition (financial or otherwise) or operations of the Company and its Subsidiaries taken as a
whole. The execution and delivery of this Agreement and the issuance and sale of the Notes will be
exempt from, or will not involve any transaction which is subject to, the prohibitions of section
406 of ERISA and will not involve any transaction in connection with which a penalty could be
imposed under section 502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the
Code. The representation by the Company in the next preceding sentence is made in reliance upon and
subject to the accuracy of your representation in paragraph 9B.

 

32

 

8K. Governmental Consent. Assuming the representations made by you in paragraph 9 are
accurate, neither the nature of the Company or of any Subsidiary, nor any of their respective
businesses or properties, nor any relationship between the Company or any Subsidiary and any other
Person, nor any circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or other action by or
notice to or filing with any court or administrative or governmental body (other than those which
are made or obtained prior to Closing and routine filings after the date of any Closing with the
Securities and Exchange Commission and/or state Blue Sky authorities) in connection with the
execution and delivery of this Agreement, the offering, issuance, sale or delivery of the Notes or
fulfillment of or compliance with the terms and provisions hereof or of the Notes.

8L. Environmental Compliance.

(i) The Company and its Subsidiaries and all of their respective Properties have
complied at all times and in all respects with all Environmental Requirements where failure
to comply could reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole.

(ii) Neither the Company nor any Subsidiary is subject to any Environmental Liability
or Environmental Requirement which could reasonably be expected to have a material adverse
effect on the business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries, taken as a whole.

(iii) Neither the Company nor any Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA. Except as
specified on Schedule 8L, none of the Properties has been identified on any current or
proposed National Priorities List under 40 C.F.R. § 300 or any list arising from a state
statute similar to CERCLA. None of the Properties has been identified on any CERCLIS list.

(iv) No Hazardous Materials have been or are being used, produced, manufactured,
processed, generated, stored, disposed of, released, managed at or shipped or transported to
or from the Properties or are otherwise present at, on, in or under the Properties or, to
the actual knowledge of the Company, at or from any adjacent site or facility, except for
Hazardous Materials used, produced, manufactured processed, generated, stored, disposed of,
released and managed in the ordinary course of business in compliance with all applicable
Environmental Requirements and except for Hazardous Materials present in amounts which have
not required and do not require remediation, pursuant to applicable law or regulation, or if
remediation is required, such remediation could not reasonably be expected to have a
material adverse effect on the business, condition (financial or otherwise) or operations of
the Company and its Subsidiaries, taken as a whole.

(v) The Company and each Subsidiary have procured all permits necessary under
Environmental Requirements for the conduct of their respective businesses or is
otherwise in compliance with all applicable Environmental Requirements, except to the
extent the failure to do so could not reasonably be expected to have a material adverse
effect on the business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries, taken as a whole.

 

33

 

8M. Disclosure. Neither this Agreement nor any other document, certificate or statement
furnished to you by or on behalf of the Company in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact peculiar to the Company or
any Subsidiary which materially adversely affects or in the future may (so far as the Company can
now reasonably foresee) materially adversely affect the business, property or assets, or financial
condition of the Company and its Subsidiaries taken as a whole and which has not been set forth in
this Agreement or in the other documents, certificates and statements furnished to you by or on
behalf of the Company prior to the date hereof in connection with the transactions contemplated
hereby.

8N. Hostile Tender Offers. None of the proceeds of the sale of any Notes will be used to
finance a Hostile Tender Offer.

8O. Absence Of Foreign Or Enemy Status. Neither the Company nor any of its Subsidiaries is or
will become a Person described by section 1 of Executive Order 13224 of September 24, 2001 Blocking
Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support
Terrorism, 31 CFR Part 595 et seq. (the “Anti-Terrorism Order”), and neither the Company nor any
Subsidiary has knowingly engaged in any dealings or transactions, or otherwise knowingly been
associated, with any such Person. Neither the sale of the Notes nor the use of proceeds thereof
will result in a violation of the Trading with the Enemy Act, as amended, or any of the Foreign
Assets Control Regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V,
as amended), or any ruling issued thereunder or any enabling legislation or presidential executive
order in connection therewith. Whether or not, in each case, the Company and its Subsidiaries are
subject to the jurisdiction thereof, the Company and its Subsidiaries are in material compliance
with the provisions of the Anti-Terrorism Order, and do not and will not engage in any dealings or
transactions or otherwise be associated with Persons who are on the list of Specially Designated
Nationals and Blocked Persons, as published from time to time, or in Section 1 of Executive Order
13224.

8P. Solvency. Each Credit Party is, individually and together with its Subsidiaries on a
consolidated basis, Solvent.

9. REPRESENTATIONS OF THE PURCHASERS. You represent as follows:

9A. Nature of Purchase. You are acquiring the Notes to be purchased by you hereunder for your
own account and not with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act, provided that the disposition of your property shall at all
times be and remain within your control.

 

34

 

9B. Source of Funds. At least one of the following statements is an accurate representation as
to each source of funds (a “Source”) to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:

(i) the Source is an “insurance company general account” (as the term is defined in the
United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in
respect of which the reserves and liabilities (as defined by the annual statement for life
insurance companies approved by the National Association of Insurance Commissioners (the
“NAIC Annual Statement”)) for the general account contract(s) held by or on behalf of any
employee benefit plan together with the amount of the reserves and liabilities for the
general account contract(s) held by or on behalf of any other employee benefit plans
maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the
same employee organization in the general account do not exceed 10% of the total reserves
and liabilities of the general account (exclusive of separate account liabilities) plus
surplus as set forth in the NAIC Annual Statement filed with your state of domicile; or

(ii) the Source is a separate account that is maintained solely in connection with your
fixed contractual obligations under which the amounts payable, or credited, to any employee
benefit plan (or its related trust) that has any interest in such separate account (or to
any participant or beneficiary of such plan (including any annuitant)) are not affected in
any manner by the investment performance of the separate account; or

(iii) the Source is either (a) an insurance company pooled separate account, within the
meaning of PTE 90-1 or (b) a bank collective investment fund, within the meaning of the PTE
91-38 and, except as disclosed by you to the Company in writing pursuant to this clause
(iii), no employee benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or

(iv) the Source constitutes assets of an “investment fund” (within the meaning of Part
V of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager”
or “QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit plan’s
assets that are included in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or by an affiliate
(within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the
definition of “control” in Section V(e) of the QPAM Exemption) owns a 5% or more interest in
the Company and (a) the identity of such QPAM and (b) the names of all employee benefit
plans whose assets are included in such investment fund have been disclosed to the Company
in writing pursuant to this clause (iv); or

 

35

 

(v) the Source constitutes assets of a “plan(s)” (within the meaning of Section IV of
PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager”
or “INHAM” (within the meaning of Part IV of the INHAM exemption), the conditions of Part
I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person
controlling or controlled by the INHAM (applying the definition of “control” in Section
IV(h) of the INHAM Exemption) owns a 5% or more interest in the Company and (a) the identity
of such INHAM and (b) the name(s) of the employee benefit plan(s) whose assets constitute
the Source have been disclosed to the Company in writing pursuant to this clause (v); or

(vi) the Source is a governmental plan; or

(vii) the Source is one or more employee benefit plans, or a separate account or trust
fund comprised of one or more employee benefit plans, each of which has been identified to
the Company in writing pursuant to this clause (vii); or

(viii) the Source does not include assets of any employee benefit plan, other than a
plan exempt from the coverage of ERISA.

As used in this paragraph 9B, the terms “employee benefit plan,” “governmental plan,” and
“separate account” shall have the respective meanings assigned to such terms in Section 3 of ERISA.

10. DEFINITIONS. For the purpose of this Agreement, the terms defined in the introductory
sentence and in paragraphs 1 and 2 shall have the respective meanings specified therein, and the
following terms shall have the meanings specified with respect thereto below:

10A. Yield-Maintenance Terms.

“Called Principal” shall mean, with respect to any Note, the principal of such Note that is to
be prepaid pursuant to paragraph 4C or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.

“Designated Spread” shall mean 0% in the case of each Series AA Note and of any other Series
unless the Confirmation of Acceptance with respect to the Notes of such other Series specifies a
different Designated Spread in which case it shall mean, with respect to each Note of such other
Series, the Designated Spread so specified.

“Discounted Value” shall mean, with respect to the Called Principal of any Note, the amount
obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from
their respective scheduled due dates to the Settlement Date with respect to such Called Principal,
in accordance with accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Note is payable) equal to the Reinvestment Yield
with respect to such Called Principal.

 

36

 

“Reinvestment Yield” shall mean, with respect to the Called Principal of any Note, the
Designated Spread over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M.
(New York City time) on the Y-M Business Day next preceding the Settlement Date with respect to
such Called Principal as of such Settlement Date, as reported by TradeWeb LLC (or, if such
data for any reason ceases to be available through TradeWeb LLC, or TradeWeb LLC shall cease
to be Prudential Capital Group’s customary source of information for calculating yield-maintenance
amounts on privately placed notes, then such source as is then Prudential Capital Group’s customary
source of such information), or if such yields shall not be reported as of such time or the yields
reported as of such time shall not be ascertainable, the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been so reported as of the Y-M
Business Day next preceding the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H. 15 (519) (or any comparable successor publication) for actively
traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (b) interpolating linearly between yields reported for various
maturities.

“Remaining-Average Life” shall mean, with respect to the Called Principal of any Note, the
number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called
Principal into (ii) the sum of the products obtained by multiplying (a) each Remaining Scheduled
Payment of such Called Principal (but not of interest thereon) by (b) the number of years
(calculated to the nearest one-twelfth year) which will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” shall mean, with respect to the Called Principal of any Note,
all payments of such Called Principal and interest thereon that would be due on or after the
Settlement Date with respect to such Called Principal if no payment of such Called Principal were
made prior to its scheduled due date, but assuming for purposes of this definition of Remaining
Scheduled Payments that the stated interest rate on the outstanding Series AA Notes is 6.73%, and
that the stated interest rate on the outstanding 2001 Notes is 6.94%.

“Settlement Date” shall mean, with respect to the Called Principal of any Note, the date on
which such Called Principal is to be prepaid pursuant to paragraph 4B or is declared to be
immediately due and payable pursuant to paragraph 7A, as the context requires.

“Yield-Maintenance Amount” shall mean, with respect to any Note, an amount equal to the
excess, if any, of the Discounted Value of the Called Principal of such Note over the sum of (i)
such Called Principal plus (ii) interest accrued thereon as of (including interest due on) the
Settlement Date with respect to such Called Principal, but assuming for purposes of this definition
of Yield-Maintenance Amount that the stated interest rate on the outstanding Series AA Notes is
6.73% and that the stated interest rate on the outstanding 2001 Notes is 6.94%. The
Yield-Maintenance Amount shall in no event be less than zero.

“Y-M Business Day” shall mean any day other than a Saturday, Sunday or a day on which
commercial banks in New York City are required or authorized to be closed.

10B. Other Terms.

“Acceptance” is defined in paragraph 2B(5) of this Agreement.

 

37

 

“Acceptance Day” is defined in paragraph 2B(5) of this Agreement.

“Acceptance Window” is defined in paragraph 2B(5) of this Agreement.

“Accepted Note” is defined in paragraph 2B(5) of this Agreement.

“Affiliate” shall mean with respect to any Person, any other Person (a) directly or indirectly
controlling or controlled by or under direct or indirect common control with such Person, (b) which
other Person beneficially owns or holds 5% or more of the shares of any class of Voting Stock of
such Person or (c) 5% or more of any class of the Voting Stock of which is beneficially owned or
held by such designated entity. For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”), as used with
respect to any entity, shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such entity, whether through the ownership of
Voting Stock or by contract or otherwise. Affiliate shall not include Subsidiaries.

“Agreement Effective Date” means May 11, 2010.

“Asset Disposition” shall mean the sale or other disposition of any assets by the Company or
any of its Subsidiaries to any Person (other than an Credit Party) other than (x) sales of assets
in the ordinary course of business, (y) sales of other assets to the extent the proceeds of such
sale or other disposition are in excess of One Hundred Thousand Dollars ($100,000) during any
fiscal year of the Company and are not to be reinvested in fixed assets or other similar assets
within one hundred eighty (180) days of such sale or other disposition and (z) sales of assets
permitted under 6D(iii).

“Authorized Officer” shall mean (i) in the case of the Company, its chief executive officer,
its chief financial officer, any vice president of the Company designated as an “Authorized
Officer” of the Company in the Information Schedule attached hereto or any vice president of the
Company designated as an “Authorized Officer” of the Company for the purpose of this Agreement in
an Officer’s Certificate executed by the Company’s chief executive officer or chief financial
officer and delivered to Prudential, and (ii) in the case of Prudential, any officer of Prudential
designated as its “Authorized Officer” in the Information Schedule or any officer of Prudential
designated as its “Authorized Officer” for the purpose of this Agreement in a certificate executed
by one of its Authorized Officers. Any action taken under this Agreement on behalf of the Company
by any individual who on or after the date of this Agreement shall have been an Authorized Officer
of the Company and whom Prudential in good faith believes to be an Authorized Officer of the
Company at the time of such action shall be binding on the Company even though such individual
shall have ceased to be an Authorized Officer of the Company, and any action taken under this
Agreement on behalf of Prudential by any individual who on or after the date of this Agreement
shall have been an Authorized Officer of Prudential and whom the Company in good faith believes to
be an Authorized Officer of Prudential at the time of such action shall be binding on Prudential
even though such individual shall have ceased to be an Authorized Officer of Prudential.

 

38

 

“Available Facility Amount” shall have the meaning specified in paragraph 2(B)(1) of this
Agreement.

“Bankruptcy Law” is defined in clause (viii) of paragraph 7A of this Agreement.

“Board” shall mean, for any Person, its Board of Directors or equivalent governing body.

“Business Day” shall mean any day other than (i) a Saturday, a Sunday or (ii) a day on which
commercial banks in New York City or Charlotte, North Carolina are required or authorized to be
closed.

“Cancellation Date” is defined in paragraph 2B(8)(iv) of this Agreement.

“Cancellation Fee” is defined in paragraph 2B(8)(iv) of this Agreement.

“Capitalized Lease Obligation” shall mean any rental obligation which, under generally
accepted accounting principles, would be required to be capitalized on the books of the Company or
any Subsidiary, taken at the amount thereof accounted for as indebtedness (net of interest expense)
in accordance with such principles.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act.

“CERCLIS” shall mean the Comprehensive Environmental Response, Compensation and Liability
Inventory System established pursuant to CERCLA.

“Closing Day” is defined in paragraph 2B(3)(iv).

“Code” shall mean the Internal Revenue Code of 1986. as amended.

“Collateral” shall mean all of the property that is or is intended under the terms of the
Collateral Documents to be subject to Liens in favor of the Collateral Agent for the benefit of the
holders of the Notes.

“Collateral Agency Agreement” means that certain Collateral Agency Agreement, dated as of the
date hereof, by and among the Collateral Agent, the holders of the Notes, the Company and the
Guarantors.

“Collateral Agent” means The Bank of New York Mellon Trust Company, N.A., in its capacity as
Collateral Agent under the Collateral Documents, or any successor collateral agent.

“Collateral Documents” shall mean, collectively, the Security Agreement, the Collateral Agency
Agreement, the Mortgages, each Intellectual Property Security Agreement (as defined in the Security
Agreement) each document, instrument, agreement, financing statement, endorsement, stock-power,
collateral assignment or any other agreement delivered to the Collateral Agent pursuant to the
terms thereof or of paragraphs 3A, 5C or 5D, and each of the other agreement, instrument or
document that creates or purports to create a Lien in favor of the Collateral Agent for the benefit
of the holders of the Notes.

 

39

 

“Company” shall have the meaning assigned to such term in the initial paragraph hereof.

“Confirmation of Acceptance” is defined in paragraph 2B(5) of this Agreement.

“Consolidated” shall mean the consolidated financial information of the Company and its
Subsidiaries under generally accepted accounting principles.

“Consolidated Assets” shall mean, as at any date of determination, the total assets of the
Company and its Subsidiaries appearing on a Consolidated balance sheet prepared under generally
accepted accounting principles as of the date of determination, after deducting any reserves
applicable thereto and after eliminating all intercompany transactions and all amounts properly
attributable to minority interests, if any, in the stock and surplus of Subsidiaries.

“Consolidated Capitalization” shall mean, at any time, the sum of (i) Consolidated Debt at
such time plus (ii) Consolidated Net Worth at such time.

“Consolidated EBITDA” shall mean, for the Company and its Subsidiaries on a Consolidated basis
for the four fiscal quarters most recently ended, Consolidated Net Earnings, or Consolidated Net
Loss, as the case may be, for such period, plus, to the extent deducted in calculating such
Consolidated Net Earnings or Consolidated Net Loss, taxes, depreciation, amortization and
Consolidated Interest Charges .

“Consolidated Fixed Charges” shall mean, for the Company and its Subsidiaries on a
Consolidated basis, the sum (without duplication) of:

(i) all Rentals (excluding all principal components of Rentals under Capitalized Lease
Obligations) paid during the most recently completed four fiscal quarters (the “Prior
Period”); and

(ii) all Consolidated Interest Charges for the Prior Period.

“Consolidated Interest Charges” shall mean, for any applicable period, for the Company and its
Subsidiaries on a Consolidated basis, all interest expense (as determined in accordance with
generally accepted accounting principles) on all Debt (including Capitalized Lease Obligations) net
of interest income.

“Consolidated Net Earnings” shall mean, for any applicable period, for the Company and its
Subsidiaries on a Consolidated basis, the excess of (a) gross revenues (including, but not limited
to, any and all proceeds received in connection with the Continued Dumping and Subsidy Offset Act
of 2000) over (b) all expenses and charges of a proper character (including current and deferred
taxes on income and current additions to reserves) each for the applicable period, but (x)
excluding from expenses and charges for the applicable period a one time restructuring charge of up
to $6,000,000 to be taken no later than the 2009 fiscal year in connection with the conversion of
the Company’s Martinsville, Virginia facility from a manufacturing facility to a warehouse facility
and (y) not including in gross revenues:

(i) any gains (net of expenses and taxes applicable thereto) in excess of losses
resulting from the sales, conversions or other dispositions of capital assets outside the
ordinary course of business,

(ii) any gains resulting from the write-up of assets,

 

40

 

(iii) any earnings or deferred credit (or amortization of a deferred credit) of any
Person acquired by the Company or any Subsidiary through purchase, merger or consolidation
or otherwise for any year prior to the year of acquisition not included in gross revenues
under generally accepted accounting principles,

(iv) any deferred credit representing the excess of equity in any Subsidiary of the
Company at the date of acquisition over the cost of the investment in such Subsidiary,

(v) proceeds of life insurance policies on any Responsible Officer exceeding $250,000
for such period,

(vi) gains arising from the acquisition of debt securities for a cost less than the
principal amount and accrued interest,

(vii) extraordinary items or transactions of a non-recurring or non-operating and
material nature or arising from gains or sales relating to the discontinuance of operations,
or

(viii) any portion of the net earnings (included in the determination of such
Consolidated Net Earnings or such Consolidated Net Loss) of any Subsidiary which for any
reason shall be unavailable for payment of dividends to the Company,

all as determined in accordance with generally accepted accounting principles.

If the above calculation results in an amount less than zero, then for such period there shall be a
“Consolidated Net Loss” as determined below.

“Consolidated Net Loss” shall mean, for any applicable period, for the Company and its
Subsidiaries on a Consolidated basis, the excess of (a) expenses and charges of a proper character
(including current and deferred taxes on income, provision for taxes an unremitted foreign earnings
which are included in gross revenues, and current additions to resources) over (b) gross revenues
for the same period, but not including in gross revenues those items listed in clauses (i) through
(iv), inclusive, in the definition Consolidated Net Earnings above, all as determined in accordance
with generally accepted accounting principles. If the above calculation results in an amount of
zero or more, then for such period there shall be “Consolidated Net Earnings” as determined above.

“Consolidated Net Worth” shall mean, at any time, for the Company and its Subsidiaries on a
Consolidated basis shareholders’ equity at such time determined in accordance with generally
accepted accounting principles.

 

41

 

“Consolidated Operating Income” shall mean, for the Company and its Subsidiaries on a
Consolidated basis for the four fiscal quarters most recently ended, Consolidated Net Earnings, or
Consolidated Net Loss, as the case may be, for such period, plus to the extent deducted in
calculating such Consolidated Net Earnings or Consolidated Net Loss, taxes, Consolidated Interest
Charges and Rentals.

“Consolidated Priority Debt” shall mean, on a Consolidated basis on any date of determination,
the sum (without duplication) of:

(i) the aggregate amount of Debt of all Subsidiaries, plus

(ii) Debt of any Person which is secured by, or otherwise benefitting from, a Lien on
any property, tangible or intangible, of the Company or any Subsidiary, whether or not the
Company or such Subsidiary has assumed or become liable for the payment of such Debt, plus

(iii) the present value of the rental obligations of the Company or a Subsidiary as
lessee under a Capitalized Lease Obligation (discounted according to generally accepted
accounting principles at the debt rate implicit in the lease).

“Credit Party” shall mean the Company and each Guarantor.

“Debt” shall mean with respect to any Person, at any date of determination,

(i) all indebtedness for borrowed money which such Person has directly or indirectly
created, incurred or assumed (including, without limitation, all Capitalized Lease
Obligations); and

(ii) all indebtedness, whether or not for borrowed money, secured by any Lien on any
property or asset owned or held by such Person subject thereto, whether or not the
indebtedness secured thereby shall have been assumed by such Person; and

(iii) any indebtedness, whether or not for borrowed money, with respect to which such
Person has become directly or indirectly liable and which represents or has been incurred to
finance the purchase price (or a portion thereof) of any property or services or business
acquired by such Person, whether by purchase, consolidation, merger or otherwise other than
any trade payable in the ordinary course of business that is a current liability under
generally accepted accounting principles; and

(iv) any indebtedness of the character referred to in clauses (i), (ii) or (iii) of
this definition deemed to be extinguished under generally accepted accounting principles but
for which such Person remains legally liable to the extent the market value of any assets
such Person has placed in trust for the benefit of the holders of that indebtedness is less
than the aggregate amount of that indebtedness; and

(v) any indebtedness of any other Person of the character referred to in subdivision
(i), (ii), (iii) or (iv) of this definition with respect to which the Person whose Debt is
being determined has become liable by way of a Guarantee;

 

42

 

all as determined in accordance with generally accepted accounting principles, provided, however,
Debt shall not include endorsement of negotiable instruments for collection in the ordinary course
of business.

“Default Rate” means, for any Series of Notes, a rate of interest per annum from time to time
equal to the lesser of (i) the maximum rate permitted by applicable law and (ii) the greater of (a)
2% over the interest rate applicable to such Series of Notes immediately prior to such Event of
Default and (b) 2.0% over the rate of interest publicly announced by JPMorgan Chase Bank, National
Association from time to time in New York City as its Prime Rate.

“Delay Delivery Fee” is defined in paragraph 2B(8)(iii) of this Agreement.

“Disposition”
means the sale, lease, transfer or other disposition of property, and “Disposed
of” has a corresponding meaning to Disposition.

“Environmental Authority” shall mean any foreign, federal, state, local or regional government
that exercises any form of jurisdiction or authority under any Environmental Requirement.

“Environmental Judgments and Orders” shall mean all judgments, decrees or orders arising from
or in any way associated with any Environmental Requirements, whether or not entered upon consent
or written agreements with an Environmental Authority or other entity arising from or in any way
associated with any Environmental Requirement, whether or not incorporated in a judgment, degree or
order.

“Environmental Liabilities” shall mean any liabilities, whether accrued or contingent, arising
from or relating in any way to any Environmental Requirements.

“Environmental Notices” shall mean any written communication from any Environmental Authority
stating possible or alleged noncompliance with or possible or alleged liability under any
Environmental Requirement, including without limitation any complaints, citations, demands or
requests from any Environmental Authority for correction of any purported violation of any
Environmental Requirements or any investigation concerning any purported violation of any
Environmental Requirements. Environmental Notices also shall mean (i) any written communication
from any other Person threatening litigation or administrative proceedings against or involving the
Company relating to alleged violation of any Environmental Requirements and (ii) any complaint,
petition or similar documents filed by any other Person commencing litigation or administrative
proceedings against or involving the Company relating to alleged violation of any Environmental
Requirements.

“Environmental Proceedings” shall mean any judicial or administrative proceedings arising from
or in any way associated with any Environmental Requirement.

“Environmental Releases” shall mean releases (as defined in CERCLA or under any applicable
state or local environmental law or regulation) of Hazardous Materials. Environmental Releases does
not include releases for which no remediation or reporting is required by applicable Environmental
Requirements and which do not present a danger to health, safety or the environment.

 

43

 

“Environmental Requirements” shall mean any applicable local, state or federal law, rule,
regulation, permit, order, decision, determination or requirement relating in any way to Hazardous
Materials or to health, safety or the environment.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” shall mean any corporation which is a member of the same controlled group of
corporations as the Company within the meaning of section 414(b) of the Code, or any trade or
business which is under common control with the Company within the meaning of section 414(c) of the
Code.

“Event of Default” shall mean any of the events specified in paragraph 7A, provided that there
has been satisfied any requirement in connection with such event for the giving of notice, or the
lapse of time, or the happening of any further condition, event or act, and “Default” shall mean
any of such events, whether or not any such requirement has been satisfied.

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

“Facility” is defined in paragraph 2B(1) of this Agreement.

“Fair Market Value” shall mean at any time, the sale value of property that would be realized
in an arm’s-length sale at such time between an informed and willing buyer, and an informed and
willing seller, under no compulsion to buy or sell, respectively.

“Guarantee” shall mean, with respect to any Person, any direct or indirect liability,
contingent or otherwise, of such Person with respect to any Debt, lease, dividend or other
obligation of another, including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business)
or discounted or sold with recourse by such Person, or in respect of which such Person is otherwise
directly or indirectly liable, including, without limitation, any such obligation in effect
guaranteed by such Person through any agreement (contingent or otherwise) to purchase, repurchase
or otherwise acquire such obligation or any security therefor, or to provide funds for the payment
or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain the solvency or any balance sheet or other financial
condition of the obligor of such obligation, or to make payment for any products, materials or
supplies or for any transportation or services regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to provide assurance that
such obligation will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such obligation will be protected against loss in respect
thereof. The amount of any Guarantee shall be equal to the outstanding principal amount of the
obligation guaranteed or such lesser amount to which the maximum exposure of the guarantor shall
have been specifically limited.

“Guarantor” shall mean each Subsidiary of the Company that Guarantees the Notes and has
complied with the provisions of paragraphs 5C and 5D.

 

44

 

“Guaranty Agreement” shall mean that certain Guaranty Agreement, dated the date hereof and
executed by the Guarantors in favor the holders of the Notes (as amended, restated, supplemented or
modified from time to time), together with each joinder thereto, or such other guaranty agreement
delivered pursuant to paragraph 5C.

“Hazardous Materials” shall mean (a) hazardous waste as defined in the Resource Conservation
and Recovery Act of 1976, or in any applicable federal, state or local law or regulation, (b)
hazardous substances, as defined in CERCLA, or in any applicable state or local law or regulation,
(c) gasoline, or any other petroleum product or by-product, (d) toxic substances, as defined in the
Toxic Substances Control Act of 1976, or in any applicable federal, state or local law or
regulation or (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide,
Fungicide, and Rodenticide Act of 1975, or in any applicable federal, state or local law or
regulation, as each such Act, statute or regulation may be amended from time to time.

“Hedge Treasury Note(s)” shall mean, with respect to any Accepted Note, the United States
Treasury Note or Notes whose duration (as determined by Prudential) most closely matches the
duration of such Accepted Note.

“Hostile Tender Offer” shall mean, with respect to the use of proceeds of any Note, any offer
to purchase, or any purchase of, shares of capital stock of any corporation or equity interests in
any other entity, or securities convertible into or representing the beneficial ownership of. or
rights to acquire, any such shares or equity interests, if such shares, equity interests,
securities or rights are of a class which is publicly traded on any securities exchange or in any
over-the-counter market, other than purchases of such shares, equity interests, securities or
rights representing less than 5% of the equity interests or beneficial ownership of such
corporation or other entity for portfolio investment purposes, and such offer or purchase has not
been duly approved by the board of directors of such corporation or the equivalent governing body
of such other entity prior to the date on which the Company makes the Request for Purchase of such
Note.

“Investment” shall mean, when used with respect to any Person, any direct or indirect advance,
loan or other extension of credit (other than the creation of receivables in the ordinary course of
business) or capital contribution by such Person (by means of transfers of property to others or
payments for property or services for the account or use of others, or otherwise) to any other
Person, or any direct or indirect purchase or other acquisition by such Person of, or of a
beneficial interest in, capital stock, partnership interests, bonds, notes, debentures or other
securities issued by any other Person.

“Issuance Fee” is defined in paragraph 2B(8)(ii) of this Agreement.

“Issuance Period” is defined in paragraph 2B(2) of this Agreement.

“Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien (statutory or
otherwise), or charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform Commercial Code of any
jurisdiction, but excluding protective filings for operating leases for equipment) or any
other type of preferential arrangement for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an obligation, including any rights
of setoff (whether by statute, common law, contract or otherwise).

 

45

 

“Mortgage” shall mean a deed of trust, trust deed, deed to secure debt, mortgage, leasehold
mortgage, and leasehold deed of trust (together with the assignments of leases and rents referred
to therein) and each other mortgage delivered pursuant to paragraph 3A or paragraph 5D, in each
case as amended, to be in form and substance satisfactory to the Required Holders and their counsel
to account for local law matters.

“Mortgaged Property Support Documents” shall mean for any property encumbered by a Mortgage,
in each case as the Required Holders may require, such title searches and existing surveys,
opinions of counsel and other documentation and evidence that all other action the Required Holders
may deem necessary or desirable in order to create valid first and subsisting Liens on the property
described in the Mortgages has been taken.

“Multiemployer Plan” shall mean any Plan which is a “multiemployer plan” (as such term is
defined in section 4001(a)(3) of ERISA).

“Net Cash Proceeds” shall mean (i) with respect to any Asset Disposition, an amount equal to
one hundred percent (100%) of the proceeds of such Asset Disposition net of amounts reasonably
determined by the Company to be required to pay taxes and costs applicable to the disposition, (ii)
with respect to any Recovery Event for which the Company decides not to replace, rebuild or restore
such property or if Company has not delivered the Recovery Determination Notice within thirty (30)
days after such Recovery Event, the proceeds of insurance paid in connection with such Recovery
Event, when received, and (iii) with respect to any Recovery Event for which the Company decides to
replace, rebuild or restore such property, any amounts of insurance proceeds not applied to the
costs of replacement or restoration.

“Note Document(s)” shall mean this Agreement, the Notes, the Guaranty Agreement and any other
guaranty agreement executed pursuant to this Agreement, the Collateral Documents and any other
agreements, certificates, and instruments to be executed pursuant to the terms of each of the
foregoing, as each may be amended, restated or otherwise modified from time to time.

“Notes” is defined in paragraph lB of this Agreement.

“Obligations” means all amounts, obligations, liabilities, agreements, undertakings,
provisions, covenants and duties of every type and description owing by any Credit Party to the
holders of Notes pursuant to or in connection with this Agreement or any other Note Document,
including without limitation, all principal, interest (including any interest accruing after the
filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like
proceeding relating to the Issuer, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), all reimbursement obligations, fees, expenses, indemnification and
reimbursement payments, costs and expenses (including all fees and expenses of counsel to the
holders of Notes incurred pursuant to this Agreement or any other Note Document), whether
direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or
hereafter arising hereunder or thereunder, and all obligations and liabilities incurred in
connection with collecting and enforcing the foregoing, together with all renewals, extensions,
modifications or refinancings thereof.

 

46

 

“Officer’s Certificate” shall mean a certificate signed in the name of the Company by its
Chairman, President, one of its Vice Presidents or its Treasurer.

“Original Agreement” shall have the meaning assigned to such term in the initial paragraph
hereof.

“Person” shall mean and include an individual, a partnership, a joint venture, a corporation,
a limited liability company, a trust, an unincorporated organization and a government or any
department or agency thereof.

“Plan” shall mean any “employee pension benefit plan” (as such term is defined in section 3 of
ERISA) which is or has been established or maintained, or to which contributions are or have been
made, by the Company or any ERISA Affiliate.

“Preferred Stock”, as applied to any corporation, shall mean shares of stock of such
corporation which are entitled to preference or priority over any other shares of such corporation
in respect of the payment of dividends or distribution of assets upon liquidation or both.

“Properties” shall mean all real property owned, leased or otherwise used or occupied by the
Company or any Subsidiary, wherever located.

“Proposed 4H Prepayment Date” is defined in Paragraph 4H(c).

“Prudential” is defined in the Introduction of this Agreement.

“Prudential Affiliate” shall mean (i) any Person which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control with, Prudential, or
(ii) any investment fund, account or other vehicle for which Prudential (or any Prudential
Affiliate) acts as investment advisor or portfolio manager. As used in the preceding clause (i),
the term “control” means the possession, directly or indirectly, of 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.

“Purchasers” shall mean Prudential, Hartford Life Insurance Company, and Medica Health Plans
with respect to the 2001 Notes; Prudential, Pruco Life Insurance Company of New Jersey, Prudential
Retirement Insurance and Annuity Company, and Mutual of Omaha Insurance Company, and their
respective successors and assigns, with respect to the Series AA Notes; and, with respect to any
Accepted Notes, Prudential and/or the Prudential Affiliate(s), and their respective successors and
assigns which are purchasing such Accepted Notes.

“Recovery Determination Notice” is defined in Paragraph 4H(a).

 

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“Recovery Event” shall mean (a) any casualty loss in respect of assets of the Company or any
of its Subsidiaries covered by casualty insurance, and (b) any compulsory transfer or taking under
threat of compulsory transfer of any asset of the Company or any of its Subsidiaries by any
governmental authority.

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

“Rentals” shall mean for any period of determination all fixed rents or charges (including as
such all payments during any such period of determination which the lessee is obligated to make on
termination of the lease or surrender of the property) payable by the Company or a Subsidiary (as
lessee, sublessee, license, franchisee or the like) for such period under a lease, license, or
other agreement for the use or possession of real or personal property, tangible or intangible, as
determined in accordance with generally accepted accounting principles.

“Request for Purchase” is defined in paragraph 2B(3) of this Agreement.

“Required Holder(s)” shall mean the holder or holders of at least 66 2/3% of the aggregate
principal amount of the Notes from time to time outstanding.

“Rescheduled Closing Day” is defined in paragraph 2B(7) of this Agreement.

“Responsible Officer” shall mean the chief executive officer, chief operating officer,
principal financial officer, principal accounting officer, treasurer or assistant treasurer of the
Company or any other senior executive officer of the Company involved principally in its financial
administration or its controllership function.

“SEC” shall mean the Securities and Exchange Commission.

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

“Security Agreement” shall mean that certain Security Agreement, dated the date hereof and
delivered by the Company and the Guarantors to the Collateral Agent on behalf of the holders of the
Notes (as amended, restated, supplemented or modified from time to time), together with each
joinder and supplement thereto, or such other security agreement delivered pursuant to paragraph
5C.

“Series AA Closing Day” is defined in paragraph 2A of this Agreement.

“Series AA Note(s)” is defined in paragraph 1A of this Agreement.

“Series AA Note Purchaser(s)” shall mean Prudential, Hartford Life Insurance Company and
Medica Health Plans.

“Shelf Notes” is defined in paragraph lB of this Agreement.

 

48

 

“Significant Holder” shall mean (i) you, so long as you shall hold (or be committed under this
Agreement to purchase) any Note, or (ii) any other Person which holds at least $5,000,000 of the
aggregate principal amount of the Notes from time to time outstanding.

“Solvent” shall mean, with respect to any Person on any date of determination, that on such
date (a) the fair value of the property of such Person is greater than the total amount of
liabilities, including contingent liabilities, of such Person, (b) the present fair salable value
of the assets of such Person is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured, (c) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s
ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a transaction, for which such
Person’s property would constitute an unreasonably small capital, and (e) such Person is able to
pay its debts and liabilities, contingent obligations and other commitments as they mature in the
ordinary course of business. The amount of contingent liabilities at any time shall be computed as
the amount that, in the light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured liability.

“Subsidiary” shall mean any corporation, limited liability company, or partnership organized
under the laws of any state of the United States of America which conducts the major portion of its
business in and makes the major portion of its sales to Persons located in the United States or
Canada, whose accounts are or are required to be consolidated with the Company’s under generally
accepted accounting principles.

“Third Party” shall mean all lessees, sublessees, licensees and other users of the Properties,
excluding those users of the Properties in the ordinary course of the Company’s business
(consistent with its practices on the Date of Closing) and on a temporary basis.

“Transferee” shall mean any direct or indirect transferee of all or any part of any Note
purchased by you under this Agreement.

“2001 Notes” shall have the meaning in the initial paragraph hereof.

“Voting Stock” shall mean, with respect to any Person, any shares of stock of or other
ownership interest in such Person whose holders are entitled under ordinary circumstances to vote
for the election of directors or similar body of such Person (irrespective of whether at the time
stock of any other class or classes shall have or might have voting power by reason of the
happening of any contingency).

10C. Accounting Principles, Terms and Determinations. All references in this Agreement to
“generally accepted accounting principles” shall be deemed to refer to generally accepted
accounting principles in effect in the United States at the time of application thereof Unless
otherwise specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters required to be furnished
hereunder shall be prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial statements of
the Company and its Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no
such statements have been so delivered, the most recent audited financial statements referred to in
clause (i) of paragraph 8B, subject in the case of, interim statements to normal year end
adjustments and to the absence of footnotes. For purposes of determining compliance with the
financial covenants contained in this Agreement, including without limitation those set forth in
Paragraph 6, any election by the Company to measure an item of Debt using fair value (as permitted
by Statement of Financial Accounting Standards No. 159 or any similar accounting standard) shall be
disregarded and such determination shall be made as if such election had not been made.

 

49

 

11. MISCELLANEOUS.

11A. Note Payments. The Company agrees that, so long as any Purchaser shall hold any Note, it
will make payments of principal of, interest on, and any Yield-Maintenance Amount payable with
respect to such Note, which comply with the terms of this Agreement, by wire transfer of
immediately available funds for credit (not later than 12:00 noon, New York City time, on the date
due) to (i) the account or accounts of such Purchaser specified in the Purchaser Schedule attached
hereto in the case of any 2001 Note or any Series AA Note, (ii) the account or accounts of such
Purchaser specified in the Confirmation of Acceptance with respect to such Note in the case of any
Shelf Note, or (iii) or such other account or accounts in the United States as such Purchaser may
from time to time designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. Each Purchaser agrees (and any Transferee shall agree as
a condition to the transfer of any Note or part thereof) that, before disposing of any Note, it
(and any such Transferee) will make a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to which interest thereon has been paid.
The Company agrees to afford the benefits of this paragraph 11A to any Transferee which shall have
made the same agreement as you have made in this paragraph 11A.

11B. Expenses. The Company agrees, whether or not the transactions contemplated hereby shall
be consummated, to pay, and save you and any Transferee harmless against liability for the payment
of, all reasonable out-of-pocket expenses actually incurred (including without limitation legal
fees) arising in connection with such transactions, including:

(i) all taxes (together in each case with interest and penalties, if any), other than
state or federal income taxes or franchise taxes, including without limitation, all stamp,
intangibles, recording and other taxes, which may be payable with respect to the execution
and delivery of this Agreement or the execution, delivery or acquisition of any Note;

(ii) all reasonable document production and duplication charges and the reasonable fees
and expenses of any special counsel engaged by you or any Transferee after the Series AA
Closing Day in connection with this Agreement or the Notes and any subsequent proposed
modification or waiver of, or proposed consent under, this Agreement or the Notes, whether
or not such proposed modification or waiver shall be effected or proposed consent granted,
and

 

50

 

(iii) the reasonable costs and expenses, including reasonable attorneys’ fees, actually
incurred by you or such Transferee or the Collateral Agent in connection with the
restructuring, refinancing or “work out” of this Agreement or the Notes or the transactions
contemplated hereby or thereby or in enforcing (or determining whether or how to enforce)
any rights under this Agreement or the Notes or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this Agreement or the
Notes or the transactions contemplated hereby or by reason of your or any Transferee’s
having acquired any Note, including without limitation costs and expenses incurred in any
bankruptcy case, and

(iv) all reasonable costs and expenses, including reasonable fees, charges and
disbursements of the Collateral Agent incurred pursuant to this Agreement or any of the
Collateral Documents.

The Company shall indemnify each holder of the Notes and each of its Related Parties (each
such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, penalties, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery
of this Agreement, the Notes, the other Note Documents, or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective obligations hereunder
or under the Notes, the other Note Documents, or the consummation of the transactions contemplated
hereby or thereby, (ii) any Notes or the use of the proceeds thereof, (iii) any actual or alleged
presence or release of Hazardous Materials on or from any property owned or operated by the Company
or any of its Subsidiaries, or any Environmental Liability related in any way to the Company or any
of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or any other theory,
whether brought by a third party or by the Company or any of the Company’s directors, shareholders
or creditors, and regardless of whether any Indemnitee is a party thereto; provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, penalties, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee.

The obligations of the Company under this paragraph 11B shall survive the transfer of any Note
or portion thereof or interest therein by you or any Transferee and the payment of any Note.

11C. Consent to Amendments. This Agreement may be amended, and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by it, if the Company
shall obtain the written consent to such amendment, action or omission to act, of the Required
Holder(s) except that, without the written consent of the holder or holders of all Notes at the
time outstanding, no amendment to this Agreement shall change:

(i) the maturity of any Note,

 

51

 

(ii) the principal of, or the rate or time of payment of interest on or any
Yield-Maintenance Amount payable on any Note,

(iii) the time, amount or allocation of any prepayments, or

(iv) the proportion of the principal amount of the Notes required for any consent,
amendment, waiver or declaration.

Each holder of any Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring to any such consent. No
course of dealing between the Company and the holder of any Note nor any delay in exercising any
rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein and in the Notes, the term “this Agreement” and references thereto shall mean
this Agreement as it may from be amended or supplemented time to time.

11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes. The Notes are issuable in
registered form without coupons in denominations of at least $1,000,000, except as may be necessary
to reflect any principal amount not evenly divisible by $1,000,000. The Company shall keep at its
principal office a register in which the Company shall provide for the registration of Notes and a
record of transfers of the Notes. Upon surrender for registration of transfer of any Note at the
principal office of the Company, the Company shall, at its expense, execute and deliver one or more
new Notes of like tenor and of a like aggregate principal amount, registered in the name of such
transferee or transferees. At the option of the holder of any Note, such Note may be exchanged for
other Notes of like tenor and of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the principal office of the Company. Whenever
any Notes are so surrendered for exchange, the Company shall, at its expense, execute and deliver
the Notes which the holder making the exchange is entitled to receive. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Note or such holder’s attorney duly
authorized in writing. Any Note or Notes issued in exchange for any Note or upon transfer thereof
shall carry the rights to unpaid interest and interest to accrue which were carried by the Note so
exchanged or transferred, so that neither gain nor loss of interest shall result from any such
transfer or exchange. Upon receipt of written notice from the holder of any Note of the loss,
theft, destruction or mutilation of such Note and, in the case of any such loss, theft or
destruction, upon receipt of such holder’s unsecured indemnity agreement, or in the case of any
such mutilation upon surrender and cancellation of such Note, the Company will make and deliver a
new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.

11E. Persons Deemed Owners; Participations. Prior to due presentment for registration of
transfer, the Company shall treat the Person in whose name any Note is registered as the owner and
holder of such Note for the purpose of receiving payment of principal of, interest on and any
Yield-Maintenance Amount payable with respect to such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall not be affected by notice to the
contrary. Subject to the preceding sentence, the holder of any Note may from time to time grant
participations in such Note to any Person (other than any
Person not an institutional investor) on such terms and conditions as may be determined by
such holder in its sole and absolute discretion.

 

52

 

11F. Survival of Representations and Warranties; Entire Agreement. All representations and
warranties contained herein or made in writing by or on behalf of the Company in connection
herewith shall survive the execution and delivery of this Agreement and the Notes, the transfer by
you of any Note or portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time by or on behalf of
you or any Transferee. Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof

11G. Successors and Assigns; Transfer Provisions. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties hereto (including, without
limitation, any Transferee) whether so expressed or not.

11H. Disclosure to Other Persons; Confidentiality. The Company acknowledges that the holder of
any Note may deliver copies of any financial statements and other documents or information
delivered to such holder, and disclose any other information disclosed to such holder, by or on
behalf of the Company or any Subsidiary in connection with or pursuant to this Agreement only to:

(i) such holder’s directors, officers, employees, agents and professional consultants,

(ii) any other holder of any Note,

(iii) any Person to which such holder offers to sell such Note or any part thereof,
provided that each such Person agrees in writing to observe the confidentiality standards
described in this paragraph 11H,

(iv) any Person to which such holder sells or offers to sell a participation in all or
any part of such Note, provided that each such Person agrees in writing to observe the
confidentiality standards described in this paragraph 11H,

(v) any Person from which such holder offers to purchase any security of the Company,
provided that each such Person agrees in writing to observe the confidentiality standards
described in this paragraph 11H,

(vi) any federal or state regulatory authority having jurisdiction over such holder,

(vii) the National Association of Insurance Commissioners or any similar organization
or

 

53

 

(viii) any other Person to which such delivery or disclosure may be necessary or
reasonably appropriate (a) in compliance with any law, rule, regulation or order applicable
to such holder, (b) in response to any subpoena or other legal process or informal
investigative demand or (c) in connection with any litigation to which such holder is a
party.

Subject to the foregoing, each holder of a Note hereby agrees to use its best efforts to hold in
confidence and not to disclose any Confidential Information; provided, that such holder will be
free, after notice to the Company, to correct any false or misleading information which may become
public concerning its relationship to the Company. For the purpose of this paragraph 11H, the term
“Confidential Information” shall mean information about the Company or any Subsidiary furnished by
the Company or any Subsidiary to such holder, but does not include any information (i) which as
publicly known, or otherwise known to such holder, at the time of disclosure, (ii) which
subsequently becomes publicly known through no act or omission by such holder, or (iii) which
otherwise becomes known to such holder other than through disclosure by the Company or any
Subsidiary.

11I. Notices. All written communications provided for hereunder shall be sent by first class
mail or nationwide overnight delivery service (with charges prepaid) and

(i) if to you, addressed to you at the address specified for such communications in the
Purchaser Schedule attached hereto, or at such other address as you shall have specified to
the Company in writing,

(ii) if to any other holder of any Note, addressed to such other holder at such address
as such other holder shall have specified to the Company in writing or, if any such other
holder shall not have so specified an address to the Company, then addressed to such other
holder in care of the last holder of such Note which shall have so specified an address to
the Company,

(iii) if to the Collateral Agent, addressed to it at Bank of New York Mellon Trust
Company, N.A., Corporate Trust (Jacksonville), 10161 Centurion Parkway North, 2nd Floor,
Jacksonville, Florida 32256, or at such other address as the Collateral Agent shall have
specified to the holders of Notes and the Company in writing; and

(iv) if to the Company, addressed to it at 1641 Fairystone Park Highway, Stanleytown,
Virginia 24168, Telephone: (276) 627-2000, Telecopy: (276) 629-5114, Attention: Mr. Douglas
I. Payne, Executive Vice President — Finance and Administration or at such other address as
the Company shall have specified to the holder of each Note in writing.

11J. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the
contrary notwithstanding, any payment of principal of or interest on, or Yield-Maintenance Amount
payable with respect to, any Note that is due on a date other than a Business Day shall be made on
the next succeeding Business Day without including the additional days elapsed in the computation
of the interest payable on such next succeeding Business Day; provided that if the maturity
date of any Note is a date other than a Business Day, then and in such event
payment shall be made on the next succeeding Business Day, but shall include the additional
days elapsed in the computation of interest payable on such next succeeding Business Day.

 

54

 

11K. Satisfaction Requirement. If any agreement, certificate or other writing, or any action
taken or to be taken, is by the terms of this Agreement required to be satisfactory to you or to
the Required Holder(s), the determination of such satisfaction shall be made by you or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.

11L. Independence of Covenants. All covenants of the Company hereunder shall be of independent
effect so that if a particular action or condition is not permitted by any one of such covenants,
the fact that it would be permitted by an exception to, or otherwise be within the other
limitations of, another covenant, shall not avoid the occurrence of an Event of Default or Default
if such action is taken or condition exists.

11M. Governing Law. This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York. THE COMPANY HEREBY
SUBMITS TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK LOCATED IN NEW YORK
COUNTY, NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE SOLE AND ABSOLUTE ELECTION OF THE REQUIRED HOLDER(S) AND TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR
THE NOTES SHALL BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH
COURTS.

11N. Severability. Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.

11O. Descriptive Headings. The descriptive headings of the several paragraphs of this
Agreement are inserted for convenience only and do not constitute a part of this Agreement.

11P. Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one instrument.

11Q. Collateral Agent Each holder of the Notes authorizes the Collateral Agent to execute and
deliver on its behalf and approves the Security Agreement, the Mortgages, each Intellectual
Property Security Agreement and all other Collateral Documents.

 

55

 

If you agree to the foregoing, please sign the form of acceptance on the enclosed counterpart
of this letter and return the same to the Company, whereupon this letter shall become a binding
agreement between the Company and you.

[signatures appear on following pages]

 

56

 

	 	 	 	 	 
	 	Very truly yours,

STANLEY FURNITURE COMPANY, INC.

 	 
	 	By:  	/s/  Douglas I. Payne
 	 
	 	 	Name:  	Douglas I. Payne 	 
	 	 	Title:  	Executive Vice President

Finance and Administration 	 
	 

The foregoing Agreement is

hereby accepted as of the date

first above written.

THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA

	 	 	 	 	 
	By:

	 	/s/ Robert Derrick	 	 
	 

	 	 

Name: Robert Derrick
	 	 
	 

	 	Title:   Vice President	 	 
	 
	 	 	 	 
	HARTFORD LIFE INSURANCE COMPANY	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors,	 	 
	 

	 	L.P. (as Investment Advisor)	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors, Inc.	 	 
	 

	 	(as its General Partner)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert Derrick	 	 
	 

	 	 

Name: Robert Derrick
	 	 
	 

	 	Title:   Vice President	 	 

[SIGNATURE PAGE TO STANLEY FURNITURE AMENDED AND RESTATED

NOTE PURCHASE AND PRIVATE SHELF AGREEMENT]

 

 

 

	 	 	 	 	 
	 
	 	 	 	 
	MEDICA HEALTH PLANS	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors,	 	 
	 

	 	L.P. (as Investment Advisor)	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors, Inc.	 	 
	 

	 	(as its General Partner)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert Derrick	 	 
	 

	 	 

Name: Robert Derrick
	 	 
	 

	 	Title:   Vice President	 	 
	 
	 	 	 	 
	PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert Derrick	 	 
	 

	 	 

Name: Robert Derrick
	 	 
	 

	 	Title:   Assistant Vice President	 	 
	 
	 	 	 	 
	PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY	 	 
	 
	 	 	 	 
	By:

	 	Prudential Investment Management, Inc.,	 	 
	 

	 	as investment manager	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert Derrick	 	 
	 

	 	 

Name: Robert Derrick
	 	 
	 

	 	Title:   Vice President	 	 
	 
	 	 	 	 
	MUTUAL OF OMAHA INSURANCE COMPANY	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors,	 	 
	 

	 	L.P. (as Investment Advisor)	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors, Inc.	 	 
	 

	 	(as its General Partner)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert Derrick	 	 
	 

	 	 

Name: Robert Derrick
	 	 
	 

	 	Title:   Vice President	 	 

[SIGNATURE PAGE TO STANLEY FURNITURE AMENDED AND RESTATED

NOTE PURCHASE AND PRIVATE SHELF AGREEMENT]

 

 

 

	 	 	 	 	 
	The foregoing Agreement is
hereby accepted as of the date
first above written.	 	 
	 
	 	 	 	 
	THE BANK OF NEW YORK MELLON TRUST COMPANY, as Collateral Agent	 	 
	 
	 	 	 	 
	By:

	 	/s/ Geraldine Creswell	 	 
	 

	 	 

Name: Geraldine Creswell
	 	 
	 

	 	Title:   Vice President	 	 

[SIGNATURE PAGE TO STANLEY FURNITURE AMENDED AND RESTATED

NOTE PURCHASE AND PRIVATE SHELF AGREEMENT]

 

 

 

EXHIBIT A-1

[FORM OF SERIES 2001 NOTE]

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF THE UNITED
STATES OF AMERICA AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION NOR SUCH
EXEMPTION IS REQUIRED BY LAW.

STANLEY FURNITURE COMPANY, INC.

8.44% SENIOR NOTE, SERIES A, DUE MAY 3, 2011

			
	 	 	 
	No. RA-[_____]
	 	PPN [_____]

	 	 	 
	ORIGINAL PRINCIPAL AMOUNT:
	 	 
	 
	 
	ORIGINAL ISSUE DATE:

	 	 April 26, 2001
	 
	 
	INTEREST RATE:

	 	 8.44%
	 
	 
	INTEREST PAYMENT DATES:

	 	 May 3 and November 3 of each year, commencing on November 3, 2001.
	 
	 
	FINAL MATURITY DATE:

	 	 May 3, 2011
	 
	 
	PRINCIPAL PREPAYMENT 

DATES AND AMOUNTS:

	 	 May 3, 2005 — $714,285.71
	 

	 	 May 3, 2006 — $714,285.71
	 

	 	 May 3, 2007 — $714,285.71
	 

	 	 May 3, 2008 — $714,285.71
	 

	 	 May 3, 2009 — $714,285.71
	 

	 	 May 3, 2010 — $714,285.71
	 

	 	 May 3, 2011 — $714,285.74

FOR VALUE RECEIVED, the undersigned, STANLEY FURNITURE COMPANY, INC. (herein called the
“Company”), a corporation organized and existing under the laws of the State of Delaware, hereby
promises to pay to [_____], or registered assigns, the principal sum of
[____] and [_____]/100 DOLLARS ($[_____]), payable in installments on
the Principal Installment Dates and in the amounts specified above, and on the Final Maturity Date
specified above in an amount equal to the unpaid balance of the principal hereof, with interest
(computed on the basis of a 360-day year—30-day month) (a) on the unpaid balance hereof at the
Interest Rate per annum specified above if no Event of Default has occurred and is continuing,
payable on each Interest Payment Date specified above and on the Final Maturity Date specified
above, commencing with the Interest Payment Date next succeeding the date hereof, until the
principal hereof shall have become due and payable, and (b) on the unpaid balance hereof at the
Default Rate (as defined in the Note Purchase Agreement referred to below) if an Event of Default
has occurred and is continuing, and to the extent permitted by law on any overdue payment of
interest and any Yield-Maintenance Amount (as defined in the Note Purchase Agreement referred to
below), payable at
the Default Rate on each Interest Payment Date as aforesaid (or, at the option of the
registered holder hereof, on demand).

 

 

 

Payments of principal of, interest on and any Yield-Maintenance Amount with respect to this
Note are to be made in lawful money of the United States of America at such place designated in the
Purchaser Schedule attached to the Agreement referred to below.

This Note is one of a series of senior Notes (herein called the “Notes”) issued pursuant to a
Second Amended and Restated Note Purchase and Private Shelf Agreement, dated as of May 11, 2010 (as
it may be amended, restated, modified or supplemented from time to time, the “Agreement”), among
the Company, on the one hand, and The Prudential Insurance Company of America, certain other
Purchasers defined therein and each Prudential Affiliate which becomes a party thereto, on the
other hand, and is entitled to the benefits thereof. All capitalized terms not defined herein
shall have the meanings ascribed to them in the Agreement. As provided in the Agreement, this Note
is subject to optional prepayment, in whole or from time to time in part on the terms specified in
the Agreement.

This Note is a registered Note and, as provided in the Agreement, upon surrender of this Note
for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or such holder’s attorney duly authorized in
writing, a new Note for the then outstanding principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be affected by any notice
to the contrary.

This Note is subject to prepayment on the terms specified in the Agreement.

In case an Event of Default shall occur and be continuing, the principal of this Note may be
declared or otherwise become due and payable in the manner and with the effect provided in the
Agreement.

This Note is intended to be performed in the State of New York and shall be construed and
enforced in accordance with the internal law of such State. As provided in paragraph 11M of the
Agreement, the Company submits to the jurisdiction of the Supreme Court of the State of New York
located in New York County, New York and the United States District Court for the Southern District
of New York in any action or proceeding relating to this Note.

	 	 	 	 	 
	 	STANLEY FURNITURE COMPANY, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[SIGNATURE PAGE TO STANLEY FURNITURE AMENDED AND RESTATED

NOTE PURCHASE AND PRIVATE SHELF AGREEMENT]

 

 

 

EXHIBIT A-2

[FORM OF SERIES AA NOTE]

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF THE UNITED
STATES OF AMERICA AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION NOR SUCH
EXEMPTION IS REQUIRED BY LAW.

STANLEY FURNITURE COMPANY, INC.

8.23% SERIES AA SENIOR NOTE DUE MAY 3, 2017

 
	 	 	 
	No. R-_____ 

	 	 
	 
	 	 
	ORIGINAL PRINCIPAL AMOUNT:

	 	$_____ 

	 
	 	 
	ORIGINAL ISSUE DATE:

	 	
 _____, 2007
	 
	 	 
	INTEREST RATE: 
	 	8.23% 
	 
	 	 
	INTEREST PAYMENT DATES:

	 	May 3 and November 3 of each calendar year
	 
	 	 
	FINAL MATURITY DATE:

	 	May 3, 2017
	 
	 	 
	PRINCIPAL PREPAYMENT DATES AND AMOUNTS:

	 	$_____ 
due May 3, 2011 and each anniversary date thereafter
	 
	 	 
	PPN:

	 	 _____  

FOR VALUE RECEIVED, the undersigned, Stanley Furniture Company, Inc., a Delaware corporation
(the “Company”), hereby promises to pay to 
 _____, or registered assigns, the principal
sum of
 _____ 
DOLLARS, payable on the Principal Prepayment Dates and
in the amounts specified above, and on the Final Maturity Date specified above in an amount equal
to the unpaid balance of the principal hereof, with interest (computed on the actual number of days
elapsed in a 360-day year and 30-day months) (a) on the unpaid balance hereof at the Interest Rate
per annum specified above if no Event of Default has occurred and is continuing, payable on each
Interest Payment Date specified above and on the Final Maturity Date specified above, commencing
with the Interest Payment Date next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) on the unpaid balance hereof at the Default Rate (as defined
in the Note Purchase Agreement referred to below) if an Event of Default has occurred and is
continuing, and to the extent permitted by law on any overdue payment of interest and any
Yield-Maintenance Amount (as defined in the Note Purchase Agreement referred to below), payable at
the Default Rate on each Interest Payment Date as aforesaid (or, at the option of the registered
holder hereof, on demand).

[SIGNATURE PAGE TO STANLEY FURNITURE AMENDED AND RESTATED

NOTE PURCHASE AND PRIVATE SHELF AGREEMENT]

 

 

 

Payments of principal of, interest on and any Yield-Maintenance Amount with respect to this
Note are to be made in lawful money of the United States of America at such place designated in the
Purchaser Schedule attached to the Agreement referred to below.

This Note is one of a series of senior Notes (herein called the “Notes”) issued pursuant to a
Second Amended and Restated Note Purchase and Private Shelf Agreement, dated as of May [_____], 2010
(as it may be amended, restated, modified or supplemented from time to time, the “Agreement”),
among the Company, on the one hand, and The Prudential Insurance Company of America, certain other
Purchasers defined therein and each Prudential Affiliate which becomes a party thereto, on the
other hand, and is entitled to the benefits thereof. All capitalized terms not defined herein
shall have the meanings ascribed to them in the Agreement.

This Note is a registered Note and, as provided in the Agreement, upon surrender of this Note
for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or such holder’s attorney duly authorized in
writing, a new Note for the then outstanding principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be affected by any notice
to the contrary.

This Note is subject to prepayment on the terms specified in the Agreement.

In case an Event of Default shall occur and be continuing, the principal of this Note may be
declared or otherwise become due and payable in the manner and with the effect provided in the
Agreement.

This Note is intended to be performed in the State of New York and shall be construed and
enforced in accordance with the internal law of such State. As provided in paragraph 11M of the
Agreement, the Company submits to the jurisdiction of the Supreme Court of the State of New York
located in New York County, New York and the United States District Court for the Southern District
of New York in any action or proceeding relating to this Note.

	 	 	 	 	 
	 	STANLEY FURNITURE COMPANY, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[SIGNATURE PAGE TO STANLEY FURNITURE AMENDED AND RESTATED

NOTE PURCHASE AND PRIVATE SHELF AGREEMENT]Exhibit 4.2

Exhibit 4.2

 SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) is made as of May 11, 2010, by Stanley
Furniture Company, Inc., a Delaware corporation (the “Issuer”), each of the undersigned
Subsidiaries of the Issuer (the “Subsidiary Grantors”) and the Additional Grantors (as
hereinafter defined) (the Issuer, the Subsidiary Grantors and the Additional Grantors are herein
collectively called the “Grantors” and each, individually, a “Grantor”), in favor
of The Bank of New York Mellon Trust Company, N.A., as collateral agent (together with its
successors and assigns, the “Collateral Agent”) for the benefit of The Prudential Insurance
Company of America (together with its successors and assigns, “Prudential”) and each holder
of Notes (as defined in the Note Purchase Agreement referenced below; collectively, and together
with and Prudential and their successors and assigns and the Collateral Agent, the “Secured
Parties”).

RECITALS:

WHEREAS, the Issuer and the Secured Parties are entering into that certain Second Amended and
Restated Note Purchase and Private Shelf Agreement, dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time, the “Note Purchase
Agreement”), and the Subsidiary Grantors are guaranteeing all obligations of the Issuer
thereunder, as required by the Note Purchase Agreement; capitalized terms used herein and not
defined herein shall have the meaning assigned thereto in the Note Purchase Agreement;

WHEREAS, the Company, the holders of the Notes, the Guarantors and the Collateral Agent have
entered into that certain Collateral Agency Agreement dated as of the date hereof (the
“Collateral Agency Agreement”)

WHEREAS, the Grantors expect to receive substantial direct and indirect benefits from the
amendments effected through the Note Purchase Agreement (which benefits are hereby acknowledged);

WHEREAS, it is a condition precedent to the Secured Parties entering into the Note Purchase
Agreement that the Grantors execute and deliver this Agreement and grant the security interests
contemplated hereby, and each Grantor wishes to grant pledges and security interests in favor of
the Collateral Agent, for the benefit of the Secured Parties, as herein provided.

 

 

 

NOW, THEREFORE, in consideration of the premises contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

ARTICLE I.

Definitions and References

SECTION 1.1 Definitions.

(a) The following terms which are defined in the UCC are used herein as so defined (and if
defined in more than one Article of the UCC, such terms shall have the meanings given in Article 9
thereof): Account, As-Extracted Collateral, Certificated Security, Chattel Paper, Commercial Tort
Claim, Commodity Account, Commodity Contract, Commodity Intermediary, Deposit Account, Document,
Electronic Chattel Paper, Equipment, Farm Products, Financial Asset, Fixtures, General Intangibles,
Goods, Instrument, Inventory, Investment Property, Letter of Credit, Letter-of-Credit Right, Money,
Payment Intangibles, Proceeds, Records, Registered Organization, Security, Securities Account,
Security Certificate, Security Entitlement, Securities Intermediary, Software, Supporting
Obligation, Transmitting Utility, Uncertificated Security and Tangible Chattel Paper. The parties
intend that the terms used herein which are defined in the UCC have, at all times, the broadest and
most inclusive meanings possible. Accordingly, if the UCC shall in the future be amended or held
by a court to define any term used herein more broadly or inclusively than the UCC in effect on the
date hereof, then such term, as used herein, shall be given such broadened meaning. If the UCC
shall in the future be amended or held by a court to define any term used herein more narrowly, or
less inclusively, than the UCC in effect on the date hereof, such amendment or holding shall be
disregarded in defining terms used herein.

(b) As used herein, the following terms shall have the following meanings:

“Additional Grantor” has the meaning given to such term in Section 5.2.

“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.

“Collateral” has the meaning given to such term in Section 2.1.

“Collateral Agent” has the meaning set forth in the introductory paragraph of this
Agreement.

“Contracts” means all contracts and agreements between any Grantor and any other
Person (in each case, whether written or oral, or third party or intercompany), including (a) all
rights of any Grantor to receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of any Grantor to receive proceeds of any insurance, indemnity, warranty
or guaranty with respect thereto, (c) all rights of any Grantor to damages arising thereunder and
(d) all rights of any Grantor to terminate and to perform and compel performance of, such contracts
and agreements, and to exercise all remedies thereunder.

“Copyright License” means any license or other agreement, whether now or hereafter in
existence, under which is granted or authorized any right to use, copy, reproduce, distribute,
prepare derivative works, display or publish any records or other materials on which a Copyright is
in existence or may come into existence, including the agreements identified in Schedule
3.1(c).

“Copyrights” means all the following: (a) all copyrights under the laws of the United
States or any other country (whether or not the underlying works of authorship have been
published), all registrations and recordings thereof, all intellectual property rights to works of
authorship (whether or not published), and all application for copyrights under the laws of the
United States or any other country, including registrations, recordings and applications in
the United States Copyright Office or in any similar office or agency of the United States, any
State thereof or other country, or any political subdivision thereof, including those described in
Schedule 3.1(c), (b) all reissues, renewals and extensions thereof, (c) all claims for, and
rights to sue for, past or future infringements of any of the foregoing, and (d) all income,
royalties, damages and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements thereof.

 

2

 

“Copyright Security Agreement” means a Copyright Security Agreement executed and
delivered by any Grantor in favor of the Collateral Agent for the benefit of the Secured Parties,
substantially in the form of Exhibit B.

“Excluded Collateral” means: (a) any lease, license, permit, contract, property
rights, agreement or instrument to which any Grantor is a party or in which such Grantor has a
interest, in each case, only to the extent and for so long as the terms of such lease, license,
permit, contract, property rights, agreement or instrument or any law applicable thereto, prohibit
the creation by such Grantor of a security interest in therein in favor of the Collateral Agent, or
only to the extent and for so long as the grant of such security interest would constitute a
default or breach thereunder or result in the termination thereof (other than to the extent that
any such term would be rendered ineffective pursuant to Section 9-406, 9-408 or 9-409 of the UCC or
any other applicable law (including, without limitation, Title 11 of the United States Code) or
principles of equity); and (b) any Equipment owned by any Grantor on the date hereof or hereafter
acquired by a Grantor that is subject to a Lien securing a purchase money obligation or Capitalized
Lease Obligation permitted to be incurred pursuant to the provisions of the Note Purchase
Agreement, only to the extent and for so long as the contract or other agreement in which such Lien
is granted (or the documentation providing for such purchase money obligation or Capitalized Lease
Obligation) prohibits the creation of any other Lien on such Equipment, or only to the extent and
for so long as the grant of such security interest would constitute a default or breach under such
contract or agreement or result in the termination thereof; provided, that immediately upon
the ineffectiveness, lapse or termination of any such provision, the foregoing property shall cease
to be Excluded Collateral, and the applicable Grantor shall be deemed to have granted a security
interest in all such rights and interests as if such provision had never been in effect.

“Grantors” has the meaning set forth in the introductory paragraph of this Agreement.

“Guaranty Agreement” means that certain Guaranty Agreement, entered into by each of
the Subsidiary Grantors and each other Person who shall become a party thereto, dated as of the
date hereof, pursuant to which such Subsidiary Grantors have guaranteed the full and prompt payment
and performance of the Obligations (as defined in the Guaranty Agreement).

“Intellectual Property” means any and all Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks and Trademark Licenses.

“Intellectual Property Filings” means, with respect to any Intellectual Property, the
filing of the applicable Intellectual Property Security Agreement with the United States
Patent and Trademark Office or the United States Copyright Office, as applicable, and any
other governmental authorities necessary to perfect the security interest hereunder in such
Intellectual Property, together with an appropriately completed recordation form, in each case
sufficient to record the security interest granted to the Collateral Agent hereunder in such
Intellectual Property.

 

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“Intellectual Property Security Agreement” means a Copyright Security Agreement, a
Patent Security Agreement or a Trademark Security Agreement.

“Off-Site Collateral” means: (a) Collateral being transported in the ordinary course
of business and (b) Collateral which in the ordinary course of business is located at an off-site
location for repair, storage, maintenance, or further processing or manufacturing.

“Other Liable Party” means any Person, other than Grantors, who may now or may at any
time hereafter be primarily or secondarily liable for any of the Secured Obligations or who may now
or may at any time hereafter have granted to the Collateral Agent or any other Secured Party a Lien
upon any property as security for the Secured Obligations.

“Patent License” means any license or other agreement, whether now or hereafter in
existence, under which is granted or authorized any right with respect to any Patent or any
invention now or hereafter in existence, whether patentable or not, whether a patent or application
for patent is in existence on such invention or not, and whether a patent or application for patent
on such invention may come into existence, including the agreements identified in Schedule
3.1(c).

“Patents” means all the following: (a) all letters patent and design letters patent
of the United States or any other country and all applications for letters patent and design
letters patent of the United States or any other country, including applications in the United
States Patent and Trademark Office or in any similar office or agency of the United States, any
State thereof or other country, or any political subdivision thereof, including those described in
Schedule 3.1(c), (b) all reissues, divisions, continuations, continuations-in-part,
renewals and extensions thereof, (c) all claims for, and rights to sue for, past or future
infringements of any of the foregoing, and (d) all income, royalties, damages and payments now or
hereafter due or payable with respect to any of the foregoing, including damages and payments for
past or future infringements thereof.

“Patent Security Agreement” means the Patent Security Agreement executed and delivered
by any Grantor in favor of the Collateral Agent for the benefit of the Secured Parties,
substantially in the form of Exhibit A.

“Perfection Certificate” means the Perfection Certificate dated as of even date
herewith, executed by Borrower in favor of the Secured Parties.

“Permitted Liens” means Liens permitted under Paragraph 6C(1) of the Note Purchase
Agreement.

“Real Property Interests” means all property of any Grantor to the extent that it is
treated as real property under applicable law.

 

4

 

“Receivables” means (a) all Accounts and all other rights to payment for goods or
other personal property which have been (or are to be) sold, leased, or exchanged or for services
which have been (or are to be) rendered, regardless of whether such Accounts or other rights to
payment have been earned by performance and regardless of whether such Accounts or other rights to
payment are evidenced by or characterized as accounts receivable, contract rights, book debts,
notes, drafts or other obligations of indebtedness, (b) all Documents, Instruments, Chattel Paper,
Letters of Credit and Letter-of-Credit Rights of any kind relating to such Accounts or other rights
to payment or otherwise arising out of or in connection with the sale, lease or exchange of goods
or other personal property or the rendering of services, (c) all rights in, to, or under all
security agreements, leases and other contracts securing or otherwise relating to any such
Accounts, rights to payment, Documents, Instruments, Chattel Paper, Letters of Credit or
Letter-of-Credit Rights, (d) all rights in, to and under any purchase orders, service contracts, or
other contracts out of which such Accounts and other rights to payment arose (or will arise on
performance), and (e) all rights in or pertaining to any goods arising out of or in connection with
any such purchase orders, service contracts, or other contracts, including rights in returned or
repossessed goods and rights of replevin, repossession, and reclamation.

“Receiver” has the meaning set forth in Section 4.2(h).

“Secured Obligations” means all amounts, obligations, liabilities, agreements,
undertakings, provisions, covenants and duties of every type and description owing by the Issuer
and the other Grantors to the holders of Notes pursuant to or in connection with the Note Purchase
Agreement, the Guaranty Agreement, or any other Note Document, including without limitation, all
principal, interest (including any interest accruing after the filing of any petition in bankruptcy
or the commencement of any insolvency, reorganization or like proceeding relating to such Grantor,
whether or not a claim for post-filing or post-petition interest is allowed in such proceeding),
all Yield-Maintenance Amounts, fees, expenses, indemnification and reimbursement payments, costs
and expenses (including all fees and expenses of counsel to the holders of Notes incurred pursuant
to this Agreement or any other Note Document), whether direct or indirect, absolute or contingent,
liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, and all
obligations and liabilities incurred in connection with collecting and enforcing the foregoing,
together with all renewals, extensions, modifications or refinancings thereof.

“Security Agreement Supplement” has the meaning set forth in Section 5.2.

“Trademark License” means any license or agreement, whether now or hereafter in
existence, under which is granted or authorized any right to use any Trademark, including the
agreements identified on Schedule 3.1(c).

“Trademarks” means all of the following: (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles, service marks,
logos, brand names, trade dress, prints and labels on which any of the foregoing have appeared or
appear, package and other designs, and any other source or business identifiers, and the rights in
any of the foregoing which arise under applicable law, (b) the goodwill of the business symbolized
thereby or associated with each of them, (c) all registrations and applications in connection
therewith, including registrations and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United States, any State
thereof or other country, or any political subdivision thereof, including those described in
Schedule 3.1(c), (d) all reissues, extensions and renewals thereof, (e) all claims for, and
rights to sue for, past or future infringements of any of the foregoing, and (f) all income,
royalties, damages and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements thereof.

 

5

 

“Trademark Security Agreement” means the Trademark Security Agreement executed and
delivered by any Grantor in favor of the Collateral Agent for the benefit of the Secured Parties,
substantially in the form of Exhibit C.

“UCC” means the Uniform Commercial Code in effect in the State of New York.

SECTION 1.2 Other Definitions. Reference is hereby made to the Note Purchase
Agreement for a statement of the terms thereof. All capitalized terms used in this Agreement which
are defined in the Note Purchase Agreement or the Securities Purchase Agreement (as defined in the
Note Purchase Agreement) and not otherwise defined herein shall have the same meanings herein as
set forth therein.

SECTION 1.3 Attachments. All exhibits or schedules which may be attached to this
Agreement are a part hereof for all purposes.

SECTION 1.4 Other Interpretive Provisions. Unless otherwise specified herein:

(a) The definitions of terms herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The word “or” is not exclusive, and the words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The
word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the
context requires otherwise, (i) any definition of or reference to any agreement, instrument or
other document shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other Note Document), (ii) any
reference herein to any Person shall be construed to include such Person’s successors and assigns,
(iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used herein,
shall be construed to refer this Agreement in its entirety and not to any particular provision
thereof, (iv) all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (v)
any reference to any law shall include all statutory and regulatory provisions consolidating,
amending, replacing or interpreting such law and any reference to any law or regulation shall,
unless otherwise specified, refer to such law or regulation as amended, modified or supplemented
from time to time, and (vi) the words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

6

 

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

(c) Section headings herein are included for convenience of reference only and shall not
affect the interpretation of this Agreement.

ARTICLE II.

Security Interest

SECTION 2.1 Grant of Security Interest. Each Grantor hereby pledges and assigns to
the Collateral Agent for the benefit of the Secured Parties, and grants to the Collateral Agent a
continuing security interest, for the benefit of the Secured Parties, in and to all of such
Grantor’s right, title and interest in and to all of the following property, whether now owned or
existing or hereafter acquired or arising and regardless of where located, as collateral security
for the prompt and complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations, whether now existing or hereafter incurred
or arising (the “Collateral”):

(a) all Accounts;

(b) all As-Extracted Collateral;

(c) all Chattel Paper (including, without limitation, Electronic Chattel Paper);

(d) all Commercial Tort Claims described on Schedule 2.1(d) (as such schedule may be
updated from time to time in accordance with Section 3.1(e));

(e) all Commodity Accounts;

(f) all Commodity Contracts;

(g) all Contracts;

(h) all Deposit Accounts;

(i) all Documents;

(j) all Financial Assets;

(k) all Fixtures;

(l) all General Intangibles;

(m) all Goods (including, without limitation, all Equipment and Inventory);

(n) all Instruments;

 

7

 

(o) all Intellectual Property;

(p) all Investment Property;

(q) all Letters of Credit;

(r) all Letter-of-Credit Rights;

(s) all Money;

(t) all Payment Intangibles;

(u) all Receivables, to the extent not otherwise described above;

(v) all Securities (including Certificated Securities and Uncertificated Securities);

(w) all Securities Accounts;

(x) all Securities Entitlements;

(y) all Software;

(z) all Supporting Obligations;

(aa) all books and Records pertaining to the other property described in this Section
2.1; and

(bb) to the extent not otherwise described in this Section 2.1, all Proceeds,
products, accessions, rents and profits of or in respect of any and all of the foregoing and all
collateral security and guarantees given by any Person to or in favor of any Grantor with respect
to any of the foregoing;

provided, notwithstanding anything to the contrary contained in clauses (a) through (bb)
above, the security interest created by this Agreement shall not extend to, and the term
“Collateral” shall not include, any Excluded Collateral.

In each case, the foregoing property shall be covered by this Agreement, whether such Grantor’s
ownership or other rights therein are presently held or hereafter acquired and howsoever such
Grantor’s interests therein may arise or appear (whether by ownership, security interest, claim or
otherwise).

Each Grantor hereby acknowledges that the Secured Obligations are owed to the Secured Parties and
that the Collateral Agent, as agent for the Secured Parties, is entitled to the benefits of the
Liens given under this Agreement.

 

8

 

SECTION 2.2 Grantors Remain Liable. Notwithstanding anything to the contrary
contained herein, (i) each Grantor shall remain liable for all obligations under and in respect of
the Collateral and nothing contained herein is intended or shall be a delegation of
duties to the Collateral Agent or any other Secured Party, (ii) each Grantor shall remain
liable under each of the agreements included in the Collateral, including any Receivables, to
perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to
the terms and provisions thereof and neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any of such agreements by reason of or arising out of this
Agreement or any other document related hereto nor shall the Collateral Agent nor any other Secured
Party have any obligation to make any inquiry as to the nature or sufficiency of any payment
received by it or have any obligation to take any action to collect or enforce any rights under any
agreement included in the Collateral, including any agreements relating to any Receivables, and
(iii) the exercise by the Collateral Agent of any of its rights hereunder shall not release any
Grantor from any of its duties or obligations under the contracts and agreements included in the
Collateral, including any agreements relating to any Receivables.

SECTION 2.3 Action by the Collateral Agent. In each and every case the Collateral
Agent is required to act or refrain from acting hereunder it shall be at the written direction of
the Required Holders in accordance with the terms and conditions of the Collateral Agency
Agreement. Any and all such actions or inaction hereunder by the Collateral Agent shall be covered
by all of the rights and indemnities set forth in the Collateral Agency Agreement as if they were
fully set forth herein.

ARTICLE III.

Representations, Warranties and Covenants

SECTION 3.1 Representations and Warranties. Each Grantor hereby represents and
warrants that each of the representations and warranties made in the Note Purchase Agreement is
true and correct insofar as it refers to such Grantor, except to the extent that such
representations and warranties related to an earlier date (in which case such representations and
warranties are true as of such earlier date) and, in addition, each Grantor hereby represents and
warrants to the Collateral Agent and each other Secured Party as follows:

(a) Security Interest. Such Grantor has and will have at all times full right, power
and authority to grant a security interest in the Collateral to the Collateral Agent for the
benefit of the Secured Parties as provided herein, free and clear of any Lien other than Permitted
Liens. This Agreement creates a valid and binding security interest in favor of the Collateral
Agent for the benefit of the Secured Parties in the Collateral, which security interest secures all
of the Secured Obligations. Any and all references made in this Agreement to Permitted Liens (or
to the Liens created hereunder as being subject to any Permitted Liens, or subject to the rights of
any Person holding any such Lien) are made for the purpose of limiting certain warranties and
covenants made by each Grantor herein and such reference is not intended to affect the description
herein of the Collateral nor to subordinate the Liens and security interests hereunder to any
Permitted Liens.

 

9

 

(b) Perfection. The taking of possession by the Collateral Agent of all Instruments,
Chattel Paper, Letters of Credit and Money, if any, constituting Collateral from time to time will
perfect, and establish the first priority of, the security interest created hereunder in favor of
the Collateral Agent for the benefit of the Secured Parties in such Collateral. The
Collateral Agent’s control (within the meaning of the UCC) of all Investment Property,
Electronic Chattel Paper, and Letter-of-Credit Rights constituting Collateral from time to time
will perfect, and establish the first priority (subject only to Permitted Liens) of, the security
interest created hereunder in such Collateral. To the extent that the filing of a financing
statement can be effective under the UCC to perfect the security interest created hereunder in any
Collateral, the filing of a financing statement with the secretary of state (or equivalent
governmental official) of the state in which such Grantor is organized which sufficiently indicates
all such Collateral (other than Real Property Interests) will perfect, and establish the first
priority (subject only to Permitted Liens) of, the security interest created hereunder in such
Collateral. The filing of a financing statement in the office designated for the filing or
recording of a mortgage on the real property where Collateral consisting of As-Extracted Collateral
is located, which sufficiently indicates the As-Extracted Collateral and contains the necessary
real property description, will perfect and establish the first priority (subject only to Permitted
Liens) of, the security interest created hereunder in such As-Extracted Collateral. No further or
subsequent filing, recording, registration, other public notice or other action is necessary to
perfect or otherwise continue, preserve or protect such security interest except (i) for
continuation statements described in Section 9-515(d) of the UCC or (ii) for filings required to be
filed in the event of a change in the name, identity, or organizational structure of such Grantor.
It is the sole responsibility of the Grantors to file any and all UCC financing statements,
continuation statements, amendments and any and all other filings necessary to maintain the
perfection of the liens granted by this Agreement, notwithstanding the foregoing, each of the
Collateral Agent and/or any holder of a Note shall be permitted (but not required) to make any
filing permitted hereunder.

(c) Intellectual Property. As of the date hereof, each registration and application
for registration for Patents, Copyrights and Trademarks that is part of Intellectual Property
included within the Collateral is listed on Schedule 3.1(c).

(d) Ownership Free of Liens. Except as set forth on Schedule 3.1(d), no
effective financing statement or other registration or instrument similar in effect covering all or
any part of the Collateral is on file in any recording office except (i) any which have been filed
in favor of the Collateral Agent relating to the Security Documents and any which have been filed
to perfect or protect any Permitted Lien, and (ii) any such financing statement or other instrument
for which a termination statement that such Grantor is authorized to file has been delivered to the
Collateral Agent. None of the tangible Collateral is in the possession of any Person other than
the Grantors or the Collateral Agent, except for (A) Off-Site Collateral and (B) Collateral in
possession of any Person other than the Grantors or the Collateral Agent, in an aggregate amount
not to exceed $700,000.

(e) Miscellaneous. No Grantor owns any interest in any Farm Products or timber to be
cut. No Grantor is a Transmitting Utility. Schedule 2.1(d) specifically describes each
Commercial Tort Claim as to which any Grantor has any right, title or interest. Each Grantor is a
Registered Organization, and each Grantor’s sole jurisdiction of organization is as set forth in
the Perfection Certificate (or in such other jurisdiction as to which such Grantor has given the
Collateral Agent prior written notice in accordance with Section 3.2(a)). As of the date
hereof, all of the information set forth in the Perfection Certificate is true and correct insofar
as it relates to such Grantor.

 

10

 

SECTION 3.2 General Covenants Applicable to Collateral. Unless the Collateral Agent
shall otherwise consent in writing at the direction of the Required Holders, each Grantor will at
all times comply with the covenants contained in the Note Purchase Agreement that are applicable to
such Grantor for so long as any part of the Secured Obligations or the Notes is outstanding and, in
addition, each Grantor hereby covenants to the Collateral Agent and each other Secured Party as
follows:

(a) Change of Name, Location, or Structure; Additional Filings. Each Grantor
recognizes that financing statements pertaining to the Collateral have been or may be filed with
the secretary of state (or equivalent governmental official) of the state in which such Grantor is
organized. Without limitation of any other covenant herein, no Grantor will cause or permit any
change to be made in its name or organizational structure, or any change to be made to its
jurisdiction of organization, unless such Grantor shall have first (i) notified the Collateral
Agent of such change at least thirty (30) days prior to the effective date of such change and (ii)
taken all action reasonably requested by the Collateral Agent, as directed by the Required Holders
(under the following subsection (b) or otherwise) for the purpose of further confirming and
protecting the Collateral Agent’s security interests and rights under this Agreement and the
perfection and priority thereof. In any notice furnished pursuant to this subsection, each Grantor
will expressly state that the notice is required by this Agreement and contains facts that may
require additional filings of financing statements or other notices for the purposes of continuing
perfection of the Collateral Agent’s security interest in the Collateral.

(b) Further Assurances. No Grantor will take or fail to take any action which would
in any manner impair the value or enforceability of the Collateral Agent’s security interest in any
Collateral (subject to the rights of any Person holding a Permitted Lien). Each Grantor will, at
its expense as from time to time reasonably requested by the Collateral Agent at the direction of
the Required Holders, promptly execute and deliver all further instruments, agreements, filings and
registrations, and take all further action, in order: (i) to confirm and validate this Agreement
and the Collateral Agent’s rights and remedies hereunder, (ii) to correct any errors or omissions
in the descriptions herein of the Secured Obligations or the Collateral or in any other provisions
hereof, (iii) to perfect, register and protect the security interests and rights created or
purported to be created hereby or to maintain or upgrade in rank the priority of such security
interests and rights, (iv) to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder in respect of the Collateral, or (v) to otherwise give the Collateral Agent the
full benefits of the rights and remedies described in or granted under this Agreement. As part of
the foregoing, each Grantor will, whenever reasonably requested by the Collateral Agent at the
direction of the Required Holders, (i) authenticate (as defined in the UCC) and file any financing
statements, continuation statements, and other filings or registrations relating to the Collateral
Agent’s security interests and rights hereunder, and any amendments thereto, and (ii) mark its
books and records relating to any Collateral to reflect that such Collateral is subject to this
Agreement and the security interests hereunder. To the extent reasonably requested by the
Collateral Agent at the direction of the Required Holders from time to time, each Grantor will use
commercially reasonable efforts to obtain from any material account debtor or other obligor on the
Collateral the acknowledgment of such account debtor or obligor that such Collateral is subject to
this Agreement.

 

11

 

(c) Information. Subject to the terms and conditions of the Note Purchase Agreement,
upon the reasonable request from time to time by the Collateral Agent as directed by the Required
Holders, each Grantor will furnish to the Collateral Agent (i) any information concerning any
covenant, provision or representation contained herein or any other matter in connection with its
Collateral or such Grantor’s business, properties, or financial condition, and (ii) statements and
schedules identifying and describing its Collateral and other reports and information requested in
connection with its Collateral, all in reasonable detail.

(d) Ownership, Liens, Possession and Transfers. Each Grantor will maintain good
title to all of its Collateral, free and clear of all Liens, except for the security interest
created by this Agreement and any Permitted Liens. No Grantor will grant or allow to remain in
effect, and each Grantor will cause to be terminated, any financing statement or other registration
or instrument similar in effect covering all or any part of the Collateral, except any which have
been filed in favor of the Collateral Agent relating to this Agreement or the other Security
Documents and any which have been filed to perfect or protect any Permitted Lien. Each Grantor
will defend the Collateral Agent’s Lien in and to such Grantor’s Collateral against the claims of
any Person (subject only to Permitted Liens). Except as expressly permitted under the Note
Purchase Agreement, each Grantor (i) will insure that all of its tangible Collateral, whether
Goods, Documents, Instruments, Chattel Paper, Letters of Credit or otherwise, is and remains in the
possession of such Grantor or the Collateral Agent (or a bailee selected by the Collateral Agent
who is holding such Collateral for the benefit of the Collateral Agent), except for Off-Site
Collateral or Collateral in possession of any Person other than the Grantors or the Collateral
Agent, in an aggregate amount not to exceed $700,000, and (ii) will not sell, assign (by operation
of law or otherwise), transfer, exchange, lease or otherwise dispose of any of its Collateral,
except for Dispositions permitted by Paragraph 6D of the Note Purchase Agreement, subject to
compliance with all terms and conditions of the Note Purchase Agreement.

(e) Intellectual Property.

(i) Each Grantor will maintain and protect the validity and enforceability of all
Intellectual Property owned by such Grantor included within the Collateral. Each Grantor
will use commercially reasonable efforts to defend and protect such Intellectual Property
and its rights thereunder against any infringement, dilution, or misappropriation and will
use commercially reasonable efforts to defend any claim or administrative or arbitral
proceedings which challenge the validity or enforceability of such Intellectual Property,
such Grantor’s purported rights therein and thereunder, or such Grantor’s rights to register
or patent the same or to use and practice the same in its business. Each Grantor will give
the Collateral Agent written notice of any proceeding in which such defense is being carried
on. Each Grantor will diligently prosecute and maintain all applications and registrations
for any such Intellectual Property (except that such Grantor shall have the right to
determine, in its ordinary course of business, not to pursue any such applications or
registrations for any such Intellectual Property), and such Grantor will notify the
Collateral Agent whenever it learns that any application or registration relating to any
such Intellectual Property has been (or is alleged to have been) abandoned, dedicated or
otherwise terminated.

 

12

 

(ii) Within thirty days after filing any application for registration (or any similar
request) of any Intellectual Property with the United States Copyright Office, the United
States Patent and Trademark Office, or any similar office or agency of the United States,
any State thereof or other country, or any political subdivision thereof, each Grantor will
give the Collateral Agent written notice of such filing and will, upon the Collateral
Agent’s request, execute, deliver and file any agreements, instruments, registrations and
filings which the Collateral Agent may reasonably request to confirm the Collateral Agent’s
security interest therein and to put such security interest of record in such office.

(iii) On the date of this Agreement (or, with respect to any Additional Grantor, the
date of such Additional Grantor’s Security Agreement Supplement), each Grantor will sign and
deliver to the Collateral Agent Intellectual Property Security Agreements with respect to
all of its Intellectual Property. Within 30 days after each March 31 and September 30
thereafter, such Grantor will sign and deliver to the Collateral Agent an applicable
Intellectual Property Security Agreement for all of its Intellectual Property as of such
March 31 or September 30 that is not covered by any previous Intellectual Property Security
Agreement so signed and delivered by it. In each case, if requested by the Collateral
Agent, such Grantor will promptly make all Intellectual Property Filings necessary to record
the security interests granted to the Collateral Agent hereunder in such Intellectual
Property. All such documentation shall be reasonably satisfactory to the Required Holders

(f) Investment Property. If any Grantor shall at any time hold or acquire any
Security Certificate, such Grantor shall promptly endorse, assign, and deliver the same to the
Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank
as the Collateral Agent as directed by the Required Holders may from time to time specify. If any
Security now or hereafter acquired by any Grantor is uncertificated and is issued to any Grantor or
its nominee directly by the issuer thereof, such Grantor shall promptly notify the Collateral Agent
of such issuance and, at the Collateral Agent’s request and option, as directed by the Required
Holders, pursuant to an agreement in form and substance reasonably satisfactory to the Required
Holders, either (i) cause the issuer thereof to agree to comply with instructions from the
Collateral Agent as directed by the Required Holders as to such Security, without further consent
of such Grantor or such nominee, or (ii) arrange for the Collateral Agent to become the registered
owner of such Security. If any Securities, whether certificated or uncertificated, or other
Investment Property now or hereafter acquired by any Grantor, are held by such Grantor or its
nominee through a Securities Intermediary or Commodity Intermediary, such Grantor shall promptly
notify in writing the Collateral Agent thereof, and, at the Collateral Agent’s request and option
as directed by the Required Holders, pursuant to an agreement in form and substance reasonably
satisfactory to the Required Holders, either (i) cause such Securities Intermediary or Commodity
Intermediary, (as the case may be) to agree to comply with entitlement orders or other instructions
from the Collateral Agent as directed by the Required Holders to such Securities Intermediary as to
such Securities or other Investment Property, or (as the case may be) to apply any value
distributed on account of any Commodity Contract as directed by the Collateral Agent to such
Commodity Intermediary, in each case without further consent of such Grantor or such nominee, or
(ii) in the case of Financial Assets or other Investment Property held through a Securities
Intermediary, arrange for the Collateral
Agent to become the entitlement holder with respect to such Investment Property, with such
Grantor being permitted, only with the consent of the Collateral Agent as directed by the Required
Holders, to exercise rights to withdraw or otherwise deal with such Investment Property. The
Collateral Agent and the holders of the Notes agree with each Grantor that the Collateral Agent
shall not give any such entitlement orders or instructions or directions to any issuer, Securities
Intermediary, or Commodity Intermediary, and shall not withhold its consent to the exercise of any
withdrawal or dealing rights by such Grantor, unless an Event of Default has occurred and is
continuing.

 

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(g) Commercial Tort Claims. If any Grantor shall at any time hold or acquire a
Commercial Tort Claim, such Grantor shall promptly notify the Collateral Agent in writing of the
details thereof and grant to the Collateral Agent in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and
substance reasonably acceptable to the Required Holders. Upon receipt of such notice, the
Collateral Agent is hereby authorized to (i) amend Schedule 2.1(d) to include the details
of such Commercial Tort Claim and (ii) file any financing statements and other filings or
registrations relating to the Collateral Agent’s security interests and rights in such Commercial
Tort Claim.

(h) Insurance. Each Grantor covenants that it will maintain, with responsible
insurers, insurance with respect to its properties and business against such casualties and
contingencies and in such amounts as is customary in the case of similarly situated corporations
engaged in the same or similar businesses including (i) property insurance on the Inventory and the
Equipment in an amount not less than the full insurable value thereof, against loss or damage by
theft, fire, lightning and other hazards ordinarily included under uniform broad form standard
extended coverage policies, limited only as may be provided in the standard broad form of extended
coverage endorsement at the time in use in the states in which the Collateral is located; (ii)
comprehensive general liability insurance against claims for bodily injury, death or property
damage occurring with or about such Collateral (such coverage to include provisions waiving
subrogation against the Secured Parties), with the Collateral Agent and the Secured Parties as
additional insureds thereunder, in amounts as shall be reasonably satisfactory to the Required
Holders; (iii) liability insurance with respect to the operation of its facilities under the
workers’ compensation laws of the states in which such Collateral is located, in amounts as shall
be reasonably satisfactory to the Required Holders; and (iv) business interruption insurance in
amounts as shall be reasonably satisfactory to the Required Holders.

All casualty and property insurance policies required hereby and by the Note Purchase Agreement
shall contain clauses providing that the proceeds thereof shall be payable to the Collateral Agent
as its interests may appear. All insurance policies required hereby and by the Note Purchase
Agreement or the certificates issued by the applicable insurers of such policies, shall contain
clauses providing that the Collateral Agent for benefit of the Secured Parties is an additional
insured or loss payee thereunder and providing that such policies may not be cancelled, reduced or
otherwise negatively affected without at least thirty (30) days prior written notice to the
Collateral Agent. Upon request by the Collateral Agent as directed by the Required Holders, each
Grantor shall deliver to the Collateral Agent true and correct copies of the original policies,
evidence of payment of premiums, certificates evidencing renewals, and such other information
regarding such insurance as the Collateral Agent, as directed by the Required Holders, may
reasonably request. In the event of any loss under any insurance policies so carried
by any Grantor, the Collateral Agent, as directed by the Required Holders, shall, after they have
determined in the sole judgment of the Required Holders that such Grantor has failed to commence or
diligently pursue efforts to collect the same, have the right (but not the obligation) to make
proof of loss and collect the same. In the preceding instances and during the continuance of an
Event of Default, the Collateral Agent is hereby authorized but not obligated to enforce in its
name or in the name of any Grantor payment of any or all of said policies or settle or compromise
any claim in respect thereof, and to collect and make receipts for the proceeds thereof and, in and
during the continuance of an Event of Default, the Collateral Agent is hereby appointed each
Grantor’s agent and attorney-in-fact to endorse any check or draft payable to such Grantor in order
to collect the proceeds of insurance. In the event of the sale of any Collateral pursuant to the
Collateral Agent’s exercise of any remedies hereunder, or other transfer of title to the Collateral
in extinguishment in whole or in part of the Secured Obligations, all right, title and interest of
any Grantor in and to such policies then in force concerning the Collateral and all proceeds
payable thereunder shall thereupon vest in the purchaser at such sale or other transferee in the
event of such other transfer of title.

 

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Notwithstanding anything contained in this Section 3.2(h), the Collateral Agent will have
no responsibilities, obligations or liabilities as to the form, adequacy or substance of any
insurance policy or certificate required under this Agreement or the Note Purchase Agreement, nor
shall the Collateral Agent have any responsibility or obligation whatsoever to decide, judge or
make any determination with respect to any such insurance policy or certificate including without
limitation whether any such insurance policy meets the requirements of this Agreement or this
Section 3.2(h) or the requirements of the Note Purchase Agreement.

(i) Documents, Instruments, etc. Each Grantor will cause all of its Instruments and
Chattel Paper included within the Collateral to have only one original counterpart. Each Grantor
will promptly deliver to the Collateral Agent all originals of its Documents, Instruments and
Chattel Paper which are included within the Collateral. Upon request by the Collateral Agent, each
Grantor will mark each of its Tangible Chattel Paper which is included within the Collateral with a
legend indicating that such Tangible Chattel Paper is subject to the security interest granted by
this Agreement. If any of the Collateral is or shall become Electronic Chattel Paper, such Grantor
shall ensure that (1) a single authoritative copy exists which is unique, identifiable, unalterable
(except as provided in clauses (3), (4) and (5) of this paragraph), (2) such authoritative copy
identifies the Collateral Agent as the assignee and is communicated to and maintained by the
Collateral Agent or its designee, (3) copies or revisions that add or change the assignee of the
authoritative copy can only be made with the participation of the Collateral Agent, (4) each copy
of the authoritative copy and any copy of a copy is readily identifiable as a copy and not the
authoritative copy and (5) any revision of the authoritative copy is readily identifiable as an
authorized or unauthorized revision.

(j) Letters of Credit. With respect to any Letters of Credit that are by their terms
transferable, each Grantor will, upon receipt of a written request from the Collateral Agent, as
directed by the Required Holders, use commercially reasonable efforts to cause all issuers and
nominated persons under Letters of Credit in which a Grantor is the beneficiary or assignee to
consent to the assignment of such Letter of Credit to the Collateral Agent and, upon receipt of
written notice from the Collateral Agent that an Event of Default has occurred, and so long as such
Event of Default is continuing, it shall cause all payments thereunder to be made to the
Collateral Agent. With respect to any Letters of Credit that are not transferable, each
Grantor shall, upon receipt of a written request from the Collateral Agent, as directed by the
Required Holders, use commercially reasonable efforts to obtain the consent of the issuer thereof
and any nominated person thereon to the assignment of the proceeds of such Letter of Credit to the
Collateral Agent in accordance with Section 5-114(c) of the UCC. The Collateral Agent shall have
no responsibilities, obligations or liabilities as to the form, substance or adequacy of such
Letters of Credit or the assignment thereof.

 

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ARTICLE IV.

Remedies, Powers and Authorizations

SECTION 4.1 Provisions Concerning the Collateral.

(a) Authorization to file Financing Statements. Each Grantor hereby irrevocably
authorizes the Collateral Agent, at the direction of the Required Holders, at any time and from
time to time to file, without the signature of such Grantor, in any jurisdiction any amendments to
existing financing statements and any initial financing statements and amendments thereto that (i)
indicate the Collateral (1) as “all assets of such debtor” or words of similar effect, regardless
of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of
the UCC, or (2) as being of an equal or lesser scope or with greater detail; (ii) contain any other
information required by Article 9 of the UCC for the sufficiency or filing office acceptance of any
financing statement or amendment, including the address of such Grantor, whether such Grantor is an
organization, the type of organization and any organization identification number issued to such
Grantor; and (iii) are necessary to properly effectuate the transactions described in the Note
Documents, as determined by the Collateral Agent as directed by the Required Holders, if the
Grantors fail to do so. Each Grantor agrees to furnish any such information to the Collateral
Agent promptly upon request. Each Grantor hereby further authorizes the Collateral Agent, as
directed by the Required Holders, to file one or more continuation statements to such financing
statements. Each Grantor further agrees that, where permitted by applicable law, a carbon,
photographic or other reproduction of this Agreement or any financing statement describing any
Collateral is sufficient as a financing statement and may be filed in any jurisdiction by the
Collateral Agent.

(b) Power of Attorney. Each Grantor hereby irrevocably appoints the Collateral Agent
as such Grantor’s attorney-in-fact and proxy, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise at any time that an Event of Default shall
have occurred and is continuing, as directed by the Required Holders to take any action, and to
execute or endorse any instrument, certificate or notice, which the Collateral Agent, as directed
by the Required Holders, may deem necessary or advisable to accomplish the purposes of this
Agreement, including any action or instrument: (i) to obtain and adjust any insurance required to
be maintained by Grantors hereunder or paid to the Collateral Agent pursuant hereto; (ii) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral; (iii) to receive, indorse and
collect any drafts or other Instruments, Documents or other Collateral; (iv) to enforce any
obligations included among the Collateral; and (v) to file any claims or take any action or
institute any proceedings which the Collateral Agent, as directed by
the Required Holders, may deem reasonably necessary for the collection of any of the
Collateral or otherwise to enforce, perfect, or establish the priority of the rights of such
Grantor or the Collateral Agent with respect to any of the Collateral. Each Grantor hereby
acknowledges that such power of attorney and proxy are coupled with an interest, are irrevocable,
except by termination of this Agreement, and are to be used by the Collateral Agent for the sole
benefit of the Secured Parties.

 

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(c) Performance by the Collateral Agent. If any Grantor fails to perform promptly any
agreement or obligation contained herein, the Collateral Agent may, as directed by the Required
Holders, itself perform, or cause performance of, such agreement or obligation, and the reasonable
expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor
under Section 4.5; provided, however, that unless an Event of Default has
occurred and is continuing or time is of the essence, the Collateral Agent shall not exercise this
power without first making demand on the applicable Grantor and such Grantor failing to comply
promptly therewith.

(d) Bailees. If any Collateral of any Grantor is at any time in the possession or
control of any warehouseman, bailee or any of such Grantor’s agents or processors, such Grantor
shall, upon the request of the Collateral Agent, as directed by the Required Holders, notify such
warehouseman, bailee, agent or processor of the Collateral Agent’s rights hereunder and instruct
such Person to hold all such Collateral for the Collateral Agent’s account subject to the
Collateral Agent’s instructions. No such request by the Collateral Agent shall be deemed a waiver
of any provision hereof which was otherwise violated by such Collateral being held by such Person
prior to such instructions by such Grantor.

(e) Collection. The Collateral Agent, as directed by the Required Holders, shall have
the right at any time, upon the occurrence and during the continuance of an Event of Default, to
notify, or to require any Grantor to notify, any and all obligors under any Receivables, General
Intangibles, Instruments, Chattel Paper, or other rights to payment included among the Collateral
of the assignment thereof to the Collateral Agent under this Agreement and to direct such obligors
to make payment of all amounts due or to become due to such Grantor thereunder directly to the
Collateral Agent and, upon such written notification and at the expense of such Grantor and to the
extent permitted by law, to enforce collection of any such Receivables, General Intangibles,
Instruments, Chattel Paper, or other rights to payment and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as such Grantor could have
done. After any Grantor receives notice that the Collateral Agent has given, or after the
Collateral Agent has required any Grantor to give, any notice referred to above in this subsection,
and so long as any Event of Default shall be continuing:

(i) all amounts and proceeds (including instruments and writings) received by such
Grantor in respect of such Receivables, General Intangibles, Instruments, Chattel Paper, or
other rights to payment shall be received in trust for the benefit of the Collateral Agent
hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid
over to the Collateral Agent in the same form as so received (with any necessary
endorsement) to be, at the Collateral Agent’s discretion, either (A) held as cash collateral
and released to such Grantor upon the remedy of all
Defaults and Events of Default, or (B) while any Event of Default is continuing,
applied as specified in Section 4.3, and

 

17

 

(ii) such Grantor will not adjust, settle or compromise the amount or payment of any
such Receivable, General Intangible, Instrument, Chattel Paper, or other right to payment or
release wholly or partly any account debtor or obligor thereof or allow any credit or
discount thereon.

SECTION 4.2 Event of Default Remedies. If an Event of Default shall have occurred and
be continuing, the Collateral Agent, as directed by the Required Holders, may from time to time,
without limitation and without notice except as expressly provided below:

(a) exercise in respect of the Collateral, in addition to any other rights and remedies
provided for herein, under the other Note Documents or otherwise available to it at law, in equity
or under any statute or other agreement, all the rights and remedies of a secured party on default
under the UCC (whether or not the UCC applies to the affected Collateral);

(b) require each Grantor to, and each Grantor hereby agrees that it will at its expense and
upon request of the Collateral Agent, as directed by the Required Holders, forthwith, assemble all
or part of the Collateral as directed by the Collateral Agent, as directed by the Required Holders,
and make it (together with all books, records and information of such Grantor relating thereto)
available to the Collateral Agent at a place to be designated by the Collateral Agent;

(c) prior to the disposition of any Collateral, (i) to the extent permitted by applicable law,
enter, with or without process of law and without breach of the peace, any premises where any of
the Collateral is or may be located, and without charge or liability to the Collateral Agent, as
directed by the Required Holders, seize and remove such Collateral from such premises, (ii) have
access to and use the relevant Grantor’s books, records, and information relating to the
Collateral, and (iii) store or transfer any of the Collateral without charge in or by means of any
storage or transportation facility owned or leased by the relevant Grantor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in any manner and to the
extent the Collateral Agent, as directed by the Required Holders, deems appropriate and, solely as
reasonably necessary for such preparation and disposition, use without charge any copyright,
trademark, trade name, patent or technical process used by such Grantor;

(d) reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the
security interest created hereby by any available judicial procedure;

(e) dispose of, at its office, on the premises of the respective Grantor or elsewhere, all or
any part of the Collateral, as a unit or in parcels, by public or private proceedings, and by way
of one or more contracts (it being agreed that the sale of any part of the Collateral shall not
exhaust the Collateral Agent’s power of sale, but sales may be made from time to time, and at any
time, until all of the Collateral has been sold or until the Secured Obligations have been paid and
performed in full), and at any such sale it shall not be necessary to exhibit any of the
Collateral;

 

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(f) buy (or allow one or more of the Secured Parties to buy) the Collateral, or any part
thereof, at any public sale;

(g) buy (or allow one or more of the Secured Parties to buy) the Collateral, or any part
thereof, at any private sale if the Collateral is of a type customarily sold in a recognized market
or is of a type which is the subject of widely distributed standard price quotations;

(h) appoint by instrument in writing one or more receivers, managers or receiver/manager for
the Collateral or the business and undertaking of any Grantor pertaining to the Collateral (a
“Receiver”). Any such Receiver will have, in addition to any other rights, remedies and
powers which a Receiver may have at law, in equity or by statute, the rights and powers set out
elsewhere in this Section 4.2. In exercising such rights and powers, any Receiver will act
as and for all purposes will be deemed to be the agent of the Grantors and neither the Collateral
Agent nor any other Secured Party will be responsible for any act or default of any Receiver. The
Collateral Agent or any other Secured Party may remove any Receiver and appoint another from time
to time. No Receiver appointed by the Collateral Agent or any other Secured Party need be
appointed by, nor need its appointment be ratified by, or its actions in any way supervised by, a
court; and

(i) apply by appropriate judicial proceedings for appointment of a receiver for the
Collateral, or any part thereof, and each Grantor hereby consents to any such appointment.

Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10)
days’ notice to such Grantor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.

In addition to the foregoing, if any Event of Default has occurred and is continuing:

(j) the Collateral Agent may license, or sublicense, whether general, special or otherwise,
and whether on an exclusive or non-exclusive basis, any Copyrights, Patents or Trademarks included
in the Collateral throughout the world for such term or terms, on such conditions and in such
manner as the Collateral Agent shall in its sole discretion determine;

(k) the Collateral Agent may (without assuming any obligations or liability thereunder), at
any time and from time to time, in its sole discretion, enforce (and shall have the exclusive right
to enforce) against any licensee or sublicensee all rights and remedies of the Grantor in, to and
under any Copyright Licenses, Patent Licenses or Trademark Licenses and take or refrain from taking
any action under any thereof; and

(l) upon request by the Collateral Agent, each Grantor will execute and deliver to the
Collateral Agent a power of attorney, in form and substance satisfactory to the Collateral Agent,
for the implementation of any lease, assignment, license, sublicense, grant of option, sale or
other disposition of a Copyright, Patent or Trademark or any action related thereto. In the event
of any such disposition pursuant to this Section, each Grantor shall use
commercially reasonable efforts to supply its know-how and expertise relating to the
manufacture and sale of the products bearing Trademarks or the products or services made or
rendered in connection with Patents, and its customer lists and other records relating to such
Patents or Trademarks and to the distribution of said products, to the Collateral Agent.

 

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Provided, however, that the Collateral Agent will not be deemed to have knowledge
or notice of a Default or an Event of Default unless and until it receives written notice of such
Default or Event of Default.

SECTION 4.3 Application of Proceeds. If any Event of Default shall have occurred and
be continuing, the Collateral Agent may, at the direction of the Required Holders, apply any cash
held by the Collateral Agent as Collateral, and any cash proceeds received by the Collateral Agent
in respect of any sale of, collection from, or other realization upon all or any part of the
Collateral, first to the expenses (including all reasonable fees and expenses of counsel) of
retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating and
the Collateral and then to the satisfaction of all Secured Obligations; provided,
however, that the Collateral Agent will not be deemed to have knowledge or notice of a
Default or an Event of Default unless and until it receives written notice of such Default or Event
of Default.

SECTION 4.4 Deficiency. In the event that the proceeds of any sale, collection or
realization of or upon Collateral by the Collateral Agent are insufficient to pay all Secured
Obligations and any other amounts to which the Collateral Agent is legally entitled, all Grantors
shall be jointly and severally liable for the deficiency, together with interest thereon as
provided in the governing Note Documents, as applicable, or (if no interest is so provided) at such
other rate as shall be fixed by applicable law, together with the costs of collection and the fees
of any legal counsel employed by the Collateral Agent or any other Secured Party to collect such
deficiency.

SECTION 4.5 Indemnity and Expenses. In addition to, but not in qualification or
limitation of, any similar obligations under the other Note Documents:

(a) each Grantor will indemnify the Collateral Agent and each other Secured Party and their
respective successors and assigns (each such Person being called an “Indemnitee”), from and
against any and all claims, losses and liabilities arising out of or resulting from this Agreement
(including enforcement of this Agreement), whether based on contract, tort or any other theory,
whether brought by a third party or by such Grantor or any other Issuer or Grantor, and regardless
of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in
whole or in part, out of the negligence of any Indemnitee; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful misconduct of such
Indemnitee.

(b) each Grantor will upon demand pay to the Collateral Agent the amount of any and all
reasonable costs and expenses, including the fees and disbursements of the Collateral Agent’s
counsel and of any experts and agents, which the Collateral Agent may incur in
connection with (i) the preparation of this Agreement and the perfection and preservation of
the security interests created under this Agreement, (ii) the administration of this Agreement,
(iii) the custody, preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iv) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder and (v) the failure by any Grantor to perform or observe any of the
provisions hereof.

 

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SECTION 4.6 Non-Judicial Remedies. In granting to the Collateral Agent the power to
enforce its rights hereunder without prior judicial process or judicial hearing, each Grantor
expressly waives, renounces and knowingly relinquishes any legal right which might otherwise
require the Collateral Agent to enforce its rights by judicial process. In so providing for
non-judicial remedies, each Grantor recognizes and concedes that such remedies are consistent with
the usage of trade, are responsive to commercial necessity, and are the result of a bargain at
arm’s length. Nothing herein is intended, however, to prevent the Collateral Agent from resorting
to judicial process at its option.

SECTION 4.7 Other Recourse. Each Grantor waives any right to require the Collateral
Agent or any other Secured Party to proceed against any other Person, to exhaust any Collateral or
other security for the Secured Obligations, to have any other Grantor joined with such Grantor in
any suit arising out of the Secured Obligations or this Agreement, or to pursue any other remedy in
the Collateral Agent’s or such Secured Party’s power. Each Grantor further waives any and all
notice of acceptance of this Agreement and of the creation, modification, rearrangement, renewal or
extension for any period of any of the Secured Obligations of any other Grantor from time to time.
Each Grantor further waives any defense arising by reason of any disability or other defense of any
other Grantor or by reason of the cessation from any cause whatsoever of the liability of any other
Grantor. This Agreement shall continue as to each Grantor irrespective of the fact that the
liability of any other Grantor may have ceased and irrespective of the validity or enforceability
of any other Note Document to which any Grantor may be a party, and notwithstanding any death,
incapacity, reorganization, or bankruptcy of any Grantor or any other event or proceeding affecting
any Grantor. Until all of the Secured Obligations shall have been paid in full, no Grantor shall
have any right to subrogation and each Grantor waives the right to enforce any remedy which the
Collateral Agent or any other Secured Party has or may hereafter have against any other Grantor,
and waives any benefit of and any right to participate in any other security whatsoever now or
hereafter held by the Collateral Agent. Each Grantor authorizes the Collateral Agent and each
other Secured Party, without notice or demand, without any reservation of rights against such
Grantor, and without in any way affecting such Grantor’s liability hereunder or on the Secured
Obligations, from time to time to (a) take or hold any other property of any type from any other
Person as security for the Secured Obligations, and exchange, enforce, waive and release any or all
of such other property, (b) apply the Collateral or such other property and direct the order or
manner of sale thereof as the Collateral Agent or such Secured Party may in its reasonable
discretion determine, (c) renew, extend for any period, accelerate, modify, compromise, settle or
release any of the obligations of any other Grantor in respect of any or all of the Secured
Obligations or other security for the Secured Obligations, (d) waive, enforce, modify, amend,
restate or supplement any of the provisions of any Note Document with any Person other than such
Grantor and (e) release or substitute any Grantor.

 

21

 

SECTION 4.8 Limitation on Duty of the Collateral Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Collateral Agent shall have no
duty as to any Collateral in its possession or control or in the possession or control of any agent
or bailee or as to the preservation of rights against prior parties or any other rights pertaining
thereto. The Collateral Agent shall be deemed to have exercised reasonable care in the custody of
the Collateral in its possession if the Collateral is accorded treatment substantially equal to
that which it accords the property of its other customers, and shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Collateral Agent in good faith.

SECTION 4.9 Appointment of Collateral Agents. At any time or times, in order to
comply with any legal requirement in any jurisdiction, the Collateral Agent, at the direction of
the Required Holders, may appoint any bank or trust company or one or more other Persons, either to
act as co-agent or co-agents, jointly with the Collateral Agent, or to act as separate agent or
agents on behalf of the Collateral Agent and the other Secured Parties, with such power and
authority as may be necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment. In so doing, the Collateral Agent may, in the name and
on behalf of any Grantor, give to such co-agent or separate agent indemnities and other protections
similar to those provided in this Agreement for the Collateral Agent. The Collateral Agent shall
notify Grantors in writing of any such appointment promptly thereafter; provided that, no
such notice shall be required if such appointment was made in connection with the Collateral
Agent’s or any other Secured Party’s exercise of any remedies hereunder or if an Event of Default
has occurred and is continuing.

ARTICLE V.

Miscellaneous

SECTION 5.1 Notices. Any notice or communication required or permitted hereunder
shall be given in writing as provided in Paragraph 11I of the Note Purchase Agreement and shall be
addressed (a) if to the Issuer, at the Issuer’s address indicated in the Note Purchase Agreement
(b) if to any other Grantor, at the address of the Issuer indicated in the Note Purchase Agreement
and (c) if to the Collateral Agent, at the address of the Collateral Agent indicated in the Note
Purchase Agreement.

SECTION 5.2 Amendments; Security Agreement Supplements. No amendment of any provision
of this Agreement shall be effective unless it is in writing and signed by each Grantor and the
Collateral Agent, and no waiver of any provision of this Agreement, and no consent to any departure
by any Grantor therefrom, shall be effective unless it is in writing and signed by the Collateral
Agent, and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given and to the extent specified in such writing. In addition, all
such amendments and waivers shall be effective only if given with the necessary approvals of
Required Holders as required in the Note Purchase Agreement. Upon the execution and delivery by
any Person of a security agreement supplement in substantially the form of Exhibit D (each,
a “Security Agreement Supplement”): (a) such Person shall be referred
to as an “Additional Grantor” and shall become and be a Grantor hereunder, and each
reference in this Agreement to a “Grantor” shall also mean and be a reference to such Additional
Grantor, and each reference in any other Note Document to a “Grantor” or a “Credit Party” shall
also mean and be a reference to such Additional Grantor; and (b) each reference herein to “this
Agreement,” “hereunder,” “hereof” or words of like import referring to this Agreement, and each
reference in any other Note Document to the “Security Agreement,” “thereunder,” “thereof” or words
of like import referring to this Agreement, shall mean and be a reference to this Agreement as
supplemented by such Security Agreement Supplement.

 

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SECTION 5.3 Preservation of Rights. No failure on the part of the Collateral Agent or
any other Secured Party to exercise, and no delay in exercising, any right hereunder or under any
other Note Document shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of any other right.
Neither the execution nor the delivery of this Agreement shall in any manner impair or affect any
other security for the Secured Obligations. The rights and remedies of the Collateral Agent
provided herein and in the other Note Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law or otherwise. The rights of the Collateral
Agent under any Note Document against any party thereto are not conditional or contingent on any
attempt by the Collateral Agent to exercise any of its rights or exhaust any recourse under any
other Note Document against such party or against any other Person.

SECTION 5.4 Unenforceability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or invalidity without invalidating the remaining portions hereof or thereof or
affecting the validity or enforceability of such provision in any other jurisdiction.

SECTION 5.5 Survival of Agreements. All representations and warranties of each
Grantor herein and all covenants and agreements herein shall survive the execution and delivery of
this Agreement, the execution and delivery of any other Note Document and the creation of the
Secured Obligations.

SECTION 5.6 Liability. Neither this Agreement nor the exercise by the Collateral
Agent or any Secured Party or the failure of the Collateral Agent or any Secured Party to exercise
any right, power or remedy conferred herein or by law shall be construed as relieving any Grantor
from liability on the Secured Obligations or any deficiency thereon.

SECTION 5.7 Offset. To secure the repayment of the Secured Obligations, each Grantor
hereby grants to each Secured Party, including the Collateral Agent a security interest, a Lien,
and a right of offset, each of which shall be in addition to all other interests, Liens, and rights
of any Secured Party at common law, under the Note Documents, or otherwise, and each of which shall
be upon and against (a) any and all moneys, securities or other property (and the proceeds
therefrom) of such Grantor, now or hereafter held or received by or in transit to any Secured Party
from or for the account of such Grantor, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special, time or demand, provisional
or final) of such Grantor with any Secured Party and (c) any other credits and claims of such
Grantor at any time existing against any Secured Party, including claims
under certificates of deposit. From time to time during the continuance of any Event of
Default, each holder of Secured Party is hereby authorized to foreclose upon or to offset against
the Secured Obligations then due and payable (in either case without notice to any Grantor), any
and all items referred to above. The remedies of foreclosure and offset are separate and
cumulative, and either may be exercised independently of the other without regard to procedures or
restrictions applicable to the other.

 

23

 

SECTION 5.8 Binding Effect and Assignment. This Agreement creates a continuing
security interest in the Collateral and such security interest, together with all covenants and
other agreements contained in this Agreement by or on behalf of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties hereto (including,
without limitation, any Transferee) whether so expressed or not. None of the rights or duties of
any Grantor hereunder may be assigned or otherwise transferred without the prior written consent of
the Collateral Agent as directed by the Required Holders.

SECTION 5.9 Termination. Upon receipt of written notice from each holder of Notes of
the satisfaction in full of the Secured Obligations and the termination or expiration of the Note
Purchase Agreement (other than indemnity obligations that survive the termination of this Agreement
for which no notice of claims has been received by the Grantors), the Collateral shall be released
from the Liens created hereby, and this Agreement shall terminate (other than those provisions
expressly stated to survive such termination) and all rights to the Collateral shall revert to the
applicable Grantor, all without delivery of any instrument or performance of any act by any party.
The Collateral Agent will thereafter, upon any Grantor’s request and at such Grantor’s expense, (a)
return to such Grantor such of the Collateral in the Collateral Agent’s possession as shall not
have been sold or otherwise disposed of or applied pursuant to the terms hereof and (b) execute and
deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such
termination. If any of the Collateral shall be sold or otherwise disposed of by any Grantor in a
transaction permitted by the Note Purchase Agreement, then the Collateral Agent, at the request and
sole expense of such Grantor, shall promptly execute and deliver to such Grantor all releases or
other documents reasonably necessary for the release of the Liens created hereby on such
Collateral. Each Grantor acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement originally filed in
connection herewith without the prior written consent of the Collateral Agent, subject to such
Grantor’s rights under Sections 9-509(d)(2) and 9-518 of the New York UCC.

SECTION 5.10 Governing Law; Submission to Jurisdiction. This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall be governed by, the
law of the State of New York. THE GRANTORS HEREBY SUBMIT TO THE JURISDICTION OF THE SUPREME COURT
OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW YORK AND THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND IRREVOCABLY AGREE THAT, SUBJECT TO THE SOLE AND ABSOLUTE
ELECTION OF THE REQUIRED HOLDER(S) AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT OR THE NOTES SHALL BE LITIGATED IN SUCH COURTS, AND THE
GRANTORS WAIVE ANY OBJECTION WHICH THEY MAY HAVE BASED ON IMPROPER VENUE OR FORUM
NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURTS.

 

24

 

SECTION 5.11 Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein or made in writing by or on behalf of the Grantors
in connection herewith shall survive the execution and delivery of this Agreement and the Notes,
the transfer of any Note or portion thereof or interest therein and the payment of any Note, and
may be relied upon by any Transferee, regardless of any investigation made at any time by or on
behalf of any Purchaser or any Transferee. Subject to the preceding sentence, this Agreement, the
Notes and the other Note Documents embody the entire agreement and understanding between the
holders of the Notes and the Grantors and supersede all prior agreements and understandings
relating to the subject matter hereof

SECTION 5.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one instrument.

(Remainder of Page Intentionally Left Blank; Signature Pages Follow)

 

25

 

IN WITNESS WHEREOF, each Grantor has executed and delivered this Agreement as of the date
first above written.

	 	 	 	 	 
	 	GRANTORS:

STANLEY FURNITURE COMPANY, INC.

 	 
	 	By:  	/s/ Douglas I. Payne
 	 
	 	 	Name:  	Douglas I. Payne 	 
	 	 	Title:  	Executive Vice President
Finance and Administration 	 
	 
	 	STANLEY FURNITURE OF STANLEYTOWN, LLC

 	 
	 	By:  	/s/ Douglas I. Payne
 	 
	 	 	Name:  	Douglas I. Payne 	 
	 	 	Title:  	Executive Vice President
Finance and Administration 	 
	 
	 	STANLEY FURNITURE OF ROBBINSVILLE, LLC

 	 
	 	By:  	/s/ Douglas I. Payne
 	 
	 	 	Name:  	Douglas I. Payne 	 
	 	 	Title:  	Executive Vice President
Finance and Administration 	 
	 
	 	STANLEY FURNITURE OF MARTINSVILLE, LLC

 	 
	 	By:  	/s/ Douglas I. Payne
 	 
	 	 	Name:  	Douglas I. Payne 	 
	 	 	Title:  	Executive Vice President
Finance and Administration 	 
	 
	 	STANLEY FURNITURE COMPANY 2.0, LLC

 	 
	 	By:  	/s/ Anita Wimmer
 	 
	 	 	Name:  	Anita W. Wimmer 	 
	 	 	Title:  	Vice President — Treasurer 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	COLLATERAL AGENT:

THE BANK OF NEW YORK MELLON, TRUST COMPANY, N.A., as
Collateral Agent
 	 
	 
	 
	 	By:  	/s/ Geraldine Creswell
 	 
	 	 	Name:  	Geraldine Creswell 	 
	 	 	Title:  	Vice President

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