Exhibit 10.1

LOAN AND SECURITY AGREEMENT

by and among

PRIMO WATER CORPORATION

PRIMO PRODUCTS, LLC

PRIMO DIRECT, LLC

PRIMO REFILL, LLC

and

PRIMO ICE, LLC

(as Borrowers)

and

PRIMO REFILL CANADA CORPORATION

(as Guarantor)

and

TD BANK, N.A.

(as a Lender and as Agent)

and

THE LENDERS FROM TIME TO TIME HERETO

(as Lenders)

and

TD BANK, N.A.

(as Arranger and Syndication Agent)

and

TD BANK, N.A.

(as Bookrunner)

April 30, 2012

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

     Page  

1. DEFINITIONS

     1   

1.1 Accounting Terms

     1   

1.2 General Terms

     1   

1.3 Uniform Commercial Code Terms

     40   

1.4 Certain Matters of Construction

     40   

2. ADVANCES, PAYMENTS

     40   

2.1 Revolving Advances

     40   

2.2 Procedure for Borrowing

     41   

2.3 Disbursement of Advance Proceeds

     43   

2.4 [Reserved.]

     44   

2.5 Repayment of Advances

     44   

2.6 Repayment of Excess Advances

     45   

2.7 Statement of Account

     45   

2.8 Letters of Credit

     45   

2.9 Issuance of Letters of Credit

     46   

2.10 Requirements for Issuance of Letters of Credit

     46   

2.11 Additional Payments/Protective Advances

     47   

2.12 Manner of Borrowing and Payment

     48   

2.13 Mandatory Prepayments

     50   

2.14 Use of Proceeds

     51   

2.15 Defaulting Lender/Impacted Lender

     51   

2.16 Joint and Several Liability

     53   

2.17 Interrelated Businesses

     54   

2.18 Appointment of Administrative Borrower as Agent for Requesting Advances and
Letters of Credit and Receipts of Advances and Statements and Receipts and
Sending of Notices

     54   

2.19 Increase in Maximum Credit

     55   

3. INTEREST AND FEES

     57   

3.1 Interest

     57   

3.2 Letter of Credit Fees; Cash Collateral

     58   

3.3 Loan Fees

     58   

3.4 Computation of Interest and Fees

     59   

3.5 Maximum Charges

     59   

3.6 Increased Costs

     59   

3.7 Basis For Determining Interest Rate Inadequate or Unfair

     60   

3.8 Capital Adequacy

     61   

3.9 Withholding Taxes

     62   

 

(i)

--------------------------------------------------------------------------------

4. GRANT OF SECURITY INTEREST; COLLATERAL COVENANTS

     63   

4.1 Security Interest in the Collateral

     63   

4.2 Perfection of Security Interest

     63   

4.3 Preservation of Collateral

     64   

4.4 Ownership and Location of Collateral

     64   

4.5 Defense of Agent’s and Lenders’ Interests

     65   

4.6 Books and Records

     65   

4.7 Financial Disclosure

     65   

4.8 Compliance with Laws

     66   

4.9 Inspection of Premises/Appraisals

     66   

4.10 Insurance

     66   

4.11 Failure to Pay Insurance

     67   

4.12 Payment of Taxes

     67   

4.13 Payment of Leasehold Obligations

     67   

4.14 Accounts and other Receivables

     68   

4.15 Inventory

     71   

4.16 Maintenance of Equipment

     72   

4.17 Exculpation of Liability

     72   

4.18 Environmental Matters

     72   

4.19 Financing Statements

     74   

5. REPRESENTATIONS AND WARRANTIES

     74   

5.1 Authority, Etc.

     74   

5.2 Formation and Qualification

     75   

5.3 Survival of Representations and Warranties

     75   

5.4 Tax Returns

     75   

5.5 Financial Statements

     75   

5.6 Corporate Name

     76   

5.7 O.S.H.A. and Environmental Compliance

     77   

5.8 Solvency; No Litigation, Violation of Law; No ERISA Issues

     77   

5.9 Patents, Trademarks, Copyrights and Licenses

     79   

5.10 Licenses and Permits

     79   

5.11 No Contractual Default

     79   

5.12 No Burdensome Restrictions/No Liens

     79   

5.13 No Labor Disputes

     80   

5.14 Margin Regulations

     80   

5.15 Investment Company Act

     80   

5.16 Disclosure

     80   

5.17 Real Property

     80   

5.18 Hedging Agreements

     80   

5.19 Conflicting Agreements

     81   

5.20 Business and Property of Loan Parties

     81   

5.21 Material Contracts

     81   

 

(ii)

--------------------------------------------------------------------------------

5.22 Capital Structure

     82   

5.23 Bank Accounts, Security Accounts, Etc.

     82   

5.24 Related Agreements

     83   

5.25 OFAC

     83   

6. AFFIRMATIVE COVENANTS

     83   

6.1 Payment of Fees

     83   

6.2 Conduct of Business; Compliance with Laws and Maintenance of Existence and
Assets

     84   

6.3 Violations

     84   

6.4 Government Receivables

     84   

6.5 Execution of Supplemental Instruments; Further Assurances

     85   

6.6 Payment of Indebtedness

     85   

6.7 Standards of Financial Statements

     85   

6.8 Post-Closing Deliveries

     85   

7. NEGATIVE COVENANTS

     86   

7.1 Merger, Amalgamation, Consolidation, Acquisition and Sale of Assets

     86   

7.2 Creation of Liens

     88   

7.3 Guarantees

     88   

7.4 Investments

     88   

7.5 Loans

     89   

7.6 Capital Expenditures

     90   

7.7 Dividends and Distributions

     90   

7.8 Indebtedness

     91   

7.9 Nature of Business

     93   

7.10 Transactions with Affiliates

     93   

7.11 Leases

     93   

7.12 Subsidiaries

     93   

7.13 Fiscal Year and Accounting Changes

     94   

7.14 Pledge of Credit

     94   

7.15 Amendment of Organizational Documents; Term Loan Documents; and other
Related Agreements

     94   

7.16 Compliance with ERISA

     94   

7.17 Prepayment, Etc. of Money Borrowed

     95   

7.18 State of Organization/Names/Locations

     95   

7.19 Foreign Assets Control Regulations, Etc.

     95   

8. CONDITIONS PRECEDENT

     96   

8.1 Conditions to Initial Advances

     96   

8.2 Conditions to Each Advance

     99   

 

(iii)

--------------------------------------------------------------------------------

9. INFORMATION AS TO LOAN PARTIES

     100   

9.1 Disclosure of Material Matters Pertaining to Collateral

     100   

9.2 Collateral and Related Reports

     100   

9.3 Environmental Reports

     103   

9.4 Litigation

     103   

9.5 Material Occurrences

     104   

9.6 Government Receivables

     104   

9.7 Annual Financial Statements

     104   

9.8 [Reserved.]

     105   

9.9 Monthly Financial Statements

     105   

9.10 Notices re Equity Holders; the Term Loan Documents

     105   

9.11 Additional Information

     106   

9.12 Projected Operating Budget

     106   

9.13 Variances From Operating Budget

     106   

9.14 Notice of Governmental Body Items

     106   

9.15 ERISA Notices and Requests

     107   

9.16 Notice of Change in Management, Etc.

     107   

9.17 Additional Documents

     107   

10. EVENTS OF DEFAULT

     107   

11. LENDERS’ RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT

     110   

11.1 Rights and Remedies

     110   

11.2 Waterfall

     112   

11.3 Agent’s Discretion

     113   

11.4 Setoff

     113   

11.5 Rights and Remedies not Exclusive

     113   

11.6 Commercial Reasonableness

     113   

12. WAIVERS AND JUDICIAL PROCEEDINGS

     114   

12.1 Waiver of Notice

     114   

12.2 Delay

     114   

12.3 Jury Waiver

     114   

12.4 Waiver of Counterclaims

     115   

13. EFFECTIVE DATE AND TERMINATION

     115   

13.1 Term

     115   

13.2 Termination

     115   

14. REGARDING AGENT

     115   

14.1 Appointment

     115   

14.2 Nature of Duties

     116   

14.3 Lack of Reliance on Agent and Resignation

     116   

14.4 Certain Rights of Agent

     117   

14.5 Reliance

     117   

14.6 Notice of Default

     118   

14.7 Indemnification

     118   

14.8 Agent in its Individual Capacity

     118   

14.9 Actions in Concert

     118   

14.10 Intercreditor Agreements/Subordination Agreements

     119   

 

(iv)

--------------------------------------------------------------------------------

15. GUARANTEE

     120   

15.1 Guarantee; Contribution Rights

     120   

15.2 Waivers

     120   

15.3 No Defense

     120   

15.4 Guarantee of Payment

     121   

15.5 Liabilities Absolute

     121   

15.6 Waiver of Notice

     122   

15.7 Agent’s Discretion

     122   

15.8 Reinstatement

     122   

15.9 No Marshalling, Etc.

     123   

15.10 Action Upon Event of Default

     124   

15.11 Statute of Limitations

     124   

15.12 Interest

     124   

15.13 Guarantor’s Investigation

     124   

15.14 Termination of Guarantee

     125   

15.15 Extension of Guarantee

     125   

15.16 Applicability to Borrowers

     125   

16. MISCELLANEOUS

     125   

16.1 Governing Law; Consent to Jurisdiction; Etc.

     125   

16.2 Entire Understanding; Amendments; Lender Replacements; Overadvances

     126   

16.3 Successors and Assigns; Participations; New Lenders; Taxes; Syndication

     128   

16.4 Application of Payments

     131   

16.5 Indemnity/Currency Indemnity

     131   

16.6 Notice

     132   

16.7 Survival

     133   

16.8 Postponement of Subrogation, Etc. Rights

     133   

16.9 Severability

     133   

16.10 Expenses

     133   

16.11 Injunctive Relief

     134   

16.12 Consequential Damages

     134   

16.13 Captions

     135   

16.14 Counterparts; Facsimile or Emailed Signatures

     135   

16.15 Construction

     135   

16.16 Confidentiality; Sharing Information

     135   

16.17 Publicity

     136   

16.18 Patriot Act Notice

     136   

16.19 Agent Titles

     136   

16.20 Conflict with Term Loan Intercreditor Agreement

     136   

 

(v)

--------------------------------------------------------------------------------

List of Exhibits and Schedules

Exhibits

 

Exhibit A   Form of Borrowing Base Certificate Exhibit B   Form of Notice of
Conversion Exhibit C   Form of Notice of Advance Request Exhibit 9.7   Form of
Compliance Certificate Exhibit 16.3   Form of Commitment Transfer Supplement
Schedules Schedule C-1   Commitments Schedule R-1   Real Property Schedule 2.3  
Payment Account; Disbursements of Advance Proceeds Schedule 4.4   Equipment,
Inventory and Books and Records Locations Schedule 4.14(c)   Location of Chief
Executive Offices Schedule 5.2(a)   Jurisdictions of Qualification and Good
Standing Schedule 5.2(b)   Subsidiaries Schedule 5.4   Federal Tax
Identification Number Schedule 5.6   Corporate Names Schedule 5.8(b)  
Litigation / Commercial Tort Claims / Money Borrowed Schedule 5.8(d)   Plans
Schedule 5.9   Intellectual Property, Source Code Escrow Agreements Schedule
5.13   Labor Disputes Schedule 5.21   Material Contracts Schedule 5.22   Capital
Structure Schedule 5.23   Bank Accounts Schedule 6.8   Bank Accounts Schedule
7.2   Existing Liens Schedule 7.8   Existing Indebtedness

 

-i-

--------------------------------------------------------------------------------

LOAN AND SECURITY AGREEMENT

This LOAN AND SECURITY AGREEMENT (this “Agreement”), dated April 30, 2012, is
entered into by and among PRIMO WATER CORPORATION, a corporation organized under
the laws of the State of Delaware (“Parent”), PRIMO PRODUCTS, LLC, a limited
liability company organized under the laws of the State of North Carolina
(“Products”), PRIMO DIRECT, LLC, a limited liability company organized under the
laws of the State of North Carolina (“Direct”), PRIMO REFILL, LLC, a limited
liability company organized under the laws of the State of North Carolina
(“Refill”), PRIMO ICE, LLC, a limited liability company organized under the laws
of the State of North Carolina (“ICE”; and together with Parent, Products,
Direct, Refill and any other Person that at any time after the date hereof
becomes a Borrower, each a “Borrower” and collectively, the “Borrowers”), PRIMO
REFILL CANADA CORPORATION, a corporation organized under the laws of the
Province of British Columbia, Canada (“Canadian Guarantor”; and together with
any other Person that at any time after the date hereof becomes a Guarantor,
each a “Guarantor” and collectively, the “Guarantors”), the lenders which are
now or which hereafter become a party hereto (each a “Lender” and collectively,
the “Lenders”) and TD BANK, N.A., a national banking association (in its
individual capacity, “TD Bank”), in its capacity as agent (TD Bank, in such
capacity, the “Agent”) for Secured Parties (as hereinafter defined).

IN CONSIDERATION of the mutual covenants and undertakings herein contained, Loan
Parties, Lenders and Agent hereby agree as follows:

1. DEFINITIONS.

1.1 Accounting Terms.

As used in this Agreement, the Note(s), any Other Document, or any certificate,
report or other document made or delivered pursuant to this Agreement,
accounting terms not defined in Section 1.2 or elsewhere in this Agreement and
accounting terms partly defined in Section 1.2 to the extent not defined, shall
have the respective meanings given to them under GAAP.

1.2 General Terms.

For purposes of this Agreement the following terms shall have the following
meanings:

“Accountants” shall have the meaning set forth in Section 9.7.

“Accounts” shall mean and include as to each Loan Party and each of its
Subsidiaries, all of such Loan Party’s and Subsidiary’s “accounts” as defined in
the UCC, whether now owned or hereafter acquired including, without limitation
all present and future rights of such Loan Party to payment of a monetary
obligation, whether or not earned by performance, which is not evidenced by
chattel paper or an instrument, (a) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a secondary obligation incurred or to be incurred, or
(d) arising out of the use of a credit or charge card or information contained
on or for use with any such card.

--------------------------------------------------------------------------------

“Acquisition Pro Forma” shall have the meaning set forth in the definition of
Permitted Acquisition.

“Administrative Borrower” shall mean Parent, in its capacity as Administrative
Borrower on behalf of itself and the other Borrowers pursuant to Section 2.18
hereof, and its successors and assigns in such capacity.

“Advances” shall mean the Revolving Advances (including without limitation the
Protective Advances) and Swingline Loan Advances, or any of them as the context
implies.

“Advance Rates” shall mean the lending formula percentages set forth in the
definition of Borrowing Base.

“Affiliate” of any Person shall mean (a) any Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such Person, or (b) any Person who is a director, manager or
officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (A) to vote twenty
(20%) percent or more of the Equity Interests having ordinary voting power for
the election of directors or managers (or other comparable body) of such Person,
or (B) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.

“Agent” shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.

“Agreement” shall mean this Loan and Security Agreement, as amended, restated,
modified and supplemented from time to time.

“Applicable Margin” for each type of Advance shall mean, at any time:

(a) subject to clause (b) below, the applicable percentage (on a per annum
basis) set forth in the chart below for Base Rate Loans and for LIBOR Rate
Loans, respectively, that will result, in accordance with such chart, if the
Quarterly Average Excess Availability for the immediately preceding calendar
quarter is in an amount within the range indicated in the chart below for such
percentage:

 

Tier

  

Quarterly Average

Excess Availability

   Applicable Margin
for Base Rate Loans     Applicable Margin
for LIBOR
Rate Loans  

I

   Greater than $12,000,000      2.25 %      3.25 % 

II

   Less than or equal to $12,000,000 but greater than $7,500,000      2.50 %   
  3.50 % 

III

   Less than or equal to $7,500,000      2.75 %      3.75 % 

 

2

--------------------------------------------------------------------------------

(b) Notwithstanding anything to the contrary set forth in clause (a) above,
(i) until the first (1st) day of the first (1st) quarter that follows the date
that is six (6) months after the Closing Date, the Applicable Margin for the
interest rate for Base Rate Loans and for LIBOR Rate Loans shall be the
applicable percentage calculated based on the percentage set forth in Tier II
set forth above, and for each calendar quarter thereafter, the interest rate
will be adjusted quarterly thereafter, on the first (1st) day of each calendar
quarter, based on the Quarterly Average Excess Availability and the chart set
forth above, (ii) the Applicable Margin shall be calculated and established once
each calendar quarter, based upon the Quarterly Average Excess Availability for
the immediately preceding calendar quarter and shall remain in effect until
adjusted thereafter (if applicable) at the beginning of the next calendar
quarter, and (iii) each adjustment of the Applicable Margin shall be effective
as of the first (1st) day of a calendar quarter based on the Quarterly Average
Excess Availability for the immediately preceding calendar quarter. In the event
that at any time after the end of a calendar quarter the Quarterly Average
Excess Availability for the prior calendar quarter used for the determination of
the Applicable Margin of such recently ended calendar quarter was less than the
actual amount of the Quarterly Average Excess Availability for such prior
calendar quarter, the Applicable Margin of such recently ended calendar quarter
shall be adjusted to the applicable percentage based on such actual Quarterly
Average Excess Availability, as determined by Agent, and any additional interest
for the applicable period as a result of such recalculation shall be promptly
paid to Agent. In the event that the Quarterly Average Excess Availability for
the prior calendar quarter used for the determination of the Applicable Margin
of such recently ended calendar quarter was greater than the actual amount of
the Quarterly Average Excess Availability, the Applicable Margin of such
recently ended calendar quarter shall be adjusted to the applicable percentage
based on such actual Quarterly Average Excess Availability, and any reduction in
interest for the applicable period as a result of such recalculation shall be
promptly credited to the loan account of Borrowers. The foregoing provisions
that provide for a credit to the loan account of Borrowers shall not be
construed to limit the rights of Agent or Lenders with respect to the amount of
interest payable after a Default or Event of Default, whether based on such
recalculated percentage or otherwise, but this sentence shall not affect the
right of Borrowers to have such credit.

“Approved Fund” shall mean (a) any fund, trust or similar entity that invests in
commercial loans in the ordinary course of business and is advised or managed by
(i) a Lender, (ii) a Controlled Affiliate of a Lender, (iii) the same investment
advisor that manages a Lender or (iv) a Controlled Affiliate of an investment
advisor that manages a Lender or (b) any finance company, insurance company or
other financial institution which temporarily warehouses loans for any Lender or
any Person described in clause (a) above.

“Arranger” shall mean TD Bank, in its capacity as lead arranger.

“Authority” shall have the meaning set forth in Section 4.18(d).

“Availability Block” shall mean $2,000,000.

“Bank Product Agreement” shall mean those agreements entered into from time to
time by any Loan Party or its Subsidiaries with a Bank Product Provider in
connection with the obtaining of any of the Bank Products.

“Bank Product” shall mean any service or facility extended to any Loan Party by
a Bank Product Provider including: (a) credit cards, (b) debit cards,
(c) purchase cards, (d) credit card, debit card and purchase card processing
services, (e) treasury, cash management or related services (including the
Automated Clearing House processing of electronic funds transfers through the
direct Federal Reserve Fedline system), (f) cash management, including
controlled disbursement, accounts or services, (g) return items, netting,
overdraft and interstate depositary network services or (h) Hedging Agreements.

 

3

--------------------------------------------------------------------------------

“Bank Product Obligations” shall mean all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by any Loan Party to a Bank
Product Provider pursuant to or evidenced by the Bank Product Agreements and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all such amounts that any Loan Party is obligated to reimburse to
a Bank Product Provider as a result of such Person purchasing participations or
executing indemnities or reimbursement obligations with respect to the Bank
Products provided to any Loan Party pursuant to the Bank Product Agreements.

“Bank Product Provider” shall mean (a) TD Bank or any of its Affiliates or
(b) any Lender or any Affiliate of any Lender (in each case as to any Lender or
any Affiliate of any Lender, to the extent approved by Agent in its Permitted
Discretion) that provides any Bank Products to any Loan Party.

“Bankruptcy Code” shall have the meaning set forth in Section 2.16(a) and shall
include, with respect to Canadian Guarantor, the Bankruptcy & Insolvency Act,
the Companies’ Creditors Arrangement Act, the Winding Up and Restructuring Act
and the Business Corporations Act (Ontario) and any other statute with similar
application regarding the restructuring, reorganization, winding up or
liquidation of a debtor.

“Base Rate” shall mean, for any day (or if such day is not a Business Day, the
immediately preceding Business Day), a rate per annum (rounded upward, if
necessary, to the next 1/100th of one (1%) percent) equal to the greater of
(a) the Prime Rate, (b) the Federal Funds Effective Rate in effect on such day
plus one-half of one (0.50%) percent, and (c) the LIBOR Rate for a LIBOR Loan
with a one (1) month interest period plus one (1%) percent. If the Agent shall
have determined in its reasonable discretion (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Agent to obtain sufficient quotations in accordance with the terms of the
definition thereof, the Base Rate shall be determined without regard to clause
(b) of the preceding sentence until the circumstances giving rise to such
inability no longer exist. Any change in the Base Rate due to a change in the
Prime Rate, the Federal Funds Effective Rate or the LIBOR Rate shall be
effective on the effective date of such change in the Prime Rate, the Federal
Funds Effective Rate or the LIBOR Rate, respectively. The term “Federal Funds
Effective Rate” shall mean, for any period, a fluctuating interest rate per
annum equal, for each day during such period, to the weighted average of the
rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not published for any day
that is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by Agent.

“Base Rate Loan” shall mean any Advance that bears interest based upon the Base
Rate.

 

4

--------------------------------------------------------------------------------

“Benefited Lender” shall have the meaning set forth in Section 2.12(f).

“BIA” shall mean the Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c.
B-3, as the same now exists or may from time to time hereafter be amended,
modified, recodified or supplemented, together with all official rules,
regulations and interpretations thereunder or related thereto.

“Blocked Accounts” shall have the meaning set forth in Section 4.14(h).

“Borrower” or “Borrowers” shall have the meanings set forth in the preamble to
this Agreement and shall extend to all permitted successors and assigns of such
Persons.

“Borrowers’ Account” shall have the meaning set forth in Section 2.7.

“Borrowing Base” shall mean, at any time, the amount equal to:

(a) eighty-five (85%) percent of Eligible Accounts, plus

(b) the amount equal to the least of (i) sixty-five (65%) percent of the Value
of the Eligible Inventory, (ii) eighty-five (85%) percent of the Net Liquidation
Percentage multiplied by the Value of the Eligible Inventory or (iii) the
Inventory Loan Limit, minus

(c) the Availability Block, minus

(d) Reserves.

“Borrowing Base Certificate” shall mean a certificate duly executed by a
Responsible Officer of Administrative Borrower appropriately completed and in
substantially the form of Exhibit A, as such form may from time to time be
modified by Agent (in consultation with Administrative Borrower) in a manner
consistent with the terms of this Agreement.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which commercial banks under the laws of the State of New York, the State of New
Jersey or the State of New Hampshire are authorized or required by law to close,
and, if the applicable Business Day relates to any LIBOR Rate Loan, a day on
which dealings are carried on in the London interbank market.

“Canadian Dollars” or “C$” shall mean the lawful currency of Canada.

“Canadian Guarantor” shall have the meaning set forth in the preamble to this
Agreement.

“Capital Expenditures” shall mean, with respect to any Person, without
duplication, all expenditures (including deposits) made by such Person for, or
contracts for expenditures with respect to any fixed assets or improvements, or
for replacements, substitutions or additions thereto, which have a useful life
of more than one (1) year, including the direct or indirect acquisition of such
assets by way of increased product or service charges, offset items or
otherwise, as determined in accordance GAAP consistently applied and all other
expenditures which, in accordance with GAAP, would be required to be capitalized
and shown on the consolidated balance sheet of such Person.

 

5

--------------------------------------------------------------------------------

“Capital Lease” shall mean any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP consistently applied, should be accounted
for as a capital lease.

“Cash Equivalents” shall mean: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor’s Corporation or at least P-1 from Moody’s Investors Service, Inc.;
(c) certificates of deposit or bankers’ acceptances maturing within one (1) year
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000 and whose debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A (or the equivalent rating) by a nationally recognized
investment rating agency (an “A Rated Bank”); (d) time deposits maturing no more
than thirty (30) days from the date of creation thereof with A Rated Banks;
(e) mutual funds that invest solely in one or more of the investments described
in clauses (a) through (d) above; and (f) with respect to such investments in
currencies other than Dollars or in jurisdictions other than the United States,
other investments reasonably deemed by a Loan Party to be equivalent to the
investments described in clauses (a) through (e) above.

“Cash Interest Expense” shall mean, without duplication, for any period,
Interest Expense (excluding the following non-cash components of Interest
Expense: (a) the amortization of fees and costs with respect to the transactions
contemplated by this Agreement which have been capitalized as transaction costs,
and (b) interest paid in kind).

“Cash Receipt Account” or “Cash Receipt Accounts” shall mean, individually or
collectively, all lockbox accounts, dominion accounts or other deposit accounts
established and maintained by Loan Parties for the purpose of collecting or
depositing cash, checks, notes, instruments, and other items of payment
(including insurance proceeds, cash proceeds of asset sales, rental proceeds,
and tax refunds), and which are designated as such and listed on Schedule 5.23.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

“CFC” shall mean a “controlled foreign corporation” as defined in Section 957 of
the Code.

“Change in Tax Law” shall mean a change in the treaty, law or regulation after
the date on which the applicable Agent or Lender becomes a party to this
Agreement (or, if such Lender is a non-U.S. intermediary or flow-through entity
for U.S. federal income tax purposes, after the relevant beneficiary or member
of such Lender became such a beneficiary or member, if later); provided,
however, such term does not include regulations or other guidance issued by the
IRS or U.S. Treasury implementing or interpreting laws already enacted, but not
yet effective.

“Change of Control” shall mean the occurrence of any event (whether in one or
more transactions) which results in (a) fifty-one (51%) percent or more of the
Voting Equity Interests of Parent is owned and controlled by a single Person (as
such term is used in Section 13(d)(3) of the Exchange Act), (b) one hundred
(100%) percent of the Equity Interests of each Borrower (other than Parent) is
no longer owned and controlled by Parent, (c) one hundred (100%) percent of the
Equity Interests of each Loan Party (other than Borrowers and Parent) is no
longer owned and controlled directly or indirectly by Borrowers or Parent or
(d) a “Change of Control” or other similar event shall occur, as defined in, or
under, the Term Loan Documents.

 

6

--------------------------------------------------------------------------------

“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, Liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the PBGC or any environmental agency or
superfund), upon the Collateral, any Loan Party or any Subsidiary of any Loan
Party.

“Closing Date” shall mean April 30, 2012.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time and the regulations promulgated thereunder.

“Collateral” shall mean any and all collateral granted under this Agreement or
any Other Document to secure any and all of the Obligations, including without
limitation all tangible and intangible property of each Loan Party, all personal
and real property of each Loan Party, all movable and immovable property of each
Loan Party, in each case whether now owned or hereafter acquired and wherever
located, including, but not limited to, the following of each Loan Party:

(a) all Accounts and other Receivables;

(b) all certificated and uncertificated securities;

(c) all chattel paper, including electronic chattel paper;

(d) all Computer Hardware and Software and all rights with respect thereto,
including, any and all licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, supporting information, improvement
rights, renewal rights and indemnifications, and any substitutions,
replacements, additions or model conversions of any of the foregoing;

(e) all Contract Rights;

(f) all commercial tort claims, (including, without limitation any commercial
tort claims from time to time described on Schedule 5.8(b) (as such
Schedule 5.8(b) may from time to time be updated));

(g) all deposit accounts;

(h) all documents;

(i) all financial assets;

 

7

--------------------------------------------------------------------------------

(j) all General Intangibles, including payment intangibles and software;

(k) all goods (including all Equipment and Inventory), and all embedded
software, accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor;

(l) all instruments;

(m) all Intellectual Property;

(n) all Investment Property;

(o) all of the Equity Interests issued by each Loan Party (other than Parent)
and each of their Subsidiaries;

(p) all leasehold interests;

(q) all cash, cash equivalents or other money;

(r) all letter of credit rights;

(s) all security entitlements;

(t) all supporting obligations;

(u) all of each Loan Party’s right, title and interest in and to (i) all of its
respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of each Loan Party’s rights as a consignor, a
consignee, an unpaid vendor, mechanic, artisan, or other lienor, including
stoppage in transit, setoff, compensation, detinue, replevin, reclamation and
repurchase; (iii) all supporting obligations and all additional amounts due to
any Loan Party from any Customer relating to the Receivables; (iv) all other
property of any kind whatsoever of each Loan Party, including, but not limited
to, warranty claims, relating to any goods; (v) all of each Loan Party’s
Contract Rights, rights of payment which have been earned under a Contract
Right, letter of credit rights (whether or not the letter of credit is evidenced
by a writing), instruments (including promissory notes), documents, chattel
paper (whether tangible or electronic), warehouse receipts, deposit accounts,
money and securities; (vi) if and when obtained by any Loan Party, all real,
immovable, movable and personal property of third parties in which such Loan
Party has been granted a Lien; and (vii) any other goods, movable or personal
property or real or immovable property of any kind or description, wherever
located, now or hereafter owned or acquired by any Loan Party; and

(v) all books, records, writings, data bases, information and other property
relating to, used or useful in connection with, or evidencing, embodying,
incorporating or referring to any of the foregoing, and all proceeds, products,
offspring, rents, issues, profits and returns of and from any of the foregoing;

provided, however, that, no Excluded Assets shall be included in Collateral.

 

8

--------------------------------------------------------------------------------

“Collateral Access Agreement” shall mean an agreement in writing, in form and
substance reasonably satisfactory to Agent, from any lessor of premises to any
Loan Party, or any other Person to whom any Collateral is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, duly
executed and delivered in favor of Agent with respect to the Collateral at such
premises or otherwise in the custody, control or possession of such lessor,
consignee or other Person.

“Commitment” shall mean, with respect to each Lender, its Revolver Commitment or
its Swingline Loan Commitment, as the context requires, and, with respect to all
Lenders, their Revolver Commitments or their Swingline Loan Commitments, as the
context requires, in each case as such Dollar amounts are set forth beside such
Lender’s name under the applicable heading on Schedule C-1 or in the Commitment
Transfer Supplement pursuant to which such Lender became a Lender hereunder, as
such amounts may be reduced or increased from time to time pursuant to
assignments made in accordance with the provisions of this Agreement.

“Commitment Percentage” shall mean (i) prior to the Revolver Commitments being
terminated or reduced to zero, the percentage obtained by dividing (y) such
Lender’s Revolver Commitment, by (z) the aggregate Revolver Commitments of all
Lenders, and (ii) from and after the time that the Revolver Commitments have
been terminated or reduced to zero, the percentage obtained by dividing (y) the
outstanding principal amount of such Lender’s Advances and ratable portion in
Letters of Credit by (z) the outstanding principal amount of all Advances made
by the Lenders (inclusive of all Swingline Loan Advances made by Swingline
Lender and all Letters of Credit.

“Commitment Transfer Supplement” shall mean a document in the form of
Exhibit 16.3, properly completed, or otherwise in form and substance reasonably
satisfactory to Agent, by which a Purchasing Lender purchases and assumes all or
a portion of Advances made by a Lender and/or all or a portion of the
Commitments of a Lender.

“Compliance Certificate” shall mean the Compliance Certificate executed and
delivered by a Responsible Officer of Administrative Borrower’s pursuant to
Sections 9.7, 9.8 and 9.9 in the form of Exhibit 9.7 appended hereto.

“Computer Hardware and Software” shall mean all of each Loan Party’s and each of
its Subsidiary’s rights (including rights as licensee and lessee) with respect
to (a) computer and other electronic data processing hardware, including all
integrated computer systems, central processing units, memory units, display
terminals, printers, computer elements, card readers, tape drives, hard and soft
disk drives, cables, electrical supply hardware, generators, power equalizers,
accessories, peripheral devices and other related computer hardware; (b) all
software and all software programs designed for use on the computers and
electronic data processing hardware described in clause (a) above, including all
operating system software, utilities and application programs in whatsoever form
(source code and object code in magnetic tape, disk or hard copy format or any
other listings whatsoever); (c) any firmware associated with any of the
foregoing; and (d) any documentation for hardware, software and firmware
described in clauses (a), (b) and (c) above, including flow charts, logic
diagrams, manuals, specifications, training materials, charts and pseudo codes.

 

9

--------------------------------------------------------------------------------

“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Loan Party’s
business or to permit the effectuation and performance of this Agreement, the
Other Documents and the Related Transactions, including, without limitation, any
Consents required under all applicable federal, state or other applicable law.

“Contra Claims” shall have the meaning set forth in subparagraph (l) of the
definition of Eligible Accounts.

“Contract Right” shall mean any right of each Loan Party to payment under a
contract for the sale or lease of goods or the rendering of services, which
right is at the time not yet earned by performance.

“Control Notice” shall mean a written notice delivered by Agent pursuant to a
“control” or other agreements instructing the depository bank to comply with
instructions originated by Agent with respect to the Blocked Account that is
covered thereby without further consent of Loan Parties.

“Controlled Affiliate” of any Person shall mean any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person. For purposes of this definition, control of a Person shall mean the
power, direct or indirect, to (a) vote fifty-one (51%) percent or more of the
Equity Interests having ordinary voting power for the election of directors or
managers (or other comparable body) of such Person, and (b) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.

“Controlled Group” shall mean all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with any Loan Party, are treated as a single employer under
Section 414 of the Code.

“Currency Due” shall have the meaning set forth in Section 16.5.

“Customer” shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or Contract Right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Loan Party,
pursuant to which such Loan Party is to deliver any personal property or perform
any services.

“Customs” shall mean the United States of America Customs and Border Protection
Agency of the United States Department of Homeland Security.

“Default” shall mean an event which, with the giving of notice or passage of
time or both, would constitute an Event of Default.

“Default Rate” shall have the meaning set forth in Section 3.1.

“Defaulting Lender” shall have the meaning set forth in Section 2.15(a).

“Depository Accounts” shall have the meaning set forth in Section 4.14(h).

 

10

--------------------------------------------------------------------------------

“Disposition” shall have the meaning set forth in Section 7.1; and “Dispose”
shall have the correlative meaning.

“Dollar” and the sign “$” shall mean lawful money of the United States of
America.

“Dollar Equivalent” shall mean, at any time, (a) as to any amount denominated in
Dollars, the amount thereof at such time, and (b) as to any amount denominated
in a currency other than Dollars, the equivalent amount in Dollars as reasonably
determined by Agent at such time that such amount could be converted into
Dollars by Agent according to prevailing exchange rates selected by Agent.

“EBITDA” shall mean for any period, without duplication, the total of the
following for Loan Parties and their Subsidiaries on a consolidated basis, each
calculated for such period:

(a) Net Income; plus

(b) (without duplication), to the extent included in the calculation of Net
Income, the sum of (i) income and franchise taxes paid or accrued, (ii) Interest
Expense, net of interest income, paid or accrued, (iii) amortization and
depreciation, (iv) non-cash and/or non-recurring impairment charges,
(v) non-cash and/or non-recurring compensation expense, (vi) non-cash and/or
non-recurring equity charges and (vii) non-cash and/or non-recurring charges
related to acquisition, severance and reserves in an amount not to exceed
$500,000 in the aggregate during any fiscal year; less

(c) (without duplication), to the extent included in the calculation of Net
Income, the sum of (i) the income of any Person (other than a Loan Party or a
Subsidiary of any Loan Party) in which any Loan Party or a Subsidiary of any
Loan Party has an ownership interest except to the extent such income is
received by any Loan Party or such Subsidiary in a cash distribution during such
period, (ii) gains or losses from sales or other dispositions of assets (other
than sales of Inventory in the normal course of business) and (iii) the greater
of (A) $0 and (B) the sum of extraordinary or non-recurring gains less
extraordinary or non-recurring losses.

“Eligible Accounts” shall mean and include each Account of a Borrower and
Canadian Guarantor arising in the ordinary course of such Borrower’s or Canadian
Guarantor’s business and which Agent, in its Permitted Discretion shall deem to
be an Eligible Account, based on such considerations as Agent may from time to
time deem appropriate in its Permitted Discretion. In addition, without limiting
the foregoing, in no event shall an Account be an Eligible Account if:

(a) (i) with respect to each Borrower, it does not arise from the actual and
bona fide sale and delivery of goods or rendition of services by such Borrower
in the ordinary course of business of such Borrower, which transactions are
completed in accordance in all material respects with the terms and provisions
contained in any agreement binding on such Borrower, and (ii) with respect to
Canadian Guarantor, it does not arise from the actual and bona fide sale and
delivery of goods or rendition of services by Canadian Guarantor in the ordinary
course of Canadian Guarantor’s exchange business, which transactions are
completed in accordance in all material respects with the terms and provisions
contained in any agreement binding on Canadian Guarantor (it being understood
and agreed that any Account of Canadian Guarantor that does not arise out of
Canadian Guarantor’s exchange business shall not be an Eligible Account
hereunder);

 

11

--------------------------------------------------------------------------------

(b) it is due or unpaid more than the earlier of (i) sixty (60) days after the
original due date and (ii) one hundred twenty (120) days after the original
invoice date;

(c) it is owed by a Customer who has Accounts unpaid more than the earlier of
(i) sixty (60) days after the original due date and (ii) one hundred twenty
(120) days after the original invoice date, which unpaid Accounts constitute
more than fifty (50%) percent of the total Accounts of such Customer (such
percentage may, in Agent’s sole discretion, be increased or decreased from time
to time);

(d) it is not subject to the first priority, valid and perfected Lien of Agent
(except with respect to the Term Loan Priority Collateral (subject to the Term
Loan Intercreditor Agreement) and subject to Permitted Encumbrances; but without
limiting the right of Agent to establish any Reserves with respect to Permitted
Encumbrances);

(e) any covenant, representation or warranty contained in this Agreement with
respect to such Account has been breached in any material respect;

(f) the Customer shall (i) apply for, suffer, or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee, administrator or
liquidator of itself or of all or a substantial part of its property or call a
meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state, federal or other bankruptcy or insolvency laws
(as now or hereafter in effect), or enter into discussions with its creditors
existing at any one time with respect to rescheduling any of its Indebtedness,
(v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, any petition which is filed against it in any
involuntary case under such bankruptcy or insolvency laws, or (viii) take any
action for the purpose of effecting any of the foregoing or which is indicative
of insolvency;

(g) the sale is to a Customer located or incorporated (or other analogous term)
outside the United States of America or Canada (but excluding the provinces of
Newfoundland, the Northwest Territories, the Yukon Territories and the Territory
of Nunavut), unless the sale is on letter of credit, guarantee or acceptance
terms, in each case acceptable to Agent in its Permitted Discretion;

(h) the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase, return
or contingent or conditional basis or is evidenced by chattel paper;

(i) the Customer is the United States of America, Canada, any state, province or
any department, agency or instrumentality of any of them, unless (i) such
Borrower or Canadian Guarantor assigns its right to payment of such Account to
Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or the Financial
Administration Act (Canada) or has otherwise complied with other similar
applicable statutes or ordinances or (ii) such Account is otherwise acceptable
to Agent in its sole discretion; except, that, notwithstanding the foregoing,
Accounts owing by the United States of America, Canada, any state, province or
any department, agency or instrumentality of any of them shall (so long as such
Accounts are otherwise Eligible Accounts hereunder) be considered Eligible
Accounts up to an aggregate amount of $50,000 at any given time;

 

12

--------------------------------------------------------------------------------

(j) the goods giving rise to such Account have not been shipped and delivered to
and accepted by the Customer or the services giving rise to such Account have
not been performed by such Borrower or Canadian Guarantor and accepted by the
Customer (such as advanced billings) or the Account otherwise does not represent
a final sale;

(k) the Accounts of the Customer exceed a credit limit determined by Agent, in
its Permitted Discretion, to the extent such Account exceeds such limit;

(l) the Account is subject to any offset, deduction, defense, dispute, or
counterclaim, the Customer is also a creditor or supplier of such Borrower or
Canadian Guarantor or the Account is contingent in any respect or for any reason
(each such offset, deduction, defense, dispute, counterclaim or contingency, a
“Contra Claim”);

(m) such Borrower or Canadian Guarantor has made any agreement with any Customer
for any deduction therefrom, except for discounts or allowances made in the
ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each respective
invoice related thereto;

(n) any return, rejection or repossession of the Inventory has occurred the sale
of which gave rise to such Account or such Account relates to a Customer whose
obligation to pay is in any respect, conditional or subject to any such right of
return, rejection, repossession or similar rights;

(o) such Account is not payable to such Borrower or Canadian Guarantor;

(p) in the case of any single Customer and its Affiliates, such Accounts
constitute more than fifty (50%) percent of all otherwise Eligible Accounts (but
the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts); except, that, with respect to (i) Wal-Mart Stores, Inc. and
its Affiliates, so long as Wal-Mart Stores, Inc. and its Affiliates are rated at
least A- by the Standard & Poor’s Corporation or an equivalent rating by another
nationally recognized rating agency, such Accounts do not constitute more than
sixty-five (65%) percent of all otherwise Eligible Accounts (but the portion of
the Accounts not in excess of such percentage may be deemed Eligible Accounts)
and (ii) and (ii) Lowes Companies, Inc. and its Affiliates, so long as Lowes
Companies, Inc. and its Affiliates are rated at least A- by the Standard &
Poor’s Corporation or an equivalent rating by another nationally recognized
rating agency, such Accounts do not constitute more than sixty-five
(65%) percent of all otherwise Eligible Accounts (but the portion of the
Accounts not in excess of such percentage may be deemed Eligible Accounts);

(q) such Account consists of progress billings (such that the obligation of the
Customer with respect to such Account is conditioned upon such Borrower’s or
Canadian Guarantor’s satisfactory completion of any further performance under
the agreement giving rise thereto), bill and hold invoices or retainage
invoices, except as to bill and hold invoices, if Agent shall have received an
agreement in writing from the Customer, in form and substance reasonably
satisfactory to Agent, confirming the unconditional obligation of the Customer
to take the goods related thereto and pay such invoice;

 

13

--------------------------------------------------------------------------------

(r) the Customer or any officer or employee of the Customer with respect to such
Account is an officer, employee, agent or other Affiliate of any Loan Party or
any Subsidiary of any Loan Party;

(s) there are proceedings or actions which are threatened or pending against the
Customer with respect to such Account which might result in any Material Adverse
Effect under clause (a) of such definition with respect to such Customer;

(t) the underlying sale and other documentation governing such Account do not
provide that such Account must be paid by the Customer in Dollars or Canadian
Dollars; or

(u) the underlying sale and other documentation governing such Account are not
governed by the laws of the United States of America or, for Customers located
or incorporated (or other analogous term) in Canada, the laws of the United
States or Canada.

The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Agent in good
faith, based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from such Borrower or Canadian Guarantor prior to the date hereof, in either
case under clause (i) or (ii) which adversely affects or could reasonably be
expected to adversely affect the Accounts in the good faith determination of
Agent. Any Accounts which are not Eligible Accounts shall nevertheless be part
of the Collateral.

“Eligible Inventory” shall mean Inventory owned by a Borrower consisting of
finished goods held for resale in the ordinary course of the business of such
Borrower, in each case, which Agent, in its Permitted Discretion, shall deem to
be Eligible Inventory, based on such considerations as Agent may from time to
time deem appropriate in its Permitted Discretion. Without limiting the
foregoing, in no event shall Inventory be Eligible Inventory if such Inventory:

(a) is work-in-process or raw materials;

(b) is spare parts for equipment;

(c) is packaging and shipping materials;

(d) is supplies used or consumed in such Borrower’s business;

(e) is not located at premises owned and controlled by such Borrower; except,
that, Inventory at premises leased and controlled by such Borrower or Inventory
at a warehouse owned and operated by a third Person on behalf of such Borrower,
in each case that otherwise satisfies the criteria for Eligible Inventory, may
be considered Eligible Inventory if Agent has received and accepted a Collateral
Access Agreement from the owner and lessor or operator of such premises, as the
case may be, duly authorized, executed and delivered by such owner and lessor or
operator;

(f) is not subject to the first priority, valid and perfected Lien of Agent
(other than Permitted Encumbrances; but without limiting the right of Agent to
establish any Reserves with respect to Permitted Encumbrances);

 

14

--------------------------------------------------------------------------------

(g) is not beneficially and legally owned solely by such Borrower;

(h) is bill and hold goods;

(i) is unserviceable, obsolete or slow moving Inventory or Inventory in a poor
condition;

(j) is damaged and/or defective Inventory;

(k) is returned Inventory (other than undamaged and non-defective Inventory
returned in the ordinary course of business that is held for resale in the
ordinary course of business);

(l) is purchased or sold on consignment;

(m) is not subject to an appraisal in accordance with the requirements of Agent;
or

(n) is located outside the continental United States of America.

The criteria for Eligible Inventory set forth above may only be changed and any
new criteria for Eligible Inventory may only be established by Agent in good
faith, based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from Administrative Borrower prior to the date hereof, in either case under
clause (i) or (ii) which adversely affects or could reasonably be expected to
adversely affect the Inventory in the good faith determination of Agent. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.

“Environmental Complaint” shall have the meaning set forth in Section 4.18(d).

“Environmental Laws” shall mean all federal, state, provincial, local and other
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, formal agency, interpretations,
decisions, orders and directives of federal, state, local and other Governmental
Body with respect thereto.

“Equipment” shall mean and include as to each Loan Party and each of its
Subsidiaries, all of such Loan Party’s and Subsidiary’s, whether now owned or
hereafter acquired and wherever located equipment, machinery, apparatus, motor
vehicles, fittings, furniture, furnishings, fixtures, parts, accessories, and
all other goods (other than Inventory) and all replacements and substitutions
therefor or accessions thereto.

“Equity Interest Option Holders” shall mean those directors, officers and
employees holding options and/or warrants in respect of the Equity Interests of
Parent.

“Equity Interests” shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person’s capital stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock or other equity interests).

 

15

--------------------------------------------------------------------------------

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

“ERISA Affiliate” shall mean, with respect to any Loan Party, any trade or
business (whether or not incorporated) that, together with such Loan Party, are
treated as a single employer within the meaning of Sections 414(b), (c), (m) or
(o) of the Code.

“ERISA Event” shall mean, with respect to any Loan Party or any ERISA Affiliate,
(a) any event described in Section 4043(c) of ERISA with respect to a Title IV
Plan; (b) the withdrawal of any Loan Party or ERISA Affiliate from a Title IV
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Loan Party or any ERISA Affiliate from any
Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV
Plan or the treatment of a plan amendment as a termination under Section 4041 of
ERISA; (e) the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (f) the failure by any Loan Party or ERISA
Affiliate to make when due required contributions to a Multiemployer Plan or
Title IV Plan unless such failure is cured within thirty (30) days; (g) the
imposition of a lien under Section 412 or 430 of the Code or Section 303 or 4068
of ERISA on any property (or rights to property, whether real or personal) of
any ERISA Affiliate; (h) a Title IV Plan is in “at risk status” within the
meaning of Code Section 430(i), (i) a Multiemployer Plan is in “endangered
status” or “critical status” within the meaning of Code Section 432(b); (j) an
ERISA Affiliate incurs a substantial cessation of operations within the meaning
of ERISA Section 4062(e), with respect to a Title IV Plan; (k) any other event
or condition that might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of
liability under Section 4069 or 4212(c) of ERISA; (l) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or
(m) the revocation or threatened revocation of a Qualified Plan’s qualification
or tax exempt status; or (n) the termination of a Plan described in Section 4064
of ERISA.

“ESOP” shall mean a Plan that is intended to satisfy the requirements of
Section 4975(e)(7) of the Code.

“Event of Default” shall mean the occurrence of any of the events set forth in
Section 10.

“Excess Availability” shall mean the amount, as determined by Agent in its
Permitted Discretion, calculated at any date, equal to: (a) the lesser of:
(i) the Borrowing Base and (ii) the Maximum Credit less Maximum Credit Reserves
(in each case under (i) and (ii), without duplication and without giving effect
to Reserves in respect of outstanding Letters of Credit), minus (b) the sum of:
(i) the amount of all then outstanding and unpaid Advances plus the amount of
all then outstanding Letters of Credit, plus (ii) the aggregate amount of all
then outstanding and unpaid trade payables and other obligations of Loan Parties
which are outstanding more than sixty (60) days past due as of the end of the
immediately preceding month or at Agent’s option, as of a more recent date based
on such reports as Agent may from time to time specify (other than trade
payables or other obligations being contested or disputed by Loan Parties in
good faith), plus (iii) without duplication, the amount of checks issued by Loan
Parties to pay trade payables and other obligations which are more than sixty
(60) days past due as of the end of the immediately preceding month or at
Agent’s option, as of a more recent date based on such reports as Agent may from
time to time specify (other than trade payables or other obligations being
contested or disputed by the Borrowers in good faith), but not yet sent.

 

16

--------------------------------------------------------------------------------

“Exchange Act” shall mean the Securities Exchange Act of 1934, together with all
rules, regulations and interpretations thereunder or related thereto.

“Excluded Assets” shall mean:

(a) any Excluded Equity Interests;

(b) each instrument, contract (including each Intellectual Property-related
contract and any Accounts and other Receivables arising under such contract),
chattel paper, license, permit, General Intangible, and other agreement that is
with, or issued by, a Person that is not a Loan Party or Affiliate of any Loan
Party, but only while, and only to the extent that, the grant of a security
interest therein pursuant to this Agreement would result in a default or penalty
under, or a breach, violation or termination of, such instrument, contract,
chattel paper, license, permit, General Intangible, or other agreement (any such
provisions that would result in any of the foregoing being referred to herein as
a “Restriction”; and any such asset or property, or interest thereon, that is at
any time subject to a Restriction being referred to herein as a “Restricted
Asset”), except, in each case, to the extent that, pursuant to the Code or other
applicable law, the grant of a security interest therein can be made without
resulting in a default or penalty thereunder or breach, violation or termination
thereof; provided, that, none of the foregoing assets and properties, or
interests therein, shall constitute Excluded Assets if (i) the Restriction
applicable thereto has been waived or such other Person has otherwise consented
to the creation hereunder of a security interest in such Restricted Asset, or
(ii) such Restriction would be rendered ineffective pursuant to Section 9-406,
9-407, 9-408 or 9-409 of Article 9 of the UCC, as applicable, and as then in
effect in any relevant jurisdiction, or any other applicable law (including the
Bankruptcy Code or the PPSA) or principles of equity; provided further, that,
(A) immediately upon the ineffectiveness, lapse or termination of any such
Restriction with respect to a Restricted Asset (a “Non-Restricted Asset”), such
Loan Party shall be deemed to have automatically, without further act by any
Loan Party, Agent, Lenders or any other Person, granted a security interest in,
all its rights, title and interests in and to such Non-Restricted Asset as if
such Restriction had never been in effect; and (B) the foregoing exclusion shall
in no way be construed so as to limit, impair or otherwise affect Agent’s
unconditional continuing security interest in and to all rights, title and
interests of such Loan Party in or to any payment obligations or other rights to
receive monies due or to become due under any such Restricted Asset and in any
such monies and other proceeds of such Restricted Asset;

(c) applications for any trademarks that have been filed with the U.S. Patent
and Trademark Office on the basis of an “intent-to-use” with respect to such
marks, unless and until a statement of use or amendment to allege use is filed
and accepted by the U.S. Patent and Trademark Office or any other filing is made
or circumstances otherwise change so that the interests of a Loan Party in such
marks is no longer on an “intent-to-use” basis, at which time such marks shall
automatically and without further action by the parties be subject to the
security interests and liens granted by a Loan Party to Agent hereunder;

 

17

--------------------------------------------------------------------------------

(d) any Restricted Account but only while, and only to the extent that, the
grant of a security interest therein pursuant to this Agreement is prohibited
under applicable law;

(e) any “consumer goods” (within the meaning of the PPSA) of Canadian Guarantor;

(f) the last day of any term of any lease (whether oral or written) or any
agreement to lease (but Canadian Guarantor will stand possessed of any such
revision in trust for the Agent, on behalf of Secured Parties, or as Lenders or
Agent on their behalf, may direct, and Canadian Guarantor will assign and
dispose thereof in accordance with such directions); and

(g) any property of any Loan Party to the extent that Agent shall determine in
its sole discretion that the costs of obtaining a Lien in such property is
excessive in relation to the value of the security to be afforded thereby.

“Excluded Equity Interests” shall mean (a) voting Equity Interests issued by a
Non-US Subsidiary that is a CFC and a “first-tier” foreign Subsidiary (other
than Canadian Guarantor) representing in excess of sixty-six (66%) percent (or
such greater percentage to the extent such greater percentage would not result
in a material adverse tax consequence to Loan Parties under Treas. Reg.
Section 1.956-2) of the voting Equity Interests of such Non-US Subsidiary, and
(b) the Equity Interests of any Non-US Subsidiary that is not a “first-tier”
foreign Subsidiary.

“Excluded Tax” shall mean, (a) with respect to any Lender (as defined in
Section 3.6) any Tax imposed on (or measured by) such Lender’s gross revenues or
net income (however denominated) and any franchise tax (in each case imposed in
lieu of a net income tax) by any jurisdiction (or any political subdivision
thereof) under the laws of which the Lender is organized or in which its
principal office or its applicable lending office is located, and any branch
profits taxes imposed on the Lender by the United States or any similar tax
imposed on the Lender by a jurisdiction in which the Lender is resident for tax
purposes, and (b) in the case of a Lender organized under the laws of a
jurisdiction outside the United States (other than an assignee pursuant to a
request by any Borrower under Section 16.2(c)), any federal withholding Taxes
resulting from any law in effect (including FATCA) on the date such Lender
becomes a party to this Agreement (or designates a new lending office) or is
attributable to such Lender’s failure to comply with Section 16.3(f) or
Section 16.3(h).

“Existing Deposit Accounts” shall have the meaning set forth in Section 4.14(h).

“Existing Deposit Banks” shall mean, collectively, Wells Fargo Bank, N.A., Bank
of America, N.A. and Royal Bank of Canada.

“Extraordinary Receipts” shall mean any cash received by any Loan Party or any
of their respective Subsidiaries consisting of (a) proceeds of judgments,
proceeds of settlements or other consideration of any kind in connection with
any cause of action, (b) indemnity payments (other than to the extent such
indemnity payments are (i) immediately payable to a Person that is not a Loan
Party or any of their respective Subsidiaries, or (ii) received by a Loan Party
or any of their respective Subsidiaries as reimbursement for any payment
previously made to such Person), (c) any purchase price adjustment received in
connection with any purchase or other acquisition agreement, (d) tax refunds,
(e) pension plan reversions, (f) proceeds of insurance (other than such proceeds
described in Section 2.13(a)) and (g) at any time that an Event of Default has
occurred and is continuing, at the sole discretion of Agent, any other cash
received by any Loan Party or any of their respective Subsidiaries not in the
ordinary course of business (and not consisting of proceeds described in
Section 2.13(a) of this Agreement).

 

18

--------------------------------------------------------------------------------

“FATCA” shall mean Sections 1471 through 1474 of the Code and any regulations or
official interpretations thereof (including any Revenue Ruling, Revenue
Procedure, Notice or similar guidance issued by the U.S. Internal Revenue
Service thereunder as a precondition to relief or exemption from taxes under
such provisions).

“Federal Funds Rate” shall mean, for any day, the rate per annum (rounded upward
to the nearest one one-hundredth of one (1/100th of 1%) 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 of New York on the Business Day next
succeeding such day; provided, that, 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 quoted to Agent on such day on such transactions as determined by
Agent in a commercially reasonable manner.

“Fee Letter” shall mean the Fee Letter, dated as of the date hereof, by and
among the Borrowers and Agent, as amended, restated, modified and supplemented
from time to time.

“Fixed Charge Coverage Ratio” shall mean, with respect to Loan Parties and their
Subsidiaries on a consolidated basis, for any applicable period, the ratio of
(a) EBITDA for such period minus all unfinanced Capital Expenditures (other than
Capital Expenditures financed with proceeds of debt, asset Dispositions (other
than sales of inventory) and insurance and condemnation proceeds in an amount
not to exceed the amount of any such proceeds) made during such period minus
cash taxes paid during such period, to (b) Fixed Charges for such period.

“Fixed Charges” shall mean, as to Loan Parties and their Subsidiaries determined
on a consolidated basis, with respect to any period, the sum of, without
duplication, (a) all Cash Interest Expense during such period, plus (b) all
regularly scheduled (as determined at the beginning of the respective period)
principal payments of Money Borrowed, Indebtedness with respect to earn-outs and
similar obligations and Indebtedness with respect to Capital Leases, in each
case made or required to be made during such period (and without duplicating
items in (a) and (b) of this definition, the interest component with respect to
Indebtedness under Capital Leases paid in cash), plus (c) all taxes paid or
required to be paid during such period in cash, plus (d) all cash dividends or
other cash distributions made or required to be made on account of Equity
Interests (other than those made to a Loan Party) and all repurchases or
redemptions of Equity Interests (other than those made to a Loan Party) made or
required to be made during such period, plus (e) all management and similar fees
paid in cash to any Affiliate of Loan Parties and their Subsidiaries for such
period.

 

19

--------------------------------------------------------------------------------

“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time, as may be amended from time to time by
the Financial Accounting Standards Board; except, that, if there occurs after
the date of this Agreement any change in GAAP that affects in any respect the
calculation of any covenant contained in Section 6.8 hereof, Agent and the
Borrowers shall negotiate in good faith amendments to the provisions of this
Agreement that relate to the calculation of such covenants with the intent of
having the respective positions of Agent, Lenders and the Borrowers, after such
change in GAAP conform as nearly as possible to their respective positions as of
the date of this Agreement and, until any such amendments have been agreed upon,
the covenants in Section 6.8 hereof shall be calculated on the basis of such
principles in effect prior to such change and consistent with those used in the
preparation of the most recent audited financial statements delivered to Agent
prior to the date of such change.

“General Intangibles” shall mean and include as to each Loan Party and each of
its Subsidiaries, all of such Loan Party’s and Subsidiary’s general intangibles
(as such term is defined in the UCC) and intangibles (as such term is defined in
the PPSA), whether now owned or hereafter acquired including, without
limitation, all payment intangibles, choses in action, commercial tort claims,
causes of action, corporate or other business records, inventions, designs,
patents, patent applications, equipment formulations, manufacturing procedures,
quality control procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights, registrations, licenses, franchises, customer lists,
tax refunds, tax refund claims, computer programs and computer software, all
claims under guaranties, Liens or other security held by or granted to such Loan
Party or Subsidiary to secure payment of any of the Receivables by a Customer,
all rights of indemnification and all other intangible property of every kind
and nature (other than Receivables).

“Governmental Body” shall mean any nation or government, any state, province or
other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.

“Government Receivables” shall have the meaning set forth in Section 6.4.

“Guarantee” shall mean the guarantee set forth in Section 15 of this Agreement
and any other guarantee of the Obligations of the Borrowers now or hereafter
executed by a Guarantor in favor of Agent for its benefit and for the ratable
benefit of Lenders.

“Guarantor” or “Guarantors” shall have the meaning set forth in the preamble to
this Agreement and shall extend to all permitted successors and assigns of such
Persons as well as each other Subsidiary of Parent and the Borrowers that
becomes a guarantor of any of the Obligations after the Closing Date pursuant to
Section 7.12(a) or otherwise.

“Hazardous Discharge” shall have the meaning set forth in Section 4.18(d).

“Hazardous Substance” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous or Toxic Substances or related materials
as defined in CERCLA, the Hazardous Substances Transportation Act, as amended
(49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of the New York
State Environmental Conservation Law or any other applicable Environmental Law
and in the regulations adopted pursuant thereto.

 

20

--------------------------------------------------------------------------------

“Hazardous Wastes” shall mean all waste materials subject to regulation under
CERCLA, RCRA or applicable state or other law, and any other applicable federal,
state, provincial or other laws now in force or hereafter enacted relating to
hazardous waste disposal.

“Hedging Agreements” shall mean an agreement between any Loan Party and any
financial institution that is a rate swap agreement, basis swap, forward rate
agreement, commodity swap, interest rate option, forward foreign exchange
agreement, spot foreign exchange agreement, rate cap agreement rate, floor
agreement, rate collar agreement, currency swap agreement, cross-currency rate
swap agreement, currency option, any other similar agreement (including any
option to enter into any of the foregoing or a master agreement for any of the
foregoing together with all supplements thereto) for the purpose of protecting
against fluctuations in or managing exposure with respect to interest or
exchange rates, currency valuations or commodity prices.

“Impacted Lender” shall mean any Lender that (a) is an Impaired Lender or
(b) fails to promptly provide Agent, upon Agent’s written request, reasonably
satisfactory assurance that such Lender is not, and will not become, a
Defaulting Lender or an Impaired Lender.

“Impaired Lender” shall mean any Lender (a) that has given verbal or written
notice (and so long as such notice has not been retracted in writing) to any
Borrower, the Agent or any other Lender or has otherwise publicly announced (and
such announcement has not been retracted in writing) that such Lender believes
it will fail to fund all payments required to be made by it or fund all
purchases of participations required to be funded by it under this Agreement and
the Other Documents, (b) as to which the Agent has (and for so long as Agent
continues to have) a good faith belief that such Lender has defaulted in
fulfilling its obligations (as a lender, agent or letter of credit issuer) under
one or more other syndicated credit facilities or (c) with respect to which one
or more Lender-Related Distress Events has occurred and are continuing with
respect to such Person or any Person that directly or indirectly controls such
Lender and Agent has determined that such Lender may become a Defaulting Lender.
For purposes of this definition, control of a Person shall have the same meaning
as provided in the definition of Affiliate.

“Indebtedness” of a Person at a particular date shall mean (a) all indebtedness
for Money Borrowed of such Person whether direct or guaranteed; (b) that portion
of obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet in conformity with GAAP consistently applied;
(c) notes payable and drafts accepted representing extensions of credit; (d) any
obligation owed for all or any part of the deferred purchase price of property
or services if the purchase price is due more than six (6) months from the date
the obligation is incurred or is evidenced by a note or similar written
instrument (including, without limitation, the maximum potential amount of all
earn-outs and similar deferred payment obligations regardless of the length of
deferral); (e) all indebtedness secured by any Lien on any property or asset
owned or held by that Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is non-recourse to the credit
of that Person; (f) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(g) all obligations evidenced by bonds, debentures, notes or similar
instruments; (h) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker’s acceptances, drafts or similar documents or
instruments issued for such Person’s account; (i) all obligations, liabilities
and indebtedness of such Person (marked to market) arising under Hedging
Agreements; and (j) the principal and interest portions of all rental
obligations of such Person under any synthetic lease or similar off-balance
sheet financing where such transaction is considered to be borrowed money for
tax purposes but is classified as an operating lease in accordance with GAAP
consistently applied, in each case whether such liabilities are present or
future, actual or contingent and whether owned jointly or severally.

 

21

--------------------------------------------------------------------------------

“Intellectual Property” shall mean all trade secrets and other proprietary
information; trademarks, service marks, business names, Internet domain names,
designs, logos, trade dress, slogans, indicia and other source and/or business
identifiers, and the goodwill of the business relating thereto and all
registrations or applications for registrations which have heretofore been or
may hereafter be issued thereon throughout the world; copyrights (including
copyrights for computer programs and software) and copyright registrations or
applications for registrations which have heretofore been or may hereafter be
issued throughout the world and all tangible property embodying the copyrights;
unpatented inventions (whether or not patentable); patent applications and
patents; industrial designs, industrial design applications and registered
industrial designs; license agreements related to any of the foregoing and
income therefrom; books, records, writings, computer tapes or disks, flow
diagrams, specification sheets, source codes, object codes and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to sue for all infringements of any of the foregoing; and all common law and
other rights throughout the world in and to all of the foregoing.

“Interest Expense” shall mean, for any period, as to any Person, as determined
in accordance with GAAP consistently applied, the total interest expense of such
Person, whether paid or accrued during such period but without duplication
(including the interest component of Capital Leases for such period).

“Interest Period” shall mean the period provided for any LIBOR Rate Loan
pursuant to Section 2.2(b).

“Interest Rate” shall mean the Revolving Interest Rate.

“Inventory” shall mean and include as to each Loan Party and each Subsidiary of
each Loan Party, all of such Loan Party’s and Subsidiary’s now owned or
hereafter acquired inventory (as such term is defined in the UCC), goods,
merchandise and other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Loan Party’s or
Subsidiary’s business or used in selling or furnishing such goods, merchandise
and other personal property, all other inventory of such Loan Party or
Subsidiary, and all documents of title or other documents representing them.

“Inventory Loan Limit” shall mean an amount equal to the lesser of
(a) thirty-five (35%) percent multiplied by the Maximum Credit and
(b) thirty-five (35%) percent multiplied by the then current Borrowing Base
(calculated without regard to the Availability Block).

 

22

--------------------------------------------------------------------------------

“Investment Property” shall mean any “investment property” as such term is
defined in Section 9-102 of the UCC now owned or hereafter acquired by any Loan
Party or any of its Subsidiaries, wherever located, including (a) all
securities, whether certificated or uncertificated, including stocks, bonds,
interests in limited liability companies, partnership interests, treasuries,
certificates of deposit, and mutual fund shares; (b) all securities entitlements
of any Loan Party or Subsidiary, including the rights of any Loan Party or
Subsidiary to any securities account and the financial assets held by a
securities intermediary in such securities account and any free credit balance
or other money owing by any securities intermediary with respect to that
account; (c) all securities accounts of any Loan Party or Subsidiary; (d) all
commodity contracts of any Loan Party or Subsidiary; and (e) all commodity
accounts held by any Loan Party or Subsidiary.

“IRS” shall mean the United States Internal Revenue Service.

“Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a
draft pursuant to the terms thereof (it being agreed that so long as TD Bank
shall be Agent, then the Issuer shall be (a) TD Bank or any of its Affiliates,
and/or (b) such other Person selected by Agent in its Permitted Discretion and
in consultation with Administrative Borrower; provided, however, that, in the
event that TD Bank is neither Agent nor a Lender, the “Issuer” with respect to
all subsequently issued Letters of Credit shall be a Person selected by the
Borrowers and acceptable to the Required Lenders, the Agent and such Person).

“Judgment Currency” shall have the meaning set forth in Section 16.5.

“Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.

“Lender Default” shall have the meaning set forth in Section 2.15(a).

“Lender-Related Distress Event” shall mean, with respect to any Lender or any
Person that directly or indirectly controls such Lender (each a “Distressed
Person”), a voluntary or involuntary case with respect to such Distressed Person
under the Bankruptcy Code or any similar bankruptcy or insolvency laws of its
jurisdiction of formation, or a custodian, conservator, receiver or similar
official is appointed for such Distressed Person or any substantial party of
such Distressed Person’s assets, or such Distressed Person or any Person that
directly or indirectly controls such Distressed Person is subject to a forced
liquidation, merger, sale or other change of control supported in whole or in
party by guaranties or other support (including, without limitation, the
nationalization or assumption of ownership or operating control by) the U.S.
government or other Governmental Body, or such Distressed Person makes a general
assignment for the benefit of creditors or is otherwise adjudicated as, or
determined by any Governmental Body having regulatory authority over such
Distressed Person or its assets to be, insolvent, bankrupt, or deficient in
meeting any capital adequacy or liquidity standard of any such Governmental
Body. For purposes of this definition, control of a Person shall have the same
meaning as provided in the definition of Affiliate.

“Letter of Credit Application” shall have the meaning set forth in
Section 2.9(a).

“Letter of Credit Fees” shall have the meaning set forth in Section 3.2(a).

 

23

--------------------------------------------------------------------------------

“Letters of Credit” shall have the meaning set forth in Section 2.8.

“LIBOR” shall mean, for any Interest Period with respect to a LIBOR Loan, a per
annum rate of interest (rounded upward, if necessary, to the nearest one-eighth
of one (1/8th of 1%) percent), determined by Agent at approximately 11:00 a.m.
(London time) two Business Days before commencement of such Interest Period, for
a term comparable to such Interest Period, equal to (a) the British Bankers
Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other
commercially available source designated by Administrative Agent) or (b) if BBA
LIBOR is not available for any reason, the average interest rate (as quoted to
Agent by three major banks in the London interbank Eurodollar market selected by
Agent) at which Dollar deposits in the approximate amount of the LIBOR Rate Loan
would be offered to Agent. If the Board of Governors imposes a Statutory Reserve
with respect to LIBOR deposits and the applicable rate is determined by
reference to the foregoing clauses (a) or (b), then LIBOR shall be (x) the
foregoing rate, divided by (y) the sum of one (1) minus the Statutory Reserve.

“LIBOR Rate Loan” shall mean an Advance that bears interest based on LIBOR.

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the UCC, PPSA or comparable law of any jurisdiction.
Any reference to the Lien of Agent shall be construed in the broadest sense
possible and shall in each case include a security interest and other Lien as
the context implies.

“Loan Party” shall mean, individually, each Borrower and each Guarantor, and
“Loan Parties” shall mean, collectively, the Borrowers and the Guarantors.

“Material Adverse Effect” shall mean a material adverse effect on (a) the
financial condition, operations, assets or business of any Borrower on an
individual basis and/or Loan Parties and their Subsidiaries taken as a whole,
(b) any Loan Party’s ability to pay the Obligations or to comply with this
Agreement or any Other Document in accordance with the terms hereof or thereof,
(c) the value of the Collateral, or Agent’s Liens on the Collateral or the
priority of any such Lien or (d) Agent’s ability to realize on the Collateral or
otherwise enforce the terms of this Agreement or any of the Other Documents.

“Material Contracts” shall have the meaning set forth in Section 5.21.

“Maximum Credit” shall mean $20,000,000 (subject to adjustment as provided
pursuant to the terms of Section 2.19).

“Maximum Credit Increase Effective Date” shall have the meaning set forth in
Section 2.19(c).

“Maximum Credit Reserves” shall mean Reserves to the extent that such Reserves
are in respect of amounts that may be payable to third parties and for which
Agent elects from time to time in its Permitted Discretion to institute such
Reserves against the Maximum Credit in addition to instituting such Reserves
against the Borrowing Base.

 

24

--------------------------------------------------------------------------------

“Maximum Swingline Loan Advance Amount” shall mean $5,000,000.

“Money Borrowed” shall mean (a) Indebtedness for borrowed money arising from the
lending of money by any Person to any Loan Party or any of their respective
Subsidiaries, (b) Indebtedness, whether or not in any such case arising from the
lending by any Person of money to any Loan Party or any of their respective
Subsidiaries, (i) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (ii) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for property, (c) reimbursement obligations
with respect to letters of credit or guaranties of letters of credit, and
(d) Indebtedness of any Loan Party or any of their respective Subsidiaries under
any guarantee of obligations that would constitute Indebtedness for Money
Borrowed under clauses (a), (b) or (c) hereof, if owed directly by any Loan
Party or any of their respective Subsidiaries.

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections
3(37) and 4001(a)(3) of ERISA.

“Net Income” shall mean, for any period, the aggregate income (or loss) of Loan
Parties and their Subsidiaries for such period, all computed and calculated in
accordance with GAAP consistently applied on a consolidated basis.

“Net Liquidation Percentage” shall mean the percentage of the book value of
Eligible Inventory that is estimated to be recoverable in an orderly liquidation
of such Eligible Inventory, net of all associated costs and expenses of such
liquidation, such percentage to be as determined from time to time by the most
recent appraisal received by Agent, which appraisal shall (a) be reasonably
satisfactory to Agent, (b) prepared by an appraisal company reasonably
acceptable to Agent and (c) expressly provide that Agent is permitted to rely
thereon.

“Non-Restricted Asset” shall have the meaning as set forth in the definition of
Excluded Assets.

“Non-US Loan Party” shall mean a Loan Party other than a US Loan Party.

“Non-US Subsidiary” shall mean any Subsidiary other than a US Subsidiary.

“Note” or “Notes” shall mean, individually or collectively, the Revolving Credit
Notes and the Swingline Loan Note.

“Notice of Conversion” shall mean a notice duly executed by a Responsible
Officer of Administrative Borrower appropriately completed and in substantially
the form of Exhibit B.

 

25

--------------------------------------------------------------------------------

“Obligations” shall mean and include (a) any and all of each Loan Party’s
Indebtedness and/or liabilities pursuant to or evidenced by this Agreement or
any Other Documents to Agent, Lenders or any Issuer of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise (including all interest accruing after
the commencement of any bankruptcy or similar proceeding whether or not
enforceable in such proceeding) and all obligations of any Loan Party to Agent,
Lenders or any Issuer to perform acts or refrain from taking any action under
this Agreement or any Other Documents, and (b) Bank Product Obligations solely
for purposes of (x) Section 4.1 (and other Lien grants made by Loan Parties in
the Other Documents to secure any and all of the Obligations) and (y) defining
“Senior Indebtedness,” “First Lien Indebtedness” or words of similar meaning in
any subordination agreement or intercreditor agreement, in each case subject to
the priority in right of payment set forth in Section 11.2; provided, that, as
to any such Bank Product Obligations, the same shall only be included within the
Obligations if (i) the applicable Bank Product Provider, other than TD Bank and
its Affiliates, and the applicable Loan Party shall have delivered prompt
written notice to Agent that (A) such Bank Product Provider has entered into a
transaction to provide Bank Products to such Loan Party, (B) the maximum dollar
amount of Obligations arising thereunder to be included as a Reserve (the “Bank
Product Amount”), together with the methodology used by such parties in
determining the Bank Product Amount, subject in all events, however, to Agent’s
right, in its Permitted Discretion, to establish such Reserve as Agent shall at
any time determine is appropriate to reflect the reasonably anticipated
liabilities and obligations of Loan Parties with respect to such Bank Product
then provided or outstanding, and (C) the express agreement of such Bank Product
Provider and such Borrower or such other Loan Party that the Bank Product
Obligations arising pursuant to such Bank Products provided to such Borrower or
such other Loan Party constitute Obligations entitled to the benefits of the
Liens of Agent granted hereunder, and Agent shall have accepted such notice in
writing, (ii) in no event shall any Bank Product Provider acting in such
capacity to whom such Bank Product Obligations are owing be deemed a Lender for
purposes hereof except with respect to the Lien granted in favor of Agent, for
itself and on behalf of each Secured Party, and in no event shall the approval
of any such Person in its capacity as Bank Product Provider be required in
connection with the release or termination of any security interest or other
Lien of Agent or with respect to any other matter governed by this Agreement or
any Other Document, and (iii) Agent may terminate this Agreement and the Other
Documents, along with any Liens granted under this Agreement and the Other
Documents, without any notice to or consent by any Bank Product Provider, in its
capacity as such, regardless of whether or not any Bank Product Obligations are
outstanding. The Bank Product Amount may be changed from time to time upon
written notice to Agent by a Bank Product Provider and any Loan Party owing Bank
Product Obligations to such Bank Product Provider. No Bank Product Amount may be
established or increased at any time that a Default or Event of Default exists,
or if a Reserve in such amount would cause Borrowing Availability to be less
than zero (0).

“OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets
Control.

“Operating Account” or “Operating Accounts” shall mean, individually or
collectively, the operating accounts established and maintained by Loan Parties
and which are designated as such and listed on Schedule 5.23.

“Original Term” shall have the meaning set forth in Section 13.1.

 

26

--------------------------------------------------------------------------------

“Other Documents” shall mean any Note, the Questionnaire, any Guarantee, any
Collateral Access Agreement, the Term Loan Intercreditor Agreement and any and
all other agreements, instruments and documents, including, without limitation,
guaranties, pledges, security agreements, mortgages, deeds of trust, debentures,
control agreements, other collateral documents, subordination agreements,
intercreditor agreements, powers of attorney, consents, and all other writings
heretofore, now or hereafter executed and/or delivered by any Loan Party to
Agent or any Lender in respect of the transactions contemplated by this
Agreement, in each case, as such agreements, instruments and documents are
amended, restated, modified or supplemented from time to time.

“Parent” shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.

“Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances or Commitments of such Lender and
who shall have entered into a participation agreement in form and substance
reasonably satisfactory to such Lender.

“Payment Account” shall mean Agent’s account set forth on Schedule 2.3 or such
other account of Agent, if any, which Agent may designate by notice to
Administrative Borrower and to each Lender to be the Payment Account.

“Payment in Full” or “Paid in Full” shall mean (a) all Commitments have been
terminated or expired and (b) all of the Obligations have been paid in full in
cash (or with respect to this clause (b), (i) in the case of outstanding Letters
of Credit, Borrowers have furnished to Agent either, (A) the original Letter of
Credit from the beneficiary thereof for immediate and complete termination or
(B) as selected by Agent, either (1) cash collateral in an amount not less than
one hundred and five (105%) percent of the aggregate undrawn amount of all
Letters of Credit (pursuant to cash collateral arrangements to be in form and
substance reasonably satisfactory to Agent) or (2) back-up letters of credit in
form and substance reasonably satisfactory to Agent, and from an issuer
reasonably acceptable to Agent, in an amount not less than one hundred and five
(105%) percent of the aggregate undrawn amount of all Letters of Credit and
(ii) in the case of any other contingent Obligations (including, without
limitation, Bank Product Obligations, except to the extent not required by
Agent), each Loan Party shall have furnished Agent and Lenders with cash
collateral from a Person, and pursuant to terms and conditions, which are
satisfactory to Agent in all respects, or indemnification from a Person
consistent with the terms and provisions set forth herein.

“PBGC” shall mean the Pension Benefit Guaranty Corporation.

“Permitted Acquisition” shall mean the purchase by a Borrower or wholly-owned US
Subsidiary of Borrower that is a Loan Party after the date hereof of all or
substantially all of the assets or property or all of the Equity Interests of
any Person or any business unit or division of such Person (such assets or
Person being referred to herein as the “Target”), subject to the satisfaction of
each of the following conditions:

(a) Agent shall receive at least thirty (30) days’ prior written notice of such
proposed Permitted Acquisition, which notice shall include a reasonably detailed
description of such proposed Permitted Acquisition;

(b) the Target’s assets shall only comprise a business of the type engaged in by
Loan Parties as of the date hereof or ancillary businesses reasonably related to
the business engaged in by Loan Parties as of the date hereof, and which
business would not subject Agent or any Lender to regulatory or third party
approvals in connection with the exercise of its rights and remedies under this
Agreement or any Other Documents other than approvals applicable to the exercise
of such rights and remedies with respect to Loan Parties prior to such proposed
Permitted Acquisition;

 

27

--------------------------------------------------------------------------------

(c) the total cash and non-cash consideration paid by Loan Parties and their
Subsidiaries (including, without limitation, assumption or incurrence of all
Indebtedness (including without limitation earn-outs and deferred purchase price
obligations) for (i) all Permitted Acquisitions shall not exceed $10,000,000 in
the aggregate during the Term or (ii) any Permitted Acquisition shall not exceed
$3,000,000;

(d) subject to the limitation in clause (c) immediately above and all of the
other terms and conditions of this Agreement, Borrowers may use proceeds of
Revolving Advances in an aggregate amount not to exceed (i) $3,000,000 in the
aggregate during the Term to fund the consideration paid by Loan Parties in all
Permitted Acquisitions or (ii) $1,000,000 to fund the consideration paid by Loan
Parties in any single Permitted Acquisition; provided, that, at the time of any
such proposed usage of Revolving Advances and after giving effect thereto,
Excess Availability (i) for the thirty (30) consecutive day period immediately
prior to the date of the consummation of such proposed Permitted Acquisition is
not less than $7,500,000 and (ii) is not less than $7,500,000 on the date of and
after giving effect to any such proposed Permitted Acquisition;

(e) Loan Parties and their Subsidiaries (including the Target), on a
consolidated basis, shall have a Fixed Charge Coverage Ratio (calculated as
provided in Section 6.8) of 1.1:1.0 on the date of and on a pro forma basis for
the trailing twelve (12) month period after giving effect to such proposed
Permitted Acquisition;

(f) Target must have had a positive EBITDA on a cumulative basis for the
immediately preceding four (4) fiscal quarters and no more than one (1) fiscal
quarter during such four fiscal quarter period may have a negative EBITDA;

(g) at or prior to the closing of such proposed Permitted Acquisition, Agent,
for the ratable benefit of each Secured Party, will be granted a first priority
perfected security interest and lien (subject to Permitted Encumbrances) in all
assets and Equity Interests (other than Excluded Assets) acquired in connection
therewith and each Person acquired in connection therewith shall have joined
this Agreement as a Guarantor and each Loan Party and each Person acquired in
connection therewith shall have executed (or caused to be executed) such
documents and taken such actions as may be required by Agent in its Permitted
Discretion in connection therewith;

(h) such proposed Permitted Acquisition shall not be hostile and, prior to its
closing, shall have been approved by the board of directors (or other similar
body) and/or the stockholders or other equity holders of the Target;

(i) such proposed Permitted Acquisition shall only involve assets located in the
United States;

(j) all material consents necessary for such proposed Permitted Acquisition
(including such consents as the Agent deems reasonably necessary) have been
acquired and such proposed Permitted Acquisition is consummated in accordance
with the applicable acquisition documents and applicable law;

 

28

--------------------------------------------------------------------------------

(k) each of the representations and warranties made by any Loan Party in or
pursuant to this Agreement and any Other Document to which it is a party, and
each of the representations and warranties contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any Other Document shall be true and correct
in all material respects (without duplication of any materiality qualifiers
already set forth therein) on and as of such date such proposed Permitted
Acquisition is consummated both before and after giving effect thereto as if
made on and as of such date, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and correct in all material
respects (without duplication of any materiality qualifiers already set forth
therein) on and as of such earlier date);

(l) Administrative Borrower shall have delivered to Agent, in form and substance
reasonably satisfactory to Agent:

(A) a pro forma consolidated balance sheet, income statement and cash flow
statement of Parent and its Subsidiaries (the “Acquisition Pro Forma”), based on
recent financial statements, which shall be complete and shall fairly present in
all material respects the assets, liabilities, financial condition and results
of operations of Parent and its Subsidiaries in accordance with GAAP
consistently applied, but taking into account such proposed Permitted
Acquisition and the funding of all Advances in connection therewith, and such
Acquisition Pro Forma shall reflect that (x) Excess Availability criteria set
forth above has been satisfied, and (y) on a pro forma basis, no Default or
Event of Default has occurred and is continuing or would result after giving
effect to such proposed Permitted Acquisition and Borrowers would have been in
compliance with the financial covenants set forth in Section 6.8 for the four
(4) quarter period reflected in the Compliance Certificate most recently
delivered to Agent pursuant to Section 9.7 prior to the consummation of such
proposed Permitted Acquisition (after giving effect to such proposed Permitted
Acquisition and all Advances funded in connection therewith as if made on the
first (1st) day of such period);

(B) updated versions of the most recently delivered projections delivered
pursuant to Section 5.5(b) covering the one (1) year period commencing on the
date of such proposed Permitted Acquisition and otherwise prepared in accordance
with such projections (the “Acquisition Projections”) and based upon historical
financial data of a recent date reasonably satisfactory to Agent, taking into
account such proposed Permitted Acquisition; and

(C) a certificate of the chief financial officer of Administrative Borrower to
the effect that: (w) each Loan Party (after taking into consideration all rights
of contribution and indemnity such Loan Party has against each other Loan Party)
will be Solvent upon the consummation of such proposed Permitted Acquisition;
(x) the Acquisition Pro Forma fairly presents the financial condition of Loan
Parties and their Subsidiaries (on a consolidated and consolidating basis) as of
the date thereof after giving effect to such proposed Permitted Acquisition;
(y) the Acquisition Projections are reasonable estimates of the future financial
performance of Loan Parties and their Subsidiaries subsequent to the date
thereof based upon the historical performance of Loan Parties, their
Subsidiaries and the Target and show that Loan Parties and their Subsidiaries
shall continue to be in compliance with the financial covenants set forth in
Section 6.8 for the remainder of the Term; and (z) Loan Parties have completed
their due diligence investigation with respect to the Target and such proposed
Permitted Acquisition, which investigation was conducted in a manner similar to
that which would have been conducted by a prudent purchaser of a comparable
business and the results of which investigation were delivered to Agent and
Lenders;

 

29

--------------------------------------------------------------------------------

(m) on or prior to the date of such proposed Permitted Acquisition, Agent shall
have received, in form and substance reasonably satisfactory to Agent, copies of
the acquisition agreement (which shall allow collateral assignments of Loan
Parties rights thereunder in favor of the Agent and the Lenders) or merger
agreement, as applicable, and all related agreements and instruments, and all
opinions, certificates, lien search results and other documents reasonably
requested by Agent; and

(n) concurrently with consummation of such proposed Permitted Acquisition,
Administrative Borrower Representative shall have delivered to Agent a
certificate stating that the foregoing conditions have been satisfied.

Notwithstanding anything to the contrary contained in this definition, if
Administrative Borrower requests that any assets acquired pursuant to any
Permitted Acquisition be included in the Borrowing Base, Agent shall initiate,
within thirty (30) days of such request, an appraisal, field examination or
collateral audit (as the case may be) with respect to the business and assets of
the Target in accordance with Agent’s customary procedures and practices and as
otherwise required by the nature and circumstances of the business of the
Target, the scope and results of which shall be reasonably satisfactory to
Agent, and which shall have been completed, before such assets may be included
in the Borrowing Base. Any Accounts or Inventory of the Target shall only be
Eligible Accounts or Eligible Inventory to the extent that (i) Agent has so
completed such appraisal, field examination or collateral audit (as the case may
be) with respect thereto and (ii) the criteria for Eligible Accounts or Eligible
Inventory (as applicable) set forth herein are satisfied with respect thereto in
accordance with this Agreement.

“Permitted Discretion” shall mean a determination made by the Agent in the
exercise of reasonable (from the perspective of an asset-based secured lender)
business judgment.

“Permitted Encumbrances” shall mean:

(a) Liens in favor of Agent for the benefit of each Secured Party, which, in
each case, secure Obligations;

(b) Liens for taxes, assessments or other governmental charges (“Tax Lien”) not
delinquent or being contested in good faith and by appropriate proceedings by
the applicable Loan Party or Subsidiary of a Loan Party and with respect to
which proper reserves have been taken by Loan Parties and the Subsidiaries;
provided, that, the Tax Lien shall have no effect on the priority of the Liens
in favor of Agent or the value of the Collateral in which Agent has such a Lien
(taking into account any such reserves taken by Loan Parties) and a stay of
enforcement of any such Tax Lien shall be in effect;

(c) deposits or pledges to secure obligations under worker’s compensation,
social security or similar laws, or under unemployment insurance, in each case
made in the ordinary course of business and excluding deposits, liens or pledges
under ERISA;

 

30

--------------------------------------------------------------------------------

(d) deposits or pledges of cash to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the ordinary course
of the applicable Loan Party’s or Subsidiary’s business;

(e) mechanics’, workers’, materialmen’s, carriers’, warehousemen’s, landlords or
other like Liens arising in the ordinary course of the applicable Loan Party’s
or Subsidiary’s business with respect to obligations which are (i) not due or
(ii) being contested in good faith and by appropriate proceedings by the
applicable Loan Party or Subsidiary of a Loan Party and with respect to which
proper reserves have been taken by Loan Parties and the Subsidiaries; provided,
that, the such Lien shall have no effect on the priority of the Liens in favor
of Agent or the value of the Collateral in which Agent has such a Lien and a
stay of enforcement of any such Lien shall be in effect;

(f) Liens placed upon fixed assets and intellectual property related to such
fixed assets hereafter acquired by any Loan Party or any Subsidiary to secure a
portion of the purchase price thereof; provided, that, (i) any such Lien shall
not encumber any other property of Loan Parties or their Subsidiaries and
(ii) the aggregate amount secured by such Liens shall not exceed the applicable
amount provided for in Section 7.8(b);

(g) Liens in existence on the date hereof that are disclosed on Schedule 7.2;

(h) Liens on amounts not exceeding $100,000 in the aggregate deposited as
security for surety or appeal bonds in connection with obtaining such bonds in
the ordinary course of business;

(i) with respect to any Real Property, Liens consisting of easements, rights of
way and zoning restrictions that do not materially interfere with or impair the
use or operation thereof;

(j) Liens on Depository Accounts granted or arising in the ordinary course of
business in favor of depositary banks maintaining such Depository Accounts
solely to the extent they secure customary account fees and charges payable in
respect of such Depository Accounts;

(k) non-consensual statutory Liens (other than Liens securing the payment of
taxes or ERISA matters) arising in the ordinary course of a Loan Party or
Subsidiary’s business; provided, that, such Liens do not secure Indebtedness or
any other amounts in excess of $100,000 in the aggregate which are past due;

(l) Liens arising from (i) operating leases with respect to assets which are not
owned by any Loan Party or any Subsidiary and the precautionary UCC and PPSA
financing statement filings in respect thereof and (ii) equipment or other
materials which are not owned by any Loan Party or Subsidiary located on the
premises of such Loan Party or Subsidiary (but not in connection with, or as
part of, the financing thereof) from time to time in the ordinary course of
business and consistent with current practices of Loan Parties and their
Subsidiaries and the precautionary UCC and PPSA financing statement filings in
respect thereof;

(m) judgments and other similar Liens arising in connection with court
proceedings that do not constitute an Event of Default;

(n) Liens of a collection bank arising under Section 4-210 of the UCC on items
in the course of collection;

 

31

--------------------------------------------------------------------------------

(o) Liens in favor of customs and revenue authorities arising as a matter of law
to secure custom duties which are not past due in connection with the
importation of goods by Loan Parties or their Subsidiaries in the ordinary
course of business;

(p) Liens on specific fixed assets and intellectual property related to such
fixed assets (as opposed to any blanket lien on any asset type) acquired
pursuant to a Permitted Acquisition in existence at the time such assets are
acquired pursuant to such Permitted Acquisition and not created in contemplation
thereof; provided, that, such Liens do not encumber any Accounts, Inventory or
other assets included in the Borrowing Base, and such Liens do not attach to any
assets other than the assets acquired pursuant to such Permitted Acquisition;

(q) receipt of deposits and advances from customers in the ordinary course of
business which may create an interest in the Inventory to be sold to such
customers, but which do not constitute contractual Liens granted by a Loan Party
or any Subsidiary;

(r) Liens securing Indebtedness of any Loan Party under the Term Loan Documents,
subject in all respect to the Term Loan Intercreditor Agreement;

(s) Liens of any counterparty to a Hedging Agreement to secure the Indebtedness
permitted under Section 7.8(e); and

(t) Liens on amounts not exceeding $100,000 in the aggregate deposited as
security for corporate credit card programs maintained in the ordinary course of
business.

“Person” shall mean any individual, sole proprietorship, partnership,
corporation, company, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether federal,
state, provincial, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).

“Plan” shall mean any employee benefit plan within the meaning of Section 3(3)
of ERISA, maintained for employees of Loan Parties or any member of the
Controlled Group or any such Plan to which any Loan Party or any member of the
Controlled Group is required to contribute on behalf of any of its employees.

“PPSA” shall mean the Personal Property Security Act (British Columbia) or any
other like applicable federal or provincial statute pertaining to the granting,
perfecting, priority or ranking of security interests, liens, hypothecs on
personal property, and any successor statutes, together with any regulations
thereunder, in each case as in effect from time to time. References to sections
of the PPSA shall be construed to also refer to any successor sections.

“Prior Defaulting/Impacted Lender” shall mean, as of any date, a Lender that is
not then a Defaulting Lender or an Impacted Lender but was a Defaulting Lender
or an Impacted Lender at any time during the past 365 days.

 

32

--------------------------------------------------------------------------------

“Priority Payables” shall mean, as to Canadian Guarantor at any time, (a) the
full amount of the liabilities of such Borrower or Guarantor at such time which
(i) have a trust imposed to provide for payment or a security interest, pledge,
lien, hypothec or charge ranking or capable of ranking senior to or pari passu
with security interests, liens, hypothecs or charges securing the Obligations
under Federal, Provincial, Territorial, county, district, municipal, or local
law in Canada or (ii) have a right imposed to provide for payment ranking or
capable of ranking senior to or pari passu with the Obligations under local or
national law, regulation or directive, including, but not limited to, claims for
unremitted and/or accelerated rents, taxes, wages, withholding taxes (including
claims for debts due to Canada Revenue Agency), VAT and other amounts payable to
an insolvency administrator, employee withholdings or deductions, severance pay,
termination pay and vacation pay, workers’ compensation obligations, government
royalties or pension fund obligations or contributions, in each case to the
extent such trust, or security interest, lien or charge has been or may be
imposed and (b) the amount equal to the percentage applicable to Inventory in
the calculation of the Borrowing Base multiplied by the aggregate Value of the
Eligible Inventory which Agent, in good faith, considers is or may be subject to
retention of title by a supplier or a right of a supplier to recover possession
thereof, where such supplier’s right has priority over the security interests,
liens or charges securing the Obligations, including, without limitation,
Eligible Inventory subject to a right of a supplier to repossess goods pursuant
to Section 81.1 of the BIA or any applicable laws granting revendication or
similar rights to unpaid suppliers or any similar laws of Canada or any other
applicable jurisdiction (provided, that, to the extent such Inventory has been
identified and has been excluded from Eligible Inventory, the amount owing to
the supplier shall not be considered a Priority Payable).

“Prime Rate” shall mean the “Prime Rate” of interest as published in the “Money
Rates” section of The Wall Street Journal on the applicable date (or the highest
“Prime Rate” if more than one is published) as such rate may change from time to
time.

“Pro Forma Balance Sheet” shall have the meaning set forth in Section 5.5(a).

“Protective Advances” shall have the meaning set forth in Section 2.11.

“Purchasing Lender” shall have the meaning set forth in Section 16.3(c).

“Qualified Assignee” shall mean (a) any Lender (other than a Defaulting Lender,
an Impacted Lender or a Prior Defaulting/Impacted Lender), any Controlled
Affiliate of any Lender (other than a Defaulting Lender, an Impacted Lender or a
Prior Defaulting/Impacted Lender) and any Approved Fund (other than with respect
to a Defaulting Lender, an Impacted Lender or a Prior Defaulting/Impacted
Lender); and (b) any other Person consented to by (i) Agent, which consent of
Agent shall not be unreasonably withheld, conditioned or delayed, and (ii) so
long as no Event of Default has occurred and is continuing and such assignment
is not being made in connection with an assignment, sale or transfer of a
portfolio of loans by the assigning, selling or transferring Lender, by
Administrative Borrower, which consent of Administrative Borrower shall not be
unreasonably withheld, conditioned or delayed (except, that, Administrative
Borrower, for itself and on behalf of Borrowers, shall be deemed to have
consented to any such assignment unless Administrative Borrower shall have
objected thereto by written notice to Agent within five (5) Business Days after
having received notice thereof); provided, that, (A) neither any Loan Party nor
any Affiliate of any Loan Party shall qualify as a Qualified Assignee unless
consented to by Agent in its sole discretion, (B) no Person (or Affiliate of
such Person) proposed to become a Lender after the Closing Date that holds any
(x) Indebtedness that is contractually subordinated to any or all of the
Obligations, (y) secured Indebtedness that is subject to any contractual Lien
subordination to the Liens securing any or all of the Obligations or (z) Equity
Interests issued by any Loan Party shall be a Qualified Assignee unless
consented to by Agent in its sole discretion, and (C) no Person proposed to
become a Lender after the Closing Date and determined by Agent to be acting in
the capacity of a vulture fund or distressed debt purchaser shall be a Qualified
Assignee unless consented to by Agent in its sole discretion.

 

33

--------------------------------------------------------------------------------

“Qualified Plan” shall mean a Plan that is intended to be tax qualified under
Section 401(a) of the Code.

“Quarterly Average Excess Availability” shall mean, for any calendar quarter,
the daily average of the Excess Availability for the immediately preceding
calendar quarter, as calculated by Agent in accordance with this Agreement. For
the purposes of calculating Quarterly Average Excess Availability only, the
Borrowing Base shall be calculated without regard to the Availability Block.

“Questionnaire” shall mean each of the Information Certificates, each dated as
of the date hereof, executed by each Loan Party in favor of the Agent.

“RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901
et seq., as same may be amended from time to time.

“Real Property” shall mean all of each Loan Party and each of their Subsidiary’s
right, title and interest in and to its owned and leased premises.

“Receivables” shall mean and include, as to each Loan Party and each Subsidiary
of each Loan Party, all of such Loan Party’s and Subsidiary’s Accounts, Contract
Rights, instruments (including promissory notes and instruments evidencing
indebtedness owed to Loan Parties and their Subsidiaries by their Affiliates),
documents, chattel paper (whether tangible or electronic), general intangibles
relating to Accounts, drafts and acceptances, and all other forms of obligations
owing to such Loan Party and Subsidiary arising out of or in connection with the
sale, lease or other disposition of Inventory or the rendition of services, all
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.

“Related Agreements” shall mean the Term Loan Documents.

“Related Transactions” shall mean the transactions contemplated by the Related
Agreements.

“Release” shall have the meaning set forth in Section 5.7(c).

“Reportable Event” shall mean a reportable event described in Section 4043(b) of
ERISA or the regulations promulgated thereunder.

“Reporting Trigger Event” shall mean either (a) an Event of Default shall exist
or have occurred and be continuing or (b) Excess Availability is less than
$5,000,000 for any period of three (3) consecutive Business Days; provided,
that, any such Reporting Trigger Event resulting solely from this clause
(b) shall cease to exist to the extent that Excess Availability is greater than
or equal to $5,000,000 for sixty (60) consecutive days during any applicable
period after the occurrence of such Reporting Trigger Event and no other
Reporting Trigger Event then exists as of such sixtieth (60th) day.

 

34

--------------------------------------------------------------------------------

“Required Lenders” shall mean (a) if there are three (3) or more Lenders, at
least two (2) or more Lenders having Commitment Percentages, the aggregate
amount of which exceeds fifty (50%) percent, and (b) if there are either one
(1) or two (2) Lenders, all Lenders.

“Reserves” shall mean such reserves as Agent may from time to time establish in
its Permitted Discretion, including, without limitation, reserves for
(a) matters that could adversely affect the Collateral, its value or the amount
that Agent and the Lenders might receive from the sale or other disposition
thereof or the ability of Agent to realize thereon, (b) sums that Loan Parties
or any of their Subsidiaries are required to pay under any provision of this
Agreement or any Other Document or otherwise (such as taxes, assessments,
payroll, insurance premiums, amounts owing to customs brokers, or, in the case
of leased assets, rents or other amounts payable under such leases or, in the
case of license agreements, royalties or other amounts payable under such
license agreements), (c) amounts owing by any Loan Party or any Subsidiary to
any Person to the extent secured by a Lien on, or trust over, any of the
Collateral or over any assets or properties of any Customer of any Loan Party or
any Subsidiary (such as Liens or trusts in favor of landlords, warehousemen,
carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for
ad valorem, income, payroll, excise, sales, pension plan obligations or other
taxes), including without limitation any Permitted Encumbrance, (d) amounts
believed by the Agent to be necessary to provide for possible inaccuracies, in
any report or in any information provided to the Agent pursuant to this
Agreement, (e) dilution with respect to Accounts of the Borrowers (based on the
ratio of the aggregate amount of non-cash reductions in Accounts of the
Borrowers for any period to the aggregate dollar amount of sales of the
Borrowers for such period) calculated by Agent for any period that is or is
reasonably anticipated to be greater than five (5%) percent, (f) Bank Product
Obligations to the extent that such Bank Product Obligations constitute
Obligations as such term is defined herein or otherwise receive the benefit of
the security interest of Agent in any Collateral, and (g) Priority Payables and
any obligations of Canadian Guarantor subject to superpriority liens under the
BIA and the Wage Earner Protection Program Act (Canada). The amount of any
Reserve established by Agent shall have a reasonable relationship to the event,
condition or other matter which is the basis for such Reserve as determined by
Agent in its Permitted Discretion.

“Responsible Officer” shall mean with respect to any Person, such Person’s chief
executive officer, president, chief operating officer, chief financial officer
or other officer having substantially the same authority and responsibility with
respect to the matters at hand (or having substantially the same knowledge of
the contents of the certificate, document or other document being delivered).

“Restricted Accounts” shall mean deposit accounts or other accounts
(a) established and used (and at all times will be used) solely for the purpose
of paying current payroll obligations of Loan Parties (and which do not (and
will not at any time) contain any deposits other than those necessary to fund
current payroll), in each case in the ordinary course of business,
(b) maintained (and at all times will be maintained) solely in connection with
an employee benefit plan, but solely to the extent that all funds on deposit
therein are solely held for the benefit of, and owned by, employees (and will
continue to be so held and owned) pursuant to such plan, and (c) used in the
ordinary course of business for petty cash, the balance of which shall not
exceed $25,000 in the aggregate at any time; provided, that, without limiting
the foregoing, in order for any such deposit account or other account to
constitute a “Restricted Account”, such deposit or other account must be
expressly designated as a “Restricted Account” on Schedule 5.23 (as such
schedule may from time to time be updated in accordance with Section 5.23),
which designation shall constitute a representation and warranty by each Loan
Party that such deposit account or other account satisfies the criteria set
forth in this definition to constitute a “Restricted Account”.

 

35

--------------------------------------------------------------------------------

“Restricted Asset” shall have the meaning as set forth in the definition of
Excluded Assets.

“Restriction” shall have the meaning as set forth in the definition of Excluded
Assets.

“Revolver Commitment” shall mean, with respect to each Lender, its Revolver
Commitment, and, with respect to all Lenders, their Revolver Commitments, and
without duplication, the commitment of each Lender to purchase a participation
in the Swingline Loan Advances pursuant to Section 2.4, in each case, in the
aggregate amounts set forth beside such Lender’s name under the applicable
heading on Schedule C-1 or in the Commitment Transfer Supplement pursuant to
which such Lender became a Lender hereunder, as such amounts may be reduced or
increased from time to time pursuant to assignments made in accordance with the
provisions of this Agreement.

“Revolving Advances” shall mean Advances made pursuant to Section 2.1 (and shall
also include Protective Advances and Swingline Loan Advances to the extent the
context implies such).

“Revolving Credit Note” shall have the meaning set forth in Section 2.1(a).

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Base Rate plus the Applicable Margin per annum with respect to Base
Rate Loans that are Revolving Advances and (b) the sum of LIBOR plus the
Applicable Margin per annum with respect to LIBOR Rate Loans that are Revolving
Advances.

“Sanctioned Entity” shall mean (a) an agency of the government of, (b) an
organization directly or indirectly controlled by, or (c) a person resident in,
a country that is subject to a sanctions program identified on the list
maintained and published by OFAC and available at
http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise
published from time to time as such program may be applicable to such agency,
organization or person.

“Sanctioned Person” shall mean a person named on the list of Specially
Designated Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.html or as otherwise
published from time to time.

“Secured Party” shall mean Agent, the Lenders, Issuer and Bank Products
Provider; sometimes hereinafter collectively referred to as “Secured Parties”.

“Settlement Date” shall mean the Closing Date and thereafter every Business Day
designated by Agent as a “Settlement Date” by notice from Agent to each Lender,
but not less frequently than weekly.

“Solvent” shall mean, at any time with respect to any Person, that at such time
such Person (a) is able to pay its debts as they mature and has (and has a
reasonable basis to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such Person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).

 

36

--------------------------------------------------------------------------------

“Statutory Reserves” shall mean for any Interest Period for any LIBOR Rate Loan,
the average maximum rate at which reserves (including any marginal, supplemental
or emergency reserves) are required to be maintained during such Interest Period
under Regulation D by member banks of the United States Federal Reserve System
in New York City with deposits exceeding one billion Dollars against
“Eurocurrency liabilities” (as such term is used in Regulation D). LIBOR Rate
Loans shall be deemed to constitute Eurodollar liabilities and to be subject to
such reserve requirements without benefit of or credit for proration, exceptions
or offsets which may be available from time to time to any Lender under
Regulation D.

“Subordinated Debt” shall mean the subordinated Indebtedness described in
Section 7.8 (i).

“Subsidiary” shall mean, with respect to any Person, a corporation, partnership,
limited liability company or other entity of which such Person owns, directly or
indirectly, such number of outstanding shares or other equity interests as to
have more than 50% of the ordinary voting power for the election of directors or
other managers of such corporation, partnership, limited liability company or
other entity. Unless the context otherwise requires, each reference to
Subsidiaries herein shall be a reference to Subsidiaries of Borrowers.

“Swingline Lender” shall TD Bank or any other Lender that, at the request of
Borrowers and with the consent of Agent, agrees, in such Lender’s sole
discretion, to become the Swingline Lender under Section 2.4.

“Swingline Loan Advances” shall mean each Revolving Advance converted by Agent
to a Swingline Loan Advance pursuant to Section 2.1(c).

“Swingline Loan Commitment” shall mean, with respect to TD Bank, its Swingline
Commitment as set forth besides its name under the applicable heading on
Schedule C-1.

“Swingline Loan Interest Rate” shall mean an interest rate per annum equal to
the Revolver Interest Rate applicable to Base Rate Loans that are Revolver
Advances.

“Swingline Loan Note” shall have the meaning set forth in Section 2.1(c).

“Syndication Agent” shall mean TD Bank, in its capacity as syndication agent.

“Target” shall have the meaning as set forth in the definition of Permitted
Acquisition.

“Tax” or “Taxes” shall mean any tax, fee, premium, charge, duty, escheat or
other amount imposed by a Governmental Body and any interest, penalty, or
addition to tax imposed with respect thereto or any applicable law, treaty,
regulation or directive.

 

37

--------------------------------------------------------------------------------

“Tax Lien” shall have the meaning as set forth in the definition of Permitted
Encumbrances.

“TD Bank” shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.

“Term” shall mean the period commencing on the Closing Date and ending on the
Termination Date.

“Term Loan Agent” shall mean ComVest Capital II, L.P., a Delaware limited
partnership, and its successors and assigns.

“Term Loan Credit Agreement” shall mean that certain Credit and Security
Agreement, dated as of the date hereof, by and among the Term Loan Agent, the
lenders from time to time party thereto, the Borrowers, and the other Loan
Guarantors party thereto.

“Term Loan Documents” shall mean the “Other Documents” as defined in the Term
Loan Credit Agreement.

“Term Loan Intercreditor Agreement” shall mean that certain Intercreditor
Agreement, dated as of the date hereof, by and between Agent and the Term Loan
Agent, and acknowledged and agreed to by Loan Parties.

“Term Loan Priority Collateral” shall mean the “Term Loan Priority Collateral”,
as such term is defined in the Term Loan Intercreditor Agreement.

“Termination Date” shall have the meaning set forth in Section 13.1.

“Termination Event” shall mean (a) a Reportable Event with respect to any Plan
or Multiemployer Plan; (b) the withdrawal of any Loan Party or any of their
Subsidiaries or any member of the Controlled Group from a Plan or Multiemployer
Plan during a plan year in which such entity was a “substantial employer” as
defined in Section 4001(a)(2) of ERISA; (c) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (d) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (e) any event or condition (i) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan, or (ii) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (f) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of any Loan Party, any Subsidiary thereof or any member
of the Controlled Group from a Multiemployer Plan.

“Title IV Plan” shall mean a Plan (other than a Multiemployer Plan), that is
covered by Title IV of ERISA, and that any Loan Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.

“Toxic Substance” shall mean and include any material present on the Real
Property or the leasehold interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., or any other
applicable federal, state, provincial or other laws now in force or hereafter
enacted relating to toxic substances. “Toxic Substance” includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

 

38

--------------------------------------------------------------------------------

“Transferee” shall have the meaning set forth in Section 16.3(b).

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New
York from time to time; provided, that, when used with respect to Canadian
Guarantor or when the context so requires, the term “UCC” shall mean the PPSA.

“Unfunded Pension Liability” shall mean, at any time, the aggregate amount, if
any, of the sum of (a) the amount by which the present value of all accrued
benefits under each Title IV Plan exceeds the fair market value of all assets of
such Title IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each such Title
IV Plan using the actuarial assumptions for funding purposes in effect under
such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Loan Party or any ERISA Affiliate as a result of such transaction.

“US Loan Party” shall mean a Loan Party organized, incorporated or otherwise
formed under the laws of the United States or any state thereof or the District
of Columbia.

“US Subsidiary” shall mean a Subsidiary organized, incorporated or otherwise
formed under the laws of the United States or any state thereof or the District
of Columbia.

“Value” shall mean, as determined by Agent in its Permitted Discretion, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP consistently applied or (b) market value;
provided, that, for purposes of the calculation of the Borrowing Base, (i) the
Value of the Inventory shall not include: (A) the portion of the value of
Inventory equal to the profit earned by any Affiliate on the sale thereof to any
Borrower or (B) write-ups or write-downs in value with respect to currency
exchange rates and (ii) notwithstanding anything to the contrary contained
herein, the cost of the Inventory shall be computed in the same manner and
consistent with the most recent appraisal of the Inventory received and accepted
by Agent for the purposes of this Agreement (which appraisal must be performed
by an appraisal company selected by Agent using assumptions and appraisal
methods acceptable to Agent, pursuant to an appraisal report acceptable to Agent
on which Agent is expressly permitted to rely).

“Voting Equity Interests” shall mean with respect to any Person, (a) one (1) or
more classes of Equity Inerests of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Equity Interests of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Equity Interests of such Person convertible or
exchangeable without restriction at the option of the holder thereof into Equity
Interests of such Person described in clause (a) of this definition.

“Waterfall Event” shall mean the occurrence of (a) failure by Borrowers to repay
all of the Obligations as of the end of the Term or after the Obligations have
been accelerated, or (b) an Event of Default and the election by the Agent or
the Required Lenders to require that payments and proceeds of Collateral be
applied pursuant to Section 11.2(b).

 

39

--------------------------------------------------------------------------------

“Week” shall mean the time period commencing with the opening of business on a
Monday and ending on the end of business the following Sunday.

1.3 Uniform Commercial Code Terms.

All terms used herein and defined in the UCC or, solely with respect to Canadian
Guarantor, in the PPSA, including, the terms accessions, account debtor,
certificated security, chattel paper, commercial tort claim, deposit account,
document, electronic chattel paper, equipment, financial asset, fixtures, goods,
health-care-insurance receivable, inventory, instrument, investment property,
letter-of-credit rights, payment intangibles, proceeds, securities accounts,
security, security entitlement, software, supporting obligations and
uncertificated security, shall have the meaning given therein unless otherwise
defined herein or unless the context provides otherwise.

1.4 Certain Matters of Construction.

The terms “herein”, “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular section, paragraph
or subdivision. Each reference to a Section, an Exhibit or a Schedule shall be
deemed to refer to a Section, an Exhibit or a Schedule, as applicable, of this
Agreement unless otherwise specified. The terms “including” and other words of
similar import refer to “including, but not limited” unless otherwise specified.
Any pronoun used shall be deemed to cover all genders. Wherever appropriate in
the context, terms used herein in the singular also include the plural and vice
versa. All references to statutes (including the UCC and the PPSA) and related
regulations shall include any amendments of same and any successor statutes and
regulations. Unless otherwise provided, all references to any instruments or
agreements, including, without limitation, references to this Agreement or any
of the Other Documents, shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof to the extent not
prohibited by this Agreement or any Other Document. The amount outstanding under
any Letter of Credit shall mean, at any date of determination, (a) the maximum
aggregate amount available for drawing thereunder under any and all
circumstances, plus (b) the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit. Unless otherwise provided Dollar
($) baskets set forth in the representations and warranty, covenants and event
of default provisions of this Agreement (and other similar baskets) are
calculated as of each date of measurement by the Dollar Equivalents thereof as
of such date of measurement.

2. ADVANCES, PAYMENTS.

2.1 Revolving Advances.

(a) Revolving Advances. Subject to the terms and conditions set forth in this
Agreement (including, without limitation, Sections 2.1(b) and 8), each Lender,
severally and not jointly, agrees to make Revolving Advances according to its
Commitment Percentage thereof to the Borrowers (or Administrative Borrower on
behalf of the Borrowers) from the Closing Date until the Termination Date.
Revolving Advances shall be funded by Agent or Lenders (as applicable) in
Dollars and shall be repaid in Dollars. To the extent required by a Lender, the
Revolving Advances made by such Lender shall be evidenced by a promissory note
in a form acceptable to Agent (each, a “Revolving Credit Note”; it being
understood that no such promissory note shall include a grant of a Lien in favor
of any individual Lender).

 

40

--------------------------------------------------------------------------------

(b) Revolving Advance Limitations/Protective Advances and Overadvances. The
aggregate amount of the Revolving Advances (including, without limitation,
Swingline Loan Advances) and the Letters of Credit outstanding at any time shall
not (i) exceed the Maximum Credit less the Maximum Credit Reserves or
(ii) except as provided in Section 2.11 with respect to Protective Advances and
in Section 16.2(e) with respect to overadvances, cause Excess Availability to be
less than $0.

(c) Swingline Loan Advances. Agent may convert any request by the Borrowers for
a Revolving Advance into a request for a Swingline Loan Advance from the
Swingline Lender. The Swingline Loan Advance shall bear interest at the
Swingline Loan Interest Rate and shall not exceed in the aggregate at any time
outstanding the Maximum Swingline Loan Advance Amount. To the extent required by
the Swingline Lender, the Swingline Loan Advances made by the Swingline Lender
shall be evidenced by a promissory note in a form acceptable to Agent and the
Swingline Lender (each, a “Swingline Loan Note”). Upon the making of a Swingline
Loan Advance (whether before or after the occurrence of a Default or Event of
Default), without further action by any party hereto, each Lender shall be
deemed to have irrevocably and unconditionally purchased and received from the
Swingline Lender or Agent, without recourse or warranty, an undivided interest
and participation to the extent of such Lender’s Commitment Percentage in such
Swingline Loan Advance. To the extent that there is no settlement in accordance
with Section 2.12(c) below, the Swingline Lender or Agent, as the case may be,
may at any time, require the Lenders to fund their participations. From and
after the date, if any, on which any Lender is required to fund its
participation in any Swingline Loan Advance, Agent shall promptly distribute to
such Lender, such Lender’s Commitment Percentage of all payments of principal
and interest received by Agent in respect of such Swingline Loan Advance.

2.2 Procedure for Borrowing.

(a) Administrative Borrower shall notify Agent of the request by any applicable
Borrower(s) to incur a Revolving Advance hereunder. Such notice shall be in the
form of the Notice of Advance Request attached hereto as Exhibit C and shall be
required to be delivered by Administrative Borrower to Agent on or prior to
11:00 a.m. (New York time) (i) on the Business Day of the date of such requested
borrowing with respect to Base Rate Loans and (ii) three (3) Business Days prior
to the date of such requested borrowing with respect to LIBOR Rate Loans. Each
such notice shall include (A) an indication of which Borrower is requesting such
Revolving Advance, (B) the amount of such proposed borrowing (which amount with
respect to (1) LIBOR Rate Loans shall be in a minimum amount of $500,000 and in
integral multiples of $100,000 in excess thereof and (2) with respect to Base
Rate Loans shall be in a minimum amount of $10,000), (C) the date of such
proposed borrowing (which must be a Business Day) and (D) whether such borrowing
is to be initially a LIBOR Rate Loan (and if so, the duration of the first
(1st) Interest Period therefor) or a Base Rate Loan. Additionally, any amount
required to be paid as interest, fees, charges or other Obligations under this
Agreement or any Other Document, at the election of Agent, shall be deemed a
request by Borrowers for a Revolving Advance as of the date such payment is due,
in the amount required to pay in full or in part such interest, fee, charge or
other Obligation under this Agreement or any Other Document and such deemed
request shall be irrevocable.

 

41

--------------------------------------------------------------------------------

(b) Interest Periods for LIBOR Rate Loans shall be for one (1), two (2) or
three (3) months. At the election of Agent or Required Lenders, no LIBOR Rate
Loan shall be made available to the Borrowers during the continuance of a
Default or an Event of Default. After giving effect to each LIBOR Rate Loan (or
any conversion to a LIBOR Rate Loan), there shall not be outstanding more than
six (6) LIBOR Rate Loans in the aggregate.

(c) Each Interest Period of a LIBOR Rate Loan shall commence on the date such
LIBOR Rate Loan is made and shall end on such date as Administrative Borrower
may elect as set forth in clause (D) of Section 2.2(a); provided, that, the
exact length of each Interest Period shall be determined in accordance with the
practice of the interbank market for offshore Dollar deposits and no Interest
Period shall end after the Termination Date.

(d) Administrative Borrower shall elect the initial Interest Period applicable
to a LIBOR Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(a) or by its Notice of Conversion given to Agent pursuant to
Section 2.2(e), as the case may be. Administrative Borrower shall elect the
duration of each succeeding Interest Period by giving irrevocable written notice
to Agent of such duration not less than three (3) Business Days prior to the
last day of the then current Interest Period applicable to such LIBOR Rate Loan;
provided, that, at the election of Agent or Required Lenders, no loan shall be
converted to a LIBOR Rate Loan if an Event of Default shall have occurred and be
continuing. If Agent does not receive timely notice of the Interest Period
elected by Administrative Borrower, Administrative Borrower shall be deemed to
have elected to convert to a Base Rate Loan subject to Section 2.2(e).

(e) Administrative Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding LIBOR Rate Loan, or on any
Business Day with respect to Base Rate Loans, convert any such loan into a loan
of another type in the same aggregate principal amount; provided, that, any
conversion of a LIBOR Rate Loan shall be made only on the last Business Day of
the then current Interest Period applicable to such LIBOR Rate Loan; provided
further, that, at the election of Agent or Required Lenders, no loan shall be
converted to a LIBOR Rate Loan if an Event of Default shall have occurred and be
continuing. If the Borrowers desire to convert a Base Rate Loan to a LIBOR Rate
Loan or convert a LIBOR Rate Loan to a Base Rate Loan, Administrative Borrower
shall give Agent a Notice of Conversion not less than three (3) Business Days’
prior to such conversion, specifying the date of such conversion, the loans to
be converted and if the conversion is from a Base Rate Loan to a LIBOR Rate
Loan, the duration of the first (1st) Interest Period therefor. After giving
effect to each such conversion, there shall not be outstanding more than the
number of LIBOR Rate Loans permitted by Section 2.2(b).

(f) At the option of the Borrowers and upon three (3) Business Days’ prior
written notice, the Borrowers may prepay the LIBOR Rate Loans in whole at any
time or in part from time to time, without premium or penalty (except as
otherwise expressly provided in this Agreement), but with accrued interest on
the principal being prepaid to the date of such repayment. Administrative
Borrower shall specify the date of prepayment of Advances which are LIBOR Rate
Loans and the amount of such prepayment. In the event that any prepayment of a
LIBOR Rate Loan is required or permitted on a date other than the last Business
Day of the then current Interest Period with respect thereto, the Borrowers and
each other Loan Party shall indemnify Agent and Lenders therefor in accordance
with Section 2.2(g).

 

42

--------------------------------------------------------------------------------

(g) Each Loan Party shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any
default by the Borrowers in the payment of the principal of or interest on any
LIBOR Rate Loan or failure by the Borrowers to complete a borrowing of, a
prepayment of or conversion of or to a LIBOR Rate Loan after notice thereof has
been given, including, but not limited to, Agent’s and Lenders’ standard charges
with respect to the foregoing and any interest payable by Agent or Lenders to
lenders of funds obtained by any of them in order to make or maintain their
respective LIBOR Rate Loans hereunder. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Agent (or the
applicable Lenders) to Administrative Borrower and Agent shall be conclusive
absent manifest error; provided, that, no such certificate shall be required in
the case of Agent’s and Lenders’ standard charges with respect to the events
indemnified in this Section 2.2(g)).

(h) Notwithstanding any other provision hereof, if any applicable law, treaty,
regulation or directive, or any change therein or in the interpretation or
application thereof, shall after the Closing Date make it unlawful for any
Lender (for purposes of this Section 2.2(h), the term “Lender” shall include any
Lender and the office or branch where any Lender or any corporation or bank
controlling such Lender makes or maintains any LIBOR Rate Loans) to make or
maintain its LIBOR Rate Loans, such Lender shall notify the Agent and
Administrative Borrower, and upon such notification, the obligation of such
Lender to make such LIBOR Rate Loans hereunder shall forthwith be cancelled and
the Borrowers shall, if any affected LIBOR Rate Loans are then outstanding,
promptly upon notice from Agent, either pay all such affected LIBOR Rate Loans
or convert such affected LIBOR Rate Loans into Base Rate Loans (and following
such notification any request for LIBOR Rate Loans from such Lender shall be
deemed to be a request for Base Rate Loans). If any such payment or conversion
of any LIBOR Rate Loan is made on a day that is not the last day of the Interest
Period applicable to such LIBOR Rate Loan, the Borrowers shall pay Agent, upon
Agent’s notice, such amount or amounts as may be necessary to compensate such
Lender for any loss or expense sustained or incurred by such Lender in respect
of such LIBOR Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by such Lender to
lenders of funds obtained by such Lender in order to make or maintain such LIBOR
Rate Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Agent (or the applicable Lenders) to
Administrative Borrower and Agent shall be conclusive absent manifest error.

2.3 Disbursement of Advance Proceeds.

All Advances shall be disbursed from whichever office or other place Agent or
Lenders, as applicable, may designate from time to time. During the Term, the
Borrowers may request, repay and reborrow Revolving Advances, all in accordance
with the terms and conditions of this Agreement. The proceeds of each Revolving
Advance requested by the Borrowers (or Administrative Borrower on behalf of the
Borrowers) or deemed to have been requested by the Borrowers (or Administrative
Borrower on behalf of the Borrowers) under Section 2.2(a) shall, subject to the
terms and conditions of this Agreement with respect to requested Revolving
Advances, be made available to the Borrowers on the Business Day so requested by
way of credit to the Borrowers’ operating account (no. 4266772958) maintained at
TD Bank (or such other operating account designated by Administrative Borrower
in writing to Agent) in immediately available federal funds or other immediately
available funds or, with respect to Revolving Advances deemed to have been
requested by the Borrowers (or Administrative Borrower on behalf of the
Borrowers), be disbursed to Agent to be applied to the outstanding Obligations
giving rise to such deemed request.

 

43

--------------------------------------------------------------------------------

2.4 [Reserved.]

2.5 Repayment of Advances.

(a) The Revolving Advances shall be due and payable in full on the Termination
Date subject to earlier prepayment as herein provided.

(b) The Borrowers recognize that the amounts evidenced by checks, notes, drafts
or any other items of payment relating to and/or proceeds of Collateral may not
be collectible by Agent on the date received. In consideration of Agent’s
consideration (subject to the last sentence of this clause (b)) to conditionally
credit the Borrowers’ Account as of the Business Day on which Agent receives
those items of payment, the Borrowers agree that, in computing the charges under
this Agreement, all items of payment shall be deemed applied by Agent on account
of the applicable Obligations on the date of confirmation to Agent by the
Blocked Account bank or Depository Account bank, as provided for in
Section 4.14(h), that such items of payment have been collected in good funds
and finally credited to Agent’s account. Without limiting the above provisions
of this clause (b), Agent is not, however, required to credit the Borrowers’
Account for the amount of any item of payment which is unsatisfactory to Agent
and Agent may charge the Borrowers’ Account for the amount of any item of
payment which is returned to Agent unpaid.

(c) All payments (including prepayments) of principal, interest and other
amounts payable hereunder and under each Other Document shall be made to Agent
at the Payment Account not later than 2:00 p.m. (New York time) on the due date
therefor (or, if such due date is not a Business Day, on the next Business Day)
in lawful money of the United States of America in funds immediately available
to Agent. Any payment received by Agent subsequent to 2:00 p.m. (New York time)
on any Business Day (regardless of whether such payment is due on such Business
Day) shall be deemed received by Agent, and shall be applied to the applicable
Obligations intended to be paid thereby, on the next Business Day. Agent shall
have the right to effectuate payment on any and all Obligations due and owing
hereunder by charging the Borrowers’ Account or by making Revolving Advances as
provided in Section 2.2.

(d) The Borrowers shall pay principal, interest, and all other amounts payable
hereunder and under each Other Document without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.

(e) If, notwithstanding the terms of this Agreement or any Other Document, Agent
or any Lender receives any payment from or on behalf of any Borrower or any
other Loan Party in a currency other than the Currency Due (including, without
limitation, payments in respect of any Account in the lawful currency of
Canada), Agent or such Lender may convert the payment (including the monetary
proceeds of realization upon any Collateral and any funds then held in a cash
collateral account) into the Currency Due at exchange rate selected by Agent or
such lender in the manner contemplated by Section 16.5 and Borrowers shall
reimburse Agent and Lenders on demand for all costs they incur with respect
thereto. To the extent permitted by law, the obligation shall be satisfied only
to the extent of the amount actually received by Agent upon such conversion.

 

44

--------------------------------------------------------------------------------

2.6 Repayment of Excess Advances.

If for any reason Excess Availability at any time is less than $0 or the balance
of any or all of the outstanding Advances and Letters of Credit at any time is
otherwise in excess of any applicable limitation set forth in this Agreement
(subject to Section 16.2(d) with respect to overadvances), such excess amount
shall be immediately due and payable, without the necessity of any demand, at
the Payment Account (it being understood and agreed that it shall be an Event of
Default if at any time Excess Availability is less than $0).

2.7 Statement of Account.

Agent shall maintain, in accordance with its customary procedures, a loan
account (the “Borrowers’ Account”) in the name of the Borrowers in which shall
be recorded the date and amount of each Advance made by Lenders and the date and
amount of each payment in respect thereof; provided, however, that, the failure
by Agent to record the date or amount of any Advance or any other item shall not
adversely affect Agent or any Lender under this Agreement or any Other Document
or diminish any obligation of any Loan Party under this Agreement or any Other
Document. Each month, Agent shall send to Administrative Borrower a statement
showing the accounting for the Advances made, payments made or credited in
respect thereof, and certain other transactions between Lenders and the
Borrowers, during such month. The monthly statements shall be deemed correct and
binding upon the Borrowers in the absence of manifest error and shall constitute
an account stated between Lenders and the Borrowers unless Agent receives a
written statement of the Borrowers’ specific exceptions thereto within thirty
(30) days after such statement is received by Administrative Borrower. The
records of Agent with respect to each Borrowers’ Account shall be conclusive
evidence absent manifest error of the amounts of Advances and other charges
thereto and of payments applicable thereto.

2.8 Letters of Credit.

Subject to the terms and conditions hereof, Agent shall issue or cause the
issuance of letters of credit (collectively, “Letters of Credit”) by the Issuer
on behalf of the Borrowers; provided, however, that, Agent will not be required
to issue or cause to be issued any Letters of Credit to the extent that the face
amount of such Letters of Credit would cause Excess Availability to be less than
$0. The maximum amount of outstanding Letters of Credit shall not exceed
$5,000,000 in the aggregate at any time. All outstanding reimbursement
obligations and disbursements or payments related to Letters of Credit shall be
deemed to be Base Rate Loans consisting of Revolving Advances and shall bear
interest at the Revolving Interest Rate for Base Rate Loans. Notwithstanding
anything to the contrary contained in this Agreement, in the event that there is
a Defaulting Lender, an Impacted Lender or Prior Defaulting/Impacted Lender,
Issuing Bank shall not be required to (and, in any event, shall not if directed
by Agent) issue any Letter of Credit, or increase or extend or otherwise amend
any Letter of Credit, unless the Borrowers provide cash collateral to Issuing
Bank with respect thereto to hold, on terms and conditions satisfactory to
Issuing Bank and Agent, in an amount equal to such Defaulting Lender’s, Impacted
Lender’s or Prior Defaulting/Impacted Lender’s Commitment Percentage of all
obligations in respect of Letters of Credit and in any such event, the
Defaulting or Impacted Lender or Prior Defaulting or Impacted Lender shall not
be entitled to any commitment fee or Letter of Credit Fees.

 

45

--------------------------------------------------------------------------------

2.9 Issuance of Letters of Credit.

(a) Administrative Borrower may request Agent to issue or cause the issuance of
a Letter of Credit by delivering to Agent Issuer’s standard form of letter of
credit application and, if requested, letter of credit security agreement
(collectively, the “Letter of Credit Application”) and any draft, if applicable,
completed to the satisfaction of Agent, together with such other certificates,
documents and other papers and information as Agent or Issuer may reasonably
request.

(b) Each Letter of Credit shall, among other things, (i) provide for the payment
of sight drafts or acceptances of issuance drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the
documents described therein, (ii) be denominated in Dollars and (iii) have an
expiry date not later than one (1) year after such Letter of Credit’s date of
issuance, and in no event having an expiry date later than five (5) Business
Days prior to the Termination Date unless Loan Parties provide cash collateral
equal to not less than one hundred five (105%) percent of the face amount
thereof to be held by Agent pursuant to a cash collateral agreement in form and
substance reasonably satisfactory to Agent; provided, that, any Letter of Credit
with a one (1) year term may provide for the renewal thereof for additional one
(1) year periods (which shall in no event extend beyond the date referred to in
clause (iii) above).

(c) Agent shall use its reasonable efforts to notify Lenders of the request by
Administrative Borrower for a Letter of Credit hereunder, but any failure to so
notify Lenders shall not reduce any liability or any obligation of the Lenders
hereunder or any rights of Agent hereunder.

2.10 Requirements for Issuance of Letters of Credit.

(a) In connection with the issuance of any Letter of Credit, each Borrower shall
indemnify, save and hold Agent, each Lender and each Issuer harmless from any
loss, cost, expense or liability, including, without limitation, payments made
by Agent, any Lender or any Issuer and expenses and reasonable attorneys’ fees
incurred by Agent, any Lender or any Issuer arising out of, or in connection
with, any Letter of Credit, except for any loss, cost, expense, liability or
payment resulting from Agent’s, any Lender’s, or any Issuer’s gross (not mere)
negligence or willful misconduct, as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. The Borrowers shall
be bound by Agent’s or Issuer’s regulations and good faith interpretations of
any Letter of Credit, although this interpretation may be different from
Borrowers’ own interpretation; and, neither Agent, nor any Lender, nor any
Issuer shall be liable for any error, negligence, or mistakes, whether of
omission or commission, in following any Borrower’s instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit except for
Agent’s, any Lender’s, or any Issuer’s gross (not mere) negligence or willful
misconduct, as determined pursuant to a final, non-appealable order of a court
of competent jurisdiction.

(b) The Borrowers shall authorize and direct any Issuer of a Letter of Credit to
deliver to Agent all related payment/acceptance advices, to deliver to Agent all
instruments, documents, and other writings and property received by the Issuer
pursuant to the Letter of Credit and to accept and rely upon Agent’s
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit or the application therefor.

 

46

--------------------------------------------------------------------------------

(c) In connection with all Letters of Credit issued or caused to be issued by
Agent under this Agreement, each Borrower hereby appoints Agent, or its
designee, as its attorney, with full power and authority upon the occurrence and
during the continuance of an Event of Default: (i) to sign and/or endorse each
Borrower’s name upon any warehouse or other receipts, Letter of Credit
Applications and acceptances; (ii) to sign each Borrower’s name on bills of
lading; (iii) to clear Inventory through Customs in the name of each Borrower or
Agent or Agent’s designee, and to sign and deliver to Customs officials powers
of attorney in the name of each Borrower for such purpose; and (iv) to complete
in each Borrower’s name or Agent’s, or in the name of Agent’s designee, any
order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Agent nor its attorneys
will be liable for any acts or omissions nor for any error of judgment or
mistakes of fact or law, except for Agent’s or its attorney’s gross (not mere)
negligence or willful misconduct, as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.

(d) Each Lender, according to its Commitment Percentage, shall to the extent of
the aggregate amount of all unreimbursed reimbursement obligations arising from
disbursements made or obligations incurred with respect to the Letters of Credit
be deemed to have irrevocably purchased an undivided participation in (i) each
such unreimbursed reimbursement obligation, (ii) Agent’s credit support
enhancement provided to the Issuer of any Letter of Credit and (iii) each
Revolving Advance made as a consequence of the issuance of a Letter of Credit
and all disbursements thereunder. In the event that at the time a disbursement
is made the unpaid balance of Revolving Advances exceeds or would exceed, with
the making of such disbursement, the amount permitted under Section 2.1, and
such disbursement is not reimbursed by the Borrowers within two (2) Business
Days, upon Agent’s demand each Lender shall pay to Agent such Lender’s
Commitment Percentage of such unreimbursed disbursement together with such
Lender’s Commitment Percentage of Agent’s unreimbursed costs and expenses
relating to such unreimbursed disbursement. Upon receipt by Agent of a repayment
from the Borrowers of any amount disbursed by Agent for which Agent had already
been reimbursed by Lenders, Agent shall deliver to each Lender that Lender’s
proportionate share of such repayment. Each Lender’s participation commitment
shall continue until the last to occur of any of the following events: (A) Agent
ceases to be obligated to issue or cause to be issued Letters of Credit
hereunder; (B) no Letter of Credit issued hereunder remains outstanding and
uncancelled or (C) Agent, Issuer and all Persons (other than the Borrowers) have
been fully reimbursed for all payments made under or relating to Letters of
Credit.

2.11 Additional Payments/Protective Advances.

Any sums expended (a) by Agent or any Lender due to any Loan Party’s failure to
perform or comply with its Obligations under this Agreement or any Other
Document, or (b) by Agent to protect the Collateral or enhance the likelihood of
repayment of the Obligations or any portion thereof (as determined by Agent in
its Permitted Discretion) may, in Agent’s Permitted Discretion, be charged to
the Borrowers’ Account as a Revolving Advance (regardless of whether or not the
conditions specified in this Agreement for the making of a Revolving Advance
have been satisfied, including, without limitation, Sections 2.1 or 8.2) and
added to the Obligations, and each Lender shall be obligated in connection
therewith as if such conditions had been satisfied (including, without
limitation, to fund its Commitment Percentage of such Revolving Advances). Such
sums charged to the Borrowers’ Account as a Revolving Advance (collectively,
“Protective Advances”), plus the amount of intentional over-Advances made
pursuant to Section 16.2(d), shall not exceed an amount outstanding equal to ten
(10%)percent of the Maximum Credit without the consent of each of the Lenders.
Notwithstanding anything contained in this Section 2.12 to the contrary, any
proposed Protective Advance shall be subject to the limitations set forth in
Section 2.1(b)(i).

 

47

--------------------------------------------------------------------------------

2.12 Manner of Borrowing and Payment.

(a) Each borrowing of Advances shall be advanced according to the applicable
Commitment Percentages of Lenders.

(b) All proceeds of Collateral, together with each payment (including each
prepayment) by the Borrowers on account of the principal of the Advances, shall
be applied to the Advances pro rata according to the applicable Commitment
Percentages of Lenders. Except as expressly provided herein, all payments
(including prepayments) to be made by the Borrowers on account of principal,
interest and fees shall be made in Dollars without setoff or counterclaim and
shall be made to Agent on behalf of the Agent and the Lenders to the Payment
Account, in each case on or prior to the time specified in Section 2.5(c) in
immediately available funds.

(c) Notwithstanding anything to the contrary contained in Sections 2.13(a) and
2.13(b) or any other provision of this Agreement, commencing with the first
(1st) Business Day following the Closing Date, each or any borrowing of Advances
may, in Agent’s Permitted Discretion, be advanced by Agent (on behalf of the
Lenders) and each payment by the Borrowers on account of Advances shall be
applied first to those Advances advanced by Agent (any such Advance provided by
the Agent may (at the discretion of the Agent) accrue interest as a Base Rate
Loan, regardless of whether or not the Borrowers requested such Advance be a
LIBOR Rate Loan, until the Agent is reimbursed for such Advance). Alternatively,
Agent may request that each Lender (and each Lender shall) on or before 1:00
p.m. (New York time) on the requested borrowing date, transfer in immediately
available funds to Agent such Lender’s Commitment Percentage of such requested
borrowing. On each Settlement Date commencing with the first (1st) Settlement
Date following the Closing Date, Agent and Lenders shall make certain payments
as follows: (i) if a Lender’s balance of the Advances (including Protective
Advances and Swingline Loan Advances) exceeds such Lender’s Commitment
Percentage of the Advances (including Protective Advances and Swingline Loan
Advances) as of a Settlement Date, then Agent shall transfer in immediately
available funds to a deposit account of such Lender (as such Lender may
designate in writing to Agent) an amount such that each such Lender shall, upon
receipt of such amount, have as of the Settlement Date, its Commitment
Percentage of the Advances (including Protective Advances and Swingline Loan
Advances) and (ii) if a Lender’s balance of the Advances (including Protective
Advances and Swingline Loan Advances) is less than such Lender’s Commitment
Percentage of the Advances (including Protective Advances and Swingline Loan
Advances) as of a Settlement Date, such Lender shall transfer in immediately
available funds to the Agent, not later than 2:00 p.m. (New York time), an
amount such that each such Lender shall, upon transfer of such amount, have as
of the Settlement Date, its Commitment Percentage of the Advances (including
Protective Advances and Swingline Loan Advances).

 

48

--------------------------------------------------------------------------------

(d) A Lender shall be entitled to earn interest at the applicable Interest Rate
on outstanding Advances which such Lender has funded for the periods in which
such Advance was so funded by such Lender. Agent shall be entitled to earn
interest at the applicable Interest Rate on outstanding Advances (including
Protective Advances and Swingline Loan Advances) which Agent has funded for the
periods in which such Advance (including Protective Advances and Swingline Loan
Advances) was so funded by Agent.

(e) Promptly following each Settlement Date, Agent shall submit to each Lender a
certificate with respect to payments received and Advances made during the Week
immediately preceding such Settlement Date. Such certificate of Agent shall be
conclusive in the absence of manifest error.

(f) If any Lender or Participant (a “Benefited Lender”) shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender’s
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such Benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender’s Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders according to their
Commitment Percentages thereof; provided, however, that, if all or any portion
of such excess payment or benefits is thereafter recovered from such Benefited
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. Each Lender so
purchasing a portion of another Lender’s Advances may exercise all rights of
payment (including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.

(g) Unless Agent shall have been notified in writing, prior to the making of any
Advance, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make (and such Lender unconditionally shall be obligated to make) such amount
available to Agent on or prior to the next Settlement Date and, in reliance upon
such assumption, make available to Administrative Borrower (on behalf of the
applicable Borrower(s)) a corresponding amount. Agent will promptly notify
Administrative Borrower of its receipt of any such notice from a Lender. If such
amount is made available to Agent on a date after such next Settlement Date,
such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of
three hundred sixty (360) days) during such period as quoted by Agent, times
(ii) such amount, times (iii) the number of days from and including such
Settlement Date to the date on which such amount becomes immediately available
to Agent. A certificate of Agent submitted to any Lender with respect to any
amounts owing under this paragraph (g) shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to Agent by such
Lender within three (3) Business Days after such Settlement Date, Agent shall be
entitled to recover such an amount, with interest thereon at the rate per annum
then applicable to such Advance hereunder, on demand from the Borrowers;
provided, however, that, Agent’s right to such recovery shall not prejudice or
otherwise adversely affect the Borrowers’ rights (if any) against such Lender.

 

49

--------------------------------------------------------------------------------

2.13 Mandatory Prepayments.

Notwithstanding the following, during a Waterfall Event, the order of
application to the Obligations shall be made pursuant to Section 11.2 rather
than as is provided in this Section 2.13.

(a) When any Loan Party or any of their Subsidiaries Disposes of any Collateral
or other assets (other than sales of Inventory in the ordinary course of
business) or receives proceeds of property or casualty insurance, within one
(1) Business Day thereof, Loan Parties shall repay the Advances in an amount
equal to one hundred (100%) percent of the net cash proceeds of such sale (i.e.,
gross cash proceeds less the reasonable out-of-pocket costs and expenses in
respect of such Dispositions (including any taxes and similar amounts)) or all
of the cash proceeds of such insurance, as applicable, such repayments to be
made promptly but in no event more than one (1) Business Day following receipt
of such proceeds, and until the date of payment, such proceeds shall be held in
trust for Agent. Such repayments shall be applied to the Revolving Advances in
such order as Agent may determine until paid in full, subject to the Borrowers’
ability to reborrow Revolving Advances in accordance with the terms hereof.
Notwithstanding the foregoing, unless and until an Event of Default has occurred
and is continuing or would result therefrom, such proceeds from Dispositions and
insurance payments that do not exceed $250,000 in the aggregate in any fiscal
year may be retained by Loan Parties solely to acquire replacement assets
without making a mandatory prepayment hereunder so long as (1) the fair market
value of the acquired assets is equal to or greater than the fair market value
of the assets which were Disposed or subject to the insurance payment, as
applicable, (2) the acquired assets are purchased by the applicable Loan Party
within one hundred twenty (120) days of the Disposal of the assets or receipt of
the insurance payment, as applicable, (3) the acquired assets are acceptable to
Agent in its Permitted Discretion, (4) if the assets that were Disposed or that
were the subject of the insurance payment, as applicable, were Collateral, the
acquired assets must all be Collateral and shall be subject to Agent’s first
priority Lien created hereunder (other than with respect to the Term Loan
Priority Collateral (subject to the Term Loan Intercreditor Agreement) or
subject to Permitted Encumbrances), and (5) until such time as the proceeds are
used to acquire such replacement assets, at Agent’s option, either (x) such
proceeds shall be held by Agent as cash collateral for the Obligations pursuant
to terms acceptable to Agent in its sole discretion or (y) such proceeds shall
be applied as a repayment of Revolving Advances and a Reserve in the amount of
such repayment shall be established. Such cash collateral or Reserve, as the
case may be, shall be released by Agent only in connection with the making of a
Revolving Advance to be used by the Borrowers solely for the purposes of funding
the acquisition of replacement assets pursuant to the terms of this
Section 2.13; provided, however, that, nothing contained herein shall waive or
modify any conditions to the making of Revolving Advances or any other
provisions of this Agreement. If a Loan Party fails to meet the conditions set
forth above, Loan Parties hereby authorize Agent and Lenders to apply the
proceeds held by Agent as a prepayment of the Advances in the manner set forth
above. The provisions of this Section 2.13(a) shall not be deemed to be implied
consent to any such Disposition otherwise prohibited by the terms and conditions
of this Agreement or any Other Document.

(b) Within one (1) Business Day of the date of receipt by any Loan Party or any
of its Subsidiaries of any Extraordinary Receipts in excess of $50,000
individually or in the aggregate, Borrowers shall prepay the outstanding amount
of the Advances in an amount equal to one hundred (100%) percent of such
Extraordinary Receipts, net of any reasonable out of pocket fees and expenses
incurred in collecting such Extraordinary Receipts. Such Extraordinary Receipts
shall be applied to the Revolving Advances in such order as Agent may determine
until paid in full, subject to the Borrowers’ ability to reborrow Revolving
Advances in accordance with the terms hereof. The provisions of this
Section 2.13(b) shall not be deemed to be implied consent to any event giving
rise to such Extraordinary Receipts otherwise prohibited by the terms and
conditions of this Agreement.

 

50

--------------------------------------------------------------------------------

(c) Within one (1) Business Day of the date of the issuance by any Loan Party or
any of its Subsidiaries of any shares of its or their Equity Interests (other
than (i) the issuance of Equity Interests to another Loan Party or Subsidiary
thereof, (ii) the issuance of Equity Interests of Parent to directors, officers
and employees of a Loan Party and any of their respective Subsidiaries pursuant
to employee stock option plans (or other employee incentive plans or other
compensation arrangements) approved by the board of directors of Parent and
(iii) the issuance of Equity Interests of Parent, to the extent the proceeds
thereof are used concurrently with the issuance thereof to fund the purchase
price of a Permitted Acquisition), Borrowers shall prepay the outstanding amount
of the Advances in an amount equal to one hundred (100%) percent of the net cash
proceeds of such sale (i.e., gross cash proceeds less the reasonable
out-of-pocket costs and expenses in respect of such issuance (including any
taxes and similar amounts)) received by such Person in connection with such
issuance. Such proceeds shall be applied to the Revolving Advances in such order
as Agent may determine until paid in full, subject to the Borrowers’ ability to
reborrow Revolving Advances in accordance with the terms hereof. The provisions
of this Section 2.13(c) shall not be deemed to be implied consent to any such
issuance otherwise prohibited by the terms and conditions of this Agreement.

2.14 Use of Proceeds.

The Borrowers shall use the initial proceeds of the Advances and Letters of
Credit hereunder only for: (a) payments on the Closing Date to each of the
Persons listed in the disbursement direction letter furnished by the Borrowers
to Agent on or about the Closing Date and (b) costs, expenses and fees incurred
on or prior to the Closing Date in connection with the preparation, negotiation,
execution and delivery of this Agreement and the Other Documents. All other
Advances made or Letters of Credit provided to or for the benefit of the
Borrowers pursuant to the provisions hereof shall be used by the Borrowers only
for general operating, working capital and other general corporate purposes of
the Borrowers not otherwise prohibited by the terms hereof, including, without
limitation, any Permitted Acquisitions permitted hereunder and any payments in
respect of Indebtedness under the Term Loan Documents. Further, none of the
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purposes of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Advances to be
considered a “purpose credit” within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended.

2.15 Defaulting Lender/Impacted Lender.

(a) Notwithstanding anything to the contrary contained herein, in the event any
Lender (i) has refused (if the refusal constitutes a breach by such Lender of
its obligations under this Agreement) to make available its portion of any
Advance, (ii) notifies either Agent or Administrative Borrower that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement), or
(iii) failed to fund any payments required to be made by it under this Agreement
or any Other Document (each, a “Lender Default”), all rights and obligations
hereunder of such Lender (a “Defaulting Lender”) as to which a Lender Default is
in effect and of the other parties hereto shall be modified to the extent of the
express provisions of this Section 2.15 while such Lender Default remains in
effect. Notwithstanding the foregoing, no Lender Default shall be deemed to
occur with respect to a Lender, and such Lender shall not constitute a
Defaulting Lender hereunder, if such Lender notifies Agent and Borrowers in
writing that such Lender’s refusal or failure to fund any Advance or any such
payments required to be made by it hereunder is the result of such Lender’s
determination that one or more conditions precedent to funding as set forth in
this Agreement (each of which conditions precedent, together with any applicable
Default or Event of Default, shall be specifically identified in writing) has
not been satisfied.

 

51

--------------------------------------------------------------------------------

(b) The obligations of each Lender to make Advances shall continue to be based
on their respective Commitment Percentages, and no Commitment Percentage of any
Lender or any Commitment Percentage of any Advances required to be advanced by
any Lender shall be increased as a result of a Lender Default. Amounts received
in respect of the Obligations owing to the Lenders shall be applied to reduce
the applicable Obligations owing to each Lender that is not a Defaulting Lender
prior to any such amounts being applied to reduce the Obligations owing to such
Defaulting Lender to the extent that the aggregate amount of outstanding
Obligations owing to such Defaulting Lender is less than what it would have been
if such Lender Default did not occur.

(c) Notwithstanding anything set forth herein to the contrary, a Defaulting
Lender shall not have any voting or consent rights, or be permitted to direct
the Agent, under or with respect to any Loan Document or constitute a “Lender”
(or be included in the calculation of “Required Lenders” hereunder) for any
voting or consent rights, or in directing the Agent, under or with respect to
any Loan Document; provided, that, the foregoing shall not permit (i) an
increase in the principal amount of such Defaulting Lender’s Commitment,
(ii) the reduction of the principal of, rate of interest on (other than the
waiver of any default rate) or fees payable with respect to any Loan or Letter
of Credit of such Defaulting Lender or (iii) unless all other Lenders affected
thereby are treated similarly, the extension of any scheduled (as opposed to
mandatory prepayment) payment date or final maturity date of the principal among
of any Loan of such Defaulting Lender.

(d) Other than as expressly set forth in this Section 2.15, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent;
provided, that, to the extent that a Defaulting Lender fails to timely indemnify
Agent or any Issuer pursuant to the terms and conditions of this Agreement or
any Other Document, the other Lenders shall contribute to such shortfall in such
indemnification according to their Commitment Percentages thereof) and the other
parties hereto shall remain unchanged. Nothing in this Section 2.15 shall be
deemed to release any Defaulting Lender from its obligations under this
Agreement and the Other Documents, shall alter such obligations, shall operate
as a waiver of any default by such Defaulting Lender hereunder, or shall
prejudice any rights which the Borrowers, Agent or any Lender may have against
any Defaulting Lender as a result of any default by such Defaulting Lender
hereunder. At the option of Agent, any amount payable to a Defaulting Lender
hereunder (whether on account of principal, interest, fees or otherwise) shall,
in lieu of being distributed to such Defaulting Lender, be retained by Agent as
cash collateral for future funding obligations of the Defaulting Lender in
respect of any Advance or existing or future participating interest in any
Swingline Loan Advance or Letter of Credit (including the obligation to
indemnify Agent pursuant to Section 14.7). Loan Parties shall not be obligated
to pay any Defaulting Lender any unused line fee payable pursuant to
Section 3.3(a). Any Defaulting Lender’s decision-making and participation rights
and rights to payments hereunder (including, without limitation, any rights to
receive the unused line fee payable pursuant to Section 3.3(a)) shall be
restored only upon the payment by the Defaulting Lender of its Commitment
Percentage of any Obligations, any participation obligation, or expenses as to
which it is delinquent, together with interest thereon at the rate set forth in
Section 2.13(g) hereof from the date when originally due until the date upon
which any such amounts are actually paid.

 

52

--------------------------------------------------------------------------------

(e) In the event a Defaulting Lender retroactively cures to the satisfaction of
Agent the breach which caused a Lender to become a Defaulting Lender, then, from
and after the date on which such cure has been so effected, such Defaulting
Lender shall no longer be a Defaulting Lender and shall be treated as a Lender
that is not a Defaulting Lender under this Agreement.

(f) Agent or Administrative Borrower (on behalf of Borrowers) may replace a
Defaulting Lender or an Impacted Lender in accordance with Section 16.2(d).

2.16 Joint and Several Liability.

(a) All Borrowers shall be liable, on a joint and several basis, for all
Obligations, including, without limitation, all amounts due to Agent and Lenders
under this Agreement and the Other Documents, regardless of which Borrower
actually receives the Advances or other proceeds of the Obligations or the
manner in which Agent and Lenders account for such Advances or other Obligations
on its books and records or for any other reason. The Obligations with respect
to Advances made to a Borrower, and the Obligations arising as a result of the
joint and several liability of a Borrower hereunder, with respect to Advances
made to the other Borrowers hereunder, shall be separate and distinct
obligations, but all such Obligations shall be primary obligations of all
Borrowers. The Obligations arising as a result of the joint and several
liability of a Borrower hereunder with respect to Advances or other Obligations
shall, to the fullest extent permitted by law, be unconditional irrespective of
(i) the validity or enforceability, avoidance or subordination of the
Obligations of the other Borrowers or of any promissory note or other document
evidencing all or any part of the Obligations of the other Borrowers, (ii) any
incapacity or lack of power, authority or legal personality of any other
Borrower or other Person, (iii) the absence of any attempt to collect the
Obligations from the other Borrowers or any other security therefor, or the
absence of any other action to enforce or failure to realize the full value of
the same, (iv) any amendment (however fundamental) replacement variation,
assignment termination and/or the waiver, consent, extension, forbearance or
granting of any indulgence by Agent or Lenders with respect to any provisions of
any instrument evidencing the Obligations of the other Borrowers, or any part
thereof, or any other agreement now or hereafter executed by the other Borrowers
and delivered to Agent or Lenders, (v) the failure by Agent, Lenders or any
other Person to take any steps to perfect and maintain its Lien in, or to
preserve its rights and maintain its security or collateral for the Obligations
of the other Borrowers, (vi) the election of Agent, Lenders or any other Person
in any proceeding instituted under Title 11 of the United States Code, as
amended (“Bankruptcy Code”), of the application of Section 1111(b)(2) of the
Bankruptcy Code, (vii) the disallowance of all or any portion of the claim(s) of
Agent, Lenders or any other Person for the repayment of the Obligations of the
other Borrowers under Section 502 of the Bankruptcy Code, (viii) any insolvency,
liquidation, administration or similar procedure or corporate action in respect
of any other Borrower and/or any legal proceedings or procedures by any of the
other Borrowers’ creditors or (ix) any other circumstances which might
constitute a legal or equitable discharge or defense of the other Borrowers.
With respect to the Obligations arising as a result of the joint and several
liability of a Borrower hereunder with respect to Advances, Letters of Credit or
other Obligations, each Borrower waives, until all of the Obligations have been
Paid in Full, any right to enforce any right of subrogation or any remedy which
Agent, Lenders or any other Person now has or may hereafter have against
Borrowers, any endorser or any guarantor of all or any part of the Obligations,
and any benefit of, and any right to participate in, any security or collateral
given to Agent, Lenders or any other Person. Upon any Event of Default and for
so long as the same is continuing, Agent and Lenders may proceed directly and at
once, without notice, against any Borrower to collect and recover the full
amount, or any portion of the Obligations, without first proceeding against the
other Borrowers or any other Person, or against any security or collateral for
the Obligations. Each Borrower consents and agrees that none of Agent, Lenders
or any other Person shall be under any obligation to marshal any assets in favor
of Borrowers or any other Person or against or in payment of any or all of the
Obligations.

 

53

--------------------------------------------------------------------------------

(b) Each Borrower expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution of any other claim which
such Borrower may now or hereafter have against the other Borrowers or any other
Person directly or contingently liable for the Obligations hereunder, or against
or with respect to the other Borrowers’ property (including, without limitation,
any property which is Collateral for the Obligations), arising from the
existence or performance of this Agreement.

2.17 Interrelated Businesses.

Loan Parties hereby represent and warrant to Agent and Lenders that (a) Loan
Parties and their respective Subsidiaries make up a related organization of
various entities constituting a single economic and business enterprise so that
Loan Parties and their respective Subsidiaries share an identity of interests
such that any benefit received by any Loan Party or any Subsidiary of any Loan
Party benefits each other Loan Party and each other Subsidiary of Loan Parties;
(b) certain of Loan Parties and their respective Subsidiaries render services to
or for the benefit of other Loan Parties and Subsidiaries, as the case may be,
purchase or sell and supply goods to or from or for the benefit of the others,
make loans, advances and provide other financial accommodations to or for the
benefit of the other Loan Parties and Subsidiaries (including, inter alia, the
payment by Loan Parties and Subsidiaries of creditors of the other Loan Parties
and Subsidiaries and guarantees by Loan Parties and Subsidiaries of indebtedness
of the other Loan Parties and Subsidiaries and provide administrative,
marketing, payroll and management services to or for the benefit of the other
Loan Parties and Subsidiaries), and (c) Loan Parties and their Subsidiaries have
centralized accounting and legal service, common officers and directors and are
identified to creditors as a single economic and business enterprise.

2.18 Appointment of Administrative Borrower as Agent for Requesting Advances and
Letters of Credit and Receipts of Advances and Statements and Receipts and
Sending of Notices.

(a) Each Borrower hereby irrevocably appoints and constitutes Administrative
Borrower as its agent to request and receive Advances and Letters of Credit
pursuant to this Agreement and the Other Documents from Agent or any Lender in
the name or on behalf of such Borrower. Agent and Lenders may disburse the
Advances to such bank account of Administrative Borrower or a Borrower or
otherwise make such Loans to a Borrower, and provide such Letters of Credit for
the account of a Borrower, in each case as Administrative Borrower may designate
or direct, without notice to any other Borrower or Loan Party. Notwithstanding
anything to the contrary contained herein, Agent may at any time and from time
to time require that Advances (including without limitation Protective Advances)
be disbursed directly to an operating account of a Borrower or to any other
Person.

 

54

--------------------------------------------------------------------------------

(b) Each Loan Party hereby irrevocably appoints and constitutes Administrative
Borrower as its agent to receive statements on account and all other notices
from Agent and Lenders with respect to the Obligations or otherwise under or in
connection with this Agreement and the Other Documents.

(c) Any notice, election, representation, warranty, agreement or undertaking by
or on behalf of any Loan Party by Administrative Borrower shall be deemed for
all purposes to have been made by such Loan Party and shall be binding upon and
enforceable against such Loan Party to the same extent as if made directly by
such Loan Party.

(d) Administrative Borrower hereby accepts the appointment by each Loan Party to
act as the agent of the Borrowers pursuant to this Section 2.18. Administrative
Borrower shall ensure that the disbursement of any Advances to each Borrower
requested by or paid to or for the account of the Borrowers, or the issuance of
any Letters of Credit for the account of a Borrower hereunder, shall be paid to
or issued for the account of such Borrower.

(e) No purported termination of the appointment of Administrative Borrower as
agent as aforesaid shall be effective, except after ten (10) days’ prior written
notice to Agent.

2.19 Increase in Maximum Credit.

(a) Subject to Section 2.19(f) below, Administrative Borrower may, one (1) time
during the Term, deliver a written request to Agent to increase the Maximum
Credit; provided, that, (i) any such increase shall be subject to the consent of
Agent and satisfaction of each of the conditions set forth in Section 2.19(c)
below, (ii) any such written request shall specify the request by the
Administrative Borrower to the increase in the Maximum Credit by $5,000,000 to
an aggregate amount of $25,000,000, and (iii) any such request shall be
irrevocable.

(b) Upon the receipt by Agent of any such written request, Agent shall notify
each of the Lenders of such request and each Lender (other than Defaulting
Lenders, Impacted Lenders and Prior Defaulting/Impacted Lender) shall have the
option (but not the obligation) to increase the amount of its Revolver
Commitment by an amount approved by Agent in its sole discretion of the amount
of the increase in the Maximum Credit requested by Administrative Borrower as
set forth in the notice from Agent to such Lender. Each Lender shall notify
Agent within ten (10) days after the receipt of such notice from Agent whether
it is willing to so increase its Revolver Commitment, and if so, the amount of
such increase; provided, that, (i) the minimum increase in the Revolving
Commitment of each such Lender providing the additional Revolver Commitment
shall equal or exceed $1,000,000, and (ii) no Lender shall be obligated to
provide such increase in its Revolver Commitment and the determination to
increase the Revolver Commitment of a Lender shall be within the sole and
absolute discretion of such Lender. If the aggregate amount of the increases in
the Revolver Commitments received from the Lenders does not equal or exceed the
amount of the increase in the Maximum Revolving Advances Amount requested by
Administrative Borrower, Agent or Administrative Borrower may seek additional
increases from Lenders (other than Defaulting Lenders, Impacted Lenders or Prior
Defaulting/Impacted Lender) or Revolver Commitments from such Qualified
Assignees as it may determine, after, in the case of Administrative Borrower,
consultation with Agent. In the event Lenders (or Lenders and any such Qualified
Assignees, as the case may be) have committed in writing to provide increases in
their Revolver Commitments or new Revolver Commitments in an aggregate amount in
excess of the increase in the Maximum Credit requested by Administrative
Borrower or permitted hereunder, Agent shall then have the right to allocate
such commitments, first to Lenders and then to Qualified Assignees, in such
amounts and manner as Agent may determine, after consultation with
Administrative Borrower.

 

55

--------------------------------------------------------------------------------

(c) The Maximum Credit shall be increased by the amount of the increase in
Revolver Commitments from Lenders or new Commitments from Qualified Assignees,
in each case selected in accordance with Section 2.19(b) above, for which Agent
has received written confirmation in from and substance satisfactory to Agent
from such Lenders or Qualified Assignees, as applicable, on the date requested
by Administrative Borrower for the increase or such other date as Agent and
Administrative Borrower may agree (but subject to the satisfaction of the
conditions set forth below), whether or not the aggregate amount of the increase
in Revolver Commitments and new Revolver Commitments, as the case may be, equal
or exceed the amount of the increase in the Maximum Credit requested by
Administrative Borrower in accordance with the terms hereof (but in no event
shall the Maximum Revolver Amount be increased above the amounts described in
Section 2.19(a)), effective on the date that Agent notifies Administrative
Borrower that each of the following conditions have been satisfied (such date
being the “Maximum Credit Increase Effective Date”):

(i) Agent shall have received from each Lender or Qualified Assignee that is
providing an additional Revolver Commitment as part of the increase in the
Maximum Credit, a written confirmation described above duly executed by such
Lender or Qualified Assignee, Agent and Administrative Borrower;

(ii) the conditions precedent to the making of Advances set forth in Section 8.2
shall be satisfied as of the date of the increase in the Maximum Credit, both
before and after giving effect to such increase whether or not an Advance is
then being made;

(iii) upon the request of Agent, Agent shall have received an opinion of counsel
to Loan Parties in form and substance and from counsel reasonably satisfactory
to Agent addressing such matters as Agent may reasonably request (including an
opinion that such increase shall not violate Material Contracts of Loan Parties)
and any other documents and agreements required by Agent with respect thereto;

(iv) such increase in the Maximum Credit on the date of the effectiveness
thereof shall not violate any term or provisions of any applicable law,
regulation or order or decree of any court or other Governmental Body and shall
not be enjoined, temporarily, preliminarily or permanently;

 

56

--------------------------------------------------------------------------------

(v) there shall have been paid to each Lender and Qualified Assignee, in each
case, providing an additional Revolver Commitment in connection with such
increase in the Maximum Credit all fees and expenses due and payable to such
Person on or before the effectiveness of such increase, including, without
limitation, all such fees payable pursuant to the Fee Letter; and

(vi) Agent shall have received evidence satisfactory to Agent in its sole
discretion that such increase in the Maximum Credit shall not violate any of the
terms of the Term Loan Documents and that all Obligations at any time arising
hereunder, after giving effect to such increase in the Maximum Credit, shall
constitute permitted indebtedness under and as defined therein.

(d) There shall have been paid to Agent, for the account of the Agent and
Lenders (in accordance with any agreement among them) all fees and expenses
(including reasonable fees and expenses of counsel) due and payable pursuant to
any of the Other Documents on or before the effectiveness of such increase to
the extent relating to such increase.

(e) As of a Maximum Credit Increase Effective Date, each reference to the term
Maximum Credit herein, and in any of the Other Documents shall be deemed amended
to mean the amount of the Maximum Credit specified in the written notice from
Agent to Administrative Borrower of the increase in the Maximum Credit.

(f) As of the Closing Date, each Loan Party acknowledges, confirms and agrees
that Agent and Lenders do not have credit approval to increase the Maximum
Credit as in effect on the Closing Date and the terms and provisions of this
Section 2.19 shall not constitute or be deemed to constitute a commitment by
Agent or any Lender to increase the Maximum Credit as in effect on the Closing
Date.

3. INTEREST AND FEES.

3.1 Interest.

Interest on Advances shall be payable to Agent for the benefit of Lenders in
arrears on the first (1st) day of each month with respect to Base Rate Loans
and, with respect to LIBOR Rate Loans (including, without limitation, Swingline
Loan Advances), in arrears at the end of each Interest Period or, for LIBOR Rate
Loans with an Interest Period in excess of three (3) months, at the earlier of
each date that is three (3) months following date of the commencement of such
Interest Period and at the end of such Interest Period. Interest charges shall
be computed on the actual principal amount of Advances outstanding at a rate per
annum equal to the applicable Interest Rate. Concurrent with any increase or
decrease in the Base Rate, the Interest Rate for Base Rate Loans shall be
similarly changed without notice or demand of any kind by an amount equal to the
amount of such change in the Base Rate. At the election of Agent or the Required
Lenders, upon and after the occurrence of an Event of Default, and during the
continuation thereof, the outstanding Advances and all other Obligations shall
bear interest at the applicable Interest Rate plus two (2) percentage points per
annum (as applicable, the “Default Rate”). At the election of Agent or the
Required Lenders, such Default Rate shall be applied retroactively to commence
on the date of the first (1st) occurrence of the event giving rise to such Event
of Default.

 

57

--------------------------------------------------------------------------------

3.2 Letter of Credit Fees; Cash Collateral.

(a) The Borrowers shall pay (i) to Agent, for the benefit of Lenders according
to their applicable Commitment Percentages, fees for each Letter of Credit for
the period from and excluding the date of issuance of same to and including the
date of expiration or termination, equal to the average daily face amount of
each outstanding Letter of Credit multiplied by the Applicable Margin for LIBOR
Rate Loans, such fees to be calculated on the basis of a three hundred sixty
(360) day year for the actual number of days elapsed and to be payable monthly
in arrears on the first (1st) day of each month and for so long as any Letter of
Credit remains outstanding, and (ii) to Agent for the benefit of the Issuer, any
and all fees and expenses as agreed upon by the Issuer and the Borrowers in
connection with any Letter of Credit, including, without limitation, in
connection with the opening, amendment or renewal of any such Letter of Credit
and shall reimburse Agent for any and all fees and expenses, if any, paid by
Agent to the Issuer (all of the foregoing fees described in clauses (i) and
(ii) above, the “Letter of Credit Fees”). Any such charge in effect at the time
of a particular transaction shall be the charge for that transaction,
notwithstanding any subsequent change in the Issuer’s prevailing charges for
that type of transaction. At the election of Agent or the Required Lenders, upon
the occurrence of an Event of Default, and during the continuation thereof,
Agent may, and at the direction of the Required Lenders Agent shall, increase
the Letter of Credit Fees by two (2) percentage points per annum. At the
election of Agent or the Required Lenders, such increased Letter of Credit Fee
shall be applied retroactively to commence on the first (1st) date of the
occurrence of the event giving rise to such Event of Default. All Letter of
Credit Fees payable hereunder shall be deemed earned in full on the date when
the same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.

(b) (i) At the election of Agent or the Required Lenders, at any time when a
Default or an Event of Default has occurred and is continuing and (ii) on the
Termination Date, the Borrowers will cause cash to be deposited and maintained
in a non-interest bearing account with Agent, as cash collateral, in an amount
equal to one hundred five (105%) percent of the outstanding Letters of Credit
and, if requested by Agent, Bank Product Obligations, and the Borrowers hereby
irrevocably authorize Agent, in its discretion, on the Borrowers’ behalf and in
the Borrowers’ or Agent’s name, to open such an account and to make and maintain
deposits therein, or in an account opened by the Borrowers, in the amounts
required to be made by the Borrowers, out of the proceeds of Receivables or
other Collateral or out of any other funds of the Borrowers coming into Agent or
any Lender’s possession at any time. The Borrowers may not withdraw amounts
credited to any such account except upon Payment in Full of all of the
Obligations.

3.3 Loan Fees.

(a) Unused Line Fee. If, for any month during the Term, the average daily unpaid
balance of the Revolving Advances and Letters of Credit for each day of such
month does not equal the Maximum Credit, then the Borrowers shall pay to Agent,
for the ratable benefit of Lenders (other than any Defaulting Lenders) according
to their Commitment Percentages, a fee at a rate equal to one-half of one
(0.50%) percent per annum on the amount by which the Maximum Credit exceeds such
average daily unpaid balance. Such fee shall be payable to Agent in arrears on
the first (1st) day of each month, commencing May 1, 2012.

 

58

--------------------------------------------------------------------------------

(b) Other Fees. The Borrowers shall pay to Agent, for Agent’s own account (and
not for the account of any Lender), the other fees and amounts set forth in the
Fee Letter in the amounts and at the times specified therein.

3.4 Computation of Interest and Fees.

Interest and fees hereunder shall be computed on the basis of a year of three
hundred sixty (360) days and for the actual number of days elapsed; except,
that, interest on Base Rate Loans shall be computed on the basis of a year of
three hundred sixty-five (365) or three hundred sixty-six (366) days, as
applicable, and for the actual number of days elapsed. If any payment to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the applicable Interest Rate for Base Rate Loans
during such extension.

3.5 Maximum Charges.

In no event whatsoever shall interest and other charges charged hereunder exceed
the highest rate permissible under law. For greater certainty, in the event
interest and other charges as computed hereunder would otherwise exceed the
highest rate permitted under law, such excess amount shall be first applied to
any unpaid principal balance owed by the Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to the Borrowers and the provisions
hereof shall be deemed amended to provide for such permissible rate.

3.6 Increased Costs.

In the event that any applicable law, treaty or governmental regulation, or any
change therein or in the interpretation or application thereof is effected after
the Closing Date (provided, however, that, notwithstanding anything herein to
the contrary, this Section 3.6 shall be deemed to apply to the Dodd-Frank Wall
Street Reform and Consumer Protection Act and to The Basel III Accord published
by The Basel Committee on Banking Supervision, and to all requests, rules,
regulations, guidelines or directives under either of the foregoing or issued in
connection therewith, regardless of the date enacted, adopted or issued, even if
enacted, adopted or issued before the Closing Date), or compliance by any Lender
(for purposes of this Section 3.6, the term “Lender” shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender or any
Subsidiary of Agent or any Lender) and the office or branch where any Lender
makes or maintains any LIBOR Rate Loans with any request or directive (whether
or not having the force of law) from any central bank or other financial,
monetary or other authority, in each case adopted after the Closing Date, shall:

(a) subject any Lender to any tax (other than any Excluded Tax) of any kind
whatsoever, as a result of a Change in Tax Law, with respect to this Agreement
or any Other Document or change the basis of taxation of payments to any Lender
of principal, fees, interest or any other amount payable in respect thereof
(except for changes in any Excluded Tax);

(b) impose, modify or hold applicable any reserve, special deposit, assessment
or similar requirement against assets held by, or deposits in or for the account
of, advances or loans by, or other credit extended by, any office of any Lender,
including (without limitation) pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or

 

59

--------------------------------------------------------------------------------

(c) impose on any Lender any other condition with respect to this Agreement or
any Other Document;

and the result of any of the foregoing is to increase the cost to any Lender of
making, renewing or maintaining its Advances hereunder or to reduce the amount
of any payment (whether of principal, interest or otherwise) in respect of any
of the Advances or the Lender’s overall capital, then, in any case the Borrowers
shall promptly pay such Lender, upon its demand, such additional amount as will
compensate such Lender for such additional cost or such reduction, as the case
may be. Such Lender shall certify the amount of such additional cost or reduced
amount to Administrative Borrower and Agent, and such certification shall be
conclusive absent manifest error. Notwithstanding anything to the contrary in
this Section 3.6, Loan Parties shall not be required to compensate a Lender
pursuant to this Section 3.6 for any amounts incurred more than one hundred
eighty (180) days prior to the date that such Lender notifies Administrative
Borrower of such Lender’s intention to claim compensation therefor; provided,
that, if the circumstances giving rise to such claim have a retroactive effect,
then such one hundred eighty (180) day period shall be extended to include the
period of such retroactive effect.

If any Lender requests compensation under this Section 3.6, then such Lender
shall use reasonable efforts to designate a different lending office for funding
or booking such Lender’s Advances or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates if, in the judgment
of Agent, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to this Section 3.6 in the future, and (ii) in each case, would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. Borrowers hereby agree to pay all
reasonable costs and expenses incurred by Agent or such Lender in connection
with any such designation or assignment.

3.7 Basis For Determining Interest Rate Inadequate or Unfair.

In the event that Agent or any Lender shall have determined that:

(a) reasonable means do not exist for ascertaining LIBOR applicable pursuant to
Section 2.2 for any Interest Period; or

(b) Dollar deposits in the relevant amount and for the relevant maturity are not
available to Agent or such Lender in the London interbank market, with respect
to an outstanding LIBOR Rate Loan, a proposed LIBOR Rate Loan, or a proposed
conversion of a Base Rate Loan into a LIBOR Rate Loan; or

(c) the LIBOR for any requested Interest Period with respect to a proposed LIBOR
Rate Loan does not adequately and fairly reflect the cost to Agent or any Lender
of funding such LIBOR Rate Loan,

 

60

--------------------------------------------------------------------------------

then Agent, on behalf of itself or at the direction of such Lender, shall give
Administrative Borrower prompt written, telephonic or telegraphic notice of such
determination. If such notice is given, (i) any such requested LIBOR Rate Loan
shall be made as a Base Rate Loan, unless Administrative Borrower shall notify
Agent no later than 10:00 a.m. (New York time) two (2) Business Days prior to
the date of such proposed borrowing, that its request for such borrowing
(A) shall be cancelled, (B) shall be made as a LIBOR Rate Loan with a different
Interest Period for which LIBOR can be ascertained (if such notice is given
solely with respect to clause (a) above), (C) shall be made as a LIBOR Rate Loan
with a different Interest Period which is available in the London interbank
market to Agent or such Lender (if such notice is given solely with respect to
clause (b) above) or (D) shall be made as a LIBOR Rate Loan with a different
Interest Period which does adequately and fairly reflect the cost to Agent or
such Lender (if such notice is given solely with respect to clause (c) above),
and (ii) any Base Rate Loan or LIBOR Rate Loan which was to have been continued
as or converted to an affected type of LIBOR Rate Loan shall be continued as or
converted into a Base Rate Loan, or, if Administrative Borrower shall notify
Agent, no later than 10:00 a.m. (New York time) two (2) Business Days prior to
the proposed conversion, such Base Rate Loan or LIBOR Rate Loan, (A) shall be
continued or converted as a LIBOR Rate Loan with a different Interest Period for
which LIBOR can be ascertained (if such notice is given solely with respect to
clause (a) above), (B) shall be continued or converted as a LIBOR Rate Loan with
a different Interest Period which is available in the London interbank market to
Agent or such Lender (if such notice is given solely with respect to clause
(b) above) or (C) shall be continued or converted as a LIBOR Rate Loan with a
different Interest Period which does adequately and fairly reflect the cost to
Agent or such Lender (if such notice is given solely with respect to clause
(c) above), and (iii) any outstanding affected LIBOR Rate Loans shall be
converted into a Base Rate Loan, or, if Administrative Borrower shall notify
Agent, no later than 10:00 a.m. (New York time) two (2) Business Days prior to
the last Business Day of the then current Interest Period applicable to such
affected LIBOR Rate Loan, shall be converted into (A) a LIBOR Rate Loan with a
different Interest Period for which LIBOR can be ascertained (if such notice is
given solely with respect to clause (a) above), (B) a LIBOR Rate Loan with a
different Interest Period which is available in the London interbank market to
Agent or such Lender (if such notice is given solely with respect to clause
(b) above) or (C) a LIBOR Rate Loan with a different Interest Period which does
adequately and fairly reflect the cost to Agent or such Lender (if such notice
is given solely with respect to clause (c) above). Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of LIBOR
Rate Loan or maintain outstanding affected LIBOR Rate Loans and the Borrowers
(or Administrative Borrower on behalf of Borrowers) shall have no right to
convert a Base Rate Loan or an unaffected type of LIBOR Rate Loan into an
affected type of LIBOR Rate Loan.

3.8 Capital Adequacy.

(a) In the event that any Lender (for purposes of this Section 3.8, the term
“Lender” shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) shall have determined that any applicable law,
rule, regulation or guideline regarding capital adequacy in effect on the
Closing Date, or any change therein effected after the Closing Date, or any
change in the interpretation or administration thereof by any Governmental Body,
central bank or other financial, monetary or other authority, in each case
adopted after the Closing Date, charged with the interpretation or
administration thereof, or compliance by any Lender and the office or branch
where any Lender (as so defined) makes or maintains any LIBOR Rate Loans with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on any Lender’s capital as
a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration each Lender’s policies with respect to capital adequacy),
then, from time to time, the Borrowers shall pay upon demand to such Lender such
additional amount or amounts as will compensate such Lender for such reduction;
provided, however, that, notwithstanding anything herein to the contrary, this
Section 3.8 shall be deemed to apply to the Dodd-Frank Wall Street Reform and
Consumer Protection Act and to The Basel III Accord published by The Basel
Committee on Banking Supervision, and to all requests, rules, regulations,
guidelines or directives under either of the foregoing or issued in connection
therewith, regardless of the date enacted, adopted or issued, even if enacted,
adopted or issued before the Closing Date. In determining such amount or
amounts, such Lender may use any reasonable averaging or attribution methods.
Such Lender shall certify the amount of such reduction and provide a reasonably
detailed calculation thereof to Administrative Borrower and Agent.
Notwithstanding anything to the contrary in this Section 3.8, Loan Parties shall
not be required to compensate a Lender pursuant to this Section 3.8 for any
amounts incurred more than one hundred eighty (180) days prior to the date that
such Lender notifies Administrative Borrower of such Lender’s intention to claim
compensation therefor; provided, that, if the circumstances giving rise to such
claim have a retroactive effect, then such one hundred eighty (180) day period
shall be extended to include the period of such retroactive effect. The
protection of this Section 3.8 shall be available to each Lender regardless of
any possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition.

 

61

--------------------------------------------------------------------------------

(b) A certificate of such Lender setting forth such amount or amounts as shall
be necessary to compensate such Lender with respect to Section 3.8(a) when
delivered to Administrative Borrower and Agent shall be conclusive absent
manifest error.

3.9 Withholding Taxes.

Except as otherwise required by law and subject to Section 16.3, each payment by
the Borrowers or the Guarantors under this Agreement or the Other Documents
shall be made without withholding or deduction for or on account of any present
or future Taxes or Charges (other than Excluded Taxes). If any such withholding
or deduction for Taxes or Charges is so required, the Borrowers or Guarantors,
as applicable, shall promptly upon becoming aware that such withholding or
deduction is necessary, notify the Agent and shall make the withholding or
deduction, pay the amount withheld to the appropriate Governmental Body before
penalties attach thereto or interest accrues thereon and except with respect to
Excluded Taxes forthwith pay such additional amount as may be necessary to
ensure that the net amount actually received by Agent and each Lender free and
clear of such taxes (including such taxes on such additional amount) is equal to
the amount which that Agent or such Lender (as the case may be) would have
received had such withholding or deduction not been made. Within thirty
(30) days of paying any amount withheld or deducted on account of tax,
Administrative Borrower shall, or shall procure that the other relevant Borrower
shall, deliver to the Agent evidence (reasonably satisfactory to the Agent) that
the appropriate payment has been paid to the relevant tax authority. If the
Agent or any Lender pays any amount in respect of any such Taxes (other than
Excluded Taxes), the Borrowers and Guarantors shall reimburse the Agent or such
Lender for that payment on demand in the currency in which such payment was
made. If the Borrowers or Guarantors pay any such Taxes, it shall deliver
official tax receipts evidencing that payment or certified copies thereof to the
Agent or Lender on whose account such withholding was made (with a copy to the
Agent if not the recipient of the original) on or before the thirtieth
(30th) day after payment.

 

62

--------------------------------------------------------------------------------

4. GRANT OF SECURITY INTEREST; COLLATERAL COVENANTS.

4.1 Security Interest in the Collateral.

To secure the prompt payment and performance of all of the Obligations to each
Secured Party, each Loan Party hereby collaterally assigns, pledges and grants
to Agent, for the ratable benefit of each Secured Party, a continuing Lien in
and to all of its Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located. Each Loan Party shall mark its
books and records as may be necessary or appropriate to evidence, protect and
perfect Agent’s Lien and shall cause its financial statements, where applicable,
to reflect such Lien.

4.2 Perfection of Security Interest.

(a) Each Loan Party shall take all action that may be necessary or desirable, or
that Agent may request in its Permitted Discretion, so as at all times to
maintain the validity, perfection, enforceability and priority of Agent’s Lien
in the Collateral to the extent required by this Agreement or any Other
Documents.

(b) Agent may, and each Loan Party hereby authorizes Agent to, at any time and
from time to time file in accordance with Section 9-509 of the UCC and with the
PPSA, financing statements and amendments thereto that describe the Collateral
as “all assets” or similar language of the applicable Loan Party and which
contain any other information required by the UCC or the PPSA (as applicable)
for the sufficiency or filing office acceptance of any financing statements,
continuation statements or amendments. Each Loan Party agrees to furnish any
such information to Agent promptly upon request.

(c) Each Loan Party shall, at any time and from time to time, take such
commercially reasonable steps as Agent may request in its Permitted Discretion
to (i) obtain an acknowledgment, in form and substance reasonably satisfactory
to Agent, of any bailee having possession of any of the Collateral, stating that
the bailee holds such Collateral for Agent, (ii) obtain “control” of any
letter-of-credit rights, deposit accounts (other than Restricted Accounts) or
electronic chattel paper (as such terms are defined in the UCC with
corresponding provisions thereof defining what constitutes “control” for such
items of Collateral), and any investment property, securities entitlements,
securities accounts, futures contracts, future accounts (as such terms are
defined in the PPSA or the Securities Transfer Act (British Columbia), as
applicable, with corresponding provisions thereof defining what constitutes
“control” for such items of Collateral), in each case, with any agreements
establishing control to be in form and substance reasonably satisfactory to
Agent, and (iii) otherwise insure the continued perfection and priority of
Agent’s Liens in any of the Collateral for the benefit of the Lenders and of its
rights therein. If any Loan Party shall at any time, acquire a “commercial tort
claim” (as such term is defined in the UCC) in excess of $250,000, such Loan
Party shall promptly notify Agent thereof in writing (which notice shall be
deemed to be an update of Schedule 5.8(b)), therein providing a reasonable
description and summary thereof, and upon delivery thereof to Agent, such Loan
Party shall be deemed to thereby have granted to Agent, for the ratable benefit
of each Secured Party (and each Loan Party hereby grants to Agent, for the
ratable benefit of each Secured Party) a Lien in and to each such commercial
tort claim and all proceeds thereof, all upon the terms of and governed by this
Agreement to secure the prompt payment and performance of all of the
Obligations.

 

63

--------------------------------------------------------------------------------

(d) Each Loan Party hereby confirms and ratifies all UCC and PPSA financing
statements filed by Agent with respect to such Loan Party on or prior to the
date of the Agreement.

(e) All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any taxes relating thereto, shall be charged to the Borrowers’
Account as a Revolving Advance and added to the Obligations, or, at Agent’s
option, shall be paid by Loan Parties to Agent promptly upon demand.

4.3 Preservation of Collateral.

Following the occurrence and during the continuance of an Event of Default, in
addition to the rights and remedies set forth in Section 11.1, and subject to
the terms of the Term Loan Intercreditor Agreement, Agent: (a) may at any time
take such steps as Agent deems necessary or appropriate to protect Agent’s Lien
in and to preserve the Collateral, including, without limitation, the hiring of
such security guards or the placing of other security protection measures as
Agent may deem appropriate; (b) may employ and maintain at any Loan Party’s
premises a custodian who shall have full authority to do all acts necessary to
protect Agent’s interests in the Collateral; (c) may lease warehouse facilities
to which Agent may move all or part of the Collateral; (d) may use any Loan
Party’s owned or leased lifts, hoists, trucks and other facilities or equipment
for handling or removing the Collateral; (e) shall have, and is hereby granted,
a right of ingress and egress to the places where the Collateral is located, and
may proceed over and through any Loan Party’s owned or leased property; and
(f) shall have a non-exclusive, royalty-free, license to use each Loan Party’s
Intellectual Property for the purposes of the completion, processing and sale of
such Loan Party’s Inventory and other assets. At such time, each Loan Party
shall cooperate fully with all of Agent’s commercially reasonable efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
Agent may direct in connection therewith. All of Agent’s expenses of preserving
the Collateral, including, without limitation, any expenses relating to any
actions by Agent described in this Section 4.3, may, at the election of the
Agent, be charged to the Borrowers’ Account and added to the Obligations.

4.4 Ownership and Location of Collateral.

(a) At the time the Collateral becomes subject to Agent’s Lien, each Loan Party
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority Lien (other than with respect to the Term
Loan Priority Collateral (subject to the Term Loan Intercreditor Agreement) and
except for Permitted Encumbrances) the Collateral shall be free and clear of all
Liens and encumbrances whatsoever.

(b) Each Loan Party’s books and records, Equipment, Inventory and all other
assets (other than (i) motor vehicles and (ii) Equipment out for repair in the
ordinary course of business) shall be located at one of the locations set forth
on Schedule 4.4 (as such Schedule may from time to time be updated in accordance
with Section 7.18) and shall not be removed from such location(s) without the
prior written consent of Agent.

 

64

--------------------------------------------------------------------------------

4.5 Defense of Agent’s and Lenders’ Interests.

Until all of the Obligations have been Paid in Full, Agent’s Liens in the
Collateral shall continue in full force and effect. For so long as Agent’s Liens
in the Collateral continue in full force and effect, no Loan Party shall,
without Agent’s prior written consent, pledge, assign, transfer, create, charge
or suffer to exist a Lien upon any part of the Collateral, except for Permitted
Encumbrances. Each Loan Party shall defend Agent’s Liens in the Collateral
against any and all Persons whatsoever (other than holders of Permitted
Encumbrances). At any time following demand by Agent for payment of all
Obligations in accordance with Section 11.1, in addition to and not in
limitation of Agent’s rights and remedies set forth in Section 11.1, and subject
to the terms of the Term Loan Intercreditor Agreement: (a) Agent shall have the
right to take possession of the indicia of the Collateral and the Collateral,
(b) Loan Parties shall, upon Agent’s demand, assemble the Collateral in the best
manner possible and make it available to Agent at a place reasonably convenient
to Agent, and (c) upon demand by Agent each Loan Party shall, and Agent may, at
its option, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments of such
Loan Party to deliver same to Agent (or any Person designated by Agent) and/or
subject to Agent’s order and if they shall come into any Loan Party’s
possession, all such Collateral shall be held by such Loan Party in trust as
Agent’s trustee, and such Loan Party will immediately deliver such Collateral to
Agent (or any Person designated by Agent) in their original form, together with
any necessary endorsement.

4.6 Books and Records.

Each Loan Party shall, and shall cause each of its Subsidiaries to, (a) keep
proper books of record and account in which full, true and correct entries will
be made of all dealings or transactions of or in relation to its business and
affairs; (b) set up on its books accruals with respect to all taxes,
assessments, charges, levies and claims; and (c) on a reasonably current basis
set up on its books, from its earnings, allowances against doubtful Receivables,
advances and investments and all other proper accruals (including without
limitation by reason of enumeration, accruals for premiums, if any, due on
required payments and accruals for depreciation, obsolescence, or amortization
of properties), which should be set aside from such earnings in connection with
its business. All determinations pursuant to this subsection shall be made in
accordance with, or as required by, GAAP consistently applied.

4.7 Financial Disclosure.

Each Loan Party hereby irrevocably authorizes and directs all Accountants and
auditors employed by such Loan Party at any time during the Term to exhibit and
deliver to Agent copies of any of such Loan Party’s and each of its
Subsidiaries’ financial statements, trial balances or other accounting records
of any sort in the Accountant’s or auditor’s possession, and to disclose to
Agent any information such Accountants may have concerning such Loan Party’s and
each of its Subsidiaries’ financial status and business operations. Each Loan
Party hereby authorizes all federal, state, provincial and municipal authorities
to furnish to Agent copies of reports or examinations relating to such Loan
Party or to any of its Subsidiaries, whether made by such Loan Party or
otherwise. Notwithstanding the foregoing authorization, so long as no Default or
Event if Default is in existence, Agent will attempt to obtain such information
or materials directly from such Loan Party prior to obtaining such information
or materials from such Accountants, auditors or such authorities.

 

65

--------------------------------------------------------------------------------

4.8 Compliance with Laws.

Each Loan Party shall, and shall cause each of its Subsidiaries to, comply in
all respects with all acts, rules, regulations and orders of any Governmental
Body applicable to its respective Collateral or any part thereof or to the
operation of such Person’s business the non-compliance with which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Each Loan Party may, however, contest or dispute any
acts, rules, regulations, orders and directions of those bodies or officials in
any reasonable manner; provided, that, if as a result of such contest or dispute
commenced at the option of any Loan Party, any related Lien is inchoate or
stayed and, at Agent’s option, sufficient Reserves shall be established to the
satisfaction of Agent to protect Agent’s Lien in the Collateral. The Collateral
at all times shall be maintained in accordance in all material respects with the
requirements of all insurance carriers which provide insurance with respect to
the Collateral so that such insurance shall remain in full force and effect.

4.9 Inspection of Premises/Appraisals.

At any time during the existence of an Event of Default, and otherwise at all
reasonable times during normal business hours, Agent shall have the right, at
Borrowers’ expense (subject to Section 16.10(c)), (a) to audit, check, inspect
and make abstracts and copies from each Loan Party’s books, records, audits,
correspondence and all other papers relating to the Collateral and the operation
of each Loan Party’s business and (b) to enter, or to have their agents enter,
upon any Loan Party’s premises at any time during business hours and at any
other reasonable time, and from time to time, for the purpose of inspecting the
Collateral (and/or with respect to Agent (and Persons designated by Agent)
appraising the Collateral) and any and all records pertaining thereto and the
operation of such Loan Party’s business. From time to time as determined by
Agent, Agent shall have the right to conduct appraisals (or have other Persons
selected by Agent conduct appraisals) of the Inventory, Equipment, Real Property
and other Collateral, in each case, at all times subject to Section 16.10(c).

4.10 Insurance.

Each Loan Party shall bear the full risk of any loss of any nature whatsoever
with respect to the Collateral. At each Loan Party’s own cost and expense, each
Loan Party shall, and shall cause each of its Subsidiaries to, maintain
insurance in amounts, types and with carriers in each case acceptable to Agent.
Without limiting the foregoing, each Loan Party shall, and shall cause each of
its Subsidiaries to, (a) keep all its insurable properties insured against the
hazards of fire, flood, those hazards covered by extended coverage insurance and
such other hazards, and for such amounts, not less than as is customary in the
case of companies engaged in businesses similar to such Loan Party’s business,
including, without limitation, business interruption insurance; (b) maintain
liability insurance against claims for personal injury, death or property damage
suffered by others; and (c) maintain all such worker’s compensation or similar
insurance as may be required under the laws of any state, province or
jurisdiction in which Loan Party is engaged in business. Each Loan Party shall
(i) furnish Agent with copies of all policies and evidence of the maintenance of
such policies required hereby upon the request of Agent and (ii) cause all such
policies to include appropriate loss payable endorsements, and/or additional
insured endorsements, in form and substance reasonably satisfactory to Agent,
providing with respect to loss payable endorsements that (A) all proceeds
thereunder shall be payable to Agent, (B) no such insurance shall be affected by
any act or neglect of the insured or owner of the property described in such
policy, and (C) that such policy and loss payable clauses may not be cancelled,
amended or terminated unless at least thirty (30) days’ prior written notice is
given to Agent (or such shorter period as Agent may agree). If any insurance
losses are paid by check, draft or other instrument payable to any Loan Party
and Agent jointly, Agent may endorse such Loan Party’s name thereon and do such
other things as Agent may deem advisable to reduce the same to cash and apply
the same in accordance with this Agreement.

 

66

--------------------------------------------------------------------------------

4.11 Failure to Pay Insurance.

If any Loan Party fails to obtain insurance as hereinabove provided, or to keep
the same in force, Agent, at its option, may obtain such insurance and pay the
premium therefor for the Borrowers’ Account, and charge the Borrowers’ Account
therefor and such expenses so paid shall be part of the Obligations.

4.12 Payment of Taxes.

Each Loan Party shall, and shall cause each of its Subsidiaries to, pay, when
due, all federal, state, provincial and other material Taxes and other Charges
lawfully levied or assessed upon such Person or any of the Collateral, except
for those Taxes and Charges that are being contested in good faith by
appropriate proceedings diligently pursued and available to such Loan Party,
which proceedings (or orders entered in connection with such proceedings) stay
the forfeiture or sale of, or other enforcement against, the property subject to
any such taxes, assessments, fees and other governmental charges and with
respect to which adequate reserves have been set aside on the books of such Loan
Party in accordance with GAAP consistently applied. If any Tax or other Charges
remain unpaid after the date fixed for their payment, or if any claim shall be
made which, in Agent’s opinion, may possibly create a valid Lien on the
Collateral (which is not otherwise a Permitted Encumbrance), Agent may without
notice to Loan Parties pay such Taxes or other Charges and each Loan Party
hereby indemnifies and holds Agent and each Lender harmless in respect thereof.
The amount of any payment by Agent under this Section 4.12 may, at the election
of Agent, be charged to the Borrowers’ Account and added to the Obligations and,
until Loan Parties shall furnish Agent with an indemnity therefor (or supply
Agent with evidence satisfactory to Agent that due provision for the payment
thereof has been made), Agent may hold without interest any balance standing to
Loan Parties’ credit and Agent shall retain its Lien in any and all Collateral
held by Agent.

4.13 Payment of Leasehold Obligations.

Each Loan Party shall, and shall cause each of its Subsidiaries to, at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent’s
request will provide evidence of having done so, except, in each case, where the
failure to do so could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect.

 

67

--------------------------------------------------------------------------------

4.14 Accounts and other Receivables.

(a) Nature of Accounts. Each of the Accounts that Administrative Borrower or any
Borrower reports as being an Eligible Account or requests be treated as an
Eligible Account shall (i) be a bona fide and valid Account representing a bona
fide Indebtedness incurred by the Customer therein named, for a fixed sum as set
forth in the invoice relating thereto (provided immaterial or unintentional
invoice errors shall not be deemed to be a breach hereof) with respect to an
absolute sale or lease and delivery of Inventory upon stated terms of a
Borrower, or work, labor or services theretofore rendered by a Borrower as of
the date each Account is created, (ii) be due and owing in accordance with the
invoice (excepting immaterial invoice errors) evidencing such Accounts without
dispute, setoff or counterclaim, except as may be stated on the Accounts
schedules delivered by Loan Parties to Agent (provided, that, immaterial errors
in the Accounts schedules shall not be deemed to be a breach hereof), and
(iii) satisfy each of the criteria set forth in the definition of “Eligible
Accounts” set forth in this Agreement to qualify as an Eligible Account.

(b) Solvency of Customers. Each Customer, to the best of each Loan Party’s
knowledge, as of the date each Account (that Administrative Borrower or any
Borrower reports as being an Eligible Account or requests be treated as an
Eligible Account) is created, is and will be Solvent and able to pay all
Accounts on which the Customer is obligated in full when due or with respect to
such Customers of any Loan Party who are not Solvent such Loan Party has set up
on its books and in its financial records bad debt reserves adequate to cover
such Accounts.

(c) Locations of Chief Executive Office. Each Loan Party’s chief executive
office is located at the addresses set forth on Schedule 4.14(c)) (as such
schedule may from time to time be updated in accordance with Section 7.18).
Until written notice is given to Agent by Administrative Borrower of any other
office at which any Loan Party keeps its records pertaining to Accounts and the
other Receivables, all such records shall be kept at such executive office or
otherwise as set forth on Schedule 4.14(c).

(d) Collection of Accounts and other Receivables. Until any Loan Party’s
authority to do so is terminated by Agent (which notice of termination Agent may
give at any time following the occurrence and during the continuance of an Event
of Default), each Loan Party will, at such Loan Party’s sole cost and expense,
collect all amounts received on Accounts and other Receivables. From and after
the occurrence and during the continuance of an Event of Default, upon Agent’s
demand, each Loan Party shall deliver to Agent, in original form and on the date
of receipt thereof, all checks, drafts, notes, money orders, acceptances, cash
and other evidences of Indebtedness at any time received by Loan Parties.

(e) Notification of Assignment of Accounts and other Receivables; Verification.
Whether or not an Event of Default exists, Agent shall have the right (i) to
send notice of the assignment of, and Agent’s Lien in, the Accounts and other
Receivables of each Loan Party to any and all Customers, any other Person
obligated on such Accounts and other Receivables or any third party holding or
otherwise concerned with any of the Collateral (which notice may include a
direction by Agent to make all payments thereon to an account designated by
Agent) and (ii) at any time, in the name of Agent, any designee of Agent or any
Borrower or any other Loan Party, to verify the validity, amount or any other
matter relating to any Accounts and other Receivables of any Loan Party by mail,
telephone or otherwise. Each Loan Party shall cooperate fully with Agent in an
effort to facilitate and promptly conclude any such verification process.
Following the occurrence and during the continuance of any Event of Default, at
its option, Agent shall have the exclusive right to collect the Accounts and
other Receivables of each Loan Party, take possession of the Collateral, or
both. In such case, Agent’s actual collection expenses, including, but not
limited to, stationery and postage, telephone and facsimile, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to the Borrowers’ Account and added to the
Obligations.

 

68

--------------------------------------------------------------------------------

(f) Power of Agent to Act on Loan Parties’ Behalf. Agent shall have the right to
receive, endorse, assign and/or deliver in the name of Agent or any Loan Party
any and all checks, drafts and other instruments for the payment of money
relating to the Accounts and other Receivables of each Loan Party, and each Loan
Party hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Each Loan Party hereby constitutes Agent or Agent’s
designee as such Loan Party’s attorney with power (i) to endorse such Loan
Party’s name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (ii) upon the occurrence and during the
continuance of an Event of Default, to sign such Loan Party’s name on any
invoice or bill of lading relating to any of the Accounts and other Receivables
of each such Loan Party, drafts against Customers, assignments and verifications
of Accounts and other Receivables of each such Loan Party; (iii) at any time, to
send verifications of Accounts and other Receivables of each such Loan Party to
any Customer or Person; (iv) at any time, to sign such Loan Party’s name on all
financing statements or any other documents or instruments deemed necessary or
appropriate by Agent to preserve, protect, or perfect Agent’s interest in the
Collateral and to file same; (v) after the occurrence and during the continuance
of an Event of Default, to demand payment of the Accounts and other Receivables
of each such Loan Party; (vi) after the occurrence and during the continuance of
an Event of Default, to enforce payment of the Accounts and other Receivables of
each such Loan Party by legal proceedings or otherwise; (vii) after the
occurrence and during the continuance of an Event of Default, to exercise all of
Loan Parties’ rights and remedies with respect to the collection of the
Accounts, Receivables and any other Collateral; (viii) after the occurrence and
during the continuance of an Event of Default, to settle, adjust, compromise,
extend or renew the Accounts and other Receivables of each such Loan Party;
(ix) after the occurrence and during the continuance of an Event of Default, to
settle, adjust or compromise any legal proceedings brought to collect Accounts
and other Receivables of each such Loan Party; (x) after the occurrence and
during the continuance of an Event of Default, to prepare, file and sign such
Loan Party’s name on a proof of claim in bankruptcy or similar document against
any Customer or any other Person obligated with respect to an Account or other
Receivable of each such Loan Party; (xi) to prepare, file and sign such Loan
Party’s name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Accounts and other Receivables of each
such Loan Party; and (xii) after the occurrence and during the continuance of an
Event of Default, to do all other acts and things necessary to carry out this
Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law, unless done maliciously or with gross (not mere) negligence, as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction;
this power being coupled with an interest is irrevocable at all times until all
of the Obligations have been Paid in Full. Agent shall have the right at any
time following the occurrence and during the continuance of an Event of Default,
to change the address for delivery of mail addressed to any Loan Party to such
address as Agent may designate and to receive, open and dispose of all mail
addressed to any Loan Party.

 

69

--------------------------------------------------------------------------------

(g) No Liability. Neither Agent nor any Lender shall, under any circumstances or
in any event whatsoever (other than damages caused by Agent or any Lender’s
gross (not mere) negligence or willful misconduct, as determined pursuant to a
final, non-appealable order of a court of competent jurisdiction), have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Accounts, other Receivables or
any instrument received in payment thereof, or for any damage resulting
therefrom. Following the occurrence and at any time during the continuance of an
Event of Default, Agent may, without notice or consent from any Loan Party, sue
upon or otherwise collect, extend the time of payment of, compromise or settle
for cash, credit or upon any terms any of the Accounts, other Receivables or any
other securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Agent is authorized and empowered to accept following the
occurrence and during the continuance of an Event of Default the return of the
goods represented by any of the Accounts and other Receivables, without notice
to or consent by any Loan Party, all without discharging or in any way affecting
any Loan Party’s liability hereunder.

(h) Establishment of a Lockbox Account, Dominion Account; Cash Dominion. As of
the Closing Date and at all times thereafter, each Loan Party shall establish
and maintain a lockbox account, dominion account or such other “blocked account”
(together with the Cash Receipt Accounts and the Operating Accounts,
collectively, the “Blocked Accounts”) with TD Bank or, with Agent’s prior
written consent, such banks as may be selected by each such Loan Party and
reasonably acceptable to Agent (it being understood and agreed that, as of the
Closing Date, the Existing Deposit Banks are reasonably acceptable to Agent
despite the fact that the deposit accounts maintained at such Existing Deposit
Banks (the “Existing Deposit Accounts”) are not lockbox accounts, dominion
accounts or “blocked accounts”). As of the Closing Date and at all times
thereafter, all proceeds of Collateral and all other cash and Cash Equivalents
of each such Loan Party (other than amounts properly on deposit in Restricted
Accounts) shall at all times be deposited by each Loan Party in the Blocked
Accounts, and Loan Parties shall (as agent and trustee for the Agent) cause each
of their Customers and all other applicable Persons to at all times send
payments on all Accounts and other Receivables of Loan Parties into the Blocked
Accounts (it being understood and agreed that, notwithstanding the foregoing, on
or before the date that is ninety (90) days after the date hereof (or such later
date as Agent shall agree in writing), all Customers of Borrowers shall be
remitting all payments to Existing Deposit Accounts maintained with Wells Fargo
Bank, N.A. or Bank of America, N.A., or to a Blocked Account). If, for any
reason any Customer makes payments on any Account or other Receivable directly
to any Loan Party, such Loan Party shall collect (as agent and trustee for the
Agent) all such amounts and immediately pay all such amounts into a Blocked
Account (it being understood and agreed that, notwithstanding the foregoing, on
or before the date that is ninety (90) days after the date hereof (or such later
date as Agent shall agree in writing), all amounts shall be remitted to Existing
Deposit Accounts maintained with Wells Fargo Bank, N.A. or Bank of America,
N.A., or to a Blocked Account); provided, however, that, until such payment into
a Blocked Account or an Existing Deposit Account maintained with Wells Fargo
Bank, N.A. or Bank of America, N.A., all moneys so received will be held upon
trust for and promptly remitted to the Agent. Each Loan Party shall instruct all
of its Customers to make all payments into a Blocked Account (it being
understood and agreed that, notwithstanding the foregoing, on or before the date
that is ninety (90) days after the date hereof (or such later date as Agent
shall agree in writing), all Customers of Borrowers shall be remitting all
payments to the Existing Deposit Accounts maintained with Wells Fargo Bank, N.A.
or Bank of America, N.A., or to a Blocked Account). All of the Blocked Accounts
(but not the Restricted Accounts) shall be governed by “control” or other
agreements in form and substance acceptable to Agent satisfactory to, among
other things, establish Agent’s perfection and rights in such Blocked Accounts
or other accounts under the UCC, PPSA and other applicable law. All invoices for
sales of Inventory or services by

 

70

--------------------------------------------------------------------------------

Loan Parties shall contain the address of the Blocked Accounts constituting Cash
Receipt Accounts as the address for remittance of payment (it being understood
and agreed that, notwithstanding the foregoing, on or before the date that is
ninety (90) days after the date hereof (or such later date as Agent shall agree
in writing), all such invoices may contain the address of the Existing Deposit
Accounts maintained with Wells Fargo Bank, N.A. or Bank of America, N.A.). The
“control” agreements covering the Blocked Accounts constituting Operating
Accounts (other than Restricted Accounts) shall provide that (i) after delivery
of a Control Notice (which may be delivered by Agent upon the occurrence and
during the continuance of an Event of Default), (A) such bank or other
institution shall comply with the instructions given by Agent with respect to
such Blocked Accounts and funds therein without further consent by Loan Parties
and (B) all amounts in such Blocked Accounts shall be transferred on a daily
basis by such bank or other institution to the Payment Account or such other
account as may be designated by Agent, and (ii) such bank or other institution
shall waive any offset rights against the funds so deposited into such Blocked
Accounts, subject to exceptions to such waiver of offset rights as shall be
reasonably acceptable to Agent. The “control” agreements covering the Blocked
Accounts constituting Cash Receipt Accounts shall provide that all amounts in
such Cash Receipt Accounts shall be transferred on a daily basis by such bank or
other institution to an Operating Account subject to a “control” agreement.
Neither Agent nor any Lender assumes any responsibility for any Blocked Account
arrangement, including without limitation, any claim of accord and satisfaction
or release with respect to deposits accepted by any bank thereunder.
Alternatively, upon the occurrence and during the continuance of an Event of
Default, Agent may establish depository accounts (collectively, the “Depository
Accounts”) in the name of Agent at a bank or banks for the deposit of such funds
and Loan Parties shall deposit all proceeds of Collateral or cause same to be
deposited, in kind, in such Depository Accounts of Agent in lieu of depositing
same to the Blocked Accounts. Notwithstanding the foregoing, no “control”
agreement shall be required for (1) Restricted Accounts and (2) any deposit
accounts maintained at the Existing Deposit Banks so long as (w) the existing
cash management arrangements at the Existing Deposit Banks are terminated within
ninety (90) days after the Closing Date (subject to Section 6.8), (x) with
respect to all deposit accounts maintained at Wells Fargo Bank, N.A. (other that
the deposit account set forth in clause (y) below), Loan Parties shall, on each
Business Day, remit all amounts in such deposit accounts directly to the Payment
Account, (y) with respect to deposit account no. 2000026543086 maintained at
Wells Fargo Bank, N.A., Loan Parties shall, on each Business Day, remit all
amounts in excess of $500,000 in such deposit account directly to the Payment
Account, and (z) with respect to all lockbox and collection accounts maintained
at Bank of America, N.A., Loan Parties shall, on each Business Day, remit all
amounts in excess of C$400,000 in such accounts directly to the Payment Account.

(i) Adjustments. No Loan Party will, without Agent’s consent, compromise or
adjust any Accounts or other Receivables (or extend the time for payment
thereof) of any such Loan Party or accept any returns of merchandise or grant
any additional discounts, allowances or credits thereon except for those
compromises, adjustments, returns, discounts, credits and allowances in the
ordinary course of business of such Loan Party, as previously disclosed to
Agent.

4.15 Inventory.

All Inventory manufactured in the United States of America and held for sale or
lease by any Loan Party, has been and will be produced by such Loan Party in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.

 

71

--------------------------------------------------------------------------------

4.16 Maintenance of Equipment.

All Equipment used or useful in the conduct of any Loan Party’s business shall
be maintained in good operating condition and repair (reasonable wear and tear
excepted) and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of such Equipment shall be maintained
and preserved (reasonable wear and tear excepted). Each Loan Party shall use or
operate any Equipment in compliance with Section 4.8. No Loan Party shall sell
or otherwise Dispose of any of its Equipment, except to the extent set forth in
Section 7.1.

4.17 Exculpation of Liability.

Nothing herein contained shall be construed to constitute Agent or any Lender as
any Loan Party’s agent for any purpose whatsoever, nor shall Agent or any Lender
be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof (other than caused by Agent’s or any Lender’s
gross (not mere) negligence or willful misconduct, as determined pursuant to a
final, non-appealable order of a court of competent jurisdiction). Neither Agent
nor any Lender, whether by anything herein or in any assignment or otherwise,
assumes any of Loan Party’s obligations under any contract or agreement to which
it is a party, and neither Agent nor any Lender shall be responsible in any way
for the performance by Loan Party of any of the terms and conditions thereof.

4.18 Environmental Matters.

(a) Loan Parties shall ensure any Real Property remains in compliance with all
Environmental Laws and they shall not place or permit to be placed any Hazardous
Substances on any such Real Property, except as not prohibited by applicable law
or appropriate Governmental Body and except where any such noncompliance or
placement could not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.

(b) Loan Parties shall assure and monitor continued compliance with all
applicable Environmental Laws, except where any failure to comply could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.

(c) Loan Parties shall (i) employ in connection with the use of any Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws, except where any such noncompliance could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect and (ii) dispose of any and all Hazardous Waste
generated at such Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws,
except where the failure to do so could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. Loan Parties
shall use their best efforts to obtain certificates of disposal, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Loan Parties in connection with the
transport or disposal of any Hazardous Waste generated at such Real Property,
except where the failure to do so could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

 

72

--------------------------------------------------------------------------------

(d) In the event any Loan Party obtains, gives or receives notice of any Release
or threat of Release of a reportable quantity of any Hazardous Substances at any
Real Property (any such event being hereinafter referred to as a “Hazardous
Discharge”) or receives any notice of violation, request for information or
notification that it is potentially responsible for investigation or cleanup of
environmental conditions at such Real Property, demand letter or complaint,
order, citation, or other written notice with regard to any Hazardous Discharge
or violation of Environmental Laws affecting such Real Property or any Loan
Party’s interest therein (any of the foregoing is referred to herein as an
“Environmental Complaint”) from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
such Real Property is located or the United States Environmental Protection
Agency (any such Person hereinafter the “Authority”), then the Borrowers shall
promptly (but in any case within five (5) Business Days) give written notice of
same to Agent detailing facts and circumstances of which any Loan Party is aware
giving rise to the Hazardous Discharge or Environmental Complaint. Such
information is to be provided to allow Agent to protect its Lien in such Real
Property and is not intended to create nor shall it create any obligation upon
Agent or any Lender with respect thereto.

(e) Loan Parties shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or any Real Property
to any Lien, except where the failure to do so could not reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.

(f) During the continuation of an Event of Default, promptly upon the written
request of Agent, Loan Parties shall provide Agent, at Loan Parties’ expense,
with an environmental site assessment or environmental audit report prepared by
an environmental engineering firm acceptable in the reasonable opinion of Agent,
to assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within any Real
Property.

(g) Loan Parties shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including attorney’s fees, suffered or incurred by Agent or
Lenders under or on account of any Environmental Laws, including, without
limitation, the assertion of any Lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting any Real Property,
whether or not the same originates or emerges from such Real Property or any
contiguous real estate, except to the extent such loss, liability, damage and
expense is attributable to any Hazardous Discharge resulting from actions on the
part of Agent or any Lender caused by their gross (not mere) negligence or
willful misconduct, as determined pursuant to a final, non-appealable order of a
court of competent jurisdiction. Loan Parties’ obligations under this
Section 4.18 shall arise upon the discovery of the presence of any Hazardous
Substances at Real Property, whether or not any federal, state, provincial or
local environmental agency has taken or threatened any action in connection with
the presence of any Hazardous Substances. Loan Parties’ obligation and the
indemnifications hereunder shall survive the termination of this Agreement.

 

73

--------------------------------------------------------------------------------

(h) For purposes of Sections 4.18 and 5.7, all references to any Real Property
shall be deemed to include all of Loan Parties’ and their respective
Subsidiaries’ right, title and interest in and to their respective owned and
leased premises.

4.19 Financing Statements.

As of the Closing Date, except for the financing statements filed by Agent and
the other financing statements described on Schedule 7.2 (if any), no financing
statement covering any of the Collateral or any proceeds thereof is on file in
any public office.

5. REPRESENTATIONS AND WARRANTIES.

Each Loan Party represents and warrants as follows:

5.1 Authority, Etc.

Each Loan Party has the requisite limited liability company or corporate power
and authority and legal right to enter into this Agreement and the Other
Documents and to perform all its respective Obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and of the
Other Documents (a) are within such Loan Party’s limited liability company,
partnership or corporate powers, as applicable, have been duly authorized, are
not in contravention of law or the terms of such Loan Party’s certificate of
formation, limited liability company agreement, certificate or articles of
incorporation, by-laws, partnership agreement or other applicable documents
relating to such Loan Party’s formation and governance or to the conduct of such
Loan Party’s business or of any material agreement or undertaking to which such
Loan Party is a party or by which such Loan Party is bound, and (b) will not
conflict with nor result in any breach in any of the provisions of or constitute
a default under or result in the creation of any Lien except Permitted
Encumbrances upon any asset of such Loan Party under the provisions of any
agreement or instrument to which such Loan Party or its property is a party or
by which it may be bound. The execution, delivery, and performance by each Loan
Party of this Agreement and the Other Documents to which such Loan Party is a
party and the consummation of the transactions contemplated by this Agreement
and the Other Documents do not and will not require any registration with,
Consent, or approval of, or notice to, or other action with or by, any
Government Body, other than Consents or approvals that have been obtained or
waived and that are still in force and effect or complied with, except for
filings and recordings with respect to the Collateral to be made, or otherwise
delivered to the Agent for filing or recordation, as of the Closing Date. This
Agreement and each Other Document has been duly executed and delivered by each
Loan Party that is a party thereto and is a legally valid and binding obligation
of such Loan Party, enforceable against such Loan Party in accordance with its
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors’ rights generally.

 

74

--------------------------------------------------------------------------------

5.2 Formation and Qualification.

(a) Each Loan Party is duly formed or incorporated and in good standing under
the laws of its respective state, province or other jurisdiction of organization
or incorporation listed on Schedule 5.2(a) (as such schedule may from time to
time be updated in accordance with Section 7.18) and each Loan Party is
qualified to do business and is in good standing in the states, provinces and
other jurisdictions listed with respect to that Loan Party on Schedule 5.2(a)
(as such schedule may from time to time be updated in accordance with
Section 7.18), which constitute all states, provinces and other jurisdictions in
which qualification and good standing are necessary for such Loan Party to
conduct its business and own its property and where the failure to so qualify
could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. The state or provincial organizational number of each
Loan Party is set forth on Schedule 5.2(a) (as such schedule may from time to
time be updated in accordance with Section 7.18). Each Loan Party has delivered
to Agent true and complete copies of its certificate of formation, limited
liability company agreement, certificate of incorporation, by-laws, partnership
agreement or other applicable documents relating to such Loan Party’s formation
and governance, as the case may be, and will promptly notify Agent of any
amendment or changes thereto.

(b) All of the Subsidiaries of each Loan Party are listed on Schedule 5.2(b) (as
such schedule may from time to time be updated in accordance with
Section 7.12(a)).

5.3 Survival of Representations and Warranties.

All representations and warranties of such Loan Party contained in this
Agreement and the Other Documents shall be true at the time of such Loan Party’s
execution of this Agreement and the Other Documents, and shall survive the
execution, delivery and acceptance thereof by the parties thereto and the
closing of the transactions described therein or related thereto.

5.4 Tax Returns.

Each Loan Party’s federal tax identification number (to the extent applicable)
is set forth on Schedule 5.4. Except as otherwise expressly permitted by this
Agreement, each Loan Party and each of its Subsidiaries has (a) filed all
federal and all other material state, provincial, local and other tax returns,
reports and statements, including information returns, it is required by law to
file and (b) paid all federal and all other material state, provincial, local
and other Taxes that are due and payable with respect thereto or otherwise
owing. No federal or any other material state, provincial, local or other income
tax return of any Loan Party or Subsidiary that has been filed is known by any
Loan Party to be under examination as of the Closing Date. All federal and all
other material income tax returns have been timely filed as of the Closing Date.
The provisions for Taxes on the books of each Loan Party and each of its
Subsidiaries are adequate in all material respects for all years not closed by
applicable statutes, and for its current fiscal year, and no Loan Party nor any
of its Subsidiaries has any knowledge of any material deficiency or additional
assessment in connection therewith not provided for on its books.

5.5 Financial Statements.

(a) The pro forma balance sheet of Loan Parties and their Subsidiaries on a
consolidated basis (the “Pro Forma Balance Sheet”) furnished to Agent on the
Closing Date reflects the consummation of the transactions contemplated under
this Agreement and the Related Transactions and is accurate, complete and
correct in all material respects and fairly reflects the financial condition of
Loan Parties and their Subsidiaries on a consolidated basis as of the Closing
Date after giving effect to the transactions under this Agreement and the
Related Transactions, and has been prepared in accordance with GAAP,
consistently applied.

 

75

--------------------------------------------------------------------------------

(b) The projections, dated March 30, 2012, for the fiscal years ending 2012
through 2017 of Loan Parties and their Subsidiaries on a consolidated basis and
their projected balance sheets as of the Closing Date were prepared by a
Responsible Officer of Administrative Borrower and are based on underlying
assumptions which Loan Parties believe provide a reasonable basis for the
projections contained therein in light of conditions and facts known to Loan
Parties at the time such projections were made and reflect Loan Parties’ good
faith judgment.

(c) The consolidated balance sheets of Loan Parties, their Subsidiaries and such
other Persons described therein as of December 31, 2011 and the related
statements of income, changes in stockholders’ equity, and changes in cash flow
for the period ended on such date, all accompanied by reports thereon containing
opinions without qualification by independent certified public accountants,
copies of which have been delivered to Agent, have been prepared in accordance
with GAAP consistently applied (except for changes in application in which such
accountants concur and present fairly the financial position of Loan Parties and
their Subsidiaries at such date and the results of their operations and changes
in stockholders’ equity and cash flow for such period) and fairly reflects the
financial condition of Loan Parties, their Subsidiaries and such other Persons
on a consolidated basis as of the date thereof.

(d) The consolidated balance sheets of Loan Parties, their Subsidiaries and such
other Persons described therein as of March 31, 2012 and the related statements
of income, changes in stockholders’ equity, and changes in cash flow for the
period ended on such date, copies of which have been delivered to Agent, have
been prepared in accordance with GAAP, consistently applied and such balance
sheet presents fairly the financial condition of Loan Parties, their
Subsidiaries and such other Persons on a consolidated basis as of such date,
subject to normal year-end audit adjustments and absence of footnotes, the
statement of cash flows and the statement of changes in shareholders’ equity.

(e) Since December 31, 2011, there has been no change in the condition,
financial or otherwise, of any Borrower (individually), or Loan Parties and
their Subsidiaries taken as a whole, except changes which could not reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect.

5.6 Corporate Name.

The exact legal name of each Loan Party is set forth in the first paragraph to
this Agreement (or, if such Loan Party is not listed in such first paragraph,
such exact legal name is set forth on Schedule 5.6 (as such schedule may from
time to time be updated in accordance with Section 7.18)). No Loan Party has
been known by any other corporate, limited liability company or partnership name
in the past five (5) years and no Loan Party sells Inventory or has submitted
tax returns under any other name except as set forth on Schedule 5.6 (as such
schedule may from time to time be updated in accordance with Section 7.18), nor
has any Loan Party been the surviving corporation of a merger, amalgamation or
consolidation or acquired all or substantially all of the assets of any Person
or has acquired any assets of any Person outside the ordinary course of business
during the preceding five (5) years except as set forth on Schedule 5.6 (as such
schedule may from time to time be updated in accordance with Section 7.18).

 

76

--------------------------------------------------------------------------------

5.7 O.S.H.A. and Environmental Compliance.

(a) Each Loan Party and each of their Subsidiaries has duly complied, and each
of their facilities, businesses, assets, properties and leaseholds are in
compliance, in all material respects with the provisions of the Federal
Occupational Safety and Health Act, RCRA and any other applicable Environmental
Laws; there have been no outstanding citations, notices or orders of
non-compliance issued to any Loan Party or any of their Subsidiaries or relating
to its business, assets, property or leaseholds under any such laws, rules or
regulations, except as could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

(b) Each Loan Party and each of their Subsidiaries has been issued all required
federal, state, provincial and local licenses, certificates or permits relating
to all applicable Environmental Laws, except as could not reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.

(c) (i) There are no visible signs of releases, spills, discharges, leaks or
disposal (each, a “Release”) of Hazardous Substances at, upon, under or within
any Real Property or any premises leased by any Loan Party or any of their
Subsidiaries; (ii) there are no underground storage tanks or polychlorinated
biphenyls on the Real Property or any premises leased by any Loan Party or any
of their Subsidiaries; (iii) neither the Real Property nor any premises leased
by any Loan Party or any of their Subsidiaries has ever been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) no
Hazardous Substances are present on the Real Property or any premises leased by
any Loan Party or any of their Subsidiaries, excepting such quantities as are
handled in accordance with all applicable manufacturer’s instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of any Loan Party or any of their
Subsidiaries or of their respective tenants, in each case under clauses (c)(i),
(ii), (iii) and (iv), except as could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

5.8 Solvency; No Litigation, Violation of Law; No ERISA Issues.

(a) After giving effect to the transactions contemplated by this Agreement and
the Related Transactions, each Borrower is Solvent and Loan Parties and their
Subsidiaries taken as a whole are Solvent.

(b) No Loan Party nor any of their Subsidiaries has (i) except as disclosed in
Schedule 5.8(b), any pending (or, to the knowledge of any Loan Party, threatened
in writing) litigation, arbitration, actions or proceedings which involve the
possibility of having a Material Adverse Effect, (ii) except as disclosed in
Schedule 5.8(b), as of the Closing Date, any pending (or, to the knowledge of
any Loan Party, threatened in writing) litigation, arbitration, actions or
proceedings which involve the possibility of having liability in excess of
$250,000, (iii) except as disclosed in Schedule 5.8(b) (as such schedule may
from time to time be updated by Administrative Borrower providing written notice
to Agent of any new commercial tort claims reasonably estimated to exceed
$250,000), any commercial tort claims, and (iv) except as disclosed in
Schedule 5.8(b), as of the Closing Date, any Money Borrowed other than the
Obligations.

 

77

--------------------------------------------------------------------------------

(c) No Loan Party nor any of their Subsidiaries is in violation of any
applicable statute, regulation or ordinance in any respect which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, nor is any Loan Party or any of their Subsidiaries in
violation of any order of any court or Governmental Body which could reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect.

(d) Except with respect to Multiemployer Plans, each plan that is intended to
qualify under Section 401 of the Code has been determined by the IRS to qualify
under Section 401 of the Code, the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of the
Code, and nothing has occurred that would cause the loss of such qualification
or tax exempt status. Each Plan is in compliance with the applicable provisions
of ERISA and the Code, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. Neither any
Loan Party nor ERISA Affiliate has failed to make any material contribution or
pay any material amount due as required by either Section 412 of the Code or
Section 302 of ERISA or the terms of any such Plan. Neither any Loan Party nor
ERISA Affiliate has engaged in a “prohibited transaction,” as defined in
Section 406 of ERISA and Section 4975 of the Code, in connection with any Plan,
that would subject any Loan Party to a material tax on prohibited transactions
imposed by Section 502(i) of ERISA or Section 4975 of the Code. Except as set
forth in Schedule 5.8(d): (i) no Title IV Plan has any Unfunded Pension
Liability; (ii) no ERISA Event with respect to any Title IV Plan has occurred or
is reasonably expected to occur; (iii) there are no pending, or to the knowledge
of any Loan Party, threatened claims (other than claims for benefits in the
normal course), sanctions, actions or lawsuits, asserted or instituted against
any Title IV Plan or any Person as fiduciary or sponsor of any Title IV Plan;
(iv) no Loan Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five (5) years no Title IV Plan of any
Loan Party or ERISA Affiliate has been terminated, whether or not in a “standard
termination” as that term is used in Section 4041(b)(1) of ERISA, nor has any
Title IV Plan of any Loan Party or any ERISA Affiliate (determined at any time
within the last five (5) years) with Unfunded Pension Liabilities been
transferred outside of the “controlled group” (within the meaning of
Section 4001(a)(14) of ERISA) of any Loan Party or ERISA Affiliate (determined
at such time); (vi) except in the case of any ESOP, Equity Interests of all Loan
Parties and their ERISA Affiliates makes up, in the aggregate, no more than ten
(10%) percent of fair market value of the assets of any Title IV Plan measured
on the basis of fair market value as of the latest valuation date of any Title
IV Plan; and (vii) no liability under any Title IV Plan has been satisfied with
the purchase of a contract from an insurance company that is not rated AAA by
the Standard & Poor’s Corporation or an equivalent rating by another nationally
recognized rating agency.

 

78

--------------------------------------------------------------------------------

5.9 Patents, Trademarks, Copyrights and Licenses.

All patents, patent applications, trademarks, trademark applications, service
marks, service mark applications, copyrights, copyright applications, design
rights, trade names, assumed names, trade secrets and licenses owned or utilized
by any Loan Party or any of their Subsidiaries are set forth on Schedule 5.9 (as
such schedule may from time to time be updated by Administrative Borrower
providing written notice to Agent of any newly acquired Intellectual Property
rights, so long as Loan Parties have taken (or caused to be taken) all steps
required by Agent to perfect Agent’s Lien therein), are valid and have been duly
registered or filed with all appropriate Governmental Body and constitute all of
the Intellectual Property rights which are necessary for the operation of its
business; there is no objection to or pending challenge to the validity of any
such material patent, trademark, copyright, design right, trade name, trade
secret or license and no Loan Party nor any Subsidiary of any Loan Party is
aware of any grounds for any challenge. Each patent, patent application, patent
license, trademark, trademark application, trademark license, service mark,
service mark application, service mark license, copyright, copyright application
and copyright license owned or held by any Loan Party or any such Subsidiary and
all trade secrets used by any Loan Party or any such Subsidiary consist of
original material or property developed by such Loan Party or such Subsidiary or
was lawfully acquired by such Loan Party or such Subsidiary from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all software used by any Loan Party, such Loan Party is in possession of all
source and object codes related to each piece of software or is the beneficiary
of a source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 (as such schedule may from time to time be updated by
Administrative Borrower providing written notice to Agent of any newly acquired
Intellectual Property rights, so long as Loan Parties have taken (or caused to
be taken) all steps required by Agent with respect thereto).

5.10 Licenses and Permits.

Each Loan Party and each Subsidiary of each Loan Party (a) is in compliance with
and (b) has procured and is now in possession of, all material licenses or
permits required by any applicable federal, state, provincial, local or other
law or regulation for the operation of its business in each jurisdiction wherein
it is now conducting or proposes to conduct business and where the failure to
procure such licenses or permits could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

5.11 No Contractual Default.

No Loan Party is in default in the payment or performance of any of its
contractual obligations with respect to which a default thereunder could be
reasonably expected to have, either individually or in the aggregate, a Material
Adverse Effect.

5.12 No Burdensome Restrictions/No Liens.

No Loan Party nor any Subsidiary of any Loan Party is party to any contract or
agreement the performance of which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. No Loan Party nor
any Subsidiary of any Loan Party has agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.

 

79

--------------------------------------------------------------------------------

5.13 No Labor Disputes.

No Loan Party nor any Subsidiary of any Loan Party is involved in any labor
dispute; there are no strikes or walkouts or union organization of any Loan
Party’s or any of such Subsidiary’s employees in existence or threatened in
writing and no labor contract is scheduled to expire during the Term other than
as set forth on Schedule 5.13 (as such schedule may from time to time be updated
by Administrative Borrower providing written notice to Agent of any newly
arising item, so long as (i) Loan Parties have taken (or caused to be taken) all
steps reasonably required by Agent with respect thereto and (ii) such items
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect).

5.14 Margin Regulations.

No Loan Party nor any Subsidiary of any Loan Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin
stock” within the meaning of the quoted term under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. No part of the proceeds of any Advance will be used for “purchasing”
or “carrying” “margin stock” as defined in Regulation U of such Board of
Governors.

5.15 Investment Company Act.

No Loan Party nor any Subsidiary of any Loan Party is an “investment company”
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.

5.16 Disclosure.

No representation or warranty made by or on behalf of any Loan Party or any
Subsidiary of any Loan Party in this Agreement, any Other Document or in any
financial statement, report, certificate or any other document furnished in
connection herewith and no information at any time furnished by or on behalf of
any Loan Party or any Subsidiary of any Loan Party to Agent or any Lender
pursuant hereto or in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading in light of the circumstances under
which they were made.

5.17 Real Property.

Each Loan Party and each of its Subsidiaries owns record title in fee simple or
the leasehold interest to the Real Property described on Schedule R-1 (as such
Schedule may from time to time be updated by written notice from Administrative
Borrower to Agent, so long as Loan Parties have taken (or caused to be taken)
all steps reasonably required by Agent with respect thereto), free and clear of
all Liens, except Permitted Encumbrances. The Real Property described on
Schedule R-1 (as such Schedule may from time to time be updated by written
notice from Administrative Borrower to Agent, so long as Loan Parties have taken
(or caused to be taken) all steps reasonably required by Agent with respect
thereto) constitutes all of the Real Property of Loan Parties.

5.18 Hedging Agreements.

No Loan Party nor any Subsidiary of any Loan Party is a party to any Hedging
Agreement as of the Closing Date.

 

80

--------------------------------------------------------------------------------

5.19 Conflicting Agreements.

No provision of any mortgage, indenture, contract, agreement, judgment, decree
or order binding on any Loan Party or affecting the Collateral conflicts with,
or requires any Consent which has not already been obtained, or would in any way
prevent the execution, delivery or performance of the terms of this Agreement or
the Other Documents.

5.20 Business and Property of Loan Parties.

Upon and after the Closing Date, Loan Parties and their Subsidiaries do not
propose to engage in any business other than as currently conducted and related
activities necessary to conduct the foregoing. Each Loan Party and each
Subsidiary of a Loan Party owns or leases all the property and possesses all of
the rights and consents necessary for the conduct of the business of such Loan
Party and such Subsidiary except as could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

5.21 Material Contracts.

Except for the Related Agreements and the other agreements set forth on
Schedule 5.21 (collectively with the Related Agreements, the “Material
Contracts”, as such schedule may from time to time be updated by Administrative
Borrower providing written notice to Agent of any new contracts, so long as Loan
Parties have taken (or caused to be taken) all steps required by Agent with
respect thereto), as of the Closing Date there are no (a) employment agreements
covering the management of any Loan Party or any Subsidiary, (b) collective
bargaining agreements or other labor agreements covering any employees of any
Loan Party or any Subsidiary, (c) agreements for managerial, consulting or
similar services to which any Loan Party or any Subsidiary is a party or by
which it is bound, (d) agreements regarding any Loan Party or any Subsidiary,
its assets or operations or any investment therein to which any of its equity
holders is a party, (e) patent licenses, trademark licenses, copyright licenses
or other lease or license agreements in respect of intellectual property to
which any Loan Party or any Subsidiary is a party, either as lessor or lessee,
or as licensor or licensee, (f) distribution, marketing or supply agreements to
which any Loan Party or any Subsidiary is a party, (g) customer agreements to
which any Loan Party or any Subsidiary is a party, (h) real estate leases to
which any Loan Party or any Subsidiary is a party, (in each case with respect to
any agreement of the type described in the preceding clauses (a), (b), (c), (d),
(e), (f), (g) and (h) requiring payment of more than $250,000 in the aggregate
in any year), (i) partnership agreements to which any Loan Party or any
Subsidiary is a partner, limited liability company agreements to which any Loan
Party or any Subsidiary is a member or manager, or joint venture agreements to
which any Loan Party or any Subsidiary is a party, or (j) any other agreements
or instruments to which any Loan Party or any Loan Party is a party the breach,
nonperformance or cancellation of which, would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. The
consummation of the transactions contemplated by this Agreement and the Other
Documents and the other Related Agreements will not give rise to a right of
termination in favor of any party to any Material Contract which would
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Each Material Contract is in full force and effect and
no defaults enforceable against any Loan Party or any Subsidiary exist
thereunder, except as could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. No Loan Party nor
any Subsidiary of any Loan Party has received notice from any party to any
Material Contract stating that it intends to terminate or amend such contract,
except to the extent such termination could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

 

81

--------------------------------------------------------------------------------

5.22 Capital Structure.

Schedule 5.22 sets forth the authorized Equity Interests, and owner thereof, of
each of Loan Parties and each of their Subsidiaries as of the Closing Date. All
of the Equity Interests of each of Loan Parties (other than Parent) and each of
their Subsidiaries are owned directly or indirectly by one of the Borrowers. All
issued and outstanding Equity Interests of each of Loan Parties and each of
their Subsidiaries are duly authorized and validly issued, fully paid and
non-assessable, and such Equity Interests were issued in compliance with all
applicable laws. All issued and outstanding Equity Interests of each Loan Party
and each of their Subsidiaries are free and clear of all Liens other than
Permitted Encumbrances and the Lien in favor of Agent for the benefit of Agent
and Lenders. The identity of the holders of the Equity Interests of each of the
Loan Parties and each of their Subsidiaries and the percentage of their fully
diluted ownership of the Equity Interests of each of Loan Parties and each of
their Subsidiaries as of the Closing Date is set forth on Schedule 5.22. No
shares of the Equity Interests of any Loan Party or any of their Subsidiaries,
other than those described above, are issued and outstanding as of the Closing
Date. As of the Closing Date there are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from any Loan Party or any of
their Subsidiaries of any Equity Interests of any such entity.

5.23 Bank Accounts, Security Accounts, Etc.

No Loan Party has any bank accounts, deposit accounts, investments accounts,
securities accounts or any other similar accounts other than the accounts set
forth Schedule 5.23 (as such Schedule may from time to time be updated by
Administrative Borrower delivering a written update thereto to Agent, so long as
such updates are approved by Agent and Loan Parties take all action required by
Section 4.14(h) with respect thereto). The purpose and type of each such account
is specified on Schedule 5.23.

 

82

--------------------------------------------------------------------------------

5.24 Related Agreements.

Administrative Borrower has furnished Agent a true and correct copy of each the
Related Agreements, along with all agreements, side letters and other documents
executed by any Loan Party, Subsidiary or Affiliate thereof in connection
therewith. Each of Loan Parties and their respective Subsidiaries and, to Loan
Party’s knowledge, each other party to the Related Agreements, has duly taken
all necessary organizational action to authorize the execution, delivery and
performance of the Related Agreements and the consummation of transactions
contemplated thereby. As of the Closing Date, the Related Transactions have been
consummated (or are being consummated substantially contemporaneously with the
initial credit extension hereunder) in accordance with the terms of the Related
Agreements. The Related Transactions will comply with all applicable legal
requirements, and all necessary Consents required to be obtained by a Loan Party
or a Subsidiary thereof and, to each Loan Party’s knowledge, each other party to
the Related Agreements in connection with the Related Transactions will be,
prior to consummation of the Related Transactions, duly obtained and will be in
full force and effect. As of the date of the Related Agreements, all applicable
waiting periods with respect to the Related Transactions will have expired
without any action being taken by any competent Governmental Body which
restrains, prevents or imposes material adverse conditions upon the consummation
of the Related Transactions. The execution and delivery of the Related
Agreements did not, and the consummation of the Related Transactions will not,
violate any statute or regulation of the United States (including any securities
law), Canada or of any state, province or other applicable jurisdiction, or any
order, judgment or decree of any court or Governmental Body binding on any Loan
Party or Subsidiary or, to each Loan Party’s knowledge, any other party to the
Related Agreements, or result in a breach of, or constitute a default under, any
material agreement, indenture, instrument or other document, or any judgment,
order or decree, to which any Loan Party or Subsidiary is a party or by which
any Loan Party or Subsidiary is bound or, to each Loan Party’s knowledge, to
which any other party to the Related Agreements is a party or by which any such
party is bound. No statement or representation made in the Related Agreements by
any Loan Party or Subsidiary or, to Loan Party’s knowledge, any other Person,
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not
misleading as of the time that such statement or representation is made. As of
the Closing Date and any other date on which such representations and warranties
are otherwise remade or deemed remade hereunder, (a) each of the representations
and warranties contained in the Related Agreements made by a Loan Party or any
Subsidiary is true and correct in all material respects and (b) to each Loan
Party’s knowledge, each of the representations and warranties contained in the
Related Agreements made by any Person other than a Loan Party is true and
correct in all material respects.

5.25 OFAC.

None of Borrower, any Subsidiary of Borrower or any Affiliate of Borrower:
(a) is a Sanctioned Person, (b) has more than ten (10%) percent of its assets in
Sanctioned Entities or (c) derives more than ten (10%) percent of its operating
income from investments in, or transactions with Sanctioned Persons or
Sanctioned Entities. The proceeds of any Loan will not be used and have not been
used to fund any operations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Entity.

6. AFFIRMATIVE COVENANTS.

Each Loan Party shall at all times until all of the Obligations have been Paid
in Full:

6.1 Payment of Fees.

Promptly following demand, pay to Agent all usual and customary fees and
expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.14(h). Agent may, without
making demand, charge the Borrowers’ Account for all such fees and expenses.

 

83

--------------------------------------------------------------------------------

6.2 Conduct of Business; Compliance with Laws and Maintenance of Existence and
Assets.

Conduct, and cause each Subsidiary of each Loan Party to conduct, continuously
and operate actively its business according to business practices and maintain,
and cause each Subsidiary of each Loan Party to maintain, all of its properties
useful or necessary in its business in good working order and condition in all
material respects (reasonable wear and tear excepted and except as may be
Disposed of in accordance with the terms of this Agreement (including, without
limitation, Section 7.1)), including, without limitation, all Intellectual
Property and take all actions necessary to enforce and protect the validity of
its Intellectual Property. Each Loan Party shall, and shall cause each
Subsidiary of each Loan Party to, (a) keep in full force and effect its
existence and its material rights and franchises, except as expressly permitted
by this Agreement (including pursuant to Section 7.1), (b) comply in all
material respects with the laws and regulations governing the conduct of its
business where the failure to do so could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect, and (c) except as
expressly permitted hereunder, make all such reports and pay all such franchise
and other taxes and license fees and do all such other acts and things as may be
lawfully required to maintain its rights, licenses, leases, powers and
franchises under the laws of the United States, Canada or any of their political
subdivisions or, based on commercially reasonable efforts, to do so in any
applicable foreign jurisdiction or any political subdivision of any of such
foreign jurisdictions.

6.3 Violations.

Promptly after becoming aware of the same, notify Agent in writing of any
violation of any law, statute, regulation or ordinance of any Governmental Body,
or of any agency thereof, applicable to any Loan Party or any of their
Subsidiaries which could reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect.

6.4 Government Receivables.

If Administrative Borrower or any Borrower reports as being an Eligible Account
or requests be treated as an Eligible Account any Accounts in excess of $50,000
owing by the United States, Canada, any state, any province or any department,
agency or instrumentality of any of them (collectively, “Government
Receivables”), or upon Agent’s request at any time following the occurrence and
during the continuance of a Default or Event of Default with respect to any
other Governmental Receivables, take all steps necessary to protect Agent’s
interest in the such Government Receivables under the Federal Assignment of
Claims Act, the Financial Administration Act (Canada) or other applicable state,
provincial or local statutes or ordinances and deliver to Agent appropriately
endorsed, any instrument or chattel paper connected with any Government
Receivables.

 

84

--------------------------------------------------------------------------------

6.5 Execution of Supplemental Instruments; Further Assurances.

Promptly upon request by Agent, each Loan Party shall take such additional
actions (including, without limitation, execution and delivery of such
supplemental agreements or instruments, statements, assignments and transfers,
or instructions or documents relating to the Collateral) as Agent may require in
its Permitted Discretion from time to time in order (a) to carry out more
effectively the purposes of this Agreement or any Other Document, (b) to subject
all of the existing or hereinafter acquired personal and real property (other
than Excluded Assets) of each Loan Party to first-priority perfected Liens
(other than with respect to the Term Loan Priority Collateral (subject to the
Term Loan Intercreditor Agreement) and subject to Permitted Encumbrances) in
favor of Agent to secure the Obligations, (c) to perfect and maintain the
validity, effectiveness and priority of any of the Liens created, or intended to
be created thereby, by this Agreement or any Other Document to the extent
required herein or therein, and (d) to better assure, convey, grant, assign,
transfer, preserve, protect and confirm to Agent and Lenders the rights granted
or now or hereafter intended to be granted to Agent and the Lenders under this
Agreement or any Other Document. Without limiting the generality of the
foregoing, each Loan Party shall (and shall cause each other Loan Party to)
guarantee (to the extent not already directly obligated with respect thereto)
all of the Obligations and to grant to Agent, for the benefit of Agent, Lenders,
Bank Product Provider and Issuer, a Lien in all of such Loan Party’s existing or
hereinafter acquired personal and real property (other than Excluded Assets) to
secure all of the Obligations; provided, that, no such guarantee or grant shall
be required by a Non-US Subsidiary that is a CFC to the extent such guarantee or
grant would result in material adverse tax consequences to Loan Parties under
Treas. Reg. Section 1.956-2.

6.6 Payment of Indebtedness.

Each Loan Party shall, and shall cause each Subsidiary of each Loan Party to,
subject at all times to any applicable subordination or intercreditor
arrangement in favor of Agent and/or Lenders, pay, discharge or otherwise
satisfy at or before maturity (subject, where applicable, to specified grace
periods and, in the case of the trade payables, to normal payment practices) all
its Indebtedness of whatever nature, except when the failure to do so could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect or when the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and each Loan Party and
each of their Subsidiaries shall have provided for such reserves as Agent may
reasonably deem proper and necessary.

6.7 Standards of Financial Statements.

Each Loan Party shall, and shall cause each Subsidiary of each Loan Party to,
cause all financial statements referred to in Sections 9.7 and 9.9 as to which
GAAP is applicable to be true and correct in all material respects (subject, in
the case of interim financial statements, to normal year-end audit adjustments)
and to be prepared in reasonable detail and in accordance with GAAP consistently
applied.

6.8 Post-Closing Deliveries.

Without limiting any other obligation of Loan Parties set forth herein or in any
of the Other Documents, Loan Parties shall deliver or cause to be delivered to
Agent, in form and substance reasonably satisfactory to Agent, as promptly as
possible following the Closing Date, but in any event no later than the dates
referred to in Schedule 6.8 hereto with respect to each such item (or such later
date as Agent shall agree in writing), each of the items referred to in such
Schedule.

 

85

--------------------------------------------------------------------------------

7. NEGATIVE COVENANTS.

No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to,
at any time prior to the Payment in Full of all of the Obligations:

7.1 Merger, Amalgamation, Consolidation, Acquisition and Sale of Assets.

(a) Consummate any merger, amalgamation, consolidation or other reorganization
with or into any other Person or acquire all or a substantial portion of the
assets or Equity Interests of any Person or permit any other Person to
consolidate with, amalgamate with or merge with it; except, that, (i) a Loan
Party may merge, amalgamate or consolidate into another Loan Party so long as
(A) no Event of Default shall have occurred and be continuing,
(B) Administrative Borrower shall give Agent at least ten (10) Business Days
prior notice thereof, (C) if a Borrower is a party to such merger, amalgamation
or consolidation a Borrower shall be the surviving entity; provided, that, any
assets of the Person so acquired from any Person that was not a Borrower prior
thereto shall only be eligible for inclusion into the Borrowing Base to the
extent that Agent has completed an appraisal, collateral audit and/or field
examination (as the case may be) with respect thereto and the criteria for
eligibility set forth herein (or such other or additional criteria as Agent may,
at its option, establish with respect thereto in accordance with this Agreement
and subject to such Reserves as Agent may establish in connection with the
assets of the Person so acquired) are satisfied with respect thereto in a manner
acceptable to Agent, (D) no Loan Party shall merge, amalgamate or consolidate
with a Loan Party that exists under the laws of a country different than the
country in which such Loan Party exists and (E) prior to such merger,
amalgamation or consolidation Loan Parties have taken (or caused to be taken)
all steps required by Agent with respect thereto (including without limitation
all steps required by Agent to maintain Agent’s Lien on the Collateral granted
by such Loan Parties, as well as the priority and effectiveness of such Lien);
and (ii) a Subsidiary of the Borrowers that is not a Loan Party may merge,
amalgamate or consolidate into another Subsidiary of the Borrowers that is not a
Loan Party so long as (A) no Event of Default shall have occurred and be
continuing, (B) Administrative Borrower shall give Agent at least ten
(10) Business Days prior notice thereof, and (C) prior to such merger,
amalgamation or consolidation Loan Parties have taken (or caused to be taken)
all steps required by Agent with respect thereto.

(b) Acquire all or a substantial portion of the assets or Equity Interests of
any Person except for investments permitted by Section 7.4.

(c) Directly or indirectly, sell, assign, lease, transfer, abandon or otherwise
dispose of any of its assets or properties (including, without limitation, the
Collateral) to any other Person (each, a “Disposition”), except for:

(i) the sale of Inventory in the ordinary course of business,

(ii) provided no Default or Event of Default shall have occurred and be
continuing or result therefrom, the Disposition of assets (other than equity
interests of any of its Subsidiaries) having a fair market value not to exceed
$250,000 in the aggregate in any fiscal year;

(iii) the sale, lease, transfer or other Disposition of property by a Loan Party
or a Subsidiary of a Loan Party to any other Loan Party or Subsidiary of a Loan
Party; provided, that, (A) if a Borrower or any of its assets is subject to a
Disposition, all parties to such Disposition must be Borrowers, (B) if a Loan
Party or any of its assets is subject to a Disposition, all parties to such
Disposition must be Loan Parties, (C) if a US Loan Party or any of its assets is
subject to a Disposition, all parties to such Disposition must be US Loan
Parties, (D) to the extent such transaction constitutes an investment, such
transaction must be permitted under Section 7.4 and (E) any Lien in favor of
Agent on such property shall continue in all respects and shall not be deemed
released or terminated as a result of such sale, lease, transfer or other
Disposition and Loan Parties shall execute and deliver such agreements,
documents and instruments as Agent may reasonably request with respect thereto;

 

86

--------------------------------------------------------------------------------

(iv) the sale, lease, transfer or Disposition of used, worn-out or obsolete
machinery and equipment and machinery and equipment no longer used or useful in
the conduct of business of Loan Parties or any of their Subsidiaries having a
fair market value not to exceed $250,000 in the aggregate in any fiscal year;

(v) the grant in the ordinary course of business by any Loan Party or any of
their Subsidiaries after the date hereof of a non-exclusive license of any
Intellectual Property or any exclusive license of any Intellectual Property in a
particular territory; provided, that, the rights of the licensee shall be
subject to the rights of Agent, and shall not adversely affect, limit or
restrict the rights of Agent to use such Intellectual Property or to sell or
otherwise dispose of any Inventory or other Collateral in connection with the
exercise by Agent of any rights or remedies hereunder or under any of the Other
Documents, or otherwise adversely limit or interfere in any material respect
with the use of any such Intellectual Property by Agent in connection with the
exercise of its rights or remedies hereunder or under any of the Other Documents
or by any Loan Party or Subsidiary;

(vi) the issuance of Equity Interests by Loan Parties; provided, that, no Loan
Party or Subsidiary shall be required to pay any cash dividends, distributions
or repurchase or redeem such Equity Interests or make any other payments in
respect thereof, except as otherwise expressly permitted in Section 7.7;

(vii) the issuance of Equity Interests by Parent consisting of common stock (or
its equivalent) pursuant to an employee stock option plan or grant or similar
equity plan or 401(k) plan of Loan Parties and their Subsidiaries for the
benefit of their employees, directors and officers;

(viii) the abandonment or other disposition of Intellectual Property that is not
material and is no longer used or useful in any material respect in the business
of any Loan Party or any of its Subsidiaries and does not appear on or is
otherwise not affixed to or incorporated in any Inventory or Equipment or have
any material value;

(ix) involuntary Dispositions occurring by reason of casualty or condemnation;

(x) the leasing, occupancy agreements or sub-leasing of Real Property or
Equipment in the ordinary course of business consistent with past practices that
would not materially interfere with the required use of such Real Property or
Equipment by any Loan Party or any of its Subsidiaries;

(xi) transfers of condemned real property as a result of the exercise of
“eminent domain” or other similar policies to the respective governmental
authority or agency that has condemned the same (whether by deed in lieu of
condemnation or otherwise), and transfers of properties that have been subject
to a casualty to the respective insurer of such real property as part of an
insurance settlement; and

 

87

--------------------------------------------------------------------------------

(xii) any Disposition of property or assets, or issuance of Equity Interests,
that is permitted under Sections 7.1(a) and 7.7.

7.2 Creation of Liens.

Create or suffer to exist any Lien or transfer upon or against any of its
property or assets now owned or hereafter acquired, except for Permitted
Encumbrances.

7.3 Guarantees.

Become liable upon the obligations of any Person by assumption, endorsement or
guarantee thereof or otherwise (other than with respect to the Obligations)
except:

(a) for the endorsement of checks in the ordinary course of business; and

(b) that (i) Loan Parties and their Subsidiaries may guarantee Indebtedness or
other obligations of Borrowers and their US Subsidiaries that are Loan Parties
and (ii) a Non-US Subsidiary may guarantee Indebtedness or other obligations of
another Non-US Subsidiary (provided if the Non-US Subsidiary that is providing
such guarantee is a Loan Party such other Non-US Subsidiary must also be a Loan
Party);

(c) that Loan Parties and their Subsidiaries may guarantee Indebtedness under
the Term Loan Documents; and

(d) guarantees not permitted under clauses (a) through (b) above in an aggregate
outstanding amount not to exceed $100,000 at any time.

7.4 Investments.

Purchase or acquire Indebtedness or Equity Interests of, or any other interest
in, any Person, except:

(a) cash or Cash Equivalents;

(b) as expressly permitted pursuant to Section 7.1, Section 7.5, Section 7.7 and
Section 7.8;

(c) the endorsement of instruments for collection or deposit in the ordinary
course of business;

(d) obligations under Hedging Agreements permitted under Section 7.8(e);

(e) Equity Interests or other obligations issued to Loan Parties by any Person
(or the representative of such Person) in compromise or settlement of
Indebtedness of such Person owing to Loan Parties (whether or not in connection
with the insolvency, bankruptcy, receivership or reorganization of such a Person
or a composition or readjustment of the debts of such Person) or upon the
foreclosure, perfection or enforcement of any Lien in favor of a Loan Party
securing any such obligations;

 

88

--------------------------------------------------------------------------------

(f) obligations of account debtors to Loan Parties and their Subsidiaries
arising from Accounts which are evidenced by a promissory note made by such
account debtor payable to the applicable Loan Party or Subsidiary; provided,
that, promptly upon the receipt of the original of any such promissory note
issued to any Loan Party from any account debtor in excess of $250,000 in the
aggregate (or regardless of the amount after an Event of Default exists or has
occurred and is continuing, at the request of Agent), such promissory note(s)
shall, upon the request of Agent, be endorsed to the order of Agent by Loan
Parties and promptly delivered to Agent as so endorsed;

(g) investments by Loan Parties and their Subsidiaries in the form of Equity
Interests received as part or all of the consideration for the sale of assets
pursuant to a Disposition by any such Loan Party of Subsidiary to the extent
permitted under Section 7.1(c);

(h) the existing investments of any Loan Party or Subsidiary thereof as of the
date hereof in their respective Subsidiaries;

(i) investments made after the date hereof by (i) Parent in another Loan Party,
(ii) a Loan Party (other than Parent) in another Loan Party, (iii) a US
Subsidiary of a Loan Party in a US Subsidiary of another Loan Party and (iv) a
Non-US Subsidiary of a Loan Party in a Non-US Subsidiary of a Loan Party;
provided, that, in no such case shall a Loan Party make an investment in a
Person that is not a Loan Party;

(j) Permitted Acquisitions;

(k) loans or advances to employees, officers and directors to the extent
permitted in Section 7.5(c); and

(l) investments not permitted under clauses (a) through (k) above in an
aggregate outstanding amount not to exceed the $100,000 at any time; provided,
that, as of the date of such investment or any payment made in respect thereof
and after giving effect to such investment or payment, no Default or Event of
Default shall exist or have occurred and be continuing.

7.5 Loans.

Make advances, loans or other extensions of credit to any Person, including,
without limitation, any Subsidiary or Affiliate, except with respect to:

(a) the extension of commercial trade credit in connection with the sale of
Inventory or the provision of services, each in the ordinary course of its
business;

(b) deposits of cash for leases, utilities, worker’s compensation and similar
matters in the ordinary course of business;

(c) advances or loans by a Loan Party or any Subsidiary of a Loan Party to its
employees, officers or directors in the ordinary course of business in an
aggregate amount not to exceed $75,000 at any time outstanding for:
(i) reasonable and necessary work-related travel or other ordinary business
expenses to be incurred by such employee, officer or director in connection with
their work for such Loan Party or Subsidiary and (ii) reasonable and necessary
relocation expenses of such employees, officers and directors (including home
mortgage financing for relocated employees, officers and directors); and

 

89

--------------------------------------------------------------------------------

(d) advances, loans or extensions of credit made by (i) Parent to another Loan
Party, (ii) a Loan Party (other than Parent) to another Loan Party, (iii) a US
Subsidiary of a Loan Party in a US Subsidiary of another Loan Party and (iv) a
Non-US Subsidiary of a Loan Party to a Non-US Subsidiary of a Loan Party;
provided, that, in no such case shall a Loan Party make an advance, loan or
extension of credit in a Person that is not a Loan Party.

7.6 Capital Expenditures.

Contract for, purchase or make any Capital Expenditures during any fiscal year
set forth below in an aggregate amount in excess of the amount set forth below
for such fiscal year:

 

Fiscal Year

   Maximum Capital Expenditures  

Fiscal year ended December 31, 2012

   $ 5,500,000   

Fiscal year ended December 31, 2013 (and each fiscal year thereafter)

   $ 6,000,000   

Notwithstanding the foregoing, with respect to the fiscal year ended
December 31, 2013 and each fiscal year thereafter, Loan Parties may make Capital
Expenditures in an aggregate amount in excess of the amount set forth above for
such fiscal year (the “Maximum Capital Expenditures Amount”) so long as, at all
times following the date that the Maximum Capital Expenditures Amount for such
fiscal year has been exceeded (the “Maximum Capital Expenditures Determination
Date”) through and including the end of such fiscal year, Loan Parties shall
have a Fixed Charge Coverage Ratio, calculated as of the last day of each fiscal
month for the trailing twelve (12) month period then ended (commencing with the
last day of the fiscal month immediately preceding the Maximum Capital
Expenditures Determination Date), equal to or greater than 1.1:1.0.

7.7 Dividends and Distributions.

Declare, pay or make any dividend or distribution or payment with respect to:

(a) any shares of the Equity Interests of any Loan Party or any of their
Subsidiaries (other than dividends or distributions payable in its Equity
Interests permitted hereunder) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any such Equity Interests;
except, that, (i) in lieu of making tax payments directly, Loan Parties and
their Subsidiaries may make dividends and distributions to Parent from time to
time for the sole purpose of allowing Parent to, and Parent shall promptly upon
receipt thereof use the proceeds thereof solely to, pay federal, state and
provincial income taxes and franchise taxes solely arising out of the
consolidated operations of Parent, Borrowers and their Subsidiaries, after
taking into account all available credits and deductions (provided, that, no
Borrower or Subsidiary thereof shall make any distribution to Parent in any
amount greater than the share of such taxes arising out of Borrowers and their
Subsidiaries’ consolidated net income); (ii) Loan Parties and their Subsidiaries
may make dividends and distributions to any Loan Party from time to time in
respect of any Equity Interests owned by any Loan Party; and (iii) Parent may
purchase and redeem its Equity Interests for the sole purpose of providing
proceeds to Equity Interest Option Holders in order to permit such Equity
Interest Option Holders to pay federal, state and provincial income taxes solely
arising out of and relating to options and warrants owned by such Equity
Interest Option Holders; provided, that, the aggregate amount of purchases and
redemptions under this clause (iii) shall not exceed $150,000 during any fiscal
year, and

 

90

--------------------------------------------------------------------------------

(b) any redemption, prepayment (whether mandatory or optional), defeasance,
repurchase or any other payment in respect of any Subordinated Debt, or apply
any of its funds, property or assets to the purchase, redemption or other
retirement of any Subordinated Debt; except, that, mandatory payments may be
made on Subordinated Debt to the extent expressly permitted in any subordination
or intercreditor agreement executed by Agent with respect thereto.

7.8 Indebtedness.

Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade
payables incurred in the ordinary course of business consistent with past
practices outstanding no more than thirty (30) days past its due date) except in
respect of:

(a) the Obligations;

(b) Indebtedness (other than the Obligations) to the extent incurred after the
Closing Date to finance Capital Expenditures in an aggregate amount not to
exceed $500,000 at any one time outstanding;

(c) Indebtedness existing on the Closing Date as set forth on Schedule 7.8 and
any refinancings, refundings, renewals or extensions thereof (without shortening
the maturity thereof or increasing the principal amount thereof (excluding
accrued interest, fees, discounts, premiums and expenses));

(d) Indebtedness expressly permitted by Section 7.3 and Section 7.5;

(e) Indebtedness arising under Hedging Agreements which are not entered into for
speculative purposes and are intended to provide protection against fluctuations
in interest rates or foreign currency exchange rates; provided, that, if such
Indebtedness arising under any Hedging Agreement is not provided by a Bank
Product Provider or any of its Affiliates, the Indebtedness under such Hedging
Agreement shall only be Indebtedness permitted under this Section 7.8(e) if
(i) prior to entering into any such Hedging Agreement, the applicable Loan Party
shall have offered to a Bank Product Provider or any of its Affiliates the right
of first refusal to enter such Hedging Agreement on substantially the same
economic terms, and (ii) a Bank Product Provider or any of its Affiliates shall
have elected not to exercise its right of first refusal and enter into such
Hedging Agreement on substantially the same or, with respect to any Loan Party,
better, economic terms;

(f) Indebtedness in respect of netting services, overdraft protections, employee
credit card programs and otherwise in connection with deposit accounts and
Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, that, such Indebtedness is extinguished within five
(5) Business Days of incurrence;

 

91

--------------------------------------------------------------------------------

(g) Indebtedness in respect of bid, performance and surety bonds, including
guarantees or obligations of Loan Parties with respect to letters of credit
supporting such bid, performance and surety bonds or other forms of credit
enhancement supporting performance obligations under services contracts,
workers’ compensation claims, self-insurance obligations, unemployment
insurance, health, disability and other employee benefits or property, casualty
or liability insurance in each case incurred in the ordinary course of business;
provided, that, upon Agent’s request, Agent shall have received true, correct
and complete copies of all material agreements, documents or instruments
evidencing or otherwise related to such Indebtedness, as duly authorized,
executed and delivered by the parties thereto;

(h) unsecured Indebtedness arising from agreements to provide for customary
indemnification, adjustment of purchase price or similar obligations, earn-outs
or other similar obligations, in each case, incurred in connection with a
Permitted Acquisition or Disposition permitted hereunder and in the case of
earn-outs or other similar obligations so long as they have been subordinated to
the Obligations pursuant to a subordination agreement in favor of Agent on terms
and conditions reasonably satisfactory to Agent;

(i) unsecured subordinated Indebtedness of Loan Parties and their Subsidiaries
arising after the date hereof to any third person not otherwise permitted in
this Section 7.8, in an aggregate outstanding principal amount not to exceed
$100,000 at any time and any refinancings, refundings, renewals or extensions
thereof (without shortening the maturity thereof or increasing the principal
amount thereof (excluding accrued interest, fees, discounts, premiums and
expenses)); provided, that, (i) as of the date of incurring such Indebtedness
and after giving effect thereto, no Default or Event of Default shall exist or
have occurred and be continuing, (ii) the terms and provisions of such
Indebtedness shall provide that no principal or interest (other than interest
payable in kind (i.e., non-cash interest)) shall be paid in respect thereof
until after all of the Obligations are Paid in Full, and (iii) such third person
shall have entered into a subordination agreement with Agent on terms and
conditions reasonably satisfactory to Agent;

(j) Indebtedness arising pursuant to financing of insurance premiums payable on
insurance policies maintained by or for the benefit of Loan Parties or any of
their Subsidiaries; provided, that, upon Agent’s request, Agent shall have
received true, correct and complete copies of all material agreements, documents
and instruments evidencing or otherwise related to such Indebtedness;

(k) subject to the terms and conditions of the Term Loan Intercreditor
Agreement, Indebtedness of any Loan Party under the Term Loan Documents; and

(l) additional unsecured Indebtedness of Loan Parties and their Subsidiaries in
an aggregate principal amount not to exceed $100,000 at any one time
outstanding.

 

92

--------------------------------------------------------------------------------

7.9 Nature of Business.

Substantially change the nature of the business in which it is presently
engaged, and similar, related or complementary businesses subsequently engaged
in, nor except as specifically permitted hereby purchase or invest, directly or
indirectly, in any assets or property other than in the ordinary course of
business for assets or property which are useful in, necessary or appropriate
for and are to be used in its business as presently conducted or similar,
related or complementary businesses.

7.10 Transactions with Affiliates.

Directly or indirectly, purchase, acquire or lease any property from, or sell,
transfer or lease any property to, or otherwise deal with, any Affiliate, except
for:

(a) transactions, arrangements and other business activities entered into in the
ordinary course of business, on an arm’s-length basis on terms no less favorable
than terms which would have been obtainable from a Person other than an
Affiliate;

(b) any employment or compensation arrangement or agreement, employee benefit
plan or arrangement, officer or director indemnification agreement or any
similar arrangement or other compensation arrangement entered into in good
faith, for actual services rendered to any Loan Party or any Subsidiary, by any
Loan Party and the Subsidiaries in the ordinary course of business and non-cash
payments, issuance of securities or awards pursuant thereto, and including the
grant of stock options, restricted stock, stock appreciation rights, phantom
stock awards or similar rights to employees and directors in each case approved
by the Board of Directors of such Loan Party; and

(c) transactions among Loan Parties and their Subsidiaries expressly permitted
by Section 7.1(c), Section 7.3(b), Section 7.4(i), Section 7.5(c),
Section 7.5(d) and Section 7.7.

7.11 Leases.

After the Closing Date, enter as lessee into any lease arrangement for Equipment
or Real Property (unless capitalized and permitted under Sections 7.6 and 7.8)
if after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $500,000 in any one (1) fiscal year for all Loan Parties
and their Subsidiaries (or such higher amount as Agent may approve in its sole
discretion). Any renewal, replacement or extension of any lease or lease
arrangement that exists as of the Closing Date shall not be taken into account
for the purposes of this Section 7.11.

7.12 Subsidiaries.

(a) Form any Subsidiary unless (i) such Subsidiary expressly joins in this
Agreement as a Loan Party, becomes jointly and severally liable for, or
otherwise guaranties, all of the Obligations and grants a Lien on substantially
all of its assets to secure all of the Obligations and consents to the pledge of
its Equity Interests to secure all of the Obligations in form and substance
reasonably satisfactory to Agent (in each case, except (A) to the extent that
such assets constitute Excluded Assets and (B) no such guarantee or grant shall
be required by a Non-US Subsidiary that is a CFC to the extent such guarantee or
grant would result in material adverse tax consequences to Loan Parties under
Treas. Reg. Section 1.956-2), (ii) Agent is provided with a pledge of all of the
outstanding Equity Interests of such Subsidiary to secure all of the Obligations
in form and substance reasonably satisfactory to Agent (except to the extent
that such Equity Interests constitutes Excluded Assets), and (iii) Agent shall
have received fifteen (15) days prior written notice thereof (along with an
update of Schedule 5.2(b)) and all documents, including collateral documents,
guaranties, corporate authority documents and legal opinions, as Agent may
require in its Permitted Discretion in connection therewith, all in form and
substance reasonably satisfactory to Agent; provided, that, investments in any
Subsidiary which Loan Parties may form in accordance with this Section 7.12(a)
may only be made to the extent permitted by Section 7.4.

 

93

--------------------------------------------------------------------------------

(b) Enter into any partnership, joint venture or similar arrangement.

7.13 Fiscal Year and Accounting Changes.

Change its fiscal year-end from December 31, or make any change (a) in
accounting treatment and reporting practices except as required by GAAP
consistently applied or (b) in tax reporting treatment except as required by
law.

7.14 Pledge of Credit.

Now or hereafter pledge Agent’s or any Lender’s credit on any purchases or for
any purpose.

7.15 Amendment of Organizational Documents; Term Loan Documents; and other
Related Agreements.

(a) Amend, modify or waive any term or provision of its certificate of
formation, limited liability company agreement, certificate of incorporation,
by-laws, partnership agreement or other applicable documents relating to such
Loan Party’s or Subsidiary’s formation or governance, or any shareholders
agreement, unless Agent is provided prior five (5) Business Days’ prior written
notice of any such amendment, modification or waiver and such amendment,
modification or waiver is not materially adverse in any respect to Agent and the
Lenders.

(b) Amend, modify or waive any term or provision of any Term Loan Documents,
unless Agent is provided prior five (5) Business Days’ prior written notice of
any such amendment, modification or waiver and such amendment, modification or
waiver is permitted by the Term Loan Intercreditor Agreement.

(c) Amend, modify or waive any term or provision of any Related Agreement or
Material Contract not specified in another clause of this Section 7.15, unless
Agent is provided prior five (5) Business Days’ prior written notice of any such
amendment, modification or waiver and such amendment, modification or waiver is
not materially adverse in any respect to Agent and the Lenders.

7.16 Compliance with ERISA.

(a) Maintain, or permit any member of the Controlled Group to maintain, or
become obligated to contribute, or permit any member of the Controlled Group to
become obligated to contribute, to any Title IV Plan, other than those Title IV
Plans disclosed on Schedule 5.8(d), (b) engage, or permit any member of the
Controlled Group to engage, in any non-exempt “prohibited transaction”, as that
term is defined in Section 406 of ERISA and Section 4975 of the Code, (c) incur,
or permit any member of the Controlled Group to fail the applicable “minimum
funding standard”, as that term is defined in Section 302 of ERISA or
Section 412 of the Code, (d) terminate, or permit any member of the Controlled
Group to terminate, any Title IV Plan where such event could result in any
liability of any Loan Party or any member of the Controlled Group or the
imposition of a Lien on the property of any Loan Party or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (e) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (f) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect, (g) fail
promptly to notify Agent of the occurrence of any Termination Event, (h) fail to
comply, or permit a member of the Controlled Group to fail to comply, with the
requirements of ERISA or the Code or other applicable laws in respect of any
Plan, or (i) fail to meet, or permit any member of the Controlled Group to fail
to meet, all minimum funding requirements under ERISA or the Code or postpone or
delay or allow any member of the Controlled Group to postpone or delay any
funding requirement with respect of any Title IV Plan.

 

94

--------------------------------------------------------------------------------

7.17 Prepayment, Etc. of Money Borrowed.

At any time, directly or indirectly, voluntarily prepay any Money Borrowed
(other than the Obligations), or voluntarily repurchase, redeem, retire or
otherwise acquire any Money Borrowed of any Loan Party or any Subsidiary, in
each case prior to the due date thereof.

7.18 State of Organization/Names/Locations.

Change the jurisdiction in which it is incorporated or otherwise organized, or
change its legal name (or use a different name), location of chief executive
office or location of any of the Collateral, unless Administrative Borrower has
given Agent not less than thirty (30) days prior written notice thereof (along
with an update of Schedule 4.4, Schedule 4.14(c), Schedule 5.2(a) and
Schedule 5.6, as applicable) and Loan Parties have taken (or caused to be taken)
all steps required by Agent with respect thereto (including without limitation
all steps required by Agent to maintain Agent’s Lien on such Collateral, as well
as the priority and effectiveness of such Lien); provided, that, no Loan Party
shall change its jurisdiction of incorporation or organization or location of
any of its Collateral to a jurisdiction or location from (a) the continental
United States to outside of the continental United States or (b) one country to
another country.

7.19 Foreign Assets Control Regulations, Etc.

None of the requesting or borrowing of the Loans or the requesting or issuance,
extension or renewal of any Letters of Credit or the use of the proceeds of any
thereof will violate the Trading With the Enemy Act (50 U.S.C. §1 et seq., as
amended) (the “Trading With the Enemy Act”) or any of the foreign assets control
regulations of the United States Treasury Department (31 C.F.R., Subtitle B,
Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any
enabling legislation or executive order relating thereto (including, but not
limited to (a) Executive order 13224 of September 21, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56). Neither
Borrower nor any other Loan Party is or will become a Sanctioned Entity or
Sanctioned Person as described in the Executive Order, the Trading with the
Enemy Act or the Foreign Assets Control Regulations or engages or will engage in
any dealings or transactions, or be otherwise associated, with any such
Sanctioned Entity or Sanctioned Person.

 

95

--------------------------------------------------------------------------------

8. CONDITIONS PRECEDENT.

8.1 Conditions to Initial Advances.

The agreement of Lenders to make the initial Advances and Letters of Credit
requested to be made on the Closing Date is subject to the satisfaction, or
waiver by Lenders, immediately prior to or concurrently with the making of such
Advances and Letters of Credit, of the following conditions precedent, all in
form and substance acceptable to Agent:

(a) Agreement. Agent shall have received this Agreement duly executed and
delivered by an authorized officer of each of the parties hereto;

(b) Notes. Agent, to the extent required by Lenders, shall have received the
Notes duly executed and delivered by an authorized officer of the Borrowers in
favor of such Lenders;

(c) Filings, Registrations, Recordings and Searches. Each document (including,
without limitation, any UCC and PPSA financing statements) required by this
Agreement, any Other Document or under law or reasonably requested by Agent to
be filed, registered or recorded in order to create, in favor of Agent, a
perfected Lien upon the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or recordation
thereof is so required or requested, and Agent shall have received an
acknowledgment copy, or other evidence satisfactory to it, of each such filing,
registration or recordation and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto. Agent shall also have received
UCC, PPSA, tax, judgment and other Lien searches with respect to each Loan Party
in such jurisdictions as Agent shall require, and the results of such searches
shall be satisfactory to Agent;

(d) Payoff Letters; Releases. Fully executed payoff letters (or other evidence
of repayment) from all creditors being repaid (in whole or in part) in
connection with the making of the initial Advances, along with appropriate Lien
releases;

(e) Corporate Proceedings of Loan Parties. Agent shall have received a copy of
the resolutions of the board of directors (or equivalent authority) of each Loan
Party authorizing (i) the execution, delivery and performance of this Agreement
and the Other Documents to which it is a party, and (ii) the granting by each
Loan Party of the Liens upon the Collateral in each case certified by the
Secretary or an Assistant Secretary of each Loan Party as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;

(f) Incumbency Certificates of Loan Parties. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Loan Party, dated
as of the Closing Date, as to the incumbency and signature of the officers of
each Loan Party executing this Agreement, any certificate or Other Documents to
be delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;

 

96

--------------------------------------------------------------------------------

(g) Certificates. Agent shall have received a copy of the certificate of
formation, limited liability company agreement, certificate of incorporation,
by-laws, partnership agreement or other applicable documents relating to each
Loan Party’s formation and governance, and all amendments thereto, certified in
the case of formation documents filed with a Governmental Body by the Secretary
of State or other appropriate official of its jurisdiction of incorporation or
formation and certified in the case of other formation and governance documents
as accurate and complete by the Secretary or Assistant Secretary of each Loan
Party;

(h) Good Standing Certificates. Agent shall have received good standing
certificates or certificates of status or certificates of compliance, as
applicable, for each Loan Party dated not more than thirty (30) days prior to
the Closing Date, issued by the Secretary of State or other appropriate official
of each such Loan Party’s jurisdiction of incorporation or formation and each
jurisdiction in which qualification and good standing are necessary for each
such Loan Party to conduct its business and own its property and where the
failure to so qualify could reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect;

(i) Legal Opinion. Agent shall have received the executed legal opinions of Loan
Parties’ legal counsel, which shall cover such matters incident to the
transactions contemplated by this Agreement and the Other Documents as Agent may
reasonably require and each Loan Party hereby authorizes and directs such
counsel to deliver such opinions to Agent and Lenders;

(j) No Litigation. (i) No litigation, investigation or proceeding before or by
any arbitrator or Governmental Body shall be continuing or threatened in writing
against any Loan Party or against the officers or directors of any Loan Party in
connection with this Agreement and/or the Other Documents or any of the
transactions contemplated thereby and which, in the reasonable opinion of Agent,
is deemed material and (ii) no injunction, writ, restraining order or other
order of any nature materially adverse to any Loan Party or the conduct of its
business or inconsistent with the due consummation of the transactions
contemplated by this Agreement or any of the other Related Transactions shall
have been issued by any Governmental Body;

(k) Collateral Examination. Agent shall have completed Collateral examinations
and received appraisals, the results of which shall be satisfactory in form and
substance to Lenders, of the Collatera of each Loan Party and all books and
records in connection therewith;

(l) Fees and Expenses. Agent shall have received all fees payable to Agent and
Lenders on or prior to the Closing Date pursuant to Section 3.3 and the Fee
Letter and all reimbursable expenses of Agent invoiced to date in accordance
with this Agreement;

(m) Financial Statements. Agent shall have received a copy of the financial
statements referred to in Section 5.5;

(n) Other Documents. Agent shall have received fully executed copies of all
Other Documents to the extent required to be executed on the Closing Date;

(o) Insurance. Agent shall have received insurance certificates and loss payable
endorsements naming Agent as loss payee or additional insured, as applicable,
with respect to Loan Parties’ property and liability insurance policies;

 

97

--------------------------------------------------------------------------------

(p) Payment Instructions. Agent shall have received written instructions from
Administrative Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;

(q) Blocked Accounts; Cash Management. Loan Parties shall have established
deposit accounts and cash management arrangements in form and substance
reasonably satisfactory to Agent (it being understood and agreed that, as of the
Closing Date, the cash management arrangements maintained at the Existing
Deposit Banks are reasonably satisfactory to Agent);

(r) Consents. Agent shall have received any and all Consents necessary to permit
the effectuation of the transactions contemplated by this Agreement and the
Related Transactions; and, Agent shall have received such Consents and waivers
of such third parties as might assert claims with respect to the Collateral, as
Agent and its counsel shall deem necessary;

(s) No Adverse Material Change. Since December 31, 2011, there shall not have
occurred any event, condition or state of facts which could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect;

(t) Collateral Access Agreements. Agent shall have received duly executed
Collateral Access Agreements with respect to all third party Collateral
locations required by Agent;

(u) Equity Interests Pledge. Agent shall have received a pledge agreement,
executed by each applicable Loan Party in favor of Agent, pursuant to which such
Loan Party shall pledge to Agent and grant to Agent a Lien upon all of the
outstanding Equity Interests of each Subsidiary (other than Equity Interests, if
any, constituting Excluded Assets) of such Loan Party, together with share
powers duly executed in blank and originals of any related share, membership or
other similar certificates;

(v) Term Loan Documents. Agent shall have received executed copies of the Term
Loan Intercreditor Agreement and all of the Term Loan Documents, and evidence
that Loan Parties have received $15,000,000 in the aggregate from advances made
on or about the date hereof as proceeds thereof;

(w) Related Transactions. Loan Parties and their Subsidiaries shall have
completed (or concurrently with the initial credit extension hereunder will
complete) the Related Transactions in accordance with the terms of the Related
Agreements (without any amendment thereto or waiver thereunder unless consented
to by Agent). Agent shall have received copies of the Related Agreements
(including a consent to the collateral assignment of rights and indemnities
under the appropriate Related Agreements in favor of Agent and Lenders)
certified by Administrative Borrower’s secretary or an assistant secretary (or
similar officer) as being in true, accurate and complete;

(x) Contract Review. Agent shall have reviewed all Material Contracts of Loan
Parties, including, without limitation, and to the extent required by Agent,
leases, union contracts, labor contracts, vendor supply contracts, license
agreements and distributorship agreements and such contracts and agreements
shall be satisfactory in all respects to Agent;

 

98

--------------------------------------------------------------------------------

(y) Borrowing Base. Agent shall have received a duly executed Borrowing Base
Certificate which shall indicate that the aggregate amount of Eligible Accounts
and Eligible Inventory is sufficient in value and amount to support Revolving
Advances and Letters of Credit in the amount requested by the Borrowers on the
Closing Date;

(z) Excess Availability. After giving effect to the initial Advances and Letters
of Credit and all fees and expenses pertaining to the closing of this Agreement
and the Related Transactions, the Borrowers shall have Excess Availability of at
least $5,000,000;

(aa) Due Diligence. Agent and its counsel shall have completed its business and
legal due diligence with results satisfactory to Agent and its counsel,
including without limitation (i) pre-funding field examination of the business
and collateral of each Loan Party in accordance with Agent’s customary
procedures and practices and as otherwise required by the nature and
circumstances of the businesses of each Loan Party, (ii) favorable trade and
customer references and (iii) background checks with respect to such individuals
as Agent determines issued by investigatory firms satisfactory to Agent; and
Agent shall be satisfied with the corporate and capital structure and management
of each Loan Party’s license agreements and with all legal, tax, accounting and
other matters relating to each Loan Party; and

(bb) Other. All corporate and other proceedings, and all documents, instruments
and other legal matters in connection with the transactions contemplated by this
Agreement and the other Related Transactions shall be satisfactory in form and
substance to Agent and its counsel.

8.2 Conditions to Each Advance.

The agreement of Lenders to make or to issue or to cause to be issued any
Advance or Letter of Credit requested to be made or issued on any date
(including, without limitation, the initial Advance(s) or Letter(s) of Credit),
is subject to the satisfaction of the following conditions precedent as of the
date such Advance or Letter of Credit is made or issued:

(a) Representations and Warranties. Each of the representations and warranties
made by any Loan Party in or pursuant to this Agreement and any Other Document
to which it is a party, and each of the representations and warranties contained
in any certificate, document or financial or other statement furnished at any
time under or in connection with this Agreement or any Other Document shall be
true and correct in all material respects (without duplication of any
materiality qualifiers already set forth therein; or in all respects with
respect to representations and warranties made on the Closing Date) on and as of
such date as if made on and as of such date, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and correct
in all material respects (without duplication of any materiality qualifiers
already set forth therein) on and as of such earlier date); provided, however,
that, each Lender, in its sole discretion, may (and at the direction of Agent
and Required Lenders, shall) continue to make Advances and participate in
Letters of Credit notwithstanding the failure to make such representations and
warranties and that any Advances so made and Letters of Credit so issued shall
not be deemed a waiver of any applicable Default or Event of Default;

 

99

--------------------------------------------------------------------------------

(b) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however, that, each Lender, in its
sole discretion, may (and at the direction of Agent and Required Lenders, shall)
continue to make Advances and participate in Letters of Credit notwithstanding
the existence of a Default or Event of Default and that any Advances so made and
Letters of Credit so issued shall not be deemed a waiver of any such Default or
Event of Default; and

(c) Maximum Revolving Advances/Letters of Credit. The limits set forth in
Section 2.1(b) are not exceeded after giving effect to such Advances or Letters
or Credit, as applicable.

Each request for an Advance or Letter of Credit by Administrative Borrower (on
behalf of the Borrowers) hereunder shall constitute a representation and
warranty by the Borrowers as of the date of such Advance or Letter of Credit
that the conditions contained in this subsection shall have been satisfied.

9. INFORMATION AS TO LOAN PARTIES.

Until all of the Obligations are Paid in Full, each Loan Party shall:

9.1 Disclosure of Material Matters Pertaining to Collateral.

Immediately upon learning thereof, report to Agent all matters materially
affecting the value, enforceability or collectability of any portion of the
Collateral including, without limitation, any Loan Party’s reclamation or
repossession of, or the return to any Loan Party of, a material amount of goods
or claims or disputes asserted by any Customer or other obligor.

9.2 Collateral and Related Reports.

(a) Deliver to Agent on or before the third (3rd) Business Day of each calendar
week (or on a daily basis, current as of the end of the immediately preceding
day, after the occurrence and during the continuance of a Reporting Trigger
Event), the following reports, which shall be current as of the close of
business on the last Business Day of the calendar week immediately prior to such
date:

(i) a rollforward of Accounts, including gross billings, cash receipts, credit
memos (reported separately by dilutive and non-dilutive categories) and other
adjustments issued (recorded directly to the Accounts receivable aging),
write-offs, other debit and credit adjustments (including an explanation of all
such adjustments); and

(ii) a perpetual Inventory summary report as of the end of the immediately
preceding week;

(b) Deliver to Agent on or before the twentieth (20th) day of each calendar
month (or more frequently if required by Agent after the occurrence and during
the continuance of a Reporting Trigger Event) a report, in form and substance
reasonably satisfactory to Agent, detailing the amount on deposit in all
Restricted Accounts;

 

100

--------------------------------------------------------------------------------

(c) Deliver to Agent on or before the twentieth (20th) day of each calendar
month (or more frequently if required by Agent after the occurrence and during
the continuance of a Reporting Trigger Event) a Borrowing Base Certificate
substantially in the form attached hereto as Exhibit A executed by a Responsible
Officer of Administrative Borrower (on behalf of the Borrowers), which shall be
calculated as of the last day of the immediately preceding calendar month (which
shall not be binding upon Agent or restrictive of Agent’s rights under this
Agreement, and which shall not restrict the rights of Agent to recalculate the
Borrowing Base or any of the related components), setting forth an updated
calculation of all components of the Borrowing Base including without limitation
Reserves that Administrative Borrower is aware of (it being understood that
Agent may institute additional Reserves), the Borrowing Base and Excess
Availability, if any, and supported by schedules showing the derivation thereof
and containing such detail and such other information as Agent may request from
time to time;

(d) Deliver to Agent on or before the twentieth (20th) day of each calendar
month (or more frequently if required by Agent after the occurrence and during
the continuance of a Reporting Trigger Event) the following reports, which shall
be current as of the close of business on the last Business Day of the calendar
month immediately prior to such date:

(i) with respect to each Borrower, a detail and summary Accounts receivable
aging by Customer, along with a listing of related Contra Claims;

(ii) with respect to each Borrower, an Accounts receivable rollforward report,
which shall separately identify (A) the Accounts receivable aging balance as of
the first (1st) day of such immediately preceding calendar month, (B) gross
billings, cash receipts, credit memos and other adjustments issued (recorded
directly to the Accounts receivable aging), write-offs, other debit and credit
adjustments on a cumulative basis for such calendar month (together with an
explanation for all such adjustments that individually exceed $100,000) during
such immediately preceding calendar month, and (C) Accounts receivable aging
balance as of the last day of such immediately preceding calendar month,
supported by the following information for such immediately preceding calendar
month:

(1) Accounts receivable aging summary totals;

(2) total amount of sales and invoices issued;

(3) total amount of cash receipts; and

(4) total amount of credits and adjustments (including credit memos issued,
write-offs, returns, discounts and other credit adjustments);

(iii) (A) a reconciliation of the Accounts receivable aging balance, together
with a copy of Borrowers’ detailed trial balance, as of the last day of such
immediately preceding calendar month to each of the following for such calendar
month: (1) Accounts receivable balance delivered to Agent, (2) each Borrower’s
general ledger (tied to corresponding trial balance accounts), and (3) each
Borrower’s balance sheet, together with supporting documentation for any
reconciling items, and (B) notice of all claims, offsets, or disputes or other
Contra Claims asserted by Customers with respect to any Borrower’s Accounts
receivable;

 

101

--------------------------------------------------------------------------------

(iv) for each of the Borrowers’ ten (10) largest Customers, the payment terms of
such Customer’s Accounts receivable, its address, credit ratings and an aging
for such Customers’ Accounts receivable balances as set forth in the accounts
receivable aging most recently delivered to Agent;

(v) with respect to each Borrower, a perpetual Inventory report, current as of
the close of business on the last Business Day of the immediately preceding
calendar month, and reconciliation to each Borrower’s general ledger and balance
sheet and Inventory reporting for the same calendar month;

(vi) with respect to each Borrower, an Inventory report by location, category
and component (i.e., raw materials, work in process and finished goods),
including Inventory aging report (and including the amounts of Inventory and the
value thereof at any leased locations and at premises of warehouses, processors
or other third parties);

(vii) with respect to each Loan Party’s accounts payable and expenses for the
immediately preceding calendar month, a report including an accounts payable
aging, accrued expenses, and listing of checks held, together with a
reconciliation to each Loan Party’s general ledger and balance sheet for such
calendar month;

(viii) (A) a detailed report of accrued and other liabilities of Loan Parties as
of the end of such immediately preceding calendar month reconciled to the
balance sheet for such calendar month; (B) listing of (1) past due amounts owing
to owners and lessors of leased premises, warehouses, processors and other third
parties from time to time in possession of any Collateral of Loan Parties,
(2) monthly rent, lease, warehouse and other amounts payable to the Persons
referred to in the foregoing clause (1), and (3) cost of all Inventory and other
Collateral then located at each of the locations referred to in the foregoing
clause (1); and (C) confirmation that all sales, personal property and payroll
and other taxes of Loan Parties are currently paid;

(ix) (A) a reconciliation of outstanding Advances and undrawn Letters of Credit
as of the end of such immediately preceding calendar month to each Borrower’s
general ledger and balance sheet for such calendar month; and (B) a detailed
list of Letters of Credit outstanding, including for each Letter of Credit the
undrawn principal amount thereof, beneficiary name, issuer name, and expiration
date; and

(x) notice of termination or breach of any Material Contract of a Loan Party or
any of their Subsidiaries (A) which could reasonably be expected to result in a
Material Adverse Effect or (B) with respect to a contract in which the aggregate
payments thereunder by any Loan Party or any of their Subsidiaries exceed
$500,000 in any fiscal year;

(e) Deliver to Agent on or before the sixtieth (60th) day after the end of each
the Borrowers’ fiscal years:

(i) current certificates of insurance and loss payee endorsements for all
insurance policies which Loan Parties and their Subsidiaries are required to
maintain pursuant to Section 4.10; and

 

102

--------------------------------------------------------------------------------

(ii) a list of all Customers of Loan Parties owing Accounts receivable as of the
end of such fiscal year, including such Customers’ respective name, address,
phone number, and e-mail address;

(f) Promptly, upon the request of Agent in its Permitted Discretion, in each
case to the extent available, (i) copies of customer statements, customer
purchase orders, customer sales invoices, credit memos, remittance advices and
reports, and copies of deposit slips and bank statements, (ii) copies of
customer purchase orders, invoices and delivery documents for Accounts or other
Receivables created by any Loan Party, (iii) copies of shipping and delivery
documents for Inventory and Equipment acquired by any Loan Party, and (iv) test
verifications;

(g) Promptly, deliver to Agent (i) current certificates of insurance and loss
payee endorsements for all insurance policies which Loan Parties and their
Subsidiaries are required to maintain pursuant to Section 4.10, immediately
following the renewal of each such policy and any amendments thereto; and
(ii) such other reports and information as to the Collateral, Loan Parties or
their Subsidiaries as Agent shall request from time to time in its Permitted
Discretion; and

(h) Promptly upon the occurrence thereof, deliver to Agent notice of termination
or breach of any Material Contract of a Loan Party or any of their Subsidiaries
which could reasonably be expected to result in a Material Adverse Effect;

(i) All Collateral reporting which shall be provided to Agent pursuant to this
Sections 9.2 shall be delivered to Agent electronically (or other manner
reasonably satisfactory to Agent) and in form and substance satisfactory to
Agent. All such reports are solely for Agent’s convenience in maintaining
records of the Collateral, and any Loan Party’s failure to deliver any of such
reports to Agent shall not affect, terminate, modify or otherwise limit Agent’s
Lien with respect to the Collateral. Agent shall have the right to confirm and
verify all Receivables by any manner and through any medium it considers
advisable and do whatever it may deem reasonably necessary to protect its
interests hereunder.

9.3 Environmental Reports.

Furnish Agent, concurrently with the delivery of the financial statements
referred to in Sections 9.7 and 9.8, with a certificate signed by a Responsible
Officer of Administrative Borrower stating, to the best of such officer’s
knowledge, that each Loan Party and each of their respective Subsidiaries is in
compliance in all material respects with all Environmental Laws. To the extent
any Loan Party or any Subsidiary of any Loan Party is not in compliance with any
Environmental Laws, the certificate shall set forth with specificity all areas
of non-compliance and the proposed action such Loan Party or Subsidiary, as
applicable, will implement in order to achieve full compliance.

9.4 Litigation.

Promptly (but in any event within five (5) Business Days thereafter) notify
Agent in writing of (or of any judgment, settlement or other material
development in) any litigation, suit or administrative proceeding affecting any
Loan Party or any Subsidiary, whether or not the claim is covered by insurance,
and of (or of any material development in) any suit or administrative
proceeding, which in any such matter could reasonably be expected to (i) result
in liability in excess of $250,000 or (ii) have a Material Adverse Effect.

 

103

--------------------------------------------------------------------------------

9.5 Material Occurrences.

Promptly (but in any event within five (5) Business Days thereafter) notify
Agent in writing upon the occurrence of (a) any Event of Default or Default;
(b) any event, development or circumstance whereby any financial statements or
other reports furnished to Agent fail in any material respect to present fairly,
in accordance with GAAP consistently applied, the financial condition or
operating results of any Loan Party or any Subsidiary of any Loan Party as of
the date of such statements; (c) any accumulated retirement plan funding
deficiency which, if such deficiency continued for two (2) plan years and was
not corrected as provided in Section 4971 of the Code, could subject any Loan
Party or any Subsidiary of any Loan Party to a tax imposed by Section 4971 of
the Code; (d) each and every default by any Loan Party or any Subsidiary of any
Loan Party which might result in the acceleration of the maturity of any
Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (e) any other development in the business or affairs of any
Loan Party or any Subsidiary of any Loan Party which could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect; in each case describing the nature thereof and the action Loan Parties
or such Subsidiaries propose to take with respect thereto.

9.6 Government Receivables.

Notify Agent promptly of any Government Receivables in excess of $250,000 in any
one case.

9.7 Annual Financial Statements.

Furnish Agent and each Lender within one hundred twenty (120) days after the end
of each fiscal year of Loan Parties, financial statements of Loan Parties and
their Subsidiaries on a consolidated basis, including, but not limited to,
statements of income and stockholders’ equity and cash flow from the beginning
of the current fiscal year to the end of such fiscal year and the balance sheet
as at the end of such fiscal year, all prepared in accordance with GAAP applied
on a basis consistent with prior practices, and in reasonable detail and
reported upon without qualification by an independent certified public
accounting firm selected by Loan Parties and satisfactory to Agent (the
“Accountants”). The report of the Accountants shall be accompanied by (a) copies
of all management letters, exception reports or similar letters or reports
received by Loan Parties or their Subsidiaries from the Accountants, and (b) a
statement of the Accountants certifying that (i) they have caused this Agreement
to be reviewed, and (ii) in making the examination upon which such report was
based, either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any related
agreement or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth Loan Parties’ compliance with the requirements or restrictions
imposed by Section 7.6. In addition, the reports shall be accompanied by a
Compliance Certificate of a Responsible Officer of Administrative Borrower which
shall state that, based on an examination sufficient to permit such Responsible
Officer to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Loan Parties with respect to such event, and such Compliance Certificate shall
have appended thereto calculations which set forth Loan Parties’ compliance with
the requirements or restrictions imposed by Section 7.6. The Compliance
Certificate shall also set forth a calculation of Quarterly Average Excess
Availability for the purposes of determining the Applicable Margin with respect
to the then current calculation period.

 

104

--------------------------------------------------------------------------------

9.8 [Reserved.]

9.9 Monthly Financial Statements.

Furnish Agent and each Lender within thirty (30) days after the end of each
month or within forty-five (45) days after the end of each month that is the end
of a fiscal quarter, an unaudited balance sheet of Loan Parties and their
Subsidiaries on a consolidated basis and unaudited statements of income and
stockholders’ equity and cash flow of Loan Parties and their Subsidiaries on a
consolidated basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Loan Parties or their
Subsidiaries. Each such balance sheet, statement of income and stockholders’
equity and statement of cash flow shall set forth a comparison of the figures
for (a) the current fiscal period and the current year-to-date with the figures
for the same fiscal period and year-to-date period of the immediately preceding
fiscal year and (b) the projections for such fiscal period and year-to-date
period delivered pursuant to Section 5.5(b) or Section 9.12, as applicable, and
shall be accompanied by an analysis and discussion of results (including a
summary, discussion and analysis of all variances from the relevant budget)
prepared by senior management of Loan Parties with respect thereto, satisfactory
to Agent. The financial statements shall be accompanied by a Compliance
Certificate signed by a Responsible Officer of Administrative Borrower, which
shall state that, based on an examination sufficient to permit such Responsible
Officer to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Loan Parties with respect to the events giving risk to such Default or Event of
Default and, such Compliance Certificate shall have appended thereto
calculations which set forth Loan Parties’ compliance with the requirements or
restrictions imposed by Section 7.6.

9.10 Notices re Equity Holders; the Term Loan Documents.

Furnish promptly to Agent (a) with copies of such financial statements, reports
and returns as each Loan Party and their Subsidiaries shall send to its equity
holders and (b) copies of all notices or reports sent or received by any Loan
Party or any Subsidiary in connection with, along with all amendments,
modifications and new documents with respect to the Term Loan Documents.

 

105

--------------------------------------------------------------------------------

9.11 Additional Information.

Furnish promptly to Agent or any requesting Lender with such additional
information as Agent or such Lender shall reasonably request in order to enable
Agent or such Lender to determine whether Loan Parties are in compliance with
the terms, covenants, provisions and conditions of this Agreement and the Other
Documents.

9.12 Projected Operating Budget.

Furnish Agent, no later than twenty (20) days prior to the beginning of each
Loan Party’s fiscal years, commencing with Loan Party’s fiscal year ending
December 31, 2013, a month by month projected operating budget and cash flow of
Loan Parties and their Subsidiaries on a consolidated basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by a Responsible Officer of Administrative Borrower to the
effect that such projections have been prepared in good faith on the basis of
sound financial planning practice consistent with past budgets and financial
statements.

9.13 Variances From Operating Budget.

Furnish Agent and each Lender, concurrently with the delivery of the financial
statements referred to in Section 9.7 and Section 9.9, or more frequently if
requested by Agent, a written report summarizing all material variances from
budgets submitted by Loan Parties pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.

9.14 Notice of Governmental Body Items.

Furnish Agent with prompt (and, in any event, not more than five (5) Business
Days) notice of (a) any lapse or other termination of any Consent issued to any
Loan Party or any Subsidiary of any Loan Party by any Governmental Body or any
other Person that is material to the operation of any Loan Party’s or such
Subsidiaries’ business, (b) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (c) copies of any periodic or
special reports filed by any Loan Party or any Subsidiary of any Loan Party with
any Governmental Body or Person, if such reports indicate any material change in
the business, operations, affairs or condition of any Loan Party or any such
Subsidiary, or if copies thereof are requested by Agent or any Lender,
(d) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Loan Party or any
Subsidiary of any Loan Party and (e) any federal, state, local or other income
tax return of any Loan Party or Subsidiary that has been filed becoming the
subject of an audit.

 

106

--------------------------------------------------------------------------------

9.15 ERISA Notices and Requests.

Furnish Agent with immediate written notice in the event that (a) any Loan
Party, any Subsidiary of any Loan Party or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Loan Party, such Subsidiary of any Loan Party or member of the
Controlled Group has taken, is taking, or proposes to take with respect thereto
and, when known, any action taken or threatened by the IRS, Department of Labor
or PBGC with respect thereto, (b) any Loan Party, any Subsidiary of any Loan
Party or any member of the Controlled Group knows or has reason to know that a
prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the
Code) has occurred, together with a written statement describing such
transaction and the action which such Loan Party, such Subsidiary of any Loan
Party or any member of the Controlled Group has taken, is taking or proposes to
take with respect thereto, (c) a funding waiver request has been filed with
respect to any Title IV Plan together with all communications received by any
Loan Party, any Subsidiary of any Loan Party or any member of the Controlled
Group with respect to such request, (d) any increase in the benefits of any
existing Title IV Plan or the establishment of any new Title IV Plan or the
commencement of contributions to any Title IV Plan to which any Loan Party, any
Subsidiary of any Loan Party or any member of the Controlled Group was not
previously contributing shall occur, (e) any Loan Party, any Subsidiary of any
Loan Party or any member of the Controlled Group shall receive from the PBGC a
notice of intention to terminate a Title IV Plan or to have a trustee appointed
to administer a Title IV Plan, together with copies of each such notice, (f) any
Loan Party, any Subsidiary of any Loan Party or any member of the Controlled
Group shall receive any favorable or unfavorable determination letter from the
IRS regarding the qualification of a Title IV Plan, together with copies of each
such letter; (g) any Loan Party, any Subsidiary of any Loan Party or any member
of the Controlled Group shall receive a notice regarding the imposition of
withdrawal liability, together with copies of each such notice; (h) any Loan
Party, any Subsidiary of any Loan Party or any member of the Controlled Group
shall fail to make a required installment or any other required payment under
Section 412 of the Code on or before the due date for such installment or
payment; (i) any Loan Party, any Subsidiary of any Loan Party or any member of
the Controlled Group knows that a (i) Multiemployer Plan has been terminated,
(ii) the administrator or plan sponsor of a Multiemployer Plan intends to
terminate a Multiemployer Plan, or (iii) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate a Multiemployer
Plan.

9.16 Notice of Change in Management, Etc.

Furnish Agent with prompt (and, in any event, not more than five (5) Business
Days) notice of any person becoming after the date hereof an officer, director
or member of the senior management of any Loan Party.

9.17 Additional Documents.

Execute and deliver to Agent, upon request, such documents and agreements as
Agent may, from time to time, request in its Permitted Discretion from any Loan
Party to carry out the purposes, terms or conditions of this Agreement and the
Other Documents.

10. EVENTS OF DEFAULT.

The occurrence of any one or more of the following events shall constitute an
“Event of Default”:

10.1 Failure by any Loan Party to pay (a) the principal or interest payment when
due and payable, and (b) any other Obligations within three (3) days of when
such Obligations are due and payable, whether at maturity or by reason of
acceleration pursuant to the terms of this Agreement or any Other Document;

 

107

--------------------------------------------------------------------------------

10.2 Failure by Loan Parties to perform, keep or observe:

(a) any provision of Sections 4.9, 4.10, 4.14(h), 7, 9.2(a), 9.2(b), 9.2(c),
9.5(a), 9.7 or 9.9;

(b) any provision of Sections 4.2, 9.2 (other than Sections specified in the
foregoing clause (a)), 9.4, 9.5, 9.12 or 9.13, which is not cured within five
(5) days after the date thereof; provided, that, such five (5) day period shall
not apply in the case of any failure to observe any such provision which is not
capable of being cured at all; or

(c) any other provision of this Agreement or any provision of any Other Document
(to the extent such breach is not otherwise embodied in any other provision of
this Section 10 for which a different grace or cure period is specified or which
constitute an immediate Event of Default under this Agreement or the Other
Documents), which is not cured within thirty (30) days after the date thereof;
provided, that, such thirty (30) day period shall not apply in the case of any
failure to observe any such provision which is not capable of being cured at
all;

10.3 Any representation or warranty made or deemed made by any Loan Party in
this Agreement or any Other Document or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect (without
duplication of any materiality qualifiers already set forth herein) on the date
when made or deemed to have been made;

10.4 Except for Permitted Encumbrances, issuance of a notice of Lien, levy,
assessment, injunction or attachment against a material portion of any Loan
Party’s or any Subsidiary of any Loan Party’s property which is not stayed or
bonded pending appeal or lifted within thirty (30) days;

10.5 Any judgment or judgments for payment of money are rendered or judgment
Liens for payment of money filed against one or more Loan Parties or
Subsidiaries of Loan Parties for an amount, individually or in the aggregate (to
the extent not covered by independent third party insurance where the insurer
has not denied or disputed coverage in writing), in excess of $1,000,000, which
within thirty (30) days of such rendering or filing is not either satisfied,
stayed or discharged of record; or any action is taken to enforce any Lien over
the assets of any Loan Party (or any analogous procedure or step is taken in any
jurisdiction) for an amount, individually or in the aggregate, in excess of
$1,000,000;

10.6 Any Loan Party or any Subsidiary of any Loan Party shall (a) apply for,
consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (b) admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business, (c) make a general assignment for the benefit of
creditors, (d) commence a voluntary case under any state, federal or other
bankruptcy laws (as now or hereafter in effect), (e) be adjudicated a bankrupt
or insolvent, (f) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (g) acquiesce to, or fail to have
dismissed, within forty-five (45) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (h) take any action for the
purpose of effecting any of the foregoing;

 

108

--------------------------------------------------------------------------------

10.7 Any Lien created hereunder or provided for hereby or under any Other
Document in any Collateral having a value in excess of $750,000 for any reason
ceases to be or is not a valid and perfected Lien having a first priority
interest (except with respect to the Term Loan Priority Collateral (subject to
the Term Loan Intercreditor Agreement) and except for Permitted Encumbrances and
as otherwise expressly permitted herein);

10.8 Any default under (a) any of the Term Loan Documents, which default
continues for more than the applicable cure period, if any, with respect
thereto, or (b) any other documents, instruments or agreements to which any Loan
Party, any Subsidiary or any Loan Party is a party or by which any of its
properties is bound, relating to any Indebtedness (other than the Obligations)
individually or in aggregate in excess of $500,000, which default continues for
more than the applicable cure period, if any, with respect thereto;

10.9 Any of the Obligations for any reason shall cease to be permitted debt
under the Term Loan Documents;

10.10 Any Change of Control shall occur;

10.11 Any material provision hereof or of any of the Other Documents (other than
provisions relating to the creation, validity, or perfection of a Lien) shall
for any reason cease to be valid, binding and enforceable with respect to any
Loan Party hereto or thereto in accordance with its terms, or any such Loan
Party shall challenge the enforceability hereof or thereof, or shall assert in
writing, or take any action or fail to take any action based on the assertion
that any material provision hereof or of any of the Other Documents (other than
provisions relating to the creation, validity, or perfection of a Lien) has
ceased to be or is otherwise not valid, binding or enforceable in accordance
with its terms;

10.12 The indictment by any Governmental Body of any Loan Party or any
Subsidiary of any Loan Party of which any Loan Party, such Subsidiary or Agent
receives notice, in either case, as to which there is a reasonable possibility
of an adverse determination, in the good faith determination of Agent, under any
criminal statute, or commencement or threatened commencement of criminal
proceedings against such Loan Party or such Subsidiary, pursuant to which
criminal statute or proceedings the penalties or remedies sought or available
include forfeiture of (a) any of the Collateral having a value in excess of
$500,000 or (b) any other property of any Borrower, or of Loan Parties and their
Subsidiaries taken as a whole, which is necessary or material to the conduct of
any Borrower’s business or Loan Parties and their Subsidiaries taken as a whole;

10.13 Any material portion of the Collateral shall be seized or taken by a
Governmental Body, or any Loan Party or the title and rights of any Loan Party
in and to any material portion of the Collateral shall have become the subject
matter of litigation which might, in the opinion of Agent, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;

10.14 The operations of any Loan Party’s or any Subsidiary’s facilities is
interrupted in any material respect by virtue of any determination, ruling,
decision, decree or order of any court or Governmental Authority of competent
jurisdiction, and such interruption could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect; or

 

109

--------------------------------------------------------------------------------

10.15 An event or condition specified in Section 7.16 or Section 9.15 shall
occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Loan Party or
any member of the Controlled Group shall incur a liability to a Plan or the PBGC
(or both) in excess of $500,000.

11. LENDERS’ RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.

11.1 Rights and Remedies.

(a) Upon the occurrence of (i) an Event of Default pursuant to Section 10.6, all
Obligations shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed terminated, (ii) any of
the other Events of Default and at any time thereafter, Agent may (and at the
direction of Required Lenders, shall) declare that all or any portion of the
Obligations shall be immediately due and payable and Agent or Required Lenders
shall have the right to terminate this Agreement and to terminate or limit the
obligation of Lenders to make Advances (including, without limitation, reducing
the lending formulas or amounts of Revolving Advances and Letters of Credit
available to the Borrowers), and (iii) a filing of a petition against any Loan
Party in any involuntary case under any state, federal or other bankruptcy laws,
the obligation of Lenders to make Advances hereunder shall be terminated other
than as may be required by an appropriate order of the bankruptcy court having
jurisdiction over any Loan Party. Upon the occurrence and during the continuance
of any Event of Default, Agent shall have the right to exercise any and all
other rights and remedies provided for herein, under the UCC, the PPSA and at
law or equity generally, including, without limitation, the right to foreclose
the Liens granted herein and in the Other Documents and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process. Agent may
enter any Loan Party’s premises or other premises without legal process and
without incurring liability to any Loan Party therefor, and Agent may thereupon,
or at any time thereafter, in its discretion, without notice or demand, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require Loan Parties to make the Collateral available to Agent at a
convenient place. With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Loan Parties reasonable notification of such sale or
sales, it being agreed that in all events written notice mailed to Loan Parties
at least ten (10) days prior to such sale or sales is reasonable notification.
At any public sale Agent or any Lender may bid for and become the purchaser, and
Agent, any Lender or any other purchaser at any such sale thereafter shall hold
the Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by each Loan Party. Agent may specifically
disclaim any warranties of title or the like at any sale of Collateral. In
connection with the exercise of the foregoing remedies, Agent shall have the
right to use all of each Loan Party’s Intellectual Property and other
proprietary rights (subject to any licenses and other usage rights therein
granted in favor of other Persons) which are used in connection with
(A) Inventory for the purpose of disposing of such Inventory and (B) Equipment
for the purpose of completing the manufacture of unfinished goods, in each case
without any obligation to compensate any Loan Party therefor.

 

110

--------------------------------------------------------------------------------

(b) Agent may seek the appointment of a receiver, interim receiver, manager or
receiver and manager (a “Receiver”) under the laws of Canada or any province
thereof to take possession of all or any portion of the Collateral of Canadian
Guarantor or to operate same and, to the maximum extent permitted by law, may
seek the appointment of such a Receiver without the requirement of prior notice
or a hearing. Any such Receiver shall, to the extent permitted by law, so far as
concerns responsibility for his/her acts, be deemed agent of Canadian Guarantor
and not Agent and the Lenders, and Agent and the Lenders shall not be in any way
responsible for any misconduct, negligence or non-feasance on the part of any
such Receiver, his/her servants or employees, absent the gross negligence or
willful misconduct of the Agent or the Lenders as determined pursuant to a
final, non-appealable order of a court of competent jurisdiction. Subject to the
provisions of the instrument appointing him/her, any such Receiver shall have
power to take possession of Collateral of Canadian Guarantor, to preserve
Collateral of Canadian Guarantor or its value, to carry on or concur in carrying
on all or any part of the business of such Loan Party and to sell, lease,
license or otherwise dispose of or concur in selling, leasing, licensing or
otherwise disposing of Collateral of Canadian Guarantor. To facilitate the
foregoing powers, any such Receiver may, to the exclusion of all others,
including Canadian Guarantor, enter upon, use and occupy all premises owned or
occupied by Canadian Guarantor wherein Collateral of Canadian Guarantor may be
situated, maintain Collateral of Canadian Guarantor upon such premises, borrow
money on a secured or unsecured basis and use Collateral of Canadian Guarantor
directly in carrying on Canadian Guarantor’s business or as security for loans
or advances to enable the Receiver to carry on Canadian Guarantor’s business or
otherwise, as such Receiver shall, in its discretion, determine. Except as may
be otherwise directed by Agent, all money received from time to time by such
Receiver in carrying out his/her appointment shall be received in trust for and
paid over to Agent. Every such Receiver may, in the discretion of Agent, be
vested with all or any of the rights and powers of Agent and the Lenders. Agent
may, either directly or through its nominees, exercise any or all powers and
rights given to a Receiver by virtue of the foregoing provisions of this
paragraph.

(c) Agent may execute any of its rights and remedies under this Agreement 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 rights and remedies. Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by Agent with reasonable
care absent the gross (not mere) negligence or willful misconduct of the Agent
or the Lenders as determined pursuant to a final, non-appealable order of a
court of competent jurisdiction. Agent may also from time to time, when the
Agent deems it to be necessary or desirable, appoint one or more trustees,
co-trustees, collateral co-agents, collateral subagents or attorneys-in-fact
(each, a “Subagent”) with respect to all or any part of the Collateral of
Canadian Guarantor; provided, that, no such Subagent shall be authorized to take
any action with respect to any such Collateral unless and except to the extent
expressly authorized in writing by Agent. Should any instrument in writing from
Agent be required by any Subagent so appointed by Agent to more fully or
certainly vest in and confirm to such Subagent such rights, powers, privileges
and duties, Canadian Guarantor shall execute, acknowledge and deliver any and
all such instruments promptly upon request by Agent. If any Subagent, or
successor thereto, shall die, become incapable of acting, resign or be removed,
all rights, powers, privileges and duties of such Subagent, to the extent
permitted by law, shall automatically vest in and be exercised by Agent until
the appointment of a new Subagent. Agent shall not be responsible for the
negligence or misconduct of any agent, attorney-in-fact or Subagent that it
selects in accordance with the foregoing provisions of this Section in the
absence of Agent’s gross (not mere) negligence or willful misconduct as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction (but such agent, attorney-in-fact or Subagent may be responsible
for their own gross (not mere) negligence or willful misconduct as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction).

 

111

--------------------------------------------------------------------------------

11.2 Waterfall.

(a) So long as no Waterfall Event has occurred and is continuing and except as
otherwise provided with respect to Defaulting Lenders, all principal and
interest payments, shall be apportioned ratably among the Lenders (according to
their Commitment Percentages thereof) and all payments of fees, costs and
expenses (other than fees, costs or expenses that are for Agent’s or any
Lender’s separate account) shall be apportioned ratably among the Lenders
according to their Commitment Percentages thereof (it being understood that all
costs and expenses due and owing to Agent, and all principal and interest of
Advances (including Protective Advances) made by Agent and not reimbursed by
Lenders, shall first be paid in full before any such payments are made to any of
the Lenders). Payments for the purposes of this clause (a) shall include
proceeds of Collateral received by Agent.

(b) At any time that a Waterfall Event has occurred and is continuing and except
as otherwise provided with respect to Defaulting Lenders, all payments remitted
to Agent and all proceeds of Collateral received by Agent shall be applied to
the Obligations as follows (it being understood that in the event that any
Lender, as opposed to Agent, receives such payment or proceeds from any source
other than Agent, such Lender shall remit such payment or proceeds, as
applicable to Agent for application to the Obligations as provided in this
Agreement): first, to the Obligations consisting of costs and expenses
(including attorneys’ fees and expenses) incurred by Agent in connection with
this Agreement or any Other Document and to the principal and interest of
Advances (including Protective Advances and Swingline Loan Advances) made by
Agent and not reimbursed by Lenders until paid in full; second, pro rata to
interest due to Lenders upon any of the Advances and to the Obligations
consisting of costs and expenses (including attorneys’ fees and expenses)
incurred by Lenders in connection with (and to the extent payable or
reimbursable to Lenders under) this Agreement or any Other Document according to
their respective Commitment Percentages thereof until paid in full; third, pro
rata to fees due to Agent and the Lenders in connection with this Agreement or
any Other Document according to their respective Commitment Percentages thereof
until paid in full; fourth, to the principal of the Swingline Loan Advances made
by the Swingline Lender; fifth, pro rata to the principal of the Advances made
by each Lender according to their respective Commitment Percentages thereof and,
after an Event of Default pursuant to Section 10.6 or if requested by Agent or
Required Lenders after the occurrence of any other Event of Default, on a pro
rata basis, to furnish to Agent cash collateral in an amount not less than one
hundred five (105%) percent of the aggregate undrawn amount of all Letters of
Credit, such cash collateral arrangements to be in form and substance reasonably
satisfactory to Agent until paid in full; sixth, pro rata to any other
Obligations (other than Bank Product Obligations) until paid in full; and
seventh, pro rata to any Bank Product Obligations until paid in full.

(c) If any deficiency shall arise, Loan Parties shall remain liable to Agent and
Lenders therefor. If it is determined by an authority of competent jurisdiction
that a disposition by Agent did not occur in a commercially reasonably manner,
Agent may obtain a deficiency judgment for the difference between the amount of
the Obligation and the amount that a commercially reasonable sale would have
yielded. Agent will not be considered to have offered to retain the Collateral
in satisfaction of the Obligations unless Agent has entered into a written
agreement with Loan Party to that effect.

 

112

--------------------------------------------------------------------------------

11.3 Agent’s Discretion.

Agent shall have the right in its Permitted Discretion to determine which
rights, Liens or remedies Agent may at any time pursue, relinquish, subordinate,
or modify or to take any other action with respect thereto and such
determination will not in any way modify or affect any of Agent’s or Lenders’
rights hereunder.

11.4 Setoff.

In addition to any other rights and remedies which Agent, any Lender or any
Issuer may have under applicable law, this Agreement or any Other Document, upon
the occurrence and during the continuance of an Event of Default hereunder,
Agent, such Lender, such Issuer and their Affiliates shall have a right to
setoff and apply any Loan Party’s property held by Agent, such Lender, such
Issuer or such Affiliate to reduce the Obligations, all without notice to Loan
Parties. No Lender, Issuer or Affiliate shall setoff or apply such property
without the prior written consent of Agent.

11.5 Rights and Remedies not Exclusive.

The enumeration of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any right or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.

11.6 Commercial Reasonableness.

To the extent that applicable law imposes duties on Agent or any Lender to
exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), each Loan Party acknowledges and agrees that it is not
commercially unreasonable for Agent or any Lender (a) to fail to incur expenses
reasonably deemed necessary or appropriate by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (b) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain consents of any
Governmental Body or other third party for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors, secondary obligors or other Persons obligated
on Collateral or to remove Liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against account debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
Persons, whether or not in the same business as any Loan Party, for expressions
of interest in acquiring all or any portion of the Collateral, (g) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Loan Party acknowledges that the purpose of this Section is to
provide non-exhaustive indications of what actions or omissions by Agent or any
Lender would not be commercially unreasonable in the exercise by Agent or any
Lender of remedies against the Collateral and that other actions or omissions by
Agent or any Lender shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section. Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant any
rights to any Loan Party or to impose any duties on Agent or Lenders that would
not have been granted or imposed by this Agreement or by applicable law in the
absence of this Section.

 

113

--------------------------------------------------------------------------------

12. WAIVERS AND JUDICIAL PROCEEDINGS.

12.1 Waiver of Notice.

Each Loan Party hereby waives notice of non-payment of any of the Receivables,
demand, presentment, protest and notice thereof with respect to any and all
instruments, notice of acceptance hereof, notice of loans or advances made,
credit extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein or as otherwise by law.

12.2 Delay.

No delay or omission on Agent’s or any Lender’s part in exercising any right,
remedy or option shall operate as a waiver of such or any other right, remedy or
option or of any Default or Event of Default.

12.3 Jury Waiver.

EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT
OR ANY OTHER DOCUMENT, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER DOCUMENT, OR THE TRANSACTIONS RELATED HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

114

--------------------------------------------------------------------------------

12.4 Waiver of Counterclaims.

Each Loan Party waives all rights to interpose any claims, deductions, setoffs
or counterclaims of any nature (other then compulsory counterclaims) in any
action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or thereto.

13. EFFECTIVE DATE AND TERMINATION.

13.1 Term.

This Agreement, which shall inure to the benefit of and shall be binding upon
the respective successors and permitted assigns of each Loan Party, Agent and
each Lender, shall become effective on the date hereof and shall continue in
full force and effect until the earliest of (a) April 30, 2017 (the “Original
Term”), (b) the date that is six (6) months prior to the stated maturity date
under the Term Loan Documents, (c) the acceleration of all Obligations pursuant
to the terms of this Agreement or (d) the date on which this Agreement shall be
terminated in accordance with the provisions hereof or by operation of law (the
“Termination Date”). Loan Parties may terminate this Agreement at any time upon
ninety (90) days’ prior written notice upon Payment in Full of all of the
Obligations.

13.2 Termination.

The termination of the Agreement shall not affect any Loan Party’s, Agent’s or
any Lender’s rights, or any of the Obligations arising or incurred prior to the
effective date of such termination, and each of the provisions of this Agreement
and of the Other Documents shall continue to be fully operative until all of the
Obligations have been Paid in Full. The Liens and rights granted to Agent and
Lenders hereunder and the financing statements filed hereunder shall continue in
full force and effect, notwithstanding the termination of this Agreement or the
fact that the Borrowers’ Account may from time to time be temporarily in a zero
or credit position, until all of the Obligations have been Paid in Full.
Accordingly, each Loan Party waives any rights which it may have under
Section 9-513 of the UCC to demand the filing of termination statements with
respect to the Collateral, and Agent shall not be required to send such
termination statements to each Loan Party, or to file them with any filing
office, until all of the Obligations have been Paid in Full. All
representations, warranties, covenants, waivers and agreements contained herein
and in the Other Documents shall survive termination hereof until all of the
Obligations have been Paid in Full.

14. REGARDING AGENT.

14.1 Appointment.

Each Lender hereby designates TD Bank to act as Agent for such Lender under this
Agreement and the Other Documents. Each Lender hereby irrevocably authorizes
Agent to take such action on its behalf under the provisions of this Agreement
and the Other Documents and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of Agent
by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. Agent may perform any of its duties hereunder by or through
its agents or employees. As to any matters not expressly provided for by this
Agreement (including without limitation, collection of the Notes) Agent shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding; provided, however, that, Agent shall not
be required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
agrees to do so in its Permitted Discretion and is furnished with an
indemnification satisfactory to Agent in its Permitted Discretion with respect
thereto.

 

115

--------------------------------------------------------------------------------

14.2 Nature of Duties.

Agent shall have no duties or responsibilities except those expressly set forth
in this Agreement and the Other Documents. None of Agent, any Lender, or any
Issuer nor any of their respective officers, directors, employees or agents
shall be (a) liable for any action taken or omitted by them as such under this
Agreement or any Other Document or in connection herewith or therewith, unless
caused by their gross (not mere) negligence or willful misconduct, as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction,
or (b) responsible in any manner for any recitals, statements, representations
or warranties made by any Loan Party or any officer thereof contained in this
Agreement, or in any of the Other Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any of the Other Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement, or any of the Other Documents or for any failure of Loan
Party to perform its obligations hereunder. Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any of the Other Documents, or to inspect or appraise the
properties, books or records of any Loan Party or any other Person. The duties
of Agent in respect of the Advances shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement or any Other Document a
fiduciary relationship in respect of any Secured Party, nor shall the Agent
constitute a trustee in respect of any Secured Party; and nothing in this
Agreement or any Other Document, expressed or implied, is intended to or shall
be so construed as to impose upon Agent any obligations in respect of this
Agreement or any Other Document except as expressly set forth herein or therein.

14.3 Lack of Reliance on Agent and Resignation.

(a) Independently and without reliance upon Agent, any Issuer or any other
Lender, each Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of each Loan Party and each
other Person in connection with the making and the continuance of the Advances
hereunder and the taking or not taking of any action in connection with this
Agreement or any Other Document, and (ii) its own appraisal of the
creditworthiness of each Loan Party and each other Person. Agent shall have no
duty or responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information with respect thereto, whether
coming into its possession before making of the Advances or at any time or times
thereafter except to the extent, if any, expressly required in this Agreement.
Agent shall not be responsible to any Lender for any recitals, statements,
information, representations or warranties herein or in any agreement, document,
certificate or a statement delivered in connection with or for the execution,
effectiveness, genuineness, validity, enforceability, perfection, priority,
collectability or sufficiency of this Agreement or any Other Document, the
Collateral, or of the financial condition of any Loan Party or any other Person,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Note, the Other Documents, the Collateral, or the financial condition of any
Loan Party or any other Person, or the existence of any Event of Default or any
Default.

 

116

--------------------------------------------------------------------------------

(b) Agent may resign on thirty (30) days’ written notice to each of Lenders and
Administrative Borrower and upon such resignation, the Required Lenders will
promptly designate a successor Agent with the consent to Administrative
Borrower, which consent of Administrative Borrower shall not be unreasonably
withheld, conditioned or delayed (provided, that, if an Event of Default has
occurred and is continuing, no such consent of Administrative Borrower shall be
required). If no such successor Agent is appointed at the end of such thirty
(30) day period, Agent may designate one of the Lenders as a successor Agent,
and shall give Administrative Borrower prompt notice of such appointment. If no
Lender accepts such designation, Required Lenders shall serve as the successor
Agent, and Agent shall remain entitled to so resign.

(c) Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent’s resignation as Agent, the provisions of this
Section 14, Section 16.5 and Section 16.10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.

14.4 Certain Rights of Agent.

If Agent shall request instructions from Lenders with respect to any act or
action (including failure to act) in connection with this Agreement or any Other
Document, Agent shall be entitled to refrain from such act or taking such action
unless and until Agent shall have received instructions from the Required
Lenders; and Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, Lenders shall not have any right of
action whatsoever against Agent as a result of its acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.

14.5 Reliance.

Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, statement, certificate, telex, teletype
or facsimile message, cablegram, email, order or other document or telephone
message believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person, and, with respect to all legal matters pertaining
to this Agreement and the Other Documents and its duties hereunder, upon advice
of counsel selected by it. Agent may employ agents and attorneys-in-fact and
shall not be liable for the default or misconduct of any such agents or
attorneys-in-fact selected by Agent with reasonable care.

 

117

--------------------------------------------------------------------------------

14.6 Notice of Default.

Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder or under the Other Documents, unless Agent
has received notice from a Lender or Administrative Borrower referring to this
Agreement or the Other Documents, describing such Default or Event of Default
and stating that such notice is a “notice of default”. In the event that Agent
receives such a notice, Agent shall give notice thereof to Lenders. Subject to
Section 14.1, Agent shall take such action with respect to such Default or Event
of Default (including, without limitation, the institution of the Default Rate
pursuant to Section 3.1) as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, 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 (including, without limitation, the institution of the Default Rate
pursuant to Section 3.1) as it shall deem advisable in the best interests of
Lenders.

14.7 Indemnification.

To the extent Agent and/or Issuer, as applicable, is not timely reimbursed and
indemnified by Loan Parties, each Lender promptly will reimburse and indemnify
Agent and each Issuer and each of their respective officers, directors,
Affiliates, employees, representatives and agents in proportion to its
respective Commitment Percentage from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, fees and disbursements of counsel) arising from any action,
litigation, proceeding, dispute or investigation which may be imposed on,
incurred by, or asserted against Agent or such Issuer in any litigation,
proceeding, dispute or investigation instituted or conducted by any Governmental
Body or any other Person with respect to any aspect of, or any transaction
contemplated by, or referred to in, or any matter related to, this Agreement or
the Other Documents, on in connection with performing any of its duties,
functions or activities under this Agreement or under any Other Document, or in
any way relating to or arising out of this Agreement or any Other Document
whether or not Agent or any Issuer is a party thereto, except to the extent that
any of the foregoing arises out of the gross (not mere) negligence or willful
misconduct of Agent or such Issuer, as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. Nothing contained in
this Section 14.7 shall in any manner limit, impair, waive or otherwise affect
Loan Parties’ reimbursement and indemnification Obligations at any time owing to
Agent.

14.8 Agent in its Individual Capacity.

With respect any Advances made by Agent, except as otherwise provided in this
Agreement, the Advances made by Agent shall have the same rights and powers
hereunder as any other Lender and as if it were not performing the duties as
Agent specified herein. Agent may engage in business with any Loan Party as if
it were not performing the duties specified herein, and may accept fees and
other consideration from any Loan Party for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.

14.9 Actions in Concert.

Anything in this Agreement to the contrary notwithstanding, each Lender hereby
agrees with each other Lender and Agent that (a) Agent shall have the exclusive
right to enforce and exercise all rights and remedies of Agent and Lenders
hereunder and under the Other Documents at all times following the occurrence
and during the continuance of an Event of Default, on behalf of Agent and all
Lenders, subject to the direction of Required Lenders as provided for herein,
and (b) no Lender shall take any action to protect or enforce its rights arising
out of this Agreement or the Other Documents (including exercising any rights of
setoff or compensation) without first obtaining the prior written consent of
Agent or Required Lenders, it being the intent of Lenders that any such action
to protect or enforce rights under this Agreement and the Notes shall be taken
in concert and at the direction or with the consent of Agent or Required
Lenders.

 

118

--------------------------------------------------------------------------------

14.10 Intercreditor Agreements/Subordination Agreements.

The Lenders, Issuer and any other holder of any Obligations acknowledge that the
Indebtedness under the Term Loan Documents are secured by Liens on the
Collateral and that the exercise of certain of the rights and remedies of Agent
under the Loan Documents may be subject to the provisions of the Term Loan
Intercreditor Agreement and any other subordination or intercreditor agreement
pertaining to any Subordinated Debt. Each Lender and Issuer irrevocably
(a) consents to the terms and conditions of the Term Loan Intercreditor
Agreement and any other subordination or intercreditor agreement pertaining to
any Subordinated Debt, (b) authorizes and directs Agent to execute and deliver
the Term Loan Intercreditor Agreement, any documents relating thereto and any
other subordination or intercreditor agreement pertaining to any other
Subordinated Debt, in each case, on behalf of such Lender or such Issuer and to
take all actions (and execute all documents) required (or deemed advisable) by
it in accordance with the terms of the Interecreditor Agreement and any other
subordination or intercreditor agreement pertaining to any other Subordinated
Debt, in each case, and without any further consent, authorization or other
action by such Lender or Issuer, (c) agrees that, upon the execution and
delivery thereof, such Lender and Issuer will be bound by the provisions of the
Term Loan Intercreditor Agreement and any other subordination or intercreditor
agreement pertaining to any other Subordinated Debt as if it were a signatory
thereto and will take no actions contrary to the provisions of the Term Loan
Intercreditor Agreement and any other subordination or intercreditor agreement
pertaining to any other Subordinated Debt, (d) agrees that no Lender or Issuer
shall have any right of action whatsoever against Agent as a result of any
action taken by Agent pursuant to this Section or in accordance with the terms
of the Term Loan Intercreditor Agreement and any other subordination or
intercreditor agreement pertaining to any other Subordinated Debt, and
(e) acknowledges (or is deemed to acknowledge) that a copy of the Term Loan
Intercreditor Agreement has been delivered, or made available, to such Lender
and Issuer. Each Lender hereby further irrevocably authorizes and directs Agent
to enter into such amendments, supplements or other modifications to the Term
Loan Intercreditor Agreement and any other subordination or intercreditor
agreement pertaining to any other Subordinated Debt as are approved by Agent and
the Required Lenders (except as to any amendment that expressly requires the
approval of all Lenders as set forth in Section 16.2(b)), provided, that, Agent
may execute and deliver such amendments, supplements and modifications thereto
as are contemplated by the Term Loan Intercreditor Agreement and any other
subordination or intercreditor agreement pertaining to any other Subordinated
Debt in connection with any extension, renewal, refinancing or replacement of
this Agreement or any refinancing of the Obligations, in each case, on behalf of
such Lender and Issuer and without any further consent, authorization or other
action by any Lender or Issuer. Agent shall have the benefit of each of the
provisions of Section 14 with respect to all actions taken by it pursuant to
this Section 14.10 or in accordance with the terms of the Term Loan
Intercreditor Agreement and any other subordination or intercreditor agreement
pertaining to any other Subordinated Debt to the full extent thereof.

 

119

--------------------------------------------------------------------------------

15. GUARANTEE.

15.1 Guarantee; Contribution Rights.

Each Guarantor hereby unconditionally guarantees, as a primary obligor and not
merely as a surety, jointly and severally with each other Guarantor when and as
due, whether at maturity, by acceleration, by notice of prepayment or otherwise,
the due (whether at the stated maturity, by acceleration or otherwise) and
punctual performance of all Obligations. Each payment made by any Guarantor
pursuant to this Guarantee shall be made in lawful money of the United States in
immediately available funds without offset, counterclaim or deduction of any
kind.

Anything herein this Section 15 to the contrary notwithstanding, the maximum
liability of each Guarantor this Section 15 shall in no event exceed the amount
which can be guaranteed by such Guarantor under applicable federal and state
laws relating to the insolvency of debtors (after giving effect to the right of
contribution established in the following paragraph). It being understood that
no amendments or other modifications to any of the Loan Documents need to be
made to implement the provisions of this paragraph and instead the
implementation of the provisions of this paragraph shall occur automatically.

Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid
more than its proportionate share of any payment made hereunder, such Guarantor
shall be entitled to seek and receive contribution from and against any other
Guarantor hereunder which has not paid its proportionate share of such payment.
Each Guarantor’s right of contribution shall be subject to the terms and
conditions of Section 15.9(d). The provisions of this paragraph shall in no
respect limit the obligations and liabilities of any Guarantor to Agent and
Lenders, and each Guarantor shall remain liable to Agent and Lenders for the
full amount guaranteed by such Guarantor hereunder.

15.2 Waivers.

Each Guarantor hereby absolutely, unconditionally and irrevocably waives
(a) promptness, diligence, notice of acceptance, notice of presentment of
payment and any other notice hereunder, (b) demand of payment, protest, notice
of dishonor or nonpayment, notice of the present and future amount of the
Obligations and any other notice with respect to the Obligations, (c) any
requirement that Agent or any Lender protect, secure, perfect or insure any Lien
or any property subject thereto or exhaust any right or take any action against
any other Loan Party, or any Person or any Collateral, (d) any other action,
event or precondition to the enforcement hereof or the performance by each such
Guarantor of the Obligations, (e) any defense arising by any lack of capacity or
authority or any other defense of any Loan Party or any notice, demand or
defense by reason of cessation from any cause of Obligations other than Payment
in Full of all of the Obligations, (f) any defense that any other guarantee or
security was or was to be obtained by Agent or any Lender, and (g) any other
defense.

15.3 No Defense.

No invalidity, irregularity, voidableness, voidness or unenforceability of this
Agreement or any Other Document or any other agreement or instrument relating
thereto, or of all or any part of the Obligations or of any collateral security
therefor shall affect, impair or be a defense hereunder.

 

120

--------------------------------------------------------------------------------

15.4 Guarantee of Payment.

The Guarantee hereunder is one of payment and performance, not collection, and
the obligations of each Guarantor hereunder are independent of the Obligations
of the other Loan Parties, and a separate action or actions may be brought and
prosecuted against any Guarantor to enforce the terms and conditions of this
Section 15, irrespective of whether any action is brought against any other Loan
Party or other Persons or whether any other Loan Party or other Persons are
joined in any such action or actions. Each Guarantor waives any right to require
that any resort be had by Agent or any Lender to any security held for payment
of the Obligations or to any balance of any deposit account or credit on the
books of Agent or any Lender in favor of any Loan Party or any other Person. No
election to proceed in one form of action or proceedings, or against any Person,
or on any Obligations, shall constitute a waiver of Agent’s right to proceed in
any other form of action or proceeding or against any other Person unless Agent
has expressed any such right in writing. Without limiting the generality of the
foregoing, no action or proceeding by Agent against any Loan Party under any
document evidencing or securing Indebtedness of any Loan Party to Agent shall
diminish the liability of any Guarantor hereunder, except to the extent Agent
receives actual payment on account of Obligations by such action or proceeding,
notwithstanding the effect of any such election, action or proceeding upon the
right of subrogation of any Guarantor in respect of any Loan Party and/or
otherwise.

15.5 Liabilities Absolute.

The liability of each Guarantor hereunder shall be absolute, unlimited and
unconditional and shall not be subject to any reduction, limitation, impairment,
discharge or termination for any reason, including, without limitation, any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any claim, defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of any
Obligation or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor shall not be discharged or impaired, released,
limited or otherwise affected by:

(a) any change in the manner, place or terms of payment or performance, and/or
any change or extension of the time of payment or performance of, release,
renewal or alteration of, or any new agreements relating to any Obligation, any
security therefor, or any liability incurred directly or indirectly in respect
thereof, or any rescission of, or amendment, waiver or other modification of, or
any consent to departure from, this Agreement or any Other Document, including
any increase in the Obligations resulting from the extension of additional
credit to the Borrowers or otherwise;

(b) any sale, exchange, release, surrender, loss, abandonment, realization upon
any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or any of the Obligations, and/or any offset there
against, or failure to perfect, or continue the perfection of, any Lien in any
such property, or delay in the perfection of any such Lien, or any amendment or
waiver of or consent to departure from any other guarantee for all or any of the
Obligations;

(c) the failure of Agent or any Lender to assert any claim or demand or to
enforce any right or remedy against the Borrowers or any other Loan Party or any
other Person under the provisions of this Agreement or any Other Document or any
other document or instrument executed and delivered in connection herewith or
therewith;

 

121

--------------------------------------------------------------------------------

(d) any settlement or compromise of any Obligation, any security therefor or any
liability (including any of those hereunder) incurred directly or indirectly in
respect thereof or hereof, and any subordination of the payment of all or any
part thereof to the payment of any obligation (whether due or not) of any Loan
Party to creditors of any Loan Party other than any other Loan Party;

(e) any manner of application of Collateral, or proceeds thereof, to all or any
of the Obligations, or any manner of sale or other disposition of any Collateral
for all or any of the Obligations or any other assets of any Loan Party; and

(f) any other agreements or circumstance of any nature whatsoever that may or
might in any manner or to any extent vary the risk of any Guarantor, or that
might otherwise at law or in equity constitute a defense available to, or a
discharge of, the Guarantee hereunder and/or the obligations of any Guarantor,
or a defense to, or discharge of, any Loan Party or any other Person or party
hereto or the Obligations or otherwise with respect to the Advances, Letters of
Credit or other financial accommodations to the Borrowers pursuant to this
Agreement and/or the Other Documents or otherwise.

15.6 Waiver of Notice.

Except as otherwise contemplated hereunder, Agent shall have the right to do any
of the above without notice to or the consent of any Guarantor and each
Guarantor expressly waives any right to notice of, consent to, knowledge of and
participation in any agreements relating to any of the above or any other
present or future event relating to Obligations whether under this Agreement or
otherwise or any right to challenge or question any of the above and waives any
defenses of such Guarantor which might arise as a result of such actions.

15.7 Agent’s Discretion.

Agent may at any time and from time to time (whether prior to or after the
revocation or termination of this Agreement) without the consent of, or notice
to, any Guarantor, and without incurring responsibility to any Guarantor or
impairing or releasing the Obligations, apply any sums by whomsoever paid or
howsoever realized to any Obligations regardless of what Obligations remain
unpaid.

15.8 Reinstatement.

The Guarantee provisions herein contained shall continue to be effective or be
reinstated, as the case may be, if claim is ever made upon Agent or any Lender
for repayment or recovery of any amount or amounts received by Agent or such
Lender in payment or on account of any of the Obligations and Agent or such
Lender repays all or part of said amount for any reason whatsoever, including,
without limitation, by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over Agent or such Lender or the
respective property of each, or any settlement or compromise of any claim
effected by Agent or such Lender with any such claimant (including any Loan
Party); and in such event each Guarantor hereby agrees that any such judgment,
decree, order, settlement or compromise or other circumstances shall be binding
upon such Guarantor, notwithstanding any revocation hereof or the cancellation
of any note or other instrument evidencing any Obligation, and each Guarantor
shall be and remain liable to Agent and/or Lenders for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by Agent or such Lenders.

 

122

--------------------------------------------------------------------------------

15.9 No Marshalling, Etc.

(a) Agent shall not be required to marshal any assets in favor of any Guarantor,
or against or in payment of Obligations.

(b) No Guarantor shall be entitled to claim against any present or future
security held by Agent or any Lender from any Person for Obligations in priority
to or equally with any claim of Agent or any Lender, or assert any claim for any
liability of any Loan Party to any Guarantor in priority to or equally with
claims of Agent or any Lender for Obligations, and no Guarantor shall be
entitled to compete with Agent or any Lender with respect to, or to advance any
equal or prior claim to any security held by Agent or any Lender for
Obligations.

(c) If any Loan Party makes any payment to Agent or any Lender, which payment is
wholly or partly subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to any Person under any federal
or provincial or other statute or at common law or under equitable principles,
then to the extent of such payment, the Obligation intended to be paid shall be
revived and continued in full force and effect as if the payment had not been
made, and the resulting revived Obligation shall continue to be guaranteed,
uninterrupted, by each Guarantor hereunder.

(d) All present and future monies payable by any Loan Party or any other
Guarantor to any Guarantor, whether arising out of a right of subrogation,
contribution or otherwise, are assigned to Agent for its benefit and for the
ratable benefit of Lenders as security for such Guarantor’s liability to Agent
and Lenders hereunder and are postponed and subordinated to Agent’s and Lenders’
prior right to Payment in Full of all of the Obligations. Except to the extent
prohibited otherwise by this Agreement, all monies received by any Guarantor
from any Loan Party shall be held by such Guarantor as agent and trustee for
Agent and Lenders. This assignment, postponement and subordination shall only
terminate when all of the Obligations are Paid in Full.

(e) Each Loan Party acknowledges this assignment, postponement and subordination
and, except as otherwise set forth herein, agrees to make no payments to any
Guarantor without the prior written consent of Agent. Each Loan Party agrees to
give full effect to the provisions hereof.

 

123

--------------------------------------------------------------------------------

15.10 Action Upon Event of Default.

Upon the occurrence and during the continuance of any Event of Default, Agent
may and upon written request of the Required Lenders shall, without notice to or
demand upon any Loan Party, any Guarantor or any other Person, declare all or
any portion of the Obligations of such Guarantor hereunder immediately due and
payable, and shall be entitled to enforce the Obligations of each Guarantor.
Upon such declaration by Agent, Agent, Lenders and any of their Affiliates are
hereby authorized at any time and from time to time to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other Indebtedness at any time owing by Agent or Lenders to or for
the credit or the account of any Guarantor against any and all of the
Obligations of each Guarantor now or hereafter existing hereunder in accordance
with the terms of this Agreement, whether or not Agent or Lenders shall have
made any demand hereunder against any other Loan Party and although such
Obligations may be contingent and unmatured. The rights of Agent and Lenders
hereunder are in addition to other rights and remedies (including other rights
of set-off) which Agent and Lenders may have. Upon such declaration by Agent,
with respect to any claims (other than those claims referred to in the
immediately preceding paragraph) of any Guarantor against any Loan Party (the
“Claims”), Agent shall have the full right on the part of Agent in its own name
or in the name of such Guarantor to collect and enforce such Claims by legal
action, proof of debt in bankruptcy or other liquidation proceedings, vote in
any proceeding for the arrangement of debts at any time proposed, or otherwise,
Agent and each of its officers being hereby irrevocably constituted
attorneys-in-fact for each Guarantor for the purpose of such enforcement and for
the purpose of endorsing in the name of each Guarantor any instrument for the
payment of money. Each Guarantor will receive as trustee for Agent and will pay
to Agent forthwith upon receipt thereof any amounts which such Guarantor may
receive from any Loan Party on account of the Claims. Each Guarantor agrees that
at no time hereafter will any of the Claims be represented by any notes or other
negotiable instruments or writings, except and in such event they shall either
be made payable to Agent, or if payable to any Guarantor, shall forthwith be
endorsed by such Guarantor to Agent. Each Guarantor agrees that no payment on
account of the Claims or any Lien therein shall be created, received, accepted
or retained during the continuance of any Event of Default nor shall any
financing statement be filed with respect thereto by any Guarantor.

15.11 Statute of Limitations.

Any acknowledgment or new promise, whether by payment of principal or interest
or otherwise and whether by any Loan Party or others (including any Lenders)
with respect to any of the Obligations shall, if the statute of limitations in
favor of any Guarantor against Agent or Lenders shall have commenced to run,
toll the running of such statute of limitations and, if the period of such
statute of limitations shall have expired, prevent the operation of such statute
of limitations.

15.12 Interest.

All amounts due, owing and unpaid from time to time by any Guarantor hereunder
shall bear interest at the interest rate per annum then chargeable with respect
to Base Rate Loans constituting Revolving Advances.

15.13 Guarantor’s Investigation.

Each Guarantor acknowledges receipt of a copy of each of this Agreement and the
Other Documents. Each Guarantor has made an independent investigation of Loan
Parties and of the financial condition of Loan Parties. Neither Agent nor any
Lender has made, Agent and Lenders do not hereby make, any representations or
warranties as to the income, expense, operation, finances or any other matter or
thing affecting any Loan Party nor has Agent or any Lender made any
representations or warranties as to the amount or nature of the Obligations of
any Loan Party to which this Section 15 applies as specifically herein set
forth, nor has Agent or any Lender or any officer, agent or employee of Agent or
any Lender or any representative thereof, made any other oral representations,
agreements or commitments of any kind or nature, and each Guarantor hereby
expressly acknowledges that no such representations or warranties have been made
and such Guarantor expressly disclaims reliance on any such representations or
warranties.

 

124

--------------------------------------------------------------------------------

15.14 Termination of Guarantee.

Subject to reinstatement as provided in Section 15.8, the provisions of this
Section 15 shall remain in effect until all of Obligations have been Paid in
Full.

15.15 Extension of Guarantee.

Without prejudice to the generality of this Section 15, each Guarantor expressly
confirms that it intends that the guarantee provided in this Section 15 shall
extend from time to time to any (however fundamental) variation, increase,
extension or addition of or to any of the provisions of this Agreement or any
Other Document and/or any facility or amount made available hereunder or
thereunder.

15.16 Applicability to Borrowers.

Without limiting any of any Borrower’s obligations under this Agreement or any
Other Document, each Borrower shall also be considered a Guarantor for purposes
of this Section 15 to the extent such Borrower is not directly and primarily
obligated with respect to the Obligations.

16. MISCELLANEOUS.

16.1 Governing Law; Consent to Jurisdiction; Etc.

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York applied to contracts to be performed wholly within the
State of New York, without regard to conflicts of laws principles; provided,
that, the exercise of any rights and remedies with respect to the Collateral of
Canadian Guarantor shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the federal laws of Canada
applicable thereto. Any judicial proceeding brought by or against any Loan Party
with respect to any of the Obligations, this Agreement or any Other Document may
be brought in any court of competent jurisdiction located in the County and
State of New York, United States of America, and, by execution and delivery of
this Agreement, each Loan Party accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Each Loan Party hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by registered mail (return receipt requested)
directed to Administrative Borrower (on behalf of the Borrowers) at its address
set forth in Section 16.6 and service so made shall be deemed completed five
(5) days after the same shall have been so deposited in the mails of the United
States of America, or, at Agent’s and/or any Lender’s option, by service upon
Administrative Borrower (on behalf of the Borrowers) which each Loan Party
irrevocably appoints as such Loan Party’s agent for the purpose of accepting
service within the State of New York. Nothing herein shall affect the right to
serve process in any manner permitted by law or shall limit the right of Agent
or any Lender to bring proceedings against any Loan Party in the courts of any
other jurisdiction. Each Loan Party waives any objection to jurisdiction and
venue of any action instituted hereunder and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum non conveniens. Any
judicial proceeding by any Loan Party against Agent or any Lender involving,
directly or indirectly, any matter or claim in any way arising out of, related
to or connected with this Agreement or any Other Document (except to the extent,
if any, expressly provided otherwise in any Other Document), shall be brought
only in a federal or state court located in the City of New York, State of New
York.

 

125

--------------------------------------------------------------------------------

16.2 Entire Understanding; Amendments; Lender Replacements; Overadvances.

(a) This Agreement and the Other Documents executed concurrently herewith or on
or after the Closing Date contain the entire understanding between each Loan
Party, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof or thereof. Any
promises, representations, warranties or guarantees of Agent or any Lender to
any Loan Party not herein contained or not contained in any Other Document
executed on or after the Closing Date shall have no force and effect. Neither
this Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing
pursuant to clause (b) below. Any Default or Event of Default that occurs
hereunder shall continue unless and until expressly waived in writing pursuant
to clause (b) below. Each Loan Party acknowledges that it has been advised by
counsel in connection with the execution of this Agreement and Other Documents
and is not relying upon oral representations or statements inconsistent with the
terms and provisions of this Agreement.

(b) Agent and the Required Lenders (or Agent with the consent in writing of the
Required Lenders), and the Borrowers may, subject to the provisions of this
Section 16.2(b), from time to time enter into written amendments and
supplemental agreements to this Agreement or the Other Documents executed by the
Borrowers, for the purpose of adding or deleting any provisions or otherwise
changing, varying or waiving in any manner the rights of Lenders, Agent or Loan
Parties hereunder or thereunder or the conditions, provisions or terms hereof or
thereof or waiving any Default or Event of Default hereunder or thereunder, but
only to the extent specified in such written agreements; provided, however,
that, no such amendment or supplemental agreement shall:

(i) increase the Commitment of any Lender without the consent of Agent and the
affected Lender;

(ii) increase the Maximum Credit without the consent of Agent and all Lenders;

(iii) extend the Term or the final scheduled maturity of any Advance or the due
date for any amount payable hereunder, or decrease the rate of interest (other
than the waiver of any default rate), reduce the principal amount of any
outstanding Advances, or reduce any scheduled (as opposed to mandatory
prepayment) principal payment or fee payable by the Borrowers to Agent or a
Lender pursuant to this Agreement or any Other Document, without the consent of
Agent and each such Lender directly affected thereby;

(iv) alter the definition of the term Required Lenders or alter, amend or modify
this Section 16.2(b) without the consent of Agent and all Lenders;

 

126

--------------------------------------------------------------------------------

(v) release any Collateral during any calendar year (other than in accordance
with the provisions of this Agreement, including any Disposition thereof
permitted by this Agreement) having an aggregate value in excess of $5,000,000
without the consent of Agent and all Lenders;

(vi) change the rights and duties of Agent without the consent of Agent; or

(vii) increase the Advance Rates above the Advance Rates in effect on the
Closing Date without the consent of Agent and all Lenders;

(viii) alter the definition of the terms Borrowing Base, Eligible Accounts or
Eligible Equipment in any manner which would have the effect of increasing
availability of Advances, without the consent of Agent and all Lenders;

(ix) release of any Loan Party from its Obligations hereunder, except in
accordance with the terms of this Agreement;

(x) subordinate the priority of the Liens in the Collateral in favor of Agent,
for the benefit of Secured Parties, to any Liens therein held by any other
Person, without the consent of Agent and all Lenders; or

(xi) alter the priority of allocation of payments and proceeds of Collateral
provided for in Section 11.2(b) without the consent of Agent and all Lenders.

Any such amendment or supplemental agreement shall apply equally to each Lender
and shall be binding upon Loan Parties, Lenders and Agent and all future holders
of the Obligations. In the case of any waiver of a Default or Event of Default
pursuant to a waiver provided in accordance with the above provisions of this
Section 16.2(b), Loan Parties, Agent and Lenders shall be restored to their
former positions and rights, and any Default or Event of Default waived shall be
deemed to be cured and not continuing, but no waiver of a specific Default or
Event of Default shall extend to any other Default or Event of Default or any
subsequent Default or Event of Default (whether or not the subsequent Default or
Event of Default is the same as the Default or Event of Default which was
waived), or impair any right consequent thereon.

(c) In the event that (i) Agent requests the consent of a Lender pursuant to
this Section 16.2 and such consent is denied, (ii) a Lender is a Defaulting
Lender, (iii) a Lender is an Impacted Lender or (iv) a Lender is a Prior
Defaulting/Impacted Lender, then, in each case, Agent or Administrative Borrower
(on behalf of Borrowers) may, at its option, require such Lender to assign its
Advances and Commitments to Agent or to another Lender or to any other Person (a
“Designated Lender”) designated by Agent or Administrative Borrower (on behalf
of Borrowers), for a price equal to the then outstanding principal amount of all
Advances held by such Lender plus accrued and unpaid interest and fees owing to
such Lender, which interest and fees shall be paid when, and if, collected from
the Borrowers. In the event Agent or Administrative Borrower (on behalf of
Borrowers) elects to require any Lender to assign such Lender’s Advances and
Commitments to Agent or to a Designated Lender, Agent or Administrative Borrower
(on behalf of Borrowers)will so notify such Lender in writing within one hundred
and eighty (180) days following such Lender’s denial (or with respect to clauses
(ii), (iii) or (iv)) above, during the time that such Lender is a Defaulting
Lender, an Impacted Lender or a Prior Defaulting/Impacted Lender, as applicable,
or within one hundred and eighty (180) days thereafter), and such Lender will
assign its interest to Agent or the Designated Lender no later than five
(5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender (or Agent on behalf of such Lender if such
Lender refuses to execute such Commitment Transfer Supplement within such time
period; and each Lender hereby irrevocable authorizes Agent to so execute such a
Commitment Transfer Supplement on its behalf), Agent or the Designated Lender,
as appropriate, and Agent (if Agent is not the Designated Lender).

 

127

--------------------------------------------------------------------------------

(d) Notwithstanding the foregoing (and in addition to the Agent’s rights to make
Protective Advances hereunder), Agent may at its discretion and without the
consent of the Required Lenders, voluntarily permit the outstanding Revolving
Advances and Letters of Credit at any time to exceed the Borrowing Base (but not
to exceed the Maximum Credit) by up to ten (10%) percent of the Borrowing Base
for up to thirty (30) consecutive Business Days; provided, that, any such
overadvance shall still constitute an Event of Default as of the first (1st) day
of such overadvance regardless of the reason for or amount of such overadvance.
For purposes of the preceding sentence, the discretion granted to Agent
hereunder shall not preclude involuntary overadvances that may result from time
to time due to the fact that the Borrowing Base was unintentionally exceeded for
any reason, including, but not limited to, Collateral previously deemed to be
eligible for inclusion in the Borrowing Base, becomes ineligible, collections of
Receivables applied to reduce outstanding Advances are thereafter returned for
insufficient funds or overadvances are made to protect or preserve the
Collateral; provided, that, any such overadvance shall still constitute an Event
of Default as of the first (1st) day of such overadvance regardless of the
reason for or amount of such overadvance. In the event Agent involuntarily
permits the outstanding Revolving Advances and Letters of Credit to exceed the
Borrowing Base by more than ten (10%) percent of the Borrowing Base, Borrowers
shall decrease such excess in as expeditious a manner as is practicable under
the circumstances and not inconsistent with the reason for such excess;
provided, that, any Event of Default resulting therefrom shall remain in
existence. Revolving Advances made or Letters of Credit issued after Agent has
determined the existence of involuntary overadvances shall be deemed to be
involuntary overadvances and shall be decreased in accordance with the preceding
sentence, and in all events shall constitute an Event of Default.

16.3 Successors and Assigns; Participations; New Lenders; Taxes; Syndication.

(a) This Agreement and the Other Documents shall be binding upon and inure to
the benefit of each Loan Party, Agent, each Lender, all future holders of the
Obligations and their respective successors and assigns; except, that, no Loan
Party may assign or transfer any of its rights or obligations under this
Agreement or any Other Document (other than pursuant to a merger or
consolidation of Loan Parties permitted hereunder) without the prior written
consent of Agent and each Lender.

 

128

--------------------------------------------------------------------------------

(b) Each Loan Party acknowledges that one or more Lenders may at any time and
from time to time sell participating interests in the Advances to other Persons
with the prior written consent of Agent, which consent of Agent shall not be
unreasonably withheld, conditioned or delayed (each such transferee or purchaser
of a participating interest, a “Transferee”); provided, that, no participating
interest may be sold to a Person organized under the laws of a jurisdiction
outside the United States that cannot make the certifications required by
Section 16.3(f) or meet the requirements required by Section 16.3(h). Each
Transferee may exercise all rights of payment with respect to the portion of
such Advances held by it or other Obligations payable hereunder as fully as if
such Transferee were the direct holder thereof; provided, that, Loan Parties
shall not be required to pay to any Transferee more than the amount which it
would have been required to pay to the Lender which granted an interest in its
Advances or other Obligations payable hereunder to such Transferee, had such
Lender retained such interest in the Advances hereunder or other Obligations
payable hereunder, and in no event shall Loan Parties be required to pay any
such amount arising from the same circumstances and with respect to the same
Advances or other Obligations payable hereunder to both such Lender and such
Transferee. Transferee’s rights under Section 16.2 shall be limited to those
items in Section 16.2(b) which require consent of each Lender or each directly
affected Lender, as applicable. Neither Agent, any Lender (other than the Lender
selling a participation) nor any Loan Party shall have any duty to any
Transferee (except as specifically provided in this Section 16.3(b)) and may
continue to deal solely with the Lender selling a participation as if no such
sale had occurred.

(c) Any Lender may sell, assign or transfer all or any part of its Advances and
Commitments (and related rights and obligations under this Agreement and the
Other Documents) to Qualified Assignees (each a “Purchasing Lender”), in minimum
amounts of not less than $5,000,000 (except such minimum amount shall not apply
to (i) a sale, assignment or transfer by any Lender to an Affiliate of such
Lender or to a group of new Lenders, each of which is an Affiliate of each other
to the extent that the aggregate amount to be assigned to all such new Lenders
is at least $5,000,000 or (ii) a sale, assignment or transfer by any Lender of
all of its Commitments and all of its Advances), pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and
Agent and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (A) Purchasing Lender
thereunder shall be a party to this Agreement and the Other Documents as a
Lender and, to the extent transferred pursuant to such Commitment Transfer
Supplement, have Commitments and outstanding Advances, and (B) the transferor
Lender thereunder shall, to the extent its Advances and Commitments have been
transferred pursuant to such Commitment Transfer Supplement, be released from
its obligations under this Agreement and the Other Documents. Such Commitment
Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing Lender
as a Lender and the resulting adjustment of the Commitment Percentages arising
from the purchase by such Purchasing Lender of all or a portion of the Advances
and Commitments of such transferor Lender under this Agreement and the Other
Documents. Loan Parties hereby consent to the addition of such Purchasing Lender
as a Lender and the resulting adjustment of the Commitment Percentages arising
from the purchase by such Purchasing Lender of all or a portion of the Advances
and Commitments of such transferor Lender. Loan Parties shall execute and
deliver such further documents and do such further acts and things in order to
effectuate the foregoing. Notwithstanding the foregoing, any Lender may assign
all or any portion of the Advances or Notes held by it to any Federal Reserve
Bank or the United States Treasury as collateral security pursuant to Regulation
A of the Board of Governors of the Federal Reserve System and any Operating
Circular issued by such Federal Reserve Bank; provided, that, any payment in
respect of such assigned Advances or Notes made by the Borrowers to or for the
account of the assigning or pledging Lender in accordance with the terms of this
Agreement shall satisfy the Borrowers’ obligations hereunder in respect to such
assigned Advances or Notes to the extent of such payment. No such assignment
described in the immediately preceding sentence shall release the assigning
Lender from its obligations hereunder.

 

129

--------------------------------------------------------------------------------

(d) Agent, acting solely in this situation as a non-fiduciary agent of the
Borrower, shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the “Register”) for the recordation
of the names and addresses of the Advances owing to each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Loan Parties, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Advance recorded therein
for the purposes of this Agreement. The Register shall be available for
inspection by Loan Parties or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$3,500 payable by the applicable Purchasing Lender upon the effective date of
each transfer or assignment to such Purchasing Lender.

(e) Loan Parties authorize each Lender, the Arranger and the Syndication Agent
to disclose to any Transferee or Purchasing Lender and any prospective
Transferee or Purchasing Lender (who agrees in writing or through electronic
media to treat the information as confidential and use it solely in connection
with a proposed transfer under this Section 16.3) any and all financial and
other information in such Lender’s possession concerning Loan Parties which has
been delivered to Agent or such Lender by or on behalf of Loan Parties pursuant
to this Agreement or in connection with Agent’s or such Lender’s credit
evaluation of Loan Parties.

(f) Each Lender or Participant organized under the laws of a jurisdiction
outside the United States, and from time to time thereafter if either requested
by the Borrowers (or Administrative Borrower on behalf of the Borrowers) or
Agent or upon the obsolescence or expiration of any previously delivered form,
shall provide Agent and Administrative Borrower (on behalf of the Borrowers)
with (i) two (2) original executed copies of a correct and completed IRS Form
W-8BEN, W-8ECI, or W-8IMY (with appropriate attachments), as appropriate, or any
successor or other form prescribed by the IRS, certifying that payments to such
Lender or Participant are not subject to United States federal withholding tax
under the Code because such payment is either effectively connected with the
conduct by such Lender or Participant of a trade or business in the United
States or totally exempt from United States federal withholding tax by reason of
the application of an income tax treaty to which the United States is a party or
such Lender is otherwise exempt, (ii) or to the extent permitted by law, each
such Lender or Participant may provide Administrative Borrower (on behalf of the
Borrowers) and Agent with two original executed copies of IRS Form W-8BEN, or
any successor form prescribed by the IRS, certifying that such Lender is exempt
from United States federal withholding tax pursuant to Section 871(h) or 881(c)
of the Code, together with an annual certificate stating that such Lender or
Participant is not a “person” described in Section 871(h)(3) or 881(c)(3) of the
Code and (iii) a duly completed and executed IRS Form W-8BEN or W 9, as
appropriate, or any successor or other form establishing an exemption from
United States federal backup withholding tax. Each such Lender further agrees to
complete and deliver to Administrative Borrower (on behalf of the Borrowers),
upon its request, such other forms or other documentation as may be appropriate
to minimize any withholding tax on payments pursuant to this Agreement under the
laws of any other jurisdiction unless such completion and delivery may in any
event be disadvantageous for such Lender. For purposes of this subsection (f),
the term “United States” shall have the meaning specified in Section 7701 of the
Code. Each Lender that is a United States person, shall provide the Agent and
Administrative Borrower with two original executed IRS Form W-9s, certifying as
to status for United States federal back up withholding tax purposes.

 

130

--------------------------------------------------------------------------------

(g) At the request of Agent from time to time both before and after the Closing
Date, Loan Parties will assist Agent in the syndication of the credit facility
provided pursuant to this Agreement and the Other Documents. Such assistance
shall include, but not be limited to (i) prompt assistance in the preparation of
an information memorandum and the verification of the completeness and accuracy
of the information and the reasonableness of the projections contained therein,
(ii) preparation of offering materials and financial projections by Loan Parties
and their advisors, (iii) providing Agent with all information reasonably deemed
necessary by Agent to successfully complete the syndication, (iv) confirmation
as to the accuracy and completeness of such offering materials and information
and confirmation that management’s projections are based on assumptions believed
by Loan Parties to be reasonable at the time made, and (v) participation of Loan
Parties’ senior management in meetings and conference calls with potential
lenders at such times and places as Agent may reasonably request.

(h) If a payment made to Agent or any Lender hereunder or under any Other
Document would be subject to withholding tax imposed by FATCA if Agent or such
Lender fails to comply with applicable reporting and other requirements of
FATCA, Agent or such Lender shall deliver to Administrative Borrower and Agent,
at the time or times prescribed by applicable law or as reasonably requested by
Administrative Borrower or Agent, (i) two (2) accurate, complete and signed
certifications prescribed by applicable law or reasonably satisfactory to
Administrative Borrower and Agent that establish that such payment is exempt
from withholding tax imposed by FATCA and (ii) any other documentation
reasonably requested by Administrative Borrower or Agent sufficient for
Administrative Borrower and Agent to comply with their obligations under FATCA
and to determine that Agent or such Lender has complied with such applicable
reporting and other requirements of FATCA.

16.4 Application of Payments.

Agent shall have the continuing and exclusive right to apply or reverse and
re-apply any payment and any and all proceeds of Collateral to any portion of
the Obligations. To the extent that any Loan Party makes a payment or Agent or
any Lender receives any payment or proceeds of the Collateral for any Loan
Party’s benefit, which are subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Agent or such Lender.

16.5 Indemnity/Currency Indemnity.

(a) Each Loan Party shall indemnify Agent, each Issuer, each Lender and each of
their respective officers, directors, Affiliates, employees, representatives and
agents (each, an “Indemnitee”) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, fees and disbursements of counsel) arising from any action,
litigation, proceeding, dispute or investigation which may be imposed on,
incurred by, or asserted against Agent, such Issuer or any Lender in any
litigation, proceeding, dispute or investigation instituted or conducted by any
Governmental Body or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement or the Other Documents, whether or not Agent, any Issuer or any Lender
is a party thereto; except, that, no Indemnitee shall be entitled to
indemnification hereunder to the extent that any of the foregoing arises out of
the gross (not mere) negligence or willful misconduct of such Indemnitee as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. Upon learning of any matter described above for which any
Indemnitee may want to seek indemnity from any Loan Party, such Indemnitee shall
promptly notify Administrative Borrower of such matter; provided, that, the
failure to do so shall not in any manner limit, impair or affect Loan Parties’
indemnification obligations hereunder. Nothing contained herein or in any Other
Document shall prohibit any Loan Party from seeking contribution or indemnity
from any Person other than Agent or a Lender.

 

131

--------------------------------------------------------------------------------

(b) If for the purposes of obtaining or enforcing judgment in any court in any
jurisdiction with respect to this Agreement or any Other Document, it becomes
necessary to convert into the currency of such jurisdiction (the “Judgment
Currency”) any amount due under this Agreement or under any Other Document in
any currency other than the Judgment Currency (the “Currency Due”) (including
any Currency Due for the purposes of Section 2.5) then, to the extent permitted
by law, conversion shall be made at the exchange rate selected by Agent on the
Business Day before the day on which judgment is given (or for the purposes of
Section 2.5 on the Business Day on which the payment was received by the Agent).
In the event that there is a change in such exchange rate between the Business
Day before the day on which the judgment is given and the date of receipt by the
Agent of the amount due, Borrowers shall to the extent permitted by law, on the
date of receipt by Agent, pay such additional amounts, if any, or be entitled to
receive reimbursement of such amount, if any, as may be necessary to ensure that
the amount received by Agent on such date is the amount in the Judgment Currency
which (when converted at such exchange rate on the date of receipt by Agent in
accordance with normal banking procedures in the relevant jurisdiction) is the
amount then due under this Agreement or such Other Document in the Currency Due.
If the amount of the Currency Due (including any Currency Due for purposes of
Section 2.5) which the Agent is so able to purchase is less than the amount of
the Currency Due (including any Currency Due for purposes of Section 2.5)
originally due to it, Borrowers shall to the extent permitted by law jointly and
severally indemnify and save Agent and Lenders harmless from and against loss or
damage arising as a result of such deficiency.

16.6 Notice.

Any notice or request required to be given hereunder to any Loan Party or to
Agent or any Lender shall be in writing (except as expressly provided herein) at
their respective addresses set forth below or at such other address as may
hereafter be specified in a notice designated as a notice of change of address
under this Section 16.6. Any notice or request required to be given hereunder
shall be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, or (d) facsimile to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Any notice or request required to be given hereunder shall be deemed given on
the earlier of (i) actual receipt thereof, and (ii) (A) one Business Day
following posting thereof by a recognized overnight courier, (B) three (3) days
following posting thereof by registered or certified mail, return receipt
requested, or (C) upon the sending thereof when sent by facsimile with
electronic confirmation of its receipt, in each case addressed to each party at
its address set forth below or at such other address as has been furnished in
writing by a party to the other by like notice:

 

132

--------------------------------------------------------------------------------

If to Agent or to TD Bank as Lender at:

 

TD Bank, N.A.

317 Madison Avenue, 3rd Floor

New York, New York 10017
Attention:    Account Manager - Primo Water

Telephone:   212-299-5711

Facsimile:   856-533-7124

If to a Lender other than TD Bank, as specified on the signature pages hereof or
in the applicable Commitment Transfer Supplement.

 

If to any Borrower or any Loan Party:

 

Primo Water Corporation

104 Cambridge Plaza Drive

Winston-Salem, North Carolina 27104

Attention:   Mark Castaneda

Telephone: 336-331-4047

Facsimile:   336-331-4247

16.7 Survival.

The obligations of Loan Parties under Sections 2.2(g), 3.6, 3.9, 14.7, 16.5 and
16.10 shall survive termination of this Agreement and the Other Documents and
Payment in Full of the Obligations.

16.8 Postponement of Subrogation, Etc. Rights.

Each Loan Party expressly agrees not to exercise, until Payment in Full of all
of the Obligations, any and all rights of subrogation, reimbursement, indemnity,
exoneration, contribution of any other claim which such Loan Party may now or
hereafter have against the other Loan Parties or other Person directly or
contingently liable for the Obligations hereunder, or against or with respect to
the other Loan Parties’ property (including, without limitation, any property
which is Collateral for the Obligations), arising from the existence or
performance of this Agreement.

16.9 Severability.

If any part of this Agreement is contrary to, prohibited by, or deemed invalid
under applicable laws or regulations, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given effect so
far as possible.

16.10 Expenses.

The Borrowers shall reimburse Agent (and, with respect to clause (a) below,
Lenders) for all costs and expenses (including without limitation, travel
expenses) paid or incurred by Agent (and, with respect to clause (a) below,
Lenders) in connection with this Agreement and the Other Documents, including,
without limitation:

 

133

--------------------------------------------------------------------------------

(a) reasonable attorneys’ fees and disbursements incurred by Agent and, during
the continuance of a Default or Event of Default, by Lenders (i) in all efforts
made to enforce payment of any Obligations or collection of or other realization
upon any Collateral, (ii) in defending or prosecuting any actions or proceedings
arising out of or relating to this Agreement and the Other Documents, (iii) in
connection with the enforcement of this Agreement or any Other Document, and
(iv) in enforcing Agent’s security interest in or Lien on any of the Collateral,
whether through judicial proceedings or otherwise;

(b) reasonable attorneys’ fees and expenses, fees and expenses of financial
accountants, advisors, consultants, appraisers and other professionals incurred
by Agent and other costs and expenses incurred by Agent (i) in connection with
the preparing, negotiating, entering into, performing or syndicating this
Agreement and/or the Other Documents, any amendment, waiver, consent or other
modification with respect thereto and the administration, work-out or
enforcement of this Agreement and the Other Documents, (ii) in instituting,
maintaining, preserving and foreclosing on Liens on any of the Collateral,
whether through judicial proceedings or otherwise, (iii) in connection with any
advice given to Agent with respect to its rights and obligations under this
Agreement and all Other Documents or (iv) that Agent reasonably deems necessary
or appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to this Agreement and the Other Documents; and

(c) reasonable fees and disbursements incurred by Agent in connection with any
appraisals of Inventory, Equipment or other Collateral, field examinations,
collateral analysis or monitoring or other business analysis conducted by
outside Persons in connection with this Agreement and the Other Documents (it
being understood that Borrowers shall not be responsible for more than (i) one
(1) appraisal of Inventory during such year unless (A) a Reporting Trigger Event
has occurred, in which case Borrowers shall be responsible for a second
(2nd) appraisal of Inventory during such year or (B) an Event of Default has
occurred and is continuing, in which case Borrowers shall be responsible for
such appraisals of Inventory as Agent may request; (ii) two (2) field
examinations during such year unless (A) a Reporting Trigger Event has occurred,
in which case Borrowers shall be responsible for a third (3rd) field examination
during such year or (b) an Event of Default has occurred and is continuing, in
which case Borrowers shall be responsible for such field examinations as Agent
may request).

16.11 Injunctive Relief.

Each Loan Party recognizes that, in the event any Loan Party fails to perform,
observe or discharge any of its obligations or liabilities under this Agreement,
any remedy at law may prove to be inadequate relief to Agent and the Lenders;
therefore, Agent, if Agent so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
that actual damages are not an adequate remedy.

16.12 Consequential Damages.

None of Agent, any Issuer, any Lender, any Loan Party nor any agent or attorney
for any of them, shall be liable for special, punitive, exemplary, indirect or
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations.

 

134

--------------------------------------------------------------------------------

16.13 Captions.

The captions at various places in this Agreement are intended for convenience
only and do not constitute and shall not be interpreted as part of this
Agreement.

16.14 Counterparts; Facsimile or Emailed Signatures.

This Agreement may be executed in any number of and by different parties hereto
on separate counterparts, all of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile or email transmission shall be
deemed to be an original signature hereto.

16.15 Construction.

The parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments, schedules or exhibits
thereto.

16.16 Confidentiality; Sharing Information.

(a) Agent, each Lender and each Transferee shall hold all non-public information
designated as confidential and obtained by Agent, such Lender or such Transferee
pursuant to the requirements of this Agreement in accordance with Agent’s, such
Lender’s and such Transferee’s customary procedures for handling confidential
information of this nature; provided, however, that, Agent, each Lender and each
Transferee may disclose such confidential information (i) to its examiners,
affiliates, outside auditors, counsel and other professional advisors, (ii) to
Agent, any Lender or to any prospective Transferees and Purchasing Lenders (who
agrees in writing or through electronic media to treat the information as
confidential and use it solely in connection with a proposed transfer under
Section 16.3), (iii) that ceases to be non-public information through no fault
of Agent or any Lender, and (iv) as required or requested by any Governmental
Body or representative thereof or pursuant to legal process; provided, further,
that, (A) unless specifically prohibited by applicable law or court order,
Agent, each Lender and each Transferee shall use reasonable efforts prior to
disclosure thereof, to notify Administrative Borrower (on behalf of the
Borrowers) of the applicable request for disclosure of such non-public
information (1) by a Governmental Body or representative thereof (other than any
such request in connection with an examination of the financial condition of
Agent, a Lender or a Transferee by such Governmental Body) or (2) pursuant to
legal process, and (B) in no event shall Agent, any Lender or any Transferee be
obligated to return any materials furnished by any Loan Party other than those
documents and instruments in possession of Agent or any Lender constituting
possessory Collateral once all of the Obligations have been Paid in Full.

(b) Each Loan Party acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to such Loan
Party or one or more of its Affiliates (in connection with this Agreement or
otherwise) by Agent, any Lender or by one or more Subsidiaries or Affiliates of
Agent or such Lender and each Loan Party hereby authorizes Agent and each Lender
to share any information delivered to Agent or such Lender by such Loan Party
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of Agent or such Lender to enter into this Agreement, to any such
Subsidiary or Affiliate of Agent or such Lender, it being understood that any
such Subsidiary or Affiliate of Agent or any Lender receiving such information
shall be bound by the provision of this Section 16.16 as if it were a Lender
hereunder. Such authorization shall survive the repayment of the Obligations and
the termination of this Agreement.

 

135

--------------------------------------------------------------------------------

16.17 Publicity.

Agent shall not make any announcements of the financial arrangement entered into
among Loan Parties, Agent and Lenders, including, without limitation,
announcements which are commonly known as tombstones, unless the Administrative
Borrower provides its prior written consent. In addition, Agent shall not
include, without the prior written consent of the Administrative Borrower, any
Loan Party’s name or logo in select transaction profiles and client testimonials
prepared by Agent for use in publications, company brochures and other marketing
materials of Agent. Subject to Agent’s prior written approval (which shall not
be unreasonably withheld or delayed), Loan Parties shall have the right to make
appropriate announcements of the financial arrangement entered into among Loan
Parties, Agent and Lenders in such publications and to such selected parties as
Loan Parties deem appropriate; except, that, Loan Parties shall have the right
to make any disclosure required by law or by applicable SEC regulations without
any requirement to obtain prior written approval.

16.18 Patriot Act Notice.

Each Lender subject to the USA Patriot Act of 2001 (31 U.S.C. 5318 et seq.)
hereby notifies Loan Parties that, pursuant to Section 326 thereof, it is
required to obtain, verify and record information that identifies Loan Parties,
including the name and address of each Loan Party and other information allowing
such Lender to identify Loan Parties in accordance with such act.

16.19 Agent Titles.

Each Lender or other Person that is designated (in the preamble of this
Agreement or otherwise) as “Arranger”, “Syndication Agent”, “Bookrunner” or any
title of any similar type shall not have any right, power, responsibility or
duty under this Agreement or any of the Other Documents, other than those
applicable to all Lenders (in the case of a Lender), and shall in no event be
deemed to have any fiduciary relationship with any other Lender.

16.20 Conflict with Term Loan Intercreditor Agreement.

Each of the parties hereto acknowledge and agree that whenever (a) any term or
provision of this Agreement or any term or provision of any Other Document are
incapable of being performed or complied with if the Loan Parties are also
required to perform and comply with the terms and provisions of the Term Loan
Documents, and (b) such conflict is resolved pursuant to the terms and
provisions of the Term Loan Intercreditor Agreement, the terms and provisions of
the Term Loan Intercreditor Agreement shall govern and control, and the failure
of the Loan Parties to comply with the terms and provisions of this Agreement
and the Other Documents shall not constitute a breach of any such terms or
provisions of this Agreement and such Other Documents.

[SIGNATURE PAGES FOLLOW]

 

136

--------------------------------------------------------------------------------

Each of the parties has signed this Agreement as of the day and year first above
written.

 

BORROWERS: PRIMO WATER CORPORATION By:   /s/ Mark Castaneda Name:   Mark
Castaneda Title:   Chief Financial Officer PRIMO PRODUCTS, LLC By:   /s/ Mark
Castaneda Name:   Mark Castaneda Title:   Chief Financial Officer PRIMO DIRECT,
LLC By:   /s/ Mark Castaneda Name:   Mark Castaneda Title:   Chief Financial
Officer PRIMO REFILL, LLC By:   /s/ Mark Castaneda Name:   Mark Castaneda Title:
  Chief Financial Officer PRIMO ICE, LLC By:   /s/ Mark Castaneda Name:   Mark
Castaneda Title:   Chief Financial Officer

[SIGNATURES CONTINUED ON NEXT PAGE]

--------------------------------------------------------------------------------

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

 

GUARANTOR: PRIMO REFILL CANADA CORPORATION By:   /s/ Mark Castaneda Name:   Mark
Castaneda Title:   Chief Financial Officer

[SIGNATURES CONTINUED ON NEXT PAGE]

--------------------------------------------------------------------------------

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

 

AGENT AND LENDERS: TD BANK, N.A., as Agent, Swingline Lender, Issuing Bank and a
Lender By:   /s/ Andrew Loughlin Name:   Andrew Loughlin Title:   Vice President