Exhibit 10.1
 

THIRD AMENDED AND RESTATED LOAN AGREEMENT
AMONG
CRAFTMADE INTERNATIONAL, INC.,
THE FROST NATIONAL BANK,
As Administrative Agent,
AND
THE OTHER LENDERS PARTY HERETO
December 31, 2007
 

 

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TABLE OF CONTENTS

                  Section       Page  
 
                ARTICLE I   DEFINITIONS     1  
 
  1.1   Definitions     1  
 
  1.2   Additional Definitions     14  
 
  1.3   Construction     15  
 
                ARTICLE II   LOANS     15  
 
  2.1   Revolving Loans     15  
 
  2.2   Borrowings     16  
 
  2.3   Repayment     16  
 
  2.4   Voluntary Prepayments     16  
 
  2.5   Mandatory Prepayments     16  
 
  2.6   Termination and Reduction of Commitments     16  
 
  2.7   Interest on Loans Generally     16  
 
  2.8   Computations     17  
 
  2.9   Interest After an Event of Default     17  
 
  2.10   Payments Generally     17  
 
  2.11   Sharing of Payments     19  
 
  2.12   Booking the Loans     19  
 
  2.13   Collateral     19  
 
  2.14   Commitment Fee     20  
 
                ARTICLE III   TAXES, YIELD PROTECTION AND ILLEGALITY     20  
 
  3.1   Taxes     20  
 
  3.2   Illegality     21  
 
  3.3   Inability to Determine Rates     22  
 
  3.4   Increased Cost and Reduced Return; Capital Adequacy; Reserves on        
 
      LIBOR Rate Loans     22  
 
  3.5   Matters Applicable to all Requests for Compensation     23  
 
  3.6   Replacement of Lenders     23  
 
  3.7   Survival     23  
 
                ARTICLE IV   CONDITIONS PRECEDENT     24  
 
  4.1   Conditions Precedent to Initial Revolving Loan     24  
 
  4.2   Conditions Precedent to all Revolving Loans     25  
 
                ARTICLE V   AFFIRMATIVE COVENANTS     26  
 
  5.1   General Covenants     26  
 
  5.2   Accounts, Reports and Other Information     27  
 
  5.3   Inspection     28  
 
  5.4   Compliance with ERISA     29  
 
  5.5   Maintenance of Priority of Bank Liens     29  
 
  5.6   Indemnity     29  
 
  5.7   Use of Proceeds     30  

 

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                  Section       Page  
 
                ARTICLE VI   NEGATIVE COVENANTS     30  
 
  6.1   Nature of Business     30  
 
  6.2   Liquidations, Mergers, Consolidations     30  
 
  6.3   Disposition of Assets     30  
 
  6.4   Liens     31  
 
  6.5   Debt     31  
 
  6.6   Change in Management     31  
 
  6.7   Loans     31  
 
  6.8   Transactions with Affiliates     31  
 
  6.9   Burdensome Agreements     31  
 
  6.10   Acquisition of Assets     31  
 
  6.11   Loans and Investments     32  
 
  6.12   ERISA     32  
 
  6.13   Assignment     32  
 
  6.14   Business     32  
 
  6.15   Stock Repurchases     32  
 
  6.16   Debt to Worth Ratio     33  
 
  6.17   Fixed Charge Coverage Ratio     33  
 
                ARTICLE VII   REPRESENTATIONS AND WARRANTIES     33  
 
  7.1   Organization and Qualification     33  
 
  7.2   Financial Statements     33  
 
  7.3   Compliance With Laws and Other Matters     34  
 
  7.4   Litigation     34  
 
  7.5   Title to Properties     34  
 
  7.6   Authorization; Validity     34  
 
  7.7   Taxes     34  
 
  7.8   Use of Proceeds     34  
 
  7.9   Possession of Franchises, Licenses, Etc     35  
 
  7.10   Leases     35  
 
  7.11   Disclosure     35  
 
  7.12   ERISA     35  
 
  7.13   Regulatory Acts     35  
 
  7.14   Solvency     35  
 
  7.15   Environmental Matters     36  
 
  7.16   Survival of Representations and Warranties, Etc     36  
 
                ARTICLE VIII   EVENTS OF DEFAULT     36  
 
  8.1   Default     36  
 
  8.2   Remedies     38  
 
  8.3   Application of Funds     38  
 
                ARTICLE IX   ADMINISTRATIVE AGENT     39  
 
  9.1   Appointment and Authorization of Administrative Agent     39  
 
  9.2   Delegation of Duties     40  
 
  9.3   Liability of Administrative Agent     40  
 
  9.4   Reliance by Administrative Agent     40  
 
  9.5   Notice of Default     41  

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                  Section       Page  
 
               
 
  9.6   Credit Decision; Disclosure of Information by Administrative Agent    
41  
 
  9.7   Indemnification of Administrative Agent     41  
 
  9.8   Administrative Agent in its Individual Capacity     42  
 
  9.9   Successor Administrative Agent     42  
 
  9.10   Administrative Agent May File Proofs of Claim     43  
 
  9.11   Collateral Matters     43  
 
                ARTICLE X   MISCELLANEOUS     44  
 
  10.1   Notices     44  
 
  10.2   Expenses     44  
 
  10.3   Waivers     44  
 
  10.4   Determinations by Administrative Agent and Lenders     45  
 
  10.5   Set-Off     45  
 
  10.6   Assignment     45  
 
  10.7   Amendment and Waiver     47  
 
  10.8   Confidentiality     47  
 
  10.9   Counterparts     48  
 
  10.10   Severability     48  
 
  10.11   Interest and Charges     48  
 
  10.12   Replacement of Lenders     49  
 
  10.13   Exception to Covenants     49  
 
  10.14   USA Patriot Act Notice     49  
 
  10.15   Amendment and Restatement of Existing Loan Agreement     50  
 
  10.16   GOVERNING LAW     50  
 
  10.17   WAIVER OF JURY TRIAL     50  
 
  10.18   ENTIRE AGREEMENT     50  
 
                SIGNATURES         S-l  

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EXHIBITS

     
Exhibit A
  Revolving Note
Exhibit B
  Revolving Loan Notice
Exhibit C
  Security Agreement — Borrower
Exhibit D
  Security Agreement — Subsidiary
Exhibit E
  Compliance Certificate
Exhibit F
  Notice of Final Agreement
Exhibit G
  Assignment Agreement
Exhibit H
  Guaranty Agreement
Exhibit I
  Borrowing Base Certificate
 
   
Schedule 2.1
  Commitments; Pro Rata Shares
Schedule 6.4
  Existing Liens
Schedule 6.5
  Existing Debt
Schedule 6.11
  Existing Investments
Schedule 7.1
  Subsidiaries
Schedule 7.4
  Existing Litigation
Schedule 10.1
  Notice Addresses

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THIRD AMENDED AND RESTATED LOAN AGREEMENT
     THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT is dated as of December 31,
2007 (this agreement, together with all amendments and restatements, this
“Agreement”), among CRAFTMADE INTERNATIONAL, INC., a Delaware corporation
(“Borrower”), THE FROST NATIONAL BANK, as Administrative Agent, and each lender
from time to time party hereto (singly, a “Lender” and collectively, the
“Lenders”).
BACKGROUND
     A. Borrower and The Frost National Bank (“Frost”) are parties to that
certain Second Amended and Restated Loan Agreement, dated as of September ___,
2006, which amended and restated that certain Amended and Restated Loan
Agreement, dated as of October 31, 2005 (said Second Amended and Restated Loan
Agreement, as amended through the date hereof, the “Existing Loan Agreement”).
     B. Borrower has requested (a) that Frost increase the commitment under the
Existing Loan Agreement to $50,000,000, subject to Frost obtaining commitments
from other banks for $30,000,000, and (b) certain other changes to the covenants
and terms set forth in the Existing Loan Agreement.
     C. It is the intent of the parties hereto (a) that this Agreement does not
constitute a novation of rights, obligations and liabilities of the respective
parties existing under the Existing Loan Agreement and the other Loan Documents
(as defined in the Existing Loan Agreement) or evidence payment of all or any
such obligations and liabilities, and such rights, obligations and liabilities
shall continue and remain outstanding and (b) that this Agreement amend and
restate in its entirety the Existing Loan Agreement.
AGREEMENT
     In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration, receipt of which is acknowledged by
the parties hereto, the parties hereto agree that the Existing Loan Agreement is
hereby amended and restated in its entirety as follows:
ARTICLE I
DEFINITIONS
     1.1 Definitions. For purposes of this Agreement:
     “Administrative Agent” means Frost in its capacity as administrative agent
under any of the Loan Documents, or any successor administrative agent.
     “Administrative Agent’s Office” means Administrative Agent’s address and,
as appropriate, account as set forth on Schedule 10.1, or such other address or
account as Administrative Agent may from time to time notify Borrower and
Lenders.

 

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     “Affiliate” means any Person that directly, or indirectly, through one or
more intermediaries, Controls or is Controlled By or is Under Common Control
with any other Person.
     “Aggregate Commitments#148; means the sum of all Commitments of all
Lenders.
     “Agreement Date” means the date of this Agreement.
     “Applicable Law” means (a) in respect of any Person, all provisions of Laws
and orders of Governmental Authorities applicable to such Person and its
properties, including, without limiting the foregoing, all orders and decrees of
all Governmental Authorities and arbitrators in proceedings or actions to which
the Person in question is a party, and (b) in respect of contracts relating to
interest or finance charges that are made or performed in the State of Texas,
“Applicable Law” means the Laws of the United States of America, including
without limitation 12 U.S.C. §§85 and 86, and any other statute of the United
States of America now or at any time hereafter prescribing the maximum rates of
interest on loans and extensions of credit, and the Laws of the State of Texas,
and any other Laws of the State of Texas now or at any time hereafter
prescribing maximum rates of interest on loans and extensions of credit.
     “Applicable Margin” means a per annum percentage equal to 1.50.
     “Assignment Agreement” means an Assignment Agreement substantially in the
form of Exhibit G.
     “Attorney Costs” means and includes all fees, expenses and disbursements of
any law firm or other external counsel and, without duplication, the allocated
cost of internal legal services and all expenses and disbursements of internal
counsel.
     “Auditors” means independent certified public accountants selected by
Borrower and reasonably acceptable to Administrative Agent and Required Lenders.
     “Authorized Signatory” means such senior personnel of Borrower, any
Subsidiary of Borrower or an Obligor as may be duly authorized and designated in
writing by Borrower, such Subsidiary or such Obligor to execute documents,
agreements and instruments on behalf of Borrower, such Subsidiary or such
Obligor.
     “Bank Liens” means Liens in favor of Administrative Agent or any Lender
securing all or any of the Obligations, including, but not limited to, rights in
any Collateral created in favor of Administrative Agent or any Lender, whether
by mortgage, pledge, hypothecation, assignment, transfer, or other granting or
creation of Liens.
     “Borrowing Base” means, as of any date, an amount equal to the sum of
(a) 80% of aggregate Eligible Accounts on such date, and (b) 55% of aggregate
Eligible Inventory on such date; provided, however, the outstanding amount
advanced against Eligible Inventory at any time shall not exceed 50% of the
total outstanding Revolving Loans.
     “Borrowing Base Certificate” means the Borrowing Base Certificate, duly
completed and executed by the chief executive officer, the chief financial
officer, or another senior financial officer of Borrower, substantially in the
form of Exhibit I.

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     “Business Day” means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where Administrative Agent’s office is located and, if such
day relates to any LIBOR Rate Loan, means any such day on which dealings in
Dollar deposits are conducted by and between banks in the applicable offshore
Dollar interbank market.
     “Capital Leases” means capital leases and subleases, as defined in the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 13, dated November 1976, as amended.
     “CM Real Estate” means CM Real Estate, LLC, a Texas limited liability
company, and wholly-owned direct Subsidiary of Borrower.
     “Code” means the Uniform Commercial Code as in effect in Texas.
     “Collateral” means any assets of any Person in which at any time
Administrative Agent shall be granted a Bank Lien to secure the Obligations.
     “Commitment” means each Lender’s obligation to make Revolving Loans to
Borrower pursuant to Section 2.1, in the aggregate principal amount not to
exceed the amount set forth on Schedule 2.1 or in the most recent Assignment
Agreement to which such Lender is a party.
     “Commitment Letter” means that certain commitment letter, dated December 6,
2007, from Frost to Borrower.
     “Compliance Certificate” means a compliance certificate, substantially in
the form of Exhibit E.
     “Contingent Debt” means, for any Person:
     (a) guarantees, endorsements (other than endorsements of negotiable
instruments for collection in the ordinary course of business) and other
contingent liabilities (whether direct or indirect) in connection with the
obligations of any other Person;
     (b) obligations under any contract providing for the making of loans,
advances or capital contributions to any other Person, or for the purchase of
any property from any other Person, in each case in order to enable such other
Person primarily to maintain working capital, net worth or any other balance
sheet condition or to pay Debts, Dividends or expenses;
     (c) obligations under any contract to rent or lease (as lessee) any real or
personal property (other than operating leases) if such contract (or any related
document) provides that the obligation to make payments thereunder is absolute
and unconditional under conditions not customarily found in commercial leases
then in general use or requires that the lessee purchase or otherwise acquire
securities or obligations of the lessor;

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     (d) obligations in respect of letters of credit; and
     (e) obligations under any other contract which, in economic effect, is
substantially equivalent to a guaranty, including but not limited to “keep well”
or “capital maintenance” agreements.
     “Control” or “Controlled By” or “Under Common Control” means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); provided that, in any event any Person which beneficially owns,
directly or indirectly, 10% or more (in number of votes) of the securities
having ordinary voting power for the election of directors of a corporation or
managers of a limited liability company or other governance board of an entity
shall be conclusively presumed to control such corporation or limited liability
company.
     “Debt” means, at any time, for any Person, (a) Capital Leases,
(b) Contingent Debt, (c) debt created, issued, incurred or assumed for money
borrowed or for the deferred purchase price of property purchased, (d) all debt,
obligations and liabilities secured by any Lien upon any property owned by such
Person, even though it has not assumed or become liable for the payment of same,
and (e) liabilities in respect of unfunded vested benefits under any Plans.
     “Debt to Worth Ratio” means, as of any date of determination, for Borrower
and its Subsidiaries on a consolidated basis determined in accordance with GAAP,
the ratio of (a) total liabilities (excluding any Subordinated Debt) as of such
date to (b) Tangible Net Worth as of such date.
     “Debtor Relief Laws” means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, fraudulent conveyance,
reorganization or similar debtor relief Laws affecting the rights of creditors
generally from time to time in effect.
     “Default” means any of the events specified in Section 8.1 that would, with
the giving of notice or the passage of time, become an Event of Default.
     “Default Rate” means a simple per annum interest rate equal to the lesser
of (a) the LIBOR Rate in effect at such time, plus 6.50%, and (b) the Highest
Lawful Rate.
     “Defaulting Lender” means any Lender that (a) has failed to fund any
portion of a Revolving Loan required to be funded by it hereunder within one
Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to Administrative Agent or any other Lender any
other amount required to be paid by it hereunder within one Business Day of the
date when due, unless the subject of a good faith dispute, or (c) has been
deemed insolvent or become the subject of a proceeding under Debtor Relief Law.
     “Disposition” and “Dispose” mean any sale, lease, abandonment, transfer,
disposal, exchange or other transfer of any ownership or leasehold interest in
or control of any asset.
     “Dividends” means, with respect to any Person, any dividend on any class of
its capital stock or other equity interest now or hereafter outstanding, any
distribution of cash or property to owners of any shares of such stock or other
equity interest.

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     “Dollars” and the sign “$” mean lawful money of the United States of
America.
     “Eligible Accounts” means, at any time, an amount equal to the aggregate
net invoice or ledger amount owing on all trade accounts receivable of Borrower
and any other Obligor for goods sold or leased or services rendered in the
ordinary course of business, in which the Administrative Agent has a perfected,
first priority Lien, after deducting (without duplication): (i) each such
account that is unpaid 60 days or more after the original invoice date thereof,
or, in the case of Lowe’s, 90 days or more after the original invoice date
thereof, or in the case of Woodard, 60 days or more after the due date set forth
in the original invoice thereof or 180 days or more after the original invoice
date thereof, (ii) the amount of all discounts, allowances, rebates, credits and
adjustments to such accounts, (iii) the amount of all contra accounts, setoffs,
defenses or counterclaims asserted by or available to the account debtors,
(iv) all accounts with respect to which good are placed on consignment or
subject to a guaranteed sale or other terms by reason of which payment by the
account debtor may be conditional, (v) all accounts with respect to which a
payment and/or performance bond has been furnished and that portion of any
account for or representing retainage, if any, until all prerequisites to the
immediately payment of retainage have been satisfied, (vi) all accounts owing by
account debtors for which there has been instituted a proceeding in bankruptcy
or reorganization under any Debtor Relief Laws, (vii) all accounts owing by any
Affiliates, (viii) all accounts in which the account debtor is the United States
or any department, agency or instrumentality of the United States, except to the
extent an Assignment of Claims Act and other applicable laws has been received
by Administrative Agent, (ix) all accounts due by any account debtor whose
principal place of business is located outside the Untied States of America and
its territories, (x) all accounts subject to any provision prohibiting
assignment or requiring notice of or consent to such assignment, (xi) that
portion of all account balances owing by any single account debtor which exceeds
25% of the aggregate of all accounts otherwise deemed eligible hereunder which
are owing by all account debtors, other than Lowe’s, (xii) all accounts subject
to a landlord’s Lien, whether contractual, statutory or otherwise, and
(xiii) any other accounts deemed unacceptable by Administrative Agent in its
sole and absolute discretion; provided, however, if more than 20% of the then
balance owing by any single account debtor does not qualify as an Eligible
Account under the foregoing provisions, then the aggregate amount of all
accounts owing by such account debtor shall be excluded from Eligible Accounts.
     “Eligible Inventory’’’ means as of any date, the aggregate value of all
inventory of raw materials and finished goods (excluding work in progress and
packaging materials, supplies and any advertising costs capitalized into
inventory) then owned by Borrower and any other Obligor and held for sale, lease
or other disposition in the ordinary course of its business, in which
Administrative Agent has a first priority lien, excluding (i) inventory which is
damaged, defective, obsolete or otherwise unsaleable in the ordinary course of
business, (ii) inventory which has been returned or rejected due to being
determined as being unsaleable, and (iii) inventory subject to any consignment
arrangement with any other person or entity. For purposes of this definition,
Eligible Inventory shall be valued at the lower of cost (excluding the cost of
labor) or market value.
     “Elitex” means the Elitex Development, Ltd., a Hong Kong company, and
wholly-owned direct Subsidiary of Trade Source International, Inc.

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     “Environment” means ambient air, surface water and groundwater (including
potable water, navigable water and wetlands), the land surface or subsurface
strata, real property improvements or as otherwise defined in any Environmental
Law.
     “Environmental Claim” means any written accusation, allegation, notice of
violation, claim, demand, order, directive, consent decree, cost recovery action
or other cause of action by, or on behalf of, any Governmental Authority or any
Person for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, property damage, natural
resource damages, nuisance, pollution, any adverse effect on the Environment
caused by any Hazardous Material, or for fines, penalties or restrictions,
resulting from or based upon: (a) the existence, or the continuation of the
existence, of a Release; (b) exposure to any Hazardous Material; (c) the
presence, use, handling, transportation, storage, treatment or disposal of any
Hazardous Material; or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
     “Environmental Law” means any and all applicable domestic Laws, judgments,
injunctions, notices or binding agreements issued, promulgated or entered into
by any Governmental Authority, relating in any way to the Environment,
preservation or reclamation of natural resources, the management, Release or
threatened Release of any Hazardous Material or to health and safety matters,
including the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. §§ 9601 et seq. (collectively “CERCLA”), the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq., the
Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977,
33 U.S.C. §§ 1251 et seq., the Clean Air Act of 1970, 42 U.S.C. §§ 7401 et seq.,
as amended, the Toxic Substances Control Act of 1976, 15 U.S.C. §§ 2601 et seq.,
the Occupational Safety and Health Act of 1970, as amended by 29 U.S.C. §§ 651
et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. §§ 11001 et seq., the Safe Drinking Water Act of 1974, as amended by 42
U.S.C. §§ 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
§§ 5101 et seq., and any similar or implementing Law.
     “Environmental Permit” means any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
     “ERISA” means the Employee Retirement Income Security Act of 1974.
     “Event of Default” means any of the events specified in Section 8.1,
provided there has been satisfied any requirement in connection with such event
for the giving of notice, or the lapse of time, or the happening of any further
specified condition, event or act.
     “Existing Debt” means the Debt of Borrower and its Subsidiaries existing on
the Agreement Date, which is described on Schedule 6.5, including renewals (but
not increases) thereof.

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     “Existing Investments” means the Investments of Borrower and its
Subsidiaries existing on the Agreement Date, which are described on
Schedule 6.11.
     “Existing Liens” means Liens against assets of Borrower and its
Subsidiaries existing on the Agreement Date, which are described on Schedule
6.4.
     “Existing Litigation” means the Litigation involving or otherwise affecting
Borrower and its Subsidiaries existing on the Agreement Date, which is described
on Schedule 7.4.
     “Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank on the Business Day next
succeeding such day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate (rounded upward,
if necessary, to a whole multiple of 1/100 of 1 %) charged to Frost on such day
on such transactions as determined by Administrative Agent.
     “Financial Statements” includes, but is not limited to, balance sheets,
profit and loss statements, reconciliations of capital and surplus and/or
partnership capital accounts, as appropriate, and statements of changes in
financial position or cash flow, prepared in comparative form with respect to
the corresponding period of the preceding fiscal year and prepared in accordance
with GAAP.
     “Fixed Charge Coverage Ratio” means, as of the end of any fiscal quarter
for Borrower and its Subsidiaries determined on a consolidated basis in
accordance with GAAP and calculated for the four fiscal quarters ending on such
date of calculation, the ratio of (a) net income after taxes, plus depreciation,
amortization, other non-cash charges and interest expense, plus net cash
proceeds received by Borrower from issuances of its capital stock, minus
non-cash credits, minus Stock Repurchases, minus Dividends, minus capital
expenditures, in each case for such four fiscal quarter period to (b) interest
expense and current portion of long-term debt, in each case for such four fiscal
quarter period.
     “Foreign Subsidiary” means Elitex, TSI Prime Asia and any other direct or
indirect Subsidiary of Borrower that is not organized under the laws of any
political subdivision of the United States.
     “Frost” means The Frost National Bank and its successors.
     “GAAP” means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board, which are applicable in the
circumstances as of the date in question, and the requisite that such principles
be applied on a consistent basis shall mean that the accounting principles
observed in a current period are comparable in all material respects to those
applied in a preceding period.

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     “Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative Governmental Authority, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
     “Guarantor” means each Subsidiary (whether now or hereafter existing) of
Borrower other than CM Real Estate (so long as (a) CM Real Estate engages in no
business or activity other than the ownership, operation, leasing and
maintenance of the real property located at 650 South Royal Lane, Coppell, Texas
and activities related thereto and (b) Borrower remains its sole member) and any
Foreign Subsidiary.
     “Guaranty” means a Guaranty Agreement, substantially in the form of
Exhibit H, duly executed by each Guarantor.
     “Hazardous Materials” means all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls (“PCBs”) or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
     “Highest Lawful Rate” means at the particular time in question the maximum
rate of interest which, under Applicable Law, any Lender is then permitted to
charge on the Obligations. If the maximum rate of interest which, under
Applicable Law, any Lender is permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to
Borrower. For purposes of determining the Highest Lawful Rate under Applicable
Law, the indicated rate ceiling shall be the lesser of (a)(i) the “weekly
ceiling”, as that expression is defined in Section 303.003 of the Texas Finance
Code, as amended, or (ii) if available in accordance with the terms thereof and
at Administrative Agent’s option after notice to Borrower and otherwise in
accordance with the terms of Section 303.103 of the Texas Finance Code, as
amended, the “annualized ceiling” and (b)(i) if the amount outstanding under
this Agreement is less than $250,000, 24% per annum, or (ii) if the amount under
this Agreement is equal to or greater than $250,000, 28% per annum.
     “Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or acquisition
of all or substantially all of the assets of any Person, (b) any direct or
indirect purchase or other acquisition of, or a beneficial interest in, any
equity interest or other securities of any other Person, or (c) any direct or
indirect loan, advance, or capital contribution to or investment in any other
Person, including without limitation the incurrence or sufferance of Debt or
accounts receivable of any other Person that are not current assets or do not
arise from Dispositions to that other Person in the ordinary course of business.
     “Investment Grade Securities” means and includes (a) securities that are
direct obligations of the United States of America, the payment of which is
backed by the full faith and

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credit of the United States of America, (b) debt securities or debt instruments
with a rating of A or higher by S&P, A2 or higher by Moody’s, Class (1) or
higher by NAIC or the equivalent of such rating by S&P, Moody’s or NAIC, or if
none of S&P, Moody’s and NAIC shall then exist, the equivalent of such rating by
any other nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among Borrower and its
wholly-owned Subsidiaries, and (c) any fund investing exclusively in investments
of the type described in clauses (a) and (b), which funds may also hold
immaterial amounts of cash pending investment and/or distribution.
     “Laws” means, collectively, all international, foreign, Federal, state and
local constitutions, statutes, treaties, rules, guidelines, regulations,
ordinances, codes and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any Governmental
Authority charged with the enforcement, interpretation or administration
thereof, and all applicable administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any Governmental
Authority, in each case whether or not having the force of law.
     “LIBOR Rate” means, for any date, the Wall Street Journal London Interbank
Offered Rate (as defined below) in effect on the 1 st day of each calendar month
and which will apply from the first day of the then current calendar month to
the last day of the then current calendar month.
     “LIBOR Rate Loan” means a Revolving Loan when it bears interest at a rate
based on the LIBOR Rate.
     “Lien” means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give or not to give any of the
foregoing), any conditional sale or other title retention agreement, any
financing or other lease in the nature thereof, and the filing of or agreement
to give any financing statement or other similar form of public notice under the
Laws of any jurisdiction.
     “Litigation” means any proceeding, claim, lawsuit and/or investigation
conducted or threatened by or before any Governmental Authority, including, but
not limited to, proceedings, claims, lawsuits, and/or investigations under or
pursuant to any environmental, occupational, safety and health, antitrust,
unfair competition, securities, Tax, or other Law, or under or pursuant to any
contract, agreement or other instrument.
     “Loan Documents” means this Agreement, the Notes, the Security Documents,
the Guaranties, and all other documents and instruments executed and delivered
to Administrative Agent and any Lender by any Obligor or any other Person in
connection with this Agreement.
     “Material Adverse Change or Effect” means (a) a material adverse change in,
or a material adverse effect upon, the operations, business, properties,
liabilities (actual or contingent), condition (financial or otherwise) or
prospects of Borrower or Borrower and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of any Obligor to perform its obligations
under any Loan Document to which it is a party; or (c) an adverse effect on any
Lien granted pursuant to a Security Agreement.

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     “Maximum Amount” means the maximum amount of interest which, under
Applicable Law, any Lender is permitted to charge on the Obligations.
     “Moody’s” means Moody’s Investors Service, Inc.
     “Notice of Final Agreement” means the Arbitration and Notice of Final
Agreement, substantially in the form of Exhibit F.
     “Obligations” means all obligations, indebtedness and liabilities under the
Loan Documents now or hereafter owing by Borrower or any other Person to or for
the benefit of Administrative Agent and Lenders, whether joint or several, fixed
or contingent, including principal, interest, expenses of collection and
foreclosure and attorneys’ fees that Borrower is responsible for pursuant to
Section 10.2. Without limiting the generality of the foregoing, “Obligations”
includes interest, fees and other amounts that would accrue after the
commencement by or against Borrower, any Affiliate thereof or any other Person
(other than Administrative Agent, any Lender or any Participant) of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest, fees and other amounts are
allowed claims in such proceeding.
     “Obligor” means Borrower, each Guarantor and each other Person liable for
performance of any of the Obligations or the property of which secures the
performance of any of the Obligations.
     “Off-Balance Sheet Liabilities” means, with respect to any Person as of any
date of determination thereof, without duplication and to the extent not
included as a liability on the consolidated balance sheet of such Person and its
Subsidiaries in accordance with GAAP: (a) with respect to any asset
securitization transaction (including any accounts receivable purchase facility)
(i) the unrecovered investment of purchasers or transferees of assets so
transferred and (ii) any other payment, recourse, repurchase, hold harmless,
indemnity or similar obligation of such Person or any of its Subsidiaries in
respect of assets transferred or payments made in respect thereof, other than
limited recourse provisions that are customary for transactions of such type and
that neither (x) have the effect of limiting the loss or credit risk of such
purchasers or transferees with respect to payment or performance by the obligors
of the assets so transferred nor (y) impair the characterization of the
transaction as a true sale under applicable Laws (including Debtor Relief Laws);
(b)the monetary obligations under any financing lease or so-called “synthetic,”
tax retention or off-balance sheet lease transaction which, upon the application
of any Debtor Relief Law to such Person or any of its Subsidiaries, would be
characterized as indebtedness; (c) the monetary obligations under any sale and
leaseback transaction which does not create a liability on the consolidated
balance sheet of such Person and its Subsidiaries; or (d) any other monetary
obligation arising with respect to any other transaction which (i) upon the
application of any Debtor Relief Law to such Person or any of its Subsidiaries,
would be characterized as indebtedness or (ii) is the functional equivalent of
or takes the place of borrowing but which does not constitute a liability on the
consolidated balance sheet of such Person and its Subsidiaries (for purposes of
this clause (d), any transaction structured to provide tax deductibility as
interest expense of any Dividend, coupon or other periodic payment will be
deemed to be the functional equivalent of a borrowing).

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     “Outstanding Amount” means, as of any date of determining, the aggregate
outstanding principal amount of all Revolving Loans, after giving effect to any
Revolving Borrowing and any principal payment of Revolving Loans occurring on
such date.
     “Payment Date” means the first Business Day of each calendar month during
the term of this Agreement.
     “PBGC” means the Pension Benefit Guaranty Corporation established under
ERISA.
     “Permitted Acquisition” means the acquisition of all or substantially all
of the assets or equity of another Person, so long as in each case (a) the prior
written consent of all Lenders is obtained with respect thereto, and (b) each
acquired entity executes and delivers, or causes to be executed and delivered,
each of the documents described in Section 6.10.
     “Permitted Debt” means (a) Existing Debt, (b) the Obligations, (c) trade
accounts payable and other similar obligations incurred in the ordinary course
of business, and (d) purchase money Debt not to exceed $1,500,000 in aggregate
amount outstanding at any time.
     “Permitted Investments” means (a) Investment Grade Securities, (b) Existing
Investments, (c) travel advances to employees in the ordinary course of
business, (d) equity contributions made by Borrower or Subsidiaries of Borrower
in existing Subsidiaries of Borrower that are either Guarantors, if such equity
contribution results in an increase in shareholders’ or members’ equity of such
Subsidiary receiving such equity contribution, and (e) other Investments of
Borrower and its Subsidiaries that do not, as at any date of determination,
exceed in the aggregate $500,000 (the value of each such Investment to be the
greater of (1) the then current market value of such Investment, and (2) the
purchase price of such Investment).
     “Permitted Liens” means (a) Bank Liens, (b) pledges or deposits made to
secure payment of workmen’s compensation, or to participate in any fund in
connection with workmen’s compensation, unemployment insurance, pensions, or
other social security programs (excluding any Liens in respect of ERISA),
(c) good-faith pledges or deposits made to secure performance of bids, tenders,
contracts (other than for the repayment of borrowed money), or leases, or to
secure statutory obligations, surety or appeal bonds, or indemnity, performance,
or other similar bonds in the ordinary course of business, (d) encumbrances
consisting of zoning restrictions, easements, or other restrictions on the use
of real property, none of which impair the use of such property by any Obligor
or any of its Subsidiaries in the operation of its business in any manner which
would have a Material Adverse Effect, (e) the following, if the validity or
amount thereof is being contested in good faith and by appropriate and lawful
proceedings for which Borrower has established adequate reserves and so long as
levy and execution thereon have been stayed and continue to be stayed: claims
and Liens for Taxes due and payable; claims and Liens upon, and defects of title
to, real or personal property or other legal process prior to adjudication of a
dispute on the merits, including mechanic’s and materialmen’s Liens; and adverse
judgments on appeal, (f) set-off, charge-back and other rights of depository and
collection banks and other financial institutions with respect to money or
instruments of Borrower or its Subsidiaries on depository with or in possession
of such institutions, (g) Liens arising under Capital Leases and purchase money
Debt permitted under this Agreement, and (h) Existing Liens.

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     “Person” means and includes an individual, a partnership, a joint venture,
a limited liability company, a corporation, a trust, an unincorporated
organization, and a government or any department, Governmental Authority, agency
or political subdivision thereof.
     “Plan” means any plan subject to Title IV of ERISA and maintained for
employees of any Obligor or any of its Subsidiaries, or of any member of a
controlled group of corporations, as the term “controlled group of corporations”
is defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of
which any Obligor or any of its Subsidiaries is a part.
     “Prime Rate” means for any day a per annum rate of interest equal to the
“prime rate,” as published in the “Money Rates” column of The Wall Street
Journal, from time to time, or if for any reason such rate is no longer
available, the rate established by Frost as its prime rate. The Prime Rate shall
change effective as of the date of any change as published in The Wall Street
Journal, or as established by Frost, as appropriate. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer of any Lender.
     “Prime Rate Loan” means a Revolving Loan when it bears interest at a rate
based on the Prime Rate.
     “Principal Office” means the principal office of a Lender specified on
Schedule 10.1.
     “Pro Rata Share” means, with respect to each Lender at any time, a fraction
(expressed as a percentage, carried out to the ninth decimal place), the
numerator of which is the amount of the Commitment of such Lender at such time
and the denominator of which is the amount of the Aggregate Commitments at such
time; provided that if the Commitment of each Lender has been terminated
pursuant to either Section 2.6 or 8.2, then the Pro Rata Share of each Lender
shall be determined based on the Pro Rata Share of such Lender immediately prior
to such termination and after giving effect to any subsequent assignments made
pursuant to the terms hereof. The initial Pro Rata Share of each Lender is set
forth opposite the name of such Lender on Schedule 2.1 or in the most recent
Assignment Agreement to which such Lender is a party.
     “Release” means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the Environment.
     “Remedial Action” means (a) “remedial action” as such term is defined in
CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the Environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the Environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.
     “Reportable Event” means a reportable event as defined in Section 4043(b)
of Title IV of ERISA or PBGC regulations issued thereunder, other than a
reportable event not subject to Section 4043’s notification requirements
pursuant to PGBC’s regulations.

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     “Required Lenders” means, as of any date of determination, Lenders having
100% of the Aggregate Commitments or, if the commitment of each Lender to make
its Pro Rata Share of Revolving Loans has been terminated pursuant to Sections
2.6 or 8.2, at least two Lenders holding in the aggregate 100% of the Total
Outstandings; provided that the Commitment of, and the portion of the Total
Outstandings held or deemed held by, any Defaulting Lender shall be excluded for
purposes of making a determination of Required Lenders.
     “Revolving Borrowing” means a borrowing by Borrower of Revolving Loans made
by a Lender pursuant to Section 2.1.
     “Revolving Loan Maturity Date” means the first to occur of (a) the
Termination Date, (b) the date the Aggregate Commitments are terminated pursuant
to either Section 2.6 or 8.2, or (c) the date the Obligations are accelerated.
     “Revolving Loan Notice” means a notice of a Revolving Borrowing request
pursuant to Section 2.2(a), substantially in the form of Exhibit B.
     “Revolving Note” means the promissory note made by Borrower in favor of a
Lender evidencing the Revolving Loans made by such Lender, substantially in the
form of Exhibit A.
     “S&P” means Standard & Poor’s Ratings Group, a division of McGraw-Hill,
Inc., a New York corporation.
     “Security Agreements” means the Security Agreement executed by Borrower
substantially in the form of Exhibit C, and each Security Agreement executed by
each Guarantor, in substantially the form of Exhibit D.
     “Security Documents” means, collectively, the Security Agreements and any
and all other documents, instruments, financing statements, public notices and
the like executed and delivered in connection with any of the Bank Liens or the
Collateral.
     “Senior Management” means each of James Ridings, Brad Heimann, and Marcus
Scrudder.
     “Solvent” means, with respect to any Person, that the fair value of the
assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.
     “Special Counsel” means the law firm of Winstead PC, or such other legal
counsel as Administrative Agent may select.

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     “Stock Repurchases” means, with respect to any Person, any retirement,
redemption, purchase, repurchase or other acquisition, directly or indirectly,
of any shares of any class of its capital stock or other equity interest now or
hereafter outstanding.
     “Subordinated Debt” means any indebtedness of Borrower or its Subsidiaries
which shall have been and continues to be validly and effectively subordinated
to the Obligations pursuant to a written agreement in form and substance
acceptable to Administrative Agent.
     “Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
Controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
     “Tangible Net Worth” means, as of any date of determination, for Borrower
and its Subsidiaries on a consolidated basis determined in accordance with GAAP,
an amount equal to total assets (excluding intangible assets) as of such date
less total liabilities (excluding Subordinated Debt) as of such date.
     “Taxes” means all taxes, assessments, fees or other charges from time to
time or at any time imposed by any Laws or by any Governmental Authority.
     “Termination Date” means December 31, 2009.
     “TSI Prime Asia” means TSI Prime Asia Limited, a wholly-owned direct
Subsidiary of Elitex.
     “Wall Street Journal London Interbank Offered Rate” means the London
Interbank Offered Rate (LIBOR) for one month quoted in the most recently
published issue of The Wall Street Journal in the “Money Rates” column, as
adjusted from time to time in Lender’s reasonable discretion for then applicable
reserve requirements, deposit insurance assessment rates and other regulatory
costs. If the Wall Street Journal London Interbank Offered Rate ceases to be
made available by the publisher, or any successor to the publisher of The Wall
Street Journal, the interest rate will be determined by using a comparable index
as determined by Lender in its sole discretion. If more than one Wall Street
Journal London Interbank Offered Rate for one month is quoted, the higher rate
shall apply. The Wall Street Journal London Interbank Offered Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer.
     “Woodard’ means Woodard-CM, LLC, a Delaware limited liability company.
     1.2 Additional Definitions. The following additional terms have the meaning
specified in the indicated Section or other provision of this Agreement:

      Term   Section/Provision
 
   
Agent-Related Person
  Section 9.3

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      Term   Section/Provision
 
   
Agreement
  Introductory Paragraph
Assignee
  Section 10.6(c)
Borrower
  Introductory Paragraph
Compensation Period
  Section 2.10(e)
Eurocurrency liabilities
  Section 3.4(c)
Existing Loan Agreement
  Background Paragraph
Indemnified Matters
  Section 5.6
Indemnified Taxes
  Section 3.1(a)
Indemnitees
  Section 5.6
Lender
  Introductory Paragraph
Participant
  Section 10.6(b)
Participation
  Section 10.6(b)
Properties
  Section 7.16(a)
Revolving Loans
  Section 2.1(a)

     1.3 Construction. Unless otherwise expressly provided in this Agreement or
the context requires otherwise, (a) the singular shall include the plural, and
vice versa, (b) words of a gender include the other gender, (c) all accounting
and financial terms shall be construed in accordance with GAAP, (d) all
references to time are San Antonio time, (e) monetary references are to Dollars,
(f) all references to “Articles,” “Sections,” “Exhibits,” and “Schedules” are to
the Articles, Sections, Exhibits, and Schedules of and to this Agreement,
(g) headings used in this Agreement and each other Loan Document are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof or thereof, (h) references to any Person include that
Person’s heirs, personal representatives, successors, and permitted assigns,
that Person as a debtor-in possession, and any receiver, trustee, liquidator,
conservator, custodian, or similar party appointed for such Person or all or
substantially all of its assets, (i) references to any Law include every
amendment or restatement to it, rule and regulation adopted under it, and
successor or replacement for it, and (j) references to a particular Loan
Document include each amendment, modification, or supplement to or restatement
of it made in accordance with this Agreement and such Loan Document.
ARTICLE II
LOANS
     2.1 Revolving Loans. Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make loans (each such loan, a “Revolving Loan”),
to Borrower from time to time on any Business Day during the period from the
Agreement Date to the Revolving Loan Maturity Date, in an aggregate amount not
to exceed at any time outstanding such Lender’s Commitment; provided, however,
that after giving effect to any Revolving Borrowing,
          (a) such Lender’s Pro Rata Share of the Outstanding Amount shall not
exceed such Lender’s Commitment, and
          (b) the Outstanding Amount shall not exceed the lesser of (A) the
Borrowing Base and (B) the Aggregate Commitments.

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Prior to the Revolving Loan Maturity Date, Borrower may borrow, repay and
reborrow Revolving Loans, all in accordance with this Agreement.
     2.2 Borrowings.
          (a) Revolving Borrowings. Each Revolving Borrowing shall be made upon
Borrower’s irrevocable notice to Administrative Agent, which may be given by
telephone. Each such notice must be received by Administrative Agent not later
than 2:00 p.m. one Business Day prior to the requested date of any Revolving
Borrowing. Each such telephonic notice must be confirmed promptly by delivery to
Administrative Agent of a written Revolving Loan Notice appropriately completed
and signed by an Authorized Signatory of Borrower. Each Revolving Loan Notice
(whether telephonic or written) shall specify (i) the requested date of the
Revolving Borrowing, as the case may be (which shall be a Business Day),
(ii) the principal amount of the Revolving Loan to be borrowed, and (iii) the
intended use of the proceeds of such Revolving Borrowing.
          (b) Funding. Upon satisfaction of the applicable conditions set forth
in Article V, Administrative Agent shall make the proceeds of each Revolving
Borrowing available to Borrower by crediting the account of Borrower on the
books of Administrative Agent with the amount of such funds.
     2.3 Repayment. The principal amount of all Revolving Loans, together with
all accrued and unpaid interest, shall be due and payable on the Revolving Loan
Maturity Date.
     2.4 Voluntary Prepayments. Borrower may at any time or from time to time
voluntarily prepay the Revolving Loans in whole or in part without premium or
penalty.
     2.5 Mandatory Prepayments. On any date that the Outstanding Amount exceeds
the lesser of (a) Aggregate Commitments and (b) the Borrowing Base, Borrower
shall prepay the Revolving Loans in an amount equal to such excess. Each
mandatory prepayment shall be accompanied by all accrued interest thereon.
     2.6 Termination and Reduction of Commitments.
          (a) Borrower shall have the right to terminate or reduce the Aggregate
Commitments at any time. Each reduction shall be in the minimum amount of
$500,000 and a whole multiple of $100,000 in excess thereof.
          (b) On the Termination Date, the Aggregate Commitments shall
automatically reduce to zero and terminate.
          (c) Borrower shall not have any right to rescind any termination or
reduction. Once terminated or reduced, the Aggregate Commitments may not be
reinstated.
     2.7 Interest on Loans Generally.
          (a) Subject to the provisions of Section 2.7(b) and Section 2.9, each
Loan shall bear interest on the outstanding principal amount thereof from the
applicable borrowing

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date or such other date on which it becomes a LIBOR Rate Loan (as applicable) to
but not including the date on which another interest rate becomes applicable to
it pursuant to the terms of this Agreement at a rate per annum equal to the
lesser of (i) the Highest Lawful Rate and (ii) the LIBOR Rate plus the
Applicable Margin.
          (b) Subject to the provisions of Section 2.9, if at any time
Administrative Agent has notified Borrower that the provisions of Sections 3.2
or 3.3 apply, each Loan shall bear interest on the outstanding principal amount
thereof from the date on which Administrative Agent determines or is notified
that the provisions of Sections 3.2 or 3.3 apply to and including the date on
which Administrative Agent notifies Borrower that the provisions of Sections 3.2
and 3.3 no longer apply at a rate per annum equal to the lesser of (i) the
Highest Lawful Rate and (ii) the Prime Rate less 0.75% (but in no event shall
the rate in this clause (ii) be less than 4.0% per annum at any time). Borrower
may not elect that any Revolving Loan be a Prime Rate Loan unless Administrative
Agent has notified Borrower that the provisions of Sections 3.2 or 3.3 apply.
          (c) Interest on the Revolving Loans shall be due and payable in
arrears on each Payment Date and at such other times as may be specified herein.
Interest hereunder shall be due and payable in accordance with the terms hereof
before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.
     2.8 Computations. Subject to Section 10.11, interest on the Revolving
Loans, fees and any other amounts due hereunder shall be calculated on the basis
of actual days elapsed over a year of 360 days. Nothing herein shall be deemed
to obligate any Lender to obtain the funds for its portion of any Revolving Loan
in any particular place or manner or to constitute a representation by any
Lender that it has obtained or will obtain the funds for its portion of any
Revolving Loan in any particular place or manner.
     2.9 Interest After an Event of Default, (a) If an Event of Default exists
(other than an Event of Default specified in Section 8.1(d) or (e)), at the
option of Required Lenders, and (b) after an Event of Default specified in
Section 8.1(d) or (e) and during any continuance thereof, automatically and
without any action by any Lender or Administrative Agent, the Obligations shall
bear interest at a rate per annum equal to the lesser (i) the Default Rate and
(ii) the Highest Lawful Rate. Such interest shall be payable on the earlier of
demand or the Termination Date and shall accrue until the earlier of (a) waiver
or cure (to the satisfaction of Required Lenders) of the applicable Event of
Default, (b) agreement by Required Lenders to rescind the charging of interest
at the Default Rate, or (c) payment in full of the Obligations. Neither Lenders
nor Administrative Agent shall be required to accelerate the maturity of any
Revolving Loan, to exercise any other rights or remedies under the Loan
Documents, or to give notice to Borrower of the decision to charge interest at
the Default Rate. Administrative Agent will undertake to notify Borrower, after
the effective date, of the decision to charge interest at the Default Rate.
     2.10 Payments Generally, (a) Each payment (including prepayments) by
Borrower of the principal of or interest on the Loans and any other amount owed
under this Agreement or any other Loan Document shall be made not later than
2:00 p.m. on the date specified for payment under this Agreement to
Administrative Agent at Administrative Agent’s Office, in Dollars constituting
immediately available funds. Administrative Agent will promptly distribute to
each

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Lender its Pro Rata Share (or other applicable share as provided herein) of such
payment in like funds as received by wire transfer to such Lender’s Principal
Office. All payments received by Administrative Agent after 2:00 p.m. shall be
deemed received on the next succeeding Business Day and any applicable interest
or fee shall continue to accrue.
          (b) If any payment under this Agreement or any other Loan Document
shall be specified to be made upon a day which is not a Business Day, it shall
be made on the next succeeding day which is a Business Day. Any extension of
time shall in such case be included in computing interest and fees, if any, in
connection with such payment.
          (c) Borrower agrees to pay principal, interest, fees and all other
amounts due under the Loan Documents without deduction for set-off or
counterclaim or any deduction whatsoever.
          (d) If some but less than all amounts due from Borrower are received
by Administrative Agent, Administrative Agent shall apply such amounts in the
following order of priority: (i) to the payment of Administrative Agent’s
expenses incurred on behalf of Lenders under the Loan Documents then due and
payable, if any; (ii) to the payment of all other fees under the Loan Documents
then due and payable; (iii) to the payment of interest then due and payable on
the Revolving Loans (applied as provided in Section 8.3); (iv) to the payment of
all other amounts not otherwise referred to in this Section 2.10(d) then due and
payable under the Loan Documents; and (v) to the payment of principal then due
and payable on the Loan (applied as provided in Section 8.3).
          (e) Unless Borrower or any Lender has notified Administrative Agent,
prior to the date any payment is required to be made by it to Administrative
Agent hereunder, that Borrower or such Lender, as the case may be, will not make
such payment, Administrative Agent may assume that Borrower or such Lender, as
the case may be, has timely made such payment and may (but shall not be so
required to), in reliance thereon, make available a corresponding amount to the
Person entitled thereto. If and to the extent that such payment was not in fact
made to Administrative Agent in immediately available funds, then:
          (i) if Borrower failed to make such payment, each Lender shall
forthwith on demand repay to Administrative Agent the portion of such assumed
payment that was made available to such Lender in immediately available funds,
together with interest thereon in respect of each day from and including the
date such amount was made available by Administrative Agent to such Lender to
the date such amount is repaid to Administrative Agent in immediately available
funds at the Federal Funds Rate from time to time in effect; and
          (ii) if any Lender failed to make such payment, such Lender shall
forthwith on demand pay to Administrative Agent the amount thereof in
immediately available funds, together with interest thereon for the period from
the date such amount was made available by Administrative Agent to Borrower to
the date such amount is recovered by Administrative Agent (the “Compensation
Period”) at a rate per annum equal to the Federal Funds Rate from time to time
in effect. If such Lender does not pay such amount forthwith upon Administrative
Agent’s demand therefor, Administrative

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Agent may make a demand therefor upon Borrower, and Borrower shall pay such
amount to Administrative Agent, together with interest thereon for the
Compensation Period at a rate per annum equal to the interest rate then
applicable to Revolving Loans as provided in Section 2.7 or 2.9 Nothing herein
shall be deemed to relieve any Lender from its obligation to fulfill its
Commitment or to prejudice any rights which Administrative Agent or Borrower may
have against any Lender as a result of any default by such Lender hereunder.
     A notice of Administrative Agent to any Lender or Borrower with respect to
any amount owing under this Section 2.10(e) shall be conclusive, absent manifest
error.
          (f) If any Lender makes available to Administrative Agent funds for
its Pro Rata Share of a Revolving Loan and such funds are not made available to
Borrower by Administrative Agent because the conditions set forth in Article IV
are not satisfied or waived in accordance with the terms hereof, Administrative
Agent shall return such funds (in like funds as received from such Lender) to
such Lender, without interest.
          (g) The obligation of a Lender hereunder to make its Pro Rata Share of
each Revolving Loan are several and not joint. The failure of any Lender to fond
its Pro Rata Share of any Revolving Loan shall not relieve any other Lender of
its corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to fund its Pro Rata Share of
any Revolving Loan.
     2.11 Sharing of Payments. Any Lender obtaining a payment (whether voluntary
or involuntary, due to the exercise of any right of set-off, or otherwise) on
account of any in excess of its Pro Rata Share, as applicable, of all payments
made by Borrower with respect to such Revolving Loan shall purchase from each
other Lender such participation in such Revolving Loan as shall be necessary to
cause such purchasing Lender to share the excess payment pro rata according to
the respective Pro Rata Shares, with each other Lender; provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest. Borrower agrees
that any Lender so purchasing a participation from another Lender pursuant to
this Section 2.11, to the fullest extent permitted by Law, may exercise all of
its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.
     2.12 Booking the Loans. Any Lender may make, carry or transfer its Pro Rata
Share of each Revolving Loan at, to or for the account of any of its branch
offices or the office of any Affiliate.
     2.13 Collateral. Payment of the Obligations is secured on the Agreement
Date by (a) a perfected first priority security interest in current and future
accounts and inventory (and related assets) of Borrower and all of its
Subsidiaries, and (b) Guaranties of the Obligations by each Guarantor. Borrower
shall cause each Subsidiary of Borrower created or acquired after the Agreement
Date to execute and deliver to Administrative Agent a Guaranty, Security
Agreement and such other documents as are required to grant to and perfect the
Lien granted pursuant to such Security Agreement.

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     2.14 Commitment Fee. Borrower shall pay to Administrative Agent for the
account of each Lender in accordance with its Pro Rata Share a per annum
commitment fee equal to 0.25% times the actual daily amount by which the
Aggregate Commitments exceed the Outstanding Amount. The commitment fee shall
accrue at all times from the Agreement Date to the Revolving Loan Maturity Date,
including at any time during which one or more of the conditions contained in
Article IV is not met, and shall be due and payable monthly in arrears on each
Payment Date, commencing with the first such date after the Agreement Date and
on the Revolving Loan Maturity Date.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
     3.1 Taxes.
          (a) Except as provided in this Section 3.1, any and all payments by
Borrower to or for the account of Administrative Agent or any Lender under any
Loan Document shall be made free and clear of and without deduction for any and
all present or future income, stamp or other Taxes, duties, levies, imposts,
deductions, assessments, fees, withholdings or similar charges, now or hereafter
imposed, and all liabilities with respect thereto, excluding, in the case of
Administrative Agent, any Lender, or its Principal Office, applicable lending
office, or any branch or Affiliate thereof, Taxes imposed on or measured by its
net income (including net income Taxes imposed by means of a backup withholding
tax) franchise Taxes, branch Taxes, Taxes on doing business or Taxes measured by
or imposed upon the overall capital or net worth of Administrative Agent or such
Lender or its Principal Office, applicable lending office, or any branch or
Affiliate thereof, in each case imposed: (i) by the jurisdiction under the Laws
of which Administrative Agent or such Lender or its Principal Office, applicable
lending office, branch or Affiliate is organized or is located, or in which the
principal executive office of Administrative Agent or such Lender is located, or
any nation within which such jurisdiction is located or any political
subdivision thereof, or (ii) by reason of any present or former connection
between the jurisdiction imposing such Tax and Administrative Agent or such
Lender or its applicable lending office, branch or Affiliate other than a
connection arising solely from Administrative Agent or such Lender having
executed, delivered or performed its obligation under, or received payment under
or enforced this Agreement the Laws of such jurisdiction (all such Taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and liabilities being hereinafter referred to as “Indemnified Taxes”).
If Borrower shall be required by any Laws to deduct any Indemnified Taxes from
or in respect of any sum payable under any Loan Document to Administrative Agent
or any Lender, (i) the sum payable shall be increased as necessary to yield to
Administrative Agent or such Lender an amount equal to the sum it would have
received had no such deductions been made, (ii) Borrower shall make such
deductions, (iii) Borrower shall pay the full amount deducted to the relevant
taxation authority or other Governmental Authority in accordance with Applicable
Laws, and (iv) promptly (but in no event later than thirty days) after the date
of such payment, Borrower shall furnish to Administrative Agent (which shall
forward the same to such Lender) the original or a certified copy of a receipt
evidencing payment thereof.

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          (b) In addition, Borrower shall pay any and all present or future
stamp, court or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under any Loan
Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Loan Document (hereinafter
referred to as “Other Taxes”),
          (c) If Borrower shall be required to deduct or pay any Indemnified
Taxes or Other Taxes from or in respect of any sum payable under any Loan
Document to Administrative Agent or any Lender, Borrower shall also pay to
Administrative Agent (its account and for the account of such Lender), at the
time interest on the Obligations is paid, such additional amount that
Administrative Agent or such Lender specifies as necessary to preserve the
after-tax yield (after factoring in all Taxes, including Taxes imposed on or
measured by net income) Administrative Agent or such Lender would have received
if such Indemnified Taxes or Other Taxes had not been imposed.
          (d) BORROWER SHALL INDEMNIFY ADMINISTRATIVE AGENT AND EACH LENDER FOR
(i) THE FULL AMOUNT OF INDEMNIFIED TAXES AND OTHER TAXES (INCLUDING ANY
INDEMNIFIED TAXES OR OTHER TAXES IMPOSED OR ASSERTED BY ANY JURISDICTION ON
AMOUNTS PAYABLE UNDER THIS SECTION) PAID BY ADMINISTRATIVE AGENT AND SUCH
LENDER, (ii) AMOUNTS PAYABLE UNDER SECTION 3.1(c) AND (iii) ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, IN EACH CASE WHETHER OR NOT SUCH INDEMNIFIED TAXES OR OTHER TAXES WERE
CORRECTLY OR LEGALLY IMPOSED OR ASSERTED BY THE RELEVANT GOVERNMENTAL AUTHORITY.
PAYMENT UNDER THIS SECTION 3.1(d) SHALL BE MADE WITHIN THIRTY DAYS AFTER THE
DATE ADMINISTRATIVE AGENT OR ANY LENDER MAKES A DEMAND THEREFOR.
          (e) If Administrative Agent or any Lender determines, in its
reasonable discretion, that it has received a refund of any Indemnified Taxes or
Other Taxes as to which it has been indemnified by Borrower or with respect to
which Borrower has paid additional amounts pursuant to this Section, it shall
pay to Borrower an amount equal to such refund (but only to the extent of
indemnity payments made, or additional amounts paid, by Borrower under this
Section with respect to the Indemnified Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of Administrative Agent or such
Lender, as the case may be, and without interest (other than any interest paid
by the relevant Governmental Authority with respect to such refund), provided
that Borrower, upon the request of Administrative Agent, such Lender, agrees to
repay the amount paid over to Borrower (plus any penalties, interest or other
charges imposed by the relevant Governmental Authority) to Administrative Agent
or such Lender in the event Administrative Agent or such Lender is required to
repay such refund to such Governmental Authority. This Section shall not be
construed to require Administrative Agent or any Lender to make available its
tax returns (or any other information relating to its taxes that it deems
confidential) to Borrower or any other Person.
     3.2 Illegality. If any Lender determines that any change in Law on or after
the Agreement Date has made it unlawful, or that any Governmental Authority on
or after the

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Agreement Date has asserted that it is unlawful, for any Lender or its
applicable lending office to make, maintain or fund LIBOR Rate Loans, or
materially restricts the authority of such Lender to purchase or sell, or to
take deposits of, Dollars in the applicable offshore Dollar market, or to
determine or charge interest rates based upon LIBOR, then, on notice thereof by
such Lender to Administrative Agent (who shall notify Borrower thereof), any
obligation of such Lender to make or maintain LIBOR Rate Loans shall be
suspended until each Lender notifies Administrative Agent (who shall notify
Borrower thereof) that the circumstances giving rise to such determination no
longer exist. Upon the date of such notice, all LIBOR Rate Loans of all Lenders
shall convert to Prime Rate Loans. Each Lender agrees to designate a different
lending office if such designation will avoid the need for such notice and will
not, in the good faith judgment of such Lender, otherwise be materially
disadvantageous to such Lender.
     3.3 Inability to Determine Rates. If (a) Administrative Agent reasonably
determines in connection with any request for or maintenance of a LIBOR Rate
Loan or any determination of the LIBOR Rate that (i) Dollar deposits are not
being offered to banks in the applicable offshore Dollar market for the
applicable amount and applicable term, or (ii) adequate and reasonable means do
not exist for determining the LIBOR Rate, or (b) any Lender notifies
Administrative Agent that the LIBOR Rate for such LIBOR Rate Loan does not
adequately and fairly reflect the cost to such Lender of funding or maintaining
such LIBOR Rate Loan, Administrative Agent will promptly notify Borrower and all
Lenders. Thereafter, the obligation of all Lenders to make or maintain LIBOR
Rate Loans shall be suspended until each Lender notifies Administrative Agent
that such Lender revokes such notice. Upon the date of such notice, all LIBOR
Rate Loans of all Lenders shall convert to Prime Rate Loans.
     3.4 Increased Cost and Reduced Return; Capital Adequacy; Reserves on LIBOR
Rate Loans.
          (a) If any Lender in good faith determines that as a result of the
introduction of or any change in or in the interpretation of any Law on or after
the Agreement Date, or such Lender’s compliance therewith, there shall be any
increase in the cost to such Lender of agreeing to make or making, funding or
maintaining LIBOR Rate Loans, or a reduction in the amount received or
receivable by such Lender in connection with any of the foregoing (excluding for
purposes of this Section 3.4(a) any such increased costs or reduction in amount
resulting from (i) Indemnified Taxes or Other Taxes (as to which Section 3.1
shall govern), (ii) changes in the basis of taxation of overall net income or
overall gross income by the United States or any foreign jurisdiction or any
political subdivision of either thereof under the Laws of which such Lender is
organized or has its Principal Office or applicable lending office, and
(iii) reserve requirements contemplated by Section 3.4(c)), then from time to
time within five Business Days after demand of such Lender (with a copy of such
document to Administrative Agent), Borrower shall pay to such Lender such
additional amounts as will compensate such Lender for such increased cost or
reduction.
          (b) If any Lender in good faith determines that the introduction of
any Law regarding capital adequacy or any change therein or in the
interpretation thereof on or after the Agreement Date, or compliance by such
Lender (or its lending office) therewith, has the effect of reducing the rate of
return on the capital of such Lender or any corporation controlling such Lender
with respect to this Agreement as a consequence of such Lender’s obligations
hereunder

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(taking into consideration its policies with respect to capital adequacy and
such Lender’s desired return on capital), then from time to time within five
Business Days after demand of such Lender (with a copy of such demand to
Administrative Agent), Borrower shall pay to such Lender such additional amounts
as will compensate such Lender for such reduction.
          (c) Borrower shall pay to each Lender, as long as such Lender shall be
required under regulations of the Federal Reserve Board to maintain reserves
with respect to liabilities or assets consisting of or including Eurocurrency
funds or deposits (currently known as “Eurocurrency liabilities”), additional
costs on the unpaid principal amount of each LIBOR Rate Loan equal to the actual
costs of such reserves allocated to such Loan by such Lender (as determined by
such Lender in good faith, which determination shall constitute prima facie
evidence as to the facts thereof), which shall be due and payable on each date
on which interest is payable on such Loan, provided Borrower shall have received
at least fifteen days’ prior notice (with a copy of such notice to
Administrative Agent) of such additional interest from such Lender. If such
Lender fails to give notice fifteen days prior to the relevant Payment Date,
such additional interest shall be due and payable fifteen days from receipt of
such notice.
          (d) If any Lender claims any additional amounts payable pursuant to
this Section 3.4, it shall use its reasonable best efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its applicable lending office, if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
which may thereafter accrue and would not, in the reasonable judgment of such
Lender, be disadvantageous to such Lender.
     3.5 Matters Applicable to all Requests for Compensation. Any demand or
notice delivered by Administrative Agent or any Lender to Borrower claiming
compensation under this Article III shall be in writing and shall certify
(a) that one of the events described in this Article III has occurred,
describing in reasonable detail the nature of such event and (b) as to the
amount or amounts for which Administrative Agent or such Lender seeks
compensation hereunder, setting forth in reasonable detail the basis for and
calculations of such compensation. Such certification shall be conclusive in the
absence of manifest error. In determining such amount, Administrative Agent or
such Lender may use any reasonable averaging and attribution methods.
     3.6 Replacement of Lenders. If any Lender requests compensation under
Section 3.4, or if Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 3.1, Borrower may replace such Lender in accordance with Section 10.12.
     3.7 Survival. All of Borrower’s obligations under this Article III shall
survive termination of the Aggregate Commitments and payment in full of all
Obligations.

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ARTICLE IV
CONDITIONS PRECEDENT
     4.1 Conditions Precedent to Initial Revolving Loan. The obligation of each
Lender to make its Pro Rata Share of the initial Revolving Loan is subject to
(i) receipt by Administrative Agent of the following items which are to be
delivered, in form and substance reasonably satisfactory to Administrative Agent
and each Lender and (ii) satisfaction of the following conditions, in form and
substance reasonably satisfactory to Administrative Agent and each Lender:
          (a) Borrower Certificate. A certificate of officers acceptable to
Administrative Agent of Borrower certifying as to (i) the incumbency of the
officers signing such certificate and the Loan Documents to which it is a party,
(ii) an original certified copy of its Certificate of Incorporation, certified
as true, complete and correct as of a date not more than ten days prior to the
Agreement Date by the appropriate authority of the State of Delaware, (iii) a
copy of its By-Laws, as in effect on the Agreement Date, (iv) a copy of the
resolutions of its Board of Directors authorizing it to execute, deliver and
perform the Loan Documents to which it is a party, (v) an original certificate
of good standing and existence issued by the appropriate authority of the State
of Delaware (certified as of a date not more than ten days prior to the
Agreement Date), (vi) the accuracy of the representations and warranties in the
Loan Documents, (vii) no Default or Event of Default exists, and (viii) no
Material Adverse Change having occurred.
          (b) Obligor Certificate. A certificate of officers acceptable to
Administrative Agent of each Obligor (other than Borrower) certifying as to
(i) the incumbency of the officers signing such certificate and the Loan
Documents to which it is a party, (ii) if a corporation, an original certified
copy of its Articles of Incorporation or Certificate of Incorporation, as
applicable, certified as true, complete and correct as of a date not more than
ten days prior to the Agreement Date by the appropriate authority of its state
of incorporation, (iii) if a limited liability company, an original certified
copy of its Articles of Organizations (or similar organization and governance
document), certified as true, complete and correct as of a date not more than
ten days prior to the Agreement Date by the appropriate authority of its state
of organization, (iv) if a limited partnership, an original certified copy of
its Certificate of Limited Partnership (or similar organization or governance
document), certified as true, complete and correct as of a date not more than
ten days prior to the Agreement Date by the appropriate authority of its
jurisdiction of organization, (v) if a corporation, a copy of its By-Laws, as in
effect on the Agreement Date, (vi) if a limited liability company, a copy of its
operating agreement (or similar organization and governance document), as in
effect on the Agreement Date, (vii) if a limited partnership, a copy of its
partnership agreement (or similar organization or governance document), as in
effect on the Agreement Date, (viii) a copy of the resolutions of the
appropriate governance board authorizing it to execute, deliver and perform the
Loan Documents to which it is a party, and (ix) an original certificate of good
standing and existence issued by the appropriate authority of its state of
organization (certified as of a date not more than ten days prior to the
Agreement Date).

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          (c) Notes. Duly executed Revolving Notes, payable to the order of each
Lender and in an amount equal to such Lender’s Commitment.
          (d) Security Agreements. The duly executed and completed Security
Agreements, executed by Borrower and each Subsidiary, dated as of the Agreement
Date, granting to Administrative Agent, for the benefit of Lenders, a first
priority Lien in the Collateral set forth therein.
          (e) Guaranties. A duly executed Guaranty for each Guarantor.
          (f) Expenses. Reimbursement for Special Counsel’s reasonable fees and
expenses rendered through the date hereof.
          (g) UCC and Lien Searches. Searches of the Uniform Commercial Code,
Tax lien and other records as Administrative Agent may require.
          (h) Opinions of Borrower’s and Obligors’ Counsel. Opinions of counsel
to Borrower and each other Obligor addressed to Administrative Agent and Lenders
dated the Agreement Date and covering such matters incident to the transactions
contemplated hereby as Administrative Agent or Special Counsel may reasonably
request.
          (i) Compliance Certificate. A Compliance Certificate, dated the
Agreement Date and signed by an Authorized Signatory of Borrower, confirming
compliance with the financial covenants set forth therein as of the most recent
determination date.
          (j) Final Agreement Notice. The Final Agreement Notice executed by all
parties thereto.
          (k) Other Documents. In form and substance satisfactory to
Administrative Agent and Special Counsel, such other documents, instruments and
certificates as Administrative Agent and any Lender may reasonably require in
connection with the transactions contemplated hereby.
          (1) Payment of Fees. Payment by Borrower to Administrative Agent and
Lenders of all fees agreed to be paid by Borrower with respect to this Agreement
set forth in the Commitment Letter.
     4.2 Conditions Precedent to all Revolving Loans. The obligation of each
Lender to make its Pro Rata Share of each Revolving Loan (including the initial
Loan) is subject to fulfillment of the following conditions immediately prior to
or contemporaneously with each such Revolving Loan:
          (a) Representations and Warranties. All of the representations and
warranties of Borrower, each of its Subsidiaries and each other Obligor under
this Agreement and each other Loan Document, which, pursuant to Section 7.16,
are made at and as of the time of each Revolving Loan, shall be true and correct
when made, except to the extent applicable to a specific date, both before and
after giving effect to the application of the proceeds of such Revolving Loan.

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          (b) No Default or Event of Default. There shall not exist a Default or
Event of Default.
          (c) Material Adverse Change. There shall have occurred no change in
the business, assets, operations, prospects or conditions (financial or
otherwise) of Borrower, any other Obligor, or any Subsidiary of Borrower since
June 30, 2007, which caused or could reasonably be expected to cause a Material
Adverse Effect.
ARTICLE V
AFFIRMATIVE COVENANTS
     From the date hereof and so long as this Agreement is in effect and until
payment in full of the Obligations, the termination of the Aggregate
Commitments, and the performance of all other obligations of each Obligor under
this Agreement and each other Loan Document, Borrower will, and will cause each
of its Subsidiaries to:
     5.1 General Covenants.
          (a) Payment of Taxes and Claims. Pay and discharge all lawful Taxes
imposed upon its income or profits or upon any of its property before the same
shall be in default, and all lawful claims for labor, rentals, materials and
supplies which, if unpaid, might become a Lien upon its property or any part
thereof; provided, however, that it shall not be required to pay or discharge
any such Tax, assessment or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings, and adequate book reserves
shall be established with respect thereto, and it shall pay such Tax, charge or
claim before any property subject thereto shall be sold to satisfy a Lien.
          (b) Maintenance of Existence. Do all things necessary to preserve and
keep in full force and effect it as a corporation, limited liability company or
partnership, as appropriate.
          (c) Preservation of Property. Keep its properties which are necessary
to continue business, whether owned in fee or otherwise, or leased, in good
operating condition, ordinary wear and tear excepted, and comply with all
material leases to which it is a party or under which it occupies or uses
property so as to prevent any material loss or forfeiture thereunder.
          (d) Insurance. Maintain in force with financially sound and reputable
insurers, policies with respect to its property and business against such
casualties and contingencies (including public liability, larceny, embezzlement
or other criminal misappropriation insurance) and in such amounts as is
customary in the case of entities engaged in the same or similar lines of
business of comparable size and financial strength and as deemed necessary or
required by Administrative Agent.
          (e) Compliance with Applicable Laws. Comply in all material respects
with the requirements of all applicable Laws and orders of any Governmental
Authority, except where contested in good faith and by proper proceedings or
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect, and obtain and maintain all material

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licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its business.
     5.2 Accounts, Reports and Other Information. Maintain a system of
accounting in accordance with GAAP, consistently applied, and furnish, or cause
to be furnished, to Administrative Agent and each Lender the following:
          (a) Interim Financial Statements. As soon as available, and in any
event within forty-five (45) days after the end of each quarter of each fiscal
year of Borrower, a balance sheet and income statement of Borrower as of the end
of such fiscal quarter, all in form and substance and in reasonable detail
satisfactory to Administrative Agent and duly certified (subject to year-end
review adjustments) by the President and/or Chief Financial Officer of Borrower
(i) as being true and correct in all material respects to the best of his or her
knowledge and (ii) as having been prepared in accordance with GAAP, consistently
applied.
          (b) Annual Financial Statements. As soon as available and in any event
within ninety (90) days after the end of each fiscal year of Borrower, a balance
sheet and income statement of Borrower as of the end of such fiscal year, in
each case audited and unqualified by Auditors.
          (c) Compliance Certificate. A certificate signed by the Chief
Financial Officer of Borrower within forty-five (45) days after the end of each
quarter of each fiscal year of Borrower stating that Borrower is in full
compliance with all of its obligations under this Loan Agreement and all other
Loan Documents and is not in default of any term or provisions hereof or
thereof, and demonstrating compliance with all financial ratios and covenants
set forth in Sections 6.16 and 6.17 of this Agreement.
          (d) Borrowing Base Certificate. A Borrowing Base Certificate signed by
the Chief Financial Officer of Borrower within thirty (30) days after the end of
each month of each fiscal year, in form and detail satisfactory to
Administrative Agent.
          (e) Accounts Aging. An account receivable aging report within thirty
(30) days after the end of each month of each fiscal year, in form and detail
satisfactory to Administrative Agent.
          (f) 10K Filings. Borrower’s annual 10K filing with the Securities and
Exchange Commission within fifteen (15) days after such filing.
          (g) 10Q Filings. Borrower’s quarterly 10Q filing with the Securities
and Exchange Commission within forty-five (45) days after the end of each
quarter of each fiscal year of Borrower.
          (h) Other Reports. Promptly upon request by Administrative Agent, a
copy of (i) such financial statements, reports, notices or proxy statements sent
by it to stockholders requested by Administrative Agent, (ii) such regular or
periodic reports and any registration statements, prospectuses and written
communications in respect thereof filed by it with any state insurance
department, any securities exchange, or with the Securities Exchange Commission
or

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any successor agency requested by Administrative Agent, and (iii) all press
releases concerning it.
          (i) Notice of Default. Promptly upon the happening of any condition or
event which constitutes an Event of Default or Default, a written notice
specifying the nature and period of existence thereof and what action it is
taking and propose to take with respect thereto.
          (j) Notice of Litigation. Promptly upon becoming aware of the
existence of any Litigation before any Governmental Authority, arbitrator or
mediator (but no later than 10 days after the filing thereof) involving it,
which could reasonably be expected to involve its payment of $200,000 or more.
          (k) Notice of Claimed Default. Promptly upon becoming aware that the
holder of any note or any evidence of indebtedness or other security or payee of
any obligation in an amount of $200,000 or more has given notice or taken any
action with respect to a claimed default or event of default thereunder, a
written notice specifying the notice given or action taken by such holder and
the nature of the claimed default or event of default thereunder and what action
it is taking or proposes to take with respect thereto.
          (l) Notice from Governmental Authority. Promptly upon receipt thereof,
information with respect to and copies of any notices received from any
Governmental Authority relating to an order, ruling, statute or other Law or
information which could reasonably be expected to have a Material Adverse
Effect.
          (m) Auditors’ Reports. Promptly upon receipt thereof, a copy of
(i) each other report or “management letter” submitted to Borrower or any of its
Subsidiaries by Auditors in connection with any annual, interim or special audit
made by them of the books of Borrower or such Subsidiary and (ii) each report
submitted to Borrower or any of its Subsidiaries by any Auditors to the extent
that such report, in the good faith opinion of Borrower or such Subsidiary,
identifies a condition, situation or event that has or is reasonably likely to
have a Material Adverse Effect.
          (n) Additional Information. Such other additional financial
information as may be reasonably requested from time to time by Administrative
Agent, including but not limited to operating statements on any assets listed on
Borrower’s financial statements.
     5.3 Inspection. (a) If no Event of Default exists, upon three Business
Day’s prior notice, and as often as may be reasonably requested, and (b) if an
Event of Default exists, upon request by Administrative Agent, permit
Administrative Agent or any representatives of Administrative Agent to visit and
inspect any of its properties, to examine all books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss the
affairs, finances and accounts with its officers, employees and auditors (and by
this provision Borrower authorizes Auditors to discuss with Administrative Agent
and its representatives the finances and affairs of Borrower and its
Subsidiaries, provided Borrower receives advance notice of any such discussions
with the Auditors and has an opportunity to participate in such discussions).
All costs and expenses of Administrative Agent related to (a) the first such
inspection during each fiscal year conducted when no Event of Default exists,
and (b) each such

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inspection conducted when an Event of Default exists, shall be a part of the
Obligations and paid by Borrower to Administrative Agent within ten days after
demand by Administrative Agent.
     5.4 Compliance with ERISA. Comply with ERISA in all material respects, and
(a) at all times make contributions within the time limits imposed by Law to
meet the minimum funding standards set forth in ERISA with respect to any Plan;
(b) notify Administrative Agent as soon as reasonably practicable of any fact
which it knows or should know, including but not limited to any Reportable
Event, arising in connection with any Plan which could reasonably be expected to
result in termination thereof by the PBGC or for the appointment by a
Governmental Authority of a trustee to administer the Plan; and (c) furnish to
Administrative Agent upon such request such additional information concerning
any Plan as Administrative Agent may reasonably request.
     5.5 Maintenance of Priority of Bank Liens. Upon the request of
Administrative Agent from time to time, it shall perform such acts and duly
authorize, execute, acknowledge, deliver, file, and record such additional
assignments, pledge agreements, security agreements and other agreements,
documents, instruments, and certificates as Administrative Agent may deem
necessary or appropriate in order to perfect and maintain the Bank Liens in
favor of Administrative Agent and preserve and protect the rights of
Administrative Agent and Lenders in respect of the Collateral.
     5.6 Indemnity. BORROWER SHALL DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
ADMINISTRATIVE AGENT AND EACH LENDER, THEIR RESPECTIVE AFFILIATES, AND EACH OF
THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES’) OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT LIMITATION,
THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED SATISFACTION OF
ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING (COLLECTIVELY,
“INDEMNITEES”) FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
THE ATTORNEY COSTS OF COUNSEL FOR SUCH INDEMNITEES IN CONNECTION WITH ANY
INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT SUCH
INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL AND
WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND REGULATIONS, UNDER COMMON
LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT, TORT OR OTHERWISE, ARISING FROM OR
CONNECTED WITH THE PAST, PRESENT OR FUTURE OPERATIONS OF BORROWER OR ANY OF ITS
SUBSIDIARIES OR THEIR RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT
OR FUTURE ENVIRONMENTAL CONDITION OF PROPERTY OF BORROWER OR ANY OF ITS
SUBSIDIARIES), IN ANY MANNER RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR ANY ACT, EVENT OR TRANSACTION OR ALLEGED ACT, EVENT OR
TRANSACTION RELATING

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OR ATTENDANT THERETO, THE MAKING OR ANY PARTICIPATION IN LOANS, INCLUDING IN
CONNECTION WITH, OR AS A RESULT, IN WHOLE OR IN PART, OF ANY NEGLIGENCE OF
ADMINISTRATIVE AGENT OR ANY LENDER (OTHER THAN THOSE MATTERS RAISED EXCLUSIVELY
BY A PARTICIPANT AGAINST A LENDER AND NOT BORROWER), OR THE USE OR INTENDED USE
OF THE PROCEEDS OF ANY REVOLVING LOAN HEREUNDER, OR IN CONNECTION WITH ANY
INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING ANY CLAIM OR
LIABILITY THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY INDEMNITEE, AS DETERMINED IN A FINAL, NON-APPEALABLE JUDGMENT
BY A COURT OF COMPETENT JURISDICTION (COLLECTIVELY, “INDEMNIFIED MATTERS”). IN
ADDITION, BORROWER SHALL PERIODICALLY, UPON REQUEST, REIMBURSE EACH INDEMNITEE
FOR ITS REASONABLE LEGAL AND OTHER ACTUAL EXPENSES (INCLUDING THE COST OF ANY
INVESTIGATION AND PREPARATION) INCURRED IN CONNECTION WITH ANY INDEMNIFIED
MATTER. THE REIMBURSEMENT, INDEMNITY AND CONTRIBUTION OBLIGATIONS UNDER THIS
SECTION SHALL BE IN ADDITION TO ANY LIABILITY WHICH BORROWER MAY OTHERWISE HAVE,
SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS TO EACH INDEMNITEE, AND SHALL BE
BINDING UPON AND INURE TO THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS AND
PERSONAL REPRESENTATIVES OF BORROWER, ADMINISTRATIVE AGENT, EACH LENDER, AND ALL
OTHER INDEMNITEES. THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT
AND PAYMENT OF THE OBLIGATIONS.
     5.7 Use of Proceeds. Borrower shall use the proceeds of the Revolving Loans
(a) to provide working capital to Borrower and Guarantors, and (b) to make
Permitted Acquisitions.
ARTICLE VI
NEGATIVE COVENANTS
     From the date hereof and so long as this Agreement is in effect and until
payment in full of the Obligations, the termination of the Aggregate
Commitments, and the performance of all other obligations of each Obligor under
this Agreement and each other Loan Document, Borrower shall not, and shall not
permit any of its Subsidiaries to:
     6.1 Nature of Business. Make any material change in the nature of its
business as carried on as of the Agreement Date.
     6.2 Liquidations, Mergers, Consolidations. Liquidate, merge or consolidate
with or into any other entity
     6.3 Disposition of Assets. Dispose of any of its assets or properties,
other than in the ordinary course of business or sales of worn, damaged or
obsolete equipment.

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     6.4 Liens. Create or incur any lien or encumbrance on any of its assets,
other than Permitted Liens.
     6.5 Debt. Create, incur or assume any Debt, other than Permitted Debt.
     6.6 Change in Management. Permit a change in two or more of the individual
Persons comprising Senior Management.
     6.7 Loans. Make any loans or advances to any Person except for (i) loans to
Obligors, and (ii) loans to officers and directors of Borrower not to exceed
$100,000.00 in the aggregate at any one time.
     6.8 Transactions with Affiliates. Except for transactions among Obligors,
enter into any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate of
Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower’s business and upon fair and reasonable terms no less
favorable to Borrower than would be obtained in a comparable arm’s-length
transaction with a Person not an Affiliate of Borrower.
     6.9 Burdensome Agreements. Enter into any agreement (other than this
Agreement or any other Loan Document) that limits the ability (a) of any
Subsidiary to pay Dividends to Borrower or to otherwise transfer property to
Borrower, (b) of any Subsidiary to guarantee the Obligations or (c) of Borrower
or any Subsidiary to create, incur, assume or suffer to exist Liens on property
of such Person.
     6.10 Acquisition of Assets. Acquire any assets, property or business of any
Person, except in the ordinary course of business, or participate in any joint
venture, or create or acquire any Subsidiary, except Permitted Acquisitions,
provided and if such Permitted Acquisition results in a new Subsidiary, such new
Subsidiary delivers to Administrative Agent (in such number of counterparts as
Administrative Agent may reasonably require) the following:
          (a) A certificate of officers acceptable to Administrative Agent of
such Subsidiary certifying as to (i) the incumbency of the officers signing such
certificate and the Loan Documents to which it is a party, (ii) if a
corporation, an original certified copy of its Articles of Incorporation or
Certificate of Incorporation, as applicable, certified as true, complete and
correct by the appropriate authority of its state of incorporation as of a date
not more than ten days prior to the date such certificate is delivered to
Administrative Agent, (iii) if a limited liability company, an original
certified copy of its Articles of Organizations (or similar organization and
governance document), certified as true, complete and correct by the appropriate
authority of its state of organization as of a date not more than ten days prior
to the date such certificate is delivered to Administrative Agent, (iv) if a
corporation, a copy of its By-Laws, as in effect on the date such certificate is
delivered to Administrative Agent, (v) if a limited liability company, a copy of
its operating agreement (or similar organization and governance document), as in
effect on the date such certificate is delivered to Administrative Agent, (vi) a
copy of the resolutions of the appropriate governance board authorizing it to
execute, deliver and perform the Loan Documents to which it is a party, and
(vii) an original certificate of good standing and existence issued by the
appropriate authority of its state of

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organization (certified as of a date not more than ten days prior to the date
such certificate is delivered to Administrative Agent).
          (b) The duly executed and completed Security Agreement of such
Subsidiary, granting to Administrative Agent, for the benefit of Lenders, a
first priority Lien in the Collateral set forth therein.
          (c) The duly executed Guaranty of such Subsidiary.
          (d) Reimbursement of Administrative Agent’s reasonable expenses
related to the formation of such new Subsidiary, including Special Counsel’s
reasonable fees and expenses.
          (e) Searches of the Uniform Commercial Code, Tax lien and other
records as Administrative Agent may require.
          (f) Opinions of counsel to Borrower and such Subsidiary addressed to
Administrative Agent and Lenders and covering such matters incident to such new
Subsidiary and the Loan Documents as Administrative Agent or Special Counsel may
reasonably request.
          (g) A Notice of Final Agreement executed by such Subsidiary.
          (h) In form and substance satisfactory to Administrative Agent and
Special Counsel, such other documents, instruments and certificates as
Administrative Agent and any Lender may reasonably require in connection with
the formation of such new Subsidiary.
     By signing this Agreement, Lenders are hereby deemed to have consented to
the acquisition by Borrower and/or Woodard of substantially all of the assets of
Woodard, LLC, a Delaware limited liability company, pursuant to the terms of
that certain Asset Purchase Agreement, dated as of December 18, 2007, among
Woodard, LLC, Henry Crown and Company and Borrower, as it may be amended or
modified pursuant to terms reasonably acceptable to Administrative Agent.
     6.11 Loans and Investments. Make any Investment except (a) Permitted
Investments, and (b) acquisitions permitted by Section 6.10.
     6.12 ERISA. Make funding contributions with respect to any Plan that are
less than the minimum required by ERISA or the regulations thereunder, or permit
any Plan ever to be subject to involuntary termination proceeding by the PBGC
pursuant to ERISA § 4042(a).
     6.13 Assignment. Directly or indirectly, assign or transfer, or attempt to
do so, any rights, duties or obligations under the Loan Documents.
     6.14 Business. Engage in any material line or lines of business activity or
any businesses not engaged in on the Agreement Date.
     6.15 Stock Repurchases. Make any Stock Repurchases, except that if no
Default or Event of Default exists or would result after giving effect thereto,
Borrower may repurchase up

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to 200,000 shares of its capital stock authorized by its Board of Directors as
of the Agreement Date.
     6.16 Debt to Worth Ratio. Permit the Debt to Worth Ratio to be greater than
(a) 2.50 to 1.00 at the end of any first, second or fourth fiscal quarter of
Borrower or (b) 3.25 to 1.00 at the end of any third fiscal quarter of Borrower.
     6.17 Fixed Charge Coverage Ratio. Permit, as of the end of any fiscal
quarter, the Fixed Charge Coverage Ratio to be less than 1.25 to 1.00.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
     Borrower represents, warrants, and covenants, to Administrative Agent and
each Lender, as follows:
     7.1 Organization and Qualification. Borrower and each of its Subsidiaries
(a) is a corporation, limited liability company or limited partnership duly
organized, validly existing, and in good standing under the Laws of its
jurisdiction of organization; (b) is duly licensed and in good standing as a
foreign corporation, limited liability company or limited partnership in each
jurisdiction in which the nature of the business transacted or the property
owned is such as to require licensing as such; and (c) possesses all requisite
corporate, limited liability company or limited partnership, respectively,
power, authority and legal right, to execute, deliver and comply with the terms
of the Loan Documents to be executed by it, all of which have been duly
authorized and approved by all necessary corporate, limited liability company or
limited partnership action and for which no approval or consent of any
Governmental Authority which has not been obtained is required. No proceeding is
pending for the forfeiture of any Borrower’s or any such Subsidiary’s
organization documents or its dissolution. The issued and outstanding capital
stock, limited liability company interest and partnership interest of Borrower
and each of its Subsidiaries is duly authorized validly issued, fully paid and
nonassessable, and free of the preemptive rights of shareholders. Schedule 7.1
sets forth the respective jurisdiction of organization and percentage ownership
as of the Agreement Date of each of Borrower’s direct and indirect Subsidiaries.
Borrower has no direct or indirect Subsidiary other than those set forth on
Schedule 7.1.
     7.2 Financial Statements. The Financial Statements heretofore furnished to
Administrative Agent and Lenders prior to the Agreement Date are complete and
correct in all material respects and prepared in accordance with GAAP, and
fairly present the financial condition of the Persons described therein as of
the dates indicated and for the periods involved. There are no Contingent Debts,
liabilities for Taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, any of which are material
in amount in relation to the financial condition of Borrower or any of its
Subsidiaries, except for Existing Debt. Neither the Borrower nor any of its
Subsidiaries has any Off-Balance Sheet liabilities. Since the date of the most
recent financial statements delivered pursuant to Section 5.2(a) or (b), as
applicable, there has been no Material Adverse Change.

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     7.3 Compliance With Laws and Other Matters. The execution, delivery and
performance and compliance with the terms of the Loan Documents will not cause
Borrower or any of its Subsidiaries to be, (a) in violation of its corporate
charter or bylaws, certificate of organization, operating agreement, certificate
of limited partnership, partnership agreement or other organization and
governance document, (b) in violation of any Law in any respect which could have
any Material Adverse Effect, or (c) in default (nor has any event occurred
which, with notice or lapse of time or both, could constitute a default) under
any material agreement (including any agreement related to any Debt or such
Person).
     7.4 Litigation. There is no Litigation pending against or, to the knowledge
of Borrower, threatened against or affecting any Borrower or any of its
Subsidiaries or their respective assets or properties which involves the
probability of any final judgment or liability which may result in a Material
Adverse Change. Schedule 7.4 is a complete and correct description of all
Existing Litigation. There are no outstanding or unpaid final judgments against
Borrower or any of its Subsidiaries.
     7.5 Title to Properties. Borrower and each of its Subsidiaries has (a) full
corporate, limited liability or partnership, respectively, power, authority and
legal right to own and operate the properties which it now owns, and to carry on
the lines of business in which it is now engaged, and (b) good and marketable
title to its owned properties, subject to no Lien of any kind, except Permitted
Liens.
     7.6 Authorization; Validity. The Board of Directors, managers, partners or
other appropriate governance board of each Obligor has duly authorized the
execution and delivery of the Loan Documents to which such Obligor is a party
and the performance of their respective terms. No consent of the stockholders,
members, partners or other equityholders of any Obligor is required as a
prerequisite to the validity and enforceability of any Loan Document. Each
Obligor has full corporate, limited liability or partnership, respectively,
power, authority and legal right to execute and deliver and to perform and
observe the provisions of all Loan Documents to which such Obligor is a party.
Each of the Loan Documents is the legal, valid and binding obligation of each
Obligor which is a party thereto, enforceable in accordance with its respective
terms, subject as to enforcement of remedies to any Debtor Relief Laws.
     7.7 Taxes. Borrower and each of its Subsidiaries have filed all federal and
state and all other material income Tax returns which are required to be filed
by such Person and has paid all Taxes as shown on said returns, and all Taxes
due and payable without returns and all assessments received to the extent that
such Taxes or assessments have become due and payable. All Tax liabilities of
Borrower and each of its Subsidiaries are adequately provided for on the books
of such Person, including interest and penalties. No income Tax liability of a
material nature has been asserted by taxing authorities for Taxes in excess of
those already paid, except such Taxes being contested in good faith by
appropriate proceedings.
     7.8 Use of Proceeds. No Obligor is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) and no part of the proceeds of
any Loan will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock.

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None of the assets of any Obligor are margin stock. No Obligor nor any agent
acting on its behalf has taken or will take any action which might cause this
Agreement or any of the Loan Documents to violate any regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, in each case as in effect now or as the same may hereafter be in
effect.
     7.9 Possession of Franchises, Licenses, Etc. Borrower and each of its
Subsidiaries possesses all franchises, certificates, licenses, permits and other
authorizations from all Governmental Authorities, free from burdensome
restrictions, that (a) are necessary for the ownership, maintenance and
operation of its properties and assets, and (b) the loss of possession of which
could reasonably be expected to have a Material Adverse Effect, and such Person
is not in violation of any thereof.
     7.10 Leases. Borrower and each of its Subsidiaries enjoys peaceful and
undisturbed possession of all leases necessary for the operation of its
properties and assets the loss of possession of which could reasonably be
expected to have a Material Adverse Effect. All such leases are valid and
subsisting and are in full force and effect.
     7.11 Disclosure. Neither this Agreement nor any other document, certificate
or statement furnished to Administrative Agent or any Lender by or on behalf of
Borrower or any of its Subsidiaries in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading. There
is no fact known to Borrower or any of its Subsidiaries and not known to the
public generally which reasonably may be expected to materially adversely affect
its assets or in the future may reasonably be expected (so far as such Borrower
or each of its Subsidiaries can now foresee) to result in a Material Adverse
Effect, which has not been set forth in this Agreement or in the documents,
certificates and statements furnished to Administrative Agent or any Lender by
or on behalf of Borrower or any of its Subsidiaries prior to the date hereof in
connection with the transactions contemplated hereby.
     7.12 ERISA. Neither Borrower nor any of its Subsidiaries has (a) incurred
any material accumulated funding deficiency within the meaning of ERISA, or
(b) incurred any material liability to the PBGC in connection with any Plan
established or maintained by it. No Reportable Event has occurred with respect
to any Plan which could reasonably be expected to result in a Material Adverse
Change.
     7.13 Regulatory Acts. Borrower and each of its Subsidiaries is an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended, or is subject to regulation under any other Law (other than
Regulation X of the Board of Governors of the Federal Reserve System) which
regulates the incurring by Borrower or any of its Subsidiaries of debt,
including, but not limited to, Laws regulating common or contract carriers or
the sale of electricity, gas, steam, water, or other public utility services.
     7.14 Solvency. Borrower and each of its Subsidiaries is, and Borrower and
its Subsidiaries on a consolidated basis are, Solvent.

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     7.15 Environmental Matters. Except as could not reasonably be expected to
result in a Material Adverse Change or Effect:
          (a) The properties owned, operated or leased by Borrower and each of
its Subsidiaries (the “Properties”) do not contain any Hazardous Materials in
amounts or concentrations which (i) constitute a violation of, or (ii) could
reasonably be expected to give rise to liability under, Environmental Laws;
          (b) All Environmental Permits have been obtained and are in effect
with respect to the Properties and operations of Borrower and each of its
Subsidiaries, and the Properties and all operations of each Obligor are in
material compliance therewith;
          (c) Neither Borrower nor any of its Subsidiaries has received any
written notice of an Environmental Claim in connection with the Properties or
the operations of Borrower or any of its Subsidiaries, nor does Borrower or any
of its Subsidiaries have knowledge that any such written notice will be received
or is being threatened;
          (d) Neither Borrower nor any of its Subsidiaries has actual knowledge
of any liabilities related to Hazardous Materials Borrower or any of its
Subsidiaries has retained or assumed, in whole or in part, contractually;
          (e) To Borrower’s knowledge, Hazardous Materials have not been
transported from the Properties, nor have Hazardous Materials been generated,
treated, stored or disposed of at, on or under any of the Properties in a manner
that could reasonably be expected to give rise to liability under any
Environmental Law; and
          (f) Neither Borrower nor any of its Subsidiaries has actual knowledge
that Borrower or any of its Subsidiaries has retained or assumed any liability
contractually, with respect to the generation, treatment, storage or disposal of
Hazardous Materials.
     7.16 Survival of Representations and Warranties, Etc. All representations
and warranties made under this Agreement and the other Loan Documents shall be
deemed to be made at and as of the Agreement Date and at and as of the date of
the making of each Revolving Loan, and each shall be true and correct in all
material respects when made, except to the extent applicable to a specific date.
All such representations and warranties shall survive, and not be waived by, the
execution hereof by Administrative Agent and Lenders, any investigation or
inquiry by Administrative Agent or any Lender, or by the making of any Revolving
Loan under this Agreement.
ARTICLE VIII
EVENTS OF DEFAULT
     8.1 Default. The term “Event of Default” as used herein, means the
occurrence and continuance of any one or more of the following events (including
the passage of time, if any, specified therefor):

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          (a) Revolving Loans. The failure or refusal of Borrower to pay any
part of the principal of or interest on any Revolving Loan or of Borrower on or
before the date such payment is due;
          (b) Other Obligations. The failure or refusal of Borrower to pay any
part of the Obligations (other than as referenced in Section 8.1(a)) on or
before the date such payment is due and such failure shall continue for three
days after such payment was due;
          (c) Covenants. (i) The failure or refusal of any Obligor to perform,
observe and comply with any covenant, agreement or condition contained in
Article VI or Sections 5.1(b), 5.2, 5.4 or 5.5 or (ii) the failure or refusal of
any Obligor to perform, observe and comply with any other covenant, agreement or
condition in this Agreement or any other Loan Document (other than covenants to
pay the Obligations and those referenced in clause (i) immediately preceding)
and the continuation of such failure or refusal for fifteen days;
          (d) Voluntary Debtor Relief. Any Obligor or any of its Subsidiaries
shall (i) execute an assignment for the benefit of creditors, or (ii) admit in
writing its inability, or be generally unable, to pay its debts generally as
they become due, or (iii) voluntarily seek the benefit or benefits of any Debtor
Relief Law, or (iv) voluntarily become a party to any proceeding provided for by
any Debtor Relief Law that would suspend or otherwise affect any of the rights
of Administrative Agent or any Lender granted in the Loan Documents;
          (e) Involuntary Proceedings. Any Obligor or any of its Subsidiaries
shall involuntarily (i) have an order, judgment or decree entered against it or
a material portion of its property by any Governmental Authority pursuant to any
Debtor Relief Law that would suspend or otherwise affect any of the rights
granted to Administrative Agent or any Lender in any of the Loan Documents, or
(ii) have a petition filed against it or a material portion of its property
seeking the benefit or benefits provided for by any Debtor Relief Law that would
suspend or otherwise affect any of the rights granted to Administrative Agent or
any Lender in any of the Loan Documents, and the failure to have such order,
judgment, decree or petition dismissed within sixty days after the filing or
entry thereof;
          (f) Judgments. Any Obligor or any of its Subsidiaries shall have
rendered against it a money judgment in an aggregate uninsured amount in excess
of $250,000 for which such Person has not set aside appropriate reserves, and
the same shall remain in effect and unstayed for a period of thirty consecutive
days;
          (g) Other Debt. (i) Any Obligor or any of its Subsidiaries shall
default (A) in the payment of principal of or interest on any Debt in an
aggregate amount, together with all other Debt in which a default exists, in
excess of $50,000, or (B) in the performance of any other covenant, term or
condition contained in any agreement with respect to such Debt (if such default
shall occur and be continuing beyond any grace period with respect to such
payment or performance), if the effect of such default is to cause or permit the
holder or holders of such Debt (or any trustee on their behalf) to cause such
Debt to become due, prepaid, redeemed or purchased prior to its date of
maturity; or (ii) any event shall occur which either causes or permits the
holder or holders of such Debt (or any trustee on their behalf) to cause such
Debt to become due, prepaid, redeemed or purchased prior to its date of
maturity;

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          (h) Misrepresentation. Any statement, representation or warranty in
the Loan Documents or in any writing ever delivered to Administrative Agent or
any Lender pursuant to the Loan Documents proves to be incorrect in any material
respect where made;
          (i) ERISA. Any Reportable Event under any Plan, or the appointment by
an appropriate Governmental Authority of a trustee to administer any Plan, or
the termination of any Plan within the meaning of Title IV of ERISA, or any
material accumulated funding deficiency within the meaning of ERISA under any
Plan, or the institution of proceedings by the PBGC to terminate any Plan or to
appoint a trustee to administer any Plan, and any of such events could
reasonably be expected to result in a Material Adverse Change; or
          (j) Loan Documents. This Agreement, any Note, any Guaranty, any
Security Agreement, any document evidencing or intended to perfect any Lien
granted pursuant to any Loan Document or any other material agreement related to
this Agreement shall, at any time after its execution and delivery and for any
reason, cease to be in full force and effect in or be declared to be null and
void (other than in accordance with the terms hereof or thereof) or the validity
or enforceability thereof be contested by any Person party thereto (other than
Administrative Agent or any Lender) or any Person (other than Administrative
Agent or any Lender) shall deny in writing that it has any liability or any
further liability or obligations under any Loan Document to which it is a party;
or any Security Document shall for any reason (other than pursuant to the terms
thereof) cease to create a valid and perfected first priority Lien in any
Collateral.
     8.2 Remedies. If an Event of Default exists:
          (a) With the exception of an Event of Default specified in
Section 8.1(d) or (e), Required Lenders may terminate each Lender’s Commitment
and/or declare the principal of and interest on the Revolving Loans and
Obligations and other amounts owed under the Loan Documents to be forthwith due
and payable without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything in the Loan Documents to the
contrary notwithstanding.
          (b) Upon the occurrence of an Event of Default specified in
Section 8.1(d) or (e), the principal of and interest on the Revolving Loans and
Obligations and other amounts and under the Loan Documents shall thereupon and
concurrently therewith become due and payable and the Aggregate Commitments
shall forthwith terminate, all without any action by Administrative Agent or any
Lender or any holders of the Notes and without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything in the
Loan Documents to the contrary notwithstanding.
          (c) Required Lenders may request that Administrative Agent and Lenders
exercise all of the post-default rights granted to them under the Loan Documents
or under Law.
          (d) The rights and remedies of Administrative Agent and Lenders
hereunder shall be cumulative, and not exclusive.
     8.3 Application of Funds. After the exercise of remedies provided for in
Section 8.2 (or after the Revolving Loans and other Obligations have
automatically become immediately due

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and payable), any amounts received on account of the Obligations shall be
applied by Administrative Agent and Lenders in the following order:
          (a) First, to payment of that portion of the Obligations constituting
fees, indemnities, expenses and other amounts (including Attorney Costs payable
under Section 10.2 and amounts payable under Article III) payable under the Loan
Documents to Administrative Agent in its capacity as such;
          (b) Second, to payment of that portion of the Obligations constituting
fees, indemnities and other amounts (other than principal and interest) payable
to Lenders (including Attorney Costs payable under Section 10.2 and amounts
payable under Article III), ratably among them in proportion to the amounts
described in this clause Second payable to them;
          (c) Third, to payment of that portion of the Obligations constituting
accrued and unpaid interest on the Revolving Loans, ratably among Lenders in
proportion to the respective amounts described in this clause Third payable to
them;
          (d) Fourth, to payment of that portion of the Obligations constituting
unpaid principal of the Revolving Loans, ratably among Lenders in proportion to
the respective amounts described in this clause Fourth held by them;
          (e) Fifth, to all other Obligations; and
          (f) Last, to the balance, if any, after all of the Obligations have
been indefeasibly paid in full, to Borrower or as otherwise required by Law;
ARTICLE IX
ADMINISTRATIVE AGENT
     9.1 Appointment and Authorization of Administrative Agent. Each Lender
hereby irrevocably appoints, designates and authorizes Administrative Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere herein or in
any other Loan Document, Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall
Administrative Agent have or be deemed to have any fiduciary relationship with
any Lender or Participant, 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 Administrative
Agent. Without limiting the generality of the foregoing sentence, the use of the
term “agent” herein and in the other Loan Documents with reference to
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable Law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.

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     9.2 Delegation of Duties. Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel and
other consultants or experts concerning all matters pertaining to such duties.
Administrative Agent shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects in the absence of gross
negligence or willful misconduct.
     9.3 Liability of Administrative Agent. Neither Frost nor any Person under
the Control of Frost or any Person having Control of Frost nor any of their
respective equityholders, directors, officers, employees or agents (each, an
“Agent-Related Person”) shall (a) be liable for any action taken or omitted to
be taken by any of them under or in connection with this Agreement or any other
Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct in connection with its duties expressly set
forth herein), or (b)be responsible in any manner to any Lender or Participant
for any recital, statement, representation or warranty made by any Obligor or
any officer thereof, contained herein or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Administrative Agent under or in connection with, this Agreement
or any other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Obligor or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender or Participant 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 any Obligor or any Affiliate thereof.
     9.4 Reliance by Administrative Agent.
          (a) Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, communication, signature, resolution,
representation, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, electronic mail message, statement or
other document or conversation 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 counsel to any Obligor), independent
accountants and other experts selected by Administrative Agent. Administrative
Agent shall be fully justified in failing or refusing to take any action under
any Loan Document unless it shall first receive such advice or concurrence of
Required Lenders as it deems appropriate and, if it so requests, it shall first
be indemnified to its satisfaction by 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. Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of Required Lenders (or such
greater number of Lenders as may be expressly required hereby in any instance)
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all Lenders.
          (b) For purposes of determining compliance with the conditions
specified in Article IV, each Lender that has signed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter required thereunder

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to be consented to or approved by or acceptable or satisfactory to a Lender
unless Administrative Agent shall have received notice from such Lender prior to
the Agreement Date specifying its objection thereto.
     9.5 Notice of Default. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to Administrative Agent for the account of Lenders, unless
Administrative Agent shall have received written notice, from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default.” Administrative
Agent will notify Lenders of its receipt of any such notice. Administrative
Agent shall take such action with respect to such Default or Event of Default as
may be directed by Required Lenders in accordance with Article VIII; provided,
however, that unless and until Administrative Agent has received any such
direction, 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 or in the best interest of Lenders.
     9.6 Credit Decision; Disclosure of Information by Administrative Agent.
Each Lender acknowledges that no Agent-Related Person has made any
representation or warranty to it, and that no act by Administrative Agent
hereafter taken, including any consent to and acceptance of any assignment or
review of the affairs of any Obligor or any Affiliate thereof, shall be deemed
to constitute any representation or warranty by any Agent-Related Person to any
Lender as to any matter, including whether Agent-Related Persons have disclosed
material information in their possession. Each Lender represents to
Administrative Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of any Obligor and its Subsidiaries, and all applicable bank or
other regulatory Laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend credit to Borrower
hereunder. Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person 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 investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower. Except
for notices, reports and other documents expressly required to be furnished to
Lenders by Administrative Agent herein, Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of any Obligor or any of its Affiliates
which may come into the possession of any Agent-Related Person.
     9.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, Lenders shall indemnify upon
demand each Agent-Related Person (to the extent not reimbursed by or on behalf
of any Obligor and without limiting the obligation of any Obligor to do so),
based on their Pro Rata Share, and hold harmless each Agent-Related Person from
and against any and all Indemnified Liabilities incurred by it;

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provided, however, that no Lender shall be liable for the payment to any
Agent-Related Person of any portion of such Indemnified Liabilities to the
extent determined in a final, nonappealable judgment by a court of competent
jurisdiction to have resulted from such Agent-Related Person’s own gross
negligence or willful misconduct; provided, however, that no action taken in
accordance with the directions of Required Lenders shall be deemed to constitute
gross negligence or willful misconduct for purposes of this Section. Without
limitation of the foregoing, each Lender shall reimburse Administrative Agent
upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by Administrative Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Administrative Agent is not reimbursed for such expenses by
or on behalf of Borrower. The undertaking in this Section shall survive
termination of the Aggregate Commitments, the payment of all other Obligations
and the resignation of Administrative Agent.
     9.8 Administrative Agent in its Individual Capacity. Frost and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with each
Obligor and its respective Affiliates as though Frost were not Administrative
Agent and without notice to or consent of Lenders. Lenders acknowledge that,
pursuant to such activities, Frost or its Affiliates may receive information
regarding any Obligor or its Affiliates (including information that may be
subject to confidentiality obligations in favor of such Obligor or such
Affiliate) and acknowledge that Administrative Agent shall be under no
obligation to provide such information to them. With respect to its interest in
the Revolving Loans, Frost shall have the same rights and powers under this
Agreement as any other Lender and may exercise such rights and powers as though
it were not Administrative Agent, and the terms “Lender” and “Lenders” include
Frost in its individual capacity.
     9.9 Successor Administrative Agent. Administrative Agent may resign as
Administrative Agent upon 30 days’ notice to Lenders. If Administrative Agent
resigns under this Agreement, Required Lenders shall appoint from among Lenders
a successor administrative agent for Lenders, which successor administrative
agent shall be consented to by Borrower at all times other than during the
existence of a Default (which consent of Borrower shall not be unreasonably
withheld or delayed). If no successor administrative agent is appointed prior to
the effective date of the resignation of Administrative Agent, Administrative
Agent may appoint, after consulting with Lenders and Borrower, a successor
administrative agent from among Lenders. Upon the acceptance of its appointment
as successor administrative agent hereunder, the Person acting as such successor
administrative agent shall succeed to all the rights; powers and duties of the
retiring Administrative Agent and the term “Administrative Agent” shall mean
such successor administrative agent. After any retiring Administrative Agent’s
resignation hereunder as Administrative Agent, the provisions of this Article IX
and Sections 5.6 and 10.2 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor administrative agent has accepted appointment as
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent’s notice of resignation, the retiring Administrative
Agent’s resignation shall nevertheless thereupon become effective and the
Lenders shall perform all of the duties of

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Administrative Agent hereunder until such time, if any, as Required Lenders
appoint a successor agent as provided for above (except that in the case of any
collateral security held by Administrative Agent on behalf of Lenders under any
of the Loan Documents, the retiring Administrative Agent shall continue to hold
such collateral security until such time as a successor Administrative Agent is
appointed).
     9.10 Administrative Agent May File Proofs of Claim. In case of the pendency
of any proceeding pursuant to any Debtor Relief Law or other judicial proceeding
relative to any Obligor or entity the equity or debt of which secures
performance of the Obligations, Administrative Agent (irrespective of whether
the principal of any Revolving Loan or any other Obligation shall then be due
and payable as herein expressed or by declaration or otherwise and irrespective
of whether Administrative Agent shall have made any demand on Borrower) shall be
entitled and empowered, by intervention in such proceeding or otherwise
          (a) to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Revolving Loans and all other
Obligations that are owing and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of Lenders and Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of Lenders and Administrative Agent and their
respective agents and counsel and all other amounts due Lenders and
Administrative Agent under Sections 5.6 and 10.2) allowed in such judicial
proceeding; and
          (b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to Administrative Agent and, in the event that
Administrative Agent shall consent to the making of such payments directly to
Lenders, to pay to Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of Administrative Agent and
its agents and counsel, and any other amounts due Administrative Agent under
Sections 5.6 and 10.2.
     Nothing contained herein shall be deemed to authorize Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or to authorize Administrative Agent to
vote in respect of the claim of any Lender in any such proceeding.
     9.11 Collateral Matters. Lenders irrevocably authorize Administrative
Agent, at its option and in its discretion, to release any Lien on any property
granted to or held by Administrative Agent under any Loan Document (x) upon
termination of the Aggregate Commitments and payment in full of all Obligations
(other than contingent indemnification obligations), (y) that is sold or to be
sold as part of or in connection with any sale permitted hereunder or under any
other Loan Document, or (z) subject to Section 9.7, if approved, authorized or
ratified in writing by the Required Lenders.

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     Upon request by Administrative Agent at any time, Required Lenders will
confirm in writing Administrative Agent’s authority to release or subordinate
its interest in particular types or items of property pursuant to this
Section 9.11.
ARTICLE X
MISCELLANEOUS
     10.1 Notices.
          (a) All notices and other communications under this Agreement (except
in those cases where giving notice by telephone is expressly permitted) shall be
in writing and shall be deemed to have been given on the date personally
delivered or sent by telecopy (answerback received), or three days after deposit
in the mail, designated as certified mail, return receipt requested,
postage-prepaid, or one day after being entrusted to a reputable commercial
overnight delivery service, addressed to the party to which such notice is
directed at its address determined as provided in this Section. All notices and
other communications under this Agreement shall be given if to Borrower, at the
address specified on Schedule 10.1, if Administrative Agent, at the address
specified on Schedule 10.1, and if to any Lender, at the address specified on
Schedule 10.1.
          (b) Any party hereto may change the address to which notices shall be
directed by giving ten days’ written notice of such change to the other parties.
     10.2 Expenses. Borrower shall promptly pay:
          (a) all reasonable out-of-pocket expenses and reasonable Attorney
Costs of Administrative Agent in connection with the preparation, negotiation,
execution and delivery of this Agreement and the other Loan Documents, the
transactions contemplated hereunder and thereunder, and the making of the
Revolving Loans hereunder;
          (b) all reasonable out-of-pocket expenses and reasonable Attorney
Costs of Administrative Agent in connection with the preparation, negotiation,
execution and delivery of any waiver, amendment or consent by Lenders or
Required Lenders, as appropriate, relating to this Agreement or the other Loan
Documents; and
          (c) all costs, out-of-pocket expenses and Attorney Costs of
Administrative Agent and each Lender incurred for enforcement, collection,
restructuring, refinancing and “work-out”, or otherwise incurred in obtaining
performance under the Loan Documents, and all costs and out-of-pocket expenses
of collection if default is made in the payment of the Revolving Notes or other
Obligations which in each case shall include without limitation fees and
expenses of consultants, counsel for Administrative Agent, and administrative
fees for Administrative Agent.
     10.3 Waivers. The rights and remedies of Administrative Agent and Lenders
under this Agreement and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which it would otherwise have. No failure or
delay by Administrative Agent or any Lender in exercising any right shall
operate as a waiver of such right. Any waiver or

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indulgence granted by Administrative Agent or any Lender shall not constitute a
modification of any Loan Document, except to the extent expressly provided in
such written waiver or indulgence, or constitute a course of dealing by
Administrative Agent or any Lender at variance with the terms of any Loan
Document such as to require further notice by Administrative Agent or any Lender
of Administrative Agent’s or any Lender’s intent to require strict adherence to
the terms of such Loan Document in the future. Any such actions shall not in any
way affect the ability of Administrative Agent or any Lender, in its discretion,
to exercise any rights available to them under this Agreement, any other Loan
Document or under any other agreement, whether or not Administrative Agent or
any Lender is a party thereto, relating to Borrower, its Subsidiaries or other
Obligors.
     10.4 Determinations by Administrative Agent and Lenders. Any material
determination required or expressly permitted to be made by Administrative Agent
or any Lender under this Agreement shall be made in its reasonable judgment and
in good faith, and shall when made, absent manifest error, constitute prima
facie evidence as to the accuracy thereof.
     10.5 Set-Off. In addition to any rights now or hereafter granted under Law
and not by way of limitation of any such rights, during the existence of an
Event of Default, Administrative Agent and each Lender and any subsequent holder
of any Revolving Note or other Obligations, and any assignee or participant in
any Revolving Note or other Obligation is hereby authorized by Borrower at any
time or from time to time, without notice to Borrower or any other Person, any
such notice being hereby expressly waived, to set-off, appropriate and apply any
deposits (general or special (except trust and escrow accounts), time or demand,
including without limitation Debt evidenced by certificates of deposit, in each
case whether matured or unmatured) and any other Debt at any time held or owing
by Administrative Agent, such Lender, or such holder to or for the credit or the
account of Borrower, against and on account of the Obligations and other
liabilities of Borrower to Administrative Agent, such Lender, or such holder,
irrespective of whether or not (a) Administrative Agent, such Lender, or such
holder shall have made any demand hereunder, or (b) Administrative Agent, such
Lender, or such holder shall have declared the principal of and interest on any
Loan and other amounts due hereunder to be due and payable as permitted by
Section 8.2 and although such obligations and liabilities, or any of them, shall
be contingent or unmatured. Any sums obtained by Administrative Agent, any
Lender, or any assignee, participant or subsequent holder of any Revolving Note
or other Obligation shall be subject to pro rata treatment of the Obligations
and other liabilities hereunder. Notwithstanding any provision of any Loan
Document to the contrary, no Lender may set-off against funds in any account
containing only funds held in trust by Borrower for the benefit of a third party
and which account Borrower has disclosed to Administrative Agent as being a
trust account.
     10.6 Assignment.
          (a) Neither Borrower nor any other Obligor may assign or transfer any
of its rights or obligations hereunder or under the other Loan Documents without
the prior written consent of Administrative Agent and Lenders.

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          (b) With the prior written consent of Administrative Agent (which
consent by Administrative Agent shall not be unreasonably withheld), a Lender
may at any time sell participations in all or any part in its Commitment and/or
the Revolving Loans (collectively, “Participations”) to any banks or other
financial institutions (“Participants”) provided that such Participation shall
not confer on any Person (other than the parties hereto) any right to vote on,
approve or sign amendments or waivers, or any other independent benefit or any
legal or equitable right, remedy or other claim under this Agreement or any
other Loan Documents, other than the right to vote on, approve, or sign
amendments or waivers or consents with respect to items that would result in (i)
(A) the extension of the date of maturity of, or (B) the extension of the due
date for any payment of principal, interest or fees respecting, or (C) the
reduction of the amount of any installment of principal or interest on or the
change or reduction of any mandatory reduction required hereunder, or (D) a
reduction of the rate of interest on, the Revolving Loans; or (ii) the release
of security for the Obligations (except pursuant to this Agreement).
Notwithstanding the foregoing, Borrower agrees that Participants shall be
entitled to the benefits of Article VIII and Section 10.5 as though they were a
Lender. To the fullest extent it may effectively do so under Law, Borrower
agrees that any Participant may exercise any and all rights of banker’s lien,
set-off and counterclaim with respect to its Participation as fully as if such
Participant were the holder of the Revolving Loans in the amount of its
Participation.
          (c) Each Lender may assign to one or more financial institutions or
funds organized under the Laws of the United States, or any state thereof, or
under the Laws of any other country that is a member of the Organization for
Economic Cooperation and Development, or a political subdivision of any such
country, which is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business (each, an “Assignee”)
its rights and obligations under this Agreement and the other Loan Documents;
provided, however, that (i) each such assignment (other than an assignment to a
Lender) shall be subject to the prior written consent of Administrative Agent
(which consent by Administrative Agent shall not be unreasonably withheld) and
Borrower (which consent shall not be unreasonably withheld or delayed, and
provided further, no consent of Borrower shall be required if an Event of
Default exists), (ii) the amount of the Commitment and the Loans being assigned
pursuant to each such assignment (determined as of the date of the assignment
with respect to such assignment) shall in no event be less than $3,000,000,
(iii) the applicable Lender, Administrative Agent and applicable Assignee shall
execute and deliver to Administrative Agent an Assignment Agreement, together
with the Revolving Notes subject to such assignment, and (iv) the Assignee or
Lender executing the Assignment Agreement as the case may be, shall deliver to
Administrative Agent a processing fee of $2,500. Upon such execution, delivery
and acceptance from and after the effective date specified in each Assignment
Agreement, which effective date shall be at least three Business Days after the
execution thereof, (A) the Assignee hereunder shall be party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment Agreement, have the rights and obligations of a Lender
hereunder and (B) the assigning Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish such rights and be released from such obligations under
this Agreement.
          (d) Upon its receipt of an Assignment Agreement executed by a Lender
and an Assignee, and any Revolving Note subject to such assignment, Borrower
shall, within ten days after its receipt of such Assignment Agreement, at its
own expense, execute and deliver to

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Administrative Agent in exchange for the surrendered Revolving Note a new
Revolving Note payable to the order of such Assignee in an amount equal to the
portion of the Revolving Loan assigned to it pursuant to such Assignment
Agreement and a new Revolving Note to the order of the assignor in an amount
equal to the portion of the Revolving Loan retained by it hereunder. Such new
Revolving Notes shall be in an aggregate principal amount equal to the principal
amount of such surrendered Revolving Note, shall be dated the effective date of
such Assignment Agreement and shall otherwise be in substantially the form of
Exhibit G. Administrative Agent shall retain all restated Revolving Notes
(marked “Restated”) until final payment in full of all Obligations, termination
of the Aggregate Commitments.
          (e) Notwithstanding anything in this Section 10.6 to the contrary,
each Lender may assign and pledge all or any portion of its interest in the
Loans and its Revolving Notes to any Federal Reserve Bank as collateral
security.
          (f) Except as specifically set forth in this Section 10.6, nothing in
this Agreement or any other Loan Documents, expressed or implied, is intended to
or shall confer on any Person other than the respective parties hereto and
thereto and their successors and assignees permitted hereunder and hereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Documents.
          (g) Notwithstanding anything in this Section 10.6 to the contrary, no
Assignee or Participant shall be entitled to receive any greater payment under
Article III than the assigning or participating Lender would have been entitled
to receive with respect to the interest assigned or participated to such
Assignee or Participant.
     10.7 Amendment and Waiver. The provisions of this Agreement may not be
amended, modified or waived except by the written agreement of Borrower and
Required Lenders; provided, however, that no such amendment, modification or
waiver shall be made (a) without the consent of all Lenders, if it would
(i) increase the Pro Rata Share or Commitment of any Lender, or (ii) extend the
date of maturity of, extend the due date for any payment of principal or
interest on, reduce the amount of any installment of principal or interest on,
or reduce the rate of interest on, the Revolving Loans or other amount owing
under any Loan Documents, or (iii) release any security for the Obligations
(except pursuant to this Agreement), or (iv) reduce the fees payable hereunder,
or (v) revise this Section 10.7, or (vi) waive the date for payment of any of
the Obligations, or (vii) amend the definition of Required Lenders; or (b)
without the consent of Administrative Lender, if it would alter the rights,
duties or obligations of Administrative Lender. Neither this Agreement nor any
term hereof may be amended orally, nor may any provision hereof be waived orally
but only by an instrument in writing the parties required by this Section 10.7.
Notwithstanding anything to the contrary herein, no Defaulting Lender shall have
any right to approve or disapprove any amendment, waiver or consent hereunder,
except that the Commitment of such Lender may not be increased or extended
without the consent of such Lender.
     10.8 Confidentiality. Administrative Agent and each Lender agree to
maintain the confidentiality of the Information, except that Information may be
disclosed (a) to its and its Affiliates’ directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be

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informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any Governmental
Authority, (c) to the extent required by Laws or by any subpoena or similar
legal process, (d) to any other Lender, (e) in connection with the exercise of
any remedies hereunder or under any other Loan Document or any action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to any
assignee of or Participant in, or any prospective assignee of or Participant in,
any of its rights or obligations under this Agreement, (g) with the written
consent of Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section or (ii) becomes
available to Administrative Agent or any Lender on a nonconfidential basis from
a source other than Borrower, any of its Subsidiaries or any other Obligor. For
purposes of this Section, “Information” means all information received from
Borrower, any other Obligor or any Subsidiary of Borrower relating to Borrower,
any other Obligor or any Subsidiary of Borrower or any of their respective
businesses, other than any such information that is available to Administrative
Agent or any Lender on a nonconfidential basis prior to disclosure by Borrower,
any other Obligor or any Subsidiary of Borrower, provided that, in the case of
information received from a Borrower, any other Obligor or any Subsidiary of
Borrower after the date hereof, such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
     10.9 Counterparts. This Agreement may be executed in any number of
counterparts, including via facsimile, each of which shall be deemed to be an
original, but all such separate counterparts shall together constitute but one
and the same instrument.
     10.10 Severability. Any provision of this Agreement which is for any reason
prohibited or found or held invalid or unenforceable by any Governmental
Authority shall be ineffective to the extent of such prohibition or invalidity
or unenforceability without invalidating the remaining provisions hereof in such
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.
     10.11 Interest and Charges. It is not the intention of any parties to this
Agreement to make an agreement in violation of the Laws of any applicable
jurisdiction relating to usury. Regardless of any provision in any Loan
Document, neither Administrative Agent nor any Lender shall ever be entitled to
receive, collect or apply, as interest on the Obligations, any amount in excess
of the Maximum Amount. If Administrative Agent, any Lender, or any Participant
ever receives, collects or applies, as interest, any such excess, such amount
which would be excessive interest shall be deemed a partial repayment of
principal by Borrower. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the Maximum Amount, Borrower
and Administrative Agent and Lenders shall, to the maximum extent permitted
under Applicable Law, (a) characterize any non-principal payment as an expense,
fee or premium rather than as interest, (b) exclude voluntary prepayments and
the effect thereof, and (c) amortize, prorate, allocate and spread in equal
parts, the total amount of interest throughout the entire contemplated term of
the Obligations so that the interest rate is uniform

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throughout the entire term of the Obligations; provided, however, that if the
Obligations are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, Administrative Agent and Lenders
shall refund to Borrower the amount of such excess or credit the amount of such
excess against the total principal amount of the Obligations owing, and, in such
event, neither Administrative Agent nor any Lender shall be subject to any
penalties provided by any Laws for contracting for, charging or receiving
interest in excess of the Maximum Amount. This Section shall control every other
provision of all agreements pertaining to the transactions contemplated by or
contained in the Loan Documents.
     10.12 Replacement of Lenders. If any Lender requests compensation under
Section 3.4, or if Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 3.1, then Borrower may, at its sole expense and effort, upon notice to
such Lender and Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in, and consents required by, Section 10.6), all of its interests,
rights and obligations under this Agreement and the related Loan Documents to an
assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that:
          (a) The assignee Lender shall have paid to Administrative Agent the
assignment fee specified in Section 10.6(c);
          (b) such Lender shall have received payment of an amount equal to the
outstanding principal of its Revolving Loans, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder and under the other Loan
Documents from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or Borrower (in the case of all other amounts);
          (c) in the case of any such assignment resulting from a claim for
compensation under Section 3.4 or payments required to be made pursuant to
Section 3.1, such assignment will result in a reduction in such compensation or
payments thereafter; and
          (d) such assignment does not conflict with Applicable Laws.
     A Lender shall not be required to make any such assignment or delegation
if, prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling Borrower to require such assignment and delegation cease
to apply.
     10.13 Exception to Covenants. No Obligor shall be deemed to be permitted to
take any action or fail to take any action which is permitted as an exception to
any of the covenants contained herein or which is within the permissible limits
of any of the covenants contained herein if such action or omission would result
in the breach of any other covenant contained herein.
     10.14 USA Patriot Act Notice. Administrative Agent and each Lender hereby
notify Borrower that pursuant to the requirements of the USA Patriot Act (Title
III of Pub.L. 107-56 (signed into law October 26, 2001)) (the “Act”),
Administrative Agent and each Lender are

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required to obtain, verify and record information that identifies Borrower,
which information includes the name and address of Borrower and other
information that will allow Administrative Agent and each Lender to identify
Borrower in accordance with the Act.
     10.15 Amendment and Restatement of Existing Loan Agreement. Upon
satisfaction of the conditions set forth in Sections 4.1 and 4.2, this Agreement
shall be deemed to amend and restate the Existing Loan Agreement. In no event
shall the Liens and Guaranties securing the Existing Loan Agreement or the
obligations thereunder be deemed affected hereby, it being the intent and
agreement of the Obligors that the Guaranties and the Liens on the Collateral
granted to secure the obligations in connection with the Existing Loan Agreement
shall not be extinguished or impaired and shall remain valid, binding and
enforceable securing the obligations under the Existing Credit Agreement, as
amended and restated hereby.
     10.16 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS;
PROVIDED, HOWEVER, IT IS AGREED THAT THE PROVISIONS OF CHAPTER 346 OF THE TEXAS
FINANCE CODE SHALL NOT APPLY TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. THE
LOAN DOCUMENTS ARE PERFORMABLE IN SAN ANTONIO, BEXAR COUNTY, TEXAS, AND
BORROWER, ADMINISTRATIVE AGENT AND LENDERS WAIVE THE RIGHT TO BE SUED ELSEWHERE.
BORROWER, ADMINISTRATIVE AGENT AND LENDERS AGREE THAT THE STATE AND FEDERAL
COURTS OF TEXAS LOCATED IN SAN ANTONIO, TEXAS SHALL HAVE JURISDICTION OVER
PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
     10.17 WAIVER OF JURY TRIAL. EACH OF BORROWER, ADMINISTRATIVE AGENT AND
LENDERS HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVE, TO
THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT
TO LENDERS ENTERING INTO THIS AGREEMENT AND MAKING ANY LOANS.
     10.18 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER
LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
The Remainder of This Page Is Intentionally Left Blank.

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     IN WITNESS WHEREOF, this Agreement is executed as of the date first set
forth above.

            BORROWER: CRAFTMADE INTERNATIONAL, INC.
      By:   /s/ Brad Dale Heimann         Name:   Brad Dale Heimann       
Title:   President   

 

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            ADMINISTRATIVE AGENT: THE FROST NATIONAL BANK,
as Administrative Agent
      By:   /s/ D. Michael Randall         Name:   D. Michael Randall       
Title:   Senior Vice President     

            LENDERS: THE FROST NATIONAL BANK
      By:   /s/ D. Michael Randall         Name:   D. Michael Randall        
Title:   Senior Vice President     

 

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            WHITNEY NATIONAL BANK
      By:   /s/ Kevin P. Rafferty         Name:   Kevin P. Rafferty       
Title:   Senior Vice President   

 

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            COMMERCE BANK, N.A.
      By:   /s/ Joe McCaddon         Name:   Joe McCaddon        Title:   Senior
Vice President