Exhibit 10.71

 

LOAN AND SECURITY AGREEMENT

 

Dated as of July     , 2003

 

among

 

IMPCO TECHNOLOGIES, INC.,

 

as Borrower

 

and

 

LASALLE BUSINESS CREDIT, LLC,

 

as a Lender and as Agent

 

and

 

THE INSTITUTIONS FROM TIME TO TIME

 

A PARTY HERETO

 

as Lenders

 

$12,000,000

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

THIS LOAN AND SECURITY AGREEMENT (“Agreement”) is made as of this      day of
July, 2003, by and among LASALLE BUSINESS CREDIT, LLC, a Delaware limited
liability company (“LaSalle”), with its principal office at 135 South LaSalle
Street, Chicago, Illinois 60603, the financial institutions which from time to
time become a party hereto (collectively, the “Lenders” and individually, a
“Lender”), LaSalle as agent for Lenders (in such capacity, “Agent”), and IMPCO
TECHNOLOGIES, INC., a Delaware corporation, with its principal office at 16804
Gridley Place, Cerritos, California 90703 (“Borrower”).

 

WITNESSETH:

 

WHEREAS, from time to time Borrower may request Agent and Lenders to make loans
and advances to and extend certain credit accommodations to Borrower, and the
parties wish to provide for the terms and conditions upon which such loans,
advances and credit accommodations shall be made;

 

NOW, THEREFORE, in consideration of any loans, advances and credit
accommodations (including any loans by renewal or extension) hereafter made to
Borrower by Agent and the Lenders, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Borrower, the parties agree as follows:

 

1. DEFINITIONS.

 

(a) General Definitions

 

“Account Debtor” shall mean the Person who is obligated on or under an Account.

 

“Accounts” shall have the meaning given to the term “accounts” in the UCC and
shall in any event include, without limitation, all of Borrower’s presently
existing and hereafter arising accounts, accounts receivable, contract rights,
instruments, documents, chattel paper, and all other forms of obligations owing
to Borrower arising out of the sale or lease of goods or the rendition of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guarantees, letters of credit and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower, and all products
and proceeds of the foregoing.

 

“Accounts Advance Rate” shall have the meaning set forth in paragraph 2(b)(i)(A)
hereof.

 

“Accounts Trial Balance” shall have the meaning set forth in paragraph 11(c)
hereof.

 

“Advance Rates” shall mean collectively, the Accounts Advance Rate and the
Inventory Advance Rate.

 

“Affiliate” means any Person: (a) directly or indirectly controlling, controlled
by, or under common control with, Borrower; (b) directly or indirectly owning or
holding five percent (5%) or more of any equity interest in Borrower; or (c)
five percent (5%) or more of

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

whose voting stock or other equity interest having ordinary voting power for the
election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by Borrower; or (d) which
has a senior executive officer who is also a senior executive officer of
Borrower. For purposes of this definition, “control” (including with correlative
meanings, the terms “controlling”, “controlled by” and “under common control
with”) means the possession directly or indirectly of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities or other equity interest, or by contract or
otherwise. Notwithstanding anything to the contrary contained in the foregoing,
the following entities shall at all time be deemed to be an “Affiliate” of
Borrower: the Consolidated Subsidiaries and BRC.

 

“Agent” shall have the meaning set forth in the introductory paragraph hereof.

 

“Asset Disposition” shall mean the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any or all of
the assets of Borrower, or any of its Subsidiaries or Affiliates, other than
sales of Inventory or Equipment in the ordinary course of business consistent
with prudent business practice.

 

“Authority” shall have the meaning set forth in paragraph 14(t)(iv) hereof.

 

“Bank” shall mean LaSalle Bank National Association.

 

“Bankruptcy Code” shall mean the Bankruptcy Reform Act of 1978, as amended,
including amendments made by The Bankruptcy Reform Act of 1994, as codified in
Title 11 of the United States Code.

 

“Benefit Plan” shall mean an employee pension benefit plan of Borrower or an
ERISA Affiliate, as defined in Section 3(2) of ERISA, which is subject to Title
IV of ERISA.

 

“Blocked Account” shall have the meaning set forth in paragraph 10(a).

 

“Borrower” shall have the meaning set forth in the introductory paragraph
hereof.

 

“Borrowing Base” shall have the meaning specified in paragraph 2(b)(i) hereof.

 

“Borrowing Base Certificate” shall mean a certificate duly executed by an
officer of Borrower appropriately completed and in substantially the form of
Exhibit C hereto.

 

“BRC” shall mean B.R.C. Societa a Responsablità Limitata, an Italian limited
liability company.

 

“BRC Agreements” shall collectively mean the BRC Sale and Purchase Agreement,
the BRC Option Agreement, the BRC Lock-up Agreement and the BRC Shareholders
Agreement, together with all amendments thereof and other documents ancillary
thereto.

 

2

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

“BRC Lock-up Agreement” shall mean, collectively, the form of lockup agreement
contemplated by the BRC Option Agreement and executed by each of the BRC
Shareholders in favor of Borrower, as amended from time to time.

 

“BRC Option Agreement” shall mean that certain Option Agreement, dated as of
October 3, 2002, by and among Borrower and the controlling shareholders of BRC,
as amended from time to time.

 

“BRC Sale and Purchase Agreement” shall mean that certain Sale and Purchase
Agreement, dated as of May 8, 2003, by and among the Borrower and the BRC
Shareholders, as amended from time to time.

 

“BRC Shareholders” shall mean each of Mariano Costamagna, Pier Antonio
Costamagna, Bruna Giachino and Carla Borgogno.

 

“BRC Transaction” shall mean the payment on or before September 30, 2003 of the
Deferred Portion of the Purchase Price (as such term is defined in the BRC Sale
and Purchase Agreement) and such other actions as are contemplated by the BRC
Agreements to be performed by Borrower to fully consummate its acquisition of
50% of the currently outstanding equity of BRC in accordance with the BRC Sale
and Purchase Agreement.

 

“Bridge Loan Lenders” shall have the meaning specified in paragraph 15(a)(xxvii)
hereof.

 

“Bridge Loan Subordinated Debt Documents” shall have the meaning specified in
paragraph 15(a)(xxvii) hereof.

 

“Bridge Loan Subordination Agreements” shall have the meaning specified in
paragraph 15(a)(xxvii) hereof.

 

“Business Day” shall mean with respect to all Loans, any day other than a
Saturday, Sunday, or such other day as banks in Illinois and/or New York are
authorized or required to be closed for business.

 

“Capital Adequacy Charge” shall have the meaning specified in paragraph 5(i)
hereof.

 

“Capital Adequacy Demand” shall have the meaning specified in paragraph 5(i)
hereof.

 

“Capital Expenditures” shall mean, with respect to any period, the aggregate of
all expenditures (whether paid in cash or accrued as liabilities and including
expenditures for capitalized lease obligations) by Borrower during such period
that are required by GAAP to be included in or reflected by the property, plant
or equipment or similar fixed asset accounts (or in intangible accounts subject
to amortization) in the balance sheet of Borrower.

 

“Capital Lease” shall mean a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.

 

3

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

“Capital Lease Obligations” of any Person shall mean any Indebtedness
represented by obligations under a Capital Lease.

 

“Cash Equivalents” shall mean: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one (1) year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within one (1) year from the date of acquisition thereof and, at the
time of acquisition, having the highest rating obtainable from either Standard &
Poor’s rating service (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”),
(c) commercial paper maturing no more than two hundred seventy (270) days from
the date of acquisition thereof and, at the time of acquisition, having a rating
of A-1 or P-1, or better, from S&P or Moody’s, and (d) certificates of deposit
or bankers’ acceptances maturing within one (1) year from the date of
acquisition thereof that are either: (i) issued by any bank organized under the
laws of the United States or any state thereof which bank has a rating of A or
A2, or better, from S&P or Moody’s, or (ii) in an amount less than or equal to
$100,000 in the aggregate if issued by any other bank insured by the Federal
Deposit Insurance Corporation.

 

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

 

“Change of Control” shall mean: (a) the occurrence of any event (whether in one
or more transactions) which results in an acquisition of: (i) more than
twenty-five percent (25%) of the outstanding shares of Borrower’s stock, or (ii)
control of Borrower by a Person who is not presently an owner of Borrower or
directly controlled by a present owner, (b) any merger or consolidation of or
with Borrower, (c) the sale of all or substantially all of the property or
assets of Borrower, (d) a majority of the present members of the board of
directors of Borrower shall cease to be members of Borrower’s board of
directors, or (e) a breach of any change of ownership or control provision under
the Securities Purchase Agreement or any other existing or future credit or loan
agreement to which Borrower is a party. For purposes of this definition,
“control of Borrower” shall mean the power, direct or indirect to direct or
cause the direction of the management and policies of Borrower by contract or
otherwise.

 

“Chattel Paper” shall have the meaning given to the term “chattel paper” in the
UCC and in any event shall include, without limitation, a writing or writings
which evidence both a monetary obligation and a security interest in or a lease
of specific goods.

 

“Closing Date” shall mean the date upon which the initial Loan is made.

 

“Closing Document List” shall have the meaning specified in paragraph 15(a)(i)
hereof.

 

“Collateral” shall mean all of the personal property of Borrower as described in
paragraph 8 hereof and all other real or personal property of any Obligor or any
other Person now or hereafter pledged to Agent for its benefit and for the
ratable benefit of Lenders to secure, either directly or indirectly, repayment
of any of the Liabilities.

 

4

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

“Collateral Locations” shall have the meaning set forth in paragraph 13(c)
hereof.

 

“Commercial Tort Claim” shall have the meaning given to the term “commercial
tort claim” in the UCC and in any event shall include, without limitation, a
claim arising in tort with respect to which: (A) the claimant is an
organization; or (B) the claimant is an individual and the claim: (i) arose in
the course of the claimant’s business or profession; and (ii) does not include
damages arising out of personal injury to or the death of an individual.

 

“Commitment Percentage” of any Lender shall mean the percentage set forth below
such Lender’s name on the signature page hereof as same may be adjusted upon any
assignment by a Lender pursuant to paragraph 24 hereof.

 

“Commitment Transfer Supplement” has the meaning set forth in paragraph 24(b).

 

“Confidential Information” shall have the meaning set forth in paragraph 27(e)
hereof.

 

“Consolidated EBITDA” shall mean, for any period, the consolidated EBITDA of the
Consolidated Group, determined on a consolidated basis, in accordance with GAAP.

 

“Consolidated Group” shall mean Borrower and the Consolidated Subsidiaries.

 

“Consolidated Leverage Ratio” shall mean, as at the last day of any period of
four (4) consecutive fiscal quarters, the ratio of: (a) Indebtedness of the
Consolidated Group on such day to (b) Consolidated EBITDA for such periods.

 

“Consolidated Subsidiaries” shall mean IMPCO Technologies Pty Limited, IMPCO
Technologies (SA) Pty Ltd., IMPCO Technologies (NSW) Pty. Ltd., IMPCO Fuel
Systems Pty Ltd., IMPCO Technologies Japan, KK, Grupo I.M.P.C.O. Mexicano,
IMPCO-BERU Technologies B.V., IMPCO-BERU Technologies, GmbH, IMPCO-BERU
Technologies S.A.R.L., IMPCO-BERU Technologies Limited, Minda IMPCO
Technologies, Limited, Minda IMPCO Limited, and CNGC-IMPCO Technologies, LLC.

 

“Consolidated Tangible Net Worth” shall mean, for any period, the consolidated
Tangible Net Worth of the Consolidated Group, determined on a consolidated
basis, in accordance with GAAP.

 

“Contingent Obligation(s)” as applied to any Person, shall mean any direct or
indirect liability, contingent or otherwise, of that Person: (i) with respect to
any underlying indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that the underlying indebtedness, lease, dividend or other obligation
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto; (ii) with respect to any letter
of credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; or (iii) under any foreign

 

5

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

exchange contract, currency swap agreement, interest rate swap agreement or
other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (other than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, or to maintain working capital or equity
capital of such other Person or otherwise to maintain the net worth or solvency
of such other Person, (c) any liability of such Person for the obligations of
another through any agreement to purchase, repurchase or otherwise acquire such
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another, and
(d) otherwise to assure or hold harmless the owner of any of the foregoing
obligations against loss in respect thereto. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if not a fixed and determined amount, the maximum amount
so guaranteed.

 

“Contract Year” shall mean each period of twelve (12) consecutive months
commencing on the Closing Date and on each anniversary thereafter.

 

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

 

“Customer Lists” shall mean the customer lists of Borrower which include the
name and complete address of each of Borrower’s customers, attached hereto as
Exhibit B and made a part hereof, as same shall be updated pursuant to paragraph
11(h) hereof.

 

“Customs” shall have the meaning set forth in paragraph 3(f) hereof.

 

“Default” shall mean any event, condition or default which with the giving of
notice, the lapse of time or both would be an Event of Default.

 

“Defaulting Lender” shall have the meaning set forth in paragraph 6(g) hereof.

 

“Defaulting Lender Cure Period” shall have the meaning set forth in paragraph
6(l) hereof.

 

“Deposit Account” shall have the meaning given to the term “deposit account” in
the UCC and in any event shall include, without limitation, a demand, time,
savings, passbook or similar account maintained with a bank.

 

“Designated Lender” shall have the meaning set forth in paragraph 6(l) hereof.

 

“Documents” shall mean the term “documents” as such term is defined under
Article 9 of the UCC.

 

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

 

6

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

“EBITDA” shall mean, with respect to any applicable fiscal period, the following
for any Person or Persons each calculated for such fiscal period: net income
before taxes for such period (excluding pre-tax gains or losses on the sale of
assets (other than the sales of Inventory in the ordinary course of business)
and excluding other pre-tax extraordinary gains) plus cash interest expense,
depreciation, amortization and other non-cash charges deducted in determining
net income for such period, minus interest income calculated in determining net
income for such period.

 

“Eligible Account” shall mean an Account owing to Borrower which is acceptable
to Agent in its reasonable discretion for lending purposes. Agent shall, in
general, consider an Account to be an Eligible Account if it meets, and so long
as it continues to meet, the following requirements:

 

(i) it is genuine and in all respects is what it purports to be;

 

(ii) it is owned by Borrower and Borrower has the right to subject it to a
security interest in favor of Agent;

 

(iii) it arises from: (A) the performance of services by Borrower and such
services have been fully performed and acknowledged and accepted by the Account
Debtor thereunder, or (B) the sale or lease of Goods by Borrower, and such Goods
have been completed in accordance with the Account Debtor’s specifications (if
any) and delivered to and accepted by the Account Debtor (provided, however, if
such Goods have not been completed in accordance with the Account Debtor’s
specifications, such Goods may not be considered ineligible solely due to its
failure to satisfy such specifications, if such Account Debtor has waived such
specifications and accepted all such Goods as-is where-is with all faults, all
in writing in form and substance satisfactory to Lender), and such Account
Debtor has not returned, offered to return or given notice of its intention to
return any of the Goods which are the subject of such Account, and Borrower has
possession of, or has delivered to Agent at Agent’s request, shipping and
delivery receipts evidencing delivery of such Goods;

 

(iv) it is evidenced by an invoice rendered to the Account Debtor thereunder,
does not remain unpaid more than either: (x) sixty (60) days after the stated
due date thereof and (y) ninety (90) days past the stated invoice date thereof;
provided, however, that if more than twenty-five percent (25%) of the aggregate
dollar amount of invoices owing by a particular Account Debtor remain unpaid for
more than: (A) sixty (60) days past the respective stated due dates thereof or
(B) ninety (90) days past the respective invoice dates thereof, then all
Accounts owing to Borrower by that Account Debtor shall be deemed ineligible;

 

(v) it is not subject to any prior assignment, offset, claim, lien, security
interest or encumbrance whatsoever, other than Liens in favor of Agent and
subordinate liens granted to the Subordinate Lender covered by the Subordination
Agreement;

 

(vi) it is a valid, legally enforceable and unconditional obligation of the
Account Debtor thereunder, and is not subject to setoff, counterclaim, credit,
allowance or adjustment by such Account Debtor, or to any claim asserted by such
Account Debtor denying liability thereunder in whole or in part;

 

7

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

(vii) it does not arise out of a contract or order which fails in any material
respect to comply with the requirements of applicable law;

 

(viii) the Account Debtor thereunder is not a director, officer, employee or
agent of Borrower, or a Subsidiary, Parent or Affiliate of Borrower;

 

(ix) it is not an Account with respect to which the Account Debtor is the United
States of America or any state or local government, or any department, agency or
instrumentality thereof, unless Borrower assigns its right to payment of such
Account to Agent pursuant to, and in full compliance with, the Assignment of
Claims Act of 1940, as amended or any comparable state or local law;

 

(x) it is not an Account with respect to which the Account Debtor is located in
a state which requires Borrower, as a precondition to commencing or maintaining
an action in the courts of that state, either to: (A) receive a certificate of
authority to do business and be in good standing in such state, or (B) file a
notice of business activities report or similar report with such state’s taxing
authority, unless: (x) Borrower has taken one of the actions described in
clauses (A) or (B), (y) the failure to take one of the actions described in
either clause (A) or (B) may be cured retroactively by Borrower at its election,
or (z) Borrower has proven, to Agent’s satisfaction, that it is exempt from any
such requirements under any such state’s laws;

 

(xi) it is an Account which arises out of a sale made in the ordinary course of
Borrower’s business;

 

(xii) the Account Debtor is a resident or citizen of, and is located within, the
United States of America or Canada;

 

(xiii) it is not an Account with respect to which the Account Debtor’s
obligation to pay is conditional upon the Account Debtor’s approval of the Goods
or services or is otherwise subject to any repurchase obligation or return
right, as with sales made on a bill-and-hold, guaranteed sale, sale on approval,
sale or return or consignment basis;

 

(xiv) it is not an Account: (A) with respect to which any representation or
warranty contained in this Agreement is untrue or (B) which violates any of the
covenants of Borrower contained in this Agreement;

 

(xv) it is not an Account which, when added to a particular Account Debtor’s
other indebtedness to Borrower, exceeds fifteen percent (15%) of the aggregate
of Borrower’s Accounts (except with respect to Accounts due from UPS Oasis
Supply, in which case, such percentage limit shall be 25%); provided, however,
that Accounts excluded from Eligible Accounts solely by reason of this
subparagraph (xv) shall be Eligible Accounts to the extent of such concentration
limit;

 

(xvi) it is not an Account with respect to which the prospect of payment or
performance by the Account Debtor is or will be impaired, as determined by Agent
in its sole discretion;

 

8

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

(xvii) it is not an Account arising from progress billings, invoices for
deposits, samples or tooling;

 

(xviii) it is not an Account with respect to which the sale is on an installment
basis, cash on delivery basis, lease or other extended payment basis; and

 

(xix) it is not that portion of an Account representing late fees, service
charges or interest.

 

“Eligible Inventory” shall mean Inventory held for sale by Borrower, normally
and currently saleable in the ordinary course of Borrower’s business, and which
at all times pertinent hereto is of good and merchantable quality, free from
defects, as to which Inventory Agent has a perfected first priority security
interest and which Inventory is subject to no other Lien other than Liens in
favor of Agent and subordinate Liens in favor of the Subordinate Lender which
are covered by the Subordination Agreement, and which is located at the
locations set forth in Exhibit A of this Agreement and is not in transit, as
that Exhibit may, from time to time, be amended or supplemented in accordance
with the terms of this Agreement, and as to which Borrower has satisfied all
terms, conditions, warranties and representations of this Agreement and the
Other Agreements; but Eligible Inventory shall not include any of the following:
(i) catalogs, marketing materials, packages, shipping materials, supplies
consumed in Borrower’s business, shrink wrap and warranty reserves and other
promotional materials of any kind; (ii) returned items; (iii) work-in-process;
(iv) damaged, defective or recalled items; (v) obsolete items; (vi) items used
as demonstrators, prototypes or salesmen’s samples; (vii) items of Inventory
which have been consigned to Borrower or as to which a Person claims a security
interest, prior assignment claim or encumbrance whatsoever other than Liens in
favor of Agent; (viii) items of Inventory which have been consigned by Borrower
to a consignee; (ix) Inventory located on premises leased by Borrower from a
landlord with whom Agent has not entered into a landlord’s waiver on terms
satisfactory to Agent; (x) Inventory located at a warehouse premises with
respect to which Agent has not received: (1) a bailee letter, acceptable in all
respects to Agent, executed by the bailee of such warehouse or (2) evidence
satisfactory in all respects to Agent of such bailee’s receipt of a bailee
letter acceptable in all respects to Agent; (xi) Inventory which in the
reasonable judgment of Agent is considered to be slow moving or otherwise not
merchantable; (xii) Inventory located outside the United States of America or
Canada; (xiii) material review board Inventory; (xiv) labor and overhead costs
added to raw materials and other raw material labor and burden; (xv)
sub-assemblies and components; (xvi) scrap materials; (xvii) Inventory in
transit; (xviii) Inventory which is subject to a license agreement unless Agent
shall have entered into a licensor consent letter with the licensor in form and
substance satisfactory to Agent; and (xix) any Inventory that Agent has
reasonably determined is not acceptable due to age, type, category or quantity.

 

“Eligible L/C Inventory” shall mean all raw material or finished goods Inventory
owned by Borrower which is in transit to one of the Collateral Locations and
which Inventory is: (a) owned by Borrower, (b) fully insured with Agent named as
loss payee with respect to such insurance, (c) subject to a first priority
security interest in and lien upon such goods in favor of Agent (except for any
possessory lien upon such goods in the possession of a freight carrier or
shipping company securing only the freight charges for the transportation of
such goods to Borrower), (d) evidenced or deliverable pursuant to documents,
notices,

 

9

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

instruments, statements and bills of lading all of which have been delivered to
Agent or an agent acting on Agent’s behalf, (e) Agent has entered into a written
agreement, in form and substance reasonably satisfactory to Agent, with Borrower
and Borrower’s customs broker and/or any other Person working on behalf of
Borrower, who is reasonably satisfactory to Agent in all respects and who is
responsible for clearing Inventory through Customs on behalf of Borrower
(“Importer”), which shall provide, among other things, that upon notice to
Importer by Agent, Importer shall thereafter take direction with respect to such
Inventory, including transfer, disposition or possession of such Inventory
solely from Lender (and not Borrower), (f) such Inventory has been purchased
pursuant to the terms of a documentary Letter of Credit issued pursuant to the
terms of this Agreement, and (g) except for such Inventory being in-transit is
otherwise deemed “Eligible Inventory” hereunder.

 

“Environmental Complaint” shall have the meaning set forth in paragraph
14(s)(iv) hereof.

 

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

 

“Equipment” shall have the meaning given to the term “equipment” in the UCC and
in any event shall include, without limitation, the machinery and equipment of
Borrower, including without limitation processing equipment, data processing and
computer equipment with software and peripheral equipment, and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, molds, dies, attachments, accessories, automotive
equipment, trailers, trucks, motor vehicles, tanks, cylinders and other
equipment of every kind and nature, and fixtures, all whether now owned or
hereafter acquired, and wheresoever situated, together with all additions and
accessions thereto, replacements therefor, all parts therefor, and all manuals,
drawings, instructions, warranties, and rights with respect thereto, and all
products and proceeds of the foregoing, and condemnation awards and insurance
proceeds with respect thereto.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended, and all references to sections thereof shall include such sections and
any predecessor and successor provisions thereto.

 

“ERISA Affiliate” shall mean any member of a controlled group of entities as
determined under Section 414(b),(c),(m), or (o) of the IRC, of which Borrower is
a member.

 

“Event of Default” shall have the meaning specified in paragraph 16 hereof.

 

“Excess Availability” shall mean, as of any date of determination by Agent, the
excess, if any, of: (i) the lesser of: (a) the Revolving Loan Commitment and (b)
the Borrowing Base over (ii) the outstanding Revolving Loans, in each case as of
the close of business on such date. For purposes of calculating Excess
Availability of Borrower and the amount of the

 

10

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

Borrowing Base relating thereto, Agent may, in the exercise of its sole
discretion, establish a reserve in an aggregate amount based on the sum of: (a)
Borrower’s outstanding trade payables which are not current or which are past
due beyond Borrower’s normal trade terms in any material respect, plus (b) any
taxes due and unpaid to any taxing authority, plus (c) transaction fees incurred
by Borrower in connection with the consummation of the transactions contemplated
by this Agreement which are due and remain unpaid, in each case as of such date
of determination, to the extent thereof.

 

“Exhibit A” shall mean the exhibit entitled Exhibit A - Business and Collateral
Locations which is attached hereto and made a part hereof.

 

“Exhibit D” shall mean the exhibit entitled Exhibit D - Officer’s Certificate
which is attached hereto and made a part hereof.

 

“Fiscal Year” shall mean with respect to Borrower, the twelve (12) month
accounting period of Borrower commencing January 1st of each calendar year and
ending December 31st of such calendar year.

 

“Fixed Charge Coverage Ratio” shall mean and include, with respect to any
applicable fiscal period, the ratio of: (a) Consolidated EBITDA, minus
non-financed Capital Expenditures made during such period by any member of the
Consolidated Group minus cash taxes actually paid during such period with
respect to the Consolidated Group to (b) the sum of: (i) scheduled principal
payments of long-term debt paid or scheduled to be paid during such period by
any member of the Consolidated Group plus (ii) capitalized leases paid or
scheduled to be paid during such period by any member of the Consolidated Group
plus (iii) cash interest expense of the Consolidated Group for such period plus
(iv) payments made to the Subordinated Lender plus (v) payments made to the
Bridge Loan Lenders.

 

“GAAP” shall mean generally accepted accounting principles and policies in the
United States as in effect from time to time as applied by Borrower on a
consistent basis.

 

“General Intangibles” shall have the meaning given to the term “general
intangibles” in the UCC and in any event shall include, without limitation, all
of Borrower’s present and future general intangibles and other personal
property, any and all rights of Borrower to all choses or things in action, tax
refund claims, credits, claims, claims against carriers and shippers, guarantee
claims, contract rights, rights under contracts, security interests, security
rights and any rights to indemnification, demands, goodwill, licenses, franchise
agreements, subscription costs, patents, patent applications, design rights,
trade names, trademarks, trademark applications, copyrights, registrations,
rights to royalties, blueprints, drawings, customer lists, purchase orders,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, methods, sales literature, video tapes, confidential information and
trade secrets, consulting agreements, employment agreements, leasehold interests
in real and personal property, insurance policies, deposits with insurers
relating to worker’s compensation liabilities, Deposit Accounts and tax refunds,
other than Equipment, Inventory, Investment Property and Accounts, as well as
Borrower’s books and records relating to any of the foregoing, and all products
and proceeds of the foregoing.

 

11

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

“Goods” shall have the meaning given to the term “goods” in the UCC and in any
event shall include, without limitation, all of Borrower’s tangible assets and
tangible properties which are moveable at the time the security interest
attaches or which are fixtures.

 

“Hazardous Discharge” shall have the meaning set forth in paragraph 14(t)(iv)
hereof.

 

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

 

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

 

“Health-Care-Insurance Receivable” shall have the meaning given to the term
“health-care-insurance-receivable” in the UCC and in any event shall include,
without limitation, an interest in or claim under a policy of insurance which is
a right to payment of a monetary obligation for health-care goods or services
provided.

 

“Hedge Agreements” shall mean all interest rate swaps, caps or collar agreements
or similar arrangements entered into by Borrower or any of its Subsidiaries
providing for protection against fluctuations in interest rates, currency
exchange rates or commodity prices, or the exchange of nominal interest
obligations, either generally or under specific contingencies.

 

“Highest Lawful Rate” shall have the meaning set forth in paragraph 5(c).

 

“Indebtedness” shall mean of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of Property or services (other than trade
payables incurred in the ordinary course of such Person’s business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to Property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations or Synthetic Lease
Obligations of such Person, (f) all obligations of such Person, contingent or
otherwise, as an account party under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person, contingent or otherwise, to
purchase, redeem, retire or otherwise acquire for value any equity of such
Person, (h) all Contingent Obligations of such Person in respect of obligations
of the kind referred to in clauses (a) through (g) above; (i) all obligations of
the kind referred to in clauses (a) through (h) above secured by (or for which
the holder of such obligation has an existing right, contingent or otherwise, to
be secured by) any

 

12

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

Lien on Property (including, without limitation, accounts and contract rights)
owned by such Person, whether or not such Person has assumed or become liable
for the payment of such obligation, (j) all accrued but unpaid obligations of
such Person in respect of Hedge Agreements and (k) the redemption value of any
preferred equity of such Person or its Subsidiaries held by any Person other
than such Person and its wholly-owned Subsidiaries; provided, however, that
obligations of the kind referred to in clause (j) shall not be included in
“Indebtedness” for the purposes of calculating the financial covenants set forth
in paragraph 14(p).

 

“Indemnified Party” shall have the meaning specified in paragraph 18 hereof.

 

“Instruments” shall have the meaning given to the term “instruments” in the UCC
and in any event shall include, without limitation, a negotiable instrument or a
certificated security or any other writing which evidences a right to the
payment of money.

 

“Inventory” shall have the meaning given to the term “inventory” in the UCC and
in any event shall include, without limitation, all present and future inventory
in which Borrower has any interest, including, but not limited to, goods held by
Borrower for sale or lease or to be furnished under a contract of service and
all of Borrower’s present and future raw materials, work in process, finished
goods, supplies and packing and shipping materials, wherever located, any and
all merchandise returned to or reclaimed by Borrower, and any documents of title
representing any of the above.

 

“Inventory Advance Rate” shall have the meaning set forth in paragraph
2(b)(i)(A) hereof.

 

“Investment Property” shall have the meaning given to the term “investment
property” in the UCC, and in any event shall include, without limitation, all of
Borrower’s now owned or hereafter acquired securities, whether certificated or
uncertificated, securities entitlements, securities accounts, commodity and
futures contracts and commodity and futures accounts.

 

“IRC” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

“ISP 98” shall mean the International Standby Practices which applies to standby
letters of credit, prepared by the Institute of International Banking Law and
Practice, as amended from time to time.

 

“L/C Issuer” shall mean the Bank or such other bank as may be selected by Agent
in its sole discretion.

 

“Lender Default” shall have the meaning set forth in paragraph 6(g) hereof.

 

“Lender(s)” shall have the meaning set forth in the introductory paragraph
hereof.

 

“Letter of Credit Fee” shall have the meaning set forth in paragraph 5(d)
hereof.

 

13

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

“Letter of Credit Obligations” shall mean, as of any date of determination, the
sum of: (i) 100% of the aggregate face amount of all undrawn Stand-by Letters of
Credit, (ii) 50% of the aggregate face amount of all undrawn Documentary Letters
of Credit and (iii) the aggregate unreimbursed amount of all drawn Letters of
Credit.

 

“Letter-of-Credit Right” shall have the meaning given to the term
“letter-of-credit-right” in the UCC and in any event shall include, without
limitation, a right to payment or performance under a letter of credit, whether
or not the beneficiary has demanded or is at the time entitled to demand payment
or performance.

 

“Letters of Credit” shall mean those documentary letters of credit (“Documentary
Letters of Credit”) and stand-by letters of credit (Stand-by Letters of Credit”)
issued for Borrower’s account in accordance with the terms of paragraph 3
hereof.

 

“Liabilities” shall mean all Loans and any and all other obligations,
liabilities and Indebtedness of Borrower to Agent and/or Lenders or to any
parent, affiliate or subsidiary of Agent and/or Lenders of any and every kind
and nature, howsoever created, arising or evidenced and howsoever owned, held or
acquired, and any and all other Loans, obligations, liabilities and indebtedness
of Borrower to Agent and/or Lenders of any kind and nature, howsoever created,
arising or evidenced under this Agreement and/or the Other Agreements, in each
case whether now or hereafter existing, whether now due or to become due,
whether primary, secondary, direct, indirect, absolute, contingent or otherwise
(including, without limitation, obligations of performance), whether several,
joint or joint and several, and whether arising or existing under written or
oral agreement or by operation of law.

 

“Lien” shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the UCC or
comparable law of any jurisdiction).

 

“Loan” or “Loans” shall mean any and all Revolving Loans, made by Agent and
Lenders to Borrower pursuant to paragraph 2 hereof and all other loans, advances
and financial accommodations made by Agent and Lenders to or on behalf of
Borrower hereunder.

 

“Lock Box” shall have the meaning specified in paragraph 10 hereof.

 

“Material Adverse Effect” shall mean a material adverse change in, or a material
adverse effect upon, any of the business, property, assets, operations,
condition (financial or otherwise) or prospects of Borrower, related to any
event, act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related.

 

14

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

“Mexican Subsidiary” shall have the meaning specified in paragraph 14(h) hereof.

 

“Mexican Subsidiary Lender” shall have the meaning specified in paragraph 14(h)
hereof.

 

“Multiemployer Plan” shall mean a plan described in Section 4001(a)(3) of ERISA
which covers employees of Borrower or any ERISA Affiliate.

 

“Non-Defaulting Lenders” shall have the meaning set forth in paragraph 6(h)
hereof.

 

“Note” shall mean, the Revolving Note.

 

“Obligor” shall mean Borrower and each Person who is or shall become primarily
or secondarily liable for any of the Liabilities (including, without limitation
any Person who provides security to Agent for any Liability), provided, however,
that such term shall not include any Account Debtor.

 

“Organizational Documents” shall mean, collectively, as the case may be,
articles of incorporation, certificate of incorporation, certificate of
partnership, certificate of limited partnership, certificate of formation,
by-laws, operating agreement, partnership agreement, limited partnership
agreement and/or any other agreement, certificate, document and/or instrument
associated with the organization and/or governance of the applicable entity or
the conduct of its business.

 

“Other Agreements” shall mean all agreements, instruments and documents
including, without limitation, guaranties, mortgages, trust deeds, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrower or any other
Person and delivered to Agent or any Lender or to any parent, affiliate or
subsidiary of Agent or any Lender in connection with the Liabilities or the
transactions contemplated hereby.

 

“Parent” shall mean any Person now or at any time or times hereafter owning or
controlling (alone or with any other Person) at least a majority of the issued
and outstanding stock or equity interest of Borrower or any Subsidiary and if
Borrower is a Partnership, the general partner of Borrower.

 

“Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Loans.

 

“Payment Intangible” shall have the meaning given to the term “payment
intangible” in the UCC and in any event shall include, without limitation, a
General Intangible under which the Account Debtor’s principle obligation is a
monetary obligation.

 

15

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

“Payment Office” shall mean initially 135 South LaSalle Street, Chicago,
Illinois 60603, thereafter, such other office of Agent, if any, which Agent may
designate by notice to Borrower to be the Payment Office.

 

“Permitted Liens” shall mean: (1) statutory liens of landlords, carriers,
warehousemen, processors, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder, (2) liens or security interests in favor of
Agent, (3) zoning restrictions and easements, rights of way, licenses, covenants
and other restrictions affecting the use of real property that do not
individually or in the aggregate have a Material Adverse Effect on Borrower’s
ability to use such real property for its intended purpose in connection with
Borrower’s business, (4) liens securing the payment of taxes or other
governmental charges not yet delinquent or being contested in good faith and by
appropriate proceedings, (5) deposits to secure performance of bids, trade
contracts, leases and statutory obligations (to the extent not excepted
elsewhere herein); (6) liens specifically permitted by Agent in writing as set
forth on Schedule 1(a) attached hereto; (7) pledges or deposits in connection
with worker’s compensation, unemployment insurance and other social security
legislation; (8) grants of security and rights of setoff in Deposit Accounts,
securities and other properties held at banks or financial institutions to
secure the payment or reimbursement under overdraft, acceptance and other
facilities, (9) rights of setoff, banker’s lien and other similar rights arising
solely by operation of law, and (10) subordinated liens granted to the
Subordinated Lender under the Subordinated Debt Documents, to the extent
subordinated to the liens granted to Agent hereunder pursuant to and permitted
by the Subordination Agreement.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor
agency.

 

“Person” shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.

 

“Prime Rate” shall mean the publicly announced prime rate of the Bank, in effect
from time to time. The Prime Rate is not intended to be the lowest or most
favorable rate of the Bank in effect at any time.

 

“Prohibited Transaction” shall mean a prohibited transaction described in
Section 406 of ERISA or Section 4975 of the IRC.

 

“Purchasing Lender” shall have the meaning set forth in paragraph 24(b) hereof.

 

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

 

“Real Property” shall mean all of Borrower’s right, title and interest in and to
the owned and leased premises identified on Schedule 1(b) hereto.

 

“Register” shall have the meaning set forth in paragraph 24(c).

 

16

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

“Releases” shall have the meaning set forth in paragraph 13(ee)(iii) hereof.

 

“Reportable Event” shall mean a reportable event described in Section 4043(b) of
ERISA or the regulations promulgated thereunder for which the 30-day notice of
such event has not been waived pursuant to such regulations.

 

“Required Lenders” shall mean Lenders holding at least fifty one percent (51%)
of the Loans, or if no Loans are outstanding, Lenders holding at least fifty one
percent (51%) of the Commitment Percentages.

 

“Revolving Loan Commitment” shall mean the sum of $12,000,000.

 

“Revolving Loans” shall have the meaning set forth in paragraph 2(a) hereof.

 

“Revolving Note” shall mean the promissory note(s) in the aggregate original
principal amount of the Revolving Loan Commitment, executed by Borrower to the
order of Agent for its benefit and for the benefit of Lenders, or to each
Lender, as applicable, dated as of the Closing Date, together with all
replacements and substitutions thereof.

 

“Settlement Date” shall mean the Closing Date and thereafter every Business Day
designated by Agent as a “Settlement Date” by notice from Agent to each Lender,
regardless of whether a Default or an Event of Default shall be in existence.

 

“Settlement Period” shall have the meaning set forth in paragraph 6(d)(i).

 

“Solvent” shall mean, with respect to any Person, as of any date of
determination, (a) the amount the “present fair saleable value” of the assets of
such Person will, as of such date, exceed the amount of all “liabilities of such
Person, contingent or otherwise,” as of such date, as such quoted terms are
determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person which will, as of such date, be greater than the
amount that will be required to pay the liability of such Person on its debts as
such debts become absolute and matured, (c) such Person will not have, as of
such date, an unreasonably small amount of capital with which to conduct its
business, (d) such Person will be able to pay its debts as they mature, and (e)
such Person is not insolvent within the meaning of any applicable law. For
purposes of this definition, (i) “debt” means liability on a “claim,” and (ii)
“claim” means any (x) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.

 

“Subordinated Debt Documents” shall mean the Subordinated Note, the related
Securities Purchase Agreement dated as of the date hereof (the “Securities
Purchase Agreement”) between Borrower and the Subordinated Lender, and all other
documents, agreements and instruments executed in connection therewith.

 

17

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

“Subordinated Lender” shall mean Bison Capital Structured Equity Partners, LLC
and its successors and permitted assigns.

 

“Subordinated Note” shall mean that certain Senior Subordinated Promissory Note
dated as of the date hereof executed by Borrower in favor of Subordinated Lender
in the original principal amount of $20,000,000, which Subordinated Note is due
July     , 2007.

 

“Subordination Agreement” shall mean that certain Subordination and
Intercreditor Agreement dated as of the Closing Date between Agent and
Subordinated Lender, pursuant to which the Indebtedness evidenced by the
Subordinated Debt Documents and the Liens securing such Indebtedness are fully
subordinated to the Liabilities and the Liens in favor of Agent, which agreement
shall be in form and substance acceptable to Agent.

 

“Subsidiary” shall mean: (i) any corporation of which more than fifty percent
(50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
at the time stock of any other class of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by Borrower, (ii) any partnership, limited
liability company, entity or joint venture of which more than fifty percent
(50%) of the outstanding equity interests is at the time, directly or
indirectly, owned by Borrower or (iii) any partnership of which Borrower is
general partner and includes, without limitation, the Consolidated Subsidiaries.

 

“Supporting Obligation” shall have the meaning given to the term “supporting
obligation” in the UCC and in any event shall include, without limitation, a
Letter-of-Credit Right or secondary obligation that supports the payment or
performance of an Account, Chattel Paper, a Document, a General Intangible, an
Instrument or Investment Property.

 

“Synthetic Lease Obligations” shall mean all monetary obligations of a Person
under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property creating obligations
which do not appear on the balance sheet of such Person but which, upon the
insolvency or bankruptcy of such Person, would be characterized as the
Indebtedness of such Person (without regard to accounting treatment).

 

“Tangible Net Worth” shall mean with respect to any applicable fiscal period,
the following for any Person or Persons, each calculated for such period on
consolidated basis with respect to such Persons: shareholders’ equity (including
retained earnings) less the book value of all intangible assets and less prepaid
expenses, determined by Agent on a consistent basis, plus the amount of any debt
subordinated to Agent on terms and conditions acceptable to Agent in its sole
judgment, all as determined in accordance with GAAP, consistently applied.

 

“Term” shall have the meaning set forth in paragraph 12 hereof.

 

“Termination Event” shall mean: (i) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any
member of the Controlled Group from a Benefit Plan or Multiemployer Plan during
a plan year in which such entity was a “substantial employer” as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section

 

18

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

4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a
Benefit Plan or Multiemployer Plan; (v) any event or condition: (a) which might
reasonably constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Benefit Plan or
Multiemployer Plan, or (b) that may reasonably result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower or any member of the Controlled Group from a Multiemployer Plan.

 

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

 

“Transactions” shall mean the transactions contemplated by the Subordinated Debt
Documents and under this Agreement.

 

“Transferee” shall have the meaning set forth in paragraph 24(a) hereof.

 

“UCC” shall mean the Uniform Commercial Code as in effect on the date hereof in
the State of New York, as amended and revised from time to time, and any
successor statute; provided, however, that, in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of Agent’s security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other that the State of
New York, the term “Code” shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions of this Agreement
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.

 

(b) Accounting Terms and Definitions. Unless otherwise defined or specified
herein, all accounting terms used in this Agreement shall be construed in
accordance with GAAP, applied on a basis consistent in all material respects
with the financial statements delivered by Borrower to Agent on or before the
Closing Date or as otherwise agreed to by Agent. All accounting determinations
for purposes of determining compliance with the financial covenants contained in
paragraph 14(p) shall be made in accordance with GAAP as in effect on the
Closing Date and applied on a basis consistent in all material respects with the
audited financial statements of Borrower delivered to Agent by Borrower on or
before the Closing Date. The financial statements required to be delivered
hereunder from and after the Closing Date, and all financial records, shall be
maintained in accordance with GAAP. If GAAP shall change from the basis used in
preparing the audited financial statements delivered to Agent by Borrower on or
before the Closing Date, the certificates required to be delivered pursuant to
paragraph 11 demonstrating compliance with the covenants contained herein shall
include, at the election of Borrower or upon the request of Agent, calculations
setting forth the adjustments necessary to demonstrate how Borrower is in
compliance with the financial covenants based upon GAAP as in effect on the
Closing Date.

 

19

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

2. REVOLVING LOANS. Subject to the terms and conditions of this Agreement and
the Other Agreements, during the Term, absent the existence of a Default or
Event of Default:

 

(a) Revolving Loan Commitment. Each Lender, severally and not jointly, shall
make such revolving loans and advances (the “Revolving Loans”) to Borrower in
aggregate amounts outstanding at any time equal to such Lender’s Commitment
Percentage as Borrower shall from time to time request, in accordance with the
terms of paragraph 2(b) hereof. The aggregate unpaid principal amount of all
Revolving Loans outstanding at any one time made to Borrower shall not exceed
the lesser of: (i) the Borrowing Base (plus any overadvances permitted to be
outstanding at such time in the sole discretion of Agent pursuant to paragraph
23 hereof and (ii) the Revolving Loan Commitment, in each case, minus the
outstanding Letter of Credit Obligations. All Revolving Loans shall be repaid in
full upon the earlier to occur of: (i) the end of the Term and (ii) the
acceleration of the Liabilities pursuant to paragraph 17 of this Agreement. If
at any time the outstanding principal balance of the Revolving Loans made to
Borrower exceeds: (i) the Borrowing Base (plus any overadvances permitted to be
outstanding at such time in the sole discretion of Agent pursuant to paragraph
23 hereof, provided, however, that, any such overadvance shall be paid by
Borrower immediately following demand therefor by Agent) or (ii) the Revolving
Loan Commitment, in each case, minus the outstanding Letter of Credit
Obligations, Borrower shall immediately, and without the necessity of a demand
by Agent, pay to Agent such amount as may be necessary to eliminate such excess,
and Agent shall apply such payment, first against overadvances then outstanding
and then pro rata according to the Commitment Percentage of each Lender against
the outstanding principal balance of the Revolving Loans. Borrower hereby
authorizes Agent to charge any of Borrower’s accounts to make any payments of
principal, interest and/or fees required by this Agreement. All Revolving Loans
shall, in Agent’s sole discretion, be evidenced by one or more Revolving Notes
in substantially the form attached hereto as Exhibit 2(a). However, if such
Revolving Loans are not so evidenced, such Revolving Loans may be evidenced
solely by entries upon the books and records maintained by Agent.

 

(b) Borrowing Limits. Each Lender, severally and not jointly, shall make
Revolving Loans to Borrower up to its Commitment Percentage of the lesser of
clause (i) or (ii) below (the amount calculated pursuant to clause (i) below
being the “Borrowing Base”):

 

(i) An amount equal to: (A) the sum of: (1) up to eighty-five percent (85%) (the
“Accounts Advance Rate”) of the face amount of Eligible Accounts, plus (2) the
lesser of: (x) $6,000,000 or (y) up to 60% (the “Inventory Advance Rate”) of the
value of Eligible Inventory consisting of finished goods and raw materials
calculated on the basis of the lower of cost or market value on a first in,
first out basis, minus (B) such reserves as Agent may establish from time to
time in the exercise of its commercially reasonable discretion (provided,
however, that, in any event, 100% of the aggregate face amount of all undrawn
Stand-by Letters of Credit and 50% of the aggregate face amount of all
Documentary Letters of Credit shall be reserved from the availability under the
Borrowing Base) minus (without duplication) (C) the outstanding amount of all
Letter of Credit Obligations; or

 

(ii) The Revolving Loan Commitment, minus the outstanding amount of all Letter
of Credit Obligations.

 

20

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

The Advance Rates may be increased or decreased by Agent at any time and from
time to time in the exercise of its sole discretion. Borrower consents to any
such increases or decreases and acknowledges that decreasing the Advance Rates
or imposing reserves may limit or restrict Loans requested by Borrower.

 

3. LETTER OF CREDIT.

 

(a) Subject to the terms and conditions hereof, Agent shall: (i) from time to
time issue or cause the L/C Issuer to issue Documentary Letters of Credit for
the purpose of financing the importation of Eligible Inventory and Stand-by
Letters of Credit to secure obligations of Borrower approved by Agent, in each
case, issued for the account of Borrower; provided, however, that Agent will not
be required to issue or cause to be issued any Letters of Credit to the extent
that the issuance of such Letters of Credit would then cause the sum of: (A) the
outstanding Revolving Loans plus (B) the Letter of Credit Obligations (with the
requested Letter of Credit being deemed to be outstanding for purposes of this
calculation) to exceed the lesser of: (x) the Revolving Loan Commitment or (y)
the Borrowing Base (plus any overadvances permitted to be outstanding at such
time in the sole discretion of Agent, pursuant to paragraph 23 hereof) in effect
prior to the issuance of the requested Letter of Credit. The maximum amount of
outstanding Documentary Letters of Credit shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate at any time. The maximum amount of
outstanding Stand-by Letters of Credit shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate at any time. Each disbursement or
payment by the L/C Issuer or Agent related to Letters of Credit shall be deemed
to be a Revolving Loan and shall bear interest as a Revolving Loan. Letters of
Credit that have not been drawn upon shall not bear interest.

 

(b) Borrower may from time to time upon notice not later than 12:00 Noon,
Chicago Time, at least three (3) Business Days in advance, request Agent to
assist Borrower in establishing or opening a Letter of Credit by delivering to
Agent at the Payment Office, the L/C Issuer’s standard form of letter of credit
application (the “Letter of Credit Application”) completed to the satisfaction
of the L/C Issuer; and, such other certificates, documents and other papers and
information as Agent may reasonably request.

 

(c) Each Letter of Credit shall, among other things: (i) provide for the payment
of sight drafts when presented for honor thereunder in accordance with the terms
thereof and when accompanied by the documents described therein and (ii) have an
expiry date not later than twelve (12) months after such Letter of Credit’s date
of issuance and in no event later than the last day of the Term. Each Letter of
Credit Application and each Letter of Credit shall be subject to: (x) the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, and any amendments or
revision thereof in connection with any Documentary Letter of Credit and (y) ISP
98 in connection with any Standby Letter of Credit, or with respect to any
Letter of Credit Application or Letter of Credit, any other rules, regulations
and customs prevailing at the place where any such Letter of Credit Application
is made or where any such Letter of Credit is available or the drafts are drawn
or negotiated and, to the extent not inconsistent therewith, the laws of the
State of New York.

 

21

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

(d) In connection with the issuance of any Letter of Credit, Borrower shall
indemnify, save and hold Agent, each Lender and each L/C Issuer harmless from
any loss, cost, expense or liability, including, without limitation, payments
made by Agent, any Lender or any L/C Issuer, and expenses and reasonable
attorneys’ fees incurred by Agent, any Lender or any L/C Issuer arising out of,
or in connection with, any Letter of Credit to be issued for the account of
Borrower. Borrower shall be bound by the L/C Issuer’s regulations and good faith
interpretations of any Letter of Credit issued or created for Borrower’s
account, although this interpretation may be different from Borrower’s own; and,
neither Agent nor any Lender, any L/C Issuer, nor any of their respective
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following Borrower’s instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for
Agent’s or any Lender’s or such correspondents’ gross (not mere) negligence or
willful misconduct.

 

(e) Borrower shall authorize and direct the L/C Issuer to name Borrower as the
“Account Party” therein and to deliver to Agent all instruments, documents, and
other writings and property received by the L/C Issuer pursuant to the Letter of
Credit and to accept and rely upon Agent’s instructions and agreements with
respect to all matters arising in connection with the Letter of Credit and the
application therefor.

 

(f) In connection with all Letters of Credit issued or caused to be issued by
Agent under this Agreement, Borrower hereby appoints Agent, or its designee, as
its attorney, with full power and authority: (i) to sign and/or endorse
Borrower’s name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign Borrower’s name on bills of lading;
(iii) to clear Inventory through the United States of America Customs Department
(“Customs”) in the name of Borrower or Agent or Agent’s designee, and to sign
and deliver to Customs officials powers of attorney in the name of Borrower for
such purpose; (iv) to complete in the name of Agent, or Agent’s designee, any
order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof; (v) to clear and resolve any
questions of non-compliance of documents; (vi) to give any instructions as to
acceptance or rejection of any documents or goods; (vii) to execute any and all
applications for steamship or airways guarantees, indemnities or delivery
orders; (viii) to grant any extensions of the maturity of, time of payment for,
or time of presentation of, any drafts, acceptances, or documents; and (ix) to
agree, subject to the prior written approval of Borrower, to any amendments,
renewals, extensions, modifications, changes or cancellation of any of the terms
or conditions of any of the applications, Letters of Credit, drafts or
acceptances; all in Agent’s sole name, and the L/C Issuer shall be entitled to
comply with and honor any and all such documents or instruments executed by or
received solely from Agent; all without notice to or consent from Borrower.
Neither Agent nor its attorneys will be liable for any acts or omissions nor for
any error of judgment or mistakes of fact or law, except for Agent’s or its
attorney’s gross (not mere) negligence or willful misconduct. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.

 

(g) Neither Agent nor any Lender shall be responsible for: the existence,
character, quality, quantity, condition, packing, value or delivery of the goods
purporting to be represented by any documents; any differences or variation in
the character, quality, quantity, condition, packing, value or delivery of the
goods from that expressed in the documents; the

 

22

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

validity, sufficiency or genuineness of any documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent, or forged (assuming the absence of
any fraud or forgery on the part of Agent, Lenders or their respective agents);
the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions, delay, default, or fraud by the shipper and/or any one else in
connection with the Collateral or the shipping thereof; or any breach of
contract between the shipper or vendors and Borrower.

 

(h) Any necessary import, export or other licenses or certificates for the
import or handling of the Collateral will have been promptly procured; all
foreign and domestic governmental laws and regulations in regard to the shipment
and importation of the Collateral or the financing thereof will have been
promptly and fully complied with; any certificates in that regard that Agent may
at any time request will be promptly furnished. In this connection, Borrower
warrants and represents that all shipments made under any such Letters of Credit
are in accordance with the governmental laws and regulations of the countries in
which the shipments originate and terminate, and are not prohibited by any such
law and regulations. Borrower assumes all risk, liability and responsibility
for, and agrees to pay and discharge all present and future local, state,
federal or foreign taxes, duties, or levies. Any embargo, restriction, laws,
customs or regulations of any country, state, city or other political
subdivision where the Collateral is or may be located or wherein payments are to
be made or wherein drafts may be drawn, negotiated, accepted, or paid shall be
solely at Borrower’s risk, liability and responsibility.

 

(i) Each Lender shall, in proportion to such Lender’s Commitment Percentage of
the aggregate amount of all disbursements made with respect to the Letters of
Credit, be deemed to have irrevocably purchased an undivided participation in
each Revolving Loan made as a consequence of such disbursement. In the event
that at the time a disbursement is made the unpaid balance of Revolving Loans
exceeds or would exceed, with the making of such disbursement, the lesser of the
Revolving Loan Commitment or the Borrowing Base (plus any overadvances permitted
to be outstanding at such time in the sole discretion of Agent pursuant to
paragraph 23 hereof), and such disbursement is not reimbursed by Borrower within
two (2) Business Days, Agent shall promptly notify each Lender and upon Agent’s
demand each Lender shall pay to Agent such Lender’s proportionate share of such
unreimbursed disbursement together with such Lender’s proportionate share of
Agent’s unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from Borrower of any amount
disbursed by Agent for which Agent had already been reimbursed by the Lenders,
Agent shall deliver to each of the Lenders that Lender’s pro rata share of such
repayment. Each Lender’s participation commitment shall continue until the last
to occur of any of the following events: (A) Agent ceases to be obligated to
issue or cause the issuance of Letters of Credit hereunder; (B) no Letter of
Credit issued hereunder remains outstanding and uncancelled or (C) all Persons
(other than Borrower) have been fully reimbursed for all payments made under or
relating to Letters of Credit.

 

(j) The obligations of a Lender to make payments to the Agent for the account of
the Agent or the L/C Issuer with respect to a Letter of Credit shall be
irrevocable, without any qualification or exception whatsoever and shall be made
in accordance with the

 

23

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

terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:

 

(A) any lack of validity or enforceability of this Agreement or any of the Other
Agreements;

 

(B) the existence of any claim, setoff, defense or other right which Borrower
may have at any time against a beneficiary named in such Letter of Credit or any
transferee of such Letter of Credit (or any Person for which any such transferee
may be acting), the Agent, L/C Issuer, any Lender, or any other person, whether
in connection with this Agreement, such Letter of Credit, the transactions
contemplated herein or any related transactions (including any underlying
transactions between Borrower or any other party and the beneficiary named in
such Letter of Credit);

 

(C) any draft, certificate or any other document presented under such Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;

 

(D) the surrender or impairment of any security for the performance or
observance of any of the terms of this Agreement or any of the Other Agreements;

 

(E) any failure by the Agent to provide any notices required pursuant to this
Agreement relating to such Letter of Credit;

 

(F) any payment by the L/C Issuer under any of the Letters of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit (if, in the good faith opinion of the L/C Issuer, such
prepayment is deemed to be appropriate); or

 

(G) the occurrence of any Default or Event of Default,

 

provided, however, that after paying in full its reimbursement obligation
hereunder, nothing herein shall adversely affect the right of Borrower or any
Lender, as the case may be, to commence any proceeding against such L/C Issuer
for any wrongful disbursement made by such L/C Issuer under a Letter of Credit
as a result of acts or omissions constituting gross (not mere) negligence or
willful misconduct on the part of such L/C issuer.

 

4. MANDATORY PREPAYMENTS. If Borrower sells any Equipment, or if any of the
Collateral is damaged, destroyed or taken by condemnation, Borrower shall pay to
Agent for its benefit and for the ratable benefit of Lenders, unless otherwise
specifically provided herein or otherwise agreed to by Agent and Borrower, as
and when received by Borrower and as a mandatory prepayment of the Loans, to be
applied against the outstanding Revolving Loans (subject to Borrower’s ability
to reborrow Revolving Loans in accordance with the terms of this agreement) a
sum equal to the proceeds received by Borrower from such sale or such damage,
destruction or condemnation, provided, however, that without Agent’s consent,
unless and until an Event of Default has occurred and is continuing: (a)
obsolete or worn out Equipment may be sold or otherwise disposed of by Borrower
and the proceeds thereof may be retained by

 

24

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

Borrower, so long as the fair market value of any such Equipment sold or
otherwise disposed of in any single transaction is less than $50,000, and the
fair market value, in the aggregate, of all such Equipment sold or otherwise
disposed of by Borrower during any twelve-month period is less than $100,000;
and (b) proceeds of Collateral arising from the damage, destruction or
condemnation thereof may be retained by Borrower and used by Borrower to repair,
restore or replace such Collateral, as the case may be, so long as the fair
market value of any such Collateral damaged, destroyed or condemned in any
single incident is less than $50,000 and the fair market value, in the
aggregate, of all such Collateral owned by Borrower and damaged, destroyed or
condemned during any twelve-month period is less than $100,000.

 

5. INTEREST, FEES AND CHARGES.

 

(a) Rate of Interest. Interest accrued on the Loans shall be due on the earliest
of: (i) the first day of each month (for the immediately preceding month),
computed through the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default in consequence of which Agent elects to
accelerate the maturity and payment of the Liabilities, or (iii) termination of
this Agreement pursuant to paragraph 12 hereof. Interest shall accrue on the
unpaid principal amount of the Revolving Loans made to Borrower outstanding at
the end of each day at a fluctuating rate of interest per annum equal to one
percent (1%) above the Prime Rate. The rate of interest shall increase or
decrease by an amount equal to any increase or decrease in the Prime Rate,
effective as of the opening of business on the day that any such change in the
Prime Rate occurs. Upon and after the occurrence of an Event of Default and
during the continuation thereof the principal amount of all Loans shall bear
interest on demand at a rate per annum equal to the rate of interest then in
effect under this paragraph 5(a) plus two percent (2%).

 

(b) Computation of Interest and Fees. Interest and collection charges hereunder
shall be calculated daily and shall be computed on the actual number of days
elapsed over a year consisting of three hundred and sixty (360) days. For the
purpose of computing interest hereunder, all items of payment received by Agent
shall be deemed applied by Agent on account of the Liabilities (subject to final
payment of such items) on the second Business Day after receipt by Agent of good
funds in Agent’s account located in Chicago, Illinois.

 

(c) Maximum Interest. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any Other Agreement, the parties hereto hereby
agree that all agreements between them under this Agreement and the Other
Agreements, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever shall
the amount paid, or agreed to be paid, to the Agent or any Lender for the use,
forbearance, or detention of the money loaned to the Borrower and evidenced
hereby or obligation contained herein or therein, exceed the maximum
non-usurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Liabilities, under
the laws of the State of New York (or the laws of any other jurisdiction whose
laws may be mandatory applicable notwithstanding other provisions of this
Agreement and the Other Agreements), or under applicable federal laws which may
presently or hereafter be in effect and which allow a higher maximum
non-usurious interest rate that under the laws of the State of New York (or such
other jurisdiction), in any case after taking into account, to the extent
permitted by applicable law, any and all relevant payments or charges

 

25

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

under this Agreement and the Other Agreements executed in connection herewith,
and any available exemptions, exceptions and exclusions (the “Highest Lawful
Rate”). If due to any circumstance whatsoever, fulfillment of any provision of
this Agreement or any of the Other Agreements at the time performance of such
provision shall be due shall exceed the Highest Lawful Rate, then automatically,
the obligation to be fulfilled shall be modified or reduced to the extent
necessary to limit such interest to the Highest Lawful Rate, and if from any
such circumstance Agent or any Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such principal amount then outstanding hereunder or on account of any other then
outstanding Liabilities and not to the payment of interest, or if such excessive
interest exceeds the principal unpaid balance then outstanding hereunder and
such other then outstanding Liabilities, such excess shall be refunded to
Borrower. All sums paid or agreed to be paid to Agent or the Lenders for the
use, forbearance, or detention of the Liabilities and other Indebtedness of
Borrower to the Lenders shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
Indebtedness, until payment in full thereof, so that the actual rate of interest
on account of all such Indebtedness does not exceed the Highest Lawful Rate
throughout the entire term of such Indebtedness. The terms and provisions of
this paragraph shall control every other provision of this Agreement, the Other
Agreements and all other agreements among the parties hereto.

 

(d) Letter of Credit Fees. Borrower shall remit to Agent for its own account a
letter of credit fee equal to two percent (2%) per annum (the “Letter of Credit
Fee”) on the aggregate undrawn face amount of all outstanding Letters of Credit
issued for the account of Borrower, which fee shall be payable monthly in
arrears on each day that interest is payable hereunder. Borrower shall also pay
on demand the normal and customary administrative charges for issuance,
amendment, negotiation, renewal or extension of any Letter of Credit imposed by
the L/C Issuer. Upon the occurrence and during the continuance of an Event of
Default, all Letter of Credit Fees shall be payable on demand at a rate equal to
the Letter of Credit Fees under this paragraph 5(d) then in effect plus two
percent (2%) per annum in excess of the Letter of Credit Fee on the aggregate
undrawn face amounts thereof.

 

(e) Closing Fee. Borrower shall pay to Agent for its own account a closing fee
of One Hundred Thousand Dollars ($100,000), which fee shall be deemed fully
earned, non-refundable and due on the Closing Date.

 

(f) Unused Line Fee. Borrower shall pay to Agent for the ratable benefit of
Lenders at the end of each month, in arrears, and on the last day of the Term an
Unused Line Fee equal to one-half of one percent (1/2%) per annum on the daily
average amount by which the Revolving Loan Commitment exceeds the sum of: (i)
the outstanding principal balance of the Revolving Loans and (ii) the
outstanding Letter of Credit Obligations. The Unused Line Fee shall accrue from
the Closing Date until the last day of the Term.

 

(g) Collateral Management Fee. Borrower shall pay to Agent for its own account
an annual collateral management fee of Twenty-Four Thousand Dollars ($24,000)
per annum, payable quarterly in arrears, on the last day of each October,
January, April and July, subject to the earlier termination of this Agreement,
which fee shall be deemed earned in full on

 

26

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

the Closing Date and on each anniversary thereafter and shall not be subject to
rebate, refund or proration for any reason.

 

(h) Examination and Appraisal Fees. In addition to the costs and expenses
described in paragraph 5(g) hereof, Borrower shall pay to Agent for its own
account an examination fee of $750 per Person per day charged by Agent for each
examination performed by or at Agent’s direction of Borrower’s books and records
and Collateral and such other matters as Agent shall deem appropriate in its
commercially reasonable judgment together with each such Person’s out of pocket
expenses incurred in connection with each such examination, each such fee and
out of pocket expenses to be paid upon the completion of each such examination;
provided, however, that so long as no Event of Default or Default has occurred
and is continuing, the examination fee referred to above will be $400 per Person
per day and the total of such examination fees shall not exceed $12,000 during
each fiscal year of Borrower; provided, further, however, that such limitation
shall not apply to any expenses incurred by any such Person.

 

(i) Capital Adequacy Charge. If Agent or any Lender shall have determined that
the adoption of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof, or compliance by
Agent or any Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or governmental
authority enacted after the Closing Date, does or shall have the effect of
reducing the rate of return on Agent’s or any Lender’s capital as a consequence
of its obligations hereunder to a level below that which Agent could have
achieved but for such adoption, change or compliance (taking into consideration
Agent’s or such Lender’s policies with respect to capital adequacy) by a
material amount, then from time to time, after submission by Agent to Borrower
of a written demand therefor (“Capital Adequacy Demand”) together with the
certificate described below, Borrower shall pay to Agent or such Lender such
additional amount or amounts (“Capital Adequacy Charge”) as will compensate
Agent or such Lender for such reduction, such Capital Adequacy Demand to be made
with reasonable promptness following such determination. A certificate of Agent
claiming entitlement to payment as set forth above shall be conclusive in the
absence of manifest error. Such certificate shall set forth the nature of the
occurrence giving rise to such reduction, the amount of the Capital Adequacy
Charge to be paid to Agent or such Lender, and the method by which such amount
was determined. In determining such amount, Agent or such Lender may use any
reasonable averaging and attribution method, applied on a non-discriminatory
basis.

 

6. LOAN ADMINISTRATION.

 

(a) Loan Requests. A request for a Revolving Loan shall be made or shall be
deemed to be made, each in the following manner: (i) Borrower shall give Agent
same day written notice, no later than 1:00 P.M. (Chicago time) of such day, of
its intention to borrow, a Revolving Loan, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date,
provided, however, that no such request may be made at a time when there exists
a Default or an Event of Default; and (ii) the coming due of any amount required
to be paid under this Agreement or any Note, whether on account of interest or
for any other Liability, shall be deemed irrevocably to be an authorized request
for a Revolving Loan on the due date thereof in the amount required to pay such
interest or other Liability. As an

 

27

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

accommodation to Borrower, Agent may permit electronic transmittals of requests
for Revolving Loans, instructions, authorizations, agreements or reports to
Agent by Borrower; provided, however, that any request for a Revolving Loan or
disbursement instruction shall be signed only by an officer or officers of
Borrower whose name, incumbency and signature appear on the most recent list of
authorized officers delivered from time to time by Borrower to Lender (each, a
“Loan Request Authorization”) and, until such a Loan Request Authorization is
delivered to Lender, all names set forth on the secretary’s certificate
delivered to Lender in connection with this Agreement are acknowledged to be so
authorized, and Lender is irrevocably authorized to rely thereon. Borrower
specifically directs Agent not to accept or act upon telephonic communications
from Borrower. Neither Agent nor any Lender shall have any liability to Borrower
for any loss or damage suffered by Borrower as a result of Agent’s honoring of
any requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to it electronically or otherwise and
purporting to have been sent to Agent by Borrower in the manner and by the
authorized officer provided above, and Agent shall have no duty to verify the
origin of any such communication or the authority of the Person sending it,
except in connection with its review of the most recent Loan Request
Authorization delivered to Lender by Borrower. Each notice of borrowing shall be
irrevocable by and binding on Borrower.

 

(b) Disbursement. Borrower hereby irrevocably authorizes Agent to disburse the
proceeds of each Revolving Loan requested by Borrower, or deemed to be requested
by Borrower, as follows: (i) the proceeds of each Revolving Loan requested under
paragraph 6(a)(i) shall be disbursed by Agent in lawful money of the United
States of America in immediately available funds, in the case of the initial
borrowing, in accordance with the terms of the written disbursement letter from
Borrower, and in the case of each subsequent borrowing, by wire transfer to such
bank account as may be agreed upon by Borrower and Agent from time to time, or
elsewhere if pursuant to a written direction from Borrower; and (ii) the
proceeds of each Revolving Loan requested under paragraph 6(a)(ii) shall be
disbursed by Agent by way of direct payment of the relevant interest or other
Liability. Each borrowing of Revolving Loans shall be advanced according to the
Commitment Percentages of the Lenders. The Term Loan shall be advanced according
to the Commitment Percentages of the Lenders.

 

(c) Each payment (including each prepayment) by Borrower on account of the
principal of and interest on the Revolving Note shall be applied to the
Revolving Loans, pro rata according to the Commitment Percentages of the
Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M. (Chicago time), in Dollars and in immediately available funds.

 

(d) (i) Notwithstanding anything to the contrary contained in subparagraphs (b)
and (c) hereof, commencing with the first Business Day following the Closing
Date, each borrowing of Revolving Loans shall be advanced by Agent and each
payment by Borrower on account of Revolving Loans shall be applied first to
those Revolving Loans made by Agent. On or before 1:00 P.M. (Chicago time) on
each Settlement Date commencing with the first Settlement Date following the
Closing Date, Agent and Lenders shall make certain payments as follows: (A) if
the aggregate amount of new Revolving Loans made by Agent

 

28

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

during the period commencing with the later of: (x) the Closing Date and (y) the
immediately preceding Settlement Date and ending on the day immediately
preceding the current Settlement Date (such period, the “Settlement Period”)
exceeds the aggregate amount of repayments applied to outstanding Revolving
Loans during such preceding Settlement Period, then each Lender shall provide
Agent with funds in an amount equal to its Commitment Percentage of the
difference between: (x) such Revolving Loans and (y) such repayments and (B) if
the aggregate amount of repayments applied to outstanding Revolving Loans during
such Settlement Period exceeds the aggregate amount of new Revolving Loans made
during such Settlement Period, then Agent shall provide each Lender with its
Commitment Percentage of the difference between (x) such repayments and (y) such
Revolving Loans.

 

(ii) Each Lender shall be entitled to earn interest at the interest rate
provided in paragraph 5(a) on outstanding Loans which it has funded.

 

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

 

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

 

(f) Unless Agent shall have been notified by telephone, confirmed in writing, by
any Lender that such Lender will not make the amount which would constitute its
Commitment Percentage of the Loans available to Agent, Agent may (but shall not
be obligated to) assume that such Lender shall make such amount available to
Agent and, in reliance upon such assumption, make available to Borrower a
corresponding amount. Agent will promptly notify Borrower of its receipt of any
such notice from a Lender. If such amount is made available to Agent on a date
after a Settlement Date, such Lender shall pay to Agent on demand an amount
equal to the product of: (i) the daily average federal funds rate (computed on
the basis of a year of 360 days) during such period as quoted by Agent, times
(ii) such amount, times (iii) the number of days from and including such
Settlement Date to the date on which such amount becomes immediately available
to Agent. A certificate of Agent submitted to any Lender with respect to any
amounts owing under this paragraph 6(f) shall be conclusive, in the absence of

 

29

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

manifest error. If such amount is not in fact made available to Agent by such
Lender within three (3) Business Days after such Settlement Date, Agent shall be
entitled to recover such an amount, with interest thereon at the rate per annum
then applicable to Revolving Loans hereunder, on demand from Borrower; provided,
however, that Agent’s right to such recovery shall not prejudice or otherwise
adversely affect Borrower’s rights (if any) against such Lender.

 

(g) Notwithstanding anything to the contrary contained herein, in the event any
Lender: (i) has refused (which refusal constitutes a breach by such Lender of
its obligations under this Agreement) to make available its Commitment
Percentage of any Loan or (ii) notifies either Agent or Borrower that it does
not intend to make available its Commitment Percentage of any Loan (if the
actual refusal would constitute a breach by such Lender of its obligations under
this Agreement) (each, a “Lender Default”), all rights and obligations hereunder
of such Lender (a “Defaulting Lender”) as to which a Lender Default is in effect
and of the other parties hereto shall be modified to the extent of the express
provisions of this paragraph 6(g) while such Lender Default remains in effect.

 

(h) Revolving Loans shall be allocated pro rata among Lenders (the
“Non-Defaulting Lenders”) which are not Defaulting Lenders in accordance with
their respective Commitment Percentages, and no Commitment Percentage of any
Lender or any pro rata share of any Revolving Loans required to be advanced by
any Lender shall be increased as a result of such Lender Default. Amounts
received in respect of principal of Loans shall be applied to reduce Loans of
each Lender pro rata based on the aggregate of the outstanding Loans of all
Lenders at the time of such application; provided, that, such amount shall not
be applied to any Loans of a Defaulting Lender at any time when, and to the
extent that, the aggregate amount of Loans of any Lender that is not a
Defaulting Lender exceeds such Lender’s Commitment Percentage of all Loans then
outstanding.

 

(i) A Defaulting Lender shall not be entitled to: (A) give instructions to Agent
or to approve, disapprove, consent to or vote on any matters relating to this
Agreement or the Other Agreements or (B) receive or earn unused line fees which
are due and payable during the continuation of a Lender Default. All amendments,
waivers and other modifications of this Agreement and the Other Agreement may be
made without regard to a Defaulting Lender and, solely for purposes of the
definition of “Required Lenders”, a Defaulting Lender shall be deemed not to be
a Lender and not to have Loans outstanding.

 

(j) Other than as expressly set forth in this paragraph 6(j), the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this paragraph
6(j) shall be deemed to release any Defaulting Lender from its obligations under
this Agreement or the Other Agreements, shall alter such obligations, shall
operate as a waiver of any default by such Defaulting Lender hereunder, or shall
prejudice any rights which Borrower, Agent or any Lender may have against any
Defaulting Lender as a result of any default by such Defaulting Lender
hereunder.

 

(k) In the event a Defaulting Lender retroactively cures, to the satisfaction of
Agent, the breach which caused such Lender to become a Defaulting Lender, such
Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as
a Lender under this Agreement.

 

30

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

(l) In the event a Defaulting Lender fails to retroactively cure, to the
satisfaction of Agent and Borrower, the breach which caused a Lender to become a
Defaulting Lender within five (5) Business Days after the occurrence of such
default (the “Defaulting Lender Cure Period”), then Agent may, but shall not be
obligated to, require such Defaulting Lender to assign its interest in the Loans
to Agent or to another financial institution designated by Agent (the
“Designated Lender”) for a purchase price equal to the outstanding principal
amount of all Loans made by such Defaulting Lender plus accrued and unpaid
interest and fees (other than any unused line fees due during the continuance of
such Lender Default) due to such Defaulting Lender, which interest and fees
shall be paid to the Defaulting Lender when collected from Borrower. In the
event Agent so elects to require any Defaulting Lender to assign its interest to
Agent or to the Designated Lender, as applicable, Agent will notify such
Defaulting Lender at any time after the expiration of the Defaulting Lender Cure
Period, and such Defaulting Lender shall assign its interest to Agent or the
Designated Lender, as applicable, no later than five (5) days following receipt
of such notice pursuant to a Commitment Transfer Supplement executed by such
Defaulting Lender, Agent or the Designated Lender, as applicable, and Agent.
Upon: (A) the execution of the Commitment Transfer Supplement, (B) payment of
the purchase price set forth above, (C) recordation of the assignment in the
Register by Agent pursuant to paragraph 24(c) hereof, and (D) if so requested by
Agent or the Designated Lender (as applicable), receipt by such Person of
replacement Notes, Agent or the Designated Lender (as applicable) shall increase
its Commitment Percentage hereunder or shall become a Lender hereunder, as
applicable, and the Defaulting Lender shall cease to be a Lender hereunder
except with respect to indemnification provisions set forth herein.

 

31

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

7. GRANT OF SECURITY INTEREST TO AGENT. As security for the payment of all Loans
now or in the future made by Agent and Lenders to Borrower hereunder and for the
payment or other satisfaction of all other Liabilities, Borrower hereby assigns
and grants to Agent for its benefit and for the ratable benefit of Lenders a
continuing security interest in all assets of Borrower, whether now or hereafter
owned, existing, acquired or arising and wherever now or hereafter located
including without limitation: (a) all Accounts (whether or not Eligible Accounts
including, without limitation, Health Care Insurance Receivables)) and all Goods
whose sale, lease or other disposition by Borrower has given rise to Accounts
and have been returned to or repossessed or stopped in transit by Borrower; (b)
all Chattel Paper, Instruments (including without limitation, promissory notes),
Documents and General Intangibles (including, without limitation, Payment
Intangibles); (c) all Inventory (whether or not Eligible Inventory or Eligible
L/C Inventory); (d) all Goods (other than Inventory) including, without
limitation, Equipment, vehicles and fixtures; (e) all deposits and cash and any
other property of Borrower now or hereafter in the possession, custody or
control of Agent, any Lender or any agent or any parent, affiliate or subsidiary
of Agent or such Lender or any participant with Agent or such Lender in the
Loans for any purpose (whether for safekeeping, deposit, collection, custody,
pledge, transmission or otherwise); (f) all Investment Property (excluding stock
or other equity in Borrower’s Subsidiaries or joint ventures); (g) all Customer
Lists; (h) all Real Property; (i) all Deposit Accounts; (j) all Supporting
Obligations; (k) all Letter of Credit Rights; (l) any Commercial Tort Claim; and
(m) all additions and accessions to, substitutions for, and replacements,
products and proceeds of the foregoing property, including, without limitation,
proceeds of all insurance policies insuring the foregoing property, and all of
Borrower’s books and records relating to any of the foregoing and to Borrower’s
business.

 

8A. CONCERNING ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE .

 

(a) Commercial Tort Claim. If Borrower shall at any time acquire a Commercial
Tort Claim, Borrower shall immediately notify Agent in a writing signed by
Borrower of the brief details thereof and grant to Agent in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Agent.

 

(b) Perfection by Filing. Agent may at any time and from time to time, pursuant
to the provisions of paragraph 8 hereof, file financing statements, continuation
statements and amendments thereto that describe the Collateral as all assets of
Borrower or words of similar effect and which contain any other information
required by Part 5 of Article 9 of the UCC for the sufficiency or filing office
acceptance of any financing statement, continuation statement or amendment,
including whether Borrower is an organization, the type of organization and any
organization identification number issued to Borrower. Borrower agrees to
furnish any such information to Agent promptly upon Agent’s request therefor.
Any such financing statements, continuation statements and/or amendments may be
signed by Agent on behalf of Borrower or may be filed without any signatures, as
provided in this Agreement, and may be filed at any time in any jurisdiction
whether or not Revised Article 9 is then in effect in that jurisdiction.

 

(c) Other Perfection, etc. Borrower shall at any time and from time to time,
take such steps as Agent may request: (a) for Agent to obtain an
acknowledgement, in form and

 

32

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

substance satisfactory to Agent, of each bailee having possession of any
Collateral that such bailee holds such Collateral for the benefit of Agent, (b)
for Agent to obtain “control” of any Investment Property, Deposit Accounts,
Letter-of-Credit Rights or electronic Chattel Paper (with corresponding
provisions in Rev. §§9-104, 9-105, 9-106 and 9-107 of the UCC relating to what
constitutes “control” for such items of Collateral), with any agreements
establishing control to be in form and substance satisfactory to Agent, and (c)
to insure the continued perfection and priority of Agent’s security interest in
any of the Collateral and the preservation of its rights therein.

 

(d) Savings Clause. Nothing contained in this paragraph 8A shall be construed to
narrow the scope of Agent’s security interest in any of the Collateral or the
perfection or priority thereof or to impair or otherwise limit any of the
rights, powers, privileges or remedies of Agent or any Lender hereunder.

 

8. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Borrower shall, at Agent’s request, at any time and from time to time, execute
and deliver to Agent such financing statements, documents and other agreements
and instruments (and pay the cost of filing or recording the same in all public
offices deemed reasonably necessary or desirable by Agent) and do such other
acts and things as Agent may deem necessary or desirable in order to establish
and maintain a valid, attached and perfected security interest in the Collateral
in favor of Agent for its benefit and for the ratable benefit of Lenders (free
and clear of all other liens, claims and rights of third parties whatsoever,
whether voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Liabilities, and in order to facilitate the collection of the
Collateral. Borrower irrevocably hereby makes, constitutes and appoints Agent
(and all Persons designated by Agent for that purpose) as Borrower’s true and
lawful attorney and agent-in-fact to execute and/or file such financing
statements (with or without signatures thereon), documents and other agreements
and instruments and do such other acts and things as may be necessary to
preserve and perfect Agent’s security interest in the Collateral. Borrower
further agrees that a carbon, photographic, photostatic or other reproduction of
this Agreement or of a financing statement shall be sufficient as a financing
statement.

 

9. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of Default has
occurred and is continuing, Borrower shall have the right, except as otherwise
provided for in this Agreement, in the ordinary course of Borrower’s business,
to: (a) sell, lease or furnish under contracts of service any of Borrower’s
Inventory normally held by Borrower for any such purpose, and (b) use and
consume any raw materials, work in process or other materials normally held by
Borrower for such purpose, provided, however, that a sale in the ordinary course
of business shall not include any transfer or sale in satisfaction, partial or
complete, of a debt owed by Borrower.

 

10. COLLECTIONS.

 

(a) Establishment of Lockbox and Blocked Account. Borrower shall direct all of
its Account Debtors to make all payments on the Accounts directly to a post
office box (“Lock Box”) with a financial institution acceptable to, and in the
name and under exclusive control of Agent. Borrower shall establish an account
(“Blocked Account”) in Agent’s name for the benefit

 

33

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

of Borrower with a financial institution acceptable to Agent, into which all
payments received in the Lock Box shall be deposited, and into which Borrower
will immediately deposit all payments received by Borrower for Inventory or
services sold, leased or rendered by Borrower and received by Borrower in the
identical form in which such payments were received, whether by cash or check.
If Borrower, any Affiliate or Subsidiary of Borrower, or any shareholder,
officer, director, employee or agent of Borrower or any Affiliate or Subsidiary,
or any other Person acting for or in concert with Borrower shall receive any
monies, checks, notes, drafts or other payments relating to or as proceeds of
Accounts or other Collateral, Borrower and each such Person shall receive all
such items for the benefit of, and as the sole and exclusive property of, Agent
for its benefit and for the ratable benefit of Lenders and, as soon as
practicable after receipt thereof (but in no event later than 1:00 P.M. (Chicago
time) on the next Business Day), shall remit the same (or cause the same to be
remitted) in kind to the Blocked Account. Each financial institution with which
a Lock Box or Blocked Account is established shall acknowledge and agree, in a
manner satisfactory to Agent for its benefit and for the ratable benefit of
Lenders, that the amounts on deposit in such Lock Box and such Blocked Account
are the sole and exclusive property of Agent, that such financial institution
has no right to setoff against such Lock Box or Blocked Account or against any
other account maintained by such financial institution into which the contents
of such Blocked Account are transferred, and that such financial institution
shall wire, or otherwise transfer in immediately available funds in a manner
satisfactory to Agent, funds deposited in the Blocked Account on a daily basis
as such funds are collected. Borrower agrees that all payments made to the
Blocked Account established by Borrower or otherwise received by Agent, whether
in respect of the Accounts of Borrower or as proceeds of other Collateral of
Borrower or otherwise, will be applied on account of the Revolving Loans and
also on account of such other due and payable Liabilities of Borrower as Agent
shall determine in accordance with the terms of this Agreement. Borrower agrees
to pay all fees, costs and expenses which Borrower incurs in connection with
opening and maintaining a Lock Box and Blocked Account. All of such fees, costs
and expenses which remain unpaid by Borrower pursuant to any Lock Box or Blocked
Account Agreement with Borrower, to the extent same shall have been paid by
Agent hereunder, shall constitute Revolving Loans hereunder, shall be payable to
Agent for its benefit and for the ratable benefit of Lenders by Borrower upon
demand, and, until paid, shall bear interest at the highest rate then applicable
to Revolving Loans hereunder. All checks, drafts, instruments and other items of
payment or proceeds of Collateral delivered to Agent in kind shall be endorsed
by Borrower to Agent, and, if that endorsement of any such item shall not be
made for any reason, Agent is hereby irrevocably authorized to endorse the same
on Borrower’s behalf. For the purpose of this paragraph, Borrower irrevocably
hereby makes, constitutes and appoints Agent (and all Persons designated by
Agent for that purpose) as Borrower’s true and lawful attorney and
agent-in-fact: (i) to endorse Borrower’s name upon said items of payment and/or
proceeds of Collateral of Borrower and upon any Chattel Paper, document,
instrument, invoice or similar document or agreement relating to any Account of
Borrower or goods pertaining thereto; (ii) to take control in any manner of any
item of payment or proceeds thereof; (iii) to have access to any lock box or
postal box into which any of Borrower’s mail is deposited; and (iv) open and
process all mail addressed to Borrower and deposited therein, provided, however,
that Agent shall not exercise any such powers described in clauses (ii) and (iv)
unless and until an Event of Default has occurred, and provided, further, that
in the exercise of its rights hereunder, Agent shall, as soon as practicable,
deliver or cause to be delivered to Borrower, any mail that does not constitute
payment on any

 

34

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

Account or any other Collateral or proceeds thereof or any other cash.
Notwithstanding anything to the contrary contained herein, Borrower shall cause
all of its Subsidiaries and Affiliates to wire all remittances and other
payments due Borrower from such Subsidiaries and Affiliates directly to the
Blocked Account.

 

(b) Collection of Accounts. Agent may, at any time and from time to time after
the occurrence and during the continuation of an Event of Default, whether
before or after notification to any Account Debtor and whether before or after
the maturity of any of the Liabilities: (i) enforce collection of any of
Borrower’s Accounts, other amounts owed to Borrower or contract rights by suit
or otherwise; (ii) exercise all of Borrower’s rights and remedies with respect
to proceedings brought to collect any Accounts or other amounts owed to
Borrower; (iii) surrender, release or exchange all or any part of any Accounts
of Borrower or other amounts owed to Borrower, or compromise or extend or renew
for any period (whether or not longer than the original period) any Indebtedness
thereunder; (iv) sell or assign any Account of Borrower or other amounts owed to
Borrower upon such terms, for such amount and at such time or times as Agent
deems advisable; (v) prepare, file and sign Borrower’s name on any proof of
claim in bankruptcy or other similar document against any Account Debtor
indebted on an Account of Borrower or other Person obligated to Borrower; and
(vi) do all other acts and things which are necessary, in Agent’s sole
discretion, to fulfill Borrower’s obligations under this Agreement and to allow
Agent to collect the Accounts or other amounts owed to Borrower. In addition to
any other provision hereof, Agent may at any time on or after the occurrence and
during the continuation of an Event of Default, at Borrower’s expense, notify
any parties obligated on any of the Accounts of Borrower to make payment
directly to Agent of any amounts due or to become due thereunder.

 

(c) Application of Proceeds. Agent shall, within two (2) Business Days after
receipt by Agent at its office in Chicago, Illinois of cash or other immediately
available funds from collections of items of payment and proceeds of any
Collateral, apply the whole or any part of such collections or proceeds against
the Liabilities in such order as Agent shall determine in its sole discretion.

 

(d) Acceptance of Assignment. In its sole credit judgment, without waiving or
releasing any obligation, liability or duty of Borrower under this Agreement or
the Other Agreements or any Event of Default, at any time or times hereafter,
Agent may (but shall not be obligated to) pay, acquire or accept an assignment
of any security interest, lien, encumbrance or claim asserted by any Person in,
upon or against the Collateral. All sums paid by Agent in respect thereof and
all costs, fees and expenses (including without limitation reasonable attorney
fees, all court costs and all other charges relating thereto) incurred by Agent
shall constitute Revolving Loans, payable by Borrower to Agent on demand and,
until paid, shall bear interest at the highest rate then applicable to Revolving
Loans hereunder.

 

(e) Delivery of Documents and Instruments. Immediately upon Borrower’s receipt
of any portion of the Collateral evidenced by an agreement, instrument or
document including, without limitation, any Chattel Paper, Borrower shall
deliver the original thereof to Agent together with an appropriate endorsement
or other specific evidence of assignment thereof to Agent (in form and substance
acceptable to Agent). If an endorsement or assignment of any

 

35

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

such items shall not be made for any reason, Agent is hereby irrevocably
authorized, as Borrower’s attorney and agent-in-fact, to endorse or assign the
same on Borrower’s behalf.

 

11. SCHEDULES AND REPORTS.

 

Borrower shall furnish or cause to be furnished to Agent the following:

 

(a) As soon as practicable and in any event on Tuesday of each week, a Borrowing
Base Certificate (which shall be calculated as of the last day of the
immediately preceding Week and which shall not be binding upon Agent or
restrictive of Agent’s rights under this Agreement). In addition, Borrower shall
provide Agent with a written report each Week hereafter, reflecting the activity
of Borrower with respect to sales, collections of Accounts and credits issued by
Borrower for the immediately preceding Week. Such report shall be in a form and
with such specificity as is satisfactory to Agent and shall contain such
additional information as Agent may reasonably require concerning Accounts and
Inventory included, described or referred to in such weekly report and any other
documents in connection therewith requested by Agent, including without
limitation but only if specifically requested by Agent, copies of all invoices
prepared in connection with such Accounts.

 

(b) As soon as practicable and in any event within thirty (30) days following
the end of each calendar month: (i) statements of income and statements of cash
flow of Borrower for each such month and for the period from the beginning of
the then current Fiscal Year to the end of such month, (ii) balance sheets of
Borrower as of the end of such month, and (iii) with respect to such statements
of income and balance sheets, in comparative form, figures for the corresponding
periods in the preceding Fiscal Year, all in reasonable detail and certified by
the chief financial officer of Borrower that such statements fairly present the
financial condition of Borrower in accordance with GAAP, subject to changes
resulting from normal and recurring year-end adjustments that individually and
in the aggregate are not material to the business of Borrower and the absence of
footnotes, together with detailed computations of Borrower’s compliance with the
covenants set forth in this Agreement.

 

(c) As soon as practicable and in any event within forty-five (45) days
following the end of each fiscal quarter (other than the fourth fiscal quarter
of each fiscal year): (i) statements of income and statements of cash flow of
Borrower for each such quarter and for the period from the beginning of the then
current Fiscal Year to the end of such quarter, (ii) balance sheets of Borrower
as of the end of such quarter, and (iii) with respect to such statements of
income and balance sheets, in comparative form, figures for the corresponding
periods in the preceding Fiscal Year, all in reasonable detail and certified by
the chief financial officer of Borrower that such statements fairly present the
financial condition of Borrower in accordance with GAAP, subject to changes
resulting from normal and recurring year-end adjustments that individually and
in the aggregate are not material to the business of Borrower and the absence of
footnotes, together with detailed computations of Borrower’s compliance with the
covenants set forth in this Agreement.

 

(d) As soon as practicable and in any event within fifteen (15) days following
the end of each calendar month and at such other times as may be requested by
Agent from time to time: (i) a schedule identifying by age each Account of
Borrower together with copies of the

 

36

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

invoices when requested by Agent (with evidence of shipment attached) pertaining
to each such Account and a schedule identifying by age each account payable of
Borrower, (ii) a detailed aged trial balance of Borrower’s Accounts (“Accounts
Trial Balance”) in form and substance satisfactory to Agent in its reasonable
discretion, including, without limitation, the names and addresses of all
Account Debtors of Borrower, (iii) a summary and detail of accounts payable
(such Accounts and accounts payable divided into such time intervals as Agent
may require in its reasonable discretion), including a listing of any held
checks, (iv) such additional schedules, certificates, reports and information
with respect to the Collateral as Agent may from time to time require; (v) a
copy of any statement received by Borrower in connection with the Lockbox and/or
the Blocked Account; (vi) an assignment of any or all items of Collateral to
Agent and (vii) the general ledger inventory account balance, a perpetual
inventory report and Agent’s standard form of Inventory report then in effect,
for Borrower by each category of Inventory, together with a description of the
change in each category of Inventory, in each case, for such immediately
preceding month (or other applicable period). Agent, through its officers,
employees or agents, shall have the right, at any time and from time to time in
Agent’s name, in the name of a nominee of Agent or in Borrower’s name, to verify
the validity, amount or any other matter relating to any of Borrower’s Accounts,
by mail, telephone, telegraph or otherwise. Borrower shall reimburse Agent, on
demand, for all reasonable costs, fees and expenses incurred by Agent in this
regard. Borrower shall immediately notify Agent of any event causing loss or
depreciation in value of Borrower’s Inventory (other than normal depreciation
occurring in the ordinary course of business).

 

(e) As soon as practicable and in any event within ninety (90)] days after the
end of each Fiscal Year commencing with the Fiscal Year ending December 31,
2003: (i) statements of income of Borrower for such Fiscal Year, and a balance
sheet of Borrower as of the end of such Fiscal Year, and (ii) statements of cash
flow of Borrower for such Fiscal Year, all setting forth in comparative form,
corresponding figures for the period covered by the preceding annual audit and
as of the end of the preceding Fiscal Year, such statements to be presented in
accordance with Borrower’s normal method of accounting for Inventory and (if
Borrower uses the LIFO method) on a pre-tax FIFO basis, all in reasonable detail
and in accordance with GAAP and examined and reported on by independent
certified public accountants of recognized national standing selected by
Borrower and satisfactory to Agent, whose opinion shall be unqualified and shall
be in accordance GAAP, in form and substance satisfactory to Agent.

 

(f) As soon as practicable and in any event not later than thirty (30) days
prior to the beginning of each Fiscal Year commencing with the Fiscal Year
commencing January 1, 2004, projected balance sheets, statements of income and
cash flow for Borrower, for each of the twelve (12) months during such Fiscal
Year, which shall include the assumptions used therein, together with
appropriate supporting details as requested by Agent (hereinafter referred to as
“Projections”).

 

(g) As soon as practicable and in any event within ten (10) days of delivery to
Borrower, a copy of any letter issued by Borrower’s independent public
accountants or other management consultants with respect to Borrower’s financial
or accounting systems or controls, including all so-called “management letters”.

 

37

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

(h) In conjunction with the delivery of the annual presentation of projections
or budgets referred to in subparagraph (e) above, a letter signed by the chief
financial officer of Borrower, describing, comparing and analyzing, in detail,
all changes and developments between the anticipated financial results included
in such projections or budgets and the historical financial statements of
Borrower.

 

(i) As soon as practicable and in any event at the end of each Fiscal Year or as
Agent may otherwise reasonably request, a complete and accurate update of the
Customer Lists.

 

(j) With reasonable promptness, such other business or financial data, reports,
appraisals and projections as Agent may reasonably request.

 

Without limiting any of Borrower’s obligations contained in this Section 11,
Borrower shall, contemporaneously with delivery to Subordinated Lender, deliver
to Lender, copies of all financial statements, financial information, reports,
press releases, documents filed with the Securities and Exchange Commission,
notices, correspondence, documents and all other information and items which
Borrower is obligated to deliver or furnish to Subordinated Lender (provided,
however, that such items may be in the same form delivered to the Subordinated
Lender), whether pursuant to Article 8 of the Securities Purchase Agreement or
otherwise.

 

All financial statements and other financial information delivered to Agent
pursuant to the requirements of this paragraph 11 (except where otherwise
expressly indicated) shall be prepared in accordance with GAAP as provided in
this Agreement, on a consolidated and consolidating basis. Together with each
delivery of financial statements required by subparagraphs (b) and (d) above,
Borrower shall deliver to Agent an officer’s certificate in the form attached
hereto as Exhibit D, which shall include a calculation of financial covenants in
the schedule attached to such Officer’s Certificate in form satisfactory to
Agent. Together with each delivery of annual financial statements required by
subparagraph (d) above, Borrower shall deliver to Agent a certificate of the
accountants who performed the audit in connection with such statements stating
that in making the audit necessary to the issuance of a report on such financial
statements, they have obtained no knowledge of any Event of Default, or, if such
accountants have obtained knowledge of an Event of Default, specifying the
nature and period of existence thereof and such certificates shall contain or
have appended thereto calculations which set forth Borrower’s compliance with
the financial covenants set forth herein.

 

(k) All schedules, certificates, reports and assignments and other items
delivered by Borrower to Agent hereunder shall be executed by an authorized
representative of Borrower and shall be in such form and contain such
information as Agent shall reasonably request. Borrower shall deliver from time
to time such other schedules and reports pertaining to the Collateral of
Borrower as Agent may reasonably request.

 

12. TERM.

 

(a) This Agreement shall be in effect from the date hereof until July     , 2006
(the “Term”) unless the due date of the Liabilities is accelerated pursuant to
paragraph 17 hereof, in which case this Agreement shall terminate on the date
thereafter that the Liabilities are paid in

 

38

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

full, provided, however, that the security interests and liens created under
this Agreement and the Other Agreements shall survive such termination until the
date upon which payment and satisfaction in full of the Liabilities shall have
occurred. At such time as Borrower has repaid all of the Liabilities and this
Agreement has terminated, Borrower shall deliver to Agent a release, in form and
substance reasonably satisfactory to Agent, of all obligations and liabilities
of Agent, Lenders and their officers, directors, employees, agents, parents,
subsidiaries and affiliates to Borrower, and if Borrower is obtaining new
financing from another lender, Borrower shall deliver such lender’s
indemnification of Agent and each Lender, in form and substance reasonably
satisfactory to Agent, for checks which Agent has credited to Borrower’s
account, but which subsequently are dishonored for any reason.

 

(b) If: (i) Borrower prepays all or any portion of the Liabilities (which
prepayment by Borrower must be upon forty-five (45) days’ prior written notice
to Agent), (ii) Agent demands or Borrower is otherwise required to make payment
in full of the Liabilities upon the occurrence of an Event of Default, (iii) a
voluntary or involuntary Change of Control occurs, (iv) any other voluntary or
involuntary prepayment of the Liabilities by Borrower or any other Person occurs
(other than reductions to zero of the outstanding balance of the Revolving Loans
resulting from the ordinary course operation of the provisions of paragraph 10
hereof), whether by virtue of Agent’s exercising its right of set-off or
otherwise, (v) Agent accelerates the Note or makes any demand on the Note, (vi)
any payment or reduction of the outstanding balance of the Note and/or the Loans
is made during a bankruptcy, reorganization or other proceeding or is made
pursuant to any plan of reorganization or liquidation or any similar law or
(vii) the termination of this Agreement for any other reason whatsoever and the
prepayment of some or all of the Liabilities (each, a “prepayment”), then, at
the effective date of any such termination and/or prepayment, Borrower agrees to
pay to Agent for its benefit and for the ratable benefit of Lenders, as a
prepayment fee, in addition to the payment of all other Liabilities owing by
Borrower to Agent and Lenders, an amount equal to: (x) three percent (3%) of the
Revolving Loan Commitment if such prepayment is made during the first Contract
Year; (y) two percent (2%) of the Revolving Loan Commitment if such prepayment
is made during the second Contract Year; and (z) one-half of one percent (1/2%)
of the Revolving Loan Commitment if such prepayment is made at any time during
the third Contract Year prior to the expiration of the Term. In light of the
extreme difficulty of accurately calculating actual damages arising out of any
early termination and/or prepayment, Agent, Lenders and Borrower has agreed that
the prepayment fee provided for above is a reasonable estimate of actual damages
that would be incurred by Agent and Lenders.

 

13. REPRESENTATIONS AND WARRANTIES. Borrower hereby makes the following
representations, warranties and covenants:

 

(a) Borrower has furnished to Agent: (1) balance sheets, income statements and
cash flow projections of Borrower reflected quarterly for the period beginning
January 1, 2003 and ending December 31, 2003 as set forth on Exhibit 13(a)(1)
attached hereto and made a part hereof, (2) balance sheets, income statements
and cash flow projections of Borrower reflected annually for the second and
third Contract Years as set forth on Exhibit 13(a)(2) attached hereto and made a
part hereof, and (3) an availability schedule for the period ending December 31,
2003 in the form attached hereto as Schedule 13(a)(3). The financial statements
described in clauses (1), (2) and (3) of the first sentence of this paragraph
were prepared by or

 

39

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

under the direction of the Chief Financial Officer of Borrower and reflect, as
of the Closing Date, the reasonable estimates of Borrower of the information
projected therein, based on the assumptions accompanying such projections;

 

(b) the office where Borrower keeps its books, records and accounts (or copies
thereof) concerning the Collateral, Borrower’s principal place of business and
all of Borrower’s other places of business, locations of Collateral and post
office boxes are as set forth in Exhibit A; Borrower shall promptly (but in no
event less than thirty (30) days prior thereto) advise Agent in writing of the
proposed opening of any new place of business, the closing of any existing place
of business, any change in the location of Borrower’s principal place of
business, Borrower’s books, records and accounts (or copies thereof) or the
opening or closing of any post office box of Borrower;

 

(c) the Collateral, including without limitation the Equipment (except any part
thereof which prior to the date of this Agreement Borrower shall have advised
Agent in writing consists of Collateral normally used in more than one state) is
and shall be kept, or, in the case of vehicles, based, only at the addresses set
forth on the first page of this Agreement or on Exhibit A (such locations,
“Collateral Locations”), and at other locations within the continental United
States of which Agent has been advised by Borrower pursuant to twenty (20) days
prior written notice (provided, however, that notwithstanding the foregoing, so
long as there is then no continuing Event of Default or event which, with notice
or lapse of time, or both, would become an Event of Default, Borrower may move
Equipment among those Collateral Locations located in the continental United
States);

 

(d) Borrower shall immediately give written notice to Agent of any use of any
such Goods in any state or county other than a state or county in which Borrower
has previously advised Agent in writing that such Goods shall be used (as of the
Closing Date, such states or counties being set forth on Exhibit 13(d) hereto),
and such Goods shall not, unless Agent shall otherwise consent in writing, be
used outside of the continental United States (provided, however, that
notwithstanding the foregoing, so long as there is then no continuing Event of
Default or event which, with notice or lapse of time, or both, would become an
Event of Default, Borrower may move Equipment among those Collateral Locations
located in the continental United States);

 

(e) no security agreement, financing statement or analogous instrument exists or
shall exist with respect to any of the Collateral other than any security
agreement, financing statement or analogous instrument evidencing Permitted
Liens;

 

(f) each Account or item of Inventory which Borrower shall, expressly or by
implication, request Agent to classify as an Eligible Account or as Eligible
Inventory, respectively, shall, as of the time when such request is made,
conform in all respects to the requirements of such classification as set forth
in the respective definitions of Eligible Account and Eligible Inventory and as
otherwise established by Agent from time to time, and Borrower shall promptly
notify Agent in writing if any such Eligible Account, Eligible Inventory or
Eligible L/C Inventory shall subsequently become ineligible;

 

40

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

(g) Borrower is and shall at all times during the Term be the lawful owner of
all Collateral now purportedly owned or hereafter purportedly acquired by
Borrower, free from all liens, claims, security interests and encumbrances
whatsoever, whether voluntarily or involuntarily created and whether or not
perfected including without limitation, any liens, security interests, trusts or
encumbrances arising our of the Perishable Agricultural Commodities Act, the
Packers and Stockyard Act, the Food Security Act of 1985 (the “Food Act”), or
any law, regulation, rules, policies, guidelines, orders or directives relating
to food or any food product, other than the Permitted Liens;

 

(h) Borrower has the right and power and is duly authorized and empowered to
enter into, execute and deliver this Agreement and the Other Agreements and
perform its obligations hereunder and thereunder; Borrower’s execution, delivery
and performance of this Agreement and the Other Agreements does not and shall
not conflict with the provisions of any statute, regulation, ordinance or rule
of law, or any agreement, contract or other document which may now or hereafter
be binding on Borrower, or Borrower’s Organizational Documents, and Borrower’s
execution, delivery and performance of this Agreement and the Other Agreements
shall not result in the imposition of any lien or other encumbrance upon any of
Borrower’s property under any existing indenture, mortgage, deed of trust, loan
or credit agreement or other agreement or instrument by which Borrower or any of
its property may be bound or affected, other than in favor of Agent;

 

(i) there are no actions or proceedings which are pending or, to the best of
Borrower’s knowledge, threatened against Borrower which are reasonably likely to
have a Material Adverse Effect and Borrower shall, promptly upon becoming aware
of any such pending or threatened action or proceeding, give written notice
thereof to Agent;

 

(j) Borrower has obtained and shall maintain all consents, franchises,
certificates, licenses, authorizations, approvals and permits, the lack of which
would have a Material Adverse Effect, and Borrower is and shall remain in
compliance in all material respects with all applicable federal, state, local
and foreign statutes, orders, regulations, rules and ordinances (including,
without limitation, statutes, orders, regulations, rules and ordinances relating
to taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety or
environmental matters), the failure to comply with which would be reasonably
likely to have a Material Adverse Effect;

 

(k) all written information now, heretofore or hereafter furnished by Borrower
to Agent is and shall be true and correct in all material respects as of the
date with respect to which such information was or is furnished (except for
financial projections, which have been prepared in good faith based upon
reasonable assumptions);

 

(l) Borrower is not conducting, permitting or suffering to be conducted, nor
shall it conduct, permit or suffer to be conducted, any activities pursuant to
or in connection with which any of the Collateral is now, or will (while any
Liabilities remain outstanding) be owned by any Affiliate;

 

(m) During the prior ten (10) years, Borrower’s name has always been as set
forth on the first page of this Agreement and Borrower has used and presently
uses no

 

41

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

tradenames, assumed names, fictitious names or division names in the operation
of its business, except as otherwise disclosed in writing to Agent; Borrower
shall notify Agent in writing at least thirty (30) days prior to the change of
its name or the use of any tradenames, assumed names, fictitious names or
division names not previously disclosed to Agent in writing;

 

(n) with respect to Borrower’s Equipment: (i) Borrower has good and indefeasible
and marketable title to and ownership of all of its Equipment; (ii) Borrower
shall keep and maintain the Equipment in good operating condition and repair and
shall make all necessary replacements thereof and renewals thereto so that the
value and operating efficiency thereof shall at all times be preserved and
maintained, ordinary wear and tear excepted; (iii) Borrower shall not permit any
such items to become a fixture to real estate or an accession to other personal
property; (iv) from time to time Borrower may sell, exchange or otherwise
dispose of obsolete, unused or worn out Equipment, but only to the extent
provided in paragraph 4(a) hereof; and (v) Borrower, immediately on demand by
Agent, shall deliver to Agent any and all evidence of ownership of, including,
without limitation, certificates of title and applications of title to, any of
the Equipment;

 

(o) this Agreement and the Other Agreements to which Borrower is a party are the
legal, valid and binding obligations of Borrower and are enforceable against
Borrower in accordance with their respective terms, except to the extent that
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights of creditors
generally;

 

(p) Borrower is solvent, is able to pay its debts as they become due and has
capital sufficient to carry on its business, now owns property having a value
both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;

 

(q) Borrower is not now obligated, whether directly or indirectly, for any loans
or other Indebtedness for borrowed money other than: (i) the Liabilities; (ii)
Indebtedness disclosed to Agent on Schedule 13(q); (iii) unsecured Indebtedness
to trade creditors arising in the ordinary course of Borrower’s business; (iv)
Indebtedness due to Subordinated Lender under the Subordinated Debt Documents as
in effect on the Closing Date so long as such Indebtedness is subject to the
terms of the Subordination Agreement, and (v) unsecured Indebtedness arising
from the endorsement of drafts and other instruments for collection, in the
ordinary course of Borrower’s business;

 

(r) Borrower does not own any margin securities, and none of the proceeds of the
Loans hereunder shall be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time;

 

(s) except as otherwise disclosed on Schedule 13(s), Borrower has no Parents,
Affiliates, Subsidiaries or divisions, nor is Borrower engaged in any joint
venture or partnership with any other Person;

 

42

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

(t) Borrower is duly organized, validly existing and in good standing in its
state of organization and Borrower is duly qualified and in good standing in all
states where the nature and extent of the business transacted by it or the
ownership of its assets makes such qualification necessary, except for such
other states in which the failure to so qualify would not have a Material
Adverse Effect, and Borrower has delivered to Agent true and complete copies of
its Organizational Documents as in effect on the Closing Date;

 

(u) Borrower is not in default under any material contract, lease or commitment
to which it is a party or by which it is bound, nor does Borrower know of any
dispute regarding any contract, lease or commitment which is material to the
continued financial success and well-being of Borrower;

 

(v) there are no controversies pending or threatened between Borrower and any of
its employees, other than employee grievances arising in the ordinary course of
business which are not, in the aggregate, material to the continued financial
success and well-being of Borrower, and Borrower is in compliance in all
material respects with all federal and state laws respecting employment and
employment terms, conditions and practices, except where the failure to so
comply would not have a Material Adverse Effect;

 

(w) Borrower possesses, and shall continue to possess, adequate licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and tradenames to continue to conduct its business as
heretofore conducted by it; and Schedule 13(w) sets forth a complete list of all
of Borrower’s licenses, registered patents, patent applications, registered
copyrights, registered service marks, registered trademarks, trademark
applications, tradestyles and tradenames;

 

(x) Borrower has delivered to Agent complete copies of the Subordinated Debt
Documents (including all schedules, exhibits and disclosure letters referred to
therein or delivered pursuant thereto, if any) and all amendments thereto,
waivers relating thereto and other side letters or agreements affecting the
terms thereof. None of such agreements and documents has been amended or
supplemented, nor have any of the provisions thereof been waived, except
pursuant to a written agreement or agreement which has heretofore been delivered
to Agent;

 

(y) The proceeds of the Loans shall be used solely: (i) to pay Indebtedness of
Borrower due to Bank of America N.A, and (ii) for Borrower’s general working
capital purposes.

 

(z) Except as set forth on Schedule 13(z), no Benefit Plan was in violation in
any material respect of any of the provisions of ERISA or any of the
qualification requirements of Section 401(a) of the IRC within the immediately
preceding five year period, no non-exempt Prohibited Transaction or Reportable
Event has occurred with respect to any Benefit Plan, no Benefit Plan has been
the subject of a waiver of the minimum funding standard under Section 412 of the
IRC, no Benefit Plan has experienced an accumulated funding deficiency under
Section 412 of the IRC, no Lien has been imposed upon the Borrower or any ERISA
Affiliate of Borrower under Section 412(n) of the IRC, no Benefit Plan has been
amended in such a way that the security requirements of Section 401(a)(29) of
the IRC apply, no notice of intent to terminate a Benefit Plan has been
distributed to affected parties or filed with the PBGC under Section 4041

 

43

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

of ERISA, and no Benefit Plan has been terminated under Section 4041(e) of
ERISA, the PBGC has not instituted proceedings to terminate, or appoint a
trustee to administer, a Benefit Plan and no event has occurred or condition
exists which might reasonably constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Benefit
Plan, neither Borrower nor any ERISA Affiliate of Borrower would be liable for
any amount in the aggregate pursuant to Sections 4062, 4063 or 4064 of ERISA if
all Benefit Plans terminated as of the most recent valuation dates of such
Benefit Plans which would reasonably result in a Material Adverse Effect;
neither Borrower nor any ERISA Affiliate of Borrower maintains any employee
welfare benefit plan, as defined in Section 3(1) of ERISA, which provides any
benefits to an employee or the employee’s dependents with respect to claims
incurred after the employee separates from service other than is required by
applicable law; and neither Borrower nor any ERISA Affiliate of Borrower has
incurred or expects to incur any withdrawal liability to any Multiemployer Plan
and after the Closing Date, none of the above-described events shall occur which
are reasonably likely to result in Material Adverse Effect;

 

(aa) The audited consolidated and consolidating balance sheets of Borrower and
its Subsidiaries as at December 31, 2002, April 30, 2002 and April 30, 2001 and
the audited consolidated and consolidating statements of income and of cash
flows for the eight (8) month transition period ending on December 31, 2002,
reported on by and accompanied by an unqualified report from Ernst & Young LLP,
present fairly and accurately the consolidated and consolidating financial
condition of Borrower and its Subsidiaries as at such date, and the consolidated
and consolidating results of its operations and its consolidated and
consolidating cash flows for the respective fiscal years then ended. All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants
and disclosed therein). Borrower and its Subsidiaries do not have any material
Contingent Obligations or liabilities for taxes that are not reflected in the
most recent financial statements referred to in this paragraph. During the
period from December 31, 2002 to and including the date hereof there has been no
material Asset Disposition by Borrower or any of its Subsidiaries or Affiliates
of any material part of its business or property.

 

(bb) Since December 31, 2002, there has been no development or event that has
had or could reasonably be expected to result in a Material Adverse Effect,
except that Borrower has been in default under its loan documents with Bank of
America N.A. due to its failure to repay its obligations to Bank of America N.A.
on July 15, 2003.

 

(cc) Borrower is, and after giving effect to the transactions contemplated
hereby will be, Solvent.

 

(dd) No transfer of property is being made by Borrower and no obligation is
being incurred by Borrower in connection with the transactions contemplated by
this Agreement or the Other Agreements with the intent to hinder, delay, or
defraud either present or future creditors of the Borrower.

 

(ee) (i) Except as set forth on Schedule 13(ee) attached hereto, Borrower has
duly complied with, and its facilities, business, assets, property, leaseholds
and Equipment are in compliance in all material respects with, the provisions of
the Federal Occupational Safety

 

44

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

and Health Act, the Environmental Protection Act, RCRA and all other
Environmental Laws; there have been no outstanding citations, notices or orders
of non-compliance issued to Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations;

 

(ii) Borrower has been issued all required federal, state and local licenses,
certificates or permits relating to all applicable Environmental Laws;

 

(iii) (A) There are no visible signs of releases, spills, discharges, leaks or
disposal (collectively referred to as “Releases”) of Hazardous Substances at,
upon, under or within any Real Property; (B) except as set forth on Schedule
13(ee) attached hereto, there are no underground storage tanks or
polychlorinated biphenyls on the Real Property; (C) the Real Property has never
been used by Borrower as a treatment, storage or disposal facility of Hazardous
Waste; and (D) no Hazardous Substances are present on the Real Property or any
premises leased by Borrower, excepting such quantities as are handled in
accordance with all applicable manufacturer’s instructions and governmental
regulations and in proper storage containers and as are necessary for the
operation of the commercial business of Borrower or of its tenants;

 

(ff) Borrower is not involved in any labor dispute, there are no strikes or
walkouts or union organization of Borrower’s employees threatened or in
existence and no labor contract is scheduled to expire during the Term, in all
cases, other than as set forth on Schedule 13(ff) attached hereto; and

 

(gg) Upon and after the Closing Date, Borrower does not propose to engage in any
business other than the business in which it is presently engaged. On the
Closing Date, Borrower will own and possess all of the rights and consents
necessary for the conduct of the business of Borrower.

 

Borrower represents, warrants and covenants to Agent and each Lender that all
representations, warranties and covenants of Borrower contained in this
Agreement (whether appearing in paragraphs 13 or 14 hereof or elsewhere) shall
be true at the time of Borrower’s execution of this Agreement, shall survive the
execution, delivery and acceptance hereof by the parties hereto and the closing
of the transactions described herein or related hereto, shall remain true until
the repayment in full of all of the Liabilities and termination of this
Agreement, and shall be remade by Borrower at the time each Revolving Loan is
made and each Letter of Credit is issued pursuant to this Agreement.

 

14. COVENANTS. Until payment or satisfaction in full of all Liabilities and
termination of this Agreement, unless Borrower obtains Agent’s prior written
consent waiving or modifying any of Borrower’s covenants hereunder in any
specific instance, Borrower agrees as follows:

 

(a) Borrower shall at all times keep accurate and complete books, records and
accounts with respect to all of Borrower’s and its Subsidiaries and Affiliates
business activities, in accordance with sound accounting practices and generally
accepted accounting principles

 

45

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

consistently applied, and shall keep such books, records and accounts, and any
copies thereof, only at the addresses indicated for such purpose on Exhibit A.

 

(b) Agent, or any Persons designated by it, shall have the right, at any time,
in the exercise of its commercially reasonable credit judgment, to call at
Borrower’s and its Subsidiaries and Affiliates places of business at any
reasonable times, and, without hindrance or delay, to inspect the Collateral and
to inspect, audit, check and make extracts from Borrower’s and its Subsidiaries’
and Affiliates’ books, records, journals, orders, receipts and any
correspondence and other data relating to Borrower’s and its Subsidiaries’ and
Affiliates’ business, the Collateral or any transactions between the parties
hereto, and shall have the right to make such verification concerning Borrower’s
and its Subsidiaries’ and Affiliates’ business as Agent may consider reasonable
under the circumstances. Borrower shall and shall cause its Subsidiaries and
Affiliates to furnish to Agent such information relevant to Agent’s rights under
this Agreement as Agent shall at any time and from time to time reasonably
request. Borrower authorizes Agent to discuss the affairs, finances and business
of Borrower with any officers or directors of Borrower or any Affiliate or
Subsidiary of Borrower, or with those employees of any of the foregoing with
whom Agent has determined in its commercially reasonable judgment to be
necessary or desirable to converse, and to discuss the financial condition of
Borrower and its Subsidiaries and Affiliates with Borrower’s independent public
accountants. Any such discussions shall be without liability to Agent or to such
accountants. Borrower shall pay to or reimburse Agent for all reasonable fees,
costs, and out-of-pocket expenses incurred by Agent in the exercise of its
rights hereunder (in addition to the fees payable by Borrower pursuant to
paragraph 5 in connection with Agent’s examination of Borrower’s and its
Subsidiaries’ and Affiliates’ books and records and Collateral) and all of such
costs, fees and expenses shall constitute Revolving Loans hereunder, shall be
payable on demand and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder.

 

(c) (i) Borrower shall: keep the Collateral properly housed and shall keep the
Collateral insured against such risks and in such amounts as are customarily
insured against by Persons engaged in businesses similar to that of Borrower
with such companies, in such amounts and under policies in such form as shall be
reasonably satisfactory to Agent. Originals or certified copies of such policies
of insurance have been or shall be delivered to Agent on the Closing Date,
together with evidence of payment of all premiums therefor, and shall contain an
endorsement, in form and substance acceptable to Agent, showing loss under such
insurance policies payable to Agent. Such endorsement, or an independent
instrument furnished to Agent, shall provide that the insurance company shall
give Agent at least thirty (30) days prior written notice before any such policy
of insurance is altered or cancelled and that no act, whether willful or
negligent, or default of Borrower or any other Person shall affect the right of
Agent to recover under such policy of insurance in case of loss or damage.
Borrower hereby directs all insurers under such policies of insurance to pay all
proceeds payable thereunder directly to Agent for its benefit and for the
ratable benefit of Lenders as their respective interests may appear. Borrower
irrevocably, makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent) as Borrower’s true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of

 

46

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

insurance, provided, however, that Agent shall exercise such rights only upon
the occurrence of an Event of Default.

 

(ii) Borrower shall maintain, at its expense, such public liability and third
party property damage insurance as is customary for Persons engaged in
businesses similar to that of Borrower with such companies and in such amounts,
with such deductibles and under policies in such form as shall be reasonably
satisfactory to Agent and originals or certified copies of such policies have
been or shall be delivered to Agent on the Closing Date, together with evidence
of payment of all premiums therefor; each such policy shall contain an
endorsement showing Agent as additional insured thereunder and providing that
the insurance company shall give Agent at least thirty (30) days prior written
notice before any such policy shall be altered or cancelled; and

 

(iii) If Borrower at any time or times hereafter shall fail to obtain or
maintain any of the policies of insurance required above or to pay any premium
in whole or in part relating thereto, then Agent, without waiving or releasing
any obligation or default by Borrower hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as Agent deems
advisable. All sums disbursed by Agent in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys’ fees, shall constitute Revolving Loans
hereunder and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder.

 

(d) Borrower shall not use the Collateral, or any part thereof, in any unlawful
business or for any unlawful purpose or use or maintain any of the Collateral in
any manner that does or could result in material damage to the environment or a
violation of any applicable Environmental Laws; Borrower shall keep the
Collateral in commercially reasonable condition, repair and order, ordinary wear
and tear excepted; Borrower shall not permit the Collateral, or any part
thereof, to be levied upon under execution, attachment, distraint or other legal
process; Borrower shall not sell, lease, grant a security interest in or
otherwise dispose of any of the Collateral except as expressly permitted by this
Agreement or as contemplated by the Subordinated Debt Documents and covered and
permitted by the Subordination Agreement; and Borrower shall not secrete or
abandon any of the Collateral, or remove or permit removal of any of the
Collateral from any of the locations listed on Exhibit A, except for the removal
of Inventory sold in the ordinary course of Borrower’s business as permitted
herein.

 

(e) All monies and other property obtained by Borrower from Agent pursuant to
this Agreement will be used solely for the purposes set forth herein.

 

(f) Borrower shall, at the request of Agent, indicate on its records concerning
the Collateral a notation, in form satisfactory to Agent, of the security
interest of Agent hereunder, and Borrower shall not maintain duplicates or
copies of such records at any address other than Borrower’s principal place of
business set forth on the first page of this Agreement; provided, however, that
Borrower, in the ordinary course of its business, may furnish copies of such
records to its accountants, attorneys and other agents or advisors as it may
determine to be necessary or desirable, in the exercise of its commercially
reasonable judgment.

 

47

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

(g) Borrower shall file all required tax returns and pay all of its taxes when
due, including, without limitation, taxes imposed by federal, state or municipal
agencies, and shall cause any liens for taxes to be promptly released; provided,
however, that Borrower shall have the right to contest the payment of such taxes
in good faith by appropriate proceedings so long as: (i) the amount so contested
is shown on Borrower’s financial statements, (ii) the contesting of any such
payment does not give rise to a lien for taxes, (iii) upon the occurrence of an
Event of Default, Borrower keeps on deposit with Agent (such deposit to be held
without interest) an amount of money which, in the sole judgment of Agent, is
sufficient to pay such taxes and any interest or penalties that may accrue
thereon, and (iv) if Borrower fails to prosecute such contest with reasonable
diligence, Agent may apply the money so deposited in payment of such taxes. If
Borrower fails to pay any such taxes and in the absence of any such contest by
Borrower, Agent may (but shall be under no obligation to) advance and pay any
sums required to pay any such taxes and/or to secure the release of any lien
therefor, and any sums so advanced by Agent shall constitute Revolving Loans
hereunder, shall be payable by Borrower to Agent on demand, and, until paid,
shall bear interest at the highest rate then applicable to Revolving Loans
hereunder.

 

(h) Borrower shall not: (i) incur, create, assume or suffer to exist any
Indebtedness other than: (w) Indebtedness arising under this Agreement, (x)
subordinated Indebtedness to the Subordinated Lender under the Subordinated Debt
Documents to the extent covered and permitted by the Subordination Agreement,
(y) subordinated Indebtedness to the Bridge Loan Lenders under the Bridge Loan
Subordinated Debt Documents to the extent covered and permitted by the Bridge
Loan Subordination Agreements, and (z) unsecured Indebtedness owing in the
ordinary course of business to trade suppliers arising on or after the Closing
Date; or (ii) assume, guarantee or endorse, or otherwise become liable in
connection with, the obligations of any Person, except by endorsement of
instruments for deposit or collection or similar transactions in the ordinary
course of business. In the event that Grupo I.M.P.C.O. Mexicano intends to enter
into a financing transaction with a lender or financing source, Borrower shall
deliver to Lender true, correct and complete copies of all documents executed in
connection therewith, not later than three (3) Business Days after consummation
of such transaction.

 

(i) Borrower shall not enter into any merger or consolidation, or sell, lease or
otherwise dispose of all or substantially all of its assets; Borrower shall not
create or acquire any new Subsidiary (and Borrower shall not cause BRC to become
a Subsidiary) or Affiliate or issue any shares of, or warrants or other rights
to receive or purchase any shares of, any class of its stock or other equity;
Borrower shall not enter into any transaction outside the ordinary course of
Borrower’s business; provided, however, that Agent shall not unreasonably
withhold its consent to Borrower’s entry into a joint venture or creation of a
Subsidiary (other than BRC the creation as a Subsidiary is prohibited) in the
ordinary course of its business, so long as: (A) prior to and after giving
effect to any proposed transaction, there is then no Event of Default or event
which, with notice or lapse of time, or both, would become an Event of Default,
(B) Borrower provides Lender with not less than thirty (30) days prior written
notice of any such proposed transaction and a copy of all material documents,
and (C) Borrower’s contribution to the capitalization of assets of any proposed
entity never exceeds $200,000 individually or $500,000 in the aggregate for all
such transactions.

 

48

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

(j) Borrower shall not: (i) declare or pay any dividend or other distribution
(whether in cash or in kind) on, purchase, redeem or retire any shares of any
class of its stock, or make any payment on account of, or set apart assets for
the repurchase, redemption, defeasance or retirement of, any class of its stock
equity or other interest; (ii) make any optional payment or prepayment on or
redemption (including without limitation by making payments to a sinking fund or
analogous fund or with respect to any “Excess Cash Flow provision” under the
Subordinated Debt Documents) or repurchase of any Indebtedness for borrowed
money other than Indebtedness pursuant to this Agreement (provided, however,
that so long as there is no Event of Default or Default and there would be no
Event of Default or Default after giving effect to any such proposed payment,
Borrower may make the Excess Cash Flow Payments (as defined in the Securities
Purchase Agreement) to the Subordinated Lender required to be paid under Section
11.2 of the Securities Purchase Agreement); (iii) make any payments whatsoever
on the Indebtedness owing to the Subordinated Lender except as permitted under
the Subordination Agreement; (iv) pay any management or similar fees to any
Person or Persons in excess of $150,000, annually, in the aggregate for all such
Persons; or (v) make any loan to any Person except travel advances to Borrower’s
employees in the ordinary course of business consistent with past practices.

 

(k) Borrower shall not make any investment in any Person, whether in cash,
securities or other property of any kind, other than direct obligations of the
United States, other than as would be permitted pursuant to paragraph 14(i)
above.

 

(l) Borrower shall not: (i) change its jurisdiction of organization, (ii) amend
its Organizational Documents or any shareholder’s or similar agreement
including, without limitation, amend its name, (iii) change its Fiscal Year, or
(iv) amend any of the Subordinated Debt documents or request any waiver or
consent with respect to any term or provisions thereof.

 

(m) Borrower shall not enter into or maintain any transaction or agreement with
its Affiliates, except in the ordinary course of business in a manner and to an
extent consistent with past practices of Borrower and necessary or desirable for
the prudent operation of its business and upon fair and reasonable terms no less
favorable to Borrower than would be obtained by Borrower in a comparable
arms-length transaction with a Person who is not an Affiliate of Borrower.

 

(n) Borrower shall not enter into any amendment, waiver or modification of the
Subordinated Debt Documents.

 

(o) Borrower shall not: (i) (x) maintain, or permit any member of the Controlled
Group to maintain, or (y) become obligated to contribute, or permit any member
of the Controlled Group to become obligated to contribute, to any Benefit Plan,
other than those Benefit Plans disclosed on Schedule 13(z), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
“prohibited transaction”, as that term is defined in Section 406 of ERISA and
Section 4975 of the IRC, (iii) incur, or permit any member of the Controlled
Group to incur, any “accumulated funding deficiency”, as that term is defined in
Section 302 of ERISA or Section 412 of the IRC, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Benefit Plan could result in
any material liability of Borrower or any member of the Controlled Group or the
imposition of a lien on the property of Borrower or any member

 

49

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

of the Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit
any member of the Controlled Group to assume, any obligation to contribute to
any Multiemployer Plan not disclosed on Schedule 13(z), (vi) incur, or permit
any member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, in all material respects, or permit a
member of the Controlled Group to fail to comply, in all material respects, with
the requirements of ERISA or IRC or other applicable laws in respect of any
Benefit Plan, (ix) fail to meet, or permit any member of the Controlled Group to
fail to meet, all minimum funding requirements under ERISA or IRC or postpone or
delay or allow any member of the Controlled Group to postpone or delay any
funding requirement with respect of any Benefit Plan except as permitted by
applicable laws, in each event (i) through (ix) which would be reasonably likely
to result in a Material Adverse Effect.

 

(p) Borrower shall maintain and keep in full force and effect and cause to be
maintained and kept in full force and effect, each of the financial covenants
set forth below. The calculation and determination of each such financial
covenant, and all accounting terms contained therein, shall be so calculated and
construed in accordance with GAAP, on a consolidated basis for the Consolidated
Group and applied on a basis consistent with the financial statements of
Borrower with respect to itself and its Subsidiaries (including the Consolidated
Group) delivered on or before the Closing Date to Agent:

 

(i) Consolidated Tangible Net Worth. Borrower shall maintain and cause the
Consolidated Group to maintain, as of the end of each fiscal quarter,
Consolidated Tangible Net Worth of not less than the respective amount set forth
below opposite each such fiscal quarter:

 

Fiscal Quarter

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

  

Minimum Consolidated

Tangible Net Worth

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

FQ3 2003

   $ 17,000,000

FQ4 2003

       17,000,000

FQ1 2004

       18,000,000

FQ2 2004

       19,000,000

FQ3 2004

       20,000,000

FQ4 2004

       21,000,000

FQ1 2005

       22,500,000

FQ2 2005

       24,000,000

FQ3 2005

       25,500,000

FQ4 2005

       27,000,000

FQ1 2006

       29,000,000

FQ2 2006

       31,000,000

FQ3 2006

       33,000,000

 

(ii) Minimum Consolidated EBITDA. Borrower shall maintain and cause the
Consolidated Group to maintain, as of the end of each fiscal quarter of
Borrower, Consolidated EBITDA, of not less than the amount set forth below
opposite each such fiscal quarter, with respect to the period of four (4)
consecutive fiscal quarters of the Consolidated

 

50

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

Group ending on such fiscal quarter; provided, however, that for purposes of
calculating the Consolidated EBITDA for the third fiscal quarter in 2003, the
Consolidated EBITDA for the fourth fiscal quarter in 2002 shall be ($375,000):

 

Fiscal Quarter

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

  

Minimum Consolidated

EBITDA

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

FQ3 2003

   $ 2,750,000

FQ4 2003

       4,000,000

FQ1 2004

       5,250,000

FQ2 2004

       7,000,000

FQ3 2004

       8,250,000

FQ4 2004

     10,500,000

FQ1 2005

     10,875,000

FQ2 2005

     11,250,000

FQ3 2005

     11,625,000

FQ4 2005

     12,000,000

FQ1 2006

     12,250,000

FQ2 2006

     12,500,000

FQ3 2006

     12,750,000

 

(iii) Fixed Charge Coverage Ratio. Borrower shall maintain and cause the
Consolidated Group to maintain, as of the end of each fiscal quarter of
Borrower, a Fixed Charge Coverage Ratio, of not less than the ratio set forth
below opposite each such fiscal quarter, with respect to the period of four (4)
consecutive fiscal quarters of the Consolidated Group ending on such fiscal
quarter; provided, however, that for purposes of calculating the Fixed Charge
Coverage Ratio for the third fiscal quarter in 2003, the Consolidated EBITDA for
the fourth fiscal quarter in 2002 shall be ($375,000):

 

Fiscal Quarter

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

  

Fixed Charge

Coverage Ratio

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

FQ4 2003

   0.25 : 1.00

FQ1 2004

   0.50 : 1.00

FQ2 2004

   1.00 : 1.00

FQ3 2004

   1.00 : 1.00

FQ4 2004

   1.50 : 1.00

FQ1 2005

   2.00 : 1.00

FQ2 2005

   2.00 : 1.00

FQ3 2005

   2.25 : 1.00

FQ4 2005

   2.25 : 1.00

FQ1 2006

   2.25 : 1.00

FQ2 2006

   2.25 : 1.00

FQ3 2006

   2.25 : 1.00

 

(iv) Consolidated Leverage Ratio. Borrower shall not permit or cause the
Consolidated Leverage Ratio of Borrower at any time during or as of the end of a
fiscal

 

51

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

quarter of Borrower to exceed the ratio set forth below opposite such fiscal
quarter with respect to the period of four (4) consecutive fiscal quarters of
Borrower ending on such fiscal quarter:

 

Fiscal Quarter

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

  

Consolidated

Leverage Ratio

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

FQ4 2003

   8.45 : 1.00

FQ1 2004

   6.95 : 1.00

FQ2 2004

   4.95 : 1.00

FQ3 2004

   3.95 : 1.00

FQ4 2004

   3.45 : 1.00

FQ1 2005

   3.20 : 1.00

FQ2 2005

   3.20 : 1.00

FQ3 2005

   2.95 : 1.00

FQ4 2005

   2.95 : 1.00

FQ1 2006

   2.70 : 1.00

FQ2 2006

   2.70 : 1.00

FQ3 2006

   2.70 : 1.00

 

(v) Maximum Outstanding Intercompany Accounts. Borrower shall not, directly or
indirectly, extend credit to, or incur Indebtedness otherwise permitted
hereunder for the benefit of any Subsidiary or Affiliate of Borrower or its
Subsidiaries (including but not limited to, the incurrence of any Contingent
Obligation), except for credit, Indebtedness or any Contingent Obligation not to
exceed, in the aggregate, the amounts set forth below opposite each identified
Subsidiary and Affiliate or group thereof set forth below:

 

Subsidiary

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

   Permitted Credit

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

IMPCO Technologies Pty Ltd.

IMPCO Technologies (SA) Pty. Ltd.

IMPCO Technologies (NSW) Pty. Ltd.

IMPCO Fuel Systems Pty Ltd.

   $1,000,000

IMPCO Technologies Japan, KK

   $500,000

Grupo I.M.P.C.O. Mexicano

   $5,000,000

IMPCO Beru Technologies B.V.

IMPCO-Beru Technologies, GmbH

IMPCO-Beru Technologies S.A.R.L.

IMPCO Technologies, Limited.

   $2,000,000

 

52

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

Subsidiary

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

   Permitted Credit

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

Minda IMPCO Technologies, Limited

Minda IMPCO Limited

CNGC-IMPCO Technologies, LLC

and all other Subsidiaries and

Affiliates whether now or hereafter existing

   $1,500,000

 

(q) Borrower (together with all of its Subsidiaries and Affiliates) shall not
make Capital Expenditures of an aggregate amount of more than $2,250,000 in any
period of four (4) consecutive fiscal quarters of Borrower (measured as at the
end of each fiscal quarter of Borrower with respect to the period of four (4)
consecutive fiscal quarters ending on such date).

 

(r) Borrower shall reimburse: (i) Agent for all costs and expenses including,
without limitation, legal expenses and reasonable attorneys’ fees (both in-house
and outside counsel), incurred by Agent in connection with the documentation and
consummation of this transaction and any other transactions between Borrower and
Agent, including, without limitation, UCC and other public record searches, lien
filings, Federal Express or similar express or messenger delivery, appraisal
costs, surveys, title insurance and environmental audit or review costs, and
(ii) each of Agent and each Lender for all costs and expenses including,
without, limitation, legal expenses and reasonable attorneys’ fees (both
in-house and outside counsel), incurred by Agent and/or such Lender in seeking
to collect, protect or enforce any rights in or to the Collateral or incurred by
Agent in seeking to collect any Liabilities, restructure the Liabilities,
workout the Liabilities (whether any such costs or expenses are incurred in
connection with any bankruptcy filing) and to administer and enforce any of
Agent’s and/or such Lenders rights under this Agreement (whether any such costs
or expenses are incurred in connection with any bankruptcy filing). Borrowers
shall also, jointly and severally, pay all normal service charges with respect
to accounts maintained by Agent for the benefit of any Borrower. All such costs,
expenses and charges shall constitute Revolving Loans hereunder, shall be
payable by Borrowers to Agent on demand, and, until paid, shall bear interest at
the highest rate then applicable to Revolving Loans hereunder.

 

(s) Borrower shall promptly notify Agent in writing of the occurrence of: (i) a
Default or an Event of Default; (ii) any default under the Subordinated Debt
Documents; (iii) any event which with the giving of notice or lapse of time, or
both, would constitute an event of default under the Subordinated Debt
Documents; (iv) any event, development or circumstance whereby any financial
statements furnished to Agent fail in any material respect to present fairly, in
accordance with GAAP consistently applied, the financial condition or operating
results of Borrower as of the date of such statements or whereby any reports
furnished to Agent fail in any material respect to present fairly the financial
condition or operating results of Borrower as of the date of such reports; (v)
any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of IRC, could subject Borrower to a tax imposed by Section 4971 of IRC; (vi)
each and every default by Borrower which might result in the acceleration of the
maturity of any Indebtedness, including the names and addresses of the holders
of such Indebtedness with respect to which there is a default existing or with
respect to which the maturity has been or could be accelerated,

 

53

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

and the amount of such Indebtedness; and (vii) any other development in the
business or affairs of Borrower which could reasonably be expected to have a
Material Adverse Effect; in each case describing the nature thereof and the
action Borrower proposes to take with respect thereto.

 

(t) (i) Borrower shall ensure that the Real Property remains in compliance with
all Environmental Laws and shall not place or permit to be placed any Hazardous
Substances on any Real Property except as not prohibited by applicable law or
appropriate governmental authorities.

 

(ii) Borrower shall establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.

 

(iii) Borrower shall: (i) employ in connection with the use of the Real Property
appropriate technology necessary to maintain compliance with any applicable
Environmental Laws and (ii) dispose of any and all Hazardous Waste generated at
the Real Property only at facilities and with carriers that maintain valid
permits under RCRA and any other applicable Environmental Laws. Borrower shall
use its best efforts to obtain certificates of disposal, such as hazardous waste
manifest receipts, from all treatment, transport, storage or disposal facilities
or operators employed by Borrower in connection with the transport or disposal
of any Hazardous Waste generated at the Real Property.

 

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

 

(v) Borrower shall promptly forward to Agent copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by Borrower to
dispose of Hazardous Substances and shall continue to forward copies of
correspondence between Borrower and the Authority regarding such claims to Agent
until the claim is settled. Borrower shall promptly forward to Agent copies of
all documents and reports concerning a Hazardous Discharge at the Real Property
that Borrower is

 

54

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

required to file under any Environmental Laws. Such information is to be
provided solely to allow Agent to protect Agent’s security interest in the Real
Property and the Collateral.

 

(vi) Borrower shall respond promptly to any Hazardous Discharge or Environmental
Complaint and take all necessary action in order to safeguard the health of any
Person and to avoid subjecting the Collateral or Real Property to any lien. If
Borrower shall fail to respond promptly to any Hazardous Discharge or
Environmental Complaint or Borrower shall fail to comply with any of the
requirements of any Environmental Laws, Agent on behalf of Lenders may, but
without the obligation to do so, for the sole purpose of protecting Agent’s
interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Prime Rate Revolving Loans shall be paid upon demand by
Borrower, and until paid shall be added to and become a part of the Liabilities
secured by the liens created by the terms of this Agreement or any other
agreement between Agent, any Lender and Borrower.

 

(vii) Promptly upon the written request of Agent from time to time, Borrower
shall provide Agent, at Borrower’s expense, with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within the Real Property. Any report
or investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean-up of such Hazardous
Discharge shall be acceptable to Agent. If such estimates, individually or in
the aggregate, exceed $100,000, Agent shall have the right to require Borrower
to post a bond, letter of credit or other security reasonably satisfactory to
Agent to secure payment of these costs and expenses.

 

(viii) Borrower shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including attorney’s fees, suffered or incurred by Agent or
Lenders under or on account of any Environmental Laws, including, without
limitation, the assertion of any lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting the Real Property,
whether or not the same originates or emerges from the Real Property or any
contiguous real estate, including any loss of value of the Real Property as a
result of the foregoing except to the extent such loss, liability, damage and
expense is attributable to any Hazardous Discharge resulting from actions on the
part of Agent or any Lender. Borrower’s obligations under this paragraph
14(t)(viii) shall arise upon the discovery of the presence of any Hazardous
Substances at the Real Property, whether or not any federal, state, or local
environmental agency has taken or threatened any action in connection with the
presence of any

 

55

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

Hazardous Substances. Borrower’s obligation and the indemnifications hereunder
shall survive the termination of this Agreement.

 

(ix) For purposes of paragraphs 13(bb) and 14(t), all references to Real
Property shall be deemed to include all of Borrower’s right, title and interest
in and to its owned and leased premises.

 

(u) Neither Borrower nor any Affiliate of Borrower shall use any portion of the
proceeds of the Loans, either directly or indirectly, for the purpose of: (i)
purchasing any securities underwritten or privately placed by ABN AMRO
Securities (USA) Inc. (“AASI”), an affiliate of Agent, (ii) purchasing from AASI
any securities in which AASI makes a market, or (iii) refinancing or making
payments of principal, interest or dividends on any securities issued by
Borrower or any Affiliate, and underwritten, privately placed or dealt in by
AASI.

 

(v) Borrower’s common stock shall at all times be listed on the NASDAQ National
Market.

 

(w) Borrower shall not exercise its right and option to purchase the Quota (as
defined in the BRC Sale and Purchase Agreement) or other stock of BRC, pursuant
to Paragraph 8 of the BRC Sale and Purchase Agreement, the Options Deed dated
May 8, 2003 among certain BRC Shareholders and Borrower, or otherwise.

 

15. CONDITIONS PRECEDENT.

 

(a) The obligation of Agent and each Lender to fund the initial Revolving Loan
on the Closing Date, and to co-sign as applicant for the initial Letter of
Credit on the Closing Date, is subject to the satisfaction or waiver on or
before the Closing Date of the following conditions precedent:

 

(i) Agent shall have received each of the agreements, opinions, reports,
approvals, consents, certificates and other documents set forth on the closing
document list attached hereto as Schedule A (the “Closing Document List”).

 

(ii) Since March 31, 2003, no event shall have occurred which has had or could
reasonably be expected to have a Material Adverse Effect, as determined by Agent
in its sole discretion.

 

(iii) Agent shall have received payment in full of all fees and expenses set
forth herein payable to it by Borrower on or before the Closing Date.

 

(iv) Agent shall have determined that immediately after giving effect to: (A)
the making of the initial Loans requested to be made on the Closing Date and (B)
the issuance of the initial Letters of Credit, if any, requested to be made on
the Closing Date and (C) the payment or reimbursement by Borrower of Agent for
all closing costs and expenses incurred in connection with the transactions
contemplated hereby, on a pro forma basis the Excess Availability of Borrower
shall not be less than One Million Dollars ($1,000,000).

 

56

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

(v) Agent shall have received a certificate from Borrower’s chief executive
officer or chief financial officer, pursuant to which such officer shall certify
that in calculating the Excess Availability described in clause (iv) above, the
outstanding trade payables of Borrower were and are current and not past due in
any material respect.

 

(vi) The Obligors shall have executed and delivered to Agent all documents which
Agent determines are reasonably necessary to consummate the transactions
contemplated hereby.

 

(vii) Agent shall have received duly executed agreements establishing the Lock
Box and Blocked Accounts with financial institutions acceptable to Agent for the
collection or servicing of the Accounts and proceeds of the Collateral.

 

(viii) Agent shall have completed Collateral examinations and received
appraisals, the results of which shall be satisfactory in form and substance to
the Agent, of the Accounts, Inventory, General Intangibles, Investment Property
and Equipment of Borrower and all books and records in connection therewith.

 

(ix) Agent shall have received the audited financial statements of Borrower for
the eight month transition period ended December 31, 2002 and the fiscal year
ended April 30, 2002. Agent’s receipt of such financial statements shall be
deemed to have occurred if the same are contained in Borrower’s Annual Reports
on Form 10-K for the transition period ended December 31, 2002.

 

(x) There shall exist no default in any obligations or in compliance with any
applicable legal requirement of Borrower (other than those disclosed to Agent in
writing on or prior to the date hereof).

 

(xi) Agent shall be satisfied with its due diligence review of the business and
financial affairs of Borrower and its management and its pre-closing audit of
Borrower.

 

(xii) Agent shall have received the executed legal opinion of Davis Wright
Tremaine LLP, in form and substance satisfactory to Agent which shall cover such
matters incident to the transactions contemplated by this Agreement, the Notes,
and related agreements as Agent may reasonably require (including, without
limitation, enforceability and perfection issues with respect to the Collateral)
and Borrower hereby authorizes and directs such counsel to deliver such opinions
to Agent and Lenders.

 

(xiii) Agent shall have received landlord, processor or warehouseman agreements
satisfactory to Agent with respect to all premises leased by Borrower or
controlled by any of its processors, suppliers or customers at which books and
records, Inventory and Equipment are located.

 

(xiv) Agent shall have received in form and substance satisfactory to Agent,
certified copies of Borrower’s casualty insurance policies, together with loss
payable endorsements on Agent’s standard form of loss payee endorsement naming
Agent as lender loss

 

57

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

payee, and certified copies of Borrower’s liability insurance policies, together
with endorsements naming Agent as a co-insured.

 

(xv) Each document (including, without limitation, any Uniform Commercial Code
financing statement and filings with the United State Patent and Trademark
Office or any similar state authority) required by this Agreement, any Other
Agreement or under law or reasonably requested by the Agent to be filed,
registered or recorded in order to create, in favor of Agent, a perfected
security interest in or lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received
an acknowledgment copy, or other evidence satisfactory to it, of each such
filing, registration or recordation and satisfactory evidence of the payment of
any necessary fee, tax or expense relating thereto.

 

(xvi) (A) No litigation, investigation or proceeding before or by any arbitrator
or governmental body shall be continuing or threatened against Borrower or
against the officers or directors of Borrower: (I) in connection with this
Agreement or the Other Agreements or any of the Transactions and which, in the
reasonable opinion of Agent, is deemed material or (II) which if adversely
determined, could, in the reasonable opinion of Agent, have a Material Adverse
Effect on Borrower; and (Bi) no injunction, writ, restraining order or other
order of any nature materially adverse to Borrower or the conduct of its
business or inconsistent with the due consummation of the transactions
contemplated by this Agreement or the Other Agreements shall have been issued by
any governmental body.

 

(xvii) Agent shall have received all environmental studies and reports prepared
by independent environmental engineering firms regarding the Real Property, the
results of which shall be satisfactory to Agent in all respects.

 

(xviii) Agent shall have reviewed all material contracts of Borrower including,
without limitation, leases, union contracts, labor contracts, vendor supply
contracts, license agreements and distributorship agreements and such contracts
and agreements shall be satisfactory in all respects to Agent.

 

(xix) Borrower shall be in compliance with all applicable laws and regulations.

 

(xx) No Default or Event of Default shall exist.

 

(xxi) All corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to Agent, Lenders and
their counsel.

 

(xxii) Agent shall have received and reviewed the Pro Forma Balance Sheet and
monthly projections of the Borrower through December 31, 2003, , together with
financial projections for the second and third Contract Year, calculated on an
annual basis, and such balance sheet and projections shall be in form and
substance satisfactory to the Agent.

 

58

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

(xxiii) The Subordinated Lender shall have invested, in cash, not less than
$17,250,000 in Borrower, in the form of a capital contribution (if a capital
contribution is made, the capital structure of Borrower must be satisfactory to
Lender) and/or a subordinated loan covered by and subordinated pursuant to the
Subordination Agreement; Agent shall have received copies of the executed
Subordinated Debt Documents, each of which shall be in form and substance
satisfactory to Agent; Agent shall have entered into the Subordination Agreement
with the Subordinated Lender; and Agent shall have received satisfactory
evidence that Borrower received the cash proceeds under the Subordinated Debt
Documents and/or equity contribution.

 

(xxiv) Agent shall have received approval from its credit committee for all of
the Transactions.

 

(xxv) Lender shall have received evidence satisfactory to Lender that the entire
$7,000,000 Deferred Portion of the Purchase Price (as such term is defined in
the BRC Sale and Purchase Agreement) due the BRC Shareholders relating to the
BRC Transaction with respect to Borrower’s acquisition of BRC under the BRC
Agreements has been paid by wire transfer of immediately available funds to an
account designated by the BRC Shareholders.

 

(xxvi) Borrower shall have furnished to Lender copies of Borrower’s agreements
with UPS Oasis Supply and the terms thereof shall be satisfactory to Lender and
its counsel.

 

(xxvii) Agent shall have received evidence satisfactory to Agent that certain
Indebtedness of Borrower to certain lenders relating to payments made to the BRC
Shareholders has been paid in full, and Olywood LLC and Jon Adams (collectively,
the “Bridge Loan Lenders”) shall have delivered to the Agent, copies of all
promissory notes, warrant agreements and other agreements evidencing or relating
to the indebtedness and obligations of Borrower to the Bridge Loan Lenders (the
“Bridge Loan Subordinated Debt Documents”), and each of the Bridge Loan Lenders
and the Subordinated Lender hall have executed and delivered to and with Agent,
subordination agreements in form and substance satisfactory to Agent
(collectively, the “Bridge Loan Subordination Agreements”), pursuant to which
the due payment and performance of all indebtedness, liabilities and obligations
of Borrower to the Bridge Loan Lenders shall be subordinated to the payment and
satisfaction in full of all of the Liabilities.

 

(b) The obligation of Agent or any Lender to make any requested Loan, or to
issue or cause the issuance of any requested Letter of Credit, whether on or at
any time after the Closing Date, is subject to the satisfaction of the
conditions precedent set forth below. Each such request shall constitute a
representation and warranty that such conditions are satisfied:

 

(i) All representations and warranties contained in this Agreement and the Other
Agreements shall be true and correct on and as of the date of such request, as
if then made, other than representations and warranties that relate solely to an
earlier date.

 

(ii) No Default or Event of Default shall have occurred, or would result from
the making of the requested Loan or the issuance of the requested Letter of
Credit, which has not been waived in writing by Agent.

 

59

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

(iii) Since December 31, 2002, no event has occurred which has had or could
reasonably be expected to have a Material Adverse Effect.

 

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

 

(a) the failure of any Obligor to pay when due, declared due, or demanded by
Agent in accordance with the terms hereof, any of the Liabilities;

 

(b) the failure of any Obligor to perform, keep or observe any of the covenants,
conditions, promises, agreements or obligations of such Obligor under this
Agreement or any of the Other Agreements;

 

(c) (i) the making or furnishing by any Obligor to Agent or any Lender of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and Agent or such
Lender, which is untrue or misleading in any material respect, or (ii) the
failure of any Obligor to perform, keep or observe any of the covenants,
conditions, promises, agreements of such Obligor under any other agreement with
any Person if such failure has or is reasonably likely to have a Material
Adverse Effect;

 

(d) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien or other encumbrance upon any of the Collateral, other than the
Permitted Liens, or the making or any attempt to make any levy, seizure or
attachment thereof, or any material portion of Borrower’s or any of its
Subsidiaries’ assets is attached, seized, subjected to a writ or distress
warrant, or by any reason of an act or omission to act by Borrower comes into
the possession of any third Person;

 

(e) the commencement of any proceedings: (i) in bankruptcy by or against any
Obligor, (ii) for the liquidation or reorganization of any Obligor, (iii)
alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or (iv) for the readjustment or arrangement of any Obligor’s debts,
whether under the United States Bankruptcy Code or under any other law, whether
state or federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary and Borrower has not consented to an order for
relief in connection therewith, such action shall not constitute an Event of
Default unless such proceedings are not dismissed within ninety (90) days after
the commencement of such proceedings;

 

(f) the appointment of a receiver or trustee for any Obligor, for any of the
Collateral or for any substantial part of any Obligor’s assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor; provided, however,
that if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within thirty
(30) days after the commencement of such proceedings;

 

60

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

(g) the entry of any judgment or order in excess of $50,000 against any Obligor
which remains unsatisfied or undischarged and in effect for thirty (30) days
after such entry without a stay of enforcement or execution;

 

(h) the occurrence of a default or event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to Agent pursuant to which such Person has guaranteed to Agent for
its benefit and for the ratable benefit of Lenders the payment of all or any of
the Liabilities or has granted Agent for its benefit and for the ratable benefit
of Lenders a security interest in or lien upon some or all of such Person’s real
and/or personal property to secure the payment of all or any of the Liabilities;

 

(i) the occurrence of a default or event of default under any other agreement or
instrument evidencing Indebtedness for borrowed money in excess of $50,000
executed or delivered by Borrower or pursuant to which agreement or instrument
Borrower or its properties is or may be bound, including, without limitation,
the Subordinated Debt Documents;

 

(j) the occurrence of any event or condition which has or is reasonably likely
to have a Material Adverse Effect;

 

(k) the occurrence of a Change of Control;

 

(l) if any Reportable Event shall have occurred or any Benefit Plan shall be
terminated within the meaning of Title IV of ERISA, or a trustee shall be
appointed by the appropriate United States District Court to administer any
Benefit Plan, the PBGC shall institute proceedings to terminate any Benefit
Plan, or there shall be a withdrawal from any Multiemployer Plan, and there
shall be a Material Adverse Effect in the case of any event described in this
paragraph 16(l);

 

(m) the occurrence of any event specified in Borrower’s Organizational Documents
that may result in Borrower’s dissolution or liquidation or Borrower shall file
a certificate of dissolution or shall be liquidated, dissolved or wound-up or
shall commence or have commenced against it any action or proceeding for
dissolution, winding up or liquidation; or

 

(n) the operations of Borrower’s manufacturing facility are interrupted at any
time for more than five (5) consecutive Business Days, unless Borrower shall:
(i) be entitled to receive for such period of interruption, proceeds of business
interruption insurance sufficient to assure that its per diem cash needs during
such period is at least equal to its average per diem cash needs for the
consecutive three month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in clause
(i) preceding not later than thirty (30) days following the initial date of any
such interruption; provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this paragraph 16(n), an Event of Default shall be
deemed to have occurred if Borrower shall be receiving the proceeds of business
interruption insurance for a period of thirty (30) consecutive days;

 

(o) any amount is paid pursuant to Section 11.3 of the Securities Purchase
Agreement;

 

61

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

(p) Borrower or any of its Subsidiaries makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to the
payment of the Liabilities, except for payments permitted to be made under the
Subordination Agreement (other than amounts paid pursuant to Section 11.3 of the
Securities Purchase Agreement the payment of which is an Event of Default under
subsection 16(o) above);

 

(q) this Agreement or any of the Other Agreements that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected first
priority Lien on and security interest in any or all of the Collateral covered
hereby or thereby;

 

(r) there is a default by Borrower or any of its Subsidiaries under any material
agreement to which it is a party; or

 

(s) any provision of this Agreement or any of the Other Agreements shall at any
time for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by Borrower, or a proceeding is
commenced by Borrower or by any governmental authority having jurisdiction over
Borrower, seeking to establish the invalidity or unenforceability thereof, or
Borrower shall deny that Borrower has liability or obligation purported to be
created under this Agreement or the Other Agreements.

 

Notwithstanding anything contained in this paragraph 16 or contained in any
other provision of this Agreement or the Other Agreements to the contrary, in
the event of the institution of any proceeding or appointment described in
paragraph 16(e) or paragraph 16(f) hereof against Borrower, Agent and Lenders
shall not be obligated to make advances to Borrower during the thirty (30) day
grace period provided in paragraph 16(e) or paragraph 16(f).

 

17. REMEDIES UPON AN EVENT OF DEFAULT.

 

(a) Upon the occurrence of an Event of Default described in paragraph 16(e) or
paragraph 16 (f) hereof, all of the Liabilities shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all of the Liabilities may, at the
option of Agent at the direction of Required Lenders, and without demand, notice
or legal process of any kind, be declared, and immediately shall become, due and
payable.

 

(b) Upon the occurrence of an Event of Default, Agent may exercise from time to
time any rights and remedies available to it under the UCC and under any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any of the Other Agreements and all of
Agent’s rights and remedies shall be cumulative and non-exclusive to the extent
permitted by law. In particular, but not by way of limitation of the foregoing,
Agent may, without notice, demand or legal process of any kind, take possession
of any or all of the Collateral (in addition to Collateral of which it already
has possession), wherever it may be found, and for that purpose may pursue the
same wherever it may be found, and may enter into any of Borrower’s premises
where any of the Collateral may be, and search for, take possession of, remove,
keep and store any of the Collateral until the same shall be sold or otherwise
disposed of, and Agent shall have the right to store the same at any of
Borrower’s premises without cost to Agent. At Agent’s request, Borrower shall,
at Borrower’s

 

62

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

expense, assemble the Collateral and make it available to Agent at one or more
places to be designated by Agent and reasonably convenient to Agent and
Borrower. Borrower recognizes that if Borrower fails to perform, observe or
discharge any of its Liabilities under this Agreement or the Other Agreements,
no remedy at law will provide adequate relief to Agent or Lenders, and Borrower
agrees that Agent and Lenders shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages. Any notification of intended disposition of any of the Collateral
required by law will be deemed reasonably and properly given if given at least
ten (10) calendar days before such disposition. Any proceeds of any disposition
by Agent of any of the Collateral may be applied by Agent to the payment of
expenses in connection with the Collateral including, without limitation, legal
expenses and reasonable attorneys’ fees (both in-house and outside counsel) and
any balance of such proceeds may be applied by Agent toward the payment of such
of the Liabilities, and in such order of application, as Agent may from time to
time elect. No delay or omission of the Agent or any Lender to exercise any
right or remedy hereunder shall impair any such right or operate as a waiver
thereof. No single or partial exercise by the Agent or any Lender of any right
or remedy shall preclude any other or further exercise thereof, or preclude any
other right or remedy.

 

(c) The Agent shall have no obligation to marshal any Collateral or to seek
recourse against or satisfaction of any of the Liabilities from one source
before seeking recourse against or satisfaction from another source. The net
cash proceeds resulting from the Agent’s exercise of any of the foregoing rights
to liquidate all or substantially all of the Collateral, including any and all
collections (after deducting all of the Agent’s and Lender’s expenses related
thereto), shall be applied by the Agent to such of the Liabilities and in such
order as the Agent shall elect in its sole and absolute discretion, whether due
or to become due. Borrower shall remain liable to the Agent and the Lenders for
any deficiencies. All of the Agent’s and the Lenders’ remedies under the Other
Agreements shall be cumulative, may be exercised simultaneously against any
Collateral and any Obligor or in such order and with respect to such Collateral
or such Obligor as the Agent may deem desirable, and are not intended to be
exhaustive.

 

(d) To the extent permitted by law and not otherwise prohibited by contracts
with third parties, each Borrower hereby grants to the Agent, for use by the
Lenders and the Agent solely in connection with the preservation or sale of any
Collateral, a license or other right to use, without charge by any Obligor or
Subsidiary thereof, all computer software, copyrights, labels, trade secrets,
service marks, patents, advertising materials and other rights, assets and
materials used by Borrower and needed in connection with the preservation or
sale of such Collateral.

 

18. INDEMNIFICATION. Borrower agrees to defend (with counsel reasonably
satisfactory to Agent), protect, indemnify and hold harmless Agent and each
Lender, each affiliate or subsidiary of Agent or such Lender, and each of their
respective officers, directors, employees, attorneys and agents (each an
“Indemnified Party”) from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each Indemnified Party in
connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto and any
fees associated with a broker or similar Person),

 

63

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

which may be imposed on, incurred by, or asserted against, any Indemnified Party
(whether direct, indirect or consequential and whether based on any federal,
state or local laws or regulations including, without limitation, securities,
Environmental Laws and commercial laws and regulations, under common law or in
equity, or based on contract or otherwise) in any manner relating to or arising
out of this Agreement or any Other Agreement, or any act, event or transaction
related or attendant thereto, the making and the management of the Loans or any
Letters of Credit or the use or intended use of the proceeds of the Loans or any
Letters of Credit; provided, however, that Borrower shall not have any
obligation hereunder to any Indemnified Party with respect to matters caused by
or resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall, together with interest
thereon at the highest rate then applicable to Revolving Loans hereunder from
the date incurred by each Indemnified Party until paid by Borrower, be added to
the Liabilities of Borrower and be secured by the Collateral. The provisions of
this paragraph 18 shall survive the satisfaction and payment of the other
Liabilities and the termination of this Agreement.

 

19. REGARDING AGENT.

 

(a) Appointment. Each Lender hereby designates LaSalle to act as Agent for such
Lender under this Agreement and the Other Agreements. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Agreements and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in
subparagraphs 5(d), 5(e), 5(g) and 5(h)), charges and collections (without
giving effect to any collection days) received pursuant to this Agreement, for
the ratable benefit of Lenders. Agent may perform any of its duties hereunder by
or through its agents or employees. As to any matters not expressly provided for
by this Agreement, Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
provided, however, that Agent shall not be required to take any action which
exposes Agent to liability or which is contrary to this Agreement or the Other
Agreements or applicable law unless Agent is furnished with an indemnification
reasonably satisfactory to Agent with respect thereto.

 

(b) Nature of Duties. Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and the Other Agreements. Neither
Agent nor any of its officers, directors, employees or agents shall be: (i)
liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any Other Agreement or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement

 

64

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

or any Other Agreement or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any Other Agreement or for
any failure of Borrower to perform its obligations hereunder. Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any Other Agreement, or to inspect the properties, books
or records of Borrower. The duties of Agent as respects the Loans to Borrower
shall be mechanical and administrative in nature; Agent shall not have by reason
of this Agreement a fiduciary relationship in respect of any Lender; and nothing
in this Agreement, expressed or implied, is intended to or shall be so construed
as to impose upon Agent any obligations in respect of this Agreement except as
expressly set forth herein.

 

(c) Lack of Reliance on Agent and Resignation.

 

(i) Independently and without reliance upon Agent or any other Lender, each
Lender has made and shall continue to make: (A) its own independent
investigation of the financial condition and affairs of Borrower in connection
with the making and the continuance of the Loans hereunder and the taking or not
taking of any action in connection herewith, and (B) its own appraisal of the
creditworthiness of Borrower. Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before making of the Loans or at any time or times thereafter except as shall be
provided by Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any Other Agreement, or of the financial condition of Borrower, or
be required to make any inquiry concerning either the performance or observance
of any of the terms, provisions or conditions of this Agreement, the Notes, the
Other Agreements or the financial condition of Borrower, or the existence of any
Event of Default or any Default.

 

(ii) Agent may resign on sixty (60) days’ written notice to each of Lenders and
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent reasonably satisfactory to Borrower.

 

(iii) Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent’s resignation as Agent, the provisions of this paragraph
19, shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.

 

(d) Certain Rights of Agent. If Agent shall request instructions from Lenders
with respect to any act or action (including failure to act) in connection with
this Agreement or any Other Agreement, Agent shall be entitled to refrain from
such act or taking such action unless and until Agent shall have received
instructions from the Required Lenders; and Agent shall not incur liability to
any Person by reason of so refraining. Without limiting the foregoing,

 

65

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

Lenders shall not have any right of action whatsoever against Agent as a result
of its acting or refraining from acting hereunder in accordance with the
instructions of the Required Lenders.

 

(e) Reliance. Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, order or other document or
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or entity, and, with respect to all
legal matters pertaining to this Agreement and the Other Agreements and its
duties hereunder, upon advice of counsel selected by it. Agent may employ agents
and attorneys-in-fact and shall not be liable for the default or misconduct of
any such agents or attorneys-in-fact selected by Agent with reasonable care.

 

(f) Notice of Default. Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default hereunder or under the Other
Agreements, unless Agent has received notice from a Lender or Borrower referring
to this Agreement or the Other Agreements, describing such Default or Event of
Default and stating that such notice is a “notice of default”. In the event that
Agent receives such a notice, Agent shall give notice thereof to Lenders. Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders; provided, that, unless and until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
Lenders.

 

(g) Indemnification. To the extent Agent is not reimbursed and indemnified by
Borrower, each Lender will reimburse and indemnify Agent in proportion to its
respective portion of the Loans (or, if no Loans are outstanding, according to
its Commitment Percentage), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against Agent in performing its duties hereunder, or
in any way relating to or arising out of this Agreement or any Other Agreement;
provided that, Lenders shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent’s gross (not mere) negligence or
willful misconduct.

 

(h) Agent in its Individual Capacity. With respect to the obligation of Agent to
lend under this Agreement, the Loans made by it shall have the same rights and
powers hereunder as any other Lender and as if it were not performing the duties
as Agent specified herein; and the term “Lender” or any similar term shall,
unless the context clearly otherwise indicates, include Agent in its individual
capacity as a Lender. Agent may engage in business with Borrower as if it were
not performing the duties specified herein, and may accept fees and other
consideration from Borrower for services in connection with this Agreement or
otherwise without having to account for the same to Lenders.

 

(i) Delivery of Documents. To the extent Agent receives documents and written
information from Borrower pursuant to paragraphs 11(c), (d), (e), (f) or (g) of
this Agreement, Agent will promptly furnish such documents and information to
Lenders.

 

66

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

(j) Borrower’s Undertaking to Agent. Without prejudice to its obligations to the
Lenders under the other provisions of this Agreement, Borrower hereby undertakes
with Agent to pay to Agent from time to time on demand all amounts from time to
time due and payable by it for the account of Agent or the Lenders or any of
them pursuant to this Agreement to the extent not already paid. Any payment made
pursuant to any such demand shall pro tanto satisfy Borrower’s obligations to
make payments for the account of the Lenders or the relevant one or more of them
pursuant to this Agreement.

 

20. NOTICES. All written notices and other written communications with respect
to this Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered by reputable courier or in person to: LaSalle Business
Credit, LLC, 565 Fifth Avenue, New York, New York 10017, Attention: District
Credit Manager,

 

with a copy to:

 

Jenkens & Gilchrist Parker Chapin LLP

405 Lexington Avenue

New York, New York 10174

Attention: Michael A. Leichtling, Esq.

Telephone: (212) 704-6257

Facsimile: (212) 704-6288

 

and

 

LaSalle Business Credit, LLC

135 South LaSalle Street

Suite 425

Chicago, Illinois 60603-4105

Attention: Michael Carsella, Esq.

Telephone: (312) 904-7805

Facsimile: (312) 904-7425

 

and in the case of Borrower shall be sent to Borrower at its principal place of
business as set forth on the first page of this Agreement, and in the case of
any Lender shall be sent to such Lender at its address set forth on the
signature page hereto or in a Commitment Transfer Supplement or at such other
address as may be designated by any party from time to time in a notice
complying as to delivery with the terms of this paragraph to the other parties.
Any notice, if mailed or delivered via reputable courier or by hand delivery and
properly addressed with postage or delivery costs prepaid, shall be deemed given
when received; any notice, if transmitted by telecopy, shall be deemed given
when transmitted, provided receipt is confirmed.

 

21. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and the Other
Agreements are submitted by Borrower to Agent for Agent’s acceptance or
rejection at Agent’s place of business located in New York, New York, as an
offer by Borrower to borrow monies from Agent and Lenders now and from time to
time hereafter, and shall not be binding upon Agent or any Lender or become
effective until accepted by Agent on behalf of Lenders, in writing, at said
place of business. If so accepted by Agent on behalf of Lenders, this

 

67

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

Agreement and the Other Agreements shall be deemed to have been made at said
place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS,
INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER
CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL,
WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION.
If any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.

 

22. FORUM SELECTION AND SERVICE OF PROCESS. To induce Agent on behalf of Lenders
to accept this Agreement, Borrower irrevocably agrees that, subject to Agent’s
sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR
RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER
AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
THE CITY OF NEW YORK, STATE OF NEW YORK. BORROWER HEREBY CONSENTS AND SUBMITS TO
THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY
AND STATE. Borrower further irrevocably consents to the service of any
complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to it by hand or by mail in the manner provided
for in paragraph 20 hereof. Borrower hereby expressly and irrevocably waives any
claim or defense in any such action or proceeding based on any alleged lack of
personal jurisdiction, improper venue or forum non conveniens or any similar
basis. Borrower shall not be entitled in any such action or proceeding to assert
any defense given or allowed under the laws of any state other than the State of
New York unless such defense is also given or allowed by the laws of the State
of New York. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE
THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY AGENT OR ANY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH. Nothing in this paragraph 22 shall affect or
impair in any manner or to any extent the right of Lender to comprise legal
proceedings or otherwise proceed against Borrower in any jurisdiction or to
serve process in any manner provided by law.

 

23. MODIFICATION AND BENEFIT OF AGREEMENT.

 

(a) This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower, Agent and Required
Lenders as provided in subparagraph (b) below. Borrower may not sell, assign or
transfer this Agreement, or the Other Agreements or any portion thereof
including, without limitation, Borrower’s rights, titles, interest, remedies,
powers or duties thereunder.

 

(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrower may, subject to the provisions of this paragraph 23(b),
from time to time enter into written supplemental agreements to this Agreement,
the Notes or the Other

 

68

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

Agreements executed by Borrower, for the purpose of adding or deleting any
provisions or otherwise changing, varying or waiving in any manner the rights of
Lenders, Agent or Borrower thereunder or the conditions, provisions or terms
thereof of waiving any Event of Default thereunder, but only to the extent
specified in such written agreements; provided, however, that no such
supplemental agreement shall, without the consent of all the Lenders and with
respect to clause (v) below, the consent of Agent:

 

(i) increase the Commitment Percentage of any Lender.

 

(ii) extend the maturity of any Note or the due date for any amount payable
hereunder, or increase any of the Advance Rates, or decrease the rate of
interest or reduce any principal payment due on the Loans or fee payable by
Borrower to Lenders pursuant to this Agreement (it being understood and agreed,
however, that any vote to rescind any acceleration of the Liabilities made
pursuant to paragraph 17 hereof shall only require the vote of the Required
Lenders).

 

(iii) alter the definition of the term Required Lenders or alter, amend or
modify this paragraph 23(b).

 

(iv) release any Collateral during any calendar year having an aggregate value
in excess of $50,000, other than Collateral which is permitted to be sold or
otherwise disposed of pursuant to paragraph 4(a) hereof.

 

(v) change the rights and duties of Agent.

 

(vi) permit any Revolving Loan to be made if after giving effect thereto the
total of Revolving Loans outstanding hereunder would exceed one hundred and ten
percent (110%) of the Borrowing Base for more than sixty (60) consecutive
Business Days.

 

Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon Borrower, the Lenders and Agent and all future holders of
the Liabilities. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.

 

Notwithstanding the foregoing, Agent may in its sole discretion and without the
consent of the Required Lenders, voluntarily permit the outstanding Revolving
Loans at any time to exceed the Borrowing Base by up to one hundred and ten
percent (110%) of the Borrowing Base for up to sixty (60) consecutive Business
Days. All such Loans made in connection with the foregoing sentence shall be
Revolving Loans and each Lender shall be required to fund such Revolving Loans
in accordance with the terms of this Agreement. For purposes of the preceding
sentence, the discretion granted to Agent hereunder shall not preclude
involuntary overadvances that may result from time to time due to the fact that
the Borrowing Base was unintentionally exceeded for any reason, including, but
not limited to, Collateral previously deemed to be either “Eligible Accounts”,
“Eligible Inventory” or “Eligible L/C Inventory”, as applicable, becomes
ineligible, collections of Accounts applied to reduce outstanding Revolving
Loans are thereafter

 

69

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

returned for insufficient funds or overadvances are made to protect or preserve
the Collateral. In the event Agent involuntarily permits the outstanding
Revolving Loans to exceed the Borrowing Base by more than ten percent (10%),
Agent shall decrease such excess in as expeditious a manner as practicable under
the circumstances and not inconsistent with the reason for such excess.
Revolving Loans made after Agent has determined the existence of involuntary
overadvances shall be deemed to be involuntary overadvances and shall be
decreased in accordance with the preceding sentence. Any voluntary or
involuntary overadvances permitted to be outstanding under this paragraph shall
be paid by Borrower immediately following demand therefor by Agent.

 

In the event that Agent requests the consent of a Lender pursuant to this
paragraph 23 and such consent is denied, then Agent may, at its option, require
such Lender to assign its interest in the Loans to Agent or to a Designated
Lender for a price equal to the then outstanding principal amount thereof plus
accrued and unpaid interest and fees (including prepayment fees, if any) due
such Lender, which interest and fees shall be paid upon consummation of such
assignment. In the event Agent elects to require any Lender to assign its
interest to Agent or to the Designated Lender, Agent will so notify such Lender
in writing within forty five (45) days following such Lender’s denial, and such
Lender will assign its interest to Agent or the Designated Lender, as
applicable, no later than five (5) days following receipt of such notice
pursuant to a Commitment Transfer Supplement executed by such Lender, Agent or
the Designated Lender, as appropriate, and Agent.

 

24. PARTICIPATIONS AND ASSIGNMENT.

 

(a) Borrower acknowledges that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Loans to other financial institutions (each such
transferee or purchaser of a participating interest, a “Transferee”). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Loans held by it or other
Liabilities payable hereunder as fully as if such Transferee were the direct
holder thereof, provided, however, that Borrower shall not be required to pay to
any Transferee more than the amount which it would have been required to pay to
the Lender which granted an interest in its Loans or other Liabilities payable
hereunder to such Transferee had such Lender retained such interest in the Loans
hereunder or other Liabilities payable hereunder and in no event shall Borrower
be required to pay any such amount arising from the same circumstances and with
respect to the same Loans or other Liabilities payable hereunder to both such
Lender and such Transferee. Borrower hereby grants to any Transferee a
continuing security interest in any deposits, moneys or other property actually
or constructively held by such Transferee as security for the Transferee’s
interest in the Loans.

 

(b) Any Lender may with the consent of Agent which shall not be unreasonably
withheld or delayed sell, assign or transfer all or any part of its rights under
this Agreement and the Other Agreements to one or more additional banks or
financial institutions and one or more additional banks or financial
institutions may commit to make Loans hereunder (each a “Purchasing Lender”), in
minimum amounts of not less than $2,000,000, pursuant to a commitment transfer
supplement in form and substance satisfactory to Agent, such transfer or Lender
and the Purchasing Lender (a “Commitment Transfer Supplement”), executed by such

 

70

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

Purchasing Lender, the transferor Lender and Agent, and delivered to Agent for
recording. Upon such execution, delivery, acceptance and recording, from and
after the transfer effective date determined pursuant to such Commitment
Transfer Supplement: (i) a Purchasing Lender thereunder shall be a party hereto
and, to the extent provided in such Commitment Transfer Supplement, have the
rights and obligations of a Lender hereunder with a Commitment Percentage as set
forth therein, and (ii) the transferor Lender thereunder shall, to the extent
provided in such Commitment Transfer Supplement, be released from its
obligations under this Agreement, the Commitment Transfer Supplement creating a
novation for that purpose. Such Commitment Transfer Supplement shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the resulting adjustment of
the Commitment Percentages arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of such transferor Lender
under this Agreement and the Other Agreements. Borrower hereby consents to the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Agreements. Borrower shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.

 

(c) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the “Register”) for the recordation
of the names and addresses of the Loans owing to each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of manifest
error, and Borrower, Agent and Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loans recorded therein for the
purposes of this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Agent shall receive a fee in the amount of $3,500
payable by the Purchasing Lender upon the transfer or assignment to such
Purchasing Lender.

 

(d) Borrower authorizes each Lender to disclose to any Transferee or Purchasing
Lender and any prospective Transferee or Purchasing Lender any and all financial
information in such Lender’s possession concerning Borrower which has been
delivered to such Lender by or on behalf of Borrower pursuant to this Agreement
or in connection with such Lender’s credit evaluation of Borrower.

 

25. HEADINGS OF SUBDIVISIONS.

 

The headings of subdivisions in this Agreement are for convenience of reference
only, and shall not govern the interpretation of any of the provisions of this
Agreement.

 

26. POWER OF ATTORNEY.

 

Borrower acknowledges and agrees that its appointment of Agent as its
attorney-in-fact for the purposes specified in this Agreement is an appointment
coupled with an interest and shall be irrevocable until all of the Liabilities
are paid in full and this Agreement is terminated.

 

71

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

27. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.

 

(a) AGENT, EACH LENDER AND BORROWER HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT OF BORROWER, AGENT OR LENDERS OR WHICH, IN ANY WAY,
DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP AMONG
BORROWER, AGENT AND/OR LENDERS. IN NO EVENT SHALL AGENT OR ANY LENDER BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.

 

(b) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO
THE EXERCISE BY AGENT OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF BORROWER
WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL
WITHOUT PRIOR NOTICE OR HEARING.

 

(c) Borrower hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.

 

(d) Agent’s or any Lender’s failure, at any time or times hereafter, to require
strict performance by Borrower of any provision of this Agreement or any of the
Other Agreements shall not waive, affect or diminish any right of Agent or any
Lender, thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Agent or any Lender, of an Event of Default under this
Agreement or any default under any of the Other Agreements shall not suspend,
waive or affect any other Event of Default under this Agreement or any other
default under any of the Other Agreements, whether the same is prior or
subsequent thereto and whether of the same or of a different kind or character.
No delay on the part of Agent or any Lender in the exercise of any right or
remedy under this Agreement or any Other Agreement shall preclude other or
further exercise thereof or the exercise of any right or remedy. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or any of the Other Agreements and no Event of
Default under this Agreement or default under any of the Other Agreements shall
be deemed to have been suspended or waived by Agent or any Lender unless such
suspension or waiver is in writing in compliance with Paragraph 23(b) hereof.

 

(e) Borrower has furnished and will furnish to Agent certain information
concerning Borrower which Borrower has advised is non-public, proprietary or
confidential in nature (“Confidential Information”). Agent confirms to the
Borrower that it is Agent’s policy and practice to maintain in confidence all
Confidential Information which is provided to it under agreements providing for
the extension of credit and which is identified to it as such, and that it will
protect the confidentiality of Confidential Information submitted to it with
respect to Borrower under this Agreement, commensurate with its efforts to
maintain the confidentiality of its own Confidential Information, provided,
however, that: (i) nothing contained herein shall prevent Agent from disclosing
Confidential Information: (A) to its affiliates and their respective directors,
officers, and employees and to any legal counsel, auditors, appraisers,
consultants or

 

72

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

other persons retained by it or its affiliates as professional advisors, on the
condition that such information not be further disclosed except in compliance
with this paragraph 27(e); (B) under color of legal authority, including,
without limitation, to any regulatory authority having jurisdiction over it or
its operations or to, or under the authority of, any court deemed by it to be of
competent jurisdiction; (C) to any actual or potential Transferee or Purchasing
Lender in Agent’s rights and obligations under this Agreement to the extent such
actual or potential Transferee or Purchasing Lender has agreed to maintain such
information in confidence on the basis set forth in this paragraph 27(e); and
(D) as necessary in connection with the exercise of its remedies under this
Agreement or any of the Other Agreements; (ii) the terms of this paragraph 27(e)
shall be inapplicable to any information furnished to it which is in possession
prior to the delivery to it of such information by Borrower or any other
authorized Person, or otherwise has been obtained by it on a non-confidential
basis, or which was or becomes available to the public or otherwise part of the
public domain (other than as a result of Agent’s failure or any prospective
participant’s or assignee’s failure to abide hereby), or which was not
non-public, proprietary or confidential when Borrower or any other authorized
Person delivered it to Agent; and (iii) the determination by Agent as to the
application of any of the circumstances described in the foregoing clauses (i)
and (ii) will be conclusive and binding if made in good faith.

 

(f) Notwithstanding subparagraph (e) above, Borrower consents to Agent
publishing a tombstone or similar advertising material relating to the financing
transaction contemplated by this Agreement.

 

73

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

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above set forth.

 

LASALLE BUSINESS CREDIT, LLC,

as a Lender and as Agent

By:

 

 

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

   

Name:

Title:

Commitment Percentage: 100%

IMPCO TECHNOLOGIES, INC.,

as Borrower

By:

 

 

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

   

Name:

Title:

 

74

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

LIST OF EXHIBITS AND SCHEDULES

 

1.

   Exhibit A    Business and Collateral Locations

2.

   Exhibit B    Customer Lists

3.

   Exhibit C    Borrowing Base Certificate

4.

   Exhibit D    Officer’s Certificate

5.

   Exhibit 2(a)    Revolving Note

6.

   Exhibit 13(a)(1)    Cash Flow Projections – First Contract Year

7.

   Exhibit 13(a)(2)    Cash Flow Projections – Second and Third Contract Years

8.

   Exhibit 13(d)    Locations Where Goods are Used

9.

   Schedule 1(a)    Permitted Liens

10.

   Schedule 1(b)    Real Property

11.

   Schedule 13(a)(3)    Availability Schedule

12.

   Schedule 13(q)    Permitted Indebtedness

13.

   Schedule 13(s)    Parents, Subsidiaries, Affiliates or Divisions

14.

   Schedule 13(w)    Intellectual Property

15.

   Schedule 13(z)    Benefit Plans

16.

   Schedule 13(ee)    Environmental and OSHA matters

17.

   Schedule 13(ff)    Labor Disputes

18.

   Schedule A    Closing Document List

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

EXHIBIT A - BUSINESS AND COLLATERAL LOCATIONS

 

1. Borrower’s business locations (please indicate which location is the
principal place of business and at which locations originals and all copies of
Borrower’s books, records and accounts are kept):

 

2. Other locations of Collateral owned by Borrower (including, without
limitation, warehouse locations, processing locations, consignment locations)
and all post office boxes of Borrower. Please indicate the relationship of such
location to Borrower (i.e. public warehouse, processor, etc.).

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

EXHIBIT B - CUSTOMER LISTS

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

EXHIBIT C - BORROWING BASE CERTIFICATE

 

See Attached.

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

EXHIBIT D - OFFICER’S CERTIFICATE

 

THIS CERTIFICATE is submitted pursuant to paragraph 11 of the Loan and Security
Agreement dated as of July     , 2003 (as amended, modified, restated or
supplemented from time to time, the “Loan Agreement”) among LaSalle Business
Credit, LLC (“LaSalle”), the various other financial institutions named therein
or which hereafter become a party thereto (together with LaSalle, collectively,
the “Lenders”), LaSalle as agent for Lenders (in such capacity, “Agent”), and
IMPCO Technologies, Inc. (“Borrower”).

 

The undersigned hereby certifies to Agent or Lenders that as of the date of this
Agreement:

 

1. The undersigned is the                      of the Borrower.

 

2. There exists no Default or Event of Default, (as such terms are defined in
the Loan Agreement), or, if such Default or Event of Default exists, a writing
attached hereto specifies the nature thereof, the period of existence thereof
and the action that Borrower has taken or proposes to take with respect thereto.

 

3. No Material Adverse Effect (as such term is defined in the Loan Agreement)
has occurred since                     , or, if a Material Adverse Effect has
occurred, a writing attached hereto specifies the nature thereof and the action
that Borrower has taken or proposes to take with respect thereto.

 

4. All insurance premiums due as of the date hereof have been paid.

 

5. All taxes due as of the date hereof have been paid or, for those taxes which
have not been paid, a writing attached hereto describes the nature and amount of
such taxes, and sets forth Borrower’s rationale for not paying such taxes and
the action that Borrower has taken or proposes to take with respect thereto.

 

6. To the best of the undersigned’s knowledge, after appropriate inquiry, except
as previously disclosed to Agent in writing, no litigation, investigation or
proceeding, or injunction writ or restraining order is pending or threatened
against the Borrower or, if any litigation, investigation or proceeding, or
injunction, writ or restraining order is pending or threatened against the
Borrower, a writing attached hereto specifies the nature thereof and the action
that Borrower has taken or proposes to take with respect thereto.

 

7. Borrower is in compliance with the representations, warranties and covenants
in the Loan Agreement, or, if Borrower is not in compliance with any
representations, warranties or covenants in the Loan Agreement, a writing
attached hereto specifies the nature thereof, the period of existence thereof
and the action that Borrower has taken or proposes to take with respect thereto.

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

8. Attached hereto is a true and correct calculation of the financial covenants
contained in paragraph 14(p) of the Loan Agreement.

 

 

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

Name:

Title:

 

80

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

EXHIBIT 2(a) - REVOLVING NOTE

 

See Attached.

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

EXHIBIT 13(a)(1) - CASH FLOW PROJECTIONS - FIRST CONTRACT YEAR

 

See Attached.

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

EXHIBIT 13(a)(2) - CASH FLOW PROJECTIONS -

 

SECOND AND THIRD CONTRACT YEARS

 

See Attached.

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

EXHIBIT 13(d) - LOCATIONS WHERE GOODS ARE USED

 

See Attached.

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

SCHEDULE 1(a) - PERMITTED LIENS

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

SCHEDULE 1(b) - REAL PROPERTY

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

SCHEDULE 13(a)(3) - AVAILABILITY SCHEDULE

 

See Attached.

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

SCHEDULE 13(q) - PERMITTED INDEBTEDNESS

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

SCHEDULE 13(s) - PARENTS, SUBSIDIARIES, AFFILIATES OR DIVISIONS

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

SCHEDULE 13(w) - INTELLECTUAL PROPERTY

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

SCHEDULE 13(z) - BENEFIT PLANS

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

SCHEDULE 13(ee) - ENVIRONMENTAL AND OSHA MATTERS

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

SCHEDULE 13(ff) - LABOR DISPUTES

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

SCHEDULE A - CLOSING DOCUMENT LIST

 

See Attached.

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

TABLE OF CONTENTS

 

          Page

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

1.

  

DEFINITIONS.

   1

2.

  

REVOLVING LOANS.

   20

3.

  

LETTER OF CREDIT.

   21

4.

  

MANDATORY PREPAYMENTS

   24

5.

  

INTEREST, FEES AND CHARGES.

   25

6.

  

LOAN ADMINISTRATION.

   27

7.

  

GRANT OF SECURITY INTEREST TO AGENT

   32

8A.

  

CONCERNING ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE .

   32

8.

  

PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.

   33

9.

  

POSSESSION OF COLLATERAL AND RELATED MATTERS.

   33

10.

  

COLLECTIONS.

   33

11.

  

SCHEDULES AND REPORTS.

   36

12.

  

TERM.

   38

13.

  

REPRESENTATIONS AND WARRANTIES.

   39

14.

  

COVENANTS.

   45

15.

  

CONDITIONS PRECEDENT.

   56

16.

  

DEFAULT.

   60

17.

  

REMEDIES UPON AN EVENT OF DEFAULT.

   62

18.

  

INDEMNIFICATION.

   63

19.

  

REGARDING AGENT.

   64

20.

  

NOTICES.

   67

21.

  

CHOICE OF GOVERNING LAW AND CONSTRUCTION.

   67

22.

  

FORUM SELECTION AND SERVICE OF PROCESS.

   68

 

i

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

TABLE OF CONTENTS

(Continued)

 

23.

  

MODIFICATION AND BENEFIT OF AGREEMENT.

   68

24.

  

PARTICIPATIONS AND ASSIGNMENT.

   70

25.

  

HEADINGS OF SUBDIVISIONS.

   71

26.

  

POWER OF ATTORNEY.

   71

27.

  

WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.

   72

 

ii