EXECUTION VERSION

 

 

REVOLVING CREDIT AND TERM LOAN

AGREEMENT

Dated as of May 18, 2005

among

 

QUAKER FABRIC CORPORATION OF FALL RIVER

 

as Borrower,

BANK OF AMERICA, N.A., and the Other Lending

Institutions Listed on Schedule 1 hereto,

BANK OF AMERICA, N.A.

as Administrative Agent and Issuing Bank,

FLEET NATIONAL BANK

as Cash Management Bank,

with

BANC OF AMERICA SECURITIES LLC

as Sole Lead Arranger and Book Manager

 

 

 

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TABLE OF CONTENTS

 

Page

 

 

 

1.

DEFINITIONS AND RULES OF INTERPRETATION

1

 

1.1.

Definitions

1

 

1.2.

Rules of Interpretation

22

2.

REVOLVING LOANS AND TERM LOAN

23

 

2.1.

Revolving Loans

23

 

2.2.

Commitment Fee

23

 

2.3.

Reduction of Commitments

24

 

2.4.

The Revolving Notes

24

 

2.5.

Interest on Revolving Loans

25

 

2.6.

Requests for Revolving Loans

25

 

2.6.1.

General

25

 

2.6.2.

Swing Line

25

 

2.7.

Conversion Options

26

 

2.7.1.

Conversion to Different Type of Revolving Loan

26

 

2.7.2.

Continuation of Type of Revolving Loan

26

 

2.7.3.

LIBOR Rate Loans

26

 

2.8.

Funds for Revolving Loans

27

 

2.8.1.

Funding Procedures for Revolving Loans

27

 

2.8.2.

Advances by Administrative Agent for Revolving Loans

27

 

2.9.

Change in Borrowing Bases

27

 

2.10.

Settlements

27

 

2.10.1.

General

28

 

2.10.2.

Failure to Make Funds Available

28

 

2.10.3.

No Effect on Other Lenders

28

 

2.11.

Repayments of Revolving Loans Prior to Event of Default

29

 

2.11.1.

Credit for Funds Received in Concentration Account

29

 

2.11.2.

Application of Payments Prior to Event of Default

29

 

2.12.

Repayments of Loans After Event of Default

30

 

2.13.

Term Loan

30

 

2.14.

Term Notes

30

 

2.15.

Interest on Term Loan

30

 

2.15.1.

Interest Rates

31

 

2.15.2.

Notification by Borrower

31

 

2.15.3.

Amounts, etc

31

 

2.16.

Administrative Agent Advances

31

3.

REPAYMENT OF LOANS

32

 

3.1.

Revolving Loans.

32

 

3.1.1.

Maturity

32

 

 

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3.1.2.

Mandatory Repayments of Revolving Loans

32

 

3.1.3.

Optional Repayments of Revolving Loans

32

 

3.2.

Term Loan.

33

 

3.2.1.

Mandatory Prepayments of Term Loan

33

 

3.2.2.

Optional Prepayments of Term Loan

35

4.

LETTERS OF CREDIT

35

 

4.1.

Letter of Credit Commitments

35

 

4.1.1.

Commitment to Issue Letters of Credit

35

 

4.1.2.

Letter of Credit Applications

35

 

4.1.3.

Terms of Letters of Credit

35

 

4.1.4.

Reimbursement Obligations of Lenders

36

 

4.1.5.

Participations of Lenders

36

 

4.2.

Reimbursement Obligation of the Borrower

36

 

4.3.

Letter of Credit Payments

37

 

4.4.

Obligations Absolute

38

 

4.5.

Reliance by Issuer

38

 

4.6.

Letter of Credit Fee

38

 

4.7.

Existing Letters of Credit

39

5.

CERTAIN GENERAL PROVISIONS

39

 

5.1.

Fees.

39

 

5.1.1.

Administrative Agent’s Fee

39

 

5.1.2.

Closing Fee

39

 

5.2.

Funds for Payments

39

 

5.2.1.

Payments to Administrative Agent

39

 

5.2.2.

No Offset, etc

39

 

5.2.3.

Non-U.S. Lenders

40

 

5.3.

Computations

40

 

5.4.

Interest Limitation

41

 

5.5.

Inability to Determine LIBOR Rate

41

 

5.6.

Illegality

41

 

5.7.

Additional Costs, etc

41

 

5.8.

Capital Adequacy

43

 

5.9.

Certificate

43

 

5.10.

Indemnity

43

 

5.11.

Interest After Default

43

 

5.12.

Collateral Security and Guaranties

44

6.

REPRESENTATIONS AND WARRANTIES

44

 

 

 

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6.1.

Corporate Authority, Etc

44

 

6.1.1.

Existence, Good Standing

44

 

6.1.2.

Authorization

44

 

6.1.3.

Delivery

45

 

6.1.4.

Enforceability

45

 

6.2.

Financial Statements; Projections

45

 

6.3.

Solvency

46

 

6.4.

No Material Adverse Changes, etc

46

 

6.5.

Absence of Mortgages and Liens

46

 

6.6.

Franchises, Patents, Copyrights, etc

46

 

6.7.

Litigation

47

 

6.8.

No Materially Adverse Contracts, etc

47

 

6.9.

Compliance with Other Instruments, Laws, etc

47

 

6.10.

Tax Status

47

 

6.11.

No Default or Event of Default

47

 

6.12.

Holding Company and Investment Company Acts

47

 

6.13.

Employee Benefit Plans

47

 

6.13.1.

In General

47

 

6.13.2.

Terminability of Welfare Plans

48

 

6.13.3.

Guaranteed Pension Plans

48

 

6.13.4.

Multiemployer Plans

48

 

6.14.

Regulations U and X

48

 

6.15.

True Copies of Governing Documents

48

 

6.16.

Fiscal Year

49

 

6.17.

Perfection of Security Interest

49

 

6.18.

Subsidiaries, etc

49

 

6.19.

Environmental Compliance

49

 

6.20.

Bank Accounts

50

 

6.21.

Labor Contracts

51

 

6.22.

Disclosure

51

 

6.23.

Title to Properties; Leases

51

 

6.24.

Certain Transactions

51

 

6.25.

Foreign Assets Control Regulations, Etc

51

7.

AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER

52

 

7.1.

Punctual Payment

52

 

7.2.

Maintenance of Office

52

 

7.3.

Records and Accounts

52

 

7.4.

Financial Statements, Certificates and Information

52

 

7.5.

Notices

54

 

7.5.1.

Defaults

54

 

 

 

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7.5.2.

Notice of Litigation and Judgments

54

 

7.5.3.

Notification of Claim against Collateral

54

 

7.5.4.

Notices Concerning Inventory Collateral

55

 

7.5.5.

Notification of Additional Intellectual Property Rights

55

 

7.5.6.

Environmental Events

55

 

7.6.

Legal Existence; Maintenance of Properties

55

 

7.7.

Insurance

56

 

7.8.

Taxes

56

 

7.9.

Compliance with Laws, Contracts, Licenses, and Permits

56

 

7.10.

Employee Benefit Plans

57

 

7.11.

Use of Proceeds

57

 

7.12.

Certain Changes

57

 

7.13.

Conduct of Business

57

 

7.14.

Further Assurances

57

 

7.15.

Inspection of Properties and Books, etc

57

 

7.15.1.

General

57

 

7.15.2.

Appraisals

58

 

7.15.3.

Communications with Accountants

58

 

7.15.4.

Environmental Assessments

58

 

7.16.

Additional Mortgaged Property

58

 

7.17.

Bank Accounts

59

 

7.17.1.

General

59

 

7.18.

Domestic Subsidiaries

59

 

7.19.

Landlord Waivers

59

8.

NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER

59

 

8.1.

Investments

60

 

8.2.

Restrictions on Indebtedness

60

 

8.3.

Restrictions on Liens

61

 

8.3.1.

Permitted Liens

61

 

8.3.2.

Restrictions on Negative Pledges and Upstream Limitations

62

 

8.4.

Restricted Payments

62

 

8.5.

Merger, Consolidation and Disposition of Assets

62

 

8.5.1.

Mergers and Acquisitions

62

 

8.5.2.

Disposition of Assets

62

 

8.6.

Sale and Leaseback

63

 

8.7.

Change of Fiscal Year

63

 

8.8.

Employee Benefit Plans

63

 

8.9.

Compliance with Environmental Laws

63

 

8.10.

Change in Terms of Governing Documents

63

 

8.11.

Creation of Subsidiaries

64

 

 

 

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8.12.

Transactions with Affiliates

64

 

8.13.

Agency Account

64

 

8.14.

Business Activities

65

9.

FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER

65

 

9.1.

Minimum Consolidated EBITDA

65

 

9.2.

Fixed Charge Coverage Ratio

66

 

9.3.

Capital Expenditures

66

10.

CLOSING CONDITIONS

67

 

10.1.

Loan Documents

67

 

10.2.

Certified Copies of Governing Documents

67

 

10.3.

Corporate or Other Action

67

 

10.4.

Incumbency Certificate

67

 

10.5.

Validity of Liens

67

 

10.6.

Perfection Certificates and UCC Search Results

67

 

10.7.

Certificates of Insurance

68

 

10.8.

Agency Account Agreements

68

 

10.9.

Borrowing Base and Collateral Update Certificates

68

 

10.10.

Accounts Receivable Aging Report

68

 

10.11.

Payment of Closing Fees

68

 

10.12.

Payoff Letter

68

 

10.13.

Senior Notes

68

 

10.14.

Opinions of Counsel

68

 

10.15.

Survey, Taxes, etc

69

 

10.16.

Title Insurance

69

 

10.17.

Hazardous Waste Assessments

69

 

10.18.

Solvency Certificate

69

 

10.19.

No Material Adverse Change

69

 

10.20.

Landlord Waivers

69

 

10.21.

Landlord Consents

69

 

10.22.

Collateral Examinations/Appraisals

69

 

10.23.

Financial Statement and Projections

69

11.

CONDITIONS TO ALL BORROWINGS

69

 

11.1.

Representations True; No Default or Event of Default

70

 

11.2.

No Legal Impediment

70

 

11.3.

Governmental Regulation

70

 

11.4.

Proceedings and Documents

70

 

11.5.

Payment of Fees

70

 

 

 

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11.6.

Exchange Limitations

70

 

11.7.

Validity of Liens

70

 

11.8.

Financial Covenants

70

12.

EVENTS OF DEFAULT; ACCELERATION; ETC

71

 

12.1.

Events of Default and Acceleration

71

 

12.2.

Termination of Commitments

73

 

12.3.

Remedies

74

 

12.4.

Distribution of Collateral Proceeds

74

13.

SETOFF

75

14.

THE ADMINISTRATIVE AGENT

76

 

14.1.

Authorization

76

 

14.2.

Employees and Administrative Agents

76

 

14.3.

No Liability

76

 

14.4.

No Representations

77

 

14.4.1.

General

77

 

14.4.2.

Closing Documentation, etc

77

 

14.5.

Payments

77

 

14.5.1.

Payments to Administrative Agent

77

 

14.5.2.

Distribution by Administrative Agent

78

 

14.5.3.

Delinquent Lenders

78

 

14.6.

Holders of Letters of Credit Participation

78

 

14.7.

Indemnity

78

 

14.8.

Administrative Agent as Lender

78

 

14.9.

Resignation

79

 

14.10.

Notification of Defaults and Events of Default

79

 

14.11.

Duties in the Case of Enforcement

79

 

14.12.

Administrative Agent May File Proofs of Claim

79

15.

EXPENSES

80

16.

INDEMNIFICATION

81

17.

SURVIVAL OF COVENANTS, ETC

82

18.

ASSIGNMENT AND PARTICIPATION

82

 

18.1.

General Conditions

82

  18.2. Assignments
82

 

 

 

 

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18.3.

Register

83

 

18.4.

Participations

83

 

18.5.

Payments to Participants

84

 

18.6.

Miscellaneous Assignment Provisions

84

 

18.7.

Assignee or Participant Affiliated with the Parent

84

 

18.8.

New Notes

84

 

18.9.

Special Purpose Funding Vehicle

85

19.

NOTICES, ETC

85

20.

GOVERNING LAW

86

21.

HEADINGS

86

22.

COUNTERPARTS

86

23.

ENTIRE AGREEMENT, ETC

87

24.

WAIVER OF JURY TRIAL

87

25.

CONSENTS, AMENDMENTS, WAIVERS, ETC

87

26.

SEVERABILITY

89

27.

CONFIDENTIALITY

89

28.

USA PATRIOT ACT

90

29. DESIGNATION OF PERMITTED LIENS
90

 

 

vii

 

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EXHIBITS AND SCHEDULES

Exhibit A Form of Loan Request Exhibit B Form of Compliance Certificate Exhibit
C Form of Assignment and Acceptance Exhibit D-1 Form of Borrowing Base
Certificate Exhibit D-2 Form of Collateral Update Certificate Exhibit D-3 Form
of Accounts Receivable/Loan Reconciliation Report Exhibit E Form of Revolving
Note Exhibit F Form of Term Note     Schedule 1 Lenders, Commitment Percentages,
Lending Offices Schedule 1.1(a) Mortgaged Properties Schedule 4.7 Existing
Letters of Credit Schedule 6.6 Intellectual Property Schedule 6.7 Litigation

Schedule 6.8

Material Adverse Contracts

Schedule 6.13.1

Employment Matters

Schedule 6.18

Subsidiaries

Schedule 6.19(a)

Environmental Notices

Schedule 6.19(b)

Material Environmental Notices

Schedule 6.20

Bank Accounts

Schedule 6.21

Labor Contracts

Schedule 8.1

Existing Investments

Schedule 8.2

Existing Indebtedness

Schedule 8.3.1

Existing Liens

Schedule 10.20(a)

Landlord Waivers

Schedule 10.20(b)

Post-Closing Landlord Waivers

 

 

 

 

 

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REVOLVING CREDIT AND TERM LOAN AGREEMENT

THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT dated as of May 18, 2005 is by and
among Quaker Fabric Corporation of Fall River, a Massachusetts corporation (the
“Borrower”), Quaker Fabric Corporation, a Delaware corporation (the “Parent”),
Bank of America, N.A. and the other lenders from time to time party hereto, Bank
of America, N.A., as Administrative Agent and Issuing Bank, and Fleet National
Bank, as Cash Management Bank.

The parties hereto agree as follows:

1. DEFINITIONS AND RULES OF INTERPRETATION.

1.1.       Definitions. The following terms shall have the meanings set forth in
this §1 or elsewhere in the provisions of this Credit Agreement referred to
below:

Accounts Receivable. All rights of a Person to payment for goods sold, leased or
otherwise marketed in the ordinary course of business and all rights of a Person
to payment for services rendered in the ordinary course of business and all sums
of money or other proceeds due thereon pursuant to transactions with account
debtors recorded on books of account in accordance with GAAP.

Accounts Receivable/Loan Reconciliation Report. A certificate signed by the
senior financial officer (or another officer designated by such senior financial
officer) of the Borrower in substantially the form of Exhibit D-3 hereto.

Adjustment Date. The first day of the month immediately following the month in
which a Compliance Certificate is to be delivered by the Parent and the Borrower
pursuant to §7.4(d).

Administrative Agent. Bank of America, N.A., acting as administrative agent for
the Lenders, and each other person appointed as the successor Administrative
Agent in accordance with §14.9.

Administrative Questionnaire. An Administrative Questionnaire in a form supplied
by the Administrative Agent.

Administrative Agents Advances. See §2.16.

Administrative Agent’s Fee. See §5.1.1.

Administrative Agent’s Office. The Administrative Agent’s office located at One
Federal Street, Boston, Massachusetts 02110, or at such other location as the
Administrative Agent may designate from time to time.

Administrative Agent’s Special Counsel. Bingham McCutchen LLP of Boston,
Massachusetts or such other counsel as may be approved by the Administrative
Agent.

Affiliate. With respect to any Person, any other Person which directly or
indirectly, controls, is controlled by or is under common control with such
Person. "Control" means the power, directly or indirectly, (a) to vote ten
percent (10%) or more of the Capital Stock (on a fully diluted basis) of a
Person having ordinary voting power for the election of directors, managing
members or general partners (as applicable); or (b) to direct or cause the
direction of the management and policies of a Person (whether by contract or
otherwise).

 

 

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-2-

 

 

Agency Account Agreement. See §7.17.1.

Applicable Margin. For each period commencing on an Adjustment Date through the
date immediately preceding the next Adjustment Date, the Applicable Margin
applicable to the Loans and the Commitment Fee shall be the rate per annum
corresponding to the Consolidated Total Funded Debt to EBITDA Ratio, determined
as at the end of the most recently ended Fiscal Quarter of the Parent, as set
forth in the table below:

 

 

Revolving Loans

Term Loan

 

Level

 

Consolidated Total
Funded Debt to
EBITDA Ratio

 

Base Rate
Loans

 

LIBOR
Rate Loans

 

Base Rate
Loans

 

LIBOR Rate
Loans

 

 

 

 

 

 

I

> 3.00:1.00

1.00%

2.50%

1.75%

3.25%

II

<3.00:1.00 and > 2.50:1.00

0.75%

2.25%

1.50%

3.00%

III

<2.50:1.00 and > 2.00:1.00

0.50%

2.00%

1.25%

2.75%

IV

<2.00:1.00

0.25%

1.75%

1.00%

2.50%

 

Notwithstanding the foregoing, (a) during the period commencing on the Closing
Date through the date immediately preceding the first Adjustment Date to occur
after the end of FQ4 of 2005, the Applicable Margin shall be the Applicable
Margin set forth in Level II above, (b) if the Parent and the Borrower fail to
deliver any Compliance Certificate pursuant to §7.4(d) hereof then, for the
period commencing on the next Adjustment Date to occur subsequent to such
failure through the date immediately following the date on which such Compliance
Certificate is delivered, the Applicable Margin shall be the highest Applicable
Margin set forth in Level I above, (c) until the first Adjustment Date to occur
after the end of FQ2 of 2006, the Borrower shall not be entitled to the
Applicable Margin set forth in Level IV above and (d) in the event that Excess
Availability, determined as at the end of any Fiscal Quarter is less than
$20,000,000 (prior to the application of the Availability Reserve), the Borrower
shall not be entitled to the Applicable Margin set forth in Level IV above at
the first Adjustment Date to occur after the end of such Fiscal Quarter.

Applicable Pension Legislation. At any time, any pension or retirement benefits
legislation (be it national, federal, provincial, territorial or otherwise) then
applicable to the Parent or any of its Subsidiaries.

Approved Fund. Any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

Arranger. Banc of America Securities LLC.

Asset Sale. Any one or series of related transactions in which the Parent or any
of its Subsidiaries conveys, sells, leases, licenses or otherwise disposes of,
directly or indirectly, any of its properties, businesses or assets (including
the sale or issuance of Capital Stock of any Subsidiary other than to the
Parent) whether owned on the Closing Date or thereafter acquired.

Assignment and Acceptance. An assignment and acceptance entered into by a Lender
and an Eligible Assignee (with the consent of any party whose consent is
required by §18.2), and accepted by the Administrative Agent, in substantially
the form of Exhibit C or any other form approved by the Administrative Agent.

 

 

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-3-

 

 

Availability Reserve. $5,000,000.

Balance Sheet Date. April 2, 2005.

Bank of America. Bank of America, N.A and its successors and assigns.

Base Rate. The higher of (i) the variable annual rate of interest so designated
from time to time by Bank of America as its “prime rate”, such rate being a
reference rate and not necessarily representing the lowest or best rate being
charged to any customer, and (ii) one-half of one percent (0.5%) above the
Federal Funds Effective Rate. For the purposes of this definition, “Federal
Funds Effective Rate” shall mean for any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, 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 so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three funds brokers of recognized standing selected by the
Administrative Agent. Changes in the Base Rate resulting from any changes in
Bank of America’s “prime rate” shall take place immediately without notice or
demand of any kind.

Base Rate Loans. All or any portion of the Revolving Credit Loans and the Term
Loan bearing interest calculated by reference to the Base Rate.

Borrower. As defined in the preamble hereto.

Borrowing Base. As of any date of determination, an amount equal to the result
of the following:

(a)           eighty-five percent (85%) of the net amount of Eligible Accounts
Receivable of the Borrower outstanding at such date; plus

(b)

the lesser of

 

 

(i)

$20,000,000 and

 

(ii)

the sum of

 

(A)                the lesser of (x) 65% of the Net Book Value of Eligible
Finished Goods Inventory of the Borrower, determined in accordance with GAAP and
(y) 85% of the Net Orderly Liquidation Value of Eligible Finished Goods
Inventory of the Borrower; plus

(B)                (x) prior to the date on which the Administrative Agent
receives the first inventory appraisal pursuant to §7.15.2, 35% of the Net Book
Value of Eligible Raw Materials Inventory of the Borrower and (y) at all times
thereafter, the lesser of (1) 40% of the Net Book Value of Eligible Raw
Materials Inventory of the Borrower, in each case, determined in accordance with
GAAP and (2) 85% of the Net Orderly Liquidation Value of Eligible Raw Materials
Inventory of the Borrower; minus

(c)

the Availability Reserve; minus

(d)

Reserves.

 

 

 

 

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-4-

 

 

The Administrative Agent may, from time to time in its sole discretion (not to
be exercised unreasonably), (x) reduce the lending formula with respect to
Eligible Accounts Receivable of the Borrower to the extent that the
Administrative Agent determines that: (i) the dilution with respect of the
Accounts Receivable of the Borrower for any period has increased in any material
respect or may be reasonably anticipated to increase in any material respect
above historical levels, or (ii) the general creditworthiness of account debtors
or other obligors of the Borrower has declined or (y) reduce the lending
formula(s) with respect to Eligible Inventory of the Borrower to the extent that
the Administrative Agent determines that: (i) the number of days of the turnover
of the inventory of the Borrower for any period has changed in any material
adverse respect, (ii) the liquidation value of the Eligible Inventory of the
Borrower, or any category thereof, has decreased, or (iii) the nature and
quality of the inventory of the Borrower has deteriorated in any material
respect or the mix of such inventory has changed materially. In determining
whether to reduce the lending formula(s), the Administrative Agent may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts Receivable of the Borrower, Eligible Inventory of
the Borrower or in establishing the Reserves.

Borrowing Base Certificate. A certificate signed by the senior financial officer
(or another officer designated by such senior financial officer) of the Borrower
demonstrating calculation of the Borrowing Base in the form of Exhibit D-1
hereto.

Business Day. Any day on which commercial banking institutions in Boston,
Massachusetts, are open for the transaction of banking business and, in the case
of LIBOR Rate Loans, also a day which is a LIBOR Business Day.

Capital Assets. Fixed assets, both tangible (such as land, buildings, fixtures,
machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and goodwill); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with GAAP.

Capital Expenditures. Amounts paid or Indebtedness incurred by the Parent or any
Subsidiary of the Parent in connection with (i) the purchase or lease by the
Parent or such Subsidiary of Capital Assets that would be required to be
capitalized and shown on the balance sheet of such Person in accordance with
GAAP or (ii) the lease of any assets by the Parent or such Subsidiary as lessee
under any Synthetic Lease to the extent that such assets would have been Capital
Assets had the Synthetic Lease been treated for accounting purposes as a
Capitalized Lease.

Capitalized Leases. Leases under which the Parent or any of its Subsidiaries is
the lessee or obligor, the discounted future rental payment obligations under
which are required to be capitalized on the balance sheet of the lessee or
obligor in accordance with GAAP.

Capital Stock. Any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing (including
convertible debt instruments).

Cash Management Bank. Fleet National Bank and its successors and assigns, in its
capacity as the provider of cash management services to the Parent and its
Subsidiaries.

Cash Management Obligations. All present and future liabilities, obligations and
Indebtedness of the Parent and its Subsidiaries owing to any Lender, the
Administrative Agent, the Cash Management Bank or any Affiliate thereof under or
in connection with any cash management or related services or products provided
by any Lender, the Administrative Agent, the Cash Management Bank or any
Affiliate

 

 

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thereof to or for the account of the Parent or any Subsidiary of the Parent,
including, without limitation, liabilities, obligations or Indebtedness in
respect of automated clearing house and other fund transfers, checks, money
orders, drafts, instruments, funds, payments and other items and forms of
remittances paid, deposited or otherwise credited to any deposit, disbursement
or other account of the Parent or any Subsidiary of the Parent, any overdraft or
other extension of credit made to cover any funds transfer, check, draft,
instrument or amount paid for the account or benefit of the Parent or any
Subsidiary of the Parent, and all fees, charges, indemnities, expenses and other
amounts from time to time owing to any Lender, the Administrative Agent, the
Cash Management Bank or any Affiliate thereof in connection therewith (all
whether accruing before or after the commencement of any bankruptcy proceeding
by or against the Parent or any Subsidiary of the Parent and regardless of
whether allowed as a claim in any such proceeding).

Casualty Event. With respect to any property (including any interest in
property) of the Parent or any Subsidiary of the Parent, any loss of, damage to,
or condemnation or other taking of, such property for which the Parent or such
Subsidiary receives insurance proceeds, proceeds of a condemnation award or
other compensation.

Change of Control. An event or series of events by which:

(a)        any “person” or “group” (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit
plan of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such
plan), other than Nortex Holdings, Inc. or any Affiliate thereof, becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, except that a person or group shall be deemed to have
“beneficial ownership” of all securities that such person or group has the right
to acquire (such right, an “option right”), whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of 30%
or more of the equity securities of the Parent entitled to vote for members of
the board of directors or equivalent governing body of the Parent on a
fully-diluted basis (and taking into account all such securities that such
person or group has the right to acquire pursuant to any option right);

(b)        during any period of 12 consecutive months, a majority of the members
of the board of directors or other equivalent governing body of the Parent
ceases to be composed of individuals (i) who were members of that board or
equivalent governing body on the first day of such period, (ii) whose election
or nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors); or

(c)        any Person, other than Nortex Holdings, Inc. or any Affiliate
thereof, or two or more Persons acting in concert shall have acquired by
contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation thereof, will result in its or their acquisition of the
power to exercise, directly or indirectly, a controlling influence over the

 

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management or policies of the Parent, or control over the equity securities of
the Parent entitled to vote for members of the board of directors or equivalent
governing body of the Parent on a fully-diluted basis (and taking into account
all such securities that such Person or group has the right to acquire pursuant
to any option right) representing 30% or more of the combined voting power of
such securities.

Closing Date. The first date on which the conditions set forth in §§10 and 11
have been satisfied and any Loans are to be made or any Letters of Credit are to
be issued hereunder.

Closing Fee. See §5.1.2.

Code. The Internal Revenue Code of 1986.

Collateral. All of the property, rights and interests of (a) the Borrower, (b)
the Parent, (c) each Subsidiary of the Parent, and (d) all other Guarantors from
time to time party to the Guaranties, that are or are intended to be subject to
the Liens created by the Security Documents.

Collateral Update Certificate. A certificate signed by the senior financial
officer (or another officer designated by such senior financial officer) of the
Borrower in substantially the form of Exhibit D-2 hereto.

Commitment. With respect to each Lender, (a) the Dollar amount set forth on
Schedule 1 hereto as the amount of such Lender’s commitment (i) to make
Revolving Loans to the Borrower and (ii) to participate in the issuance,
extension and renewal of Letters of Credit issued for the account of the
Borrower or Quaker Textile, as the same may be reduced from time to time; or (b)
if such commitment is terminated pursuant to the provisions hereof, zero.

Commitment Fee. See §2.2.

Commitment Percentage. With respect to each Lender, the percentage set forth on
Schedule 1 hereto reflecting such Lender’s commitment to make Revolving Loans
and to participate in the issuance, extension and renewal of Letters of Credit
issued for the account of the Borrower or Quaker Textile and, with respect to
the Term Loan, the percentage set forth on Schedule 1 hereto reflecting such
Lender’s commitment to make the Term Loan.

Compliance Certificate. See §7.4(d).

Concentration Account. See §7.17.1.

Consolidated or consolidated. With reference to any term defined herein, shall
mean that term as applied to the accounts of the Parent and its Subsidiaries,
consolidated in accordance with GAAP.

Consolidated EBITDA. For any period, (a) the net income (or deficit) of the
Parent and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) for such period, plus (b) to the extent
deducted in calculating net income (i) income taxes accrued during such period,
(ii) interest and fees in respect of Indebtedness (including amounts accrued or
paid in respect of Derivative Agreements) during such period (whether or not
actually paid in cash during such period), (iii) depreciation, amortization and
other non-cash charges (including asset impairment charges) accrued for such
period, (iv) Eligible Non-Recurring Charges for such period and (v)
extraordinary losses during such period, minus (c) to the extent such items were
added in calculating net income (i) extraordinary gains during such period and
(ii) proceeds received during such period in respect of Casualty Events and

 

 

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-7-

 

dispositions of any property (other than dispositions in the ordinary course of
business on ordinary business terms).

Consolidated Interest Expense. For any period, the sum, without duplication, for
the Parent and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness required to be paid or accrued during such period
(whether or not actually paid during such period), but excluding capitalized
debt acquisition costs (including fees and expenses related to this Credit
Agreement) plus (b) the net amounts payable (or minus the net amounts
receivable) in respect of Derivative Agreements accrued during such period
(whether or not actually paid or received during such period) excluding
reimbursement of legal fees and other similar transaction costs and further
excluding payments required by reason of the early termination of Derivative
Agreements in effect on the date hereof plus (c) all fees, including letter of
credit fees and expenses, (but excluding reimbursement of legal fees) incurred
hereunder during such period.

Consolidated Total Funded Debt. With respect to the Parent and its Subsidiaries
(determined on a consolidated basis), the sum, without duplication, of (a) the
aggregate amount of Indebtedness of the Parent and its Subsidiaries relating to
(i) the borrowing of money or the obtaining of credit, including the issuance of
notes or bonds, (ii) the deferred purchase price of assets (other than trade
payables incurred in the ordinary course of business), (iii) in respect of any
Synthetic Leases or any Capitalized Leases, and (iv) the maximum drawing amount
of all letters of credit outstanding and bankers acceptances plus (b)
Indebtedness of the type referred to in clause (a) of another Person guaranteed
by the Parent or any Subsidiary of the Parent.

Consolidated Total Funded Debt to EBITDA Ratio. As of any date of determination
the ratio of (a) Consolidated Total Funded Debt as of such date of determination
to (b) Consolidated EBITDA for the four Fiscal Quarter period ending on such
date of determination.

Conversion Request. A notice given by the Borrower to the Administrative Agent
of the Borrower’s election to convert or continue a Loan in accordance with
§2.7.

Copyright Mortgage. The Memorandum of Grant of Security Interest in Copyrights,
dated as of the Closing Date, made by the Borrower and the Guarantors in favor
of the Administrative Agent, in form and substance satisfactory to the
Administrative Agent.

Credit Agreement. This Revolving Credit and Term Loan Agreement, including the
Schedules and Exhibits hereto.

Default. See §12.1.

Default Rate. (a) When used with respect to Obligations other than Letter of
Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the
Applicable Margin applicable to the Base Rate Loans plus (iii) 2% per annum;
provided, however, that with respect to a LIBOR Rate Loan, the Default Rate
shall be an interest rate equal to the LIBOR Rate plus the Applicable Margin
applicable to such Loan plus 2% per annum, and (b) when used with respect to
Letter of Credit Fees, a rate equal to the Applicable Margin applicable to
Revolving Loans bearing interest at the LIBOR Rate plus 2% per annum, in all
cases to the fullest extent permitted by applicable laws.

Delinquent Lender. See §14.5.3.

Derivative Agreement. Any forward contract, futures contract, swap, option or
other similar agreement or arrangement (including, without limitation, caps,
floors, collars and similar agreements), the

 

 

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-8-

 

value of which is dependent upon interest rates, currency exchange rates,
commodities or other indices (including foreign exchange lines).

Distribution. The declaration or payment of any dividend on or in respect of any
shares of any class of Capital Stock of the Parent or any Subsidiary of the
Parent, other than dividends payable solely in shares of common stock of the
Parent or such Subsidiary; the payment or prepayment of principal of, premium,
if any, or interest on, or purchase, redemption, defeasance, retirement or other
acquisition of with respect to any shares of any class of Capital Stock of the
Parent or any Subsidiary of the Parent, directly or indirectly through a
Subsidiary of such Person or otherwise (including the setting apart of assets
for a sinking or other analogous fund to be used for such purpose); the return
of capital by the Parent or any Subsidiary of the Parent to its shareholders as
such; or any other distribution on or in respect of any shares of any class of
Capital Stock of the Parent or any Subsidiary of the Parent.

Dollars or $. Dollars in lawful currency of the United States of America.

Domestic Lending Office. Initially, the office of each Lender designated as such
in Schedule 1 hereto; thereafter, such other office of such Lender, if any,
located within the United States that will be making or maintaining Base Rate
Loans.

Domestic Subsidiary. Any Subsidiary that is organized under the laws of the
United States of America, any state or territory thereof or the District of
Columbia.

Drawdown Date. The date on which any Revolving Loan is made or is to be made,
and the date on which any Revolving Loan is converted or continued in accordance
with §2.7 or all or any portion of the Term Loan is converted or continued in
accordance with §2.15.2.

Eligible Accounts Receivable.   With respect to the Borrower, the aggregate of
the unpaid portions of Accounts Receivable (net of any contra accounts, credits,
rebates, offsets, holdbacks or other adjustments or commissions payable to third
parties that are adjustments to such Accounts Receivable) of the Borrower,
except any Account Receivable to which any of the exclusionary criteria set
forth below applies. The Administrative Agent shall have the right to establish,
modify or eliminate Reserves against Eligible Accounts Receivable from time to
time in its reasonable credit judgment. In addition, the Administrative Agent
reserves the right, at any time and from time to time after the Closing Date, to
adjust any of the criteria set forth below and to establish new criteria, in its
reasonable credit judgment, reflecting changes in the collectibility or
realization values of such Accounts Receivable arising or discovered by the
Administrative Agent after the Closing Date, subject to the approval of the
Required Lenders in the case of adjustments or new criteria which have the
effect of making additional credit available hereunder. Eligible Accounts
Receivable shall not include any Account Receivable if:

(i)         it is unpaid for more than sixty (60) days after the original due
date shown on the invoice; or

(ii)         it is due and unpaid more than ninety (90) days after the original
invoice date; or

(iii)        25% or more of the Accounts Receivable from the account debtor are
not deemed Eligible Accounts Receivable; or

(iv)        the total unpaid Accounts Receivable of the account debtor exceed
25% of the net amount of all Eligible Accounts Receivable, to the extent of such
excess; or

 

 

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-9-

 

 

(v)        any material covenant, representation or warranty contained in the
agreement with respect to such Account Receivable has been breached by the
Borrower; or

(vi)        the account debtor is also the Borrower’s creditor or supplier, or
the account debtor has disputed liability with respect to such Account
Receivable, or the account debtor has made any claim with respect to any other
Account Receivable due from such account debtor to the Borrower, or the Account
Receivable otherwise is or may become subject to any right of setoff by the
account debtor; provided that, only the portion of the Account Receivable equal
to the amount of such dispute, claim or setoff shall not be an Eligible Account
Receivable pursuant to this clause (vi); or

(vii)       the account debtor has commenced a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or other insolvency,
reorganization or adjustment laws of any other jurisdiction, or made an
assignment for the benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
account debtor in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or other insolvency, reorganization or
adjustment laws of any other jurisdiction, or any other petition or other
application for relief under the federal bankruptcy laws or other insolvency,
reorganization or adjustment laws of any other jurisdiction has been filed
against the account debtor, or if the account debtor has failed, suspended
business, ceased to be solvent, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a significant
portion of its assets or affairs; or

(viii)      it arises from a sale to an account debtor outside the United States
and Canada or is denominated in a currency other than Dollars, unless, in each
case, the sale is covered by credit insurance or on letter of credit, guaranty
or acceptance terms, in each case acceptable to Administrative Agent in its sole
discretion; or

(ix)        it arises from a sale to the account debtor on a bill and hold,
guaranteed sale, sale or return, sale on approval, consignment or any other
repurchase or return basis; or

(x)        the account debtor is the United States of America or any state
located therein or any department, agency or instrumentality thereof, unless the
Borrower assigns its right to payment of such Account Receivable to the
Administrative Agent, in a manner satisfactory to the Administrative Agent, so
as to comply with the Assignment of Claims Act of 1940 (31 U.S.C. §203 et seq.),
as amended or any equivalent state law; or

(xi)        it is not at all times subject to the Administrative Agent’s duly
perfected, first priority security interest and no other Lien except a Permitted
Lien; or

(xii)       the goods giving rise to such Account Receivable have not been
delivered to and accepted by the account debtor or the services giving rise to
such Account Receivable have not been performed by the Borrower and accepted by
the account debtor or the Account Receivable otherwise does not represent a
final sale; or

(xiii)      the Account Receivable is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; or

 

 

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(xiv)      the Borrower has made any agreement with the account debtor for any
deduction therefrom, except for discounts or allowances which are made in the
ordinary course of business for prompt payment or quality credits related to
such Account Receivable; or

(xv)       the Borrower has made an agreement with the account debtor to extend
the time of payment thereof; or

(xvi)      it arises out of a sale made by the Borrower to a Subsidiary of the
Borrower or an Affiliate of the Borrower or to a Person controlled by an
Affiliate of the Borrower.

Eligible Assignee. Any of (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund and (d) any other Person (other than a natural person) approved by
(i) the Administrative Agent and (ii) unless a Default or an Event of Default
has occurred and is continuing, the Borrower (each such approval not to be
unreasonably withheld or delayed).

Eligible Finished Goods Inventory. That portion of Eligible Inventory consisting
of finished goods.

Eligible Inventory. With respect to the Borrower, all of the inventory owned by
the Borrower shall be “Eligible Inventory” for purposes of this Credit
Agreement, except any inventory to which any of the exclusionary criteria set
forth below applies. The Administrative Agent shall have the right to establish,
modify or eliminate Reserves against Eligible Inventory from time to time in its
reasonable credit judgment. In addition, the Administrative Agent reserves the
right, at any time and from time to time after the Closing Date, to adjust the
criteria set forth below and to establish new criteria, in its reasonable credit
judgment, reflecting changes in the saleability or realization values of
inventory arising or discovered by the Administrative Agent after the Closing
Date, subject to the approval of the Required Lenders in the case of adjustments
or new criteria which have the effect of making additional credit available
hereunder. Eligible Inventory shall not include any inventory if:

 

(i)

it is not readily marketable in its current form; or

 

(ii)

it is not in good, new and saleable condition; or

 

(iii)

it is slow moving, obsolete, defective or unmerchantable; or

(iv)      it consists of supplies, packing materials, shipping materials or
work-in-process; or

(v)       it does not meet all standards imposed by any governmental agency or
authority, including, without limitation, the Fair Labor Standards Act; or

(vi)      it does not conform in all respects to the warranties and
representations set forth in this Credit Agreement; or

(vii)     it is not at all times subject to the Administrative Agent’s duly
perfected, first priority security interest and no other Lien except a Permitted
Lien; or

(viii)    it is not situated at a location in compliance with this Credit
Agreement or is in transit; or

 

 

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-11-

 

 

(ix)

it is not located in the United States of America; or

 

(x)

it is held on consignment, or not otherwise owned by the Borrower; or

(xi)    it has been shipped to a customer, regardless of whether such shipment
is on a consignment basis; or

(xii)   it is held at a location leased by the Borrower, unless the
Administrative Agent has received a waiver from the lessor (and any sublessor)
of such property, in form and substance satisfactory to the Administrative
Agent; or

(xiii)   it has been returned by a customer and has not been qualified by the
Borrower within thirty (30) days as being Eligible Inventory; or

(xiv)    it is not in the possession of the Borrower, unless the Administrative
Agent has received a waiver from the party in possession of such inventory in
form and substance satisfactory to the Administrative Agent; or

(xv)     it is subject to a third party’s trademark or other proprietary right
unless the Administrative Agent determines that such inventory could be sold
pursuant to the exercise of remedies by the Administrative Agent hereunder or
under applicable law on terms satisfactory to the Administrative Agent in its
sole discretion.

Eligible Non-Recurring Charges. Those charges incurred and expensed by the
Parent and its Subsidiaries from January 1, 2005 through the Closing Date
related to (i) prepayment of, and legal, forbearance and extension costs
associated with the Existing Credit Agreement and the Senior Notes, plus (ii)
costs associated with the preparation of an industry analysis report conducted
for the Parent by Kurt Salmon Associates, plus (iii) those expenses incurred as
a result of vendor disruption with Les Textiles Du-Re and Solutia, Inc.,
including premium product charges, incremental freight charges, and overtime
incurred and manufacturing efficiencies lost as a result of the disruption, plus
(iv) certain non-recurring costs associated with the Parent’s reporting and
compliance requirements related to the Sarbanes-Oxley Act; provided that the
aggregate amount of such charges and expenses described in clauses (i), (ii),
(iii) and (iv) above shall not exceed $2,750,000.

Eligible Raw Materials Inventory. That portion of Eligible Inventory consisting
of raw materials.  

Employee Benefit Plan. Any employee benefit plan within the meaning of §3(3) of
ERISA maintained or contributed to by the Parent, the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.

ERISA. The Employee Retirement Income Security Act of 1974.

ERISA Affiliate. Any Person which is treated as a single employer with the
Parent or any Subsidiary of the Parent under §414 of the Code.

ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension
Plan within the meaning of §4043 of ERISA and the regulations promulgated
thereunder as to which the requirement of notice has not been waived.

Eurocurrency Reserve Rate. For any day, the maximum rate (expressed as a
decimal) at which any bank subject thereto would be required to maintain
reserves under Regulation D of the Board of

 

 

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-12-

 

Governors of the Federal Reserve System (or any successor or similar regulations
relating to such reserve requirements) against “Eurocurrency Liabilities” (as
that term is used in Regulation D), if such liabilities were outstanding. The
Eurocurrency Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in the Eurocurrency Reserve Rate.

Event of Default. See §12.1.

Excess Availability. As of any date of determination thereof, the difference
between (a) the lesser of (i) the Total Commitment at such time and (ii) the
Borrowing Base at such time, and (b) the Revolving Exposure at such time.

Excess Cash Flow. For each Fiscal Year calculated based upon the financial
statements required to be delivered pursuant to §7.4(a) for such Fiscal Year,
(a) Consolidated EBITDA for such Fiscal Year minus (b) to the extent not
deducted in computing Consolidated EBITDA, the sum of (i) the aggregate amount
of all unfunded Capital Expenditures during such Fiscal Year, (ii) the aggregate
amount paid in cash or withheld (and not deducted in the calculation of Excess
Cash Flow in any prior Fiscal Year) by the Parent and its Subsidiaries in
respect of income taxes for such period, (iii) the aggregate amount of interest
with respect to the Loans paid in cash during such Fiscal Year, and (iv) the
aggregate amount of payments of principal in respect of the Term Loan paid in
cash during such Fiscal Year.

Excluded Taxes. With respect to the Administrative Agent, any Lender, the
Issuing Bank, the Cash Management Bank or any other recipient of any payment to
be made by or on account of any obligation of the Borrower hereunder, (a) taxes
imposed on or measured by its overall net income (however denominated), and
franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located, (b) any branch profits
taxes imposed by the United States or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) any taxes imposed on a
Lender as a result of such Lender’s failure to comply with §5.2.3.

Existing Credit Agreement. The Second Amended and Restated Credit Agreement,
dated as of February 14, 2002, among the Parent, the Borrower, Quaker Mexico,
Quaker Textile and Fleet National Bank.

Existing Letters of Credit. See §4.7 hereof.

Fee Letter. The fee letter, dated as April 18, 2005, among the Borrower, the
Administrative Agent and the Arranger.

Fees. Collectively, the Commitment Fee, the Letter of Credit Fees, the
Administrative Agent’s Fee and the Closing Fee.

Fiscal Quarter(s). The thirteen (13) or fourteen (14) week periods, the first of
which shall commence on the first day of each Fiscal Year, and each of which
shall be referred to as "FQ1", "FQ2", "FQ3" and "FQ4", respectively.

Fiscal Year. The fifty-two (52) or fifty-three (53) week period ending on the
Saturday closest to January 1 of each calendar year.

Fixed Charge Coverage Ratio. As at any date of determination, the ratio of (a)
(i) Consolidated EBITDA for the four Fiscal Quarter period ending on such date
of determination minus (ii) the aggregate amount of all Non-Financed Capital
Expenditures made during such period minus (iii) the aggregate

 

 

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-13-

 

amount paid, or required to be paid (without duplication), in cash in respect of
the current portion of all income taxes for such period minus (iv) the aggregate
amount of dividends and distributions permitted to be paid by the Parent under
§8.4 (if any) and actually paid in cash during such period plus (v) tax refunds
received in cash during such period to (b) the sum for the Parent and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of (i) the aggregate amount of Consolidated Interest
Expense for such period and (ii) the aggregate amount of regularly scheduled
payments of principal in respect of Indebtedness for borrowed money (including
the principal component of any payments in respect of Capitalized Leases) paid
or required to be paid during such period (excluding payments made pursuant to
§3.2.1(b)).

Fleet National Bank. Fleet National Bank and its successors and assigns.

Foreign Subsidiary. Any Subsidiary that is not a Domestic Subsidiary.

Fund. Any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in the ordinary course of its business.

GAAP. (i) When used in §9 or in the definition of Applicable Margin, whether
directly or indirectly through reference to a capitalized term used therein,
means (A) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the Fiscal Year ended on January 1, 2005, and (B) to the extent
consistent with such principles, the accounting practice of the Parent and its
Subsidiaries reflected in the Parent’s financial statements for the year ended
on the Balance Sheet Date, and (ii) when used in general, other than as provided
above, means principles that are (A) consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors, as
in effect from time to time, and (B) consistently applied with past financial
statements of the Parent and its Subsidiaries adopting the same principles,
provided that in each case referred to in this definition of “GAAP” a certified
public accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than
qualifications regarding changes in GAAP and as to normal year-end adjustments)
as to financial statements in which such principles have been properly applied.

Governing Documents. With respect to any Person, its certificate or articles of
incorporation, certificate of formation, or, as the case may be, certificate of
limited partnership, its by-laws, operating agreement or, as the case may be,
partnership agreement or other constitutive documents and all shareholder
agreements, voting trusts and similar arrangements applicable to any of its
Capital Stock.

Governmental Authority. Any foreign, federal, state, provincial, regional, local
municipal or other government, or any department, commission, board, bureau,
agency, public authority or instrumentality thereof, or any court or arbitrator.

Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of
§3(2) of ERISA maintained or contributed to by the Parent, the Borrower or any
ERISA Affiliate, the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.

Gross Availability. At any time, the lesser of (a) the Borrowing Base at such
time and (b) the Total Commitment at such time.

 

 

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Guaranties. The Guaranties made by each Guarantor in favor of the Lenders and
the Administrative Agent pursuant to which such Guarantor guaranties to the
Lenders and the Administrative Agent the payment and performance in full of the
Obligations.

Guarantors. Collectively, (i) the Parent, Quaker Mexico and Quaker Textile and
(ii) any direct or indirect Domestic Subsidiary of the Parent.

Indebtedness. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:

(a)

every obligation of such Person for money borrowed,

(d)        every obligation of such Person evidenced by bonds, debentures, notes
or other similar instruments, including obligations incurred in connection with
the acquisition of property, assets or businesses,

(e)        every reimbursement obligation of such Person with respect to letters
of credit, bankers’ acceptances, or similar facilities issued for the account of
such Person,

(f)         every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business),

(g)

every obligation of such Person under any Capitalized Lease,

(h)

every obligation of such Person under any Synthetic Lease,

 

(i)         all sales by such Person of (i) accounts or general intangibles for
money due or to become due, (ii) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (iii) other receivables
(collectively “receivables”), whether pursuant to a purchase facility or
otherwise, other than in connection with the disposition of the business
operations of such Person relating thereto or a disposition of defaulted
receivables for collection and not as a financing arrangement, and together with
any obligation of such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection therewith,

(j)         every obligation of such Person (an “equity related purchase
obligation”) to purchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock issued by such Person or any rights measured by the
value of such Capital Stock,

(k)

every obligation of such Person under any Derivative Agreement,

(l)         every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent that such Person is liable therefor as a result of such Person’s
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law, and

(m)       every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise acting
as surety for, any obligation of a type

 

 

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described in any of clauses (a) through (j) (the “primary obligation”) of
another Person (the “primary obligor”), in any manner, whether directly or
indirectly, and including, without limitation, any obligation of such Person (i)
to purchase or pay (or advance or supply funds for the purchase of) any security
for the payment of such primary obligation, (ii) to purchase property,
securities or services for the purpose of assuring the payment of such primary
obligation, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such primary obligation.

The “amount” or “principal amount” of any Indebtedness at any time of
determination represented by (1) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with GAAP, (2) any
Capitalized Lease shall be the present value of the aggregate of the rentals
obligation under such Capitalized Lease payable over the term thereof that is
not subject to termination by the lessee, (3) any sale of receivables shall be
the amount of unrecovered capital or principal investment of the purchaser
(other than the Parent or any of its wholly-owned Subsidiaries) thereof,
excluding amounts representative of yield or interest earned on such investment,
(4) any Synthetic Lease shall be the stipulated loss value, termination value or
other equivalent amounts, (5) any derivative contract shall be the maximum
amount of any termination or loss payment required to be paid by such Person if
such derivative contract were, at the time of determination, to be terminated by
reason of any event of default or early termination event thereunder, whether or
not such event of default or early termination event has in fact occurred, (6)
any equity related purchase obligation shall be the maximum fixed redemption or
purchase price thereof inclusive of any accrued and unpaid dividends to be
comprised in such redemption or purchase price and (7) any guaranty or other
contingent liability referred to in clause (k) shall be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
guaranty or other contingent obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.

Interest Payment Date. (i) As to any Base Rate Loan, the first day of each
calendar month (including the month which includes the Drawdown Date thereof)
and the Maturity Date and (ii) as to any LIBOR Rate Loan, the last day of each
Interest Period applicable to such Loan and the Maturity Date; provided,
however, that if any Interest Period for a LIBOR Rate Loan exceeds three (3)
months, the respective dates that fall every three months after the beginning of
such Interest Period shall also be Interest Payment Dates.

Interest Period. With respect to each Revolving Loan or all or any relevant
portion of the Term Loan, (i) initially, the period commencing on the Drawdown
Date of such Loan and ending on the last day of one of the periods set forth
below, as selected by the Borrower in a Loan Request or as otherwise required by
the terms of this Credit Agreement (A) for any Base Rate Loan, the last day of
the calendar month and (B) for any LIBOR Rate Loan 1, 2, 3, or 6 months, and
(ii) thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Revolving Loan or all or such portion of the
Term Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrower in a Conversion Request; provided that all of the
foregoing provisions relating to Interest Periods are subject to the following:

(a)        if any Interest Period with respect to a LIBOR Rate Loan would
otherwise end on a day that is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into

 

 

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another calendar month, in which event such Interest Period shall end on the
immediately preceding Business Day;

(n)        if any Interest Period with respect to a Base Rate Loan would end on
a day that is not a Business Day, that Interest Period shall end on the next
succeeding Business Day;

(o)        if the Borrower fails to give notice as provided in §2.7, the
Borrower shall be deemed to have requested a conversion of the affected LIBOR
Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base
Rate Loans on the last day of the then current Interest Period with respect
thereto;

(p)        any Interest Period relating to any LIBOR Rate Loan that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and

(q)        any Interest Period relating to any LIBOR Rate Loan that would
otherwise extend beyond the Maturity Date shall end on the Maturity Date.

Investments. All loans, advances (other than commission, travel and similar
advances to officers, directors and employees made in the ordinary course of
business), extensions of credit (other than accounts receivable arising in the
ordinary course of business provided that in no event shall such extension of
credit exceed 180 days in accordance with its terms), deposit account or
contribution of capital to any Person or any investment in, or purchase or other
acquisition of, the Capital Stock of, or in respect of any guaranty of the
obligations of, any Person. In determining the aggregate amount of Investments
outstanding at any particular time: (i) the amount of any Investment represented
by a guaranty shall be taken at not less than the principal amount of the
obligations guaranteed and still outstanding; (ii) there shall be included as an
Investment all interest accrued with respect to Indebtedness constituting an
Investment unless and until such interest is paid; (iii) there shall be deducted
in respect of each such Investment any amount received as a return of capital
(but only by repurchase, redemption, retirement, repayment, liquidating dividend
or liquidating distribution); (iv) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (ii) may be deducted when paid; and (v) there
shall not be deducted from the aggregate amount of Investments any decrease in
the value thereof.

Issuing Bank. (a) Bank of America N.A. and (b) solely in connection with the
Existing Letters of Credit, Fleet National Bank.

LC Guaranty. A guaranty or indemnity in form and substance satisfactory to the
Administrative Agent and the Issuing Bank pursuant to which the Administrative
Agent shall guaranty the payment or performance by the Borrower of its
reimbursement obligations in respect of Letters of Credit.

Lender or Lenders. Bank of America, N.A. and the other lending institutions
listed on Schedule 1 hereto and any other person who becomes an assignee of any
rights and obligations of a Lender pursuant to §18 and, unless the context
otherwise requires, the Issuing Bank and the Cash Management Bank.

Letter of Credit. See §4.1.

 

 

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Letter of Credit Application. With respect to any Letter of Credit issued for
the account of the Borrower or Quaker Textile hereunder, an application for such
Letter of Credit made to the Issuing Bank on its customary form.

Letter of Credit Fee. See §4.6.

LIBOR Business Day. Any day on which commercial banks are open for international
business (including dealings in U.S. dollar deposits) in London.

LIBOR Lending Office. Initially, the office of each Lender designated as such by
notice to the Borrower; thereafter, such other office of such Lender, if any,
that shall be making or maintaining LIBOR Rate Loans.

LIBOR Rate. For any Interest Period with respect to a LIBOR Rate Loan, the rate
of interest equal to (i) the rate determined by the Administrative Agent at
which Dollar deposits for such Interest Period are offered based on information
presented on Page 3750 of the Dow Jones Market Service (formerly known as the
Telerate Service) as of 11:00 a.m. London time on the second LIBOR Business Day
prior to the first day of such Interest Period, divided by (ii) a number equal
to 1.00 minus the Eurocurrency Reserve Rate. If the rate described above does
not appear on the Dow Jones Market Service on any applicable interest
determination date, the LIBOR Rate shall be the rate (rounded upward, if
necessary, to the nearest one hundred-thousandth of a percentage point),
determined on the basis of the offered rates for deposits in Dollars for a
period of time comparable to such LIBOR Rate Loan which are offered by four
major banks in the London interbank market at approximately 11:00 a.m. London
time, on the second LIBOR Business Day prior to the first day of such Interest
Period as selected by the Administrative Agent. The principal London office of
each of the four major London banks will be requested to provide a quotation of
its Dollar deposit offered rate. If at least two such quotations are provided,
the rate for that date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for that date will be
determined on the basis of the rates quoted for loans in Dollars to leading
European banks for a period of time comparable to such Interest Period offered
by major banks in New York City at approximately 11:00 a.m. New York City time,
on the second LIBOR Business Day prior to the first day of such Interest Period.
In the event that the Administrative Agent is unable to obtain any such
quotation as provided above, it will be considered that LIBOR Rate pursuant to a
LIBOR Rate Loan cannot be determined.

LIBOR Rate Loans. All or any portion of the Revolving Loans or the Term Loan
bearing interest calculated by reference to the LIBOR Rate.

Liens. Any encumbrance, mortgage, deed of trust, assignment, attachment, deposit
arrangement, lien (statutory, judgment or otherwise), pledge, hypothecation,
charge, restriction or other security interest, security agreement, or any
interest of any kind securing any obligation of any entity or person, whether
such interest is based on common law, civil law, statute or contract.

Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, the Guaranties, the Security Documents, the
LC Guaranty, the Fee Letter and any other agreement between the Borrower and/or
any Guarantor and the Administrative Agent and/or any Lender relating to fee
arrangements.

Loan Request. See §2.6.1.

Loans. The Revolving Loans and the Term Loan.

 

 

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Maturity Date. May 18, 2010.

Maximum Drawing Amount. The maximum aggregate amount that the beneficiaries may
at any time draw under outstanding Letters of Credit issued for the account of
the Borrower or Quaker Textile, as such aggregate amount may be reduced from
time to time pursuant to the terms of the Letters of Credit issued for the
account of the Borrower or Quaker Textile.

Mortgaged Property. Any Real Estate which is subject to any Mortgage.

Mortgages. (a) The mortgage(s) and, if applicable, deed(s) of trust, dated on or
prior to the Closing Date, from the Borrower to the Administrative Agent with
respect to the fee and, if applicable, leasehold interests of the Borrower in
the properties listed on Schedule 1.1(a) hereto and (b) any other deeds of
mortgage, deeds of trust, or deeds of leasehold mortgage executed and delivered
to the Administrative Agent after the Closing Date pursuant to §7.16 hereof, in
each case, in form and substance satisfactory to the Administrative Agent.

Multiemployer Plan. Any multiemployer plan within the meaning of §3(37) of ERISA
maintained or contributed to by the Parent, the Borrower or any ERISA Affiliate.

Net Book Value. At the relevant time of reference thereto, the net book value of
Eligible Inventory determined on a first-in first-out basis at lower of cost or
market as expressed on the Borrower’s perpetual inventory report.

Net Orderly Liquidation Value. With respect to any inventory, the net appraised
orderly liquidation value of such inventory, as determined from time to time by
the Administrative Agent by reference to the most recent appraisal of the
inventory of the Borrower performed by an appraisal firm acceptable to the
Administrative Agent.

Non-Financed Capital Expenditures Capital Expenditures paid in cash and not
financed with Indebtedness for borrowed money; provided that Capital
Expenditures financed with the proceeds of Revolving Loans shall be deemed to
constitute “Non-Financed Capital Expenditures” for purposes of this Agreement.

Non-U.S. Lender. See §5.2.3.

Notes. The Revolving Notes and the Term Notes.

Obligations. All indebtedness, obligations and liabilities of the Parent and its
Subsidiaries to any of the Lenders, the Issuing Bank, the Administrative Agent,
the Cash Management Bank or any of their Affiliates, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of the other Loan Documents or any Derivative Agreement
or in respect of any of the Loans made, or any obligations under Derivative
Agreements or Cash Management Obligations or Reimbursement Obligations incurred
or any of the Letter of Credit Applications, Letters of Credit or other
instruments at any time evidencing any thereof.

Outstanding or outstanding. With respect to the Loans, the aggregate unpaid
principal thereof as of any date of determination.

Parent. As defined in the preamble hereto.

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Patent Agreement. The Patent Collateral Assignment and Security Agreement, dated
as of the Closing Date, made by the Borrower and the Guarantors in favor of the
Administrative Agent, in form and substance satisfactory to the Administrative
Agent.

PBGC. The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any
successor entity or entities having similar responsibilities.

Perfection Certificates. The Perfection Certificates referenced to and defined
in each of the Security Agreements.

Permitted Liens. Liens permitted by §8.3 hereof.

Person. Any individual, corporation, limited liability company, partnership,
limited partnership, trust, unincorporated association, business, or other legal
entity, or any Governmental Authority.

Pledge Agreement. The Pledge Agreement, executed by the Parent and the Borrower
in favor of the Administrative Agent, in form and substance satisfactory to the
Administrative Agent.

Quaker Mexico. Quaker Fabric Mexico, S.A. de C.V., a corporation organized under
the laws of Mexico.

Quaker Textile Quaker Textile Corporation, a Massachusetts corporation.

Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Parent or any Subsidiary of the Parent.

Record. The grid attached to a Note, or the continuation of such grid, or any
other similar record, including computer records, maintained by any Lender with
respect to any Loan referred to in such Note.

Register. See §18.3.

Reimbursement Obligation. The Borrower’s obligation to reimburse the
Administrative Agent and the Lenders on account of any drawing under any Letter
of Credit issued for the account of the Borrower or Quaker Textile as provided
in §4.2.

Related Parties. With respect to any specified Person, such Person’s Affiliates
and the respective directors, officers, employees, agents and advisors of such
Person and such Person’s Affiliates.

Required Lenders. As of any date, any combination of two or more Lenders,
excluding Delinquent Lenders, holding Loans and participating interests in the
risks relating to Letters of Credit constituting at least fifty-one percent
(51%) of the outstanding Loans and Letters of Credit; or, if no Loans or Letters
of Credit are then outstanding, any combination of two or more Lenders,
excluding Delinquent Lenders, having at least fifty-one percent (51%) of the
Total Commitment.

Reserves. As determined by the Administrative Agent in the exercise of its
reasonable discretion and upon written notice to the Borrower, such amounts as
the Administrative Agent may from time to time establish and revise (a) to
reflect (i) any Default or Event of Default or (ii) events, conditions,
contingencies or risks which do or may have a material adverse effect on the
business, assets, operations or financial condition of the Borrower and the
Guarantors (taken as a whole), or the ability of the Parent and its Subsidiaries
to fulfill its obligations under this Credit Agreement or the other Loan
Documents or (b) to reflect the belief of the Administrative Agent that any
Borrowing Base Certificate or other collateral

 

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report or financial information furnished by or on behalf of the Parent and the
Borrower to the Administrative Agent or any of the Lenders is or may have been
incomplete, inaccurate or misleading in any material respect or (c) to reflect
events, conditions, contingencies or risks which would reasonably be expected to
have a material adverse effect on the value of the Collateral, taken as a whole,
or the value of the security interests and other rights of the Administrative
Agent and the Lenders in the Collateral (including the enforceability,
perfection or priority thereof) or (d) in respect of any Derivative Agreements
or cash management or similar arrangements.

Restricted Payment. In relation to the Parent and any Subsidiary of the Parent,
any (a) Distribution or (b) any payment made to any Affiliates of the Parent or
a Subsidiary of the Parent in respect of management, consulting or other similar
services provided to the Parent or a Subsidiary of the Parent.

Revolving Exposure. At any time, the sum of the outstanding amount of all
Revolving Loans plus the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations.

Revolving Loans. The revolving credit loans to be made by the Lenders to the
Borrower (including Swing Line Loans) pursuant to §2.

Revolving Notes. See §2.4.

Sarbanes-Oxley Act. The Sarbanes-Oxley Act of 2002.

Security Agreement. The Security Agreement, dated as of the Closing Date, among
the Parent, the Borrower, Quaker Textile, Quaker Mexico and the Administrative
Agent.

Security Documents. The Guaranties, the Security Agreement, the Copyright
Mortgage, the Patent Agreement, the Pledge Agreement, the Mortgages, the
Trademark Agreement, and all other instruments and documents, including without
limitation Uniform Commercial Code financing statements and other equivalent
registration documents, control agreements and the like, required to be executed
or delivered pursuant to, or in connection with, this Credit Agreement or any
other Loan Document.

Senior Management. The chairman, president, chief executive officer, chief
financial officer, any executive vice president, any senior vice president, the
vice-president – legal and environmental, the treasurer, the controller, or the
general counsel of the Parent or a Subsidiary of the Parent.

Senior Notes (a) The 7.09% senior promissory notes due October 10, 2005 issued
by the Borrower to The Prudential Insurance Company of America and Pruco Life
Insurance Company pursuant to the Note Purchase Agreement (the "Note Agreement")
dated as of October 10, 1997 in an original aggregate amount of $15,000,000, (b)
the 7.18% senior promissory notes due October 10, 2007 issued by the Borrower to
The Prudential Insurance Company of America and Pruco Life Insurance Company
pursuant to the Note Agreement, in an original aggregate amount of $30,000,000,
(c) the 7.56% senior promissory notes due February 14, 2009 issued by the
Borrower to The Prudential Insurance Company of America pursuant to the Note
Purchase Agreement and Private Shelf Facility (the “Additional Note Agreement”)
dated as of February 14, 2002 in an aggregate amount not to exceed $5,000,000,
(d) the Shelf Notes (as defined in the Additional Note Agreement) issued under
the terms of the Additional Note Agreement on terms and conditions substantially
similar to the 7.56% Senior Notes.

Settlement. With respect to any Swing Line Loans, the making or receiving of
payments, in immediately available funds, by the Lenders, to the extent
necessary to cause each Lender’s actual share of the outstanding amount of
Revolving Loans (after giving effect to any Loan Request) to be equal to

 

 

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such Lender’s Commitment Percentage of the outstanding amount of such Revolving
Loans (after giving effect to any Loan Request), in any case where, prior to
such event or action, the actual share is not so equal.

Settlement Amount. See §2.10.1.

Settlement Date. (a) Friday of each week, or if a Friday is not a Business Day,
the Business Day immediately following such Friday, (b) at the option of the
Administrative Agent, on any Business Day following a day on which the account
officers of the Administrative Agent active upon the Borrower’s account become
aware of the existence of an Event of Default, (c) the Business Day immediately
following any day on which the Administrative Agent gives written notice to the
Lenders to effect a Settlement, (d) the Maturity Date and (e) on the third (3rd)
Business Day following any date on which the Borrower requests a conversion of a
Swing Line Loan to a LIBOR Rate Loan.

Settling Lender. See §2.10.1.

Subsidiary. Any corporation, association, trust, or other business entity of
which the designated parent shall at any time own directly or indirectly through
a Subsidiary or Subsidiaries at least a majority (by number of votes) of the
outstanding Voting Stock.

Swing Line Loans. See §2.6.2.

Synthetic Lease. Any lease of goods or other property, whether real or personal,
which is treated as an operating lease under GAAP and as a loan or financing for
U.S. income tax purposes.

Taxes. All present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

Term Loan. The term loan advanced to the Borrower pursuant to §2.13.

Term Notes. See §2.14.

Title Insurance Company. Stewart Title Guaranty Company.

Title Policy. In relation to each Mortgaged Property, an ALTA standard form
title insurance policy issued by the Title Insurance Company (with such
reinsurance or co-insurance as the Administrative Agent may require, any such
reinsurance to be with direct access endorsements) in such amount as may be
determined by the Administrative Agent insuring the priority of the Mortgage of
such Mortgaged Property and that the Parent or one of its Subsidiaries holds
marketable fee simple or leasehold title to such Mortgaged Property, subject
only to Permitted Liens and which shall not contain exceptions for mechanics
liens, persons in occupancy or matters which would be shown by a survey (except
as may be permitted by such Mortgage), shall not insure over any matter except
to the extent that any such affirmative insurance is acceptable to the
Administrative Agent in its sole discretion, and shall contain such endorsements
and affirmative insurance as the Administrative Agent in its discretion may
require, including but not limited to (a) comprehensive endorsement, (b)
variable rate of interest endorsement, (c) usury endorsement, (d) revolving
credit endorsement, (e) tie-in endorsement, (f) doing business endorsement and
(g) ALTA form 3.1 zoning endorsement.

Total Commitment. The sum of the Commitments of the Lenders, as in effect from
time to time.

 

 

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Trademark Agreement. The Trademark Collateral Security and Pledge Agreement,
dated as of the Closing Date, made by the Borrower and the Guarantors in favor
of the Administrative Agent and the Assignments of Trademarks executed in
connection therewith, in form and substance satisfactory to the Administrative
Agent.

Type. As to any Revolving Loan or all or any portion of the Term Loan, its
nature as a Base Rate Loan or LIBOR Rate Loan.

Unpaid Reimbursement Obligation. The Reimbursement Obligations for which the
Borrower does not reimburse the Administrative Agent and the Lenders on the date
specified in, and in accordance with, §4.3.

Voting Stock. Stock or similar interests, of any class or classes (however
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.

1.2.

Rules of Interpretation.

(a)        A reference to any document or agreement shall include such document
or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Credit Agreement.

(b)

The singular includes the plural and the plural includes the singular.

(c)        Unless otherwise expressly indicated, a reference to any law or
regulation includes any amendment or modification to such law or regulation.

(d)        A reference to any Person includes its permitted successors and
permitted assigns.

(e)        Accounting terms not otherwise defined herein have the meanings
assigned to them by GAAP applied on a consistent basis by the accounting entity
to which they refer.

(f)

The words “include”, “includes” and “including” are not limiting.

(g)        All terms not specifically defined herein or by GAAP, which terms are
defined in the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts, have the meanings assigned to them therein, with the term
“instrument” being that defined under Article 9 of the Uniform Commercial Code.

(h)        Reference to a particular “§” refers to that section of this Credit
Agreement unless otherwise indicated.

(i)         The words “herein”, “hereof”, “hereunder” and words of like import
shall refer to this Credit Agreement as a whole and not to any particular
section or subdivision of this Credit Agreement.

(j)         Unless otherwise expressly indicated, in the computation of periods
of time from a specified date to a later specified date, the word “from” means
“from and including,” the words “to” and “until” each mean “to but excluding,”
and the word “through” means “to and including.”

 

 

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(k)        This Credit Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are, however, cumulative
and are to be performed in accordance with the terms thereof.

(l)         This Credit Agreement and the other Loan Documents are the result of
negotiation among, and have been reviewed by counsel to, among others, the
Administrative Agent, the Parent and the Borrower and are the product of
discussions and negotiations among all parties. Accordingly, this Credit
Agreement and the other Loan Documents are not intended to be construed against
the Administrative Agent or any of the Lenders merely on account of the
Administrative Agent’s or any Lender’s involvement in the preparation of such
documents.

(m)       If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in any Loan Document, and either the
Borrower or the Required Lenders shall so request, the Administrative Agent, the
Lenders and the Borrower shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP (subject to the approval of the Required Lenders); provided that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Borrower shall
provide to the Administrative Agent and the Lenders financial statements and
other documents required under this Credit Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

2. REVOLVING LOANS AND TERM LOAN.

2.1.       Revolving Loans. Subject to the terms and conditions set forth in
this Credit Agreement, each of the Lenders severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date up to but not including the Maturity Date upon notice by the
Borrower to the Administrative Agent given in accordance with §2.6, such sums as
are requested by the Borrower up to a maximum aggregate amount outstanding
(after giving effect to all amounts requested) at any one time equal to such
Lender’s Commitment minus such Lender’s Commitment Percentage of the sum of (a)
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations and (b) the
outstanding Swing Line Loans; provided that the Revolving Exposure (after giving
effect to all amounts requested) shall not at any time exceed the Gross
Availability. The Revolving Loans shall be made pro rata in accordance with each
such Lender’s Commitment Percentage. Each request for a Revolving Loan hereunder
shall constitute a representation and warranty by the Borrower that the
conditions set forth in §10 and §11, in the case of the initial Revolving Loans
to be made on the Closing Date, and §11, in the case of all other Revolving
Loans, have been satisfied on the date of such request.

2.2.       Commitment Fee. The Borrower agrees to pay to the Administrative
Agent for the accounts of the Lenders in accordance with their respective
Commitment Percentages a commitment fee (the “Commitment Fee”) calculated at the
rate of 0.375% per annum on the average daily amount during each calendar month
or portion thereof from the date hereof to the Maturity Date by which the Total
Commitment minus the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations exceeds the outstanding amount of Revolving Loans
(excluding Swing Line Loans) during such calendar month. The Commitment Fee
shall be payable monthly in arrears on the first day of each calendar month for
the immediately preceding calendar month commencing on the first such date
following the date hereof, with a final payment on the Maturity Date or any
earlier date on which the Commitments shall terminate.

 

 

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2.3.       Reduction of Commitments. The Borrower shall have the right at any
time and from time to time upon five (5) Business Days prior written notice to
the Administrative Agent to reduce by $5,000,000 or an integral multiple of
$1,000,000 in excess thereof or to terminate entirely the Total Commitment in
excess of the Revolving Exposure at such time, whereupon the Commitments of the
Lenders shall be reduced pro rata in accordance with their respective Commitment
Percentages of the amount specified in such notice or, as the case may be,
terminated. Promptly after receiving any notice of the Borrower delivered
pursuant to this §2.3, the Administrative Agent will notify the Lenders of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Administrative Agent for the respective accounts
of such Lenders the full amount of any Commitment Fee then accrued on the amount
of the reduction. No reduction or termination of the Commitments may be
reinstated. If the Total Commitment is terminated or reduced by the Borrower in
whole or in part on or prior to the second anniversary of the Closing Date, the
Borrower shall pay to the Administrative Agent for the benefit of the Lenders an
early termination fee in an amount calculated as follows:

(a)        if such termination or reduction is concluded on or prior to the
first anniversary of the Closing Date, an amount equal to one percent (1%) of
the Total Commitment immediately prior to such termination or in the case of a
partial reduction, one percent (1%) of the amount of such reduction;

(b)        if such termination or reduction is concluded after the first
anniversary of the Closing Date but on or prior to the second anniversary of the
Closing Date, an amount equal to one-half of one percent (0.5%) of the Total
Commitment immediately prior to such termination or in the case of a partial
reduction, one-half of one percent (0.5%) of the amount of such reduction; or

(c)        if such termination or reduction is concluded after the second
anniversary of the Closing Date, the Borrower will not be required to pay an
early termination fee.

For greater clarity, the Borrower acknowledges and agrees that as a direct and
proximate result of such termination under the aforesaid circumstances, the
Lenders will suffer a loss in an amount which is difficult to calculate and
determine with certainty and, therefore, as a result of the Borrower’s and each
Lender’s reasonable endeavour to ascertain and agree in advance to the amount
necessary to compensate the Lenders for said loss, the Borrower has agreed to
pay the aforesaid early termination fees described in this §2.3 in the
circumstances described.

Notwithstanding the foregoing, no early termination fee shall be payable under
this §2.3 due to the repayment or prepayment of the Revolving Loans and the
termination of the Total Commitment if the Total Commitment is replaced with a
similar commitment from the Administrative Agent or an Affiliate of the
Administrative Agent in an amount equal to or greater than $50,000,000 (it being
understood that neither the Administrative Agent nor any of its Affiliates shall
be under any obligation to provide such commitment and that any such commitment
shall be satisfactory to the Administrative Agent in all respects).

2.4.       The Revolving Notes. The Revolving Loans shall be evidenced by
separate promissory notes of the Borrower in substantially the form of Exhibit E
hereto (each a “Revolving Note”), dated as of the Closing Date (or such other
date on which a Lender may become a party hereto in accordance with §18 hereof)
and completed with appropriate insertions. One Revolving Note shall be payable
to the order of each Lender in a principal amount equal to such Lender’s
Commitment Percentage of the Total Commitment or, if less, the outstanding
amount of all Revolving Loans made by such Lender, plus interest accrued
thereon, as set forth below. The Borrower irrevocably authorizes each such
Lender to

 

 

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make or cause to be made, at or about the time of the Drawdown Date of any
Revolving Loan or at the time of receipt of any payment of principal on such
Lender’s Revolving Note, an appropriate notation on such Lender’s Revolving Note
Record reflecting the making of such Revolving Loan or (as the case may be) the
receipt of such payment. The outstanding amount of the Revolving Loans set forth
on such Lender’s Revolving Note Record shall be prima facie evidence of the
principal amount thereof owing and unpaid to such Lender, but the failure to
record, or any error in so recording, any such amount on such Lender’s Revolving
Note Record shall not limit or otherwise affect the obligations of the Borrower
hereunder or under any Revolving Note to make payments of principal of or
interest on any Revolving Note when due.

2.5.

Interest on Revolving Loans. Except as otherwise provided in §5.11,

(a)        Each Revolving Loan which is a Base Rate Loan shall bear interest for
the period commencing with the Drawdown Date thereof and ending on the last day
of the Interest Period with respect thereto at the rate per annum equal to the
Base Rate plus the Applicable Margin as in effect from time to time applicable
to Revolving Loans bearing interest at the Base Rate.

(b)        Each Revolving Loan which is a LIBOR Rate Loan shall bear interest
for the period commencing with the Drawdown Date thereof and ending on the last
day of the Interest Period with respect thereto at the rate per annum equal to
the LIBOR Rate determined for such Interest Period plus the Applicable Margin as
in effect from time to time applicable to Revolving Loans bearing interest at
the LIBOR Rate.

The Borrower promises to pay interest on each Revolving Loan in arrears on each
Interest Payment Date with respect thereto.

2.6.

Requests for Revolving Loans.

2.6.1.    General. The Borrower shall give to the Administrative Agent written
notice in the form of Exhibit A hereto of each Revolving Loan requested
hereunder (a “Loan Request”) no less than (a) one (1) Business Day prior to the
proposed Drawdown Date of any Base Rate Loan and (b) three (3) Business Days
prior to the proposed Drawdown Date of any LIBOR Rate Loan. Each such notice
shall specify (i) the principal amount of the Revolving Loan requested, (ii) the
proposed Drawdown Date of such Revolving Loan, (iii) the Interest Period for
such Revolving Loan and (iv) the Type of such Revolving Loan. Promptly upon
receipt of any such notice, the Administrative Agent shall notify each of the
Lenders thereof. Each Loan Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Revolving Loan requested
from such Lenders on the proposed Drawdown Date. Each Loan Request with respect
to a Base Rate Loan shall be in a minimum aggregate amount of $500,000 or an
integral multiple of $100,000 in excess thereof and each Loan Request with
respect to a LIBOR Rate Loan shall be in a minimum aggregate amount of
$1,000,000 or an integral multiple of $100,000 in excess thereof.

2.6.2.    Swing Line. Notwithstanding the notice and minimum amount requirements
set forth in §2.6.1 but otherwise in accordance with the terms and conditions of
this Credit Agreement, the Administrative Agent may, in its sole discretion and
without conferring with the Lenders, make Revolving Loans to the Borrower (a) by
entry of credits to the Borrower’s operating account (No. 51191331) (the
“Operating Account”) with the Cash Management Bank to cover checks or other
charges which the Borrower has drawn or made against such account or (b) in an
amount as otherwise requested by the Borrower; provided that the maximum
outstanding amount of advances made by the Administrative Agent pursuant to this
§2.6.2 (each a “Swing

 

 

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Line Loan”) shall not, at any time, exceed $5,000,000. The Borrower hereby
requests and authorizes the Administrative Agent to make from time to time the
Swing Line Loans by means of appropriate entries of such credits sufficient to
cover checks and other charges then presented for payment from the Operating
Account or as otherwise so requested. The Borrower acknowledges and agrees that
the making of the Swing Line Loans shall, in each case, be subject in all
respects to the provisions of this Credit Agreement as if they were Revolving
Loans covered by a Loan Request including, without limitation, the limitations
set forth in §2.1 and the requirements that the applicable provisions of §10 (in
the case of Swing Line Loans made on the Closing Date) and §11 be satisfied.
Swing Line Loans made pursuant to this §2.6.2 shall be Base Rate Loans until
converted in accordance with the provisions of this Credit Agreement and, prior
to a Settlement, such interest shall be for the account of the Administrative
Agent.

2.7.

Conversion Options.

2.7.1.    Conversion to Different Type of Revolving Loan. The Borrower may elect
from time to time to convert any outstanding Revolving Loan to a Revolving Loan
of another Type, provided that (a) with respect to any such conversion of a
LIBOR Rate Loan to a Base Rate Loan, the Borrower shall give the Administrative
Agent at least three (3) Business Days prior written notice of such election;
(b) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate
Loan, the Borrower shall give the Administrative Agent at least three (3)
Business Days prior written notice of such election; (c) with respect to any
such conversion of a LIBOR Rate Loan into a Base Rate Loan, such conversion
shall only be made on the last day of the Interest Period with respect thereto
and (d) no Revolving Loan may be converted into, or continued as, a LIBOR Rate
Loan when any Default or Event of Default has occurred and is continuing.
Promptly upon the receipt of any such election, the Administrative Agent shall
notify the Lenders thereof. On the date on which such conversion is being made,
each Lender shall take such action as is necessary to transfer its Commitment
Percentage of such Revolving Loans to its Domestic Lending Office or its LIBOR
Lending Office, as the case may be. All or any part of outstanding Revolving
Loans of any Type may be converted into a Revolving Loan of another Type as
provided herein, provided that any partial conversion with respect to Revolving
Loans shall be in an aggregate principal amount of $1,000,000 or a whole
multiple of $100,000 in excess thereof. Each Conversion Request relating to the
conversion of a Revolving Loan to a LIBOR Rate Loan shall be irrevocable by the
Borrower.

2.7.2.    Continuation of Type of Revolving Loan. Any Revolving Loan of any Type
may be continued as a Revolving Loan of the same Type upon the expiration of an
Interest Period with respect thereto by compliance by the Borrower with the
notice provisions contained in §2.7.1; provided that no LIBOR Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the last
day of the first Interest Period relating thereto ending during the continuance
of any Default or Event of Default of which officers of the Administrative Agent
active upon the Borrower’s account have actual knowledge. In the event that the
Borrower fails to provide any such notice with respect to the continuation of
any LIBOR Rate Loan, then such LIBOR Rate Loan shall be automatically converted
to a Base Rate Loan on the last day of the first Interest Period relating
thereto. The Administrative Agent shall notify the Lenders thereof promptly when
any such automatic conversion contemplated by this §2.7 is scheduled to occur.

2.7.3.    LIBOR Rate Loans. Any conversion to or from LIBOR Rate Loans shall be
in such amounts and be made pursuant to such elections so that, after giving
effect thereto, the aggregate principal amount of all LIBOR Rate Loans having
the same Interest Period shall not be

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less than $1,000,000 or a whole multiple of $100,000 in excess thereof. No more
than ten (10) LIBOR Rate Loans having different Interest Periods may be
outstanding at any time.

2.8.

Funds for Revolving Loans.

2.8.1.    Funding Procedures for Revolving Loans. Not later than 2 p.m. (Boston
time) on the proposed Drawdown Date of any Revolving Loans, each of the Lenders
will make available to the Administrative Agent, at the Administrative Agent’s
Office, in immediately available funds, the amount of such Lender’s Commitment
Percentage of the amount of the requested Revolving Loans. Upon receipt from
such Lender of such amount, and upon receipt of the documents required by §§10
and 11 and the satisfaction of the other conditions set forth therein, to the
extent applicable, the Administrative Agent will make available to the Borrower
the aggregate amount of such Revolving Loans made available to the
Administrative Agent by such Lenders. The failure or refusal of any such Lender
to make available to the Administrative Agent at the aforesaid time and place on
any Drawdown Date the amount of its Commitment Percentage of the requested
Revolving Loans shall not relieve any other Lender of its several obligation
hereunder to make available to the Administrative Agent the amount of such other
Lender’s Commitment Percentage of any requested Revolving Loans.

2.8.2.    Advances by Administrative Agent for Revolving Loans. The
Administrative Agent may, unless notified to the contrary by any Lender prior to
a Drawdown Date, assume that such Lender has made available to the
Administrative Agent on such Drawdown Date the amount of such Lender’s
Commitment Percentage of the Revolving Loans to be made on such Drawdown Date,
and the Administrative Agent may (but it shall not be required to), in reliance
upon such assumption, make available to the Borrower a corresponding amount. If
any such Lender makes available to the Administrative Agent such amount on a
date after such Drawdown Date, such Lender shall pay to the Administrative Agent
on demand an amount equal to the product of (a) the average computed for the
period referred to in clause (c) below, of the weighted average interest rate
paid by the Administrative Agent for federal funds acquired by the
Administrative Agent during each day included in such period, times (b) the
amount of such Lender’s Commitment Percentage of such Revolving Loans, times (c)
a fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Lender’s
Commitment Percentage of such Revolving Loans shall become immediately available
to the Administrative Agent, and the denominator of which is 360. A statement of
the Administrative Agent submitted to such Lender with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due and
owing to the Administrative Agent by such Lender. If the amount of such Lender’s
Commitment Percentage of such Revolving Loans is not made available to the
Administrative Agent by such Lender within three (3) Business Days following
such Drawdown Date, the Administrative Agent shall be entitled to recover such
amount from the Borrower on demand, with interest thereon at the rate per annum
applicable to the Revolving Loans made on such Drawdown Date.

2.9.       Change in Borrowing Bases. The Borrowing Base shall be determined
weekly (or at such other interval as may be specified pursuant to §7.4(f)) by
the Administrative Agent by reference to the Borrowing Base Certificate
delivered to the Lenders and the Administrative Agent pursuant to §7.4(f) and
other information obtained by or provided to the Administrative Agent. The
Administrative Agent shall give to the Borrower written notice of any change in
the Borrowing Base determined by the Administrative Agent, which notice shall be
effective upon its receipt by the Borrower.

 

 

 

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2.10.

Settlements.

2.10.1.  General. On each Settlement Date, the Administrative Agent shall, not
later than 11:00 a.m. (Boston time), give telephonic or facsimile notice (a) to
the Lenders and the Borrower of the respective outstanding amount of Swing Line
Loans made by the Administrative Agent on behalf of the Lenders from the
immediately preceding Settlement Date through the close of business on the prior
day and (b) to such Lenders of the amount (a “Settlement Amount”) that each such
Lender (a “Settling Lender”) shall pay to effect a Settlement of any Swing Line
Loan. A statement of the Administrative Agent submitted to such Lenders and the
Borrower or to the Lenders with respect to any amounts owing under this §2.10
shall be prima facie evidence of the amount due and owing. Each Settling Lender
shall, not later than 2:00 p.m. (Boston time) on such Settlement Date, effect a
wire transfer of immediately available funds to the Administrative Agent in the
amount of the Settlement Amount for such Settling Lender. All funds advanced by
such Lender as a Settling Lender pursuant to this §2.10 shall for all purposes
be treated as a Revolving Loan made by such Settling Lender to the Borrower and
all funds received by such Lender pursuant to this §2.10 shall for all purposes
be treated as repayment of amounts owed with respect to Revolving Loans made by
such Lender. In the event that any bankruptcy, reorganization, liquidation,
receivership or similar cases or proceedings in which the Borrower is a debtor
prevent a Settling Lender from making any Revolving Loan to effect a Settlement
as contemplated hereby, such Settling Lender will make such dispositions and
arrangements with the other Lenders with respect to such Revolving Loans, either
by way of purchase of participations, distribution, pro tanto assignment of
claims, subrogation or otherwise as shall result in each Lender’s share of the
outstanding Revolving Loans being equal, as nearly as may be, to such Lender’s
Commitment Percentage of the outstanding amount of the Revolving Loans.

2.10.2.  Failure to Make Funds Available. The Administrative Agent may, unless
notified to the contrary by any Settling Lender prior to a Settlement Date,
assume that such Settling Lender has made or will make available to the
Administrative Agent on such Settlement Date the amount of such Settling
Lender’s Settlement Amount, and, if applicable, the Administrative Agent may
(but it shall not be required to), in reliance upon such assumption, make
available to the Borrower a corresponding amount. If any Settling Lender makes
available to the Administrative Agent such amount on a date after such
Settlement Date, such Settling Lender shall pay to the Administrative Agent on
demand an amount equal to the product of (a) the average computed for the period
referred to in clause (c) below, of the weighted average interest rate paid by
the Administrative Agent for federal funds acquired by the Administrative Agent
during each day included in such period, times (b) the amount of such Settlement
Amount, times (c) a fraction, the numerator of which is the number of days that
elapse from and including such Settlement Date to the date on which the amount
of such Settlement Amount shall become immediately available to the
Administrative Agent, and the denominator of which is 360. A statement of the
Administrative Agent submitted to such Settling Lender with respect to any
amounts owing under this §2.10.2 shall be prima facie evidence of the amount due
and owing to the Administrative Agent by such Settling Lender. If such Settling
Lender’s Settlement Amount is not made available to the Administrative Agent by
such Settling Lender within three (3) Business Days following such Settlement
Date, the Administrative Agent shall be entitled to recover such amount from the
Borrower on demand, with interest thereon at the rate per annum applicable to
the Revolving Loans as of such Settlement Date.

2.10.3.  No Effect on Other Lenders. The failure or refusal of any Settling
Lender to make available to the Administrative Agent at the aforesaid time and
place on any Settlement Date the amount of such Settling Lender’s Settlement
Amount shall not (a) relieve any other Settling Lender from its several
obligations hereunder to make available to the Administrative

 

 

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Agent the amount of such other Settling Lender’s Settlement Amount or (b) impose
upon any Lender, other than the Settling Lender so failing or refusing, any
liability with respect to such failure or refusal or otherwise increase the
Commitment of such other Lender.

2.11.

Repayments of Revolving Loans Prior to Event of Default.

2.11.1.  Credit for Funds Received in Concentration Account. Prior to the
occurrence of an Event of Default as to which the account officers of the
Administrative Agent active upon the Borrower’s account have actual knowledge,
(a) all funds and cash proceeds in the form of money, checks and like items
received in the Concentration Account (as defined in and as contemplated by
§7.17.1) shall be credited to the Borrower, on the same Business Day on which
the Administrative Agent determines that good collected funds have been
received, and, prior to the receipt of good collected funds, on a provisional
basis until final receipt of good collected funds, (b) all funds and cash
proceeds in the form of a wire transfer received in the Concentration Account as
contemplated by §7.17 shall be credited to the Borrower on the same Business Day
as the Cash Management Bank’s receipt of such amounts in good collected funds,
(c) all funds and cash proceeds in the form of an automated clearing house
transfer received in the Concentration Account as contemplated by §7.17 shall be
credited to the Borrower, on the next Business Day following the Cash Management
Bank’s receipt of such amounts in good collected funds. For purposes of the
foregoing provisions of this §2.11.1, the Cash Management Bank shall not be
deemed to have received any such funds or cash proceeds on any day unless
received by the Cash Management Bank before 2:30 p.m. (Boston time) on such day.
The Borrower further acknowledges and agrees that any such provisional credits
or credits in respect of wire or automatic clearing house funds transfers shall
be subject to reversal if final collection in good funds of the related item is
not received by, or final settlement of the funds transfer is not made in favor
of, the Cash Management Bank in accordance with Cash Management Bank’s customary
procedures and practices for collecting provisional items or receiving
settlement of funds transfers.

2.11.2.

Application of Payments Prior to Event of Default.

(a)        Prior to the occurrence of an Event of Default of which the account
officers of the Administrative Agent active on the Borrower’s account have
knowledge, all funds transferred to the Concentration Account and for which the
Borrower has received credits shall be transferred to the Operating Account.

(b)        Any payments made by the Borrower pursuant to §§7.17(b)(v) or (vi)
shall be applied to the Obligations of the Borrower as follows:

(i)         first, to pay amounts then due and payable by the Borrower under
this Credit Agreement, the Notes and the other Loan Documents and in respect of
any other Obligations of the Borrower;

(ii)         second, to repay Swing Line Loans made by the Administrative Agent
pursuant to §2.6.2 and for which Settlement has not then been made;

(iii)

third, to repay Revolving Loans which are Base Rate Loans;

 

(iv)

fourth, to repay Revolving Loans which are LIBOR Rate Loans; and

 

 

 

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(v)        fifth, except as otherwise required by §§4.2(b) and (c), to the
Operating Account.

(c)        All prepayments of LIBOR Rate Loans prior to the end of an Interest
Period shall obligate the Borrower to pay any breakage costs associated with
such LIBOR Rate Loans in accordance with §5.10. Prior to the occurrence of an
Event of Default, the Borrower may elect to avoid such breakage costs by
providing to the Administrative Agent cash in an amount sufficient to cash
collateralize such LIBOR Rate Loans, but in no event shall the Borrower be
deemed to have paid such LIBOR Rate Loans until such cash has been paid to the
Administrative Agent and has been applied to such LIBOR Rate Loans. Until such
application, the Administrative Agent may elect to cause such cash collateral to
be deposited into either (i) a cash collateral account pursuant to the terms of
a cash collateral agreement executed by the Borrower and the Administrative
Agent and in form and substance satisfactory to the Administrative Agent or (ii)
the Operating Account with appropriate instructions prohibiting the Borrower’s
withdrawal of such funds so long as they remain cash collateral. In each such
case, the Borrower agrees to execute and deliver to the Administrative Agent
such instruments and documents, including Uniform Commercial Code or other
financing statements and agreements with any third party depository banks, as
the Administrative Agent may request.

(d)        All prepayments of the Revolving Loans pursuant to this §2.11.2 shall
be allocated among the Lenders making such Revolving Loans, in proportion, as
nearly as practicable, to the respective unpaid principal amount of such
Revolving Loans outstanding, with adjustments to the extent practicable to
equalize any prior payments or repayments not exactly in proportion. Prior to
any Settlement Date, however, all prepayments of the Revolving Loans shall be
applied in accordance with this §2.11.2, first to outstanding Revolving Loans of
the Administrative Agent.

2.12.     Repayments of Loans After Event of Default. Following the occurrence
and during the continuance of an Event of Default of which the account officers
of the Administrative Agent active on the Borrower’s account have knowledge, all
funds transferred to the Concentration Account and for which the Borrower has
received credits shall be applied to the Obligations in accordance with §12.4.

2.13.     Term Loan. Subject to the terms and conditions set forth in this
Credit Agreement, each Lender agrees to lend to the Borrower on the Closing Date
the amount of its Commitment Percentage of the principal amount of $20,000,000.

2.14.     Term Notes. The Term Loan shall be evidenced by separate promissory
notes of the Borrower in substantially the form of Exhibit F hereto (each a "
Term Note"), each dated the Closing Date (or such other date on which a Lender
may become a party hereto in accordance with §18 hereof) and completed with
appropriate insertions. One Term Note shall be payable to the order of each
Lender in a principal amount equal to such Lender's Commitment Percentage of the
Term Loan and representing the obligation of the Borrower to pay to such Lender
such principal amount or, if less, the outstanding amount of such Lender's
Commitment Percentage of the Term Loan plus interest accrued thereon, as set
forth below. The Borrower irrevocably authorizes each Lender to make or cause to
be made a notation on such Lender's Term Note Record reflecting the original
principal amount of such Lender's Commitment Percentage of the Term Loan and, at
or about the time of such Lender's receipt of any principal payment on such
Lender's Term Note, an appropriate notation on such Lender's Term Note Record
reflecting such payment. The aggregate unpaid amount set forth on such Lender's
Term Note Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to such Lender, but the failure to record, or any error in so
recording, any such amount on such Lender's Term Note Record shall not affect
the

 

 

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obligations of the Borrower hereunder or under any Term Note or to make payments
of principal of and interest on any Term Note when due.

2.15.

Interest on Term Loan.

2.15.1.  Interest Rates. Except as otherwise provided in §5.11, the Term Loan
shall bear interest during each Interest Period relating to all or any portion
of the Terms Loan at the following rates:

(a)        To the extent that all or any portion of the Term Loan bears interest
during such Interest Period at the Base Rate, the Term Loan or such portion
shall bear interest during such Interest Period at the rate per annum equal to
the Base Rate plus the Applicable Margin as in effect from time to time
applicable to all or any portion of the Term Loan bearing interest at the Base
Rate.

(b)        To the extent that all or any portion of the Term Loan bears interest
during such Interest Period at the LIBOR Rate, the Term Loan or such portion
shall bear interest during such Interest Period at the rate per annum equal to
the LIBOR Rate determined for such Interest Period plus the Applicable Margin as
in effect from time to time applicable to all or any portion of the Term Loan
bearing interest at the LIBOR Rate.

The Borrower promises to pay interest on the Term Loan or any portion thereof in
arrears on each Interest Payment Date with respect thereto.

2.15.2.  Notification by Borrower. The Borrower shall notify the Administrative
Agent, such notice to be irrevocable, at least four (4) Business Days prior to
the Drawdown Date of the Term Loan if all or any portion of the Term Loan is to
bear interest at the LIBOR Rate. After the Term Loan has initially been made on
the Closing Date, the provisions of §2.7 shall apply mutatis mutandis with
respect to all or any portion of the Term Loan so that the Borrower may have the
same interest rate options with respect to all or any portion of the Term Loan
as it would be entitled to with respect to the Revolving Loans.

2.15.3.  Amounts, etc. Any portion of the Term Loan bearing interest at the
LIBOR Rate relating to any Interest Period shall be in the amount of $1,000,000
or an integral amount thereof. No Interest Period relating to the Term Loan or
any portion thereof bearing interest at the LIBOR Rate shall extend beyond the
date on which a regularly scheduled installment payment of the principal of the
Term Loan is to be made unless a portion of the Term Loan at least equal to such
installment payment has an Interest Period ending on such date or is then
bearing interest at the Base Rate.

2.16.     Administrative Agent Advances. Notwithstanding anything to the
contrary contained herein (including, without limitation, the borrowing
limitations set forth in Section 2.1 hereof), but subject to the limitations set
forth in the proviso contained in this Section 2.16, the Administrative Agent is
hereby authorized by the Borrower and the Lenders, from time to time at the
request of the Borrower but in the Administrative Agent’s sole discretion, (a)
after the occurrence and during the continuance of a Default or an Event of
Default, or (b) at any time that any of the other applicable conditions
precedent set forth in §11 have not been satisfied, to make Revolving Loans to
the Borrower on behalf of the Lenders which the Administrative Agent, in its
reasonable business judgment, deems necessary or desirable (i) to preserve or
protect the Collateral, or any portion thereof, (ii) to enhance the likelihood
of, or maximize the amount of, repayment of the Loans and other Obligations
(other than amounts in respect of Cash Management Obligations), or (iii) to pay
any other amount chargeable to the Borrower pursuant to the

 

 

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terms of this Agreement (other than amounts in respect of Cash Management
Obligations), including, without limitation, costs, fees and expenses as
described in §15 (any of the advances described in this §2.16 being hereinafter
referred to as “Administrative Agent Advances”); provided, that (w) the
Administrative Agent Advances shall be due and payable on the earlier of (1)
demand by the Administrative Agent and (2) sixty (60) days after the making
thereof, (x) not more than two (2) Administrative Agent Advances shall be made
in any 180 day period, (y) the aggregate outstanding principal amount of all
Administrative Agent Advances shall not exceed $2,500,000 and (z) the
Administrative Agent shall not make any Administrative Agent Advance to the
Borrower if the amount thereof would cause the Revolving Exposure to exceed the
Total Commitment. The Administrative Agent Advances shall be repayable on demand
and secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to Base Rate Loans
which are Revolving Loans from time to time. The Administrative Agent shall
notify each Lender and the Borrower in writing of each such Administrative Agent
Advance promptly following the making thereof, which notice shall include a
description of the purpose of such Administrative Agent Advance. Each Lender
irrevocably agrees to purchase from the Administrative Agent, upon demand, its
pro rata share (in accordance with its Commitment Percentage) of the amount of
the outstanding Administrative Agent Advances. Until such purchase, all payments
in respect of the Administrative Agent Advances shall be for the account of the
Administrative Agent.

3. REPAYMENT OF LOANS.

3.1.

Revolving Loans.

3.1.1.    Maturity. The Borrower promises to pay on the Maturity Date, and there
shall become absolutely due and payable on the Maturity Date, all of the
Revolving Loans outstanding on such date, together with any and all accrued and
unpaid interest thereon and all other fees and other amounts then accrued and
outstanding with respect thereto.

3.1.2.    Mandatory Repayments of Revolving Loans. If at any time the sum of the
Revolving Exposure exceeds the Gross Availability, then the Borrower shall
immediately pay the amount of such excess to the Administrative Agent for the
respective accounts of the Lenders for application: first, to any Swing Line
Loans outstanding, second, to any Unpaid Reimbursement Obligations; third, to
all Revolving Loans advanced to the Borrower; and fourth, to provide to the
Administrative Agent cash collateral for Reimbursement Obligations as
contemplated by §4.2(b) and (c). Each payment of any Unpaid Reimbursement
Obligation or prepayment of Revolving Loans shall be allocated among the
Lenders, in proportion, as nearly as practicable, to each Reimbursement
Obligation or (as the case may be) the respective unpaid principal amount of
each Lender’s Revolving Note or loan account (as the case may be) with
adjustments to the extent practicable to equalize any prior payments or
repayments not exactly in proportion. In addition, the Borrower shall repay the
Revolving Loans in accordance with §3.2.1(d).

3.1.3.    Optional Repayments of Revolving Loans. The Borrower shall have the
right, at their election, to repay the outstanding amount of the Revolving
Loans, as a whole or in part, at any time without penalty or premium, provided
that any full or partial prepayment of the outstanding amount of any LIBOR Rate
Loans pursuant to this §3.1.3 may be made only on the last day of the Interest
Period relating thereto (unless breakage costs are paid by the Borrower pursuant
to §5.10 or cash collateral is provided in accordance with §2.11.2(c)) . The
Borrower shall provide to the Administrative Agent, no later than 10:00 a.m.,
Boston time, at least three (3) Business Days prior written notice of any
proposed prepayment pursuant to this §3.1.3, specifying the proposed date of
prepayment of any LIBOR Rate Loans and the principal amount to be prepaid. Each
such partial prepayment of the Revolving Loans shall be accompanied by the

 

 

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payment of accrued interest on the principal prepaid to the date of prepayment
and shall be applied, in the absence of instruction by the Borrower, first to
the principal of Base Rate Loans which are Revolving Loans and second to the
principal of LIBOR Rate Loans which are Revolving Loans. Each partial prepayment
shall be allocated among the Lenders, in proportion, as nearly as practicable,
to the respective unpaid principal amount of each such Lender’s Revolving Note
or loan account, as the case may be, with adjustments to the extent practicable
to equalize any prior repayments not exactly in proportion.

3.2.

Term Loan.

 

 

3.2.1.

Mandatory Prepayments of Term Loan.  

(a)        The Borrower shall repay to the Lenders the principal amount of the
Term Loan in quarterly installments. Such quarterly installments (“Term Loan
Installments”) of principal shall be payable on the installment payment dates
(each a “Term Loan Installment Date ”), and shall be in the amounts as set forth
in the table below as adjusted in accordance with the terms of this Credit
Agreement, with all remaining outstanding amounts of the Term Loan to be repaid
on the Maturity Date.

Term Loan Installment Payment Date

Term Loan Installment

November 1, 2005

$1,000,000

February 1, 2006

$1,000,000

May 1, 2006

$1,000,000

August 1, 2006

$1,000,000

November 1, 2006

$1,000,000

February 1, 2007

$1,000,000

May 1, 2007

$1,000,000

August 1, 2007

$1,000,000

November 1, 2007

$1,000,000

February 1, 2008

$1,000,000

May 1, 2008

$1,000,000

August 1, 2008

$1,125,000

November 1, 2008

$1,125,000

February 1, 2009

$1,125,000

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May 1, 2009

$1,125,000

August 1, 2009

$1,125,000

November 1, 2009

$1,125,000

February 1, 2010

$1,125,000

Maturity Date

$1,125,000 or the remaining outstanding amount of the Term Loan

(b)        Commencing with the end of the 2005 Fiscal Year, and for each Fiscal
Year ended thereafter, in addition to the Term Loan Installments to be made in
accordance with (a) above, the Borrower shall make a prepayment in an aggregate
amount equal to (A) 75% of Excess Cash Flow for the preceding Fiscal Year, if at
the end of such Fiscal Year, the Consolidated Total Funded Debt to EBITDA Ratio
is greater than or equal to 3.50:1.00 or (b) 50% of Excess Cash Flow for the
preceding Fiscal Year, if at the end of such Fiscal Year, the Consolidated Total
Funded Debt to EBITDA Ratio is less than 3.50:1.00. Prepayments made pursuant to
this §3.2.1(b) shall (a) be due not later than thirty (30) days after the date
that is the earlier of (i) the date on which the financial statements have been
delivered pursuant to §7.4(a) and (ii) the date that such financial statements
are required to be delivered pursuant to the terms of §7.4(a) and (b) shall be
applied in the manner set forth in §3.2.1(d).

(c)

Concurrently with the receipt by the Parent or any Subsidiary of the Parent of:

(i)         net cash proceeds from any Asset Sales by the Parent or such
Subsidiary (other than the sale, lease, license or other disposition of assets
in the ordinary course of business consistent with past practices) in excess of
$100,000 in any Fiscal Year or $500,000 in the aggregate during the term of this
Credit Agreement, which have not been utilized by the Parent or such Subsidiary
to replace the assets disposed of within sixty (60) days of such Asset Sale;

(ii)         net cash proceeds from the issuance by the Parent or such
Subsidiary of any debt (other than debt permitted under §8.2) or equity
securities (other than equity securities issued in connection with any
compensatory employee benefit or option plan); or

(iii)        net cash proceeds received by the Parent or such Subsidiary from
Casualty Events which have not been utilized by the Parent or such Subsidiary to
repair or replace the property so damaged, destroyed or taken within one hundred
and eighty (180) days of receipt of such proceeds;

the Borrower shall pay to the Administrative Agent for the respective accounts
of the Lenders an amount equal to one hundred percent (100%) of such proceeds,
to be applied in the manner set forth in §3.2.1(d). Notwithstanding the
foregoing, the provisions of this §3.2.1(c) shall not impair any restrictions
set forth in the Loan Documents with respect to the incurrence of Indebtedness
or Asset Sales by the Parent or any of its Subsidiaries.

 

 

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(d)        (i) All payments made pursuant to §3.2.1(b) shall be applied to repay
the outstanding principal amount of the Term Loan, with such payments to be
applied against the remaining scheduled installments of principal of the Term
Loan on a pro rata basis and pro rata among the Lenders and (ii) all payments
made pursuant to §3.2.1(c) shall be applied (A) first, to repay the outstanding
principal amount of the Term Loan, with such payments to be applied against the
remaining scheduled installments of principal of the Term Loan on a pro rata
basis and pro rata among the Lenders, (B) then, upon payment in full of all
outstanding amounts on the Term Loan, to repay the outstanding principal amount
of the Revolving Loans; provided that the Borrower may reborrow such Revolving
Loans subject to the terms of this Credit Agreement. Such mandatory prepayments
shall be allocated among the Lenders in proportion, as nearly as practicable, to
the respective outstanding amounts of each such Lender's Notes or loan accounts,
as the case may be, with adjustments to the extent practicable to equalize any
prior prepayments not exactly in proportion. No amounts repaid with respect to
the Term Loan pursuant to this §3.2.1 may be reborrowed.

3.2.2.    Optional Prepayments of Term Loan. The Borrower shall have the right
at any time to prepay the Term Notes on or before the Maturity Date, as a whole,
or in part, upon not less than five (5) Business Days prior written notice to
the Administrative Agent, without premium or penalty, provided that (a) no
portion of the Term Loan bearing interest at the LIBOR Rate may be prepaid
pursuant to this §3.2.2 except on the last day of the Interest Period relating
thereto (unless breakage costs are paid by the Borrower pursuant to §5.10 or
cash collateral is provided in accordance with §2.11.2(c)) and (b) each partial
prepayment shall be allocated among the Lenders, in proportion, as nearly as
practicable, to the respective outstanding amount of each such Lender's Term
Note, or loan account, as the case may be, with adjustments to the extent
practicable to equalize any prior prepayments not exactly in proportion. Any
prepayment of principal of the Term Loan shall include all interest accrued to
the date of prepayment and shall be applied pro rata to the remaining scheduled
installments of the Term Loan on a pro rata basis and pro rata among the
Lenders. No amount repaid with respect to the Term Loan may be reborrowed.

4. LETTERS OF CREDIT.

4.1.

Letter of Credit Commitments.

4.1.1.    Commitment to Issue Letters of Credit. Subject to the terms and
conditions hereof and the execution and delivery by the Borrower of a letter of
credit application on the Issuing Bank’s customary form (a “Letter of Credit
Application”), the Administrative Agent on behalf of the Lenders and in reliance
upon the agreement of such Lenders set forth in §4.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees to (a)
cause the Issuing Bank to issue, extend and renew for the account of the
Borrower or Quaker Textile one or more standby or documentary letters of credit
(each individually, a “Letter of Credit”), in such form as may be requested from
time to time by the Borrower and agreed to by the Administrative Agent and the
Issuing Bank and (b) enter into an LC Guaranty to support the reimbursement
obligations of the Borrower with respect to Letters of Credit requested by the
Borrower; provided, however, that after giving effect to such request, (i) the
sum of the aggregate Maximum Drawing Amount on all Letters of Credit and all
Unpaid Reimbursement Obligations shall not exceed $10,000,000 at any one time
and (ii) the Revolving Exposure shall not exceed the Gross Availability at such
time.

4.1.2.    Letter of Credit Applications. Each Letter of Credit Application shall
be completed to the satisfaction of the Administrative Agent and the Issuing
Bank. In the event that

 

 

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any provision of any Letter of Credit Application shall be inconsistent with any
provision of this Credit Agreement, then the provisions of this Credit Agreement
shall, to the extent of any such inconsistency, govern.

4.1.3.    Terms of Letters of Credit. Each Letter of Credit issued, extended or
renewed hereunder shall, among other things, (a) provide for the payment of
sight drafts for honor thereunder when presented in accordance with the terms
thereof and when accompanied by the documents described therein, and (b) have an
expiry date no later than the date which is fourteen (14) days (or, if the
Letter of Credit is confirmed by a confirmer or otherwise provides for one or
more nominated persons, forty-five (45) days) prior to the Maturity Date.
Subject to clause (b) above, each Letter of Credit shall expire (without giving
effect to any extension thereof by reason of an interruption of business) at or
prior to the close of business 365 days, in the case of standby Letters of
Credit, or 180 days, in the case of documentary Letters of Credit, after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, 365 days or 180 days, as applicable, after such renewal or
extension) provided that the Issuing Bank may, in its sole and absolute
discretion, agree to issue any such standby Letter of Credit providing for
automatic extensions thereof to a date not later than 365 days beyond its
current expiration date; provided that any such automatic extension Letter of
Credit must permit the Issuing Bank to prevent any such extension at least once
in each twelve-month period (commencing with the date of issuance of such Letter
of Credit) by giving prior notice to the beneficiary thereof not later than a
day in each such twelve-month period to be agreed upon at the time such Letter
of Credit is issued. Each Letter of Credit so issued, extended or renewed shall
be subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500 or any
successor version thereto adopted by the Issuing Bank in the ordinary course of
its business as a letter of credit issuer and in effect at the time of issuance
of such Letter of Credit (the “Uniform Customs”) or, in the case of a standby
Letter of Credit, either the Uniform Customs or the International Standby
Practices (ISP98), International Chamber of Commerce Publication No. 590, or any
successor code of standby letter of credit practices among banks adopted by the
Issuing Bank in the ordinary course of its business as a standby letter of
credit issuer and in effect at the time of issuance of such Letter of Credit.

4.1.4.    Reimbursement Obligations of Lenders. Each Lender severally agrees
that it shall be absolutely liable, without regard to the occurrence of any
Default or Event of Default or any other condition precedent whatsoever, to the
extent of such Lender’s Commitment Percentage, to reimburse the Administrative
Agent on demand for the amount of each draft paid by the Issuing Bank under each
Letter of Credit issued for the account of the Borrower or Quaker Textile and
each payment made by the Administrative Agent to the Issuing Bank under the LC
Guaranty relating to any Letter of Credit issued for the account of the Borrower
or Quaker Textile to the extent that such amount is not reimbursed by the
Borrower pursuant to §4.2 (such agreement by a Lender being called herein the
“Letter of Credit Participation” of such Lender).

4.1.5.    Participations of Lenders. Each such payment made by a Lender shall,
unless the applicable Reimbursement Obligation has been otherwise funded as a
Revolving Loan bearing interest at the Base Rate pursuant to §4.2, be treated as
the purchase by such Lender of a participating interest in the Borrower’s
Reimbursement Obligation under §4.2 in an amount equal to such payment. To that
extent, each Lender shall share in accordance with its participating interest in
any interest which accrues pursuant to §4.2.

4.2.       Reimbursement Obligation of the Borrower. In order to induce the
Administrative Agent to cause the Issuing Bank to issue, extend and renew each
Letter of Credit for the account of the Borrower or Quaker Textile, the Borrower
agrees to reimburse or pay to the Administrative Agent, for the

 

 

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account of the Administrative Agent and/or the Issuing Bank or (as the case may
be) the Lenders, with respect to each Letter of Credit issued, extended or
renewed for the Borrower’s or Quaker Textile’s account,

(a)        except as otherwise expressly provided in §§4.2(b) and (c), on each
date that any draft presented under such Letter of Credit is honored by the
Issuing Bank, or the Issuing Bank or the Administrative Agent otherwise makes a
payment with respect thereto or the Administrative Agent makes any payment under
the LC Guaranty, (i) the amount paid by the Issuing Bank or the Administrative
Agent under or with respect to such Letter of Credit, and (ii) the amount of any
taxes, fees, charges or other costs and expenses whatsoever incurred by the
Issuing Bank or Administrative Agent or any Lender in connection with any
payment made by the Issuing Bank, Administrative Agent or any Lender under, or
with respect to, such Letter of Credit; provided that, subject to the conditions
to borrowing set forth herein, payment of each Reimbursement Obligation by the
Borrower under this §4.2(a) shall be made through the automatic funding of a
Revolving Loan bearing interest at the Base Rate applicable to Revolving Loans
in an amount equal to the amount of such Reimbursement Obligation, and the
Borrower hereby irrevocably authorizes and directs the Administrative Agent and
Issuing Bank to take such actions as may be necessary to effectuate such
automatic funding of any such Base Rate Loans;

(b)        upon the reduction (but not termination) of the Total Commitment to
an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Administrative Agent for the
benefit of the Lenders and the Administrative Agent as cash collateral for all
Reimbursement Obligations, and

(c)        upon the termination of the Total Commitment, or the acceleration of
the Reimbursement Obligations with respect to all Letters of Credit issued for
the account of the Borrower or Quaker Textile in accordance with §12, an amount
equal to the then Maximum Drawing Amount on all Letters of Credit issued for the
account of the Borrower or Quaker Textile, which amount shall be held by the
Administrative Agent for the benefit of the Lenders and the Administrative Agent
as cash collateral for all Reimbursement Obligations.

Each such payment shall be made to the Administrative Agent at the
Administrative Agent’s Office in immediately available funds. Interest on any
and all amounts remaining unpaid by the Borrower under this §4.2 at any time
from the date such amounts become due and payable (whether as stated in this
§4.2, by acceleration or otherwise) until payment in full (whether before or
after judgment) shall be payable to the Administrative Agent on demand at the
Default Rate.

4.3.       Letter of Credit Payments. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Administrative
Agent shall notify the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. If the Borrower fails to reimburse the
Administrative Agent as provided in §4.2 on or before the date that such draft
is paid or other payment is made by the Issuing Bank or the Administrative Agent
or, as a result of the applicable borrowing limits described therein being
exceeded such Reimbursement Obligations are not satisfied by the making of a
Revolving Loan bearing interest at the Base Rate applicable to Revolving Loans,
the Administrative Agent may at any time thereafter notify the Lenders of the
amount of any such Unpaid Reimbursement Obligation. No later than 2:00 p.m.
(Boston time) on the Business Day next following the receipt of such notice,
each such Lender shall make available to the Administrative Agent, at the
Administrative Agent’s Office, in immediately available funds, such Lender’s
Commitment Percentage of such Unpaid Reimbursement Obligation, together with an
amount equal to the product of (a) the average, computed for the period referred
to in clause (c) below, of the weighted average interest rate paid by the
Administrative Agent for

 

 

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federal funds acquired by the Administrative Agent during each day included in
such period, times (b) the amount equal to such Lender’s Commitment Percentage
of such Unpaid Reimbursement Obligation, times (c) a fraction, the numerator of
which is the number of days that elapse from and including the date the Issuing
Bank or the Administrative Agent paid the draft presented for honor or otherwise
made payment to the date on which such Lender’s Commitment Percentage of such
Unpaid Reimbursement Obligation, shall become immediately available to the
Administrative Agent, and the denominator of which is 360. The responsibility of
the Issuing Bank and the Administrative Agent to the Borrower and the Lenders
shall be only to determine that the documents (including each draft) delivered
under each Letter of Credit in connection with such presentment shall be in
conformity in all material respects with such Letter of Credit.

4.4.       Obligations Absolute. The Borrower’s obligations under this §4 shall
be absolute and unconditional under any and all circumstances and irrespective
of the occurrence of any Default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which the Borrower
or Quaker Textile may have or have had against the Issuing Bank or the
Administrative Agent, any Lender or any beneficiary of a Letter of Credit. The
Borrower further agrees with the Administrative Agent and the Lenders that none
of the Issuing Bank, the Administrative Agent and the Lenders shall be
responsible for, and the Borrower’s Reimbursement Obligations under §4.2 shall
not be affected by, among other things, the validity or genuineness of documents
or of any endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, fraudulent or forged, or any dispute between
or among the Borrower or Quaker Textile, the beneficiary of any Letter of Credit
or any financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of the Borrower or Quaker
Textile against the beneficiary of any Letter of Credit or any such transferee.
None of the Issuing Bank, the Administrative Agent and the Lenders shall be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Issuing Bank, the Administrative Agent or any Lender under or in connection
with each Letter of Credit and the related drafts and documents, if done in good
faith and in the absence of gross negligence, shall be binding upon the Borrower
and Quaker Textile and shall not result in any liability on the part of the
Issuing Bank, the Administrative Agent or any Lender to the Borrower or Quaker
Textile.

4.5.       Reliance by Issuer. To the extent not inconsistent with §4.4, the
Issuing Bank and the Administrative Agent shall be entitled to rely, and shall
be fully protected in relying upon, any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by such Person to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Issuing Bank or the Administrative Agent. Each of the Issuing Bank and
the Administrative Agent shall be fully justified in failing or refusing to take
any action under this Credit Agreement unless it shall first have received such
advice or concurrence of the Required Lenders as they reasonably deem
appropriate or it shall first be indemnified to its reasonable satisfaction by
the other Lenders against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Issuing Bank and the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Credit Agreement in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the
Lenders and all future holders of the Revolving Notes or of a Letter of Credit
Participation.

4.6.       Letter of Credit Fee. The Borrower shall pay a fee (in each case, a
“Letter of Credit Fee”) to the Administrative Agent, in respect of each Letter
of Credit issued for the account of the Borrower or Quaker Textile, (a) in an
amount equal to the Applicable Margin per annum with respect to

 

 

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LIBOR Rate Loans that are Revolving Loans on the available amount of each such
Letter of Credit, which Letter of Credit Fee shall be for the accounts of the
Lenders in accordance with their respective Commitment Percentages and (b) in an
amount equal to one-eighth of one percent (0.125%) per annum on the available
amount of each such Letter of Credit, which amount shall be for the account of
the Administrative Agent or the Issuing Bank as a fronting fee. The Letter of
Credit Fee shall be paid monthly in arrears on the first Business Day of each
month for the immediately preceding calendar month. In respect of each Letter of
Credit issued for the account of the Borrower or Quaker Textile, the Borrower
shall also pay to the Administrative Agent for the Issuing Bank’s or the
Administrative Agent’s own account, at such other time or times as such charges
are customarily made by the Issuing Bank or the Administrative Agent, the
Issuing Bank’s and/or the Administrative Agent’s customary issuance, amendment,
negotiation, payment or document examination and other administrative fees as in
effect from time to time.

4.7.       Existing Letters of Credit. Schedule 4.7 contains a list of certain
letters of credit issued prior to the Closing Date for the account of the
Borrower or Quaker Textile by Fleet National Bank, in its capacity as issuing
bank under the Existing Credit Agreement (the “Existing Letters of Credit”). On
the Closing Date, (a) the Existing Letters of Credit shall be deemed to be
Letters of Credit issued pursuant to this §4 and shall be subject to all of the
provisions applicable to Letters of Credit under this Credit Agreement and (b)
all liabilities of the Borrower with respect to the Existing Letters of Credit
shall constitute Obligations of the Borrower with respect to Letters of Credit
in accordance with this Credit Agreement and the other Loan Documents as though
the Borrower had delivered a Letter of Credit Application under this Credit
Agreement. On the Closing Date, the letter of credit fees owing with respect to
the Existing Letters of Credit under §2.3 of the Existing Credit Agreement shall
be calculated and paid in full to Fleet National Bank, as lender under the
Existing Credit Agreement. From and after the Closing Date, the Borrower shall
pay Letter of Credit Fees and such other fees as provided in §4.6, in each case
when due pursuant to §4.6, with respect to each of the Existing Letters of
Credit.

5. CERTAIN GENERAL PROVISIONS.

5.1.

Fees.

5.1.1.    Administrative Agent’s Fee. The Borrower shall pay to the
Administrative Agent, for its own account, an administrative agent’s fee as set
forth in the Fee Letter (the “Administrative Agent’s Fee”), in the amounts and
at the times referred to therein.

5.1.2.    Closing Fee. The Borrower shall pay to the Administrative Agent on the
Closing Date the additional fees set forth in the Fee Letter (the “Closing
Fee”), in the amounts and at the times referred to therein.

5.2.

Funds for Payments.

5.2.1.    Payments to Administrative Agent. All payments of principal and
interest on Loans and all Reimbursement Obligations, Fees and any other amounts
due hereunder or under any of the other Loan Documents (unless the provisions of
this Credit Agreement require otherwise) shall be made on the due date thereof
to the Administrative Agent in Dollars for the respective accounts of the
Lenders and the Administrative Agent, at the Administrative Agent’s Office or at
such other place that the Administrative Agent may from time to time designate,
in each case no later than 12:00 noon (Boston, Massachusetts, time or other
local time at the place of payment) and in immediately available funds.

 

 

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5.2.2.    No Offset, etc. All payments by the Borrower hereunder and under any
of the other Loan Documents shall be made without recoupment, setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein (other than Excluded Taxes) unless the Borrower is compelled
by law to make such deduction or withholding. If any such obligation is imposed
upon the Borrower with respect to any amount payable by it hereunder or under
any of the other Loan Documents, the Borrower will pay to the Administrative
Agent, for the account of the Lenders or (as the case may be) the Administrative
Agent, on the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Lenders or the Administrative Agent to receive the same
net amount which the Lenders or the Administrative Agent would have received on
such due date had no such obligation been imposed upon the Borrower. The
Borrower will deliver promptly to the Administrative Agent certificates or other
valid vouchers for all taxes or other charges deducted from or paid with respect
to payments made by the Borrower hereunder or under such other Loan Document.

5.2.3.    Non-U.S. Lenders. Each Lender and the Administrative Agent that is not
a U.S. Person as defined in Section 7701(a)(30) of the Code for federal income
tax purposes (a "Non-U.S. Lender") hereby agrees that, if and to the extent it
is legally able to do so, it shall, prior to the date on which it becomes a
Lender hereunder, deliver to the Borrower and the Administrative Agent, as
applicable, such certificates, documents or other evidence, as and when required
by the Code or Treasury Regulations issued pursuant thereto, including (a) in
the case of a Non-U.S. Lender that is a "bank" for purposes of Section
881(c)(3)(A) of the Code, two (2) duly completed copies of Internal Revenue
Service Form W-8BEN or Form W-8ECI and any other certificate or statement of
exemption required by Treasury Regulations, or any subsequent versions thereof
or successors thereto, properly completed and duly executed by such Lender or
the Administrative Agent establishing that with respect to payments of
principal, interest or fees hereunder it is (i) not subject to United States
federal withholding tax under the Code because such payment is effectively
connected with the conduct by such Lender or Administrative Agent of a trade or
business in the United States or (ii) totally exempt from United States federal
withholding tax under a provision of an applicable tax treaty and (b) in the
case of a Non-U.S. Lender that is not a "bank" for purposes of
Section 881(c)(3)(A) of the Code, a certificate in form and substance reasonably
satisfactory to the Administrative Agent and the Borrower and to the effect that
(i) such Non-U.S. Lender is not a "bank" for purposes of Section 881(c)(3)(A) of
the Code, is not subject to regulatory or other legal requirements as a bank in
any jurisdiction, and has not been treated as a bank for purposes of any tax,
securities law or other filing or submission made to any governmental authority,
any application made to a rating agency or qualification for any exemption from
any tax, securities law or other legal requirements, (ii) is not a ten (10)
percent shareholder for purposes of Section 881(c)(3)(B) of the Code and
(iii) is not a controlled foreign corporation receiving interest from a related
person for purposes of Section 881(c)(3)(C) of the Code, together with a
properly completed Internal Revenue Service Form W-8 or W-9, as applicable (or
successor forms). Each Lender or the Administrative Agent agrees that it shall,
promptly upon a change of its lending office or the selection of any additional
lending office, to the extent the forms previously delivered by it pursuant to
this section are no longer effective, and promptly upon the Borrower’s or the
Administrative Agent's reasonable request after the occurrence of any other
event (including the passage of time) requiring the delivery of a Form W-8BEN,
Form W-8ECI, Form W-8 or W-9 in addition to or in replacement of the forms
previously delivered, deliver to the Borrower and the Administrative Agent, as
applicable, if and to the extent it is properly entitled to do so, a properly
completed and executed Form W-8BEN, Form W-8ECI, Form W-8 or W-9, as applicable
(or any successor forms thereto).

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5.3.       Computations. All computations of interest on Loans, any Fees or any
other amount due hereunder shall, unless otherwise expressly provided herein, be
based on a 360-day year and paid for the actual number of days elapsed. Except
as otherwise provided in the definition of the term “Interest Period” with
respect to LIBOR Rate Loans, whenever a payment hereunder or under any of the
other Loan Documents becomes due on a day that is not a Business Day, the due
date for such payment shall be extended to the next succeeding Business Day, and
interest and fees shall accrue during such extension.

5.4.       Interest Limitation. Notwithstanding any other term of this Credit
Agreement or any other document referred to herein or therein, the maximum
amount of interest which may be charged to or collected from any person liable
hereunder by the Lenders shall be absolutely limited to, and shall in no event
exceed, the maximum amount of interest which could lawfully be charged or
collected under applicable law (including, to the extent applicable, the
provisions of Section 5197 of the Revised Statutes of the United States of
America, as amended or 12 U.S.C. Section 85, as amended), so that the maximum of
all amounts constituting interest under applicable law, howsoever computed,
shall never exceed as to any Person liable therefor such lawful maximum, and any
term of this Credit Agreement or any other document referred to herein or
therein which could be construed as providing for interest in excess of such
lawful maximum, shall be and hereby is made expressly subject to and modified by
the provisions of this paragraph.

5.5.       Inability to Determine LIBOR Rate. In the event, prior to the
commencement of any Interest Period relating to any LIBOR Rate Loan, the
Administrative Agent shall determine or be notified by the Required Lenders that
(a) adequate and reasonable methods do not exist for ascertaining the LIBOR Rate
that would otherwise determine the rate of interest to be applicable to any
LIBOR Rate Loan during any Interest Period or (b) the LIBOR Rate determined or
to be determined for such Interest Period will not adequately and fairly reflect
the cost to the Lenders of making or maintaining their LIBOR Rate Loans during
such period, the Administrative Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Lenders) to the Borrower and the Lenders. In such event (i) any Loan Request or
Conversion Request with respect to LIBOR Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (ii) each LIBOR
Rate Loan will automatically, on the last day of the then current Interest
Period relating thereto, become a Base Rate Loan and (iii) the obligations of
the Lenders to make LIBOR Rate Loans shall be suspended until the Administrative
Agent or the Required Lenders determine that the circumstances giving rise to
such suspension no longer exist, whereupon the Administrative Agent or, as the
case may be, the Administrative Agent upon the instruction of the Required
Lenders, shall so notify the Borrower and the Lenders.

5.6.       Illegality. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Lender to (i) make or
maintain LIBOR Rate Loans, or (ii) perform its obligations in respect of any
LIBOR Rate Loan, such Lender shall forthwith give notice of such circumstances
to the Borrower and the other Lenders and thereupon (a) the commitment of such
Lender to make LIBOR Rate Loans or convert Loans of another Type to LIBOR Rate
Loans shall forthwith be suspended, and (b) such Lender’s Loans then outstanding
as LIBOR Rate Loans if any such Loans exist, shall be converted automatically to
Base Rate Loans on the last day of each Interest Period applicable to such LIBOR
Rate Loans or within such earlier period as may be required by law. The Borrower
hereby agrees promptly to pay to the Administrative Agent for the account of
such Lender, upon demand by such Lender, any additional amounts necessary to
compensate such Lender for any costs incurred by such Lender in making any
conversion in accordance with this §5.6, including any interest or fees payable
by such Lender to lenders of funds obtained by it in order to make or maintain
its LIBOR Rate Loans hereunder.

 

 

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5.7.       Additional Costs, etc. If any present or future applicable law, which
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Lender,
the Administrative Agent, the Issuing Bank or the Cash Management Bank by any
central bank or other fiscal, monetary or other authority (whether or not having
the force of law), shall:

(a)        subject any Lender, the Administrative Agent, the Issuing Bank or the
Cash Management Bank to any Tax, levy, impost, duty, charge, fee, deduction or
withholding of any nature with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, such Lender’s Commitment or the LIBOR Rate
Loans, or change in the basis of taxation of payments to such Lender, the
Administrative Agent, the Issuing Bank or the Cash Management Bank (other than
Taxes, levies, imposts. charges, fees, deductions or withholdings covered by
§5.2.2 and the imposition of, or any change in the rate of, any Excluded Tax
payable by such Lender, the Administrative Agent, the Issuing Bank or the Cash
Management Bank), or

(b)        impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or letters of credit issued by,
or commitments of an office of any Lender, the Administrative Agent, the Issuing
Bank or the Cash Management Bank, or

(c)        impose on any Lender, the Administrative Agent, the Issuing Bank or
the Cash Management Bank any other conditions or requirements with respect to
this Credit Agreement, the other Loan Documents, such Lender’s Commitment, any
Letters of Credit or, the LIBOR Rate Loans, and the result of any of the
foregoing is:

(i)         to increase the cost to any Lender or the Issuing Bank of making,
funding, issuing, renewing, extending or maintaining any of the LIBOR Rate
Loans, such Lender’s Commitment or any Letter of Credit, or

(ii)         to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Lender, the Administrative Agent or
the Issuing Bank hereunder on account of such Lender’s Commitment, any Letter of
Credit or any of the Loans, or

(iii)        to require such Lender, the Administrative Agent, the Issuing Bank
or the Cash Management Bank to make any payment or to forego any interest or
Reimbursement Obligation or other sum payable hereunder, the amount of which
payment or foregone interest or Reimbursement Obligation or other sum is
calculated by reference to the gross amount of any sum receivable or deemed
received by such Lender, the Administrative Agent, the Issuing Bank or the Cash
Management Bank from the Borrower hereunder,

then, and in each such case, the Borrower will, upon demand made by such Lender,
the Administrative Agent, the Issuing Bank or the Cash Management Bank at any
time and from time to time and as often as the occasion therefor may arise, pay
to such Lender, the Administrative Agent, the Issuing Bank or the Cash
Management Bank such additional amounts as will be sufficient to compensate such
Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank
for such additional cost,

 

 

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reduction, payment or foregone interest or Reimbursement Obligation or other sum
upon presentation by such Lender, the Administrative Agent, the Issuing Bank or
the Cash Management Bank of a certificate in accordance with §5.9 hereof;
provided that the Borrower shall not be liable to any Lender, the Administrative
Agent, the Issuing Bank or the Cash Management Bank for costs incurred more than
one hundred and twenty (120) days prior to receipt by the Borrower of such
certificate from such Lender, the Administrative Agent, the Issuing Bank, or the
Cash Management Bank, as applicable, unless such costs were incurred prior to
such 120-day period solely as a result of such present or future applicable law
being retroactive to a date which occurred prior to such 120-day period.

5.8.       Capital Adequacy. If after the date hereof any Lender, the
Administrative Agent or the Issuing Bank determines that (i) the adoption of or
change in any law, governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) regarding capital requirements for
banks or bank holding companies or any change in the interpretation or
application thereof by a court or governmental authority with appropriate
jurisdiction, or (ii) compliance by such Lender, the Administrative Agent or the
Issuing Bank or any corporation controlling such Lender, the Administrative
Agent or the Issuing Bank with any law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) of any such
entity regarding capital adequacy, has the effect of reducing the return on such
Lender’s, the Administrative Agent’s or the Issuing Bank’s commitment with
respect to any Loans to a level below that which such Lender, the Administrative
Agent or the Issuing Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Lender’s, the Administrative Agent’s
or Issuing Bank’s then existing policies with respect to capital adequacy and
assuming full utilization of such entity’s capital) by any amount deemed by such
Lender, the Administrative Agent or the Issuing Bank to be material, then such
Lender, the Administrative Agent or the Issuing Bank may notify the Borrower of
such fact upon presentation of a certificate in accordance with §5.9 hereof. To
the extent that the amount of such reduction in the return on capital is not
reflected in the Base Rate, the Borrower and such Lender shall thereafter
attempt to negotiate in good faith, within thirty (30) days of the day on which
the Borrower receive such notice, an adjustment to the compensation payable
hereunder which will adequately compensate such Lender in light of these
circumstances. If the Borrower and such Lender are unable to agree to such
adjustment within thirty (30) days of the date on which the Borrower receives
such notice, then commencing on the date of such notice (but not earlier than
the effective date of any such increased capital requirement), the fees payable
hereunder shall increase by an amount that will, in the Administrative Agent’s,
Issuing Bank’s or such Lender’s reasonable determination, provide adequate
compensation; provided that the Borrower shall not be liable to any Lender, the
Administrative Agent or the Issuing Bank for costs incurred more than one
hundred and twenty (120) days prior to receipt by the Borrower of such notice.
Each Lender shall allocate such cost increases among its customers in good faith
and on an equitable basis.

5.9.       Certificate. A certificate setting forth any additional amounts
payable pursuant to §5.7 or §5.8 and a brief explanation of such amounts which
are due, submitted by any Lender, the Administrative Agent, the Issuing Bank or
the Cash Management Bank to the Borrower, shall be prima facie evidence that
such amounts are due and owing.

5.10.     Indemnity. The Borrower agrees to indemnify each Lender and to hold
each Lender harmless from and against any loss, cost or expense that such Lender
may sustain or incur as a consequence of (a) default by the Borrower in payment
of the principal amount of or any interest on any LIBOR Rate Loans as and when
due and payable, including any such loss or expense arising from interest or
fees payable by such Lender to banks of funds obtained by it in order to
maintain its LIBOR Rate Loans, (b) default by the Borrower in making a borrowing
or conversion after the Borrower has given (or are deemed to have given) a Loan
Request or a notice (in the case of all or any portion of the Term Loan pursuant
to §2.15.2) or a Conversion Request relating thereto in accordance with §2.7 or
(c) the making of any payment of a LIBOR Rate Loan or the making of any
conversion of any such Loan to a Base Rate

 

 

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Loan on a day that is not the last day of the applicable Interest Period with
respect thereto, including interest or fees payable by such Lender to lenders of
funds obtained by it in order to maintain any such Loans.

5.11.     Interest After Default. Immediately upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on the
principal amount of all outstanding Obligations and Letter of Credit Fees at a
fluctuating interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by applicable laws.

5.12.     Collateral Security and Guaranties. Each of the Parent and the
Borrower covenants and agrees that:

(a)        Pursuant to the terms of the Security Documents, the Obligations
shall be secured by a perfected first priority security interest (subject only
to Permitted Liens) in the Collateral.

(b)

The Obligations shall also be guaranteed pursuant to the terms of the
Guaranties.

6. REPRESENTATIONS AND WARRANTIES.

Each of the Parent and the Borrower represents and warrants to the Lenders and
the Administrative Agent as follows:

6.1.

Corporate Authority, Etc.

 

 

6.1.1.

Existence, Good Standing.

(a)        Each of the Parent and its Subsidiaries (i) is a corporation (or
similar business entity) duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or formation, (ii) has taken
all actions which, by reason of its ownership of property or carrying on of
business, are required to be taken by it under the laws of any jurisdiction,
wherein it owns property or carries on business, except where the failure to do
so would not materially and adversely affect the Borrower and the Guarantors
(taken as a whole) and (iii) has all corporate authority (or the equivalent
company) power to own its property and conduct its business as now conducted and
as presently contemplated.

(b)        Each of the Parent and its Subsidiaries has adequate power and
authority and has full legal right to enter into each of the Loan Documents to
which it is or is to become a party, to perform, observe and comply with all of
its agreements and obligations under each of such documents, and to make all of
the borrowings and obtain the extensions of credit contemplated by this Credit
Agreement.

6.1.2.    Authorization. The execution and delivery by each of the Parent and
its Subsidiaries of each of the Loan Documents executed and delivered on the
Closing Date to which, by the terms of such document, it is a party, the
performance by each of the Parent and its Subsidiaries of all of its agreements
and obligations under each of such documents, and the making by the Borrower of
all of the borrowings contemplated by this Credit Agreement, are within the
corporate (or the equivalent company) authority of the Parent and each of its
Subsidiaries, as applicable, have been duly authorized by all necessary
corporate or other action on the part of the Parent and its Subsidiaries, as
applicable, and do not and will not (i) except as otherwise expressly
contemplated by the Loan Documents, conflict with, or result in a breach of any
material term, condition or provision of, or constitute a default under or
result in the creation

 

 

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of any mortgage, lien, pledge, charge, security interest or other encumbrance
upon any of the property of the Parent or its Subsidiaries, under any agreement,
trust deed, indenture, mortgage or other instrument to which the Parent or any
of its Subsidiaries is a party or by which the Parent or any of its Subsidiaries
or any of the property of the Parent or any of its Subsidiaries is bound, the
consequences of which would have a material and adverse effect on the financial
condition, assets or operations of the Borrower and the Guarantors (taken as a
whole), (ii) violate or contravene any provision of any law, regulation, order,
ruling or interpretation thereunder or any decree, order or judgment of any
court or governmental or regulatory authority, bureau, agency or official (all
as from time to time in effect and applicable to the Parent or any of its
Subsidiaries) except where such violation or contravention would not materially
and adversely affect the financial condition, assets or operations of the
Borrower and the Guarantors (taken as a whole), (iii) require any waivers,
consents or approvals by any of the creditors of the Parent or any of its
Subsidiaries which have not been obtained (except when failure to do so would
not materially and adversely affect the financial condition, assets or
operations of the Borrower and the Guarantors, taken as a whole), (iv) in the
case of the Parent and its Subsidiaries, require any consents or approvals by
any shareholders or members of such Person, (except such as will be obtained on
or prior to the Closing Date and will be in full force and effect on and as of
the Closing Date), (v) require any approval, consent, order, authorization or
license by, or giving notice to, or taking any other action with respect to, any
governmental or regulatory authority or agency under any provision of any law
applicable to the Parent or any of its Subsidiaries, except those actions which
have been taken or will be taken prior to the Closing Date and except where
failure to take such actions would not materially and adversely affect the
financial condition, assets or operations of the Borrower and the Guarantors
(taken as a whole), or (vi) conflict with any provision of the Governing
Documents of the Parent or any Subsidiary of the Parent.

6.1.3.    Delivery. Each of the Parent and its Subsidiaries has duly executed
and delivered each of the Loan Documents to which it is a party and each of such
documents is in full force and effect.

6.1.4.    Enforceability. The execution and delivery of this Credit Agreement
and the other Loan Documents to which the Parent or any of its Subsidiaries is
or is to become a party will result in valid and legally binding obligations of
such Person enforceable against it in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors’ rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.

6.2.

Financial Statements; Projections.

(a)        There has been furnished to the Administrative Agent and each of the
Lenders a consolidated balance sheet of the Parent and its Subsidiaries as at
January 1, 2005, and consolidated statements of income and cash flow of the
Parent and its Subsidiaries for the Fiscal Year then ended, certified by
PricewaterhouseCoopers. Such balance sheet and statements of income and cash
flow have been prepared in accordance with GAAP and fairly present the financial
condition of the Parent and its Subsidiaries as at the close of business on the
date thereof and the results of operations for the Fiscal Year then ended. There
are no contingent liabilities of the Parent or any of its Subsidiaries as of
such date involving material amounts, known to the officers of the Parent or the
Borrower, which were not disclosed in such balance sheet and the notes related
thereto.

 

 

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(b)        There has been furnished to the Administrative Agent and each of the
Lenders an unaudited consolidated balance sheet of the Parent and its
Subsidiaries as at April 2, 2005, and unaudited consolidated statements of
income and cash flow of the Parent and its Subsidiaries as of such date. Such
balance sheet and statements of income and cash flow have been prepared in
accordance with GAAP and fairly present the financial condition of the Parent
and its Subsidiaries as at the close of business on the date thereof and the
results of operations. There are no contingent liabilities of the Parent or any
of its Subsidiaries as of such date involving material amounts, known to the
officers of the Parent or the Borrower, which were not disclosed in such balance
sheet and the notes related thereto.

(c)        There has also been furnished to the Administrative Agent and each of
the Lenders projections of the monthly operating budgets, balance sheets and
cash flow statements of the Parent and its Subsidiaries for the 2005 Fiscal Year
and the quarterly operating budgets, balance sheets and cash flow statements of
the Parent and its Subsidiaries for the 2006, 2007, 2008 and 2009 Fiscal Years,
in each case, on a consolidated basis. To the knowledge of the Parent and its
Subsidiaries, no facts exist that (individually or in the aggregate) would
result in any material change in any of such projections (taken as a whole). The
projections are based upon reasonable estimates and assumptions and reflect the
reasonable estimates of the Parent and its Subsidiaries of the results of
operations and other information projected therein (it being understood that
such projections are not a guarantee of future performance).

6.3.       Solvency. As of the Closing Date and after giving effect to the Loans
hereunder and the other transactions contemplated hereby:

(a)        the aggregate value of all properties of the Parent and its
Subsidiaries, on a consolidated basis, at their present fair saleable value
exceed the amount of all the probable debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of the Parent
and its Subsidiaries as they become absolute and mature;

(b)        the present fair saleable value of the assets of the Parent and its
Subsidiaries, on a consolidated basis, is not less than the amount that will be
required to pay the probable liability on their debts as they become absolute
and mature;

(c)        the Parent and its Subsidiaries will not, on a consolidated basis,
have an unreasonably small capital with which to conduct their business
operations as heretofore conducted; and

(d)        the Parent and its Subsidiaries do not, on a consolidated basis,
intend to incur debts or liabilities beyond their ability to pay such debts and
liabilities as they mature.

6.4.       No Material Adverse Changes, etc. Since the Balance Sheet Date, there
has occurred no material adverse change in the financial condition or business
of the Parent or any of its Subsidiaries. Since the Balance Sheet Date, neither
the Parent nor any Subsidiary of the Parent has made any Restricted Payment
(other than Restricted Payments permitted under §8.4).

6.5.       Absence of Mortgages and Liens. Except with respect to Permitted
Liens, there is no financing statement, security agreement, chattel mortgage,
real estate mortgage or other document filed or recorded with any filing
records, registry or other public office, that purports to cover, affect or give
notice of any present or possible future Lien on, or security interest in, any
of the material assets or property of the Parent or any Subsidiary of the Parent
or of any of the rights relating thereto.

 

 

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6.6.       Franchises, Patents, Copyrights, etc. Each of the Parent and its
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others unless the failure of such possession would
not have a material adverse effect on the business, assets, operations or
financial condition of the Borrower and the Guarantors (taken as a whole).
Attached hereto as Schedule 6.6 is a true, correct and complete list of all
patents, patent applications, federally registered copyrights, trademarks,
trademark applications, trade names and other intellectual property owned by the
Parent or any Subsidiary of the Parent as of the Closing Date.

6.7.       Litigation. Except as set forth in Schedule 6.7 hereto, there are no
actions, suits, proceedings or investigations of any kind pending, or, to the
best knowledge of the Senior Management after all due investigation appropriate
under the circumstances, threatened against the Parent or any of its
Subsidiaries, before any court, tribunal or administrative agency or board that
would be likely to, either in any case or in the aggregate, materially adversely
affect the properties, assets, financial condition or business of the Borrower
and the Guarantors, taken as a whole, or materially impair the right of the
Borrower and the Guarantors, taken as a whole, to carry on business
substantially as now conducted by them, or that questions the validity of this
Credit Agreement or any of the other Loan Documents.

6.8.       No Materially Adverse Contracts, etc. Except as set forth on Schedule
6.8, neither the Parent nor any of its Subsidiaries is subject to any charter,
partnership or other legal restriction, or any judgment, decree, order, law,
statute, rule or regulation that has or is expected in the future to have a
material adverse effect on the business, assets or financial condition of the
Borrower and the Guarantors, taken as a whole. Except as listed on Schedule 6.8
hereto, neither the Parent nor any of its Subsidiaries is a party to any
contract or agreement that has or is expected, in the judgment of the Parent’s
or the Borrower’s officers, to have any material adverse effect on the business
of the Borrower and the Guarantors, taken as a whole.

6.9.       Compliance with Other Instruments, Laws, etc. Neither the Parent nor
any of its Subsidiaries is in violation of any provision of its Governing
Documents, or any agreement or instrument to which it may be subject or by which
it or any of its properties may be bound or any decree, order, judgment,
statute, license, rule or regulation, in any of the foregoing cases in a manner
that could materially and adversely affect the financial condition, properties
or business of the Parent and its Subsidiaries.

6.10.     Tax Status. The Parent and its Subsidiaries (i) have made or filed all
federal, provincial and all material state, provincial and foreign income and
all other material tax returns, reports and declarations required by any
jurisdiction to which any of them is subject, (ii) have paid all material Taxes
and other governmental assessments and charges imposed on them, except those
being contested in good faith and by appropriate proceedings and for which the
Parent and its Subsidiaries have set aside on their books reasonably adequate
provisions therefor (unless foreclosure or other enforcement action has been
commenced in respect thereof or any Lien has attached as security therefor, in
which case such exception does not apply), and (iii) have set aside on their
books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid Taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, except those being contested in good faith and as
to which adequate reserves are maintained, and the officers of the Parent and
the Borrower know of no basis for any such claim.

6.11.     No Default or Event of Default. No Default or Event of Default has
occurred and is continuing.

 

 

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6.12.     Holding Company and Investment Company Acts. Neither the Parent nor
any of its Subsidiaries is a “holding company”, or a “subsidiary company” of a
“holding company”, or an affiliate” of a “holding company”, as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
“investment company”, or an “affiliated company” or a “principal underwriter” of
an “investment company”, as such terms are defined in the Investment Company Act
of 1940.

6.13.

Employee Benefit Plans.

6.13.1.  In General. Each Employee Benefit Plan and each Guaranteed Pension Plan
has been maintained and operated in compliance in all material respects with
applicable law including without limitation the provisions of ERISA and all
Applicable Pension Legislation and, to the extent applicable, the Code,
including but not limited to the provisions thereunder respecting prohibited
transactions, other than as set forth on Schedule 6.13.1 attached hereto. The
Parent and the Borrower have heretofore delivered to the Administrative Agent
the most recently completed annual report, Form 5500, with all required
attachments, and actuarial statement required to be submitted under §103(d) of
ERISA, with respect to each Guaranteed Pension Plan.

6.13.2.  Terminability of Welfare Plans. Under each Employee Benefit Plan which
is an employee welfare benefit plan within the meaning of §3(1) or §3(2)(B) of
ERISA, no benefits are due unless the event giving rise to the benefit
entitlement occurs prior to plan termination (except as required by Title I,
Part 6 of ERISA). The Parent, the Borrower or an ERISA Affiliate, as
appropriate, may terminate each such Plan at any time (or at any time subsequent
to the expiration of any applicable bargaining agreement) in the discretion of
the Parent, the Borrower or such ERISA Affiliate without liability to any
Person, other than for benefits which have accrued prior to termination.

6.13.3.  Guaranteed Pension Plans. Each contribution required to be made to a
Guaranteed Pension Plan, whether required to be made to avoid the incurrence of
an accumulated funding deficiency, the notice or lien provisions of §302(f) of
ERISA, or otherwise, has been timely made. No waiver of an accumulated funding
deficiency or extension of amortization periods has been received with respect
to any Guaranteed Pension Plan and none of the Parent, the Borrower nor any
ERISA Affiliate is obligated to or has posted security in connection with an
amendment to a Guaranteed Pension Plan pursuant to §307 of ERISA or §401(a)(29)
of the Code. No liability to the PBGC (other than required insurance premiums,
all of which have been paid) has been incurred by the Parent, the Borrower or
any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has
not been any ERISA Reportable Event, or any other event or condition which
presents a material risk of termination of any Guaranteed Pension Plan by the
PBGC. Based on the latest valuation of each Guaranteed Pension Plan (which in
each case occurred within twelve months of the date of this representation), and
on the actuarial methods and assumptions employed for that valuation, the
aggregate benefit liabilities of all such Guaranteed Pension Plans within the
meaning of §4001 of ERISA did not exceed the aggregate value of the assets of
all such Guaranteed Pension Plans.

6.13.4.  Multiemployer Plans. None of the Parent, the Borrower nor any ERISA
Affiliate has incurred any material liability (including secondary liability) to
any Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under §4201 of ERISA or as a result of a sale of assets
described in §4204 of ERISA. None of the Parent, the Borrower nor any ERISA
Affiliate has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of §4241 or §4245 of ERISA or is at risk
of entering reorganization or becoming insolvent, or that any Multiemployer Plan
intends to terminate or has been terminated under §4041A of ERISA.

 

 

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6.14.     Regulations U and X. The proceeds of the Loans and Letters of Credit
shall be used solely for the purposes specified in §7.11. No portion of any Loan
is to be used, and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any “margin security” or “margin stock” as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.

6.15.     True Copies of Governing Documents. The Parent and the Borrower have
furnished or caused to be furnished to each of the Lenders true and complete
copies of the Governing Documents (together with any amendments thereto) of the
Parent and each Subsidiary of the Parent.

6.16.     Fiscal Year. The Parent has a Fiscal Year which is the fifty-two (52)
or fifty-three (53) week period ending on the Saturday closest to January 1 of
each calendar year.

6.17.     Perfection of Security Interest. All filings, assignments, pledges and
deposits of documents or instruments have been made and all other actions have
been taken that are necessary or advisable, under applicable United States
federal and state law, to establish and perfect the Administrative Agent’s
first-priority Lien and security interest in the Collateral. The Collateral and
the Administrative Agent’s rights with respect to the Collateral are not subject
to any setoff, claims, withholdings or other defenses. The Borrower and the
Guarantors party to the Security Agreements are the owners of the Collateral
free from any Lien, except for Permitted Liens.

6.18.     Subsidiaries, etc. The Parent does not have any Subsidiaries except as
set forth on Schedule 6.18 hereto, as such schedule may be updated from time to
time by the Borrower in accordance with §8.11.

6.19.     Environmental Compliance. With respect to the past and present
condition and usage of the Real Estate and the operations conducted thereon:

(a)        none of the Parent, its Subsidiaries or any operator of the Real
Estate or any operations thereon is in violation, or alleged violation, of any
judgment, decree, order, law, license, rule, permit or regulation pertaining to
environmental matters, including without limitation, those arising under the
Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the
Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any
other state, local, foreign or common law, statute, regulation, ordinance,
order, decree or any other binding requirement of any Governmental Authority
relating to health, safety or the environment (all of the foregoing,
collectively, the “Environmental Laws”), which violation could reasonably be
expected to have a material adverse effect on the business, assets, operations
or financial condition of the Borrower and the Guarantors (taken as a whole), or
the ability of the Parent or any Subsidiary of the Parent to fulfill its
obligations under this Credit Agreement or the other Loan Documents;

(b)        (i) except as set forth on Schedule 6.19(a) hereto, as of the Closing
Date, neither the Parent nor any of its Subsidiaries has received notice from
any third party including, without limitation, any Governmental Authority, (A)
that any one of them has been identified by the United States Environmental
Protection Agency (“EPA”) as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B; (B) that any hazardous waste, as defined by 42 U.S.C. §6903(5), any
hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or
contaminant as defined by 42 U.S.C. §9601(33) and any toxic substances, oil or
hazardous materials or other chemicals or substances regulated by

 

 

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any Environmental Laws (“Hazardous Substances”) which any one of them has
generated, transported or disposed of has been found at any site at which a
Governmental Authority has conducted or has ordered that the Parent or any
Subsidiary of the Parent conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (C) that it is or shall be
a named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising out of
any third party’s incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances and (ii)
except as set forth on Schedule 6.19(b), as such schedule may be updated from
time to time by the Borrower (subject to the prior approval of the
Administrative Agent), neither the Parent nor any of its Subsidiaries has
received any notices referred to in clause (i) above identifying any event or
condition that could materially and adversely affect the financial condition,
properties or business of the Borrower and the Guarantors, taken as a whole;

(c)        except as set forth on Schedule 6.19(a) attached hereto: (i) no
portion of the Real Estate is used for the handling, processing, storage or
disposal of Hazardous Substances except in material accordance with applicable
Environmental Laws; and, to the best of the Parent’s and Borrower’s knowledge,
no underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate; (ii) in the course of
any activities conducted by the Parent, its Subsidiaries or operators of its
properties, no Hazardous Substances have been generated or are being used on the
Real Estate except in material accordance with applicable Environmental Laws;
(iii) there have been no releases (i.e. any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Substances on, upon,
into or from the properties of the Parent or its Subsidiaries, which releases
could reasonably be expected to have a material adverse effect on the value of
any of the Real Estate or on the business, assets, operations or financial
condition of the Borrower and the Guarantors (taken as a whole), or the ability
of the Parent or the Borrower to fulfill its obligations under this Credit
Agreement or the other Loan Documents; (iv) to the best of the Parent’s and the
Borrower’s knowledge, there have been no releases on, upon, from or into any
real property in the vicinity of any of the Real Estate which, through soil or
groundwater contamination, may have come to be located on, and which could
reasonably be expected to have a material adverse effect on the value of any of
the Real Estate or adjacent properties or the environment or on the business,
assets, operations or financial condition of the Borrower and the Guarantors
(taken as a whole), or the ability of the Parent or any Subsidiary of the Parent
to fulfill its obligations under this Credit Agreement or the other Loan
Documents; and (v) in addition, to the best of the Parent’s and the Borrower’s
knowledge, any Hazardous Substances that have been generated on any of the Real
Estate have been transported offsite only by carriers having an identification
number issued by the EPA (or the equivalent thereof in any foreign
jurisdiction), treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental Laws, which
transporters and facilities have been and are, to the best of the Parent’s and
the Borrower’s knowledge, operating in compliance with such permits and
applicable Environmental Laws;

(d)        none of the Parent nor its Subsidiaries, any Mortgaged Property or
any of the other Real Estate is subject to any applicable Environmental Law
requiring the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice to any
Governmental Authority or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the transactions set
forth herein and contemplated hereby, or as a condition to the recording of any
Mortgage or to the effectiveness of any other transactions contemplated hereby;
and

 

 

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(e)        to the best of their knowledge after due inquiry, the Parent and the
Borrower have furnished the Administrative Agent’s Special Counsel with copies
of all material environmental reports relating to the Parent and its
Subsidiaries and their properties and operations.

6.20.     Bank Accounts. Schedule 6.20, as such schedule may be updated from
time to time by the Borrower (subject to the prior approval of the
Administrative Agent), sets forth the account numbers and location of all bank
accounts of the Parent and its Subsidiaries.

6.21.     Labor Contracts. Except as set forth on Schedule 6.21, as of the
Closing Date, neither the Parent nor any of its Subsidiaries is party to any
collective bargaining agreement. Except as disclosed to the Administrative Agent
and the Lenders in writing, (a) neither the Parent nor any of its Subsidiaries
is a party to any collective bargaining agreement and (b) there are no material
grievances, disputes or controversies with any union or other organization of
the Parent’s or any of its Subsidiary’s employees, or threats of strikes or work
stoppages.

6.22.     Disclosure. Neither this Credit Agreement nor any of the other Loan
Documents contains any untrue statement of a material fact or omits to state a
material fact (known to the Parent or any of its Subsidiaries in the case of any
document or information not furnished by the Parent or any of its Subsidiaries)
necessary in order to make the statements herein or therein not misleading.
Except as disclosed to the Administrative Agent and the Lenders in writing,
there is no fact known to the Parent or any of its Subsidiaries which could
reasonably be expected to have a material adverse effect on the business,
assets, operations or financial condition of the Borrower and the Guarantors
(taken as a whole), or the ability of the Parent or any Subsidiary of the Parent
to fulfill its obligations under this Credit Agreement or the other Loan
Documents, exclusive of effects resulting from changes in general economic
conditions, legal standards or regulatory conditions.

6.23.     Title to Properties; Leases. The Parent and its Subsidiaries own all
of the assets reflected in the consolidated balance sheet of the Parent and its
Subsidiaries delivered to the Administrative Agent pursuant to §10.23, subject
to no Liens or other rights of others, except Permitted Liens.

6.24.     Certain Transactions. Except for arm's length transactions pursuant to
which the Parent, the Borrower, any of the Guarantors or any of their
Subsidiaries make payments in the ordinary course of business upon terms no less
favorable than the Parent, the Borrower, the Guarantors or such Subsidiary could
obtain from third parties, none of the officers, directors, or employees of the
Parent, the Borrower, the Guarantors or any of their Subsidiaries is presently a
party to any transaction with the Parent, the Borrower, the Guarantors or any of
their Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Parent and the Borrower,
any corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.

6.25.     Foreign Assets Control Regulations, Etc. None of the requesting or
borrowing of the Loans, 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 CFR, Subtitle B, Chapter V, as amended)
(the "Foreign Assets Control Regulations") or any enabling legislation or
executive order relating thereto (which for the avoidance of doubt shall
include, but shall not be limited to (a) Executive Order 13224 of September 21,
2001

 

 

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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)). Furthermore, neither the Parent nor any of its Subsidiaries or other
Affiliates (a) is or will become a "blocked person" as described in the
Executive Order, the Trading With the Enemy Act or the Foreign Assets Control
Regulations or (b) engages or will engage in any dealings or transactions, or be
otherwise associated, with any such "blocked person".

7. AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER.

Each of the Parent and the Borrower covenants and agrees that, so long as any
Loan, Unpaid Reimbursement Obligation or Letter of Credit is outstanding or any
Lender has any obligation to make any Loans or the Administrative Agent has any
obligation to cause the Issuing Bank to issue, extend or renew any Letter of
Credit:

7.1.       Punctual Payment. Each of the Parent and the Borrower will duly and
punctually pay or cause to be paid when due all principal and interest on the
Loans, all Reimbursement Obligations, the Fees and all other Obligations and
amounts provided for in this Credit Agreement and the other Loan Documents to
which it is a party and will cause to be paid any amounts owing by any of
Subsidiary of the Parent, all in accordance with the terms of this Credit
Agreement and such other Loan Documents.

7.2.       Maintenance of Office. Each of the Parent and the Borrower will
maintain its chief executive office in Fall River, Massachusetts or at such
other place as the Parent and the Borrower shall designate upon written notice
to the Administrative Agent, where notices, presentations and demands to or upon
the Parent or the Borrower in respect of the Loan Documents to which the Parent
or the Borrower is a party may be given or made.

7.3.       Records and Accounts. Each of the Parent and the Borrower will (i)
keep, and cause each of its Subsidiaries to keep, true and accurate records and
books of account in which full, true and correct entries will be made in
accordance with, and all financial statements provided for herein shall be
prepared in accordance with GAAP consistently applied; (ii) maintain adequate
accounts and reserves for all taxes (including incomes taxes), depreciation,
depletion, obsolescence and amortization of its properties and the properties of
its Subsidiaries, contingencies, and other reserves; and (iii) at all times,
maintain independent certified public accountants as the Parent’s and the
Borrower’s accountants which shall be satisfactory to the Administrative Agent.

7.4.       Financial Statements, Certificates and Information. The Parent and
the Borrower will deliver to each of the Lenders:

(a)        as soon as practicable, but in any event not later than ninety (90)
days after the end of each Fiscal Year, the consolidated balance sheet of the
Parent and its Subsidiaries, as at the end of such year, and the related
consolidated statements of income and retained earnings and consolidated
statement of cash flow for such year, each setting forth in comparative form the
figures for the previous Fiscal Year and all such consolidated financial
statements to be in reasonable detail, prepared in accordance with GAAP
consistently applied, and certified without qualification and without expression
of uncertainty as to the ability of the Parent and its Subsidiaries to continue
as going concerns, by PricewaterhouseCoopers or by other independent certified
public accountants satisfactory to the Administrative Agent, together with (i) a
written statement from such accountants to the effect that they have read a copy
of this Credit Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event of
Default, or, if such accountants shall have

 

 

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obtained knowledge of any then existing Default or Event of Default they shall
disclose in such statement any such Default or Event of Default; provided that
such accountants shall not be liable to the Lenders for failure to obtain
knowledge of any Default or Event of Default; and (ii) a copy of their
accountants’ management letter (if any) for such Fiscal Year;

(b)        as soon as practicable, but in any event within forty-five (45) days
after the end of each Fiscal Quarter, unaudited quarterly consolidated and
consolidating financial statements of the Parent and its Subsidiaries for such
Fiscal Quarter (i.e., the consolidated and consolidating balance sheet of the
Parent and its Subsidiaries, as at the end of such Fiscal Quarter, and the
related consolidated and consolidating statements of income and retained
earnings and consolidated and consolidating statement of cash flow for such
Fiscal Quarter) and the unaudited consolidated and consolidating financial
statements of the Parent and its Subsidiaries for the period commencing at the
end of the previous Fiscal Year and ending with the end of such Fiscal Quarter,
each prepared in accordance with GAAP consistently applied, together with a
certification by the principal financial or accounting officer(s) of the Parent
that the information contained in such financial statements fairly presents in
all material respects the financial condition of the Parent and its Subsidiaries
(as a whole) on the date thereof (subject to year-end adjustments);

(c)        as soon as practicable, but in any event within thirty (30) days
after the end of each month in each Fiscal Year, unaudited monthly consolidated
and consolidating financial statements of Parent and its Subsidiaries for such
month (i.e., the consolidated and consolidating balance sheet of the Parent and
its Subsidiaries, as at the end of such month, and the related consolidated and
consolidating statements of income and retained earnings and consolidated and
consolidating statement of cash flow for such month) and the unaudited
consolidated and consolidating financial statements of the Parent and its
Subsidiaries for the period commencing at the end of the previous Fiscal Year
and ending with the end of such month, each, prepared in accordance with GAAP
consistently applied, together with a certification by the principal financial
or accounting officer(s) of the Parent that the information contained in such
financial statements fairly presents in all material respects the financial
condition of the Parent and its Subsidiaries (as a whole) on the date thereof
(subject to year-end adjustments);

(d)        simultaneously with the delivery of the financial statements referred
to in subsections (a) and (b) above, a statement certified by the principal
financial or accounting officer(s) of the Parent in substantially the form of
Exhibit B hereto (a “Compliance Certificate”) (i) setting forth in reasonable
detail computations evidencing compliance with the covenants contained in §9 and
(if applicable) reconciliations to reflect changes in GAAP since the Balance
Sheet Date, (ii) setting forth in reasonable detail the computation of
Consolidated Total Funded Debt to EBITDA Ratio as at the end of the relevant
Fiscal Quarter and (iii) stating that such officer(s) has caused this Credit
Agreement to be reviewed and has no knowledge of any Default or Event of Default
during such Fiscal Quarter or at the end of such year, or if such officer(s) has
such knowledge, specifying each Default or Event of Default and the nature
thereof;

(e)        as soon as available and in any event no later than within fifteen
(15) days after the end of each calendar month, (i) a Collateral Update
Certificate, (ii) an Accounts Receivable/Loan Reconciliation Report, (iii) a
summary of inventory by type and location, (v) an accounts receivable aging
report, and (iv) such other information relating to the Collateral as the
Administrative Agent shall reasonably request, in each case, accompanied by such
supporting detail and documentation as the Administrative Agent shall reasonably
request;

 

 

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(f)         as soon as available and in any event no later than 1:00 p.m.
(Boston time) on Tuesday of each week (or, if such Tuesday is not a Business Day
or if the preceding Monday is not a Business Day, in each case, on Wednesday of
such week) (or with greater frequency as the Administrative Agent may request),
a Borrowing Base Certificate with respect to the Collateral of the Borrower as
of the close of business on the previous Saturday (or, if such day is not a
Business Day, on the preceding Business Day), together with such other
information relating to the Collateral as the Administrative Agent shall
reasonably request, and accompanied by such supporting detail and documentation
as the Administrative Agent shall reasonably request;

(g)        not later than December 31st of each calendar year, the annual
business plan of the Parent and its Subsidiaries for the succeeding Fiscal Year
on a monthly basis in reasonable detail, including projected consolidated and
consolidating balance sheets, statements of income and retained earnings and
cash flow statements of the Parent and its Subsidiaries for the succeeding
Fiscal Year on a monthly basis, in each case in the same format as the audited
balance sheet, statement of income and retained earnings and cash flow statement
respectively;

(h)        promptly after the sending or filing thereof, copies of all reports
which the Parent or any Subsidiary of the Parent sends to any of its security
holders, and copies of all reports and registration statements which the Parent
or any Subsidiary of the Parent files with the Securities and Exchange
Commission or any national securities exchange (including, without limitation,
all 10-K, 10-Q and 8-K reports), which reports are required to be sent to
security holders or so filed by law or by regulation or under the terms of the
Parent’s listing agreement with NASDAQ or any other stock exchange; and

(i)         from time to time such other financial data and information
(including accountants’ management letters) as the Administrative Agent or any
Lender may reasonably request.

7.5.

Notices.

7.5.1.    Defaults. The Parent and the Borrower will promptly notify the
Administrative Agent in writing of the occurrence of any Default or Event of
Default. If any Person shall give any notice to the Parent or its Subsidiaries
or take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Credit Agreement or any other note,
evidence of indebtedness, indenture or other obligation for borrowed money in
excess of $500,000 to which or with respect to which the Parent or any of its
Subsidiaries is a party or obligor, whether as principal, guarantor, surety or
otherwise, the Parent shall forthwith give written notice thereof to the
Administrative Agent, describing the notice or action and the nature of the
claimed default.

7.5.2.    Notice of Litigation and Judgments. The Parent and the Borrower will
give notice to the Administrative Agent in writing within fifteen (15) days of
Senior Management becoming aware of any litigation or proceedings threatened in
writing or any pending litigation and proceedings affecting the Parent or any of
its Subsidiaries or to which the Parent or any of its Subsidiaries is or becomes
a party involving (i) an uninsured claim against the Parent or any of its
Subsidiaries that would reasonably be expected to result in damages of more than
$1,000,000 against the Parent or any of its Subsidiaries or have a material
adverse effect on the Borrower and the Guarantors taken as a whole or (ii) any
litigation proceeding against Persons with which the Parent or any of its
Subsidiaries has a business relationship which is likely to materially and
adversely affect the business, financial condition, assets or operations of the
Borrower and the Guarantors (taken as a whole) and stating the nature and status
of such litigation or proceedings.

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The Parent will give notice to the Administrative Agent, in writing, in form and
detail satisfactory to the Administrative Agent, within ten (10) days of any
judgment not covered by insurance, final or otherwise, against the Parent or any
of its Subsidiaries in an amount in excess of $1,000,000.

 

7.5.3.    Notification of Claim against Collateral. The Parent and the Borrower
will, immediately upon becoming aware thereof, notify the Administrative Agent
and each of the Lenders in writing of any setoff, claims (including, with
respect to the Real Estate, environmental claims), withholdings or other
defenses in amounts greater than $250,000 to which any of the Collateral, or the
Administrative Agent’s rights with respect to the Collateral, are subject.

7.5.4.    Notices Concerning Inventory Collateral. The Parent and the Borrower
shall provide to the Administrative Agent prompt notice of (a) any quarterly
physical count of the Parent’s or any of its Subsidiaries’ inventory, together
with a copy of the results thereof certified by the Parent or such Subsidiary,
(b) any determination by the Parent or any of its Subsidiaries that the
inventory levels of the Parent or such Subsidiary are not adequate to meet the
sales projections of the Parent or such Subsidiary, and (c) any failure of the
Parent or any of its Subsidiaries to pay rent at any leased location, which
failure continues for more than ten (10) days following the day on which such
rent is due and payable by the Parent or such Subsidiary.

7.5.5.    Notification of Additional Intellectual Property Rights. Within ten
(10) days of the end of each Fiscal Quarter, the Parent and the Borrower will
(a) notify the Administrative Agent in writing of (i) any patents, patent
applications, patent application disclosures filed with any patent office during
such Fiscal Quarter or which the intellectual property committee of the Parent
or such Subsidiary has approved for filing during such Fiscal Quarter as a
patent application, registered copyrights or mask works registered during such
Fiscal Quarter, applications for registration of copyrights or mask works filed
during such Fiscal Quarter, trademark and service mark registrations during such
Fiscal Quarter, trademark and service mark registration applications filed
during such Fiscal Quarter, trademarks, service marks and trade names for which
the intellectual property committee of the Parent or such Subsidiary has
approved filing trademark registration applications during such Fiscal Quarter,
all of the foregoing whether a foreign or United States right and whether owned
by the Parent or such Subsidiary, to the extent not listed on Schedule 6.6, (ii)
the abandonment of any of the foregoing during such Fiscal Quarter and (b)
deliver to the Administrative Agent (i) a list of the fifty (50) most valuable
copyrights of the Parent and its Subsidiaries as of the end of such Fiscal
Quarter (based on the revenue derived therefrom) and (ii) evidence that such
fifty (50) copyrights have been registered with the United States Copyright
Office, or applications regarding the same have been filed with the United
States Copyright Office.

7.5.6.    Environmental Events. The Parent and the Borrower will promptly give
notice to the Administrative Agent and each of the Lenders (a) of any violation
of any Environmental Law that the Parent or any of its Subsidiaries reports in
writing or is reportable by such Person in writing (or for which any written
report supplemental to any oral report is made) to any Governmental Authority
and (b) upon Senior Management becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, of any Governmental Authority that, in the
case of clauses (a) or (b) above, could have a material and adverse affect on
the financial position, business, operations, or affairs of the Borrower and the
Guarantors (taken as a whole).

7.6.        Legal Existence; Maintenance of Properties. (a) Except as permitted
by §8.5, the Parent and the Borrower will do and will cause each of their
Subsidiaries to do all things necessary to (i) in the case of each of the Parent
and the Borrower, maintain in full force and effect its legal existence and

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good standing under the laws of its jurisdiction of organization or
incorporation, (ii) in the case of each of their Subsidiaries (excluding the
Borrower), maintain in full force and effect its legal existence and good
standing under the laws of its jurisdiction of organization or incorporation
except where the failure to do so would not have a material adverse affect on
the financial condition, properties or business of the Borrower and the
Guarantors, taken as a whole, (iii) maintain its qualification to do business in
each state or other jurisdiction in which the failure to do so would have a
material adverse effect on the condition, financial or otherwise, of the
Borrower and the Guarantors (taken as a whole), and (iv) maintain all of its
rights and franchises, except where the failure to maintain such right or
franchise would not have a material adverse effect on the conduct of the
business of the Borrower and the Guarantors, taken as a whole.

(b)        Each of the Parent and the Borrower (i) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of the
Parent’s business or the business of its Subsidiaries to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment, (ii) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Parent and the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
and (iii) will, and will cause each of its Subsidiaries to, continue to engage
primarily in the businesses now conducted by them and in related or
complementary businesses; provided that nothing in this §7.6(b) shall prevent
either the Parent or the Borrower from discontinuing the operation and
maintenance of any of its properties or any of those of its Subsidiaries if such
discontinuance is, in the judgment of the Parent and the Borrower, desirable in
the conduct of its or their business and that do not in the aggregate materially
adversely affect the business of the Parent and its Subsidiaries on consolidated
basis.

 7.7.        Insurance. Each of the Parent and the Borrower will and will cause
each of its Subsidiaries to, maintain with financially sound and reputable
insurers insurance with respect to its properties and business against such
casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such periods
as may be reasonable and prudent and in accordance with the terms of the
Security Documents. Each of the Parent and the Borrower will, and will cause
each of its Subsidiaries to, maintain insurance, in form, substance and amounts
satisfactory to the Administrative Agent, on the Mortgaged Properties in
accordance with the terms of the Mortgages.

 

7.8.        Taxes. Each of the Parent and the Borrower will, and will cause each
of its Subsidiaries to, duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all Taxes, assessments and
other governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a Lien or charge upon any of its property; provided that any such Tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Parent, the Borrower or such Subsidiary shall have set aside on its
books adequate reserves with respect thereto; and provided further that the
Parent and each Subsidiary of the Parent will pay all such Taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose or otherwise enforce any Lien that may have attached as security
therefor.

 

7.9.        Compliance with Laws, Contracts, Licenses, and Permits. Each of the
Parent and the Borrower will, and will cause each of its Subsidiaries to, comply
with (i) the applicable laws and regulations wherever its business is conducted,
including all environmental laws, (ii) the provisions of its Governing
Documents, (iii) all agreements and instruments by which it or any of its
properties may be bound and (iv) all applicable decrees, orders, and judgments,
provided, that in each case, such compliance

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shall be required by this Credit Agreement only where noncompliance with
§§7.9(i)-(iv) would have a material adverse effect on the business, assets,
operations or financial condition of the Borrower and the Guarantors (taken as a
whole), or the ability of either the Parent or the Borrower to fulfill its
obligations under this Credit Agreement or the other Loan Documents. If any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government or any central bank or other fiscal or
monetary authority shall become necessary or required in order that the Parent,
the Borrower or any of their Subsidiaries may fulfill any of its obligations
hereunder or any of the other Loan Documents to which the Parent, the Borrower
or such Subsidiary is a party, the Parent and the Borrower will, or (as the case
may be) will cause such Subsidiary to, promptly take or cause to be taken all
reasonable steps within the power of the Parent, the Borrower or such Subsidiary
to obtain such authorization, consent, approval, permit or license, and upon
request of the Administrative Agent, to furnish the Administrative Agent and the
Lenders with evidence thereof.

 

7.10.        Employee Benefit Plans. Each of the Parent and the Borrower will
(i) promptly upon filing (if required by applicable law) the same with the
Department of Labor or Internal Revenue Service upon request of the
Administrative Agent, furnish to the Administrative Agent a copy of the most
recent actuarial statement required to be submitted under §103(d) of ERISA and
Annual Report, Form 5500, with all required attachments, in respect of each
Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to
the Administrative Agent any notice, report or demand sent or received in
respect of a Guaranteed Pension Plan under §§302, 4041, 4042, 4043, 4063, 4065,
4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under §§4041A,
4202, 4219, 4242, or 4245 of ERISA.

 

7.11.        Use of Proceeds. The proceeds of the Loans and Letters of Credit
contemplated to be advanced or made available to the Borrower shall be used
solely for (i) the repayment in full of all Senior Notes, (ii) the repayment in
full of all amounts owing under the Existing Credit Agreement and (iii) for
working capital and general business purposes, subject to the restrictions set
forth in this Credit Agreement.

 

7.12.        Certain Changes. Each of the Parent and the Borrower shall notify
the Administrative Agent, in writing, not less than thirty (30) days prior (i)
to any change in its chief executive office, its name or the type of its
organization, (ii) the acquisition of any real estate pursuant to §7.16 or (iii)
the acquisition of any asset in any jurisdiction other than those jurisdictions
specified on the Parent’s and the Borrower’s Perfection Certificate.

 

7.13.        Conduct of Business. Except as permitted by §8.5, each of the
Parent and the Borrower will and will cause their Subsidiaries to continue to
engage primarily in the businesses engaged in by the Parent, the Borrower and
its Subsidiaries on the Closing Date, or such businesses as are reasonably
related or complementary to the businesses engaged in by the Parent, the
Borrower and their Subsidiaries on the Closing Date.

 

7.14.        Further Assurances. Each of the Parent and the Borrower will, and
will cause each of its Subsidiaries to, cooperate with the Lenders and the
Administrative Agent and execute such further instruments and documents as the
Lenders or the Administrative Agent shall reasonably request to carry out to
their satisfaction the transactions contemplated by this Credit Agreement and
the other Loan Documents.

 

7.15.        Inspection of Properties and Books, etc.

 

7.15.1.        General. The Parent and the Borrower shall permit the Lenders,
through the Administrative Agent or any of the Lenders’ other designated
representatives, at the Borrower’s expense (such expense to include a $850 per
day field examination charge plus all out of pocket

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expenses related thereto), to visit and inspect any of the properties of the
Parent or any of its Subsidiaries, to examine the books of account of the Parent
and its Subsidiaries (and to make copies thereof and extracts therefrom), and to
discuss the affairs, finances and accounts of the Parent and its Subsidiaries
with, and to be advised as to the same by, its and their officers, and to
conduct examinations and verifications (whether by internal commercial finance
examiners or independent auditors satisfactory to the Administrative Agent
(which may be affiliated with one or more of the Lenders)) of all components
included in the Borrowing Base, all at such reasonable times and intervals and
with prior notice as the Administrative Agent or any Lender may reasonably
request, which report shall indicate whether or not the information set forth in
the Borrowing Base Certificate most recently delivered is accurate and complete
in all material respects based upon a review by such auditors of the Accounts
Receivable (including verification with respect to the amount, aging, identity
and credit of the respective account debtors and the billing practices of the
Borrower) and inventory (including verification as to the value, location and
respective types). The Administrative Agent may at the Borrower’s expense,
participate in or observe any physical count of any inventory of the Parent or
such Subsidiary included in the Collateral.

7.15.2.        Appraisals. At the request of the Administrative Agent or the
Required Lenders, which requests may be made annually (or with such other
frequency as the Administrative Agent shall request upon the occurrence and
continuation of a Default or an Event of Default), the Parent and the Borrower
will obtain and deliver to the Administrative Agent and the Lenders appraisal
reports in form and substance and from appraisers satisfactory to the
Administrative Agent, stating (a) the then current fair market, Net Orderly
Liquidation Value and forced liquidation values of all or any portion of the
inventory, equipment or real estate owned by the Parent or any of its
Subsidiaries and (b) the then current business value of the Parent and its
Subsidiaries. Each such appraisal shall be conducted and made at the expense of
the Borrower.

7.15.3.        Communications with Accountants. Upon the Administrative Agent’s
reasonable request, each of the Parent and the Borrower will request that the
Parent’s and the Borrower’s independent certified public accountants communicate
with the Administrative Agent, and, if accompanied by the Administrative Agent,
the Lenders, with respect to the financial condition of the Parent or any of its
Subsidiaries; provided that the Parent and the Borrower shall participate in all
such communications.

7.15.4.        Environmental Assessments. No more frequently than once during
each calendar year (or with such other frequency as the Administrative Agent
shall request upon the occurrence and continuation of a Default or an Event of
Default), the Administrative Agent may, for the purpose of assessing and
ensuring the value of any Mortgaged Property, obtain one or more environmental
assessments or audits of such Mortgaged Property prepared by a hydrogeologist,
an independent engineer or other qualified consultant or expert approved by the
Administrative Agent to evaluate or confirm (a) whether any Hazardous Materials
are present in the soil or water at such Mortgaged Property and (b) whether the
use and operation of such Mortgaged Property complies with all Environmental
Laws. Environmental assessments may include without limitation detailed visual
inspections of such Mortgaged Property including any and all storage areas,
storage tanks, drains, dry wells and leaching areas, and the taking of soil
samples, surface water samples and ground water samples, as well as such other
investigations or analyses as the Administrative Agent deems appropriate. All
such environmental assessments shall be conducted and made at the expense of the
Borrower.

7.16.        Additional Mortgaged Property. At any time following the Closing
Date, upon request of the Administrative Agent, each of the Parent and the
Borrower shall, and shall cause each of its

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Subsidiaries to, forthwith (but in any event within sixty (60) days following
any such request therefor) deliver to the Administrative Agent for the benefit
of the Lenders a fully executed mortgage or deed of trust over any or all
parcels of Real Estate acquired or leased by the Parent, the Borrower or such
Subsidiary after the Closing Date, each of which shall be in form and substance
satisfactory to the Administrative Agent and shall be deemed to be a Security
Document hereunder, together with such title insurance policies, surveys,
environmental site assessments, evidences of insurance with the Administrative
Agent named as loss payee and additional insured, legal opinions and other
documents and certificates with respect to such Real Estate as the
Administrative Agent may reasonably request. Each of the Parent and the Borrower
further agrees that, following the taking of such actions with respect to such
Real Estate, the Administrative Agent shall have, for the benefit of the
Lenders, a valid and enforceable first priority mortgage or deed of trust over
such Real Estate, free and clear of all defects and encumbrances except for
Permitted Liens.

7.17.        Bank Accounts.

7.17.1.        General.

(a)        Each of the Parent and the Borrower will, and will cause each of
their Subsidiaries to, maintain their principal accounts for operation,
administration, cash management and other deposit accounts for the conduct of
the Parent’s, the Borrower’s and their Subsidiaries’ business with the Cash
Management Bank.

(b)        Without limiting the generality of (a) above, each of the Parent and
the Borrower will, and will cause each of its Subsidiaries to, (i) establish a
depository account with the Cash Management Bank (the “Concentration Account”)
which will be structured to assure that all amounts in such account shall only
be applied in accordance with §§2.11.2 and 2.12, (ii) instruct all account
debtors and other obligors of the Parent, the Borrower or any Subsidiary of the
Parent, pursuant to notices of assignment and instruction letters in form and
substance satisfactory to the Administrative Agent, to remit all cash proceeds
of Accounts Receivable to local depository accounts maintained by the Parent,
the Borrower or any Subsidiary of the Parent (“Local Accounts”) with financial
institutions which have entered into agency account agreements and, if
applicable, lock box agreements (collectively, “Agency Account Agreements”) in
form and substance satisfactory to the Administrative Agent, or the
Concentration Account, (iii) direct all depository institutions with Local
Accounts to cause all funds held in each such Local Account to be transferred no
less frequently than once each week to, and only to, the Concentration Account;
provided that the Parent and its Subsidiaries may maintain an aggregate amount
of no more than $150,000 in such Local Accounts, which amount shall not be
subject to such transfers, (iv) at all times ensure that immediately upon the
Parent’s, the Borrower’s or any of their Subsidiaries’ receipt of any funds
constituting cash proceeds of any Collateral, all such amounts shall have been
deposited in a Local Account or the Concentration Account, (v) at all such times
that the amounts contained in the Operating Account exceed $5,000,000, the
Borrower shall apply the excess of such $5,000,000 to the Obligations in
accordance with §2.11.2(b) and (vi) at all such times that Excess Availability
is less than $1,000,000, the Borrower shall ensure that all amounts in the
Operating Account (other than Loans credited to the Operating Account to cover
controlled disbursement requirements) are applied to the Obligations in
accordance with §2.11.2(b).

7.18.        Domestic Subsidiaries. The Parent shall cause each Domestic
Subsidiary of the Parent to be a Guarantor at all times.

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7.19.        Landlord Waivers. The Borrower shall use commercially reasonable
efforts to obtain and deliver to the Administrative Agent, landlord waivers, in
form and substance reasonably satisfactory to the Administrative Agent, relating
to each of the leased properties listed on Schedule 10.20(b) hereto.

8.        NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER.

Each of the Parent and the Borrower covenants and agrees that, so long as any
Loan, Unpaid Reimbursement Obligation or Letter of Credit is outstanding or any
Lender has any obligation to make any Loans or the Administrative Agent has any
obligations to cause the Issuing Bank to issue, extend or renew any Letter of
Credit:

8.1.        Investments. Neither the Parent or the Borrower will or will permit
any of their Subsidiaries to make any Investment in any Person, except for
Investments which consist of:

(a)        marketable direct or guaranteed obligations of the United States of
America that mature within one (1) year from the date of purchase by the Parent
or any Subsidiary of the Parent;

(b)        demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks having total assets in excess of
$100,000,000;

(c)        securities commonly known as “commercial paper” issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated and
the ratings for which are not less than “P 1” if rated by Moody’s, and not less
than “A 1” if rated by S&P;

(d)        Overnight Investments in money market funds with portfolios comprised
of the items described in clauses (a) through (c) above;

(e)        Investments consisting of the Guaranties;

(f)        Investments existing on the date hereof and listed on Schedule 8.1;

(g)        Investments with respect to Indebtedness permitted by §8.2(d) so long
as such entities remain Subsidiaries of the Borrower;

(h)        (i) Investments by the Parent in Domestic Subsidiaries of the Parent
and (ii) Investments by the Borrower in Domestic Subsidiaries of the Borrower;

(i)        Investments consisting of loans and advances to employees for moving,
entertainment, travel, housing and other similar expenses in the ordinary course
of business not to exceed $250,000 in the aggregate at any time outstanding; and

(j)        Notes receivable and securities received in connection with the
insolvency or inability to pay of any of the Parent’s or the Borrower’s account
debtors in an aggregate amount not to exceed at any time the greater of (i)
$3,000,000 and (ii) ten percent (10%) of the outstanding face amount of the
Borrower’s Accounts Receivable at such time;

provided, however, such Investments shall be permitted hereunder only to the
extent such Investments (if held by the Parent or any Domestic Subsidiary of the
Parent) are subject to the first priority perfected Lien in favor of the
Administrative Agent securing the Obligations free of all Liens

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other than Permitted Liens.

8.2.        Restrictions on Indebtedness. The Parent and the Borrower will not,
and will not permit any of their Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:

(a)        Indebtedness created hereunder;

(b)        Indebtedness existing on the Closing Date which is set forth in
Schedule 8.2;

(c)        other Indebtedness incurred after the Closing Date (determined on a
consolidated basis without duplication in accordance with GAAP) in respect of
Capitalized Leases and/or secured by Liens permitted under §8.3(h), in an
aggregate principal amount at any time outstanding not in excess of $5,000,000;

(d)        Indebtedness of a Domestic Subsidiary of the Borrower to the
Borrower; provided that, in each case, such Indebtedness is evidenced by a note
which is pledged to the Administrative Agent; and

(e)        Indebtedness of the Parent or any Subsidiary of the Parent in respect
of Derivative Agreements.

8.3.        Restrictions on Liens.

8.3.1.        Permitted Liens. Neither the Parent nor the Borrower will, nor
will it permit any of its Subsidiaries to, create, incur, assume or permit to
exist any Lien on any of its property or assets of any character now owned or
hereafter acquired by it, or assign or sell any income or revenues (including
accounts receivable) or rights in respect of any thereof, except (the following
being called “Permitted Liens”):

(a)        Liens created hereunder or under the other Loan Documents;

(b)        any Lien on any property or asset of the Parent or any Subsidiary of
the Parent existing on the date hereof and set forth in Schedule 8.3.1, provided
that (i) such Lien shall not apply to any other property or asset of the Parent
or any Subsidiary of the Parent and (ii) such Lien shall secure only those
obligations which it secures on the date hereof;

(c)        Liens imposed by any Governmental Authority for taxes, assessments or
charges not yet delinquent or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the Parent and Subsidiaries of the Parent in accordance with
GAAP and which reserves shall be acceptable to the Administrative Agent;

(d)        landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s,
repairmen’s or other like Liens, and vendors’ Liens imposed by statute or common
law not securing the repayment of Indebtedness, arising in the ordinary course
of business which are not overdue for a period of more than sixty (60) days or
which are being contested in good faith and by appropriate proceedings and Liens
securing judgments (including, without limitation, pre-judgment attachments);

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(e)       pledges or deposits under worker’s compensation, unemployment
insurance and other social security legislation and pledges or deposits to
secure the performance of bids, tenders, trade contracts (other than for
borrowed money), leases (other than Capitalized Leases), utility purchase
obligations, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of
business;

(f)         easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of Real Property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not, in the aggregate,
materially detract from the value of the Real Property of the Parent or any
Subsidiary of the Parent or materially interfere with the ordinary conduct of
the business of the Parent or any Subsidiary of the Parent;

(g)        Liens consisting of bankers’ liens and rights of setoff, in each
case, arising by operation of law, and Liens on documents presented in letter of
credit drawings;

(h)        Liens on Capital Assets, acquired, constructed or improved by the
Parent or any Subsidiary of the Parent, provided that (i) such Liens secure
Indebtedness (including Indebtedness with respect to Capitalized Leases)
permitted by §8.2(c), (ii) such Liens and the Indebtedness secured thereby are
incurred prior to or within ninety 90 days after such acquisition or the
completion of such construction or improvement or were in effect at the time the
Parent or a Subsidiary of the Parent acquired the assets or stock, (iii) the
Indebtedness secured thereby does not exceed the cost of acquiring, constructing
or improving such fixed or capital assets, and (iv) such security interests
shall not apply to any other property or assets of the Parent or its
Subsidiaries; and

(i)         Other nonconsensual Liens; provided that the aggregate amount of
obligations secured thereby does not exceed $100,000 at any time.

8.3.2.    Restrictions on Negative Pledges and Upstream Limitations. The Parent
and the Borrower will not, nor will they permit any of their Subsidiaries to (a)
enter into or permit to exist any arrangement or agreement (excluding this
Credit Agreement and the other Loan Documents) which directly or indirectly
prohibits the Parent or any of its Subsidiaries from creating, assuming or
incurring any Lien upon its properties, revenues or assets or those of any of
its Subsidiaries whether now owned or hereafter acquired, or (b) enter into any
agreement, contract or arrangement (excluding this Credit Agreement and the
other Loan Documents) restricting the ability of any Subsidiary of the Parent
and the Borrower to pay or make dividends or distributions in cash or kind to
the Parent or the Borrower, to make loans, advances or other payments of
whatsoever nature to the Parent or the Borrower, or to make transfers or
distributions of all or any part of its assets to the Parent or the Borrower; in
each case other than customary anti-assignment provisions contained in leases
and licensing agreements entered into by the Parent or any Subsidiary in the
ordinary course of its business, but only if consents by the counterparty
thereto have been obtained by the Parent or its Subsidiaries in form and
substance satisfactory to the Administrative Agent.

8.4.       Restricted Payments. The Parent, the Borrower and their Subsidiaries
will not make any Restricted Payments other than Distributions to the Parent
from a Subsidiary of the Parent or to the Borrower from a Subsidiary of the
Borrower.

 

 

 

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8.5.

Merger, Consolidation and Disposition of Assets.

8.5.1.    Mergers and Acquisitions. Neither of the Parent nor the Borrower will,
or will permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock acquisition
(other than the acquisition of assets in the ordinary course of business
consistent with past practices) except for (i) the merger or consolidation of
one or more of the Subsidiaries of the Borrower with and into the Borrower, (ii)
the merger or consolidation of two or more Subsidiaries of the Borrower.

8.5.2.    Disposition of Assets. Neither the Parent nor the Borrower will, or
will permit any of their Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than the sale of inventory, the
licensing of intellectual property and the disposition of obsolete assets, in
each case in the ordinary course of business consistent with past practices.

8.6.       Sale and Leaseback. Neither the Parent nor the Borrower will, or will
permit any of their Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Parent or any Subsidiary of the Parent shall sell or
transfer any property owned by it in order then or thereafter to lease such
property or lease other property that Parent or any Subsidiary of the Parent
intends to use for substantially the same purpose as the property being sold or
transferred.

8.7.       Change of Fiscal Year. The Parent will not at any time change its
Fiscal Year without the prior written consent of the Required Lenders.

8.8.       Employee Benefit Plans. Neither the Parent, the Borrower nor any
ERISA Affiliate will:

(a)        engage in any “prohibited transaction” within the meaning of §406 of
ERISA or §4975 of the Code which could result in a material liability for the
Parent or any of its Subsidiaries; or

(b)        permit any Guaranteed Pension Plan to incur an “accumulated funding
deficiency”, as such term is defined in §302 of ERISA, whether or not such
deficiency is or may be waived; or

(c)        fail to contribute to any Guaranteed Pension Plan to an extent which,
or terminate any Guaranteed Pension Plan in a manner which, could result in the
imposition of a Lien or encumbrance on the assets of the Parent or any of its
Subsidiaries pursuant to §302(f) or §4068 of ERISA; or

(d)        amend any Guaranteed Pension Plan in circumstances requiring the
posting of security pursuant to §307 of ERISA or §401(a)(29) of the Code.

8.9.       Compliance with Environmental Laws. The Parent and the Borrower will
not, and will not permit any of their Subsidiaries to, (a) use any of the Real
Estate or any portion thereof for the handling, processing, storage or disposal
of Hazardous Substances, (b) cause or permit to be located on any of the Real
Estate any underground tank or other underground storage receptacle for
Hazardous Substances, (c) generate any Hazardous Substances on any of the Real
Estate, (d) conduct any activity at any Real Estate or use any Real Estate in
any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) or threatened release of Hazardous Substances on, upon or
into the Real Estate or (e) otherwise conduct any activity at any Real Estate or
use any Real Estate in any manner that would violate any

 

 

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Environmental Law or bring such Real Estate in violation of any Environmental
Law, unless, in each case, such violation, use, condition, generation or
activity could not reasonably be expected to have a material adverse effect on
the value of such Real Estate or the business, assets, operations or financial
condition of the Borrower and the Guarantors (taken as a whole), or the ability
of the Parent, the Borrower or any of their Subsidiaries to fulfill its
obligations under this Credit Agreement or the other Loan Documents.

8.10.     Change in Terms of Governing Documents. The Parent and the Borrower
shall not effect or permit any change in or amendment to the Governing Documents
of the Parent or any of its Subsidiaries, which could reasonably be expected to
adversely affect the Lenders.

8.11.     Creation of Subsidiaries. Neither the Parent or the Borrower shall, or
shall permit any of its Subsidiaries to, create or permit to exist any
Subsidiary unless (a) one hundred percent (100%) of the Capital Stock or other
equity interests of such Subsidiary are owned by a Guarantor or the Borrower,
(b) prior to the formation of such Subsidiary, the Parent and the Borrower shall
notify the Administrative Agent and the Lenders thereof in writing and deliver
to the Administrative Agent an updated Schedule 6.18, (c) contemporaneously with
the formation of any Domestic Subsidiary, the Parent and the Borrower shall, and
shall cause each of their Subsidiaries to, (i) take all steps as may be
necessary or advisable in the opinion of the Administrative Agent to pledge to
the Administrative Agent, for the benefit of the Lenders and the Administrative
Agent, on a perfected, first-priority basis, all of the Capital Stock or other
equity interests of such Domestic Subsidiary pursuant to a pledge agreement in
form and substance satisfactory to the Administrative Agent, which such pledge
agreement shall be a Pledge Agreement and a Security Document hereunder, (ii)
cause any such Domestic Subsidiary to guaranty all of the Obligations hereunder
pursuant to a guaranty in form and substance satisfactory to the Administrative
Agent, which such guaranty shall be a Guaranty and a Security Document
hereunder, (iii) cause any such Subsidiary to take all steps as may be necessary
or advisable in the opinion of the Administrative Agent to grant to the
Administrative Agent, for the benefit of the Lenders and the Administrative
Agent, a first priority, perfected security interest in substantially all of its
assets as collateral security for such guaranty, pursuant to security documents,
mortgages, pledges and other documents in form and substance satisfactory to the
Administrative Agent, each of which documents shall be Security Documents
hereunder, and (iv) deliver to the Administrative Agent all such evidence of
corporate or other authorization, legal opinions (including local counsel
opinions where applicable) and other documentation as the Administrative Agent
may request, and (d) contemporaneously with the formation of any Foreign
Subsidiary, the Parent and the Borrower shall, and shall cause each of their
Subsidiaries to, take all steps as may be necessary or advisable in the opinion
of the Administrative Agent to pledge to the Administrative Agent, for the
benefit of the Lenders and the Administrative Agent, sixty-five percent (65%) of
the Capital Stock or other equity interests of such Foreign Subsidiary pursuant
to a pledge agreement in form and substance satisfactory to the Administrative
Agent, which such pledge agreement shall be a Pledge Agreement and a Security
Document hereunder.

8.12.     Transactions with Affiliates. The Parent and the Borrower will not,
and will not permit any of their Subsidiaries to, engage in any transaction with
any Affiliate (excluding Domestic Subsidiaries of the Parent) of the Parent
(other than for services by individuals as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
Affiliate or, to the knowledge of the Parent and the Borrower, any corporation,
partnership, trust or other entity in which any such Affiliate has a substantial
interest or is an officer, director, trustee or partner, on terms more favorable
to such Person than would have been obtainable on an arm's-length basis in the
ordinary course of business.

 

 

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8.13.     Agency Account. The Parent and the Borrower will not, and will not
permit any of their Subsidiaries to, (a) establish any bank accounts other than
those listed on Schedule 6.20, without the Administrative Agent’s prior written
consent, (b) violate directly or indirectly any Agency Account Agreement or
other bank agency or lock box agreement in favor of the Administrative Agent for
the benefit of the Lenders and the Administrative Agent with respect to such
account, (c) deposit into any of the payroll accounts listed on Schedule 6.20
any amounts in excess of amounts necessary to pay current payroll obligations
from such accounts (other than balances not in excess of $250,000 in accordance
with the Parent’s and the Borrower’s usual practices), or (d) cause the
aggregate balance maintained in all deposit accounts (other than payroll
accounts referred to in clause (c)) which are not subject to an Agency Account
Agreement in favor of the Administrative Agent to exceed $750,000.

8.14.     Business Activities. The Parent and the Borrower will not, and will
not permit any of their Subsidiaries to, engage directly or indirectly (whether
through Subsidiaries or otherwise) in any type of business other than the
businesses conducted by them on the Closing Date and in related businesses.

9. FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER.

Each of the Parent and the Borrower covenants and agrees that, so long as any
Loan, Unpaid Reimbursement Obligation or Letter of Credit is outstanding or any
Lender has any obligation to make any Loans or the Administrative Agent has any
obligation to cause the Issuing Bank to issue, extend or renew any Letters of
Credit and based on the consolidated financial statements of the Parent and its
Subsidiaries delivered in accordance with the terms hereof:

9.1.       Minimum Consolidated EBITDA. The Parent and the Borrower shall not
permit Consolidated EBITDA, determined as at the end of each Fiscal Quarter set
forth in the table below for the period of four (4) consecutive Fiscal Quarters
then ending, to be less than the amount set forth opposite such Fiscal Quarter
in such table; provided that, (a) at the end FQ2 of 2005, Consolidated EBITDA
shall be determined for the two (2) consecutive Fiscal Quarters then ending and
(b) at the end of FQ3 of 2005, Consolidated EBITDA shall be determined for the
three (3) consecutive Fiscal Quarters then ending:

 

Fiscal Quarter

Minimum Consolidated EBITDA

FQ2 of 2005

$5,000,000

FQ3 of 2005

$8,500,000

FQ4 of 2005

$13,500,000

FQ1 of 2006

$16,500,000

FQ2 of 2006

$16,500,000

FQ3 of 2006

$16,500,000

FQ4 of 2006

$17,250,000

FQ1 of 2007

$17,250,000

 

 

 

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FQ2 of 2007

$17,250,000

FQ3 of 2007

$17,250,000

FQ4 of 2007

$18,000,000

FQ1 of 2008

$18,000,000

FQ2 of 2008

$18,000,000

FQ3 of 2008

$18,000,000

FQ4 of 2008

$19,000,000

FQ1 of 2009

$19,000,000

FQ2 of 2009

$19,000,000

FQ3 of 2009

$19,000,000

FQ4 of 2009 and each Fiscal Quarter ending thereafter

$20,000,000

9.2.       Fixed Charge Coverage Ratio. The Parent and the Borrower shall not
permit the Fixed Charge Coverage Ratio, determined as of the end of each Fiscal
Quarter set forth in the table below, to be less than the ratio set forth
opposite such Fiscal Quarter in such table:

Fiscal Quarter

Minimum Fixed Charge Coverage Ratio

FQ1 of 2006

1.10:1.00

FQ2 of 2006

1.10:1.00

FQ3 of 2006

1.10:1.00

FQ4 of 2006

1.10:1.00

FQ1 of 2007 and each Fiscal Quarter ending thereafter

1.15:1.00

 

9.3.       Capital Expenditures. During any period referenced in the table set
forth below, the Parent and the Borrower will not, and will not allow any of
their Subsidiaries to, make Capital Expenditures that exceed the aggregate
amount set forth in the table below opposite such period:

 

 

 

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Period

Amount

FQ1 of 2005 through FQ2 of 2005

$5,750,000

FQ1 of 2005 though FQ3 of 2005

$8,500,000

Fiscal Year 2005

$9,000,000

Fiscal Year 2006

$10,000,000

Fiscal Year 2007

$12,000,000

Fiscal Year 2008 and for each Fiscal Year thereafter

$15,000,000

 

10.              CLOSING CONDITIONS.

The obligations of the Lenders to make the initial Revolving Loans and the Term
Loan and of the Administrative Agent to cause the Issuing Bank to issue any
initial Letter of Credit shall be subject to the satisfaction of the following
conditions precedent, in each case, in form and substance satisfactory to the
Administrative Agent and the Lenders:

10.1.     Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the
Lenders. Each Lender shall have received a fully executed copy of each such
document.

10.2.     Certified Copies of Governing Documents. Each of the Lenders shall
have received from the Guarantors, the Borrower and each of its Subsidiaries a
copy, certified by a duly authorized officer of such Person or other appropriate
Person to be true and complete on the Closing Date, of each of its Governing
Documents as in effect on such date of certification.

10.3.     Corporate or Other Action. All corporate (or other) action necessary
for the valid execution, delivery and performance by each of the Guarantors, the
Borrower and each of its Subsidiaries of this Credit Agreement and the other
Loan Documents to which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Lenders shall have
been provided to each of the Lenders.

10.4.     Incumbency Certificate. Each of the Lenders shall have received from
each of the Guarantors, the Borrower and each of its Subsidiaries an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
of such Guarantor, the Borrower or such Subsidiary, and giving the name and
bearing a specimen signature of each individual who shall be authorized: (a) to
sign, in the name and on behalf of each such Person, each of the Loan Documents
to which the Borrower, a Guarantor or such Subsidiary is or is to become a
party; (b) in the case of the Borrower, to make Loan Requests and Conversion
Requests and to apply for Letters of Credit; and (c) to give notices and to take
other action on its behalf under the Loan Documents.

10.5.     Validity of Liens. The Security Documents shall be effective to create
in favor of the Administrative Agent a legal, valid and enforceable first
priority perfected security interest in and Lien

 

 

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upon the Collateral. All filings, recordings, deliveries of instruments and
other actions necessary or desirable in the opinion of the Administrative Agent
to protect and preserve such security interests shall have been duly effected.
The Administrative Agent shall have received evidence thereof in form and
substance satisfactory to the Administrative Agent.

10.6.     Perfection Certificates and UCC Search Results. The Administrative
Agent shall have received from each of the Guarantors, the Borrower and its
Subsidiaries a completed and fully executed Perfection Certificate and the
results of UCC searches (and the equivalent thereof in all applicable foreign
jurisdictions) with respect to the Collateral, indicating no Liens other than
Permitted Liens and otherwise in form and substance satisfactory to the
Administrative Agent.

10.7.     Certificates of Insurance. The Administrative Agent shall have
received (a) a certificate of insurance from an independent insurance broker
dated as of the Closing Date, naming the Administrative Agent as loss payee
and/or additional insured, as applicable, identifying insurers, types of
insurance, insurance limits, and policy terms, and otherwise describing the
insurance obtained in accordance with the provisions of the Security Agreements
and (b) certified copies of all policies evidencing such insurance (or
certificates therefore signed by the insurer or an agent authorized to bind the
insurer).

10.8.     Agency Account Agreements. The Parent and its Subsidiaries shall have
established the Concentration Account, and the Administrative Agent shall have
received an Agency Account Agreement executed by the Cash Management Bank and,
to the extent required by §8.13, each depository institution with which the
Parent or any Subsidiary of the Parent maintains a Local Account.

10.9.     Borrowing Base and Collateral Update Certificates. The Administrative
Agent shall have received an executed Borrowing Base Certificate, which
Borrowing Base Certificate shall demonstrate Excess Availability of not less
than $15,000,000 (prior to the application of the Availability Reserve and after
giving effect to the payment of all sums and expenses, the issuance of all
Letters of Credit and the funding of all Loans to be paid, issued or funded on
the Closing Date) and a Collateral Update Certificate, in each case, in form and
substance satisfactory to the Administrative Agent.

10.10.   Accounts Receivable Aging Report. The Administrative Agent shall have
received from the Borrower the most recent Accounts Receivable aging report of
the Borrower dated as of a date which shall be no more than fifteen (15) days
prior to the Closing Date and the Borrower shall have notified the
Administrative Agent in writing on the Closing Date of any material deviation
from the Accounts Receivable values reflected in such Accounts Receivable aging
report and shall have provided the Administrative Agent with such supplementary
documentation as the Administrative Agent may reasonably request.

10.11.   Payment of Closing Fees. The Borrower shall have paid to the
Administrative Agent the Fees required to be paid by them on the Closing Date.

10.12.   Payoff Letter. The Administrative Agent shall have received a payoff
letter from Fleet National Bank, indicating the amount of the loan obligations
of the Parent, the Borrower and certain of their Subsidiaries under the Existing
Credit Agreement to be discharged on the Closing Date and an acknowledgment by
Fleet National Bank that the commitments have been terminated and upon receipt
of such funds, it will authorize the filing of all termination statements and
take such other actions as may be necessary to discharge any and all mortgages,
deeds of trust and security interests granted by the Parent, the Borrower and
their Subsidiaries in favor of Fleet National Bank.

 

 

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10.13.   Senior Notes. The Administrative Agent shall have received a payoff
letter(s) from the holders of the Senior Notes, indicating the outstanding
amounts thereunder to be discharged on the Closing Date and an acknowledgment
the such holders that and upon receipt of such funds the Senior Notes shall be
repaid in full and terminated and such holders will authorize the filing of all
termination statements and take such other actions as may be necessary to
discharge any and all mortgages, deeds of trust and security interests granted
by the Parent, the Borrower and their Subsidiaries as collateral to secure such
Senior Notes.

10.14.   Opinions of Counsel. Each of the Lenders and the Administrative Agent
shall have received a favorable legal opinion addressed to the Lenders and the
Administrative Agent, dated as of the Closing Date, in form and substance
satisfactory to the Lenders and the Administrative Agent, from Wilmer Cutler
Pickering Hale and Dorr LLP, counsel to the Parent and its Subsidiaries.

10.15.   Survey, Taxes, etc. The Administrative Agent shall have received (a)
surveys with respect to each Mortgage Property if necessary to eliminate any
exceptions that would otherwise be contained in the Title Policies relating to
matters which would be shown by a survey, (b) a flood zone certificate with
respect to each Mortgaged Property located in a “flood zone” and (c) evidence of
payment of real estate taxes and municipal charges on all Real Estate not
delinquent on or before the Closing Date.

10.16.   Title Insurance. The Administrative Agent shall have received a Title
Policy covering each Mortgaged Property (or commitments to issue such policies,
with all conditions to issuance of the Title Policy deleted by an authorized
agent of the Title Insurance Company) together with proof of payment of all fees
and premiums for such policies, from the Title Insurance Company and in amounts
satisfactory to the Administrative Agent, insuring the interest of the
Administrative Agent and each of the Lenders as mortgagee under the Mortgages.

10.17.   Hazardous Waste Assessments. The Administrative Agent shall have
received hazardous waste site assessments from environmental engineers and in
form and substance satisfactory to the Administrative Agent, covering all Real
Estate and all other real property in respect of which the Parent or any of its
Subsidiaries may have material liability, whether contingent or otherwise, for
dumping or disposal of Hazardous Substances.

10.18.   Solvency Certificate. The Administrative Agent shall have received an
officer's certificate of the Parent dated as of the Closing Date as to the
solvency of the Parent and its Subsidiaries following the consummation of the
transactions contemplated herein and in form and substance satisfactory to the
Lenders.

10.19.   No Material Adverse Change. Since the Balance Sheet Date, as determined
by the Administrative Agent, there has occurred no material adverse change in
the financial condition, business, assets, liabilities or business prospects of
the Borrower and the Guarantors, taken as a whole.

10.20.   Landlord Waivers. The Administrative Agent shall have received landlord
waivers, each in form and substance satisfactory to the Administrative Agent,
relating to each of the leased properties listed on Schedule 10.20(a) hereto.

10.21.   Landlord Consents. The Parent and its Subsidiaries shall have delivered
to the Administrative Agent all consents required for the Administrative Agent
to receive, as part of the Security Documents, a collateral assignment of each
material leasehold of personal property, and a mortgage of each material
leasehold of real property, together in each case with such estoppel
certificates as the Administrative Agent may request.

 

 

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10.22.   Collateral Examinations/Appraisals. The Administrative Agent shall have
received the results of collateral examinations and appraisals performed with
respect to the Collateral, each in form and substance satisfactory to the
Administrative Agent.

10.23.   Financial Statement and Projections. The Administrative Agent shall
have received the financial statements and projections referred to in §6.2, each
in form and substance satisfactory to the Administrative Agent.

11.              CONDITIONS TO ALL BORROWINGS.

The obligations of the Lenders to make any Loan, and of the Administrative Agent
to cause the Issuing Bank to issue, extend or renew any Letter of Credit, in
each case whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:

11.1.     Representations True; No Default or Event of Default. Each of the
representations and warranties of the Parent and any of its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Loan or the issuance, extension or
renewal of such Letter of Credit, with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and the other Loan Documents
and changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing, and no
condition shall exist on such date which constitutes an Event of Default.

11.2.     No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Lender would make it illegal for such Lender to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Administrative Agent would make it illegal for the
Issuing Bank to issue, extend or renew such Letter of Credit.

11.3.     Governmental Regulation. Each Lender shall have received such
statements in substance and form reasonably satisfactory to such Lender as such
Lender shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.

11.4.     Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Lenders and to the Administrative Agent and the Administrative
Agent’s Special Counsel, and the Lenders, the Administrative Agent and such
counsel shall have received all information and such counterpart originals or
certified or other copies of such documents as the Administrative Agent may
reasonably request.

11.5.     Payment of Fees. The Borrower shall have complied with their
obligations to pay all Fees, Reimbursement Obligations and each other amount
arising hereunder at any time subsequent to the Closing Date and becoming due
and payable on or before the Drawdown Date of such Loan or the date of the
issuance of such Letter of Credit.

11.6.     Exchange Limitations. There exists no reason whatsoever, including,
without limitation, by reason of the application of any so-called “currency
exchange” laws, rules or regulations (as

 

 

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in effect at the time of any proposed borrowings hereunder) which could
reasonably be expected to interfere with the Borrower satisfying any of its
Obligations in full at such time as such Obligations become due and payable
pursuant to the terms hereof.

11.7.     Validity of Liens. The Security Documents shall be effective to create
in favor of the Administrative Agent a legal, valid and enforceable first
priority perfected security interest in and Lien upon all material components of
the Collateral under applicable United States federal and state law. All
filings, recordings, deliveries of instruments and other actions necessary or
desirable in the opinion of the Administrative Agent to protect and preserve
such security interests shall have been duly effected. The Administrative Agent
shall have received evidence thereof in form and substance satisfactory to the
Administrative Agent.

11.8.     Financial Covenants. There is no reasonable expectation that the
Parent and the Borrower were not in compliance with all covenants contained in
Article 9 at the end of their immediately preceding Fiscal Quarter if they have
not yet delivered their Compliance Certificate for that Fiscal Quarter (it being
understood that this §11.8 shall not impair the measurement of such covenants as
of such Fiscal Quarter end date).

12.              EVENTS OF DEFAULT; ACCELERATION; ETC.

12.1.     Events of Default and Acceleration. If any of the following events
(“Events of Default” or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, “Defaults”) shall occur:

(a)        the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable, whether at
the stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment;

(b)        the Parent, the Borrower or any of their Subsidiaries shall fail to
pay any interest on the Loans, the Fees, or other sums due hereunder or under
any of the other Loan Documents, when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity or at
any other date fixed for payment and such failure shall continue for three (3)
days after written notice of such failure has been given to the Parent and the
Borrower by the Administrative Agent;

(c)        either the Parent or the Borrower shall fail to comply with any of
its covenants contained in §§7.1 7.2, 7.4, 7.5, 7.6(a)(i), 7.6(b)(iii), 7.7,
7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16, 7.17, 7.18 Article 8 or Article 9 of
this Credit Agreement or any of the covenants contained in any of the Mortgages;

(d)        the Parent or any of its Subsidiaries shall fail to perform any term,
covenant or agreement contained herein or in any of the other Loan Documents
(other than those specified elsewhere in this §12.1) for thirty (30) days after
written notice of such failure has been given to the Parent and the Borrower by
the Administrative Agent;

(e)        any representation or warranty of the Parent or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or in
any other document or instrument delivered pursuant to or in connection with
this Credit Agreement shall prove to have been false in any material respect
upon the date when made or deemed to have been made or repeated;

 

 

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(f)         the Parent or any of its Subsidiaries shall make an assignment for
the benefit of creditors, or admit in writing its inability to pay or generally
fail to pay its debts as they mature or become due, or shall petition or apply
for the appointment of a trustee or other custodian, liquidator or receiver of
the Parent or any of its Subsidiaries or of any substantial part of the assets
of the Parent or any of its Subsidiaries or shall commence any case or other
proceeding relating to the Parent or any of its Subsidiaries under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or hereafter
in effect, or shall take any action to authorize or in furtherance of any of the
foregoing, or if any such petition or application (including bankruptcy
application) shall be filed or any such case or other proceeding shall be
commenced against the Parent or any of its Subsidiaries or the Parent or any of
its Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within sixty (60) days following the filing thereof;

(g)        a decree or order (including a bankruptcy order) is entered
appointing any such trustee, custodian, liquidator or receiver or adjudicating
the Parent or any of its Subsidiaries bankrupt or insolvent, or approving a
petition or bankruptcy application in any such case or other proceeding, or a
decree or order (including a bankruptcy order) for relief is entered in respect
of the Parent or any Subsidiary of the Parent in an involuntary case under
bankruptcy laws as now or hereafter constituted;

(h)        there shall remain in force, undischarged, unsatisfied and unstayed,
for more than thirty (30) days, whether or not consecutive, any final judgment
against the Parent and any of its Subsidiaries (considered collectively) that,
with other outstanding final judgments, undischarged, against the Parent and its
Subsidiaries (considered collectively) exceeds in the aggregate $1,000,000;

(i)         (A) the Parent, the Borrower or any ERISA Affiliate incurs any
liability to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA
in an aggregate amount exceeding $1,000,000, or the Parent, the Borrower or any
ERISA Affiliate is assessed withdrawal liability pursuant to Title IV of ERISA
by a Multiemployer Plan requiring aggregate annual payments exceeding
$1,000,000, or any of the following occurs with respect to a Guaranteed Pension
Plan: (i) an ERISA Reportable Event, or a failure to make a required installment
or other payment (within the meaning of §302(f)(1) of ERISA), provided that the
Administrative Agent determines in its reasonable discretion that such event (A)
could be expected to result in liability of the Parent or any of its
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount
exceeding $1,000,000 and (B) could constitute grounds for the termination of
such Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate
United States District Court of a trustee to administer such Guaranteed Pension
Plan or for the imposition of a lien in favor of such Guaranteed Pension Plan;
or (ii) the appointment by a United States District Court of a trustee to
administer such Guaranteed Pension Plan; or (iii) the institution by the PBGC of
proceedings to terminate such Guaranteed Pension Plan;

(j)         the Parent or any of its Subsidiaries shall fail to pay at maturity,
or within any applicable period of grace, any obligation for Indebtedness in
excess of $500,000, or fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing or
securing Indebtedness in excess of $500,000 for such period of time as would
permit (assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate the
maturity thereof;

 

 

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(k)        if any of the Loan Documents shall be cancelled, terminated, revoked
or rescinded or the Administrative Agent’s security interests, mortgages or
liens in all or a substantial portion of the Collateral shall cease to be
perfected, or shall cease to have the priority contemplated by the Security
Documents, in each case otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of the Lenders, or
any action at law, suit or in equity or other legal proceeding to cancel, revoke
or rescind any of the Loan Documents shall be commenced by or on behalf of the
Parent, its Subsidiaries, the Guarantors or any of their respective
stockholders, or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable in accordance with the terms
thereof;

(l)         if any material covenant, agreement or obligation of the Parent or
the Borrower contained in or evidenced by the Loan Documents shall cease to be
legal, valid, binding, or enforceable in accordance with the terms thereof other
than as a result of a default or waiver thereof by the Administrative Agent;

(m)     a Change of Control shall occur;

(n)        there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, expropriation, act of God or public enemy,
or other casualty, which in any such case causes, for more than thirty (30)
consecutive days, the cessation or substantial curtailment of revenue producing
activities at any facility of the Parent or any of its Subsidiaries if such
event or circumstance is not covered by business interruption insurance and
would have a material adverse effect on the business, assets, operation or
financial condition of the Borrower and the Guarantors (taken as a whole), or
the ability of the Parent or any Subsidiary of the Parent to fulfill its
obligations under this Credit Agreement or the other Loan Documents;

(o)        the Parent or any of its Subsidiaries shall be enjoined, restrained
or in any way prevented by the order of any Governmental Authority from
conducting any part of their business and such order shall continue in effect
for more than thirty (30) days unless such order would not have a material
adverse effect on the business, assets, operation or financial condition of the
Borrower and the Guarantors (taken as a whole), or the ability of the Parent or
any Subsidiary of the Parent to fulfill its obligations under this Credit
Agreement or the other Loan Documents; or

(p)        there shall occur the loss, suspension or revocation of, or failure
to renew, any license or permit now held or hereafter acquired by the Parent or
any of its Subsidiaries if such loss, suspension, revocation or failure to renew
would have a material adverse effect on the business, assets, operation or
financial condition of the Borrower and the Guarantors (taken as a whole), or
the ability of the Parent or any Subsidiary of the Parent to fulfill its
obligations under this Credit Agreement or the other Loan Documents;

then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Required Lenders shall, by
notice in writing to the Borrower, declare all amounts owing with respect to
this Credit Agreement and the other Loan Documents and all Reimbursement
Obligations to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by each of the Parent and the Borrower;
provided that in the event of any Event of Default specified in §§12.1(f) or
12.1(g), all such amounts shall become immediately due and payable automatically
and without any requirement of notice from the Administrative Agent or any
Lender.

 

 

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12.2.     Termination of Commitments. If any one or more of the Events of
Default specified in §12.1(f) or §12.1(g) shall occur, any unused portion of the
credit hereunder shall forthwith terminate and each of the Lenders shall be
relieved of all further obligations to make Loans to the Borrower, and the
Administrative Agent shall be relieved of all further obligations to cause the
Issuing Bank to issue, extend or renew Letters of Credit for the accounts of the
Borrower. If any other Event of Default shall have occurred and be continuing,
the Administrative Agent may and, upon the request of the Required Lenders,
shall, by notice to the Borrower, terminate the unused portion of the credit
hereunder, and upon such notice being given such unused portion of the credit
hereunder shall terminate immediately and each of the Lenders shall be relieved
of all further obligations to make Loans to the Borrower and the Administrative
Agent shall be relieved of all further obligations to cause the Issuing Bank to
issue, extend or renew Letters of Credit for the accounts of the Borrower. No
termination of the credit hereunder shall relieve the Parent or any of its
Subsidiaries of any of the Obligations. No termination of the credit hereunder
shall relieve the Lenders of their obligation to fund their participations in
the Letters of Credit as otherwise set out in this Credit Agreement.

12.3.     Remedies. In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to §12.1, each Lender, if owed
any amount with respect to the Loans or the Reimbursement Obligations, may, with
the consent of the Required Lenders but not otherwise, proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Lender are evidenced,
including as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Lender. No remedy herein conferred upon any
Lender or the Administrative Agent or the purchaser of any Letter of Credit is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law.

12.4.     Distribution of Collateral Proceeds. In the event that, following the
occurrence or during the continuance of any Event of Default, the Administrative
Agent or any Lender, as the case may be, receives any monies in connection with
the enforcement of any of the Security Documents, or otherwise with respect to
the realization upon any of the Collateral, such monies shall be distributed for
application as follows:

(a)        First, to the payment of, or (as the case may be) the reimbursement
of the Administrative Agent and the Issuing Bank for or in respect of all
amounts in respect of Administrative Agent Advances and all fees, indemnities,
costs, expenses, disbursements and other amounts (including charges and
disbursements of counsel to the Administrative Agent and the Issuing Bank) and
losses payable to the Administrative Agent and the Issuing Bank or incurred or
sustained by the Administrative Agent and the Issuing Bank in their capacity as
such, including, without limitation, in connection with the collection of such
monies by the Administrative Agent and the Issuing Bank, for the exercise,
protection or enforcement by the Administrative Agent and the Issuing Bank of
all or any of the rights, remedies, powers and privileges of the Administrative
Agent and the Issuing Bank under this Credit Agreement or any of the other Loan
Documents or in respect of the Collateral or in support of any provision of
adequate indemnity to the Administrative Agent and the Issuing Bank against any
Taxes or liens which by law shall have, or may have, priority over the rights of
the Administrative Agent and the Issuing Bank to such monies;

 

 

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(b)        Second, to the payment of that portion of the Obligations
constituting fees, indemnities, costs, expenses, disbursements and other amounts
(including charges and disbursements of counsel to the Lenders but excluding
principal, interest and Cash Management Obligations) payable to the Lenders
(including amounts payable under §5.7), ratably among them in proportion to the
amounts described in this clause Second payable to them;

(c)        Third, to the payment of that portion of the Obligations constituting
accrued and unpaid interest on the Loans and other Obligations, ratably among
the Lenders in proportion to the respective amounts described in this clause
Third payable to them;

(d)        Fourth, ratably (a) to the payment of that portion of the Obligations
constituting unpaid principal of the Loans, ratably among the Lenders in
proportion to the respective amounts described in this clause Fourth payable to
them and (b) to the Administrative Agent for the account of the Issuing bank, to
cash collateralize the Reimbursement Obligations;

(e)        Fifth, to all Cash Management Obligations owing to any Lender, the
Administrative Agent, the Cash Management Bank or any Affiliate thereof, ratably
among such Persons;

(f)         Sixth, to all other Obligations in such order or preference as the
Required Lenders may determine; provided, however, that (i) distributions shall
be made with respect to each type of Obligation owing to the Lenders among the
Lenders pro rata, and (ii) the Administrative Agent may in its discretion make
proper allowance to take into account any Obligations not then due and payable;

(g)        Seventh, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Lenders and the Administrative Agent of
all of the Obligations, to the payment of any obligations required to be paid
pursuant to §9-608(a)(1)(C) or 9 615(a)(3) of the Uniform Commercial Code of the
Commonwealth of Massachusetts; and

(h)        Eighth, the excess, if any, shall be returned to the Borrower or to
such other Persons as are entitled thereto.

13.              SETOFF.

Regardless of the adequacy of any collateral, if any Event of Default shall have
occurred and be continuing, any deposits or other sums credited by or due from
any of the Lenders to the Borrower or any of the Guarantors and any securities
or other property of the Borrower or any of the Guarantors in the possession of
such Lender or any of its Affiliates may, at any time, without demand or notice
(any such notice being expressly waived by the Borrower and the Guarantors), in
whole or in part, be applied to or set off by such Lender against the payment of
Obligations and any and all other liabilities or obligations, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower or any of the Guarantors to such Lender
regardless of the adequacy of any other collateral securing the Loan. Each of
the Lenders agrees with each other Lender that (i) if an amount to be set off is
to be applied to Indebtedness of the Borrower or any of the Guarantors to such
Lender, such amount shall be applied ratably to such other Indebtedness and to
the Indebtedness evidenced by the Notes of such Lender or constituting
Reimbursement Obligations owed to such Lender, and (ii) if such Lender shall
receive from the Borrower or any Guarantor or any other source, whether by
voluntary payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes in the name of, or constituting
Reimbursement Obligations, such Lender by proceedings against the Borrower at
law or in equity or by proof thereof in bankruptcy, reorganization, liquidation,
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proceedings, or otherwise, and shall retain and apply to the payment of its
Notes, or the Reimbursement Obligations owed to such Lender any amount in excess
of its ratable portion of the payments received by all of the Lenders with
respect to the debt evidenced by the Notes corresponding to, and Reimbursement
Obligations owed to, all of the Lenders, such Lender will make such disposition
and arrangements with the other Lenders with respect to such excess, either by
way of distribution, pro tanto assignment of claims, subrogation or otherwise as
shall result in each Lender receiving in respect of the debt evidenced by the
Notes in its name or Reimbursement Obligations owed it, its proportionate
payment as contemplated by this Credit Agreement; provided that if all or any
part of such excess payment is thereafter recovered from such Lender, such
disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest. ANY AND ALL RIGHTS TO REQUIRE ANY
LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY
GUARANTOR ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

14.              THE ADMINISTRATIVE AGENT.

14.1.

Authorization.

(a)        The Administrative Agent is authorized to take such action on behalf
of each of the Lenders and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents delegated to the
Administrative Agent, together with such powers as are reasonably incident
thereto, including the authority, without the necessity of any notice to or
further consent of the Lenders, from time to time to take any action with
respect to any Collateral or the Security Documents which may be necessary to
perfect, maintain perfected or insure the priority of the security interest in
and liens upon the Collateral granted pursuant to the Security Documents, and,
provided that no duties or responsibilities not expressly assumed herein or
therein shall be implied to have been assumed by the Administrative Agent.

(b)        The relationship between the Administrative Agent and each of the
Lenders is that of an independent contractor. The use of the term
“Administrative Agent” is for convenience only and is used to describe, as a
form of convention, the independent contractual relationship between the
Administrative Agent and each of the Lenders. Nothing contained in this Credit
Agreement nor the other Loan Documents shall be construed to create an agency,
trust or other fiduciary relationship between the Administrative Agent and any
of the Lenders.

(c)        As an independent contractor empowered by the Lenders to exercise
certain rights and perform certain duties and responsibilities hereunder and
under the other Loan Documents, the Administrative Agent is nevertheless a
“representative” of the Lenders, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the Lenders
and the Administrative Agent with respect to all collateral security and
guaranties contemplated by the Loan Documents. Such actions include the
designation of the Administrative Agent as “secured party”, “mortgagee” or the
like on all financing statements and other documents and instruments, whether
recorded or otherwise, relating to the attachment, perfection, priority or
enforcement of any security interests, mortgages or deeds of trust in collateral
security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Lenders and the Administrative Agent.

(d)              The Administrative Agent is authorized and directed to consent
to any sale or other disposition of Collateral permitted to be sold or disposed
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liens on such Collateral, and the Administrative Agent is authorized to rely on
a certification from the Borrower that such sale or disposition is permitted
hereunder.

14.2.     Employees and Administrative Agents. The Administrative Agent may
exercise its powers and execute its duties by or through employees or agents and
shall be entitled to take, and to rely on, advice of counsel concerning all
matters pertaining to its rights and duties under this Credit Agreement and the
other Loan Documents. The Administrative Agent may utilize the services of such
Persons as the Administrative Agent in its sole discretion may reasonably
determine, and all reasonable fees and expenses of any such Persons shall be
paid by the Borrower.

14.3.     No Liability. Neither the Administrative Agent (in its capacity as
Administrative Agent, lender of the swing line loans and/or Cash Management
Bank) nor any of its shareholders, directors, officers or employees nor any
other Person assisting them in their duties nor any agent or employee thereof,
shall be liable to any Lender for any waiver, consent or approval given or any
action taken, or omitted to be taken, in good faith by it or them hereunder or
under any of the other Loan Documents, or in connection herewith or therewith,
or be responsible for the consequences of any oversight or error of judgment
whatsoever, except that the Administrative Agent or such other Person, as the
case may be, may be liable for losses due to its willful misconduct or gross
negligence.

14.4.

No Representations.

14.4.1.  General. The Administrative Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the Letters of
Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for any of the Loan
Documents, or for the value of any such collateral security or for the validity,
enforceability, or collectibility of any such amounts owing with respect to any
of the Loan Documents, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Parent or any of its Subsidiaries, or be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions, covenants or
agreements herein or in any instrument at any time constituting, or intended to
constitute, collateral security for any of the Loan Documents or to inspect any
of the properties, books or records of the Parent or any of its Subsidiaries.
The Administrative Agent shall not be bound to ascertain whether any notice,
consent, waiver or request delivered to it by the Parent or the Borrower shall
have been duly authorized or is true, accurate and complete. The Administrative
Agent has not made nor does it now make any representations or warranties,
express or implied, nor does it assume any liability to the Lenders, with
respect to the credit worthiness or financial conditions of the Parent or any of
its Subsidiaries. Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based
upon such information and documents as it has deemed appropriate, made its own
credit analysis and decision to enter into this Credit Agreement.

14.4.2.  Closing Documentation, etc. For purposes of determining compliance with
the conditions set forth in §10, each Lender that has executed this Credit
Agreement shall be deemed to have consented to, approved or accepted, or to be
satisfied with, each document and matter either sent, or made available, by the
Administrative Agent to such Lender for consent, approval, acceptance or
satisfaction, or required thereunder to be to be consent to or approved by or
acceptable or satisfactory to such Lender, unless an officer of the
Administrative Agent active upon the Borrower’s account shall have received
notice from such Lender not less than one (1) Business Day prior to the Closing
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objection shall not have been withdrawn by notice to the Administrative Agent to
such effect on or prior to the Closing Date.

14.5.

Payments.

14.5.1.  Payments to Administrative Agent. A payment by the Borrower to the
Administrative Agent hereunder or under any of the other Loan Documents for the
account of any Lender shall constitute a payment to such Lender. The
Administrative Agent agrees promptly to distribute to each Lender such Lender’s
pro rata share of payments received by the Administrative Agent for the account
of such Lender except as otherwise expressly provided herein or in any of the
other Loan Documents.

14.5.2.  Distribution by Administrative Agent. If in the opinion of the
Administrative Agent the distribution of any amount received by it in such
capacity hereunder or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent jurisdiction.
If a court of competent jurisdiction shall adjudge that any amount received and
distributed by the Administrative Agent is to be repaid, each Person to whom any
such distribution shall have been made shall either repay to the Administrative
Agent its proportionate share of the amount so adjudged to be repaid or shall
pay over the same in such manner and to such Persons as shall be determined by
such court.

14.5.3.  Delinquent Lenders. Notwithstanding anything to the contrary contained
in this Credit Agreement or any of the other Loan Documents, any Lender that
fails (i) to make available to the Administrative Agent its pro rata share of
any Loan or to purchase any Letter of Credit Participation in accordance with
the terms of this Credit Agreement or (ii) to comply with the provisions of §13
with respect to making dispositions and arrangements with the other Lenders,
where such Lender’s share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of such payments due and payable
to all of the Lenders, in each case as, when and to the full extent required by
the provisions of this Credit Agreement, shall be deemed delinquent (a
“Delinquent Lender”) and shall be deemed a Delinquent Lender until such time as
such delinquency is satisfied. A Delinquent Lender shall be deemed to have
assigned any and all payments due to it from the Borrower, whether on account of
outstanding Loans, Unpaid Reimbursement Obligations, interest, fees or
otherwise, to the remaining applicable non-delinquent Lenders for application
to, and reduction of, their respective pro rata shares of all outstanding Loans
and Unpaid Reimbursement Obligations. The Delinquent Lender hereby authorizes
the Administrative Agent to distribute such payments to the applicable
non-delinquent Lenders in proportion to their respective pro rata shares of all
applicable outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent
Lender shall be deemed to have satisfied in full a delinquency when and if, as a
result of application of the assigned payments to all applicable outstanding
Loans and Unpaid Reimbursement Obligations of the non-delinquent Lenders, the
Lenders’ respective pro rata shares of all outstanding Loans and Unpaid
Reimbursement Obligations have returned to those in effect immediately prior to
such delinquency and without giving effect to the nonpayment causing such
delinquency.

14.6.     Holders of Letters of Credit Participation. The Administrative Agent
may deem and treat the purchaser of any Letter of Credit Participation as the
absolute owner or purchaser thereof for all purposes hereof until it shall have
been furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.

 

 

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14.7.     Indemnity. The Lenders ratably agree hereby to indemnify and hold
harmless the Administrative Agent, the Issuing Bank and the Arranger from and
against any and all claims, actions and suits (whether groundless or otherwise),
losses, damages, costs, expenses (including any expenses for which the
Administrative Agent, the Issuing Bank and/or the Arranger has not been
reimbursed by the Borrower as required by §15), and liabilities of every nature
and character arising out of or related to this Credit Agreement or any of the
other Loan Documents or the transactions contemplated or evidenced hereby or
thereby, or the Administrative Agent’s, the Issuing Bank’s or the Arranger’s
actions taken hereunder or thereunder, except to the extent that any of the same
shall be directly caused by the Administrative Agent’s, the Issuing Bank’s or
the Arranger’s willful misconduct or gross negligence.

14.8.     Administrative Agent as Lender. In its individual capacity, Bank of
America shall have the same obligations and the same rights, powers and
privileges in respect to its Commitment and the Loans made by it and as the
purchaser of any Letter of Credit Participation as it would have were it not
also the Administrative Agent.

14.9.     Resignation. The Administrative Agent may resign at any time by giving
sixty (60) days prior written notice thereof to the Lenders and the Borrower.
Upon any such resignation, the Required Lenders shall have the right to appoint
a successor Administrative Agent. Unless a Default or Event of Default shall
have occurred and be continuing, such successor Administrative Agent shall be
reasonably acceptable to the Borrower. If no successor Administrative Agent
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within thirty (30) days after the retiring Administrative
Agent’s giving of notice of resignation, then the retiring Administrative Agent
may, on behalf of the Lenders, appoint a successor Administrative Agent, which
shall be a financial institution having a rating of not less than A or its
equivalent by Standard & Poor’s Corporation. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent’s resignation, the provisions of this Credit Agreement and the other Loan
Documents shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent.

14.10.   Notification of Defaults and Events of Default. Each Lender hereby
agrees that, upon learning of the existence of a Default or Event of Default, it
shall promptly notify the Administrative Agent thereof. The Administrative Agent
hereby agrees that upon receipt of any notice under this §14.10 it shall
promptly notify the other Lenders of the existence of such Default or Event of
Default.

14.11.   Duties in the Case of Enforcement. In case one or more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Administrative Agent shall, if (a)
so requested by the Required Lenders and (b) the Lenders have provided to the
Administrative Agent such additional indemnities and assurances against expenses
and liabilities as the Administrative Agent may reasonably request, proceed to
enforce the provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such
other legal and equitable and other rights or remedies as it may have in respect
of such Collateral. The Required Lenders may direct the Administrative Agent in
writing as to the method and the extent of any such sale or other disposition,
the Lenders hereby agreeing to indemnify and hold the Administrative Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Administrative
Agent need not comply with any such direction to the extent that the
Administrative Agent reasonably believes the Administrative Agent’s compliance
with such direction to be unlawful or commercially unreasonable in any
applicable jurisdiction.

 

 

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14.12.

Administrative Agent May File Proofs of Claim.

(a)        In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial, administrative or like proceeding or any assignment for the benefit of
creditors relative to the Parent or any of its Subsidiaries, the Administrative
Agent (irrespective of whether the principal of any Loan, Reimbursement
Obligation or Unpaid Reimbursement Obligation shall then be due and payable as
herein expressed or by declaration or otherwise and irrespective of whether the
Administrative Agent shall have made any demand on the Borrower) shall be
entitled and empowered, by intervention in such proceeding, under any such
assignment or otherwise:

(i)         to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans, Reimbursement Obligations or
Unpaid Reimbursement Obligations and all other Obligations that are owing and
unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of the Lenders and the Administrative Agent (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Lenders and the Administrative Agent and their respective agents and
counsel and all other amounts due the Lenders and the Administrative Agent under
§§2.2, 4.6, 5.1 and 15) allowed in such proceeding or under any such assignment;
and

(ii)         to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

(b)        Any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such proceeding or under any such assignment is
hereby authorized by each Lender to make such payments to the Administrative
Agent and, in the event that the Administrative Agent shall consent to the
making of such payments directly to the Lenders, nevertheless to pay to the
Administrative Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of the Administrative Agent and its agents and
counsel, and any other amounts due the Administrative Agent under §§2.2, 4.6,
5.1 and 15).

(c)        Nothing contained herein shall authorize the Administrative Agent to
consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
owed to such Lender or the rights of any Lender or to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding or under any such assignment.

15.              EXPENSES.

The Borrower agrees to pay (i) the reasonable costs of producing and reproducing
this Credit Agreement, the other Loan Documents and the other agreements and
instruments mentioned herein, (ii) without duplication of any amounts paid by
the Borrower pursuant to §5.2.2, any Taxes (including any interest and penalties
in respect thereto) payable by the Administrative Agent, the Issuing Bank, the
Arranger, the Cash Management Bank or any of the Lenders (other than Excluded
Taxes) on or with respect to the transactions contemplated by this Credit
Agreement (the Borrower hereby agreeing to indemnify the Administrative Agent,
the Issuing Bank, the Arranger, the Cash Management Bank and each Lender with
respect thereto), (iii) the reasonable fees, expenses and disbursements of the
Administrative Agent’s Special Counsel or any local counsel to the
Administrative Agent incurred in connection with the preparation, administration
or interpretation of the Loan Documents and other instruments mentioned herein,
each closing hereunder, amendments, modifications, approvals, consents

 

 

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or waivers hereto or hereunder, and proposed amendments, modifications,
approvals, consents or waivers hereto or hereunder, (iv) the reasonable fees,
expenses and disbursements of the Administrative Agent and the Arranger incurred
by the Administrative Agent and the Arranger in connection with the preparation
and syndication of the Loan Documents and other instruments mentioned herein,
including, without limitation, collateral examination, appraisal expenses and
environmental audits, (v) the reasonable fees, expenses and disbursements of the
Administrative Agent and the Arranger incurred by the Administrative Agent and
the Arranger in connection with the administration or interpretation of the Loan
Documents and other instruments mentioned herein, including, without limitation,
collateral examination, appraisal expenses and environmental audits,
inspections, testing and reports, (vi) all reasonable out-of-pocket expenses
(including without limitation reasonable attorneys’ fees and costs and
reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by the Issuing Bank, the Arranger, the
Cash Management Bank, the Administrative Agent or any Lender in connection with
(A) the enforcement of or preservation of rights under any of the Loan Documents
against any of the Guarantors, the Borrower or any of its Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default,
and (B) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Lender’s, the Issuing Bank’s, the
Arranger’s, the Cash Management Bank’s or the Administrative Agent’s
relationship with any the Parent or any of its Subsidiaries, unless such Lender,
the Issuing Bank, the Arranger, the Cash Management Bank or the Administrative
Agent, as applicable, is conclusively determined to have breached its
obligations hereunder, (vii) any fees, costs, expenses and bank charges,
including bank charges for returned checks, incurred by the Administrative
Agent, the Issuing Bank, the Arranger the Cash Management Bank or any of their
Affiliates in establishing, maintaining or handling of any accounts for the
collection of any of the Collateral, (viii) all reasonable fees, expenses and
disbursements of the Issuing Bank, the Arranger, the Cash Management Bank or the
Administrative Agent incurred in connection with UCC searches, UCC filings,
intellectual property searches, intellectual property filings, mortgage
recordings and other personal and real property searches and filings and (ix)
all title insurance premiums and surveyor, engineering, appraisal and
examination charges. The Borrower and each of the Guarantors authorizes the
Administrative Agent, the Issuing Bank, the Arranger, the Cash Management Bank
and the Lenders to debit any account maintained by such Persons with the
Administrative Agent, the Issuing Bank, the Arranger, the Cash Management Bank,
the Lenders, or any of their Affiliates, in payment of amounts due hereunder.
The covenants of this §15 shall survive payment or satisfaction of all other
Obligations.

16.              INDEMNIFICATION.

The Borrower agrees to indemnify and hold harmless the Administrative Agent, the
Issuing Bank, the Arranger, the Cash Management Bank and the Lenders, together
with each of their Affiliates and their officers, directors, employees, agents,
attorneys and advisors, from and against any and all claims, actions and suits
whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of this
Credit Agreement or any of the other Loan Documents or the transactions
contemplated hereby including, without limitation, (i) any actual or proposed
use by the Borrower or any of its Subsidiaries of the proceeds of any of the
Loans or Letters of Credit, (ii) the reversal or withdrawal of any provisional
credits granted by the Administrative Agent, the Arranger, the Issuing Bank, the
Cash Management Bank or any of their Affiliates upon the transfer of funds from
bank agency or lock box accounts or in connection with the provisional honoring
of checks or other items, (iii) the Parent or any of its Subsidiaries entering
into or performing this Credit Agreement or any of the other Loan Documents,
(iv) any actual or alleged infringement of any patent, copyright, trademark,
service mark or similar right of the Parent or any of its Subsidiaries comprised
in the Collateral, or (v) with respect to the Parent and its Subsidiaries and
their respective properties and assets, the violation of any environmental law,
the presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Hazardous Substances or any action, suit,

 

 

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proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to, claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding,
provided, however, that the Borrower shall not be liable to the Administrative
Agent, the Arranger, the Issuing Bank, the Cash Management Bank, any Lender, any
of their Affiliates or any of their officers, directors, employees, agents and
advisors for any of the foregoing to the extent that they arise from such
Person’s gross negligence, breach of contract or willful misconduct. In
litigation, or the preparation therefor, the Lenders, the Issuing Bank, the
Arranger, the Cash Management Bank and the Administrative Agent shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that the obligations of the Borrower
under this §16 are unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law. The covenants contained in this §16
shall survive payment or satisfaction in full of all other Obligations. Each of
the Administrative Agent, the Issuing Bank, the Arranger, the Cash Management
Bank and the Lenders agree to promptly notify the Borrower of any such claim,
action, suit, liability, loss, damage or expense after becoming aware of the
same; provided that the failure to provide such notice shall not affect the
Borrower’s obligations under this Article 16.

17.              SURVIVAL OF COVENANTS, ETC.

All covenants, agreements, representations and warranties made herein, in any of
the other Loan Documents or in any documents or other papers delivered by or on
behalf of the Parent or any of its Subsidiaries pursuant hereto shall be deemed
to have been relied upon by the Lenders and the Administrative Agent,
notwithstanding any investigation heretofore or hereafter made by any of them,
and shall survive the making by the Lenders of any of the Loans and the
issuance, extension or renewal of any Letters of Credit, as herein contemplated,
and shall continue in full force and effect so long as any Letter of Credit or
any amount due under this Credit Agreement or any of the other Loan Documents
remains outstanding or any Lender has any obligation to make any Loans or the
Administrative Agent has any obligation to issue, extend or renew any Letter of
Credit, and for such further time as may be otherwise expressly specified in
this Credit Agreement. All statements contained in any certificate or other
paper delivered to any Lender or the Administrative Agent at any time by or on
behalf of the Parent or any of its Subsidiaries pursuant hereto or in connection
with the transactions contemplated hereby shall constitute representations and
warranties by the Parent or such Subsidiary hereunder.

18.              ASSIGNMENT AND PARTICIPATION.

18.1.     General Conditions. The provisions of this Credit Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that neither the Borrower nor
the Parent may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender and no Lender may
assign or otherwise transfer any of its rights or obligations hereunder except
(a) to an Eligible Assignee in accordance with the provisions of §18.2, (b) by
way of participation in accordance with the provisions of §18.4 or (c) by way of
pledge or assignment of a security interest subject to the restrictions of §18.6
(and any other attempted assignment or transfer by any party hereto shall be
null and void). Nothing in this Credit Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent
provided in §18.4 and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Credit Agreement or
any of the other Loan Documents.

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18.2.     Assignments. Any Lender may at any time assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Credit
Agreement (including all or a portion of its Commitment and the Loans at the
time owing to it); provided that:

(a)        except in the cases of an assignment of the entire remaining amount
of the assigning Lender’s Commitment and the Loans at the time owing to it or of
an assignment to a Lender or a Lender Affiliate, the aggregate amount of the
Commitment (which for this purpose includes Loans outstanding thereunder) or, if
the applicable Commitment is not then in effect, the principal outstanding
balance of the Loan of the assigning Lender subject to each such assignment
(determined as of the date on which the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $10,000,000 unless each of the Administrative Agent and, so long as no
Default or Event of Default has occurred and is continuing, the Borrower
otherwise consents (each such consent not to be unreasonably withheld or
delayed);

(b)        each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Credit Agreement with respect to the Loan or the Commitment assigned, it
being understood that non-pro rata assignments of or among any of the
Commitments, the Revolving Loans, Reimbursement Obligations and the Term Loan
are not permitted;

(c)        any assignment of a Commitment must be approved by the Administrative
Agent and the Issuing Bank (whether or not the proposed assignee is itself a
Lender with a commitment or would otherwise qualify as an Eligible Assignee);
and

(d)        the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to §18.3, from and after the effective date specified in each Assignment and
Acceptance, the Eligible Assignee thereunder shall be a party to this Credit
Agreement and, to the extent of the interest assigned by such Assignment and
Acceptance have the rights and obligations of a Lender under this Credit
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Credit Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender’s rights and obligations under
this Credit Agreement, such Lender shall cease to be a party hereto) but shall
continue to be entitled to the benefits of (i) §§5.2.2, 5.7, 5.8, and 5.10 with
respect to facts and circumstances occurring prior to the effective date of such
assignment and (ii) §16 notwithstanding such assignment. Any assignment or
transfer by a Lender of rights or obligations under this Credit Agreement that
does not comply with this paragraph shall be treated for purposes of this Credit
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with §18.4.

18.3.     Register. The Administrative Agent, acting solely for this purpose as
an agent of the Borrower, shall maintain at the Administrative Agent's Office a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent and the Lenders may treat
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pursuant to the terms hereof as a Lender hereunder for all purposes of this
Credit Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower and any Lender, at any reasonable time
and from time to time upon reasonable prior notice.

18.4.     Participations. Any Lender may at any time, without the consent of, or
notice to, the Parent, the Borrower or the Administrative Agent, sell
participations to any Person (other than a natural person) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations
under this Credit Agreement (including all or a portion of its Commitment and/or
the Loans owing to it); provided that (a) such Lender’s obligations under this
Credit Agreement shall remain unchanged, (b) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (c) the Parent, the Borrower, the Administrative Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations under this Credit Agreement. Any agreement
or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Credit
Agreement and to approve any amendment, modification or waiver of any provision
of this Credit Agreement; provided that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver that would reduce the principal of or the
interest rate on any Loans, extend the term or increase the amount of the
Commitment of such Lender as it relates to such Participant, reduce the amount
of any Commitment Fee or Letter of Credit Fees to which such Participant is
entitled or extend any regularly scheduled payment date for principal or
interest. Subject to §18.5, the Parent and the Borrower agree that each
Participant shall be entitled to the benefits of §§5.2.2, 5.7, 5.8 and 5.10 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to §18.2. To the extent permitted by law, each Participant
also shall be entitled to the benefits of §13 as though it were a Lender,
provided such Participant agrees to be subject to §13 as though it were a
Lender.

18.5.     Payments to Participants. A Participant shall not be entitled to
receive any greater payment under §§5.2.2, 5.7 and 5.8 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant.

18.6.     Miscellaneous Assignment Provisions. A Lender may at any time grant a
security interest in all or any portion of its rights under this Credit
Agreement to secure obligations of such Lender, including without limitation (a)
any pledge or assignment to secure obligations to any of the twelve Federal
Reserve Banks organized under §4 of the Federal Reserve Act, 12 U.S.C. §341 and
(b) with respect to any Lender that is a Fund, to any lender or any trustee for,
or any other representative of, holders of obligations owed or securities issued
by such Fund as security for such obligations or securities or any institutional
custodian for such Fund or for such lender; provided that no such grant shall
release such Lender from any of its obligations hereunder, provide any voting
rights hereunder to the secured party thereof, substitute any such secured party
for such Lender as a party hereto or affect any rights or obligations of the
Parent, the Borrower or the Administrative Agent hereunder.

18.7.     Assignee or Participant Affiliated with the Parent. If any assignee
Lender is an Affiliate of the Parent, then any such assignee Lender shall have
no right to vote as a Lender hereunder or under any of the other Loan Documents
for purposes of granting consents or waivers or for purposes of agreeing to
amendments or other modifications to any of the Loan Documents or for purposes
of making requests to the Administrative Agent pursuant to §12.1 or §12.2, and
the determination of the Required Lenders shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to such assignee
Lender's interest in any of the Loans or Reimbursement Obligations. If any
Lender sells a participating interest in any of the Loans or Reimbursement
Obligations to a Participant, and such Participant is the Parent or an Affiliate
of the Parent, then such transferor Lender shall promptly notify the
Administrative Agent of the sale of such participation. A transferor Lender
shall have no right to vote as a Lender hereunder or under any of the other Loan
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consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the
Administrative Agent pursuant to §12.1 or §12.2 to the extent that such
participation is beneficially owned by the Parent or any Affiliate of the
Parent, and the determination of the Required Lenders shall for all purposes of
this Credit Agreement and the other Loan Documents be made without regard to the
interest of such transferor Lender in the Loans or Reimbursement Obligations to
the extent of such participation.

18.8.     New Notes. Upon its receipt of an Assignment and Acceptance executed
by the parties to such assignment, together with each Note subject to such
assignment, the Administrative Agent shall (a) record the information contained
therein in the Register, and (b) give prompt notice thereof to the Borrower and
the Lenders (other than the assigning Lender). Within five (5) Business Days
after receipt of such notice, the Borrower, at its own expense, shall, if
applicable, execute and deliver to the Administrative Agent, in exchange for
each surrendered Note, a new Note to the order of such Assignee in an amount
equal to the amount assumed by such Assignee pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained some portion of its
obligations hereunder, a new Note to the order of the assigning Lender in an
amount equal to the amount retained by it hereunder. Such new Notes shall
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the assigned
Notes.

18.9.     Special Purpose Funding Vehicle. Notwithstanding anything to the
contrary contained in this §18, any Lender (a “Granting Lender”) may grant to a
special purpose funding vehicle (an “SPC”) of such Granting Lender, identified
as such in writing from time to time delivered by the Granting Lender to the
Administrative Agent and the Borrower, the option to provide to the Borrower all
or any part of any Loan that such Granting Lender would otherwise be obligated
to make to the Borrower pursuant to this Credit Agreement, provided that (a)
nothing herein shall constitute a commitment to make any Loan by any SPC, (b)
the Granting Bank’s obligations under this Credit Agreement shall remain
unchanged, (c) the Granting Lender shall retain the sole right to enforce this
Credit Agreement and to approve any amendment, modification or waiver of any
provision of this Credit Agreement and (d) if an SPC elects not to exercise such
option or otherwise fails to provide all or any part of such Loan, the Granting
Lender shall be obligated to make such Loan pursuant to the terms hereof. The
making of a Loan by an SPC hereunder shall utilize the Commitment of the
Granting Lender to the same extent, and as if, such Loan were made by the
Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for
any expense reimbursement, indemnity or similar payment obligation under this
Credit Agreement (all liability for which shall remain with the Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Credit Agreement) that, prior to
the date that is one year and one day after the later of (i) the payment in full
of all outstanding senior indebtedness of any SPC and (ii) the Maturity Date, it
will not institute against, or join any other person in instituting against,
such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or similar proceedings under the laws of the United States of
America or any State thereof. In addition, notwithstanding anything to the
contrary contained in this §18.9, any SPC may (A) with notice to, but (except as
specified below) without the prior written consent of, the Parent, the Borrower
or the Administrative Agent and without paying any processing fee therefor,
assign all or a portion of its interests in any Loans to its Granting Lender or
to any financial institutions (consented to by the Administrative Agent and, so
long as no Default or Event of Default has occurred and is continuing, the
Borrower, which consents shall not be unreasonably withheld or delayed)
providing liquidity and/or credit facilities to or for the account of such SPC
to fund the Loans made by such SPC or to support the securities (if any) issued
by such SPC to fund such Loans and (B) disclose on a confidential basis any
non-public information relating to its Loans (other than financial statements
referred to in §§6.2 or 7.4) to any rating agency, commercial paper dealer or
provider of a surety, guarantee or credit or liquidity

 

 

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enhancement to such SPC. In no event shall the Borrower be obligated to pay to
an SPC that has made a Loan any greater amount than the Borrower would have been
obligated to pay under this Agreement if the Granting Lender had made such Loan.
An amendment to this §18.9 without the written consent of an SPC shall be
ineffective insofar as it alters the rights and obligations of such SPC.

19.              NOTICES, ETC.

Except as otherwise expressly provided in this Credit Agreement, all notices and
other communications made or required to be given pursuant to this Credit
Agreement or any Letter of Credit Applications shall be in writing and shall be
(i) delivered in hand, (ii) mailed by United States registered or certified
first class mail, postage prepaid, (iii) sent by overnight courier, or (iv) sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:

(a)        if to the Parent or the Borrower, at 941 Grinnell Street, Fall River,
MA 02721, Attention: Paul J. Kelly or at such other U.S. address for notice as
the Parent or the Borrower shall last have furnished in writing to the Person
giving the notice;

(b)        if to the Administrative Agent, at One Federal Street, Boston,
Massachusetts 02110, USA, Attention: Matthew O’Keefe, or such other address for
notice as the Administrative Agent shall last have furnished in writing to the
Person giving the notice; and

(c)        if to any Lender, at such Lender’s address for its Domestic Lending
Office set forth on Schedule 1 hereto, or such other address for notice as such
Lender shall have last furnished in writing to the Person giving the notice.

Any such notice or demand shall be deemed to have been duly given or made and to
have become effective (i) if delivered by hand, overnight courier or facsimile
to a responsible officer of the party to which it is directed, at the time of
the receipt thereof by such officer or the sending of such facsimile and (ii) if
sent by registered or certified first-class mail, postage prepaid, on the third
Business Day following the mailing thereof.

20.              GOVERNING LAW.

THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN,
EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE
PARENT AND THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY
SUCH SUIT BEING MADE UPON THE PARENT AND THE BORROWER BY MAIL AT THE ADDRESS
SPECIFIED IN §19. EACH OF THE PARENT AND THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

 

 

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21.              HEADINGS.

The captions in this Credit Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.

22.              COUNTERPARTS.

This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought. Delivery by facsimile by any of the
parties hereto of an executed counterpart hereof or of any amendment or waiver
hereto shall be as effective as an original executed counterpart hereof or of
such amendment or waiver and shall be considered a representation that an
original executed counterpart hereof or such amendment or waiver, as the case
may be, will be delivered.

23.              ENTIRE AGREEMENT, ETC.

The Loan Documents are intended by the parties as the final, complete and
exclusive statement of the transactions evidenced by the Loan Documents. All
prior or contemporaneous promises, agreements and understandings, whether oral
or written, are deemed to be superseded by the Loan Documents, and no party is
relying on any promise, agreement or understanding not set forth in the Loan
Documents.

24.              WAIVER OF JURY TRIAL.

EACH PARTY HERETO MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM BASED
HEREON ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY, INCLUDING ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR
ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION
OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES THAT IT WILL NOT
SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN WAIVED. Except as prohibited by law, each party hereto
hereby waives any right it may have to claim or recover in any litigation
referred to in the preceding sentence any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages. Each of the Parent and the Borrower (i) certifies that no
representative, agent or attorney of any Lender or the Administrative Agent has
represented, expressly or otherwise, that such Lender or the Administrative
Agent would not, in the event of litigation, seek to enforce the foregoing
waivers and (ii) acknowledges that this waiver constitutes a material inducement
for the Administrative Agent and the Lenders to execute this Credit Agreement
and make the Loans.

25.              CONSENTS, AMENDMENTS, WAIVERS, ETC.

Any consent or approval required or permitted by this Credit Agreement to be
given by all of the Lenders may be given, and any term of this Credit Agreement,
the other Loan Documents or any other instrument related hereto or mentioned
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the Parent or any of its Subsidiaries of any terms of this Credit Agreement, the
other Loan Documents or such other instrument or the continuance of any Default
or Event of Default may be waived (either generally or in a particular instance
and either retroactively or prospectively) with, but only with, the written
consent of the Required Lenders. Notwithstanding the foregoing, no amendment,
modification or waiver shall:

(a)        without the written consent of the Parent, the Borrower and each
Lender directly affected thereby:

(i)         reduce or forgive the principal amount of any Loans or Reimbursement
Obligations, or reduce the rate of interest on the Loans or the amount of the
Commitment Fees or Letter of Credit Fees (other than interest accruing pursuant
to §5.11 following the effective date of any waiver by the Required Lenders of
the Event of Default relating thereto);

(ii)         increase the amount of the Total Commitment or any Lender’s
Commitment or extend the expiration date of the Total Commitment or any Lender’s
Commitment;

(iii)        postpone or extend the Maturity Date or any other regularly
scheduled dates for payments of principal of, or interest on, the Loans or
Reimbursement Obligations or any fees or other amounts payable to such Lender or
waive any Event of Default relating thereto (it being understood that (A) a
waiver of the application of the Default Rate, (B) any vote to rescind any
acceleration made pursuant to §12.1 of amounts owing with respect to the Loans
and other Obligations and (C) any modifications of the provisions relating to
amounts or timing of prepayments of Loans and other Obligations shall require
only the approval of the Required Lenders); or

(iv)        release the Borrower from any Obligations consisting of principal,
interest, fees, reimbursement obligations, expenses, or indemnities, release all
or substantially all of the Collateral or release all or substantially all of
the Guarantors from their guaranty obligations under the Guaranties (excluding,
if the Parent or any Subsidiary of the Parent becomes a debtor under the federal
Bankruptcy Code, the release of “cash collateral”, as defined in Section 363(a)
of the federal Bankruptcy Code pursuant to a cash collateral stipulation with
the debtor approved by the Required Lenders);

(b)        without the written consent of all of the Lenders, (i) amend or waive
this §25 or the definition of Required Lenders, (ii) increase the advance rates
set forth in the definition of the Borrowing Base, (iii) amend the definition of
Availability Reserve, Borrowing Base, Eligible Accounts Receivable, Eligible
Finished Goods Inventory, Eligible Inventory, Eligible Raw Materials Inventory,
Net Book Value or Net Orderly Liquidation Value, in each case, in a manner which
would result in more credit being made available to the Borrower hereunder; or
(iv) amend or waive §12.4;

(c)        without the written consent of the Administrative Agent, amend or
waive §2.6.2, §2.16, §4, §14, the amount or time of payment of the
Administrative Agent’s Fee or any Letter of Credit Fees payable for the
Administrative Agent’s or the Issuing Bank’s account or any other provision
applicable to the Administrative Agent or the Issuing Bank;

(d)        without the written consent of the Cash Management Bank, amend or
waive any provision applicable to the Cash Management Bank;

 

 

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(e)        without the written consent of the Issuing Bank, amend or waive §4 or
any other provision applicable to the Issuing Bank; or

(f)         in the event of any change in the Person acting as the
Administrative Agent, the Issuing Bank or the Cash Management Bank hereunder,
without the written consent of the Person formerly acting as Administrative
Agent, Issuing Bank or Cash Management Bank, amend or waive any provision of
this Credit Agreement accruing to the benefit of such Person in respect of all
actions taken or omitted to be taken by either of them prior to such change.

No waiver shall extend to or affect any obligation not expressly waived or
impair any right consequent thereon. No course of dealing or delay or omission
on the part of the Administrative Agent or any Lender in exercising any right
shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand upon the Parent or the Borrower shall entitle the Parent or the
Borrower to other or further notice or demand in similar or other circumstances.

26.              SEVERABILITY.

The provisions of this Credit Agreement are severable and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction. The
parties agree that they will negotiate in good faith to replace any provision
hereof so held invalid or unenforceable with a valid provision which is as
similar as possible to the invalid or unenforceable provision.

27.              CONFIDENTIALITY.

Each of the Administrative Agent, the Lenders and the Issuing Bank agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
advisors and representatives in connection with this Credit Agreement and the
transactions contemplated hereby (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority purporting to have jurisdiction
over it (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party hereto, (e) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any action or proceeding relating
to this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Article 27, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Credit Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction
relating to the Parent and its obligations or the Borrower and its obligations,
(g) with the consent of the Parent or (h) to the extent such Information (x)
becomes publicly available other than as a result of a breach of this Article 30
or (y) becomes available to the Administrative Agent, any Lender, the Issuing
Bank or any of their respective Affiliates on a nonconfidential basis from a
source other than the Borrower.

For purposes of this Section, “Information” means all information received from
the Parent or any Subsidiary of the Parent relating to the Parent or any
Subsidiary of the Parent or any of their respective businesses, other than any
such information that is available to the Administrative Agent, any Lender or
the Issuing Bank on a nonconfidential basis prior to disclosure by the Parent or
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of the Parent; provided that, in the case of information received from the
Parent or any Subsidiary of the Parent after the date hereof, such information
is clearly identified at the time of delivery as confidential. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

Each of the Administrative Agent, the Lenders and the Issuing Bank acknowledges
that (a) the Information may include material non-public information concerning
the Parent or a Subsidiary of the Parent, as the case may be, (b) it has
developed compliance procedures regarding the use of material non-public
information and (c) it will handle such material non-public information in
accordance with applicable Law, including Federal and state securities Laws. To
the extent practicable and possible in compliance with applicable law,
regulation, proceeding or court order, each of the Lenders and the
Administrative Agent shall, prior to disclosure thereof, notify the Borrower of
any request for disclosure of any such non-public information by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) or pursuant to legal process.

The Parent and the Borrower hereby acknowledge that (a) the Administrative Agent
and/or the Arranger will make available to the Lenders and the Issuing Lender
materials and/or information provided by or on behalf of the Parent and the
Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower
Materials on IntraLinks or another similar electronic system (the “Platform”)
and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that
do not wish to receive material non-public information with respect to the
Parent, the Borrower or their securities) (each, a “Public Lender”). The Parent
and the Borrower hereby agree that (w) all Borrower Materials that are to be
made available to Public Lenders shall be clearly and conspicuously marked
“PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear
prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC,” the Parent and the Borrower shall be deemed to have authorized the
Administrative Agent, the Arranger, the Issuing Lender and the Lenders to treat
such Borrower Materials as not containing any material non-public information
with respect to the Parent, the Borrower or its securities for purposes of
United States Federal and state securities laws (provided, however, that to the
extent such Borrower Materials constitute Information, they shall be treated as
set forth in this Article 30); (y) all Borrower Materials marked “PUBLIC” are
permitted to be made available through a portion of the Platform designated
“Public Investor;” and (z) the Administrative Agent and the Arranger shall be
entitled to treat any Borrower Materials that are not marked “PUBLIC” as being
suitable only for posting on a portion of the Platform not designated “Public
Investor.”

28.              USA PATRIOT ACT.

Each Lender hereby notifies the Borrower that pursuant to the requirements of
the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that
identifies the Borrower, which information includes the name and address of the
Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Act.

29.              DESIGNATION OF PERMITTED LIENS.

The designation of a Lien as a Permitted Lien is not, and shall not be deemed to
be, an acknowledgment by the Administrative Agent or the Lenders to any Person
that the Lien shall have priority over any Lien of the Administrative Agent
granted in any Loan Document.

 

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

IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as
a sealed instrument as of the date first set forth above.

 

QUAKER FABRIC CORPORATION OF FALL RIVER
QUAKER FABRIC CORPORATION

        By:       Name:    Paul J. Kelly     Title: Vice President Finance

 

          

 

Revolving Credit and Term Loan Agreement

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

 

 

BANK OF AMERICA, N.A.,
individually and as Administrative Agent and Issuing Bank

        By:       Name:    Matthew T. O'Keefe     Title: Senior Vice President

 

FLEET NATIONAL BANK, as Cash Management Bank

        By:       Name:    Matthew T. O'Keefe     Title: Vice President

 

 

 

 

 

 

Revolving Credit and Term Loan Agreement

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

 

 

 

WELLS FARGO FOOTHILL, LLC

        By:       Name:     

 

 

 

Revolving Credit and Term Loan Agreement

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

 

 

 

MERRILL LYNCH CAPITAL, A DIVISION OF
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.

        By:       Name:     

 

 

 

 

Revolving Credit and Term Loan Agreement

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

EXHIBIT A

FORM OF LOAN REQUEST

___________ __, 20__

Bank of America, N.A., as Administrative Agent

Mail Stop: MA5-503-07-19

One Federal Street

Boston, Massachusetts 02110

 

Attention: Matthew O’Keefe

Telecopy No. (617) 654-1167

Ladies and Gentlemen:

Reference is hereby made to that certain Revolving Credit and Term Loan
Agreement dated as of May 18, 2005 (as the same may be amended and in effect
from time to time, the “Credit Agreement”), among Quaker Fabric Corporation of
Fall River, a Massachusetts corporation (the “Borrower”), Quaker Fabric
Corporation, a Delaware corporation (the “Parent”), Bank of America, N.A., as
administrative agent (hereinafter, the “Administrative Agent”) for itself and
the other lending institutions party thereto (hereinafter, collectively the
“Lenders”), the Lenders, Bank of America, N.A., as Issuing Bank, and Fleet
National Bank, as Cash Management Bank. Capitalized terms which are used herein
without definition and which are defined in the Credit Agreement shall have the
same meanings herein as in the Credit Agreement.

 

Pursuant to §2.6.1 of the Credit Agreement, the undersigned hereby requests that
a Revolving Loan consisting of [a Base Rate Loan in the principal amount of
$__________] or [a LIBOR Rate Loan in the principal amount of $__________] with
an Interest Period of _______________ be made on __________ __, 20__ to the
Borrower. This request is irrevocable and binding on the Borrower and obligates
the Borrower to accept the requested Revolving Loan on such date.

I hereby certify (a) that, on today’s date, after giving effect to the requested
Revolving Loan, the aggregate outstanding principal amount of the Revolving
Loans is $                 , the Maximum Drawing Amount of all Letters of Credit
issued for the account of the Borrower is $              , the Unpaid
Reimbursement Obligations is $                 , and the Revolving Exposure is
$_________________, (b) that the Borrower will use the proceeds of the requested
Loan or any Letter of Credit in accordance with the provisions of §7.11 of the
Credit Agreement, (c) that each of the representations and warranties contained
in the Credit Agreement or in any document or instrument delivered pursuant to
or in connection with the Credit Agreement was true as of the date as of which
it was made and is true at and as of the date hereof (except to the extent of
changes resulting from transactions contemplated or permitted by the Credit
Agreement, changes occurring in the ordinary course of business that singly or
in the aggregate are not materially adverse, and changes disclosed to the
Lenders in writing and accepted by the Lenders, and to the extent that such
representations and warranties related expressly to an earlier date) and (d)
that no Default or Event of Default has occurred and is continuing.

Very truly yours,

QUAKER FABRIC CORPORATION OF FALL RIVER

By:_______________________________

Name:
Title:

 

 

 

 

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

EXHIBIT B

FORM OF COMPLIANCE CERTIFICATE

___________ __, 20__

Bank of America, N.A., as Administrative Agent

Mail Stop: MA5-503-07-19

One Federal Street

Boston, Massachusetts 02110

 

Attention: Matthew O’Keefe

 

Ladies and Gentlemen:

Reference is hereby made to that certain Revolving Credit and Term Loan
Agreement dated as of May 18, 2005 (as the same may be amended and in effect
from time to time, the “Credit Agreement”), among Quaker Fabric Corporation of
Fall River, a Massachusetts corporation (the “Borrower”), Quaker Fabric
Corporation, a Delaware corporation (the “Parent”), Bank of America, N.A., as
administrative agent (hereinafter, the “Administrative Agent”) for itself and
the other lending institutions party thereto (hereinafter, collectively the
“Lenders”), the Lenders, Bank of America, N.A., as Issuing Bank, and Fleet
National Bank, as Cash Management Bank. Capitalized terms which are used herein
without definition and which are defined in the Credit Agreement shall have the
same meanings herein as in the Credit Agreement.

Pursuant to §7.4(d) of the Credit Agreement, the Parent, by its principal
financial or accounting officer, hereby certifies to you as follows: (a) the
information furnished in the calculations attached hereto was true and correct
as of the last day of the fiscal quarter ended ______________ ___, 20__; (b) as
of the date of this certificate, there exists no Default or Event of Default or
condition which would, with either or both the giving of notice or the lapse of
time, result in a Default or Event of Default; and (c) the financial statements
delivered herewith were prepared in accordance with GAAP applied on a basis
consistent with prior periods.

 

[Remainder of page intentionally left blank]

 

 

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

 

 

IN WITNESS WHEREOF, the undersigned officer has executed this Compliance
Certificate as of the date first written above.

QUAKER FABRIC CORPORATION

By:

 

 

Name:

 

Title:

 

 

 

 

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

 

 

COMPLIANCE CERTIFICATE WORKSHEET

 

As of ___________ __, 20__

 

I.

Section 9.1 – Minimum Consolidated EBITDA

 

  for the [two][three][four] Fiscal Quarters1 ending on __________ __, 20__    
   

A.

Net income (or deficit) of the Parent and its Subsidiaries
for such period: 

$                                    B. income taxes accrued during such period
(to the
extent deducted in calculating net income):  $                                 
  C. interest and fees in respect of Indebtedness (including amounts
accrued or paid in respect of Derivative Agreements) during such
period (whether or not actually paid in cash during such period)
(to the extent deducted in calculating net income): 
$                                    D. depreciation accrued for such period (to
the extent deducted in
calculating net income): $                                    E. amortization
accrued for such period (to the extent deducted in
calculating net income): $                                    F. other non-cash
charges (including asset impairment charges)
accrued for such period (to the extent deducted in calculating
net income):  $                                    G.  Eligible Non-Recurring
Charges for such period: $                                    H.   extraordinary
losses during such period: $                                    I.  Sum of Lines
I.A through I.H: $                                    J. extraordinary gains
during such period (to the extent such
items were added in calculating net income):  $                                 
  K. proceeds received during such period in respect of Casualty
Events and dispositions of any property (other than dispositions
in the ordinary course of business on ordinary business terms)
(to the extent such items were added in calculating net income):
$                                    L.   Sum of Lines I.J and I.K:
$                             

      

 

_________________________

1 At the end of FQ2 of 2005, Consolidated EBITDA shall be determined for the two
(2) consecutive Fiscal Quarters then ending, and at the end of FQ3 of 2005,
Consolidated EBITDA shall be determined for the three (3) consecutive Fiscal
Quarters then ending.

 

 

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

-2-

 

 

 

  M. Consolidated EBITDA:         (Result of Lines I.I minus I.L): $            
Minimum Consolidated EBITDA $ [__________]

 

 

II.

Section 9.2 – Fixed Charge Coverage Ratio

 

 

  as at __________ __, 20__        

A.

Consolidated EBITDA (see Line I.M) for the four Fiscal
Quarter period ending on date of determination: 

$                                    B. aggregate amount of all Non-Financed
Capital Expenditures
made during such period: $                                    C. aggregate
amount paid, or required to be paid (without duplication),
in cash in respect of the current portion of all income taxes for such
period: $                                    D. aggregate amount of dividends
and distributions permitted
to be paid by Parent under §8.4 of the Credit Agreement (if any)
and actually paid in cash during such period: $                                 
  E. Result of Line II.A minus Line II.B minus Line II.C minus
Line II.D:   $                                    F.  tax refunds received in
cash during such period: $                                    G.  Sum of Lines
II.E and II.F:  $                                    H.  Consolidated Interest
Expense for such period: $                                    I. aggregate
amount of regularly scheduled payments of principal
in respect of Indebtedness for borrowed money (including the
principal component of any payments in respect of Capitalized
Leases) paid or required to be paid during such period
(excluding payments made pursuant to §3.2.1(b) of the Credit
Agreement):
$                                    J.   Sum of Lines II.H and II.I:
$                                    K. Fixed Charge Coverage Ratio
$                                      1.     Ratio of Line II.G to Line II.J: $
:

Minimum Fixed Charge Coverage Ratio

[______]:1.00

 

 

 

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

 

 

III.

Section 9.3 – Capital Expenditures

 

[for FQ1 of 2005 through FQ2 of 2005]

[for FQ1 of 2005 through FQ3 of 2005]

[for Fiscal Year __________ ]

 

 

A.

Capital Expenditures:

$

 

 

Maximum Capital Expenditures

$[__________]

 

 

IV.

Consolidated Total Funded Debt to EBITDA Ratio

 

  for Fiscal Quarter ending on __________ __, 20__        

A.

Consolidated Total Funded Debt as of such date:

$                             

      B. Consolidated EBITDA for the four Fiscal Quarter period
ending on such date of determination:           1.      See Line I.M: 
$                                   C. Consolidated Total Funded Debt to EBITDA
Ratio           1.      Ratio of Line IV.A to Line IV.B.1: [______]:1.00

 

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

EXHIBIT C

FORM OF

ASSIGNMENT AND ACCEPTANCE

This Assignment and Acceptance (the “Assignment and Acceptance”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Acceptance as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (a) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including without limitation any letters of credit,
guarantees, and swingline loans included in such facilities) and (b) to the
extent permitted to be assigned under applicable law, all claims, suits, causes
of action and any other right of the Assignor (in its capacity as a Lender)
against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other documents or instruments delivered pursuant
thereto or the loan transactions governed thereby or in any way based on or
related to any of the foregoing, including, but not limited to, contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or
in equity related to the rights and obligations sold and assigned pursuant to
clause (a) above (the rights and obligations sold and assigned pursuant to
clauses (a) and (b) above being referred to herein collectively as, the
“Assigned Interest”). Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Acceptance,
without representation or warranty by the Assignor.

1. Assignor: _______________________________________       2. Assignee:
_______________________________________ [and is an Affiliate/Approved Fund of
[identify Lender]1]       3. Borrower: Quaker Fabric Corporation of Fall River  
    4. Administrative Agent: Bank of America, N.A.,
as the administrative agent under the Credit Agreement      

5.

Credit Agreement:

Revolving Credit and Term Loan Agreement, dated as of May 18, 2005 (the “Credit
Agreement”), among the Borrower, Quaker Fabric Corporation, the Lenders parties
thereto, the Administrative Agent,

           

 

 

_________________________

1Select as applicable.

 

 

 

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

-2-

 

 

Bank of America, N.A., as Issuing Bank, and Fleet National Bank, as Cash
Management Bank

6.

Assigned Interest:

 

Facility Assigned2

Aggregate Amount of
Commitment/Loans for
all Lenders*

Amount of
Commitment/Loans
Assigned*

Percentage Assigned of Commitment/Loans3

 

$

$

%

 

$

$

%

 

[7. Trade Date: ______________]4

Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]

 

 

 

 

_________________________

2Fill in the appropriate terminology for the types of facilities under the
Credit Agreement that are being assigned under this Assignment (e.g.
“Commitment,” “Term Loan,” etc.)

*Amount to be adjusted by the counterparties to take into account any payments
or prepayments made between the Trade Date and the Effective Date.

3Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

4To be completed if the Assignor and the Assignee intend that the minimum
assignment amount is to be determined as of the Trade Date.

 

 

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

-3-

 

 

The terms set forth in this Assignment and Acceptance are hereby agreed to:

ASSIGNOR

[NAME OF ASSIGNOR]

By:______________________________

Title:

ASSIGNEE

[NAME OF ASSIGNEE]

By:______________________________

Title:

[Consented to and]5 Accepted:

BANK OF AMERICA, N.A., as

Administrative Agent

By:______________________________

Title:

[Consented to:]6

QUAKER FABRIC CORPORATION

OF FALL RIVER

By:______________________________

Title:

 

 

 

 

 

_________________________

5To be added only if the consent of the Administrative Agent is required by the
terms of the Credit Agreement.

6To be added only if the consent of the Borrower is required by the terms of the
Credit Agreement.

 

 

 

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

 

 

ANNEX 1

Revolving Credit and Term Loan Agreement, dated as of May 18, 2005 (the “Credit
Agreement”), among Quaker Fabric Corporation of Fall River, Quaker Fabric
Corporation, the Lenders parties thereto, Bank of America, N.A., as
Administrative Agent and Issuing Bank, and Fleet National Bank, as Cash
Management Bank

 

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ACCEPTANCE

 

1.                 Representations and Warranties.

1.1               Assignor.  The Assignor (a) represents and warrants that (i)
it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance or other adverse claim and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Acceptance and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect
to (i) any statements, warranties or representations made in or in connection
with the Credit Agreement or any other Loan Document, (ii) the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Loan Documents or any collateral thereunder, (iii) the financial condition of
the Borrower, any of its Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document or (iv) the performance or observance
by the Borrower, any of its Subsidiaries or Affiliates or any other Person of
any of their respective obligations under any Loan Document.

1.2.               Assignee. The Assignee (a) represents and warrants that (i)
it has full power and authority, and has taken all action necessary, to execute
and deliver this Assignment and Acceptance and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
meets all requirements of an Eligible Assignee under the Credit Agreement
(subject to receipt of such consents as may be required under the Credit
Agreement), (iii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of
the Assigned Interest, shall have the obligations of a Lender thereunder, (iv)
it has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to §§6.2 and 7.4 thereof, as
applicable, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Administrative Agent or any other Lender, and (v) if it is a Non-U.S.
Lender, attached to the Assignment and Acceptance is any documentation required
to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

2.               Payments.  From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignee whether such amounts have accrued prior to, on or after the Effective
Date. The Assignor and the Assignee shall make all appropriate adjustments in
payments by the Administrative Agent for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.

 

 

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

-2-

 

 

 

3.                General Provisions.  This Assignment and Acceptance shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Assignment and Acceptance may be
executed in any number of counterparts, which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Acceptance by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Acceptance. This Assignment
and Acceptance shall be governed by, and construed in accordance with, the laws
of the Commonwealth of Massachusetts.

 

 

 

 

 

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

[banc.jpg]             Exhibit D-1
         Form of Borrowing Base Certificate

Company Name: QUAKER FABRIC CORPORATION
OF FALL RIVER Date:       /      /       Certificate Number:

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

1. ACCOUNTS RECEIVABLE (Line 5 of previous BBC dated _____/_____/_____ ) $    
Fleet Used Only 2. Additions to Accounts Receivable since last BBC           (A)
New Sales Dated ____/____/____ to ____/____/____ $         (B) Other Additions
______________________________ $         
                                              (Explain)              (C) TOTAL
ADDITIONS    $  
 +
  3. Reductions to Accounts Receivable since last BBC    

    (A) Cash Collections Dated ___/___/___ to ___/___/___ $      

       (B) Discounts issued since last BBC $     

      (C) Credit Memos issued since last BBC $      

        (D) Other Reductions since last BBC (*Explain) $      

      (E) TOTAL REDUCTIONS   $  
-
  4. Other Adjustments to Accounts Receivable ____________________________ $  
+/-
     
                                                                                      (Explain)
          5. NEW ACCOUNTS RECEIVABLE BALANCE (Total of Lines 1, 2C, 3E, and 4) $
      6. Total Ineligible Accounts
(Line 2 of previous Collateral Update Certificate dated _______/_______/_______)
$       7. Eligible Accounts Receivable (Line 5 minus Line 6)     $       8.
Accounts Receivable Availability (____% of Line 7)   $       9. Inventory
Availability
(Line 6 of previous Collateral Update Certificate dated _____/_____/_____) $    
  10. Other Availability _________________________________________________ $    
                                                                      (Explain)
        11. Other Availability _________________________________________________
$        
                                                                  (Explain)    
    12. Total Gross Availability (The lesser of the total of Lines 8 through 11
or the Credit Line of $_________________ ) $       13. BEGINNING LOAN BALANCE
(Line 17 of previous BBC dated ____/____/____ ) $       14. Plus Borrowing
requested   $  
+
  15. Less A/R cash collections remitted against loan since last BBC.
(Total must correspond to amount listed on Line 3A)  

     (A) Date ________ Amt. $ ____________        (D) Date ________ Amt. $
___________
(B) Date ________ Amt. $ ____________        (E) Date ________ Amt. $
___________
(C) Date ________ Amt. $ ____________        (F) Date ________ Amt. $
___________

     (G) TOTAL CASH REMITTED $  
-
  16. Other Adjustments and Non-A/R cash applied to loan. (*Explain) $  
+/-
  17. New Loan Balance (Line 13 plus Line 14 minus Line 15G plus or minus Line
16) $       18. Trade L/Cs Outstanding   $       19. Total of FX, SBLC, BA and
Bill of Lading Exposures $       20. NET AVAILABILITY (Line 12 minus the total
of Lines 17, 18, & 19) $      
*Explain:
   

The company named in the box above labeled "Company Name" (the "Company"), by
its duly authorized officer signing below, hereby certifies that (a) the
information set forth in this certificate is true and correct as of the date(s)
indicated herein and (b) the Company is in compliance with all terms and
provisions contained in (i) the loan or other agreement between the Company and
Fleet pursuant to which this certificate is delivered (the "Agreement") and (ii)
any and all documents, instruments and agreements evidencing, governing or
securing the Agreement or otherwise executed in connection therewith.

Prepared by: _________________________________
Rev. 9/00 Authorized Signature: (1) _________________________________

(1) If this document is being transmitted electronically, the Borrower
acknowledges that by entering the name of its duly authorized officer on the
Certificate, that officer has reviewed the Certificate and affirmed the
representations, warranties and certifications referenced above.

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

    [banc.jpg] Exhibit D-2
Form of Collateral Update Certificate             Company Name: QUAKER FABRIC
CORPORATION OF FALL RIVER   Date:     /     /
1.
  Period End Accounts Receivable as of ____ /____ /____ $    
2.
  Accounts Receivable Ineligibles as of ____ /____ /____    
Accounts
 over_____days from Due / Invoice Date $      
Intercompany Accounts
 (CIRCLE ONE)
$      
Government Accounts
  $      
Contra Accounts
  $      
Foreign Accounts
  $      
 
 

_____% Cross-aging Exclusion $      
 
  Other _________________________   $      
 
  Other _________________________   $      
 
  TOTAL INELIGIBLES     $    
 
        $    
3.
  Eligible Accounts Receivable (Line 1 minus Line 2)    
_____ %
 
4.
  Accounts Receivable Advance Rate     $    
5.
  Accounts Receivable Availability (Line 3 times Line 4)        
 
           
6.
  Inventory as of     /     /     Source:        

  Type Gross Amount (-) Ineligible (X) Adv.Rate (=) Available or CAP     

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

       

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

       

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

       

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

       Total Inventory Availability       $

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

7.
  Other Availability _____________________________________________     $    
8.
  Other Availability _____________________________________________     $    
9.
  Total Gross Availability (The lesser of the total of Lines 5, 6, 7 and 8
or Credit Line of $___________________)     $       
10. 
   Loan Balance     $     
11. 
  Trade L/Cs Outstanding     $     
12. 
  Total of FX, SBLC, BA, and Bill of Lading Guarantee Exposures     $     
13. 
  Net Availability (Line 9 minus the total of Lines 10, 11, & 12)     $         
                The Company named in the box above labeled "Company Name" (the
"Company"), by its duly authorized officer signing below, hereby certifies that
(a) the information set forth in this certificate is true and correct as of the
date(s) indicated herein and (b) the Company is in compliance with all terms and
provisions in (i) the loan or other agreement between the Company and Fleet
pursuant to which this certificate is delivered (the "Agreement") and (ii) any
and all documents, instruments and agreements evidencing, governing or securing
the Agreement or otherwise executed in connection therewith.

                                Prepared by Authorized Signature (1)         (1)
If this document is being transmitted electronically, the Borrower acknowledges
that by entering the name of its duly authorized officer, that officer has
reviewed the Certificate and affirmed the representations and warranties
referenced above.

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              [banc.jpg] Exhibit D-3
Form of Accounts Receivable / Loan Reconciliation      

        Company Name: QUAKER FABRIC CORPORATION OF FALL RIVER Date:    /    /  
   

A. Activity for the period dated _____ /_____ /_____ to _____ /_____ /_____  

B. Borrowing Base Certificates for the period numbered #_______ to #_______    
   

Accounts Receivable Reconciliation:  

1. Ending A/R Balance (from Line 5 of the last BBC of the period): $  

2. Correcting entries or items in-transit; explain and indicate the Borrowing
Base
the correction or in-transit item will be posted on (see instructions):  

  Description $ Amount (+/-)
BBC #
 

         

         

         

Total Increase(Decrease) to A/R Balance from Subsequent Activity: $  

3. Adjusted Period End Accounts Receivable Balance (Line 1 plus/minus Line 2): $
 

4. End of Period Accounts Receivable Balance per A/R Aging: $  

5. Variance between Line 3 and Line 4: $  

Explain:        

                               

Loan Reconciliation  

A. Ending Loan Balance (from Line 17 of the last BBC of the period): $  

B. Correcting entries or items in-transit; explain and indicate the Borrowing
Base the correction or in-transit item will be posted on (see instructions):  

  Description $ Amount (+/-)
BBC #
 

         

         

         

Total Increase(Decrease) to Loan Balance from Subsequent Activity: $  

C. Adjusted Period End Loan Balance (Line A plus/minus Line B): $  

D. End of Period Loan Balance per General Ledger or other company records: $  

E. Variance between Line C and Line D: $  

Explain:               The Company named in the box above labeled "Company Name"
(the "Company"), by its duly authorized officer signing below, hereby certifies
that (a) the information set forth in this certificate is true and correct as of
the date(s) indicated herein and (b) the Company is in compliance with all terms
and provisions in (i) the loan or other agreement between the Company and Fleet
pursuant to which this certificate is delivered (the "Agreement") and (ii) any
and all documents, instruments and agreements evidencing, governing or securing
the Agreement or otherwise executed in connection therewith.

      Prepared by   Authorized Signature (1)

      (1) If this document is being transmitted electronically, the Borrower
acknowledges that by entering the name of its duly authorized officer, that
officer has reviewed the Reconciliation and affirmed the representations and
warranties referenced above.

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

EXHIBIT E

 

FORM OF REVOLVING NOTE

$________

May 18, 2005

FOR VALUE RECEIVED, the undersigned Quaker Fabric Corporation of Fall River, a
Massachusetts corporation (the “Borrower”), hereby promises to pay to the order
of ____________ (the “Lender”) at the Lender’s office at _________________:

(a)        prior to or on the Maturity Date, the principal amount of
____________ DOLLARS ($________) or, if less, the aggregate unpaid principal
amount of Revolving Loans advanced by the Lender to the Borrower pursuant to the
Revolving Credit and Term Loan Agreement dated as of May 18, 2005 (as amended
and in effect from time to time, the “Credit Agreement”), among the Borrower,
Quaker Fabric Corporation, a Delaware corporation (the “Parent”), the Lender,
the other lending institutions party thereto, and Bank of America, N.A., as
Administrative Agent and Issuing Bank, and Fleet National Bank, as Cash
Management Bank;

(b)        the principal outstanding hereunder from time to time at the times
provided in the Credit Agreement; and

(c)        interest on the principal balance hereof from time to time
outstanding from the Closing Date under the Credit Agreement through and
including the maturity date hereof at the times and at the rate provided in the
Credit Agreement.

This Note evidences borrowings under and has been issued by the Borrower in
accordance with the terms of the Credit Agreement. The Lender and any holder
hereof is entitled to the benefits of the Credit Agreement, the Security
Documents and the other Loan Documents, and may enforce the agreements of the
Borrower contained therein, and any holder hereof may exercise the respective
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the respective terms thereof. All capitalized terms used in this
Note and not otherwise defined herein shall have the same meanings herein as in
the Credit Agreement.

The Borrower irrevocably authorizes the Lender to make or cause to be made, at
or about the time of the Drawdown Date of any Revolving Loan or at the time of
receipt of any payment of principal of this Note, an appropriate notation on the
grid attached to this Note, or the continuation of such grid, or any other
similar record, including computer records, reflecting the making of such
Revolving Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Revolving Loans set forth on the grid attached to this
Note, or the continuation of such grid, or any other similar record, including
computer records, maintained by the Lender with respect to any Revolving Loans
shall be prima facie evidence of the principal amount thereof owing and unpaid
to the Lender, but the failure to record, or any error in so recording, any such
amount on any such grid, continuation or other record shall not limit or
otherwise affect the obligation of the Borrower hereunder or under the Credit
Agreement to make payments of principal of and interest on this Note when due.

 

 

 

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

-2-

 

 

The Borrower has the right in certain circumstances and the obligation under
certain other circumstances to prepay the whole or part of the principal of this
Note on the terms and conditions specified in the Credit Agreement.

If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.

No delay or omission on the part of the Lender or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Lender or such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar or waiver of the same or any other
right on any further occasion.

The Borrower and every endorser and guarantor of this Note or the obligation
represented hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, and assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.

THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE
ADDRESS SPECIFIED IN §19 OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

This Note shall be deemed to take effect as a sealed instrument under the laws
of the Commonwealth of Massachusetts.

 

[Remainder of page intentionally left blank]

 

 

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IN WITNESS WHEREOF, the undersigned has caused this Revolving Note to be signed
in its corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.

 

QUAKER FABRIC CORPORATION OF FALL RIVER        
By:
      Name:     Title:

 

 

 

 

 

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

 

 

 

 

 

Amount of

Balance of

 

 

Amount

Principal Paid

Principal

Notation

Date

of Loan

or Prepaid

Unpaid

Made By:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

EXHIBIT F

 

FORM OF TERM NOTE

$_________

May 18, 2005

FOR VALUE RECEIVED, the undersigned Quaker Fabric Corporation of Fall River, a
Massachusetts corporation (the “Borrower”), hereby promises to pay to the order
of___________, (the “Lender”) at the Lender’s office at ______________:

(a)        prior to or on the Maturity Date the principal amount of ___________
DOLLARS ($________), evidencing the Term Loan made by the Lender to the Borrower
pursuant to the Revolving Credit and Term Loan Agreement dated as of May 18,
2005 (as amended and in effect from time to time, the “Credit Agreement”), among
the Borrower, Quaker Fabric Corporation, a Delaware corporation (the “Parent”),
the Lender, the other lending institutions party thereto, and Bank of America,
N.A., as Administrative Agent and Issuing Bank, and Fleet National Bank, as Cash
Management Bank;

(b)        the principal outstanding hereunder from time to time at the times
provided in the Credit Agreement; and

(c)        interest from the date hereof on the principal amount from time to
time outstanding to and including the maturity hereof at the rates and times and
in all cases in accordance with the terms of the Credit Agreement.

This Note evidences borrowings under and has been issued by the Borrower in
accordance with the terms of the Credit Agreement. The Lender and any holder
hereof is entitled to the benefits of the Credit Agreement, the Security
Documents and the other Loan Documents, and may enforce the agreements of the
Borrower contained therein, and any holder hereof may exercise the respective
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the respective terms thereof. All capitalized terms used in this
Note and not otherwise defined herein shall have the same meanings herein as in
the Credit Agreement.

The Borrower irrevocably authorizes the Lender to make or cause to be made, at
the time of receipt of any payment of principal of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, reflecting the receipt of
such payment. The outstanding amount of the Term Loan set forth on the grid
attached to this Note, or the continuation of such grid, or any other similar
record, including computer records, maintained by the Lender with respect to the
Term Loan shall be prima facie evidence of the principal amount of the Term Loan
owing and unpaid to the Lender, but the failure to record, or any error in so
recording, any such amount on any such grid, continuation or other record shall
not limit or otherwise affect the obligation of the Borrower hereunder or under
the Credit Agreement to make payments of principal of and interest on this Note
when due.

The Borrower has the right in certain circumstances and the obligation under
certain other circumstances to prepay the whole or part of the principal of this
Note on the terms and conditions specified in the Credit Agreement.

 

 

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

-2-

 

 

If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.

No delay or omission on the part of the Lender or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Lender or such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar or waiver of the same or any other
right on any future occasion.

The Borrower and every endorser and guarantor of this Note or the obligation
represented hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, and assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.

THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE
ADDRESS SPECIFIED IN §19 OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

This Note shall be deemed to take effect as a sealed instrument under the laws
of the Commonwealth of Massachusetts.

 

[Remainder of page intentionally left blank]

 

 

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

 

 

IN WITNESS WHEREOF, the undersigned has caused this Note to be signed in its
corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.

 

 

QUAKER FABRIC CORPORATION OF
FALL RIVER        
By:
      Name:     Title: