Deed of Trust, Security Agreement And Assignment of Leases And Rents

EXHIBIT 10.3


[ North Carolina ]

( COLLATERAL IS OR INCLUDES FIXTURES )

DEED OF TRUST, SECURITY AGREEMENT AND

ASSIGNMENT OF LEASES AND RENTS


THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS dated as of April 29, 2003 is made by THE COLOR WORKS, INC., a North Carolina corporation (" Grantor" ), whose address is c/o Bush Industries, Inc., Mason Drive Industrial Park, P.O. Box 460, Jamestown, New York 14702, to C. Patrick Crosby, Jr., Esq., a North Carolina resident, (" Trustee" ) whose address is c/o Kilpatrick Stockton LLP, 1001 West Fourth Street, Winston-Salem, NC 27101-2400, for the use and benefit of JPMORGAN CHASE BANK, a New York banking corporation, as administrative agent for the Lenders referred to below (in such capacity, " Beneficiary" ), whose address is 270 Park Avenue, New York, New York 10017. References to this " Deed of Trust" shall mean this instrument and any and all renewals, modifications, amendments, supplements, restatements, extensions, consolidations, substitutions, spreaders and replacements of this instrument.

Background

A. Bush Industries, Inc. (the " Company" ) has entered into that certain Credit and Guarantee Agreement, dated as of June 26, 1997 (as the same may be amended, supplemented, restated or otherwise modified from time to time, the " Credit Agreement" ) among the Company, each Foreign Subsidiary Borrower (as defined in the Credit Agreement) (together with the Company, the " Borrowers" ), the several banks and other financial institutions from time to time parties thereto (the " Lenders" ) and Beneficiary, as amended by a First Amendment, dated as of August 17, 1998, among the Borrowers, the Lenders and Beneficiary, a Second Amendment, dated as of December 31, 1998, among the Borrowers, the Lenders and the Beneficiary, a Third Amendment and Consent, dated as of March 31, 1999, among the Borrowers, the Lenders and Beneficiary, a Fourth Amendment, dated as of February 29, 2000, among the Borrowers, the Lenders and Beneficiary, a Fifth Amendment, dated as of May 2, 2000, among the Borrowers, the Lenders and Beneficiary, a Sixth Amendment, dated as of December 28, 2001, among the Borrowers, the Lenders and Beneficiary, and a Seventh Amendment, dated as of February 28, 2003, among the Borrowers, the Lenders and Beneficiary. The terms of the Credit Agreement are incorporated by reference in this Deed of Trust as if the terms thereof were fully set forth herein.

Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement. References in this Deed of Trust to the " Default Rate" shall mean the interest rate provided for in subsection 6.1(e) of the Credit Agreement.

B. Grantor is the owner of the parcel(s) of real property described on Schedule A attached hereto (such real property, together with all of the buildings, improvements, structures and fixtures now or subsequently located thereon (the " Improvements" ), being collectively referred to as the " Real Estate" ).

C. Pursuant to the terms and conditions of the Credit Agreement, the Lenders have agreed to make certain Loans to the Borrowers. The maximum aggregate principal amount of the Loans outstanding at any one time shall not exceed $163,000,000.


D. Pursuant to the Domestic Subsidiary Guarantee dated as of June 26, 1997 made by Grantor and certain of the Company' s subsidiaries in favor of Beneficiary for the benefit of Lenders (as the same may be amended, supplemented, restated or otherwise modified from time to time, the " Guarantee" ), Grantor has guaranteed payment of all indebtedness and obligations of the Borrowers under the Credit Agreement and the other Loan Documents.


E. The Borrowers are members of an affiliated group of companies that include Grantor. Grantor will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement.


F. The obligations of the Lenders to make the Loans, to issue any Letters of Credit and to enter into any Hedge Agreements are conditioned upon, among other things, the execution and delivery by Grantor of this Deed of Trust.


Granting Clauses

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor agrees that to secure the following (the " Obligations" ):


(a) the due and punctual payment and performance by Grantor of any and all of its obligations and liabilities, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with the Guarantee, including, without limitation, payment of the unpaid principal of and interest on the Loans, the Reimbursement Obligations and all other obligations and liabilities of any Borrower to Beneficiary or the Lenders (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, the Guarantee, the Notes, the Letters of Credit, the Applications, the other Loan Documents or any other document made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to Beneficiary or to the Lenders that are required to


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be paid by any Borrower or the Guarantors pursuant to the terms of the Credit Agreement, the Guarantee, this Deed of Trust or any other Loan Document);


(b) the payment of all other obligations and liabilities of Grantor, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of or in connection with the Credit Agreement, the Guarantee, this Deed of Trust, any other document or guaranty securing payment of the Obligations (the " Security Documents" ) and any amendments, supplements, extensions, renewals, restatements, replacements or modifications of any of the foregoing (the Credit Agreement, the Guarantee, the Notes, the Letters of Credit, this Deed of Trust and the other Security Documents and all other documents and instruments from time to time evidencing, securing or guaranteeing the payment and performance of the Obligations, as any of the same may be amended, supplemented, extended, renewed, restated, replaced or modified from time to time, are collectively referred to as the " Loan Documents" ), in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to Beneficiary or to the Lenders that are required to be paid by such Guarantor pursuant to the Guarantee or any other Loan Document); and


(c) the performance and observance of each obligation, term, covenant and condition to be performed or observed by Grantor under, in connection with or pursuant to the provisions of the Credit Agreement, the Notes, the Letters of Credit, the Guarantee, the Hedge Agreements, this Deed of Trust and any of the other Security Documents or any of the other Loan Documents to which Grantor is a party;


GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO TRUSTEE, IN TRUST WITH POWER OF SALE FOR THE USE AND BENEFIT OF BENEFICIARY, AND GRANTS BENEFICIARY AND TRUSTEE A SECURITY INTEREST IN:


(A) the Real Estate;


(B) all the estate, right, title, claim or demand whatsoever of Grantor, in possession or expectancy, in and to the Real Estate or any part thereof;


(C) all right, title and interest of Grantor in, to and under all easements, rights of way, gores of land, streets, ways, alleys, passages, sewer rights, waters, water courses, water and riparian rights, development rights, air rights, mineral rights and all estates, rights, titles, interests, privileges, licenses, tenements, hereditaments and appurtenances belonging, relating or appertaining to the Real Estate, and any reversions, remainders, rents, issues, profits and revenue thereof and all land lying in the bed of any street, road or avenue, in front of or adjoining the Real Estate to the center line thereof;


(D) all of the fixtures, chattels, business machines, machinery, apparatus, equipment, furnishings and fittings, and all appurtenances and additions thereto and substitutions or replacements thereof (together with, in each case, attachments,

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components, parts and accessories) currently owned or subsequently acquired by Grantor and now or subsequently attached to, or contained in or used or usable in any way in connection with any operation or letting of the Real Estate, including but without limiting the generality of the foregoing, all screens, awnings, shades, blinds, curtains, draperies, artwork, carpets, rugs, storm doors and windows, furniture and furnishings, heating, electrical, and mechanical equipment, lighting, switchboards, plumbing, ventilating, air conditioning and air-cooling apparatus, refrigerating, and incinerating equipment, escalators, elevators, loading and unloading equipment and systems, stoves, ranges, laundry equipment, cleaning systems (including window cleaning apparatus), telephones, communication systems (including satellite dishes and antennae), televisions, computers, sprinkler systems and other fire prevention and extinguishing apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of every kind and description (all of the foregoing in this paragraph (D) being referred to as the " Equipment" );


(E) all right, title and interest of Grantor in and to all substitutes and replacements of, and all additions and improvements to, the Real Estate and the Equipment, subsequently acquired by or released to Grantor or constructed, assembled or placed by Grantor on the Real Estate, immediately upon such acquisition, release, construction, assembling or placement, including, without limitation, any and all building materials whether stored at the Real Estate or offsite, and, in each such case, without any further mortgage, conveyance, assignment or other act by Grantor;

(F) all right, title and interest of Grantor in, to and under all leases, subleases, underlettings, concession agreements, management agreements, licenses and other agreements relating to the use or occupancy of the Real Estate or the Equipment or any part thereof, now existing or subsequently entered into by Grantor and whether written or oral and all guarantees of any of the foregoing (collectively, as any of the foregoing may be amended, restated, extended, renewed or modified from time to time, the " Leases" ), and all rights of Grantor in respect of cash and securities deposited thereunder and the right to receive and collect the revenues, income, rents, issues and profits thereof, together with all other rents, royalties, issues, profits, revenue, income and other benefits arising from the use and enjoyment of the Trust Property (as defined below) (collectively, the " Rents" );


(G) all right, title and interest of Grantor in and to all trade names, trade marks, logos, copyrights, good will and books and records relating to or used in connection with the operation of the Real Estate or the Equipment or any part thereof; all general intangibles related to the operation of the Improvements now existing or hereafter arising;

(H) all of Grantor' s interest in, to and under insurance policies now or subsequently obtained by Grantor relating to the Real Estate or Equipment and Grantor' s interest in and to all proceeds of any such insurance policies (including title insurance policies) including the right to collect and receive such proceeds, subject to the provisions relating to insurance generally set forth below; and all awards and other compensation,


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including the interest payable thereon and the right to collect and receive the same, made to the present or any subsequent owner of the Real Estate or Equipment for the taking by eminent domain, condemnation or otherwise, of all or any part of the Real Estate or any easement or other right therein;

(I) all right, title and interest of Grantor in and to (i) all contracts from time to time executed by Grantor or any manager or agent on its behalf relating to the ownership, construction, maintenance, repair, operation, occupancy, sale or financing of the Real Estate or Equipment or any part thereof and all agreements or options relating to the purchase or lease of any portion of the Real Estate or any property which is adjacent or peripheral to the Real Estate, together with the right to exercise such options and all leases of Equipment, (ii) all consents, licenses, building permits, certificates of occupancy and other governmental approvals relating to construction, completion, occupancy, use or operation of the Real Estate or any part thereof and (iii) all drawings, plans, specifications and similar or related items relating to the Real Estate;

(J) any and all monies now or subsequently on deposit for the payment of real estate taxes or special assessments against the Real Estate or for the payment of premiums on insurance policies covering the foregoing property or otherwise on deposit with or held by Beneficiary as provided in this Deed of Trust; all capital, operating, reserve or similar accounts held by or on behalf of Grantor and related to the operation of the Trust Property, whether now existing or hereafter arising and all monies held in any of the foregoing accounts and any certificates or instruments related to or evidencing such accounts; and


(K) all proceeds, both cash and noncash, of the foregoing;


(All of the foregoing property and rights and interests now owned or held or subsequently acquired by Grantor and described in the foregoing clauses (A) through (E) are collectively referred to as the " Premises" , and those described in the foregoing clauses (A) through (K) are collectively referred to as the " Trust Property" ).


TO HAVE AND TO HOLD the Trust Property and the rights and privileges hereby granted unto Trustee, its successors and assigns for the uses and purposes set forth, until the Obligations are fully paid and fully performed.


Terms and Conditions


Grantor further represents, warrants, covenants and agrees with Trustee and Beneficiary as follows:

1. Warranty of Title . Grantor warrants that it has good record title in fee simple to the Premises and good title to the rest of the Trust Property, subject only to the matters that are set forth in Schedule B of the title insurance policy or policies being issued to Beneficiary to insure the lien of this Deed of Trust and any other lien or encumbrance as permitted by Section 10.5 of the Credit Agreement (the " Permitted Exceptions" ). Grantor shall


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warrant, defend and preserve such title and the lien of this Deed of Trust against all claims of all persons and entities.

2. Payment of Obligations . Grantor shall pay and perform the Obligations at the times and places and in the manner specified in the Guarantee and the other Loan Documents.

3. Requirements . (a) Grantor shall promptly comply, in all material respects, with, or cause to be complied with, and conform to all present and future laws, statutes, codes, ordinances, orders, judgments, decrees, rules, regulations and requirements, and irrespective of the nature of the work to be done, of each of the United States of America, any State and any municipality, local government or other political subdivision thereof and any agency, department, bureau, board, commission or other instrumentality of any of them, now existing or subsequently created (collectively, " Governmental Authority" ) which has jurisdiction over the Trust Property and all covenants, restrictions and conditions now or later of record which may be applicable to any of the Trust Property, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction of any of the Trust Property, except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. All present and future laws, statutes, codes, ordinances, orders, judgments, decrees, rules, regulations and requirements of every Governmental Authority applicable to Grantor or to any of the Trust Property and all covenants, restrictions, and conditions which now or later may be applicable to any of the Trust Property are collectively referred to as the " Legal Requirements" .

(b) From and after the date of this Deed of Trust, Grantor shall not by act or omission permit any building or other improvement on any premises not subject to the lien created by this Deed of Trust to rely on the Premises or any part thereof or any interest therein to fulfill any Legal Requirement, and Grantor hereby assigns to Beneficiary any and all rights to give consent for all or any portion of the Premises or any interest therein to be so used. Grantor shall not by act or omission impair the integrity of any of the Real Estate as a single zoning lot separate and apart from all other premises. Grantor represents that each parcel of the Real Estate constitutes a legally subdivided lot, in compliance with all subdivision laws and similar Legal Requirements. Any act or omission by Grantor which would result in a violation of any of the provisions of this subsection shall be void.


4. Payment of Taxes and Other Impositions . (a) Promptly when due, Grantor shall pay and discharge all taxes of every kind and nature (including, without limitation, all real and personal property, income, franchise, withholding, transfer, gains, profits and gross receipts taxes), all charges for any easement or agreement maintained for the benefit of any of the Trust Property, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, vault taxes, and all other public charges even if unforeseen or extraordinary, imposed upon or assessed against or which may become a lien on any of the Trust Property, or arising in respect of the occupancy, use or possession thereof, together with any penalties or interest on any of the foregoing (all of the foregoing are collectively referred to as the " Impositions" ). Upon request by Beneficiary, Grantor shall deliver to Beneficiary (i) original or copies of receipted bills and cancelled checks evidencing payment


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of such Imposition if it is a real estate tax or other public charge and (ii) evidence acceptable to Beneficiary showing the payment of any other such Imposition. If by law any Imposition, at Grantor' s option, may be paid in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Grantor may elect to pay such Imposition in such installments and shall be responsible for the payment of such installments with interest, if any.


(b) Nothing herein shall affect any right or remedy of Trustee or Beneficiary under this Deed of Trust or otherwise, without notice or demand to Grantor, to pay any Imposition after the date such Imposition shall have become due and to add to the Obligations guaranteed by Grantor and secured by this Deed of Trust the amount so paid, together with interest from the time of payment at the Default Rate. Any sums paid by Trustee or Beneficiary in discharge of any Impositions shall be (i) a lien on the Premises secured hereby prior to any right or title to, interest in, or claim upon the Premises subordinate to the lien of this Deed of Trust, and (ii) payable on demand by Grantor to Trustee or Beneficiary, as the case may be, together with interest at the Default Rate as set forth above.


(c) Grantor shall have the right before any delinquency occurs to contest or object in good faith to the amount or validity of any Imposition by appropriate legal proceedings, but such right shall not be deemed or construed in any way as relieving, modifying, or extending Grantor' s covenant to pay any such Imposition at the time and in the manner provided in this Section unless (i) Grantor has given prior written notice to Beneficiary of Grantor' s intent so to contest or object to an Imposition, (ii) Grantor shall demonstrate to Beneficiary' s satisfaction that the legal proceedings shall operate conclusively to prevent the sale of the Trust Property, or any part thereof, to satisfy such Imposition prior to final determination of such proceedings and (iii) Grantor shall furnish a good and sufficient bond or surety as requested by and reasonably satisfactory to Beneficiary in the amount of the Impositions which are being contested plus any interest and penalty which may be imposed thereon and which could become a lien against the Real Estate or any part of the Trust Property.

5. Insurance . (a) Grantor shall maintain or cause to be maintained on all of the Premises:

(i) property insurance against loss or damage by fire, lightning, windstorm, tornado, water damage, flood, earthquake and by such other further risks and hazards as now are or subsequently may be covered by an " all risk" policy or a fire policy covering " special" causes of loss. The policy shall include building ordinance law endorsements and the policy limits shall be automatically reinstated after each loss, except for flood or earth movement or other coverage which has an annual aggregate limit of liability.

(ii) commercial general liability insurance under a policy including the " broad form CGL endorsement" (or which incorporates the language of such endorsement), covering all claims for personal injury, bodily injury or death, subject to standard exclusions of such policy, or property damage occurring on, in or about the Premises in an amount not less than $10,000,000 combined single limit with respect to injury and property damage relating to any one occurrence plus such excess limits as Beneficiary shall request from time to time;


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(iii) when and to the extent required by Beneficiary, insurance against loss or damage by any other risk commonly insured against by persons occupying or using like properties in the locality or localities in which the Real Estate is situated;

(iv) insurance against rent loss, extra expense or business interruption (and/or soft costs, in the case of new construction), if applicable, in amounts satisfactory to Beneficiary, but not less than one year' s gross rent or gross income;

(v) boiler and machinery property insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air conditioning and elevator equipment and escalator equipment, provided the Improvements contain equipment of such nature, and insurance against rent, extra expense, business interruption and soft costs, if applicable, arising from any such breakdown, in such amounts as are reasonably satisfactory to Beneficiary but not less than the lesser of $1,000,000 or 10% of the value of the Improvements;

(vi) if any portion of the Premises are located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, flood insurance in an amount satisfactory to Beneficiary, but in no event less than the maximum limit of coverage available under the National Flood Insurance Act of 1968, as amended; and

(vii) such other insurance in such amounts as Beneficiary may reasonably request from time to time.


(b) Each insurance policy (other than flood insurance written under the National Flood Insurance Act of 1968, as amended, in which case to the extent available) shall (i) provide that it shall not be cancelled, non-renewed or materially amended without 30-days' prior written notice to Beneficiary, except, in the event of cancellation for nonpayment of premium, then without 15-days' prior written notice to Beneficiary, and (ii) with respect to all property insurance, provide for deductibles not to exceed $100,000, contain a " Replacement Cost Endorsement" without any deduction made for depreciation and with no co-insurance penalty (or attaching an agreed amount endorsement satisfactory to Beneficiary), with loss payable solely to Beneficiary (modified, if necessary, to provide that proceeds in the amount of replacement cost may be retained by Beneficiary without the obligation to rebuild) as its interest may appear, without contribution, under a " standard" or " New York" Beneficiary clause acceptable to Beneficiary and be written by insurance companies having an A.M. Best Company, Inc. rating of A or higher and a financial size category of not less than XII, or otherwise as approved by Beneficiary. Liability insurance policies shall name Beneficiary (and Trustee, if Trustee shall so requires) as an additional insured and contain a waiver of subrogation against Beneficiary (and Trustee, if Trustee shall so request); all such policies shall indemnify and hold Beneficiary harmless from all liability claims occurring on, in or about the Premises and the adjoining streets, sidewalks and passageways. The amounts of each insurance policy and the form of each such policy shall at all times be reasonably satisfactory to Beneficiary. Each policy shall expressly provide that any proceeds which are payable to Beneficiary shall be paid by check payable to the order of Beneficiary only and requiring the endorsement of Beneficiary only. If any required


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insurance shall expire, be withdrawn, become void by breach of any condition thereof by Grantor or by any lessee of any part of the Trust Property or become void or unsafe by reason of the failure or impairment of the capital of any insurer, or if for any other reason whatsoever such insurance shall, in Beneficiary' s reasonable discretion, become unsatisfactory to Beneficiary, Grantor shall immediately obtain new or additional insurance satisfactory to Beneficiary. Grantor shall not take out any separate or additional insurance which is contributing in the event of loss unless it is properly endorsed and otherwise satisfactory to Beneficiary in all respects.


(c) Grantor shall deliver to Beneficiary an original of each insurance policy required to be maintained, or a certificate of such insurance acceptable to Beneficiary, together with a copy of the declaration page for each such policy. Grantor shall (i) pay as they become due all premiums for such insurance, and (ii) not later than 15 days prior to the expiration of each policy to be furnished pursuant to the provisions of this Section, deliver a renewed policy or policies, or duplicate original or originals thereof, marked " premium paid," or accompanied by such other evidence of payment satisfactory to Beneficiary with standard non-contributory mortgage clauses in favor of and acceptable to Beneficiary. Upon request of Beneficiary, Grantor shall use best efforts to cause its insurance underwriter or broker to certify to Beneficiary in writing that all the requirements of this Deed of Trust governing insurance have been satisfied


(d) If Grantor is in default of its obligations to insure or deliver any such prepaid policy or policies, then Beneficiary, at its option and without notice, may effect such insurance from year to year, and pay the premium or premiums therefor, and Grantor shall pay to Beneficiary on demand such premium or premiums so paid by Beneficiary with interest from the time of payment at the Default Rate and the same shall be added to the Obligations guaranteed by Grantor and secured by this Deed of Trust and shall be collectible in the same manner as the Obligations guaranteed by Grantor and secured by this Deed of Trust.


(e) Grantor shall increase the amount of property insurance required to equal 100% replacement cost pursuant to the provisions of this Section at the time of each renewal of each policy (but not later than 12 months from the date of this Deed of Trust and each successive 12 month period to occur thereafter) by using the F.W. Dodge Building Index to determine whether there shall have been an increase in the replacement value since the most recent adjustment and, if there shall have been such an increase, the amount of insurance required shall be adjusted accordingly


(f) Grantor promptly shall comply with and conform to (i) all provisions of each such in ...