EXHIBIT 10.1

EXECUTION VERSION

REVOLVING CREDIT

AND

SECURITY AGREEMENT

PNC BANK, NATIONAL ASSOCIATION

(AS LENDER AND AS AGENT)

WITH

MODUSLINK CORPORATION,

MODUSLINK PTS, INC.

and

each other Person that becomes a borrower hereunder

(BORROWERS)

AND

MODUS MEDIA INTERNATIONAL DOCUMENTATION SERVICES (IRELAND), LIMITED,

MODUS MEDIA INTERNATIONAL (IRELAND) LIMITED,

SALESLINK MEXICO HOLDING CORP.,

SOL HOLDINGS, INC.

and

each other Person that becomes a guarantor hereunder

(GUARANTORS)

June 30, 2014

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TABLE OF CONTENTS

 

         Page   I.   DEFINITIONS      1   

  1.1.

 

Accounting Terms

     1   

  1.2.

 

General Terms

     2   

  1.3.

 

Uniform Commercial Code Terms

     49   

  1.4.

 

Certain Matters of Construction

     50    II.   ADVANCES, PAYMENTS      51   

  2.1.

 

Revolving Advances

     51   

  2.2.

 

Procedures for Requesting Revolving Advances; Procedures for Selection of
Applicable Interest Rates for All Advances

     52   

  2.3.

 

[RESERVED]

     54   

  2.4.

 

Swing Loans.

     54   

  2.5.

 

Disbursement of Advance Proceeds

     55   

  2.6.

 

Making and Settlement of Advances

     56   

  2.7.

 

Maximum Advances

     58   

  2.8.

 

Manner and Repayment of Advances

     58   

  2.9.

 

Repayment of Excess Advances

     59   

  2.10.

 

Statement of Account

     59   

  2.11.

 

Letters of Credit

     59   

  2.12.

 

Issuance of Letters of Credit

     60   

  2.13.

 

Requirements For Issuance of Letters of Credit

     60   

  2.14.

 

Disbursements, Reimbursement

     61   

  2.15.

 

Repayment of Participation Advances

     62   

  2.16.

 

Documentation

     63   

  2.17.

 

Determination to Honor Drawing Request

     63   

  2.18.

 

Nature of Participation and Reimbursement Obligations

     63   

  2.19.

 

Liability for Acts and Omissions

     65   

  2.20.

 

Mandatory Prepayments

     66   

  2.21.

 

Use of Proceeds

     67   

  2.22.

 

Defaulting Lender

     67   

  2.23.

 

Payment of Obligations

     70   

  2.24.

 

Increase in Maximum Revolving Advance Amount

     70    III.   INTEREST AND FEES      72   

  3.1.

 

Interest

     72   

  3.2.

 

Letter of Credit Fees

     73   

  3.3.

 

Closing Fee and Facility Fee

     74   

  3.4.

 

Collateral Monitoring Fee and Collateral Evaluation Fee

     75   

  3.5.

 

Computation of Interest and Fees

     76   

  3.6.

 

Maximum Charges

     76   

  3.7.

 

Increased Costs

     76   

  3.8.

 

Basis For Determining Interest Rate Inadequate or Unfair

     77   

 

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  3.9.

 

Capital Adequacy

     78   

  3.10.

 

Taxes

     78   

  3.11.

 

Replacement of Lenders

     82    IV.   COLLATERAL: GENERAL TERMS      82   

  4.1.

 

Security Interest in the Collateral

     82   

  4.2.

 

Perfection of Security Interest

     83   

  4.3.

 

Preservation of Collateral

     84   

  4.4.

 

Ownership and Location of Collateral

     84   

  4.5.

 

Defense of Agent’s and Lenders’ Interests

     85   

  4.6.

 

Inspection of Premises

     85   

  4.7.

 

Appraisals

     86   

  4.8.

 

Receivables; Deposit Accounts and Securities Accounts

     86   

  4.9.

 

Inventory

     89   

  4.10.

 

Maintenance of Equipment

     89   

  4.11.

 

Exculpation of Liability

     89   

  4.12.

 

Financing Statements

     90    V.   REPRESENTATIONS AND WARRANTIES      90   

  5.1.

 

Authority

     90   

  5.2.

 

Formation and Qualification

     90   

  5.3.

 

Survival of Representations and Warranties

     91   

  5.4.

 

Tax Returns

     91   

  5.5.

 

Financial Statements

     91   

  5.6.

 

Entity Names

     92   

  5.7.

 

O.S.H.A. Environmental Compliance and Flood Insurance

     92   

  5.8.

 

Solvency; No Litigation, Violation, Indebtedness or Default; ERISA Compliance

     93   

  5.9.

 

Patents, Trademarks, Copyrights and Licenses

     95   

  5.10.

 

Licenses and Permits

     95   

  5.11.

 

Default of Indebtedness

     95   

  5.12.

 

No Default

     95   

  5.13.

 

No Burdensome Restrictions

     95   

  5.14.

 

No Labor Disputes

     95   

  5.15.

 

Margin Regulations

     95   

  5.16.

 

Investment Company Act

     96   

  5.17.

 

Disclosure

     96   

  5.18.

 

Swaps

     96   

  5.19.

 

Business and Property of Loan Parties

     96   

  5.20.

 

Ineligible Securities

     96   

  5.21.

 

[RESERVED]

     96   

  5.22.

 

Equity Interests

     96   

  5.23.

 

Commercial Tort Claims

     97   

  5.24.

 

Letter of Credit Rights

     97   

  5.25.

 

Material Contracts

     97   

 

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VI.   AFFIRMATIVE COVENANTS      97   

  6.1.

 

Compliance with Laws

     97   

  6.2.

 

Conduct of Business and Maintenance of Existence and Assets

     97   

  6.3.

 

Books and Records

     97   

  6.4.

 

Payment of Taxes

     98   

  6.5.

 

Financial Covenants

     98   

  6.6.

 

Insurance

     98   

  6.7.

 

Payment of Indebtedness and Leasehold Obligations

     100   

  6.8.

 

Environmental Matters

     100   

  6.9.

 

Standards of Financial Statements

     101   

  6.10.

 

[RESERVED]

     101   

  6.11.

 

Execution of Supplemental Instruments

     101   

  6.12.

 

Government Receivables

     101   

  6.13.

 

Membership / Partnership Interests

     101   

  6.14.

 

Keepwell

     102    VII.   NEGATIVE COVENANTS      102   

  7.1.

 

Merger, Consolidation, Acquisition and Sale of Assets

     102   

  7.2.

 

Creation of Liens

     102   

  7.3.

 

Guarantees

     102   

  7.4.

 

Investments

     103   

  7.5.

 

Loans

     103   

  7.6.

 

Capital Expenditures

     105   

  7.7.

 

Dividends

     105   

  7.8.

 

Indebtedness

     107   

  7.9.

 

Nature of Business

     108   

  7.10.

 

Transactions with Affiliates

     108   

  7.11.

 

[RESERVED]

     108   

  7.12.

 

Subsidiaries

     108   

  7.13.

 

Fiscal Year and Accounting Changes

     111   

  7.14.

 

Pledge of Credit

     111   

  7.15.

 

Amendment of Organizational Documents

     111   

  7.16.

 

Compliance with ERISA

     111   

  7.17.

 

Prepayment of Indebtedness

     111    VIII.   CONDITIONS PRECEDENT      112   

  8.1.

 

Conditions to Initial Advances

     112   

  8.2.

 

Conditions to Each Advance

     116    IX.   INFORMATION AS TO LOAN PARTIES      117   

  9.1.

 

Disclosure of Material Matters

     117   

  9.2.

 

Schedules

     117   

  9.3.

 

Environmental Reports

     118   

  9.4.

 

Litigation

     119   

  9.5.

 

Material Occurrences

     119   

  9.6.

 

Government Receivables

     119   

 

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  9.7.

 

Annual Financial Statements

     119   

  9.8.

 

[RESERVED]

     120   

  9.9.

 

Monthly Financial Statements

     120   

  9.10.

 

Other Reports

     121   

  9.11.

 

Additional Information

     121   

  9.12.

 

Projected Operating Budget

     121   

  9.13.

 

Variances From Operating Budget

     121   

  9.14.

 

Notice of Suits, Adverse Events

     121   

  9.15.

 

ERISA Notices and Requests

     122   

  9.16.

 

Additional Documents

     122   

  9.17.

 

Updates to Certain Schedules

     123   

  9.18.

 

Distributions of Cash to ModusLink Parent

     123   

  9.19.

 

Financial Disclosure

     123    X.   EVENTS OF DEFAULT      123   

10.1.

 

Nonpayment

     123   

10.2.

 

Breach of Representation

     124   

10.3.

 

Financial Information

     124   

10.4.

 

Judicial Actions

     124   

10.5.

 

Noncompliance

     124   

10.6.

 

Judgments

     124   

10.7.

 

Bankruptcy

     125   

10.8.

 

[RESERVED]

     125   

10.9.

 

Lien Priority

     125   

10.10.

 

[RESERVED]

     125   

10.11.

 

Cross Default

     125   

10.12.

 

Breach of Guaranty or Pledge Agreement

     125   

10.13.

 

Change of Control

     125   

10.14.

 

Invalidity

     126   

10.15.

 

Seizures

     126   

10.16.

 

Operations

     126   

10.17.

 

Pension Plans

     127   

10.18.

 

Anti-Money Laundering/International Trade Law Compliance

     127    XI.   LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT      127   

11.1.

 

Rights and Remedies

     127   

11.2.

 

Agent’s Discretion

     128   

11.3.

 

Setoff

     129   

11.4.

 

Rights and Remedies not Exclusive

     129   

11.5.

 

Allocation of Payments After Event of Default

     129    XII.   WAIVERS AND JUDICIAL PROCEEDINGS      130   

12.1.

 

Waiver of Notice

     130   

12.2.

 

Delay

     130   

12.3.

 

Jury Waiver

     131   

 

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XIII.   EFFECTIVE DATE AND TERMINATION      131   

13.1.

 

Term

     131   

13.2.

 

Termination

     131    XIV.   REGARDING AGENT      132   

14.1.

 

Appointment

     132   

14.2.

 

Nature of Duties

     132   

14.3.

 

Lack of Reliance on Agent

     133   

14.4.

 

Resignation of Agent; Successor Agent

     133   

14.5.

 

Certain Rights of Agent

     134   

14.6.

 

Reliance

     134   

14.7.

 

Notice of Default

     134   

14.8.

 

Indemnification

     134   

14.9.

 

Agent in its Individual Capacity

     135   

14.10.

 

Delivery of Documents

     135   

14.11.

 

Loan Parties’ Undertaking to Agent

     135   

14.12.

 

No Reliance on Agent’s Customer Identification Program

     135   

14.13.

 

Other Agreements

     135    XV.   BORROWING AGENCY      136   

15.1.

 

Borrowing Agency Provisions

     136   

15.2.

 

Waiver of Subrogation

     136    XVI.   MISCELLANEOUS      137   

16.1.

 

Governing Law

     137   

16.2.

 

Entire Understanding

     137   

16.3.

 

Successors and Assigns; Participations; New Lenders

     140   

16.4.

 

Application of Payments

     143   

16.5.

 

Indemnity

     143   

16.6.

 

Notice

     144   

16.7.

 

Survival

     146   

16.8.

 

Severability

     146   

16.9.

 

Expenses

     146   

16.10.

 

Injunctive Relief

     147   

16.11.

 

Consequential Damages

     147   

16.12.

 

Captions

     147   

16.13.

 

Counterparts; Facsimile Signatures

     147   

16.14.

 

Construction

     147   

16.15.

 

Confidentiality; Sharing Information

     147   

16.16.

 

Publicity

     148   

16.17.

 

Certifications From Banks and Participants; USA PATRIOT Act

     148   

16.18.

 

Anti-Terrorism Laws

     149    XVII.   GUARANTY AND SURETYSHIP AGREEMENT      149   

17.1.

 

Guaranty and Suretyship Agreement

     149   

17.2.

 

Guaranty of Payment and Not Merely Collection

     149   

 

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17.3.

 

Guarantor and Suretyship Waivers

     150   

17.4.

 

Repayments or Recovery from Secured Parties

     151   

17.5.

 

Enforceability of Obligations

     151   

17.6.

 

Guaranty Payable upon Event of Default; Remedies

     152   

17.7.

 

Waiver of Subrogation

     152   

17.8.

 

Continuing Guaranty and Suretyship Agreement

     152   

17.9.

 

General Limitation on Guarantee Obligations

     153   

17.10.

 

Right of Contribution

     153   

17.11.

 

Keepwell

     153   

 

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LIST OF EXHIBITS AND SCHEDULES

Exhibits

 

Exhibit 1.2    Borrowing Base Certificate Exhibit 1.2(a)    Compliance
Certificate Exhibit 2.1(a)    Revolving Credit Note Exhibit 2.4(a)    Swing Loan
Note Exhibit 5.5(b)    Financial Projections Exhibit 7.5-A    Intercompany Note
– Note Among Loan Parties Exhibit 7.5-B    Intercompany Note – Note by Foreign
Subsidiaries (Non-Pass Through) Exhibit 7.5-C    Intercompany Note – Note by
Foreign Subsidiaries (Pass Through) Exhibit 7.5-D    Intercompany Note – Note by
US Borrowers to ModusLink Parent (Pass Through) Exhibit 7.8    Intercompany Note
– Note by US Borrowers to Foreign Subsidiaries Exhibit 8.1(g)    Financial
Condition Certificate Exhibit 16.3    Commitment Transfer Supplement

Schedules

 

Schedule 1.2(a)   Permitted Encumbrances; Closing Date Indebtedness; Closing
Date Investments Schedule 1.2(b)   Wells Fargo Letters of Credit Schedule 1.2(c)
  EBITDA Add-Back Schedule 4.4   Equipment and Inventory Locations; Place of
Business, Chief Executive Office, Real Property Schedule 4.8(j)   Deposit and
Investment Accounts Schedule 5.1   Consents Schedule 5.2(a)   States of
Qualification and Good Standing Schedule 5.2(b)   Subsidiaries Schedule 5.4  
Federal Tax Identification Number Schedule 5.6   Prior Names Schedule 5.7  
Environmental Schedule 5.8(b)(i)   Litigation Schedule 5.8(b)(ii)   Indebtedness
Schedule 5.8(d)   Plans Schedule 5.9   Intellectual Property, Source Code Escrow
Agreements Schedule 5.10   Licenses and Permits Schedule 5.14   Labor Disputes
Schedule 5.22(a)   Equity Interests Schedule 5.22(b)   Equity Interests –
Warrants and Options, Etc. Schedule 5.22(c)   Equity Interests – Convertible
Securities Schedule 5.23   Commercial Tort Claims Schedule 5.24   Letter of
Credit Rights Schedule 5.25   Material Contracts Schedule 7.3   Guarantees

 

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REVOLVING CREDIT AND SECURITY AGREEMENT

Revolving Credit and Security Agreement dated as of June 30, 2014 among
MODUSLINK CORPORATION, a corporation organized under the laws of the State of
Delaware (“ModusLink Corp.”), MODUSLINK PTS, INC., a corporation organized under
the laws of the State of Delaware (“ModusLink PTS”, and each Person joined
hereto as a borrower from time to time, collectively, the “Borrowers”, and each
a “Borrower”), MODUS MEDIA INTERNATIONAL DOCUMENTATION SERVICES (IRELAND),
LIMITED, a Delaware corporation (“MMIDS”), MODUS MEDIA INTERNATIONAL (IRELAND)
LIMITED, a Delaware corporation (“MMII”), SALESLINK MEXICO HOLDING CORP.
(“SLMH”), a Delaware corporation, SOL HOLDINGS, INC., a Delaware corporation,
(“SI”; MMIDS, MMII, SLMH, SI and each Person joined hereto as a guarantor from
time to time, collectively, the “Guarantors”, and each a “Guarantor”) , the
financial institutions which are now or which hereafter become a party hereto
(collectively, the “Lenders” and each individually a “Lender”) and PNC BANK,
NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the
“Agent”).

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

 

I. DEFINITIONS.

1.1. Accounting Terms. As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined shall have the respective meanings given to them under GAAP; provided,
however that, whenever such accounting terms are used for the purposes of
determining compliance with financial covenants in this Agreement, such
accounting terms shall be defined in accordance with GAAP as applied in
preparation of the audited financial statements of ModusLink Parent and its
consolidated Subsidiaries for the fiscal year ended July 31, 2013. If there
occurs after the Closing Date any change in GAAP that affects in any respect the
calculation of any covenant contained in this Agreement or the definition of any
term defined under GAAP used in such calculations, Agent, Lenders and Borrowers
shall negotiate in good faith to amend the provisions of this Agreement that
relate to the calculation of such covenants with the intent of having the
respective positions of Agent, Lenders and Borrowers after such change in GAAP
conform as nearly as possible to their respective positions as of the Closing
Date, provided, that, until any such amendments have been agreed upon, the
covenants in this Agreement shall be calculated as if no such change in GAAP had
occurred and Borrowers shall provide additional financial statements or
supplements thereto, attachments to Compliance Certificates and/or calculations
regarding financial covenants as Agent may reasonably require in order to
provide the appropriate financial information required hereunder with respect to
Loan Parties both reflecting any applicable changes in GAAP and as necessary to
demonstrate compliance with the financial covenants before giving effect to the
applicable changes in GAAP.

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1.2. General Terms. For purposes of this Agreement the following terms shall
have the following meanings:

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

“Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(ii)
hereof.

“Advances” shall mean and include the Revolving Advances, Letters of Credit and
the Swing Loans.

“Affected Lender” shall have the meaning set forth in Section 3.11 hereof.

“Affiliate” of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, manager, member, managing
member, general partner or officer (i) of such Person, (ii) of any Subsidiary of
such Person or (iii) of any Person described in clause (a) above. For purposes
of this definition, control of a Person shall mean the power, direct or
indirect, (x) to vote 10% or more of the Equity Interests having ordinary voting
power for the election of directors of such Person or other Persons performing
similar functions for any such Person, or (y) to direct or cause the direction
of the management and policies of such Person whether by ownership of Equity
Interests, contract or otherwise.

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

“Agreement” shall mean this Revolving Credit and Security Agreement, as the same
may be amended, restated, supplemented or otherwise modified from time to time.

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
highest of (a) the Base Rate in effect on such day, (b) the sum of the Federal
Funds Open Rate in effect on such day plus one half of one percent (0.5%), and
(c) the sum of the Daily LIBOR Rate in effect on such day plus one percent
(1.0%), so long as a Daily LIBOR Rate is offered, ascertainable and not
unlawful.

“Alternate Source” shall have the meaning set forth in the definition of Federal
Funds Open Rate.

“Anti-Terrorism Laws” shall mean (a) any Laws relating to terrorism, trade
sanctions programs and embargoes, money laundering or bribery and (b) to the
extent imposed to limit or restrict the activities of sponsors and supporters of
terrorism, any Laws relating to import/export licensing, and, in each case, any
regulation, order, or directive promulgated, issued or enforced pursuant to such
Laws, all as amended, supplemented or replaced from time to time

“Applicable Law” shall mean all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, Other Document or contract in question,
including all applicable common law and equitable principles, all provisions of
all applicable state, federal and foreign constitutions, statutes, rules,
regulations, treaties, directives and orders of any Governmental Body, and all
orders, judgments and decrees of all courts and arbitrators.

“Applicable Margin” shall mean (a) an amount equal to zero percent (0%) for
(i) Revolving Advances consisting of Domestic Rate Loans, and (ii) Swing Loans,
and (b) an amount equal to two and one-quarter percent (2.25%) for Revolving
Advances consisting of LIBOR Rate Loans.

 

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“Application Date” shall have the meaning set forth in Section 2.8(b) hereof.

“Approvals” shall have the meaning set forth in Section 5.7(b) hereof.

“Approved Electronic Communication” shall mean each notice, demand,
communication, information, document and other material transmitted, posted or
otherwise made or communicated by e-mail, E-Fax, the StuckyNet System©, or any
other equivalent electronic service agreed to by Agent, whether owned, operated
or hosted by Agent, any Lender, any of their Affiliates or any other Person,
that any party is obligated to, or otherwise chooses to, provide to Agent
pursuant to this Agreement or any Other Document, including any financial
statement, financial and other report, notice, request, certificate and other
information material; provided that Approved Electronic Communications shall not
include any notice, demand, communication, information, document or other
material that Agent specifically instructs a Person to deliver in physical form;
provided further that any document, report or other information that is not
expressly required to be delivered in physical form and that is filed by
ModusLink Parent with the SEC shall be deemed delivered to Agent as soon as it
becomes publicly available on the SEC’s website.

“Authorized Officer” shall mean the President, Chief Financial Officer,
Treasurer or Controller of the applicable Person.

“Average Undrawn Availability” shall mean, as of any date of determination, the
sum of Undrawn Availability, calculated on a combined basis for all Borrowers,
for each of the previous five (5) days, divided by five (5).

“Base Rate” shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.

“Benefited Lender” shall have the meaning set forth in Section 2.6(e) hereof.

“Blocked Account Bank” shall have the meaning set forth in Section 4.8(h)
hereof.

“Blocked Accounts” shall have the meaning set forth in Section 4.8(h) hereof.

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

“Borrowers on a Combined and Consolidated Basis” shall mean the combination and
consolidation in accordance with GAAP of the accounts and other items of
Borrowers and their respective Subsidiaries.

 

3

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“Borrowers’ Account” shall have the meaning set forth in Section 2.10 hereof.

“Borrowing Agent” shall mean ModusLink Corp.

“Borrowing Base Certificate” shall mean a certificate in substantially the form
of Exhibit 1.2 hereto duly executed by an Authorized Officer of Borrowing Agent
and delivered to the Agent, appropriately completed, by which such officer shall
certify to Agent the Formula Amount and calculation thereof as of the date of
such certificate.

“Business Day” shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey and, if the applicable Business Day
relates to any LIBOR Rate Loans, such day must also be a day on which dealings
are carried on in the London interbank market.

“Capital Expenditures” shall mean expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements (or of any replacements or
substitutions thereof or additions thereto) which have a useful life of more
than one year and which, in accordance with GAAP, would be classified as capital
expenditures. Capital Expenditures shall include the total principal portion of
Capitalized Lease Obligations.

“Capitalized Lease Obligation” shall mean any Indebtedness of any Loan Party
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.

“Cash Collateralize” shall mean to deliver to Agent an amount (whether in cash
or in the form of a backstop letter of credit in form and substance satisfactory
to it in its Permitted Discretion, and issued by a U.S. commercial bank
acceptable to Agent in its Permitted Discretion) equal to 105% of the sum of
(i) the Maximum Undrawn Amount with respect to all then outstanding Letters of
Credit plus the aggregate amount of all unreimbursed payments and disbursements
under such Letters of Credit which have not been converted to Revolving Advances
plus (ii) the amount of all then unpaid letter of credit fees and related
charges with respect to all then outstanding Letters of Credit. Derivatives of
such term have corresponding meanings.

“Cash Management Products and Services” shall mean agreements or other
arrangements under which Agent or any Lender or any Affiliate of Agent or any
Lender (including any Person that was the Agent or a Lender or an Affiliate
thereof at the time such agreement or arrangement was entered into regardless of
whether such Person has ceased to be the Agent or such an Lender or Affiliate)
provides any of the following products or services to any of the Borrowers or
Guarantors, or any of their Subsidiaries that elect to obtain such products or
services from any such Person: (a) credit cards; (b) credit card processing
services; (c) debit cards and stored value cards; (d) commercial cards or
purchase cards; (e) ACH transactions; (f) cash management and treasury
management services and products, including without limitation controlled
disbursement accounts or services, lockboxes, automated clearinghouse
transactions, overdrafts, interstate depository network services. The
indebtedness, obligations and liabilities of any Borrower or Guarantor or any
such Subsidiary to the provider of any Cash Management Products and Services
(including all obligations and liabilities owing to such provider in respect of
any

 

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returned items deposited with such provider) (the “Cash Management Liabilities”)
shall be “Obligations” hereunder, guaranteed obligations under the Guaranty and
secured obligations under any Guarantor Security Agreement, as applicable, and
otherwise treated as Obligations for purposes of each of the Other Documents.
The Liens securing the Cash Management Products and Services shall be pari passu
with the Liens securing the all other Obligations under this Agreement and the
Other Documents, subject to the express provisions of Section 11.5.

“Cash Management Liabilities” shall have the meaning provided in the definition
of “Cash Management Products and Services.”

“CEA” shall mean the Commodity Exchange Act (7 U.S.C.§1 et seq.), as amended
from time to time, and any successor statute.

“CFTC” shall mean the Commodity Futures Trading Commission.

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

“Change in Law” shall mean the occurrence, after the Closing Date, of any of the
following: (a) the adoption or taking effect of any Applicable Law; (b) any
change in any Applicable Law or in the administration, implementation,
interpretation or application thereof by any Governmental Body; or (c) the
making or issuance of any request, rule, guideline or directive (whether or not
having the force of law) by any Governmental Body; provided that notwithstanding
anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and
Consumer Protection Act and all requests, rules, regulations, guidelines,
interpretations or directives thereunder or issued in connection therewith
(whether or not having the force of Applicable Law) and (y) all requests, rules,
regulations, guidelines, interpretations or directives promulgated by the Bank
for International Settlements, the Basel Committee on Banking Supervision (or
any successor or similar authority) or the United States or foreign regulatory
authorities (whether or not having the force of law), in each case pursuant to
Basel III, shall in each case be deemed to be a Change in Law regardless of the
date enacted, adopted, issued, promulgated or implemented.

“Change of Control” shall mean: (a) the occurrence of any event (whether in one
or more transactions) which results in ModusLink Parent failing to own, directly
or indirectly, fifty and one-tenth percent (50.1%) of the Equity Interests (on a
fully diluted basis), or otherwise results in a transfer of control, of any
Borrower to a Person other than ModusLink Parent, except to the extent that
ModusLink Parent owns, directly or indirectly, fifty and one-tenth percent
(50.1%) of the Equity Interests (on a fully diluted basis) of such Person,
(b) except to the extent otherwise permitted in this Agreement, the occurrence
of any event which results in any Borrower failing to own, directly or
indirectly, one hundred percent (100%) of the Equity Interests (on a fully
diluted basis) of any of its Subsidiaries (excluding directors’ qualifying and
nominee shares required under local law to be held by an independent party), or
(c) any person or group of persons (within the meaning of Section 13(d) or 149a)
of the Exchange Act) other than Permitted Holder shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the SEC under the
Exchange Act) of forty percent (40.0%) or more of the voting Equity Interests of
ModusLink Parent, (d) Permitted Holder shall cease to have beneficial ownership

 

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(within the meaning of Rule 13d-3 promulgated by the SEC under the Exchange Act)
of at least five percent (5.0%) of the voting Equity Interests of ModusLink
Parent, with such percentage to be reduced to reflect the issuance of Equity
Interests of ModusLink Parent in connection with (i) a conversion of convertible
notes of ModusLink Parent into Equity Interests of ModusLink Parent or
(ii) payment of consideration for such Equity Interests of ModusLink Parent,
(e) a majority of the members of the board of directors of ModusLink Parent
cease to be composed of individuals (i) who were members of that board or
equivalent governing body on the Closing Date, (ii) whose election or nomination
to that board was approved by individuals referred to in clause (i) above
constituting at the time of such election or nomination at least a majority of
that board, or (iii) whose election or nomination to that board was approved by
individuals referred to in clauses (i) and (ii) above constituting at the time
of such election or nomination at least a majority of that board; or (f) except
to the extent otherwise permitted hereunder, any merger, consolidation or sale
of substantially all of the property or assets of any Borrower. For purposes of
this definition, “control of Borrower” shall mean the power, direct or indirect
(x) to vote more than 20% of the Equity Interests having ordinary voting power
for the election of directors (or the individuals performing similar functions)
of any Borrower or (y) to direct or cause the direction of the management and
policies of any Borrower by contract or otherwise.

“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral or any Loan Party.

“CIP Regulations” shall have the meaning set forth in Section 14.12 hereof.

“Class Actions” shall mean three purported class actions commenced by
stockholders of ModusLink Parent in the United States District Court for the
District of Massachusetts on or after June 11, 2012 arising from the
circumstances described in ModusLink Parent’s June 11, 2012 announcement with
respect to the pending restatement of ModusLink Parent’s financial statements
for periods ending on or before January 31, 2012, entitled respectively:

(i) Irene Collier, Individually And On Behalf OF ALL Others Similarly Situated,
vs. ModusLink Global Solutions, Inc., Joseph C. Lawler and Steven G. Crane, Case
1:12-CV-11044-DJC, filed June 12, 2012.

(ii) Alexander Shnerer, , Individually And On Behalf OF ALL Others Similarly
Situated, vs. ModusLink Global Solutions, Inc., Joseph C. Lawler and Steven G.
Crane, Case 1:12-CV-11078-DJV, filed June 18, 2012 (the “Shnerer Action”); and

(iii) Harold Heszkel, Individually And On Behalf OF ALL Others Similarly
Situated, vs. ModusLink Global Solutions, Inc., Joseph C. Lawler and Steven G.
Crane, Case 1:12-CV-11279-DJC, filed July 11, 2012 (the “Heszkel Action”).

 

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The three purported class actions were consolidated into a single case: In Re
ModusLink Global Solutions, Inc. Securities Litigation. On March 26, 2014, the
District Court denied the defendants’ motion to dismiss.

“Closing Date” shall mean June 30, 2014 or such other date as may be agreed to
in writing by the parties hereto.

“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended
or supplemented from time to time, and any successor statute of similar import,
and the rules and regulations thereunder, as from time to time in effect.

“Collateral” shall mean and include all right, title and interest of each Loan
Party in all of the following property and assets of such Loan Party, in each
case whether now existing or hereafter arising or created and whether now owned
or hereafter acquired and wherever located:

(a) all Receivables and all supporting obligations relating thereto;

(b) all equipment and fixtures;

(c) all general intangibles (including all payment intangibles and all software)
and all supporting obligations related thereto;

(d) all Inventory;

(e) all Subsidiary Stock, securities, investment property, and financial assets;

(f) [RESERVED];

(g) [RESERVED];

(h) all contract rights, rights of payment which have been earned under a
contract rights, chattel paper (including electronic chattel paper and tangible
chattel paper), commercial tort claims (whether now existing or hereafter
arising); documents (including all warehouse receipts and bills of lading),
deposit accounts, goods, instruments (including promissory notes), letters of
credit (whether or not the respective letter of credit is evidenced by a
writing) and letter-of-credit rights, cash, certificates of deposit, insurance
proceeds (including hazard, flood and credit insurance), security agreements,
eminent domain proceeds, condemnation proceeds, tort claim proceeds and all
supporting obligations;

(i) all ledger sheets, ledger cards, files, correspondence, records, books of
account, business papers, computers, computer software (owned by any Loan Party
or in which it has an interest), computer programs, tapes, disks and documents,
including all of such property relating to the property described in clauses
(a) through (h) of this definition; and

(j) all proceeds and products of the property described in clauses (a) through
(i) of this definition, in whatever form. It is the intention of the parties
that if Agent shall fail to have a perfected Lien in any particular property or
assets of any Loan Party for any reason whatsoever, but the provisions of this
Agreement and/or of the Other Documents, together with

 

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all financing statements and other public filings relating to Liens filed or
recorded by Agent against Loan Parties, would be sufficient to create a
perfected Lien in any property or assets that such Loan Party may receive upon
the sale, lease, license, exchange, transfer or disposition of such particular
property or assets, then all such “proceeds” of such particular property or
assets shall be included in the Collateral as original collateral that is the
subject of a direct and original grant of a security interest as provided for
herein and in the Other Documents (and not merely as proceeds (as defined in
Article 9 of the Uniform Commercial Code) in which a security interest is
created or arises solely pursuant to Section 9-315 of the Uniform Commercial
Code).

Notwithstanding the forgoing, Collateral shall not include any Excluded
Property.

“Commitment Transfer Supplement” shall mean a document in the form of Exhibit
16.3 hereto, properly completed and otherwise in form and substance satisfactory
to Agent by which the Purchasing Lender purchases and assumes a portion of the
obligation of Lenders to make Advances under this Agreement.

“Compliance Authority” shall mean each and all of the (a) U.S. Treasury
Department/Office of Foreign Assets Control, (b) U.S. Treasury
Department/Financial Crimes Enforcement Network, (c) U.S. State
Department/Directorate of Defense Trade Controls, (d) U.S. Commerce
Department/Bureau of Industry and Security, (e) the U.S. Internal Revenue
Service, (f) the U.S. Justice Department, and (g) the U.S. Securities and
Exchange Commission.

“Compliance Certificate” shall mean a compliance certificate substantially in
the form of Exhibit 1.2(a) hereto to be signed by an Authorized Officer of
Borrowing Agent.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Loan Party’s
business or necessary (including to avoid a conflict or breach under any
agreement, instrument, other document, license, permit or other authorization)
for the execution, delivery or performance of this Agreement, the Other
Documents, including any Consents required under all applicable federal, state
or other Applicable Law.

“Consigned Inventory” shall mean Inventory of any Borrower that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.

“Controlled Investment Affiliate”: shall mean, as to any Person, any other
Person that (a) directly or indirectly, is in control of, is controlled by, or
is under common control with, such Person and (b) is organized by such Person
primarily for the purpose of making equity or debt investments in one or more
companies. For purposes of this definition, “control” of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.

 

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

“Covered Entity” shall mean (a) each Borrower, each of Borrower’s Subsidiaries,
all Guarantors and all pledgors of Collateral and (b) each Person that, directly
or indirectly, is in control of a Person described in clause (a) above. For
purposes of this definition, control of a Person shall mean the direct or
indirect (x) ownership of, or power to vote, 25% or more of the issued and
outstanding equity interests having ordinary voting power for the election of
directors of such Person or other Persons performing similar functions for such
Person, or (y) power to direct or cause the direction of the management and
policies of such Person whether by ownership of equity interests, contract or
otherwise.

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

“Customs” shall have the meaning set forth in Section 2.13(b) hereof.

“Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by the
Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the
Reserve Percentage.

“Debt Payments” shall mean for any period with respect to any Person (and, if
and as applicable, the combined and/or consolidated Subsidiaries of such
Person), in each case, all cash actually expended by such Person and such
Subsidiaries to make: (a) interest payments on any Advances hereunder, plus
(b) payments for all fees (including Letter of Credit Fees), commissions and
charges set forth herein that are considered interest expense in accordance with
GAAP, plus (c) payments on Capitalized Lease Obligations that are allocable to
interest or principal in accordance with GAAP, plus (d) payments with respect to
any other Indebtedness for borrowed money, all calculated for such Person (and,
if and as applicable, the combined and/or consolidated Subsidiaries of such
Person) in accordance with GAAP. For avoidance of doubt, payments of
Indebtedness of the kind described in clause (f) of the definition thereof
(regardless of whether past due beyond a certain number of days and regardless
of the amount thereof) shall not be included in the payments calculated pursuant
to the preceding clause (d).

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

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

“Defaulting Lender” shall mean any Lender that: (a) has failed, within two
(a) Business Days of the date required to be funded or paid, to (i) fund any
portion of its Revolving Commitment Percentage of Advances, (ii) if applicable,
fund any portion of its Participation Commitment in Letters of Credit or Swing
Loans or (iii) pay over to the Agent, the Issuer, the

 

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Swing Loan Lender or any Lender any other amount required to be paid by it
hereunder, unless, in the case of clause (i) above, such Lender notifies the
Agent in writing that such failure is the result of such Lender’s good faith
determination that a condition precedent to funding (specifically identified and
including a particular Default or Event of Default, if any) has not been
satisfied; (b) has notified the Borrowers or the Agent in writing, or has made a
public statement to the effect, that it does not intend or expect to comply with
any of its funding obligations under this Agreement (unless such writing or
public statement indicates that such position is based on such Lender’s good
faith determination that a condition precedent (specifically identified and
including a particular Default or Event of Default, if any) to funding a loan
under this Agreement cannot be satisfied) or generally under other agreements in
which it commits to extend credit; (c) has failed, within two (2) Business Days
after request by the Agent, acting in good faith, to provide a certification in
writing from an authorized officer of such Lender that it will comply with its
obligations (and is financially able to meet such obligations) to fund
prospective Advances and, if applicable, participations in then outstanding
Letters of Credit and Swing Loans under this Agreement, provided that such
Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon
the Agent’s receipt of such certification in form and substance satisfactory to
the Agent; (d) has become the subject of an Insolvency Event; or (e) has failed
at any time to comply with the provisions of Section 2.6(e) with respect to
purchasing participations from the other Lenders, whereby such Lender’s share of
any payment received, whether by setoff or otherwise, is in excess of its pro
rata share of such payments due and payable to all of the Lenders.

“Depository Accounts” shall have the meaning set forth in Section 4.8(h) hereof.

“Derivative Actions” shall mean, collectively:

(i) a purported derivative action commenced by a shareholder on July 13, 2012 in
United States District Court for the District of Massachusetts against ModusLink
Parent (as nominal defendants), and certain of its current and former directors
and officers, entitled, Samuel Montini, Derivatively On Behalf Of ModusLink
Global Solutions, Inc. v. Joseph C. Lawler, Steven G. Crane, Francis J. Jules,
Virginia G. Breen, Michael J. Mardy, Edward E. Lucente, Jeffrey J. Fenton,
Joseph M. O’Donnell, William R. McLennan, Thomas H. Johnson, And Anthony J. Bay,
Defendants, And ModusLink Global Solutions, Inc., A Delaware Corporation,
Nominal Defendant, Case 1:12-CV-11296-DJC and on July 31, 2012,

(ii) a purported derivative action commenced by a fifth stockholder commenced a
purported derivative action commenced by a shareholder on July 31, 2012 in
United States District Court for the District of Massachusetts against ModusLink
Parent (as nominal defendants), and certain of its current and former directors
and officers, entitled, Edward Tansey, Derivatively On Behalf Of ModusLink
Global Solutions, Inc. v. Joseph C. Lawler, Steven G. Crane, Francis J. Jules,
Virginia G. Breen, Michael J. Mardy, Edward E. Lucente, Jeffrey J. Fenton,
Joseph M. O’Donnell, William R. McLennan, Thomas H. Johnson, And Anthony J. Bay,
Defendants, And ModusLink Global Solutions, Inc., A Delaware Corporation,
Nominal Defendant, Civil Action No. 12-CV-11399 (DJC) (these Derivative Actions
in clauses (i) and (ii) were consolidated into a single case: In RE ModusLink
Global Solutions, Inc., Shareholder Derivative Litigation; on March 26, 2014,
the District Court allowed the Defendant’s motion to dismiss),

 

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(iii) On April 9, 2014, a shareholder, Rolling Rock Capital Partners, LP
submitted a request to inspect books and records of ModusLink Parent pursuant to
8 Delaware C. Section 220. On April 25, 2014 a shareholder, Mohammad
Ladjevardian, LP submitted a request to inspect books and records of ModusLink
Parent pursuant to 8 Delaware C. Section 220 (the Company has rejected both
requests), and

(iv) On October 10, 2012, a sixth stockholder, Donald Reith, served upon
ModusLink Parent’s Board of Directors a demand to institute litigation and take
other purportedly necessary, but unidentified, remedial measures to redress and
prevent a recurrence of purported breaches of fiduciary duties on the part of
the Board and unspecified corporate officers allegedly arising from the same
facts and circumstances asserted in the Derivative Actions in clauses (i) and
(ii).

“Designated Lender” shall have the meaning set forth in Section 16.2(d) hereof.

“Document” shall have the meaning given to the term “document” in the Uniform
Commercial Code.

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

“Domestic US EBITDA” shall mean, for any period, EBITDA of Borrowers on a
Combined and Consolidated Basis, adjusted, in a reasonably detailed manner
satisfactory to Agent to include only EBITDA based on net income arising from
the sale of goods or rendition of services by a Borrower, a Domestic Subsidiary
of a Borrower, or a Foreign Subsidiary of a Borrower, the invoice and billing in
respect of which is generated in the United States and the related account
receivable in respect of which is payable in U.S. Dollars and is collected by
such Person in the United States. For avoidance of doubt, the calculation of
Domestic US EBITDA shall exclude Non-Domestic US EBITDA.

“Domestic US Excess Cash Flow” shall mean, for any period, Excess Cash Flow of
Borrowers on a Combined and Consolidated Basis, the calculation of which shall
be based solely on Domestic US EBITDA.

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

“Domestic Subsidiary” shall mean any Subsidiary of any Person that is organized
or incorporated in the United States, any State of territory thereof or the
District of Columbia.

“Drawing Date” shall have the meaning set forth in Section 2.14(b) hereof.

“EBITDA” shall mean for any period with respect to any Person (and, if and as
applicable, the combined and/or consolidated Subsidiaries of such Person), the
sum of

(a) net income (or loss) for such period (excluding extraordinary gains), plus

(b) all interest expense for such period, plus

 

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(c) all charges against income for such period for federal, state and local
taxes, plus

(d) depreciation expenses for such period, plus

(e) amortization expenses for such period, plus

(f) either

(I) for purposes of calculating EBITDA of ModusLink Parent on a Global
Consolidated Basis only, the sum of (i) non-recurring cash expenses in the
aggregate not exceeding $1,000,000 in any period of 12 consecutive months,
exclusive of the amounts described in clauses (ii) through (ix) below;
(ii) restructuring, transition, severance, retention payments, settlements and
early retirement charges, charges relating to the shutdown, relocation of
facilities, integration of networks and other like restructuring charges, in an
amount not to exceed the lesser of (x) the actual amount of such charges and
(y) the pro forma synergies anticipated to be realized over the relevant
12-month period (such estimate of pro forma synergies subject to Agent’s consent
in its Permitted Discretion and without giving effect to amounts previously
added back with respect to such charges); (iii) any non-cash losses related to
the early extinguishment of Indebtedness; (iv) expenses and charges incurred in
connection with permitted investments, mergers, acquisitions (including
Permitted Acquisitions) and similar transactions, capital expenditures,
dispositions and debt and equity issuances not to exceed, as applicable,
(x) $500,000 in the aggregate over any 12-month period with respect to any and
all such expenses and charges in connection with any transactions that are not
consummated, or (y) $1,000,000 in the aggregate during any 12-month period in
connection with respect to any and all such expenses and charges in connection
with any transactions that are consummated; (v) non-cash stock option and
stock-based compensation expenses; (vi) non-recurring fees and expenses incurred
in connection with the negotiation and execution of this Agreement and the
transactions contemplated hereby; (vii) [reserved], (viii) the aggregate amount
of all other non-cash charges and impairments reducing net income for such
period; and (ix) amounts permitted pursuant to Schedule 1.2(c) attached hereto,
in each case under this paragraph (I) only to the extent such
amount/item/expense/charge is deducted from or charged against the net income of
ModusLink Parent on a Global Consolidated Basis in the calculation thereof in
accordance with GAAP, or

(II) for purposes of calculating Domestic US EBITDA or Non-Domestic US EBITDA of
Borrowers on a Combined and Consolidated Basis only, the sum of
(i) non-recurring cash expenses in the aggregate not exceeding $1,000,000 in any
period of 12 consecutive months, exclusive of the amounts described in clauses
(ii) through (ix) below; (ii) restructuring, transition, severance, retention
payments, settlements and early retirement charges, charges relating to the
shutdown, relocation of facilities, integration of networks and other like
restructuring charges, in an amount not to exceed the lesser of (x) the actual
amount of such charges and (y) the pro forma synergies anticipated to be
realized over the relevant 12-month period (such estimate of pro forma synergies
subject to Agent’s consent in its Permitted Discretion and without giving effect
to amounts previously added back with respect to such charges); (iii) any
non-cash losses related to

 

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the early extinguishment of Indebtedness; (iv) expenses and charges incurred in
connection with permitted investments, mergers, acquisitions (including
Permitted Acquisitions) and similar transactions, capital expenditures,
dispositions and debt and equity issuances not to exceed, as applicable,
(x) $500,000 in the aggregate over any 12-month period with respect to any and
all such expenses and charges in connection with any transactions that are not
consummated, or (y) $1,000,000 in the aggregate during any 12-month period in
connection with respect to any and all such expenses and charges in connection
with any transactions that are consummated; (v) non-cash stock option and
stock-based compensation expenses; (vi) non-recurring fees and expenses incurred
in connection with the negotiation and execution of this Agreement and the
transactions contemplated hereby; (vii) [reserved], (viii) the aggregate amount
of all other non-cash charges and impairments reducing net income for such
period; and (ix) amounts permitted pursuant to Schedule 1.2(c) attached hereto,
in each case under this paragraph (II) only to the extent such
amount/item/expense/charge is deducted from or charged against the net income of
Borrowers on a Combined and Consolidated Basis in the calculation thereof in
accordance with GAAP.

all such component parts of “EBITDA” to be calculated for such Person (and, if
and as applicable, the combined and/or consolidated Subsidiaries of such Person)
in accordance with GAAP.

“ECF Dividend/Foreign Subsidiary-JV Transfer Period” shall mean, with respect to
any proposed making of a ECF Foreign Subsidiary-JV Transfer or any proposed
payment of an ECF Dividend, the period of twelve consecutive fiscal months
ending with the month in which such ECF Foreign Subsidiary-JV Transfer or ECF
Dividend is proposed to be paid.

“ECF Dividends” shall mean all dividends paid by Borrowers to ModusLink Parent
pursuant to Section 7.7(c) hereof.

“ECF Foreign Subsidiary-JV Transfers” shall mean, collectively, (i) all
purchases or acquisitions by a Borrower of the obligations or Equity Interests
of, or capital contributions by a Borrower to, such Borrower’s Foreign
Subsidiaries pursuant to Section 7.4(iii) hereof, (ii) all advances or loans by
a Borrower to such Borrower’s Foreign Subsidiaries pursuant to Section 7.5(iii)
hereof, and (iii) all investments and/or capital contributions by any Borrower
in any partnership, joint venture or similar arrangements pursuant to
Section 7.12(b)(ii) hereof.

“Effective Date” means the date indicated in a document or agreement to be the
date on which such document or agreement becomes effective, or, if there is no
such indication, the date of execution of such document or agreement.

“Eligible Contract Participant” shall mean an “eligible contract participant” as
defined in the CEA and regulations thereunder.

“Eligibility Date” shall mean, with respect to each Borrower and Guarantor and
each Swap, the date on which this Agreement or any Other Document becomes
effective with respect to such Swap (for the avoidance of doubt, the Eligibility
Date shall be the Effective Date of such Swap if this Agreement or any Other
Document is then in effect with respect to such Borrower or Guarantor, and
otherwise it shall be the Effective Date of this Agreement and/or such Other
Document(s) to which such Borrower or Guarantor is a party).

 

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“Eligible Insured Foreign Receivables” shall mean Receivables that meet the
requirements of Eligible Receivables, except clause (f) of such definition,
provided that (i) such Receivable is credit insured (subject to any limitations
in such policy applicable to such Receivable, including restrictions on named
account debtors, credits limits as to account debtors, etc.), (ii) the insurance
carrier, amount and terms of such insurance are reasonably acceptable to Agent
and name Agent as beneficiary or lender loss payee, as applicable, and
(iii) notwithstanding the requirements contained in clause (b) of the definition
of Eligible Receivables, if any particular Receivable that would otherwise be an
Eligible Insured Foreign Receivable is due or unpaid more than 90 days after
invoice date and/or more than 60 days after the original due date, it shall not
be considered ineligible for that reason alone, so long as the underlying policy
of credit insurance insures the payment of such Receivable for a longer period
beyond the invoice date and/or original due date for such Receivable, as the
case may be, in which case such longer period applicable as to such invoice date
or original due date for such Receivable shall apply.

“Eligible Inventory” shall mean and include Inventory of a Borrower, including
work in process, valued at the lower of cost or market value, determined on a
first-in-first-out basis or moving average cost basis, as specified in
reasonable detail by such Borrower, basis consistent with Borrowers’ historical
accounting practices, which is not, in Agent’s Permitted Discretion, obsolete,
slow moving or unmerchantable and which Agent, in its Permitted Discretion,
shall not deem ineligible Inventory, based on such considerations as Agent may
from time to time deem appropriate including whether the Inventory is subject to
a perfected, first priority security interest in favor of Agent and no other
Lien (other than Permitted Encumbrances that arise by operation of law (as
opposed to any consensual or contractual Liens) and are either inchoate or do
not have priority over Agent’s Liens). In addition, Inventory shall not be
Eligible Inventory if it: (a) does not conform in all material respects to all
standards imposed by any Governmental Body which has regulatory authority over
such goods or the use or sale thereof; (b) is Foreign In-Transit Inventory or
in-transit within the United States; (c) is located outside the continental
United States or at a location that is not otherwise in compliance with this
Agreement; (d) constitutes Consigned Inventory; (e) is the subject of an
Intellectual Property Claim; (f) is subject to a License Agreement that limits,
conditions or restricts the applicable Borrower’s or Agent’s right to sell or
otherwise dispose of such Inventory, unless Agent is a party to a Licensor/Agent
Agreement with the Licensor under such License Agreement (or Agent shall agree
otherwise in its sole discretion after establishing reserves against the Formula
Amount with respect thereto as Agent shall deem appropriate in its Permitted
Discretion); (g) is situated at a location not owned by a Borrower unless the
owner or occupier of such location has executed in favor of Agent a Lien Waiver
Agreement (or Agent shall have established a Rent Reserve against the Formula
Amount with respect thereto as Agent shall deem appropriate in its Permitted
Discretion); or (h) or if the sale of such Inventory would result in an
ineligible Receivable.

“Eligible Receivables” shall mean and include, each Receivable of a Borrower
arising in the Ordinary Course of Business and which Agent, in its Permitted
Discretion, shall deem to be an Eligible Receivable, based on such
considerations as Agent may from time to time deem appropriate. A Receivable
shall not be deemed eligible unless such Receivable is subject to

 

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Agent’s first priority perfected security interest and no other Lien (other than
Permitted Encumbrances that arise by operation of law (as opposed to any
consensual or contractual Liens) and are either inchoate or do not have priority
over Agent’s Liens), and is evidenced by an invoice or other documentary
evidence reasonably satisfactory to Agent. In addition, no Receivable shall be
an Eligible Receivable if:

(a) it arises out of a sale made by any Borrower to an Affiliate of any Loan
Party or to a Person controlled by an Affiliate of any Loan Party;

(b) it is due or unpaid more than ninety (90) days after the original invoice
date or sixty (60) days after the original due date;

(c) fifty percent (50%) or more of the Receivables from such Customer owing to
all Borrowers are not deemed Eligible Receivables under clause (b) above. Such
percentage may, in Agent’s Permitted Discretion, be increased or decreased from
time to time;

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

(e) an Insolvency Event shall have occurred with respect to such Customer;

(f) the sale is to a Customer outside the continental United States of America
or a province of Canada that has not adopted the Personal Property Security Act
of Canada, unless (i) the sale is on letter of credit, guaranty or acceptance
terms, in each case acceptable to Agent in its Permitted Discretion;

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

(h) Agent believes, in its Permitted Discretion, that collection of such
Receivable is insecure or that such Receivable may not be paid by reason of the
Customer’s financial inability to pay;

(i) the Customer is the United States of America, any state or any department,
agency or instrumentality of any of them, unless the applicable Borrower assigns
its right to payment of such Receivable to Agent pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C.
Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes
or ordinances;

(j) the goods giving rise to such Receivable have not been delivered to and
accepted by the Customer or the services giving rise to such Receivable have not
been performed by the applicable Borrower and accepted by the Customer or the
Receivable otherwise does not represent a final sale;

(k) the aggregate outstanding amount of all Receivables of the Customer exceed
fifty percent (50%) of the total aggregate amount of all then outstanding
Receivables of all Customers of all Borrowers, to the extent such Receivable
exceeds such limit. Such percentage may, in Agent’s Permitted Discretion, be
increased or decreased from time to time;

 

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(l) the aggregate outstanding amount of all Receivables of the Customer exceeds
a credit limit determined by Agent in its Permitted Discretion, to the extent
such Receivable exceeds such limit, which credit limit is generally imposed, if
at all, by the Agent in response to a deterioration in the financial condition
of such Customer, as determined by the Agent in its Permitted Discretion;

(m) the Receivable is subject to any offset, deduction, defense, dispute,
credits or counterclaim (but such Receivable shall only be ineligible to the
extent of such offset, deduction, defense or counterclaim), the Customer is also
a creditor or supplier of a Loan Party or the Receivable is contingent in any
respect or for any reason, but only to the extent of the amount of any such
offset, deduction, defense, dispute, counterclaim or contingency;

(n) the applicable Borrower has made any agreement with any Customer for any
deduction therefrom (but only to the extent of the amount of such deduction),
except for discounts or allowances made in the Ordinary Course of Business for
prompt payment, all of which discounts or allowances are reflected in the
calculation of the face value of each respective invoice related thereto;

(o) any return, rejection or repossession of the merchandise that is the subject
of such Receivable has occurred or the rendition of services that is the subject
of such Receivable has been disputed, provided, however, that if, in connection
with the foregoing, the applicable Borrower issues a credit memo to the
applicable Customer, the amount of which (I) corresponds to the amount of such
return, rejection or repossession (in the case of merchandise) or dispute (in
the case of a rendition of services) and (II) the entire amount of the such
Receivable has not been disputed, then such Receivable shall be ineligible only
to the extent of such credit memo;

(p) such Receivable is not payable to a Borrower; or

(q) such Receivable is not otherwise satisfactory to Agent as determined in good
faith by Agent in the exercise of its Permitted Discretion.

“Eligible Uninsured Foreign Receivable or Receivables” shall mean Receivables
that met the requirements of Eligible Receivables (other than clause (f) of such
definition), except that (i) the sale is to Sony Corporation or to a subsidiary,
unit, branch or division of Sony Corporation, Sony Corporation of America or
Hewlett-Packard Corporation that is organized, or the chief executive office of
which is located, outside the continental United States of America or any
province of Canada that has adopted the Personal Property Security Act, (ii) the
Receivable does not constitute an Eligible Insured Foreign Receivable and
(iii) the Agent determines in its Permitted Discretion that the Customer is not
a Sanctioned Person and that the country in which the Customer is located or
organized is not a Sanctioned Country. For the avoidance of any doubt, and
without otherwise limiting or contradicting any provision of the definition of
Eligible Receivables, any such Receivables described in this definition for
which the Customer is Sony Corporation, Sony Corporation of America or any
subsidiary, unit, branch or division of Sony Corporation or Sony Corporation of
America shall constitute an Eligible Uninsured Foreign

 

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Receivable only after netting out from the amount thereof all offsets,
deductions, defenses, disputes, credits and counterclaims that Sony Corporation,
Sony Corporation of America or any subsidiary, unit, branch or division of Sony
Corporation or Sony Corporation of America may assert against such Receivables.

“Environmental Complaint” shall have the meaning set forth in Section 9.3(b)
hereof.

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

“Equity Interests” shall mean, with respect to any Person, any and all shares,
rights to purchase, options, warrants, general, limited or limited liability
partnership interests, member interests, participation or other equivalents of
or interest in (regardless of how designated) equity of such Person, whether
voting or nonvoting, including common stock, preferred stock, convertible
securities or any other “equity security” (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act), including in each case all of the following rights relating to
such Equity Interests, whether arising under the Organizational Documents of the
Person issuing such Equity Interests (the “issuer”) or under the applicable laws
of such issuer’s jurisdiction of organization relating to the formation,
existence and governance of corporations, limited liability companies or
partnerships or business trusts or other legal entities, as the case may be, but
only to the extent that such Equity Interests are subject to a Lien in favor of
the Agent to secure the Obligations: (i) all economic rights (including all
rights to receive dividends and distributions) relating to such Equity
Interests; (ii) all voting rights and rights to consent to any particular
action(s) by the applicable issuer; (iii) all management rights with respect to
such issuer; (iv) in the case of any Equity Interests consisting of a general
partner interest in a partnership, all powers and rights as a general partner
with respect to the management, operations and control of the business and
affairs of the applicable issuer; (v) in the case of any Equity Interests
consisting of the membership/limited liability company interests of a managing
member in a limited liability company, all powers and rights as a managing
member with respect to the management, operations and control of the business
and affairs of the applicable issuer; (vi) all rights to designate or appoint or
vote for or remove any officers, directors, manager(s), general partner(s) or
managing member(s) of such issuer and/or any members of any board of
members/managers/partners/directors that may at any time have any rights to
manage and direct the business and affairs of the applicable issuer under its
Organizational Documents as in effect from time to time or under Applicable Law;
(vii) all rights to amend the Organizational Documents of such issuer, (viii) in
the case of any Equity Interests in a partnership or limited liability company,
the status of the holder of such Equity Interests as a “partner”, general or
limited, or “member” (as applicable) under the applicable Organizational
Documents and/or Applicable Law; and (ix) all certificates evidencing such
Equity Interests.

 

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

“Event of Default” shall have the meaning set forth in Article X hereof.

“Excess Cash Flow” shall mean, with respect to any Person on a consolidated
and/or combined basis with its Subsidiaries for any fiscal period, EBITDA (or
Domestic US EBITDA or Global EBITDA, as applicable) for such Person and such
Subsidiaries, minus each of the following, to the extent actually paid in cash
by such Person and such Subsidiaries during such fiscal period, Unfunded Capital
Expenditures, taxes, dividends and distributions, and Debt Payments, all
calculated for such Person (and, if and as applicable, the combined and/or
consolidated Subsidiaries of such Person) in accordance with GAAP.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Excluded Deposit Accounts” shall mean Depository Accounts that are used solely
as (i) payroll accounts, (ii) e-Business accounts with respect to end-user
purchaser/customer deposits processed by Borrowers for Borrower’s customers, and
(iii) any tax withholding accounts containing an aggregate amount that does not
exceed the aggregate amount required to be withheld for tax purposes by
applicable law as determined by the applicable Loan Party in good faith, in each
case, maintained in the ordinary course of business.

“Excluded Hedge Liability or Liabilities” shall mean, with respect to each
Borrower and Guarantor, each of its Swap Obligations if, and only to the extent
that, all or any portion of this Agreement or any Other Document that relates to
such Swap Obligation is or becomes illegal under the CEA, or any rule,
regulation or order of the CFTC, solely by virtue of such Borrower’s and/or
Guarantor’s failure to qualify as an Eligible Contract Participant on the
Eligibility Date for such Swap. Notwithstanding anything to the contrary
contained in the foregoing or in any other provision of this Agreement or any
Other Document, the foregoing is subject to the following provisos: (a) if a
Swap Obligation arises under a master agreement governing more than one Swap,
this definition shall apply only to the portion of such Swap Obligation that is
attributable to Swaps for which such guaranty or security interest is or becomes
illegal under the CEA, or any rule, regulations or order of the CFTC, solely as
a result of the failure by such Borrower or Guarantor for any reason to qualify
as an Eligible Contract Participant on the Eligibility Date for such Swap;
(b) if a guarantee of a Swap Obligation would cause such obligation to be an
Excluded Hedge Liability but the grant of a security interest would not cause
such obligation to be an Excluded Hedge Liability, such Swap Obligation shall
constitute an Excluded Hedge Liability for purposes of the guaranty but not for
purposes of the grant of the security interest; and (c) if there is more than
one Borrower or Guarantor executing this Agreement or the Other Documents and a
Swap Obligation would be an Excluded Hedge Liability with respect to one or more
of such Persons, but not all of them, the definition of Excluded Hedge Liability
or Liabilities with respect to each such Person shall only be deemed applicable
to (i) the particular Swap Obligations that constitute Excluded Hedge
Liabilities with respect to such Person, and (ii) the particular Person with
respect to which such Swap Obligations constitute Excluded Hedge Liabilities.

 

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“Excluded Property” shall mean (A) any lease, permit, license, contract or
agreement to which any Loan Party is a party, and any of its rights or interests
thereunder, if and to the extent that a security interest therein (i) is
prohibited by or in violation of (x) any Applicable Law, or (y) a term,
provision or condition of any such lease, permit, license, contract or agreement
or (ii) would result in the abandonment, invalidation or unenforceability of any
right, title or interest of any Loan Party therein (unless in each case under
clause (i) and (ii), such Applicable Law, term, provision or condition would be
rendered ineffective with respect to the creation of such security interest
pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code
(or any successor provision or provisions) of any relevant jurisdiction or any
other Applicable Law or principles of equity), provided, however, that the
foregoing shall cease to be treated as “Excluded Property” (and shall constitute
Collateral) immediately at such time as the contractual or legal prohibition
shall no longer be applicable and to the extent severable, such security
interest shall attach immediately to any portion of such lease, permit, license,
contract or agreement not subject to the prohibitions specified in (x) or
(y) above, provided, further that Excluded Property shall not include any
proceeds of any such lease, permit, license, contract or agreement or any
goodwill of the Loan Parties’ business associated therewith or attributable
thereto, (B) any Equity Interests of any Subsidiary of any Person that does not
constitute Subsidiary Stock, or (C) the Excluded Deposit Accounts.

“Excluded Taxes” shall mean any of the following Taxes imposed on or with
respect to a Recipient or required to be withheld or deducted from a payment to
a Recipient, (a) Taxes imposed on or measured by net income (however
denominated), franchise Taxes, and branch profits Taxes, in each case,
(i) imposed as a result of such Recipient being organized under the laws of, or
having its principal office or, in the case of any Lender, its applicable
lending office located in, the jurisdiction imposing such Tax (or any political
subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of
a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for
the account of such Lender with respect to an applicable interest in a Loan or
Commitment pursuant to a law in effect on the date on which (i) such Lender
acquires such interest in the Loan or Commitment (other than pursuant to an
assignment request by the Borrower under Section 3.11) or (ii) such Lender
changes its lending office, except in each case to the extent that, pursuant to
Section 3.10, amounts with respect to such Taxes were payable either to such
Lender’s assignor immediately before such Lender became a party hereto or to
such Lender immediately before it changed its lending office, (c) Taxes
attributable to such Recipient’s failure to comply with Section 3.10(e), and
(d) any U.S. withholding Taxes imposed under FATCA.

“Facility Fee” shall have the same meaning set forth in Section 3.3(b) hereof.

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of
this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with), any current or
future regulations thereunder or official interpretations thereof and any
agreements entered into pursuant to Section 1471(b)(1) of the Code.

“FCCR Trigger Event” shall mean either (x) Undrawn Availability of all Borrowers
on any day shall be equal to or less than $10,000,000, or (y) the sum of the
aggregate principal balance of the Revolving Loans and Swing Loans plus the
undrawn amount of all Letters of Credit in each case outstanding on any date is
equal to or greater than $30,000,000.

 

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“Federal Funds Effective Rate” shall mean for any day the rate per annum (based
on a year of 360 days and actual days elapsed and rounded upward to the nearest
1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate” as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
“Federal Funds Effective Rate” for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

“Federal Funds Open Rate” shall mean for any day the rate per annum (based on a
year of 360 days and actual days elapsed) which is the daily federal funds open
rate as quoted by ICAP North America, Inc. (or any successor) as set forth on
the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such
other substitute Bloomberg Screen that displays such rate), or as set forth on
such other recognized electronic source used for the purpose of displaying such
rate as selected by PNC (an “Alternate Source”) (or if such rate for such day
does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on
any Alternate Source, or if there shall at any time, for any reason, no longer
exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate
Source, a comparable replacement rate determined by PNC at such time (which
determination shall be conclusive absent manifest error); provided however, that
if such day is not a Business Day, the Federal Funds Open Rate for such day
shall be the “open” rate on the immediately preceding Business Day. If and when
the Federal Funds Open Rate changes, the rate of interest with respect to any
advance to which the Federal Funds Open Rate applies will change automatically
without notice to the Borrowers, effective on the date of any such change.

“Financial Reporting Changeover Date” shall mean the earlier of (i) the last day
of the first month ending after the first anniversary of the Closing Date, and
(ii) the last day of any month ending prior to the first anniversary of the
Closing Date which Borrowers, at their option and election, shall have
designated in writing to Agent as the date on which the Financial Reporting
Changeover Date shall occur (subject to Borrowers’ satisfaction of the US EBITDA
Calculation Conditions on such designated date).

“Fixed Charge Coverage Ratio” shall mean, with respect to any Person (and, if
and as applicable, the combined and/or consolidated Subsidiaries of such Person)
for any fiscal period, the ratio of (a) the Applicable EBITDA for such period,
as hereinafter defined, minus Unfunded Capital Expenditures made during such
period, minus cash taxes paid during such period to (b) the sum of all Debt
Payments made during such period plus for any measurement of the Fixed Charge
Coverage Ratio for a fiscal period ending on or after the Financial Reporting
Changeover Date, the sum of all distributions (including tax distributions) and
dividends made during such period by Borrowers on a Combined and Consolidated
Basis and all Foreign Subsidiary-JV Transfers by Borrowers made during such
period (other than any distributions made under Section 7.7(b) and (d) hereof),
all calculated for such Person (and, if and as applicable, the

 

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combined and/or consolidated Subsidiaries of such Person) in accordance with
GAAP. “Applicable EBITDA,” as used in this definition, means (i) for any fiscal
measurement period ending prior to the Financial Reporting Changeover Date,
Global EBITDA for such fiscal measurement period, or (ii) for any fiscal
measurement period ending on or after the Financial Reporting Changeover Date,
Domestic US EBITDA for such fiscal measurement period.

“Flood Laws” shall mean all Applicable Laws relating to policies and procedures
that address requirements placed on federally regulated lenders under the
National Flood Insurance Reform Act of 1994 and other Applicable Laws related
thereto.

“Foreign Currency Hedge” shall mean any foreign exchange transaction, including
spot and forward foreign currency purchases and sales, listed or
over-the-counter options on foreign currencies, non-deliverable forwards and
options, foreign currency swap agreements, currency exchange rate price hedging
arrangements, and any other similar transaction providing for the purchase of
one currency in exchange for the sale of another currency entered into by any
Borrower, Guarantor and/or any of their respective Subsidiaries.

“Foreign Currency Hedge Liabilities” shall have the meaning assigned in the
definition of Lender-Provided Foreign Currency Hedge.

“Foreign In-Transit Inventory” shall mean Inventory of a Borrower that is in
transit from a location outside the United States to any location within the
United States of such Borrower or a Customer of such Borrower.

“Foreign Lender” shall mean any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrowers are resident for tax
purposes. For purposes of this definition, the United States of America, each
State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.

“Foreign Subsidiary” shall mean any Subsidiary of any Person that is not
organized or incorporated in the United States, any State or territory thereof
or the District of Columbia.

“Foreign Subsidiary-JV Transfers” shall mean, collectively, (i) all purchases or
acquisitions by a Borrower of the obligations or Equity Interests of, or capital
contributions by a Borrower to, such Borrower’s Foreign Subsidiaries pursuant to
Section 7.4(ii) or (iii) hereof, (ii) all advances or loans by a Borrower to
such Borrower’s Foreign Subsidiaries pursuant to Section 7.5(ii) or
(iii) hereof, and (iii) all investments and/or capital contributions by any
Borrower in any JV pursuant to Section 7.12(b)(i) or (ii) hereof; provided,
that, for the avoidance of doubt, neither cash payments by a Borrower to such
Borrower’s Foreign Subsidiaries for goods sold or services rendered in the
Ordinary Course of Business, nor cash payments by a Borrower to such Borrower’s
JVs for goods sold or services rendered in the Ordinary Course of Business at
fair market value on arm’s length terms, shall be considered (a) purchases or
acquisitions of the obligations or Equity Interests of, or capital contributions
by such Borrower to, such Borrower’s Foreign Subsidiaries or JVs for purposes of
Section 7.4 hereof or any other provision of this Agreement, or (b) advances or
loans by such Borrower to such Borrower’s Foreign Subsidiaries for purposes of
Section 7.5 hereof or any other provision of this Agreement.

“Formula Amount” shall have the meaning set forth in Section 2.1(a) hereof.

 

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“Funded Debt” shall mean, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from, the date of
creation thereof, and specifically including Capitalized Lease Obligations,
current maturities of long-term debt, revolving credit and short term debt
extendible beyond one year at the option of the debtor, and also including, in
the case of Borrowers, the Obligations and, without duplication, Indebtedness
consisting of guaranties of Funded Debt of other Persons; provided, however,
that for purposes of determining the amount of Funded Debt with respect to the
Obligations, the amount of Funded Debt shall be equal to the quotient of (A) the
sum of the outstanding Revolving Advances, Swing Loans and the Maximum Undrawn
Amount of all outstanding Letters of Credit for each day of the most recently
ended fiscal quarter, divided by (B) the number of such days in such fiscal
quarter.

“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time.

“Genpact Reserve” shall mean a reserve against the Formula Amount in an amount
equal to three (3) months’ fees (as reasonably determined by Agent from time to
time based on a representative or average amount of fees per month paid by Loan
Parties to Genpact in the preceding year) payable or reasonably expected to be
payable by Loan Parties to Genpact for outsourced accounting functions; as an
illustrative example the amount of the Genpact Reserve as of the Closing Date
determined in accordance with the foregoing methodology shall be $402,933.75.

“Global EBITDA” shall mean, for any period, EBITDA of ModusLink Parent on a
Global Consolidated Basis.

“Governmental Acts” shall mean any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Body.

“Governmental Body” shall mean any nation or government, any state or other
political subdivision thereof or any entity, authority, agency, division or
department exercising the executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to a government
(including any supra-national bodies such as the European Union or the European
Central Bank) and any group or body charged with setting financial accounting or
regulatory capital rules or standards (including, without limitation, the
Financial Accounting Standards Board, the Bank for International Settlements or
the Basel Committee on Banking Supervision or any successor or similar authority
to any of the foregoing).

“Guaranteed Obligations” shall have the meaning set forth in Section 17.1
hereof.

“Guarantor” shall have the meaning set forth in the preamble to this Agreement,
and shall extend to each Person signing this Agreement on the date hereof as a
“Guarantor” and any other Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations, and shall also extend
to all permitted successors and assigns of such Persons, and “Guarantors” means
collectively all such Persons.

 

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“Guarantor Security Agreement” shall mean any security agreement executed by any
Guarantor in favor of Agent securing the Obligations or the Guaranty of such
Guarantor, in form and substance satisfactory to Agent, including with respect
to Guarantors that are parties hereto, the provisions of Article IV of this
Agreement; as each may be amended, restated, supplemented or otherwise modified
from time to time.

“Guaranty” shall mean any guaranty of the Obligations executed by a Guarantor in
favor of Agent for its benefit and for the ratable benefit of Lenders, in form
and substance satisfactory to Agent, including, with respect to Guarantors that
are parties hereto, the provisions of Article XVII of this Agreement.

“Hazardous Discharge” shall have the meaning set forth in Section 9.3(b) hereof.

“Hazardous Materials” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous or Toxic Substances or related materials
as defined in or subject to regulation under Environmental Laws.

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

“Hedge Liabilities” shall mean collectively, the Foreign Currency Hedge
Liabilities and the Interest Rate Hedge Liabilities.

“Increasing Lender” shall have the meaning set forth in Section 2.24(a) hereof.

“Indebtedness” shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (a) borrowed money; (b) amounts
received under or liabilities in respect of any note purchase or acceptance
credit facility, and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (c) all Capitalized Lease
Obligations; (d) reimbursement obligations (contingent or otherwise) under any
letter of credit agreement, banker’s acceptance agreement or similar
arrangement; (e) obligations under any Interest Rate Hedge, Foreign Currency
Hedge or other interest rate management device, foreign currency exchange
agreement, currency swap agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement;
(f) any other advances of credit made to or on behalf of such Person or other
transaction (including forward sale or purchase agreements, capitalized leases
and conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements including to finance the purchase price of property or services and
all obligations of such Person to pay the deferred purchase price of property or
services (but not including (A) intercompany payables incurred in the Ordinary
Course of Business or (B) trade payables, other than intercompany

 

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payables, incurred in the Ordinary Course of Business (I) which are not
represented by a promissory note or other evidence of indebtedness, (II) which
are not more than sixty (60) days past due and (III) which do not exceed, on any
date of determination, $5,000,000 in the aggregate, it being understood that if
the outstanding amount of such trade payables equals or exceeds $5,000,000 on
such date, then the entire amount of all such past due trade payables shall be
included in the calculation of this clause (f)); (g) all Equity Interests of
such Person subject to repurchase or redemption rights or obligations (excluding
repurchases or redemptions at the sole option of such Person); (h) all
indebtedness, obligations or liabilities secured by a Lien on any asset of such
Person, whether or not such indebtedness, obligations or liabilities are
otherwise an obligation of such Person; (i) all obligations of such Person for
“earnouts”, purchase price adjustments, profit sharing arrangements, deferred
purchase money amounts and similar payment obligations or continuing obligations
of any nature of such Person arising out of purchase and sale contracts, in each
case, solely to the extent then overdue; (j) off-balance sheet liabilities
and/or pension plan liabilities of such Person; (k) obligations arising under
bonus, deferred compensation, incentive compensation or similar arrangements,
other than those arising in the Ordinary Course of Business; and (l) any
guaranty of any indebtedness, obligations or liabilities of a type described in
the foregoing clauses (a) through (k).

“Indemnified Taxes” shall mean (a) Taxes other than Excluded Taxes, and (b) to
the extent not otherwise described in (a), Other Taxes.

“Ineligible Security” shall mean any security which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

“Insolvency Event” shall mean, with respect to any Person, including without
limitation any Lender, such Person or such Person’s direct or indirect parent
company (a) becomes the subject of a bankruptcy or insolvency proceeding
(including any proceeding under Title 11 of the United States Code), or
regulatory restrictions, (b) has had a receiver, conservator, trustee,
administrator, custodian, assignee for the benefit of creditors or similar
Person charged with the reorganization or liquidation of its business appointed
for it or has called a meeting of its creditors, (c) admits in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business, (d) with respect to a Lender, such Lender is
unable to perform hereunder due to the application of Applicable Law, or (e) in
the good faith determination of the Agent, has taken any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any such
proceeding or appointment of a type described in clause(a) or (b), provided that
an Insolvency Event shall not result solely by virtue of any ownership interest,
or the acquisition of any ownership interest, in such Person or such Person’s
direct or indirect parent company by a Governmental Body or instrumentality
thereof if, and only if, such ownership interest does not result in or provide
such Person with immunity from the jurisdiction of courts within the United
States or from the enforcement of judgments or writs of attachment on its assets
or permit such Person (or such Governmental Body or instrumentality) to reject,
repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“Intellectual Property” shall mean property constituting a patent, copyright,
trademark (or any application in respect of the foregoing), service mark,
copyright, copyright application, trade name, mask work, trade secrets, design
right, assumed name or license or other right to use any of the foregoing under
Applicable Law.

 

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“Intellectual Property Claim” shall mean the assertion, by any means, by any
Person of a claim that any Loan Party’s ownership, use, marketing, sale or
distribution of any Inventory, equipment, Intellectual Property or other
property or asset is violative of any ownership of or right to use any
Intellectual Property of such Person.

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

“Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap,
floor, adjustable strike cap, adjustable strike corridor, cross-currency swap or
similar agreements entered into by any Borrower, Guarantor , or any of their
Subsidiaries that elect to enter into such an agreement, in order to provide
protection to, or minimize the impact upon, such Borrower, any Guarantor and/or
their respective Subsidiaries of increasing floating rates of interest
applicable to Indebtedness.

“Interest Rate Hedge Liabilities” shall have the meaning ascribed in the
definition of Lender-Provided Interest Rate Hedge.

“Inventory” shall mean and include as to each Loan Party all of such Loan
Party’s inventory (as defined in Article 9 of the Uniform Commercial Code) and
all of such Loan Party’s goods, merchandise and other personal property,
wherever located, to be furnished under any consignment arrangement, contract of
service or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in such Loan Party’s business or used in selling or
furnishing such goods, merchandise and other personal property, and all
Documents.

“Inventory Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(ii) hereof.

“Inventory NOLV Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(ii) hereof.

“Issuer” shall mean (i) Agent in its capacity as the issuer of Letters of Credit
under this Agreement and (ii) any other Lender which Agent in its discretion
shall designate as the issuer of and cause to issue any particular Letter of
Credit under this Agreement in place of Agent as issuer.

“JV” shall mean any partnership, joint venture or similar arrangement in which
any Borrower shall be a partner or member in accordance with the provisions of
Section 7.12(b) hereof, and shall include any partnership or joint venture
entity (including any applicable corporation or limited liability company)
formed in connection with and/or to effectuate such partnership, joint venture
or similar arrangement.

“Law(s)” shall mean any law(s) (including common law), constitution, statute,
treaty, regulation, rule, ordinance, release, ruling, order, executive order,
injunction, writ, decree, bond, judgment, authorization or approval, lien or
award of or any settlement arrangement, by agreement, consent or otherwise, with
any Governmental Body, foreign or domestic.

 

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“Leasehold Interests” shall mean all of each Loan Party’s right, title and
interest in and to, and as lessee of, the premises identified as leased Real
Property on Schedule 4.4 hereto.

“Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender. For the purpose of provision of
this Agreement or any Other Document which provides for the granting of a
security interest or other Lien to the Agent for the benefit of Lenders as
security for the Obligations, “Lenders” shall include any Affiliate of a Lender
to which such Obligation (specifically including any Hedge Liabilities and any
Cash Management Liabilities) is owed.

“Lender-Provided Foreign Currency Hedge” shall mean a Foreign Currency Hedge
which is provided by Agent or any Lender or any Affiliate of Agent or any Lender
(including any Person that was the Agent or a Lender or an Affiliate thereof at
the time such Foreign Currency Hedge was entered into regardless of whether such
Person has ceased to be the Agent or such an Lender or Affiliate) to any
Borrower or Guarantor, or any of their Subsidiaries that elect to obtain such
products or services from any such Person, and for which such Person confirms to
Agent in writing prior to the execution thereof that it: (a) is documented in a
standard International Swap Dealers Association, Inc. Master Agreement or
another reasonable and customary manner; (b) provides for the method of
calculating the reimbursable amount of the provider’s credit exposure in a
reasonable and customary manner; and (c) is entered into for hedging (rather
than speculative) purposes. The liabilities owing to the provider of any
Lender-Provided Foreign Currency Hedge (the “Foreign Currency Hedge
Liabilities”) by any Borrower or Guarantor , or any of their Subsidiaries that
elect to obtain such a Foreign Currency Hedge from any such Person, that is
party to such Lender-Provided Foreign Currency Hedge shall, for purposes of this
Agreement and all Other Documents be “Obligations” of such Person and of each
other Borrower and Guarantor, be guaranteed obligations under any Guaranty and
secured obligations under any Guarantor Security Agreement, as applicable, and
otherwise treated as Obligations for purposes of the Other Documents, except to
the extent constituting Excluded Hedge Liabilities of such Person. The Liens
securing the Foreign Currency Hedge Liabilities shall be pari passu with the
Liens securing all other Obligations under this Agreement and the Other
Documents, subject to the express provisions of Section 11.5 hereof.

“Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by Agent or any Lender or any Affiliate of Agent or any Lender
(including any Person that was the Agent or a Lender or an Affiliate thereof at
the time such agreement or arrangement was entered into regardless of whether
such Person has ceased to be the Agent or such an Lender or Affiliate) to any
Borrower or Guarantor, or any of their Subsidiaries that elect to obtain such
products or services from any such Person, and for which such Person confirms to
Agent in writing prior to the execution thereof: (a) is documented in a standard
International Swap Dealer Association Agreement; (b) provides for the method of
calculating the reimbursable amount of the provider’s credit exposure in a
reasonable and customary manner; and (c) is entered into for hedging (rather
than speculative) purposes. The liabilities owing to the provider of any
Lender-Provided Interest Rate Hedge (the “Interest Rate Hedge Liabilities”) by
any Borrower or

 

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Guarantor , or any of their Subsidiaries that elect to obtain such an Interest
Hedge from any such Person, that is party to such Lender-Provided Interest Rate
Hedge shall be “Obligations” hereunder, guaranteed obligations under the
Guaranty and secured obligations under the Guarantor Security Agreement, as
applicable, and otherwise treated as Obligations for purposes of each of the
Other Documents. The Liens securing the Hedge Liabilities shall be pari passu
with the Liens securing all other Obligations under this Agreement and the Other
Documents, subject to the express provisions of Section 11.5 hereof.

“Letter of Credit Application” shall have the meaning set forth in
Section 2.12(a) hereof.

“Letter of Credit Borrowing” shall have the meaning set forth in Section 2.14(d)
hereof.

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

“Letter of Credit Sublimit” shall mean $5,000,000.

“Letters of Credit” shall have the meaning set forth in Section 2.11 hereof.

“Leverage Ratio” shall mean, with respect to any Person (and, if and as
applicable, the combined and/or consolidated Subsidiaries of such Person) as of
any date, the ratio of (a) Funded Debt as of such date to (b) the Applicable
EBITDA for the twelve month fiscal measurement period ending on such date, all
calculated for such Person (and, if and as applicable, the combined and/or
consolidated Subsidiaries of such Person) in accordance with GAAP. “Applicable
EBITDA,” as used in this definition, means (i) for any fiscal measurement period
ending prior to the Financial Reporting Changeover Date, Global EBITDA for such
fiscal measurement period, or (ii) for any fiscal measurement period ending on
or after the Financial Reporting Changeover Date, Domestic US EBITDA for such
fiscal measurement period.

“LIBOR Alternate Source” shall have the meaning set forth in the definition of
LIBOR Rate.

“LIBOR Rate” shall mean for any LIBOR Rate Loan for the then current Interest
Period relating thereto, the interest rate per annum determined by Agent by
dividing (the resulting quotient rounded upwards, if necessary, to the nearest
1/100th of 1% per annum) (a) the rate which appears on the Bloomberg Page BBAM1
(or on such other substitute Bloomberg page that displays rates at which US
dollar deposits are offered by leading banks in the London interbank deposit
market), or the rate which is quoted by another source selected by Agent as an
authorized information vendor for the purpose of displaying rates at which U.S.
dollar deposits are offered by leading banks in the London interbank deposit
market (a “LIBOR Alternate Source”), at approximately 11:00 a.m., London time,
two (2) Business Days prior to the commencement of such Interest Period as the
London interbank offered rate for U.S. Dollars for an amount comparable to such
LIBOR Rate Loan and having a borrowing date and a maturity comparable to such
Interest Period (or if there shall at any time, for any reason, no longer exist
a Bloomberg Page BBAM1 (or any substitute page) or any LIBOR Alternate Source, a
comparable replacement rate determined by Agent at such time (which
determination shall be conclusive absent manifest error)), by (b) a number equal
to 1.00 minus the Reserve Percentage.

 

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The LIBOR Rate shall be adjusted with respect to any LIBOR Rate Loan that is
outstanding on the effective date of any change in the Reserve Percentage as of
such effective date. The Agent shall give reasonably prompt notice to Borrowing
Agent of the LIBOR Rate as determined or adjusted in accordance herewith, which
determination shall be conclusive absent manifest error.

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

“License Agreement” shall mean any agreement between any Loan Party and a
Licensor pursuant to which such Loan Party is authorized to use any Intellectual
Property in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of such Loan Party or otherwise in connection with
such Loan Party’s business operations.

“Licensor” shall mean any Person from whom any Loan Party obtains the right to
use (whether on an exclusive or non-exclusive basis) any Intellectual Property
in connection with such Loan Party’s manufacture, marketing, sale or other
distribution of any Inventory or otherwise in connection with such Loan Party’s
business operations.

“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,
in form and substance satisfactory to Agent, by which Agent is given the
unqualified right, vis-á-vis such Licensor, to enforce Agent’s Liens with
respect to and to dispose of any Loan Party’s Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of such Loan Party’s
default under any License Agreement with such Licensor.

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction.

“Lien Waiver Agreement” shall mean an agreement which is executed in favor of
Agent by a Person who owns or occupies premises at which any Collateral may be
located from time to time in form and substance satisfactory to Agent.

“Loan Parties” shall mean, collectively, all Borrowers and Guarantors, and “Loan
Party” shall mean each such Person individually, and shall extend to all
successors and permitted assigns of such Persons.

“Material Adverse Effect” shall mean a material adverse effect on (a) the
financial condition, results of operations, assets, business or properties of
Borrowers and Guarantors taken as a whole, (b) the ability of Borrowers and
Guarantors taken as a whole to duly and punctually pay or perform the
Obligations in accordance with the terms thereof, (c) the value of any material
portion of the Collateral, taken as a whole, or Agent’s Liens on a material
portion of the Collateral, taken as a whole, or the priority of any such Lien or
(d) the practical realization of the benefits of Agent’s and each Lender’s
rights and remedies under this Agreement and the Other Documents, taken as a
whole.

 

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“Material Contract” shall mean any contract, agreement, instrument, permit,
lease or license, written or oral, of any Borrower, which is material to any
Borrower’s business or which the failure to comply with could reasonably be
expected to result in a Material Adverse Effect.

“Maximum Swing Loan Advance Amount” shall mean $6,500,000; provided that, upon
the effective date of each increase in the Maximum Revolving Advance Amount in
accordance with Section 2.24, the Maximum Swing Loan Advance Amount shall
increase by an amount equal to ten percent (10%) of the amount of such increase
in the Maximum Revolving Advance Amount.

“Maximum Revolving Advance Amount” shall mean $50,000,000, as such amount may be
increased (to an amount not to exceed $70,000,000) from time to time in
accordance with Section 2.24 hereof.

“Maximum Undrawn Amount” shall mean, with respect to any outstanding Letter of
Credit as of any date, the amount of such Letter of Credit that is or may become
available to be drawn, including all automatic increases provided for in such
Letter of Credit, whether or not any such automatic increase has become
effective.

“ModusLink Parent” shall mean ModusLink Global Solutions, Inc., a corporation
organized under the laws of Delaware.

“ModusLink Parent on a Global Consolidated Basis” shall mean the consolidation
in accordance with GAAP of the accounts and other items of ModusLink Parent, its
Domestic Subsidiaries and its Foreign Subsidiaries.

“Modified Commitment Transfer Supplement” shall have the meaning set forth in
Section 16.3(d) hereof.

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in
Section 3(37) or 4001(a)(3) of ERISA to which contributions are required or,
within the preceding five plan years, were required by any Loan Party or any
member of the Controlled Group.

“Multiple Employer Plan” shall mean a Plan which has two or more contributing
sponsors (including any Loan Party or any member of the Controlled Group) at
least two of whom are not under common control, as such a plan is described in
Section 4063 or 4064 of ERISA.

“Negotiable Document” shall mean a Document that is “negotiable” within the
meaning of Article 7 of the Uniform Commercial Code.

“New Lender” shall have the meaning set forth in Section 2.24(a) hereof.

“Non-Defaulting Lender” shall mean, at any time, any Lender holding a Revolving
Commitment that is not a Defaulting Lender at such time.

 

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“Non-Qualifying Party” shall mean any Borrower or any Guarantor that on the
Eligibility Date fails for any reason to qualify as an Eligible Contract
Participant.

“Non-Domestic US EBITDA” shall mean, for any period, EBITDA of Borrowers on a
Combined and Consolidated Basis, adjusted in a reasonably detailed manner,
satisfactory to Agent, to include only EBITDA based on net income arising from
the sale of goods or rendition of services by a Foreign Subsidiary of a
Borrower, the invoice and billing in respect of which is generated outside of
the United States and the related account receivable in respect of which is
collected by such Foreign Subsidiary, or an affiliate of such Foreign
Subsidiary, outside of the United States. For avoidance of doubt, the
calculation of Non-Domestic US EBITDA shall exclude Domestic US EBITDA.

“Non-Domestic US Excess Cash Flow” shall mean, for any period, Excess Cash Flow
of Borrowers on a Combined and Consolidated Basis, the calculation of which
shall be based solely on Non-Domestic US EBITDA.

“Non-Qualifying Party” shall mean any Borrower or any Guarantor that on the
Eligibility Date fails for any reason to qualify as an Eligible Contract
Participant.

“Note” shall mean collectively, the Revolving Credit Note and the Swing Loan
Note.

“Obligations” shall mean and include any and all loans (including without
limitation, all Advances and Swing Loans), advances, debts, liabilities,
obligations (including without limitation all reimbursement obligations and cash
collateralization obligations with respect to Letters of Credit issued
hereunder), covenants and duties owing by any Borrower or Guarantor , or any of
their Subsidiaries that elect to enter into any Cash Management Products and
Services, Lender-Provided Foreign Currency Hedge or Lender-Provided Interest
Rate Hedge, to Issuer, Swing Loan Lender, Lenders or Agent (or to any other
direct or indirect subsidiary or Affiliate of Issuer, Swing Loan Lender, any
Lender or Agent), including any provider of any Cash Management Products and
Services, Lender-Provided Foreign Currency Hedge or Lender-Provided Interest
Rate Hedge, of any kind or nature, present or future (including any interest or
other amounts accruing thereon, any fees accruing under or in connection
therewith, any costs and expenses of any Person payable by any Borrower or
Guarantor or any applicable Subsidiary and any indemnification obligations
payable by any Borrower or Guarantor or applicable Subsidiary arising or payable
after maturity, or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding relating to
any Borrower or Guarantor or applicable Subsidiary, whether or not a claim for
post-filing or post-petition interest, fees or other amounts is allowable or
allowed in such proceeding), whether or not for the payment of money, whether
arising by reason of an extension of credit, opening or issuance of a letter of
credit, loan, equipment lease, establishment of any commercial card, purchase
card or similar facility or guarantee, under any interest or currency swap,
future, option or other similar agreement, or in any other manner, whether
arising out of overdrafts or deposit or other accounts or electronic funds
transfers (whether through automated clearing houses or otherwise) or out of
Agent’s or any Lender’s non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository transfer check or
other similar arrangements, whether direct or indirect (including those acquired
by assignment or participation), absolute or contingent, joint or several, due
or to become due, now existing or

 

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hereafter arising, contractual or tortious, liquidated or unliquidated, arising
under, evidenced by and/or relating to (i) this Agreement, the Other Documents
and any amendments, extensions, renewals or increases thereto, including, to the
extent provided for in Section 16.9 and otherwise in the Other Documents, all
costs and expenses of Agent, Issuer, Swing Loan Lender and any Lender incurred
in the documentation, negotiation, modification, enforcement, collection or
otherwise in connection with any of the foregoing, including but not limited to
reasonable attorneys’ fees and expenses and all obligations of any Loan Party to
Agent, Issuer, Swing Loan Lender or Lenders to perform acts or refrain from
taking any action, (ii) all Hedge Liabilities and (iii) all Cash Management
Liabilities. Notwithstanding anything to the contrary contained in the
foregoing, the Obligations shall not include any Excluded Hedge Liabilities

“Ordinary Course of Business” shall mean, with respect to any Loan Party, the
ordinary course of such Loan Party’s business as conducted on the Closing Date
(or, in the case of any Loan Party that becomes a Loan Party or Guarantor after
the Closing Date, as conducted at the time of such joinder) and reasonable
extensions thereof.

“Organizational Documents” shall mean, with respect to any Person, any charter,
articles or certificate of incorporation, certificate of organization,
registration or formation, certificate of partnership or limited partnership,
bylaws, operating agreement, limited liability company agreement, or partnership
agreement of such Person and any and all other applicable documents relating to
such Person’s formation, organization or entity governance matters (including
any shareholders’ or equity holders’ agreement or voting trust agreement) and
specifically includes, without limitation, any certificates of designation for
preferred stock or other forms of preferred equity.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Other Documents, or sold or assigned an interest in any Other Documents).

“Other Documents” shall mean the Note, the Perfection Certificates, any
Guaranty, any Guarantor Security Agreement, any Pledge Agreement, any
Lender-Provided Interest Rate Hedge or Lender-Provided Foreign Currency Hedge
(provided that no such Lender-Provided Interest Rate Hedge or Lender-Provided
Foreign Currency Hedge shall be an Other Document for the purposes of
Section 10.1, 10.5 or 10.14), and any and all other agreements, instruments and
documents, including intercreditor agreements, guaranties, pledges, powers of
attorney, consents, interest or currency swap agreements or other similar
agreements and all other writings heretofore, now or hereafter executed by any
Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of
the transactions contemplated by this Agreement, in each case together with all
extensions, renewals, amendments, supplements, modifications, substitutions and
replacements thereto and thereof.

“Other Taxes” shall mean 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 under any Other Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
Other Document, except any such Taxes that are Other Connection Taxes imposed
with respect to an assignment.

 

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“Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(e)
hereof.

“Parent” of any Person shall mean a corporation or other entity owning, directly
or indirectly, 50% or more of the Equity Interests issued by such Person having
ordinary voting power to elect a majority of the directors of such Person, or
other Persons performing similar functions for any such Person.

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

“Participant Register” has the meaning specified in clause (b) of Section 16.3.

“Participation Advance” shall have the meaning set forth in Section 2.14(d)
hereof.

“Participation Commitment” shall mean the obligation hereunder of each Lender
holding a Revolving Commitment to buy a participation equal to its Revolving
Commitment Percentage (subject to any reallocation pursuant to
Section 2.22(b)(iii) hereof) in the Swing Loans made by Swing Loan Lender
hereunder as provided for in Section 2.4(c) hereof and in the Letters of Credit
issued hereunder as provided for in Section 2.14(a) hereof.

“Payment Office” shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor.

“Pension Benefit Plan” shall mean at any time any “employee pension benefit
plan” as defined in Section 3(2) of ERISA (including a Multiple Employer Plan,
but not a Multiemployer Plan) which is covered by Title IV of ERISA or is
subject to the minimum funding standards under Section 412, 430 or 436 of the
Code and either (i) is maintained or to which contributions are required by any
Loan Party or any member of the Controlled Group or (ii) has at any time within
the preceding five years been maintained or to which contributions have been
required by any Loan Party or any entity which was at such time a member of the
Controlled Group.

“Perfection Certificates” shall mean, collectively, the information
questionnaires and the responses thereto provided by each Loan Party and
delivered to Agent.

“Permitted Acquisitions” shall mean acquisitions of the assets or Equity
Interests of another Person (the “target”) so long as: (a) at the time of and
after giving effect to such acquisition, Borrowers have Undrawn Availability and
Average Undrawn Availability (calculated as if such acquisition, and any
Revolving Advance requested to fund any portion of such acquisition, had been
made at the beginning of the applicable period) of not less than $10,000,000;
(b) the total costs and liabilities (including without limitation, all assumed

 

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liabilities, all earn-out payments, deferred payments and the value of any other
stock or assets transferred, assigned or encumbered with respect to such
acquisitions) of (A) such acquisition shall not exceed, as of the time of such
acquisition after giving effect thereto, the applicable Permitted Acquisition
Basket Amount and (B) all such acquisitions in the aggregate throughout the Term
shall not exceed, as of the time of such acquisition after giving effect thereto
$50,000,000; provided that neither (x) any amount of such acquisition costs and
liabilities funded with the proceeds of any issuance of Equity Interests of any
Borrower to ModusLink Parent and/or capital contribution by ModusLink Parent in
respect of any Equity Interests of any Borrower nor (y) any amount of such
acquisition costs and liabilities funded with the proceeds of any Permitted
Acquisition Indebtedness shall be counted again the foregoing limitation;
(c) with respect to the acquisition of Equity Interests, such target shall
(i) have a positive pro forma EBITDA based on the trailing four fiscal quarters
most recently completely prior to the date of the proposed acquisition, subject
to pro forma assumptions and adjustments (as though such acquisition had
occurred on the first day of such period) as may be approved by and acceptable
to Agent in its Permitted Discretion, (ii) be added as a Borrower or a Guarantor
(as Agent may elect in its Permitted Discretion) to this Agreement and be
jointly and severally liable for all Obligations, and (iii) grant to Agent a
first priority lien in all Equity Interests constituting Subsidiary Stock of
such target (subject only to Permitted Encumbrances); (d) the target or property
is used or useful in the Borrowers’ Ordinary Course of Business; (e) Agent shall
have received a first-priority security interest (subject only to Permitted
Encumbrances) in all acquired asset (subject only to Permitted Encumbrances),
including all assets of any target acquired through a purchase of Equity
Interests, subject to documentation satisfactory to Agent; (f) the board of
directors (or other comparable governing body) of the target shall have duly
approved the transaction; (g) Borrowers shall have delivered to Agent (i) a pro
forma balance sheet and pro forma financial statements and a Compliance
Certificate demonstrating that, upon giving effect to such acquisition on a pro
forma basis, Borrowers would be in compliance with the financial covenants set
forth in Section 6.5 as of the most recent fiscal quarter end and (ii) financial
statements of the acquired entity for the two most recent fiscal years then
ended (if available), in form and substance reasonably acceptable to Agent;
(h) if such acquisition includes general partnership interests or any other
Equity Interest that does not have a corporate (or similar) limitation on
liability of the owners thereof, then such acquisition shall be effected by
having such Equity Interests acquired by a corporate holding company directly or
indirectly wholly-owned by a Borrower and newly formed for the sole purpose of
effecting such acquisition; (i) no assets acquired in any such transaction(s)
shall be included in the Formula Amount until Agent has received a field
examination and/or appraisal of such assets (as may be required by Agent in its
Permitted Discretion), in form and substance acceptable to Agent in its
Permitted Discretion; and (j) no Default or Event of Default shall have occurred
or will occur after giving pro forma effect to such acquisition. For the
purposes of calculating Undrawn Availability and Average Undrawn Availability
under this definition, any assets being acquired in the proposed acquisition
shall be included in the Formula Amount on the date of closing so long as (but
only if) Agent has received field examination and/or appraisal of such assets
(as may be required by Agent in its Permitted Discretion), in form and substance
acceptable to Agent in its Permitted Discretion; as set forth in clause
(i) above and so long as such assets satisfy the applicable eligibility
criteria.

“Permitted Acquisition Basket Amount” shall mean, with respect to any proposed
Permitted Acquisition for the purposes of clause (b) of the definition of the
term Permitted Acquisition: (i) if at the time of and after giving effect to
such acquisition, Borrowers have

 

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Undrawn Availability and Average Undrawn Availability (calculated as if such
acquisition, and any Revolving Advance requested to fund such acquisition, had
been made at the beginning of the applicable period) of not less than
$10,000,000 but equal to or less than $12,500,000, an amount equal to
$20,000,000, (ii) if at the time of and after giving effect to such acquisition,
Borrowers have Undrawn Availability and Average Undrawn Availability (calculated
as if such acquisition, and any Revolving Advance requested to fund such
acquisition, had been made at the beginning of the applicable period) of not
less than $12,500,000 but equal to or less than $15,000,000, an amount equal to
$25,000,000, or (iii) if at the time of and after giving effect to such
acquisition, Borrowers have Undrawn Availability and Average Undrawn
Availability (calculated as if such acquisition, and any Revolving Advance
requested to fund such acquisition, had been made at the beginning of the
applicable period) of not less than $15,000,000, an amount equal to $30,000,000.

“Permitted Acquisition Indebtedness” shall mean any Indebtedness (including
Indebtedness in the form of “seller debt” or any “earn out obligations”)
incurred by Borrowers for the purpose of funding any Permitted Acquisition but
only if and to the extent that (i) the terms and conditions of such
Indebtedness, including without limitation the interest rate and other financial
terms, amortization and final maturity date, and extent of any Liens on any
assets of Loan Parties securing such Indebtedness, shall be acceptable to Agent
in its discretion (provided that, without limiting the generality of Agent’s
discretion under this clause (i), unless Agent shall agree otherwise in its
discretion, such Indebtedness shall not mature prior to the date that is 12
months after the Term, such Indebtedness shall not amortize until 12 months
after the Term, and such Indebtedness shall not provide for the payment of
interest thereon in cash or Cash Equivalents prior to the date that is 12 months
after the Term), (ii) the holder of such Indebtedness shall agree and enter into
and execute and deliver to Agent an intercreditor and subordination agreement
acceptable to Agent in its discretion providing for subordination of such
Indebtedness to the Obligations, payment blockage terms, subordination of any
Liens (if any) securing such Indebtedness to the Liens of Agent in the assets of
Loan Parties and other customary terms and provisions, and (iii) after giving
effect to the incurrence of such Indebtedness and the consummation of such
Permitted Acquisition, the pro forma Leverage Ratio of Loan Parties (calculated
as of the last day of the most recently ended month that is the last month in a
fiscal quarter and for which financial statements and a related Compliance
Certificate complying with the requirements of Section 9.9 hereof have been
delivered to Agent as though such Permitted Acquisition and such Indebtedness
had been incurred on such date) shall not be more than 4.50 to 1.00.

“Permitted Assignees” shall mean: (a) Agent, any Lender or any of their direct
or indirect Affiliates; (b) a federal or state chartered bank or financial
institution, a United States branch of a foreign bank or financial institution,
or any finance company generally engaged in the business of making revolving
commercial loans; (c) any fund that is administered or managed by Agent or any
Lender, an Affiliate of Agent or any Lender or a related entity, in each case,
that is directly engaged (or indirectly through the Agent or such Lender or
Affiliate) in the business of making revolving commercial loans; and (d) any
Person who, unless an Event of Default shall have occurred and be continuing, is
generally engaged in the business of making revolving commercial loans and to
whom Agent or any Lender assigns its rights and obligations under this Agreement
as part of an assignment and transfer of such Agent’s or Lender’s rights in and
to a material portion of such Agent’s or Lender’s portfolio of asset-based
credit facilities; provided,

 

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that neither (x) WebBank nor (y) any Person listed on a schedule of prohibited
transferees provided to the Agent by the Permitted Holder from time to time and
accepted and approved by Agent in its Permitted Discretion may be a Permitted
Assignee hereunder.

“Permitted Discretion” shall mean a determination made in good faith and in the
exercise (from the perspective of a secured asset-based lender) of commercially
reasonable business judgment.

“Permitted Dispositions” shall mean:

(a) sales, abandonment, or other dispositions of equipment that is substantially
worn, damaged, or obsolete or no longer used or useful in the Ordinary Course of
Business and leases or subleases of Real Property not useful in the conduct of
the business of Borrowers and their Subsidiaries;

(b) sales of Inventory to buyers in the Ordinary Course of Business;

(c) the use or transfer of money or Cash Equivalents in a manner that is not
prohibited by the terms of this Agreement or the Other Documents;

(d) the licensing, on a non-exclusive basis, of patents, trademarks, copyrights,
and other intellectual property rights in the Ordinary Course of Business;

(e) the granting of Permitted Encumbrances;

(f) [reserved];

(g) any involuntary loss, damage or destruction of property;

(h) any involuntary condemnation, seizure or taking, by exercise of the power of
eminent domain or otherwise, or confiscation or requisition of use of property;

(i) the leasing or subleasing of assets (other than Inventory) in the Ordinary
Course of Business;

(j) (i) the lapse of registered patents, trademarks, copyrights and other
intellectual property to the extent not economically desirable in the conduct of
its business or (ii) the abandonment of patents, trademarks, copyrights, or
other intellectual property rights in the Ordinary Course of Business so long as
(in each case under clauses (i) and (ii)), (A) with respect to copyrights, such
copyrights are not material revenue generating copyrights, and (B) such lapse is
not materially adverse to the interests of the Lenders, taken as a whole;

(k) the making of payments that are expressly permitted to be made pursuant to
this Agreement;

(l) the making of Permitted Investments;

 

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(m) so long as no Event of Default has occurred and is continuing or would
immediately result therefrom, transfers of assets in the Ordinary Course of
Business (i) from any Borrower or any of its Subsidiaries to a Loan Party that
is a Borrower or a Domestic Subsidiary, and (ii) from any Subsidiary of any
Borrower that is not a Loan Party to any other Subsidiary of any Borrower;

(n) dispositions of assets (other than Inventory or Receivables) acquired by
Borrowers and their Subsidiaries pursuant to an acquisition consummated within
12 months of the date of the proposed disposition so long as (i) the
consideration received for the assets to be so disposed is at least equal to the
fair market value of such assets, (ii) the assets to be so disposed are not
necessary or economically desirable in connection with the business of Borrowers
and their Subsidiaries, and (iii) the assets to be so disposed are readily
identifiable as assets acquired pursuant to the subject acquisition;

(o) dispositions by a Subsidiary of a Borrower that is not a Loan Party or a
Domestic Subsidiary of Receivables that are not Eligible Receivables and with
respect to which the Customer is not a resident or citizen of or otherwise
located in the United States; provided, that (i) at the time of any such
disposition, no Default or Event of Default shall exist or would result from
such disposition, (ii) such disposition shall be made on a basis that is a
non-recourse to any Loan Party, and (iii) the purchase price for such property
disposed of shall be paid to such Subsidiary solely in cash; and

(p) sales or dispositions of assets (other than Receivables, Inventory or Equity
Interests of Subsidiaries of any Borrower) not otherwise permitted in clauses
(a) through (o) above so long as made at fair market value and such sale or
disposition would not adversely affect in any material respect the financial
condition, results of operations, assets (taken as a whole), business or
properties (taken as a whole) of Borrowers and Guarantors taken as a whole.

“Permitted Dividends” shall mean dividends and distributions by any Domestic
Subsidiary of any Borrower to a Borrower or to any immediate parent company of
such Subsidiary that is also a Domestic Subsidiary of Borrower and a Guarantor.

“Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Amount” shall mean, as to
any ECF Dividend/Foreign Subsidiary-JV Transfer Period, the amount equal to the
sum of (x) 75% of Domestic U.S. Excess Cash Flow for the Permitted ECF
Dividend/Foreign Subsidiary-JV Transfer Relevant Period, plus (y) all cash
proceeds distributed by any Foreign Subsidiary of a Borrower to a Borrower
arising from the sale or transfer of machinery, equipment, real property or
other similar fixed assets of such Foreign Subsidiary during the Permitted ECF
Dividend/Foreign Subsidiary-JV Transfer Relevant Period, plus (z) 75% of
Non-Domestic U.S. Excess Cash Flow for the Permitted ECF Dividend/Foreign
Subsidiary-JV Transfer Relevant Period, but only to the extent of the actual
distribution in cash of such Non-Domestic U.S. Excess Cash Flow by the
applicable Foreign Subsidiary of a Borrower to such Borrower during such
Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Relevant Period.

“Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Conditions” shall mean,
as to any proposed ECF Dividend or ECF Foreign Subsidiary-JV Transfer, (A) no
Default or Event of Default shall have occurred and be continuing or would
result after giving effect to such

 

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proposed ECF Dividend or ECF Foreign Subsidiary-JV Transfer, (B) Borrowers shall
have pro forma Undrawn Availability and Average Undrawn Availability (calculated
as if such dividend, and any Revolving Advance requested to fund such dividend,
had been made at the beginning of the applicable period), together with the
aggregate amount of unrestricted cash actually held each Borrower, of not less
than $10,000,000 and (C) Borrowers on a Combined and Consolidated basis shall
have a Fixed Charge Coverage Ratio as of the last day in the applicable
Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Relevant Period,
calculated on a pro forma basis as if such dividend, or purchase (such term to
have the same meaning as the term “purchase” when used in clause (i) of the
defined term ECF Foreign Subsidiary-JV Transfers), advance or loan, as the case
may be, had been paid at the beginning of such period (including for purposes of
such pro forma calculation, for the avoidance of doubt, the amount of such
dividend, or purchase, advance or loan, as the case may be) of not less than
1.00 to 1.00.

“Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Relevant Period” shall
mean, as of any date and/or any ECF Dividend/Foreign Subsidiary-JV Transfer
Period, the period of twelve consecutive fiscal months ending with the fiscal
month most recently ended prior to such date or the last month in such ECF
Dividend/Foreign Subsidiary-JV Transfer Period (as applicable), in each case
that is the last month in a fiscal quarter and for which monthly financial
statements and a related Compliance Certificate in full compliance with the
requirement of Section 9.9 hereof have been delivered to Agent; provided that,
notwithstanding the foregoing, with respect to any date occurring or any ECF
Dividend/Foreign Subsidiary-JV Transfer Period ending prior to the end of the
month in which the second anniversary of the Closing Date shall occur, the
Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Relevant Period shall mean
the period beginning with the month in which the first anniversary of the
Closing Date shall occur and ending with the fiscal month most recently ended
prior to such date or the last month in such ECF Dividend/Foreign Subsidiary-JV
Transfer Period (as applicable), in each case that is the last month in a fiscal
quarter and for which monthly financial statements and a related Compliance
Certificate in full compliance with the requirement of Section 9.9 hereof have
been delivered to Agent.

“Permitted Encumbrances” shall mean:

(a) Liens granted to, or for the benefit of, the Agent to secure the
Obligations;

(b) Liens for unpaid taxes, assessments, or other governmental charges or levies
that either (i) are not yet delinquent, or (ii) do not have priority over the
Agent’s Liens and the underlying taxes, assessments, or charges or levies are
being Properly Contested;

(c) judgment Liens arising solely as a result of the existence of judgments,
orders, or awards that do not constitute an Event of Default under Section 10.6
of this Agreement and do not have priority over the Agent’s Liens;

(d) Liens set forth on Schedule 1.2 (a) to this Agreement; provided, that to
qualify as a Permitted Encumbrance, any such Lien described on Schedule 1.2 to
this Agreement shall only secure the Indebtedness that it secures on the Closing
Date and any refinancing thereof, up to the original principal amount of such
Indebtedness outstanding on the Closing Date;

 

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(e) the interests of lessors under operating leases and non-exclusive licensors
under license agreements;

(f) purchase money Liens or the interests of lessors in respect of Capital Lease
Obligations to the extent that such Liens or interests secure purchase money
Indebtedness and so long as (i) such Lien attaches only to the asset purchased
or acquired and the proceeds thereof, and (ii) such Lien only secures the
Indebtedness that was incurred to acquire the asset purchased or acquired or any
refinancing Indebtedness in respect thereof;

(g) Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen, laborers, or suppliers, incurred in the
ordinary course of business and not in connection with the borrowing of money,
and which Liens either (i) are for sums not yet delinquent, or (ii) are being
Properly Contested;

(h) Liens on amounts deposited to secure obligations in connection with worker’s
compensation or other unemployment insurance;

(i) Liens on amounts deposited to secure obligations in connection with the
making or entering into of bids, tenders, or leases in the Ordinary Course of
Business and not in connection with the borrowing of money;

(j) Liens on amounts deposited to secure reimbursement obligations with respect
to surety or appeal bonds obtained in the Ordinary Course of Business;

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

(l) non-exclusive licenses of patents, trademarks, copyrights, and other
intellectual property rights in the Ordinary Course of Business;

(m) except as otherwise provided in clause (d) hereof, Liens that are
replacements of Permitted Encumbrances to the extent that the original
Indebtedness is the subject of permitted refinancing Indebtedness and so long as
the replacement Liens only encumber those assets that secured the original
Indebtedness;

(n) rights of setoff or bankers’ liens upon deposit accounts in favor of banks
or other depository institutions, solely to the extent incurred in connection
with the maintenance of such deposit accounts in the Ordinary Course of
Business, except as otherwise provided in the deposit account control agreement,
if any, applicable to any particular deposit accounts, among the applicable Loan
Party, Agent and such bank;

(o) Liens granted in the Ordinary Course of Business on the unearned portion of
insurance premiums securing the financing of insurance premiums to the extent
the financing is permitted under the definition of Permitted Indebtedness;

(p) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods;

 

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(q) Liens solely on any cash earnest money deposits made by in connection with
any letter of intent or purchase agreement with respect to an acquisition
permitted under this Agreement;

(r) Liens assumed in connection with any one or more Permitted Acquisitions that
secure acquired Indebtedness in an aggregate principal amount for all such
Indebtedness secured by Liens described in this clause (r) not to exceed
$250,000 outstanding at any time (provided that, notwithstanding the foregoing,
Liens described in this clause (r) may at any time secure further Indebtedness
(in excess of such $250,000 aggregate limitation) assumed in connection with any
one particular such Permitted Acquisitions, up to a maximum principal amount of
$1,000,000 outstanding at any time for all such Indebtedness (including such
excess Indebtedness) secured by Lien described in this clause (r) but only to
the extent that such further Indebtedness in excess of the otherwise applicable
$250,000 aggregate limitation shall be repaid in cash no later than the
ninetieth (90th) day following the closing and consummation of the particular
Permitted Acquisitions in which such excess Indebtedness was assumed);

(s) Liens in respect of the cash collateral account (and amounts on deposit
therein) pledged to Wells Fargo Bank, N.A. in support of the Wells Fargo Letters
of Credit;

(t) Liens on the assets of Loan Parties securing Permitted Acquisition
Indebtedness to the extent such Liens are subject to a subordination and
intercreditor agreement as contemplated by and complying with the requirements
of clause (ii) of the definition of Permitted Acquisition Indebtedness; and

(u) other Liens which do not secure Indebtedness for borrowed money or letters
of credit and as to which the aggregate amount of the obligations secured
thereby does not exceed $1,000,000, but only to the extent, as to any such Lien,
that such Lien does not remain outstanding for more than ninety (90) days
following the date such Lien is granted or created and/or arises.

“Permitted Holder” shall mean, collectively, Handy & Harman, Ltd., BNS Holdings,
Inc., Steel Partners, Ltd., Steel Partners Holdings L.P., SPH Group LLC, SPH
Group Holdings LLC, Steel Partners LLC, Warren G. Lichtenstein and Glen M.
Kassan and their respective Controlled Investment Affiliates.

“Permitted Indebtedness” shall mean:

(a) Indebtedness arising under, relating to or evidenced by this Agreement or
the Other Documents;

(b) Indebtedness set forth on Schedule 1.2 to this Agreement (including
Indebtedness representing reimbursement obligations in respect of the Wells
Fargo Letters of Credit) and any refinancing Indebtedness in respect of such
Indebtedness, up to the principal amount of such Indebtedness outstanding on the
Closing Date;

(c) purchase money Indebtedness, up to an aggregate principal amount not to
exceed $1,000,000 at any one time outstanding, and any refinancing Indebtedness
in respect of such Indebtedness;

 

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(d) endorsement of instruments or other payment items for deposit;

(e) Indebtedness consisting of (i) unsecured guarantees incurred in the ordinary
course of business with respect to surety and appeal bonds, performance bonds,
bid bonds, appeal bonds, purchase orders, completion guarantee and similar
obligations; (ii) unsecured guarantees arising with respect to customary
indemnification obligations to purchasers in connection with asset dispositions;
and (iii) unsecured guarantees with respect to Indebtedness of any Loan Party,
to the extent that the Person that is obligated under such guaranty could have
incurred such underlying Indebtedness;

(f) Permitted Acquisition Indebtedness;

(g) Indebtedness assumed in connection with any Permitted Acquisition in an
aggregate principal amount for all such assumed Indebtedness described in this
clause (g) not to exceed $250,000 outstanding at any time (provided that,
notwithstanding the foregoing, further Indebtedness (in excess of such $250,000
aggregate limitation) may be assumed in connection with any one particular such
Permitted Acquisition, up to a maximum principal amount of $1,000,000
outstanding at any time for all such Indebtedness (including such excess
Indebtedness) described in this clause (g), but only to the extent that such
further Indebtedness in excess of the otherwise applicable $250,000 aggregate
limitation shall be repaid in cash no later than the ninetieth (90th) day
following the closing and consummation of the particular acquisition in which
such excess Indebtedness was assumed);

(h) Indebtedness incurred in the Ordinary Course of Business under performance,
surety, statutory, or appeal bonds;

(i) Indebtedness owed to any Person providing property, casualty, liability, or
other insurance to any Borrower or any of its Subsidiaries, so long as the
amount of such Indebtedness is not in excess of the amount of the unpaid cost
of, and shall be incurred only to defer the cost of, such insurance for the year
in which such Indebtedness is incurred and such Indebtedness is outstanding only
during such year;

(j) the incurrence of (x) Indebtedness in respect of Hedge Liabilities and
(y) unsecured obligations under any Interest Rate Hedge, Foreign Currency Hedge
or other interest rate management device, foreign currency exchange agreement,
currency swap agreement, commodity price protection agreement or other interest
or currency exchange rate or commodity price hedging arrangement, in each case
that are incurred for the bona fide purpose of hedging the interest rate,
commodity, or foreign currency risks associated with Borrowers’ and their
Subsidiaries’ operations and not for speculative purposes;

(k) Indebtedness incurred in the Ordinary Course of Business in respect of
credit cards, credit card processing services, debit cards, stored value cards,
commercial cards (including so-called “purchase cards”, “procurement cards” or
“p-cards”), or Cash Management Products and Services;

(l) [reserved];

 

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(m) contingent liabilities in respect of any indemnification obligation,
adjustment of purchase price, non-compete, or similar obligation of any Loan
Party incurred in connection with the consummation of one or more acquisitions;

(n) Indebtedness comprising Permitted Investments;

(o) accrual of interest, accretion or amortization of original issue discount,
or the payment of interest in kind, in each case, on Indebtedness that otherwise
constitutes Permitted Indebtedness;

(p) in addition to Indebtedness permitted to be incurred pursuant to clause
(f) hereof, unsecured subordinated Indebtedness, the aggregate principal amount
of which does not exceed $1,000,000 at any one time outstanding; provided that
the holder of such Indebtedness shall agree and enter into and execute and
deliver to Agent a subordination agreement acceptable to Agent in its discretion
providing for subordination of such Indebtedness to the Obligations, payment
blockage terms, and other customary terms and provisions reasonably acceptable
to Agent in its Permitted Discretion;

(q) intercompany Indebtedness owing from one or more Loan Parties to any other
one or more Loan Parties in accordance with clause (b) of the definition of
Permitted Loans; and

(r) any other unsecured Indebtedness incurred by any Borrower or any of its
Subsidiaries in an aggregate outstanding amount not to exceed $1,000,000 at any
one time.

“Permitted Investments” shall mean

(a) Investments in cash and Cash Equivalents, (i) obligations issued or
guaranteed by the United States of America or any agency thereof;
(ii) commercial paper with maturities of not more than 180 days and a published
rating of not less than A-1 or P-1 (or the equivalent rating);
(iii) certificates of time deposit and bankers’ acceptances having maturities of
not more than 180 days and repurchase agreements backed by United States
government securities of a commercial bank if (x) such bank has a combined
capital and surplus of at least $500,000,000, or (y) its debt obligations, or
those of a holding company of which it is a subsidiary, are rated not less than
A (or the equivalent rating) by a nationally recognized investment rating
agency; (d) U.S. money market funds that invest solely in obligations issued or
guaranteed by the United States of America or an agency thereof;

(b) Investments in negotiable instruments deposited or to be deposited for
collection in the Ordinary Course of Business;

(c) Investments consisting of Equity Interests or other securities received in
settlement of amounts due to any Loan Party or any of its Subsidiaries effected
in the Ordinary Course of Business or owing to any Loan Party or any of its
Subsidiaries as a result of insolvency proceedings involving an account debtor
or upon the foreclosure or enforcement of any Lien in favor of a Loan Party or
its Subsidiaries;

(d) Investments owned by any Loan Party or any of its Subsidiaries on the
Closing Date and set forth on Schedule 1.2 to this Agreement;

 

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(e) guarantees permitted under the definition of Permitted Indebtedness;

(f) Permitted Loans;

(g) Permitted Acquisitions;

(h) deposits of cash made in the Ordinary Course of Business to secure
performance of operating leases;

(i) acquisitions of assets, businesses or divisions useful or complementary to
the business of the applicable Loan Party;

(j) Investments in the form of capital contributions and the acquisition of
Equity Interests made by any Loan Party in any other Loan Party, to the extent
permitted under this Agreement;

(k) Investments resulting from entering into (i) Cash Management Products and
Services, or (ii) agreements relative to Indebtedness that is permitted under
clause (j) of the definition of Permitted Indebtedness;

(l) equity Investments by any Loan Party in any Subsidiary of such Loan Party
which is required by law to maintain a minimum net capital requirement or as may
be otherwise required by applicable law;

(m) Investments reflecting commission, travel, and similar advances to officers
and employees of such Loan Party made in the Ordinary Course of Business; and

(n) Investments held by a Person acquired in a acquired entity to the extent
that such Investments were not made in contemplation of or in connection with
such acquisition and were in existence on the date of such acquisition.

“Permitted Loans” shall mean: (a) the extension of trade credit by a Loan Party
to its Customer(s) (including, for the avoidance of doubt, Subsidiaries of any
Borrower), in the Ordinary Course of Business in connection with a sale of
Inventory or rendition of services, in each case on open account terms;
(b) intercompany loans between and among Loan Parties, so long as each such
intercompany loan is evidenced by a promissory note, either (x) in the form of
Exhibit 7.5-A attached hereto or (y) otherwise on terms and conditions
(including terms subordinating payment of the indebtedness evidenced by such
note to the prior payment in full of all Obligations) acceptable to Agent in its
sole discretion, a copy of which has been delivered to Agent (provided that,
upon request of Agent after the occurrence and during the continuance of an
Event of Default, Loan Parties shall promptly deliver the original of such
promissory note to Agent either endorsed in blank or together with an undated
instrument of transfer executed in blank by the applicable Loan Party(s) that
are the payee(s) on such note), including without limitation all intercompany
loans owing from ModusLink PTS and MMII to ModusLink Corp. originally evidenced
by (i) that certain Promissory Note dated as of October 31, 2012 by ModusLink
PTS, Inc. in favor of ModusLink Corporation in the original

 

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maximum principal amount of up to $10,000,000 and (ii) that certain Promissory
Note dated as of May 27, 2010 by Modus Media International (Ireland) Limited in
favor of ModusLink Corporation in the original maximum principal amount of
$23,370,000, and (c) that certain intercompany loan in the amount of $695,000
outstanding on the Closing Date owing from SalesLink Solutions International
Limited to ModusLink Corporation pursuant to that certain Promissory Note dated
October 31, 2012.

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

“Plan” shall mean any employee benefit plan within the meaning of Section 3(3)
of ERISA which is (a) a Pension Benefit Plan or a Multiemployer Plan and which
is maintained by any Loan Party or any member of the Controlled Group or to
which any Loan Party or any member of the Controlled Group is required to
contribute, or (b) a “welfare plan”, as defined in Section 3(1) of ERISA, which
provides self-insured benefits and which is maintained by any Loan Party or to
which any Loan Party is required to contribute.

“Pledge Agreement” shall mean (i) those certain one or more Collateral Pledge
Agreement(s) executed by Loan Parties in favor of Agent dated as of the Closing
Date and (ii) any other pledge agreements executed subsequent to the Closing
Date by any other Person to secure the Obligations.

“PNC” shall have the meaning set forth in the preamble to this Agreement and
shall extend to all of its successors and assigns.

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

“Pro Forma Financial Statements” shall have the meaning set forth in
Section 5.5(b) hereof.

“Projections” shall have the meaning set forth in Section 5.5(b) hereof.

“Properly Contested” shall mean, in the case of any Indebtedness, Lien or taxes,
as applicable, of any Person that are not paid as and when due or payable by
reason of such Person’s bona fide dispute concerning its liability to pay the
same or concerning the amount thereof: (a) such Indebtedness, Lien or taxes, as
applicable, are being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (b) such Person has
established appropriate reserves as shall be required in conformity with GAAP;
(c) the non-payment of such Indebtedness or taxes will not have a Material
Adverse Effect or will not result in the forfeiture of any assets of such
Person; (d) no Lien is imposed upon any of such Person’s assets with respect to
such Indebtedness or taxes unless such Lien (x) does not attach to any
Receivables or Inventory, (y) is at all times junior and subordinate in priority
to the Liens in favor of the Agent (except only with respect to Liens that have
priority as a matter of applicable state law), and (z) enforcement of such Lien
is stayed during the period prior to the final resolution or disposition of such
dispute; and (e) if such Indebtedness or Lien, as applicable, results from, or
is determined by the entry, rendition or issuance against a Person or any of its
assets of a judgment, writ, order or decree, enforcement of such judgment, writ,
order or decree is stayed pending a timely appeal or other judicial review.

 

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“Protective Advances” shall have the meaning set forth in Section 16.2(f)
hereof.

“Published Rate” shall mean the rate of interest published each Business Day in
the Wall Street Journal “Money Rates” listing under the caption “London
Interbank Offered Rates” for a one month period (or, if no such rate is
published therein for any reason, then the Published Rate shall be the LIBOR
Rate for a one month period as published in another publication selected by the
Agent).

“Purchasing CLO” shall have the meaning set forth in Section 16.3(d) hereof.

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

“Qualified ECP Loan Party” shall mean each Borrower or Guarantor that on the
Eligibility Date is (a) a corporation, partnership, proprietorship,
organization, trust, or other entity other than a “commodity pool” as defined in
Section 1a(10) of the CEA and CFTC regulations thereunder that has total assets
exceeding $10,000,000 or (b) an Eligible Contract Participant that can cause
another person to qualify as an Eligible Contract Participant on the Eligibility
Date under Section 1a(18)(A)(v)(II) of the CEA by entering into or otherwise
providing a “letter of credit or keepwell, support, or other agreement” for
purposes of Section 1a(18)(A)(v)(II) of the CEA.

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

“Real Property” shall mean all of the owned and leased premises identified on
Schedule 4.4 hereto or in and to any other premises or real property that are
hereafter owned or leased by any Loan Party.

“Receivables” shall mean and include, as to each Loan Party, all of such Loan
Party’s accounts (as defined in Article 9 of the Uniform Commercial Code) and
all of such Loan Party’s contract rights, instruments (including those
evidencing indebtedness owed to such Loan Party by its Affiliates), documents,
chattel paper (including electronic chattel paper), general intangibles relating
to accounts, contract rights, instruments, documents and chattel paper, and
drafts and acceptances, credit card receivables and all other forms of
obligations owing to such Loan Party arising out of or in connection with the
sale or lease of Inventory or the rendition of services, all supporting
obligations, guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder.

“Receivables Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.

“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any Swing
Loan Lender Issuer, as applicable.

 

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“Register” shall have the meaning set forth in Section 16.3(e) hereof.

“Reimbursement Obligation” shall have the meaning set forth in Section 2.14(b)
hereof.

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

“Rent Reserve” shall mean, with respect to any premises at which Collateral is
located which is not owned by a Loan Party or, if owned, is subject to a
mortgage in favor of a Person other than Agent for the benefit of the Lenders,
and in respect of which Agent has not received a Lien Waiver Agreement executed
by the lessor, mortgagee, warehouseman, bailee or consignee, as applicable, a
reserve equal to three times the monthly mortgage or lease payment or monthly
warehouse, bailment or consignment charges for such premises.

“Reportable Compliance Event” shall mean that any Covered Entity becomes a
Sanctioned Person, or is charged by indictment, criminal complaint or similar
charging instrument, arraigned, or custodially detained in connection with any
Anti-Terrorism Law or any predicate crime to any Anti-Terrorism Law, or has
knowledge of facts or circumstances to the effect that it is reasonably likely
that any aspect of its operations is in actual or probable violation of any
Anti-Terrorism Law.

“Reportable ERISA Event” shall mean a reportable event described in Section 4043
of ERISA or the regulations promulgated thereunder, other than an event for
which the thirty (30) day notice period is waived.

“Required Lenders” shall mean Lenders (not including the Swing Loan Lender (in
its capacity as such Swing Loan Lender) or any Defaulting Lender) holding at
least fifty-one percent (51%) of either (a) the aggregate of the Revolving
Commitment Amounts of all Lenders (excluding any Defaulting Lender), or
(b) after the termination of all commitments of the Lenders hereunder, the sum
of the outstanding Revolving Advances and Swing Loans plus the Maximum Undrawn
Amount of all outstanding Letters of Credit; provided, however, if there are
fewer than three (3) Lenders, Required Lenders shall mean all Lenders (excluding
any Defaulting Lender).

“Reserve Percentage” shall mean as of any day the maximum effective percentage
in effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as “Eurocurrency
Liabilities”.

“Revolving Advances” shall mean Advances made other than Letters of Credit and
the Swing Loans.

“Revolving Commitment” shall mean, as to any Lender, the obligation of such
Lender (if applicable), to make Revolving Advances and participate in Swing
Loans and Letters of Credit, in an aggregate principal and/or face amount not to
exceed the Revolving Commitment Amount (if any) of such Lender.

 

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“Revolving Commitment Amount” shall mean, (i) as to any Lender other than a New
Lender, the Revolving Commitment amount (if any) set forth below such Lender’s
name on the signature page hereto (or, in the case of any Lender that became
party to this Agreement after the Closing Date pursuant to Section 16.3(c) or
(d) hereof, the Revolving Commitment amount (if any) of such Lender as set forth
in the applicable Commitment Transfer Supplement), and (ii) as to any Lender
that is a New Lender, the Revolving Commitment amount provided for in the
joinder signed by such New Lender under Section 2.24(a)(x), in each case as the
same may be adjusted upon any increase by such Lender pursuant to Section 2.24
hereof, or any assignment by or to such Lender pursuant to Section 16.3(c) or
(d) hereof.

“Revolving Commitment Percentage” shall mean, (i) as to any Lender other than a
New Lender, the Revolving Commitment Percentage (if any) set forth below such
Lender’s name on the signature page hereof (or, in the case of any Lender that
became party to this Agreement after the Closing Date pursuant to
Section 16.3(c) or (d) hereof, the Revolving Commitment Percentage (if any) of
such Lender as set forth in the applicable Commitment Transfer Supplement), and
(ii) as to any Lender that is a New Lender, the Revolving Commitment Percentage
provided for in the joinder signed by such New Lender under Section 2.24(a)(ix),
in each case as the same may be adjusted upon any increase in the Maximum
Revolving Advance Amount pursuant to Section 2.24 hereof, or any assignment by
or to such Lender pursuant to Section 16.3(c) or (d) hereof.

“Revolving Credit Note” shall mean, collectively, the promissory notes referred
to in Section 2.1(a) hereof.

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

“Sanctioned Country” shall mean a country subject to a sanctions program
maintained under any Anti-Terrorism Law.

“Sanctioned Person” shall mean any individual person, group, regime, entity or
thing listed or otherwise recognized as a specially designated, prohibited,
sanctioned or debarred person, group, regime, entity or thing, or subject to any
limitations or prohibitions (including but not limited to the blocking of
property or rejection of transactions), under any Anti-Terrorism Law.

“SEC” shall mean the Securities and Exchange Commission or any successor
thereto.

“SEC Inquiry” shall mean the informal inquiry with respect to ModusLink Parent
initiated by the staff of the Division of Enforcement of the SEC for the Boston,
Massachusetts Regional Office on February 15, 2012 and later the formal action
In the Matter of Global Solutions, Inc. (B-02719) regarding ModusLink Parent’s
treatment of rebates associated with volume discounts provide by its vendors.

“Secured Parties” shall mean, collectively, Agent, Issuer, Swing Loan Lender and
Lenders, together with any affiliates of Agent or any Lender to whom any Hedge
Liabilities or Cash Management Liabilities are owed and with each other holder
of any of the Obligations, and the respective successors and assigns of each of
them.

 

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“Securities Act” shall mean the Securities Act of 1933, as amended.

“Settlement” shall have the meaning set forth in Section 2.6(d) hereof.

“Settlement Date” shall have the meaning set forth in Section 2.6(d) hereof.

“Subordinated Intercompany Line of Credit Note” shall mean that certain
promissory note in the original principal amount of $20,000,000, payable jointly
and severally by Borrowers to the Foreign Subsidiaries, dated as of the Closing
Date, which promissory note evidences a revolving line of credit in such
principal amount established by the Foreign Subsidiaries in favor of Borrowers,
as the same may be amended, modified, supplemented or restated from time to time
in accordance with the terms of Section 7.8(b) hereof.

“Subsidiary” shall mean of any Person a corporation or other entity of whose
Equity Interests having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person.

“Subsidiary Stock” shall mean (a) with respect to the Equity Interests issued to
a Loan Party by any Domestic Subsidiary, 100% of such issued and outstanding
Equity Interests, and (b) with respect to any Equity Interests issued to a Loan
Party by any Foreign Subsidiary (i) 100% of such issued and outstanding Equity
Interests not entitled to vote (within the meaning of Treas. Reg.
Section 1.956(c)(2)) and (ii) 65% (or such greater or lesser percentage that,
due to a change in an Applicable Law after the date hereof, (x) could not
reasonably be expected to cause the undistributed earnings of such Foreign
Subsidiary as determined for United States federal income tax purposes to be
treated as a deemed dividend to such Loan Party and (y) could not reasonably be
expected to cause any material adverse tax consequences) of such issued and
outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg.
Section 1.956-2(c)(2)).

“Swap” shall mean any “swap” as defined in Section la(47) of the CEA and
regulations thereunder other than (a) a swap entered into on, or subject to the
rules of, a board of trade designated as a contract market under Section 5 of
the CEA, or (b) a commodity option entered into pursuant to CFTC Regulation
32.3(a).

“Swap Obligation” means any obligation to pay or perform under any agreement,
contract or transaction that constitutes a Swap which is also a Lender-Provided
Interest Rate Hedge, or a Lender-Provided Foreign Currency Hedge.

“Swing Loan Lender” shall mean PNC, in its capacity as lender of the Swing
Loans.

“Swing Loan Note” shall mean the promissory note described in Section 2.4(a)
hereof.

“Swing Loans” shall mean the Advances made pursuant to Section 2.4 hereof.

 

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“Taxes” or “taxes” shall mean all present or future taxes, levies, imposts,
duties, deductions, withholdings, assessments, fees or other charges imposed by
any Governmental Body, including any interest, additions to tax or penalties
applicable thereto.

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

“Termination Event” shall mean: (a) a Reportable ERISA Event with respect to any
Pension Benefit Plan; (b) the withdrawal of any Loan Party or any member of the
Controlled Group from a Pension Benefit Plan during a plan year in which such
entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or
a cessation of operations that is treated as such a withdrawal under
Section 4062(e) of ERISA with respect to a Pension Benefit Plan; (c) the
providing of notice of intent to terminate a Pension Benefit Plan in a distress
termination described in Section 4041(c) of ERISA; (d) the commencement of
proceedings by the PBGC to terminate a Pension Benefit Plan or Multiemployer
Plan; (e) any event or condition (a) which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Benefit Plan or Multiemployer Plan, or (b) that is
reasonably likely to result in the termination of a Multiemployer Plan pursuant
to Section 4041A of ERISA; (f) the partial or complete withdrawal, within the
meaning of Section 4203 or 4205 of ERISA, of any Loan Party or any member of the
Controlled Group from a Multiemployer Plan; (g) notice that a Multiemployer Plan
is subject to Section 4245 of ERISA; or (h) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent,
upon any Loan Party or any member of the Controlled Group.

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

“Transactions” shall have the meaning set forth in Section 5.5(a) hereof.

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

“Undrawn Availability” at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount less the Maximum Undrawn Amount of all outstanding Letters of Credit less
the Genpact Reserve and such other reserves as Agent may reasonably deem proper
and necessary from time to time in its Permitted Discretion, minus (b) the sum
of (i) the outstanding amount of Revolving Advances and Swing Loans plus
(ii) all amounts due and owing to any Loan Party’s trade creditors which are
outstanding sixty (60) days or more past their due date, plus (iii) fees and
expenses incurred in connection with the Transactions for which Loan Parties are
liable but which have not been paid or charged to Borrowers’ Account. For
avoidance of doubt, if, on any date of determination of Undrawn Availability,
the US EBITDA Calculation Amount is in effect, Undrawn Availability shall be
calculated after giving effect thereto.

 

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“Unfunded Capital Expenditures” shall mean, as to any Loan Party, without
duplication, a Capital Expenditure funded (a) from such Loan Party’s internally
generated cash flow or (b) with the proceeds of a Revolving Advance or Swing
Loan.

“Uniform Commercial Code” shall have the meaning set forth in Section 1.3
hereof.

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

“US EBITDA Calculation Amount” shall mean (i) from and after on and after the
Closing Date until (but not including) the date the US EBITDA Calculation
Conditions have been satisfied, the sum of $5,000,000, and (ii) from and after
the date the US EBITDA Calculation Conditions have been satisfied, zero (-0-).

“US EBITDA Calculation Conditions” shall mean that (A) Borrowers and their
respective Subsidiaries shall have established internal financial reporting and
record keeping systems and procedures as necessary for Borrowers to produce
(x) the internally prepared monthly interim financing statements and related
Compliance Certificates for Borrowers, on a consolidated and combined basis
together with their Subsidiaries, and audited and internally prepared annual
financial statements and related Compliance Certificates for Borrowers, on a
consolidated and combined basis together with their Subsidiaries, in each case
as required under Section 9.7, clause (ii) and Section 9.9, clause (ii), as
applicable, and (y) without limiting the foregoing clause (x), accurate
calculations and reporting, according to a methodology reasonably satisfactory
to Agent in all respects, of Domestic US EBITDA and Non-Domestic US EBITDA, and
of Domestic US Excess Cash Flow and Non-Domestic US Excess Cash Flow and
(B) Borrowers shall have delivered the first set of such monthly or financial
statements (together with the applicable Compliance Certificate) referenced in
the foregoing clause (x) that fully comply with all the requirements of
Section 9.7, clause (ii) or Section 9.9, clause (ii), as applicable, as
determined by Agent to its reasonable satisfaction.

“US Person” shall mean any Person that is a “United States Person”, as such
terms is defined in Section 7701(a)(30) of the Code.

“Wells Fargo Letters of Credit” shall mean those certain letters of credit, in
aggregate face amounts of (x) $201,884 and (y) €314,815.02, issued by Wells
Fargo Bank, N.A. under a previously terminated credit facility among the
Borrowers, Wells Fargo Bank, N.A. and the other parties thereto and described
and defined as the “Outstanding Letters of Credit” under that certain letter
agreement regarding payoff and termination of liens dated April 16, 2014 among
Loan Parties, ModusLink Parent and certain of their Affiliates and Wells Fargo
Bank, National Association, which letters of credit are outstanding as of the
Closing Date and are more fully described in Schedule 1.2(b) hereto.

1.3. Uniform Commercial Code Terms. All terms used herein and defined in the
Uniform Commercial Code as adopted in the State of New York from time to time
(the “Uniform Commercial Code”) shall have the meaning given therein unless
otherwise defined herein. Without limiting the foregoing, the terms “accounts”,
“chattel paper” (and “electronic chattel

 

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paper” and “tangible chattel paper”), “commercial tort claims”, “deposit
accounts”, “documents”, “equipment”, “financial asset”, “fixtures”, “general
intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “payment intangibles”, “proceeds”, “promissory note”
“securities”, “software” and “supporting obligations” as and when used in the
description of Collateral shall have the meanings given to such terms in
Articles 8 or 9 of the Uniform Commercial Code. To the extent the definition of
any category or type of collateral is expanded by any amendment, modification or
revision to the Uniform Commercial Code, such expanded definition will apply
automatically as of the date of such amendment, modification or revision.

1.4. Certain Matters of Construction. The terms “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. 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. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Agent is a
party, including references to any of the Other Documents, shall include any and
all modifications, supplements or amendments thereto, any and all restatements
or replacements thereof and any and all extensions or renewals thereof. Except
as otherwise expressly provided for herein, all references herein to the time of
day shall mean the time in New York, New York. Unless otherwise provided, all
financial calculations shall be performed with Inventory valued on a first-in,
first-out basis. Whenever the words “including” or “include” shall be used, such
words shall be understood to mean “including, without limitation” or “include,
without limitation”. A Default or an Event of Default shall be deemed to exist
at all times during the period commencing on the date that such Default or Event
of Default occurs to the date on which such Default or Event of Default is
waived in writing pursuant to this Agreement or, in the case of a Default, is
cured within any period of cure expressly provided for in this Agreement; and an
Event of Default shall “continue” or be “continuing” until such Event of Default
has been waived in writing by Required Lenders. Any Lien referred to in this
Agreement or any of the Other Documents as having been created in favor of
Agent, any agreement entered into by Agent pursuant to this Agreement or any of
the Other Documents, any payment made by or to or funds received by Agent
pursuant to or as contemplated by this Agreement or any of the Other Documents,
or any act taken or omitted to be taken by Agent, shall, unless otherwise
expressly provided, be created, entered into, made or received, or taken or
omitted, for the benefit or account of Agent and Lenders. Wherever the phrase
“to the best of Borrowers’ knowledge” or “to the best of Loan Parties’
knowledge” or words of similar import relating to the knowledge or the awareness
of any Borrower or Loan Party are used in this Agreement or Other Documents,
such phrase shall mean and refer to (i) the actual knowledge of a senior officer
of any Loan Party or (ii) the knowledge that a senior officer would have
obtained if he/she had engaged in a good faith and diligent performance of
his/her duties, including the making of such reasonably specific inquiries as
may be necessary of the employees or agents of such Loan Party and a good faith
attempt to ascertain the existence or accuracy of the matter to which such
phrase relates. All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or otherwise
within the limitations of, another covenant shall not

 

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avoid the occurrence of a default if such action is taken or condition exists.
In addition, all representations and warranties hereunder shall be given
independent effect so that if a particular representation or warranty proves to
be incorrect or is breached, the fact that another representation or warranty
concerning the same or similar subject matter is correct or is not breached will
not affect the incorrectness of a breach of a representation or warranty
hereunder.

 

II. ADVANCES, PAYMENTS.

2.1. Revolving Advances.

(a) Amount of Revolving Advances. Subject to the terms and conditions set forth
in this Agreement specifically including Sections 2.1(b) and (c), each Lender,
severally and not jointly, will make Revolving Advances to Borrowers in
aggregate amounts outstanding at any time equal to such Lender’s Revolving
Commitment Percentage of the lesser of:

(x) the Maximum Revolving Advance Amount, less the outstanding amount of Swing
Loans, less the aggregate Maximum Undrawn Amount of all outstanding Letters of
Credit, less the Genpact Reserve and such other reserves as Agent may reasonably
deem proper and necessary from time to time in its Permitted Discretion; or

(y) an amount equal to the sum of:

(i) the sum of up to 85% (the “Receivables Advance Rate”) of each of
(A) Eligible Receivables, (B) Eligible Uninsured Foreign Receivables, and
(C) Eligible Insured Foreign Receivables; plus

(ii) the least of (A) up to 65% of the value of the Eligible Inventory (the
“Inventory Advance Rate”), (B) up to 85% of the appraised net orderly
liquidation value of Eligible Inventory (as evidenced by an Inventory appraisal
satisfactory to Agent in its Permitted Discretion exercised in good faith) (the
“Inventory NOLV Advance Rate”, together with the Inventory Advance Rate and the
Receivables Advance Rate, collectively, the “Advance Rates”), or (C) $20,000,000
in the aggregate at any one time, minus

(iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit,
minus

(iv) the US EBITDA Calculation Amount, minus

(v) the Genpact Reserve and such other reserves as Agent may reasonably deem
proper and necessary from time to time in its Permitted Discretion.

The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus
(y) Sections 2.1 (a)(y)(iii), (iv) and (v) at any time and from time to time
shall be referred to as the “Formula Amount”. The Revolving Advances shall be
evidenced by one or more secured promissory notes (collectively, the “Revolving
Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).
Notwithstanding anything to the contrary contained in the foregoing or otherwise
in this Agreement, the outstanding aggregate principal amount of Swing Loans and
the

 

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Revolving Advances at any one time outstanding shall not exceed an amount equal
to the lesser of (i) the Maximum Revolving Advance Amount less the Maximum
Undrawn Amount of all outstanding Letters of Credit or (ii) the Formula Amount.

(b) Limitation on Revolving Advances against Eligible Uninsured Foreign
Receivables and Eligible Foreign Receivables. Notwithstanding anything to the
contrary contained in Section 2.1(a)(y)(i) above, not more than $35,000,000 of
Revolving Advances made against Eligible Uninsured Foreign Receivables and
Eligible Insured Foreign Receivables may be outstanding at any one time, of
which not more than $6,000,000 of such Revolving Advances made against Eligible
Uninsured Foreign Receivables may be outstanding at any one time.

(c) Discretionary Rights. The Advance Rates may be increased or decreased by
Agent at any time and from time to time in the exercise of its Permitted
Discretion. Each Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing or imposing
reserves may limit or restrict Advances requested by Borrowing Agent. The rights
of Agent under this subsection are subject to the provisions of Section 16.2(b).

2.2. Procedures for Requesting Revolving Advances; Procedures for Selection of
Applicable Interest Rates for All Advances.

(a) Borrowing Agent on behalf of any Borrower may notify Agent prior to 1:00
p.m. on a Business Day of a Borrower’s request to incur, on that day, a
Revolving Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or Lenders, or with respect to any other Obligation under
this Agreement, become due, same shall be deemed a request for a Revolving
Advance maintained as a Domestic Rate Loan as of the date such payment is due,
in the amount required to pay in full such interest, fee, charge or Obligation,
and such request shall be irrevocable.

(b) Notwithstanding the provisions of subsection (a) above, in the event any
Borrower desires to obtain a LIBOR Rate Loan for any Advance (other than a Swing
Loan), Borrowing Agent shall give Agent written notice by no later than 1:00
p.m. on the day which is two (2) Business Days prior to the date such LIBOR Rate
Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which
shall be a Business Day), (ii) the type of borrowing and the amount of such
Advance to be borrowed, which amount shall be in a minimum amount of $1,000,000
and in integral multiples of $500,000 thereafter, and (iii) the duration of the
first Interest Period therefor. Interest Periods for LIBOR Rate Loans shall be
for one, two or three months; provided that, if an Interest Period would end on
a day that is not a Business Day, it shall end on the next succeeding Business
Day unless such day falls in the next succeeding calendar month in which case
the Interest Period shall end on the next preceding Business Day. No LIBOR Rate
Loan shall be made available to any Borrower during the continuance of a Default
or an Event of Default. After giving effect to each requested LIBOR Rate Loan,
including those which are converted from a Domestic Rate Loan under
Section 2.2(e), there shall not be outstanding more than six (6) LIBOR Rate
Loans, in the aggregate.

 

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(c) Each Interest Period of a LIBOR Rate Loan shall commence on the date such
LIBOR Rate Loan is made and shall end on such date as Borrowing Agent may elect
as set forth in subsection (b)(iii) above, provided that the exact length of
each Interest Period shall be determined in accordance with the practice of the
interbank market for offshore Dollar deposits and no Interest Period shall end
after the last day of the Term.

(d) Borrowing Agent shall elect the initial Interest Period applicable to a
LIBOR Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to
Section 2.2(e), as the case may be. Borrowing Agent shall elect the duration of
each succeeding Interest Period by giving irrevocable written notice to Agent of
such duration not later than 1:00 p.m. on the day which is three (3) Business
Days prior to the last day of the then current Interest Period applicable to
such LIBOR Rate Loan. If Agent does not receive timely notice of the Interest
Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have
elected to convert such LIBOR Rate Loan to a Domestic Rate Loan subject to
Section 2.2(e) below.

(e) Provided that no Default or Event of Default shall have occurred and be
continuing, Borrowing Agent may, on the last Business Day of the then current
Interest Period applicable to any outstanding LIBOR Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a LIBOR Rate Loan shall be made only on the last Business Day of
the then current Interest Period applicable to such LIBOR Rate Loan. If
Borrowing Agent desires to convert a loan, Borrowing Agent shall give Agent
written notice by no later than 1:00 p.m. (i) on the day which is three
(3) Business Days prior to the date on which such conversion is to occur with
respect to a conversion from a Domestic Rate Loan to a LIBOR Rate Loan, or
(ii) on the day which is one (1) Business Day prior to the date on which such
conversion is to occur (which date shall be the last Business Day of the
Interest Period for the applicable LIBOR Rate Loan) with respect to a conversion
from a LIBOR Rate Loan to a Domestic Rate Loan, specifying, in each case, the
date of such conversion, the loans to be converted and if the conversion is to a
LIBOR Rate Loan, the duration of the first Interest Period therefor.

(f) At its option and upon written notice given prior to 1:00 p.m. at least
three (3) Business Days prior to the date of such prepayment, any Borrower may,
subject to Section 2.2(g) hereof, prepay the LIBOR Rate Loans in whole at any
time or in part from time to time with accrued interest on the principal being
prepaid to the date of such repayment. Such Borrower shall specify the date of
prepayment of Advances which are LIBOR Rate Loans and the amount of such
prepayment. In the event that any prepayment of a LIBOR Rate Loan is required or
permitted on a date other than the last Business Day of the then current
Interest Period with respect thereto, such Borrower shall indemnify Agent and
Lenders therefor in accordance with Section 2.2(g) hereof.

(g) Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any
default by any Borrower in the payment of the principal of or interest on any
LIBOR Rate Loan or failure by any Borrower to complete a borrowing of, a
prepayment of or conversion of or to a LIBOR Rate

 

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Loan after notice thereof has been given, including, but not limited to, any
interest payable by Agent or Lenders to lenders of funds obtained by it in order
to make or maintain its LIBOR Rate Loans hereunder. A certificate as to any
additional amounts payable pursuant to the foregoing sentence that describes in
reasonable detail the calculations thereof submitted by Agent or any Lender to
Borrowing Agent shall be conclusive absent manifest error.

(h) Notwithstanding any other provision hereof, if any Applicable Law, treaty,
regulation or directive, or any change therein or in the interpretation or
application thereof, including without limitation any Change in Law, shall make
it unlawful for Lenders or any Lender (for purposes of this subsection (h), the
term “Lender” shall include any Lender and the office or branch where any Lender
or any Person controlling such Lender makes or maintains any LIBOR Rate Loans)
to make or maintain its LIBOR Rate Loans, the obligation of Lenders (or such
affected Lender) to make LIBOR Rate Loans hereunder shall forthwith be cancelled
and Borrowers shall, if any affected LIBOR Rate Loans are then outstanding,
promptly upon request from Agent, either pay all such affected LIBOR Rate Loans
or convert such affected LIBOR Rate Loans into loans of another type. If any
such payment or conversion of any LIBOR Rate Loan is made on a day that is not
the last day of the Interest Period applicable to such LIBOR Rate Loan,
Borrowers shall pay Agent, upon Agent’s request, such amount or amounts set
forth in clause (g) above. A certificate as to any additional amounts payable
pursuant to the foregoing sentence that describes in reasonable detail the
calculations thereof submitted by Lenders to Borrowing Agent shall be conclusive
absent manifest error.

2.3. [Reserved]

2.4. Swing Loans.

(a) Subject to the terms and conditions set forth in this Agreement, and in
order to minimize the transfer of funds between Lenders and Agent for
administrative convenience, Agent, the Lenders holding Revolving Commitments and
Swing Loan Lender agree that in order to facilitate the administration of this
Agreement, Swing Loan Lender may, at its election and option made in its sole
discretion cancelable at any time for any reason whatsoever, make swing loan
advances (“Swing Loans”) available to Borrowers as provided for in this
Section 2.4 at any time or from time to time after the date hereof to, but not
including, the expiration of the Term, in an aggregate principal amount up to
but not in excess of the Maximum Swing Loan Advance Amount, provided that the
outstanding aggregate principal amount of Swing Loans and the Revolving Advances
at any one time outstanding shall not exceed an amount equal to the lesser of
(i) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all
outstanding Letters of Credit or (ii) the Formula Amount. All Swing Loans shall
be Domestic Rate Loans only. Borrowers may borrow (at the option and election of
Swing Loan Lender), repay and reborrow (at the option and election of Swing Loan
Lender) Swing Loans and Swing Loan Lender may make Swing Loans as provided in
this Section 2.4 during the period between Settlement Dates. All Swing Loans
shall be evidenced by a secured promissory note (the “Swing Loan Note”)
substantially in the form attached hereto as Exhibit 2.4(a). Swing Loan Lender’s
agreement to make Swing Loans under this Agreement is cancelable at any time for
any reason whatsoever and the making of Swing Loans by Swing Loan Lender from
time to time shall not create any duty or obligation, or establish any course of
conduct, pursuant to which Swing Loan Lender shall thereafter be obligated to
make Swing Loans in the future

 

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(b) Upon either (x) any request by Borrowing Agent for a Revolving Advance made
pursuant to Section 2.2(a) hereof or (y) the occurrence of any deemed request by
Borrowers for a Revolving Advance pursuant to the provisions of the last
sentence of Section 2.2(a) hereof, Swing Loan Lender may elect, in its sole
discretion, to have such request or deemed request treated as a request for a
Swing Loan, and may advance same day funds to Borrowers as a Swing Loan;
provided that notwithstanding anything to the contrary provided for herein,
Swing Loan Lender may not make Swing Loan Advances if Swing Loan Lender has been
notified by Agent or by Required Lenders that one or more of the applicable
conditions set forth in Section 8.2 of this Agreement have not been satisfied or
the Revolving Commitments have been terminated for any reason.

(c) Upon the making of a Swing Loan (whether before or after the occurrence of a
Default or Event of Default and regardless of whether a Settlement has been
requested with respect to such Swing Loan), each Lender holding a Revolving
Commitment shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from Swing Loan Lender, without
recourse or warranty, an undivided interest and participation in such Swing Loan
in proportion to its Revolving Commitment Percentage. Swing Loan Lender or Agent
may, at any time, require the Lenders holding Revolving Commitments to fund such
participations by means of a Settlement as provided for in Section 2.6(d) below.
From and after the date, if any, on which any Lender holding a Revolving
Commitment is required to fund, and funds, its participation in any Swing Loans
purchased hereunder, Agent shall promptly distribute to such Lender its
Revolving Credit Percentage of all payments of principal and interest and all
proceeds of Collateral received by Agent in respect of such Swing Loan; provided
that no Lender holding a Revolving Commitment shall be obligated in any event to
make Revolving Advances in an amount in excess of its Revolving Commitment
Amount minus its Participation Commitment (taking into account any reallocations
under Section 2.22) of the Maximum Undrawn Amount of all outstanding Letters of
Credit.

2.5. Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Loan Parties to Agent or Lenders,
shall be charged to Borrowers’ Account on Agent’s books. The proceeds of each
Revolving Advance or Swing Loan requested by Borrowing Agent on behalf of any
Borrower or deemed to have been requested by any Borrower under Sections 2.2(a),
2.6(b) or 2.14 hereof shall, (i) with respect to requested Revolving Advances,
to the extent Lenders make such Revolving Advances in accordance with
Section 2.2(a), 2.6(b) or 2.14 hereof, and with respect to Swing Loans made upon
any request by Borrowing Agent for a Revolving Advance to the extent Swing Loan
Lender makes such Swing Loan in accordance with Section 2.4(b) hereof, be made
available to the applicable Borrower on the day so requested by way of credit to
such Borrower’s operating account at PNC, or such other bank as Borrowing Agent
may designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, (ii) with respect to Revolving
Advances deemed to have been requested by any Borrower or Swing Loans made upon
any deemed request for a Revolving Advance by any Borrower, be disbursed to
Agent to be applied to the outstanding Obligations giving rise to such deemed
request. During the Term, Borrowers may use the Revolving Advances and Swing
Loans by borrowing, prepaying and reborrowing, all in accordance with the terms
and conditions hereof.

 

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2.6. Making and Settlement of Advances.

(a) Each borrowing of Revolving Advances shall be advanced according to the
applicable Revolving Commitment Percentages of the Lenders holding the Revolving
Commitments (subject to any contrary terms of Section 2.22). Each borrowing of
Swing Loans shall be advanced by the Swing Loan Lender alone.

(b) Promptly after receipt by Agent of a request or a deemed request for a
Revolving Advance pursuant to Section 2.2(a) and, with respect to Revolving
Advances, to the extent Agent elects not to provide a Swing Loan or the making
of a Swing Loan would result in the aggregate amount of all outstanding Swing
Loans exceeding the maximum amount permitted in Section 2.4(a), Agent shall
notify the Lenders holding the Revolving Commitments of its receipt of such
request specifying the information provided by Borrowing Agent and the
apportionment among Lenders of the requested Revolving Advance as determined by
Agent in accordance with the terms hereof. Each Lender shall remit the principal
amount of each Revolving Advance to Agent such that Agent is able to, and Agent
shall, to the extent the applicable Lenders have made funds available to it for
such purpose and subject to Section 8.2, fund such Revolving Advance to
Borrowers in U.S. Dollars and immediately available funds at the Payment Office
prior to the close of business, on the applicable borrowing date; provided that
if any applicable Lender fails to remit such funds to Agent in a timely manner,
Agent may elect in its sole discretion to fund with its own funds the Revolving
Advance of such Lender on such borrowing date, and such Lender shall be subject
to the repayment obligation in Section 2.6(c) hereof.

(c) Unless Agent shall have been notified by telephone, confirmed in writing, by
any Lender holding a Revolving Commitment that such Lender will not make the
amount which would constitute its applicable Revolving Commitment Percentage of
the requested Revolving Advance available to Agent, Agent may (but shall not be
obligated to) assume that such Lender has made such amount available to Agent on
such date in accordance with Section 2.6(b) and may, in reliance upon such
assumption, make available to Borrowers a corresponding amount. Agent will
promptly notify Borrowing Agent of its receipt of any such notice from a Lender.
In such event, if a Lender has not in fact made its applicable Revolving
Commitment Percentage of the requested Revolving Advance available to Agent,
then the applicable Lender and Borrowers severally agree to pay to Agent on
demand such corresponding amount with interest thereon, for each day from and
including the date such amount is made available to Borrowers through but
excluding the date of payment to Agent, at (i) in the case of a payment to be
made by such Lender, the greater of (A) (x) the daily average Federal Funds
Effective Rate (computed on the basis of a year of 360 days) during such period
as quoted by Agent, times (y) such amount or (B) a rate determined by Agent in
accordance with banking industry rules on interbank compensation, and (ii) in
the case of a payment to be made by the Borrower, the Revolving Interest Rate
for Revolving Advances that are Domestic Rate Loans. If such Lender pays its
share of the applicable Revolving Advance to Agent, then the amount so paid
shall constitute such Lender’s Revolving Advance. Any payment by Borrowers shall
be without prejudice to any claim the Borrowers may have against a Lender
holding a Revolving

 

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Commitment that shall have failed to make such payment to Agent. A certificate
of Agent submitted to any Lender or Borrower with respect to any amounts owing
under this paragraph (c) shall be conclusive, in the absence of manifest error.

(d) Agent, on behalf of Swing Loan Lender, shall demand settlement (a
“Settlement”) of all or any Swing Loans with the Lenders holding the Revolving
Commitments on at least a weekly basis, or on any more frequent date that Agent
elects or that Swing Loan Lender at its option exercisable for any reason
whatsoever may request, by notifying the Lenders holding the Revolving
Commitments of such requested Settlement by facsimile, telephonic or electronic
transmission no later than 3:00 p.m. on the date of such requested Settlement
(the “Settlement Date”). Subject to any contrary provisions of Section 2.22,
each Lender holding a Revolving Commitment shall transfer the amount of such
Lender’s Revolving Commitment Percentage of the outstanding principal amount
(plus interest accrued thereon to the extent requested by Agent) of the
applicable Swing Loan with respect to which Settlement is requested by Agent, to
such account of Agent as Agent may designate not later than 5:00 p.m. on such
Settlement Date if requested by Agent by 3:00 p.m., otherwise not later than
5:00 p.m. on the next Business Day. Settlements may occur at any time
notwithstanding that the conditions precedent to making Revolving Advances set
forth in Section 8.2 have not been satisfied or the Revolving Commitments shall
have otherwise been terminated at such time. All amounts so transferred to Agent
shall be applied against the amount of outstanding Swing Loans and, when so
applied shall constitute Revolving Advances of such Lenders accruing interest as
Domestic Rate Loans. If any such amount is not transferred to Agent by any
Lender holding a Revolving Commitment on such Settlement Date, Agent shall be
entitled to recover such amount on demand from such Lender together with
interest thereon as specified in Section 2.6(c).

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

 

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2.7. Maximum Advances. The aggregate balance of Revolving Advances plus Swing
Loans outstanding at any time shall not exceed the lesser of (a) the Maximum
Revolving Advance Amount less the aggregate Maximum Undrawn Amount of all issued
and outstanding Letters of Credit or (b) the Formula Amount.

2.8. Manner and Repayment of Advances.

(a) The Revolving Advances and Swing Loans shall be due and payable in full on
the last day of the Term subject to earlier prepayment as herein provided.
Notwithstanding the foregoing, all Advances shall be subject to earlier
repayment upon (x) acceleration upon the occurrence of an Event of Default under
this Agreement or (y) termination of this Agreement. Each payment (including
each prepayment) by any Borrower on account of the principal of and interest on
the Advances shall be applied, first to the outstanding Swing Loans and next,
pro rata according to the applicable Revolving Commitment Percentages of the
Lenders, to the outstanding Revolving Advances (subject to any contrary
provisions of Section 2.22).

(b) Each Borrower recognizes that the amounts evidenced by checks, notes, drafts
or any other items of payment relating to and/or proceeds of Collateral may not
be collectible by Agent on the date received by Agent. Except as otherwise
provided in the last sentence of this Section 2.8(b), Agent shall conditionally
credit Borrowers’ Account for each item of payment on the next Business Day
after the Business Day on which such item of payment is received by Agent (and
the Business Day on which each such item of payment is so credited shall be
referred to, with respect to such item, as the “Application Date”). Agent is
not, however, required to credit Borrowers’ Account for the amount of any item
of payment which is unsatisfactory to Agent and Agent may charge Borrowers’
Account for the amount of any item of payment which is returned, for any reason
whatsoever, to Agent unpaid. Subject to the foregoing, Borrowers agree that for
purposes of computing the interest charges under this Agreement, each item of
payment received by Agent shall be deemed applied by Agent on account of the
Obligations on its respective Application Date. All proceeds received by Agent
shall be applied to the Obligations in accordance with Section 4.8(h).
Notwithstanding the foregoing, with respect to any item of payment made by Sony
Corporation or a subsidiary, unit, branch or division of Sony Corporation or
Sony Corporation of America, and received by Agent on the last day of any
particular month, the Application Date in respect of such item of payment shall
be such last day of such month.

(c) All payments of principal, interest and other amounts payable hereunder, or
under any of the Other Documents shall be made to Agent at the Payment Office
not later than 1:00 P.M. on the due date therefor in Dollars in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment of any and all Obligations due and owing hereunder by
charging Borrowers’ Account or by making Advances as provided in Section 2.2
hereof.

(d) Except as expressly provided herein, all payments (including prepayments) to
be made by any Borrower on account of principal, interest, fees and other
amounts payable hereunder shall be made without deduction, setoff or
counterclaim and shall be made to Agent on behalf of the Lenders to the Payment
Office, in each case on or prior to 1:00 P.M., in Dollars and in immediately
available funds.

 

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2.9. Repayment of Excess Advances. If at any time the aggregate balance of
outstanding Revolving Advances and/or Advances taken as a whole exceeds the
maximum amount of such type of Advances and/or Advances taken as a whole (as
applicable) permitted hereunder, such excess Advances shall be immediately due
and payable without the necessity of any demand, at the Payment Office, whether
or not a Default or Event of Default has occurred.

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

2.11. Letters of Credit.

(a) Subject to the terms and conditions hereof, Issuer shall issue or cause the
issuance of standby and/or trade letters of credit denominated in Dollars
(“Letters of Credit”) for the account of any Borrower except to the extent that
the issuance thereof would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) the outstanding Swing Loans, plus (iii) the Maximum Undrawn
Amount of all outstanding Letters of Credit, plus (iv) the Maximum Undrawn
Amount of the Letter of Credit to be issued to exceed the lesser of (x) the
Maximum Revolving Advance Amount or (y) the Formula Amount (calculated without
giving effect to the deductions provided for in Section 2.1(a)(y)(iii)). The
Maximum Undrawn Amount of all outstanding Letters of Credit shall not exceed in
the aggregate at any time the Letter of Credit Sublimit. All disbursements or
payments related to Letters of Credit shall be deemed to be Domestic Rate Loans
consisting of Revolving Advances and shall bear interest at the Revolving
Interest Rate for Domestic Rate Loans. Letters of Credit that have not been
drawn upon shall not bear interest (but fees shall accrue in respect of
outstanding Letters of Credit as provided in Section 3.2 hereof).

(b) Notwithstanding any provision of this Agreement, Issuer shall not be under
any obligation to issue any Letter of Credit if (i) any order, judgment or
decree of any Governmental Body or arbitrator shall by its terms purport to
enjoin or restrain Issuer from issuing any Letter of Credit, or any Law
applicable to the Issuer or any request or directive (whether or not having the
force of law) from any Governmental Body with jurisdiction over Issuer shall
prohibit, or request that the Issuer refrain from, the issuance of letters of
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Credit in particular or shall impose upon Issuer with respect to the Letter of
Credit any restriction, reserve or capital requirement (for which Issuer is not
otherwise compensated hereunder) not in effect on the date of this Agreement, or
shall impose upon Issuer any unreimbursed loss, cost or expense which was not
applicable on the date of this Agreement, and which Issuer in good faith deems
material to it, or (ii) the issuance of the Letter of Credit would violate one
or more policies of the Issuer applicable to letters of credit generally.

2.12. Issuance of Letters of Credit.

(a) Borrowing Agent, on behalf of any Borrower, may request Issuer to issue or
cause the issuance of a Letter of Credit by delivering to Issuer, with a copy to
Agent at the Payment Office, prior to 1:00 p.m., at least five (5) Business Days
prior to the proposed date of issuance, such Issuer’s form of Letter of Credit
Application (the “Letter of Credit Application”) completed to the satisfaction
of Agent and Issuer; and, such other certificates, documents and other papers
and information as Agent or Issuer may reasonably request. Issuer shall not
issue any requested Letter of Credit if such Issuer has received notice from
Agent or any Lender that one or more of the applicable conditions set forth in
Section 8.2 of this Agreement have not been satisfied or the commitments of
Lenders to make Revolving Advances hereunder have been terminated for any
reason.

(b) Each Letter of Credit shall, among other things, (i) provide for the payment
of sight drafts, or other written demands for payment, or acceptances of usance
drafts when presented for honor thereunder in accordance with the terms thereof
and when accompanied by the documents described therein and (ii) have an expiry
date not later than twenty-four (24) months after such Letter of Credit’s date
of issuance and in no event later than the last day of the Term. Each standby
Letter of Credit shall be subject either to the Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce at the time a Letter of Credit is issued (the “UCP”) or the
International Standby Practices (International Chamber of Commerce Publication
Number 590) (the “ISP98 Rules”), or any subsequent revision thereof at the time
a standby Letter of Credit is issued, as determined by Issuer, and each trade
Letter of Credit shall be subject to the UCP. In addition, no trade Letter of
Credit may permit the presentation of an ocean bill of lading that includes a
condition that the original bill of lading is not required to claim the goods
shipped thereunder.

(c) Agent shall use its reasonable efforts to notify Lenders of the request by
Borrowing Agent for a Letter of Credit hereunder.

2.13. Requirements For Issuance of Letters of Credit.

(a) Borrowing Agent shall authorize and direct any Issuer to name the applicable
Borrower as the “Applicant” or “Account Party” of each Letter of Credit. If
Agent is not the Issuer of any Letter of Credit, Borrowing Agent shall authorize
and direct the Issuer to deliver to Agent all instruments, documents, and other
writings and property received by the Issuer pursuant to the Letter of Credit
and to accept and rely upon Agent’s instructions and agreements with respect to
all matters arising in connection with the Letter of Credit, the application
therefor.

 

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(b) In connection with all trade Letters of Credit issued or caused to be issued
by Issuer under this Agreement, each Borrower hereby appoints Issuer, or its
designee, as its attorney, with full power and authority if an Event of Default
shall have occurred: (i) to sign and/or endorse such Borrower’s name upon any
warehouse or other receipts, and acceptances; (ii) to sign such Borrower’s name
on bills of lading; (iii) to clear Inventory through the United States of
America Customs Department (“Customs”) in the name of such Borrower or Issuer or
Issuer’s designee, and to sign and deliver to Customs officials powers of
attorney in the name of such Borrower for such purpose; and (iv) to complete in
such Borrower’s name or Issuer’s, or in the name of Issuer’s designee, any
order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Agent, Issuer nor their
attorneys will be liable for any acts or omissions nor for any error of judgment
or mistakes of fact or law, except for Agent’s, Issuer’s or their respective
attorney’s willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.

2.14. Disbursements, Reimbursement.

(a) Immediately upon the issuance of each Letter of Credit, each Lender holding
a Revolving Commitment shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from Issuer a participation in each Letter
of Credit and each drawing thereunder in an amount equal to such Lender’s
Revolving Commitment Percentage of the Maximum Undrawn Amount of such Letter of
Credit (as in effect from time to time) and the amount of such drawing,
respectively.

(b) In the event of any request for a drawing under a Letter of Credit by the
beneficiary or transferee thereof, Issuer will promptly notify Agent and
Borrowing Agent. Provided that Borrowing Agent shall have received such notice,
the Borrowers shall reimburse (such obligation to reimburse Issuer shall
sometimes be referred to as a “Reimbursement Obligation”) Issuer prior to 12:00
Noon, on each date that an amount is paid by Issuer under any Letter of Credit
(each such date, a “Drawing Date”) in an amount equal to the amount so paid by
Issuer. In the event Borrowers fail to reimburse Issuer for the full amount of
any drawing under any Letter of Credit by 12:00 Noon, on the Drawing Date,
Issuer will promptly notify Agent and each Lender holding a Revolving Commitment
thereof, and Borrowers shall be automatically deemed to have requested that a
Revolving Advance maintained as a Domestic Rate Loan be made by the Lenders to
be disbursed on the Drawing Date under such Letter of Credit, and the Lenders
holding the Revolving Commitments shall be unconditionally obligated to fund
such Revolving Advance (all whether or not the conditions specified in
Section 8.2 are then satisfied or the commitments of Lenders to make Revolving
Advances hereunder have been terminated for any reason) as provided for in
Section 2.14(c) immediately below. Any notice given by Issuer pursuant to this
Section 2.14(b) may be oral if promptly confirmed in writing; provided that the
lack of such a confirmation shall not affect the conclusiveness or binding
effect of such notice.

(c) Each Lender holding a Revolving Commitment shall upon any notice pursuant to
Section 2.14(b) make available to Issuer through Agent at the Payment Office an
amount in immediately available funds equal to its Revolving Commitment
Percentage (subject to any contrary provisions of Section 2.22) of the amount of
the drawing, whereupon the participating Lenders shall (subject to
Section 2.14(d)) each be deemed to have made a

 

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Revolving Advance maintained as a Domestic Rate Loan to Borrowers in that
amount. If any Lender holding a Revolving Commitment so notified fails to make
available to Agent, for the benefit of Issuer, the amount of such Lender’s
Revolving Commitment Percentage of such amount by 2:00 p.m. on the Drawing Date,
then interest shall accrue on such Lender’s obligation to make such payment,
from the Drawing Date to the date on which such Lender makes such payment (i) at
a rate per annum equal to the Federal Funds Effective Rate during the first
three days following the Drawing Date and (ii) at a rate per annum equal to the
rate applicable to Revolving Advances maintained as a Domestic Rate Loans on and
after the fourth day following the Drawing Date. Agent and Issuer will promptly
give notice of the occurrence of the Drawing Date, but failure of Agent or
Issuer to give any such notice on the Drawing Date or in sufficient time to
enable any Lender holding a Revolving Commitment to effect such payment on such
date shall not relieve such Lender from its obligations under this
Section 2.14(c), provided that such Lender shall not be obligated to pay
interest as provided in Section 2.14(c)(i) and (ii) until and commencing from
the date of receipt of notice from Agent or Issuer of a drawing.

(d) With respect to any unreimbursed drawing that is not converted into a
Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or in
part as contemplated by Section 2.14(b), because of Borrowers’ failure to
satisfy the conditions set forth in Section 8.2 hereof (other than any notice
requirements) or for any other reason, Borrowers shall be deemed to have
incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the
amount of such drawing. Such Letter of Credit Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the rate per annum
applicable to a Revolving Advance maintained as a Domestic Rate Loan. Each
applicable Lender’s payment to Agent pursuant to Section 2.14(c) shall be deemed
to be a payment in respect of its participation in such Letter of Credit
Borrowing and shall constitute a “Participation Advance” from such Lender in
satisfaction of its Participation Commitment in respect of the applicable Letter
of Credit under this Section 2.14.

(e) Each applicable Lender’s Participation Commitment in respect of the Letters
of Credit shall continue until the last to occur of any of the following events:
(x) Issuer ceases to be obligated to issue or cause to be issued Letters of
Credit hereunder; (y) no Letter of Credit issued or created hereunder remains
outstanding and uncancelled; and (z) all Persons (other than Loan Parties) have
been fully reimbursed for all payments made under or relating to Letters of
Credit.

2.15. Repayment of Participation Advances.

(a) Upon (and only upon) receipt by Agent for the account of Issuer of
immediately available funds from Borrowers (i) in reimbursement of any payment
made by Issuer or Agent under the Letter of Credit with respect to which any
Lender has made a Participation Advance to Agent, or (ii) in payment of interest
on such a payment made by Issuer or Agent under such a Letter of Credit, Agent
will pay to each Lender holding a Revolving Commitment, in the same funds as
those received by Agent, the amount of such Lender’s Revolving Commitment
Percentage of such funds, except Agent shall retain the amount of the Revolving
Commitment Percentage of such funds of any Lender holding a Revolving Commitment
that did not make a Participation Advance in respect of such payment by Agent
(and, to the extent that any of the other Lender(s) holding the Revolving
Commitment have

 

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funded any portion such Defaulting Lender’s Participation Advance in accordance
with the provisions of Section 2.22, Agent will pay over to such Non-Defaulting
Lenders a pro rata portion of the funds so withheld from such Defaulting
Lender).

(b) If Issuer or Agent is required at any time to return to any Borrower, or to
a trustee, receiver, liquidator, custodian, or any official in any insolvency
proceeding, any portion of the payments made by Borrowers to Issuer or Agent
pursuant to Section 2.15(a) in reimbursement of a payment made under the Letter
of Credit or interest or fee thereon, each applicable Lender shall, on demand of
Agent, forthwith return to Issuer or Agent the amount of its Revolving
Commitment Percentage of any amounts so returned by Issuer or Agent plus
interest at the Federal Funds Effective Rate.

2.16. Documentation. Each Borrower agrees to be bound by the terms of the Letter
of Credit Application and by Issuer’s interpretations of any Letter of Credit
issued on behalf of such Borrower and by Issuer’s written regulations and
customary practices relating to letters of credit, though Issuer’s
interpretations may be different from such Borrower’s own. In the event of a
conflict between the Letter of Credit Application and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment), Issuer shall not be liable for
any error, negligence and/or mistakes, whether of omission or commission, in
following Borrowing Agent’s or any Borrower’s instructions or those contained in
the Letters of Credit or any modifications, amendments or supplements thereto.

2.17. Determination to Honor Drawing Request. In determining whether to honor
any request for drawing under any Letter of Credit by the beneficiary thereof,
Issuer shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit and that any other drawing condition appearing on the face of
such Letter of Credit has been satisfied in the manner so set forth.

2.18. Nature of Participation and Reimbursement Obligations. The obligation of
each Lender holding a Revolving Commitment in accordance with this Agreement to
make the Revolving Advances or Participation Advances as a result of a drawing
under a Letter of Credit, and the obligations of Borrowers to reimburse Issuer
upon a draw under a Letter of Credit, shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Section 2.18 under all circumstances, including the following
circumstances:

(i) any set-off, counterclaim, recoupment, defense or other right which such
Lender or any Loan Party, as the case may be, may have against Issuer, Agent,
any Loan Party or Lender, as the case may be, or any other Person for any reason
whatsoever;

(ii) the failure of any Loan Party or any other Person to comply, in connection
with a Letter of Credit Borrowing, with the conditions set forth in this
Agreement for the making of a Revolving Advance, it being acknowledged that such
conditions are not required for the making of a Letter of Credit Borrowing and
the obligation of the Lenders to make Participation Advances under Section 2.14;

 

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(iii) any lack of validity or enforceability of any Letter of Credit;

(iv) any claim of breach of warranty that might be made by any Loan Party,
Agent, Issuer or any Lender against the beneficiary of a Letter of Credit, or
the existence of any claim, set-off, recoupment, counterclaim, cross-claim,
defense or other right which any Loan Party, Agent, Issuer or any Lender may
have at any time against a beneficiary, any successor beneficiary or any
transferee of any Letter of Credit or assignee of the proceeds thereof (or any
Persons for whom any such transferee or assignee may be acting), Issuer, Agent
or any Lender or any other Person, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated transaction (including any
underlying transaction between any Loan Party or any Subsidiaries of such Loan
Party and the beneficiary for which any Letter of Credit was procured);

(v) the lack of power or authority of any signer of (or any defect in or forgery
of any signature or endorsement on) or the form of or lack of validity,
sufficiency, accuracy, enforceability or genuineness of any draft, demand,
instrument, certificate or other document presented under or in connection with
any Letter of Credit, or any fraud or alleged fraud in connection with any
Letter of Credit, or the transport of any property or provision of services
relating to a Letter of Credit, in each case even if Issuer or any of Issuer’s
Affiliates has been notified thereof;

(vi) payment by Issuer under any Letter of Credit against presentation of a
demand, draft or certificate or other document which is forged or does not fully
comply with the terms of such Letter of Credit (provided that the foregoing
shall not excuse Issuer from any obligation under the terms of any applicable
Letter of Credit to require the presentation of documents that on their face
appear to satisfy any applicable requirements for drawing under such Letter of
Credit prior to honoring or paying any such draw);

(vii) the solvency of, or any acts or omissions by, any beneficiary of any
Letter of Credit, or any other Person having a role in any transaction or
obligation relating to a Letter of Credit, or the existence, nature, quality,
quantity, condition, value or other characteristic of any property or services
relating to a Letter of Credit;

(viii) any failure by Issuer or any of Issuer’s Affiliates to issue any Letter
of Credit in the form requested by Borrowing Agent, unless the Agent and Issuer
have each received written notice from Borrowing Agent of such failure within
three (3) Business Days after the Issuer shall have furnished Agent and
Borrowing Agent a copy of such Letter of Credit and such error is material and
no drawing has been made thereon prior to receipt of such notice;

(ix) the occurrence of any Material Adverse Effect;

(x) any breach of this Agreement or any Other Document by any party thereto;

(xi) the occurrence or continuance of an insolvency proceeding with respect to
any Borrower or any Guarantor;

 

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(xii) the fact that a Default or Event of Default shall have occurred and be
continuing;

(xiii) the fact that the Term shall have expired or this Agreement or the
obligations of the Lenders to make Advances have been terminated; and

(xiv) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing.

2.19. Liability for Acts and Omissions.

(a) As between Borrowers and Issuer, Swing Loan Lender, Agent and Lenders, each
Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, Issuer shall not be
responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for an issuance of any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged (even if Issuer or any of its Affiliates shall have been
notified thereof); (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) the
failure of the beneficiary of any such Letter of Credit, or any other party to
which such Letter of Credit may be transferred, to comply fully with any
conditions required in order to draw upon such Letter of Credit or any other
claim of any Loan Party against any beneficiary of such Letter of Credit, or any
such transferee, or any dispute between or among any Loan Party and any
beneficiary of any Letter of Credit or any such transferee; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Issuer, including any Governmental Acts, and
none of the above shall affect or impair, or prevent the vesting of, any of
Issuer’s rights or powers hereunder. Nothing in the preceding sentence shall
relieve Issuer from liability for Issuer’s gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final
non-appealable judgment) in connection with actions or omissions described in
such clauses (i) through (viii) of such sentence. In no event shall Issuer or
Issuer’s Affiliates be liable to any Loan Party for any indirect, consequential,
incidental, punitive, exemplary or special damages or expenses (including
without limitation attorneys’ fees), or for any damages resulting from any
change in the value of any property relating to a Letter of Credit.

(b) Without limiting the generality of the foregoing, Issuer and each of its
Affiliates: (i) may rely on any oral or other communication believed in good
faith by Issuer or such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit; (ii) may honor any presentation
if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may

 

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honor a previously dishonored presentation under a Letter of Credit, whether
such dishonor was pursuant to a court order, to settle or compromise any claim
of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to
the same extent as if such presentation had initially been honored, together
with any interest paid by Issuer or its Affiliates; (iv) may honor any drawing
that is payable upon presentation of a statement advising negotiation or
payment, upon receipt of such statement (even if such statement indicates that a
draft or other document is being delivered separately), and shall not be liable
for any failure of any such draft or other document to arrive, or to conform in
any way with the relevant Letter of Credit; (v) may pay any paying or
negotiating bank claiming that it rightfully honored under the laws or practices
of the place where such bank is located; and (vi) may settle or adjust any claim
or demand made on Issuer or its Affiliate in any way related to any order issued
at the applicant’s request to an air carrier, a letter of guarantee or of
indemnity issued to a steamship agent or carrier or any document or instrument
of like import (each an “Order”) and honor any drawing in connection with any
Letter of Credit that is the subject of such Order, notwithstanding that any
drafts or other documents presented in connection with such Letter of Credit
fail to conform in any way with such Letter of Credit.

(c) In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Issuer under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good faith and without
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment), shall not put Issuer under any
resulting liability to any Loan Party, Agent or any Lender.

2.20. Mandatory Prepayments.

(a) Subject to Section 7.1 hereof, when any Loan Party sells or otherwise
disposes of any Collateral other than Inventory in the Ordinary Course of
Business, Borrowers shall repay the Advances in an amount equal to the net
proceeds of such sale (i.e., gross proceeds less the reasonable direct costs of
such sales or other dispositions), such repayments to be made promptly but in no
event more than one (1) Business Day following receipt of such net proceeds, and
until the date of payment, such proceeds shall be held in trust for Agent. The
foregoing shall not be deemed to be implied consent to any such sale otherwise
prohibited by the terms and conditions hereof. Such repayments shall be applied
to the Advances (including cash collateralization of all Obligations relating to
any outstanding Letters of Credit in accordance with the provisions of
Section 3.2(b); provided however that if no Default or Event of Default has
occurred and is continuing, such repayments shall be applied to cash
collateralize any Obligations related to outstanding Letters of Credit last) in
such order as Agent may determine, subject to Borrowers’ ability to reborrow
Revolving Advances in accordance with the terms hereof.

(b) In the event of any issuance or other incurrence of Indebtedness (other than
Indebtedness described in the definition of Permitted Indebtedness) by Loan
Parties, Borrowers shall, no later than one (1) Business Day after the receipt
by Loan Parties of the cash proceeds from any such issuance or incurrence of
Indebtedness repay the Advances in an amount equal to one hundred percent
(100%) of such cash proceeds in the case of such incurrence or issuance of
Indebtedness. Such repayments will be applied in the same manner as set forth in
Section 2.20(a) hereof.

(c) All proceeds received by Loan Parties or Agent (i) under any insurance
policy on account of damage or destruction of any assets or property of any Loan
Parties, or (ii) as a result of any taking or condemnation of any assets or
property shall be applied in accordance with Section 6.6 hereof.

 

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2.21. Use of Proceeds.

(a) Borrowers shall apply the proceeds of Advances to (i) pay fees and expenses
relating to this transaction, (ii) provide for its working capital needs,
including capital expenditures and investments in and loans to Domestic
Subsidiaries and Foreign Subsidiaries as permitted hereunder, and reimburse
drawings under Letters of Credit, and (iii) funding dividends by Borrowers to
ModusLink Parent for general corporate purposes, including acquisitions, of
ModusLink Parent, to the extent expressly permitted under Section 7.7 hereof.

(b) Without limiting the generality of Section 2.21(a) above, neither the
Borrowers, the Guarantors nor any other Person which may in the future become
party to this Agreement or the Other Documents as a Borrower or Guarantor,
intends to use nor shall they use any portion of the proceeds of the Advances,
directly or indirectly, for any purpose in violation of Applicable Law.

2.22. Defaulting Lender.

(a) Notwithstanding anything to the contrary contained herein, in the event any
Lender is a Defaulting Lender, all rights and obligations hereunder of such
Defaulting Lender and of the other parties hereto shall be modified to the
extent of the express provisions of this Section 2.22 so long as such Lender is
a Defaulting Lender.

(b) (i) except as otherwise expressly provided for in this Section 2.22,
Revolving Advances shall be made pro rata from Lenders holding Revolving
Commitments which are not Defaulting Lenders based on their respective Revolving
Commitment Percentages, and no Revolving Commitment Percentage of any Lender or
any pro rata share of any Revolving Advances required to be advanced by any
Lender shall be increased as a result of any Lender being a Defaulting Lender.
Amounts received in respect of principal of any type of Revolving Advances shall
be applied to reduce such type of Revolving Advances of each Lender (other than
any Defaulting Lender) holding a Revolving Commitment in accordance with their
Revolving Commitment Percentages; provided, that, Agent shall not be obligated
to transfer to a Defaulting Lender any payments received by Agent for the
Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder (including any principal, interest or fees).
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
Agent. Agent may hold and, in its discretion, re-lend to a Borrower the amount
of such payments received or retained by it for the account of such Defaulting
Lender.

(ii) fees pursuant to Section 3.3(b) hereof shall cease to accrue in favor of
such Defaulting Lender.

 

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(iii) if any Swing Loans are outstanding or any Letters of Credit Obligation (or
drawings under any Letter of Credit for which the Issuer has not been
reimbursed) are outstanding or exist at the time any such Lender holding a
Revolving Commitment becomes a Defaulting Lender, then:

(A) the Defaulting Lender’s Participation Commitment in the outstanding Swing
Loans and of the Maximum Undrawn Amount of all outstanding Letters of Credit
shall be reallocated among the Non-Defaulting Lenders holding Revolving
Commitments in proportion to the respective Revolving Commitment Percentages of
such Non-Defaulting Lenders to the extent (but only to the extent) that (x) such
reallocation does not cause the aggregate sum of outstanding Revolving Advances
made by any such Non-Defaulting Lender holding a Revolving Commitment plus such
Lender’s reallocated Participation Commitment in the outstanding Swing Loans
plus such Lender’s reallocated Participation Commitment in the aggregate Maximum
Undrawn Amount of all outstanding Letters of Credit to exceed the Revolving
Commitment Amount of any such Non-Defaulting Lender, and (y) no Default or Event
of Default has occurred and is continuing at such time;

(B) if the reallocation described in clause (A) above cannot, or can only
partially, be effected, the Borrowers shall within one Business Day following
notice by the Agent (x) first, prepay any outstanding Swing Loans that cannot be
reallocated, and (y) second, cash collateralize for the benefit of the Issuer
the Borrowers’ obligations corresponding to such Defaulting Lender’s
Participation Commitment in the Maximum Undrawn Amount of all Letters of Credit
(after giving effect to any partial reallocation pursuant to clause (A) above)
in accordance with Section 3.2(b) for so long as such Obligations are
outstanding;

(C) if the Borrowers cash collateralize any portion of such Defaulting Lender’s
Participation Commitment in the Maximum Undrawn Amount of all Letters of Credit
pursuant to clause (B) above, the Borrower shall not be required to pay any fees
to such Defaulting Lender pursuant to Section 3.2(a) with respect to such
Defaulting Lender’s Revolving Commitment Percentage of Maximum Undrawn Amount of
all Letters of Credit during the period such Defaulting Lender’s Participation
Commitment in the Maximum Undrawn Amount of all Letters of Credit are cash
collateralized;

(D) if the Defaulting Lender’s Participation Commitment in the Maximum Undrawn
Amount of all Letters of Credit is reallocated pursuant to clause (A) above,
then the fees payable to the Lenders holding Revolving Commitments pursuant to
Section 3.2(a) shall be adjusted and reallocated to the Non-Defaulting Lenders
holding Revolving Commitments in accordance with such reallocation; and

(E) if all or any portion of such Defaulting Lender’s Participation Commitment
in the Maximum Undrawn Amount of all Letters of Credit is neither reallocated
nor cash collateralized pursuant to clause (A) or (B) above, then, without
prejudice to any rights or remedies of the Issuer or any other Lender hereunder,
all Letter of Credit Fees payable under Section 3.2(a) with respect to such
Defaulting Lender’s Revolving Commitment Percentage of the Maximum Undrawn
Amount of all Letters of Credit shall be payable to the Issuer (and not to such
Defaulting Lender) until (and then only to the extent that) such Participation
Commitment in the Maximum Undrawn Amount of all Letters of Credit is reallocated
and/or cash collateralized; and

 

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(iv) so long as any Lender holding a Revolving Commitment is a Defaulting
Lender, Swing Loan Lender shall not be required to fund any Swing Loans and the
Issuer shall not be required to issue, amend or increase any Letter of Credit,
unless such Issuer is satisfied that the related exposure and the Defaulting
Lender’s Participation Commitment in the Maximum Undrawn Amount of all Letters
of Credit and all Swing Loans (after giving effect to any such issuance,
amendment, increase or funding) will be fully allocated to the Non-Defaulting
Lenders holding Revolving Commitments and/or cash collateral for such Letters of
Credit will be provided by the Borrowers in accordance with clause (A) and
(B) above, and participating interests in any newly made Swing Loan or any newly
issued or increased Letter of Credit shall be allocated among the Non-Defaulting
Lenders in a manner consistent with Section 2.22(b)(ii)(A) above (and such
Defaulting Lender shall not participate therein).

(c) A Defaulting Lender shall not be entitled to give instructions to Agent or
to approve, disapprove, consent to or vote on any matters relating to this
Agreement and the Other Documents, and all amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall not be deemed to be a Lender, to have any
outstanding Advances or a Revolving Commitment Percentage provided, that this
clause (c) shall not apply to the vote of a Defaulting Lender in the case of an
amendment, waiver or other modification described in clauses (i) or (ii) of
Section 16.2(b).

(d) Other than as expressly set forth in this Section 2.22, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this
Section 2.22 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

(e) In the event that the Agent, the Borrowers, Swing Loan Lender and the Issuer
agree in writing that a Defaulting Lender has adequately remedied all matters
that caused such Lender to be a Defaulting Lender, then the Agent will so notify
the parties hereto, and, if such cured Defaulting Lender is a Lender holding a
Revolver Commitment, then Participation Commitments of the Lenders holding
Revolving Commitments (including such cured Defaulting Lender) of the Swing
Loans and Maximum Undrawn Amount of all outstanding Letters of Credit shall be
reallocated to reflect the inclusion of such Lender’s Revolving Commitment, and
on such date such Lender shall purchase at par such of the Revolving Advances of
the other Lenders as the Agent shall determine may be necessary in order for
such Lender to hold such Revolving Advances in accordance with its Revolving
Commitment Percentage.

(f) If Swing Loan Lender or Issuer has a good faith belief that any Lender
holding a Revolving Commitment has defaulted in fulfilling its obligations under
one or more other agreements in which such Lender commits to extend credit,
Swing Loan Lender shall not be required to fund any Swing Loans and Issuer shall
not be required to issue, amend or increase

 

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any Letter of Credit, unless Swing Loan Lender or Issuer, as the case may be,
shall have entered into arrangements with the Borrowers or such Lender,
satisfactory to Swing Loan Lender or Issuer, as the case may be, to defease any
risk to it in respect of such Lender hereunder.

2.23. Payment of Obligations. Agent may charge to Borrowers’ Account as a
Revolving Advance or, at the discretion of Swing Loan Lender, as a Swing Loan
(i) all payments with respect to any of the Obligations required hereunder
(including without limitation principal payments, payments of interest, payments
of Letter of Credit Fees and all other fees provided for hereunder and payments
under Sections 16.5 and 16.9) as and when each such payment shall become due and
payable (whether as regularly scheduled, upon or after acceleration, upon
maturity or otherwise), (ii) without limiting the generality of the foregoing
clause (i), (a) all amounts expended by Agent or any Lender pursuant to Sections
4.2 or 4.3 hereof and (b) all expenses which Agent incurs in connection with the
forwarding of Advance proceeds and the establishment and maintenance of any
Blocked Accounts or Depository Accounts as provided for in Section 4.8(h), and
(iii) any sums expended by Agent or any Lender due to any Loan Party’s failure
to perform or comply with its obligations under this Agreement or any Other
Document including any Loan Party’s obligations under Sections 3.3, 3.4, 4.4,
4.7, 6.4, 6.6, 6.7 and 6.8 hereof, and all amounts so charged shall be added to
the Obligations and shall be secured by the Collateral. To the extent Revolving
Advances are not actually funded by the other Lenders in respect of any such
amounts so charged, all such amounts so charged shall be deemed to be Revolving
Advances made by and owing to Agent and Agent shall be entitled to all rights
(including accrual of interest) and remedies of a Lender under this Agreement
and the Other Documents with respect to such Revolving Advances.

2.24. Increase in Maximum Revolving Advance Amount.

(a) The Borrowers may, at any time during the Term, request that the Maximum
Revolving Advance Amount be increased by (1) one or more of the current Lenders
increasing their Revolving Commitment Amount (any current Lender which elects to
increase its Revolving Commitment Amount shall be referred to as an “Increasing
Lender”) or (2) one or more new lenders (each a “New Lender”) joining this
Agreement and providing a Revolving Commitment Amount hereunder , subject to the
following terms and conditions:

(i) No current Lender shall be obligated to increase its Revolving Commitment
Amount and any increase in the Revolving Commitment Amount by any current Lender
shall be in the sole discretion of such current Lender;

(ii) Borrowers may not request the addition of a New Lender unless (and then
only to the extent that) there is insufficient participation on behalf of the
existing Lenders in the increased Revolving Commitments being requested by
Borrower;

(iii) There shall exist no Event of Default or Default on the effective date of
such increase after giving effect to such increase;

(iv) After giving effect to such increase, the Maximum Revolving Advance Amount
shall not exceed $70,000,000.

 

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(v) Borrowers may not request an increase in the Maximum Revolving Advance
Amount under this Section 2.24 more than three (3) times during the Term, and no
single such increase in the Maximum Revolving Advance Amount shall be for an
amount less than $5,000,000;

(vi) The Borrowers and other Loan Parties shall deliver to the Agent on or
before the effective date of such increase the following documents in form and
substance satisfactory to the Agent: (1) certifications of their corporate
secretaries with attached resolutions certifying that the increase in the
Revolving Commitment Amounts has been approved by such Loan Parties,
(2) certificate dated as of the effective date of such increase certifying that
no Default or Event of Default shall have occurred and be continuing and
certifying that the representations and warranties made by each Loan Party
herein and in the Other Documents are true and complete in all respects with the
same force and effect as if made on and as of such date (except to the extent
any such representation or warranty expressly relates only to any earlier and/or
specified date), (3) such other agreements, instruments and information
(including supplements or modifications to this Agreement and/or the Other
Documents executed by Loan Parties as Agent reasonably deems necessary in order
to document the increase to the Maximum Revolving Advance Amount and to protect,
preserve and continue the perfection and priority of the liens, security
interests, rights and remedies of Agent and Lenders hereunder and under the
Other Documents in light of such increase, and (4) an opinion of counsel in form
and substance satisfactory to the Agent which shall cover such matters related
to such increase as Agent may reasonably require and each Loan Party hereby
authorizes and directs such counsel to deliver such opinions to Agent and
Lenders;

(vii) The Borrowers shall execute and deliver (1) to each Increasing Lender a
replacement Note reflecting the new amount of such Increasing Lender’s Revolving
Commitment Amount after giving effect to the increase (and the prior Note issued
to such Increasing Lender shall be deemed to be cancelled) and (2) to each New
Lender a Note reflecting the amount of such New Lender’s Revolving Commitment
Amount;

(viii) Any New Lender shall be subject to the reasonable approval of the Agent
and Issuer;

(ix) Each Increasing Lender shall confirm its agreement to increase its
Revolving Commitment Amount pursuant to an acknowledgement in a form acceptable
to the Agent, signed by it and each Borrower and delivered to the Agent at least
five (5) days before the effective date of such increase; and

(x) Each New Lender shall execute a lender joinder in substantially the form of
Exhibit 2.24 pursuant to which such New Lender shall join and become a party to
this Agreement and the Other Documents with a Revolving Commitment Amount as set
forth in such lender joinder.

(b) On the effective date of such increase, (i) the Borrowers shall repay all
Revolving Advances then outstanding, subject to the Borrowers’ obligations under
Section 3.7; provided that subject to the other conditions of this Agreement,
Borrowing Agent may request new Revolving Advances on such date and (ii) the
Revolving Commitment Percentages of the

 

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Lenders holding a Revolving Commitment (including each Increasing Lender and/or
New Lender) shall be recalculated such that each such Lender’s Revolving
Commitment Percentage is equal to (x) the Revolving Commitment Amount of such
Lender divided by (y) the aggregate of the Revolving Commitment Amounts of all
Lenders. Each Lender holding a Revolving Commitment shall participate in any new
Revolving Advances made on or after such date in accordance with its Revolving
Commitment Percentage after giving effect to the increase in the Maximum
Revolving Advance Amount and recalculation of the Revolving Commitment
Percentages contemplated by this Section 2.24.

(c) On the effective date of such increase, each Increasing Lender shall be
deemed to have purchased an additional/increased participation in, and each New
Lender will be deemed to have purchased a new participation in, each then
outstanding Letter of Credit and each drawing thereunder and each then
outstanding Swing Loan in an amount equal to such Lender’s Revolving Commitment
Percentage (as calculated pursuant to Section 2.24(b) above) of the Maximum
Undrawn Amount of each such Letter of Credit (as in effect from time to time)
and the amount of each drawing and of each such Swing Loan, respectively. As
necessary to effectuate the foregoing, each existing Lender holding a Revolving
Commitment Percentage that is not an Increasing Lender shall be deemed to have
sold to each applicable Increasing Lender and/or New Lender, as necessary, a
portion of such existing Lender’s participations in such outstanding Letters of
Credit and drawings and such outstanding Swing Loans such that, after giving
effect to all such purchases and sales, each Lender holding a Revolving
Commitment (including each Increasing Lender and/or New Lender) shall hold a
participation in all Letters of Credit (and drawings thereunder) and all Swing
Loans in accordance with their respective Revolving Commitment Percentages (as
calculated pursuant to Section 2.24(b) above).

(d) On the effective date of such increase, Loan Parties shall pay all cost and
expenses incurred by Agent and by each Increasing Lender and New Lender in
connection with the negotiations regarding, and the preparation, negotiation,
execution and delivery of all agreements and instruments executed and delivered
by any of Agent, Loan Parties and/or the Increasing Lenders and New Lenders in
connection with, such increase (including all fees for any supplemental or
additional public filings of any Other Documents necessary to protect, preserve
and continue the perfection and priority of the liens, security interests,
rights and remedies of Agent and Lenders hereunder and under the Other Documents
in light of such increase).

 

III. INTEREST AND FEES.

3.1. Interest. Interest on Advances shall be payable in arrears on the first day
of each month with respect to Domestic Rate Loans and, with respect to LIBOR
Rate Loans, at the end of each Interest Period, provided further that all
accrued and unpaid interest shall be due and payable at the end of the Term.
Interest charges shall be computed on the actual principal amount of Advances
outstanding during the month at a rate per annum equal to (i) with respect to
Revolving Advances, the applicable Revolving Interest Rate and (ii) with respect
to Swing Loans, the Revolving Interest Rate for Domestic Rate Loans. Except as
expressly provided otherwise in this Agreement, any Obligations other than the
Advances that are not paid when due shall accrue interest at the Revolving
Interest Rate for Domestic Rate Loans, subject to the provision of the final
sentence of this Section 3.1 regarding the Default Rate. Whenever,

 

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subsequent to the date of this Agreement, the Alternate Base Rate is increased
or decreased, the Revolving Interest Rate for Domestic Rate Loans shall be
similarly changed without notice or demand of any kind by an amount equal to the
amount of such change in the Alternate Base Rate during the time such change or
changes remain in effect. The LIBOR Rate shall be adjusted with respect to LIBOR
Rate Loans without notice or demand of any kind on the effective date of any
change in the Reserve Percentage as of such effective date. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, at the
option of Agent or at the direction of Required Lenders (or, in the case of any
Event of Default under Section 10.7, immediately and automatically upon the
occurrence of any such Event of Default without the requirement of any
affirmative action by any party), (i) the Obligations other than LIBOR Rate
Loans shall bear interest at the Revolving Interest Rate for Domestic Rate Loans
plus two (2%) percent per annum and (ii) LIBOR Rate Loans shall bear interest at
the Revolving Interest Rate for LIBOR Rate Loans plus two (2%) percent per annum
(as applicable, the “Default Rate”).

3.2. Letter of Credit Fees.

(a) Borrowers shall pay (x) to Agent, for the ratable benefit of the Lenders
holding Revolving Commitments, fees for each Letter of Credit for the period
from and excluding the date of issuance of same to and including the date of
expiration or termination, equal to the average daily face amount of each
outstanding Letter of Credit multiplied by the Applicable Margin for Revolving
Advances consisting of LIBOR Rate Loans, such fees to be calculated on the basis
of a 360-day year for the actual number of days elapsed and to be payable
quarterly in arrears on the first day of each calendar quarter and on the last
day of the Term, and (y) to the Issuer, for its own account, a fronting fee of
one quarter of one percent (0.25%) per annum times the average daily face amount
of each outstanding Letter of Credit for the period from and excluding the date
of issuance of same to and including the date of expiration or termination, to
be payable quarterly in arrears on the first day of each calendar quarter and on
the last day of the Term. (all of the foregoing fees, the “Letter of Credit
Fees”). In addition, Borrowers shall pay to Agent, for the benefit of Issuer,
any and all administrative, issuance, amendment, payment and negotiation charges
with respect to Letters of Credit and all fees and expenses as agreed upon by
Issuer and Borrowing Agent in connection with any Letter of Credit, including in
connection with the opening, amendment or renewal of any such Letter of Credit
and any acceptances created thereunder, all such charges, fees and expenses, if
any, to be payable on demand. All such charges shall be deemed earned in full on
the date when the same are due and payable hereunder and shall not be subject to
rebate or pro-ration upon the termination of this Agreement for any reason. Any
such charge in effect at the time of a particular transaction shall be the
charge for that transaction, notwithstanding any subsequent change in the
Issuer’s prevailing charges for that type of transaction. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, at the
option of Agent or at the direction of Required Lenders (or, in the case of any
Event of Default under Section 10.7, immediately and automatically upon the
occurrence of any such Event of Default without the requirement of any
affirmative action by any party), the Letter of Credit Fees described in clause
(x) of this Section 3.2(a) shall be increased by an additional two percent
(2.0%) per annum.

(b) At any time following the occurrence of an Event of Default, at the option
of Agent or at the direction of Required Lenders (or, in the case of any Event
of Default under Section 10.7, immediately and automatically upon the occurrence
of such Event of Default,

 

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without the requirement of any affirmative action by any party), or upon the
expiration of the Term or any other termination of this Agreement (and also, if
applicable, in connection with any mandatory prepayment under Section 2.20),
Borrowers will cause cash to be deposited and maintained in an account with
Agent, as cash collateral, in an amount equal to one hundred and five percent
(105%) of the Maximum Undrawn Amount of all outstanding Letters of Credit, and
each Borrower hereby irrevocably authorizes Agent, in its discretion, on such
Borrower’s behalf and in such Borrower’s name, to open such an account and to
make and maintain deposits therein, or in an account opened by such Borrower, in
the amounts required to be made by such Borrower, out of the proceeds of
Receivables or other Collateral or out of any other funds of such Borrower
coming into any Lender’s possession at any time. Agent may, in its discretion,
invest such cash collateral (less applicable reserves) in such short-term
money-market items as to which Agent and such Borrower mutually agree (or, in
the absence of such agreement, as Agent may reasonably select) and the net
return on such investments shall be credited to such account and constitute
additional cash collateral, or Agent may (notwithstanding the foregoing)
establish the account provided for under this Section 3.2(b) as a non-interest
bearing account and in such case Agent shall have no obligation (and Borrowers
hereby waive any claim) under Article 9 of the Uniform Commercial Code or under
any other Applicable Law to pay interest on such cash collateral being held by
Agent. No Borrower may withdraw amounts credited to any such account except upon
the occurrence of all of the following: (x) payment and performance in full of
all Obligations; (y) expiration of all Letters of Credit; and (z) termination of
this Agreement. Borrowers hereby assign, pledge and grant to Agent, for its
benefit and the ratable benefit of Issuer, Lenders and each other Secured Party,
a continuing security interest in and to and Lien on any such cash collateral
and any right, title and interest of Borrowers in any deposit account,
securities account or investment account into which such cash collateral may be
deposited from time to time to secure the Obligations, specifically including
all Obligations with respect to any Letters of Credit. Borrowers agree that upon
the coming due of any Reimbursement Obligations (or any other Obligations,
including Obligations for Letter of Credit Fees) with respect to the Letters of
Credit, Agent may use such cash collateral to pay and satisfy such Obligations.

3.3. Closing Fee and Facility Fee.

(a) Upon the execution of this Agreement, Borrowers shall pay to Agent for the
ratable benefit of Lenders a closing fee of $243,750 less that portion, if any,
of the commitment fee of $40,000 heretofore paid by Borrowers to Agent and the
deposit of $50,000 heretofore paid by Borrowers to Agent, in each case remaining
after application of such commitment fee and deposit to out of pocket costs and
expenses of Agent incurred in connection with the transactions under this
Agreement incurred through the Closing Date.

(b) If, for any calendar quarter during the Term, the average daily unpaid
balance of the sum of Revolving Advances (for purposes of this computation,
Swing Loans shall be deemed to be Revolving Advances made by PNC as a Lender)
plus the Maximum Undrawn Amount of all outstanding Letters of Credit for each
day of such calendar quarter does not equal the Maximum Revolving Advance
Amount, then Borrowers shall pay to Agent, for the ratable benefit of the
Lenders holding the Revolving Commitments based on their Revolving Commitment
Percentages, a fee at a rate equal to one-quarter of one percent (0.25%) per
annum on the amount by which the Maximum Revolving Advance Amount exceeds such
average daily unpaid balance (the “Facility Fee”). Such Facility fee shall be
payable to Agent in arrears on the first day of each calendar quarter with
respect to the previous calendar quarter.

 

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3.4. Collateral Monitoring Fee and Collateral Evaluation Fee.

(a) Borrowers shall pay Agent, for its own account, a collateral monitoring fee
equal to $2,000 per month commencing on the first day of the month following the
Closing Date and on the first day of each month thereafter during the Term. The
collateral monitoring fee shall be deemed earned in full on the date when same
is due and payable hereunder and shall not be subject to rebate or proration
upon termination of this Agreement for any reason.

(b) Borrowers shall pay Agent, for its own account, an agency fee equal to
$5,000 per year for each Lender (other than PNC) that is party to this Agreement
on the date such agency fee is due and payable, such fee to be due and payable
in advance upon the Closing Date (in the case of each Lender (other than PNC)
party hereto on the Closing Date) or the effective date of the Commitment
Transfer Supplement or lender joinder pursuant to which such Lender became a
Lender hereunder, and then annually on each anniversary of the Closing Date
thereafter. The agency fee shall be deemed earned in full on the date when same
is due and payable hereunder and shall not be subject to rebate or proration
upon termination of this Agreement for any reason.

(c) Loan Parties shall pay to Agent promptly at the conclusion of any collateral
evaluation performed by or for the benefit of Agent - namely any field
examination, collateral analysis or other business analysis, the need for which
is to be determined by Agent and which evaluation is undertaken by Agent or for
Agent’s benefit - a collateral evaluation fee in an amount equal to $1,000 per
day for each person employed to perform such evaluation (whether such
examination is performed by Agent’s employees or by a third party retained by
agent), plus a per examination manager review fee in the amount of $1,300, plus
all reasonable and documented costs and disbursements incurred by Agent in the
performance of such examination or analysis, and provided that if third parties
are retained to perform such collateral evaluations, either at the request of
another Lender or for extenuating reasons determined by Agent in its sole
discretion, then such reasonable fees charged by such third parties plus all
reasonable and documented costs and disbursements incurred by such third party
(collectively “Third Party Fees and Costs”) shall be the responsibility of Loan
Party and shall not be subject to the foregoing limits; and further provided
that, notwithstanding the foregoing or anything to the contrary otherwise in
this Agreement, in the absence of the occurrence and continuance of any Event of
Default, Loan Parties shall not be required to pay the expense and cost of more
than four (4) such field examinations and audits in any calendar year (but also
provided further that the limitations set forth in the foregoing proviso:
(x) shall not apply after the occurrence and during the continuance of any Event
of Default, (and any such field examination and audit conducted at Loan Parties’
expense after the occurrence and during the continuance of any Event of Default
shall not be counted against such limitations) and (y) shall not limit the
rights of Agent to conduct any such field examinations at its own expense and
cost). For the avoidance of doubt, only the amount of Third Party Fees and Costs
actually charged to Agent (and no additional “premium” or “surcharge” in excess
of such actual amount) will be passed through to Borrowers.

 

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(d) All of the fees and out-of-pocket costs and expenses of any appraisals
conducted pursuant to Section 4.7 hereof shall be paid for when due, in full and
without deduction, off-set or counterclaim by Loan Parties. provided that,
notwithstanding the foregoing or anything to the contrary otherwise in this
Agreement, in the absence of the occurrence and continuance of any Event of
Default, Loan Parties shall not be required to pay the expense and cost of more
than one (1) such appraisal in any calendar year (but also provided further that
the limitations set forth in the foregoing proviso: (x) shall not apply after
the occurrence and during the continuance of any Event of Default (and any such
appraisal conducted at Loan Parties’ expense after the occurrence and during the
continuance of any Event of Default shall not be counted against such
limitations) and (y) shall not limit the rights of Agent to conduct any such
appraisals at its own expense and cost).

3.5. Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Revolving Interest Rate during such extension.

3.6. Maximum Charges. In no event whatsoever shall interest and other charges
charged hereunder exceed the highest rate permissible under Applicable Law. In
the event interest and other charges as computed hereunder would otherwise
exceed the highest rate permitted under Applicable Law: (i) the interest rates
hereunder will be reduced to the maximum rate permitted under Applicable Law;
(ii) such excess amount shall be first applied to any unpaid principal balance
owed by Borrowers; and (iii) if the then remaining excess amount is greater than
the previously unpaid principal balance, Lenders shall promptly refund such
excess amount to Borrowers and the provisions hereof shall be deemed amended to
provide for such permissible rate.

3.7. Increased Costs. In the event that any Applicable Law or any Change in Law
or compliance by any Lender (for purposes of this Section 3.7, the term “Lender”
shall include Agent, Swing Loan Lender, any Issuer or Lender and any corporation
or bank controlling Agent, Swing Loan Lender, any Lender or Issuer and the
office or branch where Agent, Swing Loan Lender, any Lender or Issuer (as so
defined) makes or maintains any LIBOR Rate Loans) with any request or directive
(whether or not having the force of law) from any central bank or other
financial, monetary or other authority, shall:

(a) subject any Recipient to any Taxes (other than (A) Indemnified Taxes,
(B) Taxes described in clauses (b) through (d) of the definition of Excluded
Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of
credit, commitments, or other obligations, or its deposits, reserves, other
liabilities or capital attributable thereto;

(b) impose, modify or deem applicable any reserve, special deposit, assessment,
special deposit, compulsory loan, insurance charge or similar requirement
against assets held by, or deposits in or for the account of, advances or loans
by, or other credit extended by, any office of Agent, Swing Loan Lender, Issuer
or any Lender, including pursuant to Regulation D of the Board of Governors of
the Federal Reserve System; or

(c) impose on Agent, Swing Loan Lender, any Lender or Issuer or the London
interbank LIBOR market any other condition, loss or expense (other than Taxes)
affecting this Agreement or any Other Document or any Advance made by any
Lender, or any Letter of Credit or participation therein;

 

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and the result of any of the foregoing is to increase the cost to Agent, Swing
Loan Lender, any Lender or Issuer of making, converting to, continuing, renewing
or maintaining its Advances hereunder by an amount that Agent, Swing Loan Lender
or such Lender or Issuer deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent, Swing Loan Lender or such Lender or Issuer
deems to be material, then, in any case Borrowers shall promptly pay Agent,
Swing Loan Lender or such Lender or Issuer, upon its demand, such additional
amount as will compensate Agent, Swing Loan Lender or such Lender or Issuer for
such additional cost or such reduction, as the case may be, provided that the
foregoing shall not apply to increased costs which are reflected in the LIBOR
Rate, as the case may be. Agent, Swing Loan Lender or such Lender or Issuer
shall certify the amount of such additional cost or reduced amount to Borrowing
Agent, and such certification shall be conclusive absent manifest error.

3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the event that
Agent or any Lender shall have determined that:

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

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

(c) the making, maintenance or funding of any LIBOR Rate Loan has been made
impracticable or unlawful by compliance by Agent or such Lender in good faith
with any Applicable Law or any interpretation or application thereof by any
Governmental Body or with any request or directive of any such Governmental Body
(whether or not having the force of law),

then Agent shall give Borrowing Agent prompt written or telephonic notice of
such determination. If such notice is given, (i) any such requested LIBOR Rate
Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify
Agent no later than 1:00 p.m. two (2) Business Days prior to the date of such
proposed borrowing, that its request for such borrowing shall be cancelled or
made as an unaffected type of LIBOR Rate Loan, (ii) any Domestic Rate Loan or
LIBOR Rate Loan which was to have been converted to an affected type of LIBOR
Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 1:00 p.m. two (2) Business
Days prior to the proposed conversion, shall be maintained as an unaffected type
of LIBOR Rate Loan, and (iii) any outstanding affected LIBOR Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent,
no later than 10:00 p.m. two (2) Business Days prior to the last Business Day of
the then current Interest Period applicable to such affected LIBOR Rate

 

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Loan, shall be converted into an unaffected type of LIBOR Rate Loan, on the last
Business Day of the then current Interest Period for such affected LIBOR Rate
Loans (or sooner, if any Lender cannot continue to lawfully maintain such
affected LIBOR Rate Loan). Until such notice has been withdrawn, Lenders shall
have no obligation to make an affected type of LIBOR Rate Loan or maintain
outstanding affected LIBOR Rate Loans and no Borrower shall have the right to
convert a Domestic Rate Loan or an unaffected type of LIBOR Rate Loan into an
affected type of LIBOR Rate Loan.

3.9. Capital Adequacy.

(a) In the event that Agent, Swing Loan Lender or any Lender shall have
determined that any Applicable Law or guideline regarding capital adequacy, or
any Change in Law or any change in the interpretation or administration thereof
by any Governmental Body, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent, Swing Loan
Lender, Issuer or any Lender (for purposes of this Section 3.9, the term
“Lender” shall include Agent, Swing Loan Lender, Issuer or any Lender and any
corporation or bank controlling Agent, Swing Loan Lender or any Lender and the
office or branch where Agent, Swing Loan Lender or any Lender (as so defined)
makes or maintains any LIBOR Rate Loans) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Agent, Swing Loan Lender or any Lender’s capital as a
consequence of its obligations hereunder (including the making of any Swing
Loans) to a level below that which Agent, Swing Loan Lender or such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration Agent’s, Swing Loan Lender’s and each Lender’s policies with
respect to capital adequacy) by an amount deemed by Agent, Swing Loan Lender or
any Lender to be material, then, from time to time, Borrowers shall pay upon
demand to Agent, Swing Loan Lender or such Lender such additional amount or
amounts as will compensate Agent, Swing Loan Lender or such Lender for such
reduction. In determining such amount or amounts, Agent, Swing Loan Lender or
such Lender may use any reasonable averaging or attribution methods. The
protection of this Section 3.9 shall be available to Agent, Swing Loan Lender
and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the Applicable Law, rule, regulation, guideline
or condition.

(b) A certificate of Agent, Swing Loan Lender or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent, Swing Loan Lender
or such Lender with respect to Section 3.9(a) hereof when delivered to Borrowing
Agent shall be conclusive absent manifest error.

3.10. Taxes.

(a) Any and all payments by or on account of any Obligations hereunder or under
any Other Document shall be made free and clear of and without reduction or
withholding for any Indemnified Taxes or Other Taxes; provided that if the Loan
Parties shall be required by Applicable Law to deduct any Indemnified Taxes
(including any 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

 

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Section) the Agent, Swing Loan Lender, Lender, Issuer or Participant, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Loan Parties shall make such deductions and
(iii) the Loan Parties shall timely pay the full amount deducted to the relevant
Governmental Body in accordance with Applicable Law.

(b) Without limiting the provisions of Section 3.10(a) above, the Loan Parties
shall timely pay any Other Taxes to the relevant Governmental Body in accordance
with Applicable Law.

(c) Each Loan Party shall indemnify each Recipient within ten (10) days after
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 3.10) paid by Agent, Swing
Loan Lender, such Lender, Issuer, or such Participant, as the case may be, 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 Body. A
certificate as to the amount of such payment or liability delivered to the Loan
Parties by any Lender, Swing Loan Lender, Participant, or the Issuer (with a
copy to Agent), or by Agent on its own behalf or on behalf of Swing Loan Lender,
a Lender or the Issuer, shall be conclusive absent manifest error.

(d) As soon as reasonably practicable after any payment of Taxes by any Loan
Party to a Governmental Body, the Loan Parties shall deliver to Agent the
original or a certified copy of a receipt issued by such Governmental Body
evidencing such payment, a copy of the return required by Law to report such
payment or other evidence of such payment reasonably satisfactory to the Agent.

(e)

(i) Any Lender or Swing Loan Lender that is entitled to an exemption from or
reduction of withholding Tax with respect to payments made under any Other
Document shall deliver to the Loan Parties (with a copy to Agent), at the time
or times prescribed by Applicable Law or reasonably requested by the Loan
Parties or Agent, such properly completed and executed documentation prescribed
by Applicable Law as will permit such payments to be made without withholding or
at a reduced rate of withholding. Notwithstanding the submission of such
documentation claiming a reduced rate of or exemption from U.S. withholding tax,
Agent shall be entitled to withhold United States federal income taxes at the
full 30% withholding rate if in its reasonable judgment it is required to do so
under the due diligence requirements imposed upon a withholding agent under §
1.1441-7(b) of the United States Income Tax Regulations or other Applicable Law.
Further, Agent is indemnified under § 1.1461-1(e) of the United States Income
Tax Regulations against any claims and demands of any Lender, Issuer or assignee
or participant of a Lender or Issuer for the amount of any tax it deducts and
withholds in accordance with regulations under § 1441 of the Code. In addition,
any Lender, if requested by the Loan Parties or Agent, shall deliver such other
documentation prescribed by Applicable Law or reasonably requested by the Loan
Parties or Agent as will enable the Loan Parties or Agent to determine whether
or not such Lender is subject to backup withholding or information reporting
requirements.

 

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(ii) Without limiting the generality of the foregoing, in the event that any
Loan Party is a U.S. Person,

(A) any Lender or Swing Loan Lender that is a U.S. Person shall deliver to the
Borrowers and the Agent on or prior to the date on which such Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Agent), executed originals of IRS Form
W-9 certifying that such Lender is exempt from U.S. federal backup withholding
tax;

(B) any Foreign Lender (or other Lender) shall deliver to the Loan Parties and
Agent (in such number of copies as shall be requested by the recipient) on or
prior to the date on which such Foreign Lender (or other Lender) becomes a
Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Loan Parties or the Agent, but only if such Foreign
Lender (or other Lender) is legally entitled to do so), whichever of the
following is applicable:

(1) in the case of a Foreign Lender claiming eligibility for benefits of an
income tax treaty to which the United States of America is a party (x) with
respect to payments of interest under any Other Document, executed originals of
IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of,
U.S. federal withholding Tax pursuant to the “interest” article of such tax
treaty and (y) with respect to any other applicable payments under any Loan
Document, IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “business profits” or
“other income” article of such tax treaty,

(2) executed original IRS Form W-8ECI,

(3) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Loan
Parties within the meaning of section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the Code
(a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form
W-8BEN or W-8BEN-E, or

(4) to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN,
IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate, IRS Form W-9, and/or other
certification documents from each beneficial owner, as applicable; provided that
if the Foreign Lender

 

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is a partnership and one or more direct or indirect partners of such Foreign
Lender are claiming the portfolio interest exemption, such Foreign Lender may
provide a U.S. Tax Compliance Certificate on behalf of each such direct and
indirect partner.

(C) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Agent), executed originals of any
other form prescribed by Applicable Law as a basis for claiming exemption from
or a reduction in United States Federal withholding tax duly completed together
with such supplementary documentation as may be prescribed by Applicable Law to
permit the Loan Parties or Agent to determine the withholding or deduction
required to be made, or

(D) if a payment made to a Lender or Swing Loan Lender under any Other Document
would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender
or Swing Loan Lender were to fail to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or 1472(b)
of the Code, as applicable), such Lender or Swing Loan Lender shall deliver to
the Loan Parties and the Agent at the time or times prescribed by law and at
such time or times reasonably requested by the Loan Parties or the Agent such
documentation prescribed by applicable Law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Loan Parties or the Agent as may be necessary for
the Loan Parties and the Agent to comply with their obligations under FATCA and
to determine that such Lender or Swing Loan Lender has complied with such
Lender’s or Swing Loan Lender’s obligations under FATCA or to determine the
amount to deduct and withhold from such payment. Solely for purposes of this
clause (D), “FATCA” shall include any amendments made to FATCA after the date of
this Agreement.

(iii) Each Lender or Swing Time Lender agrees that if any form or certification
it previously delivered pursuant to this Section 3.10 expires or becomes
obsolete or inaccurate in any respect, it shall update such form or
certification or promptly notify the Loan Parties and the Agent in writing of
its legal inability to do so.

(f) If a Participant or Recipient determines, in its sole discretion exercised
in good faith, that it has received a refund of any Taxes as to which it has
been indemnified by the Loan Parties or with respect to which the Loan Parties
have paid additional amounts pursuant to this Section, it shall pay to the Loan
Parties an amount equal to such refund (but only to the extent of indemnity
payments made, or additional amounts paid, by the Loan Parties under this

 

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Section giving rise to such refund); net of all out-of-pocket expenses of the
Participant or Recipient and without interest (other than any interest paid by
the relevant Governmental Body with respect to such refund), provided that the
Loan Parties, upon the request of the Participant or Recipient agrees to repay
the amount paid over to the Loan Parties (plus any penalties, interest or other
charges imposed by the relevant Governmental Body) to the Agent, Swing Loan
Lender, such Lender, Participant or the Issuer in the event the Agent, Swing
Loan Lender, such Lender, Participant or the Issuer is required to repay such
refund to such Governmental Body. This Section shall not be construed to require
the Participant or Recipient to make available its tax returns (or any other
information relating to its taxes that it deems confidential) to the Loan
Parties or any other Person.

3.11. Replacement of Lenders. If any Lender (an “Affected Lender”) (a) makes
demand upon Borrowers for (or if Borrowers are otherwise required to pay)
amounts pursuant to Section 3.7 or 3.9 hereof, (b) is unable to make or maintain
LIBOR Rate Loans as a result of a condition described in Section 2.2(h) hereof,
(c) is a Defaulting Lender, or (d) denies any consent requested by the Agent
pursuant to Section 16.2(b) hereof, Borrowers may, within ninety (90) days of
receipt of such demand, notice (or the occurrence of such other event causing
Borrowers to be required to pay such compensation or causing Section 2.2(h)
hereof to be applicable), or such Lender becoming a Defaulting Lender or denial
of a request by the Agent pursuant to Section 16.2(b) hereof, as the case may
be, by notice in writing to the Agent and such Affected Lender (i) request the
Affected Lender to cooperate with Borrowers in obtaining a replacement Lender
satisfactory to the Agent and Borrowers (the “Replacement Lender”); (ii) request
the non-Affected Lenders to acquire and assume all of the Affected Lender’s
Advances and its Revolving Commitment Percentage, as provided herein, but none
of such Lenders shall be under any obligation to do so; or (iii) propose a
Replacement Lender subject to approval by the Agent in its good faith business
judgment. If any satisfactory Replacement Lender shall be obtained, and/or if
any one or more of the non-Affected Lenders shall agree to acquire and assume
all of the Affected Lender’s Advances and its Revolving Commitment Percentage,
then such Affected Lender shall assign, in accordance with Section 16.3 hereof,
all of its Advances and its Revolving Commitment Percentage, and other rights
and obligations under this Loan Agreement and the Other Documents to such
Replacement Lender or non-Affected Lenders, as the case may be, in exchange for
payment of the principal amount so assigned and all interest and fees accrued on
the amount so assigned, plus all other Obligations then due and payable to the
Affected Lender.

 

IV. COLLATERAL: GENERAL TERMS

4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent, Issuer and each Lender (and each other holder of any
Obligations) of the Obligations, each Loan Party hereby assigns, pledges and
grants to Agent for its benefit and for the ratable benefit of each Lender,
Issuer and each other Secured Party, a continuing security interest in and to
and Lien on all of its Collateral, whether now owned or existing or hereafter
created, acquired or arising and wheresoever located. Each Loan Party shall mark
its books and records as may be necessary or appropriate to evidence, protect
and perfect Agent’s security interest and shall cause its financial statements
to reflect such security interest. Each Loan Party shall provide Agent with
written notice of all commercial tort claims in excess of $500,000 promptly upon
the occurrence of any events giving rise to any such claim(s) (regardless of

 

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whether legal proceedings have yet been commenced), such notice to contain a
brief description of the claim(s), the events out of which such claim(s) arose
and the parties against which such claims may be asserted and, if applicable in
any case where legal proceedings regarding such claim(s) have been commenced,
the case title together with the applicable court and docket number. Upon
delivery of each such notice, such Loan Party shall be deemed to thereby grant
to Agent a security interest and lien in and to such commercial tort claims
described therein and all proceeds thereof. Each Loan Party shall provide Agent
with written notice promptly upon becoming the beneficiary under any letter of
credit or otherwise obtaining any right, title or interest in any letter of
credit rights, and at Agent’s request shall take such actions as Agent may
reasonably request for the perfection of Agent’s security interest therein.

4.2. Perfection of Security Interest. Each Loan Party shall take all action (or,
as set forth in clause (ii) of this sentence, use commercially reasonable
efforts to take such action) that may be necessary or desirable, or that Agent
may request, so as at all times to maintain the validity, perfection,
enforceability and priority of Agent’s security interest in and Lien on the
Collateral, to the extent it can be perfected (with the understanding that the
Collateral may be subject to Permitted Encumbrances as otherwise provided for
herein) or to enable Agent to protect, exercise or enforce its rights hereunder
and in the Collateral, including, but not limited to, (i) immediately
discharging all Liens other than Permitted Encumbrances, (ii) using commercially
reasonable efforts to obtain Lien Waiver Agreements, (iii) delivering to Agent,
endorsed or accompanied by such instruments of assignment as Agent may specify,
and stamping or marking, in such manner as Agent may specify, any and all
chattel paper, instruments, letters of credits and advices thereof and documents
evidencing or forming a part of the Collateral individually or in the aggregate
with all other such chattel paper, instruments, letters of credit and advise
thereof not so endorsed and delivered to the Agent and so marked or stamped,
evidencing more than $500,000, (iv) entering into warehousing, lockbox, customs
and freight agreements and other custodial arrangements satisfactory to Agent as
determined in its Permitted Discretion, and (v) executing and delivering
financing statements, control agreements, instruments of pledge, mortgages,
notices and assignments, in each case in form and substance satisfactory to
Agent, relating to the creation, validity, perfection, maintenance or
continuation of Agent’s security interest and Lien under the Uniform Commercial
Code or other Applicable Law. By its signature hereto, each Loan Party hereby
authorizes Agent to file against such Loan Party, one or more financing,
continuation or amendment statements pursuant to the Uniform Commercial Code in
form and substance satisfactory to Agent (which statements may have a
description of collateral which is broader than that set forth herein, including
without limitation a description of Collateral as “all assets” and/or “all
personal property” of any Loan Party). All charges, expenses and fees Agent may
incur in doing any of the foregoing, and any local taxes relating thereto, shall
be charged to Borrowers’ Account as a Revolving Advance of a Domestic Rate Loan
and added to the Obligations, or, at Agent’s option, shall be paid by Loan
Parties to Agent for its benefit and for the ratable benefit of Lenders
immediately upon demand.

(a) Without limiting the generality of the foregoing provisions of this
Section 4.2, each Loan Party further agrees that such Loan Party shall take all
actions reasonably requested by Agent in its Permitted Discretion (and,
following the occurrence and during the continuance of any Event of Default, all
other actions requested by Agent) to create, grant, pledge and perfect a Lien in
favor of Agent for the benefit of Secured Parties with respect to the Subsidiary
Stock of any Foreign Subsidiary under the laws of the jurisdiction in which such

 

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Foreign Subsidiary is organized, including without limitation due execution and
delivery of pledge agreements governed by the laws of any such applicable
jurisdiction, making and/or authorizing any registrations or filings with any
applicable Governmental Body in any such applicable jurisdiction, causing any
such Foreign Subsidiary to make any applicable notations in its corporate share
records or adopt any applicable amendments or modifications to its
Organizational Documents and/or deliver any customary local counsel legal
opinions under the laws of any such applicable jurisdiction with respect to such
Lien, such local law pledge agreements and/or such local law actions.

4.3. Preservation of Collateral. Following the occurrence of a Default or Event
of Default, in addition to the rights and remedies set forth in Section 11.1
hereof, Agent: (a) may at any time take such steps as Agent deems necessary to
protect Agent’s interest in and to preserve the Collateral, including the hiring
of security guards or the placing of other security protection measures as Agent
may deem appropriate; (b) may employ and maintain at any of any Loan Party’s
premises a custodian who shall have full authority to do all acts necessary to
protect Agent’s interests in the Collateral; (c) may lease warehouse facilities
to which Agent may move all or part of the Collateral; (d) may use any Loan
Party’s owned or leased lifts, hoists, trucks and other facilities or equipment
for handling or removing the Collateral; and (e) shall have, and is hereby
granted, a right of ingress and egress to the places where the Collateral is
located, and may proceed over and through any of Loan Parties’ owned or leased
property. Each Loan Party shall cooperate fully with all of Agent’s efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
Agent may direct. All of Agent’s expenses of preserving the Collateral,
including any expenses relating to the bonding of a custodian, shall be charged
to Borrowers’ Account as a Revolving Advance maintained as a Domestic Rate Loan
and added to the Obligations.

4.4. Ownership and Location of Collateral.

(a) With respect to the Collateral, at the time the Collateral becomes subject
to Agent’s security interest: (i) each Loan Party shall be the sole owner of and
fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest in each and every item of its respective Collateral
to Agent; and, except for Permitted Encumbrances the Collateral shall be free
and clear of all Liens whatsoever; (ii) each document and agreement executed by
each Loan Party or delivered to Agent or any Lender in connection with this
Agreement shall be true and correct in all material respects; (iii) all
signatures and endorsements of each Loan Party that appear on such documents and
agreements shall be genuine and each Loan Party shall have full capacity to
execute same; and (iv) each Loan Party’s equipment and Inventory shall be
located as set forth on Schedule 4.4 (as updated from time to time in accordance
with the terms of this Agreement) and shall not be removed from such location(s)
(other than Inventory and Equipment in transit between such locations or
Equipment out for repair) without the prior written consent of Agent except with
respect to the sale of Inventory in the Ordinary Course of Business and
equipment to the extent permitted in Section 7.1(b) hereof.

(b) (i) There is no location at which any Loan Party has any Inventory (except
for Inventory in transit) or other Collateral other than those locations listed
on Schedule 4.4(b)(i) (as updated from time to time in accordance with the terms
of this Agreement); (ii) Schedule 4.4(b)(ii) hereto contains a correct and
complete list, as of the Closing Date, of the legal names

 

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and addresses of each warehouse at which Inventory of any Loan Party is stored;
none of the receipts received by any Loan Party from any warehouse states that
the goods covered thereby are to be delivered to bearer or to the order of a
named Person or to a named Person and such named Person’s assigns;
(iii) Schedule 4.4(b)(iii) hereto sets forth a correct and complete list as of
the Closing Date of (A) each place of business of each Loan Party and (B) the
chief executive office of each Loan Party; and (iv) Schedule 4.4(b)(iv) hereto
sets forth a correct and complete list as of the Closing Date of the location,
by state and street address, of all Real Property owned or leased by each Loan
Party, identifying which properties are owned and which are leased, together
with the names and addresses of any landlords.

4.5. Defense of Agent’s and Lenders’ Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent’s interests in the Collateral shall continue in full force and
effect. During such period no Loan Party shall, without Agent’s prior written
consent, pledge, sell (except for sales or other dispositions otherwise
permitted in Section 7.1(b) hereof), assign, transfer, create or suffer to exist
a Lien upon or encumber or allow or suffer to be encumbered in any way except
for Permitted Encumbrances, any part of the Collateral. Each Loan Party shall
use commercially reasonable efforts to defend Agent’s interests in the
Collateral against any and all Persons whatsoever. At any time following demand
by Agent for payment of all Obligations, Agent shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including: labels, stationery, documents, instruments
and advertising materials. If Agent exercises this right to take possession of
the Collateral, Loan Parties shall, upon demand, assemble it in the best manner
possible and make it available to Agent at a place reasonably convenient to
Agent. In addition, with respect to all Collateral, Agent and Lenders shall be
entitled to all of the rights and remedies set forth herein and further provided
by the Uniform Commercial Code or other Applicable Law. Upon the occurrence and
during the continuance of an Event of Default, each Loan Party shall, and Agent
may, at its option, instruct all suppliers, carriers, forwarders, warehousers or
others receiving or holding cash, checks, Inventory, documents or instruments in
which Agent holds a security interest to deliver same to Agent and/or subject to
Agent’s order and if they shall come into any Loan Party’s possession, they, and
each of them, shall be held by such Loan Party in trust as Agent’s trustee, and
such Loan Party will immediately deliver them to Agent in their original form
together with any necessary endorsement.

4.6. Inspection of Premises. At all reasonable times during regular business
hours and upon prior notice to the Borrowers, so long as no Event of Default has
occurred and is continuing, and at any time at all, without notice, during the
continuance of an Event of Default, from time to time as often as Agent shall
elect in its Permitted Discretion, Agent shall have full access to and the right
to audit, check, inspect and make abstracts and copies from each Loan Party’s
books, records, audits, correspondence and all other papers relating to the
Collateral and the operation of each Loan Party’s business. Agent and its agents
may from time to time enter upon any premises of any Loan Party at all
reasonable times during regular business hours and upon prior notice to the
Borrowers, so long as no Event of Default has occurred and is continuing, and at
any time at all, without notice, during the continuance of an Event of Default,
as often as Agent shall elect in its Permitted Discretion, for the purpose of
inspecting the Collateral and any and all records pertaining thereto and the
operation of such Loan Party’s business. Loan Parties’ liability for the costs
and expenses of such inspections and field examinations and audits shall be as
set forth in Section 3.4(c) hereof.

 

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4.7. Appraisals. Agent may, in its Permitted Discretion, exercised in a
commercially reasonable manner, at any time after the Closing Date and from time
to time, engage the services of an independent appraisal firm or firms of
reputable standing, satisfactory to Agent, for the purpose of appraising the
then current values of Loan Parties’ assets. Absent the occurrence and
continuance of an Event of Default at such time, Agent shall consult with
Borrowers as to the identity of any such firm. Loan Parties’ liability for the
costs and expenses of such inspections and field examinations and audits shall
be as set forth in Section 3.4(c) and (d) hereof. In the event the value of
Borrowers’ Inventory, as so determined pursuant to such appraisal, is less than
anticipated by Agent or Lenders, such that the Revolving Advances are in excess
of such Advances permitted hereunder, then, promptly upon Agent’s demand for
same, Borrowers shall make mandatory prepayments of the then outstanding
Revolving Advances so as to eliminate the excess Advances.

4.8. Receivables; Deposit Accounts and Securities Accounts.

(a) Each of the Receivables identified on a Borrowing Base Certificate as an
Eligible Receivable shall be a bona fide and valid account representing a bona
fide indebtedness incurred by the Customer therein named, for a fixed sum as set
forth in the invoice relating thereto (provided immaterial or unintentional
invoice errors shall not be deemed to be a breach hereof) with respect to an
absolute sale or lease and delivery of goods upon stated terms of a Loan Party,
or work, labor or services theretofore rendered by a Loan Party as of the date
each Receivable is created. Each of the Receivables identified on a Borrowing
Base Certificate as an Eligible Receivable shall be due and owing in accordance
with the applicable Loan Party’s standard terms of sale without dispute, setoff
or counterclaim except as may be stated on the accounts receivable schedules
delivered by Borrowers to Agent.

(b) Each Customer obligated on a Receivable, whether or not identified on a
Borrowing Base Certificate as an Eligible Receivable, to the best of each Loan
Party’s knowledge, as of the date each Receivable is created, is solvent and
able to pay all Receivables on which the Customer is obligated in full when due.
With respect to such Customers of any Loan Party who are not solvent, such Loan
Party has set up on its books and in its financial records bad debt reserves
adequate to cover such Receivables.

(c) Each Loan Party’s chief executive office is located as set forth on Schedule
4.4(b)(iii). Until written notice is given to Agent by Borrowing Agent of any
other office at which any Loan Party keeps its records pertaining to
Receivables, all such records shall be kept at such executive office.

(d) Loan Parties shall instruct their Customers to deliver all remittances upon
Receivables (whether paid by check or by wire transfer of funds) to such Blocked
Account(s) and/or Depository Accounts (and any associated lockboxes) as Agent
shall designate from time to time as contemplated by Section 4.8(h) or as
otherwise agreed to from time to time by Agent. Notwithstanding the foregoing,
to the extent any Loan Party directly receives any remittances upon Receivables,
such Loan Party shall, at such Loan Party’s sole cost and expense, but on

 

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Agent’s behalf and for Agent’s account, collect as Agent’s property and in trust
for Agent all amounts received on Receivables, and shall not commingle such
collections with any Loan Party’s funds or use the same except to pay
Obligations, and shall as soon as possible and in any event no later than one
(1) Business Day after the receipt thereof (i) in the case of remittances paid
by check, deposit all such remittances in their original form (after supplying
any necessary endorsements) and (ii) in the case of remittances paid by wire
transfer of funds, transfer all such remittances, in each case, into such
Blocked Accounts(s) and/or Depository Account(s). Each Loan Party shall deposit
in the Blocked Account and/or Depository Account or, upon request by Agent,
deliver to Agent, in original form and on the date of receipt thereof, all
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness.

(e) At any time following the occurrence and during the continuance of an Event
of Default, Agent shall have the right to send notice of the assignment of, and
Agent’s security interest in and Lien on, the Receivables to any and all
Customers or any third party holding or otherwise concerned with any of the
Collateral. At any time after the occurrence and during the continuance of an
Event of Default, Agent shall have the sole right to collect the Receivables,
take possession of the Collateral, or both. Agent’s actual collection expenses,
including, but not limited to, stationery and postage, telephone and telegraph,
secretarial and clerical expenses and the salaries of any collection personnel
used for collection, may be charged to Borrowers’ Account and added to the
Obligations.

(f) Agent shall have the right to receive, endorse, assign and/or deliver in the
name of Agent or any Loan Party any and all checks, drafts and other instruments
for the payment of money relating to the Receivables, and each Loan Party hereby
waives notice of presentment, protest and non-payment of any instrument so
endorsed. Each Loan Party hereby constitutes Agent or Agent’s designee as such
Loan Party’s attorney with power (i) at any time: (A) to endorse such Loan
Party’s name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (B) to sign such Loan Party’s name on any
invoice or bill of lading relating to any of the Receivables, drafts against
Customers, assignments and verifications of Receivables; (C) to send
verifications of Receivables, in the name of the applicable Borrower, to any
Customer; (D) to sign such Loan Party’s name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent’s interest in the Collateral and to file
same; and (E) to receive, open and dispose of all mail addressed to any Loan
Party at any post office box/lockbox maintained by Agent for Loan Parties or at
any other business premises of Agent; and (ii) at any time following the
occurrence and during the continuance of an Event of Default: (A) to demand
payment of the Receivables; (B) to enforce payment of the Receivables by legal
proceedings or otherwise; (C) to exercise all of such Loan Party’s rights and
remedies with respect to the collection of the Receivables and any other
Collateral; (D) to sue upon or otherwise collect, extend the time of payment of,
settle, adjust, compromise, extend or renew the Receivables; (E) to settle,
adjust or compromise any legal proceedings brought to collect Receivables;
(F) to prepare, file and sign such Loan Party’s name on a proof of claim in
bankruptcy or similar document against any Customer; (G) to prepare, file and
sign such Loan Party’s name on any notice of Lien, assignment or satisfaction of
Lien or similar document in connection with the Receivables; (H) to accept the
return of goods represented by any of the Receivables; (I) to change the address
for delivery of mail addressed to any Loan Party to such address as Agent may
designate; and (J) to do all other acts and things necessary to carry out this
Agreement. All

 

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acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliciously or with gross (not mere) negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final non-appealable
judgment); this power being coupled with an interest is irrevocable while any of
the Obligations remain unpaid.

(g) Neither Agent nor any Lender shall, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the Receivables or
any instrument received in payment thereof, or for any damage resulting
therefrom, except in the case of gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final judgment which is no
longer appealable).

(h) All proceeds of Collateral shall be deposited by Loan Parties into either
(i) a lockbox account, dominion account or such other “blocked account”
(“Blocked Accounts”) established at a bank or banks (each such bank, a “Blocked
Account Bank”) pursuant to an arrangement with such Blocked Account Bank as may
be acceptable to Agent or (ii) depository accounts (“Depository Accounts”)
established at the Agent for the deposit of such proceeds. Each applicable Loan
Party, Agent and each Blocked Account Bank shall enter into a deposit account
control agreement in form and substance satisfactory to Agent that is sufficient
to give Agent “control” (for purposes of Articles 8 and 9 of the Uniform
Commercial Code) over such account and which directs such Blocked Account Bank
to transfer such funds so deposited on a daily basis to Agent, either to any
account maintained by Agent at said Blocked Account Bank or by wire transfer to
appropriate account(s) at Agent. All funds deposited in such Blocked Accounts or
Depository Accounts shall immediately become subject to the security interest of
Agent for its own benefit and the ratable benefit of Issuer, Lenders and all
other holders of the Obligations, and Borrowing Agent shall obtain the agreement
by such Blocked Account Bank to waive any offset rights against the funds so
deposited. Neither Agent nor any Lender assumes any responsibility for such
blocked account arrangement, including any claim of accord and satisfaction or
release with respect to deposits accepted by any Blocked Account Bank
thereunder. Agent shall apply all funds received by it from the Blocked Accounts
and/or Depository Accounts to the satisfaction of the Obligations (including the
cash collateralization of the Letters of Credit) in such order as Agent shall
determine in its sole discretion, provided that, in the absence of any Event of
Default, Agent shall apply all such funds representing collection of Receivables
first to the prepayment of the principal amount of the Swing Loans, if any, and
then to the Revolving Advances.

(i) No Loan Party will, without Agent’s consent, compromise or adjust any
material amount of the Receivables (or extend the time for payment thereof) or
accept any material returns of merchandise or grant any additional discounts,
allowances or credits thereon except for those compromises, adjustments,
returns, discounts, credits and allowances as have been heretofore customary in
the Ordinary Course of Business of such Loan Party.

(j) All deposit accounts (including all Blocked Accounts and Depository
Accounts), securities accounts and investment accounts of each Loan Party as of
the Closing Date are set forth on Schedule 4.8(j). No Loan Party shall open any
new deposit account,

 

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securities account or investment account other than an Excluded Deposit Account
unless, if such account is to be maintained with a bank, depository institution
or securities intermediary that is not the Agent, such bank, depository
institution or securities intermediary, each applicable Loan Party and Agent
shall first have entered into an account control agreement in form and substance
satisfactory to Agent sufficient to give Agent “control” (for purposes of
Articles 8 and 9 of the Uniform Commercial Code) over such account.
Notwithstanding anything to the contrary provided for in this Agreement,
(i) ModusLink Corp. may continue to maintain account #5800321282 with Bank of
America, N.A. (the “BofA China Account”) for the sole purpose of receiving
collections, payments and remittances in respect of Receivables owing from Hong
Fu Jin Precision Electronics (Chong Qing) Co., Ltd. and any other Customer which
may, as of the Closing Date, be remitting its payments in respect of Receivables
to such BofA China Account in the Ordinary Course of Business of ModusLink Corp.
without any requirement for ModusLink Corp. to cause Bank of America, N.A. to
execute and deliver any account control agreement with respect to such BofA
China Account for a period not to exceed one hundred twenty (120) days following
the Closing Date (by the end of which such period ModusLink shall have either
closed such BofA China Account or caused Bank of America, N.A. to execute and
deliver an account control agreement with respect to such BofA China Account in
form and substance satisfactory to Agent sufficient to give Agent “control” (for
purposes of Articles 8 and 9 of the Uniform Commercial Code) over such account),
and (ii) ModusLink Corp. may continue to maintain account #5800321241 with Bank
of America, N.A. (the “BofA Operating Account”) as an operating account (and not
as an account to which any Customers makes any direct remittance of payments and
collections on Receivables or into which any automatic “sweep” transfers are
made from any other Deposit Accounts of any Loan Parties) without any
requirement for ModusLink Corp. to cause Bank of America, N.A. to execute and
deliver any account control agreement with respect to such BofA Operating
Account for a period not to exceed thirty (30) days following the Closing Date
(by the end of which such period ModusLink shall have either closed such BofA
Operating Account or caused Bank of America, N.A. to execute and deliver an
account control agreement with respect to such BofA Operating Account in form
and substance satisfactory to Agent sufficient to give Agent “control” (for
purposes of Articles 8 and 9 of the Uniform Commercial Code) over such account).

4.9. Inventory. To the extent Inventory held for sale or lease has been produced
by any Loan Party, it has been and will be produced by such Loan Party in
accordance, in all material respects, with the Federal Fair Labor Standards Act
of 1938, as amended, and all rules, regulations and orders thereunder.

4.10. Maintenance of Equipment. The equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted), consistent
with past practices and as needed in current operations, and all necessary
replacements of and repairs thereto shall be made so that the value and
operating efficiency of the equipment shall be maintained and preserved. The
Loan Parties shall have the right to sell equipment to the extent set forth in
Section 7.1 hereof. No Loan Party shall use or operate the equipment in
violation of any law, statute, ordinance, code, rule or regulation.

4.11. Exculpation of Liability. Nothing herein contained shall be construed to
constitute Agent or any Lender as any Loan Party’s agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
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destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof, except with respect to Collateral in its
possession or under its control, in the case of gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final
judgment which is no longer appealable). Neither Agent nor any Lender, whether
by anything herein or in any assignment or otherwise, assume any of any Loan
Party’s obligations under any contract or agreement assigned to Agent or such
Lender, and neither Agent nor any Lender shall be responsible in any way for the
performance by any Loan Party of any of the terms and conditions thereof.

4.12. Financing Statements. Except as respects the financing statements filed by
Agent, financing statements described on Schedule 1.2, and financing statements
filed in connection with Permitted Encumbrances, no financing statement covering
any of the Collateral or any proceeds thereof is or will be on file in any
public office.

 

V. REPRESENTATIONS AND WARRANTIES.

Each Loan Party represents and warrants as follows:

5.1. Authority. Each Loan Party has full power, authority and legal right to
enter into this Agreement and the Other Documents to which it is a party and to
perform all its respective Obligations hereunder and thereunder. This Agreement
and the Other Documents to which it is a party have been duly executed and
delivered by each Loan Party, and this Agreement and the Other Documents to
which it is a party constitute the legal, valid and binding obligation of such
Loan Party enforceable in accordance with their terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors’ rights generally. The execution,
delivery and performance of this Agreement and of the Other Documents to which
it is a party (a) are within such Loan Party’s corporate or company powers, as
applicable, have been duly authorized by all necessary corporate or company
action, as applicable, are not in contravention of law or the terms of such Loan
Party’s Organizational Documents or to the conduct of such Loan Party’s business
or of any Material Contract or undertaking to which such Loan Party is a party
or by which such Loan Party is bound, (b) will not, in any material respect,
conflict with or violate any law or regulation, or any judgment, order or decree
of any Governmental Body, (c) will not require the Consent of any Governmental
Body, any party to a Material Contract or any other Person, except those
Consents set forth on Schedule 5.1 hereto, all of which will have been duly
obtained, made or compiled prior to the Closing Date and which are in full force
and effect or except those which the failure to have obtained would not have, or
could not reasonably be expected to have, a Material Adverse Effect and (d) will
not conflict with, nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Loan Party under the provisions of
any agreement, instrument, or other document to which such Loan Party is a party
or by which it or its property is a party or by which it may be bound.

5.2. Formation and Qualification.

(a) Each Loan Party is duly incorporated or formed, as applicable, and in good
standing under the laws of the state listed on Schedule 5.2(a) and is qualified
to do business

 

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and is in good standing in the states listed on Schedule 5.2(a) which constitute
all states in which qualification and good standing are necessary for such Loan
Party to conduct its business and own its property and where the failure to so
qualify could reasonably be expected to have a Material Adverse Effect. Each
Loan Party has delivered to Agent true and complete copies of its Organizational
Documents and will promptly notify Agent of any amendment or changes thereto.

(b) All of the Subsidiaries of ModusLink Parent and each Borrower as of the
Closing Date are listed on Schedule 5.2(b).

5.3. Survival of Representations and Warranties. All representations and
warranties of such Loan Party contained in this Agreement and the Other
Documents to which it is a party shall be true at the time of such Loan Party’s
execution of this Agreement and the Other Documents to which it is a party, and
shall survive the execution, delivery and acceptance thereof by the parties
thereto and the closing of the transactions described therein or related
thereto.

5.4. Tax Returns. Each Loan Party’s federal tax identification number is set
forth on Schedule 5.4. Each Loan Party has filed all federal, state and other
material tax returns and other reports each is required by law to file and has
paid all federal, state and other material taxes, assessments, fees and other
governmental charges that are due and payable, except those which are being
Properly Contested. The provision for taxes on the books of each Loan Party is
adequate for all years not closed by applicable statutes, and for its current
fiscal year, and no Loan Party has any knowledge of any material deficiency or
additional assessment raised in writing in connection therewith not provided for
on its books.

5.5. Financial Statements.

(a) The pro forma balance sheet of ModusLink Parent on a Global Consolidated
Basis (the “Pro Forma Balance Sheet”) furnished to Agent on the Closing Date
reflects the consummation of the transactions contemplated to occur under this
Agreement (the “Transactions”) and is accurate, complete and correct and fairly
reflects the financial condition of ModusLink Parent on a Global Consolidated
Basis as of the Closing Date after giving effect to the Transactions, and has
been prepared in accordance with GAAP, consistently applied (except for the
absence of footnotes and for the fact that such Pro Forma Balance Sheet shall
reflect future events as though they had occurred at the time such Pro Forma
Balance Sheet shall be delivered). The Pro Forma Balance Sheet has been
certified as accurate, complete and correct in all material respects by two
Authorized Officers of ModusLink Parent. All financial statements referred to in
this subsection 5.5(a), including the related schedules and notes thereto, have
been prepared in accordance with GAAP (except for the absence of footnotes and
for the fact that such Pro Forma Balance Sheet shall reflect future events as
though they had occurred at the time such Pro Forma Balance Sheet shall be
delivered), except as may be disclosed in such financial statements.

(b) The twelve-month cash flow and balance sheet projections of ModusLink Parent
on a Global Consolidated Basis, copies of which are annexed hereto as
Exhibit 5.5(b) (the “Projections”) were prepared by the management of ModusLink
Parent, are based on underlying

 

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assumptions which provide a reasonable basis for the projections contained
therein and reflect Borrowers’ judgment based on present circumstances as of
their date of preparation of the most likely set of conditions and course of
action for the projected period, it being understood that such Projections are
by their nature prospective and contingent on a wide range of factors and that
actual results may vary significantly. The cash flow Projections together with
the Pro Forma Balance Sheet are referred to as the “Pro Forma Financial
Statements”.

(c) The (x) consolidated and unaudited consolidating balance sheets of ModusLink
Parent on a Global Consolidated Basis as of July 31, 2013, and for the period of
twelve (12) months then ended, and the related statements of income, changes in
stockholder’s equity, and consolidated changes in cash flow for the period ended
on such date, all such consolidated financial statements accompanied by reports
thereon containing opinions without qualification by independent certified
public accountants, and (y) management–prepared consolidated and unaudited
consolidating balance sheets of ModusLink Parent on a Global Consolidated Basis
as of January 31, 2014, and for the period of six (6) months then ended, and the
related statements of income, changes in stockholder’s equity, and consolidated
changes in cash flow for the period ended on such date, copies of which have
been delivered to Agent, have been prepared in accordance with GAAP,
consistently applied (except for changes in application to which such
accountants concur and present fairly the financial position of ModusLink Parent
on a Global Consolidated Basis at such date and the results of their operations
for such period. Since January 31, 2014, and except as otherwise disclosed in
note 18 (Subsequent Events) to the unaudited condensed consolidated financial
statements included in the quarterly report on Form 10-Q filed by ModusLink
Parent with the SEC on June 9, 2014: (x) there has been no change in the
condition, financial or otherwise, of Loan Parties as shown on the consolidated
balance sheet as of such date and no change in the aggregate value of machinery,
equipment and Real Property owned by Loan Parties, except changes in the
Ordinary Course of Business, none of which individually or in the aggregate has
been materially adverse, and (y) no event(s), development(s) or circumstance(s)
have occurred, nor any state of facts arisen, that individually or taken
together in the aggregate, have had or could reasonably be expected to have a
Material Adverse Effect.

5.6. Entity Names. No Loan Party has been known by any other company or
corporate name, as applicable, in the past five years and does not sell
Inventory under any other name except as set forth on Schedule 5.6, nor has any
Loan Party been the surviving corporation or company, as applicable, of a merger
or consolidation or acquired all or substantially all of the assets of any
Person during the preceding five (5) years.

5.7. O.S.H.A. Environmental Compliance and Flood Insurance. Except as would not
or could not be expected to have a Material Adverse Effect:

(a) Each Loan Party is in compliance with, and its facilities, business, assets,
property, leaseholds, Real Property and Equipment are in compliance with the
Federal Occupational Safety and Health Act and Environmental Laws and there are
no outstanding citations, notices or orders of non-compliance issued to any Loan
Party or relating to its business, assets, property, leaseholds or Equipment
under any such laws, rules or regulations.

 

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(b) Each Loan Party has been issued all required federal, state and local
licenses, certificates or permits (collectively, “Approvals”) required under
applicable Environmental Laws and all such Approvals are current and in full
force and effect.

(c) (i) there have been no releases, spills, discharges, leaks or disposal
(collectively referred to as “Releases”) of Hazardous Materials at, upon, under
or migrating from or onto any Real Property owned, leased or occupied by any
Loan Party, other than (A) any such permitted Release or Releases of an
immaterial nature or (B) Releases that customarily arise in connection with the
business of Borrower and the Guarantors, which, in any such case, could not
reasonably be expected to result in any material liability to Borrower;
(ii) there are no underground storage tanks or polychlorinated biphenyls on any
Real Property owned by any Loan Party, except for such underground storage tanks
or polychlorinated biphenyls that are present in compliance with Environmental
Laws; (iii) the Real Property owned by any Loan Party has never been used by any
Loan Party to dispose of Hazardous Materials, except as authorized by
Environmental Laws; and (iv) no Hazardous Materials are managed by any Loan
Party on any Real Property owned by any Loan Party, excepting such quantities as
are managed in accordance with all applicable manufacturer’s instructions and
compliance with Environmental Laws and as are necessary for the operation of the
commercial business of any Loan Party or of its tenants.

(d) All Real Property owned by Loan Parties is insured pursuant to policies and
other bonds which are valid and in full force and effect and which provide
adequate coverage from reputable and financially sound insurers in amounts
sufficient to insure the assets and risks of each such Loan Party in accordance
with prudent business practice in the industry of such Loan Party. Each Loan
Party has taken all actions required under the Flood Laws and/or requested by
Agent to assist in ensuring that each Lender is in compliance with the Flood
Laws applicable to the Collateral, including, but not limited to, providing
Agent with the address and/or GPS coordinates of each structure located upon any
Real Property that will be subject to a Mortgage in favor of Agent, for the
benefit of the Lenders, and, to the extent required, obtaining flood insurance
for such property, structures and contents prior to such property, structures
and contents becoming Collateral.

5.8. Solvency; No Litigation, Violation, Indebtedness or Default; ERISA
Compliance.

(a) (i) After giving effect to the Transactions, each Loan Party is and will be
solvent, able to pay its debts as they mature and has and will have capital
sufficient to carry on its business and all businesses in which it is about to
engage, (ii) as of the Closing Date, the fair present saleable value of its
assets, calculated on a going concern basis, is in excess of the amount of its
liabilities, and (iii) subsequent to the Closing Date, the fair saleable value
of its assets (calculated on a going concern basis) will be in excess of the
amount of its liabilities.

(b) Except as disclosed in Schedule 5.8(b)(i), no Loan Party has any pending or
threatened litigation, arbitration, actions or proceedings which could
reasonably be expected to have a Material Adverse Effect. No Loan Party has any
outstanding Indebtedness other than the Obligations, except for (i) Indebtedness
disclosed in Schedule 1.2 and (ii) Indebtedness otherwise permitted under
Section 7.8 hereof.

 

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(c) No Loan Party is in violation of any applicable statute, law, rule,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect, nor is any Loan Party in violation of any order
of any court, Governmental Body or arbitration board or tribunal, in either
case, which could reasonably be expected to have a Material Adverse Effect.

(d) No Loan Party or any member of the Controlled Group maintains or is required
to contribute to any Plan other than those listed on Schedule 5.8(d) hereto.
However, Schedule 5.8(d) may be updated by the Loan Parties from time to time;
provided, however, that, if a Plan that a Loan Party seeks to list on Schedule
5.8(d) could reasonably be expected to result in any Loan Party incurring a
material liability under such Plan during the Term, the consent of the Agent
will be required, which consent shall not be unreasonably withheld. Except as
could not reasonably be expected to have a Material Adverse Effect, each Plan is
in compliance in all respects with the applicable provisions of ERISA, the Code
and other federal or state laws. Except as could not reasonably be expected to
have a Material Adverse Effect: (i) each Loan Party and each member of the
Controlled Group has met all applicable minimum funding requirements under
Section 302 of ERISA and Section 412 of the Code in respect of each Pension
Benefit Plan and Multiemployer Plan, and each Pension Benefit Plan is in
compliance with Sections 412, 430 and 436 of the Code and Sections 206(g), 302
and 303 of ERISA, without regard to waivers and variances; (ii) each Pension
Benefit Plan which is intended to be a qualified plan under Section 401(a) of
the Code as currently in effect has been determined by the Internal Revenue
Service to be qualified under Section 401(a) of the Code and the trust related
thereto is exempt from federal income tax under Section 501(a) of the Code or an
application for such a determination is currently being processed by the
Internal Revenue Service; (iii) neither any Loan Party nor any member of the
Controlled Group has incurred any liability to the PBGC other than for the
payment of premiums, and there are no premium payments which have become due
which are unpaid; (iv) no Pension Benefit Plan or Multiemployer Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which could cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan; (v) neither any Loan Party nor any member of the
Controlled Group has breached any of the responsibilities, obligations or duties
imposed on it by ERISA with respect to any Plan; (vi) neither any Loan Party nor
any member of the Controlled Group has incurred any liability for any excise tax
arising under Section 4971, 4972 or 4980B of the Code, and no fact exists which
gives rise to any such liability; (vii) no Loan Party nor any fiduciary of any
Plan has engaged in a “prohibited transaction” described in Section 406 of ERISA
or Section 4975 of the Code; (viii) no Termination Event has occurred or is
expected to occur; (ix) there exists no Reportable ERISA Event; (x) neither any
Loan Party nor any member of the Controlled Group has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA; (xi) no Loan Party
maintains or is required to contribute to any Plan which provides health,
accident or life insurance benefits to former employees, their spouses or
dependents, other than in accordance with Part 6 of Title I of ERIDA,
Section 4980B of the Code, or similar state continuation of coverage laws; and
(xii) neither any Loan Party nor any member of the Controlled Group has
withdrawn, completely or partially, within the meaning of Section 4203 or 4205
of ERISA, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980 and there exists no fact which
would result in any such liability.

 

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5.9. Patents, Trademarks, Copyrights and Licenses. All Intellectual Property
owned or utilized by any Loan Party: (i) is set forth on Schedule 5.9; (ii) is
valid and has been duly registered or filed with all appropriate Governmental
Bodies; and (iii) constitutes all of the intellectual property rights which are
necessary for the operation of its business. There is no objection to, or
pending challenge to the validity of, or proceeding by any Governmental Body to
suspend, revoke, terminate or adversely modify, any such Intellectual Property
and no Loan Party is aware of any grounds for any challenge or proceedings,
except as set forth in Schedule 5.9 hereto. All Intellectual Property owned or
held by any Loan Party consists of original material or property developed by
such Loan Party or was lawfully acquired by, or licensed to, such Loan Party
from the proper and lawful owner thereof. Each of such items has been maintained
so as to preserve the value thereof from the date of creation or acquisition
thereof.

5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each Loan
Party (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state,
provincial or local law, rule or regulation for the operation of its business in
each jurisdiction wherein it is now conducting or proposes to conduct business
and where the failure to procure such licenses or permits could reasonably be
expected to have a Material Adverse Effect.

5.11. Default of Indebtedness. No Loan Party is in default in the payment of the
principal of or interest on any Indebtedness or under any material instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.

5.12. No Default. No Loan Party is in default in the payment or performance of
any of its material contractual obligations and no Default or Event of Default
has occurred.

5.13. No Burdensome Restrictions. No Loan Party is party to any contract or
agreement the performance of which could reasonably be expected to have a
Material Adverse Effect. Each Borrower has heretofore delivered to Agent true
and complete copies of all Material Contracts to which it is a party or to which
it or any of its properties is subject. No Loan Party has agreed or consented to
cause or permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be subject to a
Lien which is not a Permitted Encumbrance.

5.14. No Labor Disputes. No Loan Party is involved in any material labor
dispute; there are no strikes or walkouts or union organization of any Loan
Party’s employees threatened or in existence and no labor contract is scheduled
to expire during the Term other than as set forth on Schedule 5.14 hereto.

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

 

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

5.17. Disclosure. No representation or warranty made by any Loan Party in this
Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known to
any Loan Party or which reasonably should be known to such Loan Party which such
Loan Party has not disclosed to Agent in writing with respect to the
transactions contemplated by this Agreement which could reasonably be expected
to have a Material Adverse Effect.

5.18. Swaps. No Loan Party is a party to, nor will it be a party to, any swap
agreement whereby such Loan Party has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited “two-way basis”
without regard to fault on the part of either party.

5.19. Business and Property of Loan Parties. Upon and after the Closing Date,
Loan Parties do not propose to engage in any business other than providing
comprehensive supply chain and logistics services and activities necessary or
incidental to conduct the foregoing. On the Closing Date, each Loan Party will
own all the property and possess all of the rights and Consents necessary for
the conduct of the business of such Loan Party, except as could not reasonably
be expected to have a Material Adverse Effect.

5.20. Ineligible Securities. Loan Parties do not intend to use and shall not use
any portion of the proceeds of the Advances, directly or indirectly, to purchase
during the underwriting period, or for 30 days thereafter, Ineligible Securities
being underwritten by a securities Affiliate of Agent or any Lender.

5.21. [RESERVED].

5.22. Equity Interests. The authorized and outstanding Equity Interests of each
Loan Party and each Subsidiary of a Borrower, and each legal and beneficial
holder thereof as of the Closing Date, are as set forth on Schedule 5.22(a)
hereto. All of the Equity Interests of each Loan Party have been duly and
validly authorized and issued and are fully paid and non-assessable and have
been sold and delivered to the holders hereof in compliance with, or under valid
exemption from, all federal and state laws and the rules and regulations of each
Governmental Body governing the sale and delivery of securities. Except for the
rights and obligations set forth on Schedule 5.22(b), there are no
subscriptions, warrants, options, calls, commitments, rights or agreement by
which any Loan Party or any of the shareholders of any Loan Party is bound
relating to the issuance, transfer, voting or redemption of shares of its Equity
Interests or any pre-emptive rights held by any Person with respect to the
Equity Interests of Loan Parties. Except as set forth on Schedule 5.22(c), Loan
Parties have not issued any securities convertible into or exchangeable for
shares of its Equity Interests or any options, warrants or other rights to
acquire such shares or securities convertible into or exchangeable for such
shares.

 

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5.23. Commercial Tort Claims. No Loan Party has any commercial tort claims in
excess of $500,000, except as set forth on Schedule 5.23 hereto.

5.24. Letter of Credit Rights. As of the Closing Date, no Loan Party has any
letter of credit rights except as set forth on Schedule 5.24 hereto.

5.25. Material Contracts. Schedule 5.25 sets forth all Material Contracts of the
Borrowers. All Material Contracts are in full force and effect and no material
defaults currently exist thereunder.

5.26. Joint Ventures. As of the Closing Date, no Loan Party is party to any
partnership, joint venture or similar arrangement.

 

VI. AFFIRMATIVE COVENANTS.

Each Loan Party shall, until payment in full of the Obligations and termination
of this Agreement:

6.1. Compliance with Laws. Comply in all material respects with all Applicable
Laws with respect to the Collateral or any part thereof or to the operation of
such Loan Party’s business the non-compliance with which could reasonably be
expected to have a Material Adverse Effect (except to the extent any separate
provision of this Agreement shall expressly require compliance with any
particular Applicable Law(s) pursuant to another standard).

6.2. Conduct of Business and Maintenance of Existence and Assets. (a) Conduct
continuously and operate actively its business according to good business
practices and maintain all of its properties useful or necessary in its business
in good working order and condition (reasonable wear and tear excepted and
except as may be disposed of in accordance with the terms of this Agreement),
including all Intellectual Property and take all commercially reasonable actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral and material to the conduct of the
Borrowers’ business; (b) keep in full force and effect its existence and comply
in all material respects with the laws and regulations governing the conduct of
its business where the failure to do so could reasonably be expected to have a
Material Adverse Effect; and (c) make all such reports and pay all such
franchise and other taxes and license fees and do all such other acts and things
as may be lawfully required to maintain its rights, licenses, leases, powers and
franchises under the laws of the United States or any political subdivision
thereof where the failure to do so could reasonably be expected to have a
Material Adverse Effect.

6.3. Books and Records. Keep proper books of record and account in which full,
true and correct entries will be made of all dealings or transactions of or in
relation to its business and affairs (including without limitation accruals for
taxes, assessments, Charges, levies and claims, allowances against doubtful
Receivables and accruals for depreciation, obsolescence or amortization of
assets), that allow the Loan Parties to prepare financial reporting in
accordance with, or as required by, GAAP consistently applied in the opinion of
such independent public accountant as shall then be regularly engaged by Loan
Parties.

 

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6.4. Payment of Taxes. Unless Properly Contested, the Loan Parties will pay,
when due, all taxes, assessments and other Charges lawfully levied or assessed
upon such Loan Party or any of the Collateral (except for any such tax,
assessment or other Charge which, singly or in the aggregate, is of a de minimis
amount), including real and personal property taxes, assessments and charges and
all franchise, income, employment, social security benefits, withholding, and
sales taxes. If any tax by any Governmental Body is or may be imposed on or as a
result of any transaction between any Loan Party and Agent or any Lender which
Agent or any Lender may be required to withhold or pay or if any taxes,
assessments, or other Charges remain unpaid after the date fixed for their
payment, or if any claim shall be made which, in Agent’s or any Lender’s
opinion, would reasonably be expected to create a valid Lien on the Collateral,
Agent may, if Borrowers’ fail to do so, pay the taxes, assessments or other
Charges and each Loan Party hereby indemnifies and holds Agent and each Lender
harmless in respect thereof. Agent shall endeavor to provide notice to Borrowers
of any such payment having been made. Agent will not pay any taxes, assessments
or Charges to the extent that any applicable Loan Party has Properly Contested
those taxes, assessments or Charges. The amount of any payment by Agent under
this Section 6.4 shall be charged to Borrowers’ Account as a Revolving Advance
maintained as a Domestic Rate Loan and added to the Obligations and, until Loan
Parties shall furnish Agent with an indemnity therefor (or supply Agent with
evidence satisfactory to Agent that due provision for the payment thereof has
been made), Agent may hold without interest any balance standing to Loan
Parties’ credit and Agent shall retain its security interest in and Lien on any
and all Collateral held by Agent.

6.5. Financial Covenants.

(a) Fixed Charge Coverage Ratio. At all times from and after (but not before)
the occurrence of any FCCR Trigger Event, cause to be maintained as of the end
of each fiscal month (beginning with the first month ending after any FCCR
Trigger Event), for the trailing period of twelve consecutive fiscal months then
ended, a Fixed Charge Coverage Ratio of not less than 1.00 to 1.00.

6.6. Insurance.

(a) (i) Keep all its insurable properties and properties in which such Loan
Party has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies of a
similar size to the applicable Loan Parties and engaged in businesses similar to
the applicable Loan Parties, including business interruption insurance;
(ii) maintain insurance coverage or a bond in such amounts as is customary in
the case of companies of a similar size to the applicable Loan Parties engaged
in businesses similar to the applicable Loan Parties insuring against larceny,
embezzlement or other criminal misappropriation of insured’s officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of such Loan Party either directly or through authority
to draw upon such funds or to direct generally the disposition of such assets;
(iii) maintain public and product liability insurance against claims for
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property damage suffered by others; (iv) maintain all such worker’s compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which such Loan Party is engaged in business; and (v) furnish
Agent with (A) copies of all policies and evidence of the maintenance of such
policies by the renewal thereof promptly, and in any event no later than five
(5) Business Days after any renewal date, and (B) appropriate loss payable
endorsements in form and substance satisfactory to Agent, naming Agent as an
additional insured and mortgagee and/or lender loss payee (as applicable) as its
interests may appear with respect to all insurance coverage referred to in
clauses (i), and (iii) above, and providing (I) that all proceeds thereunder
shall be payable to Agent, (II) no such insurance shall be affected by any act
or neglect of the insured or owner of the property described in such policy, and
(III) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days prior written notice is given to
Agent (or in the case of non-payment, at least ten (10) days prior written
notice); provided that, for the avoidance of doubt, in connection with the
insurance coverages required by this Section 6.6(a), Loan Parties may obtain and
maintain insurance policies which contemplate or require self-insured retentions
in lieu of and in amounts comparable to customary deductibles (as described
below) or self-insured medical benefits, or the payment by Loan Parties of
deductibles prior to receiving payment in respect of applicable losses to the
extent such deductibles are in amount and apply with respect to such coverages
and circumstances as are customary in the case of companies of a similar size to
the applicable Loan Parties engaged in businesses similar to the applicable Loan
Parties. In the event of any loss thereunder, the carriers named therein hereby
are directed by Agent and the applicable Loan Party to make payment for such
loss to Agent and not to such Loan Party and Agent jointly. If any insurance
losses are paid by check, draft or other instrument payable to any Loan Party
and Agent jointly, Agent may endorse such Loan Party’s name thereon and do such
other things as Agent may deem advisable to reduce the same to cash. For the
avoidance of doubt, to the extent Agent receives payment in respect of a claim
for loss incurred by a Foreign Subsidiary or its property, the amount of such
payment, to such extent, shall be returned to Borrowing Agent promptly following
the receipt thereof by Agent.

(b) Each Loan Party shall take all actions required under the Flood Laws and/or
requested by Agent to assist in ensuring that each Lender is in compliance with
the Flood Laws applicable to the Collateral, including, but not limited to,
providing Agent with the address and/or GPS coordinates of each structure on any
real property that will be subject to a mortgage in favor of Agent, for the
benefit of the Lenders, and, to the extent required, obtaining flood insurance
for such property, structures and contents prior to such property, structures
and contents becoming Collateral, and thereafter maintaining such flood
insurance in full force and effect for so long as required by the Flood Laws.

(c) After the occurrence and during the continuance of an Event of Default,
Agent is hereby authorized to adjust and compromise claims under insurance
coverage referred to in Sections 6.6(a)(i), (iii) and 6.6(b). All loss
recoveries received by Agent under any such insurance may be applied to the
Obligations, in such order as Agent in its Permitted Discretion shall determine.
Any surplus shall be paid by Agent to Loan Parties or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by Loan Parties
to Agent promptly on demand. If any Loan Party fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and pay the premium therefor on behalf of such Loan
Party, which payments shall be charged to Borrowers’ Account and constitute part
of the Obligations.

 

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6.7. Payment of Indebtedness and Leasehold Obligations. Pay, discharge or
otherwise satisfy (i) at or before maturity (subject, where applicable, to
specified grace periods) all its Indebtedness, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being Properly Contested, subject at all
times to any applicable subordination arrangement in favor of Lenders and
(ii) when due its rental obligations under all leases under which it is a tenant
and which are material (individually or in the aggregate) to the operations of
the Borrowers and their respective Subsidiaries, and shall otherwise comply, in
all material respects, with all other terms of such leases and keep all such
leases in full force and effect.

6.8. Environmental Matters.

(a) Ensure that the Real Property and all operations and businesses conducted
thereon are in compliance, and remain in compliance, in all material respects
with all Environmental Laws and it shall manage any and all Hazardous Materials
on any Real Property in compliance in all material respects with Environmental
Laws, in each case, except for noncompliance which could not reasonably be
expected to have a Material Adverse Effect.

(b) If management of the Borrowers determines that it is prudent to do so,
establish and maintain an environmental management and compliance system to
assure and monitor continued compliance with all applicable Environmental Laws
which system shall include periodic environmental compliance audits to be
conducted by knowledgeable environmental professionals. Under such system,
potential violations and violations of Environmental Laws shall be reviewed with
legal counsel to determine any required reporting to applicable Governmental
Bodies and any required corrective actions to address such potential violations
or violations.

(c) Respond promptly to any Hazardous Discharge or Environmental Complaint and
take all necessary action in order to safeguard the health of any Person and to
avoid subjecting the Collateral or Real Property to any Lien. To the extent
permitted under any Landlord Waiver Agreement applicable to the relevant Real
Property, if any Loan Party shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Loan Party shall fail to comply with
any of the requirements of any Environmental Laws, Agent on behalf of Lenders
may, but without the obligation to do so, for the sole purpose of protecting
Agent’s interest in the Collateral: (i) give such notices or (ii) enter onto the
Real Property (or authorize third parties to enter onto the Real Property) after
reasonable prior notice to the Borrowers and take such actions as Agent (or such
third parties as directed by Agent) deem reasonably necessary or advisable, to
remediate, remove, mitigate or otherwise manage with any such Hazardous
Discharge or Environmental Complaint. All reasonable costs and expenses incurred
by Agent and Lenders (or such third parties) in the exercise of any such rights,
including any sums paid in connection with any judicial or administrative
investigation or proceedings, fines and penalties, together with interest
thereon from the date expended at the Default Rate for Domestic Rate Loans
constituting Revolving Advances shall be paid upon demand by Loan Parties, and
until paid shall be added to and become a part of the Obligations secured by the
Liens created by the terms of this Agreement or any other agreement between
Agent, any Lender and any Loan Party.

 

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(d) Promptly upon the written request of Agent (which request shall be based
upon Agent’s reasonable belief that (i) a Hazardous Discharge not otherwise
identified has occurred at the Real Property that requires remedial or
investigatory action under Environmental Laws or that is the subject of any
regulatory inquiry or (ii) an identified Hazardous Discharge has become the
subject of any regulatory inquiry), Loan Parties shall provide Agent, at Loan
Parties’ expense, with an environmental site assessment or environmental
compliance audit report prepared by an environmental engineering firm acceptable
in the reasonable opinion of Agent, to assess with a reasonable degree of
certainty the existence of a Hazardous Discharge and the potential costs in
connection with abatement, remediation and removal of any Hazardous Materials
found on, under, at or within the Real Property. Any report or investigation of
such Hazardous Discharge proposed and acceptable to the responsible Governmental
Body shall be acceptable to Agent. If such estimates, individually or in the
aggregate, exceed $500,000, Agent shall have the right to require Loan Parties
to post a bond, letter of credit or other security reasonably satisfactory to
Agent to secure payment of the portion of these costs and expenses in excess of
$500,000.

6.9. Standards of Financial Statements. Cause all financial statements referred
to in Sections 9.7, 9.9, 9.10, 9.11, 9.12, and 9.13 as to which GAAP is
applicable to be complete and correct in all material respects (subject, in the
case of interim financial statements, to the absence of footnotes and normal
year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as disclosed therein and agreed to by such reporting accountants
or officer, as applicable).

6.10. [RESERVED].

6.11. Execution of Supplemental Instruments. Execute and deliver to Agent from
time to time, upon demand, such supplemental agreements, statements, assignments
and transfers, or instructions or documents relating to the Collateral, and such
other instruments as Agent may reasonably request, in order that the full intent
of this Agreement may be carried into effect.

6.12. Government Receivables. Take all steps necessary to protect Agent’s
interest in the Collateral under the Federal Assignment of Claims Act, the
Uniform Commercial Code and all other applicable state or local statutes or
ordinances and deliver to Agent appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of any contract between
any Loan Party and the United States, any state or any department, agency or
instrumentality of any of them.

6.13. Membership / Partnership Interests. Designate and shall cause all of their
Subsidiaries to designate (a) their limited liability company membership
interests or partnership interests as the case may be, as securities as
contemplated by the definition of “security” in Section 8-102(15) and
Section 8-103 of Article 8 of the Uniform Commercial Code, and (b) certificate
such limited liability company membership interests and partnership interests,
as applicable.

 

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6.14. Keepwell. If it is a Qualified ECP Loan Party, then jointly and severally,
together with each other Qualified ECP Loan Party, hereby absolutely
unconditionally and irrevocably (a) guarantees the prompt payment and
performance of all Swap Obligations owing by each Non-Qualifying Party (it being
understood and agreed that this guarantee is a guaranty or payment and not of
collection), and (b) undertakes to provide such funds or other support as may be
needed from time to time by any Non-Qualifying Party to honor all of such
Non-Qualifying Party’s obligations under this Agreement or any Other Document in
respect of Swap Obligations (provided, however that each Qualified ECP Loan
Party shall only be liable under this Section 6.14 for the maximum amount of
such liability that can be hereby incurred without rending its obligations under
this Section 6.14, or otherwise under this Agreement or any Other Document,
voidable under applicable law, including applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount). The
obligations of each Qualified ECP Loan Party under this Section 6.14 shall
remain in full force and effect until payment in full of the Obligations and
termination of this Agreement and Other Documents. Each Qualified ECP Loan Party
intends that this Section 6.14 constitutes, and this Section 6.14 shall be
deemed to constitute, a guarantee of the obligations of, and a “keepwell,
support, or other agreement” for the benefit of each other Borrower and
Guarantor for all purposes of Section 1a(18(A)(v)(II) of the CEA.

 

VII. NEGATIVE COVENANTS.

No Loan Party shall, until satisfaction in full of the Obligations and
termination of this Agreement:

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

(a) Enter into any merger, consolidation or other reorganization with or into
any other Person or acquire all or a substantial portion of the assets or Equity
Interests of any Person or permit any other Person to consolidate with or merge
with it, except (x) any Borrower may merge, consolidate or reorganize with
another Borrower or acquire the assets or Equity Interests of another Borrower,
and (y) any Guarantor may merge, consolidate or reorganize with another
Guarantor (or any Borrower, if such Borrower is the surviving entity) or acquire
the assets or Equity Interests of another Guarantor, so long as in any such case
Loan Parties provide Agent with ten (10) days prior written notice of such
merger, consolidation or reorganization and delivers all of the relevant
documents evidencing such merger, consolidation or reorganization.

(b) Sell, lease, transfer or otherwise dispose of any of its properties or
assets, except (i) Permitted Dispositions and (ii) any other sales or
dispositions expressly permitted by this Agreement.

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

7.3. Guarantees. Become liable upon the obligations or liabilities of any Person
by assumption, endorsement or guaranty thereof or otherwise (other than to
Lenders) except (a) as disclosed on Schedule 7.3, (b) unsecured guarantees made
in the Ordinary Course of Business up

 

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to an aggregate amount of $3,000,000, (c) guarantees by one or more Loan
Party(s) of the Indebtedness or obligations of any other Loan Party(s) to the
extent such Indebtedness or obligations are permitted to be incurred and/or
outstanding pursuant to the provisions of this Agreement, (d) the endorsement of
checks in the Ordinary Course of Business and (e) unless otherwise provided in
Section 7.8, guarantees of Indebtedness permitted under Section 7.8.

7.4. Investments. Purchase or acquire obligations or Equity Interests of, or any
other interest in, any Person, except for:

(i) Permitted Investments,

(ii) the purchase or acquisition by a Borrower of the obligations or Equity
Interests of, or capital contributions by a Borrower to, such Borrower’s Foreign
Subsidiaries during the period beginning on the Closing Date and ending on the
first anniversary thereof in an aggregate amount as to all Borrowers not to
exceed $3,500,000 (as such amount shall be reduced by any intercompany loan
pursuant to Section 7.5(ii) hereof and/or any JV investment pursuant to
Section 7.12(i) hereof during that same period, provided that after giving
effect to any such investment,(x) no Default or Event of Default shall have
occurred and be continuing or would result after giving effect to such proposed
investment and (y) Borrowers shall have, on a combined basis, pro forma Undrawn
Availability and Average Undrawn Availability (calculated as if such investment,
and any Revolving Advance requested to fund such investment, had been made at
the beginning of the applicable period), together with the aggregate amount of
unrestricted cash actually held each Borrower, of not less than $10,000,000,

(iii) the purchase or acquisition by a Borrower of the obligations or Equity
Interests of, or capital contributions by a Borrower to, such Borrower’s Foreign
Subsidiaries at any time after the first anniversary of the Closing Date if and
to the extent that, after giving effect to such proposed investment, (x) all of
the Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Conditions shall have
been met and (y) the aggregate amount of all ECF Dividends and ECF Foreign
Subsidiary-JV Transfers made during the applicable ECF Dividend/Foreign
Subsidiary-JV Transfer Period shall not exceed the applicable Permitted ECF
Dividend/Foreign Subsidiary Transfer-JV Amount; provided that, notwithstanding
anything to the contrary contained in the foregoing or otherwise in this
agreement, no such investment may be made by any Borrower under this clause
(iii) until such time as the monthly internally-prepared financial statements
and related Compliance Certificate for the month ending July 31, 2015, fully
compliant with the requirements of Section 9.9 hereof, have been delivered to
Agent, and

(iv) the purchase or acquisition by a Borrower of the Equity Interest in, or
capital contributions by a Borrower to, such Borrowers JVs to the extent
permitted by Section 7.12(b) hereof.

7.5. Loans.

(a) Make advances, loans or extensions of credit to any Person, including any
Parent, Subsidiary or Affiliate except for:

(i) Permitted Loans,

 

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(ii) advances or loans by any Borrower to one or more of its Foreign
Subsidiaries during the period beginning on the Closing Date and ending on the
first anniversary thereof in an aggregate amount as to all Borrowers not to
exceed $3,500,000 (as such amount shall be reduced by any intercompany
investment pursuant to Section 7.4(ii) hereof and/or any JV investment pursuant
to Section 7.12(i) hereof during that same period), so long as each such
intercompany loan is evidenced by a promissory note in the form of Exhibit 7.5-B
attached hereto, a copy of which has been delivered to Agent (provided that,
upon request of Agent after the occurrence and during the continuance of an
Event of Default, Loan Parties shall promptly deliver the original of such
promissory note to Agent either endorsed in blank or together with an undated
instrument of transfer executed in blank by the applicable Loan Party(s) that
are the payee(s) on such note), and also provided that after giving effect to
any such advance or loan, (x) no Default or Event of Default shall have occurred
and be continuing or would result after giving effect to such proposed advance
or loan and (y) Borrowers shall have, on a combined basis, pro forma Undrawn
Availability and Average Undrawn Availability (calculated as if such advance or
loan, and any Revolving Advance requested to fund such advance or loan, had been
made at the beginning of the applicable period), together with the aggregate
amount of unrestricted cash actually held by each Borrower, of not less than
$10,000,000; and

(iii) advances or loans by any Borrower to one or more of its Foreign
Subsidiaries at any time after the first anniversary of the Closing Date if and
to the extent that, after giving effect to such proposed advance or loan,
(x) all of the Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Conditions
shall have been met and (y) the aggregate amount of all ECF Dividends and ECF
Foreign Subsidiary-JV Transfer during the applicable ECF Dividend/Foreign
Subsidiary-JV Transfer Period shall not exceed the applicable Permitted ECF
Dividend/Foreign Subsidiary-JV Transfer Amount; so long as each such
intercompany loan is evidenced by a promissory note in the form of Exhibit 7.5-B
attached hereto, a copy of which has been delivered to Agent (provided that,
upon request of Agent after the occurrence and during the continuance of an
Event of Default, Loan Parties shall promptly deliver the original of such
promissory note to Agent either endorsed in blank or together with an undated
instrument of transfer executed in blank by the applicable Loan Party(s) that
are the payee(s) on such note), and also provided that, notwithstanding anything
to the contrary contained in the foregoing or otherwise in this agreement, no
such advances or loans may be made by any Borrower under this clause (iii) until
such time as the monthly internally-prepared financial statements and related
Compliance Certificate for the month ending July 31, 2015 fully complying with
the requirements of Section 9.9 hereof have been delivered to Agent.

(b) Notwithstanding anything to the contrary provided for in this Section 7.5,
in Sections 7.7 and 7.8 below or otherwise in this Agreement, (i) any Borrower
may make an advance or loan to one of its Foreign Subsidies that is funded
solely with and concurrently with the receipt of the proceeds of a corresponding
intercompany loan made to such Borrower by ModusLink Parent solely for the
purpose of funding such advance or loan to such Foreign Subsidiary (each such
advance or loan to a Foreign Subsidiary so funded, a “Pass-Through Foreign
Loan”, and each such corresponding intercompany loan from ModusLink Parent made
for the purpose of funding such a Pass-Through Foreign Loan, a “Pass-Through
Parent Advance”), (ii) Borrower may incur and permit to remain outstanding
Indebtedness owing to ModusLink Parent with respect to such Pass-Through Parent
Advances, (iii) the Foreign Subsidiaries may pay and make and Borrowers may
accept payments and repayments (including

 

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payments and repayments of principal and interest) in respect of each such
Pass-Through Foreign Loan as and when Borrowers and such Foreign Subsidiaries
may elect solely for the purposes of funding corresponding payments and
repayments of the corresponding Pass-Through Parent Advance, and (iv) Borrowers
may pay and make payments and repayments (including payments and repayments of
principal and interest) to ModusLink Parent in respect of each Pass-Through
Parent Advance solely to the extent such payments and repayments are funded
solely by a corresponding payment or repayment received by Borrower from the
applicable Foreign Subsidiary on the corresponding Pass-Through Parent Advance,
but only on the conditions and provided that, (1) at no time shall the
outstanding principal balance of all such Pass-Through Parent Advances exceed
$15,000,000 in the aggregate, (2) prior to and after giving effect to the making
of any such Pass-Through Foreign Loan, Borrowers shall have Undrawn Availability
and Average Undrawn Availability of not less than $3,000,000, (3) prior to and
after giving effect to any payment or repayment by any Borrower to ModusLink
Parent in respect of any Pass-Through Parent Advance otherwise permitted under
clause (iv) above, Borrowers shall have Undrawn Availability and Average Undrawn
Availability of not less than $3,000,000, (4) all financial terms of each such
Pass-Through Parent Advance, including interest rates and rights to demand
and/or scheduled dates for the payment or maturity of principal or interest,
must be identical to the corresponding terms of the corresponding Pass-Through
Foreign Loan, (5) Borrowers must account for all such Pass-Through Foreign Loans
and all such Pass-Through Parent Advances on their books and records in a manner
reasonably satisfactory to Agent in its Permitted Discretion so as to allow such
Pass-Through Foreign Loans (and all payments in respect thereof) to be
distinguished from any Foreign Subsidiary-JV Transfers permitted and made
pursuant to Section 7.4, 7.5(a) or 7.12 hereof and so as to allow such
Pass-Through Parent Advances to be distinguished from any other investments
permitted to be made by ModusLink Parent in Borrowers and Indebtedness permitted
to be incurred by Borrowers from ModusLink Parent hereunder, (6) each such
Pass-Through Foreign Loan is evidenced by a promissory note in the form of
Exhibit 7.5-C attached hereto, a copy of which has been delivered to Agent
(provided that, upon request of Agent after the occurrence and during the
continuance of an Event of Default, Loan Parties shall promptly deliver the
original of such promissory note to Agent either endorsed in blank or together
with an undated instrument of transfer executed in blank by the applicable Loan
Party(s) that are the payee(s) on such note), and (7) each such Pass-Through
Parent Advance is evidenced by a promissory note in the form of Exhibit 7.5-D
attached hereto, a copy of which has been delivered to Agent.

7.6. Capital Expenditures. Contract for, purchase or make any expenditure or
commitments for Capital Expenditures in any fiscal year in an aggregate amount
for all Loan Parties in excess of $20,000,000.

7.7. Dividends. Declare, pay or make any dividend or distribution on any Equity
Interests of any Loan Party (other than dividends or distributions payable in
its stock, or split-ups or reclassifications of its stock) or apply any of its
funds, property or assets to the purchase, redemption or other retirement of any
Equity Interest, or of any options to purchase or acquire any Equity Interest of
any Loan Party except for:

(a) Permitted Dividends,

 

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(b) Without duplicating or restricting the dividends payable pursuant to
Section 7.7(e) hereof, but subject to the terms of Section 7.7(d) hereof,
dividends payable by any Borrower to ModusLink Parent during the period
beginning on the Closing Date and ending on the first anniversary thereof in an
aggregate amount as to all Borrowers not to exceed the sum of (x) $35,000,000,
plus (y) all cash proceeds distributed after the Closing Date by any Foreign
Subsidiary of ModusLink Parent or of a Borrower directly to ModusLink Parent, or
initially to a Borrower and concurrently therewith by such Borrower to ModusLink
Parent, in each case arising from the sale or transfer of machinery, equipment,
real property or other similar fixed assets of such Foreign Subsidiary, not to
exceed $25,000,000 in the aggregate, provided that each of the following
conditions shall have been met at the time of, and immediately after giving
effect to, the payment of any such dividend: (A) no Default or Event of Default
shall have occurred and be continuing or would result after giving effect to
such proposed dividend, (B) Borrowers shall have pro forma Undrawn Availability
and Average Undrawn Availability (calculated as if such dividend, and any
Revolving Advance requested to fund such dividend, had been made at the
beginning of the applicable period), together with the aggregate amount of
unrestricted cash actually held by each Borrower, of not less than $10,000,000
and (C) ModusLink Parent on a Global Consolidated Basis shall have a Fixed
Charge Coverage Ratio for the period of four consecutive fiscal quarters which
soonest precedes the date of the payment of such dividend for which the
financial statements required to have been delivered to Agent pursuant to
Section 9.7 and 9.8 hereof shall have been received by Agent, calculated on a
pro forma basis as if such dividend had been paid at the beginning of such
period (but excluding for purposes of such pro forma calculating the amount of
such dividend), of not less than 1.00 to 1.00;

(c) Subject to the terms of Section 7.7(d) hereof, dividends payable by any
Borrower to ModusLink Parent at any time after the first anniversary of the
Closing Date if and to the extent that, after giving effect to such proposed
dividend, (x) all of the Permitted ECF Dividend/Foreign Subsidiary-JV Transfer
Conditions shall have been met and (y) the aggregate amount of all ECF Dividends
and ECF Foreign Subsidiary-JV Transfers made during the applicable ECF
Dividend/Foreign Subsidiary-JV Transfer Period shall not exceed the applicable
Permitted ECF Dividend/Foreign Subsidiary-JV Transfer Amount; provided that,
notwithstanding anything to the contrary contained in the foregoing or otherwise
in this agreement, no such dividend may be made by any Borrower under this
paragraph (c) until such time as the monthly internally-prepared financial
statements and related Compliance Certificate for the month ending July 31, 2015
fully complying with the requirements of Section 9.9 hereof have been delivered
to Agent;

(d) Notwithstanding the provisions of Section 7.7(b) and (c) above, in the event
that (x) on any one or more days prior to the first anniversary of the Closing
Date, Borrowers would have been able to satisfy the conditions set forth in
Section 7.7(b) above in connection with the making of a distribution thereunder
(whether with respect to a dividend of the entire potential amount of
$60,000,000 contemplated thereby or any lesser amount) and (y) Borrowers shall
have nonetheless elected not to make such distributions pursuant to
Section 7.7(b) hereof prior to the first anniversary of the Closing Date, then
at any time after the first anniversary of the Closing Date but no later than
the second anniversary of the Closing Date (the “Carry-Forward Period”),
Borrowers may by prior written notice to Agent elect to make distributions
during such Carry-Forward Period if, as and to the extent (but only to the
extent) permitted by Section 7.7(b) hereof, subject to all the terms and
conditions thereof;

 

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(e) Dividends and distributions by the Foreign Subsidiaries of Borrowers to
ModusLink Parent, or initially to a Borrower and concurrently therewith by such
Borrower to ModusLink Parent, made on or during the period ending thirty
(30) days after, the Closing Date, but only if and to the extent that (x) no
Default or Event of Default shall have occurred and be continuing or would
result after giving effect to such proposed dividend and (y) the aggregate
amount of all such distributions shall not exceed the lesser of (i) $25,000,000
and (ii) the amount equal to the total aggregate amount of unrestricted cash
balances actually held by of all of the Foreign Subsidiaries of all Borrowers,
on a combined basis, on the Closing Date minus $10,000,000; provided that, for
the avoidance of doubt, after giving effect to all such dividends and
distributions under this paragraph (d), the total aggregate amount of
unrestricted cash balances actually held by of all of the Foreign Subsidiaries
of all Borrowers, on a combined basis, will not be less than $10,000,000 in the
aggregate.

7.8. Indebtedness.

(a) Create, incur, assume or suffer to exist any Indebtedness other than
Permitted Indebtedness; provided that, for the avoidance of doubt, additional
secured Indebtedness may be incurred by Loan Parties with the prior written
consent of Agent, such consent to be granted only if and to the extent that all
of the terms and conditions of such Indebtedness (including without limitation
principal amount, interest and other financial terms, amortization dates and
amounts and final maturity date, covenants, and events of defaults) and the
Liens proposed to secure such Indebtedness (which Liens shall be subordinated to
the Liens of Agent in all respects) shall be, and that such Indebtedness and
Liens shall be subject to an intercreditor and subordination agreement,
reasonably satisfactory to Agent in its sole discretion; and

(b) Unsecured Indebtedness owing by one or more Borrowers to one or more Foreign
Subsidiaries in an aggregate amount not to exceed $20,000,000 outstanding at any
one time, so long as each such intercompany loan or advance is evidenced by a
promissory note in the form of Exhibit 7.8 attached hereto, a copy of which has
been delivered to Agent, and further provided that (i) the right of each
applicable Foreign Subsidiary to receive payments in respect of any such
Indebtedness shall be subordinated to the prior payment and satisfaction in full
of all Obligations, pursuant to the terms of the Subordinated Intercompany Line
of Credit Note, (ii) no Foreign Subsidiary may make a loan pursuant to the
Subordinated Intercompany Line of Credit Note unless, after giving effect to
such loan, (x) the aggregate amount of unrestricted cash of all Foreign
Subsidiaries is not less than the U.S. Dollar equivalent of $10,000,000 and
(y) such Foreign Subsidiary is solvent, able to pay its debts as they mature and
has and will have capital sufficient to carry on its business and all businesses
in which it is about to engage (in each case as such terms are construed in
accordance with the laws in effect in the jurisdiction in which such Foreign
Subsidiary is organized), and (iii) no Borrower may pay or prepay any portion of
the principal amount of the Indebtedness arising from a loan or loans made
pursuant to the Subordinated Intercompany Line of Credit Note unless (x) both
before and after giving effect to such payment or prepayment, no Event of
Default shall have occurred and be continuing and (y) after giving effect to
such payment or prepayment, Borrowers shall have pro forma Undrawn

 

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Availability and Average Undrawn Availability (calculated as if such payment or
prepayment, and any Revolving Advance requested to fund any portion of such
payment or prepayment, had been made at the beginning of the applicable period),
together with the aggregate amount of unrestricted cash actually held by each
Borrower, of not less than $10,000,000. Each Loan Party shall be deemed to have
represented and warranted to the Agent and the Lenders, each time a loan is
(I) made or advanced pursuant to the Subordinated Intercompany Line of Credit
Note, that the conditions set forth in clause (ii) above have occurred and (II)
paid or repaid, that the conditions set forth in clause (iii) above have
occurred. Each Loan Party covenants and agrees that it shall not cause, permit
or otherwise consent or agree to any material modification of any term,
provision or condition contained in the Subordinated Intercompany Line of Credit
Note without the Agent’s prior written consent.

7.9. Nature of Business. Substantially change the nature of the business in
which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the Ordinary Course of Business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.

7.10. Transactions with Affiliates. Directly or indirectly, purchase, acquire or
lease any property from, or sell, transfer or lease any property to, or
otherwise enter into any transaction or deal with, any Affiliate, except for
(i) transactions among Loan Parties which are not expressly prohibited by the
terms of this Agreement and which are in the Ordinary Course of Business,
(ii) investments made by Loan Parties permitted under Section 7.4 hereof, loans
made by Loan Parties permitted under Section 7.5 hereof and payment by Loan
Parties of dividends and distributions permitted under Section 7.7 hereof,
(iii) loans made by a Foreign Subsidiary to a Borrower pursuant to
Section 7.8(b) hereof, (iv) cash payments made in the Ordinary Course of
Business, on fair and reasonable terms, by a Borrower to such Borrower’s Foreign
Subsidiaries for goods sold or services rendered in the Ordinary Course of
Business, and (iv) transactions disclosed to the Agent in writing, which are in
the Ordinary Course of Business, on an arm’s-length basis on terms and
conditions no less favorable than terms and conditions which would have been
obtainable from a Person other than an Affiliate, including any such
transactions consisting of cash payments by in the Ordinary Course of Business,
at fair market value and on arm’s-length terms, by a Borrower to such Borrower’s
JVs for goods sold or services rendered (provided that such transactions with
JVs may be disclosed by Borrowers to Agent in general terms rather than on a per
transaction basis).

7.11. [RESERVED]

7.12. Subsidiaries.

(a) Form or acquire any Subsidiary except that:

(i) Upon not less than five (5) days prior written notice (or such shorter
notice period as Agent may approve in its Permitted Discretion), Borrowers may
form or acquire additional Domestic Subsidiaries at any time when no Default or
Event of Default has occurred and remains outstanding or would result after
giving effect to such formation, if and to the extent that, concurrently with
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acceptable to Agent in its Permitted Discretion: (A) such new Domestic
Subsidiary either (x) expressly joins in this Agreement as a borrower and
becomes jointly and severally liable for the Obligations and grants Liens in all
of its Collateral to secure such Obligations, or (y) expressly joins in this
Agreement as a guarantor and becomes jointly and severally liable for the
Obligations and grants Liens in all of its Collateral to secure such
Obligations; provided that, no such new Domestic Subsidiary may become a
Borrower (as opposed to a Guarantor) hereunder without the approval of Agent
granted in its Permitted Discretion subject to its internal credit approval
procedures, (B) Agent shall receive all documents, including without limitation,
joinder agreements, supplemental security documents, amended and restated Notes
signed by all Borrowers, legal opinions and appraisals it may reasonably require
to establish compliance with the foregoing clause (A), and (C) Agent shall have
received a pledge (and any applicable new Pledge Agreement or amendment to
existing Pledge Agreement as Agent may request to further evidence and create
such Pledge) of 100% of the Equity Interests of such Subsidiary; provided that,
notwithstanding anything to the contrary contained in the foregoing or otherwise
in this Agreement, no assets of any such new Subsidiary that becomes party to
this Agreement and is joined as a Borrower (to the extent so elected by Agent in
its sole discretion) shall be included in the Formula Amount until Agent has
received a field examination and/or appraisal of such assets, as elected by
Agent in its sole discretion, in form and substance and the results of such are
acceptable to Agent in its sole discretion (and further provided that Loan
Parties’ shall be liable to pay to Agent the costs and expenses of such field
examination and/or appraisal of such assets as provided for in Section 3.4
without regard to (and without otherwise being counted against) the annual
limitations on Loan Parties’ liability for the costs and expenses of field
examinations and appraisals (absent any Event of Default) set forth in such
Section 3.4); and further provided that, (x) unless and until the conditions set
forth in the foregoing clauses (A), (B) and (C) shall have been satisfied
neither Borrowers nor any other Loan Party shall made any investments or capital
contributions in or loans or advances such new Domestic Subsidiary except for de
minimis amounts necessary in connection with the formation of such new Domestic
Subsidiary and the payment of initial formation fees and franchise tax payments
for such new Domestic Subsidiary and (y) notwithstanding anything to the
contrary provided for in the foregoing or Section 10.5 hereof, so long as
Borrower shall at all times be in compliance with the requirements of the
preceding subclause (x) of this proviso, no Event of Default shall occur
hereunder as a result of any failure by Borrowers to give the prior written
notice of the formation of a Subsidiary as required hereunder and/or to comply
with the provisions of clauses (A), (B) and (C) concurrently with the formation
of a Subsidiary so long as such failure is cured within ten (10) days of the
occurrence of such failure, and

(ii) Within thirty (30) days written notice thereafter (or such longer notice
period as Agent may approve in its Permitted Discretion), Borrowers may form
additional Foreign Subsidiaries at any time when no Default or Event of Default
has occurred and remains outstanding or would result after giving effect to such
formation, if and to the extent that: (x) neither Borrowers nor any other Loan
Party shall made any investments or capital contributions in or loans or
advances such new Foreign Subsidiary in connection with the formation thereof
(or at any time thereafter) other than investments, capital contributions, loans
or advances that are Foreign Subsidiary Transfers by Borrowers pursuant to and
permitted by Sections 7.4 and 7.5 hereof, and (y) concurrently with the
formation thereof, or within a reasonable period of time thereafter, not to
exceed ten (10) days, Agent shall have received a pledge (and any applicable new
Pledge Agreement or amendment to the existing Pledge Agreement as Agent may
request to further evidence and create such pledge) of 100% of the Equity
Interests of such Subsidiary that constitute Subsidiary Stock.

 

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(b) Enter into any partnership, joint venture or similar arrangement unless,
with respect to any such partnership, joint venture or similar arrangement into
which any Borrower(s) shall enter after the Closing Date, (x) Loan Parties shall
give not less than thirty (30) days prior written notice to Agent, which such
notice shall include copies of all of the final execution versions of all of the
partnership agreement(s), joint venture agreement(s) and/or similar agreement(s)
to be entered into by any one or more of the Borrowers in connection with such
partnership, joint venture or similar arrangement, and no Default or Event of
Default has have occurred and be continuing at the time Borrowers shall execute
and deliver such agreement(s) and enter into such partnership, joint venture or
similar arrangement, (y) the terms of such partnership agreement(s), joint
venture agreement(s) and/or similar agreement(s), and any other applicable
Organizational Documents for the applicable partnership or joint venture entity
(including any applicable corporation or limited liability company), shall
expressly permit such Borrower(s) to pledge one hundred percent (100%) of
Borrowers’ Equity Interests in such partnership or joint venture entity to Agent
to secure the Obligations and shall permit Agent to exercise its rights and
remedies as a secured creditor under such pledge and (z) the performance by the
applicable Borrower(s) of their respective obligations under such partnership
agreement(s), joint venture agreement(s) and/or similar agreement(s) would not
reasonably be expected to cause any Borrower to violate the provisions of this
Section 7.12(b) or to otherwise result in any Material Adverse Effect, provided
that no Borrower or other Loan Party may make any investment in any such JV at
any time (including in connection with the formation thereof or entry by
Borrower into any such JV) except for:

(i) the purchase or acquisition by a Borrower of the obligations or Equity
Interests of, or capital contributions by a Borrower to, such Borrower’s JVs
during the period beginning on the Closing Date and ending on the first
anniversary thereof in an aggregate amount as to all Borrowers not to exceed
$3,500,000 (as such amount shall be reduced by any intercompany loan pursuant to
Section 7.5(ii) hereof or any intercompany investment pursuant to
Section 7.4(ii) hereof during that same period, provided that after giving
effect to any such investment, (x) no Default or Event of Default shall have
occurred and be continuing or would result after giving effect to such proposed
investment and (y) Borrowers shall have, on a combined basis, pro forma Undrawn
Availability and Average Undrawn Availability (calculated as if such investment,
and any Revolving Advance requested to fund such investment, had been made at
the beginning of the applicable period), together with the aggregate amount of
unrestricted cash actually held each Borrower, of not less than $10,000,000, and

(ii) the purchase or acquisition by a Borrower of the obligations or Equity
Interests of, or capital contributions by a Borrower to, such Borrower’s JVs at
any time after the first anniversary of the Closing Date if and to the extent
that, after giving effect to such proposed investment, (x) all of the Permitted
ECF Dividend/Foreign Subsidiary-JV Transfer Conditions shall have been met and
(y) the aggregate amount of all ECF Dividends and ECF Foreign Subsidiary-JV
Transfers made during the applicable ECF Dividend/Foreign Subsidiary-JV Transfer
Period shall not exceed the applicable Permitted ECF Dividend/Foreign Subsidiary
Transfer-JV Amount; provided that, notwithstanding anything to the contrary
contained in the foregoing or otherwise in this agreement, no such investment
may be made by any Borrower

 

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under this clause (ii) until such time as the monthly internally-prepared
financial statements and related Compliance Certificate for the month ending
July 31, 2015, fully compliant with the requirements of Section 9.9 hereof, have
been delivered to Agent.

7.13. Fiscal Year and Accounting Changes. Change its fiscal year from July 31st
or make any significant change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as permitted by law.

7.14. Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s credit
on any purchases, commitments or contracts or for any purpose whatsoever or use
any portion of any Advance in or for any business other than such Loan Party’s
business operations as conducted on the Closing Date.

7.15. Amendment of Organizational Documents. (i) Change its legal name,
(ii) change its form of legal entity (e.g., converting from a corporation to a
limited liability company or vice versa), (iii) change its jurisdiction of
organization or become (or attempt or purport to become) organized in more than
one jurisdiction, or (iv) otherwise amend, modify or waive any term or material
provision of its Organizational Documents unless required by law, in any such
case without (x) giving at least thirty (30) days prior written notice of such
intended change to Agent, (y) having received from Agent confirmation that Agent
has taken all steps necessary for Agent to continue the perfection of and
protect the enforceability and priority of its Liens in the Collateral belonging
to such Loan Party and in the Equity Interests of such Loan Party and (z) in any
case under clause (iv), having received the prior written consent of Agent and
Required Lenders to such amendment, modification or waiver.

7.16. Compliance with ERISA. Except as could not reasonably be expected to have
a Material Adverse Effect: (i) (x) maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d) as updated from time
to time in accordance with Section 5.8(d), (ii) engage in any non-exempt
“prohibited transaction”, as that term is defined in Section 406 of ERISA or
Section 4975 of the Code, (iii) terminate, or permit any member of the
Controlled Group to terminate, any Pension Benefit Plan where such event could
result in any liability of any Loan Party or any member of the Controlled Group
or the imposition of a lien on the property of any Loan Party or any member of
the Controlled Group pursuant to Section 4068 of ERISA, (iv) incur, or permit
any member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (v) fail promptly to notify Agent of the occurrence of any
Termination Event, (vi) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
Applicable Laws in respect of any Plan, or (vii) fail to meet, permit any member
of the Controlled Group to fail to meet, or permit any Pension Benefit Plan to
fail to meet all minimum funding requirements under ERISA and the Code, without
regard to any waivers or variances, or postpone or delay or allow any member of
the Controlled Group to postpone or delay any funding requirement with respect
of any Plan.

7.17. Prepayment of Indebtedness. Except as otherwise provided in Section 7.8
(b) hereof, at any time, directly or indirectly, prepay any Indebtedness (other
than to Lenders), or repurchase, redeem, retire or otherwise acquire any
Indebtedness of any Loan Party.

 

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VIII. CONDITIONS PRECEDENT.

8.1. Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:

(a) Note. Agent shall have received the Note duly executed and delivered by an
authorized officer of each Borrower;

(b) Other Documents. Agent shall have received each of the executed Other
Documents, as applicable;

(c) Liquidity of Foreign Subsidiaries and Distribution of Cash to ModusLink
Parent. Agent shall have received and reviewed to it reasonable satisfaction
(x) a schedule setting forth the amount of each distribution or dividend of cash
to be made by any and all Foreign Subsidiaries of Borrower to ModusLink Parent
on or within thirty (30) days of the Closing Date pursuant to (and to the extent
permitted by) Section 7.7(e) hereof, including in each case the wiring
information applicable to each such distribution and (y) evidence reasonably
satisfactory to it that, after giving effect to the dividends and distributions
referenced in the preceding clause (x), the total aggregate amount of
unrestricted cash balances actually held by of all of the Foreign Subsidiaries
of all Borrowers, on a combined basis, will not be less than $10,000,000 in the
aggregate;

(d) Intercompany Loan Balances. Agent shall have received a reasonably detailed
statement which shall set forth, as of May 31, 2014, the amount of the principal
balance of each intercompany loan made (x) by and between a Borrower and any of
its Domestic Subsidiaries, and (y) by and between a Borrower and any of its
Foreign Subsidiaries, but excluding, for the avoidance of doubt, intercompany
trade payables and receivables with respect to goods and services generated in
the Ordinary Course of Business;

(e) Budget and Restatement of Expenses. Agent shall have received and reviewed
to its satisfaction a budget and forecast, prepared on a month to month basis,
for the period from the Closing Date through July 31, 2015, and for the period
from August 1, 2015 through July 31, 2016, of the anticipated restructuring and
restatement expenses (including all related legal costs and expenses) arising
from and relating to the SEC Inquiry;

(f) [reserved];

(g) Financial Condition Certificates. Agent shall have received an executed
Financial Condition Certificate in the form of Exhibit 8.1(g).

(h) Closing Certificate. Agent shall have received a closing certificate signed
by an Authorized Officer of each Borrower dated as of the date hereof, stating
that (i) all representations and warranties set forth in this Agreement and the
Other Documents are true and correct on and as of such date, and (ii) on such
date no Default or Event of Default has occurred or is continuing;

 

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(i) Borrowing Base. Agent shall have received evidence from Borrowers that the
aggregate amount of Eligible Receivables, Eligible Insured Foreign Receivables,
Eligible Uninsured Foreign Receivables and Eligible Inventory is sufficient in
value and amount to support Advances in the amount requested by Borrowers on the
Closing Date;

(j) Undrawn Availability. After giving effect to the initial Advances hereunder,
Borrowers shall have Undrawn Availability of at least $30,000,000;

(k) Blocked Accounts. Loan Parties shall have opened the Depository Accounts
with Agent or Agent shall have received duly executed agreements establishing
the Blocked Accounts with financial institutions acceptable to Agent for the
collection or servicing of the Receivables and proceeds of the Collateral and
Agent shall have entered into control agreements with the applicable financial
institutions in form and substance satisfactory to Agent with respect to such
Blocked Accounts;

(l) Filings, Registrations and Recordings. Each document (including any Uniform
Commercial Code financing statement) required by this Agreement, any related
agreement or under law or reasonably requested by the Agent to be filed,
registered or recorded in order to create, in favor of Agent, a perfected
security interest in or lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received
an acknowledgment copy, or other evidence reasonably satisfactory to it, of each
such filing, registration or recordation and satisfactory evidence of the
payment of any necessary fee, tax or expense relating thereto;

(m) Lien Waiver Agreements. Agent shall have received Lien Waiver Agreements
with respect to all locations or places at which Inventory is located and
Borrowers’ corporate headquarters, provided that if Borrowers shall fail to
deliver any such Lien Waiver Agreement with respect to any particular location
on the Closing Date, then Borrowers shall have an additional sixty (60) days
after the Closing Date to obtain such Lien Waiver Agreement; provided that,
notwithstanding anything to the contrary provided for in this Agreement, Agent
shall not establish a Rent Reserve with respect to any such location for which a
Lien Waiver Agreement has not yet been delivered until the end of such sixty
(60) day period;

(n) Secretary’s Certificates, Authorizing Resolutions and Good Standings of
Borrowers. Agent shall have received a certificate of the Secretary or Assistant
Secretary (or other equivalent officer, partner or manager) of each Borrower in
form and substance satisfactory to Agent dated as of the Closing Date which
shall certify (i) copies of resolutions in form and substance reasonably
satisfactory to Agent, of the board of directors (or other equivalent governing
body, member or partner) of such Borrower authorizing (x) the execution,
delivery and performance of this Agreement, the Notes and each Other Document to
which such Borrower is a party (including authorization of the incurrence of
indebtedness, borrowing of Revolving Advances and Swing Loans and requesting of
Letters of Credit on a joint and several basis with all Borrowers as provided
for herein), and (y) the granting by such Borrower of the security interests in
and liens upon the Collateral to secure all of the joint and several Obligations
of the Borrowers (and such certificate shall state that such resolutions have
not been amended, modified, revoked or rescinded as of the date of such
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signature of the officers of such Borrower authorized to execute this Agreement
and the Other Documents, (iii) copies of the Organizational Documents of such
Borrower as in effect on such date, complete with all amendments thereto, and
(iv) the good standing (or equivalent status) of such Borrower in its
jurisdiction of organization and each applicable jurisdiction where the conduct
of such Borrower’s business activities or the ownership of its properties
necessitates qualification, as evidenced by good standing certificate(s) (or the
equivalent thereof issued by any applicable jurisdiction) dated not more than
thirty (30) days prior to the Closing Date, issued by the Secretary of State or
other appropriate official of each such jurisdiction;

(o) Secretary’s Certificates, Authorizing Resolutions and Good Standings of
Guarantors. Agent shall have received a certificate of the Secretary or
Assistant Secretary (or other equivalent officer, partner or manager) of each
Guarantor in form and substance satisfactory to Agent dated as of the Closing
Date which shall certify (i) copies of resolutions in form and substance
reasonably satisfactory to Agent, of the board of directors (or other equivalent
governing body, member or partner) of each Guarantor authorizing (x) the
execution, delivery and performance of such Guarantor’s Guaranty and each Other
Loan Document to which such Guarantor is a party and (y) the granting by such
Guarantor of the security interests in and liens upon the Collateral to secure
its obligations under its Guaranty (and such certificate shall state that such
resolutions have not been amended, modified, revoked or rescinded as of the date
of such certificate), (ii) the incumbency and signature of the officers of such
Guarantor authorized to execute this Agreement and the Other Documents,
(iii) copies of the Organizational Documents of such Guarantor as in effect on
such date, complete with all amendments thereto, and (iv) the good standing (or
equivalent status) of such Guarantor in its jurisdiction of organization and
each applicable jurisdiction where the conduct of such Guarantor’s business
activities or the ownership of its properties necessitates qualification, as
evidenced by good standing certificate(s) (or the equivalent thereof issued by
any applicable jurisdiction) dated not more than thirty (30) days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
each such jurisdiction;

(p) Legal Opinion. Agent shall have received the executed legal opinion of
Bingham McCutchen LLP in form and substance satisfactory to Agent which shall
cover such matters incident to the transactions contemplated by this Agreement,
the Notes, the Other Documents, and related agreements as Agent may reasonably
require and each Loan Party hereby authorizes and directs such counsel to
deliver such opinions to Agent and Lenders;

(q) No Litigation. Except as otherwise disclosed in the publicly filed
statements of ModusLink Parent, (i) no litigation, investigation or proceeding
before or by any arbitrator or Governmental Body (collectively a “Proceeding”)
shall be continuing or threatened against ModusLink Parent, any Borrower, or any
Subsidiary or against the officers or directors of ModusLink Parent, any
Borrower, or any Subsidiary and no such Proceeding shall be continued or
threatened against ModusLink Parent, any Borrower, or any Subsidiary or against
the officers or directors of ModusLink Parent, any Borrower, or any Subsidiary
(A) in connection with this Agreement, the Other Documents, or any of the
transactions contemplated thereby and which, in the reasonable opinion of Agent,
is deemed material or (B) which could, in the reasonable opinion of Agent,
reasonably be expected to have a Material Adverse Effect; and (ii) no
injunction, writ, restraining order or other order of any nature materially
adverse to any Borrower or Guarantor or the conduct of its business or
inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body which, in the reasonable opinion of Agent, could
reasonably be expected to have a Material Adverse Effect;

 

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(r) Collateral Examination. Agent shall have completed Collateral examinations
and received appraisals, the results of which shall be reasonably satisfactory
in form and substance to Agent, of the Receivables, Inventory, General
Intangibles, and equipment of each Loan Party and all books and records in
connection therewith. Without limiting the generality of the foregoing, such
examination shall include (i) on a best efforts basis, verification of payment
of certain invoices discussed prior to the Closing Date between Agent and
Borrowers, (ii) a calculation of inventory turnover, (iii) gross margin testing
and (iv) verification of property and sales tax payments;

(s) Fees. Agent shall have received all fees payable to Agent and Lenders on or
prior to the Closing Date hereunder, including pursuant to Article III hereof;

(t) Pro Forma Financial Statements. Agent shall have received a copy of the Pro
Forma Financial Statements which shall be satisfactory in all respects to Agent;

(u) Insurance; Foreign Credit Insurance. Agent shall have received in form and
substance satisfactory to Agent, (i) evidence that adequate insurance, including
without limitation, casualty and liability insurance, and a policy or policies
insuring the payment and collection of Eligible Insured Foreign Receivables
required to be maintained under this Agreement is in full force and effect,
(ii) insurance certificates issued by Loan Parties’ insurance broker containing
such information regarding Loan Parties’ casualty and liability insurance
policies, and foreign credit insurance policies, in each case as Agent shall
reasonably request and naming Agent as an additional insured, lenders loss payee
and/or mortgagee, as applicable, and (iii) loss payable endorsements issued by
Loan Parties’ insurer naming Agent as lenders loss payee and mortgagee and/or as
beneficiary or additional insured, as applicable;

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

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

(x) No Material Adverse Change. (i) Since January 31, 2014, there shall not have
occurred any event, condition or state of facts which could reasonably be
expected to have a Material Adverse Effect and (ii) no representations made or
information supplied to Agent or Lenders shall have been proven to be inaccurate
or misleading in any material respect;

(y) Contract Review. Agent shall have received and reviewed all Material
Contracts of Borrowers including leases, union contracts, labor contracts,
vendor supply contracts, license agreements and distributorship agreements and
such contracts and agreements shall be satisfactory in all respects to Agent;

 

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(z) Compliance with Laws. Agent shall be reasonably satisfied that each Loan
Party is in compliance in all material respects with all pertinent federal,
state, local or territorial regulations, including those with respect to the
Federal Occupational Safety and Health Act, the Environmental Protection Act,
ERISA and the Anti-Terrorism Laws;

(aa) [Reserved];

(bb) Subordinated Intercompany Line of Credit Note. The Agent shall have
received and reviewed to its satisfaction a true and complete copy of the
Subordinated Intercompany Line of Credit Note; and

(cc) Other. All corporate and other proceedings, and all documents, instruments
and other legal matters in connection with the Transactions shall be
satisfactory in form and substance to Agent and its counsel.

8.2. Conditions to Each Advance. The agreement of Lenders to make any Advance
requested to be made on any date (including the initial Advance), is subject to
the satisfaction of the following conditions precedent as of the date such
Advance is made:

(a) Representations and Warranties. Each of the representations and warranties
made by any Loan Party in or pursuant to this Agreement, the Other Documents and
any related agreements to which it is a party, and each of the representations
and warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement, the
Other Documents or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date
(except to the extent any such representation or warranty expressly relates only
to any earlier and/or specified date);

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

(c) Maximum Advances. In the case of any type of Advance requested to be made,
after giving effect thereto, the aggregate amount of such type of Advance shall
not exceed the maximum amount of such type of Advance permitted under this
Agreement.

Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Loan Party as of the date of such Advance
that the conditions contained in this subsection shall have been satisfied.

8.3. Post-Closing Covenants/Conditions. Loan Parties hereby acknowledge and
agree that Agent and Lenders have agreed to execute and deliver this Agreement
and make the initial Advances hereunder notwithstanding the fact that certain
conditions precedent more fully described in this Section 8.3 have not been met
as of the Closing Date, and Loan Parties hereby covenant and agree to satisfy
each of such conditions no later than the respective deadlines for each such
condition set forth below as follows (and provided further for the avoidance of
doubt

 

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that any failure by Loan Parties to comply with the provisions of this
Section 8.3 shall constitute an Event of Default under Section 10.5(i) hereof):

(a) Notwithstanding anything to the contrary provided for in this Agreement or
any Other Document, specifically including any Pledge Agreement, no Loan Party
shall be required to pledge any Equity Interests of any Subsidiary organized
under the laws of Hungary provided that and so long as (x) each such Hungarian
Subsidiary is and remains an inactive Subsidiary with only de minimis assets and
liabilities and no business activities (and each Loan Party hereby represents
and warrants to Agent and Lender that each such Hungarian Subsidiary is such an
inactive Subsidiary and hereby covenants that, until satisfaction in full of the
Obligations and the termination of this Agreement, such Loan Party shall not
allow any such Hungarian Subsidiary to cease to be such an inactive Subsidiary),
(y) without limiting the generality of Section 7.2 hereof, no Loan Party shall
create, grant, pledge or suffer to exist any voluntary Lien with respect to any
Equity Interests of any such Hungarian Subsidiary and (z) in the event that that
local laws of Hungary shall change such that a pledge of less than one hundred
percent (100%) of the Equity Interest of such a Hungarian Subsidiary is
permitted under applicable Hungarian law, Loan Parties shall promptly give
notice of such change in law to Agent and shall upon request of Agent promptly
take all actions requested by Agent in its Permitted Discretion to grant, pledge
and create a Lien in favor of Agent for the benefit of Secured Parties in the
Subsidiary Stock of such Hungarian Subsidiary (and upon completion of such
actions with respect to any Hungarian Subsidiary, the provisions of clause
(x) of this paragraph shall no longer apply with respect to such Hungarian
Subsidiary).

 

IX. INFORMATION AS TO LOAN PARTIES.

Each Loan Party shall, or (except with respect to Section 9.11) shall cause
Borrowing Agent on its behalf to, until satisfaction in full of the Obligations
and the termination of this Agreement:

9.1. Disclosure of Material Matters. Immediately upon learning thereof, report
to Agent all matters materially affecting the value, enforceability or
collectability of any portion of the Collateral, including any Loan Party’s
reclamation or repossession of, or the return to any Loan Party of, a material
amount of goods or claims or disputes asserted by any Customer or other obligor.

9.2. Schedules. Deliver to Agent (i) on or before the thirtieth (30th) day of
each month as and for the prior month (a) accounts receivable ageings inclusive
of reconciliations to the general ledger, (b) accounts payable schedules
inclusive of reconciliations to the general ledger, (c) Inventory reports, (d) a
Borrowing Base Certificate in form and substance satisfactory to Agent (which
shall be calculated as of the last day of the prior month and which shall not be
binding upon Agent or restrictive of Agent’s rights under this Agreement) and
(e) a balance of, and summary of changes to, the accrual rebate reserve account,
and, (ii) on or before Tuesday of each week, a sales and collections report /
roll forward for the prior week in form and format consistent with such weekly
reports provided by Loan Parties to Agent prior to the Closing Date. In
addition, each Loan Party will deliver to Agent at such intervals as Agent may
reasonably require: (i) confirmatory assignment schedules; (ii) copies of
Customer’s invoices; (iii) evidence of shipment or delivery; and (iv) such
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the Collateral as Agent may require including trial balances and test
verifications. Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable, all in the name of
the Borrower, unless an Event of Default has occurred and is continuing, in
which case Agent may conduct any such confirmation or verification of
Receivables in such other name or names as Agent may reasonably determine to be
necessary, and do whatever it may deem reasonably necessary to protect its
interests hereunder. The items to be provided under this Section are to be in
form satisfactory to Agent and executed by each Loan Party and delivered to
Agent from time to time solely for Agent’s convenience in maintaining records of
the Collateral, and any Loan Party’s failure to deliver any of such items to
Agent shall not affect, terminate, modify or otherwise limit Agent’s Lien with
respect to the Collateral. Unless otherwise agreed to by Agent, the items to be
provided under this Section 9.2 shall be delivered to the Agent by the specific
method of Approved Electronic Communication designated by Agent.

9.3. Environmental Reports.

(a) Furnish Agent, concurrently with the delivery of the financial statements
referred to in Section 9.7 and Section 9.9 (but in the case of such financial
statements referred to in Section 9.9, only such monthly financial statements
that coincide with the last month in each fiscal quarter), with a certificate
signed by an Authorized Officer of Borrowing Agent stating, to the best of his
knowledge that each Loan Party is in compliance in all material respects with
all federal, state and local Environmental Laws, except where such noncompliance
does not constitute an Event of Default or would not reasonably be expected to
have a Material Adverse Effect. To the extent any Loan Party is not in
compliance with the foregoing laws, except where such non-compliance does not
constitute an Event of Default or would not reasonably be expected to have a
Material Adverse Effect, the certificate shall set forth with specificity all
areas of non-compliance and the proposed action such Loan Party will implement
in order to achieve full compliance.

(b) In the event any Loan Party obtains, gives or receives notice of any Release
or threat of Release of a reportable quantity of any Hazardous Materials at the
Real Property (any such event being hereinafter referred to as a “Hazardous
Discharge”) or receives any notice of violation, request for information or
notification that it is potentially responsible for investigation or cleanup of
environmental conditions at the Real Property, demand letter or complaint,
order, citation, or other written notice with regard to any Hazardous Discharge
or violation of Environmental Laws affecting the Real Property or any Loan
Party’s interest therein or the operations or the business (any of the foregoing
is referred to herein as an “Environmental Complaint”) from any Person,
including any Governmental Body, then Borrowing Agent shall, within five
(5) Business Days, give written notice of same to Agent detailing facts and
circumstances of which any Loan Party is aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to be provided to
allow Agent to protect its security interest in and Lien on the Collateral and
is not intended to create nor shall it create any obligation upon Agent or any
Lender with respect thereto.

(c) Borrowing Agent shall promptly forward to Agent copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
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site owned, operated or used by any Loan Party to manage of Hazardous Materials
and shall continue to forward copies of correspondence between any Loan Party
and the Governmental Body regarding such claims to Agent until the claim is
settled. Borrowing Agent shall promptly forward to Agent copies of all documents
and reports concerning a Hazardous Discharge or Environmental Complaint at the
Real Property, operations or business that any Loan Party is required to file
under any Environmental Laws. Such information is to be provided solely to allow
Agent to protect Agent’s security interest in and Lien on the Collateral.

9.4. Litigation. Promptly notify Agent in writing of any claim, litigation, suit
or administrative proceeding affecting any Borrower or ModusLink Parent or any
Subsidiary of either, whether or not the claim is covered by insurance, and of
any litigation, suit or administrative proceeding, which in any such case
affects the Collateral or which could reasonably be expected to have a Material
Adverse Effect.

9.5. Material Occurrences. Promptly notify Agent in writing upon the occurrence
of: (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any Loan
Party as of the date of such statements; (c) any funding deficiency which, if
not corrected as provided in Section 4971 of the Code, could reasonably be
expected to subject any Loan Party or any member of the Controlled Group to a
tax imposed by Section 4971 of the Code; (d) each and every default by any Loan
Party which might result in the acceleration of the maturity of any Indebtedness
in excess of $100,000 in principal amount, including the names and addresses of
the holders of such Indebtedness with respect to which there is a default
existing or with respect to which the maturity has been or could be accelerated,
and the amount of such Indebtedness; and (e) any other development in the
business or affairs of any Borrower or any Guarantor, which could reasonably be
expected to have a Material Adverse Effect; in each case describing the nature
thereof and the action Loan Parties propose to take with respect thereto.

9.6. Government Receivables. Notify Agent immediately if any of its Receivables
arise out of contracts between any Loan Party and the United States, any state,
or any department, agency or instrumentality of any of them.

9.7. Annual Financial Statements. Furnish Agent and Lenders within ninety
(90) days after the end of the fiscal year of (i) ModusLink Parent ending on
July 31, 2014, financial statements of ModusLink Parent and its Subsidiaries on
a consolidating and consolidated basis, including, but not limited to,
consolidated and consolidating statements of income and stockholders’ equity and
cash flow from the beginning of the current fiscal year to the end of such
fiscal year and consolidated and consolidating balance sheets as at the end of
such fiscal year, all prepared in accordance with GAAP applied on a basis
consistent with prior practices, and in reasonable detail and, in the case of
such consolidated financial statements, reported upon without qualification by
an independent certified public accounting firm selected by Loan Parties and
reasonably satisfactory to Agent (the “Accountants”), it being understood that
BDO USA, LLP is acceptable to Agent, all accompanied by the Compliance
Certificate relating thereto required by the final sentence of this Section 9.7,
and (ii) Borrowers ending on July 31, 2015, and each fiscal year thereafter,
financial statements of each Borrower and its Subsidiaries on a consolidated and
consolidating basis, and of such Borrowers and their Subsidiaries on a

 

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combined and combining basis, including but not limited to consolidating and
consolidated statements of income and stockholders’ equity and cash flow from
the beginning of the current fiscal year to the end of such fiscal year and
consolidated and consolidating balance sheets as at the end of such fiscal year,
all prepared in accordance with GAAP applied on basis consistent with prior
practices, and in reasonable detail and, in the case of such consolidated and
combined financial statements, reported upon without qualification by the
Accountants, all accompanied by the Compliance Certificate relating thereto
required by the final sentence of this Section 9.7 (for the avoidance of doubt,
all consolidating and/or combining financial statements provided under this
Section 9.7 shall be unaudited). In addition, the reports shall be accompanied
by a Compliance Certificate, which shall include, with respect to the Compliance
Certificate accompanying all such reports delivered after the Financial
Reporting Changeover Date, accurate calculations and reporting, according to a
methodology reasonably satisfactory to Agent in all respects, of Domestic US
EBITDA and Non-Domestic US EBITDA, and of Domestic US Excess Cash Flow and
Non-Domestic US Excess Cash Flow for such fiscal year.

9.8. [RESERVED].

9.9. Monthly Financial Statements. Furnish Agent and Lenders within thirty
(30) days after the end of (i) each month ending after the Closing Date but
prior to the Financial Reporting Changeover Date, an unaudited balance sheet of
ModusLink Parent and its Subsidiaries on a consolidated and consolidating basis,
and unaudited statements of income of ModusLink Parent and its Subsidiaries on a
consolidated and consolidating basis), all accompanied by the Compliance
Certificate relating thereto required by the final sentence of this Section 9.9,
and (ii) each month ending on or after the Financial Reporting Changeover Date,
an unaudited balance sheet of each Borrower and its Subsidiaries on a
consolidated and consolidating basis, and of such Borrowers and their
Subsidiaries on a combined and combining basis, and unaudited statements of
income each Borrower and its Subsidiaries on a consolidated and consolidating
basis, and of such Borrowers and their Subsidiaries on a combined and combining
basis), all accompanied by the Compliance Certificate relating thereto required
by the final sentence of this Section 9.9, in each case under the preceding
clauses (i) and (ii) reflecting results of operations for ModusLink Parent and
its Subsidiaries (in the case of clause (i)) or Borrowers and their Subsidiaries
(in the case of clause (ii)) from the beginning of the fiscal year to the end of
such month and for such month (and, in the case of any such monthly financial
statements delivered under clause (ii) for the first through eleventh months
ending after the Financial Reporting Changeover Date, for the trailing twelve
month period ending with such month), prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to the
absence of footnotes and normal and recurring year-end adjustments that
individually and in the aggregate are not material to Loan Parties’ business
operations and setting forth in comparative form the respective financial
statements for the corresponding date and period in the previous fiscal year.
The reports shall be accompanied by a Compliance Certificate which shall
include, with respect to the Compliance Certificate accompanying all such
reports delivered after the Financial Reporting Changeover Date, accurate
calculations and reporting, according to a methodology reasonably satisfactory
to Agent in all respects, of Domestic US EBITDA and Non-Domestic US EBITDA, and
of Domestic US Excess Cash Flow and Non-Domestic US Excess Cash Flow for the
periods reported on in such financial statements.

 

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9.10. Other Reports. Furnish Agent as soon as available, but in any event within
ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as each ModusLink Parent and Borrower shall send
to the stockholders of ModusLink Parent, it being understood that any document,
report or other information that is not expressly required to be delivered in
physical form and that is filed by ModusLink Parent with the SEC shall be deemed
delivered to Agent as soon as it becomes publicly available on the SEC’s
website.

9.11. Additional Information. Furnish Agent with such additional information as
Agent shall reasonably request in order to enable Agent to determine whether the
terms, covenants, provisions and conditions of this Agreement and the Other
Documents have been complied with by Loan Parties including, without the
necessity of any request by Agent, (a) copies of all environmental audits and
reviews, (b) at least ten (10) days prior thereto notice of any Loan Party’s
opening of any new office or place of business which will serve as the Loan
Parties’ chief executive office or as a location where Inventory will be
maintained, or any Loan Party’s closing of any existing office or place of
business, and (c) promptly upon any Loan Party’s learning thereof, notice of any
labor dispute to which any Loan Party may become a party, any strikes or
walkouts relating to any of its plants or other facilities, and the expiration
of any labor contract to which any Loan Party is a party or by which any Loan
Party is bound.

9.12. Projected Operating Budget. Furnish Agent and Lenders, no later than
forty-five (45) days after the beginning of each Borrower’s fiscal years
commencing with the fiscal year beginning on August 1, 2014, a month by month
projected operating budget and cash flow of Borrowers on a consolidated and
consolidating basis and combining and combined for such fiscal year (including
an income statement for each month and a balance sheet as at the end of the last
month in each fiscal quarter), such projections to be accompanied by a
certificate signed by an Authorized Officer of each Borrower to the effect that
(a) such projections are based on underlying assumptions which were believed to
be reasonable as of the date made, and reflect the Borrowers’ judgment, based on
assumptions which were believed to be reasonable at the time made regarding what
was believed to be at such time a reasonably likely operating budget for the
projected period, and (b) confirming nothing has occurred in the interval
between the date of determination of the reasonableness of the assumptions
referenced above and the date of the delivery of such projections to Agent to
render the Borrowers’ belief regarding the foregoing assumptions no longer
reasonable; provided, however, since such projections are by their nature
prospective and contingent on a wide range of factors, actual results therefore
may vary significantly; provided further, that notwithstanding the foregoing,
the projections to be delivered for the fiscal year beginning on August 1, 2014
shall be those of ModusLink Parent on a consolidated and consolidating basis.

9.13. Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.9, a
written report summarizing all material variances from budgets submitted by
Borrowers pursuant to Section 9.12 and a discussion and analysis by management
with respect to such variances.

9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt written notice
of (i) any lapse or other termination of any Consent issued to ModusLink Parent
or any Loan Party by any Governmental Body or any other Person that is material
to the operation of any Loan Party’s business, (ii) any refusal by any
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such Consent; and (iii) copies of any periodic or special reports filed by
ModusLink Parent or any Borrower or any Guarantor with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of any Borrower or any Guarantor, or if copies
thereof are requested by Lender, and (iv) copies of any material notices and
other communications from any Governmental Body or Person which specifically
relate to ModusLink Parent or any Borrower or any Guarantor.

9.15. ERISA Notices and Requests. Furnish Agent with prompt written notice in
the event that (i) any Loan Party or any member of the Controlled Group knows or
has reason to know that a Termination Event has occurred, together with a
written statement describing such Termination Event and the action, if any,
which such Loan Party or any member of the Controlled Group has taken, is
taking, or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, Department of Labor or PBGC
with respect thereto, (ii) any Loan Party knows or has reason to know that a
prohibited transaction (as defined in Section 406 of ERISA or 4975 of the Code)
has occurred that could reasonably be expected to result in a material liability
to any Loan Party, together with a written statement describing such transaction
and the action which such Loan Party has taken, is taking or proposes to take
with respect thereto, (iii) a funding waiver request has been filed with respect
to any Pension Benefit Plan together with all communications received by any
Loan Party or any member of the Controlled Group with respect to such request,
(iv) any increase in the benefits of any existing Plan that could reasonably be
expected to result in a material liability to any Loan Party or any member of
the Controlled Group, or the establishment of any new Plan or the commencement
of contributions to any Plan to which any Loan Party or any member of the
Controlled Group was not previously contributing shall occur that could
reasonably be expected to result in a material liability to any Loan Party or
any member of the Controlled Group, (v) any Loan Party or any member of the
Controlled Group shall receive from the PBGC a notice of intention to terminate
a Pension Benefit Plan or Multiemployer Plan or to have a trustee appointed to
administer a Pension Benefit Plan or Multiemployer Plan, together with copies of
each such notice, (vi) any Loan Party or any member of the Controlled Group
shall receive any notification from the Internal Revenue Service indicating that
a Plan intended to be qualified under Section 401(a) of the Code is not so
qualified, together with copies of each such notification; (vii) any Loan Party
or any member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability that could reasonably be expected to result
in a material liability to any Loan Party or any member of the Controlled Group,
together with copies of each such notice; (viii) any Loan Party or any member of
the Controlled Group shall fail to make a required installment or any other
required payment under the Code or ERISA on or before the due date for such
installment or payment; or (ix) any Loan Party or any member of the Controlled
Group knows that (a) a Multiemployer Plan has been terminated, (b) the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan or (d) a
Multiemployer Plan is in “endangered” or “critical” status, as described in
Section 432 of the Code or Section 305 of ERISA.

9.16. Additional Documents. Execute and deliver to Agent, upon request, such
documents and agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.

 

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9.17. Updates to Certain Schedules. Deliver to Agent promptly as shall be
required to maintain the related representations and warranties as true and
correct, updates to Schedules 4.4 (Locations of equipment and Inventory), 5.9
(Intellectual Property), 5.22 (Equity Interests), 5.23 (Commercial Tort Claims),
and 5.24 (Letter-of-Credit Rights); provided, that absent the occurrence and
continuance of any Event of Default, Loan Parties shall only be required to
provide such updates on a quarterly basis, concurrently with delivery of a
Compliance Certificate with respect to the last month occurring in the
applicable fiscal quarter. Any such updated Schedules delivered by Loan Parties
to Agent in accordance with this Section 9.17 shall automatically and
immediately be deemed to amend and restate the prior version of such Schedule
previously delivered to Agent and attached to and made part of this Agreement.

9.18. Distributions of Cash to ModusLink Parent. No later than thirty (30) days
following the Closing Date, Borrowers shall deliver to Agent a certificate
certifying (x) a final schedule of amount of each distribution of cash made by a
Foreign Subsidiary of ModusLink Parent pursuant to Section 7.7(e), together with
the wiring information and evidence of completion of the wire transaction
applicable to each such distribution, and (y) that each such distribution was
made in accordance with Section 7.7(e) hereof and that after giving effect to
all such distributions, the total aggregate amount of unrestricted cash balances
actually held by of all of the Foreign Subsidiaries of all Borrowers, on a
combined basis, is not less than $10,000,000 in the aggregate, together with
evidence of such cash balances reasonably satisfactory to Agent.

9.19. Financial Disclosure. Each Loan Party hereby irrevocably authorizes and
directs all accountants and auditors employed by such Loan Party at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
such Loan Party’s financial statements, trial balances or other accounting
records of any sort in the accountant’s or auditor’s possession, and to disclose
to Agent and each Lender any information such accountants may have concerning
such Loan Party’s financial status and business operations. Each Loan Party
hereby authorizes all Governmental Bodies to furnish to Agent and each Lender
copies of reports or examinations relating to such Loan Party, whether made by
such Loan Party or otherwise; however, Agent and each Lender will attempt to
obtain such information or materials directly from such Loan Party prior to
obtaining such information or materials from such accountants or Governmental
Bodies.

 

X. EVENTS OF DEFAULT.

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

10.1. Nonpayment. Failure by any Loan Party to pay when due any principal or
interest on the Obligations (including without limitation pursuant to
Section 2.9), or any other fee, charge, amount or liability provided for herein
or in any Other Document, in each case whether at maturity, by reason of
acceleration pursuant to the terms of this Agreement, by notice of intention to
prepay or by required prepayment, provided that, notwithstanding the foregoing,
if any such failure described in this Section 10.1 is on account of the failure
to immediately pay excess Advances as described in Section 2.9, then such
failure shall not constitute an Event of Default unless it continues without
cure for more than two (2) Business Days following the occurrence thereof,
provided further that the cure right provided in this Section 10.1 may be

 

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utilized not more than two (2) times in any consecutive period of 365 days and
not more than ten (10) times during the Term, and each exercise of such cure
right shall not exceed the amount necessary to repay the applicable excess
Advances in full.

10.2. Breach of Representation. Any representation or warranty made or deemed
made by any Borrower or any Guarantor in this Agreement, any Other Document or
any related agreement or in any certificate, document or financial or other
statement furnished at any time in connection herewith or therewith shall prove
to have been incorrect or misleading in any material respect on the date when
made or deemed to have been made;

10.3. Financial Information. Failure by any Loan Party to (i) furnish financial
or collateral information when due or when requested, or (ii) permit the
inspection of its books or records or access to its premises for audits and
appraisals in accordance with the terms hereof;

10.4. Judicial Actions. Issuance of a notice of Lien, levy or assessment (other
than (x) a Lien that constitutes a Permitted Encumbrance, or (y) a Lien that
does not constitute a Permitted Encumbrance, or a levy or assessment, with
respect to which, in each case under this clause (y), the underlying
indebtedness or obligation, singly or in the aggregate, is of a de minimis
amount), injunction or attachment (a) against any Loan Party’s Inventory or
Receivables or (b) against a material portion of any Loan Party’s other property
which is not stayed or lifted within thirty (30) days;

10.5. Noncompliance. Except as otherwise provided for in Sections 10.1, 10.3 and
10.18, (i) failure or neglect of any Loan Party to perform, keep or observe any
term, provision, condition or covenant contained in (x) Section 6.5 or Article
VII, or (y) Sections 4.5, 6.1, 6.3, 6.6, 6.11, 6.12, 6.13, 9.4 or 9.6 hereof
which is not cured within ten (10) days from the occurrence of such failure or
neglect or (ii) except as otherwise provided in Section 10.5 (i), failure or
neglect of any Borrower or any Guarantor or any Person to perform, keep or
observe any term, provision, condition, covenant herein contained, or contained
in any other section of this Agreement or contained in any Other Document or any
other agreement or arrangement, now or hereafter entered into between any
Borrower or any Guarantor or such Person, and Agent or any Lender which is not
cured within twenty (20) days from the occurrence of such failure or neglect;

10.6. Judgments. Any (a) judgment or judgments, writ(s), order(s) or decree(s)
for the payment of money are rendered against any Borrower or any Guarantor for
an aggregate amount in excess of $2,500,000 or against all Borrowers or
Guarantors for an aggregate amount in excess of $2,500,000, excluding any such
amount covered by insurance as to which the insurer with respect thereto has not
declined or disputed coverage and (b) (i) action shall be legally taken by any
judgment creditor to levy upon assets or properties of any Borrower or any
Guarantor to enforce any such judgment, (ii) such judgment shall remain
undischarged for a period of thirty (30) consecutive days during which a stay of
enforcement of such judgment, by reason of a pending appeal or otherwise, shall
not be in effect, or (iii) any Liens arising by virtue of the rendition, entry
or issuance of such judgment upon assets or properties of any Borrower or any
Guarantor shall be senior to any Liens in favor of Agent on such assets or
properties;

 

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10.7. Bankruptcy. ModusLink Parent, any Borrower, any Guarantor or any
Subsidiary of any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy or receivership laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent
(including by entry of any order for relief in any involuntary bankruptcy or
insolvency proceeding commenced against it), (vi) file a petition seeking to
take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, within sixty (60) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
provided that, in the case of any of the foregoing with respect to any Foreign
Subsidiary of any Loan Party, no Event of Default shall be deemed to occur
hereunder as a result of such occurrence unless such occurrence and any
Insolvency Proceedings arising therefrom would reasonably be expected to have a
Material Adverse Effect;

10.8. [RESERVED].

10.9. Lien Priority. Any Lien created hereunder or provided for hereby or under
any related agreement with respect to any Collateral with an aggregate fair
market value in excess of $1,000,000 for any reason ceases to be or is not a
valid and perfected Lien having a first priority interest (subject only to
Permitted Encumbrances that have priority as a matter of Applicable Law to the
extent such Liens only attach to Collateral other than Receivables or
Inventory);

10.10. [RESERVED];

10.11. Cross Default. Either (x) any specified “event of default” under any
Indebtedness (other than the Obligations) of any Loan Party with a
then-outstanding principal balance (or, in the case of any Indebtedness not so
denominated, with a then-outstanding total obligation amount) of $2,500,000 or
more, or any other event or circumstance which would permit the holder of any
such Indebtedness of any Loan Party to accelerate such Indebtedness (and/or the
obligations of Loan Party thereunder) prior to the scheduled maturity or
termination thereof, shall occur (regardless of whether the holder of such
Indebtedness shall actually accelerate, terminate or otherwise exercise any
rights or remedies with respect to such Indebtedness) or (y) a default of the
obligations of any Loan Party under any other agreement to which it is a party
shall occur which has or is reasonably likely to have a Material Adverse Effect;

10.12. Breach of Guaranty or Pledge Agreement. Termination or breach of any
Guaranty, Guarantor Security Agreement, Pledge Agreement or similar agreement
executed and delivered to Agent in connection with the Obligations, or if any
Guarantor or pledgor attempts to terminate, challenges the validity of, or its
liability under, any such Guaranty, Guarantor Security Agreement, Pledge
Agreement or similar agreement;

10.13. Change of Control. Any Change of Control shall occur;

 

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10.14. Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on any Borrower or
any Guarantor, or any Borrower or any Guarantor shall so claim in writing to
Agent or any Lender or any Borrower challenges the validity of or its liability
under this Agreement or any Other Document;

10.15. Seizures. Any (a) portion of the Collateral with an aggregate fair market
value in excess of $1,000,000 shall be seized, subject to garnishment or taken
by a Governmental Body, or any Borrower or any Guarantor, or (b) the title and
rights of any Borrower or any Guarantor which is the owner of any portion of the
Collateral with an aggregate fair market value in excess of $1,000,000 shall
have become the subject matter of claim, litigation, suit, garnishment or other
proceeding which might, in the opinion of Agent, upon final determination,
result in impairment or loss of the security provided by this Agreement or the
Other Documents;

10.16. Operations. The operations of any material manufacturing/operating
facility of any Borrower or any Guarantor are interrupted (other than in
connection with any regularly scheduled shutdown for employee vacations and/or
maintenance in the Ordinary Course of Business) at any time for more than
fifteen (15) consecutive days, unless such Borrower or Guarantor shall (i) be
entitled to receive for such period of interruption, proceeds of business
interruption insurance sufficient to assure that its per diem cash needs during
such period is at least equal to its average per diem cash needs for the
consecutive three month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in clause
(i) preceding not later than thirty-five (35) days following the initial date of
any such interruption; provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this section,

(i) Subject to subclause (ii) below, an Event of Default shall be deemed to have
occurred if such Borrower or Guarantor shall be receiving the proceeds of
business interruption insurance for a period of sixty (60) consecutive days, and

(ii) Notwithstanding anything to the contrary in this Section 10.16 including
the preceding subclause (i) above, interruption of operations at any facility of
any Borrower or Guarantor shall not constitute an Event of Default hereunder if,
within sixty (60) days of such interruption, the operations previously conducted
at such facility have been restarted or resumed at, moved to or substantially
replaced at, one or more new or existing facilities of Borrowers or Guarantors
(as applicable); and

(iii) Without limiting the generality of anything in Section 11.1 or Section 8.2
hereof, in the event of any such interruption of operations at any material
manufacturing/operating facility of any Borrower or any Guarantor that continues
for more than five (5) consecutive days, during the period from the sixth
consecutive day of such interruption through the earlier of (x) the date such
interruption is ended or such operations are restarted, resumed, moved to or
replaced at another facility in accordance with the preceding subclause (ii) or
(y) the sixtieth such consecutive day of such interruption, Lenders and Issuer
shall have no obligation or duty to make any further Advances or issue any
further Letters of Credit to the extent that, after giving effect thereto,
Undrawn Availability would be less than $5,000,000; or

 

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10.17. Pension Plans. An event or condition specified in Section 7.16 hereof, or
an event or condition for which notice is required under Section 9.15 hereof,
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Loan Party or
any member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect.

10.18. Anti-Money Laundering/International Trade Law Compliance. Any
representation or warranty or covenant contained in Section 16.18 is or becomes
false or misleading at any time.

 

XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

11.1. Rights and Remedies.

(a) Upon the occurrence of: (i) an Event of Default pursuant to Section 10.7
(other than Section 10.7(vii)), all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated, (ii) any of the other Events of Default and at any time
thereafter, at the option of Agent or at the direction of Required Lenders all
Obligations shall be immediately due and payable and Agent or Required Lenders
shall have the right to terminate this Agreement and to terminate the obligation
of Lenders to make Advances; and (iii) without limiting Section 8.2 hereof, any
Default under Sections 10.7(vii) hereof, the obligation of Lenders to make
Advances hereunder shall be suspended until such time as such involuntary
petition shall be dismissed. Upon the occurrence of any Event of Default, Agent
shall have the right to exercise any and all rights and remedies provided for
herein, under the Other Documents, under the Uniform Commercial Code and at law
or equity generally, including the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Agent may enter any of any Loan Party’s
premises or other premises without legal process and without incurring liability
to any Loan Party therefor, and Agent may thereupon, or at any time thereafter,
in its discretion without notice or demand, take the Collateral and remove the
same to such place as Agent may deem advisable and Agent may require Loan
Parties to make the Collateral available to Agent at a convenient place. With or
without having the Collateral at the time or place of sale, Agent may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Agent may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Agent shall
give Loan Parties reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrowing Agent at least ten
(10) days prior to such sale or sales is reasonable notification. At any public
sale Agent or any Lender may bid (including credit bid) for and become the
purchaser, and Agent, any Lender or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and all such
claims, rights and equities are hereby expressly waived and released by each
Loan Party. In connection with the exercise of the foregoing remedies, including
the sale of Inventory, Agent is granted a perpetual nonrevocable, royalty free,
nonexclusive license and Agent is granted permission to use all of each Loan

 

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Party’s (a) Intellectual Property which is used or useful in connection with
Inventory for the purpose of marketing, advertising for sale and selling or
otherwise disposing of such Inventory, provided that (x) such license shall be
exercisable only for so long as an Event of Default is continuing and (y) such
license shall terminate upon the payment in full of all Obligations and
(b) equipment for the purpose of completing the manufacture of unfinished goods.
The cash proceeds realized from the sale of any Collateral shall be applied to
the Obligations in the order set forth in Section 11.5 hereof. Noncash proceeds
will only be applied to the Obligations as they are converted into cash. If any
deficiency shall arise, Loan Parties shall remain liable to Agent and Lenders
therefor.

(b) To the extent that Applicable Law imposes duties on the Agent to exercise
remedies in a commercially reasonable manner, each Loan Party acknowledges and
agrees that it is not commercially unreasonable for the Agent: (i) to fail to
incur expenses reasonably deemed significant by the Agent to prepare Collateral
for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition; (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected
or disposed of; (iii) to fail to exercise collection remedies against Customers
or other Persons obligated on Collateral or to remove Liens on or any adverse
claims against Collateral; (iv) to exercise collection remedies against
Customers and other Persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists; (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature; (vi) to contact other
Persons, whether or not in the same business as any Loan Party, for expressions
of interest in acquiring all or any portion of such Collateral; (vii) to hire
one or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature; (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets; (ix) to dispose of assets
in wholesale rather than retail markets; (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure the Agent against risks of loss, collection or
disposition of Collateral or to provide to the Agent a guaranteed return from
the collection or disposition of Collateral; or (xii) to the extent deemed
appropriate by the Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Agent in the
collection or disposition of any of the Collateral. Each Loan Party acknowledges
that the purpose of this Section 11.1(b) is to provide non-exhaustive
indications of what actions or omissions by the Agent would not be commercially
unreasonable in the Agent’s exercise of remedies against the Collateral and that
other actions or omissions by the Agent shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section 11.1(b).
Without limitation upon the foregoing, nothing contained in this Section 11.1(b)
shall be construed to grant any rights to any Loan Party or to impose any duties
on Agent that would not have been granted or imposed by this Agreement or by
Applicable Law in the absence of this Section 11.1(b).

11.2. Agent’s Discretion. Agent shall have the right in its sole discretion to
determine which rights, Liens, security interests or remedies Agent may at any
time pursue, relinquish, subordinate, or modify, which procedures, timing and
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other action to take with respect to any or all of the Collateral and in what
order, thereto and such determination will not in any way modify or affect any
of Agent’s or Lenders’ rights hereunder as against Loan Parties or each other.

11.3. Setoff. Subject to Section 14.13, in addition to any other rights which
Agent or any Lender may have under Applicable Law, upon the occurrence of an
Event of Default hereunder, Agent and such Lender shall have a right,
immediately and without notice of any kind, to apply any Loan Party’s property
held by Agent and such Lender or any of their Affiliates to reduce the
Obligations and to exercise any and all rights of setoff which may be available
to Agent and such Lender with respect to any deposits held by Agent or such
Lender.

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

11.5. Allocation of Payments After Event of Default. Notwithstanding any other
provisions of this Agreement to the contrary, after the occurrence and during
the continuance of an Event of Default, all amounts collected or received by the
Agent on account of the Obligations (including without limitation any amounts on
account of any of Cash Management Liabilities or Hedge Liabilities), or in
respect of the Collateral may, at Agent’s discretion, be paid over or delivered
as follows:

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of the Agent in connection with enforcing
its rights and the rights of the Lenders under this Agreement and the Other
Documents, and any Out-of-Formula Loans and Protective Advances funded by the
Agent with respect to the Collateral under or pursuant to the terms of this
Agreement;

SECOND, to payment of any fees owed to the Agent;

THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of each of the Lenders to the extent
owing to such Lender pursuant to the terms of this Agreement;

FOURTH, to the payment of all of the Obligations consisting of accrued interest
on account of the Swing Loans;

FIFTH, to the payment of the outstanding principal amount of the Obligations
consisting of Swing Loans;

SIXTH, to the payment of all Obligations arising under this Agreement and the
Other Documents consisting of accrued fees and interest (other than interest in
respect of Swing Loans paid pursuant to clause FOURTH above);

SEVENTH, to the payment of the outstanding principal amount of the Obligations
(other than principal in respect of Swing Loans paid pursuant to clause FIFTH
above) arising under this Agreement including Cash Management Liabilities and
Hedge Liabilities and including the payment or cash collateralization of any
outstanding Letters of Credit in accordance with Section 3.2(b) hereof.

 

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EIGHTH, to all other Obligations arising under this Agreement which shall have
become due and payable (hereunder, under the Other Documents or otherwise and
not repaid pursuant to clauses “FIRST” through “SEVENTH” above;

NINTH, to all other Obligations which shall have become due and payable and not
repaid pursuant to clauses “FIRST” through “EIGHTH”; and

TENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances, Cash Management Liabilities and
Hedge Liabilities held by such Lender bears to the aggregate then outstanding
Advances, Cash Management Liabilities and Hedge Liabilities) of amounts
available to be applied pursuant to clauses “SIXTH”, “SEVENTH”, “EIGHTH” and
“TENTH” above; and (iii) notwithstanding anything to the contrary in this
Section 11.5, no Swap Obligations of any Non-Qualifying Party shall be paid with
amounts received from such Non-Qualifying Party under its Guaranty (including
sums received as a result of the exercise of remedies with respect to such
Guaranty) or from the proceeds of such Non-Qualifying Party’s Collateral if such
Swap Obligations would constitute Excluded Hedge Liabilities, provided, however,
that to the extent possible appropriate adjustments shall be made with respect
to payments and/or the proceeds of Collateral from other Borrowers and/or
Guarantors that are Eligible Contract Participants with respect to such Swap
Obligations to preserve the allocation to Obligations otherwise set forth above
in this Section 11.5; and (iv) to the extent that any amounts available for
distribution pursuant to clause “SEVENTH” above are attributable to the issued
but undrawn amount of outstanding Letters of Credit, such amounts shall be held
by the Agent as cash collateral for the Letters of Credit pursuant to
Section 3.2(b) hereof and applied (A) first, to reimburse the Issuer from time
to time for any drawings under such Letters of Credit and (B) then, following
the expiration of all Letters of Credit, to all other obligations of the types
described in clauses “SEVENTH,” “EIGHTH”, and “NINTH” above in the manner
provided in this Section 11.5.

 

XII. WAIVERS AND JUDICIAL PROCEEDINGS.

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

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

 

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12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, COUNTERCLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM,
COUNTERCLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

XIII. EFFECTIVE DATE AND TERMINATION.

13.1. Term. This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of each Loan Party,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until June 30, 2019 (the “Term”) unless sooner
terminated as herein provided. Borrowers may terminate this Agreement at any
time upon five (5) Business Days prior written notice to Agent upon payment in
full of the Obligations.

13.2. Termination. The termination of the Agreement shall not affect Agent’s or
any Lender’s rights, or any of the Obligations having their inception prior to
the effective date of such termination or any Obligations which pursuant to the
terms hereof continue to accrue after such date, and the provisions hereof shall
continue to be fully operative until all transactions entered into, rights or
interests created and Obligations (including any required repayment or Cash
Collateralization of the Letter of Credit obligations, but excluding any
contingent indemnification obligations upon which no claims have been made) have
been fully and indefeasibly paid, disposed of, concluded or liquidated. The
security interests, Liens and rights granted to Agent and Lenders hereunder and
the financing statements filed hereunder shall continue in full force and
effect, notwithstanding the termination of this Agreement or the fact that
Borrowers’ Account may from time to time be temporarily in a zero or credit
position, until all of the Obligations (including any required repayment or Cash
Collateralization of the Letter of Credit obligations, but excluding any
contingent indemnification obligations upon which no claims have been made) have
been indefeasibly paid and performed in full after the termination of this
Agreement or each Loan Party has furnished Agent and Lenders with an
indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, each Loan Party waives any rights which it may have under the
Uniform Commercial Code to demand the filing of termination statements with
respect to the Collateral, and Agent shall not be required to send such
termination statements to each Loan Party, or to file them with any filing
office, unless and until this Agreement shall have been terminated in accordance
with its terms and all Obligations

 

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(including any required repayment or Cash Collateralization of the Letter of
Credit obligations, but excluding any contingent indemnification obligations
upon which no claims have been made) have been indefeasibly paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations (including any required repayment or Cash Collateralization of the
Letter of Credit obligations, but excluding any contingent indemnification
obligations upon which no claims have been made) are indefeasibly paid and
performed in full.

 

XIV. REGARDING AGENT.

14.1. Appointment. Each Lender hereby designates PNC to act as Agent for such
Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
2.8(b), 3.3(a) and 3.4), charges and collections received pursuant to this
Agreement, for the ratable benefit of Lenders. Agent may perform any of its
duties hereunder by or through its agents or employees. As to any matters not
expressly provided for by this Agreement (including collection of the Note)
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding; provided, however, that Agent
shall not be required to take any action which, in Agent’s discretion, exposes
Agent to liability or which is contrary to this Agreement or the Other Documents
or Applicable Law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.

14.2. Nature of Duties. Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and the Other Documents. Neither
Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment), or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Loan Party or
any officer thereof contained in this Agreement, or in any of the Other
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by Agent under or in connection with, this
Agreement or any of the Other Documents or for the value, validity,
effectiveness, genuineness, due execution, enforceability or sufficiency of this
Agreement, or any of the Other Documents or for any failure of any Loan Party to
perform its obligations hereunder. Agent shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement or any of the
Other Documents, or to inspect the properties, books or records of any Loan
Party. The duties of Agent as respects the Advances to Borrowers shall be
mechanical and administrative in nature; Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon Agent any obligations in respect of this Agreement or the
transactions described herein except as expressly set forth herein.

 

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

14.4. Resignation of Agent; Successor Agent. Agent may resign on sixty (60) days
written notice to each of Lenders and Borrowing Agent and upon such resignation,
the Required Lenders will promptly designate a successor Agent reasonably
satisfactory to Borrowers (provided that no such approval by Borrowers shall be
required (i) in any case where the successor Agent is one of the Lenders or
(ii) after the occurrence and during the continuance of any Event of Default).
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and shall in particular succeed to all of Agent’s right, title and
interest in and to all of the Liens in the Collateral securing the Obligations
created hereunder or any Other Document (including Pledge Agreements and all
account control agreements), and the term “Agent” shall mean such successor
agent effective upon its appointment, and the former Agent’s rights, powers and
duties as Agent shall be terminated, without any other or further act or deed on
the part of such former Agent. However, notwithstanding the foregoing, if at the
time of the effectiveness of the new Agent’s appointment, any further actions
need to be taken in order to provide for the legally binding and valid transfer
of any Liens in the Collateral from former Agent to new Agent and/or for the
perfection of any Liens in the Collateral as held by new Agent or it is
otherwise not then possible for new Agent to become the holder of a fully valid,
enforceable and perfected Lien as to any of the Collateral, former Agent shall
continue to hold such Liens solely as agent for perfection of such Liens on
behalf of new Agent until such time as new Agent can obtain a fully valid,
enforceable and perfected Lien on all Collateral, provided that Agent shall not
be required to or have any liability or responsibility to take any further
actions after such date as such agent for perfection to continue the perfection
of any such Liens (other than to forego from taking any affirmative action to
release any such Liens). After any Agent’s resignation as Agent, the provisions
of this Article XIV, and any indemnification rights under this Agreement,
including without limitation, rights arising under Section 16.5 hereof, shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement (and in the event resigning Agent continues to
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immediately preceding sentence, the provisions of this Article XIV and any
indemnification rights under this Agreement, including without limitation,
rights arising under Section 16.5 hereof, shall inure to its benefit as to any
actions taken or omitted to be taken by it in connection with such Liens).

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

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

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

14.8. Indemnification. To the extent Agent is not reimbursed and indemnified by
Loan Parties, each Lender will reimburse and indemnify Agent in proportion to
its respective portion of the outstanding Advances and its respective
Participation Commitments in the outstanding Letters of Credit and outstanding
Swing Loans (or, if no Advances are outstanding, pro rata according to the
percentage that its Revolving Commitment Amount constitutes of the total
aggregate Revolving Commitment Amounts), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in performing its duties
hereunder, or in any way relating to or arising out of this Agreement or any
Other Document; provided that Lenders shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent’s gross (not mere)
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment).

 

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

14.10. Delivery of Documents. To the extent Agent receives financial statements
required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing Base
Certificates from any Loan Party pursuant to the terms of this Agreement which
any Loan Party is not obligated to deliver to each Lender, Agent will promptly
furnish such documents and information to Lenders.

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

14.12. No Reliance on Agent’s Customer Identification Program. To the extent the
Advances or this Agreement is, or becomes, syndicated in cooperation with other
Lenders, each Lender acknowledges and agrees that neither such Lender, nor any
of its Affiliates, participants or assignees, may rely on the Agent to carry out
such Lender’s, Affiliate’s, participant’s or assignee’s customer identification
program, or other obligations required or imposed under or pursuant to the USA
PATRIOT Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with any of the Loan Parties, their
Affiliates or their agents, the Other Documents or the transactions hereunder or
contemplated hereby: (i) any identity verification procedures, (ii) any
recordkeeping, (iii) comparisons with government lists, (iv) customer notices or
(v) other procedures required under the CIP Regulations or such Anti-Terrorism
Laws.

14.13. Other Agreements. Each of the Lenders agrees that it shall not, without
the express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations,
any amounts owing by such Lender to any Loan Party or any deposit accounts of
any Loan Party now or hereafter maintained with such Lender. Anything in this
Agreement to the contrary notwithstanding, each of the Lenders further agrees
that it shall not, unless specifically requested to do so by Agent, take any
action to protect or enforce its rights arising out of this Agreement or the
Other Documents, it being the intent of Lenders that any such action to protect
or enforce rights under this Agreement and the Other Documents shall be taken in
concert and at the direction or with the consent of Agent or Required Lenders.

 

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XV. BORROWING AGENCY.

15.1. Borrowing Agency Provisions.

(a) Each Loan Party hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to, as applicable: (i) borrow,
(ii) request advances, (iii) request the issuance of Letters of Credit,
(iv) sign and endorse notes, (v) execute and deliver all instruments, documents,
applications, security agreements, reimbursement agreements and letter of credit
agreements for Letters of Credit and all other certificates, notice, writings
and further assurances now or hereafter required hereunder, (vi) make elections
regarding interest rates, (vii) give instructions regarding Letters of Credit
and agree with Issuer upon any amendment, extension or renewal of any Letter of
Credit and (viii) otherwise take action under and in connection with this
Agreement and the Other Documents, all on behalf of and in the name such Loan
Party or Loan Parties, and hereby authorizes Agent to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.

(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Loan Parties and at their request. Neither Agent nor any Lender
shall incur liability to Loan Parties as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Loan Party hereby
indemnifies Agent and each Lender and holds Agent and each Lender harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Agent or any Lender by any Person arising from
or incurred by reason of the handling of the financing arrangements of Borrowers
as provided herein, reliance by Agent or any Lender on any request or
instruction from Borrowing Agent or any other action taken by Agent or any
Lender with respect to this Section 15.1 except due to willful misconduct or
gross (not mere) negligence by the indemnified party (as determined by a court
of competent jurisdiction in a final and non-appealable judgment).

(c) All Obligations shall be joint and several, and each Borrower shall make
payment upon the maturity of the Obligations by acceleration or otherwise, and
such obligation and liability on the part of each Borrower shall in no way be
affected by any extensions, renewals and forbearance granted by Agent or any
Lender to any Loan Party, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to
pursue or preserve its rights against any Loan Party, the release by Agent or
any Lender of any Collateral now or thereafter acquired from any Loan Party, and
such agreement by each Borrower to pay upon any notice issued pursuant thereto
is unconditional and unaffected by prior recourse by Agent or any Lender to the
other Loan Parties or any Collateral for such Borrower’s Obligations or the lack
thereof. Each Borrower waives all suretyship defenses.

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

 

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XVI. MISCELLANEOUS.

16.1. Governing Law. This Agreement and each Other Document (unless and except
to the extent expressly provided otherwise in any such Other Document), and all
matters relating hereto or thereto or arising herefrom or therefrom (whether
arising under contract law, tort law or otherwise) shall, in accordance with
Section 5-1401 of the General Obligations Law of the State of New York, be
governed by and construed in accordance with the laws of the State of New York.
Any judicial proceeding brought against by or any Loan Party with respect to any
of the Obligations, this Agreement, the Other Documents or any related agreement
may be brought in any court of competent jurisdiction in the State of New York,
United States of America, and, by execution and delivery of this Agreement, each
Loan Party accepts for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Each Loan Party hereby waives personal service of any and
all process upon it and consents that all such service of process may be made by
certified or registered mail (return receipt requested) directed to Borrowing
Agent at its address set forth in Section 16.6 and service so made shall be
deemed completed five (5) days after the same shall have been so deposited in
the mails of the United States of America, or, at the Agent’s option, by service
upon Borrowing Agent which each Loan Party irrevocably appoints as such Loan
Party’s Agent for the purpose of accepting service within the State of New York.
Nothing herein shall affect the right to serve process in any manner permitted
by law or shall limit the right of Agent or any Lender to bring proceedings
against any Loan Party in the courts of any other jurisdiction. Each Loan Party
waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non conveniens. Each Loan Party waives the right to
remove any judicial proceeding brought against such Loan Party in any state
court to any federal court. Any judicial proceeding by any Loan Party against
Agent or any Lender involving, directly or indirectly, any matter or claim in
any way arising out of, related to or connected with this Agreement or any
related agreement, shall be brought only in a federal or state court located in
the County of New York, State of New York.

16.2. Entire Understanding.

(a) This Agreement and the documents executed concurrently herewith contain the
entire understanding between each Loan Party, Agent and each Lender and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Loan Party’s, Agent’s and each Lender’s respective
officers. Neither this Agreement nor any portion or provisions hereof may be
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Notwithstanding the
foregoing, Agent may modify this Agreement or any of the Other Documents for the
purposes of completing missing content or correcting erroneous content of an
administrative nature, without the need for a written amendment, provided that
the Agent shall send a copy of any such modification to the Loan Parties and
each Lender (which copy may be provided by electronic mail). Each Loan Party
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
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(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Loan Parties may, subject to the provisions of this
Section 16.2(b), from time to time enter into written supplemental agreements to
this Agreement or the Other Documents executed by Loan Parties, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Loan Parties thereunder or the
conditions, provisions or terms thereof or waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall:

(i) increase the Revolving Commitment Percentage, or the maximum dollar amount
of the Revolving Commitment Amount of any Lender without the consent of such
Lender directly affected thereby;

(ii) whether or not any Advances are outstanding, extend the Term or the time
for payment of principal or interest of any Advance (excluding the due date of
any mandatory prepayment of an Advance), or any fee payable to any Lender, or
reduce the principal amount of or the rate of interest borne by any Advances or
reduce any fee payable to any Lender, without the consent of each Lender
directly affected thereby (except that Required Lenders may elect to waive or
rescind any imposition of the Default Rate under Section 3.1 or of default rates
of Letter of Credit fees under Section 3.2 (unless imposed by Agent));

(iii) except in connection with any increase pursuant to Section 2.24 hereof,
increase the Maximum Revolving Advance Amount without the consent of all
Lenders;

(iv) alter the definition of the term Required Lenders or alter, amend or modify
this Section 16.2(b) without the consent of all Lenders;

(v) alter, amend or modify the provisions of Section 11.5 without the consent of
all Lenders;

(vi) release any Collateral during any calendar year (other than in accordance
with the provisions of this Agreement) having an aggregate value in excess of
$5,000,000 without the consent of all Lenders;

(vii) change the rights and duties of Agent without the consent of all Lenders;

(viii) subject to clause (e) below, permit any Revolving Advance to be made if
after giving effect thereto the total of Revolving Advances outstanding
hereunder would exceed the Formula Amount for more than sixty (60) consecutive
Business Days or exceed one hundred fifteen percent (115%) of the Formula Amount
without the consent of all Lenders holding a Revolving Commitment;

(ix) increase the Advance Rates above the Advance Rates in effect on the Closing
Date without the consent of all Lenders; or

(x) release any Guarantor or Borrower without the consent of all Lenders.

 

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

(d) In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such consent is denied, then Agent may, at its option, require
such Lender to assign its interest in the Advances to Agent or to another Lender
or to any other Person designated by Agent (the “Designated Lender”), for a
price equal to (i) the then outstanding principal amount thereof plus
(ii) accrued and unpaid interest and fees due such Lender, which interest and
fees shall be paid when collected from Loan Parties. In the event Agent elects
to require any Lender to assign its interest to Agent or to the Designated
Lender, Agent will so notify such Lender in writing within forty five (45) days
following such Lender’s denial, and such Lender will assign its interest to
Agent or the Designated Lender no later than five (5) days following receipt of
such notice pursuant to a Commitment Transfer Supplement executed by such
Lender, Agent or the Designated Lender, as appropriate, and Agent.

(e) Notwithstanding (i) the existence of a Default or an Event of Default,
(ii) that any of the other applicable conditions precedent set forth in
Section 8.2 hereof have not been satisfied or the commitments of Lenders to make
Revolving Advances hereunder have been terminated for any reason, or (iii) any
other contrary provision of this Agreement, Agent may at its discretion and
without the consent of any Lender, voluntarily permit the outstanding Revolving
Advances at any time to exceed the Formula Amount by up to fifteen percent
(15%) of the Formula Amount for up to sixty (60) consecutive Business Days (the
“Out-of-Formula Loans”). If Agent is willing in its sole and absolute discretion
to permit such Out-of-Formula Loans, the Lenders holding the Revolving
Commitments shall be obligated to fund such Out-of-Formula Loans in accordance
with their respective Revolving Commitment Percentages, and such Out-of-Formula
Loans shall be payable on demand and shall bear interest at the Default Rate for
Revolving Advances consisting of Domestic Rate Loans; provided that, if Agent
does permit Out-of-Formula Loans, neither Agent nor Lenders shall be deemed
thereby to have changed the limits of Section 2.1(a) nor shall any Lender be
obligated to fund Revolving Advances in excess of its Revolving Commitment
Amount. For purposes of this paragraph, the discretion granted to Agent
hereunder shall not preclude involuntary overadvances that may result from time
to time due to the fact that the Formula Amount was unintentionally exceeded for
any reason, including, but not limited to, Collateral previously deemed to be
either “Eligible Receivables”, “Eligible Insured Foreign Receivables” or
“Eligible Uninsured Foreign Receivables” or “Eligible Inventory”, as applicable,
becomes ineligible, collections of Receivables applied to reduce outstanding
Revolving Advances are thereafter returned for insufficient funds or
overadvances are made to protect or preserve the Collateral. In the event Agent
involuntarily permits the outstanding Revolving Advances to exceed the Formula
Amount by more than ten percent (10%), Agent shall use its efforts to have
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excess in as expeditious a manner as is practicable under the circumstances and
not inconsistent with the reason for such excess. Revolving Advances made after
Agent has determined the existence of involuntary overadvances shall be deemed
to be involuntary overadvances and shall be decreased in accordance with the
preceding sentence. To the extent any Out-of-Formula Loans are not actually
funded by the other Lenders as provided for in this Section 16.2(e), Agent may
elect in its discretion to fund such Out-of-Formula Loans and any such
Out-of-Formula Loans so funded by Agent shall be deemed to be Revolving Advances
made by and owing to Agent, and Agent shall be entitled to all rights (including
accrual of interest) and remedies of a Lender holding a Revolving Commitment
under this Agreement and the Other Documents with respect to such Revolving
Advances.

(f) In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 16.2, the Agent is hereby authorized by
Borrowers and the Lenders, at any time in the Agent’s sole discretion,
regardless of (i) the existence of a Default or an Event of Default,
(ii) whether any of the other applicable conditions precedent set forth in
Section 8.2 hereof have not been satisfied or the commitments of Lenders to make
Revolving Advances hereunder have been terminated for any reason, or (iii) any
other contrary provision of this Agreement, to make Revolving Advances
(“Protective Advances”) to Borrowers on behalf of the Lenders which Agent, in
its reasonable business judgment, deems necessary or desirable (a) to preserve
or protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other Obligations,
or (c) to pay any other amount chargeable to Loan Parties pursuant to the terms
of this Agreement (the “Protective Advances”); provided, that the Protective
Advances made hereunder shall not exceed ten percent 10% of the Maximum
Revolving Advance Amount in the aggregate and provided further that at any time
after giving effect to any such Protective Advances, the outstanding Revolving
Advanced and Swing Loans and Maximum Undrawn Amount of all outstanding Letters
of Credit do not exceed the Maximum Revolving Advance Amount. The Lenders
holding the Revolving Commitments shall be obligated to fund such Protective
Advances and effect a settlement with Agent therefore upon demand of Agent in
accordance with their respective Revolving Commitment Percentages. To the extent
any Protective Advances are not actually funded by the other Lenders as provided
for in this Section 16.2(f), any such Protective Advances funded by Agent shall
be deemed to be Revolving Advances made by and owing to Agent, and Agent shall
be entitled to all rights (including accrual of interest) and remedies of a
Lender holding a Revolving Commitment under this Agreement and the Other
Documents with respect to such Revolving Advances.

16.3. Successors and Assigns; Participations; New Lenders.

(a) This Agreement shall be binding upon and inure to the benefit of Loan
Parties, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Loan Party may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.

(b) Each Borrower acknowledges that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other Persons (each such transferee
or purchaser of a participating interest, a “Participant”). Each Participant may
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of set-off) with respect to the portion of such Advances held by it or other
Obligations payable hereunder as fully as if such Participant were the direct
holder (it being understood that the documentation required under
Section 3.10(e) shall be delivered to the participating Lender) thereof provided
that (i) Borrowers shall not be required to pay to any Participant more than the
amount which it would have been required to pay to Lender which granted an
interest in its Advances or other Obligations payable hereunder to such
Participant had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder unless the sale of the participation to such
Participant is made with the Borrower’s prior written consent, and (ii) in no
event shall Borrowers be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Participant. Each Borrower hereby grants
to any Participant a continuing security interest in any deposits, moneys or
other property actually or constructively held by such Participant as security
for the Participant’s interest in the Advances. Each Lender that sells a
participation shall, acting solely for this purpose as an agent of the
Borrowers, maintain a register on which it enters the name and address of each
Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under the Other
Documents (the “Participant Register”); provided that no Lender shall have any
obligation to disclose all or any portion of the Participant Register (including
the identity of any Participant or any information relating to a Participant’s
interest in any commitments, loans, letters of credit or its other obligations
under any Other Document) to any Person except to the extent that such
disclosure is necessary to establish that such commitment, loan, letter of
credit or other obligation is in registered form under Section 5f.103-1(c) of
the United States Treasury Regulations. The entries in the Participant Register
shall be conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the owner of such
participation for all purposes of this Agreement notwithstanding any notice to
the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent)
shall have no responsibility for maintaining a Participant Register.

(c) Any Lender, with the consent of Agent, may sell, assign or transfer all or
any part of its rights and obligations under or relating to Revolving Advances
under this Agreement and the Other Documents to one or more additional Persons
and one or more additional Persons may commit to make Advances hereunder,
provided that any such Person must be either a Permitted Assignee or a Person
that has the operational and technical capacity to make revolving loans (each a
“Purchasing Lender”), in minimum amounts of not less than $5,000,000, pursuant
to a Commitment Transfer Supplement, executed by a Purchasing Lender, the
transferor Lender, and Agent and delivered to Agent for recording. Upon such
execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement,
(i) Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and obligations
of a Lender thereunder with a Revolving Commitment Percentage as set forth
therein, and (ii) the transferor Lender thereunder shall, to the extent provided
in such Commitment Transfer Supplement, be released from its obligations under
this Agreement, the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the Revolving
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement

 

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and the Other Documents. Each Borrower hereby consents to the addition of such
Purchasing Lender and the resulting adjustment of the Revolving Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Other Documents. Loan Parties shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing provided, however, that the consent of the Borrowers (such consent not
to be unreasonably withheld or delayed or conditioned) shall be required unless
(x) an Event of Default has occurred and is continuing at the time of such
assignment or (y) such assignment is to a Permitted Assignee; provided that the
Borrower shall be deemed to have consented to any such assignment unless it
shall object thereto by written notice to the Agent within ten (10) Business
Days after having received prior notice thereof.

(d) Any Lender, with the consent of Agent which shall not be unreasonably
withheld or delayed, may directly or indirectly sell, assign or transfer all or
any portion of its rights and obligations under or relating to Revolving
Advances under this Agreement and the Other Documents to an entity, whether a
corporation, partnership, trust, limited liability company or other entity that
(i) is engaged in making, purchasing, holding or otherwise investing in bank
loans and similar extensions of credit in the ordinary course of its business
and (ii) is administered, serviced or managed by the assigning Lender or an
Affiliate of such Lender (a “Purchasing CLO” and together with each Participant
and Purchasing Lender, each a “Transferee” and collectively the “Transferees”),
pursuant to a Commitment Transfer Supplement modified as appropriate to reflect
the interest being assigned (“Modified Commitment Transfer Supplement”),
executed by any intermediate purchaser, the Purchasing CLO, the transferor
Lender, and Agent as appropriate and delivered to Agent for recording. Upon such
execution and delivery, from and after the transfer effective date determined
pursuant to such Modified Commitment Transfer Supplement, (i) Purchasing CLO
thereunder shall be a party hereto and, to the extent provided in such Modified
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder and (ii) the transferor Lender thereunder shall, to the extent
provided in such Modified Commitment Transfer Supplement, be released from its
obligations under this Agreement, the Modified Commitment Transfer Supplement
creating a novation for that purpose. Such Modified Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing CLO. Each
Borrower hereby consents to the addition of such Purchasing CLO. Loan Parties
shall execute and deliver such further documents and do such further acts and
things in order to effectuate the foregoing.

(e) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement and Modified Commitment Transfer Supplement delivered to it and a
register (the “Register”) for the recordation of the names and addresses of each
Lender and the outstanding principal, accrued and unpaid interest and other fees
due hereunder. The entries in the Register shall be conclusive, in the absence
of manifest error, and each Borrower, Agent and Lenders may treat each Person
whose name is recorded in the Register as the owner of the Advance recorded
therein for the purposes of this Agreement. The Register shall be available for
inspection by Borrowing Agent or any Lender at any reasonable time and from time
to time upon reasonable prior notice. Agent shall receive a fee in the amount of
$3,500 payable by the applicable Purchasing Lender and/or Purchasing CLO upon
the effective date of each transfer or assignment (other than to an intermediate
purchaser) to such Purchasing Lender and/or Purchasing CLO.

 

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

(g) Notwithstanding anything to the contrary contained in this Agreement, any
Lender may at any time and from time to time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

16.4. Application of Payments. Agent shall have the continuing and exclusive
right to apply or reverse and re-apply any payment and any and all proceeds of
Collateral to any portion of the Obligations. To the extent that any Loan Party
makes a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for any Loan Party’s benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.

16.5. Indemnity. Each Loan Party shall defend, protect, indemnify, pay and save
harmless Agent, Issuer, each Lender and each of their respective officers,
directors, Affiliates, attorneys, employees and agents (each an “Indemnified
Party”) for and from and against any and all claims, demands, liabilities,
obligations, losses, damages, penalties, fines, actions, judgments, suits,
costs, charges, expenses and disbursements of any kind or nature whatsoever
(including fees and disbursements of counsel (including allocated costs of
internal counsel)) (collectively, “Claims”) which may be imposed on, incurred
by, or asserted against any Indemnified Party in arising out of or in any way
relating to or as a consequence, direct or indirect, of: (i) this Agreement, the
Other Documents, the Advances and other Obligations and/or the transactions
contemplated hereby including the Transactions, (ii) any action or failure to
act or action taken only after delay or the satisfaction of any conditions by
any Indemnified Party in connection with and/or relating to the negotiation,
execution, delivery or administration of the Agreement and the Other Documents,
the credit facilities established hereunder and thereunder and/or the
transactions contemplated hereby including the Transactions, (iii) any Loan
Party’s or any Guarantor’s failure to observe, perform or discharge any of its
covenants, obligations, agreements or duties under or breach of any of the
representations or warranties made in this Agreement and the Other Documents,
(iv) the enforcement of any of the rights and remedies of Agent, Issuer or any
Lender under the Agreement and the Other Documents, (v) any threatened or actual
imposition of fines or penalties, or disgorgement of benefits, for violation of
any Anti-Terrorism Law by any Loan Party, any Affiliate or Subsidiary of any
Loan Parties’, or any Guarantor, and (vi) any claim, litigation, proceeding or
investigation instituted or conducted by any Governmental Body or
instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement or the Other Documents, whether or not Agent or any Lender is a party
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generality of any of the foregoing, each Loan Party shall defend, protect,
indemnify, pay and save harmless each Indemnified Party from (x) any Claims
which may be imposed on, incurred by, or asserted against any Indemnified Party
arising out of or in any way relating to or as a consequence, direct or
indirect, of the issuance of any Letter of Credit hereunder and (y) any Claims
which may be imposed on, incurred by, or asserted against any Indemnified Party
under any Environmental Laws with respect to or in connection with the Real
Property, any Hazardous Discharge, the presence of any Hazardous Materials
affecting the Real Property (whether or not the same originates or emerges from
the Real Property or any contiguous real estate), including any Claims
consisting of or relating to the imposition or assertion of any Lien on any of
the Real Property under any Environmental Laws and any loss of value of the Real
Property as a result of the foregoing except to the extent such loss, liability,
damage and expense is attributable to any Hazardous Discharge resulting from
actions on the part of Agent or any Lender. Loan Parties’ obligations under this
Section 16.5 shall arise upon the discovery of the presence of any Hazardous
Materials at the Real Property, whether or not any federal, state, or local
environmental agency has taken or threatened any action in connection with the
presence of any Hazardous Materials, in each such case except to the extent that
any of the foregoing arises out of the gross negligence or willful misconduct of
the Indemnified Party (as determined by a court of competent jurisdiction in a
final and non-appealable judgment). Without limiting the generality of the
foregoing, this indemnity shall extend to any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and disbursements
of any kind or nature whatsoever (including fees and disbursements of counsel)
asserted against or incurred by any of the Indemnified Parties by any Person
under any Environmental Laws or similar laws by reason of any Loan Party’s or
any other Person’s failure to comply with laws applicable to solid or hazardous
waste materials, including Hazardous Materials and Hazardous Waste, or other
Toxic Substances.] Additionally, if any taxes (excluding taxes imposed upon or
measured solely by the net income of Agent and Lenders, but including any
intangibles taxes, stamp tax, recording tax or franchise tax) shall be payable
by Agent, Lenders or Loan Parties on account of the execution or delivery of
this Agreement, or the execution, delivery, issuance or recording of any of the
Other Documents, or the creation or repayment of any of the Obligations
hereunder, by reason of any Applicable Law now or hereafter in effect, Loan
Parties will pay (or will promptly reimburse Agent and Lenders for payment of)
all such taxes, including interest and penalties thereon, and will indemnify and
hold the Indemnified Parties harmless from and against all liability in
connection therewith.

16.6. Notice. Any notice or request hereunder may be given to Borrowing Agent or
any Loan Party or to Agent or any Lender at their respective addresses set forth
below or at such other address as may hereafter be specified in a notice
designated as a notice of change of address under this Section. Any notice,
request, demand, direction or other communication (for purposes of this
Section 16.6 only, a “Notice”) to be given to or made upon any party hereto
under any provision of this Agreement shall be given or made by telephone or in
writing (which includes by means of electronic transmission (i.e., “e-mail”) or
facsimile transmission or by setting forth such Notice on a website to which
Loan Parties are directed (an “Internet Posting”) if Notice of such Internet
Posting (including the information necessary to access such site) has previously
been delivered to the applicable parties hereto by another means set forth in
this Section 16.6) in accordance with this Section 16.6. Any such Notice must be
delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Section 16.6 hereof or in accordance with
any subsequent unrevoked Notice from any such party that is given in accordance
with this Section 16.6. Any Notice shall be effective:

(a) In the case of hand-delivery, when delivered;

 

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(b) If given by mail, four days after such Notice is deposited with the United
States Postal Service, with first-class postage prepaid, return receipt
requested;

(c) In the case of a telephonic Notice, when a party is contacted by telephone,
if delivery of such telephonic Notice is confirmed no later than the next
Business Day by hand delivery, a facsimile or electronic transmission, an
Internet Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);

(d) In the case of a facsimile transmission, when sent to the applicable party’s
facsimile machine’s telephone number, if the party sending such Notice receives
confirmation of the delivery thereof from its own facsimile machine;

(e) In the case of electronic transmission, when actually received;

(f) In the case of an Internet Posting, upon delivery of a Notice of such
posting (including the information necessary to access such site) by another
means set forth in this Section 16.6; and

(g) If given by any other means (including by overnight courier), when actually
received.

Any Lender giving a Notice to Borrowing Agent or any Loan Party shall
concurrently send a copy thereof to the Agent, and the Agent shall promptly
notify the other Lenders of its receipt of such Notice.

(A) If to Agent or PNC at:

PNC Bank, National Association

100 Summer Drive - Ste. 1001

Boston, MA 02110

Attention:       Graham Holding

Telephone:     617-338-6673

Facsimile:      617-338-6284

with a copy to:

PNC Bank, National Association

PNC Agency Services

PNC Firstside Center

500 First Avenue, 4th Floor

Pittsburgh, Pennsylvania 15219

Attention: Lisa Pierce

Telephone: (412) 762-6442

Facsimile: (412) 762-8672

 

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with an additional copy to:

Blank Rome LLP

405 Lexington Avenue

New York, NY 10174-0208

Attention: Robert Stein

Telephone: (212) 885-5206

Facsimile: (917) 332-3750

(B) If to a Lender other than Agent, as specified on the signature pages hereof

(C) If to Borrowing Agent or any Loan Party:

ModusLink Global Solutions, Inc.

1601 Trapelo Road, Suite 170

Waltham, Massachusetts 02451

Attention:     General Counsel

Telephone:   781.663.5000

Facsimile:    781.663.5045

with a copy to:

Bingham McCutchen LLP

399 Park Avenue, 26th Floor

New York, New York 10022

Attention:     Benjamin C. Burkhart

Telephone:   212.705.7741

Facsimile:    212.702.3678

16.7. Survival. The obligations of Loan Parties under Sections 2.2(f), 2.2(g),
2.2(h), 3.7, 3.8, 3.9, 3.10, 16.5, 16.9 and 17.4 and the obligations of Lenders
under Sections 2.2, 2.15(b), 2.16, 2.18, 2.19, 14.8 and 16.5, shall survive
termination of this Agreement and the Other Documents and payment in full of the
Obligations.

16.8. Severability. If any part of this Agreement is contrary to, prohibited by,
or deemed invalid under Applicable Laws, such provision shall be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given effect so
far as possible.

16.9. Expenses. The Loan Parties shall pay (i) all reasonable and documented
out-of-pocket expenses incurred by the Agent and its Affiliates (including the
reasonable and documented fees, charges and disbursements of counsel for the
Agent), in connection with the syndication of the credit facilities provided for
herein, the preparation, negotiation, execution, delivery and administration of
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modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable and documented out-of-pocket expenses incurred by the Issuer in
connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder, (iii) all out-of-pocket expenses
incurred by the Agent, any Lender or the Issuer (including the fees, charges and
disbursements of any counsel for the Agent, any Lender or the Issuer), in
connection with the enforcement or protection of its rights (A) in connection
with this Agreement and the Other Documents, including its rights under this
Section, or (B) in connection with the Advances 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, and (iv) all reasonable and documented out-of-pocket expenses of the
Agent’s regular employees and agents engaged periodically to perform audits of
the Loan Parties’ books, records and business properties.

16.10. Injunctive Relief. Each Loan Party recognizes that, in the event any Loan
Party fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or threatens to fail to perform, observe or
discharge such obligations or liabilities, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.

16.11. Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to any Borrower, or any Guarantor (or
any Affiliate of any such Person) for indirect, punitive, exemplary or
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations
or as a result of any transaction contemplated under this Agreement or any Other
Document.

16.12. Captions. The captions at various places in this Agreement are intended
for convenience only and do not constitute and shall not be interpreted as part
of this Agreement.

16.13. Counterparts; Facsimile Signatures. This Agreement may be executed in any
number of and by different parties hereto on separate counterparts, all of
which, when so executed, shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile or electronic transmission (including email transmission of a PDF
image) shall be deemed to be an original signature hereto.

16.14. Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.

16.15. Confidentiality; Sharing Information. Agent, each Lender and each
Transferee shall hold all non-public information obtained by Agent, such Lender
or such Transferee pursuant to the requirements of this Agreement in accordance
with Agent’s, such Lender’s and such Transferee’s customary procedures for
handling confidential information of this nature; provided, however, Agent, each
Lender and each Transferee may disclose such confidential

 

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information (a) to its examiners, Affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees, and (c) as required or requested by any Governmental Body or
representative thereof or pursuant to legal process; provided, further that
(i) unless specifically prohibited by Applicable Law, Agent, each Lender and
each Transferee shall use its reasonable best efforts prior to disclosure
thereof, to notify the applicable Loan Party of the applicable request for
disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by any Loan Party other than those documents and instruments in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been
terminated. Each Loan Party acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
such Loan Party or one or more of its Affiliates (in connection with this
Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Loan Party hereby authorizes each Lender to
share any information delivered to such Lender by such Loan Party and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provisions of this
Section 16.15 as if it were a Lender hereunder. Such authorization shall survive
the repayment of the other Obligations and the termination of this Agreement.
Notwithstanding any non-disclosure agreement or similar document executed by
Agent in favor of any Loan Party or any of any Loan Party’s affiliates, the
provisions of this Agreement shall supersede such agreements.

16.16. Publicity. Each Loan Party and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Loan Parties, Agent and Lenders, including announcements which are commonly
known as tombstones, in such publications and to such selected parties as Agent
shall in its sole and absolute discretion deem appropriate, in each case,
subject to the prior approval of the Borrower, such approval not to be
unreasonably withheld, conditioned or delayed.

16.17. Certifications From Banks and Participants; USA PATRIOT Act.

(a) Each Lender or assignee or participant of a Lender that is not incorporated
under the Laws of the United States of America or a state thereof (and is not
excepted from the certification requirement contained in Section 313 of the USA
PATRIOT Act and the applicable regulations because it is both (i) an affiliate
of a depository institution or foreign bank that maintains a physical presence
in the United States or foreign country, and (ii) subject to supervision by a
banking authority regulating such affiliated depository institution or foreign
bank) shall deliver to the Agent the certification, or, if applicable,
recertification, certifying that such Lender is not a “shell” and certifying to
other matters as required by Section 313 of the USA PATRIOT Act and the
applicable regulations: (1) within 10 days after the Closing Date, and (2) as
such other times as are required under the USA PATRIOT Act.

 

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(b) The USA PATRIOT Act requires all financial institutions to obtain, verify
and record certain information that identifies individuals or business entities
which open an “account” with such financial institution. Consequently, Lender
may from time to time request, and each Loan Party shall provide to Lender, such
Loan Party’s name, address, tax identification number and/or such other
identifying information as shall be necessary for Lender to comply with the USA
PATRIOT Act and any other Anti-Terrorism Law.

16.18. Anti-Terrorism Laws.

(a) Each Loan Party represents and warrants that (i) no Covered Entity is a
Sanctioned Person and (ii) no Covered Entity, either in its own right or through
any third party, (A) has any of its assets in a Sanctioned Country or in the
possession, custody or control of a Sanctioned Person in violation of any
Anti-Terrorism Law; (B) does business in or with, or derives any of its income
from investments in or transactions with, any Sanctioned Country or Sanctioned
Person in violation of any Anti-Terrorism Law; or (C) engages in any dealings or
transactions prohibited by any Anti-Terrorism Law.

(b) Each Loan Party covenants and agrees that (i) no Covered Entity will become
a Sanctioned Person, (ii) no Covered Entity, either in its own right or through
any third party, will (A) have any of its assets in a Sanctioned Country or in
the possession, custody or control of a Sanctioned Person in violation of any
Anti-Terrorism Law; (B) do business in or with, or derive any of its income from
investments in or transactions with, any Sanctioned Country or Sanctioned Person
in violation of any Anti-Terrorism Law; (C) engage in any dealings or
transactions prohibited by any Anti-Terrorism Law or (D) use the Advances to
fund any operations in, finance any investments or activities in, or, make any
payments to, a Sanctioned Country or Sanctioned Person in violation of any
Anti-Terrorism Law, (iii) the funds used to repay the Obligations will not be
derived from any unlawful activity, (iv) each Covered Entity shall comply with
all Anti-Terrorism Laws and (v) the Loan Parties shall promptly notify the Agent
in writing upon the occurrence of a Reportable Compliance Event.

 

XVII. GUARANTY AND SURETYSHIP AGREEMENT

17.1. Guaranty and Suretyship Agreement. Each Guarantor hereby guarantees, and
becomes surety for the prompt payment and performance when due (whether at
stated maturity, by required prepayment, declaration, demand, by acceleration or
otherwise) of (i) all of the Obligations owing by the Loan Parties to the
Secured Parties and (ii) all of the costs and expenses and all of the
indemnities owing to any Secured Party or other Indemnitee under the provisions
of Sections 16.5 and 16.9 hereof (the “Guaranteed Obligations”). The obligations
and liabilities of the Guarantors under this Article XVII are joint and several,
and each Guarantor hereby acknowledges and accepts such joint and several
liability and further acknowledges and agrees that the joint and several
liabilities of Guarantors under the provisions of this Article XVII shall be
primary and direct liabilities and not secondary liabilities.

17.2. Guaranty of Payment and Not Merely Collection. The provisions of this
Article XVII constitute a guaranty of payment and not of collection and no
Secured Party shall be required, as a condition of any Guarantor’s liability
hereunder, to make any demand upon or to pursue any of their rights against any
Borrower and/or any of the Collateral, or to pursue any rights which may be
available to any Secured Party with respect to any other person who may be
liable for the payment of the Guaranteed Obligations and/or any other collateral
or security available to any Secured Party therefor.

 

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17.3. Guarantor and Suretyship Waivers. The provisions of this Article XVII
constitute an absolute, unconditional, irrevocable and continuing guaranty and
will remain in full force and effect until all of the Guaranteed Obligations
have been indefeasibly paid in full in cash and this Agreement and all
commitments to lend and extend credit to Borrowers hereunder have been
terminated. The provisions of this Article XVII will remain in full force and
effect even if there are no Guaranteed Obligations outstanding at a particular
time or from time to time. The provisions of this Article XVII will not be
affected (i) by any surrender, exchange, acceptance, compromise or release by
any Secured Party of any other party, or any other guaranty or any Collateral or
other collateral or security held by it for any of the Guaranteed Obligations,
(ii) by any failure of any Secured Party to take any steps to perfect or
maintain their Liens or security interest in or to preserve their rights in or
to any Collateral or any other security or other collateral for the Guaranteed
Obligations or any guaranty, or (iii) by any irregularity, unenforceability or
invalidity of the Guaranteed Obligations or any part thereof or any security
therefor or other guaranty thereof, and the provisions of this Article XVII will
not be affected by any other facts, events, occurrences or circumstances (except
payment or performance of the Guaranteed Obligations in full) that might
otherwise give rise to any “guarantor” or “suretyship” defenses to which any
Guarantor might otherwise be entitled, all of which such “guarantor” or
“suretyship” defenses are hereby waived by each Guarantor. The obligations of
each Guarantor hereunder shall not be affected, modified or impaired by any
counterclaim, set-off, deduction or defense of any kind, including any such
counterclaim, set-off, deduction or defense based upon any claim such Guarantor
may have against any Borrower or any Secured Party (or any of their respective
Affiliates), or based upon any claim any Borrower or any other guarantor or
surety may have against any Secured Party (or any of their respective
Affiliates), except payment or performance of the Guaranteed Obligations in
full.

(a) Notice of acceptance of the agreement to guaranty provided for under the
provisions of this Article XVII, notice of extensions of credit to Loan Parties
from time to time, notice of default, diligence, presentment, notice of
dishonor, protest, demand for payment, and any defense based upon any Secured
Party’s failure to comply with the notice requirements of §§ 9-611, 9-612 and
9-613 of the Uniform Commercial Code are hereby waived to the fullest extent
permitted by law. Each Guarantor hereby waives all defenses based on suretyship
or impairment of collateral to the fullest extent permitted by law.

(b) Secured Parties may at any time and from time to time, without impairing or
releasing, discharging or modifying any Guarantor’s liabilities hereunder and
(for purposes of this Article XVII only) without notice to or the consent of any
Guarantor: (a) change the manner, place, time or terms of payment or performance
of or interest rates or other fees on, or other terms relating to (including the
maturity thereof), any of the Guaranteed Obligations; (b) renew, extend,
substitute, modify, amend or alter or refinance, or grant consents or waivers
relating to any of the terms and provisions of this Agreement or any of the
Other Documents or of the Guaranteed Obligations, or of any other guaranties, or
any security for the Obligations or guaranties, (c) increase (without limit of
any kind) or decrease the Guaranteed Obligations (including all loans and
extensions of credit thereunder) or modify the terms on which loans and
extensions of credit may be made to Loan Parties (including without limitation
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available to Loan Parties under this Agreement and/or any Other Document and as
part of the Guaranteed Obligations any new loans, advances or other extensions
of credit of any kind, including any such new loans, advances or extension of
credit of a new or different type or nature (including any new Cash Management
Products and Services of any kind, Foreign Currency Hedges of any kind and/or
Interest Rate Hedge of any kind) as compared to the loans, advances and
extensions of credit available to Loan Parties under the Credit Agreement as of
the date hereof); (d) apply any and all payments by whomever paid or however
realized including any proceeds of the Collateral or any other collateral or
security, to any Guaranteed Obligations in such order, manner and amount as
Agent may determine in its sole discretion in accordance with the terms of this
Agreement; (e) settle, compromise or deal with any other Person, including any
Borrower or any other guarantor, with respect to the Guaranteed Obligations in
such manner as Agent deems appropriate in its sole discretion; (f) substitute,
exchange, subordinate, sell, compromise or release any security or guaranty for
the Guaranteed Obligations; or (g) take such actions and exercise such remedies
hereunder as provided herein.

17.4. Repayments or Recovery from Secured Parties. If any demand or claim is
made at any time upon any Secured Party for the repayment or recovery of any
amount received by it in payment or on account of the Guaranteed Obligations
(including any such demand or claim made in respect of or arising out of any
laws relating to fraudulent transfers, fraudulent conveyances or preferences)
and if any Secured Party repays all or any part of such amount by reason of any
judgment, decree or order of any court or administrative body in respect of such
demand or claim, or by reason of any settlement or compromise of any such demand
or claim, the joint and several liability of Guarantors with respect to such
portion of the Guaranteed Obligations previously satisfied by the payment of the
amount so repaid or recovered shall be reinstated and revived and Guarantors
will be and remain jointly and severally liable hereunder for the amount so
repaid or recovered to the same extent as if such amount had never been received
originally by Agent and/or such Lender, as the case may be. The provisions of
this Section 17.4 shall survive any release and/or termination of this Agreement
(and/or of any Guarantor’s liability under this Article XVII) and will be and
remain effective notwithstanding any contrary action which may have been taken
by Guarantor in reliance upon such payment, and any such contrary action so
taken will be without prejudice to Secured Parties’ rights hereunder and any
such release and/or termination will be deemed to have been conditioned upon
such payment having become final and irrevocable.

17.5. Enforceability of Obligations. No modification, limitation or discharge of
the Guaranteed Obligations arising out of or by virtue of any bankruptcy,
reorganization or similar proceeding for relief of debtors under federal or
state law with respect to any Borrower or any other guarantor or surety for the
Guaranteed Obligations will affect, modify, limit or discharge Guarantors’
liability in any manner whatsoever and the provisions of this Article XVII will
remain and continue in full force and effect and will be enforceable against
each Guarantor to the same extent and with the same force and effect as if any
such proceeding had not been instituted. Each Guarantor hereby waives all rights
and benefits which might accrue to it by reason of any such proceeding and will
be liable to the full extent hereunder, irrespective of any modification,
limitation or discharge of the Guaranteed Obligations that may result from any
such proceeding.

 

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17.6. Guaranty Payable upon Event of Default; Remedies.

(a) Upon the occurrence of any Event of Default under this Agreement:
(a) Guarantors shall pay to Agent, without any demand or notice whatsoever, the
full amount of the Guaranteed Obligations; (b) Agent in its discretion may
exercise with respect to any Collateral of any Guarantor or any other collateral
or security for the Guaranteed Obligations any one or more of the rights and
remedies provided a secured party under the Uniform Commercial Code or any other
applicable law or at equity (all of which such rights and remedies are hereby
deemed incorporated herein and confirmed and ratified by Guarantors as if
expressly set forth and granted and agreed to by Guarantors herein); and/or
(c) Agent in its discretion may exercise from time to time any other rights and
remedies available to it or any other Secured Party at law, in equity or
otherwise.

(b) The Guarantors jointly and severally agree that, as between the Guarantors
and the Secured Parties, the obligations of Loan Parties under this Agreement
and the Other Documents may be declared to be forthwith due and payable as
provided in Section 11.1 (and shall be deemed to have become automatically due
and payable in the circumstances provided in Section 11.1) for purposes of this
Article XVII (specifically including Section 17.1 hereof), notwithstanding any
stay, injunction or other prohibition preventing such declaration (or such
obligations from becoming automatically due and payable) as against Loan Parties
and that, in the event of such declaration (or such obligations being deemed to
have become automatically due and payable), such obligations (whether or not due
and payable by Loan Parties) shall forthwith become due and payable by the
Guarantors for purposes of this Article XVII (specifically including
Section 17.1 hereof).

(c) Each Guarantor hereby acknowledges that the guarantee provided for under the
provisions of this Article XVII constitutes an instrument for the payment of
money, and consents and agrees that any Secured Party, at its sole option, in
the event of a dispute by such Guarantor in the payment of any moneys due
hereunder, shall have the right to bring a motion-action under New York CPLR
Section 3213.

17.7. Waiver of Subrogation. Until the Guaranteed Obligations are indefeasibly
paid in full in cash and this Agreement and the commitments to lend and extend
credit hereunder have been terminated, each Guarantor waives in favor of Secured
Parties any and all rights which such Guarantor may have to (a) assert any claim
against any Borrower or any other Guarantor based on subrogation, restitution,
reimbursement or contribution rights with respect to payments made under the
provisions of this Article XVII, and (b) any realization on any property of any
Borrower or any other Guarantor, including participation in any marshalling of
any Borrower’s or any other Guarantor’s assets.

17.8. Continuing Guaranty and Suretyship Agreement. The provisions of this
Article XVII shall constitute a continuing guaranty and suretyship obligation of
each Guarantor with respect to all Guaranteed Obligations from time to time
outstanding, arising or incurred, and shall continue in effect, and Secured
Parties may continue to act in reliance hereon, until all of the Guaranteed
Obligations have been paid in full in cash and this Agreement and all
commitments to lend and extend credit thereunder have been terminated, and until
such time, no Guarantor shall have any right to terminate or revoke the
provisions of this Article XVII nor any of the guarantee and surety agreements
and other covenants and undertakings provided for herein.

 

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17.9. General Limitation on Guarantee Obligations. If, in the course of any
legal action or proceeding under any applicable law, including any Insolvency
Proceedings with respect to any Guarantor(s), the obligations of any Guarantor
under the provisions of this Article XVII would otherwise be held or determined
to be void, voidable, invalid or unenforceable, or subordinated to the claims of
any other creditors, on account of the amount of its liability under the
provisions of this Article XVII, then, notwithstanding any other provision to
the contrary, the amount of such liabilities of such Guarantor under the
provisions of this Article XVII shall, without any further action by such
Guarantor, any Secured Party or any other person, be automatically limited and
reduced to the highest amount (after giving effect to the right of contribution
established in Section 17.10) that is valid and enforceable and not subordinated
to the claims of other creditors as determined in such action or proceeding.
Absent any such determination in any such legal action or proceeding, the
provisions of this Section 17.9 shall in no respect limit the obligations and
liabilities of any UK Guarantor to US Finance Parties, and each Guarantor shall
remain liable to Secured Parties for the full amount guaranteed by such
Guarantor hereunder.

17.10. Right of Contribution. Each Guarantor hereby agrees that to the extent
that any Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor’s right of contribution
shall be subject to the terms and conditions of Section 17.7 hereof. The
provisions of this Section 17.10 shall in no respect limit the obligations and
liabilities of any Guarantor to Secured Parties, and each Guarantor shall remain
liable to Secured Parties for the full amount guaranteed by such Guarantor
hereunder.

17.11. Keepwell. Without limiting any other provision of this Article XVII or
otherwise limiting the provisions of Section 6.14 as to the Loan Parties
generally, each Guarantor hereby agrees that, for the purposes of this Article
XVII as an absolute, unconditional, irrevocable and continuing guaranty
agreement, the provisions of Section 6.14 are hereby incorporated and restated
in this Article XVII as an obligation of each Guarantor that is and/or may
hereafter be a Qualified ECP Loan Party from time to time.

 

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Each of the parties has signed this Agreement as of the day and year first above
written.

 

BORROWERS: MODUSLINK CORPORATION By:  

/s/ Brian O’Donnell

Name:   Brian O’Donnell Title:   Treasurer MODUSLINK PTS, INC. By:  

/s/ Brian O’Donnell

Name:   Brian O’Donnell Title:   Treasurer PNC BANK, NATIONAL ASSOCIATION, As
Lender and as Agent By:  

/s/ Brent Mathews

Name:   Brent Mathews Title:   Vice President Revolving Commitment Percentage:
100% Revolving Commitment Amount $50,000,000

[SIGNATURE PAGE TO REVOLVING CREDIT AND SECURITY AGREEMENT]

 

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GUARANTORS: MODUS MEDIA INTERNATIONAL DOCUMENTATION SERVICES (IRELAND), LIMITED
By:  

/s/ Brian O’Donnell

Name:   Brian O’Donnell Title:   Treasurer

MODUS MEDIA INTERNATIONAL

(IRELAND) LIMITED

By:  

/s/ Brian O’Donnell

Name:   Brian O’Donnell Title:   Treasurer SALESLINK MEXICO HOLDING CORP. By:  

/s/ Brian O’Donnell

Name:   Brian O’Donnell Title:   Treasurer SOL HOLDINGS, INC. By:  

/s/ Brian O’Donnell

Name:   Brian O’Donnell Title:   Treasurer

[SIGNATURE PAGE TO REVOLVING CREDIT AND SECURITY AGREEMENT]

 

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