EX-10.1 3 l93954aexv10w1.txt EX-10.1--AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 10.1 ================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT among COLE VISION CORPORATION, THINGS REMEMBERED, INC. and PEARLE, INC., The Several Lenders from Time to Time Parties Hereto, LEHMAN COMMERCIAL PAPER INC., as Syndication Agent, WACHOVIA BANK, NATIONAL ASSOCIATION, as Documentation Agent, and CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent Dated as of May 23, 2002 ================================================================================ CIBC WORLD MARKETS, INC., as Advisor, Co-Lead Arranger and Co-Book Runner LEHMAN COMMERCIAL PAPER INC. as Co-Lead Arranger and Co-Book Runner TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS......................................................................................1 1.1. Defined Terms...............................................................................1 1.2. Other Definitional Provisions..............................................................25 SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS................................................25 2.1. Revolving Credit Commitments...............................................................25 2.2. Revolving Credit Notes.....................................................................26 2.3. Procedure for Revolving Credit Borrowing...................................................26 2.4. Commitment Fees............................................................................26 2.5. Termination or Reduction of Revolving Credit Commitments...................................27 2.6. Repayment of Revolving Credit Loans........................................................27 SECTION 3. LETTERS OF CREDIT...............................................................................28 3.1. L/C Commitment.............................................................................28 3.2. Procedure for Issuance of Letters of Credit................................................28 3.3. Fees, Commissions and Other Charges........................................................29 3.4. L/C Participations.........................................................................29 3.5. Reimbursement Obligation of the Borrowers..................................................30 3.6. Obligations Absolute.......................................................................31 3.7. Letter of Credit Payments..................................................................31 3.8. Application................................................................................31 SECTION 4. GENERAL PROVISIONS..............................................................................32 4.1. Interest Rates and Payment Dates...........................................................32 4.2. Optional Prepayments.......................................................................32 4.3. Mandatory Prepayments and Reduction of Revolving Credit Commitments........................32 4.4. Conversion and Continuation Options........................................................34 4.5. Minimum Amounts and Maximum Number of Tranches.............................................34 4.6. Computation of Interest and Fees...........................................................34 4.7. Inability to Determine Interest Rate.......................................................35 4.8. Pro Rata Treatment and Payments............................................................35 4.9. Illegality.................................................................................36 4.10. Requirements of Law........................................................................36 4.11. Taxes......................................................................................38 4.12. Indemnity..................................................................................40 4.13. Change of Lending Office; Replacement of Lenders...........................................40 SECTION 5. REPRESENTATIONS AND WARRANTIES..................................................................41 5.1. Financial Condition........................................................................41 5.2. No Change; Solvency........................................................................42 5.3. Corporate Existence; Compliance with Law...................................................42 5.4. Corporate Power; Authorization; Enforceable Obligations....................................42 5.5. No Legal Bar...............................................................................43 5.6. No Material Litigation.....................................................................43
i 5.7. No Default.................................................................................43 5.8. Ownership of Property; Liens...............................................................43 5.9. Intellectual Property......................................................................43 5.10. No Burdensome Restrictions.................................................................43 5.11. Taxes......................................................................................44 5.12. Federal Reserve Regulations................................................................44 5.13. ERISA......................................................................................44 5.14. Collateral.................................................................................44 5.15. Investment Company Act; Other Regulations..................................................45 5.16. Subsidiaries and Joint Ventures............................................................45 5.17. Purpose of Revolving Credit Loans..........................................................45 5.18. Environmental Matters......................................................................45 5.19. Regulation H...............................................................................46 5.20. No Material Misstatements..................................................................46 SECTION 6. CONDITIONS PRECEDENT............................................................................47 6.1. Conditions to Effectiveness................................................................47 6.2. Conditions to Each Extension of Credit.....................................................49 SECTION 7. AFFIRMATIVE COVENANTS...........................................................................50 7.1. Financial Statements.......................................................................50 7.2. Certificates; Other Information............................................................51 7.3. Payment of Obligations.....................................................................52 7.4. Conduct of Business and Maintenance of Existence...........................................52 7.5. Maintenance of Property; Insurance.........................................................52 7.6. Inspection of Property; Books and Records; Discussions.....................................52 7.7. Notices....................................................................................53 7.8. Environmental Laws.........................................................................54 7.9. Further Assurances.........................................................................55 7.10. Additional Collateral, etc.................................................................55 SECTION 8. NEGATIVE COVENANTS..............................................................................57 8.1. Financial Condition Covenants..............................................................57 8.2. Limitation on Indebtedness.................................................................59 8.3. Limitation on Liens........................................................................60 8.4. Limitation on Guarantee Obligations........................................................62 8.5. Limitation on Fundamental Changes..........................................................62 8.6. Limitation on Sale of Assets...............................................................63 8.7. Limitation on Dividends....................................................................63 8.8. Limitation on Capital Expenditures.........................................................64 8.9. Limitation on Investments, Loans and Advances..............................................64 8.10. Limitation on Transactions with Affiliates.................................................65 8.11. Limitation on Changes in Fiscal Year.......................................................65 8.12. Limitation on Negative Pledge Clauses......................................................65 8.13. Limitation on Lines of Business............................................................66 8.14. Limitations on Currency and Commodity Hedging Transactions.................................66 8.15. Limitation on Sale Leasebacks..............................................................66
ii 8.16. Changes to Cash Management Collection System...............................................66 SECTION 9. EVENTS OF DEFAULT...............................................................................66 SECTION 10. THE ADMINISTRATIVE AGENT.......................................................................70 10.1. Appointment................................................................................70 10.2. Delegation of Duties.......................................................................70 10.3. Exculpatory Provisions.....................................................................71 10.4. Reliance by Administrative Agent...........................................................71 10.5. Notice of Default..........................................................................71 10.6. Non-Reliance on Administrative Agent and Other Lenders.....................................72 10.7. Indemnification............................................................................72 10.8. Administrative Agent in Its Individual Capacity............................................73 10.9. Successor Administrative Agent.............................................................73 10.10. Issuing Lender.............................................................................73 10.11. Releases of Guarantees and Collateral......................................................73 SECTION 11. MISCELLANEOUS..................................................................................73 11.1. Amendments and Waivers.....................................................................73 11.2. Notices....................................................................................74 11.3. No Waiver; Cumulative Remedies.............................................................75 11.4. Survival of Representations and Warranties.................................................75 11.5. Payment of Expenses and Taxes..............................................................75 11.6. Successors and Assigns; Participations and Assignments.....................................76 11.7. Adjustments; Set-off.......................................................................79 11.8. Counterparts...............................................................................79 11.9. Severability...............................................................................79 11.10. Integration................................................................................80 11.11. GOVERNING LAW..............................................................................80 11.12. Submission To Jurisdiction; Waivers........................................................80 11.13. Acknowledgements...........................................................................80 11.14. WAIVERS OF JURY TRIAL......................................................................81 11.15. Confidentiality............................................................................81 11.16. Reference to and Effect on the Existing Credit Agreement...................................81
iii SCHEDULES I Revolving Credit Commitments and Addresses II Applicable Margin Calculation for Revolving Credit Loans 5.1 Certain Obligations and Liabilities 5.4 Consents 5.5 Material Contracts; Court Orders and Decrees 5.8 Owned Real Properties 5.13 ERISA Non-compliance 5.14 Equipment and Inventory of Borrowers and Subsidiaries 5.16 Subsidiaries and Joint Ventures 8.2(d) Permitted Indebtedness 8.3(h) Permitted Liens 8.4(a) Permitted Guarantee Obligations EXHIBITS A Form of Revolving Credit Note B-1 Form of Guarantee and Collateral Agreement B-2 Form of Copyright, Patent and Trademark Security Agreement B-3 Form of CNG Guarantee and Cash Collateral Agreement C Form of Borrowing Certificate D Form of Opinion of Counsel to Borrowers E Form of U.S. Tax Compliance Certificate F Form of Assignment and Acceptance G Form of Borrowing Base Certificate H Form of Compliance Package I Form of Borrowing Notice J Form of Continuation/Conversion Notice K Form of CNC Guarantee iv AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 23, 2002, among COLE VISION CORPORATION, a Delaware corporation ("COLE VISION"), THINGS REMEMBERED, INC., a Delaware corporation ("THINGS REMEMBERED") and PEARLE, INC., a Delaware corporation ("PEARLE"; Cole Vision, Things Remembered, and Pearle each being referred to as a "BORROWER" and collectively as the "BORROWERS"), the several banks and other financial institutions from time to time parties to this Agreement (collectively, the "LENDERS"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such capacity, the "SYNDICATION AGENT"), WACHOVIA BANK, NATIONAL ASSOCIATION, as documentation agent (in such capacity, the "DOCUMENTATION AGENT"), and CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian-chartered bank acting through its New York Agency, as administrative agent for the Lenders hereunder (in such capacity, the "ADMINISTRATIVE AGENT"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Borrowers, the Administrative Agent, and certain banks and other financial institutions are parties to the Credit Agreement dated as of November 15, 1996 (as previously amended or modified, the "EXISTING CREDIT AGREEMENT"), and the parties thereto wish to make certain modifications thereto; WHEREAS, the Borrowers have requested that the Existing Credit Agreement be amended and restated to (i) extend the maturity of the revolving credit facility provided for therein from January 31, 2003 to May 31, 2006 and (ii) make certain additional modifications thereto; and WHEREAS, the Lenders and the Administrative Agent are agreeable to the Borrowers' request and to amending and restating the Existing Credit Agreement, but only upon the terms and subject to the conditions set forth below; NOW THEREFORE, in consideration of the promises and mutual agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, the parties hereto hereby agree that on the Closing Date (as hereinafter defined) the Existing Credit Agreement shall be amended and restated to read in its entirety as follows: SECTION 1. DEFINITIONS 1.1. DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such terms to be equally applicable to the singular and plural forms thereof): "ABR LOANS": Revolving Credit Loans the rate of interest applicable to which is based upon the CIBC Alternate Base Rate. "ACCOUNT": as defined in the Uniform Commercial Code as in effect in the State of New York; and, with respect to the Borrowers and their Subsidiaries, all such 2 Accounts of such Persons, whether now existing or existing in the future, including, without limitation (i) all accounts receivable of such Person including, without limitation, all accounts created by or arising from all of such Person's sales of goods or rendition of services made under any of its trade names, or through any of its divisions, (ii) all unpaid rights of such Person (including rescission, replevin, reclamation and stopping in transit) relating to the foregoing or arising therefrom, (iii) all rights to any goods represented by any of the foregoing, including returned or repossessed goods and (iv) all reserves and credit balances held by such Person with respect to any such accounts receivable or any Obligors. "ADJUSTED INTEREST COVERAGE RATIO": as of the end of each fiscal quarter of CNG, with respect to CNG and its Subsidiaries on a Consolidated basis, the ratio of (a) EBITDAR for the twelve month period ending on such date to (b) the sum of (i) the aggregate amount paid in cash during the twelve month period ending on such date in respect of items of Interest Expense and (ii) Rental Expense for the twelve month period ending on such date. "ADJUSTMENT DATE": each date on or after the date which is six months following the Closing Date that is the second Business Day following receipt by the Lenders of both (i) the financial statements required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable, for the most recently completed fiscal period and (ii) the related Compliance Certificate required to be delivered pursuant to subsection 7.2(b) with respect to such fiscal period. "ADMINISTRATIVE AGENT": CIBC, together with its affiliates, as the co-lead arranger of the Revolving Credit Commitments and as the administrative agent for the Lenders under this Agreement and the other Loan Documents. "AFFILIATE": as to any Person, any other Person (other than a Subsidiary Guarantor) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "AGGREGATE OUTSTANDING REVOLVING CREDIT": as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding and (b) such Lender's Revolving Credit Commitment Percentage of the L/C Obligations then outstanding. "AGREEMENT": this Amended and Restated Credit Agreement, as amended, supplemented or otherwise modified from time to time. "APPLICABLE MARGIN": as applied to a given Type of Revolving Credit Loan, the rate per annum, determined on each Adjustment Date, set forth under the heading "ABR Loans Applicable Margin" or "Eurodollar Loans Applicable Margin", as applicable, on 3 Schedule II which corresponds to the Leverage Ratio determined from the financial statements and Compliance Certificate relating to the end of the fiscal quarter immediately preceding such Adjustment Date; PROVIDED, FURTHER that in the event that the financial statements required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable, and the related Compliance Certificate required to be delivered pursuant to subsection 7.2(b), are not delivered when due, then (a) if such financial statements and Compliance Certificate are delivered after the date such financial statements and Compliance Certificate were required to be delivered (without giving effect to any applicable cure period) and the Applicable Margin increases from that previously in effect as a result of the delivery of such financial statements and Compliance Certificate, then the Applicable Margin in respect of Revolving Credit Loans during the period from the date upon which such financial statements and Compliance Certificate were required to be delivered (without giving effect to any applicable cure period) until the date upon which they actually are delivered shall, except as otherwise provided in clause (c) below, be the Applicable Margin as so increased; (b) if such financial statements and Compliance Certificate are delivered after the date such financial statements and Compliance Certificate were required to be delivered and the Applicable Margin decreases from that previously in effect as a result of the delivery of such financial statements and Compliance Certificate, then such decrease in the Applicable Margin shall not become applicable until the date upon which such financial statements and Compliance Certificate actually are delivered; and (c) if such financial statements and Compliance Certificate are not delivered prior to the expiration of the applicable cure period, then, effective upon such expiration, for the period from the date upon which such financial statements and Compliance Certificate were required to be delivered (after the expiration of the applicable cure period) until two Business Days following the date upon which such financial statements and Compliance Certificate actually are delivered, the Applicable Margin in respect of Revolving Credit Loans shall be 1.25% per annum, in the case of ABR Loans, and 2.25% per annum, in the case of Eurodollar Loans. "ASSIGNEE": as defined in subsection 11.6(c). "AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Lender's Revolving Credit Commitment at such time OVER (b) the sum of (i) the aggregate unpaid principal amount at such time of all Revolving Credit Loans made by such Lender and (ii) an amount equal to such Lender's Revolving Credit Commitment Percentage of the outstanding L/C Obligations at such time; collectively, as to all the Lenders, the "AVAILABLE REVOLVING CREDIT COMMITMENTS". "BORROWER" and "BORROWERS": as defined in the preamble hereto. 4 "BORROWING BASE CERTIFICATE": as defined in subsection 7.2(e). "BORROWING BASE": an amount, calculated on a monthly basis based upon the most recent Borrowing Base Certificate delivered pursuant to subsection 7.2(e), equal to the sum (without duplication) of (a) 80% of Eligible Accounts, (b) 50% of Eligible Inventory and (c) 25% of Eligible Property. All determinations in connection with the Borrowing Base shall be made by the Borrowers and certified to the Administrative Agent by a Responsible Officer; PROVIDED, HOWEVER, that the Administrative Agent shall have the final right to review and adjust, in its reasonable judgment after consultation with the Borrowers, any such determination to the extent such determination is not in accordance with this Agreement. The Borrowing Base determined on the basis of any Borrowing Base Certificate shall remain in effect from and including the date on which such Borrowing Base Certificate is delivered, to but excluding the date on which the next Borrowing Base Certificate is delivered. "BORROWING BASE DEFICIENCY": a condition wherein the sum of (a) the aggregate principal amount of all Revolving Credit Loans outstanding at such time and (b) the aggregate amount of L/C Obligations outstanding at such time exceeds the Borrowing Base then in effect. "BORROWING DATE": any Business Day specified in a notice pursuant to subsection 2.3 or 3.2 as a date on which a Borrower requests the Lenders to make Revolving Credit Loans hereunder or the Issuing Lender to issue Letters of Credit hereunder. "BUSINESS DAY": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, except that, when used in connection with a Eurodollar Loan, "Business Day" shall mean any Business Day on which dealings in Dollars between banks may be carried on in London, England and New York, New York. "CAPITAL STOCK": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "CASH EQUIVALENTS": (i) marketable, direct obligations issued or guaranteed by the United States of America, or of any governmental agency or political subdivision thereof, maturing within 365 days of the date of purchase, (ii) Dollar-denominated time deposits and Dollar-denominated certificates of deposit (including eurodollar time deposits and certificates of deposit) maturing within 365 days of the date of purchase thereof issued by any United States or Canadian national, provincial or state (including the District of Columbia) banking institution having capital, surplus and undivided profits aggregating at least $250,000,000, or by any British, French, German, Japanese or Swiss national banking institution having capital, surplus and undivided profits aggregating at least $1,000,000,000, in each case that is (a) rated at least "A" by Standard & Poor's, a division of McGraw-Hill, Inc. ("S&P"), or at least "A-2" by Moody's Investors Service Inc. ("MOODY'S"), or (b) that is a Lender, (iii) commercial paper maturing within 270 5 days after the issuance thereof that has the highest credit rating of either of S&P or Moody's, (iv) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having the highest rating obtainable from either of S&P or Moody's, (v) tax exempted and tax advantaged instruments including, without limitation, municipal bonds, commercial paper, auction rate preferred stock and variable rate demand obligations with the highest short-term ratings by either of S&P or Moody's or a long-term debt rating of AAA from S&P, as applicable, (vi) repurchase agreements and reverse repurchase agreements with institutions described in clause (ii) above that are fully secured by obligations described in clause (i) above and (vii) investments not exceeding 365 days in duration in money market funds that invest substantially all of such funds' assets in the investments described in the preceding clauses (i) through (v). "C/D PUBLISHED MOVING RATE": on any particular date, the latest three-week moving average of daily secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market lenders, such three-week moving average (adjusted to the basis of a year of 360 days) being determined weekly for the three-week period ending on the previous Friday by the Administrative Agent on the basis of: (a) such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York (as adjusted for reserves and assessments in the same manner as the C/D Quoted Rate); or (b) if such publication shall be suspended or terminated, the C/D Quoted Rate determined by the Administrative Agent on the basis of quotations for such rates by the Administrative Agent. "C/D QUOTED RATE": relative to any determination of the C/D Published Moving Rate in circumstances when publication of the rates referred to in clause (a) of the definition thereof has been suspended or terminated, the rate of interest per annum determined by the Administrative Agent to be the sum (rounded upward to the nearest 1/16th of 1%) of: (a) the rate obtained by dividing (i) the average (rounded upward to the nearest 1/16th of 1%) of the bid rates quoted to the Administrative Agent, in CIBC's secondary market at approximately 10:00 A.M., New York City time (or as soon thereafter as practicable), by three certificate of deposit dealers of recognized standing selected by the Administrative Agent in its reasonable discretion for the purchase at face value of three-month certificates of deposit of CIBC in an amount approximately equal or comparable to the amount of CIBC's portion of the Revolving Credit Loans outstanding hereunder with respect to which the C/D Quoted Rate is being determined by (ii) a percentage equal to 100% MINUS the average of the daily percentages specified during such period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any marginal reserve requirement) for a member bank of the Federal Reserve System 6 in respect of liabilities consisting of or including (among other liabilities) three-month Dollar nonpersonal time deposits in the United States; and (b) the daily average during such period of the net annual assessment rates estimated by the Administrative Agent for determining the then current annual assessment payable by CIBC to the Federal Deposit Insurance Corporation for insuring Dollar deposits of CIBC in the United States. "CHANGE OF CONTROL": (i) any Person (including such Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the total voting or economic power of the Capital Stock of CNC and/or warrants or options to acquire such Capital Stock on a fully diluted basis, (ii) CNC consolidates with, or merges with or into, another Person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, CNC, in any such event pursuant to a transaction in which the outstanding Capital Stock of CNC is converted into or exchanged for cash, securities or other property, other than any such transaction where (a) (1) the outstanding common stock of CNC is not converted or exchanged at all (except to the extent necessary to reflect a change in the jurisdiction of incorporation) or is converted into or exchanged for Capital Stock of the surviving or transferee corporation (the "SURVIVING ENTITY") and (2) immediately after such transaction, no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than a majority of the total outstanding Capital Stock of the Surviving Entity, or (b) the holders of the Capital Stock of CNC outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the Capital Stock of the surviving corporation immediately after such consolidation or merger, (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of CNC (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders of CNC has been approved by 66 2/3% of the directors then still in office who either were directors at the beginning of such period or whose election or recommendation for election was previously so approved) cease to constitute a majority of the board of directors of CNC, (iv) CNC shall cease to own and control, beneficially, all of the issued and outstanding Capital Stock of CNG, (v) CNG shall cease to own and control all of the issued and outstanding Capital Stock of each Borrower or (vi) there shall occur a "Change of Control" under the Senior Subordinated 1997 Notes Indenture or the Senior Subordinated 2002 Notes Indenture. "CIBC": Canadian Imperial Bank of Commerce, a Canadian-chartered bank, acting through its New York Agency. 7 "CIBC ALTERNATE BASE RATE": on any particular date, a rate of interest per annum equal to the highest of: (a) the rate of interest most recently announced by CIBC as its base rate in effect at its principal office in New York City (the "CIBC PRIME RATE"); (b) the Federal Funds Rate for such date plus 1/2 of 1%; and (c) the CD Published Moving Rate most recently determined by CIBC plus 1%. The CIBC Alternate Base Rate is not necessarily intended to be the lowest rate of interest charged by CIBC in connection with extensions of credit. "CLEAN-DOWN AMOUNT": $10,000,000. "CLOSING DATE": the date on which the conditions precedent set forth in subsection 6.1 shall be satisfied. "CNC": Cole National Corporation, a Delaware corporation. "CNC GUARANTEE": the Amended and Restated Guarantee to be executed and delivered by CNC in substantially the form attached hereto as Exhibit K, as the same may be amended, supplemented or otherwise modified from time to time. "CNG": Cole National Group, Inc., a Delaware corporation. "CNG GUARANTEE AND CASH COLLATERAL AGREEMENT": the Amended and Restated CNG Guarantee and Cash Collateral Agreement to be executed and delivered by CNG in substantially the form attached hereto as Exhibit B-3, as the same may be amended, supplemented or otherwise modified from time to time. "CODE": the Internal Revenue Code of 1986, as amended from time to time. "COLE VISION": as defined in the preamble hereto. "COLLATERAL": all assets (including assets constituting shares of Capital Stock) of the Loan Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated, which is under common control with any Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes any Borrower and which is treated as a single employer under Section 414 of the Code. "COMPLIANCE CERTIFICATE": as defined in subsection 7.2(b). 0 8 "COMPLIANCE PACKAGE": the Cole National Group, Inc. and Subsidiaries Consolidated Financial Statements and Supplementary Data, in substantially the form of Exhibit H. "CONSOLIDATED": when used in connection with any financial statements required to be delivered pursuant to subsection 7.1 or 7.11 or computation of the financial covenants set forth in subsections 8.1 and 8.8, means such term as it applies to CNG and its Subsidiaries on a consolidated basis in accordance with GAAP, after eliminating all intercompany items. "CONTRACTUAL OBLIGATION": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "COPYRIGHT, PATENT AND TRADEMARK SECURITY AGREEMENT": the Amended and Restated Copyright, Patent and Trademark Security Agreement to be executed and delivered by the Borrowers and certain Subsidiaries in substantially the form attached hereto as Exhibit B-2, as the same may be amended, supplemented or otherwise modified from time to time. "DEFAULT": any of the events specified in Section 9, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "DEFAULTED ACCOUNT": any Account which has been or should have been charged-off as not collectable in conformity with the accounting policies of the Borrowers and their Subsidiaries as in effect from time to time. "DEFAULTING LENDER": at any time, any Lender that has defaulted, and at the time of determination continues to default, in its obligation to make available its Revolving Credit Commitment Percentage of any Revolving Credit Loan. "DOLLARS" and "$": dollars in lawful currency of the United States of America. "DOMESTIC SUBSIDIARY": any Subsidiary of the Borrower that is treated as "domestic" for U.S. federal income tax purposes. "EBITDA": for any period, with respect to CNG and its Subsidiaries on a Consolidated basis, determined in accordance with GAAP, an amount equal to the sum of (a) Net Income for such period, plus (b) income taxes, excluding income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales or other dispositions of assets permitted under subsection 8.6, plus (c) Interest Expense for such period, plus (d) depreciation for such period, plus (e) amortization for such period, plus (f) any other non-cash items (including minority interests) reducing Net Income for such period, plus (g) amortization of deferred financing costs and expenses for such period, minus (h) all non-cash items increasing Net Income for such period, minus (i) all cash payments made in such period in respect of restructuring charges deducted in calculating Net Income for such period or any prior period. 9 "EBITDAR": for any period, with respect to CNG and its Subsidiaries on a Consolidated basis, determined in accordance with GAAP, an amount equal to the sum of EBITDA and Rental Expense for such period. "ELIGIBLE ACCOUNTS": at any time, an amount equal to the aggregate outstanding balance of all Accounts of the Borrowers and their Subsidiaries (other than Accounts consisting of payment obligations with respect to which the Obligor is a franchisee of any Borrower or any Subsidiary arising from Investments made pursuant to subsection 8.9(e)) payable in the United States of America in Dollars as set forth in the aging reports of billed Accounts for the Borrowers and their Subsidiaries as of such time, PROVIDED that, unless otherwise approved in writing by the Administrative Agent, no amount owing in respect of any Account shall be deemed to be included in any calculation of Eligible Accounts if: (a) such Account was, at the date of the original issuance of the respective invoice therefor, payable more than 60 days after such date; (b) such Account is not a bona fide, valid and legally enforceable obligation of the account debtor in respect thereof arising from the actual sale and delivery of goods or rendition and acceptance of services in the ordinary course of business to such account debtor; (c) such Account remains unpaid for more than 60 days after the date set forth for payment in the invoice originally issued therefor; (d) the Obligor is any Borrower or any Subsidiary or Affiliate thereof; (e) the sale giving rise thereto is to an Obligor in any jurisdiction outside the United States unless the obligation thereunder is backed by a letter of credit acceptable to the Administrative Agent; (f) such Account is a Defaulted Account; (g) such Account is the result of a charge-back or a reinvoice of a disputed Account or Defaulted Account; (h) the Obligor thereon is the obligor in respect of any other Defaulted Account; (i) it is an Account which may be set off or charged against (i) any adverse security deposit or other similar deposit made by or for the benefit of the applicable Obligor or (ii) any trade payable, rebate obligation or other similar liability owing to the applicable Obligor; PROVIDED that any Account deemed ineligible pursuant to this clause (i) shall only be ineligible to the extent of such set-off or charge against such adverse security deposit, trade payable, rebate obligation or other similar deposit or liability; (j) it arises from the sale to the Obligor on a bill-and-hold, guarantied sale, sale-and-return, sale on approval or consignment basis or made pursuant to any other 10 written agreement providing for repurchase or return; PROVIDED, HOWEVER, that no Account shall be excluded pursuant to this clause (j) solely as a result of customary quality warranties or the general right to return goods provided by the Borrower or its Subsidiaries; (k) the Obligor thereon has disputed its liability on, or the Obligor thereon has made any claim or defense with respect to, such Account or any other Account due from such Obligor to any Loan Party, which has not been resolved; PROVIDED that any Account deemed ineligible pursuant to this clause (k) shall only be ineligible to the extent of the amount owed by such Loan Party to the Obligor thereon or the amount of such dispute, claim or defense; (l) a proceeding under bankruptcy or similar laws has occurred and is continuing with respect to the Obligor thereon; (m) the Obligor thereon is any Governmental Authority unless all Requirements of Law relating to the creation and perfection of a Lien thereon in favor of the Lenders shall have been satisfied; (n) the goods giving rise to such Account have not been shipped and delivered to the Obligor thereon or the services giving rise to such Account have not been performed or such Account otherwise does not represent a final sale or transfer of title to such Obligor; (o) such Account does not comply in all material respects with all applicable legal requirements; (p) if the Accounts due from any Obligor exceed an amount equal to 20% of the aggregate of all Accounts at said time, an amount of such Accounts equal to such excess; (q) such Account is not owned solely by such Person free and clear of all Liens or other rights or claims of any other Person (except in favor of the Administrative Agent); (r) such Account is subject to any material restrictions on the transfer, assignability or sale thereof, enforceable against the assignee, except pursuant to any Loan Document; or (s) the Administrative Agent does not have a valid and perfected first priority security interest in such Account for the benefit of the Lenders or such Account does not otherwise conform in all material respects to the representations and warranties contained in this Agreement or any of the Security Documents. "ELIGIBLE INVENTORY": at any time, an amount equal to the aggregate value (determined in accordance with the immediately succeeding sentence) of all Inventory of (i) Cole Vision and its Subsidiaries, located at distribution centers and laboratories owned or operated by Cole Vision or its Subsidiaries, (ii) Pearle and its Subsidiaries, located at 11 stores owned or operated by Pearle or its Subsidiaries and distribution centers and laboratories owned or operated by Pearle or its Subsidiaries and (iii) Things Remembered and its Subsidiaries, located at stores owned or operated by Things Remembered or its Subsidiaries and distribution centers owned or operated by Things Remembered or its Subsidiaries, in each case that consists of inventory other than work in process, excluding all Inventory located at a distribution center received from a third-party customer in exchange for the initial stocking of Inventory of such third-party customer in any changeover or conversion. In determining the amount to be so included, the amount of such Inventory shall be valued at the lower of cost or market on a basis consistent with such Borrower's or such Subsidiary's current and historical accounting practice LESS reserves taken, if any, (i) on account of physical inventory adjustments, (ii) for warranty and price changes as recorded in such Borrower's or such Subsidiary's accounting records, (iii) for any goods returned or rejected by such Borrower's or such Subsidiary's customers as damaged or defective, scrap, obsolete or otherwise non-salable, return to vendor goods, miscellaneous non-perpetual inventory, cores, rental tools or supplies, (iv) for goods in transit to third parties that are not excluded pursuant to clause (a), (b), (c), (d) or (e) below, (v) for Liens referred to in clause (c)(i) below and (vi) for Liens referred to in clause (c)(ii) below as established by the Administrative Agent in its reasonable judgment. Unless otherwise approved in writing by the Administrative Agent, no Inventory shall be deemed Eligible Inventory of the Borrowers or its Subsidiaries if: (a) the Inventory is not owned solely by such Borrower or such Subsidiary or is leased or on consignment or such Borrower or such Subsidiary does not have good and valid title thereto; (b) the Inventory is not located at or in transit to property that is owned or leased by such Borrower or such Subsidiary; (c) the Inventory is not subject to a perfected Lien in favor of the Administrative Agent prior to all other Liens except for (i) Liens arising by operation of law with respect to which either a Landlord Consent has been obtained or the amount of Eligible Inventory has been reduced by the amount of the applicable Rent Reserve and (ii) with respect to Eligible Inventory located at or in transit to sites described in clause (b) above, for Liens for normal and customary warehousing and transportation charges (appropriate reserves for which have been reasonably established for borrowing base purposes by such Borrower or such Subsidiary); PROVIDED that in no event shall any Inventory which is subject to a Lien permitted by subsection 8.3(m) constitute Eligible Inventory; (d) the Inventory is not located in the United States; or (e) the Inventory does not conform in all material respects to the representations and warranties contained in this Agreement or any of the Security Documents. "ELIGIBLE PROPERTY": at any time, an amount equal to the aggregate book value of all tangible assets (other than Inventory) of (i) Cole Vision and its Subsidiaries, located at distribution centers, stores and laboratories owned or operated by Cole Vision or its 12 Subsidiaries, (ii) Pearle and its Subsidiaries, located at stores owned or operated by Pearle or its Subsidiaries and offices, distribution centers, laboratories and other facilities owned or operated by Pearle or its Subsidiaries and (iii) Things Remembered and its Subsidiaries, located at stores owned or operated by Things Remembered or its Subsidiaries and distribution centers owned or operated by Things Remembered or its Subsidiaries, in each case less the amount of any Indebtedness (other than Indebtedness under any Loan Document) secured by a Lien on such assets, PROVIDED that no amount shall be included in any calculation of Eligible Property with respect to an asset (i) which is subject to any material restrictions on the transfer, assignability or sale thereof, enforceable against the assignee (except pursuant to any Loan Document), (ii) upon which the Administrative Agent does not have a valid and perfected first priority security interest (subject only to (x) Liens of the type described in and permitted by Section 8.3(e), (y) Landlord's Liens arising by operation of law with respect to which either a Landlord Consent has been obtained or the amount of Eligible Property has been reduced by the amount of the applicable Rent Reserve and (z) other Liens arising by operation of law with respect to which the amount of Eligible Property has been reduced by the amount of the obligations secured by such Liens) for the benefit of the Lenders or (iii) which does not otherwise conform in all material respects to the representations and warranties contained in this Agreement or any of the Security Documents. "ENVIRONMENTAL COSTS": any and all costs or expenses (including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, fines, penalties, damages, settlement payments, judgments and awards), of whatever kind or nature, contingent or otherwise, arising out of, or in any way relating to, any violation of, noncompliance with or liability under any Environmental Laws or any orders, requirements, demands, or investigations of any person related to any Environmental Laws. Environmental Costs include any and all of the foregoing, without regard to whether they arise out of or are related to any past, pending or threatened proceeding of any kind. "ENVIRONMENTAL LAWS": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or other legally enforceable requirements (including, without limitation, common law) of any foreign government, the United States, or any state, local, municipal or other Governmental Authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health, or employee health and safety, as has been, is now, or may at any time hereafter be, in effect. "ENVIRONMENTAL PERMITS": any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any Environmental Law. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of 13 reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "EURODOLLAR BASE RATE": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined by the Administrative Agent to be the arithmetic mean of the offered rates for deposits in Dollars with a term comparable to such Interest Period that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined below) at approximately 11:00 A.M., London time, on the second full Business Day preceding the first day of such Interest Period; PROVIDED, HOWEVER, that if there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "Eurodollar Base Rate" shall mean, with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at which CIBC is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "TELERATE BRITISH BANKERS ASSOC. INTEREST SETTLEMENT RATES PAGE" shall mean the display designated as Page 3750 on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which Dollar deposits are offered by leading banks in the London interbank deposit market). "EURODOLLAR LOANS": Revolving Credit Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "EURODOLLAR RATE": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): EURODOLLAR BASE RATE ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "EVENT OF DEFAULT": any of the events specified in Section 9, PROVIDED that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "EXCHANGE ACT": the Securities Exchange Act of 1934, as amended. "EXISTING CREDIT AGREEMENT": as defined in the recitals hereto. "EXCLUDED FOREIGN SUBSIDIARY": any Foreign Subsidiary in respect of which either (a) the pledge of all of the Capital Stock of such Subsidiary as Collateral or (b) the 14 guaranteeing by such Subsidiary of the obligations and liabilities of any of the Loan Parties hereunder or under any other Loan Documents, would, in the good faith judgment of a Borrower, result in adverse tax consequences to a Borrower. "FEDERAL FUNDS RATE": for any particular date, an interest rate per annum equal to the interest rate (rounded upwards, if necessary, to the nearest 1/16th of 1%) offered in the interbank market to the Administrative Agent as the overnight Federal Funds Rate at or about 10:00 A.M. New York City time, on such day (or if such day is not a Business Day, for the next preceding Business Day). "FINANCING LEASE": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "FOREIGN SUBSIDIARY": any Subsidiary of the Borrower that is treated as a corporation for United States tax purposes and that is not a Domestic Subsidiary. "GAAP": generally accepted accounting principles in the United States set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statement by such other entity as may be in general use by significant segments of the U.S. accounting profession; PROVIDED, that, with respect to the calculation of the financial ratios and the terms used in the covenants contained in this Agreement and the definitions related thereto, "GAAP" means generally accepted accounting principles in effect in the United States on the dates of the financial statements referred to in subsection 5.1, it being understood that, upon any change in GAAP as at such dates that in the reasonable opinion of the Administrative Agent affects in any material respect the financial ratios and covenants contained in this Agreement, the Borrowers and the Administrative Agent, on behalf of the Lenders, will negotiate in good faith to adapt or conform any such financial ratios and covenants and the definitions related thereto to any such changes in GAAP to the extent necessary to maintain the original economic terms of such financial ratios and covenants as in effect under this Agreement on the date hereof, the Administrative Agent shall promptly notify the Lenders in writing of the negotiated changes to such financial ratios, covenants and definitions, and if, by the 30th day after the date such notice is given (i) the Majority Lenders shall not have objected in writing to such changes, such changes shall be deemed to be effective, and this Agreement shall be deemed to be amended accordingly, as of such 30th day, without further action on the part of any party hereto or (ii) the Majority Lenders shall have objected to such changes, then, until this Agreement shall be amended in accordance with the terms of Section 11.1 to reflect such changes as may be necessary to maintain the original economic terms of such financial ratios and covenants, the financial ratios and covenants immediately in effect prior to such amendment shall remain in effect. "GOVERNMENTAL AUTHORITY": any nation or government, any state or other political subdivision thereof and any entity (including, without limitation, any central bank) 15 exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. For purposes of subsections 4.9, 4.10 and 11.15, the term "Governmental Authority" shall be deemed to include, without limitation, the National Association of Insurance Commissioners. "GUARANTEE": as defined in the definition of "Guarantor." "GUARANTEE AND COLLATERAL AGREEMENT": the Amended and Restated Guarantee and Collateral Agreement to be executed and delivered by each Borrower and each Subsidiary (other than any Excluded Foreign Subsidiary or any other Subsidiary which, in accordance with subsection 7.10(e), is not required to execute and deliver such Agreement) in substantially the form attached hereto as Exhibit B-1, as the same may be amended, supplemented or otherwise modified from time to time. "GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "PRIMARY OBLIGATIONS") of any other third Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrowers in good faith. "GUARANTOR": any Person which is now or hereafter a party to (a) the Guarantee and Collateral Agreement or the CNC Guarantee or (b) any other guarantee (a "GUARANTEE") hereafter delivered to the Administrative Agent guaranteeing the obligations and liabilities of each of the Loan Parties hereunder or under any other Loan 16 Documents, including, without limitations, any guarantee delivered pursuant to subsection 7.10. "HMO SUBSIDIARY": any Subsidiary of a Borrower which, by reason of its engagement in the managed vision care business and the operation of subsection 7.10(e), is not a Subsidiary Guarantor. "INDEBTEDNESS" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable incurred in the ordinary course of such Person's business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all obligations of such Person under Financing Leases, (h) for purposes of subsection 8.2 and Section 9(e), all obligations of such Person in respect of interest rate protection agreements, interest rate futures, interest rate options, interest rate caps and any other interest rate, currency, commodity or other hedging arrangement, (i) all Guarantee Obligations of such Person with respect to Indebtedness of others, (j) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (k) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "INSOLVENCY": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "INSOLVENT": pertaining to a condition of Insolvency. "INTEREST EXPENSE": for any period and without duplication, with respect to CNG and its Subsidiaries on a Consolidated basis, (a) the aggregate amount of interest which would be set forth opposite the caption "interest expense" or any like caption on an income statement for CNG and its Subsidiaries on a Consolidated basis, determined in accordance with GAAP, for such period plus, to the extent not included in such interest, (i) imputed interest included in Financing Leases for such period, (ii) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing permitted by subsection 8.2 for such period; (iii) the net payments made in connection with Interest Rate Protection Agreements for such period, (iv) the interest portion of any deferred payment obligation for such period, (v) amortization of discount or premium, if any, for such period, (vi) all other non-cash interest expense 17 (other than interest amortized to cost of sales) for such period, (vii) all net capitalized interest for such period and (viii) all interest paid under any Guarantee Obligation, minus (b) net payments received in connection with Interest Rate Protection Agreements for such period, minus (c) amortization of deferred financing costs and expenses for such period. "INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of each fiscal quarter of CNG, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, and (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period. "INTEREST PERIOD": with respect to any Eurodollar Loan: (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the respective Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by such Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; PROVIDED that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period that would otherwise extend beyond the Revolving Credit Commitment Termination Date shall end on the Revolving Credit Commitment Termination Date; (3) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (4) the Borrowers shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Revolving Credit Loan. 18 "INTEREST RATE PROTECTION AGREEMENT": any interest rate protection agreement, interest rate future, interest rate option, interest rate cap or collar or other interest rate hedge arrangement, to or under which any Borrower or any of its Subsidiaries is a party or a beneficiary on the Closing Date or becomes a party or a beneficiary after the Closing Date. "INVENTORY": as defined in the Uniform Commercial Code as in effect in the State of New York; and, with respect to the Borrowers and their Subsidiaries, all such Inventory of such Borrower or such Subsidiary including, without limitation, all finished goods, wares and merchandise, finished or unfinished parts, components, assemblies held for sale to third party customers by such Borrower or such Subsidiary. "INVESTMENT": as defined in subsection 8.9. "ISP 98": the International Standby Practices, International Chamber of Commerce Publication No. 590, as the same may be amended from time to time. "ISSUING LENDER": CIBC or any of its affiliates. "LANDLORD CONSENT": a written agreement reasonably acceptable to the Administrative Agent, pursuant to which a Person shall waive or subordinate its rights and claims as landlord in any Inventory of the Borrowers or their Subsidiaries for unpaid rents, grant access to the Administrative Agent for the repossession and sale of such inventory and make other agreements relative thereto. "L/C FEE PAYMENT DATE": the last day of each fiscal quarter of CNG. "L/C OBLIGATIONS": at any date, the sum of (a) the aggregate amount then available to be drawn under all outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed by the Borrowers pursuant to subsection 3.5. "L/C PARTICIPANTS": the collective reference to all the Lenders other than the Issuing Lender. "L/C SUBLIMIT": $30,000,000. "LENDERS": as defined in the preamble hereto and including, without limitation, the Issuing Lender. "LETTERS OF CREDIT": as defined in subsection 3.1. "LETTER OF CREDIT APPLICATION": an application in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to issue a Letter of Credit. "LEVERAGE RATIO": as of the end of each fiscal quarter of CNG, with respect to CNG and its Subsidiaries on a Consolidated basis, the ratio of (a) Total Indebtedness on such date to (b) EBITDA for the twelve month period ending on such date. 19 "LIEN": any mortgage, pledge, hypothecation, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "LOAN DOCUMENTS": this Agreement, any Revolving Credit Notes, any Letter of Credit Applications, any Letters of Credit, the Security Documents and any Guarantees. "LOAN PARTIES": CNC, CNG, the Borrowers and each Subsidiary of a Borrower which is a party to a Loan Document, individually, a "LOAN PARTY". "MAJORITY LENDERS": (i) at such times as each Lender's Revolving Credit Commitment Percentage is less than 30%, Non-Defaulting Lenders the Revolving Credit Commitment Percentages of which aggregate more than 50% of the aggregate Revolving Credit Commitment Percentages of all Non-Defaulting Lenders and (ii) at all other times, Non-Defaulting Lenders the Revolving Credit Commitment Percentages of which aggregate more than 66-2/3% of the aggregate Revolving Credit Commitment Percentages of all Non-Defaulting Lenders. "MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of the Borrowers and their Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder. "MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos or asbestos-containing materials, pollutants, contaminants, radioactivity, and any other substances of any kind, whether or not any such substance is defined as hazardous or toxic under any Environmental Law, that is regulated pursuant to or could give rise to liability under any Environmental Law. "MOODY'S": as defined in the definition of "Cash Equivalents." "MORTGAGES": the mortgages and deeds of trust to be executed and delivered or previously executed and delivered by the Borrowers and certain Subsidiaries, in a form reasonably satisfactory to the Administrative Agent, as the same may be amended, supplemented or otherwise modified from time to time. "MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NET CASH PROCEEDS": with respect to any sale or other disposition of assets by CNG, any Borrower or any of their Subsidiaries or any Recovery Event, the net amount equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or 20 otherwise, but only as and when such cash is so received) MINUS the sum of (i) the reasonable fees, commissions and other out-of-pocket expenses incurred by CNG, such Borrower or such Subsidiary in connection therewith, (ii) federal, state and local taxes incurred in connection therewith, whether payable at such time or thereafter, (iii) in the case of any such sale or other disposition of assets subject to a Lien securing any Indebtedness (which Lien and Indebtedness are permitted by this Agreement), any amounts required to be repaid by CNG, such Borrower or such Subsidiary in respect of such Indebtedness (other than Indebtedness under this Agreement and any Revolving Credit Notes) in connection with such sale or other disposition and (iv) any amounts deposited in escrow or on deposit as collateral in respect of environmental or other liabilities not assumed by the purchaser in connection with a sale or other disposition of assets, but only so long as such amounts remain on deposit or in escrow. "NET INCOME": for any period, the aggregate of the net income of CNG and its Subsidiaries for such period on a Consolidated basis, determined in accordance with GAAP, for such period; PROVIDED, HOWEVER, that there shall be excluded from Net Income (a) the net income of a Person whose net income is not consolidated with the CNG's under GAAP (other than the amount of dividends and other distributions paid or made by such Person to CNG or any of its Subsidiaries during such period), (b) the net income of any Person for such period acquired in a pooling of interests transaction for any period prior to the date of such acquisition, (c) any net gain or loss for such period (net of the related tax effect thereof) resulting from any sale or other disposition of assets or any sale or other disposition of any Capital Stock of any Person by CNG or any of its Subsidiaries, in each case, other than in the ordinary course of business and permitted by subsection 8.6, (d) extraordinary gains and losses for such period (net of the related tax effect thereof), and (e) non-recurring gains and losses for such period (net of the related tax effect thereof); PROVIDED that there shall be added back to Net Income non-cash restructuring charges deducted in calculating Net Income for such period. "NON-DEFAULTING LENDER": each Lender other than a Defaulting Lender. "NON-EXCLUDED TAXES": as defined in subsection 4.11. "OBLIGOR": any purchaser of goods or services or other Person obligated to make payment to any Borrower or any Subsidiary in respect of a purchase of such goods or services. "ORIGINAL CLOSING DATE": the date on which the conditions precedent set forth in subsection 6.1 of the Existing Credit Agreement were satisfied. "PARTICIPANT": as defined in subsection 11.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "PEARLE": as defined in the preamble hereto. 21 "PEARLE VISIONCARE LINE OF Credit AGREEMENT": that certain Line of Credit Agreement, dated as of January 19, 2001, between Pearle and Pearle Visioncare, Inc., including any promissory notes issued thereunder, as amended, supplemented or otherwise modified from time to time. "PERMITTED HEDGING ARRANGEMENT": as defined in subsection 8.14. "PERMITTED HOLDERS": (i) Jeffrey A. Cole, (ii) any employee stock ownership plan or any "group" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) in which employees of CNC or its Subsidiaries beneficially own at least 25% of the capital stock of CNC owned by such group and (iii) any Person that is controlled by any one or more of the Persons set forth in (i) or (ii) above. "PERSON": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "PLAN": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which any Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "RECOVERY EVENT": any settlement or payment in respect of any property or insurance claim or any condemnation proceeding relating to any asset of CNG, any Borrower or any of their Subsidiaries. "REGISTER": as defined in subsection 11.6(d). "REGULATION U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "REIMBURSEMENT OBLIGATIONS": the obligation of the Borrowers to reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn under Letters of Credit. "RENT RESERVE": with respect to any store, distribution center or depot where any Inventory subject to Liens arising by operation of law is located, a reserve equal to three (3) months' rent at such store, distribution center or depot. "RENTAL EXPENSE": for any period, the excess, if any, of (i) the aggregate amount of fixed rentals payable by CNG, the Borrowers and their Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, with respect to leases (other than Financing Leases) of real and personal property over (ii) the aggregate amount of fixed rental sublease income received by CNG, the Borrowers and their Subsidiaries from subleases during such period with respect to such real and personal property. "REORGANIZATION": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. 22 "REPORTABLE EVENT": any of the events set forth in Section 4043 of ERISA, other than those events as to which the thirty day notice period is waived under subsections .21, .22, .24, .26, .27 or .28 of PBGC Reg.ss. 4043. "REQUIREMENT OF LAW": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "RESPONSIBLE OFFICER": the chief executive officer, the president, any vice president and the treasurer of CNG. "REVOLVING CREDIT COMMITMENT": as to any Lender, its obligation to make Revolving Credit Loans to, and/or issue or participate in Letters of Credit issued on behalf of, the Borrowers in an aggregate amount not to exceed at any one time outstanding the amount set forth under such Lender's name in Schedule I opposite the heading "Revolving Credit Commitment" or, in the case of any Lender that is an Assignee, the amount of the assigning Lender's Revolving Credit Commitment assigned to such Assignee pursuant to subsection 11.6 (in each case as such amount may be adjusted from time to time as provided herein). "REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender, the percentage representing a fraction the numerator of which is the Revolving Credit Commitment of such Lender (or, following the termination or expiration of the Revolving Credit Commitments, the sum of (x) the aggregate principal amount of such Lender's Revolving Credit Loans then outstanding PLUS (y) such Lender's Revolving Commitment Percentage of all L/C Obligations then outstanding), and the denominator of which is the aggregate Revolving Credit Commitments of all Lenders (or, following the termination or expiration of the Revolving Credit Commitments, the sum of (x) the aggregate principal amount of all Revolving Credit Loans then outstanding PLUS (y) the aggregate principal amount of all L/C Obligations then outstanding). "REVOLVING CREDIT COMMITMENT PERIOD": the period from and including the Original Closing Date to but not including the Revolving Credit Commitment Termination Date. "REVOLVING CREDIT COMMITMENT TERMINATION DATE": the earlier of (a) May 31, 2006 or, if such date is not a Business Day, the Business Day next preceding such date and (b) the date upon which the Revolving Credit Commitments shall have terminated pursuant hereto. "REVOLVING CREDIT LOANS": as defined in subsection 2.1. "REVOLVING CREDIT NOTE": as defined in subsection 2.2. "SECURITY DOCUMENTS": the collective reference to the Guarantee and Collateral Agreement, the CNG Guarantee and Cash Collateral Agreement, the Copyright, Patent 23 and Trademark Security Agreement, the Mortgages and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrowers hereunder or under any of the other Loan Documents or to secure any guarantee of any such obligations and liabilities, including, without limitation, any security document delivered pursuant to subsection 7.10. "SENIOR SUBORDINATED 1997 NOTES": the 8 5/8% Senior Subordinated Notes due 2007 issued by CNG pursuant to the Senior Subordinated 1997 Notes Indenture, as the same may be amended, supplemented or otherwise modified from time to time without violating Section 9(m). "SENIOR SUBORDINATED 1997 NOTES INDENTURE": the Indenture dated as of August 22, l997 between CNG and Wells Fargo Bank Minnesota, N.A., formerly Norwest Bank Minnesota, N.A., as trustee, pursuant to which the Senior Subordinated 1997 Notes have been issued, as the same may be amended, supplemented or otherwise modified from time to time without violating Section 9(m). "SENIOR SUBORDINATED 2002 NOTES": the senior subordinated notes due 2012 proposed to be issued by CNG pursuant to a Rule 144A offering during the second fiscal quarter of 2002 having substantially the same subordination provisions as the Senior Subordinated Notes and having other terms that, in the reasonable determination of the Administrative Agent, are not materially less favorable to the Lenders than those applicable to the Senior Subordinated Notes in accordance with the Senior Subordinated Notes Indenture (it being agreed that such notes will mature in 2012 and will bear interest at a rate per annum based upon market conditions current at the time of issuance), as the same may be amended, supplemented or otherwise modified from time to time without violating Section 9(m). "SENIOR SUBORDINATED 2002 NOTES INDENTURE": the indenture to be entered into between CNG and Wells Fargo Bank Minnesota, N.A., formerly Norwest Bank Minnesota, N.A., as trustee, pursuant to which the Senior Subordinated 2002 Notes will be issued, as the same may be amended, supplemented or otherwise modified from time to time without violating Section 9(m). "SENIOR SUBORDINATED NOTES": the 9.875% Senior Subordinated Notes due 2006 of CNG issued pursuant to the Senior Subordinated Notes Indenture, as the same may be amended, supplemented or otherwise modified from time to time without violating Section 9(m). "SENIOR SUBORDINATED NOTES INDENTURE": the Indenture dated as of November 15, 1996 between CNG and Wells Fargo Bank Minnesota, N.A., formerly Norwest Bank Minnesota, N.A., as trustee, as the same may be amended, supplemented or otherwise modified from time to time without violating Section 9(m). 24 "SIGNIFICANT SUBSIDIARY": any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Agreement. "SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "S&P": as defined in the definition of "Cash Equivalents." "SUBSIDIARY": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity ("VOTING STOCK") are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrowers. "SUBSIDIARY GUARANTOR": each Subsidiary of CNG other than (a) any Excluded Foreign Subsidiary and (b) any other Subsidiary which is not a "Guarantor" under the Guarantee and Collateral Agreement or any Guarantee. "TAX SHARING AGREEMENT": the Agreement for the Allocation of Federal Income Tax Liability and Benefits among Members of the CNC Holding Corporation Group dated as of August 23, 1985, as amended by an Agreement dated as of December 30, 1986 and as further amended, supplemented or otherwise modified from time to time subsequent to the date hereof in a manner not adverse to the interests of the Lenders or of CNG or any of its Subsidiaries. "THINGS REMEMBERED": as defined in the preamble hereto. "TOTAL INDEBTEDNESS": on any date, with respect to CNG and its Subsidiaries, all Indebtedness of CNG and its Subsidiaries on such date on a Consolidated basis (other than Indebtedness in respect of undrawn amounts under letters of credit which support obligations of CNG or any of its Subsidiaries which do not constitute Indebtedness). "TRANCHE": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Revolving Credit Loans shall originally have been made on the same day). "TRANSFEREE": as defined in subsection 11.6(f). "TYPE": as to any Revolving Credit Loan, its nature as an ABR Loan or a Eurodollar Loan. "WACHOVIA": Wachovia Bank, National Association. 25 "WHOLLY OWNED SUBSIDIARY": means any Subsidiary, all of the outstanding voting securities of which are owned, directly or indirectly, by a Borrower. 1.2. OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Revolving Credit Notes, any other Loan Documents or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Revolving Credit Notes, any other Loan Documents and any certificate or other document made or delivered pursuant hereto, accounting terms relating to CNG, the Borrowers and their Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. Fiscal years referred to in this Agreement are identified according to the calendar year in which they begin. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS 2.1. REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans (each a "REVOLVING CREDIT LOAN", collectively, "REVOLVING CREDIT LOANS") to the Borrowers, jointly and severally, from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Revolving Credit Commitment Percentage of the then outstanding L/C Obligations, does not exceed the amount of such Lender's Revolving Credit Commitment. Notwithstanding the foregoing, in no event shall any Revolving Credit Loans be made or Letters of Credit be issued pursuant to subsection 3.1 (i) if the aggregate amount of the Revolving Credit Loans to be made and Letters of Credit to be issued would, after giving effect to the use of proceeds, if any, thereof, exceed the then aggregate Available Revolving Credit Commitments or (ii) if, after giving effect to such Revolving Credit Loan or Letter of Credit, a Borrowing Base Deficiency would exist. During the Revolving Credit Commitment Period, the Borrowers may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof, PROVIDED, HOWEVER, that the Aggregate Outstanding Revolving Credit (other than in respect of the undrawn portion of any Letters of Credit) with respect to all Lenders at any time during any consecutive thirty day period during each fiscal year of the Borrowers (such thirty day period during each fiscal year to be selected by the Borrowers) may in no event exceed the Clean-Down Amount. (b) The Revolving Credit Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the Borrowers and notified to the 26 Administrative Agent in accordance with subsections 2.3 and 4.4, PROVIDED that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Revolving Credit Commitment Termination Date. 2.2. REVOLVING CREDIT NOTES. The Borrowers agree that, upon the request to the Administrative Agent by any Lender or in connection with any assignment pursuant to subsection 11.6, to evidence such Lender's Revolving Credit Loans each Borrower will execute and deliver to such Lender a promissory note substantially in the form of Exhibit A, with appropriate insertions as to payee, date and principal amount (each, as amended, supplemented, replaced or otherwise modified from time to time, a "REVOLVING CREDIT Note"), payable to the order of such Lender and in a principal amount equal to the lesser of (a) the amount set forth under such Lender's name in Schedule I opposite the heading "Revolving Credit Commitment" and (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by such Lender to such Borrower. Each Revolving Credit Note shall (x) be dated the Closing Date, (y) be stated to mature on the Revolving Credit Commitment Termination Date and (z) provide for the payment of interest in accordance with subsection 4.1. 2.3. PROCEDURE FOR REVOLVING CREDIT BORROWING. Any Borrower may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Business Day, PROVIDED that such Borrower shall give the Administrative Agent irrevocable notice, in substantially the form of Exhibit I (which notice must be received by the Administrative Agent prior to 11:00 A.M., New York City time, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially Eurodollar Loans or (b) on the requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective amount of such Type of Revolving Credit Loan and the respective length of the initial Interest Period therefor. Each borrowing under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of ABR Loans, $500,000 or a whole multiple of $100,000 in excess thereof (or, if the aggregate Available Revolving Credit Commitments then in effect are less than $500,000, such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof. Upon receipt of any such notice from such Borrower, the Administrative Agent shall promptly notify each such Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of such Borrower at the office of the Administrative Agent specified in subsection 11.2 prior to 1:00 P.M., New York City time, on the Borrowing Date requested by such Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to such Borrower by the Administrative Agent crediting the account of such Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. 2.4. COMMITMENT FEES. The Borrowers agree, jointly and severally, to pay to the Administrative Agent for the account of each Lender, a commitment fee for the period from and including the first day of the Revolving Credit Commitment Period to the Revolving Credit Commitment Termination Date, computed on the average daily amount of the Available Revolving Credit Commitment of such Lender during the period for which payment is made at 27 the rate per annum set forth under the heading "Commitment Fees" on Schedule II opposite the percentage which the average daily amount of the Aggregate Outstanding Revolving Credit of all Lenders constitutes of the aggregate Revolving Credit Commitments of all Lenders during such payment period, payable quarterly in arrears on the last day of each fiscal quarter of CNG and on the Revolving Credit Commitment Termination Date, commencing on the first of such days to occur after the Closing Date. 2.5. TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. (a) The Borrowers shall have the right, upon not less than three Business Days' notice to the Administrative Agent (which will promptly notify the Lenders thereof), to terminate the Revolving Credit Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments; PROVIDED that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the aggregate principal amount of the Revolving Credit Loans then outstanding when added to the sum of the then outstanding L/C Obligations, would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce permanently the Revolving Credit Commitments then in effect. (b) The Revolving Credit Commitments shall be automatically reduced in accordance with subsection 4.3(a). Any such reduction shall reduce permanently the Revolving Credit Commitments then in effect. 2.6. REPAYMENT OF REVOLVING CREDIT LOANS. (a) The Borrowers hereby unconditionally promise, jointly and severally, to pay to the Administrative Agent, for the account of each Lender, the then unpaid principal amount of each Revolving Credit Loan of such Lender made to each Borrower on the Revolving Credit Commitment Termination Date (or such earlier date on which the Revolving Credit Loans become due and payable pursuant to Section 9). The Borrowers hereby further agree, jointly and severally, to pay interest on the unpaid principal amount of the Revolving Credit Loans from time to time outstanding from the date of the making of the Revolving Credit Loans until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.1. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrowers to such Lender resulting from each Revolving Credit Loan of such Lender from time to time, including, without limitation, the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain the Register pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Revolving Credit Loan made hereunder, the Type thereof and each Interest Period, if any, applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrowers and each Lender's share thereof. 28 (d) The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 2.6(c) shall, to the extent permitted by applicable law, be PRIMA FACIE evidence of the existence and amounts of the obligations of the Borrowers therein recorded; PROVIDED, HOWEVER, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrowers to repay, jointly and severally (with applicable interest), the Revolving Credit Loans made to any Borrower by such Lender in accordance with the terms of this Agreement. SECTION 3. LETTERS OF CREDIT 3.1. L/C COMMITMENT. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Lenders set forth in subsection 3.4(a), agrees to issue standby letters of credit ("LETTERS OF CREDIT") for the account of any Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Sublimit (ii) the Available Revolving Credit Commitment of all Lenders would be less than zero or (iii) a Borrowing Base Deficiency would exist. (b) Each Letter of Credit shall (i) be denominated in Dollars, (ii) be a standby letter of credit issued to support obligations of such Borrower or any of its Subsidiaries, contingent or otherwise, to finance the working capital and business needs of such Borrower or any of its Subsidiaries in the ordinary course of business and (iii) expire no later than the earlier of (x) the date that is 12 months after the date of its issuance and (y) the fifth Business Day prior to the Revolving Credit Commitment Termination Date, PROVIDED that any Letter of Credit with an expiration date of 12 months after the date of its issuance may provide for the renewal thereof for additional 12 month periods, but in no event shall the expiration date as extended be later than the fifth Business Day prior to the Revolving Credit Termination Date. (c) Each Letter of Credit shall be subject to ISP 98 and, to the extent not inconsistent therewith, the laws of the State of New York. (d) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 3.2. PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. A Borrower may request that the Issuing Lender issue a Letter of Credit at any time prior to the fifth Business Day prior to the Revolving Credit Commitment Termination Date by delivering to the Issuing Lender at its address for notices specified herein a Letter of Credit Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Letter of Credit Application, the Issuing Lender will process such Letter of Credit Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Letter of Credit Application 29 therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and such Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to such Borrower promptly following the issuance thereof. 3.3. FEES, COMMISSIONS AND OTHER CHARGES. (a) The Borrowers shall pay, jointly and severally, to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit fee with respect to each Letter of Credit, computed for the period from and including the date of issuance of such Letter of Credit to the expiration date, or earlier cancellation, of such Letter of Credit (the "L/C PERIOD") at a rate per annum equal to the Applicable Margin then in effect for Eurodollar Loans calculated on the basis of the actual number of days elapsed over a 360-day year on the aggregate face amount of Letters of Credit outstanding, payable in arrears on each L/C Fee Payment Date and on the Revolving Credit Commitment Termination Date. Such fee shall be payable to the Administrative Agent to be shared ratably among the Lenders in accordance with their respective Revolving Credit Commitment Percentages. In addition, the Borrowers shall pay, jointly and severally, to the Issuing Lender, for its own account a fee equal to 0.25% per annum of the aggregate face amount of outstanding Letters of Credit, computed for the L/C Period, payable quarterly in arrears on each L/C Fee Payment Date and on the Revolving Credit Commitment Termination Date and calculated on the basis of the actual number of days elapsed over a 360-day year. (b) In addition to the foregoing fees and commissions, the Borrowers shall pay or reimburse, jointly and severally, the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.4. L/C PARTICIPATIONS. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage from time to time in effect in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrowers in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's then Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed; provided that, if such demand is made prior to 12:00 Noon, New York City time, on a Business Day, such L/C Participant shall make such payment to the Issuing Lender prior to the end of such Business Day and otherwise such L/C Participant shall make such payment on the next succeeding Business Day. 30 (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to paragraph 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to paragraph 3.4(a) is not in fact made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from a Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will, if such payment is received prior to 12:00 Noon, New York City time, on a Business Day, distribute to such L/C Participant its pro rata share thereof prior to the end of such Business Day and otherwise the Issuing Lender will distribute such payment on the next succeeding Business Day; PROVIDED, HOWEVER, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 3.5. REIMBURSEMENT OBLIGATION OF THE BORROWERS. (a) The Borrowers agree to reimburse, jointly and severally, the Issuing Lender on the same Business Day on which a draft is presented under any Letter of Credit and paid by the Issuing Lender, provided that the Issuing Lender provides notice to the Borrowers prior to 12:00 Noon, New York City time, on such Business Day and otherwise the Borrowers will reimburse the Issuing Lender on the next succeeding Business Day; provided, further, that the failure to provide such notice shall not affect the Borrowers' absolute and unconditional obligation to reimburse the Issuing Lender for any draft paid under any Letter of Credit. The Issuing Lender shall provide notice to the Borrowers on such Business Day as a draft is presented and paid by the Issuing Lender indicating the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. (b) Interest shall be payable on any and all amounts remaining unpaid by the Borrowers under this subsection from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate which would be payable on any outstanding Revolving Credit Loans that are ABR Loans which were then overdue. 31 (c) Each drawing under any Letter of Credit shall constitute a request by the Borrowers to the Administrative Agent for a borrowing pursuant to subsection 2.3 of ABR Loans in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing. 3.6. OBLIGATIONS ABSOLUTE. (a) The Borrowers' obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrowers may have or have had against the Issuing Lender, any L/C Participant or any beneficiary of a Letter of Credit. (b) The Borrowers also agree with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrowers' Reimbursement Obligations under subsection 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of any Borrower against any beneficiary of such Letter of Credit or any such transferee. (c) Neither the Issuing Lender nor any L/C Participant shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. (d) The Borrowers agree that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrowers and shall not result in any liability of the Issuing Lender or any L/C Participant to any Borrower. 3.7. LETTER OF CREDIT PAYMENTS. If any draft shall be presented for payment under any Letter of Credit, the responsibility of the Issuing Lender to the Borrowers in connection with such draft shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. 3.8. APPLICATION. To the extent that any provision of any Letter of Credit Application related to any Letter of Credit is inconsistent with the provisions of this Agreement or any other Loan Document, the provisions of this Agreement or such Loan Document shall apply. 32 SECTION 4. GENERAL PROVISIONS 4.1. INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each ABR Loan shall bear interest at a rate per annum equal to the CIBC Alternate Base Rate plus the Applicable Margin. (c) If all or a portion of (i) any principal of any Revolving Credit Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Revolving Credit Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, PROVIDED that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 4.2. OPTIONAL PREPAYMENTS. Any Borrower may at any time and from time to time prepay the Revolving Credit Loans made to it in whole or in part, without premium or penalty, on any Business Day, PROVIDED that (i) such Borrower shall have given (x) at least three Business Days' irrevocable notice to the Administrative Agent (in the case of Eurodollar Loans) or (y) same-day irrevocable notice to the Administrative Agent (in the case of ABR Loans), (ii) such notice specifies the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, in each case if a combination thereof, the principal amount allocable to each and (iii) each prepayment is in a minimum principal amount of $100,000 and a multiple of $100,000 in excess thereof. Upon the receipt of any such notice the Administrative Agent shall promptly notify each of the Lenders thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 4.12. 4.3. MANDATORY PREPAYMENTS AND REDUCTION OF REVOLVING CREDIT COMMITMENTS. (a) If, subsequent to the Closing Date, CNG, any Borrower or any of their Subsidiaries shall receive Net Cash Proceeds from any sale or other disposition of assets (other than the sale of inventory in the ordinary course of business and sales or other dispositions of assets permitted by subsections 8.6(c), (d) or (e)) or from any Recovery Event, then 100% of such Net Cash Proceeds shall on the first Business Day after receipt thereof be applied toward the permanent reduction of the Revolving Credit Commitments; PROVIDED that the first $10,000,000 of such Net Cash Proceeds received after the Closing Date by CNG, the Borrowers and their Subsidiaries, in the aggregate, shall not be required to be applied to the permanent reduction of the Revolving Credit Commitments hereunder unless such Net Cash Proceeds 33 would otherwise be required to be applied to repurchase or redeem the Senior Subordinated 1997 Notes or the Senior Subordinated 2002 Notes; and PROVIDED, FURTHER, the Borrowers and their Subsidiaries may use or commit to use any or all of such Net Cash Proceeds to acquire fixed or capital assets or, in the case of any Recovery Event, to rebuild or replace the property lost or condemned within 180 days of receipt of such Net Cash Proceeds and any such Net Cash Proceeds so used within 180 days of receipt or within 180 days of being committed to be so used shall not be required to be applied to the permanent reduction of the Revolving Credit Commitments hereunder, but any such Net Cash Proceeds not so used shall be applied toward the permanent reduction of the Revolving Credit Commitments on the earlier of (x) the later of (I) 180th day after receipt of such Net Cash Proceeds and (II) the 180th day after such Net Cash Proceeds were committed to be used, as the case may be, and (y) the date on which the Borrowers have reasonably determined that such Net Cash Proceeds shall not be so used. (b) If, at any time during the Revolving Credit Commitment Period, the Aggregate Outstanding Revolving Credit with respect to all Lenders exceeds the aggregate Revolving Credit Commitments then in effect, the Borrowers shall, without notice or demand, immediately repay the Revolving Credit Loans in an aggregate principal amount equal to such excess, together with interest accrued to the date of such payment or prepayment and any amounts payable under subsection 4.12. To the extent that after giving effect to any prepayment of the Revolving Credit Loans required by the preceding sentence, the Aggregate Outstanding Revolving Credit with respect to all Lenders exceeds the aggregate Revolving Credit Commitments then in effect, the Borrowers shall, without notice or demand, immediately cash collateralize the then outstanding L/C Obligations in an amount equal to such excess upon terms reasonably satisfactory to the Administrative Agent. On the Business Day next succeeding the date on which a payment has caused the Aggregate Outstanding Revolving Credit with respect to all Lenders to be equal to or less than the Revolving Credit Commitments then in effect, the Administrative Agent shall return to the Borrowers the cash used to cash collateralize the then outstanding L/C Obligations pursuant to the preceding sentence. (c) If, at any time during the Revolving Credit Commitment Period, the Aggregate Outstanding Revolving Credit (other than in respect of the undrawn portion of any Letters of Credit) with respect to all Lenders is not less than the Clean-Down Amount for at least a consecutive thirty day period during each fiscal year of the Borrowers, the Borrowers shall, without notice or demand, immediately repay the Revolving Credit Loans in an aggregate principal amount equal to such excess, together with interest accrued to the date of such payment or prepayment and any amounts payable under subsection 4.12, and any borrowings of Revolving Credit Loans during such thirty day period shall be subject to the proviso to subsection 2.1(a). (d) If, at any time during the Revolving Credit Commitment Period, a Borrowing Base Deficiency shall exist, the Borrowers shall, without notice or demand, immediately prepay the Revolving Credit Loans in an aggregate principal amount equal to such Borrowing Base Deficiency, together with interest accrued to the date of such payment or prepayment and any amounts payable under subsection 4.12. To the extent that after giving effect to any prepayment of the Revolving Credit Loans required by the preceding sentence, a Borrowing Base Deficiency shall continue to exist, the Borrowers shall, without notice or demand, immediately cash collateralize the then outstanding L/C Obligations in an amount equal to such Borrowing Base 34 Deficiency upon terms reasonably satisfactory to the Administrative Agent. On the Business Day next succeeding the date on which a payment has cured such Borrowing Base Deficiency, the Administrative Agent shall return to the Borrowers the cash used to cash collateralize the then outstanding L/C Obligations pursuant to the preceding sentence. 4.4. CONVERSION AND CONTINUATION OPTIONS. (a) The Borrowers may elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election, in substantially the form of Exhibit J, PROVIDED that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrowers may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR Loans may be converted as provided herein, PROVIDED that (i) unless the Majority Lenders otherwise consent, no Revolving Credit Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and (ii) no Revolving Credit Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Revolving Credit Commitment Termination Date. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the respective Borrower giving notice to the Administrative Agent, in substantially the form of Exhibit J, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Revolving Credit Loans, PROVIDED that no Eurodollar Loan may be continued as such (i) unless the Majority Lenders otherwise consent, when any Event of Default has occurred and is continuing or (ii) after the date that is one month prior to the Revolving Credit Commitment Termination Date and PROVIDED, FURTHER, that if such Borrower shall fail to give such notice or if such continuation is not permitted such Revolving Credit Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. 4.5. MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All borrowings, conversions and continuations of Revolving Credit Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Revolving Credit Loans comprising each Tranche shall be equal to $1,000,000 or a whole multiple of $500,000 in excess thereof. In no event shall there be more than 15 Tranches outstanding at any time. 4.6. COMPUTATION OF INTEREST AND FEES. (a) Interest (other than interest based on the CIBC Prime Rate) on all Revolving Credit Loans and commitment fees payable pursuant hereto shall be calculated on the basis of a year of 360 days for the actual days elapsed; interest based on the CIBC Prime Rate shall be calculated on the basis of a 365-(or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrowers and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on the Revolving Credit Loans resulting from a change in the CIBC Alternate Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of 35 business on the day on which such change shall become effective, PROVIDED that such change becomes effective prior to 5:00 P.M., New York City time, on such day. The Administrative Agent shall as soon as practicable notify the Borrowers and each Lender of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrowers and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrowers, deliver to the Borrowers a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 4.1. 4.7. INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrowers) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Majority Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or any affiliate of any such Lender from which such Lender customarily obtains funds) (as conclusively certified by such Lenders) of making or maintaining their affected Revolving Credit Loans during such Interest Period, then the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrowers and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any ABR Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrowers have the right to convert ABR Loans to Eurodollar Loans. 4.8. PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing of Revolving Credit Loans by any Borrower from the Lenders hereunder shall be made, each payment by any Borrower on account of any commitment fee in respect of the Revolving Credit Commitments hereunder shall be allocated by the Administrative Agent, and any reduction of the Revolving Credit Commitments of the Lenders shall be allocated by the Administrative Agent, PRO RATA according to the Revolving Credit Commitment Percentages of the Lenders. Each payment (including each prepayment) by any Borrower on account of principal of and interest on any Revolving Credit Loan shall be allocated by the Administrative Agent PRO RATA according to the respective outstanding principal amounts of such Revolving Credit Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrowers hereunder and under any Revolving Credit Notes, whether on account of principal, interest, fees, Reimbursement Obligations or otherwise, shall be made without set-off or counterclaim and shall be made prior to 2:30 p.m., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders holding the relevant Revolving Credit Loans or the L/C Participants, as the case may be, at the Administrative Agent's office specified in subsection 11.2, in Dollars and in immediately available funds. Payments received by the Administrative Agent after such time shall be deemed to have been received on the next 36 Business Day. If any payment hereunder (other than payments on Eurodollar Loans) becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its Revolving Credit Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrowers a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor and the Administrative Agent shall have advanced such amount to the Borrowers, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Rate for the period until such Lender makes such amount immediately available to the Administrative Agent, PROVIDED that if such Lender's Revolving Credit Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from the Borrowers. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. 4.9. ILLEGALITY. Notwithstanding any other provision herein, if the adoption after the date of this Agreement of or any change after the date of this Agreement in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender (or any affiliate of such Lender from which such Lender customarily obtains funds) to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Revolving Credit Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Revolving Credit Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrowers shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 4.12. 4.10. REQUIREMENTS OF LAW. (a) If the adoption after the date of this Agreement of or any change after the date of this Agreement in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive 37 (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Letter of Credit Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 4.11 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender (or any affiliate of such Lender from which such Lender customarily obtains funds) which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender (or such affiliate) any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrowers shall promptly upon demand pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable. (b) If any Lender shall have determined that the adoption after the date of this Agreement of or any change after the date of this Agreement in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time upon demand, the Borrowers shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, such Lender shall promptly notify the Borrowers (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection, and the calculation thereof, submitted by such Lender to the Borrowers (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the 38 termination of this Agreement and the payment of the Revolving Credit Loans and all other amounts payable hereunder. 4.11. TAXES. (a) All payments made by the Borrowers under this Agreement, any Revolving Credit Notes, any Letters of Credit or any Letter of Credit Applications shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Revolving Credit Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Revolving Credit Note, any Letters of Credit or any Letter of Credit Applications, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, PROVIDED, HOWEVER, that the Borrowers shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are payable by any Borrower, as promptly as possible thereafter such Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by such Borrower showing payment thereof or, if an official receipt cannot be obtained with commercially reasonable effort, other evidence of payment reasonably acceptable to the Administrative Agent or such Lender. If any Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence after receiving appropriate notification of such tax liability from the affected Lender(s), the Borrowers shall indemnify, jointly and severally, the Administrative Agent and the Lenders for any incremental Non-Excluded Taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Revolving Credit Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (X) except as otherwise provided in clause (Y) below, (i) deliver to the Borrowers and the Administrative Agent (on or before the date of any payment by the Borrowers) two duly completed copies of 39 Internal Revenue Service Form W-8BEN, W-8ECI, other applicable form, or successor applicable form, as the case may be; (ii) deliver to the Borrowers and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrowers; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrowers or the Administrative Agent; or (Y) in the case of any such Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the Borrowers (for the benefit of the Borrowers and the Administrative Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (ii) agree to furnish to the Borrowers on or before the date of any payment by the Borrowers, with a copy to the Administrative Agent, (A) a certificate substantially in the form of Exhibit E (any such certificate a "U.S. TAX COMPLIANCE CERTIFICATE") and (B) two accurate and complete original signed copies of Internal Revenue Service Form W-8 BEN, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Code with respect to payments to be made under this Agreement and any Revolving Credit Notes (and to deliver to the Borrowers and the Administrative Agent two further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrowers or the Administrative Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Borrowers, to provide to the Borrowers (for the benefit of the Borrowers and the Administrative Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Agreement and any Revolving Credit Notes, PROVIDED that in determining the reasonableness of a request under this clause (iii) such Lender shall be entitled to consider the cost (to the extent unreimbursed by the Borrowers) which would be imposed on such Lender of complying with such request; unless in any such case any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrowers and the Administrative Agent. Each non-United States Person that shall become a Lender or a Participant pursuant to subsection 11.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection, PROVIDED that in the case of a Participant the obligations of such Participant pursuant to this paragraph (b) shall be determined as if such Participant were a Lender except that such Participant shall furnish all such required forms, 40 certifications and statements to the Lender from which the related participation shall have been purchased. 4.12. INDEMNITY. The Borrowers agree to indemnify, jointly and severally, each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by any Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after such Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by any Borrower in making any prepayment of Eurodollar Loans after such Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Revolving Credit Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Revolving Credit Loans and all other amounts payable hereunder. 4.13. CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS. (a) Each Lender agrees that if it makes any demand for payment under subsection 4.10 or 4.11(a), or if any adoption or change of the type described in subsection 4.9 shall occur with respect to it, it shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Borrowers to make payments under subsection 4.10 or 4.11(a), or would eliminate or reduce the effect of any adoption or change described in subsection 4.9. (b) If at any time any Lender (i) makes any demand for payment under subsection 4.10 or 4.11(a) as a result of any condition described in any such subsection, (ii) is subject to any adoption or change of the type described in Section 4.9, or (iii) becomes a Defaulting Lender, then the Borrowers may, if such condition continues to exist after such Lender shall have used reasonable efforts pursuant to paragraph (a) of this subsection 4.13 (in the circumstances described in the preceding clause (i)) or such Lender continues to be a Defaulting Lender (in the circumstances described in the preceding clause (ii)) and on ten Business Days' prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall) assign pursuant to subsection 11.6 (c) all of its rights and obligations under this Agreement to another Lender or other bank or financial institution selected by the Borrowers and acceptable to the Administrative Agent for a purchase price equal to the outstanding principal amount of all Revolving Credit Loans and all Reimbursement Obligations, accrued interest, fees and other amounts owing to such Lender; PROVIDED that (i) the Borrowers shall have no right to replace the Administrative Agent, (ii) neither the Administrative Agent nor any Lender shall have any obligation to the Borrowers to find a replacement Lender or other 41 bank or financial institution, (iii) such replacement must take place no later than 180 days after such Lender shall have made any such demand for payment or shall have become a Defaulting Lender, as the case may be, (iv) in no event shall any Lender hereby replaced be required to pay or surrender to such replacement Lender or other bank or financial institution any of the fees received by such Lender pursuant to this Agreement, (v) the Borrowers shall pay such amounts demanded under subsection 4.10 or 4.11(a) to such Lender, together with any amounts as may be required pursuant to subsection 4.12, prior to such Lender being replaced and the payment of such amounts shall be a condition to the replacement of such Lender and (vi) such Lender shall not be required to pay any fees required by subsection 11.6(e) in connection with such replacement. SECTION 5. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Revolving Credit Loans and issue or participate in the Letters of Credit, each Borrower hereby represents and warrants, on the Closing Date and on any date thereafter on which any Revolving Credit Loan or any other extension of credit is requested to be made by any Lender or on which any Letter of Credit is requested to be issued by the Issuing Lender, to the Administrative Agent and each Lender that: 5.1. FINANCIAL CONDITION. The Consolidated balance sheets of CNG and its Subsidiaries as of January 29, 2000, February 3, 2001 and February 2, 2002 and the related Consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by Arthur Andersen LLP, copies of which have heretofore been furnished to each Lender, present fairly the Consolidated financial condition of CNG and its Subsidiaries as at such dates, and the Consolidated results of their operations and their Consolidated cash flows for the fiscal years then ended. The unaudited Consolidated balance sheet of CNG and its Subsidiaries as at March 30, 2002, the related unaudited Consolidated income statement for the one-month period ended on such date and the related unaudited Consolidated statement of cash flows for the portion of the fiscal year through such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, present fairly the Consolidated financial condition of CNG and its Subsidiaries as at such date, and the Consolidated results of their operations and their Consolidated cash flows for the respective periods covered by such statements then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither CNG nor any of its Subsidiaries had, at February 2, 2002, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or other material agreement or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto or in Schedule 5.1. During the period from February 2, 2002 to and including the Closing Date there has been no sale, transfer or other disposition by CNG or any of its Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any capital stock of any other Person) material in relation to the Consolidated financial condition of CNG and its Subsidiaries at February 2, 2002. 42 5.2. NO CHANGE; SOLVENCY. Since February 2, 2002 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. As of the Closing Date, after giving effect to the transactions contemplated by the Loan Documents, the Borrowers and their Subsidiaries are solvent, on a Consolidated basis and on an individual basis. 5.3. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Borrowers and the other Loan Parties (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or other necessary power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified to do business and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except for jurisdictions in which the failure to so qualify, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.4. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of the Borrowers and the other Loan Parties has the corporate or other necessary power and authority, and the legal right, to execute, deliver and perform the Loan Documents to which it is a party and, in the case of each Borrower, to borrow hereunder and each of the Borrowers and the other Loan Parties has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and any Revolving Credit Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required to be received, made, given or completed by any of the Loan Parties in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which any Borrower or any of the other Loan Parties is a party other than filings and recordings to perfect the security interest of the Lenders created by the Security Documents and other than those set forth on Schedule 5.4. All of such consents, authorizations, filings, notices and other acts set forth on Schedule 5.4 have been heretofore received, made, given or completed except for such consents, authorizations, filings, notices and other acts that a Borrower's or other Loan Party's failure to receive, make, give or complete could not reasonably be expected to have a Material Adverse Effect. This Agreement has been duly executed and delivered by each Borrower, and each of the other Loan Documents to which each Borrower or any of the other Loan Parties is a party has been duly executed and delivered by such Borrower or such other Loan Party. This Agreement constitutes a legal, valid and binding obligation of each Borrower, and each other Loan Document to which each Borrower or any of the other Loan Parties is a party constitutes a legal, valid and binding obligation of such Borrower or such other Loan Party, enforceable against such Borrower or such other Loan Party in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 43 5.5. NO LEGAL BAR. The execution, delivery and performance of the Loan Documents to which any Borrower or any of the other Loan Parties is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of any Borrower or of any of the other Loan Parties and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation (other than the Loan Documents). Schedule 5.5 constitutes a complete list as of the date hereof of all material Contractual Obligations to which any Loan Party is a party and all orders and decrees of courts which are applicable to or binding on any Loan Party or to which any Loan Party or any of its property is subject. 5.6. NO MATERIAL LITIGATION. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of any Borrower, threatened by or against any Borrower or any of the other Loan Parties or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby or (b) which could reasonably be expected to have a Material Adverse Effect. 5.7. NO DEFAULT. No Borrower nor any of the other Loan Parties is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 5.8. OWNERSHIP OF PROPERTY; LIENS. Each of the Borrowers and the other Loan Parties has good record and marketable title in fee simple to, or a valid leasehold interest in, all its material real property, and good title to, or a valid leasehold interest in, all its other material property, and none of such property is subject to any Lien except as permitted by subsection 8.3. Except as set forth on Schedule 5.8, the properties to be encumbered by the Mortgages pursuant to subsection 7.10(a) constitute all of the material real properties owned in fee by the Borrowers and the other Loan Parties. 5.9. INTELLECTUAL PROPERTY. Each Borrower and each of the other Loan Parties owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "INTELLECTUAL PROPERTY"). No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, except for such claims which, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, nor does any Borrower know of any valid basis for any such claim. The use of such Intellectual Property by each Borrower and the other Loan Parties does not infringe on the rights of any Person, except for such infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 5.10. NO BURDENSOME RESTRICTIONS. No Requirement of Law or Contractual Obligation of any Borrower or any of the other Loan Parties could reasonably be expected to have a Material Adverse Effect. 44 5.11. TAXES. Each of the Borrowers and the other Loan Parties has filed or caused to be filed all United States federal income tax returns and all other material tax returns which, to the knowledge of the Borrowers, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any taxes, fees or other charges (i) with respect to which the failure to pay, in the aggregate, could not reasonably be expected to have a Material Adverse Effect or (ii) the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Borrower or any of the other Loan Parties, as the case may be); no tax Lien has been filed, and, to the knowledge of any Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 5.12. FEDERAL RESERVE REGULATIONS. No part of the proceeds of any Revolving Credit Loans or other extensions of credit hereunder have been or will be used for any purpose which violates the provisions of the Regulations of the Board of Governors of the Federal Reserve System, including, without limitation, Regulation U thereunder. If requested by any Lender or the Administrative Agent, each Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of Form FR G-3 or Form FR U-1 referred to in said Regulation U. 5.13. ERISA. Except as disclosed on Schedule 5.13, neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of an insufficiently funded Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five year period. The present value of all accrued benefits under all Single Employer Plans taken as a whole does not exceed the value of the assets of such Single Employer Plans by more than $75,000,000. Neither any Borrower nor any Commonly Controlled Entity has incurred or is expected to incur any liability for a complete or partial withdrawal from any Multiemployer Plan, and neither any Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA which could reasonably be expected to have a Material Adverse Effect if such Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. As of the Closing Date, and to the knowledge of any Borrower on any Borrowing Date thereafter, no such Multiemployer Plan is in Reorganization or Insolvent. 5.14. COLLATERAL. The provisions of each of the Security Documents constitute in favor of the Administrative Agent for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in all right, title, and interest of each Borrower or any of the other Loan Parties which is a party to such Security Document, as the case may be, in the Collateral described in such Security Document. As of the Closing Date, all Equipment and Inventory (as each of such terms is defined in the Guarantee and Collateral Agreement) of the Borrowers and each of its Subsidiaries will be kept at, or will be in transit to, the locations listed on Schedule 5.14, and, financing statements having been filed in the offices in the jurisdictions listed in 45 Schedule 3 to the Guarantee and Collateral Agreement, appropriate filings having been made in the U.S. Patent and Trademark Office and the U.S. Copyright Office, and such other actions as are described in each of the Security Documents having been taken in accordance with the Security Documents, the security interest created by each of the Security Documents constitutes a perfected security interest in all right, title and interest of each Borrower or such other Loan Parties, as the case may be, in the Collateral described therein, and except for Liens existing on the Closing Date which are permitted by subsection 8.3 and whose priority cannot be superseded by the provisions hereof or of any Security Document and the filings hereunder or thereunder, a perfected first lien on, and security interest in, all right, title and interest of such Borrower or such other Loan Parties, as the case may be, in the Collateral described in each Security Document. 5.15. INVESTMENT COMPANY ACT; OTHER REGULATIONS. No Borrower is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Borrower is subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 5.16. SUBSIDIARIES AND JOINT VENTURES. Schedule 5.16 hereto sets forth all of the Subsidiaries of each Borrower, and all of the joint ventures in which each Borrower or any of its Subsidiaries has an interest, at the Closing Date, the jurisdiction of their incorporation and the direct or indirect ownership interest of each Borrower therein. 5.17. PURPOSE OF REVOLVING CREDIT LOANS. The proceeds of the Revolving Credit Loans shall be used for the general corporate purposes of the Borrowers and their Subsidiaries in the ordinary course of business. 5.18. ENVIRONMENTAL MATTERS. Other than exceptions to any of the following that would not, individually or in the aggregate, reasonably be expected to give rise to a Material Adverse Effect: (i) The Borrowers and the other Loan Parties: (A) are, and within the period of all applicable statutes of limitation have been, in compliance with all applicable Environmental Laws; (B) hold all Environmental Permits (each of which is in full force and effect) required for any of their current operations or for any property owned, leased, or otherwise operated by any of them and have no reason to believe that they will not be able to timely obtain without material expense all such Environmental Permits required for planned operations; (C) are, and within the period of all applicable statutes of limitation have been, in compliance with all of their Environmental Permits; and (D) have no reason to believe that: any of their Environmental Permits will not be, or will entail material expense to be, timely renewed or complied with; any additional Environmental Permits that may be required of any of them will not be, or will entail material expense to be, timely granted or complied with; or that compliance with any Environmental Law that is applicable to any of them will not be, or will entail material expense to be, timely attained and maintained. (ii) Materials of Environmental Concern have not been generated, transported, disposed of, emitted, discharged, or otherwise released or threatened to be released, to or at any 46 real property presently or formerly owned, leased or operated by any Borrower or any of the other Loan Parties or, to the best knowledge of any Borrower, at any other location, which could reasonably be expected to (A) give rise to liability of any Borrower or any of the other Loan Parties under any applicable Environmental Law, or (B) interfere with any Borrower's or any other Loan Party's planned or continued operations, or (C) impair the fair saleable value of any real property owned or leased by any Borrower or any other Loan Parties. (iii) There is no judicial, administrative, or arbitral proceeding (including any notice of violation or alleged violation) under any Environmental Law to which any Borrower or any of the other Loan Parties is named as a party that is pending or, to the knowledge of any Borrower, threatened. (iv) No Borrower nor any of the other Loan Parties has received any written request for information, or been notified that it is a potentially responsible party, under the federal Comprehensive Environmental Response, Compensation, and Liability Act or any similar Environmental Law, or received any other written request for information with respect to any actual or potential liability for, or violation caused by any, Materials of Environmental Concern. (v) No Borrower nor any of the other Loan Parties has entered into or agreed to any consent decree, order, or settlement or other agreement, nor is subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum, relating to compliance with or liability under any Environmental Law, as to which any obligation has not been fully and finally resolved. (vi) No Borrower nor any of its Subsidiaries has assumed or retained, by contract or, to the best knowledge of any Borrower, by operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any applicable Environmental Law or with respect to any Material of Environmental Concern. 5.19. REGULATION H. Except as otherwise disclosed in writing to the Administrative Agent, no Mortgage to be delivered pursuant to subsection 7.10(a) encumbers improved real property which is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968. 5.20. NO MATERIAL MISSTATEMENTS. The written information, reports, financial statements, exhibits and schedules furnished by or on behalf of the Borrowers and each other Loan Party to the Administrative Agent and the Lenders in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto, taken as a whole, do not contain, and will not contain as of the Closing Date, any material misstatement of fact and do not, taken as a whole, omit, and will not, taken as a whole, omit as of the Closing Date, to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading. It is understood that no representation or warranty is made concerning the forecasts, estimates, PRO FORMA information, projections and statements as to anticipated future performance or conditions, and the assumptions on which they were based, contained in any such information, reports, financial statements, exhibits or schedules, except that as of the date such forecasts, estimates, PRO FORMA information, projections 47 and statements were generated, (a) such forecasts, estimates, PRO FORMA information, projections and statements were based on the good faith assumptions of the management of the Borrowers and (b) such assumptions were believed by such management to be reasonable. SECTION 6. CONDITIONS PRECEDENT 6.1. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement is subject to the satisfaction of the following conditions precedent: (a) LOAN DOCUMENTS. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of each Borrower, with a counterpart for each Lender, (ii) for the account of each of the Lenders which has requested a Note pursuant to subsection 2.2, a Revolving Credit Note conforming to the requirements hereof and executed and delivered by a duly authorized officer of each Borrower, (iii) the Guarantee and Collateral Agreement, executed and delivered by a duly authorized officer of each Borrower and each Subsidiary thereof (other than each Excluded Foreign Subsidiary and each other Subsidiary which, in accordance with subsection 7.10(e), is not required to execute and deliver such Agreement), with a counterpart or a conformed copy for each Lender, (iv) the Copyright, Patent and Trademark Security Agreement, executed and delivered by a duly authorized officer of each Borrower, and the other signatories thereto, with a counterpart or a conformed copy for each Lender, (v) the CNG Guarantee and Cash Collateral Agreement, executed and delivered by a duly authorized officer of CNG, with a counterpart or conformed copy for each Lender, (vi) the CNC Guarantee, executed and delivered by a duly authorized officer of CNC, with a counterpart or conformed copy for each Lender and (vii) a "control" agreement with Wachovia Securities, Corporate & Investment Banking, executed and delivered by a duly authorized officer of Wachovia in substantially the form of Exhibit A to the CNG Guarantee and Cash Collateral Agreement or such other form as is reasonably acceptable to the Administrative Agent. (b) FEES. The Lenders and the Administrative Agent shall have received all fees required to be paid and all expenses for which invoices have been presented (including the invoices of Simpson Thacher & Bartlett), on or before the Closing Date. (c) BORROWING CERTIFICATE. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrowers, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments, satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrowers. (d) CORPORATE PROCEEDINGS OF THE LOAN PARTIES. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each of the Loan Parties authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, (ii) in the case of the Borrowers, the borrowings contemplated hereunder and (iii) the granting by it of the Liens created pursuant to the Security Documents, certified by the Secretary or an 48 Assistant Secretary of such Loan Party as of the Closing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (e) INCUMBENCY CERTIFICATE OF THE LOAN PARTIES. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each of the Loan Parties, dated the Closing Date, as to the incumbency and signature of the officers of such Loan Party executing any Loan Document satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of such Loan Party. (f) CORPORATE DOCUMENTS. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each of the Loan Parties, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Loan Party. (g) CONSENTS, LICENSES AND APPROVALS. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of a Responsible Officer (i) attaching copies of all consents, authorizations and filings set forth on Schedule 5.4, and (ii) stating that such consents, licenses and filings are in full force and effect, and each such consent, authorization and filing shall be in form and substance satisfactory to the Administrative Agent. (h) LEGAL OPINION. The Administrative Agent shall have received, with a counterpart for each Lender, the executed legal opinion of Jones, Day, Reavis & Pogue, counsel to the Borrowers and the other Loan Parties, substantially in the form of Exhibit D, with such changes thereto as may be approved by the Administrative Agent. Such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (i) PLEDGED STOCK; STOCK POWERS; PLEDGED NOTES. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof, and the notes pledged pursuant to the Guarantee and Collateral Agreement, each endorsed in blank by a duly authorized officer of the pledgor thereof. (j) ACTIONS TO PERFECT LIENS. The Administrative Agent shall have received evidence in form and substance satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly executed financing statements on Form UCC-1, necessary or, in the opinion of the Administrative Agent, desirable to perfect the Liens created by the Security Documents shall have been completed or that all such financing statements and other documents with respect to such filings, recordings, registrations and other actions shall have been delivered to the Administrative Agent. 49 (k) SECTION 7.10 COMPLIANCE. The Administrative Agent shall have received evidence in form and substance satisfactory to it that the Borrowers and their Subsidiaries shall have executed and delivered all such documents, and taken all such action as are required so that, after giving effect thereto, the Borrowers shall be in full compliance with their obligations under subsection 7.10. (l) TAX SHARING AGREEMENT. The Administrative Agent shall have received a copy of the Tax Sharing Agreement as in effect on the date hereof, including all amendments, supplements and other modifications thereto, certified to be complete and correct by a Responsible Officer. 6.2. CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each Lender to make any Revolving Credit Loan or any other extension of credit requested to be made by it on any date (including, without limitation, its initial extension of credit), and of the Issuing Lender to issue any Letter of Credit requested to be issued by it on any date, is subject to the satisfaction of the following conditions precedent: (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by the Borrowers and any other Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for representations and warranties stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date. (b) NO DEFAULT. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. (c) BORROWING BASE. The Administrative Agent shall have received the most recent Borrowing Base Certificate required to be delivered pursuant to subsection 7.2(e) and, after giving effect to the Revolving Credit Loans and other extension of credit requested to be made on such date and the Letters of Credit requested to be issued on such date, no Borrowing Base Deficiency would exist. (d) ADDITIONAL MATTERS. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by and Letter of Credit issued on behalf of any Borrower hereunder shall constitute a representation and warranty by the Borrowers as of the date thereof that the conditions contained in this subsection have been satisfied. 50 SECTION 7. AFFIRMATIVE COVENANTS Each Borrower hereby agrees that, on and after the Closing Date and so long as the Revolving Credit Commitments remain in effect or any Letter of Credit remains outstanding and unpaid or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, each Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 7.1. FINANCIAL STATEMENTS. Furnish to each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrowers, a copy of the Consolidated balance sheet of CNG and its consolidated Subsidiaries as at the end of such year and the related Consolidated statement of income and Consolidated statements of retained earnings and of cash flows for such year and the Compliance Package, reported on, in the case of such Consolidated financial statements, without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Arthur Andersen LLP or other independent certified public accountants of nationally recognized standing selected by CNG; and (b) as soon as available, but in any event within 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrowers, the unaudited Consolidated balance sheet of CNG and its consolidated Subsidiaries as at the end of such quarter, the related unaudited Consolidated statement of income for such quarter and the portion of the fiscal year through the end of such quarter and the related unaudited Consolidated statement of cash flows for the portion of the fiscal year through the end of such quarter and the Compliance Package, in each case, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (c) as soon as available, but in any event not later than 30 days (or, in the event that such 30th day is not a Business Day, the next succeeding Business Day) after the end of each fiscal month of each fiscal year of the Borrowers (or, in the event that (i) such month (x) is the first month of a fiscal year or (y) is the last month of one of the first three fiscal quarters, not later than 45 days after the end of such month or (ii) such month is the last month of a fiscal year, not more than 60 days after the end of such month), the unaudited Consolidated balance sheet of CNG and its consolidated Subsidiaries as at the end of such month, the related unaudited Consolidated statement of income for such month and the portion of the fiscal year through the end of such month and the related unaudited Consolidated statement of cash flows for the portion of the fiscal year through the end of such month and the Compliance Package, in each case, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the 51 periods reflected therein and with prior periods (except as approved by such accountants or Responsible Officer, as the case may be, and disclosed therein). 7.2. CERTIFICATES; OTHER INFORMATION. Furnish to each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 7.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in connection with their audit nothing has come to their attention to cause them to believe that any Borrower or any of their Subsidiaries failed to comply with the covenants contained in Section 8; PROVIDED, HOWEVER, that such audit shall not have been directed primarily toward obtaining knowledge of such noncompliance, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and (b), a certificate of a Responsible Officer ("COMPLIANCE CERTIFICATE") stating that, to the best of such Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the relevant Borrower has complied with the requirements of subsection 7.10 with respect thereto), (ii) neither any Borrower nor any of their Subsidiaries has changed its name without complying with the requirements of this Agreement and the Security Documents with respect thereto, (iii) each Borrower has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, and (iv) each Borrower has set forth in reasonable detail any and all calculations necessary to show compliance with subsection 2.1(a) and all of the financial condition covenants set forth in subsections 8.1 and 8.8, including, without limitation, calculations and reconciliations, if any, necessary to show compliance with such financial condition covenants on the basis of generally accepted accounting principles in the United States of America consistent with those utilized in preparing the audited financial statements referred to in subsection 5.1, and that such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (c) not later than 45 days after the end of each fiscal year of the Borrowers, a copy of the projections by CNG of the balance sheet, statement of income and statement of cash flows on a Consolidated basis of CNG and its Subsidiaries for the next succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such projections are based upon good faith assumptions of management of CNG and such assumptions are believed by management of CNG to be reasonable; (d) within ten days after the same are sent, copies of all financial statements and reports which CNC sends to its stockholders, and within ten days after the same are filed, copies of all financial statements and reports which CNC may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; 52 (e) within 21 days after the end of each calendar month, a borrowing base certificate calculating the Borrowing Base as of the last day in such calendar month, substantially in the form of Exhibit G hereto (a "BORROWING BASE CERTIFICATE") executed by a Responsible Officer; and (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request as coordinated through the Administrative Agent. 7.3. PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, including, without limitation, taxes, except where (a) the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Borrower or such Subsidiary, as the case may be, or (b) the failure to so pay, discharge or otherwise satisfy such obligations could not, in the aggregate, be reasonably be expected to have a Material Adverse Effect. 7.4. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 8.5; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 7.5. MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and necessary in its business in good working order and condition, reasonable wear and tear excepted; maintain with financially sound and reputable insurance companies insurance on all the Collateral in accordance with the requirements of Section 5.3 of the Guarantee and Collateral Agreement, Section 5 of each of the Mortgages and on all its other property in at least such amounts (including as to amounts of deductibles) and against at least such risks (but including in any event commercial general liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Lender, upon written request by the Administrative Agent, full information as to the insurance carried. 7.6. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records, including without limitation, in connection with any collateral review or appraisal described in paragraph (b) below, at any reasonable time and upon reasonable notice and as often as may reasonably be desired (provided, however, that (i) the Lenders will arrange and coordinate each such visit through and with the Administrative Agent and (ii) so long as no Event of Default has occurred and is continuing, no more than two such visits and inspections shall be made during any fiscal 53 year) and to discuss the business, operations, properties and financial and other condition of the Borrowers and their Subsidiaries with officers and employees of the Borrowers and their Subsidiaries and with its independent certified public accountants (provided that any officers or employees of the Borrowers shall be permitted to be present at any such discussions between representatives of any Lender and the Borrowers' independent certified public accountants). (b) At any time upon the request of the Administrative Agent, permit the Administrative Agent or its professionals (including investment bankers, consultants, accountants, lawyers and appraisers) retained by the Administrative Agent to conduct evaluations and appraisals of (i) the Borrowers' practices in the computation of the Borrowing Base, (ii) the assets included in the Borrowing Base, (iii) systems and procedures relating to the Borrowing Base items, and (iv) other related procedures deemed necessary by the Administrative Agent and pay the reasonable fees and expenses in connection therewith (including, without limitation, the fees and expenses associated with services performed by the Administrative Agent's collateral monitoring department); provided, however, that the Administrative Agent shall not be entitled to conduct such evaluations and appraisals more frequently than twice per year unless (x) an Event of Default has occurred and is continuing or (y) the Administrative Agent reasonably determines in consultation with the Borrowers that any material event or material change has occurred with respect to the Loan Parties, their inventory practices or the performance of the Collateral and that as a result of such event or change more frequent evaluations or appraisals are required to effectively monitor the Borrowing Base, in which case the Borrowers will permit the Administrative Agent to conduct such evaluations and appraisals at such reasonable times and as often as may be reasonably requested, in each case so long as any Revolving Credit Loans or Letters of Credit shall be outstanding or shall have been requested by any Borrower hereunder. (c) In connection with any evaluation and appraisal relating to the computation of the Borrowing Base, agree to maintain such additional reserves (for purposes of computing the Borrowing Base) in respect of Eligible Inventory and make such other adjustments to its parameters for including Eligible Inventory in the Borrowing Base as the Administrative Agent shall require based upon the results of such evaluation and appraisal, provided that the Administrative Agent shall specify to the Borrowers in writing the reasons for any such additional reserves or adjustments. 7.7. NOTICES. Promptly give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of any Borrower or any Subsidiary, including, without limitation, under the Senior Subordinated Notes, the Senior Subordinated 1997 Notes or the Senior Subordinated 2002 Notes or (ii) litigation, investigation or proceeding which may exist at any time between any Borrower or any Subsidiary and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; 54 (c) any litigation or proceeding affecting any Borrower or any Subsidiary (i) in which the amount involved is $5,000,000 or more and not covered by insurance or (ii) in which injunctive or similar relief is sought which could reasonably be expected to have a Material Adverse Effect; (d) the following events, as soon as possible and in any event within 30 days after any Borrower knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or any Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; (e) any material adverse change in the business, operations, property, condition (financial or otherwise) or prospects of any Borrower and its Subsidiaries taken as a whole; and (f) any (i) release or discharge by any Borrower or any of its Subsidiaries of any Materials of Environmental Concern required to be reported under applicable Environmental Laws to any Governmental Authority, unless Borrowers reasonably determine that the total Environmental Costs arising out of such release or discharge are unlikely to exceed $5,000,000 or to have a Material Adverse Effect; (ii) condition, circumstance, occurrence or event not previously disclosed in writing to the Administrative Agent that could result in liability under applicable Environmental Laws unless the Borrowers reasonably determine that the total Environmental Costs arising out of such condition, circumstance, occurrence or event are unlikely to exceed $5,000,000 or to have a Material Adverse Effect, or could result in the imposition of any Lien or other restriction on the title, ownership or transferability of any facilities and properties owned, leased or operated by any Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect; and (iii) proposed action to be taken by any Borrower or any of its Subsidiaries that would reasonably be expected to subject such Borrower or any of its Subsidiaries to any material additional or different requirements or liabilities under Environmental Laws, unless the Borrowers determine that the total Environmental Costs arising out of such proposed action are unlikely to exceed $5,000,000 or to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrowers propose to take with respect thereto. 7.8. ENVIRONMENTAL LAWS. (a) (i) Comply substantially with, and undertake all reasonable efforts to ensure substantial compliance by all tenants, subtenants, and contractors with, all applicable Environmental Laws; (ii) obtain, comply substantially with and maintain any and all Environmental Permits necessary for its operations as conducted and as planned; and (iii) undertake all reasonable efforts to ensure that all tenants, subtenants, and contractors obtain, 55 comply substantially with and maintain any and all Environmental Permits necessary for their operations as conducted and as planned, with respect to any property leased or subleased from, or operated by any Borrower or its Subsidiaries. For purposes of this subsection 7.8(a), each Borrower and its Subsidiaries shall be deemed to comply substantially, or require substantial compliance, with an Environmental Law or an Environmental Permit, if (i) it complies with subsection 7.8(c) and (ii) upon learning of any actual or suspected noncompliance, such Borrower and any such affected Subsidiary shall promptly undertake all reasonable efforts, if any, to achieve compliance, PROVIDED that in any case such noncompliance would not reasonably be expected to have a Material Adverse Effect. (b) Promptly comply with all orders and directives of all Governmental Authorities issued to any Borrower or any of its Subsidiaries regarding Environmental Laws, other than any such order or directive as to which an appeal or other appropriate contest is or has been timely and properly taken, is being diligently pursued in good faith, and the pendency of such appeal or other appropriate contest would not reasonably be expected to have a Material Adverse Effect. (c) Maintain, update as appropriate, and implement in all material respects an environmental program reasonably designed to (i) ensure that the Borrowers, their Subsidiaries, any of their respective operations (including, without limitation, disposal), and any properties owned, leased or operated by any of them, attain and remain in substantial compliance with all applicable Environmental Laws and (ii) reasonably and prudently manage any liabilities or potential liabilities that the Borrowers, any of the other Loan Parties, any of their respective operations (including, without limitation, disposal), and any properties owned or leased by any of them, may have under all applicable Environmental Laws. 7.9. FURTHER ASSURANCES. Upon the request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, without limitation, financing statements and continuation statements) for filing under the provisions of the Uniform Commercial Code or any other Requirement of Law which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. 7.10. ADDITIONAL COLLATERAL, ETC.. (a) With respect to any property acquired after the Closing Date by any Borrower or any Subsidiary (other than (x) any property described in paragraph (b), (c) or (d) below, (y) any property subject to a Lien expressly permitted by subsection 8.3(f) or 8.3(l) and (z) property acquired by any Excluded Foreign Subsidiary) as to which the Administrative Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent. 56 (b) With respect to any fee or leasehold interest in any real property having a value in excess of $600,000 acquired after the Original Closing Date by any Borrower or any Subsidiary (other than (x) any such real property subject to a Lien expressly permitted by subsection 8.3(f) or 8.3(l) and (y) real property acquired by any Excluded Foreign Subsidiary), promptly (i) execute and deliver a first priority Mortgage, in favor of the Administrative Agent, for the benefit of the Lenders, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof, together with a surveyor's certificate and (y) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (c) With respect to any new Subsidiary (other than an Excluded Foreign Subsidiary) created or acquired after the Original Closing Date by any Borrower or any Subsidiary (which, for the purposes of this paragraph (c), shall include any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any Borrower or any Subsidiary, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Borrower or Subsidiary, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement, (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent and (C) to deliver to the Administrative Agent a certificate of such Subsidiary, in form and substance satisfactory to the Administrative Agent, with appropriate insertions and attachments, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (d) With respect to any new Excluded Foreign Subsidiary created or acquired after the Original Closing Date by any Borrower or any Subsidiary (other than by any Borrower or any Subsidiary that is an Excluded Foreign Subsidiary), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any such Borrower or any such Subsidiary (provided that in no event 57 shall more than 66% of the total outstanding voting Capital Stock of any such new Subsidiary be required to be so pledged), (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Borrower or Subsidiary, and take such other action as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Administrative Agent's security interest therein, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (e) Anything in this subsection 7.10 to the contrary notwithstanding, (i) Pearle shall not be required to create a Lien on any shares of Capital Stock of Pearl Visioncare, Inc. owned by it or on any rights owned by it under the Pearle Visioncare Line of Credit Agreement and (ii) no Subsidiary shall be required to become a Guarantor, create Liens on its assets or permit a Lien to be created on shares of its Capital Stock or any promissory note issued by it (x) if and to the extent that to do so would violate any law, rule or regulation of any Governmental Authority applicable to such Subsidiary and if there shall have been delivered to the Administrative Agent evidence, reasonably satisfactory to the Administrative Agent, that such a violation would result from such guarantee or creation of Lien or (y) if the aggregate net book value of the assets of such Subsidiary, when added to the aggregate net book value of all other Subsidiaries with respect to which, pursuant to this clause (y), there is then non-compliance with the provision of subsections 7.10(a), (b) and/or (c), does not exceed $200,000. Nothing in this subsection 7.10 shall be deemed to require that any Borrower or any Subsidiary thereof obtain, or seek to obtain, the consent or approval by any Governmental Authority of any guarantee or creation of Lien that would not be required pursuant to this subsection 7.10 unless such consent or approval shall have been obtained, PROVIDED that the appropriate Borrower or Subsidiary shall be required to use commercially reasonable efforts to obtain such consent or approval if the Administrative Agent, at any time when an Event of Default shall have occurred and be continuing, requests that it do so. SECTION 8. NEGATIVE COVENANTS Each Borrower hereby agrees that on and after the Closing Date and, so long as the Revolving Credit Commitments remain in effect or any Letter of Credit remains outstanding and unpaid or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, each Borrower shall not, and (except with respect to subsection 8.1) shall not permit any of its Subsidiaries to, directly or indirectly, and (with respect to subsection 8.1 only) shall not permit CNG to: 8.1. FINANCIAL CONDITION COVENANTS. (a) LEVERAGE RATIO. Permit the Leverage Ratio as of the end of any fiscal quarter of CNG set forth below to be greater than the ratio set forth opposite such fiscal quarter below: FISCAL QUARTER MAXIMUM LEVERAGE RATIO 2nd Qtr 2002 3.80 to 1.00 58 3rd Qtr 2002 3.80 to 1.00 4th Qtr 2002 3.80 to 1.00 1st Qtr 2003 3.80 to 1.00 2nd Qtr 2003 3.80 to 1.00 3rd Qtr 2003 3.80 to 1.00 4th Qtr 2003 3.35 to 1.00 1st Qtr 2004 3.35 to 1.00 2nd Qtr 2004 3.35 to 1.00 3rd Qtr 2004 3.35 to 1.00 4th Qtr 2004 2.70 to 1.00 1st Qtr 2005 2.70 to 1.00 2nd Qtr 2005 2.70 to 1.00 3rd Qtr 2005 2.70 to 1.00 4th Qtr 2005 2.40 to 1.00 1st Qtr 2006 2.40 to 1.00 2nd Qtr 2006 2.40 to 1.00 (b) ADJUSTED INTEREST COVERAGE RATIO. Permit the Adjusted Interest Coverage Ratio as of the end of any fiscal quarter of CNG set forth below to be less than the ratio set forth opposite such fiscal quarter below: 59 FISCAL QUARTER MAXIMUM ADJUSTED INTEREST COVERAGE RATIO 2nd Qtr 2002 1.30 to 1.00 3rd Qtr 2002 1.30 to 1.00 4th Qtr 2002 1.30 to 1.00 1st Qtr 2003 1.30 to 1.00 2nd Qtr 2003 1.30 to 1.00 3rd Qtr 2003 1.30 to 1.00 4th Qtr 2003 1.50 to 1.00 1st Qtr 2004 1.50 to 1.00 2nd Qtr 2004 1.50 to 1.00 3rd Qtr 2004 1.50 to 1.00 4th Qtr 2004 1.65 to 1.00 1st Qtr 2005 1.65 to 1.00 2nd Qtr 2005 1.65 to 1.00 3rd Qtr 2005 1.65 to 1.00 4th Qtr 2005 1.75 to 1.00 1st Qtr 2006 1.75 to 1.00 2nd Qtr 2006 1.75 to 1.00 8.2. LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of the Borrowers under this Agreement and any Revolving Credit Notes; (b) Indebtedness of any Borrower to any Subsidiary and of any Subsidiary Guarantor to any Borrower or any other Subsidiary; (c) Indebtedness of the Borrowers and their Subsidiaries under Permitted Hedging Arrangements; (d) Indebtedness outstanding on the Closing Date and listed on Schedule 8.2(d) and any refinancings, refundings, renewals or extensions thereof; PROVIDED that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension; (e) Indebtedness of a Person which becomes a Subsidiary of a Borrower after the Closing Date; PROVIDED that (i) such Indebtedness existed at the time such Person became a Subsidiary and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such Person by a Borrower no Default or Event of Default shall have occurred and be continuing, and any refinancings, refundings, renewals or extensions thereof; PROVIDED that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension; 60 (f) Indebtedness of up to an aggregate outstanding face amount of $10,000,000 of documentary letters of credit issued by Wachovia for the account of any Borrower or any Subsidiary; (g) Indebtedness consisting of Guarantee Obligations permitted by subsection 8.4; (h) Indebtedness of the Borrowers and their Subsidiaries incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding as to the Borrowers and their Subsidiaries $15,000,000 at any time outstanding; (i) Indebtedness resulting from loans and advances permitted under subsection 8.9; and (j) in addition to Indebtedness permitted by clauses (a)-(h) above, Indebtedness of the Borrowers and their Subsidiaries in an aggregate principal amount not exceeding as to the Borrowers and their Subsidiaries $10,000,000 at any time outstanding. 8.3. LIMITATION ON LIENS. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings; PROVIDED that adequate reserves with respect thereto are maintained on the books of a Borrower or a Subsidiary, as the case may be, in conformity with GAAP; (b) carrier's, warehousemen's, mechanic's, landlord's, materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of such Borrower or such Subsidiary conducted at the property subject thereto; 61 (f) Liens on the property or assets of a Person which becomes a Subsidiary of a Borrower after the Closing Date securing Indebtedness permitted by subsection 8.2(e); PROVIDED that (i) such Liens existed at the time such Person became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not spread to cover any property or assets of such Person after the time such corporation becomes a Subsidiary (other than additions thereto and property in replacement or substitution thereof), and (iii) the amount of Indebtedness secured thereby is not increased; (g) Liens created pursuant to the Security Documents; (h) Liens in existence on the Closing Date listed on Schedule 8.3(h), securing Indebtedness permitted by subsection 8.2(d); PROVIDED that no such Lien is spread to cover any additional property after the Closing Date and that the amount of Indebtedness secured thereby is not increased; (i) Liens arising by reason of any judgment, decree or order of any court or other Governmental Authority, if appropriate legal proceedings are being diligently prosecuted and shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired, in an aggregate amount not to exceed $5,000,000 at any time outstanding; (j) leases and subleases of real property owned or leased by any Borrower or any Subsidiary not interfering with the ordinary conduct of the business of such Borrowers and their Subsidiaries; (k) renewals, extensions and replacements of the Liens permitted under clauses (f), (h) and (j) above; PROVIDED that no such Lien shall as a result thereof cover any additional assets (other than additions thereto and property in replacement or substitution thereof) and the principal amount of Indebtedness secured thereby is not increased; (l) Liens securing Indebtedness of the Borrowers and their Subsidiaries permitted by subsection 8.2(h) incurred to finance the acquisition of fixed or capital assets; PROVIDED that (i) such Liens shall be created substantially simultaneously with or within 90 days of the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (other than additions thereto and property in replacement or substitution thereof) and (iii) the principal amount of Indebtedness secured thereby is not increased; and (m) Liens on Inventory which is the subject of a trade letter of credit issued for the account of a Borrower by Wachovia, to the extent permitted pursuant to subsection 8.2(f), on the various documents related thereto and on the proceeds thereof, PROVIDED that (i) any such Lien is not spread to cover any other property or assets of any Borrower, (ii) the amount of Indebtedness secured thereby is not increased and (iii) the Lien on the subject property shall terminate according to its terms upon payment in full of the reimbursement obligations with respect to the relevant trade letter of credit. 62 8.4. LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the Closing Date and listed on Schedule 8.4(a), and any refinancing, refundings, renewals or extensions thereof PROVIDED that the amount of such Guarantee Obligation shall not be increased at the time of such refinancing, refunding, extension or renewal; (b) guarantees made in the ordinary course of its business by any Borrower or any of its Subsidiaries of obligations of any Subsidiary Guarantor or by any Subsidiary which is not a Subsidiary Guarantor of obligations of any Borrower or any other Subsidiary, which obligations are otherwise permitted under this Agreement; (c) the Guarantee and Collateral Agreement and any of the other Guarantees; (d) Guarantee Obligations of a Person which becomes a Subsidiary after the Closing Date; PROVIDED that (i) such Guarantee Obligations existed at the time such Person became a Subsidiary and were not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such Person by a Borrower no Default or Event of Default shall have occurred and be continuing, and any refinancings, refundings, renewals or extensions thereof; PROVIDED that the amount of such Guarantee Obligations is not increased at the time of such refinancing, refunding, renewal or extension; and (e) Guarantee Obligations of Pearle of Indebtedness of franchisees of Pearle, PROVIDED that the aggregate amount of such Guarantee Obligations outstanding at any time shall not exceed $10,000,000; and (f) Guarantee Obligations permitted by subsection 8.9. 8.5. LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of any Borrower may be merged or consolidated with or into any Borrower (PROVIDED that such Borrower shall be the continuing or surviving corporation) or with or into any one or more Wholly Owned Subsidiaries of any Borrower (PROVIDED that (i) the Wholly Owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation and (ii) if such Subsidiary is a Subsidiary Guarantor, the continuing or surviving corporation shall be a Subsidiary Guarantor); (b) any Wholly Owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to any Borrower or any other Wholly Owned Subsidiary of any Borrower, PROVIDED that, if such transferor Wholly Owned Subsidiary is a Subsidiary Guarantor, the transferee Wholly Owned Subsidiary shall be a Subsidiary Guarantor; and 63 (c) sales and other dispositions of assets permitted by subsection 8.6(b). 8.6. LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than a Borrower or any Wholly Owned Subsidiary, except: (a) the sale or other disposition of any property in the ordinary course of business; (b) the sale or other disposition of any assets at fair market value, PROVIDED that the aggregate fair market value of all assets sold pursuant to this paragraph (b) in any fiscal year of the Borrowers shall not exceed $25,000,000; (c) the sale or discount without recourse of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (d) as permitted by subsection 8.5(b); and (e) dispositions resulting from any casualty or condemnation of any property. 8.7. LIMITATION ON DIVIDENDS. Declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of any Borrower or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of such Borrower or any Subsidiary, except for: (a) dividends, payments or distributions solely in common stock of a Borrower; (b) dividends to CNG in an amount sufficient to allow CNG to pay interest on the Senior Subordinated Notes, the Senior Subordinated 1997 Notes and the Senior Subordinated 2002 Notes in accordance with the terms of each thereof, PROVIDED that CNG actually uses such dividends to make such payments of interest; (c) so long as no Default or Event of Default shall have occurred and be continuing or would occur after giving effect to such dividend, dividends to CNG in an aggregate amount (declared or paid subsequent to the Closing Date) not to exceed $50,000,000 solely to allow CNG to repurchase Senior Subordinated Notes, Senior Subordinated 1997 Notes and/or Senior Subordinated 2002 Notes without violating Section 9(m); (d) so long as no Default or Event of Default shall have occurred and be continuing or would occur after giving effect to such dividend, dividends to CNG in an 64 aggregate amount (declared or paid subsequent to the Closing Date) not to exceed $4,000,000 solely to allow CNG or CNC to repurchase, redeem, or otherwise acquire or retire for value, any Capital Stock of CNG or CNC or any current or former Subsidiary of CNG held by any of CNG's (or any of its Subsidiaries') current or former employees; (e) payments or distributions in respect of taxes, as provided in the Tax Sharing Agreement, to the extent actually used to pay taxes to a taxing authority; and (f) dividends to CNG in an aggregate amount not to exceed an amount equal to .25% of the aggregate net sales of the Borrowers and their Subsidiaries for any fiscal year solely for the purpose of enabling CNC to pay the ordinary operating and administrative expenses of CNC (including all reasonable professional fees and expenses) in connection with complying with its reporting obligations and obligations to prepare and distribute business records in the ordinary course of business and CNC's costs and expenses relating to taxes (which taxes are attributable to the operations of CNG and its Subsidiaries or to CNC's ownership thereof) for such fiscal year; and (g) so long as no Default or Event of Default shall have occurred and be continuing or would occur after giving effect to such dividend, dividends to CNG other than dividends otherwise permitted under any of the foregoing clauses (a) through (f) in an aggregate amount not to exceed $10,000,000 in any fiscal year. 8.8. LIMITATION ON CAPITAL EXPENDITURES. Make any expenditure in respect of the purchase or other acquisition of fixed or capital assets and/or in respect of the development of computer systems owned or operated by the Borrowers and their Subsidiaries, except for expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrowers and their Subsidiaries subsequent to the Closing Date, $60,000,000. 8.9. LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment, in cash or by transfer of assets or property, in, any Person (each, an "INVESTMENT"), except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; (c) loans and advances to employees of the Borrowers or their Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business; (d) Investments by a Borrower in any Subsidiary thereof which is a Subsidiary Guarantor and Investments by any Subsidiary of a Borrower in such Borrower and in other Subsidiaries of such Borrower (PROVIDED that, if the Subsidiary making such Investment is a Subsidiary Guarantor, the Subsidiary in which such Investment is made shall also be a Subsidiary Guarantor); 65 (e) so long as no Default or Event of Default has occurred and is continuing or would occur after giving effect to such Investment, Investments in franchises in a business related to the optical business of Pearle and Cole Vision as conducted on the Closing Date in an aggregate amount not to exceed $15,000,000 during any fiscal year; (f) Investments in HMO Subsidiaries, PROVIDED that the aggregate amount of the Investments permitted by this paragraph (f) outstanding at any one time shall not exceed $10,000,000; (g) Investments in Excluded Foreign Subsidiaries in an aggregate amount not to exceed $10,000,000; and (h) in addition to the foregoing, Investments subsequent to the Closing Date, other than the purchase of the Senior Subordinated 1997 Notes, the Senior Subordinated 2002 Notes or the Senior Subordinated Notes, in an aggregate amount not to exceed $10,000,000. 8.10. LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of such Borrower's or such Subsidiary's business and (c) upon fair and reasonable terms no less favorable to such Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate, provided that the requirements of this clause (c) shall not be applicable (x) in the case of services provided or products sold by such Borrower or such Subsidiary to an HMO Subsidiary or a Foreign Subsidiary so long as such Borrower or such Subsidiary is reimbursed for the costs incurred by it in providing such service or, as the case may be, producing or obtaining such products or (y) to the Pearle Visioncare Line of Credit Agreement. 8.11. LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of the Borrowers to end on a day other than the Saturday closest to January 31 in any year. 8.12. LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any Person any agreement, which prohibits or limits the ability of any Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than (a) this Agreement, (b) agreements in effect on the Original Closing Date listed on Schedule 8.12, including, without limitation, the Senior Subordinated Notes Indenture, or any refinancing, refunding, renewal or extension thereof which is permitted hereunder, (c) customary non-assignment provisions under contracts to the extent such provisions prohibit or limit the ability to grant a Lien on the rights under such contracts, (d) restrictions on granting Liens on assets under agreements to sell or otherwise dispose of such assets, (e) the Senior Subordinated 1997 Notes Indenture, or any refinancing, refunding, renewal or extension thereof which is permitted hereunder, (f) the Senior Subordinated 2002 Notes Indenture, or any refinancing, refunding, renewal or extension thereof which is permitted hereunder, (g) agreements governing Indebtedness permitted by subsection 8.2(e) and (h) agreements governing any purchase money Liens or Financing Leases otherwise permitted 66 hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby). 8.13. LIMITATION ON LINES OF BUSINESS. Enter into any business, either directly or through any Subsidiary or any joint venture, except for those businesses in which the Borrowers and their Subsidiaries are engaged on the Closing Date or which are related thereto. 8.14. LIMITATIONS ON CURRENCY AND COMMODITY HEDGING TRANSACTIONS. Enter into, purchase or otherwise acquire agreements or arrangements relating to currency, commodity or other hedging except, to the extent and only to the extent that, such agreements or arrangements are entered into, purchased or otherwise acquired in the ordinary course of business of any Borrower or any Subsidiary with reputable financial institutions and not for purposes of investment or speculation (any such agreement or arrangement permitted by this subsection, a "PERMITTED HEDGING ARRANGEMENT"). 8.15. LIMITATION ON SALE LEASEBACKS. Enter into any arrangement with any Person providing for the leasing by any Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by such Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Borrower or such Subsidiary (such arrangement, a "SALE-LEASEBACK") except for Sale-Leasebacks in the ordinary course of such Borrower's or such Subsidiary's business, consistent with past practice and at market rates. For the avoidance of doubt, Sale-Leasebacks that result in a Financing Lease shall be treated as Indebtedness for all purposes of this Agreement. 8.16. CHANGES TO CASH MANAGEMENT COLLECTION SYSTEM. Without the prior written consent of the Administrative Agent, make any changes to the cash management collection system established in accordance with subsection 6.1(j) of the Existing Credit Agreement that would adversely affect the interests of the Administrative Agent and the Lenders, including, without limitation, any change which would result in the "Cash Collateral Account" (as defined in the CNG Guarantee and Cash Collateral Agreement) ceasing to be the principal cash concentration account for the Borrowers. SECTION 9. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) Any Borrower shall fail to pay any principal of any Revolving Credit Loan or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or any Borrower shall fail to pay any interest on any Revolving Credit Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by any Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other written statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove 67 to have been incorrect in any material respect on or as of the date made or deemed made; or (c) Any Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in subsection 7.7(a) or Section 8; or (d) Any Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section 9), and such default shall continue unremedied for a period of 30 days; or (e) CNG, any Borrower or any Subsidiary shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Revolving Credit Loans and the Reimbursement Obligations) in excess of $5,000,000 or in the payment of any Guarantee Obligation in excess of $5,000,000, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; or (f) (i) CNG, any Borrower or any Subsidiary shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or CNG, any Borrower or any Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against CNG, any Borrower or any Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against CNG, any Borrower or any Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) CNG, any Borrower or any Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) 68 CNG, any Borrower or any Subsidiary shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Majority Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Majority Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or (h) One or more judgments or decrees shall be entered against CNG, any Borrower or any Subsidiary involving in the aggregate a liability (not paid or fully covered by insurance) of $5,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (i) Except as, and to the extent, permitted by this Agreement, (i) any of the Security Documents or any of the other Loan Documents shall cease, for any reason, to be in full force and effect, or any Borrower or any other Loan Party which is a party to any of the Security Documents or any of the other Loan Documents shall so assert or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (j) The occurrence of any Change of Control; or (k) The Senior Subordinated Notes, the Senior Subordinated 1997 Notes or the Senior Subordinated 2002 Notes, for any reason, shall not be or shall cease to be validly subordinated, as provided therein and in the Senior Subordinated Notes Indenture, the Senior Subordinated 1997 Notes Indenture or the Senior Subordinated 2002 Notes Indenture, to the obligations of the Borrowers under this Agreement, any Revolving Credit Notes and the other Loan Documents; or (l) CNG shall engage in any business other than the owning of the capital stock of the Borrowers and all actions incidental thereto or in connection therewith, including, without limitation, entering into the CNG Guarantee and Cash Collateral Agreement and the maintenance of cash management arrangements for the Borrowers 69 and their Subsidiaries or CNG shall incur any material liabilities (other than the Senior Subordinated Notes, the Senior Subordinated 1997 Notes or the Senior Subordinated 2002 Notes); or (m) CNG shall (i) make any optional payment or prepayment on or repurchase or redemption or purchase of the Senior Subordinated Notes, the Senior Subordinated 1997 Notes or the Senior Subordinated 2002 Notes (including, without limitation, any payment on account of, or for a sinking or other analogous fund for the repurchase, redemption, defeasance or other acquisition thereof) other than (x) (so long as no Default or Event of Default has occurred and is continuing or would occur as a result of such repurchase), repurchases (subsequent to the Closing Date) by CNG of such of the Senior Subordinated Notes, the Senior Subordinated 1997 Notes and/or Senior Subordinated 2002 Notes that it is able to repurchase for an aggregate purchase price (including fees and expenses incurred in connection with such repurchase) not to exceed $50,000,000 and (y) the repurchase, redemption, defeasance or other acquisition of the Senior Subordinated Notes as soon as practicable following the issuance of the Senior Subordinated 2002 Notes with the net proceeds thereof, (ii) amend, modify or change, or consent or agree to any material amendment, modification or change to any of the terms of the Senior Subordinated Notes, the Senior Subordinated 1997 Notes or the Senior Subordinated 2002 Notes (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon or which would shorten the notice period required for optional redemption of the Senior Subordinated Notes), or (iii) amend, modify or change or consent or agree to any amendment, modification or change to the subordination provisions or to any of the other provisions of the Senior Subordinated 1997 Notes Indenture or the Senior Subordinated 2002 Notes Indenture (other than any such amendment, modification or change which would shorten the notice period required for optional redemption of the Senior Subordinated Notes); or (n) CNC shall create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to any Borrower, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, automatically the Revolving Credit Commitments shall immediately terminate and automatically the Revolving Credit Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrowers declare the Revolving Credit Commitments to be terminated forthwith, whereupon the Revolving Credit Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Administrative 70 Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrowers, declare the Revolving Credit Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Revolving Credit Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrowers shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrowers hereby grant to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants, a security interest in such cash collateral to secure all obligations of the Borrowers under this Agreement and the other Loan Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrowers hereunder and under the Revolving Credit Notes. Within three days after all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrowers hereunder and under the Revolving Credit Notes shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrowers. The Borrowers shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the within security interest in such cash collateral account. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 10. THE ADMINISTRATIVE AGENT 10.1. APPOINTMENT. Each Lender hereby irrevocably designates and appoints CIBC as the Administrative Agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes CIBC as the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall have no duties or responsibilities, except those expressly set forth herein, nor any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. 10.2. DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or 71 attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 10.3. EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrowers. 10.4. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrowers), independent accountants and other experts selected by it. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Revolving Credit Loans. 10.5. NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or a Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof reasonably promptly to the Lenders. The Administrative Agent shall take such action reasonably promptly with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided that unless and until the 72 Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 10.6. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrowers or any other Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of any Borrower and made its own decision to make its Revolving Credit Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of any Borrower or any of the other Loan Parties and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Borrower or any of the other Loan Parties which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 10.7. INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrowers or any of the other Loan Parties and without limiting the obligation of the Borrowers or any of the other Loan Parties to do so), ratably according to their respective Revolving Credit Commitment Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Revolving Credit Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Revolving Credit Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct, as the case may be. The agreements in this subsection shall survive the payment of the Revolving Credit Loans and all other amounts payable hereunder. 73 10.8. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrowers as if the Administrative Agent was not the Administrative Agent hereunder and under the other Loan Documents. With respect to the Revolving Credit Loans made by it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 10.9. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Borrowers), shall succeed to the rights, powers and duties of the Administrative Agent hereunder. Effective upon such appointment and approval, the term "Administrative Agent" shall mean such successor agent, and such former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Revolving Credit Loans. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Administrative Agent under this Agreement and the other Loan Documents. 10.10. ISSUING LENDER. The provisions of this Section 10 shall apply to the Issuing Lender in its capacity as such to the same extent that such provisions apply to the Administrative Agent. 10.11. RELEASES OF GUARANTEES AND COLLATERAL. In connection with the sale or other disposition of all of the Capital Stock of any Guarantors (other than CNG) permitted under subsection 8.6 or the sale or other disposition of Collateral permitted under subsection 8.6, the Administrative Agent shall, and is hereby authorized by the Lenders to, promptly, upon the request of the Borrowers and at the sole expense of the Borrowers, take all actions reasonably necessary to release such Guarantor from its guarantee contained in the Guarantee and Collateral Agreement or its Guarantee or to release the Collateral subject to such sale or other disposition, as the case may be, and shall take any other actions reasonably requested by the Borrowers to effect the transactions permitted under subsection 8.6. SECTION 11. MISCELLANEOUS 11.1. AMENDMENTS AND WAIVERS. Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Majority Lenders may, or, with the written consent of the Majority Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrowers and the other Loan Parties written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of amending, supplementing or modifying any provisions of this Agreement or the other Loan Documents or 74 changing in any manner the rights of the Lenders or of the Borrowers hereunder or thereunder or (b) waive, on such terms and conditions as the Majority Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall: (i) eliminate or reduce the voting rights of any Lender under this subsection 11.1, or reduce the amount or extend the scheduled date of maturity of any Revolving Credit Loan or any installment thereof or any Reimbursement Obligation or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Revolving Credit Commitment, in each case without the consent of each Lender affected thereby; or (ii) reduce the percentage specified in the definition of Majority Lenders, or consent to the assignment or transfer by any Borrower of any of its rights and obligations under this Agreement and the other Loan Documents or release all or substantially all of the guarantee obligations contained in the Guarantee and Collateral Agreement, the CNG Guarantee and Cash Collateral Agreement and the other Guarantees or release all or substantially all of the Collateral (other than in connection with any release permitted by subsection 10.11), in each case without the written consent of all the Lenders; or (iii) amend, modify or waive any provision of Section 10 without the written consent of the then Administrative Agent; or (iv) amend, modify or waive the provisions of any Letter of Credit or any L/C Obligation without the written consent of the Issuing Lender. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrowers, the Lenders, the Administrative Agent and all future holders of the Revolving Credit Loans. In the case of any waiver, the Borrowers, the Lenders and the Administrative Agent shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 11.2. NOTICES. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand or by overnight courier, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrowers and the Administrative Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: 75 The Borrowers: c/o Cole National Group, Inc. 5915 Landerbrook Drive Mayfield Heights, Ohio 44124 Attention: Joseph Gaglioti Fax: (216) 461-3489 with a copy to: Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, Ohio 44114 Attention: David P. Porter, Esq. Fax: (216) 579-0212 The Administrative Agent: Canadian Imperial Bank of Commerce 425 Lexington Avenue 7th Floor New York, New York 10017 Attention: Agency Services Fax: (212) 856-3763 PROVIDED that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.3, 2.5, 3.2, 4.2, 4.4 or 4.8 shall not be effective until received. 11.3. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 11.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder, in the other Loan Documents (or in any amendment, modification or supplement hereto or thereto) and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Revolving Credit Loans hereunder. 11.5. PAYMENT OF EXPENSES AND TAXES. The Borrowers agree, jointly and severally, (a) to pay or reimburse the Administrative Agent for all its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and 76 administration of the transactions contemplated hereby and thereby (including the syndication of the Revolving Credit Commitments (including the reasonable expenses of the Administrative Agent's due diligence investigation)), including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all their respective costs and expenses incurred in connection with the enforcement of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to the respective Lenders and the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other Non-Excluded Taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective directors, trustees, officers, employees and agents harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents or the use or proposed use of the proceeds of the Revolving Credit Loans in connection with the transactions contemplated hereby and thereby and any such other documents regardless of whether the Administrative Agent or any Lender is a party to the litigation or other proceeding giving rise thereto, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Borrower, any of its Subsidiaries or any of the facilities and properties owed, leased or operated by any Borrower or any of its Subsidiaries (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), PROVIDED that the Borrowers shall have no obligation hereunder to the Administrative Agent or any Lender or any other Person with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the party seeking indemnification. The agreements in this subsection shall survive repayment of the Revolving Credit Loans and all other amounts payable hereunder. 11.6. SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Lenders, the Administrative Agent and their respective successors and assigns, except that no Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its business or investment activities and in accordance with applicable law, at any time sell to one or more banks or other entities ("PARTICIPANTS") participating interests in any Revolving Credit Loan owing to such Lender, any Revolving Credit Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. Each Lender which sells a participating interest hereunder shall notify the Borrowers of the identity of such Participant within a reasonable time after such sale. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this 77 Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Revolving Credit Loan for all purposes under this Agreement and the other Loan Documents, and the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Loan Document except for those matters specified in clauses (i) and (ii) of the proviso to subsection 11.1. The Borrowers agree that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, PROVIDED that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 11.7(a) as fully as if it were a Lender hereunder. The Borrowers also agree that each Participant shall be entitled to the benefits of subsections 4.10, 4.11 and 4.12 with respect to its participation in the Revolving Credit Commitments and the Revolving Credit Loans outstanding from time to time as if it was a Lender; PROVIDED that, in the case of subsection 4.11, such Participant shall have complied with the requirements of said subsection and PROVIDED, FURTHER that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business or investment activities and in accordance with applicable law, at any time and from time to time assign to any Lender or any branch or affiliate thereof or, with the consent of the Borrowers and the Administrative Agent (which in each case shall not be unreasonably withheld or delayed), to an additional bank or financial institution (an "ASSIGNEE") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit F, executed by such Assignee and such assigning Lender (and, in the case of an Assignee that is not then a Lender or a branch or an affiliate thereof, by the Borrowers and the Administrative Agent) and delivered to the Administrative Agent for its acceptance and recording in the Register, PROVIDED that, in the case of any such assignment to an additional bank or financial institution, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Revolving Credit Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the Available Revolving Credit Commitment being assigned shall not be less than $5,000,000 (or such lesser amount as may be agreed to by the Borrowers and the Administrative Agent). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Revolving Credit Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this 78 Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto but shall nonetheless continue to be entitled to the benefits of subsections 4.10, 4.11, 4.12 and 11.5). Notwithstanding any provision of this paragraph (c) and paragraph (e) of this subsection, the consent of the Borrowers shall not be required, and, unless requested by the Assignee and/or the assigning Lender, new Revolving Credit Notes shall not be required to be executed and delivered by the Borrowers, for any assignment which occurs at any time when any of the Events of Default described in Section 9(f) shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrowers, shall maintain at the address of the Administrative Agent referred to in subsection 11.2 a copy of each Assignment and Acceptance delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitments of, and principal amounts of the Revolving Credit Loans owing to, and any Revolving Credit Notes evidencing the Revolving Credit Loans owned by, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Revolving Credit Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Any assignment of any Revolving Credit Loan or other obligation hereunder shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrowers and the Administrative Agent) together with payment to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall promptly accept such Assignment and Acceptance and record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrowers. Such Assignment and Acceptance and the assignment evidenced thereby shall only be effective upon appropriate entries with respect to the information contained therein being made in the Register pursuant to subsection 11.6(d). (f) The Borrowers authorize each Lender to disclose to any Participant or Assignee (each, a "TRANSFEREE") and any prospective Transferee, subject to such Person agreeing to comply with the provisions of subsection 11.15, any and all financial and other information in such Lender's possession concerning the Borrowers and their Affiliates which has been delivered to such Lender by or on behalf of the Borrowers pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrowers in connection with such Lender's credit evaluation of the Borrowers and their Affiliates prior to becoming a party to this Agreement. (g) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Revolving Credit Loans and Revolving Credit Notes relate only to absolute assignments and that such provisions do not prohibit 79 assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Revolving Credit Loan or Revolving Credit Note to any Federal Reserve Bank in accordance with applicable law. 11.7. ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER") shall at any time receive any payment of all or part of its Revolving Credit Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 9(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Revolving Credit Loans or the Reimbursement Obligations owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest (or, at the option of such benefitted Lender, a direct interest) in such portion of each such other Lender's Revolving Credit Loan or the Reimbursement Obligations owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrowers, any such notice being expressly waived by the Borrowers to the extent permitted by applicable law, upon any amount remaining unpaid (including, without limitation, any amount owing to such Lender in respect of an undivided interest purchased by such Lender in any draft paid by the Issuing Lender under any Letter of Credit pursuant to subsection 3.4(a)) after it becomes due and payable by the Borrowers hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any affiliate, branch or agency thereof to or for the credit or the account of any Borrower. Each Lender agrees promptly to notify the Borrowers and the Administrative Agent after any such set-off and application made by such Lender, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. 11.8. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrowers and the Administrative Agent. 11.9. 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. 80 11.10. INTEGRATION. This Agreement and the other Loan Documents and the Fee Letter, dated as of May 23, 2002, between CNG and the Administrative Agent represent the agreement of the Borrowers, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents or the Fee Letter. 11.11. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF -------------- THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 11.12. SUBMISSION TO JURISDICTION; WAIVERS. Each Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Borrower at its address set forth in subsection 11.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any exemplary, punitive or consequential damages. 11.13. ACKNOWLEDGEMENTS. Each Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to such Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between 81 Administrative Agent and Lenders, on one hand, and such Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrowers and the Lenders. 11.14. WAIVERS OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE AGENT --------------------- AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 11.15. CONFIDENTIALITY. Each Lender agrees to keep confidential any written information (a) provided to it by or on behalf of the Borrowers or any of their Subsidiaries pursuant to or in connection with this Agreement or (b) obtained by such Lender based on a review of the books and records of the Borrowers or any of their Subsidiaries; PROVIDED that nothing herein shall prevent any Lender from disclosing any such information (i) to the Administrative Agent or any other Lender for use in connection with the transactions contemplated by this Agreement and the other Loan Documents, (ii) to any Transferee or prospective Transferee which agrees to comply with the provisions of this subsection, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors for use in connection with the transactions contemplated by this Agreement and the other Loan Documents, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender or as shall be required pursuant to any Requirement of Law, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) in connection with any litigation to which such Lender is a party, (vii) which has been publicly disclosed other than in breach of this Agreement, or (viii) to the extent reasonably necessary, in connection with the exercise of any remedy hereunder; PROVIDED, however, that, if such Lender or any Person to whom such Lender supplies any such information becomes legally compelled to disclosed any such information or otherwise intends to disclose any such information in any of the circumstances contemplated by clauses (iv), (v), (vi) or (vii) above, such Lender agrees to provide the Borrowers as promptly as practicable with prior written notice of such compelled or intended disclosure. 11.16. REFERENCE TO AND EFFECT ON THE EXISTING CREDIT AGREEMENT. On and after the date hereof, each reference to the "Credit Agreement" in any of the Security Documents, the other Loan Documents and all other agreements, documents and instruments delivered by all or one or more of the Borrower, the Lender, the Administrative Agent and any other Person shall mean and be a reference to this Agreement. Except as specifically amended hereby, the Existing Credit Agreement shall remain in full force and in effect in the form of this Agreement, and is hereby ratified and confirmed in such form. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. COLE VISION CORPORATION By: ------------------------------------- Name: Title: THINGS REMEMBERED, INC. By: ------------------------------------- Name: Title: PEARLE, INC. By: ------------------------------------- Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent By: ------------------------------------- Name: Title: CIBC INC. By: ------------------------------------- Name: Title: LEHMAN COMMERCIAL PAPER INC. By: ------------------------------------- Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By: ------------------------------------- Name: Title: KEYBANK NATIONAL ASSOCIATION By: ------------------------------------- Name: Title: FIFTH THIRD BANK By: ------------------------------------- Name: Title: Schedule I To Credit Agreement ------------------- REVOLVING CREDIT COMMITMENTS AND ADDRESSES Revolving Credit Commitments ---------------------------- CIBC INC. $16,666,666.67 425 Lexington Avenue, 7th Floor New York, NY 10017 Attention: Agency Services Telecopy: 212-856-3763 LEHMAN COMMERCIAL PAPER INC. $16,666,666.67 745 Seventh Ave. 19th Floor New York, NY 10019 WACHOVIA BANK, NATIONAL ASSOCIATION $16,666,666.66 PA4821 1345 Chestnut Street, 3 Widener Philadelphia, PA 19101 KEYBANK NATIONAL ASSOCIATION $10,000,000.00 127 Public Square Mail Code: OH-01-27-0606 Cleveland, OH 44114 FIFTH THIRD BANK $15,000,000.00 1404 East 9th Street Cleveland, OH 44114 Schedule II to Credit Agreement APPLICABLE MARGIN CALCULATION FOR REVOLVING CREDIT LOANS
Abr Loans Eurodollar Loan Leverage Ratio Applicable Margin Applicable Margin -------------- ----------------- ----------------- Greater than 3.25 to 1.00 1.25% 2.25% Greater than 2.75 to 1.00, but less than or equal to 3.25 to 1.00 1.00% 2.00% Less than or equal to 2.75 to 1.00 0.75% 1.75%
Notwithstanding the foregoing table, (a) during the period from and including the Closing Date until the date which is six month thereafter, the Applicable Margin in respect of Revolving Credit Loans shall equal (i) with respect to ABR Loans, 1.25% per annum and (ii) with respect to Eurodollar Loans 2.25% per annum, and (b) the Applicable Margin will be adjusted on each Adjustment Date after such period to the applicable rate per annum set forth above under the heading "ABR Loans Applicable Margin" or "Eurodollar Loans Applicable Margin" minus .25% per annum in the event that, immediately preceding such Adjustment Date, (i) the senior unsecured long-term debt of CNG shall be rated at least "BBB-" by Standard & Poor's, a division of McGraw-Hill, Inc., and (ii) the Administrative Agent shall have received written notice of such rating from a Borrower. COMMITMENT FEES Percentage of Revolving Credit Commitments Used Commitment Fees ------------------------------ --------------- Greater than 33.3% 0.50% Less than or equal to 33.3% 0.75%