Exhibit 10.1
 
 
(CHASE LOGO) [l23439al2343901.gif]
CREDIT AGREEMENT
dated as of
November 21, 2006
among
TRANSCAT, INC.
and
JPMORGAN CHASE BANK, N.A.
 
 

 

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TABLE OF CONTENTS

          Page
ARTICLE I — DEFINITIONS
    1
SECTION 1.01. Defined Terms
    1
SECTION 1.02. Classification of Loans and Borrowings
  12
SECTION 1.03. Terms Generally
  12
SECTION 1.04. Accounting Terms; GAAP
  12
 
   
ARTICLE II — THE CREDIT
  13
SECTION 2.01. Commitment
  13
SECTION 2.02. Loans and Borrowings
  13
SECTION 2.03. Borrowing Procedures; Requests for Borrowings
  13
SECTION 2.04. [Section Intentionally Omitted]
  13
SECTION 2.05. Letters of Credit
  13
SECTION 2.06. Funding of Borrowings
  15
SECTION 2.07. Interest Elections
  15
SECTION 2.08. Termination and Reduction of Commitments
  16
SECTION 2.09. Repayment and Amortization of Loans; Evidence of Debt
  16
SECTION 2.10. Prepayment of Loans
  17
SECTION 2.11. Fees
  17
SECTION 2.12. Interest
  17
SECTION 2.13. Alternate Rate of Interest
  18
SECTION 2.14. Increased Costs
  18
SECTION 2.15. Break Funding Payments
  19
SECTION 2.16. Taxes
  19
SECTION 2.17. Payments Generally; Allocation of Proceeds
  20
SECTION 2.18. Indemnity for Returned Payments
  20
 
   
ARTICLE III — Representations and Warranties
  20
SECTION 3.01. Organization; Powers
  20
SECTION 3.02. Authorization; Enforceability
  21
SECTION 3.03. Governmental Approvals; No Conflicts
  21
SECTION 3.04. Financial Condition; No Material Adverse Change
  21
SECTION 3.05. Properties
  21
SECTION 3.06. Litigation and Environmental Matters
  21
SECTION 3.07. Compliance with Laws and Agreements
  22
SECTION 3.08. Investment and Holding Company Status
  22
SECTION 3.09. Taxes
  22
SECTION 3.10. ERISA
  22
SECTION 3.11. Disclosure
  22
SECTION 3.12. Material Agreements
  22
SECTION 3.13. Solvency
  22
SECTION 3.14. Insurance
  22
SECTION 3.15. Capitalization and Subsidiaries
  23
SECTION 3.16. Security Interest in Collateral
  23
SECTION 3.17. Labor Disputes
  23
SECTION 3.18. Affiliate Transactions
  23
SECTION 3.19. Common Enterprise
  23

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          Page
ARTICLE IV — CONDITIONS
  24
SECTION 4.01. Effective Date
  24
SECTION 4.02. Each Credit Event
  24
 
   
ARTICLE V — AFFIRMATIVE COVENANTS
  25
SECTION 5.01. Financial Statements; Borrowing Base and Other Information
  25
SECTION 5.02. Notices of Material Events
  26
SECTION 5.03. Existence; Conduct of Business
  26
SECTION 5.04. Payment of Obligations
  27
SECTION 5.05. Maintenance of Properties
  27
SECTION 5.06. Books and Records; Inspection Rights
  27
SECTION 5.07. Compliance with Laws
  27
SECTION 5.08. Use of Proceeds and Letters of Credit
  27
SECTION 5.09. Insurance
  27
SECTION 5.10. Casualty and Condemnation
  27
SECTION 5.11. Depository Banks
  27
SECTION 5.12. Additional Collateral; Further Assurances
  28
 
   
ARTICLE VI — NEGATIVE COVENANTS
  28
SECTION 6.01. Indebtedness
  28
SECTION 6.02. Liens
  29
SECTION 6.03. Fundamental Changes
  30
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions
  30
SECTION 6.05. Asset Sales
  31
SECTION 6.06. Sale and Leaseback Transactions
  32
SECTION 6.07. Swap Agreements
  32
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness
  32
SECTION 6.09. Transactions with Affiliates
  32
SECTION 6.10. Restrictive Agreements
  33
SECTION 6.11. Amendment of Material Documents
  33
SECTION 6.12. Financial Covenants
  33
 
   
ARTICLE VII — EVENTS OF DEFAULT
  33
 
   
ARTICLE VIII — MISCELLANEOUS
  35
SECTION 8.01. Notices
  35
SECTION 8.02. Waivers; Amendments
  36
SECTION 8.03. Expenses; Indemnity; Damage Waiver
  36
SECTION 8.04. Successors and Assigns
  36
SECTION 8.05. Survival
  38
SECTION 8.06. Counterparts; Integration; Effectiveness
  39
SECTION 8.07. Severability
  39
SECTION 8.08. Right of Setoff
  39
SECTION 8.09. Governing Law; Jurisdiction; Consent to Service of Process
  39
SECTION 8.10. WAIVER OF JURY TRIAL
  39
SECTION 8.11. Headings
  40
SECTION 8.12. Confidentiality
  40
SECTION 8.13. Nonreliance; Violation of Law
  40
SECTION 8.14. USA PATRIOT Act
  40
SECTION 8.15. Disclosure
  40
SECTION 8.16. Interest Rate Limitation
  40

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The schedules and exhibits to the Credit Agreement are listed below. Upon
request, Transcat, Inc. will furnish supplementally a copy of any schedule or
exhibit to the Securities and Exchange Commission.
SCHEDULES:
Schedule 3.05 — Properties
Schedule 3.06 — Disclosed Matters
Schedule 3.14 — Insurance
Schedule 3.15 — Capitalization and Subsidiaries
Schedule 3.18 — Affiliate Transactions
Schedule 6.01 — Existing Indebtedness
Schedule 6.02 — Existing Liens
Schedule 6.04 — Existing Investments
Schedule 6.10 — Existing Restrictions
EXHIBITS:
Exhibit A — Form of Opinion of Borrower’s Counsel
Exhibit B — Form of Compliance Certificate
Exhibit C — Closing Checklist

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          CREDIT AGREEMENT dated as of November 21, 2006 (as it may be amended
or modified from time to time, this “Agreement”), by and between TRANSCAT, INC.
and JPMORGAN CHASE BANK, N.A.
          The parties hereto agree as follows:
ARTICLE I
Definitions
          SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
          The following terms shall have the meanings given to them in the
Sections of the Agreement identified following each term: “Approved Fund"-
§8.04(b); “LC Collateral Account"- §2.05(h); “Participant"- §8.04;
“Projections"- §5.01(f).
          “ABR”, when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
          “Acquisition” means any transaction, or any series of related
transactions, consummated on or after the Closing Date, by which any Loan Party
(a) acquires any going business or all or substantially all of the assets of any
Person, whether through purchase of assets, merger or otherwise or (b) directly
or indirectly acquires (in one transaction or as the most recent transaction in
a series of transactions) at least a majority (in number of votes) of the Equity
Interests of a Person which has ordinary voting power for the election of
directors or other similar management personnel of a Person (other than Equity
Interests having such power only by reason of the happening of a contingency) or
a majority of the outstanding Equity Interests of a Person.
          “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
          “Affiliate” means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
          “Alternate Base Rate” means, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1%, and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
          “Applicable Rate” means, for any day, with respect to any ABR Loan or
Eurodollar Loan, or with respect to the commitment fees payable hereunder, as
the case may be, the applicable rate per annum set forth below under the caption
“ABR Spread”, “Eurodollar Spread” or “Commitment Fee Rate”, as the case may be,
based upon the Borrower’s Leverage Ratio as of the most recent determination
date, provided that until the delivery to the Lender, pursuant to Section 5.01,
of the Borrower’s consolidated financial information for the Borrower’s fiscal
quarter ending December 31, 2006, the “Applicable Rate” shall be the applicable
rate per annum set forth below in Category 4:

                              ABR Plus ABR   Eurodollar Plus   Commitment Fee
Leverage Ratio   Spread of   Eurodollar Spread of   Rate
Category 1 ³ 2.5 to 1.0
    0       2 %     .35 %
Category 2 < 2.5 to 1.0 but ³ 2.0 to 1.0
    0       1.75 %     .30 %
Category 3 < 2.0 to 1.0 but ³ 1.5 to 1.0
    -.45 %     1.25 %     .25 %
Category 4 < 1.5 to 1.0 but ³ 1.0 to 1.0
    -.45 %     1 %     .15 %
Category 5 < 1.0 to 1.0
    -.70 %     .65 %     .10 %

 

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          For purposes of the foregoing, (a) the Applicable Rate shall be
determined based upon the Borrower’s annual or quarterly consolidated financial
statements delivered pursuant to Section 5.01 and (b) each change in the
Applicable Rate resulting from a change in the Leverage Ratio shall be effective
on and as of the date of delivery to the Lender of such consolidated financial
statements indicating such change and ending on the date immediately preceding
the effective date of the next such change, provided that the Leverage Ratio
shall be deemed to be in Category 1 at the option of the Lender if the Borrower
fails to deliver the annual or quarterly consolidated financial statements
required to be delivered by it pursuant to Section 5.01, during the period from
the expiration of the time for delivery thereof until such consolidated
financial statements are delivered.
          “Assessment Rate” means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Lender Insurance Fund
classified as “well-capitalized” and within supervisory subgroup “B” (or a
comparable successor risk classification) within the meaning of 12 C.F.R.
Part 327 (or any successor provision) to the Federal Deposit Insurance
Corporation for insurance by such Corporation of time deposits made in dollars
at the offices of such member in the United States.
          “Available Commitment” means, at any time, the Commitment then in
effect minus the Revolving Exposure at such time.
          “Availability Period” means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitment.
          “Banking Services” means each and any of the following bank services
provided to any Loan Party by the Lender or any of its Affiliates:
(a) commercial credit cards, (b) stored value cards and (c) treasury management
services (including, without limitation, controlled disbursement, automated
clearinghouse transactions, return items, overdrafts and interstate depository
network services).
          “Banking Services Obligations” of the Loan Parties means any and all
obligations of the Loan Parties, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor) in connection
with Banking Services.
          “Banking Services Reserves” means all reserves which the Lender from
time to time establishes in its discretion for Banking Services then provided or
outstanding.
          “Base CD Rate” means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
          “Board” means the Board of Governors of the Federal Reserve System of
the United States of America.
          “Borrower” means Transcat, Inc., an Ohio corporation.
          “Borrowing” means Loans of the same Type, made, converted or continued
on the same date and, in the case of Eurodollar Loans, as to which a single
Interest Period is in effect.
          “Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
          “Business Day” means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
          “Capital Expenditures” means, without duplication, any expenditure or
commitment to expend money for any purchase or other acquisition of any asset
which would be classified as a fixed or capital asset on a consolidated balance
sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP.
          “Capital Lease Obligations” of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance

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sheet of such Person under GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
          “Change in Control” means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of shares
at any time representing in the aggregate more than 30% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
the Borrower; (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were neither
(i) nominated by the board of directors of the Borrower nor (ii) appointed by
directors so nominated, or (c) the acquisition of direct or indirect Control of
the Borrower by any Person or group.
          “Change in Law” means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by the Lender (or, for
purposes of Section 2.14(b), by any lending office of the Lender or by the
Lender’s holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
          “Closing Checklist” means that certain closing checklist, dated as of
the date hereof, between the Loan Parties and the Lender, in the form of
Exhibit C hereto.
          “Code” means the Internal Revenue Code of 1986, as amended from time
to time.
          “Collateral” means any and all property owned, leased or operated by a
Loan Party covered by the Collateral Documents and any and all other property of
any Loan Party, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of the Lender, to secure
the Obligations.
          “Collateral Documents” means, collectively, the Security Agreement and
any other documents granting a Lien upon the Collateral as security for payment
of the Obligations.
          “Commitment” means the commitment of the Lender to make Loans and
issue Letters of Credit hereunder as such commitment may be reduced from time to
time pursuant to Section 2.08. The initial amount of the Lender’s Commitment is
$10,000,000.00.
          “Control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.
          “Default” means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
          “Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
          “dollars” or “$” refers to lawful money of the United States of
America.
          “Domestic Subsidiaries” means any domestic Subsidiary which has assets
in the aggregate of at least $100,000.00.
          “EBITDA” means, for any period, Net Income for such period plus
(a) without duplication and to the extent deducted in determining Net Income for
such period, the sum of (i) Interest Expense for such period, (ii) income tax
expense for such period, (iii) all amounts attributable to depreciation and
amortization expense for such period, (iv) any extraordinary non-cash charges
for such period and (v) any other non-cash charges for such period, including
compensation expense from options or stock grants (but excluding any non-cash
charge in respect of an item that was included in Net Income in a prior period
and any non-cash charge that relates to the write-down or write off of
inventory, asset impairment (other than goodwill) or reserve expense), minus
(b) without duplication and to the extent included in Net Income, (i) any cash
payments made during such period in respect of non-cash charges described in

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clause (a)(v) taken in a prior period and (ii) any extraordinary gains and any
non-cash items of income for such period, all calculated for the Borrower and
its Subsidiaries on a consolidated basis in accordance with GAAP.
          “Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
          “Environmental Laws” means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
          “Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
          “Equity Interests” means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.
          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
          “ERISA Affiliate” means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
          “ERISA Event” means (a) any “reportable event”, as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an “accumulated funding deficiency” (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan;
(f) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.
          “Eurodollar”, when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
          “Event of Default” has the meaning assigned to such term in
Article VII.
          “Excluded Taxes” means, with respect to the Lender, or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower hereunder, (a) income or franchise taxes imposed on (or measured by)
its net income by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Borrower is
located.
          “Federal Funds Effective Rate” means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the

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Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average (rounded upwards, if necessary, to the
next 1/100 of 1%) of the quotations for such day for such transactions received
by the Lender from three Federal funds brokers of recognized standing selected
by it.
          “Financial Officer” means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
          “Fixed Charges” means, with reference to any period, without
duplication, cash Interest Expense, plus prepayments (excluding those
prepayments of the Loans hereunder which are not given in connection with the
termination or reduction of the Commitment) and scheduled principal payments and
loan fees on Indebtedness made during such period, plus expense for taxes paid
in cash, plus permitted Restricted Payments paid in cash, plus Capital Lease
Obligation payments, plus cash contributions to any Plan, all calculated for the
Borrower and its Subsidiaries on a consolidated basis.
          “Fixed Charge Coverage Ratio” means, the ratio, determined as of the
end of each of fiscal quarter of the Borrower for the most-recently ended four
fiscal quarters, of (a) EBITDA minus the unfinanced portion of Capital
Expenditures to (b) Fixed Charges, all calculated for the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.
          “Funding Account” means the deposit account of the Borrower to which
the Lender is authorized by the Borrower to transfer proceeds of any Borrowings
requested or authorized pursuant to this Agreement.
          “GAAP” means generally accepted accounting principles in the United
States of America.
          “Governmental Authority” means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
          “Guarantee” of or by any Person (the “guarantor”) means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
          “Hazardous Materials” means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
          “Indebtedness” of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person,
(i) all obligations, contingent or otherwise, of such Person as an account party
in respect of letters of credit and letters of guaranty, (j) all obligations,
contingent or otherwise, of such Person in respect of bankers’ acceptances,
(k) obligations under any liquidated earn-out and (l) obligations of such Person
to purchase securities or other property arising out of or in connection with
the sale of the same or substantially similar securities or

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property or any other Off-Balance Sheet Liability. The Indebtedness of any
Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
          “Indemnified Taxes” means Taxes other than Excluded Taxes.
          “Interest Election Request” means a request by the Borrower to convert
or continue a Borrowing in accordance with Section 2.07.
          “Interest Expense” means, with reference to any period, the interest
expense (including that attributable to Capital Lease Obligations) of the
Borrower and its Subsidiaries for such period with respect to all outstanding
Indebtedness of the Borrower and its Subsidiaries (including all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers’ acceptance financing and net costs under Swap Agreements in respect of
interest rates to the extent such net costs are allocable to such period in
accordance with GAAP), calculated on a consolidated basis for the Borrower and
its Subsidiaries for such period in accordance with GAAP.
          “Interest Payment Date” means (a) with respect to any ABR Loan, the
first Business Day of each calendar month and the Maturity Date, (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months’ duration, each day
prior to the last day of such Interest Period that occurs at intervals of three
months’ duration after the first day of such Interest Period, and (c) the
Maturity Date.
          “Interest Period” means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period. For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.
          “LC Disbursement” means a payment made by the Lender pursuant to a
Letter of Credit.
          “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time.
          “Lender” means JPMorgan Chase Bank, N.A.
          “Letter of Credit” means any letter of credit issued pursuant to this
Agreement.
          “Leverage Ratio” means, on any date, the ratio of (a) Total Funded
Debt on such date to (b) EBITDA for the period of four consecutive fiscal
quarters ended on such date (or, if such date is not the last day of a fiscal
quarter, ended on the last day of the fiscal quarter most recently ended prior
to such date), provided that solely for purposes of Section 6.12, to the extent
the Borrower or any Subsidiary makes any acquisition permitted pursuant to
Section 6.04 or disposition of assets outside the ordinary course of business
that is permitted by Section 6.05 during the period of four fiscal quarters of
the Borrower most recently ended, the Leverage Ratio shall be calculated after
giving pro forma effect thereto (including pro forma adjustments arising out of
events which are directly attributable to the acquisition or the disposition of
assets, are factually supportable and are expected to have a continuing impact,
in each case as determined on a basis consistent with Article 11 of
Regulation S-X of the Securities Act of 1933, as amended, as interpreted by the
SEC, and as certified by a Financial Officer of the Borrower), as if such
acquisition or such disposition (and any related incurrence, repayment or
assumption of Indebtedness) had occurred in the first day of such four quarter
period.

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          “LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Lender
from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period. In the event that such rate is not available at such time
for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing
for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Lender in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
          “Lien” means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
          “Loan Documents” means this Agreement, any promissory notes issued
pursuant to the Agreement, any Letter of Credit applications, the Collateral
Documents, and all other agreements, instruments, documents and certificates
identified in Section 4.01 executed and delivered to, or in favor of, the Lender
and including all other pledges, powers of attorney, consents, assignments,
contracts, notices, letter of credit agreements and all other written documents
whether heretofore, now or hereafter executed by or on behalf of any Loan Party,
or any officer of any Loan Party, and delivered to the Lender in connection with
the Agreement or the transactions contemplated thereby. Any reference in the
Agreement or any other Loan Document to a Loan Document shall include all
appendices, exhibits or schedules thereto, and all amendments, restatements,
supplements or other modifications thereto, and shall refer to the Agreement or
such Loan Document as the same may be in effect at any and all times such
reference becomes operative.
          “Loan Guarantor” means each Loan Party other than the Borrower.
          “Loan Guaranty” means each Guaranty in form and substance satisfactory
to the Lender, delivered by each Loan Guarantor that is a Domestic Subsidiary,
as it may be amended or modified and in effect from time to time.
          “Loan Parties” means the Borrower, the Borrower’s Domestic
Subsidiaries, and any other Person who executes and delivers a Loan Guaranty or
Security Agreement with respect to the Obligations and their successors and
assigns.
          “Loans” means the loans and advances made by the Lender pursuant to
this Agreement.
          “Material Adverse Effect” means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and the Subsidiaries taken as a whole, (b) the ability of all Loan
Parties taken together to perform their obligations under the Loan Documents,
(c) the Collateral, or the Lender’s Liens on the Collateral or the priority of
such Liens, or (d) the rights of or benefits available to the Lender thereunder.
          “Material Indebtedness” means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Swap Agreements, of
any one or more of the Borrower and its Subsidiaries, taken as a whole, in an
aggregate principal amount exceeding $500,000.00. For purposes of determining
Material Indebtedness, the “obligations” of the Borrower or any Subsidiary in
respect of any Swap Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that the Borrower or such Subsidiary
would be required to pay if such Swap Agreement were terminated at such time.
          “Maturity Date” means November 21, 2009 or any earlier date on which
the Commitments are reduced to zero or otherwise terminated pursuant to the
terms hereof.
          “Moody’s” means Moody’s Investors Service, Inc.
          “Multiemployer Plan” means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.

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          “Net Income” means, for any period, the consolidated net income (or
loss) of the Borrower and its Subsidiaries, determined on a consolidated basis
in accordance with GAAP; provided that there shall be excluded (a) the income
(or deficit) of any Person accrued prior to the date it becomes a Subsidiary of
the Borrower or is merged into or consolidated with the Borrower or any of its
Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary
of the Borrower) in which the Borrower or any of its Subsidiaries has an
ownership interest, except to the extent that any such income is actually
received by the Borrower or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of the
Borrower to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation (other than under any Loan Document) or Requirement
of Law applicable to such Subsidiary.
          “Net Proceeds” means, with respect to any event, (a) the cash proceeds
received in respect of such event including (i) any cash received in respect of
any non-cash proceeds (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or purchase
price adjustment receivable or otherwise, but excluding any interest payments),
but only as and when received, (ii) in the case of a casualty, insurance
proceeds and (iii) in the case of a condemnation or similar event, condemnation
awards and similar payments, net of (b) the sum of (i) all reasonable fees and
out-of-pocket expenses paid to third parties (other than Affiliates) in
connection with such event, (ii) in the case of a sale, transfer or other
disposition of an asset (including pursuant to a sale and leaseback transaction
or a casualty or a condemnation or similar proceeding), the amount of all
payments required to be made as a result of such event to repay Indebtedness
(other than Loans) secured by such asset or otherwise subject to mandatory
prepayment as a result of such event and (iii) the amount of all taxes paid (or
reasonably estimated to be payable) and the amount of any reserves established
to fund contingent liabilities reasonably estimated to be payable, in each case
during the year that such event occurred or the next succeeding year and that
are directly attributable to such event (as determined reasonably and in good
faith by a Financial Officer).
          “Obligations” means all unpaid principal of and accrued and unpaid
interest on the Loans, all LC Exposure, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations of the Loan Parties
to the Lender or any indemnified party arising under the Loan Documents.
Obligations shall also include (i) all Banking Services Obligations; and
(ii) all Swap Obligations owing to the Lender or its Affiliates.
          “Off-Balance Sheet Liability” of a Person means (a) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (b) any indebtedness, liability or obligation
under any sale and leaseback transaction which is not a Capital Lease
Obligation, or (c) any indebtedness, liability or obligation under any so-called
“synthetic lease” transaction entered into by such Person, or (d) any
indebtedness, liability or obligation arising with respect to any other
transaction which is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the balance sheets of
such Person (other than operating leases).
          “Other Taxes” means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
          “PBGC” means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
          “Permitted Acquisition” means any Acquisition by any Loan Party in a
transaction that satisfies each of the following requirements:
     (a) such Acquisition is not a hostile or contested acquisition;
     (b) the business acquired in connection with such Acquisition is not
engaged, directly or indirectly, in any line of business other than the
businesses in which the Loan Parties are engaged on the Closing Date and any
business activities that are substantially similar, related, or incidental
thereto;
     (c) both before and after giving effect to such Acquisition and the Loans
(if any) requested to be made in connection therewith, each of the
representations and warranties in the Loan Documents is true and correct (except
(i) any such representation or warranty which relates to a specified prior date
and (ii) to the extent the Lender has been notified in writing by the Loan
Parties that any representation or warranty is not

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correct and the Lender has explicitly waived in writing compliance with such
representation or warranty) and no Default exists, will exist, or would result
therefrom;
     (d) as soon as available, but not less than thirty days prior to such
Acquisition, the Borrower have provided the Lender (i) notice of such
Acquisition and (ii) a copy of all business and financial information reasonably
requested by the Lender including pro forma financial statements, statements of
cash flow, and projections;
     (e) the purchase price for all Acquisitions in any twelve month period does
not exceed $2,000,000 and for all Acquisitions made during the term of this
Agreement shall not exceed $6,000,000;
     (f) if such Acquisition is an acquisition of the Equity Interests of a
Person, the Acquisition is structured so that the acquired Person shall become a
Wholly-Owned Subsidiary of the Borrower and, a Loan Party pursuant to the terms
of this Agreement;
     (g) if such Acquisition is an acquisition of assets, the Acquisition is
structured so that the Borrower shall acquire such assets;
     (h) if such Acquisition is an acquisition of Equity Interests, such
Acquisition will not result in any violation of Regulation U;
     (i) no Loan Party shall, as a result of or in connection with any such
Acquisition, assume or incur any direct or contingent liabilities (whether
relating to environmental, tax, litigation, or other matters) that could be
reasonably expected to have a Material Adverse Effect;
     (j) in connection with an Acquisition of the Equity Interests of any
Person, all Liens on property of such Person shall be terminated unless the
Lender in its sole discretion consents otherwise, and in connection with an
Acquisition of the assets of any Person, all Liens on such assets shall be
terminated;
     (k) before and after giving effect to the Acquisition, the Borrower shall
be in compliance with all financial covenants contained herein.
     “Permitted Consignment Inventory” means, provided there exists no Event of
Default, Inventory in the maximum aggregate amount of $100,000 at any one time
which may be held by third parties on a consignment basis for Canadian west
coast distribution. The Borrower shall provide to Lender upon its request
therefor, a detailed listing of all consignment arrangements and the Inventory
thereunder.
     “Permitted Encumbrances” means:
     (a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.04;
     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and
other like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.04;
     (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;
     (d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;
     (e) judgment liens in respect of judgments that do not constitute an Event
of Default under clause (k) of Article VII; and
     (f) easements, zoning restrictions, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of business
that do not secure any monetary obligations and

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do not materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Subsidiary;
     provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness.
     “Permitted Investments” means:
     (a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;
     (b) investments in commercial paper maturing within 270 days from the date
of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from S&P or from Moody’s;
     (c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;
     (d) fully collateralized repurchase agreements with a term of not more than
30 days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (c) above; and
     (e) money market funds that (i) comply with the criteria set forth in
Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of
1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio
assets of at least $5,000,000,000.
          “Person” means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
          “Plan” means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which the
Borrower or any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an “employer” as defined in
Section 3(5) of ERISA.
          “Prime Rate” means the rate of interest per annum publicly announced
from time to time by the Lender as its prime rate; each change in the Prime Rate
shall be effective from and including the date such change is publicly announced
as being effective.
          “Related Parties” means, with respect to any specified Person, such
Person’s Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person’s Affiliates.
          “Report” means reports prepared by the Lender or another Person
showing the results of appraisals, field examinations or audits pertaining to
the Borrower’s assets from information furnished by or on behalf of the
Borrower, after the Lender has exercised its rights of inspection pursuant to
this Agreement.
          “Requirement of Law”: means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
          “Restricted Payment” means any dividend or other distribution (whether
in cash, securities or other property) with respect to any Equity Interests in
the Borrower or any Subsidiary, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any option, warrant or other
right to acquire any such Equity Interests in the Borrower.

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          “Revolving Exposure” means, at any time, the sum of the outstanding
principal amount of Loans and LC Exposure at such time.
          “S&P” means Standard & Poor’s Ratings Services, a division of The
McGraw Hill Companies, Inc.
          “SEC” means the United States Securities and Exchange Commission.
          “Security Agreement” means those certain Security Agreement(s), dated
as of the date hereof, between the Loan Parties and the Lender and any other
pledge or security agreement entered into after the date of this Agreement by
any other Loan Party or any other Person, (as required by this Agreement or any
other Loan Document, as any of the same may be amended, restated or otherwise
modified from time to time.
          “Statutory Reserve Rate” means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Lender is subject (a) with respect to the
Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over
$100,000 with maturities approximately equal to three months, in the case of the
Base CD Rate, and (b) with respect to the Adjusted LIBO Rate, for eurocurrency
funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of
the Board). Such reserve percentages shall include those imposed pursuant to
such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
          “Subordinated Indebtedness” of a Person means any Indebtedness of such
Person the payment of which is subordinated to payment of the Obligations to the
written satisfaction of the Lender.
          “subsidiary” means, with respect to any Person (the “Parent”) at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
Parent in the Parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the Parent or one or more subsidiaries of the Parent or
by the Parent and one or more subsidiaries of the Parent.
          “Subsidiary” means any subsidiary of the Borrower or a Loan Party, as
applicable.
          “Swap Agreement” means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of these transactions; provided that
no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.
          “Swap Obligations” of a Person means any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Swap
Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Swap Agreement transaction.
          “Taxes” means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
          “Three-Month Secondary CD Rate” means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Lender of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of

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major money center banks in New York City received at approximately 10:00 a.m.,
New York City time, on such day (or, if such day is not a Business Day, on the
next preceding Business Day) by the Lender from three negotiable certificate of
deposit dealers of recognized standing selected by it.
          “Total Funded Debt” means, in respect of any Person, (i) all long term
Indebtedness of such Person, (ii) all payments in respect of item (i) above that
were required to be made within one year prior to the date of any determination
of Total Funded Debt, if the obligation to make such payments shall constitute a
current liability of the obligor under GAAP (nothing herein shall be construed
to include accounts payable), (iii) all capitalized rentals of such Person, and
(iv) interest bearing Indebtedness for borrowed money (other than long term
Indebtedness) having a maturity of less than one year.
          “Transactions” means the execution, delivery and performance by the
Borrower of this Agreement, the borrowing of Loans and other credit extensions,
the use of the proceeds thereof and the issuance of Letters of Credit hereunder.
          “Type” when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
          “UCC” means the Uniform Commercial Code as in effect from time to time
in the State of New York or any other state the laws of which are required to be
applied in connection with the issue of perfection of security interests under
any Security Agreement.
          “Withdrawal Liability” means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
          “Working Capital” means, at any date, the excess of current assets of
the Borrower and its Subsidiaries on such date over current liabilities of the
Borrower and its Subsidiaries on such date, all determined on a consolidated
basis in accordance with GAAP.
          SECTION 1.02. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Type (e.g., a
“Eurodollar Loan”). Borrowings also may be classified and referred to by Type
(e.g., a “Eurodollar Borrowing”).
          SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
          SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Lender that the Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Lender notifies the Borrower that Lender
will require an amendment to any provision hereof for such purpose), regardless
of whether any such notice is given before or after such change in GAAP or in
the application thereof, then such provision shall be interpreted on the basis
of GAAP as in effect and applied immediately before such change shall have
become effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.

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ARTICLE II
The Credit
          SECTION 2.01. Commitment. Subject to the terms and conditions set
forth herein, the Lender agrees to make Loans to the Borrower from time to time
during the Availability Period in an aggregate principal amount that will not
result in the Revolving Exposure exceeding the Commitment. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Loans.
          SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as
part of a Borrowing consisting of Loans of the same Type.
          (b) Subject to Section 2.13, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith, provided that all Borrowings made on the Effective Date
must be made as ABR Borrowings. The Lender at its option may make any Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of the Lender to
make such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement.
          (c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $50,000.00 and not less than $250,000.00. ABR Borrowings may be in
any amount. Borrowings of more than one Type may be outstanding at the same
time; provided that there shall not at any time be more than a total of seven
(7) Eurodollar Borrowings outstanding.
          (d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
          SECTION 2.03. Borrowing Procedures; Requests for Borrowings. To
request a Borrowing, the Borrower shall notify the Lender of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 10:00 a.m.,
New York time, three Business Days before the date of the proposed Borrowing or
(b) in the case of an ABR Borrowing, not later than 10:00 a.m., New York time,
on the date of the proposed Borrowing; provided that any such notice of an ABR
Borrowing to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.05(d) may be given not later than 10:00 a.m., New York time, on the
date of the proposed Borrowing. Any notices given after such time shall be
considered at the discretion of the Bank. Each such telephonic Borrowing Request
shall be irrevocable and shall be confirmed promptly by hand delivery or
facsimile to the Lender of a written Borrowing Request in a form approved by the
Lender and signed by the Borrower. Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.02:

  (i)   the aggregate amount of the requested Borrowing;     (ii)   the date of
such Borrowing, which shall be a Business Day;     (iii)   whether such
Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and     (iv)   in
the case of a Eurodollar Borrowing, the initial Interest Period to be applicable
thereto, which shall be a period contemplated by the definition of the term
“Interest Period.”

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration.
          SECTION 2.04. [Section Intentionally Omitted].
          SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of Letters of
Credit for its own account, or for the account of any Domestic Subsidiary, in a
form reasonably acceptable to the Lender at any time and from time to time
during the Availability Period. In the event of any inconsistency between the
terms and

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conditions of this Agreement and the terms and conditions of any form of letter
of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, the Lender relating to any Letter of Credit,
the terms and conditions of this Agreement shall control.
          (b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or facsimile (or transmit by electronic communication, if
arrangements for doing so have been approved by the Lender) to the Lender prior
to 9:00 am, New York time, at least three Business Days prior to the requested
date of issuance, amendment, renewal or extension, a notice requesting the
issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, and specifying the date of issuance, amendment,
renewal or extension (which shall be a Business Day), the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this
Section), the amount of such Letter of Credit, the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. If requested by the Lender, the
Borrower also shall submit a letter of credit application on the Lender’s
standard form in connection with any request for a Letter of Credit. A Letter of
Credit shall be issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Letter of Credit the Borrower shall be
deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension, (i) the LC Exposure shall not exceed
$2,000,000.00 and (ii) the total Revolving Exposures shall not exceed the
Commitment.
          (c) Expiration Date. Each Letter of Credit shall expire at or prior to
the close of business on the earlier of (i) the date one year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date; provided however, that
any Letter of Credit with a one year term may provide for the renewal thereof
for additional one year periods (which shall in no event extend beyond the date
referred to in clause (ii) above).
          (d) Reimbursement. If the Lender shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement
by paying to the Lender an amount equal to such LC Disbursement not later than
11:00 a.m., New York time, on the date that such LC Disbursement is made, if the
Borrower shall have received notice of such LC Disbursement prior to 9:00 a.m.,
New York time, on such date, or, if such notice has not been received by the
Borrower prior to such time on such date, then not later than 11:00 a.m., New
York time, on (i) the Business Day that the Borrower receives such notice, if
such notice is received prior to 9:00 a.m., New York time, on the day of
receipt, or (ii) the Business Day immediately following the day that the
Borrower receives such notice, if such notice is not received prior to such time
on the day of receipt; provided that the Borrower may, subject to the conditions
to borrowing set forth herein, request in accordance with Section 2.03 that such
payment be financed with an ABR Borrowing in an equivalent amount and, to the
extent so financed, the Borrower’s obligation to make such payment shall be
discharged and replaced by the resulting ABR Borrowing.
          (e) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (d) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Lender under a Letter of Credit
against presentation of a draft or other document that does not comply with the
terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower’s obligations hereunder. Neither
the Lender nor any of its Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of the Lender; provided that the foregoing shall not
be construed to excuse the Lender from liability to the Borrower to the extent
of any direct damages (as opposed to consequential damages, claims in respect of
which are hereby waived by the Borrower to the extent permitted by applicable
law) suffered by the Borrower that are caused by the Lender’s failure to
exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct
on the part of the Lender (as finally determined by a court of competent
jurisdiction), the Lender shall be deemed to have exercised care in each such
determination. In furtherance of the foregoing and without limiting the

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generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Lender may, in its sole discretion, either accept and make
payment upon such documents without responsibility for further investigation,
regardless of any notice or information to the contrary, or refuse to accept and
make payment upon such documents if such documents are not in strict compliance
with the terms of such Letter of Credit.
          (f) Disbursement Procedures. The Lender shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Lender shall promptly notify the Borrower
by telephone (confirmed by facsimile) of such demand for payment and whether the
Lender has made or will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower of
its obligation to reimburse the Lender with respect to any such LC Disbursement.
          (g) Interim Interest. If the Lender shall make any LC Disbursement,
then, unless the Borrower shall reimburse such LC Disbursement in full on the
date such LC Disbursement is made, the unpaid amount thereof shall bear
interest, for each day from and including the date such LC Disbursement is made
to but excluding the date that the Borrower reimburses such LC Disbursement, at
the rate per annum then applicable to ABR Revolving Loans; provided that, if the
Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph
(d) of this Section, then Section 2.12(d) shall apply. Interest accrued pursuant
to this paragraph shall be for the account of the Lender.
          (h) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Lender demanding the deposit of cash collateral pursuant to this paragraph, the
Borrower shall deposit in an account with the Lender, in the name and for the
benefit of the Lender (the “LC Collateral Account”), an amount in cash equal to
105% of the LC Exposure as of such date plus any accrued and unpaid interest
thereon; provided that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clause (h) or (i) of
Article VII. Such deposit shall be held by the Lender as Collateral for the
payment and performance of the Obligations. The Lender shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account and the Borrower hereby grants the Lender a security interest in the LC
Collateral Account. Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Lender and at the Borrower’s risk and expense, such deposits shall not bear
interest. Interest or profits, if any, on such investments shall accumulate in
such account. Moneys in such account shall be applied by the Lender for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated, be applied to satisfy other Obligations. If the Borrower
is required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all such Defaults have been cured or waived.
          SECTION 2.06. Funding of Borrowings. The Lender shall make each Loan
to be made by it hereunder on the proposed date thereof available to the
Borrower by promptly crediting the amounts in immediately available funds, to
the Funding Account; provided that ABR Loans made to finance the reimbursement
of an LC Disbursement as provided in Section 2.05(d) shall be retained by the
Lender.
          SECTION 2.07. Interest Elections. (a) Each Borrowing initially shall
be of the Type specified in the applicable Borrowing Request and, in the case of
a Eurodollar Borrowing, shall have an initial Interest Period as specified in
such Borrowing Request. Thereafter, the Borrower may elect to convert such
Borrowing to a different Type or to continue such Borrowing and, in the case of
a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section. The Borrower may elect different options with respect to different
portions of the affected Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing.
          (b) To make an election pursuant to this Section, the Borrower shall
notify the Lender of such election by telephone by the time that a Borrowing
Request would be required under Section 2.03 if the Borrower were requesting a
Borrowing of the Type resulting from such election to be made on the effective
date of such election. Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or facsimile to the
Lender of a written Interest Election Request in a form approved by the Lender
and signed by the Borrower.

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          (c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
          (i) the Borrowing to which such Interest Election Request applies and,
if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing (in
which case the information to be specified pursuant to clauses (iii) and
(iv) below shall be specified for each resulting Borrowing);
          (ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
          (iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
          (iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such election,
which shall be a period contemplated by the definition of the term “Interest
Period”.
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.
          (d) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Revolving Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
a Default has occurred and is continuing and the Lender so notifies the
Borrower, then, so long as a Default is continuing (i) no outstanding Revolving
Borrowing may be converted to or continued as a Eurodollar Borrowing and
(ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted to an
ABR Borrowing at the end of the Interest Period applicable thereto.
          SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
previously terminated, the Commitment shall terminate on the Maturity Date.
          (b) The Borrower may at any time terminate, or from time to time
reduce, the Commitment; provided that (i) each reduction of the Commitment shall
be in an amount that is an integral multiple of $1,000,000.00 and not less than
$1,000,000.00 and (ii) the Borrower shall not terminate or reduce the Commitment
if, after giving effect to any concurrent prepayment of the Loans in accordance
with Section 2.09, the Revolving Exposure exceeds the Commitment.
          (c) The Borrower shall notify the Lender of any election to terminate
or reduce the Commitment under paragraph (b) of this Section at least three
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Each notice delivered
by the Borrower pursuant to this Section shall be irrevocable; provided that a
notice of termination of the Commitment delivered by the Borrower may state that
such notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the Lender
on or prior to the specified effective date) if such condition is not satisfied.
Any termination or reduction of the Commitment shall be permanent.
          SECTION 2.09. Repayment and Amortization of Loans; Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay to the Lender for its
account the then unpaid principal amount of each Loan on the Maturity Date. All
unpaid Obligations shall be paid in full in cash by the Borrower on the Maturity
Date.
          (b) The Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to the Lender
resulting from each Loan made by the Lender, including the amounts of principal
and interest payable and paid to the Lender from time to time hereunder.
          (c) The Lender shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to the Lender hereunder
and (iii) the amount of any sum received by the Lender hereunder.

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          (d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of the
Lender to maintain such accounts or any error therein shall not in any manner
affect the obligation of the Borrower to repay the Loans in accordance with the
terms of this Agreement.
          (e) The Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to the Lender a promissory note payable to the order of the Lender (or, if
requested by the Lender, to the Lender and its registered assigns) and in a form
approved by the Lender. Thereafter, the Loans evidenced by such promissory note
and interest thereon shall at all times (including after assignment pursuant to
Section 8.04) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if such promissory note is
a registered note, to such payee and its registered assigns).
          SECTION 2.10. Prepayment of Loans. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to prior notice in accordance with paragraph (b) of this Section.
          (b) The Borrower shall notify the Lender by telephone (confirmed by
facsimile) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 10:00 a.m., New York time, three Business
Days before the date of prepayment, or (ii) in the case of prepayment of an ABR
Borrowing, not later than 10:00 a.m., New York time, on the date of prepayment.
Each such notice shall be irrevocable and shall specify the prepayment date and
the principal amount of each Borrowing or portion thereof to be prepaid;
provided that, if a notice of prepayment is given in connection with a
conditional notice of termination or reduction of the Commitment as contemplated
by Section 2.08, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.08. No partial prepayment of
any Borrowing shall reduce the outstanding principal amount thereof to less than
an amount that would be permitted in the case of an advance of a Borrowing of
the same Type as provided in Section 2.02. Prepayments shall be accompanied by
accrued interest to the extent required by Section 2.12.
          SECTION 2.11. Fees. (a) The Borrower agrees to pay to the Lender a
commitment fee, which shall accrue at the Applicable Rate on the average daily
amount of the Available Commitment of the Lender during the period from and
including the Effective Date to but excluding the date on which the Lender’s
Commitment terminates. Accrued commitment fees shall be payable in arrears on
the last day of each March, June, September and December and on the date on
which the Commitment terminates, commencing on the first such date to occur
after the date hereof. All commitment fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
          (b) The Borrower agrees to pay to the Lender a fee with respect to
Letters of Credit, which shall accrue at the same Applicable Rate used to
determine the interest rate applicable to Eurodollar Loans on the average daily
amount of the Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which the Lender’s
Commitment terminates and the date on which the Lender ceases to have any LC
Exposure, as well as the Lender’s standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Fees accrued through and including the last day of each
March, June, September and December shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the
Effective Date; provided that all such fees shall be payable on the date on
which the Commitment terminates and any such fees accruing after the date on
which the Commitment terminates shall be payable on demand. Any other fees
payable to the Lender pursuant to this paragraph shall be payable within 10 days
after demand. All fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
          (c) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Lender. Fees paid shall not be refundable
under any circumstances.
          SECTION 2.12. Interest. (a) The Loans comprising each ABR Borrowing
shall bear interest at the Alternate Base Rate plus the Applicable Rate.
          (b) The Loans comprising each Eurodollar Borrowing shall bear interest
at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Rate.

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          (c) Notwithstanding the foregoing, during the occurrence and
continuance of an Event of Default, the Lender may, at its option, by notice to
the Borrower, declare that (i) all Loans shall bear interest at 2% plus the rate
otherwise applicable to such Loans as provided in the preceding paragraphs of
this Section or (ii) in the case of any other amount outstanding hereunder, such
amount shall accrue at 2% plus the rate applicable to such fee or other
obligation as provided hereunder.
          (d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and upon termination of the Commitment;
provided that (i) interest accrued pursuant to paragraph (c) of this Section
shall be payable on demand, (ii) in the event of any repayment or prepayment of
any Loan (other than a prepayment of an ABR Loan prior to the end of the
Availability Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii) in the
event of any conversion of any Eurodollar Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.
          (e) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Lender, and such
determination shall be conclusive absent manifest error.
          SECTION 2.13. Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:
     (a) the Lender determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period; or
     (b) the Lender determines the Adjusted LIBO Rate or the LIBO Rate, as
applicable, for such Interest Period will not adequately and fairly reflect the
cost to the Lender of making or maintaining its Loan for such Interest Period;
          then the Lender shall give notice thereof to the Borrower by telephone
or facsimile as promptly as practicable thereafter and, until the Lender
notifies the Borrower that the circumstances giving rise to such notice no
longer exist, (i) any Interest Election Request that requests the conversion of
any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a
Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request
requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an
ABR Borrowing.
          SECTION 2.14. Increased Costs. (a) If any Change in Law shall:
     (i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, the Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate); or
     (ii) impose on the Lender or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender or
any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to the Lender of
participating in, issuing or maintaining any Letter of Credit or to reduce the
amount of any sum received or receivable by the Lender hereunder (whether of
principal, interest or otherwise), then the Borrower will pay to the Lender such
additional amount or amounts as will compensate the Lender for such additional
costs incurred or reduction suffered.
          (b) If the Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on the
Lender’s capital or on the capital of the Lender’s holding company, as a
consequence of this Agreement or the Loans made by, Letters of Credit issued by
the Lender to a level below that which the Lender or the Lender’s holding
company could have achieved but for such Change in Law (taking into
consideration the Lender’s policies and the policies of the Lender’s holding
company with respect to capital adequacy),

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then from time to time the Borrower will pay to the Lender such additional
amount or amounts as will compensate the Lender or the Lender’s holding company
for any such reduction suffered.
          (c) A certificate of the Lender setting forth the amount or amounts
necessary to compensate the Lender or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
the Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
          (d) Failure or delay on the part of the Lender to demand compensation
pursuant to this Section shall not constitute a waiver of the Lender’s right to
demand such compensation; provided that the Borrower shall not be required to
compensate a Lender pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that the Lender
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of the Lender’s intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.
          SECTION 2.15. Break Funding Payments. In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto or (c) the failure to borrow, convert,
continue or prepay any Eurodollar Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.08(c) and is revoked in accordance therewith), then, in any such
event, the Borrower shall compensate the Lender for the loss, cost and expense
attributable to such event. In the case of a Eurodollar Loan, such loss, cost or
expense to the Lender shall be deemed to include an amount determined by the
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which the Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market. A certificate of the Lender
setting forth any amount or amounts that the Lender is entitled to receive
pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay the Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
          SECTION 2.16. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Lender receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
          (b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
          (c) The Borrower shall indemnify the Lender within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Lender on or with respect to any payment by or on account of
any obligation of the Borrower hereunder (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability delivered
to the Borrower by the Lender shall be conclusive absent manifest error.
          (d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Lender the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment and a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Lender.

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          (e) If the Lender determines, in its sole discretion, that it has
received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section 2.16, it shall pay over such refund
to the Borrower (but only to the extent of indemnity payments made, or
additional amounts paid, by the Borrower under this Section 2.16 with respect to
the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of the Lender and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund); provided, that the
Borrower, upon the request of the Lender, agrees to repay the amount paid over
to the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Lender in the event the Lender is
required to repay such refund to such Governmental Authority. This Section shall
not be construed to require the Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.
          SECTION 2.17. Payments Generally; Allocation of Proceeds. The Borrower
shall make each payment required to be made by it hereunder (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts
payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to 11:00 a.m., New
York time, on the date when due, in immediately available funds, without set-off
or counterclaim. Any amounts received after such time on any date may, in the
discretion of the Lender, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Lender at its offices at One Chase Square, Rochester, New
York 14643, except that payments pursuant to Section 8.03 shall be made directly
to the Persons entitled thereto. If any payment hereunder shall be due on a day
that is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
          (b) Any proceeds of Collateral or payments received by the Lender
(i) not constituting a specific payment of principal, interest, fees or other
sum payable under the Loan Documents (which shall be applied as specified by the
Borrower), or (ii) after an Event of Default has occurred and is continuing and
the Lender so elects such funds shall be applied ratably first, to pay any fees,
indemnities, or expense reimbursements including amounts then due to the Lender
from the Borrower, second, to pay interest then due and payable on the Loans,
third, to prepay principal on the Loans and unreimbursed LC Disbursements in
inverse order of maturity, fourth, to pay an amount to the Lender equal to one
hundred five percent (105%) of the aggregate undrawn face amount of all
outstanding Letters of Credit, to be held as cash collateral for such
Obligations, fifth, to payment of any amounts owing with respect to Banking
Services and Swap Obligations, and sixth, to the payment of any other Obligation
due to the Lender by the Borrower. Notwithstanding anything to the contrary
contained in this Agreement, unless so directed by the Borrower, or unless a
Default is in existence, the Lender shall not apply any payment which it
receives to any Eurodollar Loan, except on the expiration date of the Interest
Period applicable to any such Eurodollar Loan. In any event, the Borrower shall
pay any break funding payment required in accordance with Section 2.15. The
Lender shall have the continuing and exclusive right to apply and reverse and
reapply any and all proceeds and payments referred to in clause (ii) above to
any portion of the Obligations.
          SECTION 2.18. Indemnity for Returned Payments. If after receipt of any
payment which is applied to the payment of all or any part of the Obligations,
the Lender is for any reason compelled to surrender such payment or proceeds to
any Person because such payment or application of proceeds is invalidated,
declared fraudulent, set aside, determined to be void or voidable as a
preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not been received by the Lender and the
Borrower shall be liable to pay to the Lender. The provisions of this
Section 2.18 shall be and remain effective notwithstanding any contrary action
which may have been taken by the Lender in reliance upon such payment or
application of proceeds. The provisions of this Section 2.18 shall survive the
termination of this Agreement.
ARTICLE III
Representations and Warranties
          Borrower represents and warrants to the Lender, and each other Loan
Party, for itself only, represents and warrants to the Lender that:
          SECTION 3.01. Organization; Powers. Each of the Loan Parties and each
of its Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has all requisite

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power and authority to carry on its business as now conducted and is qualified
to do business in, and is in good standing in, every jurisdiction where such
qualification is required.
          SECTION 3.02. Authorization; Enforceability. The Transactions are
within each Loan Party’s corporate powers and have been duly authorized by all
necessary corporate and, if required, shareholder action. The Loan Documents to
which each Loan Party is a party have been duly executed and delivered by such
Loan Party and constitute a legal, valid and binding obligation of such Loan
Party, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
          SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect and except for filings
necessary to perfect Liens created pursuant to the Loan Documents, (b) will not
violate any Requirement of Law applicable to any Loan Party or any of its
Subsidiaries, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon any Loan Party or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by any Loan Party or any of its Subsidiaries, and (d) will
not result in the creation or imposition of any Lien on any asset of any Loan
Party or any of its Subsidiaries, except Liens created pursuant to the Loan
Documents.
          SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The
Borrower has heretofore furnished to the Lender its consolidated balance sheet
and statements of income, shareholders equity and cash flows (i) as of and for
the fiscal year ended March 25, 2006, reported on by Price Waterhouse Coopers
LLP, independent public accountants, and (ii) as of and for the fiscal quarter
and the portion of the fiscal year ended September 23, 2006, certified by its
chief financial officer. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Borrower and its consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes in the case of the statements referred to in clause
(ii) above.
          (b) No event, change or condition has occurred that has had, or could
reasonably be expected to have, a Material Adverse Effect, since March 25, 2006.
          SECTION 3.05. Properties. (a) As of the date of this Agreement,
Schedule 3.05 sets forth the address of each parcel of real property that is
owned or leased by each Loan Party. Each of such leases and subleases is valid
and enforceable in accordance with its terms and is in full force and effect,
and no material default by any party to any such lease or sublease exists. Each
of the Loan Parties and its Subsidiaries has good and indefeasible title to, or
valid leasehold interests in, all its real and personal property, free of all
Liens other than those permitted by Section 6.02.
          (b) Each Loan Party and its Subsidiaries owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents and other intellectual property
necessary to its business as currently conducted, a correct and complete list of
which, as of the date of this Agreement, is set forth on Schedule 3.05, and the
use thereof by the Loan Parties and its Subsidiaries does not infringe in any
material respect upon the rights of any other Person, and the Loan Parties’
rights thereto are not subject to any licensing agreement or similar
arrangement.
          SECTION 3.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of any Loan Party, threatened
against or affecting the Loan Parties or any of their Subsidiaries (i) as to
which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.
          (b) Except for the Disclosed Matters (i) no Loan Party nor any of its
Subsidiaries has received notice of any claim with respect to any Environmental
Liability or knows of any basis for any Environmental Liability and (ii) except
with respect to any other matters that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, no Loan Party
nor any of its Subsidiaries (1) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law or (2) has become subject to any
Environmental Liability.

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          (c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
          SECTION 3.07. Compliance with Laws and Agreements. Each Loan Party and
its Subsidiaries is in compliance with all Requirements of Law applicable to it
or its property and all indentures, agreements and other instruments binding
upon it or its property, except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing.
          SECTION 3.08. Investment and Holding Company Status. No Loan Party nor
any of its Subsidiaries is (a) an “investment company” as defined in, or subject
to regulation under, the Investment Company Act of 1940 or (b) a “holding
company” as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935.
          SECTION 3.09. Taxes. Each Loan Party and its Subsidiaries has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which such Loan Party or such Subsidiary, as applicable, has
set aside on its books adequate reserves or (b) to the extent that the failure
to do so could not be expected to result in a Material Adverse Effect. No tax
liens have been filed and no claims are being asserted with respect to any such
taxes.
          SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect.
          SECTION 3.11. Disclosure. The Borrower has disclosed to the Lender all
agreements, instruments and corporate or other restrictions to which it or any
Subsidiary is subject, and all other matters known to it, that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect. None of the reports, financial statements, certificates or other
information furnished by or on behalf of any Loan Party to the Lender in
connection with the negotiation of this Agreement or any other Loan Document (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time
delivered and, if such projected financial information was delivered prior to
the Effective Date, as of the Effective Date.
          SECTION 3.12. Material Agreements. No Loan Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (i) any material agreement to which it is a party or
(ii) any agreement or instrument evidencing or governing Indebtedness which,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
          SECTION 3.13. Solvency. (a) Immediately after the consummation of the
Transactions to occur on the Effective Date, (i) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise, (ii) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (iii) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, and (iv) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted after
the Effective Date.
          (b) No Loan Party intends to, or will permit any of its Subsidiaries
to, and believes that it or any of its Subsidiaries will, incur debts on a
consolidated basis with all Loan Parties beyond their collective ability to pay
such debts as they mature, taking into account the timing of and amounts of cash
to be received by them or any such Subsidiary and the timing of the amounts of
cash to be payable on or in respect of their Indebtedness.
          SECTION 3.14. Insurance. Schedule 3.14 sets forth a description of all
insurance maintained by or on behalf of the Loan Parties and the Subsidiaries as
of the Effective Date. As of the Effective Date, all premiums in respect of such
insurance have been paid. The Borrower believes that the insurance maintained by
or on behalf of the Borrower and the Subsidiaries is adequate.

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          SECTION 3.15. Capitalization and Subsidiaries. Schedule 3.15 sets
forth (a) a correct and complete list of the name and relationship to the
Borrower of each and all of the Borrower’s Subsidiaries, (b) a true and complete
listing of each class of each of the Borrower’s authorized Equity Interests, and
all issued shares are validly issued, outstanding, fully paid and
non-assessable, (c) the type of entity of the Borrower and each of its
Subsidiaries, and (d) the current listing of all Domestic Subsidiaries. All of
the issued and outstanding Equity Interests owned by any Loan Party has been (to
the extent such concepts are relevant with respect to such ownership interests)
duly authorized and issued and is fully paid and non-assessable.
          SECTION 3.16. Security Interest in Collateral. The provisions of the
Security Agreement, this Agreement and the other Loan Documents create legal and
valid Liens on all the Collateral in which a security interest may be created
under Article 9 of the UCC (“Article 9”) in favor and for the benefit of the
Lender; and such Liens constitute perfected and continuing Liens on such
Collateral, securing the Obligations, enforceable against the applicable Loan
Party and all third parties, and having priority over all other Liens, on any
material portion of such Collateral (such determination of materiality shall be
made by Lender in its reasonable discretion), except in the case of
(a) Permitted Encumbrances and Liens permitted under Section 6.02, to the extent
any such Permitted Encumbrances and Liens would have priority over the Liens in
favor of the Lender pursuant to any applicable law or agreement, (b) Liens that
can be perfected only by possession or only by control, to the extent the Lender
has not obtained or does not maintain possession or control of such Collateral,
(c) if a Lien can be perfected either by possession or by control and also by
filing a financing statement under Article 9, Lender will not have priority if
the Lender has not obtained or does not maintain possession or control of such
Collateral and the UCC grants priority to any third party having possession or
control, (d) Liens that can only be perfected under a certificate of title law,
to the extent the Lender has not complied with the terms thereof, (e) Liens on
Collateral the existence of which the Borrower has properly disclosed in writing
to the Lender, if the Lender has determined not to take action that will result
in either perfection or priority of Lender’s security interest therein, provided
Borrower has delivered to the Lender a certificate dated as of the Closing Date
under which the Borrower represents that there is no such Collateral in
existence on the Closing Date in excess of $100,000, (f) to the extent that
Section 9-328 of the UCC grants priority to a third party over the Lender with
respect to a Lien on Investment Property and the Lender has not obtained a
control agreement with respect thereto (g) a Lien on a fixture, to the extent
that Borrower has not verified whether an encumbrancer or owner of real estate
has a Lien that is prior to that of Lender and (h) Permitted Consignment
Inventory.
Nothing contained herein shall be construed as limiting the Lender’s ability to
require that the Borrower take further action (including, without limitation,
gaining possession, control or third party consents) in order to create or
perfect the Lender’s security interest in the Collateral or to gain priority
thereof in favor of the Lender in accordance with the Security Agreement.
          SECTION 3.17. Labor Disputes. As of the Effective Date, there are no
strikes, lockouts or slowdowns against any Loan Party or any Subsidiary pending
or, to the knowledge of the Borrower, threatened. The hours worked by and
payments made to employees of the Loan Parties and the Subsidiaries have not
been in violation of the Fair Labor Standards Act or any other applicable
Federal, state, local or foreign law dealing with such matters. All payments due
from any Loan Party or any Subsidiary, or for which any claim may be made
against any Loan Party or any Subsidiary, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of the Loan Party or such Subsidiary.
          SECTION 3.18. Affiliate Transactions. Except for transactions
permitted under Section 6.09 or as set forth on Schedule 3.18, as of the date of
this Agreement, there are no existing or proposed agreements, arrangements,
understandings, or transactions between any Loan Party and any of the officers,
members, managers, directors, shareholders, parents, other interest holders,
employees, or Affiliates (other than Subsidiaries) of any Loan Party or any
members of their respective immediate families, and none of the foregoing
Persons are directly or indirectly indebted to any Affiliate of any Loan Party.
          SECTION 3.19. Common Enterprise. Each Loan Party expects to derive
benefit (and its board of directors or other governing body has determined that
it may reasonably be expected to derive benefit), directly and indirectly, from
(i) successful operations of each of the other Loan Parties and (ii) the credit
extended by the Lenders to the Borrower hereunder, both in their separate
capacities and as members of the group of companies. Each Loan Party has
determined that execution, delivery, and performance of this Agreement and any
other Loan Documents to be executed by such Loan Party is within its purpose,
will be of direct and indirect benefit to such Loan Party, and is in its best
interest.

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ARTICLE IV
Conditions
          SECTION 4.01. Effective Date. The obligations of the Lender to make
Loans and to issue Letters of Credit hereunder shall not become effective until
the date on which each of the following conditions is satisfied (or waived in
accordance with Section 8.02):
     (a) Credit Agreement and Loan Documents. The Lender (or its counsel) shall
have received (i) from each party hereto either (A) a counterpart of this
Agreement signed on behalf of such party or (B) written evidence satisfactory to
the Lender (which may include facsimile transmission of a signed signature page
of this Agreement) that such party has signed a counterpart of this Agreement
and (ii) duly executed copies of the Loan Documents and such other certificates,
documents, instruments and agreements as the Lender shall reasonably request in
connection with the transactions contemplated by this Agreement and the other
Loan Documents, including all those documents and requirements listed in the
Closing Checklist, each in form and substance reasonably satisfactory to Lender.
     (b) Financial Statements and Projections. The Lender shall have received
(i) audited consolidated financial statements of the Borrower for the 2006 and
2005 fiscal years, (ii) unaudited interim consolidated financial statements of
the Borrower for each fiscal quarter ended after the date of the latest
applicable financial statements delivered pursuant to clause (i) of this
paragraph as to which such financial statements are available, and such
financial statements shall not, in the reasonable judgment of the Lender,
reflect any material adverse change in the consolidated financial condition of
Borrower, as reflected in the financial statements or projections.
     (c) Fees. The Lender shall have received all fees required to be paid, and
all expenses for which invoices have been presented (including the reasonable
fees and expenses of legal counsel), on or before the Effective Date. All such
amounts will be paid with proceeds of Loans made on the Effective Date and will
be reflected in the funding instructions given by the Borrower to the Lender on
or before the Effective Date.
     (d) Pledged Stock; Stock Powers; Pledged Notes. The Lender shall have
received (i) the certificates representing the shares of Equity Interests
pledged pursuant to the Security Agreement, together with an undated stock power
for each such certificate executed in blank by a duly authorized officer of the
pledgor thereof and (ii) each promissory note (if any) pledged to the Lender
pursuant to the Security Agreement endorsed (without recourse) in blank (or
accompanied by an executed transfer form in blank) by the pledgor thereof.
     (e) Filings, Registrations and Recordings. Each document (including any
Uniform Commercial Code financing statement, Trademark or Copyright notice)
required by the Collateral Documents or under law or reasonably requested by the
Lender to be filed, registered or recorded in order to create in favor of the
Lender, a perfected Lien on the Collateral described therein, prior and superior
in right to any other Person (other than with respect to Liens expressly
permitted by Section 6.02), shall be in proper form for filing, registration or
recordation.
     (f) Other Documents. The Lender shall have received such other documents as
the Lender or its counsel may have reasonably requested and those items set
forth on the Closing Checklist.
The Lender shall notify the Borrower of the Effective Date, and such notice
shall be conclusive and binding. Notwithstanding the foregoing, the obligations
of the Lender to make Loans and to issue Letters of Credit hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 2:00 p.m., New York time, on November
30, 2006 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
          SECTION 4.02. Each Credit Event. The obligation of the Lender to make
a Loan on the occasion of any Borrowing, and to issue, amend, renew or extend
any Letter of Credit, is subject to the satisfaction of the following
conditions:

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     (a) The representations and warranties of each Loan Party set forth in this
Agreement shall be true and correct on and as of the date of such Borrowing or
the date of issuance, amendment, renewal or extension of such Letter of Credit,
as applicable.
     (b) At the time of and immediately after giving effect to such Borrowing or
the issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
Affirmative Covenants
          Until the Commitment has expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been paid
in full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, Borrower agrees, and each other Loan
Party executing this Agreement covenants and agrees, (but only to the extent
that any of the following requires performance by such other Loan Party), with
the Lender that:
          SECTION 5.01. Financial Statements; Borrowing Base and Other
Information. The Borrower will furnish to the Lender:
     (a) within 90 days after the end of each fiscal year of the Borrower,
(i) its Annual Report on Form 10-K filed with the SEC for such fiscal year or
(ii) its audited consolidated balance sheet and related statements of
operations, shareholders’ equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by independent public accountants
acceptable to the Lender (without a “going concern” or like qualification or
exception and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements present fairly
in all material respects the financial condition and results of operations of
the Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, accompanied by any management letter
prepared by said accountants;
     (b) within 45 days after the end of each of the first three fiscal quarters
of the Borrower, either (i) its Quarterly Report on Form 10-Q filed with the SEC
for such fiscal quarter or (ii) its consolidated balance sheet and related
statements of operations, shareholders’ equity and cash flows as of the end of
and for such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of the end of)
the previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and results
of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;
     (c) concurrently with any delivery of financial statements under clause
(a) or (b) above, a certificate of a Financial Officer of the Borrower in
substantially the form of Exhibit B (i) certifying, in the case of the financial
statements delivered under clause (b), as presenting fairly in all material
respects the financial condition and results of operations of the Borrower and
its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes, (ii) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (iii) setting forth reasonably
detailed calculations demonstrating compliance with Sections 6.12(a) and (b) and
(iv) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;
     (d) concurrently with any delivery of financial statements under clause
(a) above, a certificate of the accounting firm that reported on such financial
statements stating whether they obtained knowledge during

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the course of their examination of such financial statements of any Default
(which certificate may be limited to the extent required by accounting rules or
guidelines);
     (e) as soon as available, but in any event by the end of each fiscal year
of the Borrower, a copy of the plan and forecast (including a projected
consolidated balance sheet, income statement and funds flow statement) of the
Borrower for each month of such fiscal year (the “Projections”) in form
reasonably satisfactory to the Lender;
     (f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Borrower or any Subsidiary with the SEC, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with any
national securities exchange, or distributed by the Borrower to its shareholders
generally, as the case may be; and
     (g) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or compliance with the terms of this Agreement, as
the Lender may reasonably request.
          SECTION 5.02. Notices of Material Events. The Borrower will furnish to
the Lender prompt written notice of the following:
     (a) the occurrence of any Default;
     (b) receipt of any notice of any governmental investigation or any
litigation commenced or threatened against any Loan Party that (i) seeks damages
in excess of $100,000.00, (ii) seeks injunctive relief, (iii) is asserted or
instituted against any Plan, its fiduciaries or its assets, (iv) alleges
criminal misconduct by any Loan Party, (v) alleges the violation of any law
regarding, or seeks remedies in connection with, any Environmental Laws; (vi)
contests any tax, fee, assessment, or other governmental charge in excess of
$100,000.00, or (vii) involves any product recall;
     (c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
a Material Adverse Effect;
     (d) any Lien (other than Permitted Encumbrances) or claim made or asserted
against any of the Collateral, other than claims asserted in the ordinary course
of business, which do not in any one instance or the aggregate exceed $200,000;
     (e) any loss, damage, or destruction to the Collateral, in one occurrence
or a series of occurrences, in the amount of $200,000.00 or more, whether or not
covered by insurance;
     (f) any and all default notices received under or with respect to any
leased location or public warehouse where a material amount of Collateral is
located (which shall be delivered within two Business Days after receipt
thereof);
     (g) all material amendments to the Borrower’s written distribution
agreements, together with a copy of each such amendment;
     (h) the fact that a Loan Party has entered into a Swap Agreement or an
amendment to a Swap Agreement, together with copies of all agreements evidencing
such Swap Agreement or amendments thereto (which shall be delivered within two
Business Days); and
     (i) any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
          SECTION 5.03. Existence; Conduct of Business. Borrower will, and will
cause each Domestic Subsidiary to, (a) do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its

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legal existence and the rights, qualifications, licenses, permits, franchises,
governmental authorizations, intellectual property rights, licenses and permits
material to the conduct of the business of Borrower and its Subsidiaries taken
as a whole, and maintain all requisite authority to conduct such business in
each jurisdiction in which such business is conducted, to the extent material to
the business of the Borrower and its Subsidiaries, taken as a whole; provided
that the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 6.03 and (b) carry on and conduct its
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted.
          SECTION 5.04. Payment of Obligations. Each Loan Party will, and will
cause each Subsidiary to, pay or discharge all Material Indebtedness and all
other material liabilities and obligations, including Taxes, for which it is
obligated before the same shall become delinquent or in default, except where
(a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) such Loan Party or such Subsidiary has set aside on
its books adequate reserves with respect thereto in accordance with GAAP and
(c) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.
          SECTION 5.05. Maintenance of Properties. Each Loan Party will, and
will cause each Subsidiary to, keep and maintain all property material to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted.
          SECTION 5.06. Books and Records; Inspection Rights. Each Loan Party
will, and will cause each Subsidiary to, (i) keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities and (ii) permit any
representatives designated by the Lender (including employees of the Lender or
any consultants, accountants, lawyers and appraisers retained by the Lender,
upon reasonable prior notice, to visit and inspect its properties, to examine
and make extracts from its books and records, including environmental assessment
reports and Phase I or Phase II studies, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested. The Loan Parties
acknowledge that the Lender, after exercising its rights of inspection, may
prepare certain Reports pertaining to the Loan Parties’ assets for internal use
by the Lender.
          SECTION 5.07. Compliance with Laws. Each Loan Party will, and will
cause each Subsidiary to, comply with all Requirements of Law applicable to it
or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
          SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of
the Loans will be used only for refinancing of existing debt and for working
capital and general corporate purposes. No part of the proceeds of any Loan and
no Letter of Credit will be used, whether directly or indirectly, (i) for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations T, U and X or (ii) to make any Acquisition other than
Permitted Acquisitions.
          SECTION 5.09. Insurance . Each Loan Party will, and will cause each
Subsidiary to, maintain with financially sound and reputable carriers having a
financial strength rating of at least A+ by A.M. Best Company (a) insurance in
such amounts (with no greater risk retention) and against such risks (including
(i) loss or damage by fire and loss in transit; (ii) theft, burglary, pilferage,
larceny, embezzlement, and other criminal activities; (iii) business
interruption; (iv) general liability and (v) and such other hazards, as is
customarily maintained by companies of established repute engaged in the same or
similar businesses operating in the same or similar locations and (b) all
insurance required pursuant to the Collateral Documents. The Borrower will
furnish to the Lender, upon request of the Lender, information in reasonable
detail as to the insurance so maintained.
          SECTION 5.10. Casualty and Condemnation. The Borrower (a) will furnish
to the Lender prompt written notice of any casualty or other insured damage to
any material portion of the Collateral or the commencement of any action or
proceeding for the taking of any material portion of the Collateral or interest
therein under power of eminent domain or by condemnation or similar proceeding
and (b) will ensure that the Net Proceeds of any such event (whether in the form
of insurance proceeds, condemnation awards or otherwise) are collected and
applied in accordance with the applicable provisions of this Agreement and the
Collateral Documents.
          SECTION 5.11. Depository Banks. The Borrower and each Subsidiary will
use their best efforts within a reasonable period after the Closing Date to
cause the Lender to be its principal depository bank and maintain Lender as such
thereafter, including for the maintenance of operating, administrative, cash
management, collection activity,

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and other deposit accounts for the conduct of its business subject, however, to
Lender’s ability to provide such services on commercially reasonable terms.
          SECTION 5.12. Additional Collateral; Further Assurances. (a) Subject
to applicable law, the Borrower and each Subsidiary that is a Loan Party shall,
unless the Lender otherwise consents, cause each of its Domestic Subsidiaries
formed or acquired after the date of this Agreement in accordance with the terms
of this Agreement and each Subsidiary that acquires sufficient assets to become
a Domestic Subsidiary after the date of this Agreement to become a Loan Party by
executing a Loan Guaranty and Security Agreement in form and content reasonably
acceptable to Lender. Upon execution and delivery thereof, each such Person
(i) shall automatically become a Loan Guarantor hereunder and thereupon shall
have all of the rights, benefits, duties, and obligations in such capacity under
the Loan Documents and (ii) will grant Liens to the Lender, in any property of
such Loan Party which constitutes Collateral.
          (b) The Borrower and each Subsidiary that is a Loan Party will cause
(i) 100% of the issued and outstanding Equity Interests of each of its domestic
Subsidiaries and (ii) 65% (or such greater percentage that, due to a change in
applicable law after the date hereof, (1) could not reasonably be expected to
cause the undistributed earnings of such foreign Subsidiary as determined for
U.S. federal income tax purposes to be treated as a deemed dividend to such
foreign Subsidiary’s U.S. parent and (2) could not reasonably be expected to
cause any material adverse tax consequences) of the issued and outstanding
Equity Interests entitled to vote (within the meaning of Treas. Reg.
Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests
not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2) in
each foreign Subsidiary directly owned by the Borrower or any Domestic
Subsidiary to be subject at all times to a first priority, perfected Lien in
favor of the Lender pursuant to the terms and conditions of the Loan Documents
or other security documents as the Lender shall reasonably request.
          (c) Without limiting the foregoing, each Loan Party will, and will
cause each Subsidiary to, execute and deliver, or cause to be executed and
delivered, to the Lender such documents, agreements and instruments, and will
take or cause to be taken such further actions (including the filing and
recording of financing statements, fixture filings and other documents and such
other actions or deliveries of the type required by Section 4.01, as
applicable), which may be required by law or which the Lender may, from time to
time, reasonably request to carry out the terms and conditions of this Agreement
and the other Loan Documents and to ensure perfection and priority of the Liens
against such Loan Party’s Collateral, created or intended to be created by the
Collateral Documents, all at the expense of the Loan Party which owns such
Collateral.
          (d) If any material assets (other than any real property or
improvements thereto or any interest therein) are acquired by the Borrower or
any Subsidiary that is a Loan Party after the Effective Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien in favor of the Security Agreement upon acquisition thereof), the Borrower
will notify the Lender, and, if requested by the Lender, the Borrower will cause
such assets to be subjected to a Lien securing the Obligations and will take,
and cause the Subsidiary Loan Parties to take, such actions as shall be
necessary or reasonably requested by the Lender to grant and perfect such Liens,
including actions described in paragraph (c) of this Section, all at the expense
of the Borrower.
ARTICLE VI
Negative Covenants
          Until the Commitment has expired or terminated and the principal of
and interest on each Loan and all fees, expenses and other amounts payable under
any Loan Document have been paid in full and all Letters of Credit have expired
or terminated and all LC Disbursements shall have been reimbursed, the Borrower
agrees, and each other Loan Party covenants and agrees (but only to the extent
that any of the following requires performance by such other Loan Party, with
the Lender that:
          SECTION 6.01. Indebtedness. It will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
     (a) the Obligations incurred by it;
     (b) Indebtedness existing on the date hereof and set forth in Schedule 6.01
and extensions, renewals and replacements of any such Indebtedness in accordance
with clause (f) hereof;

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     (c) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to
the Borrower or any other Subsidiary, provided that (i) Indebtedness of any
Subsidiary that is not a Loan Party to the Borrower or to any Subsidiary that is
a Loan Party shall be subject to Section 6.04(e) and (ii) Indebtedness of the
Borrower to any Subsidiary and Indebtedness of any Subsidiary that is a Loan
Party to any Subsidiary that is not a Loan Party shall be subordinated to the
Obligations on terms reasonably satisfactory to the Lender;
     (d) Guarantees by the Borrower of Indebtedness of any Subsidiary and by any
Subsidiary of Indebtedness of the Borrower or any other Subsidiary, provided
that (i) the Indebtedness so Guaranteed is permitted by this Section 6.01,
(ii) Guarantees by the Borrower or any Subsidiary that is a Loan Party of
Indebtedness of any Subsidiary that is not a Loan Party shall be subject to the
provision to Section 6.04(f) and (iii) Guarantees permitted under this clause
(d) shall be subordinated to any Obligations of the applicable Subsidiary on the
same terms as the Indebtedness so Guaranteed is subordinated to the Obligations;
     (e) Indebtedness of the Borrower or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets (whether
or not constituting purchase money Indebtedness), including Capital Lease
Obligations and any Indebtedness assumed in connection with the acquisition of
any such assets or secured by a Lien on any such assets prior to the acquisition
thereof, and extensions, renewals and replacements of any such Indebtedness in
accordance with clause (f) hereof; provided that (i) such Indebtedness is
incurred prior to or within 90 days after such acquisition or the completion of
such construction or improvement and (ii) the aggregate principal amount of
Indebtedness permitted by this clause (e) shall not exceed $100,000 or when
combined with the principal amount of the Indebtedness permitted by clause
(b) above, $200,000;
     (f) Indebtedness which represents an extension, refinancing, or renewal of
any of the Indebtedness described in clauses (b) and (e) hereof; provided that,
(i) the principal amount or interest rate of such Indebtedness is not increased
above the maximum amount of such Indebtedness then or previously permitted
hereunder, (ii) any Liens securing such Indebtedness are not extended to any
additional property of any Loan Party, (iii) no Loan Party that is not
originally obligated with respect to repayment of such Indebtedness is required
to become obligated with respect thereto, (iv) such extension, refinancing or
renewal does not result in a shortening of the average weighted maturity of the
Indebtedness so extended, refinanced or renewed, (v) the terms of any such
extension, refinancing, or renewal are not less favorable to the obligor
thereunder than the original terms of such Indebtedness and (iv) if the
Indebtedness that is refinanced, renewed, or extended was subordinated in right
of payment to the Obligations, then the terms and conditions of the refinancing,
renewal, or extension Indebtedness must include subordination terms and
conditions that are at least as favorable to the Lender as those that were
applicable to the refinanced, renewed, or extended Indebtedness;
     (g) Indebtedness owed to any person providing workers’ compensation,
health, disability or other employee benefits or property, casualty or liability
insurance, pursuant to reimbursement or indemnification obligations to such
person, in each case incurred in the ordinary course of business;
     (h) Indebtedness of the Borrower or any Subsidiary in respect of
performance bonds, bid bonds, appeal bonds, surety bonds and similar
obligations, in each case provided in the ordinary course of business;
          SECTION 6.02. Liens. No Loan Party will, nor will it permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
     (a) Liens created pursuant to any Loan Document;
     (b) Permitted Encumbrances;
     (c) any Lien on any property or asset of the Borrower or any Subsidiary
existing on the date hereof and set forth in Schedule 6.02; provided that
(i) such Lien shall not apply to any other property or asset of the Borrower or
Subsidiary and (ii) such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof, above the maximum
amount of such Indebtedness then or previously permitted hereunder;

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     (d) Liens on fixed or capital assets acquired, constructed or improved by
the Borrower or any Subsidiary; provided that (i) such security interests secure
Indebtedness permitted by clause (e) of Section 6.01, (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or within
90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets and (iv) such
security interests shall not apply to any other property or assets of the
Borrower or Subsidiary;
     (e) Liens of a collecting bank arising in the ordinary course of business
under Section 4-208 of the Uniform Commercial Code in effect in the relevant
jurisdiction covering only the items being collected upon;
     (f) Liens arising out of sale and leaseback transactions permitted by
Section 6.06; and
     (g) Liens granted by a Subsidiary that is not a Loan Party in favor of the
Borrower or another Loan Party in respect of Indebtedness owed by such
Subsidiary.
          SECTION 6.03. Fundamental Changes. (a) No Loan Party will, nor will it
permit any Subsidiary to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Event of Default shall have occurred and be continuing (i) any
Person may merge into the Borrower in a transaction in which the surviving
entity is the Borrower, (ii) any Person may merge into any Subsidiary in a
transaction in which the surviving entity is a Subsidiary and, if any party to
such merger is a Subsidiary that is a Loan Party, is or becomes a Subsidiary
that is Loan Party concurrently with such merger, and (iii) any Subsidiary that
is not a Loan Party may liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lender; provided that any
such merger involving a Person that is not a wholly owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by
Section 6.04.
          (b) No Loan Party will, nor will it permit any of its Subsidiaries to,
engage to any material extent in any business other than businesses of the type
conducted by the Borrower and its Subsidiaries on the date of execution of this
Agreement and businesses reasonably related thereto.
          SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. No Loan Party will, nor will it permit any Subsidiary to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a Loan Party and a wholly owned Subsidiary prior to such merger) any
capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit (whether through
purchase of assets, merger or otherwise), except:
     (a) Permitted Investments, subject to control agreements in favor of the
Lender or otherwise subject to a perfected security interest in favor of the
Lender;
     (b) Permitted Acquisitions, subject to Lender’s receipt of any Loan
Guarantees and Security Agreements in favor of the Lender required pursuant to
Section 5.12;
     (c) investments in existence on the date of this Agreement and described in
Schedule 6.04;
     (d) investments by the Borrower and the Subsidiaries in Equity Interests in
their respective Subsidiaries, provided that (A) any such Equity Interests held
by a Loan Party shall be pledged pursuant to the Security Agreement (subject to
the limitations applicable to common stock of a foreign Subsidiary referred to
in Section 5.12) and (B) the aggregate amount of investments by Loan Parties in
Subsidiaries that are not Loan Parties (together with outstanding intercompany
loans permitted under clause (B) to the proviso to Section 6.04(e) and
outstanding Guarantees permitted under the proviso to Section 6.04(f)) shall not
exceed $100,000.00 at any time outstanding (in each case determined without
regard to any write-downs or write-offs);
     (e) loans or advances made by the Borrower to any Subsidiary and made by
any Subsidiary to the Borrower or any other Subsidiary, provided that (A) any
such loans and advances made by a Loan Party shall be subject to the Security
Agreement and if such are evidenced by a promissory note, the same shall be

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endorsed and delivered to the Lender and (B) the amount of such loans and
advances made by Loan Parties to Subsidiaries that are not Loan Parties
(together with outstanding investments permitted under clause (B) to the proviso
to Section 6.04(d) and outstanding Guarantees permitted under the proviso to
Section 6.04(f)) shall not exceed $100,000.00 at any time outstanding (in each
case determined without regard to any write-downs or write-offs);
     (f) Guarantees constituting Indebtedness permitted by Section 6.01,
provided that the aggregate principal amount of Indebtedness of Subsidiaries
that are not Loan Parties that is Guaranteed by any Loan Party shall (together
with outstanding investments permitted under clause (B) to the proviso to
Section 6.04(d) and outstanding intercompany loans permitted under clause (B) to
the proviso to Section 6.04(e)) shall not exceed $100,000.00 at any time
outstanding (in each case determined without regard to any write-downs or
write-offs);
     (g) loans or advances made by a Loan Party to its employees on an
arms-length basis in the ordinary course of business consistent with past
practices for travel and entertainment expenses, relocation costs and similar
purposes;
     (h) investments in the form of Swap Agreements permitted by Section 6.07;
     (i) investments of any Person existing at the time such Person becomes a
Subsidiary of the Borrower or consolidates or merges with the Borrower or any of
the Subsidiaries (including in connection with a Permitted Acquisition) so long
as such investments were not made in contemplation of such Person becoming a
Subsidiary or of such merger;
     (j) investments received in connection with the dispositions of assets
permitted by Section 6.05;
     (k) investments constituting deposits described in clauses (c) and (d) of
the definition of the term “Permitted Encumbrances”; and
     (l) capital stock or other securities with a maximum aggregate value or
face amount not exceeding $100,000 at any time, acquired in connection with the
compromise, settlement or collection of accounts receivable and provided there
exists no Event of Default at such time.
          SECTION 6.05. Asset Sales. No Loan Party will, nor will it permit any
Subsidiary to, sell, transfer, lease or otherwise dispose of any asset,
including any Equity Interest owned by it, nor will the Borrower permit any
Subsidiary to issue any additional Equity Interest in such Subsidiary (other
than to the Borrower or another Subsidiary in compliance with Section 6.04),
except:
     (a) sales, transfers and dispositions of (i) inventory in the ordinary
course of business and (ii) used, obsolete, worn out or surplus equipment or
property in the ordinary course of business;
     (b) sales, transfers and dispositions to the Borrower or any Subsidiary,
provided that any such sales, transfers or dispositions involving a Subsidiary
that is not a Loan Party shall be made in compliance with Section 6.09;
     (c) sales, transfers and dispositions of accounts receivable in connection
with the compromise, settlement or collection thereof;
     (d) sales, transfers and dispositions of investments permitted
Section 6.04;
     (e) sale and leaseback transactions permitted by Section 6.06; and
     (f) dispositions resulting from any casualty or other insured damage to, or
any taking under power of eminent domain or by condemnation or similar
proceeding of, any property or asset of the Borrower or any Subsidiary.
provided that all sales, transfers, leases and other dispositions permitted
hereby (other than those permitted by paragraphs (b) and (f) above) shall be
made for fair value and for at least 75% cash consideration.

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          SECTION 6.06. Sale and Leaseback Transactions. No Loan Party will, nor
will it permit any Subsidiary to, enter into any arrangement, directly or
indirectly, whereby it shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property that it intends to use
for substantially the same purpose or purposes as the property sold or
transferred, except for any such sale of any fixed or capital assets by the
Borrower or any Subsidiary that is made for cash consideration in an amount not
less than the fair value of such fixed or capital asset and is consummated
within 90 days after the Borrower or such Subsidiary acquires or completes the
construction of such fixed or capital asset.
          SECTION 6.07. Swap Agreements. No Loan Party will, nor will it permit
any Subsidiary to, enter into any Swap Agreement, except (a) Swap Agreements
entered into to hedge or mitigate risks to which the Borrower or any Subsidiary
has actual exposure (other than those in respect of Equity Interests of the
Borrower or any of its Subsidiaries), and (b) Swap Agreements entered into in
order to effectively cap, collar or exchange interest rates (from fixed to
floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or investment of the Borrower or
any Subsidiary.
          SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness.
(a) No Loan Party will, nor will it permit any Subsidiary to, declare or make,
or agree to pay or make, directly or indirectly, any Restricted Payment, or
incur any obligation (contingent or otherwise) to do so, except (i) the Borrower
may declare and pay dividends with respect to its common stock payable solely in
additional shares of its common stock, and, with respect to its preferred stock,
payable solely in additional shares of such preferred stock or in shares of its
common stock, (ii) Subsidiaries may declare and pay dividends ratably with
respect to their Equity Interests, (iii) the Borrower may make Restricted
Payments, during any fiscal year, pursuant to and in accordance with stock
option plans or other benefit plans for management or employees of the Borrower
and its Subsidiaries and (iv) the Borrower may purchase stock of the Borrower
and pay Permitted Dividends during any fiscal year up to an aggregate amount for
all such purchases and payments of $1,000,000, as long as no Default exists at
the time of or would result from such payments. “Permitted Dividends” as used
herein shall be dividends in an amount not to exceed $500,000 in any fiscal
year.
          (b) No Loan Party will, nor will it permit any Subsidiary to, make or
agree to pay or make, directly or indirectly, any payment or other distribution
(whether in cash, securities or other property) of or in respect of principal of
or interest on any Indebtedness, or any payment or other distribution (whether
in cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any Indebtedness, except:
     (i) payment of Indebtedness created under the Loan Documents;
     (ii) payment of regularly scheduled interest and principal payments as and
when due in respect of any Indebtedness, other than payments in respect of the
Subordinated Indebtedness prohibited by the subordination provisions thereof;
     (iii) refinancings of Indebtedness to the extent permitted by Section 6.01;
and
     (iv) payment of secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such Indebtedness.
          SECTION 6.09. Transactions with Affiliates. No Loan Party will, nor
will it permit any Subsidiary to, sell, lease or otherwise transfer any property
or assets to, or purchase, lease or otherwise acquire any property or assets
from, or otherwise engage in any other transactions with, any of its Affiliates,
except (a) transactions that (i) are in the ordinary course of business and
(ii) are at prices and on terms and conditions not less favorable to the
Borrower or such Subsidiary than could be obtained on an arm’s-length basis from
unrelated third parties, (b) transactions between or among the Borrower and any
Subsidiary that is a Loan Party not involving any other Affiliate, (c) any
investment permitted by Sections 6.04(d) any Indebtedness permitted under
Section 6.01(e) any Restricted Payment permitted by Section 6.08, (f) loans or
advances to employees permitted under Section 6.04, (g) the payment of
reasonable fees to directors of the Borrower or any Subsidiary who are not
employees of the Borrower or any Subsidiary, and compensation and employee
benefit arrangements paid to, and indemnities provided for the benefit of,
directors, officers, employees or former employees of the Borrower or its
Subsidiaries in the ordinary course of business and (h) any issuances of
securities or other payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment agreements, stock options and stock
ownership plans approved by the Borrower’s board of directors.

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          SECTION 6.10. Restrictive Agreements. No Loan Party will, nor will it
permit any Subsidiary to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of such Loan Party or any of its Subsidiaries
to create, incur or permit to exist any Lien upon any of its property or assets,
or (b) the ability of any Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay loans or
advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of
the Borrower or any other Subsidiary; provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by any Loan Document,
(ii) the foregoing shall not apply to restrictions and conditions existing on
the date hereof identified on Schedule 6.10 (and shall not apply to any
extension or renewal of, or any amendment or modification that does not expand
the scope of, any such restriction or condition), (iii) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iv) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases [and
other contracts] restricting the assignment thereof.
          SECTION 6.11. Amendment of Material Documents. No Loan Party will, nor
will it permit any Subsidiary to, amend, modify or waive any of its rights under
(a) agreement relating to any Subordinated Indebtedness, (b) its certificate of
incorporation, by-laws, operating, management or partnership agreement or other
organizational documents or (c) any written distribution agreement of the
Borrower to the extent any such amendment, modification or waiver would be
adverse to the Lender.
          SECTION 6.12. Financial Covenants.
          (a) Fixed Charge Coverage Ratio. The Borrower will not permit as of
the end of each fiscal quarter the Fixed Charge Coverage Ratio, determined for
the period of four consecutive fiscal quarters then ending to be less than 1.40
to 1.0.
          (b) Leverage Ratio. The Borrower will not permit as of the end of each
fiscal quarter, the Leverage Ratio, (with Total Funded Debt measured at the end
of such quarter and EBITDA determined for the period of four consecutive fiscal
quarters then ending), to be greater than 2.75 to 1.0.
ARTICLE VII
Events of Default
          If any of the following events (“Events of Default”) shall occur:
     (a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;
     (b) the Borrower shall fail to pay any interest on any Loan or any fee or
any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three
Business Days;
     (c) any representation or warranty made or deemed made by or on behalf of
any Loan Party or any Subsidiary in or in connection with this Agreement or any
Loan Document or any amendment or modification thereof or waiver thereunder, or
in any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
materially incorrect when made or deemed made; provided, however, if any Event
of Default under this Subsection (c) occurs on account of a misrepresentation
made in good faith under Section 3.16 hereof, the Borrower shall have 30
consecutive days from the earlier of (i) the date the Borrower becomes aware of
the facts forming the basis of the Event of Default, or (ii) the date notice of
such Event of Default shall have been made to the Borrower by the Lender, in
which to take the steps necessary to remedy the underlying facts and render the
representation or warranty true and correct;
     (d) any Loan Party shall fail to observe or perform any covenant, condition
or agreement contained in Section 5.02(a), 5.03 (with respect to a Loan Party’s
existence) or 5.08 or in Article VI;

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     (e) any Loan Party shall fail to observe or perform any covenant, condition
or agreement contained in this Agreement (other than those which constitute a
default under another Section of this Article), and such failure shall continue
unremedied for a period of (i) 5 days after the earlier of such breach or notice
thereof from the Lender if such breach relates to terms or provisions of
Section 5.01, 5.02 (other than Section 5.02(a)), 5.03 through 5.07, 5.09, 5.10
or 5.12 of this Agreement or (ii) 15 days after the earlier of such breach or
notice thereof from the Lender if such breach relates to terms or provisions of
any other Section of this Agreement;
     (f) any Loan Party or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable, unless
such failure is being contested in compliance with Section 5.04;
     (g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness;
     (h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of a Loan Party or any Subsidiary of any Loan Party or its debts, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Loan Party or any Subsidiary of any Loan
Party or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for 60 days or an order or
decree approving or ordering any of the foregoing shall be entered;
     (i) any Loan Party or any Subsidiary of any Loan Party shall
(i) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for such Loan Party or
Subsidiary of any Loan Party or for a substantial part of its assets, (iv) file
an answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the foregoing;
     (j) any Loan Party or any Subsidiary of any Loan Party shall become unable,
admit in writing its inability or fail generally to pay its debts as they become
due;
     (k) one or more judgments for the payment of money in an aggregate amount
in excess of $500,000 shall be rendered against any Loan Party, and the same
shall remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets with an aggregate
market value in excess of $200,000 of any Loan Party or to enforce any such
judgment or any Loan Party shall fail within 30 days to discharge one or more
non-monetary judgments or orders which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, which judgments or
orders, in any such case, are not stayed on appeal or otherwise being
appropriately contested in good faith by proper proceedings diligently pursued;
     (l) an ERISA Event shall have occurred that, in the opinion of the Lender,
when taken together with all other ERISA Events that have occurred, could
reasonably be expected to result in a Material Adverse Effect;
     (m) a Change in Control shall occur;
     (n) the occurrence of any “default”, as defined in any Loan Document (other
than this Agreement) or the breach of any of the terms or provisions of any Loan
Document (other than this Agreement), which

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default or breach continues beyond any period of grace therein provided,
provided if such default is on account of a default by a Loan Party other than
the Borrower, that such default also could reasonably be expected to have a
Material Adverse Effect;
     (o) the Loan Guaranty shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of the Loan Guaranty, or any Loan Guarantor shall fail to
comply with any of the terms or provisions of the Loan Guaranty to which it is a
party and such could reasonably be expected to have a Material Adverse Effect,
or any Loan Guarantor shall deny that it has any further liability under the
Loan Guaranty to which it is a party, or shall give notice to such effect;
     (p) any Collateral Document shall for any reason fail to create a valid and
perfected first priority security interest in any Collateral appropriately
described therein and purported to be covered thereby, after any applicable cure
period as set forth in subsection (c) hereof, except as permitted by the terms
of any Collateral Document, or any Collateral Document shall fail to remain in
full force or effect or any action shall be taken to discontinue or to assert
the invalidity or unenforceability of any Collateral Document, or there shall
exist a default under any Collateral Document beyond any applicable notice or
cure period, provided if such default is on account of a default by a Loan Party
other than the Borrower, that such default also could reasonably be expected to
have a Material Adverse Effect; or
     (q) any material provision of any Loan Document for any reason ceases to be
valid, binding and enforceable in accordance with its terms (or any Loan Party
shall challenge the enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such assertion, that
any provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms).
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Lender may, by notice to the Borrower,
take either or both of the following actions, at the same or different times:
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Loans then outstanding to be due and payable
in whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; and in case of any event with respect to the Borrower described in
clause (h) or (i) of this Article, the Commitments shall automatically terminate
and the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall automatically become due and payable, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower.
Upon the occurrence and the continuance of an Event of Default, the Lender may
increase the rate of interest applicable to the Loans and other Obligations as
set forth in Section 2.12(c) of this Agreement and exercise any rights and
remedies provided to the Lender under the Loan Documents or at law or equity,
including all remedies provided under the UCC.
ARTICLE VIII
Miscellaneous
          SECTION 8.01. Notices. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by facsimile, as follows:

         
 
  (i)   if to any Loan Party, to the Borrower at:
 
       
 
      Transcat, Inc.
 
      35 Vantage Point Drive
 
      Rochester, New York 14624
 
      Attention: John J. Zimmer, Vice President Finance and Chief Financial
Officer
 
      Facsimile No: (585) 352-7788

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  (ii)   if to the Lender, to JPMorgan Chase Bank, N.A. at:
 
       
 
      JPMorgan Chase Bank, N.A.
 
      One Chase Square
 
      Rochester, New York 14643
 
      Attention: Thomas Strasenburgh, Vice President
 
      Facsimile No: (585) 258-6609

All such notices and other communications (i) sent by hand or overnight courier
service, or mailed by certified or registered mail, shall be deemed to have been
given when received or (ii) sent by facsimile, with appropriate confirmation of
receipt, shall be deemed to have been given when sent, provided that if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient.
          (b) Notices and other communications to the Lender hereunder may be
delivered or furnished by electronic communications (including e-mail and
internet or intranet websites) pursuant to procedures approved by the Lender;
provided that the foregoing shall not apply to notices pursuant to Article II or
to compliance and no Event of Default certificates delivered pursuant to
Section 5.01(d) unless otherwise agreed by the Lender. The Lender or the
Borrower (on behalf of the Loan Parties) may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications. All such notices and
other communications (i) sent to an e-mail address shall be deemed received upon
the sender’s receipt of an acknowledgement from the intended recipient (such as
by the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if not given during the normal business
hours of the recipient, such notice or communication shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient, and (ii) posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail address
as described in the foregoing clause (b)(i) of notification that such notice or
communication is available and identifying the website address therefor.
          (c) Any party hereto may change its address or facsimile number for
notices and other communications hereunder by notice to the other parties
hereto.
          SECTION 8.02. Waivers; Amendments. (a) No failure or delay by the
Lender in exercising any right or power hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Lender hereunder and under any other Loan Document are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of any Loan Document or consent to any departure by any
Loan Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any Event
of Default, regardless of whether the Lender may have had notice or knowledge of
such Event of Default at the time.
          (b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except (i) in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrower and the Lender, or (ii) in the case of any other
Loan Document, pursuant to an agreement or agreements in writing entered into by
the Lender and the Loan Party or Loan Parties that are parties thereto.
          SECTION 8.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower
shall pay (i) all reasonable out-of-pocket expenses incurred by the Lender and
its Affiliates, including the reasonable fees, charges and disbursements of
counsel for the Lender (whether outside counsel or the allocated costs of its
internal legal department), in connection with the credit facilities provided
for herein, the preparation and administration of the Loan Documents or any
amendments, modifications or waivers of the provisions of the Loan Documents
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the Lender
in connection with the issuance, amendment, renewal or extension of any Letter
of Credit or any demand for payment thereunder and (iii) all reasonable
out-of-pocket expenses incurred by the Lender, including the fees, charges and
disbursements of any counsel for the Lender (whether outside counsel or the
allocated costs of

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its internal legal department), in connection with the enforcement, collection
or protection of its rights in connection with the Loan Documents, including its
rights under this Section, or in connection with the Loans made or Letters of
Credit issued hereunder, including all such out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of such Loans or
Letters of Credit. Expenses being reimbursed by the Borrower under this Section
include, without limiting the generality of the foregoing, costs and expenses
incurred in connection with the following, provided that Borrower shall be
responsible for expenses under subparagraphs I and II below only if incurred
after the occurrence and during the continuance of a Default:
     (I) appraisals;
     (II) field examinations and the preparation of Reports based on the fees
charged by a third party retained by the Lender or the internally allocated fees
for each Person employed by the Lender with respect to each field examination;
     (III) lien searches;
     (IV) taxes, fees and other charges for filing financing statements and
continuations, and other actions to perfect, protect, and continue the Lender’s
Liens;
     (V) sums paid or incurred to take any action required of any Loan Party
under the Loan Documents that such Loan Party fails to pay or take; and
     (VI) forwarding loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the accounts and lock boxes pursuant
to separate agreements between Borrower and Lender, and costs and expenses of
preserving and protecting the Collateral as provided in any Collateral Document.
All of the foregoing costs and expenses may be charged to the Borrower as
Revolving Loans or to another deposit account, all as described in
Section 2.17(c).
          (b) The Borrower shall indemnify the Lender, and each Related Party of
the Lender(each such Person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, penalties,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of the Loan Documents or any agreement or instrument
contemplated thereby, the performance by the parties hereto of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Lender to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of
Credit), (iii) any actual or alleged presence or release of Hazardous Materials
on or from any property owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, penalties,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
          (c) The relationship between any Loan Party on the one hand and the
Lender on the other hand shall be solely that of debtor and creditor. The Lender
(i) shall not have any fiduciary responsibilities to any Loan Party or (ii) does
not undertake any responsibility to any Loan Party to review or inform such Loan
Party of any matter in connection with any phase of any Loan Party’s business or
operations. To the extent permitted by applicable law, no Loan Party shall
assert, and each hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement or any agreement or instrument contemplated hereby,
the Transactions, any Loan or Letter of Credit or the use of the proceeds
thereof.
          (d) All amounts due under this Section shall be payable promptly after
written demand therefor.
          SECTION 8.04. Successors and Assigns. . (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby.

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Except as provided below, neither party may assign or otherwise transfer any of
its rights or obligations hereunder without the prior written consent of the
other (which consent in the case of the Borrower shall not be unreasonably
withheld) (and any attempted assignment or transfer without such consent shall
be null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of the Lender) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
          (b) The Lender may assign all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it ) without the Borrower’s consent (i) to
one or more assignees after the occurrence of an Event of Default or (ii) to an
Affiliate of the Lender at any time. Subject to notification of an assignment,
the assignee shall be a party hereto and, to the extent of the interest
assigned, have the rights and obligations of the Lender under this Agreement,
and the Lender shall, to the extent of the interest assigned, be released from
its obligations under this Agreement (and, in the case of an assignment covering
all of the Lender’s rights and obligations under this Agreement, the Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.13, 2.14, 2.15 and 8.03). Any assignment or transfer by
the Lender of rights or obligations under this Agreement that does not comply
with this paragraph shall be treated for purposes of this Agreement as a sale by
the Lender of a participation in such rights and obligations in accordance with
paragraph (c) of this Section.
          (c) The Lender may, without the consent of the Borrower, sell
participations to one or more banks or other entities (a “Participant”) up to
25% of the Lender’s rights and obligations under this Agreement (including all
or a portion of its Commitment and the Loans owing to it); provided that (i) the
Lender’s obligations under this Agreement shall remain unchanged, (ii) the
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrower shall continue to deal
solely and directly with the Lender in connection with the Lender’s rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
the Lender sells such a participation shall provide that the Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that the Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver that
will increase the Participant’s participation interest, extend the time of
payment or maturity date of any payment, reduce any payment amount, change any
rate of interest or commitment or other fee, or release any collateral of
guarantee for the Obligations Subject to paragraph (d) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.14 and 2.15 to the same extent as if it were the Lender and had
acquired its interest by assignment.
          (d) A Participant shall not be entitled to receive any greater payment
under Section 2.14 or 2.15 than the Lender would have been entitled to receive
with respect to the participation sold to such Participant, unless the sale of
the participation to such Participant is made with the Borrower’s prior written
consent.
          (e) The Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
the Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release the Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for the Lender as a party
hereto.
          SECTION 8.05. Survival. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Lender may have had notice or
knowledge of any Event of Default or incorrect representation or warranty at the
time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 8.03
shall survive and remain in full force and effect regardless of the consummation
of the transactions contemplated hereby, the repayment of the Loans, the
expiration or termination of the Letters of Credit and the Commitments or the
termination of this Agreement or any provision hereof.

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          SECTION 8.06. Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Loan Documents and any separate letter agreements with respect to fees payable
to the Lender constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Lender and when the Lender shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
facsimile shall be effective as delivery of a manually executed counterpart of
this Agreement.
          SECTION 8.07. Severability. Any provision of any Loan Document held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions thereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
          SECTION 8.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the Obligations held by Lender, irrespective of
whether or not Lender shall have made any demand under the Loan Documents and
although such obligations may be unmatured. The rights of Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which Lender may have.
          SECTION 8.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) The Loan Documents (other than those containing a contrary express
choice of law provision) shall be governed by and construed in accordance with
the laws of the State of New York, but giving effect to federal laws applicable
to national banks.
          (b) Each Loan Party hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any U.S.
Federal or New York State court sitting in Rochester, New York in any action or
proceeding arising out of or relating to any Loan Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement or any other Loan
Document shall affect any right that the Lender, the Lender or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
any other Loan Document against any Loan Party or its properties in the courts
of any jurisdiction.
          (c) Each Loan Party hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Document in any court referred to in paragraph (b) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
          (d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
          SECTION 8.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE

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BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
          SECTION 8.11. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
          SECTION 8.12. Confidentiality. The Lender agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to
(i) any permitted assignee of or Participant in, or any prospective permitted
assignee of or Participant in, any of its rights or obligations under this
Agreement or (ii) any actual or prospective counterparty (or its advisors) to
any swap or derivative transaction relating to the Loan Parties and their
obligations, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Lender on a nonconfidential basis
from a source other than the Borrower. For the purposes of this Section,
“Information” means all information received from the Borrower relating to the
Borrower or its business, other than any such information that is available to
the Lender on a nonconfidential basis prior to disclosure by the Borrower. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
          SECTION 8.13. Nonreliance; Violation of Law. The Lender hereby
represents that it is not relying on or looking to any margin stock for the
repayment of the Borrowings provided for herein. Anything contained in this
Agreement to the contrary notwithstanding, the Lender shall not be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
          SECTION 8.14. USA PATRIOT Act. The Lender is subject to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”) and hereby notifies the Borrower that
pursuant to the requirements of the Act, it is required to obtain, verify and
record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow such
Lender to identify the Borrower in accordance with the Act.
          SECTION 8.15. Disclosure. Each Loan Party hereby acknowledges and
agrees that the Lender and/or its Affiliates from time to time may hold
investments in, make other loans to or have other relationships with any of the
Loan Parties and their respective Affiliates.
          SECTION 8.16. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
(Signature Page Follows)

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.

                  TRANSCAT, INC.    
 
           
 
  By:   /s/ Charles P. Hadeed    
 
                Name: Charles P. Hadeed         Title: President and Chief
Operating Officer    
 
                JPMORGAN CHASE BANK, N.A.    
 
           
 
  By:   /s/ Thomas C. Strasenburgh    
 
                Name: Thomas C. Strasenburgh         Title: Vice President    

[Signature Page to Credit Agreement]