REVOLVING CREDIT, TERM LOAN

 

AND

 

SECURITY AGREEMENT

 

 

 

PNC BANK, NATIONAL ASSOCIATION

(AS LENDER AND AS AGENT)

 

 

 

WITH

 

 

 

HUDSON TECHNOLOGIES COMPANY

(BORROWER)

 

 

 

JUNE 22, 2012

 

 

 

 

TABLE OF CONTENTS

 

    Page       I. DEFINITIONS. 1   1.1 Accounting Terms 1   1.2 General Terms 1
  1.3 Uniform Commercial Code Terms 21   1.4 Certain Matters of Construction 22
        II. ADVANCES, PAYMENTS. 22   2.1 Revolving Advances. 22   2.2 Procedure
for Revolving Advances Borrowing. 23   2.3 Disbursement of Advance Proceeds 25  
2.4 Term Loan. 26   2.5 Maximum Advances 26   2.6 Repayment of Advances. 26  
2.7 Repayment of Excess Advances 27   2.8 Statement of Account 27   2.9 Letters
of Credit 27   2.10 Issuance of Letters of Credit. 27   2.11 Requirements For
Issuance of Letters of Credit. 28   2.12 Disbursements, Reimbursement. 28   2.13
Repayment of Participation Advances. 30   2.14 Documentation 30   2.15
Determination to Honor Drawing Request 30   2.16 Nature of Participation and
Reimbursement Obligations 30   2.17 Indemnity 32   2.18 Liability for Acts and
Omissions 32   2.19 Additional Payments 33   2.20 Manner of Borrowing and
Payment. 34   2.21 Mandatory Prepayments. 35   2.22 Use of Proceeds. 35   2.23
Defaulting Lender. 36         III. INTEREST AND FEES. 37   3.1 Interest 37   3.2
Letter of Credit Fees. 37   3.3 Closing Fee. 38   3.4 Collateral Evaluation Fee,
Collateral Monitoring Fee and Fee Letter. 38   3.5 Computation of Interest and
Fees 39   3.6 Maximum Charges 39   3.7 Increased Costs 39   3.8 Basis For
Determining Interest Rate Inadequate or Unfair 40   3.9 Capital Adequacy. 41  
3.10 Gross Up for Taxes 41   3.11 Withholding Tax Exemption. 41         IV.
COLLATERAL:  GENERAL TERMS 42   4.1 Security Interest in the Collateral 42

 

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TABLE OF CONTENTS (CONT’D)

 

      Page           4.2 Perfection of Security Interest 42   4.3 Disposition of
Collateral 43   4.4 Preservation of Collateral 43   4.5 Ownership of Collateral.
43   4.6 Defense of Agent’s and Lenders’ Interests 44   4.7 Books and Records 44
  4.8 Financial Disclosure 45   4.9 Compliance with Laws 45   4.10 Inspection of
Premises 45   4.11 Insurance 45   4.12 Failure to Pay Insurance 46   4.13
Payment of Taxes 46   4.14 Payment of Leasehold Obligations 47   4.15
Receivables. 47   4.16 Inventory 49   4.17 Maintenance of Equipment 49   4.18
Exculpation of Liability 49   4.19 Environmental Matters. 49   4.20 Financing
Statements 51         V. REPRESENTATIONS AND WARRANTIES. 52   5.1 Authority 52  
5.2 Formation and Qualification. 52   5.3 Survival of Representations and
Warranties 52   5.4 Tax Returns 52   5.5 Financial Statements. 53   5.6 Entity
Name 53   5.7 O.S.H.A. and Environmental Compliance. 53   5.8 Solvency; No
Litigation, Violation, Indebtedness or Default. 54   5.9 Patents, Trademarks,
Copyrights and Licenses 55   5.10 Licenses and Permits 55   5.11 Default of
Indebtedness 55   5.12 No Default 55   5.13 No Burdensome Restrictions 55   5.14
No Labor Disputes 56   5.15 Margin Regulations 56   5.16 Investment Company Act
56   5.17 Disclosure 56   5.18 Swaps 56   5.19 Conflicting Agreements 56   5.20
Application of Certain Laws and Regulations 56   5.21 Business and Property of
Borrower 57   5.22 Section 20 Subsidiaries 57   5.23 Anti-Terrorism Laws. 57  
5.24 Trading with the Enemy 58

 

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TABLE OF CONTENTS (CONT’D)

 

    Page         5.25 Federal Securities Laws           VI.  AFFIRMATIVE
COVENANTS.     6.1 Payment of Fees 58   6.2 Conduct of Business and Maintenance
of Existence and Assets 58   6.3 Violations 58   6.4 Government Receivables 58  
6.5 Financial Covenants. 59   6.6 Execution of Supplemental Instruments 59   6.7
Payment of Indebtedness 59   6.8 Standards of Financial Statements 59   6.9
Federal Securities Laws 59   6.10 Employment Agreement with Kevin Zugibe 59    
    VII. NEGATIVE COVENANTS. 59   7.1 Merger, Consolidation, Acquisition and
Sale of Assets. 59   7.2 Creation of Liens 60   7.3 Guarantees 60   7.4
Investments 60   7.5 Loans 60   7.6 Capital Expenditures 60   7.7 Dividends 60  
7.8 Indebtedness 61   7.9 Nature of Business 61   7.10 Transactions with
Affiliates 61   7.11 Leases 61   7.12 Subsidiaries. 61   7.13 Fiscal Year and
Accounting Changes 61   7.14 Pledge of Credit 61   7.15 Amendment of Articles of
Incorporation, By-Law 62   7.16 Compliance with ERISA 62   7.17 Prepayment of
Indebtedness 62   7.18 Anti-Terrorism Laws 62   7.19 Membership/Partnership
Interests 63   7.20 Trading with the Enemy Act 63         VIII. CONDITIONS
PRECEDENT. 63   8.1 Conditions to Initial Advances 63   8.2 Conditions to Each
Advance 67         IX. INFORMATION AS TO BORROWER. 67   9.1 Disclosure of
Material Matters 67   9.2 Schedules 67   9.3 Environmental Reports 68   9.4
Litigation 68   9.5 Material Occurrences 68   9.6 Government Receivables 68

 

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TABLE OF CONTENTS (CONT’D)

 

      Page           9.7 Annual Financial Statements 68   9.8 Quarterly
Financial Statements 69   9.9 Monthly Financial Statements 69   9.10 Other
Reports 69   9.11 Additional Information 69   9.12 Projected Operating Budget 69
  9.13 INTENTIONALLY OMITTED 69   9.14 Notice of Suits, Adverse Events 69   9.15
ERISA Notices and Requests 70   9.16 Additional Documents 70         X. EVENTS
OF DEFAULT. 70   10.1 Nonpayment 70   10.2 Breach of Representation 70   10.3
Financial Information 71   10.4 Judicial Actions 71   10.5 Noncompliance 71  
10.6 Judgments 71   10.7 Bankruptcy 71   10.8 Inability to Pay 71   10.9
Subsidiary Bankruptcy 71   10.10 Material Adverse Effect 72   10.11 Lien
Priority 72   10.12 Cross Default 72   10.13 Breach of Guaranty 72   10.14
Change of Ownership 72   10.15 Invalidity 72   10.16 Licenses 72   10.17
Seizures 72   10.18 Pension Plans 73         XI. LENDERS’ RIGHTS AND REMEDIES
AFTER DEFAULT. 73   11.1 Rights and Remedies. 73   11.2 Agent’s Discretion 74  
11.3 Setoff 75   11.4 Rights and Remedies not Exclusive 75   11.5 Allocation of
Payments After Event of Default 75         XII. WAIVERS AND JUDICIAL
PROCEEDINGS. 76   12.1 Waiver of Notice 76   12.2 Delay 76   12.3 Jury Waiver 76
        XIII. EFFECTIVE DATE AND TERMINATION. 76   13.1 Term 76   13.2
Termination 77

 

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TABLE OF CONTENTS (CONT’D)

 

    Page       XIV. REGARDING AGENT. 77   14.1 Appointment 77   14.2 Nature of
Duties 78   14.3 Lack of Reliance on Agent and Resignation 78   14.4 Certain
Rights of Agent 79   14.5 Reliance 79   14.6 Notice of Default 79   14.7
Indemnification 79   14.8 Agent in its Individual Capacity 79   14.9 Delivery of
Documents 80   14.10 Borrower’s Undertaking to Agent 80   14.11 No Reliance on
Agent’s Customer Identification Program 80   14.12 Other Agreements 80        
XV. MISCELLANEOUS. 81   15.1 Governing Law 81   15.2 Entire Understanding. 81  
15.3 Successors and Assigns; Participations; New Lenders. 83   15.4 Application
of Payments 85   15.5 Indemnity 86   15.6 Notice 86   15.7 Survival 88   15.8
Severability 88   15.9 Expenses 88   15.10 Injunctive Relief 88   15.11
Consequential Damages 88   15.12 Captions 89   15.13 Counterparts; Facsimile
Signatures 89   15.14 Construction 89   15.15 Confidentiality; Sharing
Information 89   15.16 Publicity 89   15.17 Certifications From Banks and
Participants; US PATRIOT Act 90

 

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TABLE OF CONTENTS (CONT’D)

 

    Page       List of Exhibits and Schedules       Exhibits           Exhibit
1.2 Borrowing Base Certificate   Exhibit 2.1(a) Revolving Credit Note   Exhibit
2.4(a) Term Note   Exhibit 8.1(k) Financial Condition Certificate   Exhibit 16.3
Commitment Transfer Supplement         Schedules           Schedule 1.2
Permitted Encumbrances   Schedule 4.5 Equipment and Inventory Locations  
Schedule 4.15(h) Deposit and Investment Accounts   Schedule 4.19 Real Property  
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 5.8(b) Litigation  
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 7.3 Guarantees  

 

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REVOLVING CREDIT, TERM LOAN

AND

SECURITY AGREEMENT

 

This Revolving Credit, Term Loan and Security Agreement dated June 22, 2012
among Hudson Technologies Company, a corporation organized under the laws of the
State of Tennessee (“Borrower”), the financial institutions which are now or
which hereafter become a party hereto (collectively, the “Lenders” and
individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as a Lender
and as agent for Lenders (PNC, in such capacity, the “Agent”).

 

IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrower, 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, 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 Borrower for the fiscal year ended December 31,
2011.

 

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 mean, collectively, the Receivables Advance Rate and the
Inventory Advance Rate.

 

“Advances” shall mean and include the Revolving Advances, Letters of Credit as
well as the Term Loan.

 

“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, 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 35% 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, Term Loan 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
higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open
Rate in effect on such day plus 1/2 of 1% and (iii) the Daily LIBOR Rate plus
1%. For purposes of this definition, “Daily LIBOR Rate” shall mean, for any day,
the rate per annum determined by Agent by dividing (x) the Published Rate by (y)
a number equal to 1.00 minus the percentage prescribed by the Federal Reserve
for determining the maximum reserve requirements with respect to any
eurocurrency funding by banks on such day. For the purposes of this definition,
“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
eurodollar rate for a one month period as published in another publication
determined by Agent).

 

“Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or
money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the
Applicable Laws comprising or implementing the Bank Secrecy Act, and the
Applicable Laws administered by the United States Treasury Department’s Office
of Foreign Asset Control (as any of the foregoing Applicable Laws may from time
to time be amended, renewed, extended, or replaced).

 

“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.

 

“Authority” shall have the meaning set forth in Section 4.19(d).

 

“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.

 

“Blocked Accounts” shall have the meaning set forth in Section 4.15(h).

 

“Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).

 

“Blocked Person” shall have the meaning set forth in Section 5.24(b) hereof.

 

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

 

“Borrower’s Account” shall have the meaning set forth in Section 2.8.

 

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“Borrowing Base Certificate” shall mean a certificate in substantially the form
of Exhibit 1.2 duly executed by the President, Chief Financial Officer or
Controller of the Borrower 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 Eurodollar 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, replacements, substitutions
or additions thereto which have a useful life of more than one year, including
the total principal portion of Capitalized Lease Obligations, which, in
accordance with GAAP, would be classified as capital expenditures.

 

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

 

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

 

“Change of Control” shall mean (a) the occurrence of any event (whether in one
or more transactions) which results in a transfer of control of Borrower to a
Person who is not an Original Owner or (b) any merger or consolidation of or
with Borrower or sale of all or substantially all of the property or assets of
Borrower. For purposes of this definition, “control of Borrower” shall mean the
power, direct or indirect (x) to vote 50% or more of the Equity Interests having
ordinary voting power for the election of directors (or the individuals
performing similar functions) of Borrower or (y) to direct or cause the
direction of the management and policies of Borrower by contract or otherwise.

 

“Change of Ownership” shall mean (a) 50% or more of the Equity Interests of
Borrower is no longer owned or controlled by (including for the purposes of the
calculation of percentage ownership, any Equity Interests into which any Equity
Interests of Borrower held by any of the Original Owners are convertible or for
which any such Equity Interests of Borrower or of any other Person may be
exchanged and any Equity Interests issuable to such Original Owners upon
exercise of any warrants, options or similar rights which may at the time of
calculation be held by such Original Owners) a Person who is an Original Owner
or (b) any merger, consolidation or sale of substantially all of the property or
assets of Borrower.

 

“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, Borrower or any of its Affiliates.

 

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“Closing Date” shall mean June 22, 2012 or such other date as may be agreed to
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:

 

(a)         all Receivables;

 

(b)         all General Intangibles;

 

(c)         all Inventory;

 

(d)         all Investment Property;

 

(e)         all Subsidiary Stock;

 

(f)          the Leasehold Interests;

 

(g)         all of Borrower’s right, title and interest in and to, whether now
owned or hereafter acquired and wherever located, (i) its respective other
property including, but not limited to, all merchandise returned or rejected by
Customers, relating to or securing any of the Receivables; (ii) all of
Borrower’s rights as a consignor, a consignee, an unpaid vendor, mechanic,
artisan, or other lienor, including stoppage in transit, setoff, detinue,
replevin, reclamation and repurchase; (iii) all additional amounts due to
Borrower from any Customer relating to the Receivables; (iv) other property,
including warranty claims, relating to any goods securing the Obligations; (v)
all of Borrower’s contract rights, rights of payment which have been earned
under a contract right, instruments (including promissory notes), documents,
chattel paper (including electronic chattel paper), warehouse receipts, deposit
accounts, letters of credit and money; (vi) all commercial tort claims (whether
now existing or hereafter arising); (vii) if and when obtained by Borrower, all
real and personal property of third parties in which Borrower has been granted a
lien or security interest as security for the payment or enforcement of
Receivables; (viii) all letter of credit rights (whether or not the respective
letter of credit is evidenced by a writing); (ix) all supporting obligations;
and (x) any other goods, personal property or real property now owned or
hereafter acquired in which Borrower has expressly granted a security interest
or may in the future grant a security interest to Agent hereunder, or in any
amendment or supplement hereto or thereto, or under any other agreement between
Agent and Borrower;

 

(h)         all of Borrower’s ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by Borrower or in which it has an interest), computer programs,
tapes, disks and documents relating to (a), (b), (c), (d), (e), (f) or (g) of
this Paragraph; and

 

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(i)         all proceeds and products of (a), (b), (c), (d), (e), (f), (g) and
(h) in whatever form, including, but not limited to: cash, deposit accounts
(whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds.

 

“Commitment Percentage” of any Lender shall mean the percentage set forth below
such Lender’s name on the signature page hereof as same may be adjusted upon any
assignment by a Lender pursuant to Section 15.3(c) or (d) hereof.

 

“Commitment Transfer Supplement” shall mean a document in the form of Exhibit
15.3 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 Certificate” shall mean a compliance certificate to be signed by the
Chief Financial Officer or Controller of Borrower, which shall state that, based
on an examination sufficient to permit such officer to make an informed
statement, no Default or Event of Default exists, or if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrower with respect to
such default and, such certificate shall have appended thereto calculations
which set forth Borrower’s compliance with the requirements or restrictions
imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10 and 7.11.

 

“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 Borrower’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 or the Other
Documents, including any Consents required under all applicable federal, state
or other Applicable Law.

 

“Consigned Inventory” shall mean Inventory of 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.

 

“Contract Rate” shall mean, as applicable, the Revolving Interest Rate or the
Term Loan Rate.

 

“Controlled Group” shall mean, at any time, the Borrower 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
Borrower, are treated as a single employer under Section 414 of the Code.

 

“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 Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.

 

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“Customs” shall have the meaning set forth in Section 2.11(b) hereof.

 

“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 have the meaning set forth in Section 2.23(a) hereof.

 

“Depository Accounts” shall have the meaning set forth in Section 4.15(h)
hereof.

 

“Designated Lender” shall have the meaning set forth in Section 15.2(b) hereof.

 

“Documents” shall have the meaning set forth in Section 8.1(c) hereof.

 

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

 

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

 

“Drawing Date” shall have the meaning set forth in Section 2.12(b) hereof.

 

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

 

“Earnings Before Interest and Taxes” shall mean for any period the sum of (i)
net income (or loss) of Borrower for such period (excluding extraordinary gains
and losses), plus (ii) all interest expense of Borrower for such period, plus
(iii) all charges against income of Borrower for such period for federal, state
and local taxes actually paid.

 

“EBITDA” shall mean for any period the sum of (i) Earnings Before Interest and
Taxes for such period plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period, plus (iv) non-cash charges.

 

“Eligible Inventory” shall mean and include Inventory valued at the lower of
cost or market value, determined on a first-in-first-out basis, which is not, in
Agent’s opinion, obsolete, slow moving or unmerchantable and which Agent, in its
reasonable 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 a Permitted Encumbrance). In
addition, Inventory shall not be Eligible Inventory if it (i) does not conform
to all standards imposed by any Governmental Body which has regulatory authority
over such goods or the use or sale thereof, (ii) is in transit, (iii) is located
outside the continental United States or at a location that is not otherwise in
compliance with this Agreement, (iv) constitutes Consigned Inventory, (v) is the
subject of an Intellectual Property Claim; (vi) is subject to a License
Agreement or other agreement that limits, conditions or restricts 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 (vii) or is situated at a location not owned by Borrower unless
the owner or occupier of such location has executed in favor of Agent a Lien
Waiver Agreement. Eligible Inventory shall include all Inventory in-transit for
which title has passed to Borrower, which is insured to the full value thereof
and for which Agent shall have in its possession (a) all negotiable bills of
lading properly endorsed and (b) all non-negotiable bills of lading issued in
Agent’s name. Eligible Inventory shall not include Inventory being acquired
pursuant to a trade Letter of Credit to the extent such trade Letter of Credit
remains outstanding.

 

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“Eligible Receivables” shall mean and include with respect to Borrower, each
Receivable of Borrower arising in the Ordinary Course of Business and which
Agent, in its reasonable credit judgment, 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 Agent’s first priority perfected security interest and no other Lien
(other than Permitted Encumbrances), and is evidenced by an invoice or other
documentary evidence satisfactory to Agent. In addition, no Receivable shall be
an Eligible Receivable if:

 

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

 

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

 

(c)         fifty percent (50%) or more of the Receivables from such Customer
are not deemed Eligible Receivables hereunder. Such percentage may, in Agent’s
reasonable 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)         the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing;

 

(f)          the sale is to a Customer outside the continental United States of
America and/or Canada, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its reasonable 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;

 

- 7 -

 

 

(h)         Agent believes, in its reasonable judgment, 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 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 Borrower and accepted by the Customer or the Receivable
otherwise does not represent a final sale;

 

(k)         the Receivables of the Customer exceed a credit limit determined by
Agent, in its reasonable discretion, to the extent such Receivable exceeds such
limit, however, if the Receivable of the Customer is covered by credit insurance
of at least $2,000,000, in that event, the credit limit for such Customer shall
be $2,000,000;

 

(l)         the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier of
Borrower or the Receivable is contingent in any respect or for any reason, in
such event only that portion of the Receivable subject to such offset,
deduction, defense or dispute shall be deemed Ineligible;

 

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

 

(n)         any return, rejection or repossession of the merchandise has
occurred or the rendition of services has been disputed;

 

(o)         such Receivable is not payable to Borrower;

 

(p)         such Receivable is in the possession of the Borrower for eighteen
(18) month or longer; or

 

(q)         such Receivable is not otherwise satisfactory to Agent as determined
in good faith by Agent in the exercise of its discretion in a reasonable manner.

 

“Environmental Complaint” shall have the meaning set forth in Section 4.19(d)
hereof.

 

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

 

- 8 -

 

 

“Equipment” shall mean and include all of Borrower’s goods (other than
Inventory) whether now owned or hereafter acquired and wherever located
including all equipment, machinery, apparatus, motor vehicles, fittings,
furniture, furnishings, fixtures, parts, accessories and all replacements and
substitutions therefor or accessions thereto.

 

“Equity Interests” of any Person shall mean 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).

 

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

 

“Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto the interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined by Agent by dividing (i)
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 which has been approved by the
British Bankers’ Association as an authorized information vendor for the purpose
of displaying rates at which US dollar deposits are offered by leading banks in
the London interbank deposit market (an “Alternative Source”), at approximately
11:00 a.m., London time two (2) Business Days prior to the first day of 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 Alternate Source, a
comparable replacement rate determined by the Agent at such time (which
determination shall be conclusive absent manifest error)) for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage.

 

The Eurodollar Rate shall be adjusted with respect to any Eurodollar 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 prompt notice to the
Borrower of the Eurodollar Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.

 

“Eurodollar Rate Loan” shall mean an Advance at any time that bears interest
based on the Eurodollar Rate.

 

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

 

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

 

“Executive Order No. 13224” shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.

 

- 9 -

 

 

“Federal Funds Effective Rate” for any day shall mean 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” for any day shall mean 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 the 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.

 

“Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal
period, the ratio of (a) EBITDA of the Borrower for such period, minus
Unfinanced Capital Expenditures made by the Borrower during such period, minus
the aggregate amount of cash taxes paid by the Borrower during such period,
minus the aggregate amount of dividends and distributions made by the Borrower
during such period, minus the aggregate amount of payments made with cash by the
Borrower to satisfy soil sampling and reclamation related to environmental clean
up at the Hillburn Facility during such period (to the extent not already
including in the calculation of EBITDA as determined by the Agent) to (b) the
aggregate amount of all principal payments due and/or made, except principal
payments relating to outstanding Revolving Advances with regard to all Funded
Debt of the Borrower during such period, plus the aggregate interest expense of
the Borrower during such period.

 

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

 

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

 

- 10 -

 

 

“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 Borrower, the Obligations and, without duplication, Indebtedness
consisting of guaranties of Funded Debt of other Persons.

 

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

 

“General Intangibles” shall mean and include all of Borrower’s general
intangibles, whether now owned or hereafter acquired, including all payment
intangibles, all choses in action, causes of action, corporate or other business
records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
trademark applications, service marks, trade secrets, goodwill, copyrights,
design rights, software, computer information, source codes, codes, records and
updates, registrations, licenses, franchises, customer lists, tax refunds, tax
refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to Borrower to secure payment of
any of the Receivables by a Customer (other than to the extent covered by
Receivables) all rights of indemnification and all other intangible property of
every kind and nature (other than Receivables).

 

“Governmental Acts” shall have the meaning set forth in Section 2.17.

 

“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 legislative, judicial, regulatory or administrative
functions of or pertaining to a government.

 

“Guarantor” shall mean, collectively, Holdings, HT and any other Person who may
hereafter guarantee payment or performance of the whole or any part of the
Obligations and “Guarantors” means collectively all such Persons.

 

“Guaranty” shall mean any guaranty of the obligations of Borrower 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.

 

“Hazardous Discharge” shall have the meaning set forth in Section 4.19(d)
hereof.

 

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

 

- 11 -

 

 

“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 have the meaning provided in the definition of
“Lender-Provided Interest Rate Hedge”.

 

“Hillburn Facility” shall mean the facility located at 25 Torne Valley Road,
Hillburn, New York.

 

“Holdings” shall mean Hudson Holdings, Inc., a corporation organized under the
laws of the State of Nevada.

 

“HT” shall mean Hudson Technologies, Inc., a corporation organized under the
laws of the State of New York.

 

“Hudson Technologies Europe” shall mean Hudson Technologies Europe, S.r.l., a
company registered under the laws of Italy.

 

“Increased Tax Burden” shall mean the additional federal, state or local taxes
assumed to be payable by a member of Borrower as a result of Borrower’s status
as a limited liability company as evidenced and substantiated by the tax returns
filed by Borrower as a limited liability company, with such taxes being
calculated for all members at the highest marginal rate applicable to any
member.

 

“Indebtedness” of a Person at a particular date shall mean all obligations of
such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.

 

“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.

 

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

 

“Intellectual Property Claim” shall mean the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise) that
Borrower’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.

 

- 12 -

 

 

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

 

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

 

“Inventory” shall mean and include all of Borrower’s now owned or hereafter
acquired 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 Borrower’s business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.

 

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

 

“Inventory Sublimit” shall mean an amount equal to eighty-five percent (85%) of
the Formula Amount during the month of April of each year, and sixty-five
percent (65%) of the Formula Amount during the months of May through September
of each year.

 

“Investment Property” shall mean and include all of Borrower’s now owned or
hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and
commodities accounts.

 

“Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a
draft pursuant to the terms hereof.

 

“Leasehold Interests” shall mean all of Borrower’s right, title and interest in
and to the premises identified on Schedule 4.19 hereto or which is hereafter
leased by the Borrower.

 

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

 

“Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which the Agent confirms meets the
following requirements: such Interest Rate Hedge (i) is documented in a standard
International Swap Dealer Association Agreement, (ii) provides for the method of
calculating the reimbursable amount of the provider’s credit exposure in a
reasonable and customary manner, and (iii) is entered into for hedging (rather
than speculative) purposes. The liabilities of the Borrower to the provider of
any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be
“Obligations” hereunder, guaranteed obligations under the Guaranty 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.

 

- 13 -

 

 

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

 

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

 

“Letter of Credit Sublimit” shall mean $1,000,000.

 

“Letters of Credit” shall have the meaning set forth in Section 2.9.

 

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

 

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

 

“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,
in form and content satisfactory to Agent, by which Agent is given the
unqualified right, vis-a-vis such Licensor, to enforce Agent’s Liens with
respect to and to dispose of Borrower’s Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of Borrower’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 and by which such Person shall waive any Lien that
such Person may ever have with respect to any of the Collateral and shall
authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or
dispose of such Inventory.

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the
condition (financial or otherwise), results of operations, assets, business or
properties of Borrower or any Guarantor, (b) Borrower’s ability to duly and
punctually pay or perform the Obligations in accordance with the terms thereof,
(c) the value of the Collateral, or Agent’s Liens on the Collateral 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.

 

- 14 -

 

 

“Maximum Face Amount” shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.

 

“Maximum Loan Amount” shall mean $27,000,000 less repayments of the Term Loan.

 

“Maximum Revolving Advance Amount” shall mean $23,000,000.

 

“Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of
Credit, 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.

 

“Modified Commitment Transfer Supplement” shall have the meaning set forth in
Section 15.3(d).

 

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

 

“Multiple Employer Plan” shall mean a Plan which has two or more contributing
sponsors (including the Borrower 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
4064 of ERISA.

 

“Obligations” shall mean and include any and all loans, advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to Lenders
or Agent or to any other direct or indirect subsidiary or affiliate of Agent or
any Lender of any kind or nature, present or future (including any interest or
other amounts accruing thereon after maturity, or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding relating to the Borrower, whether or not a claim for post-filing
or post-petition interest or other amounts is allowed in such proceeding),
whether or not evidenced by any note, guaranty or other instrument, whether
arising under any agreement, instrument or document, (including this Agreement
and the Other Documents) whether or not for the payment of money, whether
arising by reason of an extension of credit, opening of a letter of credit,
loan, equipment lease 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 the Agent’s
or any Lenders 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 hereafter arising, contractual or tortious, liquidated or
unliquidated, regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, including, but not limited to, any and all of
Borrower’s Indebtedness and/or liabilities under this Agreement, the Other
Documents or under any other agreement between Agent or Lenders and Borrower and
any amendments, extensions, renewals or increases and all costs and expenses of
Agent 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 Borrower to Agent or Lenders to perform acts or refrain from
taking any action.

 

- 15 -

 

 

“Ordinary Course of Business” shall mean the ordinary course of Borrower’s
business as conducted on the Closing Date.

 

“Original Owners” shall mean Holdings with respect to the Borrower, HT with
respect to Holdings and HT being a publicly traded entity.

 

“Other Documents” shall mean the Note, any Guaranty, any Lender-Provided
Interest Rate Hedge and any and all other agreements, instruments and documents,
including 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 Borrower or any Guarantor and/or
delivered to Agent or any Lender in respect of the transactions contemplated by
this Agreement.

 

“Out-of-Formula Loans” shall have the meaning set forth in Section 15.2(b).

 

“Parent” of any Person shall mean a corporation or other entity owning, directly
or indirectly at least 50% of the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the directors of the 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.

 

“Participation Advance” shall have the meaning set forth in Section 2.12(d).

 

“Participation Commitment” shall mean each Lender’s obligation to buy a
participation of the Letters of Credit issued hereunder.

 

“Payee” shall have the meaning set forth in Section 3.10.

 

“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 Borrower 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
(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 of the Code and either (i) is maintained by any member of the
Controlled Group for employees of any member of the Controlled Group; or (ii)
has at any time within the preceding five years been maintained by any entity
which was at such time a member of the Controlled Group for employees of any
entity which was at such time a member of the Controlled Group.

 

- 16 -

 

 

“Permitted Encumbrances” shall mean:

 

(a)         Liens in favor of Agent for the benefit of Agent and Lenders;

 

(b)         Liens for taxes, assessments or other governmental charges not
delinquent or being Properly Contested;

 

(c)         Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing;

 

(d)         deposits or pledges to secure obligations under worker’s
compensation, social security or similar laws, or under unemployment insurance;

 

(e)         deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the Ordinary Course
of Business;

 

(f)         Liens arising by virtue of the rendition, entry or issuance against
Borrower or any Subsidiary, or any property of Borrower or any Subsidiary, of
any judgment, writ, order, or decree for so long as each such Lien (x) is in
existence for less than 20 consecutive days after it first arises or is being
Properly Contested and (y) is at all times junior in priority to any Liens in
favor of Agent;

 

(g)         mechanics’, workers’, materialmen’s or other like Liens arising in
the Ordinary Course of Business with respect to obligations which are not due or
which are being Properly Contested;

 

(h)         Liens placed upon fixed assets hereafter acquired to secure a
portion of the purchase price thereof, provided that (x) any such lien shall not
encumber any Collateral of Borrower and (y) the aggregate amount of Indebtedness
secured by such Liens incurred as a result of such purchases during any fiscal
year shall not exceed the amount provided for in Section 7.6; and

 

(i)         Liens disclosed on Schedule 1.2; provided that such Liens shall
secure only those obligations which they secure on the Closing Date (and
extensions, renewals and refinancings of such obligations permitted by Section
7.8) and shall not subsequently apply to Collateral of Borrower.

 

“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 (including a Pension Benefit Plan), maintained for employees of
Borrower or any member of the Controlled Group or any such Plan to which
Borrower or any member of the Controlled Group is required to contribute on
behalf of any of its employees.

 

- 17 -

 

 

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

 

“Properly Contested” shall mean, in the case of any Indebtedness or Lien, as
applicable, of any Person (including any taxes) that is not paid as and when due
or payable by reason of such Person’s bona fide dispute concerning its liability
to pay same or concerning the amount thereof, (i) such Indebtedness or Lien, as
applicable, is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (ii) such Person has established
appropriate reserves as shall be required in conformity with GAAP; (iii) the
non-payment of such Indebtedness will not have a Material Adverse Effect and
will not result in the forfeiture of any assets of such Person; (iv) no Lien is
imposed upon any of such Person’s assets with respect to such Indebtedness
unless such Lien is at all times junior and subordinate in priority to the Liens
in favor of the Agent (except only with respect to property taxes that have
priority as a matter of applicable state law) and enforcement of such Lien is
stayed during the period prior to the final resolution or disposition of such
dispute; (v) 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; and
(vi) if such contest is abandoned, settled or determined adversely (in whole or
in part) to such Person, such Person forthwith pays such Indebtedness and all
penalties, interest and other amounts due in connection therewith.

 

“Purchasing CLO” shall have the meaning set forth in Section 15.3(d) hereof.

 

“Purchasing Lender” shall have the meaning set forth in Section 15.3(c) hereof.

 

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

 

“Real Property” shall mean all of Borrower’s right, title and interest in and to
the owned and leased premises identified on Schedule 4.19 hereto or which is
hereafter owned or leased by Borrower.

 

“Receivables” shall mean and include, as to Borrower, all of Borrower’s
accounts, contract rights, instruments (including those evidencing indebtedness
owed to Borrower by its Affiliates), documents, chattel paper (including
electronic chattel paper), general intangibles relating to accounts, drafts and
acceptances, credit card receivables and all other forms of obligations owing to
Borrower 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.

 

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“Register” shall have the meaning set forth in Section 15.3(e).

 

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

 

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

 

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

 

“Required Lenders” shall mean Lenders holding at least fifty one percent (51%)
of the Advances and, if no Advances are outstanding, shall mean Lenders holding
fifty one percent (51%) of the Commitment Percentages; provided, however, if
there are fewer than three (3) Lenders, Required Lenders shall mean all Lenders.

 

“Reserve Percentage” shall mean as of any day the maximum 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 Term Loan.

 

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

 

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Alternate Base Rate plus one half of one percent (0.50%) with respect
to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two and one
quarter of one percent (2.25%) with respect to Eurodollar Rate Loans.

 

“Safety Hi-Tech US Joint Venture Reserve Amount” shall mean, initially, the sum
of $650,000 to be reduced by amounts actually drawn down and utilized for the
Safety Hi-Tech US Joint Venture; and, the Safety Hi-Tech US Joint Venture
Reserve Amount shall terminate upon receipt by the Agent of a notice from the
Borrower indicating that the joint venture has been fully funded.

 

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

 

“Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company
controlling PNC, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.

 

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

 

“Settlement Date” shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.

 

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“Subsidiary” of any Person shall mean 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 all of the issued and outstanding Equity Interests
of any Subsidiary owned by the Borrower (not to exceed 65% of the Equity
Interests of any Foreign Subsidiary).

 

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

 

“Term Loan” shall mean the Advances made pursuant to Section 2.4 hereof.

 

“Term Loan Rate” shall mean an interest rate per annum equal to (a) the sum of
the Alternate Base Rate plus one half of one percent (0.50%) with respect to
Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two and one
quarter of one percent (2.25%) with respect to Eurodollar Rate Loans.

 

“Term Loan Reserve” shall mean an amount equal to the outstanding balance of the
Term Loan, as such amount may change from time to time.

 

“Term Note” shall mean, collectively, the promissory notes described in Section
2.4 hereof.

 

“Termination Date” shall mean June 22, 2015 or such other date as the Lenders
may agree in writing to extend the Termination Date until, without there being
any obligation on the part of the Lenders to extend the Termination Date.

 

“Termination Event” shall mean (i) a Reportable Event with respect to any Plan
or Multiemployer Plan; (ii) the withdrawal of Borrower or any member of the
Controlled Group from a Plan or Multiemployer Plan during a plan year in which
such entity was a “substantial employer” as defined in Section 4001(a)(2) of
ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) 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 Plan or
Multiemployer Plan, or (b) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of Borrower or
any member of the Controlled Group from a Multiemployer Plan.

 

“Toxic Substance” shall mean and include any material present on the Real
Property or the Leasehold Interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., 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.

 

- 20 -

 

 

“Trading with the Enemy Act” shall mean the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) and any enabling legislation or executive order relating thereto.

 

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

 

“Transferee” shall have the meaning set forth in Section 15.3(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, minus (b) the sum of (i) the outstanding amount of Advances (other than
the Term Loan) plus (ii) all amounts due and owing to Borrower’s trade creditors
which are past due more than sixty (60) days, plus (iii) fees and expenses for
which Borrower is liable but which have not been paid or charged to Borrower’s
Account.

 

“Unfinanced Capital Expenditures” shall mean all Capital Expenditures of
Borrower other than those made utilizing financing provided by the applicable
seller or third party lenders. For the avoidance of doubt, Capital Expenditures
made by a Borrower utilizing Revolving Advances shall be deemed Unfinanced
Capital Expenditures.

 

“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.

 

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

 

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”, “commercial tort claims”, “instruments”, “general intangibles”,
“goods”, “payment intangibles”, “proceeds”, “supporting obligations”,
“securities”, “investment property”, “documents”, “deposit accounts”,
“software”, “letter of credit rights”, “inventory”, “equipment” and “fixtures”,
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.

 

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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 or amendments thereto and any and all extensions or renewals
thereof. 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 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 the 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 Borrower’s
knowledge” or words of similar import relating to the knowledge or the awareness
of Borrower are used in this Agreement or Other Documents, such phrase shall
mean and refer to (i) the actual knowledge of a senior officer of Borrower or
(ii) the knowledge that a senior officer would have obtained if he had engaged
in good faith and diligent performance of his duties, including the making of
such reasonably specific inquiries as may be necessary of the employees or
agents of Borrower 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 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 including Section 2.1(b), each Lender, severally and
not jointly, will make Revolving Advances to Borrower in aggregate amounts
outstanding at any time equal to such Lender’s Commitment Percentage of the
lesser of (x) the Maximum Revolving Advance Amount less the aggregate Maximum
Undrawn Amount of all outstanding Letters of Credit or (y) an amount equal to
the sum of:

 

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(i)         up to 85%, subject to the provisions of Section 2.1(b) hereof
(“Receivables Advance Rate”), of Eligible Receivables, plus

 

(ii)        up to the lesser of (A) 65%, subject to the provisions of Section
2.1(b) hereof, of the value of the Eligible Inventory (“Inventory Advance Rate”
and together with the Receivables Advance Rate, collectively, the “Advance
Rates”), or (B) the Inventory Sublimit at any one time, minus

 

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

 

(iv)       the Term Loan Reserve, minus

 

(v)        the Safety Hi-Tech US Joint Venture Reserve Amount, minus

 

(vi)       such other reserves as Agent may reasonably deem proper and necessary
from time to time.

 

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), (v) and (vi) 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).

 

(b)         Discretionary Rights. Upon thirty (30) days written notice to the
Borrower, the Advance Rates may be increased or decreased by Agent at any time
and from time to time in the exercise of its reasonable discretion. 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 Borrower. The rights of Agent under this subsection are subject to
the provisions of Section 15.2(b). Notwithstanding anything to the contrary
herein, on or after the six month anniversary of the Closing Date, the Agent
shall implement a rent reserve in the amount of three (3) months rent for each
parcel of Real Property leased by the Borrower (including all warehouses) for
which the Agent has not received a fully executed landlord’s agreement/waiver
and/or warehouseman’s agreement/waiver, as applicable, in form and substance
acceptable to the Agent. Inventory located at such premises shall be deemed
Eligible Inventory during the six month period following the Closing Date and
thereafter if a rent reserve has been implemented.

 

2.2         Procedure for Revolving Advances Borrowing.

 

(a)         Borrower may notify Agent prior to 10:00 a.m. on a Business Day of
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, 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 under this Agreement or any other agreement with Agent or Lenders,
and such request shall be irrevocable.

 

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(b)         Notwithstanding the provisions of subsection (a) above, in the event
Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall give Agent
written notice by no later than 10:00 a.m. on the day which is three (3)
Business Days prior to the date such Eurodollar 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 on the date of such Advance to
be borrowed, which amount shall be in an aggregate principal amount that is not
less than $1,000,000 and integral multiples of $500,000 in excess thereof, and
(iii) the duration of the first Interest Period therefor. Interest Periods for
Eurodollar Rate Loans shall be for one, three or six months; provided, 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 Eurodollar Rate Loan shall be made available to Borrower during
the continuance of a Default or an Event of Default. After giving effect to each
requested Eurodollar Rate Loan, including those which are converted from a
Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more
than five (5) Eurodollar Rate Loans, in the aggregate.

 

(c)         Each Interest Period of a Eurodollar Rate Loan shall commence on the
date such Eurodollar Rate Loan is made and shall end on such date as Borrower
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.

 

Borrower shall elect the initial Interest Period applicable to a Eurodollar 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(d), as the case
may be. Borrower shall elect the duration of each succeeding Interest Period by
giving irrevocable written notice to Agent of such duration not later than 10:00
a.m. on the day which is three (3) Business Days prior to the last day of the
then current Interest Period applicable to such Eurodollar Rate Loan. If Agent
does not receive timely notice of the Interest Period elected by Borrower,
Borrower shall be deemed to have elected to convert to a Domestic Rate Loan
subject to Section 2.2(d) hereinbelow.

 

(d)          Provided that no Event of Default shall have occurred and be
continuing, Borrower may, on the last Business Day of the then current Interest
Period applicable to any outstanding Eurodollar 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 Eurodollar Rate Loan shall be made only on the last Business Day of the
then current Interest Period applicable to such Eurodollar Rate Loan. If
Borrower desires to convert a loan, Borrower shall give Agent written notice by
no later than 10:00 a.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 Eurodollar Rate Loan, or (ii) on the day which is
one (1) Business Day prior to the date on which such conversion is to occur with
respect to a conversion from a Eurodollar 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 from a Domestic Rate Loan to any other type of loan,
the duration of the first Interest Period therefor.

 

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(e)         At its option and upon written notice given prior to 10:00 a.m. (New
York time) at least three (3) Business Days’ prior to the date of such
prepayment, Borrower may prepay the Eurodollar 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. Borrower shall specify the date of
prepayment of Advances which are Eurodollar Rate Loans and the amount of such
prepayment. In the event that any prepayment of a Eurodollar Rate Loan is
required or permitted on a date other than the last Business Day of the then
current Interest Period with respect thereto, Borrower shall indemnify Agent and
Lenders therefor in accordance with Section 2.2(f) hereof.

 

(f)         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 Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate 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
Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrower shall be conclusive absent manifest error.

 

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

 

2.3         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 Borrower to Agent or Lenders,
shall be charged to Borrower’s Account on Agent’s books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions hereof. The proceeds of each
Revolving Advance requested by Borrower or deemed to have been requested by
Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving
Advances to the extent Lenders make such Revolving Advances, be made available
to Borrower on the day so requested by way of credit to Borrower’s operating
account at PNC, or such other bank as Borrower may designate following
notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested by Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.

 

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2.4         Term Loan.  Subject to the terms and conditions of this Agreement,
each Lender, severally and not jointly, will make a Term Loan to Borrower in the
sum equal to such Lender’s Commitment Percentage of $4,000,000. The Term Loan
shall be advanced on the Closing Date and shall be, with respect to principal,
payable in full on the Termination Date, subject to acceleration upon the
occurrence of an Event of Default under this Agreement or termination of this
Agreement. The Term Loan shall be evidenced by one or more secured promissory
notes (collectively, the “Term Note”) in substantially the form attached hereto
as Exhibit 2.4. The Term Loan may consist of Domestic Rate Loans or Eurodollar
Rate Loans, or a combination thereof, as Borrower may request. In the event that
Borrower desires to obtain or extend a Eurodollar Rate Loan or to convert a
Domestic Rate Loan to a Eurodollar Rate Loan, Borrower shall comply with the
notification requirements set forth in Sections 2.2(b) and (d) and the
provisions of Sections 2.2(b) through (g) shall apply.

 

2.5         Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving
Advance Amount or (b) the Formula Amount less, in each case, the aggregate
Maximum Undrawn Amount of all issued and outstanding Letters of Credit.

 

2.6         Repayment of Advances.

 

(a)         The Revolving Advances shall be due and payable in full on the last
day of the Term subject to earlier prepayment as herein provided. The Term Loan
shall be due and payable as provided in Section 2.4(a) hereof and in the Term
Note, subject to mandatory prepayments as herein provided.

 

(b)         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. In consideration of
Agent’s agreement to conditionally credit Borrower’s Account as of the next
Business Day following the Agent’s receipt of those items of payment, Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by Agent on account of the Obligations one (1) Business
Day after (i) the Business Day Agent receives such payments via wire transfer or
electronic depository check or (ii) in the case of payments received by Agent in
any other form, the Business Day such payment constitutes good funds in Agent’s
account. Agent is not, however, required to credit Borrower’s Account for the
amount of any item of payment which is unsatisfactory to Agent and Agent may
charge Borrower’s Account for the amount of any item of payment which is
returned to Agent unpaid.

 

(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. (New York time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrower’s
Account or by making Advances as provided in Section 2.2 hereof.

 

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(d)         Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.

 

2.7         Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder 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.

 

2.8         Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account (“Borrower’s Account”) in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent 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
Borrower a statement showing the accounting for the Advances made, payments made
or credited in respect thereof, and other transactions between Agent and
Borrower, during such month. The monthly statements shall be deemed correct and
binding upon Borrower in the absence of manifest error and shall constitute an
account stated between Lenders and Borrower unless Agent receives a written
statement of Borrower’s specific exceptions thereto within thirty (30) days
after such statement is received by Borrower. The records of Agent with respect
to the loan account shall be conclusive evidence absent manifest error of the
amounts of Advances and other charges thereto and of payments applicable
thereto.

 

2.9         Letters of Credit. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of standby and/or trade letters of credit
(“Letters of Credit”) for the account of Borrower; provided, however, that Agent
will not be required to issue or cause to be issued any Letters of Credit to the
extent that the issuance thereof would then cause the sum of (i) the outstanding
Revolving Advances plus (ii) the Maximum Undrawn Amount of all outstanding
Letters of Credit to exceed the lesser of (x) the Maximum Revolving Advance
Amount or (y) the Formula Amount. 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 applicable Contract Rate for Domestic Rate Loans;
Letters of Credit that have not been drawn upon shall not bear interest.

 

2.10        Issuance of Letters of Credit.

 

(a)         Borrower may request Agent to issue or cause the issuance of a
Letter of Credit by delivering to Agent, at the Payment Office, prior to 10:00
a.m. (New York time), at least five (5) Business Days’ prior to the proposed
date of issuance, Agent’s form of Letter of Credit Application (the “Letter of
Credit Application”) completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent may reasonably
request. Borrower also has the right to give instructions and make agreements
with respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement agreement and/or any
other applicable agreement, any letter of credit and the disposition of
documents, disposition of any unutilized funds, and to agree with Agent upon any
amendment, extension or renewal of any Letter of Credit.

 

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(b)         Each Letter of Credit shall, among other things, (i) provide for the
payment of sight drafts, 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 (ISP98-International Chamber of Commerce
Publication Number 590) (the “ISP98 Rules”)), and any subsequent revision
thereof at the time a standby Letter of Credit is issued, as determined by
Agent, and each trade Letter of Credit shall be subject to the UCP.

 

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

 

2.11        Requirements For Issuance of Letters of Credit.

 

(a)         Borrower shall authorize and direct any Issuer to name Borrower as
the “Applicant” or “Account Party” of each Letter of Credit. If Agent is not the
Issuer of any Letter of Credit, Borrower 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 or any acceptance
therefor.

 

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

 

2.12        Disbursements, Reimbursement.

 

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

 

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(b)         In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, Agent will promptly notify Borrower.
Provided that it shall have received such notice, Borrower shall reimburse (such
obligation to reimburse Agent shall sometimes be referred to as a “Reimbursement
Obligation”) Agent prior to 12:00 Noon, New York time on each date that an
amount is paid by Agent under any Letter of Credit (each such date, a “Drawing
Date”) in an amount equal to the amount so paid by Agent. In the event Borrower
fails to reimburse Agent for the full amount of any drawing under any Letter of
Credit by 12:00 Noon, New York time, on the Drawing Date, Agent will promptly
notify each Lender thereof, and Borrower shall be 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, subject to the
amount of the unutilized portion of the lesser of Maximum Revolving Advance
Amount or the Formula Amount and subject to Section 8.2 hereof. Any notice given
by Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed
in writing; provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.

 

(c)         Each Lender shall upon any notice pursuant to Section 2.12(b) make
available to Agent an amount in immediately available funds equal to its
Commitment Percentage of the amount of the drawing, whereupon the participating
Lenders shall (subject to Section 2.12(d)) each be deemed to have made a
Revolving Advance maintained as a Domestic Rate Loan to Borrower in that amount.
If any Lender so notified fails to make available to Agent the amount of such
Lender’s Commitment Percentage of such amount by no later than 2:00 p.m., New
York time 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 will promptly give notice of the occurrence of the Drawing
Date, but failure of Agent to give any such notice on the Drawing Date or in
sufficient time to enable any Lender to effect such payment on such date shall
not relieve such Lender from its obligation under this Section 2.12(c), provided
that such Lender shall not be obligated to pay interest as provided in Section
2.12(c) (i) and (ii) until and commencing from the date of receipt of notice
from Agent 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 Borrower in whole or
in part as contemplated by Section 2.12(b), because of Borrower’s failure to
satisfy the conditions set forth in Section 8.2 (other than any notice
requirements) or for any other reason, Borrower 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
Lender’s payment to Agent pursuant to Section 2.12(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 under this Section 2.12.

 

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(e)         Each Lender’s Participation Commitment shall continue until the last
to occur of any of the following events: (x) Agent 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 the Borrower) have been fully reimbursed for all payments
made under or relating to Letters of Credit.

 

2.13        Repayment of Participation Advances.

 

(a)         Upon (and only upon) receipt by Agent for its account of immediately
available funds from Borrower (i) in reimbursement of any payment made by the
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 Agent under such a Letter of Credit, Agent will pay to each Lender, in
the same funds as those received by Agent, the amount of such Lender’s
Commitment Percentage of such funds, except Agent shall retain the amount of the
Commitment Percentage of such funds of any Lender that did not make a
Participation Advance in respect of such payment by Agent.

 

(b)         If Agent is required at any time to return to Borrower, or to a
trustee, receiver, liquidator, custodian, or any official in any insolvency
proceeding, any portion of the payments made by Borrower to Agent pursuant to
Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.

 

2.14        Documentation. Borrower agrees to be bound by the terms of the
Letter of Credit Application and by Agent’s interpretations of any Letter of
Credit issued for Borrower’s account and by Agent’s written regulations and
customary practices relating to letters of credit, though Agent’s
interpretations may be different from 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), Agent shall not be liable for
any error, negligence and/or mistakes, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters of Credit or
any modifications, amendments or supplements thereto.

 

2.15        Determination to Honor Drawing Request. In determining whether to
honor any request for drawing under any Letter of Credit by the beneficiary
thereof, Agent 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.

 

2.16        Nature of Participation and Reimbursement Obligations. Each Lender’s
obligation 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 Borrower to reimburse Agent 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 2.16 under all
circumstances, including the following circumstances:

 

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(i)         any set-off, counterclaim, recoupment, defense or other right which
such Lender may have against Agent, Borrower or any other Person for any reason
whatsoever;

 

(ii)        the failure of Borrower 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 2.12;

 

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

 

(iv)       any claim of breach of warranty that might be made by Borrower 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 Borrower or any Lender may have at any time against a beneficiary, any
successor beneficiary or any transferee of any Letter of Credit or the proceeds
thereof (or any Persons for whom any such transferee may be acting), 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 Borrower or any Subsidiaries of Borrower 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 provisions of services
relating to a Letter of Credit, in each case even if Agent or any of Agent’s
Affiliates has been notified thereof;

 

(vi)       payment by Agent under any Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit;

 

(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 the Agent or any of Agent’s Affiliates to issue any
Letter of Credit in the form requested by Borrower, unless the Agent has
received written notice from Borrower of such failure within three (3) Business
Days after the Agent shall have furnished Borrower 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;

 

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(ix)        any Material Adverse Effect on Borrower or any Guarantor;

 

(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 Borrower or any Guarantor;

 

(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 hereunder shall have been terminated; and

 

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

 

2.17        Indemnity. In addition to amounts payable as provided in Section
15.5, the Borrower hereby agrees to protect, indemnify, pay and save harmless
Agent and any of Agent’s Affiliates that have issued a Letter of Credit from and
against any and all claims, demands, liabilities, damages, taxes, penalties,
interest, judgments, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which the Agent or any of Agent’s Affiliates may incur or be subject to
as a consequence, direct or indirect, of the issuance of any Letter of Credit,
other than as a result of (A) the gross negligence or willful misconduct of the
Agent as determined by a final and non-appealable judgment of a court of
competent jurisdiction or (b) the wrongful dishonor by the Agent or any of
Agent’s Affiliates of a proper demand for payment made under any Letter of
Credit, except if such dishonor resulted from any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto Governmental
Body (all such acts or omissions herein called “Governmental Acts”).

 

2.18        Liability for Acts and Omissions. As between Borrower and Agent and
Lenders, 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 respective foregoing, Agent
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 Agent 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
Borrower against any beneficiary of such Letter of Credit, or any such
transferee, or any dispute between or among Borrower 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 Agent, including any governmental acts, and none of the above shall
affect or impair, or prevent the vesting of, any of Agent’s rights or powers
hereunder. Nothing in the preceding sentence shall relieve Agent from liability
for Agent’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 Agent or Agent’s Affiliates be liable to the
Borrower 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.

 

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Without limiting the generality of the foregoing, Agent and each of its
Affiliates (i) may rely on any oral or other communication believed in good
faith by Agent 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 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 Agent 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 Agent 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 carrier or any similar document (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.

 

In furtherance and extension and not in limitation of the specific provisions
set forth above, any action taken or omitted by Agent 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 (as determined by a court of competent jurisdiction in a final
non-appealable judgment), shall not put Agent under any resulting liability to
Borrower or any Lender.

 

2.19         Additional Payments. Any sums expended by Agent or any Lender due
to Borrower’s failure to perform or comply with its obligations under this
Agreement or any Other Document including Borrower’s obligations under Sections
4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrower’s Account
as a Revolving Advance and added to the Obligations.

 

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2.20        Manner of Borrowing and Payment.

 

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

 

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

 

(c)         (i)         Notwithstanding anything to the contrary contained in
Sections 2.20(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by Borrower on account of Revolving Advances
shall be applied first to those Revolving Advances advanced by Agent. On or
before 1:00 P.M., New York time, on each Settlement Date commencing with the
first Settlement Date following the Closing Date, Agent and Lenders shall make
certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week (if any) exceeds the aggregate
amount of repayments applied to outstanding Revolving Advances during such
preceding Week, then each Lender shall provide Agent with funds in an amount
equal to its applicable Commitment Percentage of the difference between (w) such
Revolving Advances and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable
Commitment Percentage of the difference between (y) such repayments and (z) such
Revolving Advances.

 

(ii)         Each Lender shall be entitled to earn interest at the applicable
Contract Rate on outstanding Advances which it has funded.

 

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

 

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(d)         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 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.

 

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

 

2.21        Mandatory Prepayments.   Subject to Section 4.3 hereof, when
Borrower sells or otherwise disposes of any Collateral other than Inventory in
the Ordinary Course of Business, Borrower shall repay the Advances in an amount
equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable
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 (y) first, to the outstanding principal installments of the
Term Loan in the inverse order of the maturities thereof, and (z) second, to the
remaining Advances in such order as Agent may determine, subject to Borrower’s
ability to reborrow Revolving Advances in accordance with the terms hereof.

 

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2.22        Use of Proceeds.

 

(a)         Borrower shall apply the proceeds of Advances to (i) repay existing
indebtedness owed to Keltic Financial Partners, LP, (ii) pay fees and expenses
relating to this transaction, and (iii) provide for its working capital needs
and reimburse drawings under Letters of Credit.

 

(b)         Without limiting the generality of Section 2.22(a) above, neither
the Borrower, the Guarantors nor any other Person which may in the future become
party to this Agreement or the Other Documents as 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 the Trading with the Enemy Act.

 

2.23        Defaulting Lender.

 

(a)         Notwithstanding anything to the contrary contained herein, in the
event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrower that it does not intend to
make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a “Lender Default”), all rights and obligations hereunder of such Lender
(a “Defaulting Lender”) as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.23 while such Lender Default remains in effect.

 

(b)         Advances shall be incurred pro rata from Lenders (the
“Non-Defaulting Lenders”) which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender (other than any Defaulting Lender) pro rata based on the
aggregate of the outstanding Advances of that type of all Lenders at the time of
such application; 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 Borrower the amount of such payments
received or retained by it for the account of such Defaulting Lender.

 

(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. 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 be deemed not to be a Lender and not to have
either Advances outstanding or a Commitment Percentage.

 

(d)         Other than as expressly set forth in this Section 2.23, 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 2.23 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 Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.

 

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

 

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
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months from the commencement of such Eurodollar Rate Loan or (b)
the end of the Interest Period. 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 the Term Loan, the applicable Term Loan
Rate (as applicable, the “Contract Rate”). Whenever, subsequent to the date of
this Agreement, the Alternate Base Rate is increased or decreased, the
applicable Contract 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 Eurodollar Rate shall be adjusted with respect to Eurodollar 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, the Obligations shall
bear interest at the applicable Contract Rate for Domestic Rate Loans plus two
percent (2%) per annum (as applicable, the “Default Rate”).

 

3.2           Letter of Credit Fees.

 

(a)          Borrower shall pay (x) to Agent, for the ratable benefit of
Lenders, 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 two and one quarter of one percent (2.25%) per annum, 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 quarter
and on the last day of the Term, and (y) to the Issuer, a fronting fee of one
quarter of one percent (0.25%) per annum, together with 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 the
Issuer and the Borrower 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 and shall reimburse Agent for any and all
fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing
fees, the “Letter of Credit Fees”). 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. All Letter of Credit
Fees payable hereunder shall be deemed earned in full on the date when the same
are due and payable hereunder and shall not be subject to rebate or pro-ration
upon the termination of this Agreement for any reason. 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, the Letter of Credit
Fees described in clause (x) of this Section 3.2(a) shall be increased by an
additional two percent (2%) per annum.

 

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On demand, Borrower 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 Borrower hereby irrevocably authorizes Agent, in its discretion, on
Borrower’s behalf and in Borrower’s name, to open such an account and to make
and maintain deposits therein, or in an account opened by Borrower, in the
amounts required to be made by Borrower, out of the proceeds of Receivables or
other Collateral or out of any other funds of Borrower coming into any Lender’s
possession at any time. Agent will invest such cash collateral (less applicable
reserves) in such short-term money-market items as to which Agent and Borrower
mutually agree and the net return on such investments shall be credited to such
account and constitute additional cash collateral. Borrower may not 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.

 

3.3           Closing Fee.

 

(a)           Closing Fee. Upon the execution of this Agreement, Borrowers shall
pay to Agent for the ratable benefit of Lenders a closing fee of $135,000 less
that portion of the deposit fee of $30,000 and that portion of the commitment
fee of $45,000 heretofore paid by Borrowers to Agent remaining after application
of such fee to out of pocket expenses.

 

(b)           Facility Fee. If, for any calendar quarter during the Term, the
average daily unpaid balance of the Revolving Advances and undrawn amount of any
outstanding Letters of Credit for each day of such calendar quarter does not
equal the Maximum Revolving Advance Amount, then Borrower shall pay to Agent for
the ratable benefit of Lenders 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. Such fee shall be payable to
Agent in arrears on the first day of each calendar quarter with respect to the
previous calendar quarter.

 

3.4           Collateral Evaluation Fee, Collateral Monitoring Fee and Fee
Letter.

 

(a)           Collateral Evaluation Fee. Borrower shall pay Agent a collateral
evaluation fee equal to $1,500.00 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 evaluation 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.

 

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(b)          Collateral Monitoring Fee. Borrower shall pay to Agent on the first
day of each month following any month in which Agent performs any collateral
monitoring - namely any field examination, collateral analysis or other business
analysis, the need for which is to be determined by Agent and which monitoring
is undertaken by Agent or for Agent’s benefit - a collateral monitoring fee in
an amount equal to $850.00 per day for each person employed to perform such
monitoring, plus all costs and disbursements incurred by Agent in the
performance of such examination or analysis.

 

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 Contract Rate for Domestic Rate Loans during such extension.

 

3.6           Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrower, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrower 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 therein or in the interpretation or application thereof, or compliance by
any Lender (for purposes of this Section 3.7, the term “Lender” shall include
Agent or any Lender and any corporation or bank controlling Agent or any Lender)
and the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar 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 Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Other Document or change the basis of taxation
of payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except for changes in the
rate of tax on the overall net income of Agent or any Lender by the jurisdiction
in which it maintains its principal office);

 

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

 

(c)          impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;

 

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and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender 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 or such Lender deems to be material, then, in
any case Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender 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 Eurodollar Rate, as the
case may be. Agent or such Lender shall certify the amount of such additional
cost or reduced amount to Borrower, 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 Eurodollar 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 Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,

 

then Agent shall give Borrower prompt written or telephonic notice of such
determination. If such notice is given, (i) any such requested Eurodollar Rate
Loan shall be made as a Domestic Rate Loan, unless Borrower shall notify Agent
no later than 10:00 a.m. (New York City time) 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 Eurodollar Rate Loan, (ii) any
Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to
an affected type of Eurodollar Rate Loan shall be continued as or converted into
a Domestic Rate Loan, or, if Borrower shall notify Agent, no later than 10:00
a.m. (New York City time) two (2) Business Days prior to the proposed
conversion, shall be maintained as an unaffected type of Eurodollar Rate Loan,
and (iii) any outstanding affected Eurodollar Rate Loans shall be converted into
a Domestic Rate Loan, or, if Borrower shall notify Agent, no later than 10:00
a.m. (New York City time) two (2) Business Days prior to the last Business Day
of the then current Interest Period applicable to such affected Eurodollar Rate
Loan, shall be converted into an unaffected type of Eurodollar Rate Loan, on the
last Business Day of the then current Interest Period for such affected
Eurodollar Rate Loans. Until such notice has been withdrawn, Lenders shall have
no obligation to make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and Borrower shall not have the right
to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan
into an affected type of Eurodollar Rate Loan.

 

3.9           Capital Adequacy.

 

(a)          In the event that Agent or any Lender shall have determined that
any Applicable Law or guideline regarding capital adequacy, or any change
therein, 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 or any Lender
(for purposes of this Section 3.9, the term “Lender” shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender) and the
office or branch where Agent or any Lender (as so defined) makes or maintains
any Eurodollar 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 or any Lender’s capital as a consequence of its obligations
hereunder to a level below that which Agent or such Lender could have achieved
but for such adoption, change or compliance (taking into consideration Agent’s
and each Lender’s policies with respect to capital adequacy) by an amount deemed
by Agent or any Lender to be material, then, from time to time, Borrower shall
pay upon demand to Agent or such Lender such additional amount or amounts as
will compensate Agent or such Lender for such reduction. In determining such
amount or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods. The protection of this Section 3.9 shall be available to
Agent and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the Applicable Law or condition.

 

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

 

3.10         Gross Up for Taxes. If Borrower shall be required by Applicable Law
to withhold or deduct any taxes from or in respect of any sum payable under this
Agreement or any of the Other Documents to Agent, or any Lender, assignee of any
Lender, or Participant (each, individually, a “Payee” and collectively, the
“Payees”), (a) the sum payable to such Payee or Payees, as the case may be,
shall be increased as may be necessary so that, after making all required
withholding or deductions, the applicable Payee or Payees receives an amount
equal to the sum it would have received had no such withholding or deductions
been made (the “Gross-Up Payment”), (b) Borrower shall make such withholding or
deductions, and (c) Borrower shall pay the full amount withheld or deducted to
the relevant taxation authority or other authority in accordance with Applicable
Law. Notwithstanding the foregoing, Borrower shall not be obligated to make any
portion of the Gross-Up Payment that is attributable to any withholding or
deductions that would not have been paid or claimed had the applicable Payee or
Payees properly claimed a complete exemption with respect thereto pursuant to
Section 3.11 hereof.

 

3.11         Withholding Tax Exemption.

 

(a)          Each Payee that is not incorporated under the Laws of the United
States of America or a state thereof (and, upon the written request of Agent,
each other Payee) agrees that it will deliver to Borrower and Agent two (2) duly
completed appropriate valid Withholding Certificates (as defined under
§1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”)) certifying its
status (i.e., U.S. or foreign person) and, if appropriate, making a claim of
reduced, or exemption from, U.S. withholding tax on the basis of an income tax
treaty or an exemption provided by the Code. The term “Withholding Certificate”
means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related
statements and certifications as required under §1.1441-1(e)(2) and/or (3) of
the Regulations; a statement described in §1.871-14(c)(2)(v) of the Regulations;
or any other certificates under the Code or Regulations that certify or
establish the status of a payee or beneficial owner as a U.S. or foreign person.

 

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(b)          Each Payee required to deliver to Borrower and Agent a valid
Withholding Certificate pursuant to Section 3.11(a) hereof shall deliver such
valid Withholding Certificate as follows: (A) each Payee which is a party hereto
on the Closing Date shall deliver such valid Withholding Certificate at least
five (5) Business Days prior to the first date on which any interest or fees are
payable by Borrower hereunder for the account of such Payee; (B) each Payee
shall deliver such valid Withholding Certificate at least five (5) Business Days
before the effective date of such assignment or participation (unless Agent in
its sole discretion shall permit such Payee to deliver such Withholding
Certificate less than five (5) Business Days before such date in which case it
shall be due on the date specified by Agent). Each Payee which so delivers a
valid Withholding Certificate further undertakes to deliver to Borrower and
Agent two (2) additional copies of such Withholding Certificate (or a successor
form) on or before the date that such Withholding Certificate expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent Withholding Certificate so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by Borrower or
Agent.

 

(c)          Notwithstanding the submission of a Withholding Certificate
claiming a reduced rate of or exemption from U.S. withholding tax required under
Section 3.11(b) hereof, 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 Regulations. Further, Agent
is indemnified under §1.1461-1(e) of the Regulations against any claims and
demands of any Payee for the amount of any tax it deducts and withholds in
accordance with regulations under §1441 of the Code.

 

IV.          COLLATERAL: GENERAL TERMS

 

4.1           Security Interest in the Collateral. To secure the prompt payment
and performance to Agent and each Lender of the Obligations, Borrower hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing security interest in and to and Lien on all of its
Collateral, whether now owned or existing or hereafter acquired or arising and
wheresoever located. Borrower shall promptly provide Agent with written notice
of all commercial tort claims, such notice to contain the case title together
with the applicable court and a brief description of the claim(s). Upon delivery
of each such notice, Borrower shall be deemed to hereby grant to Agent a
security interest and lien in and to such commercial tort claims and all
proceeds thereof.

 

4.2           Perfection of Security Interest. Borrower shall take all 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 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) obtaining 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, (iv) entering into
warehousing, lockbox and other custodial arrangements satisfactory to Agent, 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, Borrower hereby authorizes Agent to file against Borrower, 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). All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrower’s
Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations.

 

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4.3           Disposition of Collateral. Borrower will safeguard and protect all
Collateral for Agent’s general account and make no disposition thereof whether
by sale, lease or otherwise except the sale of Inventory in the Ordinary Course
of Business.

 

4.4           Preservation of Collateral. Following the occurrence of an 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 such security guards or the placing of other security protection measures as
Agent may deem appropriate; (b) may employ and maintain at any of Borrower’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 Borrower’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 Borrower’s owned or leased property.
Borrower 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 Borrower’s
Account as a Revolving Advance maintained as a Domestic Rate Loan and added to
the Obligations.

 

4.5           Ownership of Collateral.

 

(a)          With respect to the Collateral, at the time the Collateral becomes
subject to Agent’s security interest: (i) Borrower 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 the its respective
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens and encumbrances whatsoever; (ii) each document
and agreement executed by Borrower or delivered to Agent or any Lender in
connection with this Agreement shall be true and correct in all respects; (iii)
all signatures and endorsements of Borrower that appear on such documents and
agreements shall be genuine and Borrower shall have full capacity to execute
same; and (iv) Borrower’s Inventory shall be located as set forth on Schedule
4.5 and shall not be removed from such location(s) without the prior written
consent of Agent except with respect to the sale of Inventory in the Ordinary
Course of Business. Borrower may relocate Inventory at any time to any of the
locations set forth on Schedule 4.5 without the consent of Agent.

 

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(b)          (i) There is no location at which Borrower has any Inventory
(except for Inventory in transit) other than those locations listed on Schedule
4.5; (ii) Schedule 4.5 hereto contains a correct and complete list, as of the
Closing Date, of the legal names and addresses of each warehouse at which
Inventory of Borrower is stored; none of the receipts received by Borrower 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 4.19 hereto sets forth a correct and complete
list as of the Closing Date of (A) each place of business of Borrower and (B)
the chief executive office of Borrower; and (iv) Schedule 4.19 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 Borrower, together with
the names and addresses of any landlords.

 

4.6           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 Borrower shall not, without Agent’s prior written
consent, pledge, sell (except Inventory in the Ordinary Course of Business and
Equipment to the extent permitted in Section 4.3 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. Borrower shall 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,
Borrower 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. Borrower 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 Borrower’s possession, they, and each
of them, shall be held by Borrower in trust as Agent’s trustee, and Borrower
will immediately deliver them to Agent in their original form together with any
necessary endorsement.

 

4.7           Books and Records. Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP in the
opinion of such independent public accountant as shall then be regularly engaged
by Borrower.

 

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4.8           Financial Disclosure. Borrower hereby irrevocably authorizes and
directs all accountants and auditors that are salaried employees of the Borrower
at any time during the Term to exhibit and deliver to Agent and each Lender
copies of any of Borrower’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 Borrower’s financial status and business operations. Borrower hereby
authorizes all Governmental Bodies to furnish to Agent and each Lender copies of
reports or examinations relating to Borrower, whether made by Borrower or
otherwise; however, Agent and each Lender will attempt to obtain such
information or materials directly from Borrower prior to obtaining such
information or materials from such accountants or Governmental Bodies.

 

4.9           Compliance with Laws. Borrower shall comply with all Applicable
Laws with respect to the Collateral or any part thereof or to the operation of
Borrower’s business the non-compliance with which could reasonably be expected
to have a Material Adverse Effect. Borrower may, however, contest or dispute any
Applicable Laws in any reasonable manner, provided that any related Lien is
inchoate or stayed and sufficient reserves are established to the reasonable
satisfaction of Agent to protect Agent’s Lien on or security interest in the
Collateral. The assets of Borrower at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the assets of Borrower so that such insurance shall
remain in full force and effect.

 

4.10         Inspection of Premises. At all reasonable times and upon five (5)
Business Days written notice, Agent and each Lender shall have full access to
and the right to audit, check, inspect and make abstracts and copies from
Borrower’s books, records, audits, correspondence and all other papers relating
to the Collateral and the operation of Borrower’s business. Agent, any Lender
and their agents may enter upon any of Borrower’s premises at any time during
business hours and at any other reasonable time, and from time to time, for the
purpose of inspecting the Collateral and any and all records pertaining thereto
and the operation of Borrower’s business. The Agent shall perform field
examinations with regard to the Collateral at any time in its reasonable
discretion, however, not less than once every one hundred and twenty (120) days.
The Agent shall perform in its sole discretion appraisals with regard to all
Collateral at the expense of the Borrower including, but not limited to, all
Equipment, provided, however, the Agent shall not perform any appraisals with
regard to Inventory unless (i) the value of Borrower’s Collateral, less Advances
against such Collateral is less than $2,500,000 (measured on a trailing five
consecutive Business Day basis) at which point the Agent can perform one (1)
Inventory appraisal during each twelve (12) month period and/or (ii) a Default
and/or Event of Default has occurred at which point the Agent can perform
Inventory appraisals at any time.

 

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4.11         Insurance. The assets and properties of Borrower at all times shall
be maintained in accordance with the requirements of all insurance carriers
which provide insurance with respect to the assets and properties of Borrower so
that such insurance shall remain in full force and effect. Borrower shall bear
the full risk of any loss of any nature whatsoever with respect to the
Collateral. At Borrower’s own cost and expense in amounts and with carriers
acceptable to Agent, Borrower shall (a) keep all its insurable properties and
properties in which Borrower 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 engaged in businesses similar to Borrower’s including business
interruption insurance; (b) maintain public and product liability insurance
against claims for personal injury, death or property damage suffered by others;
(c) maintain all such worker’s compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which Borrower is
engaged in business; (d) furnish Agent with (i) copies of all policies and
evidence of the maintenance of such policies by the renewal thereof at least
thirty (30) days before any expiration date, and (ii) appropriate loss payable
endorsements in form and substance satisfactory to Agent, naming Agent as an
additional-insured and lender loss payee as its interests may appear with
respect to all insurance coverage referred to in clauses (a) and (c) above, and
providing (A) that all proceeds thereunder shall be payable to Agent, (B) no
such insurance shall be affected by any act or neglect of the insured or owner
of the property described in such policy, and (C) that such policy and loss
payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days’ prior written notice is given to Agent. In the event of any
loss thereunder, the carriers named therein hereby are directed by Agent and
Borrower to make payment for such loss to Agent and not to Borrower and Agent
jointly. If any insurance losses are paid by check, draft or other instrument
payable to Borrower and Agent jointly, Agent may endorse Borrower’s name thereon
and do such other things as Agent may deem advisable to reduce the same to cash.
Agent is hereby authorized to adjust and compromise claims under insurance
coverage referred to in clause (a) above. All loss recoveries received by Agent
upon any such insurance may be applied to the Obligations, in such order as
Agent in its sole discretion shall determine. Any surplus shall be paid by Agent
to Borrower or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by Borrower to Agent, on demand.

 

4.12         Failure to Pay Insurance. If Borrower 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 Borrower,
and charge Borrower’s Account therefor as a Revolving Advance of a Domestic Rate
Loan and such expenses so paid shall be part of the Obligations.

 

4.13         Payment of Taxes. Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon Borrower or any
of the Collateral 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 Borrower 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, may possibly create a valid Lien on the Collateral, Agent may without
notice to Borrower pay the taxes, assessments or other Charges and Borrower
hereby indemnifies and holds Agent and each Lender harmless in respect thereof.
Agent will not pay any taxes, assessments or Charges to the extent that Borrower
has Properly Contested those taxes, assessments or Charges. The amount of any
payment by Agent under this Section 4.13 shall be charged to Borrower’s Account
as a Revolving Advance maintained as a Domestic Rate Loan and added to the
Obligations and, until Borrower 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 Borrower’s credit and Agent shall retain its security interest in
and Lien on any and all Collateral held by Agent.

 

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4.14         Payment of Leasehold Obligations. Borrower shall at all times pay,
when and as due, its rental obligations under all leases under which it is a
tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent’s
request will provide evidence of having done so.

 

4.15         Receivables.

 

(a)          Nature of Receivables. Each of the Receivables 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 Borrower, or work, labor or services theretofore rendered
by Borrower as of the date each Receivable is created. Same shall be due and
owing in accordance with Borrower’s standard terms of sale without dispute,
setoff or counterclaim except as may be stated on the accounts receivable
schedules delivered by Borrower to Agent.

 

(b)          Solvency of Customers. Each Customer, to the best of Borrower’s
knowledge, as of the date each Receivable is created, is and will be solvent and
able to pay all Receivables on which the Customer is obligated in full when due
or with respect to such Customers of Borrower who are not solvent Borrower has
set up on its books and in its financial records bad debt reserves adequate to
cover such Receivables.

 

(c)          Location of Borrower. Borrower’s chief executive office is located
at One Blue Hill Plaza, Pearl River, New York 10965. Until written notice is
given to Agent by Borrower of any other office at which Borrower keeps its
records pertaining to Receivables, all such records shall be kept at such
executive office.

 

(d)          Collection of Receivables. Until Borrower’s authority to do so is
terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default or when Agent in its reasonable discretion
deems it to be in Lenders’ best interest to do so), Borrower will, at Borrower’s
reasonable cost and expense, but on 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 Borrower’s funds or
use the same except to pay Obligations. Borrower shall deposit in the Blocked
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)          Notification of Assignment of Receivables. At any time following
the occurrence 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. Thereafter, 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
Borrower’s Account and added to the Obligations.

 

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

 

(g)          No Liability. 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. Following the occurrence of an Event of Default,
Agent may, without notice or consent from Borrower, sue upon or otherwise
collect, extend the time of payment of, compromise or settle for cash, credit or
upon any terms any of the Receivables or any other securities, instruments or
insurance applicable thereto and/or release any obligor thereof. Agent is
authorized and empowered to accept following the occurrence of an Event of
Default the return of the goods represented by any of the Receivables, without
notice to or consent by Borrower, all without discharging or in any way
affecting Borrower’s liability hereunder.

 

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(h)          Establishment of a Lockbox Account, Dominion Account. All proceeds
of Receivables shall be deposited by Borrower 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 selected by
Borrower and be acceptable to Agent or (ii) depository accounts (“Depository
Accounts”) established at the Agent for the deposit of such proceeds. Borrower,
Agent and each Blocked Account Bank shall enter into a deposit account control
agreement in form and substance satisfactory to Agent directing such Blocked
Account Bank to transfer such funds so deposited to Agent, either to any account
maintained by Agent at said Blocked Account Bank or by wire transfer to
appropriate account(s) of Agent. All funds deposited in such Blocked Accounts
shall immediately become the property of Agent and Borrower 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. All deposit accounts and investment accounts of Borrower and its
Subsidiaries are set forth on Schedule 4.15(h).

 

(i)          Adjustments. Borrower will not, 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 business of Borrower.

 

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

 

4.17         Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.
Borrower shall not use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation. Borrower shall have the right to
sell Equipment to the extent set forth in Section 4.3 hereof.

 

4.18         Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as Borrower’s agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. Neither
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of Borrower’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 Borrower of any of the terms and
conditions thereof.

 

4.19         Environmental Matters.

 

(a)          Borrower shall ensure that the Real Property and all operations and
businesses conducted thereon remains in material compliance with all
Environmental Laws and they shall not place or permit to be placed any Hazardous
Substances on any Real Property except as permitted by Applicable Law or
appropriate governmental authorities.

 

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

 

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

 

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

 

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

 

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

 

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

 

(h)          Borrower shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, directors and officers
harmless from and against all loss, liability, damage and expense, claims,
costs, fines and penalties, including attorney’s fees, suffered or incurred by
Agent or Lenders under or on account of any Environmental Laws, including the
assertion of any Lien thereunder, with respect to any Hazardous Discharge, the
presence of any Hazardous Substances affecting the Real Property, whether or not
the same originates or emerges from the Real Property or any contiguous real
estate, including any loss of value of the Real Property as a result of the
foregoing except to the extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from actions on the part of
Agent or any Lender. Borrower’s obligations under this Section 4.19 shall arise
upon the discovery of the presence of any Hazardous Substances at the Real
Property, whether or not any federal, state, or local environmental agency has
taken or threatened any action in connection with the presence of any Hazardous
Substances. Borrower’s obligation and the indemnifications hereunder shall
survive the termination of this Agreement.

 

(i)          For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of Borrower’s right, title and interest
in and to its owned and leased premises.

 

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

 

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V.REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants as follows:

 

5.1           Authority. Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. This Agreement and the Other
Documents have been duly executed and delivered by Borrower, and this Agreement
and the Other Documents constitute the legal, valid and binding obligation of
Borrower 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 (a) are
within Borrower’s corporate powers, have been duly authorized by all necessary
corporate action, are not in contravention of law or the terms of Borrower’s
by-laws, certificate of incorporation or other applicable documents relating to
Borrower’s formation or to the conduct of Borrower’s business or of any material
agreement or undertaking to which Borrower is a party or by which Borrower is
bound, (b) will not 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 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 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 Borrower under the provisions of any
agreement, charter document, instrument, by-law or other instrument to which
Borrower 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)          Borrower is duly incorporated and in good standing under the laws
of the state listed on Schedule 5.2(a) and is qualified to do business 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 Borrower 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. Borrower has
delivered to Agent true and complete copies of its certificate of incorporation
and by-laws and will promptly notify Agent of any amendment or changes thereto.

 

(b)          The only Subsidiaries of Borrower are listed on Schedule 5.2(b).

 

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

 

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

 

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5.5           Financial Statements. The consolidated and consolidating balance
sheets of Borrower, its Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of December 31, 2011, and the
related statements of income, changes in stockholder’s equity, and changes in
cash flow for the period ended on such date, all accompanied by reports thereon
containing opinions without qualification by independent certified public
accountants, copies of which have been delivered to Agent, have been prepared in
accordance with GAAP, (except for changes in application in which such
accountants concur) and present fairly the financial position of Borrower and
its Subsidiaries at such date and the results of their operations for such
period. Since December 31, 2011 there has been no change in the condition,
financial or otherwise, of Borrower or its Subsidiaries 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 Borrower and its
Subsidiaries, except changes in the Ordinary Course of Business, none of which
individually or in the aggregate has been materially adverse.

 

5.6           Entity Name. Borrower has not been known by any other corporate
name in the past five years and does not sell Inventory under any other name
except as set forth on Schedule 5.6, nor has Borrower been the surviving
corporation 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. and Environmental Compliance.

 

(a)          Borrower has duly complied with, and its facilities, business,
assets, property, leaseholds, Real Property and Equipment are in compliance in
all material respects with, the provisions of the Federal Occupational Safety
and Health Act, the Environmental Protection Act, RCRA and all other
Environmental Laws; there have been no outstanding citations, notices or orders
of non-compliance issued to Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.

 

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

 

(c)           (i) There are no visible signs of releases, spills, discharges,
leaks or disposal (collectively referred to as “Releases”) of Hazardous
Substances at, upon, under or within any Real Property or any premises leased by
Borrower; (ii) there are no underground storage tanks or polychlorinated
biphenyls on the Real Property or any premises leased by Borrower; (iii) neither
the Real Property nor any premises leased by Borrower has ever been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) no
Hazardous Substances are present on the Real Property or any premises leased by
Borrower, excepting such quantities as are handled in accordance with all
applicable manufacturer’s instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of the
commercial business of Borrower or of its tenants.

 

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

 

(a)           Borrower is solvent, able to pay its debts as they mature, has
capital sufficient to carry on its business and all businesses in which it is
about to engage, and (i) 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 (ii) 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), Borrower has no (i) pending
or threatened litigation, arbitration, actions or proceedings which involve the
possibility of having a Material Adverse Effect, and (ii) liabilities or
indebtedness for borrowed money other than the Obligations.

 

(c)          Borrower is not 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 Borrower in violation of any order of any
court, Governmental Body or arbitration board or tribunal.

 

(d)          Neither Borrower nor any member of the Controlled Group maintains
or contributes to any Plan other than (i) as of the Closing Date, those listed
on Schedule 5.8(d) hereto and (ii) thereafter, as permitted under this
Agreement. (i) No Plan has incurred any “accumulated funding deficiency,” as
defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or
not waived, and Borrower and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of ERISA in respect of
each Plan; (ii) each 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; (iii) neither Borrower 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 Plan has
been terminated by the plan administrator thereof nor by the PBGC, and there is
no occurrence which would cause the PBGC to institute proceedings under Title IV
of ERISA to terminate any Plan; (v) at this time, the current value of the
assets of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and neither Borrower nor any member of the Controlled
Group knows of any facts or circumstances which would materially change the
value of such assets and accrued benefits and other liabilities; (vi) neither
Borrower 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; (vii) neither Borrower nor any member of a Controlled Group has
incurred any liability for any excise tax arising under Section 4972 or 4980B of
the Code, and no fact exists which could give rise to any such liability; (viii)
neither Borrower nor any member of the Controlled Group nor any fiduciary of,
nor any trustee to, any Plan, has engaged in a “prohibited transaction”
described in Section 406 of the ERISA or Section 4975 of the Code nor taken any
action which would constitute or result in a Termination Event with respect to
any such Plan which is subject to ERISA; (ix) Borrower and each member of the
Controlled Group has made all contributions due and payable with respect to each
Plan; (x) there exists no event described in Section 4043(b) of ERISA, for which
the thirty (30) day notice period has not been waived; (xi) neither Borrower nor
any member of the Controlled Group has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other
than employees or former employees of Borrower and any member of the Controlled
Group; (xii) neither Borrower nor any member of the Controlled Group maintains
or contributes to any Plan which provides health, accident or life insurance
benefits to former employees, their spouses or dependents, other than in
accordance with Section 4980B of the Code; (xiii) neither Borrower nor any
member of the Controlled Group has withdrawn, completely or partially, 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 reasonably be
expected to result in any such liability; and (xiv) no Plan fiduciary (as
defined in Section 3(21) of ERISA) has any liability for breach of fiduciary
duty or for any failure in connection with the administration or investment of
the assets of a Plan.

 

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5.9           Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower are set
forth on Schedule 5.9, are valid and have been duly registered or filed with all
appropriate Governmental Bodies and constitute all of the intellectual property
rights which are necessary for the operation of its business; there is no
objection to or pending challenge to the validity of any such patent, trademark,
copyright, design rights, tradename, trade secret or license and Borrower is not
aware of any grounds for any challenge, except as set forth in Schedule 5.9
hereto. Each patent, patent application, patent license, trademark, trademark
application, trademark license, service mark, service mark application, service
mark license, design rights, copyright, copyright application and copyright
license owned or held by Borrower and all trade secrets used by Borrower consist
of original material or property developed by Borrower or was lawfully acquired
by Borrower 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,
Borrower (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 have a Material
Adverse Effect.

 

5.11         Default of Indebtedness. Borrower is not in default in the payment
of the principal of or interest on any Indebtedness or under any 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. Borrower is not in default in the payment or
performance of any of its contractual obligations and no Default has occurred.

 

5.13         No Burdensome Restrictions. Borrower is not party to any contract
or agreement the performance of which could have a Material Adverse Effect.
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. Borrower has not 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.

 

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5.14         No Labor Disputes. Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of Borrower’s employees
threatened or in existence and no labor contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 hereto.

 

5.15         Margin Regulations. Borrower is not 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.

 

5.16         Investment Company Act. Borrower is not 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 Borrower in this
Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of fact
or omits to state any fact necessary to make the statements herein or therein
not misleading. There is no fact known to Borrower or which reasonably should be
known to Borrower which Borrower 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. Borrower is not a party to, nor will it be a party to, any
swap agreement whereby Borrower 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         Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or affecting
the Collateral conflicts with, or requires any Consent which has not already
been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.

 

5.20         Application of Certain Laws and Regulations. Neither Borrower nor
any Affiliate of Borrower is subject to any law, statute, rule or regulation
which regulates the incurrence of any Indebtedness, including laws, statutes,
rules or regulations relative to common or interstate carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public utility
services.

 

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5.21         Business and Property of Borrower. Upon and after the Closing Date,
Borrower does not propose to engage in any business other than the sale of
reclaimed and virgin refrigerants throughout the air conditioning and
refrigeration industry, providing refrigerant management services, fire
suppression services, energy and efficiency optomization and activities
necessary to conduct the foregoing and any related businesses. On the Closing
Date, Borrower will own all the property and possess all of the rights and
Consents necessary for the conduct of the business of Borrower. 

 

5.22         Section 20 Subsidiaries. Borrower does 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 Section 20 Subsidiary.

 

5.23         Anti-Terrorism Laws.

 

(a)          General. Neither Borrower nor any Affiliate of Borrower is in
violation of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.

 

(b)          Executive Order No. 13224. Neither Borrower nor any Affiliate of
Borrower or their respective agents acting or benefiting in any capacity in
connection with the Advances or other transactions hereunder, is any of the
following (each a “Blocked Person”):

 

(i)          a Person that is listed in the annex to, or is otherwise subject to
the provisions of, the Executive Order No. 13224;

 

(ii)         a Person owned or controlled by, or acting for or on behalf of, any
Person that is listed in the annex to, or is otherwise subject to the provisions
of, the Executive Order No. 13224;

 

(iii)        a Person or entity with which any Lender is prohibited from dealing
or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

(iv)         a Person or entity that commits, threatens or conspires to commit
or supports “terrorism” as defined in the Executive Order No. 13224;

 

(v)          a Person or entity that is named as a “specially designated
national” on the most current list published by the U.S. Treasury Department
Office of Foreign Asset Control at its official website or any replacement
website or other replacement official publication of such list, or

 

(vi)         a Person or entity who is affiliated or associated with a Person or
entity listed above.

 

Neither Borrower or to the knowledge of Borrower, any of its agents acting in
any capacity in connection with the Advances or other transactions hereunder (i)
conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person, or (ii)
deals in, or otherwise engages in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order No. 13224.

 

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5.24         Trading with the Enemy. Borrower has not engaged, nor does it
intend to engage, in any business or activity prohibited by the Trading with the
Enemy Act.

 

5.25         Federal Securities Laws. Neither Borrower nor any of its
Subsidiaries (i) is required to file periodic reports under the Exchange Act,
(ii) has any securities registered under the Exchange Act or (iii) has filed a
registration statement that has not yet become effective under the Securities
Act.

 

VI.          AFFIRMATIVE COVENANTS.

 

Borrower shall, until payment in full of the Obligations and termination of this
Agreement:

 

6.1           Payment of Fees. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Blocked
Accounts or Depository Accounts as provided for in Section 4.15(h). Agent may,
without making demand, charge Borrower’s Account for all such fees and expenses.

 

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 licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (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           Violations. Promptly notify Agent in writing of any violation of
any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to Borrower which could reasonably be expected to
have a Material Adverse Effect.

 

6.4           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 contracts between
Borrower and the United States, any state or any department, agency or
instrumentality of any of them.

 

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6.5           Financial Covenants. (a)          Fixed Charge Coverage Ratio.
Cause to be maintained at all times a Fixed Charge Coverage Ratio of not less
than 1.10 to 1.00, tested quarterly on a rolling twelve (12) month basis.

 

6.6           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 request, in order that the
full intent of this Agreement may be carried into effect.

 

6.7           Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, 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 contested in good faith by appropriate
proceedings and Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.

 

6.8           Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 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 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
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).

 

6.9           Federal Securities Laws. Promptly notify Agent in writing if
Borrower or any of its Subsidiaries (i) is required to file periodic reports
under the Exchange Act, (ii) registers any securities under the Exchange Act or
(iii) files a registration statement under the Securities Act.

 

6.10         Employment Agreement with Kevin Zugibe. In the event that Kevin
Zugibe does not renew the Employment Agreement as Chairman and Chief Executive
Officer of Borrower, the Agent will retain the right to perform a background
check on his replacement.

 

VII.         NEGATIVE COVENANTS.

 

Borrower shall not, 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, provided, however, Borrower is permitted to so merge,
consolidate, reorganize or acquire such assets or Equity Interests, provided
that: (1) No Default shall exist immediately subsequent to such merger,
consolidation, reorganization or acquisition, (2) Borrower shall be the
surviving entity of any such merger, consolidation or reorganization, (3) No
additional Liens, other than Permitted Encumbrances, shall arise out of such
merger, consolidation, reorganization or acquisition and (4) Agent shall be
provided, within ten (10) days of such action, with copies of the applicable
documentation evidencing such merger, consolidation, reorganization or
acquisition.

 

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(b)          Sell, lease, transfer or otherwise dispose of any Collateral except
(i) dispositions of Inventory 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 the Collateral now owned or hereafter 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) guarantees made in
the Ordinary Course of Business up to an aggregate amount of $100,000 and (c)
the endorsement of checks in the Ordinary Course of Business.

 

7.4           Investments. Purchase or acquire obligations or Equity Interests
of, or any other interest in, any Person, except (a) obligations issued or
guaranteed by the United States of America or any agency thereof, (b) 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), (c) 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 (i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) 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, and (e) such investments permitted pursuant to
Section 7.10 herein, provided, however, the aggregate amount of Capital
Expenditures invested in any Affiliate shall not exceed (i) 300,000 for the
fiscal year ending December 31, 2012 and (ii) $100,000 for each fiscal year
thereafter.

 

7.5           Loans. Make advances, loans or extensions of credit to any Person,
including any Parent, Subsidiary or Affiliate except with respect to (a) the
extension of commercial trade credit in connection with the sale of Inventory in
the Ordinary Course of Business and (b) loans to its employees in the Ordinary
Course of Business not to exceed the aggregate amount of $100,000 at any time
outstanding.

 

7.6           Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for Capital Expenditures in any fiscal year in an
aggregate amount in excess of (i) $2,500,000 for the fiscal year ending December
31, 2012 and (ii) $2,500,000 for each fiscal year thereafter.

 

7.7           Dividends. Declare, pay or make any dividend or distribution on
any shares of the common stock or preferred stock of Borrower (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 common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of Borrower.

 

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7.8           Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) Indebtedness incurred for Capital Expenditures permitted under
Section 7.6 hereof; and (iii) Indebtedness secured by Permitted Encumbrances.

 

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
transactions disclosed to the Agent, 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, provided, however, the Borrower is permitted to make loans to
(i) Hudson Technologies Europe relating to the Safety Hi-Tech Europe Joint
Venture so long as the Borrower owns not less than forty percent (40%) of the
Equity Interests thereof and the aggregate amount of such loans does not exceed
$250,000 at any time, (ii) its Affiliates (specifically excluding the
Guarantors) and (iii) any Guarantor at any time.

 

7.11         Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $750,000 in any one fiscal year in the aggregate for
Borrower.

 

7.12         Subsidiaries.

 

(a)          Form any Subsidiary unless (i) such Subsidiary expressly joins in
this Agreement as a borrower and becomes jointly and severally liable for the
obligations of Borrower hereunder, under the Notes, and under any other
agreement between Borrower and Lenders and (ii) Agent shall have received all
documents, including legal opinions, it may reasonably require to establish
compliance with each of the foregoing conditions.

 

(b)          Enter into any partnership, joint venture or similar arrangement
other than Hudson Technologies Europe relating to the Safety Hi-Tech Europe
Joint Venture and the Safety Hi-Tech US Joint Venture; however, the maximum
amount that the Borrower may invest in the Safety Hi-Tech US Joint Venture shall
not exceed $650,000.

 

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

 

7.14         Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than Borrower’s business pursuant to
Section 5.21 hereof.

 

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7.15         Amendment of Articles of Incorporation, By-Law. Amend, modify or
waive any term or material provision of its Articles of Incorporation or By-Laws
unless required by law, or approved by the Agent in its reasonable discretion.

 

7.16         Compliance with ERISA. (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) or any other Plan
for which Agent has provided its prior written consent, (ii) engage, or permit
any member of the Controlled Group to engage, in any non-exempt “prohibited
transaction”, as that term is defined in section 406 of ERISA and Section 4975
of the Code, (iii) incur, or permit any member of the Controlled Group to incur,
any “accumulated funding deficiency”, as that term is defined in Section 302 of
ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event could result in any
liability of Borrower or any member of the Controlled Group or the imposition of
a lien on the property of Borrower or any member of the Controlled Group
pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the
Controlled Group to assume, any obligation to contribute to any Multiemployer
Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the
Controlled Group to incur, any withdrawal liability to any Multiemployer Plan;
(vii) fail promptly to notify Agent of the occurrence of any Termination Event,
(viii) fail to comply, 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, (ix) fail to meet, or permit any member of the Controlled
Group to fail to meet, all minimum funding requirements under ERISA or the Code
or postpone or delay or allow any member of the Controlled Group to postpone or
delay any funding requirement with respect of any Plan.

 

7.17         Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of Borrower.

 

7.18         Anti-Terrorism Laws. Borrower shall not, until satisfaction in full
of the Obligations and termination of this Agreement, nor shall it permit any
Affiliate or agent to:

 

(a)          Conduct any business or engage in any transaction or dealing with
any Blocked Person, including the making or receiving any contribution of funds,
goods or services to or for the benefit of any Blocked Person.

 

(b)          Deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order No.
13224.

 

(c)          Engage in or conspire to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT
Act or any other Anti-Terrorism Law. Borrower shall deliver to Lenders any
certification or other evidence requested from time to time by any Lender in its
sole discretion, confirming Borrower’s compliance with this Section.

 

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7.19         Membership/Partnership Interests. Elect to treat or permit any of
its Subsidiaries to (x) treat its 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 by Section 8-103 of
Article 8 of Uniform Commercial Code or (y) certificate its limited liability
company membership interests or partnership interests, as the case may be.

 

7.20         Trading with the Enemy Act. Engage in any business or activity in
violation of the Trading with the Enemy Act.

 

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 Borrower;

 

(b)          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 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;

 

(c)          Corporate Proceedings of Borrower. Agent shall have received a copy
of the resolutions in form and substance reasonably satisfactory to Agent, of
the Board of Directors of Borrower authorizing (i) the execution, delivery and
performance of this Agreement, the Notes and the Other Documents (collectively
the “Documents”) and (ii) the granting by Borrower of the security interests in
and liens upon the Collateral in each case certified by the Secretary or an
Assistant Secretary of Borrower as of the Closing Date; and, such certificate
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;

 

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

 

(e)          Corporate Proceedings of each Guarantor. Agent shall have received
a copy of the resolutions in form and substance reasonably satisfactory to
Agent, of the Board of Directors of each Guarantor authorizing the execution,
delivery and performance of the Guaranty and each Other Document to which it is
a party certified by the Secretary or an Assistant Secretary of each Guarantor
as of the Closing Date; and, such certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded as of
the date of such certificate;

 

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

 

(g)          Certificates. Agent shall have received a copy of the Articles or
Certificate of Incorporation of Borrower and each Guarantor, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of
Borrower and each Guarantor and all agreements of Borrower’s and each
Guarantor’s shareholders certified as accurate and complete by the Secretary of
Borrower and such Guarantor;

 

(h)          Good Standing Certificates. Agent shall have received good standing
certificates for Borrower and each Guarantor dated not more than 30 days prior
to the Closing Date, issued by the Secretary of State or other appropriate
official of Borrower’s and each Guarantor’s jurisdiction of incorporation and
each jurisdiction where the conduct of Borrower’s and each Guarantor’s business
activities or the ownership of its properties necessitates qualification;

 

(i)          Legal Opinion. Agent shall have received the executed legal opinion
of Blank Rome 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, the Guaranty and related agreements as Agent may
reasonably require and Borrower hereby authorizes and directs such counsel to
deliver such opinions to Agent and Lenders;

 

(j)          No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against Borrower or against the officers or directors of Borrower (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, have
a Material Adverse Effect; and (ii) no injunction, writ, restraining order or
other order of any nature materially adverse to Borrower or the conduct of its
business or inconsistent with the due consummation of the Transactions shall
have been issued by any Governmental Body. Agent shall have received a summary
of all existing litigation regarding the Borrower;

 

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

 

(l)          Collateral Examination. Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to Lenders, of the Receivables, Inventory, General
Intangibles, Real Property, Leasehold Interest and Equipment of Borrower and all
books and records in connection therewith;

 

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(m)          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;

 

(n)          Fictitious, Assumed or Alternate Names. Agent shall have received
certified copies of any fictitious, assumed or alternate names of the Borrower;

 

(o)          INTENTIONALLY LEFT BLANK

 

(p)           Other Documents. Agent shall have received the executed Other
Documents, all in form and substance satisfactory to Agent;

 

(q)          Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrower’s casualty insurance
policies, together with loss payable endorsements on Agent’s standard form of
loss payee endorsement naming Agent as lender loss payee, and certified copies
of Borrower’s liability insurance policies, together with endorsements naming
Agent as an additional insured;

 

(r)           Financial Statements. Agent shall have received a copy of the
Borrower’s and Guarantors’ most recent internally prepared interim financial
statements, the most recent federal and state tax returns of the Borrower and
Guarantors and the Borrower’s and Guarantors’ fiscal year end audited financial
statements for the past three (3) years;

 

(s)           Intellectual Property. Agent shall have received a list of
intellectual property of the Borrower including trademarks and trademark
applications, patents and patent applications, copyrights and copyright
applications, together with a search/abstract relating to the same;

 

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

 

(u)          Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;

 

(v)          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;

 

(w)          No Adverse Material Change. (i) since March 31, 2012, 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;

 

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(x)          INTENTIONALLY LEFT BLANK

 

(y)           Contract Review. Agent shall have received copies of all material
contracts of Borrower including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, management agreements, option
agreements, warrant agreements, royalty agreements, member agreements, purchase
agreements, warranty agreements, employment agreements, license agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all reasonable respects to Agent;

 

(z)           Operating Accounts. Agent shall have received evidence that the
Borrower has established and is maintaining operating accounts and demand
depository accounts with the Agent;

 

(aa)          Searches. Agent shall have received UCC searches, Federal and
State Litigation searches, Upper Court and Local Judgment searches, franchise
tax searches, bankruptcy searches, Federal and State Tax Lien searches and any
other Lien searches run against the names of the Borrower and Guarantors as well
as any previous, alternate and fictitious names, and against the names of all
entities which were acquired by or merged into the Borrower of any Guarantor, or
orders of applicable bankruptcy courts reflecting lien releases (as applicable),
showing no existing security interests in or Liens on the Collateral other than
Permitted Encumbrances and other Liens permitted by the Agent;

 

(bb)          Borrowing Base. Agent shall have received a Borrowing Base
Certificate from Borrowers evidencing that the Borrower will have a minimum
aggregate Undrawn Availability of at least $5,000,000 at closing (after all fees
and expenses and subtraction of trade payables 60 days or more past due);

 

(cc)          Review of Records. Agent shall have reviewed to its satisfaction
all of Borrower’s books and records;

 

(dd)          Field Audit. Agent shall complete an asset based field audit as
well as a pre-fund examination, both to the satisfaction of the Agent;

 

(ee)          Capital and Legal Structure. Agent shall have reviewed to its
satisfaction the capital and legal structure of the Borrower;

 

(ff)          Intellectual Property Security Agreement. The Agent shall have
received fully completed and executed Patents, Trademarks and Copyrights
Security Agreement from the Borrower and HT;

 

(gg)         Compliance with Laws. Agent shall be reasonably satisfied that
Borrower is in compliance 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 Trading with the Enemy Act; and

 

(hh)         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.

 

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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 Borrower 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;

 

(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 Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.

 

IX.          INFORMATION AS TO BORROWER.

 

Borrower shall, 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
collectibility of any portion of the Collateral, including Borrower’s
reclamation or repossession of, or the return to Borrower of, a material amount
of goods or claims or disputes asserted by any Customer or other obligor.

 

9.2           Schedules. Deliver to Agent on or before the fifteenth (15th) 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 and (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 shall include weekly sales, credit and collection reports).
In addition, Borrower will deliver to Agent at such intervals as Agent may
require: (i) confirmatory assignment schedules, (ii) copies of Customer’s
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding 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 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 Borrower and delivered to
Agent from time to time solely for Agent’s convenience in maintaining records of
the Collateral, and Borrower’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.

 

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9.3           Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
Compliance Certificate signed by the President of Borrower stating, to the best
of his knowledge, that Borrower is in compliance in all material respects with
all federal, state and local Environmental Laws. To the extent Borrower is not
in compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action Borrower will
implement in order to achieve full compliance.

  

9.4           Litigation. Promptly notify Agent in writing of any claim,
litigation, suit or administrative proceeding affecting Borrower or any
Guarantor, 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,
the financial condition or operating results of Borrower as of the date of such
statements; (c) any accumulated retirement plan funding deficiency which, if
such deficiency continued for two plan years and was not corrected as provided
in Section 4971 of the Code, could subject Borrower to a tax imposed by Section
4971 of the Code; (d) each and every default by Borrower which might result in
the acceleration of the maturity of any Indebtedness, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (e) any other development
in the business or affairs of 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 Borrower propose to take with respect thereto.

 

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

 

9.7           Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each fiscal year of HT, audited financial statements of HT on a
consolidating and consolidated basis including, but not limited to, statements
of income and stockholders’ equity and cash flow from the beginning of the
current fiscal year to the end of such fiscal year and the balance sheet as at
the end of such fiscal year, all prepared in accordance with GAAP and reported
upon without qualification by an independent certified public accounting firm
selected by HT (the “Accountants”). If HT should change Accountants, then such
Accountants must be reasonably satisfactory to Agent. In addition, the reports
shall be accompanied by a Compliance Certificate.

 

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9.8           Quarterly Financial Statements. Furnish Agent within forty five
(45) days after the end of each fiscal quarter, an unaudited balance sheet of HT
on a consolidated and consolidating basis and unaudited statements of income and
stockholders’ equity and cash flow of HT on a consolidated and consolidating
basis reflecting results of operations from the beginning of the fiscal year to
the end of such quarter and for such quarter, prepared in accordance with GAAP,
subject to normal and recurring year end adjustments that individually and in
the aggregate are not material to HT’s business. The reports shall be
accompanied by a Compliance Certificate.

 

9.9           Monthly Financial Statements. Furnish Agent within thirty (30)
days after the end of each month with the internally prepared Management
Statement.

 

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 Borrower shall send to its stockholders.

 

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 Notes have been complied with by Borrower including, without
the necessity of any request by Agent, (a) copies of all environmental audits
and reviews, (b) at least thirty (30) days prior thereto, notice of Borrower’s
opening of any new office or place of business or Borrower’s closing of any
existing office or place of business, and (c) promptly upon Borrower’s learning
thereof, notice of any labor dispute to which Borrower 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 Borrower is a party or by which
Borrower is bound.

 

9.12         Projected Operating Budget. Furnish Agent, no earlier than sixty
(60) days before the start of and no later than thirty (30) days after the
beginning of Borrower’s fiscal years commencing with fiscal year 2013, a quarter
to quarter projected operating budget and cash flow of Borrower on a
consolidated and consolidating basis for such fiscal year (including an income
statement for each month and a balance sheet as at the end of the last month in
each fiscal quarter).

 

9.13         INTENTIONALLY OMITTED.

 

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 Borrower
by any Governmental Body or any other Person that is material to the operation
of Borrower’s business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by 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 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 Borrower or any Guarantor.

 

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9.15         ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) Borrower 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 Borrower 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) Borrower or any member of the Controlled Group knows or
has reason to know that a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which Borrower or any member of the
Controlled Group has taken, is taking or proposes to take with respect thereto,
(iii) a funding waiver request has been filed with respect to any Plan together
with all communications received by Borrower or any member of the Controlled
Group with respect to such request, (iv) any increase in the benefits of any
existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) Borrower or any member of
the Controlled Group shall receive from the PBGC a notice of intention to
terminate a Plan or to have a trustee appointed to administer a Plan, together
with copies of each such notice, (vi) Borrower or any member of the Controlled
Group shall receive any favorable or unfavorable determination letter from the
Internal Revenue Service regarding the qualification of a Plan under Section
401(a) of the Code, together with copies of each such letter; (vii) Borrower or
any member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such notice;
(viii) Borrower or any member of the Controlled Group shall fail to make a
required installment or any other required payment under Section 412 of the Code
on or before the due date for such installment or payment; or (ix) Borrower 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, or (c) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.

 

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.

 

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 Borrower to pay any principal or interest on
the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay, or
by required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;

 

10.2         Breach of Representation.  Any representation or warranty made or
deemed made by 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 misleading in any material respect on the date when made or deemed
to have been made;

 

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10.3         Financial Information. Failure by Borrower to (i)(x) furnish
financial information when due, or (y) when requested which is unremedied for a
period of fifteen (15) days of such request, or (ii) permit the inspection of
its books or records in accordance with this Agreement;

 

10.4         Judicial Actions. Issuance of a notice of Lien, levy, assessment,
injunction or attachment against Borrower’s Inventory or Receivables or against
a material portion of Borrower’s other property which is not stayed or lifted
within forty-five (45) days;

 

10.5         Noncompliance. Except as otherwise provided for in Sections 10.1,
10.3 and 10.5(ii), (i) failure or neglect of Borrower or any Guarantor to
perform, keep or observe any term, provision, condition, covenant herein
contained, or contained in any Other Document or any other agreement or
arrangement, now or hereafter entered into between Borrower or any Guarantor,
and Agent or any Lender, or (ii) failure or neglect of Borrower to perform, keep
or observe any term, provision, condition or covenant, contained in Sections
4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured within ten
(10) days from the occurrence of such failure or neglect;

 

10.6         Judgments. Any judgment or judgments are rendered against Borrower
or any Guarantor for an aggregate amount in excess of $500,000 which (i) is not
contested in good faith by the Borrowers, (ii) the Borrowers do not establish
reserves satisfactory to the Agent with regard thereto, and (iii) is not within
forty (40) days of such rendering or filing either satisfied, stayed or
discharged of record;

 

10.7         Bankruptcy. Borrower or any Guarantor 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) make a general assignment for the benefit
of creditors, (iii) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
or insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;

 

10.8         Inability to Pay. Borrower or any Guarantor shall admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business;

 

10.9         Subsidiary Bankruptcy. Any Subsidiary of Borrower, or any
Guarantor, 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 laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, within thirty (30) 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;

 

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10.10         Material Adverse Effect. Any change in Borrower’s or any
Guarantor’s results of operations or condition (financial or otherwise) which in
Agent’s opinion has a Material Adverse Effect;

 

10.11         Lien Priority. Any Lien created hereunder or provided for hereby
or under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;

 

10.12         Cross Default. A default of the obligations of Borrower under any
other agreement to which it is a party shall occur which may have a Material
Adverse Effect which default is not cured within any applicable grace period;

 

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

 

10.14         Change of Ownership. Any Change of Ownership or Change of Control
shall occur;

 

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

 

10.16         Licenses. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of Borrower or any Guarantor, the continuation of which is material to the
continuation of Borrower’s or such Guarantor’s business, or (B) commence
proceedings to suspend, revoke, terminate or adversely modify any such license,
permit, trademark, tradename or patent and such proceedings shall not be
dismissed or discharged within sixty (60) days, or (c) schedule or conduct a
hearing on the renewal of any license, permit, trademark, tradename or patent
necessary for the continuation of Borrower’s or any Guarantor’s business and the
staff of such Governmental Body issues a report recommending the termination,
revocation, suspension or material, adverse modification of such license,
permit, trademark, tradename or patent; (ii) any agreement which is necessary or
material to the operation of Borrower’s or any Guarantor’s business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect;

 

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10.17         Seizures. Any portion of the Collateral shall be seized or taken
by a Governmental Body, or Borrower or any Guarantor or the title and rights of
Borrower, any Guarantor or any Original Owner which is the owner of any material
portion of the Collateral shall have become the subject matter of claim,
litigation, suit 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;

 

10.18         Pension Plans. An event or condition specified in Sections 7.16 or
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,
Borrower 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.

 

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 all Obligations shall be immediately due and payable and this Agreement and
the obligation of Lenders to make Advances shall be deemed terminated; and, (ii)
any of the other Events of Default and at any time thereafter (such default not
having previously been cured), at the option of Required Lenders all Obligations
shall be immediately due and payable and Lenders shall have the right to
terminate this Agreement and to terminate the obligation of Lenders to make
Advances and (iii) a filing of a petition against Borrower in any involuntary
case under any state or federal bankruptcy laws which is not dismissed within
thirty (30) days of filing, all Obligations shall be immediately due and payable
and the obligation of Lenders to make Advances hereunder shall be terminated
other than as may be required by an appropriate order of the bankruptcy court
having jurisdiction over Borrower. 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 Borrower’s premises or
other premises without legal process and without incurring liability to Borrower
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 Borrower 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 Borrower reasonable
notification of such sale or sales, it being agreed that in all events written
notice mailed to Borrower at least ten (10) days prior to such sale or sales is
reasonable notification. At any public sale Agent or any Lender may bid for and
become the purchaser, and Agent, any Lender or any other purchaser at any such
sale thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and all such
claims, rights and equities are hereby expressly waived and released by
Borrower. 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 Borrower’s
(a) trademarks, trade styles, trade names, patents, patent applications,
copyrights, service marks, licenses, franchises and other proprietary rights
which are used or useful in connection with Inventory for the purpose of
marketing, advertising for sale and selling or otherwise disposing of such
Inventory 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, Borrower shall remain liable
to Agent and Lenders therefor.

 

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(b)          To the extent that Applicable Law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, Borrower 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 the Borrower, 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
Collateral 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. Borrower 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 Borrower 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 or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent’s or Lenders’ rights hereunder.

 

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11.3         Setoff. Subject to Section 14.12, 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 Borrower’s property held by
Agent and such Lender to reduce the Obligations.

 

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 or any other amounts outstanding
under any of the Other Documents 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 protective advances made 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 fees and
interest;

 

FIFTH, to the payment of the outstanding principal amount of the Obligations
(including the payment or cash collateralization of any outstanding Letters of
Credit);

 

SIXTH, to all other Obligations and other obligations which shall have become
due and payable under the Other Documents or otherwise and not repaid pursuant
to clauses “FIRST” through “FIFTH” above; and

 

SEVENTH, 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 held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any
amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Agent in a cash collateral account 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 “FIFTH” and
“SIXTH” above in the manner provided in this Section 11.5.

 

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XII.       WAIVERS AND JUDICIAL PROCEEDINGS.

 

12.1         Waiver of Notice. Borrower 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.

 

12.3         Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER 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 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, 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 Borrower,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until the Termination Date (the “Term”) unless
sooner terminated as herein provided. Borrower may terminate this Agreement at
any time upon ninety (90) days’ prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the last
day of the Term (the date of such prepayment hereinafter referred to as the
“Early Termination Date”), Borrower shall pay to Agent for the benefit of
Lenders an early termination fee in an amount equal to (y) one percent (1.00%)
of the Maximum Loan Amount if the Early Termination Date occurs on or after the
Closing Date to and including the date immediately preceding the first
anniversary of the Closing Date and (z) one half of one percent (0.50%) of the
Maximum Loan Amount if the Early Termination Date occurs on or after the first
anniversary of the Closing Date to and including the date immediately preceding
the second anniversary of the Closing Date. However, no such early termination
fee shall be applicable in the event that the Borrower terminates this Agreement
due to receiving an assessment from the Agent pursuant to the provisions of
subsections 3.7, 3.8 or 3.9 of this Agreement.

 

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13.2         Termination. The termination of the Agreement shall not affect
Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations 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 Borrower’s
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of Borrower have been indefeasibly paid and performed in
full after the termination of this Agreement or Borrower has furnished Agent and
Lenders with an indemnification satisfactory to Agent and Lenders with respect
thereto. Accordingly, Borrower 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 Borrower, 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 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 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
3.3(a) and 3.4), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agents
or employees. As to any matters not expressly provided for by this Agreement
(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 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.

 

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

 

14.3         Lack of Reliance on Agent and Resignation. 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 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 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 Borrower pursuant to the terms hereof. Agent
shall not be responsible to any Lender for any recitals, statements,
information, representations or warranties herein or in any agreement, document,
certificate or a statement delivered in connection with or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any Other Document, or of the financial
condition of 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 of Borrower, or the existence of any Event of Default or any Default.

 

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

 

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

 

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

 

14.5         Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or 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.

 

14.6         Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrower
referring to this Agreement or the Other Documents, describing such Default or
Event of Default and stating that such notice is a “notice of default”. In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. 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.

 

14.7         Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other 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).

 

14.8         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 Borrower as
if it were not performing the duties specified herein, and may accept fees and
other consideration from Borrower for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.

 

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14.9     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 Borrower pursuant to the terms of this Agreement which
Borrower is not obligated to deliver to each Lender, Agent will promptly furnish
such documents and information to Lenders.

 

14.10     Borrower’s Undertaking to Agent. Without prejudice to its obligations
to Lenders under the other provisions of this Agreement, Borrower hereby
undertakes with Agent to pay to Agent from time to time on demand all amounts
from time to time due and payable by it for the account of Agent or 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
Borrower’s obligations to make payments for the account of Lenders or the
relevant one or more of them pursuant to this Agreement.

 

14.11     No Reliance on Agent’s Customer Identification Program. 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 Borrower, its Affiliates or its agents, this
Agreement, the Other Documents or the transactions hereunder or contemplated
hereby: (1) any identity verification procedures, (2) any record-keeping, (3)
comparisons with government lists, (4) customer notices or (5) other procedures
required under the CIP Regulations or such other laws.

 

14.12     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 Borrower or any deposit
accounts of Borrower 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.

 

XV.MISCELLANEOUS.

 

15.1     Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against Borrower 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, Borrower 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. Borrower hereby
waives personal service of any and all process upon it and consents that all
such service of process may be made by registered mail (return receipt
requested) directed to Borrower at its address set forth in Section 15.6 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. 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
Borrower in the courts of any other jurisdiction. Borrower 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. Borrower waives the right to remove any judicial proceeding
brought against Borrower in any state court to any federal court. Any judicial
proceeding by Borrower 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.

 

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15.2        Entire Understanding.

 

(a)      This Agreement and the documents executed concurrently herewith contain
the entire understanding between Borrower, 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 Borrower’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. Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement. 

 

(b)      The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrower may, subject to the provisions of this Section 15.2 (b),
from time to time enter into written supplemental agreements to this Agreement
or the Other Documents executed by Borrower, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any manner
the rights of Lenders, Agent or Borrower thereunder or the conditions,
provisions or terms thereof 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, without the consent of all Lenders:

 

(i)     increase the Commitment Percentage, the maximum dollar commitment of any
Lender or the Maximum Loan Amount.

 

(ii)     extend the maturity of any Note or the due date for any amount payable
hereunder, or decrease the rate of interest or reduce any fee payable by
Borrower to Lenders pursuant to this Agreement.

 

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(iii)     alter the definition of the term Required Lenders or alter, amend or
modify this Section 15.2(b).

 

(iv)     release any Collateral during any calendar year (other than in
accordance with the provisions of this Agreement) having an aggregate value in
excess of $500,000.

 

(v)     change the rights and duties of Agent.

 

(vi)     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
and ten percent (110%) of the Formula Amount.

 

(vii)    increase the Advance Rates above the Advance Rates in effect on the
Closing Date.

 

(viii)   release any Guarantor.

 

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

 

In the event that Agent requests the consent of a Lender pursuant to this
Section 15.2 and such consent is denied, then PNC may, at its option, require
such Lender to assign its interest in the Advances to PNC or to another Lender
or to any other Person designated by the 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 Borrower. In the event PNC elects to require
any Lender to assign its interest to PNC or to the Designated Lender, PNC 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 PNC 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, PNC or the
Designated Lender, as appropriate, and Agent.

 

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Notwithstanding (a) the existence of a Default or an Event of Default, (b) that
any of the other applicable conditions precedent set forth in Section 8.2 hereof
have not been satisfied or (c) any other provision of this Agreement, Agent may
at its discretion and without the consent of the Required Lenders, voluntarily
permit the outstanding Revolving Advances at any time to exceed the Formula
Amount by up to ten percent (10%) of the Formula Amount for up to sixty (60)
consecutive Business Days (the “Out-of-Formula Loans”); provided, that, such
outstanding Advances do not exceed the Maximum Revolving Advance Amount. If
Agent is willing in its sole and absolute discretion to make such Out-of-Formula
Loans, 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 Lenders do make Out-of-Formula Loans, neither Agent nor
Lenders shall be deemed thereby to have changed the limits of Section 2.1(a).
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” 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 Borrower decrease such 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.

 

In addition to (and not in substitution of) the discretionary Revolving Advances
permitted above in this Section 15.2, the Agent is hereby authorized by Borrower
and the Lenders, from time to time in the Agent’s sole discretion, (A) after the
occurrence and during the continuation of a Default or an Event of Default, or
(B) at any time that any of the other applicable conditions precedent set forth
in Section 8.2 hereof have not been satisfied, to make Revolving Advances to
Borrower on behalf of the Lenders which the 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 Borrower pursuant to the terms of this
Agreement; provided, that at any time after giving effect to any such Revolving
Advances the outstanding Revolving Advances do not exceed one hundred and ten
percent (110%) of the Formula Amount.

 

15.3         Successors and Assigns; Participations; New Lenders.

 

(a)     This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent, each Lender, all future holders of the Obligations and their
respective successors and permitted assigns, except that Borrower may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.

 

(b)     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 financial institutions (each
such transferee or purchaser of a participating interest, a “Participant”). Each
Participant may exercise all rights of payment (including rights 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 thereof
provided that Borrower 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 and in no event shall Borrower 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. 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. 

 

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(c)     Any Lender, with the consent of Agent which shall not be unreasonably
withheld or delayed, may sell, assign or transfer all or any part of its rights
and obligations under or relating to Revolving Advances and/or Term Loans under
this Agreement and the Other Documents to one or more additional banks or
financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a “Purchasing Lender”)
in minimum amounts of not less than $500,000, 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 Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrower hereby
consents to the addition of such Purchasing Lender and the resulting adjustment
of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Other Documents. Borrower shall execute and
deliver such further documents and do such further acts and things in order to
effectuate the foregoing.

 

(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 and/or Term Loans 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. Borrower hereby consents to the addition of such Purchasing CLO.
Borrower shall execute and deliver such further documents and do such further
acts and things in order to effectuate the foregoing.

 

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(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 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 Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$3,500 payable by the 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.

 

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

 

(g)     Notwithstanding any provision contained herein to the contrary, the
Agent may not sell participating interests or sell, assign or transfer any part
of its rights and obligations hereunder, unless Agent retains for its own
account not less than $35,000,000 in outstanding Revolving Advances and term
loans.

 

15.4     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 Borrower makes
a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for Borrower’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.

 

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15.5     Indemnity. Borrower shall indemnify Agent, each Lender and each of
their respective officers, directors, Affiliates, attorneys, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including fees and disbursements of counsel) which
may be imposed on, incurred by, or asserted against Agent or any Lender in 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 thereto, except to the extent that any of the foregoing arises
out of the willful misconduct of the party being indemnified (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
indemnitees described above in this Section 15.5 by any Person under any
Environmental Laws or similar laws by reason of Borrower’s or any other Person’s
failure to comply with laws applicable to solid or hazardous waste materials,
including Hazardous Substances 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
Borrower 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, Borrower 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 indemnitees described
above in this Section 15.5 harmless from and against all liability in connection
therewith.

 

15.6     Notice. Any notice or request hereunder may be given to Borrower 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 15.6 only, a “Notice”) to
be given to or made upon any party hereto under any provision of this Loan
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 site on the World Wide Web (a “Website
Posting”) if Notice of such Website 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 15.6) in accordance with this
Section 15.6. Any such Notice must be delivered to the applicable parties hereto
at the addresses and numbers set forth under their respective names on Section
15.6 hereof or in accordance with any subsequent unrevoked Notice from any such
party that is given in accordance with this Section 15.6. Any Notice shall be
effective:

 

(a)     In the case of hand-delivery, when delivered;

 

(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, a
Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);

 

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(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 a Website 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 15.6; and

 

(g)    If given by any other means (including by overnight courier), when
actually received.

 

Any Lender giving a Notice to Borrower 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

340 Madison Avenue, 11th Floor

New York, New York 10173

Attention:       Glenn D. Kreutzer

Telephone:     (212) 752-6093

Facsimile:       (212) 303-0060

 

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

 

with an additional copy to:

 

Wilentz, Goldman & Spitzer
90 Woodbridge Center Drive
Woodbridge, NJ 07095
Attn: Stuart A. Hoberman. Esq.

Telephone: (732) 855-6052
Facsimile: (732) 726-6518

  

(B)         If to a Lender other than Agent, as specified on the signature pages
hereof

 

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(C)          If to Borrower:

 

Hudson Technologies Company

14th Floor

One Blue Hill Plaza

P.O. Box 1541

Pearl River, New York 10965

Attention:       Brian F. Coleman, President, COO

Telephone:     (845) 735-6000 x 6007

Facsimile:       (845) 512-6070

 

15.7      Survival. The obligations of Borrower under Sections 2.2(f), 3.7, 3.8,
3.9, 4.19(h), and 15.5 and the obligations of Lenders under Section 14.7, shall
survive termination of this Agreement and the Other Documents and payment in
full of the Obligations.

 

15.8      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.

 

15.9      Expenses. All costs and expenses including reasonable attorneys’ fees
(including the allocated costs of in house counsel) and disbursements incurred
by Agent on its behalf or on behalf of Lenders (a) in all efforts made to
enforce payment of any Obligation or effect collection of any Collateral, or (b)
in connection with the entering into, modification, amendment, administration
and enforcement of this Agreement or any consents or waivers hereunder and all
related agreements, documents and instruments, or (c) in instituting,
maintaining, preserving, enforcing and foreclosing on Agent’s security interest
in or Lien on any of the Collateral, or maintaining, preserving or enforcing any
of Agent’s or any Lender’s rights hereunder and under all related agreements,
documents and instruments, whether through judicial proceedings or otherwise, or
(d) in defending or prosecuting any actions or proceedings arising out of or
relating to Agent’s or any Lender’s transactions with Borrower or any Guarantor
or (e) in connection with any advice given to Agent or any Lender with respect
to its rights and obligations under this Agreement and all related agreements,
documents and instruments, may be charged to Borrower’s Account and shall be
part of the Obligations.

 

15.10     Injunctive Relief. Borrower recognizes that, in the event Borrower
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.

 

15.11     Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to 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.

 

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15.12     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.

 

15.13     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 other form of electronic transmission shall be deemed to be an
original signature hereto.

 

15.14     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.

 

15.15     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 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 Borrower 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 Borrower 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. Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to Borrower 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
Borrower hereby authorizes each Lender to share any information delivered to
such Lender by Borrower 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 15.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement.

 

15.16     Publicity. Borrower and each Lender hereby authorizes Agent to make
appropriate announcements of the financial arrangement entered into among
Borrower, 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.

 

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15.17     Certifications From Banks and Participants; US PATRIOT Act. 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.

 

 [SIGNATURE PAGES TO FOLLOW]

 

- 90 -

 

 

Each of the parties has signed this Agreement as of the day and year first above
written.

 

ATTEST:   HUDSON TECHNOLOGIES COMPANY        /s/ Stephen P. Mandracchia   By:
/s/ Brian F. Coleman Name: Stephen P. Mandracchia   Name: Brian F. Coleman
Title: Secretary   Title: President

  

[SIGNATURE PAGE TO FOLLOW]

 

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  PNC BANK, NATIONAL ASSOCIATION,   as Lender and as Agent           By: /s/
Ivan Trajkovic   Name:  Ivan Trajkovic   Title:   Vice President       340
Madison Avenue   New York, New York  10173       Commitment Percentage:  100%

  

- 92 -

 

 

 

 

Exhibit 1.2

 

Form of Borrowing Base Certificate

 

Hudson Technologies
Sources & Uses

 

 

 

Sources:

Prefunds

06/19/12

UW
2/19/12

Survey

2/29/12

Uses:

Prefund

06/19/12

UW

2/29/12

Survey

2/29/12

AR Availability       Existing Revolver (06/20/12)       Inventory Availability
      Existing Term Loan (05/31/12)       Line Limit Reserve       Letter of
Credit       Total Revolver Avail ($20MM cap)       AP > 60 Days Past due
(06/19/12)               Expenses       PNC Term Loan       BB Reserve for Term
Loan       Cash (06/20/12)       BB Reserve for Joint Venture                  
            Excess Availability*       Total       Total                      
*Minimum excess availability of $5,000M will be required at Closing.

 

 

The undersigned hereby certifies that the above representations are true and
correct and subject to all conditions of the Loan and Security Agreement. We
also represent that to the best of our knowledge, there does not exist a
condition which may precipitate a default under the terms of the Loan and
Security Agreement or any amendment thereto.

 

 

          Signature of Preparer   Authorized Signature, Title   Date          
Name of Preparer   Name of Authorized Signer    

 

 

 

 

 

PNC Business Credit Revolving Credit, Term Loan and Security Agreement
Borrowing Base Certificate Hudson Technologies, Inc. Certificate #
Period Ended

  To induce PNC Bank, National Association (“Agent”) to make a loan advance
pursuant to the Revolving Credit, Term Loan and Security Agreement dated as of
___________ as well as amendments between the undersigned and Lender, we hereby
certify as of the above date, the following:       From To     Total   Accounts
Receivables 1 Previous Certificate AP Balance             2 Gross Sales Since
Last Certificate             3 Collections Since Last Certificate             4
Credits Since Last Certificate             5 Other Adjustments             6
Unreconciled Variance        
 
  7 Non AR Collections             8 Total AR Now Being Certified 10 Bank (Sum
of #1 thru #6)             9 Ineligible AR Per Attached        
 
  10 Net Eligible AR (#7 - #8)             10A Advance Rate        
 
  10B Gross AR Availability        
 
              Total Inventory 11 Gross Inventory As Of             12 Ineligible
Inventory        
 
  13 Net Eligible Inventory             14 Advance Rate             15 Inventory
Available before Sublimit             16 Inventory Sub limit (10/1 thru 3/31 =
no cap; 4/1 thru 9/30 = 65% of Borrowing Base)  
 
  17 Adjusted Inventory Availability        
 
              Total Collateral Reserves 18 Gross Combined Availability          
  19 Less Availability Reserve             20 Less Reserve             21 Gross
Loan Value        
 
  22 Revolver Limit        
 
Loans & Advances 23 Net Loan Value             24 Revolver Loan Balance Per
Previous Certificate             25 Net Collections Since Last Certificate      
      26 Advance Requested             27 Misc. Loan Adjustment        
 
  28 New Loan Balance             29 Reserve for Joint Venture             30
Revolver Loans & Reserves             31 Term Loans (if included in Revolver
Limit)             32 Total Loans & Reserves        
 
  33 Loan Availability (#23 - #42)        
 
  34 Remaining Revolver Availability (#23 - #30)             35 Remaining Line
Availability (#22 - #32)           The undersigned hereby certifies that the
above representations are true and correct and subject to all conditions of the
Loan and Security Agreement. We also represent that to the best of our
knowledge, there does not exist a condition which may precipitate a default
under the terms of the Loan and Security Agreement or any amendment thereto.    
            Authorized Signature, Title   Date           Name of Authorized
Signer           For Bank Use Only     $     Date of Advance   Amount          
                             

 

 

 

 

 

Hudson Technologies, Inc. Certificate #            

PNC BANK, N.A. / PNC BUSINESS CREDIT

Two Tower Center Blvd. - 21st Floor

East Brunswick, NJ 08816

        As of:       Aged by:               Current       0-30 Days       61-90
Days   Ineligible   Over 90 Days   Ineligible   Total             Hudson
Technologies, Inc.       AR Ineligible Summary   Total   Over 60 Days Past Due
Dale       Under 80 Days from Due Date, but Over 120 Days from Invoice Date    
  Debit Memos       International       Cross Aged @ 50%       Affiliates      
Rebates Due       Aged Credits       Partial Payments       Contra Analysis    
  Concentration Cap @ 25%       Finance Charges       Revenue Test Reserve
(Missing Invoice & BOL)       Credit Memo Lag Reserve       Debit Memos      
Customer Over Payments       Customer Deposits in GL #:       Accounts in
Collections/Legal       Credit Memo Reserve       Notes Receivable       Due
from Officers       Shipping Test Reserve       Verification Test Reserve      
Reconciliation Reserve       Temporary Ineligibles               Total AR
Ineligibles               The undersigned hereby certifies that the information
provided is true and accurate as the date hereof.                      
Signature of Preparer   Authorized Signature, Title   Date           Name of
Preparer   Name of Authorized Signer                    

This is only a sample document. Kindly refer to your loan document and pre-fund
exam to determine what should be deemed ineligible.

 

 

 

 

 

PNC BANK, N.A. / PNC BUSINESS CREDIT

Two Tower Center Blvd. - 21st Floor

East Brunswick, NJ 08816

          Certificate #   Hudson Technologies, Inc.   Inventory Reporting Date  
Inventory Ineligible Summary Total     Slow Moving> 1 Year       Cylinder
Reserve       No Landlord Waivers (Navy Yard I Hawaii)       Mixed Refrigerant
(Y Codes)       Exess Inventory       Miscellaneous       Inventory at Outside
Processor       Lower of Cost or Market       Reconciliation Reserve      
Miscellaneous - Touchups       Other       GIL Adjustments       Work-In-process
      Molds. Tools. Dies       Ink & Solvents       Standard Cost Variance on
Finished Goods       Obsolete (GL Reserve)       Non-Moving Inventory       Test
Count Reserve       Reconciliation Reserve       Temporary Ineligibles      
Total Ineligibles       The undersigned hereby certifies that the information
provided is true and accurate as the date hereof:                 Authorized
Signature, Title   Date           Name of Authorized Signer                  

This is only a sample document. Kindly refer to your loan document and pre-fund
exam to determine what items should be deemed ineligible.

 

 

 

 

 

INVENTORY REPORT

 

PNC BANK, N.A. / PNC BUSINESS CREDIT

Two Tower Center Blvd. - 21st Floor

East Brunswick, NJ 08816 

 

Hudson Technologies, Inc.         Certificate #                

Pursuant to the terms of our Loan and Security Agreement entered into with PNC
Bank, N.A. dated _____ , we hereby report to you that based on a valuation of
the lower of (a) cost on a first-in first-out method or, (b) current market, the
balance of inventory net of all obsolete items as of:
is as follows:      

            All Locations Other Other Other Other Total              
Refrigerant in Cylinders/Drums             Bulk Refrigerant             Empty
Cylinder/Drums             Cross Refrigerant             Gross Inventory        
             Ineligible Inventory                      Eligible Inventory      
     

 

We warrant that no items are included in the above balances which were billed or
shipped prior to the above date.

We warrant to PNC Bank, N.A. that the above balances are correct and that we are
the owners of the above
inventory, free and clear of any liens, encumbrances and claims except as
follows:

 

We warrant that the above inventory is adequately covered against losses arising
from fire, theft and other losses

and that PNC Bank, N.A. has been correctly named as loss payee on said insurance
policy.

                Authorized Signature, Title   Date           Name of Authorized
Signer    

 

 

 

 

 

EXHIBIT 2.1(a)

Form of Revolving Credit Note

 

REVOLVING CREDIT NOTE

PNC Bank, National Association

 

$23,000,000 June ___, 2012   Woodbridge, N.J.

 

This Revolving Credit Note (this “Note”) is executed and delivered under and
pursuant to the terms of that certain Revolving Credit, Term Loan and Security
Agreement dated as of the date hereof (as amended, restated, supplemented or
modified from time to time, the “Loan Agreement”) by and among HUDSON
TECHNOLOGIES COMPANY, a corporation of the State of Tennessee (the “Borrower”),
and PNC BANK, NATIONAL ASSOCIATION (“PNC”), the various financial institutions
named therein or which hereafter become a party thereto (together with PNC
collectively, “Lenders”) and PNC as agent for Lenders (in such capacity,
“Agent”). Capitalized terms not otherwise defined herein shall have the meanings
provided in the Loan Agreement.

 

FOR VALUE RECEIVED, the Borrower hereby promises to pay to the order of PNC, at
the office of Agent located at PNC Bank Center, Two Tower Center, East
Brunswick, New Jersey 08816 or at such other place as Agent may from time to
time designate to Borrower in writing:

 

(i) the principal sum of TWENTY-THREE MILLION AND 00/100 DOLLARS ($23,000,000)
or, if different from such amount, the unpaid principal balance of the Revolving
Advances as may be due and owing to PNC under the Loan Agreement, payable in
accordance with the provisions of the Loan Agreement, subject to acceleration
upon the occurrence of an Event of Default under the Loan Agreement or earlier
termination of the Loan Agreement pursuant to the terms thereof; and

 

(ii) interest on the principal amount of this Note from time to time outstanding
until such principal amount is paid in full at the applicable Revolving Interest
Rate in accordance with the provisions of the Loan Agreement. In no event,
however, shall interest exceed the maximum interest rate permitted by law. Upon
and after the occurrence of an Event of Default, and during the continuation
thereof, interest shall be payable at the Default Rate in accordance with the
Loan Agreement; and

 

(iii) notwithstanding anything to the contrary herein, in the Loan Agreement
and/or in any Other Document, all outstanding principal and interest hereunder
is due and payable on the Termination Date.

 

 

 

 

This Note is a “Revolving Credit Note” referred to in the Loan Agreement and is
secured, inter alia, by the liens granted pursuant to the Loan Agreement and the
Other Documents, is entitled to the benefits of the Loan Agreement and the Other
Documents and is subject to all of the agreements, terms and conditions therein
contained.

 

This Note is subject to mandatory prepayment, and may be voluntarily prepaid, in
whole or in part, in each case, on the terms and conditions set forth in the
Loan Agreement.

 

If an Event of Default under Section 10.7 of the Loan Agreement shall occur,
then this Note shall immediately become due and payable, without notice,
together with reasonable attorneys’ fees if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof. If any other Event
of Default shall occur under the Loan Agreement or any of the Other Documents,
which is not cured within any applicable grace period, then this Note may, as
provided in the Loan Agreement, be declared to be immediately due and payable,
without notice, together with reasonable attorneys’ fees, if the collection
hereof is placed in the hands of an attorney to obtain or enforce payment
hereof.

 

Lenders may at any time pledge or assign all or any portion of their rights
under the Loan Agreement and the Other Documents (including any portion of this
Note) to any of the twelve (12) Federal Reserve Banks organized under Section 4
of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or assignment
or enforcement thereof shall release Lenders from their obligations under the
Loan Agreement or any of the Other Documents.

 

This Note shall be construed and enforced in accordance with the laws of the
State of New York.

 

Borrower expressly waives any presentment, demand, protest, notice of protest,
or notice of any kind except as expressly provided in the Loan Agreement.

 

ATTEST: HUDSON TECHNOLOGIES COMPANY         By:_____________________________
By:_____________________________________ Name:  Stephen P. Mandracchia Name: 
Brian F. Coleman Title:    Secretary Title:    President

 

 

 

 

 

 

EXHIBIT 2.4(a)

Form of Term Note

 

TERM NOTE

PNC Bank, National Association

 

 

 

June ____, 2012   $4,000,000 Woodbridge, New Jersey

 

 

This Term Note (this “Note”) is executed and delivered under and pursuant to the
terms of that certain Revolving Credit, Term Loan and Security Agreement dated
as of the date hereof (as amended, supplemented, restated or modified from time
to time, the “Loan Agreement”) by and among HUDSON TECHNOLOGIES COMPANY., a
corporation of the State of Tennessee (the “Borrower”), and PNC BANK, NATIONAL
ASSOCIATION, a national banking association organized under the laws of the
United States of America (“PNC”), the various financial institutions named
therein or which hereafter become a party thereto (together with PNC
collectively, “Lenders”), and PNC as agent for Lenders (in such capacity,
“Agent”). Capitalized terms not otherwise defined herein shall have the meanings
provided in the Loan Agreement.

 

FOR VALUE RECEIVED, Borrower hereby promise to pay to the order of PNC Bank,
National Association, at the office of Agent located at PNC Bank Center, Two
Tower Center, East Brunswick, New Jersey 08816, or at such other place as Agent
may from time to time designate to Borrower in writing:

 

(i) the principal sum of FOUR MILLION AND 00/100 DOLLARS ($4,000,000) which
shall be due and payable in full on the Termination Date all as more
particularly described in the Loan Agreement, and subject to mandatory
prepayment and acceleration upon the occurrence of an Event of Default under the
Loan Agreement or earlier termination of the Loan Agreement pursuant to the
terms thereof; and

 

(ii) interest on the principal amount of this Note from time to time outstanding
until such principal amount is paid in full at the Term Loan Rate on a monthly
basis in accordance with the provisions of the Loan Agreement. In no event,
however, shall interest exceed the maximum interest rate permitted by law. Upon
and after the occurrence of an Event of Default, and during the continuation
thereof, interest shall be payable at the Default Rate in accordance with the
Loan Agreement;

 

 

 

 

 

(iii) notwithstanding anything to the contrary herein, in the Loan Agreement
and/or in any Other Document, all outstanding principal and interest hereunder
is due and payable on the Termination Date.

 

This Note is a “Term Note” referred to in the Loan Agreement and is secured,
inter alia, by the liens granted pursuant to the Loan Agreement and the Other
Documents, is entitled to the benefits of the Loan Agreement and the Other
Documents and is subject to all of the agreements, terms and conditions therein
contained.

 

This Note is subject to mandatory prepayment, and may be voluntarily prepaid, in
whole or in part, in each case on the terms and conditions set forth in the Loan
Agreement.

 

If an Event of Default under Section 10.7 of the Loan Agreement shall occur,
then this Note shall immediately become due and payable, without notice,
together with reasonable attorneys’ fees if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof. If any other Event
of Default shall occur under the Loan Agreement or any of the Other Documents,
which is not cured within any applicable grace period, then this Note may, as
provided in the Loan Agreement, be declared to be immediately due and payable,
without notice, together with reasonable attorneys’ fees, if the collection
hereof is placed in the hands of an attorney to obtain or enforce payment
hereof.

 

Lenders may at any time pledge or assign all or any portion of their rights
under the Loan Agreement or the Other Documents (including any portion of this
Note) to any of the twelve (12) Federal Reserve Banks organized under Section 4
of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or assignment
or enforcement thereof shall release Lenders from their obligations under the
Loan Agreement or any of the Other Documents.

 

This Note shall be construed and enforced in accordance with the laws of the
State of New York.

 

Borrower expressly waives any presentment, demand, protest, notice of protest,
or notice of any kind except as expressly provided in the Loan Agreement.

 

 

ATTEST: HUDSON TECHNOLOGIES COMPANY         By:_____________________________
By:_____________________________________ Name:  Stephen P. Mandracchia Name: 
Brian F. Coleman Title:    Secretary Title:    President

 

 

 

 

 

EXHIBIT 8.1(k)

Form of Financial Condition Certificate

 

FINANCIAL CONDITION CERTIFICATE

 

 

I, Brian F. Coleman, hereby certify that:

 

1)     I am duly elected, qualified and acting President of HUDSON TECHNOLOGIES
COMPANY (the “Borrower”) the Borrower is a corporation duly organized, existing
and in good standing under the laws of the State of Tennessee.

 

2)     I am fully familiar with all of the business and financial affairs of the
Borrower including, without limiting the generality of the foregoing, all of the
matters hereinafter described.

 

3)     This Financial Condition Certificate (the “Certificate”) is made and
delivered to PNC BANK, NATIONAL ASSOCIATION (“PNC”), each of the other financial
institutions (collectively, “Lenders”) named in or which hereafter become a
party to the Loan Agreement (as hereinafter defined) and PNC, as agent for
Lenders (in such capacity, “Agent”) pursuant to the terms of the Revolving
Credit, Term Loan and Security Agreement by and among the Borrower, Agent and
Lenders (as amended, modified, restated or supplemented from time to time, the
“Loan Agreement”), for the purpose of inducing Agent and Lenders, now and from
time to time hereafter, to advance monies and extend credit and other financial
accommodations to Borrower pursuant to the Loan Agreement together will all
notes, security agreements, mortgages, agreements, guarantees, instruments and
documents heretofore now and from time to time hereafter executed by the
Borrower and delivered to Agent and Lenders (all hereinafter collectively
referred to as the “Loan Documents”). I understand that you are relying on this
Certificate. All capitalized terms used and not otherwise defined herein shall
have the meanings set forth in the Loan Agreement.

 

4)     Immediately following the execution of the Loan Documents and the
consummation of the transactions described therein, the assets of the Borrower,
at a fair valuation and at their present fair saleable value, will be in excess
of the total amount of their liabilities (including contingent and unmatured
liabilities), the Borrower will be able to pay its debts as they become due and
Borrower will not have unreasonably small capital in order to carry on its
business. All material undisputed debts owing to third parties by the Borrower
are current and not past due.

 

5)     The Loan Agreement and the other Loan Documents were and will be executed
and delivered by the Borrower to Agent and Lenders in good faith and in exchange
for reasonably equivalent value and fair consideration.

 

6)     I have reviewed the relevant terms of the Loan Agreement and the other
Loan Documents and have made or have caused to be made under my supervision a
review of the transactions and financial conditions of the Borrower and such
review has not disclosed the existence of any condition or event which
constitutes a Default or Event of Default.

 

  HUDSON TECHNOLOGIES COMPANY           By_______________________________  
Name:   Brian F. Coleman

 

Dated: June ___, 2012

 

 

 

 

 

EXHIBIT 15.3

Form of Commitment Transfer Supplement

 

COMMITMENT TRANSFER SUPPLEMENT

 

 

COMMITMENT TRANSFER SUPPLEMENT, dated as of ________ __, 20__ by and among
___________________ (the “Transferor Lender”), each Purchasing Lender executing
this Commitment Transfer Supplement (each, a “Purchasing Lender”), and PNC Bank,
National Association (“PNC”) as agent for the Lenders (as defined below) under
the Loan Agreement (as defined below).

 

W I T N E S S E T H:

 

WHEREAS, this Commitment Transfer Supplement is being executed and delivered in
accordance with Section 15.3 of the Revolving Credit,Term Loan and Security
Agreement dated as of ____________________ (as from time to time amended,
supplemented or otherwise modified in accordance with the terms thereof, the
“Loan Agreement”) among _______________________________________________________
(each a “Borrower” and jointly and severally, “Borrowers”), PNC and the various
other financial institutions (collectively, the “Lenders”) and PNC as agent for
Lenders (in such capacity, “Agent”) named in or which hereafter become a party
to the Loan Agreement;

 

WHEREAS, each Purchasing Lender wishes to become a Lender party to the Loan
Agreement; and

 

WHEREAS, the Transferor Lender is selling and assigning to each Purchasing
Lender, rights, obligations and commitments under the Loan Agreement;

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

1.All Capitalized terms used herein which are not defined shall have the
meanings given to them in the Loan Agreement.

 

2.Upon receipt by the Agent of four (4) counterparts of this Commitment Transfer
Supplement, to each of which is attached a fully completed Schedule I, and each
of which as been executed by the Transferor Lender and Agent, Agent will
transmit to Transferor Lender and each Purchasing Lender a Transfer Effective
Notice, substantially in the form of Schedule II to this Commitment Transfer
Supplement (a “Transfer Effective Notice”). Such Transfer Effective Notice shall
set forth, inter alia, the date on which the transfer effected by this
Commitment Transfer Supplement shall become effective (the “Transfer Effective
Date”), which date shall not be earlier than the first Business Day following
the date such Transfer Effective Notice is received. From and after the Transfer
Effective Date, each Purchasing Lender shall be a Lender party to the Loan
Agreement for all purposes thereof.

 

 

 

 

 

3.At or before 12:00 Noon (New York City Time) on the Transfer Effective Date
each Purchasing Lender shall pay to Transferor Lender, in immediately available
funds, an amount equal to the purchase price, as agreed between Transferor
Lender and such Purchasing Lender (the “Purchase Price”), of the portion of the
Advances being purchased by such Purchasing Lender (such Purchasing Lender’s
“Purchased Percentage”) of the outstanding Advances and other amounts owing to
the Transferor Lender under the Loan Agreement and the Note. Effective upon
receipt by Transferor Lender of the Purchase Price from a Purchasing Lender,
Transferor Lender hereby irrevocably sells, assigns, and transfers to such
Purchasing Lender, without recourse, representation or warranty, and each
Purchasing Lender hereby irrevocably purchases, takes and assumes from
Transferor Lender, such Purchasing Lender’s Purchased Percentage of the Advances
and other amounts owing to the Transferor Lender under the Loan Agreement and
the Note together with all instruments, documents and collateral security
pertaining thereto.

 

4.Transferor Lender has made arrangements with each Purchasing Lender with
respect to (i) the portion, if any, to be paid, and the date or dates for
payment, by Transferor Lender to such Purchasing Lender of any fees heretofore
received by Transferor Lender pursuant to the Loan Agreement prior to the
Transfer Effective Date, and (ii) the portion, if any, to be paid and the date
or dates for payment, by such Purchasing Lender to Transferor Lender of fees or
interest received by such Purchasing Lender pursuant to the Loan Agreement from
and after the Transfer Effective Date.

 

5.(a) All principal payments that would otherwise be payable from and after the
Transfer Effective Date to or for the account of Transferor Lender pursuant to
the Loan Agreement and the Note shall, instead, be payable to or for the account
of Transferor Lender and Purchasing Lender, as the case may be, in accordance
with their respective interests as reflected in this Commitment Transfer
Supplement.

 

(b)All interest, fees and other amounts that would otherwise accrue for the
account of Transferor Lender from and after the Transfer Effective Date pursuant
to the Loan Agreement and the Note shall, instead, accrue for the account of,
and be payable to, Transferor Lender and Purchasing Lender, as the case may be,
in accordance with their respective interests as reflected in this Commitment
Transfer Supplement. In the event that any amount of interest, fees or other
amounts accruing prior to the Transfer Effective Date was included in the
Purchase Price paid by any Purchasing Lender, Transferor Lender and each
Purchasing Lender will make appropriate arrangements for payment by Transferor
Lender to such Purchasing Lender of such amount upon receipt thereof from
Borrower.

 

 

 

 

6.Concurrently with the execution and delivery hereof, Transferor Lender will
provide to each Purchasing Lender conformed copies of the Loan Agreement and all
related documents delivered to Transferor Lender.

 

7.Each of the parties to this Commitment Transfer Supplement agrees that at any
time and from time to time, upon the written request of any other party, it will
execute and deliver such further documents and do such further acts and things
as such other party may reasonably request in order to effect the purposes of
this Commitment Transfer Supplement.

 

8.By executing and delivering this Commitment Transfer Supplement, Transferor
Lender and each Purchasing Lender confirm to and agree with each other and Agent
and Lenders as follows: (i) other than the representation and warranty that it
is the legal and beneficial owner of the interest being assigned hereby free and
clear of any adverse claim, Transferor Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Agreement, the Note or any other instrument or document
furnished pursuant thereto; (ii) Transferor Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrowers or the performance or observance by Borrowers of any of their
Obligations under the Loan Agreement, the Note or any other instrument or
document furnished pursuant hereto; (iii) each Purchasing Lender confirms that
it has received a copy of the Loan Agreement, together with copies of such
financial statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Commitment Transfer Supplement; (iv) each Purchasing Lender will, independently
and without reliance upon Agent, Transferor Lender or any other Lenders and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Agreement; (v) each Purchasing Lender appoints and authorizes
Agent to take such action as agent on its behalf and to exercise such powers
under the Loan Agreement as are delegated to the Agent by the terms thereof;
(vi) each Purchasing Lender agrees that it will perform all of its respective
obligations as set forth in the Loan Agreement to be performed by each as a
Lender; and (vii) each Purchasing Lender represents and warrants to Transferor
Lender, Lenders, Agent and Borrower that it is either (x) entitled to the
benefits of any income tax treaty with the United States of America that
provides for an exemption from the United States withholding tax on interest and
other payments made by Borrowers under the Loan Agreement and the Other
Documents or (y) is engaged in trade or business within the United States of
America.

 

 

 

 

 

9.Schedule I hereto sets for the revised Commitment Percentages of Transferor
Lender and the Commitment Percentage of each Purchasing Lender as well as
administrative information with respect to each Purchasing Lender.

 

10.This Commitment Transfer Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.

 

IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer
Supplement to be executed by their respective duly authorized offices on the
date set forth above.

 

      As Transferor Lender           By: __________________________________  
Name: ________________________________   Title:
_________________________________               As a Purchasing Lender          
By: ___________________________________   Name:
_________________________________   Title: __________________________________  
        PNC BANK, NATIONAL ASSOCIATION   As Agent       By:
____________________________________   Name: __________________________________
  Title: ___________________________________

 

 

 

 

 

SCHEDULE I TO

COMMITMENT TRANSFER SUPPLEMENT

 

LIST OF OFFICES, ADDRESSES FOR NOTICE AND COMMITMENT AMOUNTS

 

 

  Revised Commitment Amount $_______________         Revised Commitment
Percentage   _______________%               Commitment Amount $_______________  
      Commitment Percentage _______________%

 

 

Addresses for Notices:

 

___________________________________

 

___________________________________

 

___________________________________

 

Attention: __________________________

Telephone: _________________________

Telecopier: _________________________

 

 

 

 

Schedule II to

COMMITMENT TRANSFER SUPPLEMENT

 

[Form of Transfer Effective Notice]

 

To: , as Transferor Lender         And    , as Purchasing Lender:

 

The undersigned, as Agent under the Revolving Credit,Term Loan and Security
Agreement dated as of ________________ among ______________________________,
__________________________________________________________ (the Borrowers), the
financial institutions named therein (the “Lenders”) and PNC BANK, NATIONAL
ASSOCIATION, as a Lender and as agent for Lenders, acknowledges receipt of four
(4) executed counterparts of a completed Commitment Transfer Supplement in the
form attached hereto. [Note: attach copy of Commitment Transfer Supplement].
Terms defined in such Commitment Transfer Supplement are used herein as therein
defined.

 

Pursuant to such Commitment Transfer Supplement, you are advised that the
Transfer Effective Date will be [Insert date of Transfer Effective Notice].

 

  PNC BANK, NATIONAL ASSOCIATION   As Agent       By:
________________________________   Name: ______________________________  
Title:  _______________________________

 

ACCEPTED FOR RECORDATION

IN REGISTER: ________________

 

 

 

 

 

 

 

 

 

 

SCHEDULE 1.2

Permitted Encumbrances

 

A.     Mortgages/Secured Loans:

 

1.Commercial Mortgage dated May 27, 2005 against premises located at 3402 North
Mattis Ave., Champaign, Illinois, in favor of Busey Bank, securing a Promissory
Note in the original principal amount of $945,000.

2.Mortgage, dated April 30, 2008, against vacant land east of and immediately
adjacent to 3402 North Mattis Ave, Champaign, Illinois, in favor of Busey Bank,
securing a Promissory Note in the original principal amount of $300,000.

3.Installment Note and Security Agreement, dated December 29, 2009, in favor of
The Champaign County Community Development Corporation, secured by a lien on
certain separation and reclamation equipment installed at 3402 N. Mattis Ave.,
Champaign, Illinois, in the original principal amount of $100,000.

 

Note – Items 1 and 2 above consolidated into one Promissory Note, dated as of
June 1, 2012 in the principal amount of $845,737.86.

 

B.            CAPITAL LEASES:      

 

NAME DATE AMT DUE MONTHLY
PAYMENT EQUIPMENT           FORD 9/21/2011 52,127.90 983.25 New vehicle        
  FORD 1/3/2012 27,503.02 458.38 New vehicle           FORD 1/3/2012 37,319.69
702.40 New vehicle           FORD 3/29/2012 40,353.56 723.27 New vehicle        
  FORD 3/28/2012 48,817.69 874.98 New vehicle           FORD 3/28/2012 45,803.23
820.95 New vehicle           FORD 3/28/2012 47,491.06 851.20 New vehicle        
  FORD 3/28/2012 39,269.81 703.84 New vehicle           C.         
EQUIPMENTLEASES:      

 

NAME DATE AMT DUE MONTHLY
PAYMENT EQUIPMENT           AMERITECH 6/10/2009 36,778.49 806.00 Laboratory
Equipment           AMERITECH 3/9/2011 121,870.35 5,526.82 Laboratory & Shop    
    Equipment
AMERITECH 3/10/2012 31,584.07 1,004.00 Laboratory Equipment           NMHG FIN.
SERV. 7/15/2009 67,046.00 1,613.12 Fork lifts           NMHG FIN. SERV. 4/1/2012
68,634.64 1,594.50 Fork Lifts

 

 

 

 

SCHEDULE 4.5

Equipment and Inventory Locations

Baton Rouge 7983 E Pecue Ln, Suite C&D Baton Rouge, LA 70809   Champaign, IL
Depot 3402 North Mattis Ave Champaign, IL 61821   Champaign Warehouse 1617
Interstate Dr. Champaign, IL 61822   Charlotte, NC Depot/Plant 3300
International Airport Drive, Suite 800 Charlotte, NC 28208   Stony Point, NY 29
Holt Drive Stony Point, NY 10980   Pearl River, NY Corporate Office PO Box 1541
One Blue Hill Plaza Pearl River, NY 10965   Seattle Depot 1320 26th Street NW
Suite 9 Auburn, WA 98001   Hampstead, NH RPS Office 10 Bricketts Mill Rd. Unit H
Hampstead, NH 03841   Pottsboro, TX RPS Office 501 Spur 316 Ste 101 Pottsboro,
TX 75076   Dallas, TX  Texas Cartage 12344 E. NW Hwy Dallas, TX 75228   Oakland,
CA   Bay Area Warehouse 8707 San Leandro St Oakland, CA  94621

 

 

 

 

Houston, TX   Lone Star Integrated Distribution, Inc. 960 Pleasantville Houston,
TX  77029   Denver, CO Larsen Distribution 11685 E. 53rd Ave Denver, CO 80239  
Phoenix, AZ  Freeport Logistics 4625 N. 45th Ave Phoenix, AZ 85031   St.
Gabriel, LA All Service Storage 5045 Iberville St St. Gabriel, LA 70780

 

Island Movers Third Party Storage facility Pier 42, Honolulu, HI. storage of
service Equipment & materials      Marshall Freight, Inc. Third Party Storage
facility 7385 Mission Gorge storage of service Equipment & materials San Diego,
Ca  92180  

 

 

 

 

SCHEDULE 4.15(H)

Deposit and Investment Accounts

 

Bank Name   Account#   Branch Address   Description of Account   JP Morgan Chase
Bank, N.A.   6800   1 East Central Ave.               Pearl River, NY 10965  
Operating Account                   JP Morgan Chase Bank, N.A.   6800   1 East
Central Ave.               Pearl River, NY 10965   Payroll Account              
    Oritani Bank   8700   370 Pascack Road               Washington Twp, NJ
07676   Money Market Acct.                   Bank of America   9429   1 Bryant
Park   Blocked Lockbox Depository Account   (Keltic Financial Partners, LLP    
  New York, NY 10036       fbo Hudson Technologies)                            
  PNC Bank 8026           Collection Account                     PNC Bank 8026  
        Operating Account                     PNC Bank 8026           Payroll
Account                     PNC Bank 8026           MM Account  

 

 

 

 

SCHEDULE 4.19

Real Property

 

Locations owned or leased by Company     Baton Rouge Leased - Month to month
7983 E Pecue Ln, Suite C&D   Baton Rouge, LA 70809       Champaign, IL Depot
Company Owned 3402 North Mattis Ave Includes approx. 5.390 acres of vacant land
immediately Champaign, IL 61821 adjacent to 3402 N. Mattis Ave, on the easterly
side     Champaign Warehouse Leased 1617 Interstate Dr.   Champaign, IL 61822  
    Charlotte, NC Depot/Plant Leased 3300 International Airport Drive, Suite 800
  Charlotte, NC 28208       Stony Point, NY Leased 29 Holt Drive   Stony Point,
NY 10980       Pearl River, NY Corporate Office Leased PO Box 1541 One Blue Hill
Plaza   Pearl River, NY 10965       Seattle Depot Leased - Month to month 1320
26th Street NW   Suite 9   Auburn, WA 98001       Sales Locations (no inventory)
owned or leased by Company       Hampstead, NH RPS Office Leased 10 Bricketts
Mill Rd.   Unit H   Hampstead, NH 03841       Pottsboro, TX RPS Office Leased
501 Spur 316 Ste 101   Pottsboro, TX 75076  

 

 

 

 

Kansas Office Leased (month to month) to VP Sales and reimbursed   713 Main St.
    Seneca, KS 66538                Dallas, TX      Texas Cartage     12344 E.
NW Hwy     Dallas, TX 75228           Oakland, CA       Bay Area Warehouse    
8707 San Leandro St           Houston, TX         Lone Star Integrated
Distribution, Inc.     960 Pleasantville     Houston, TX  77029          
Denver, CO       Larsen Distribution     11685 E. 53rd Ave     Denver, CO 80239
          Phoenix, AZ      Freeport Logistics     4625 N. 45th Ave     Phoenix,
AZ 85031           St. Gabriel, LA     All Service Storage     5045 Iberville St
    St. Gabriel, LA 70780           Island Movers   Pier 42, Honolulu, HI.      
Marshall Freight, Inc.   7385 Mission Gorge   San Diego, Ca  92180  

 

 

 

 

SCHEDULE 5.1

Consents

 

NONE

 

 

 

 

SCHEDULE 5.2(b)

States of Qualification and Good Standing

 

Incorporated and in good standing under the laws of Tennessee

 

Qualified to do business and in good standing under the laws of the following
states:

 

California

Illinois

Kansas

Louisiana

New Hampshire

New Jersey

New York

North Carolina

Texas

Washington

 

 

 

 

SCHEDULE 5.2(b)

Subsidiaries

 

 

NONE

 

 

 

 

SCHEDULE 5.4

Federal Tax Identification Number

 

The Borrower’s FEIN is 62-1478695

 

 

 

 

SCHEDULE 5.6

Prior Names

 

Hudson Technologies Company

dba Hudson Technologies of Tennessee

dba Hudson Technologies Company of Tennessee

dba Hudson Technologies Company, Inc.

 

 

 

 

SCHEDULE 5.8(b)

Litigation

 

Borrower has no pending or threatened litigation, arbitration, actions or
proceedings which involve the possibility of having a Material Adverse Effect,

 

Borrower has no liabilities or indebtedness for borrowed money other than the
Obligations and the Permitted Encumbrances

 

 

 

 

SCHEDULE 5.8(d)

Plans

 

Hudson Technologies, Inc. 401(K) Savings Plan

 

 

 

  

SCHEDULE 5.9

Intellectual Property, Source Code Escrow Agreements

(Patents)

 

OFGS No Owner Patent No Appln No Country

Issue

Date

Title 5721 HTI 5,802,959 08/766,957 United States 8-Sep-98 APPARATUS FOR
RECOVERNING AND ANALYZING VOLATILE REFRIGERANTS 5721-0080 HTI 6,141,977
09/146,590 United States 07-Nov-00 APPARATUS FOR RECOVERNING AND ANALYZING
VOLATILE REFRIGERANTS 5721-0061 HTI 6,164,080 09/373,301 United States 26-Dec-00
APPARATUS AND METHOD FOR FLUSHING A REFRIGERATION SYSTEM 5721-0059 HTI 6,357,240
09/373,300 United States 19-Mar-02 APPARATUS AND METHOD FOR FLUSHING A CHILLER
SYSTEM 5721-0060 HTI 6,290,778 09/373,299 United States 18-Sep-01 METHOD AND
APPARATUS FOR SONIC CLEANING OF HEAT EXCHANGERS 5721-0055 HTC 6,505,475
09/577,703 United States 14-Jan-03 METHOD AND APPARATUS FOR MEASURING AND
IMPROVING EFFICIENCY IN REFRIGERATION SYSTEMS 5721-0056 HTC 7,059,143 10/338,941
United States 13-Jun-06 METHOD AND APPARATUS FOR MEASURING AND IMPROVING
EFFICIENCY IN REFRIGERATION SYSTEMS 5721-0057 HTC 7,086,240 11/182,249 United
States 08-Aug-06 METHOD AND APPARATUS FOR MEASURING AND IMPROVING EFFICIENCY IN
REFRIGERATION SYSTEMS 5721-0058 HTC 7,533,536 11/463,101 United States 19-May-09
METHOD AND APPARATUS FOR MEASURING AND IMPROVING EFFICIENCY IN REFRIGERATION
SYSTEMS 5721-0002 HTC 7,805,952 12,468,506 United States 05-Oct-10 METHOD AND
APPARATUS FOR MEASURING AND IMPROVING EFFICIENCY IN REFRIGERATION SYSTEMS 5721-
HTC 12,468,506 United States METHOD AND APPARATUS FOR MEASURING AND IMPROVING
EFFICIENCY IN REFRIGERATION SYSTEMS 5721-0048 HTI 7,599,759 10/730,791 United
States 06-Oct-09 METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS

 

 

 

 

5721-0014 HTI 8,046,107 12/565,147 United States 25-Oct-11 METHOD AND APPARATUS
FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0078 HTI 13/280,302 United States
METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0073 HTI 5,502,974
United States 02-Apr-96 HYDRAULIC SYSTEM FOR RECOVERING REFRIGERANTS 5721-0072
HTI 5,377,499 United States 03-Jan-95 METHOD AND APPARATUS FOR REFRIGERANT
RECLAMATION 5721-0015 HTI 12/251,385 United States SYSTEM AND METHOD FOR
RECYCLING NON-REUSABLE REFRIGERANT CONTAINERS FOREIGN PATENTS 5721-0021 HTI
2509207 2509207 Canada 24-Apr-12 METHOD AND APPARATUS FOR OPTIMIZING
REFIGERATION SYSTEMS 5721-0026 HTI 233646 1306KOLNP2005 India 17-Apr-09 METHOD
AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0054 HTI Patent
Cooperation Treaty METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS
5721-0006 HTI 126139 2005036900 Singapore 29-Feb-08 METHOD AND APPARATUS FOR
OPTIMIZING REFIGERATION SYSTEMS 5721-0052 HTI 200504679 200504679 South Africa
30-Aug-06 METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0003 HTI
2003300845 2003300845 Australia 24-Jul-08 METHOD AND APPARATUS FOR OPTIMIZING
REFIGERATION SYSTEMS 5721-0005 HTI 2008203024 2008203024 Australia 11-Aug-11
METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0010 HTI ZL
2003801096035 2003801096035 China 21-Apr-10 METHOD AND APPARATUS FOR OPTIMIZING
REFIGERATION SYSTEMS

 

 

 

 

5721-0007 HTI 201001292 Eurasian Patent Conventio METHOD AND APPARATUS FOR
OPTIMIZING REFIGERATION SYSTEMS 5721-0020 HTI 038129110 Europe METHOD AND
APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0007 HTI 200500945 Eurasian
Patent Conventio METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS
5721-00 HTI HK1092520 061100083 Hong Kong 24-Dec-10 METHOD AND APPARATUS FOR
OPTIMIZING REFIGERATION SYSTEMS 5721-0019 HTI 169052 169052 Israel 01-Mar-11
METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-00 HTI 2010196854
Japan METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0023 HTI
4691736 2005511749 Japan 04-Mar-11 METHOD AND APPARATUS FOR OPTIMIZING
REFIGERATION SYSTEMS 5721-0049 HTI 1020117002168 Korea, Republic of METHOD AND
APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0009 HTI 1020057010468 Korea,
Republic of METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0022
HTI PAA2005006174 Mexico METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION
SYSTEMS 5721-0018 HTI 571299 New Zealand METHOD AND APPARATUS FOR OPTIMIZING
REFIGERATION SYSTEMS 5721-0011 HTI 540685 540685 New Zealand 12-Mar-09 METHOD
AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0008 HTI 12005501094
Philippines METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0012
HTI P377583 Poland METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS
5721-0016 HTI 155062 2007052467 Singapore 15-Feb-12 METHOD AND APPARATUS FOR
OPTIMIZING REFIGERATION SYSTEMS 5721-0017 HTI 162617 2007052475 Singapore
15-Feb-12 METHOD AND APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0053 HTI
200604590 200604590 South Africa 30-May-07 METHOD AND APPARATUS FOR OPTIMIZING
REFIGERATION SYSTEMS 5721-0079 HTI 1020117002171 Korea, Republic of METHOD AND
APPARATUS FOR OPTIMIZING REFIGERATION SYSTEMS 5721-0034 HTI 330360 Argentina
METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0035 HTI 682218 946300654
Belgium 31-Mar-99 METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION

 

 

 

 

5721-0027 HTI 94048797 9404879 Brazil 08-Aug-00 METHOD AND APPARATUS FOR
REFRIGERANT RECLAMATION 5721-0028 HTI 2137771 2137771 Canada 20-Aug-02 METHOD
AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0029 HTI 82500 941129004 China
09-Nov-01 METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0037 HTI 5042
Costa Rica METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0039 HTI 682218
946300654 Denmark 31-Mar-99 METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION
5721-0030 HTI 682218 Europe 31-Mar-99 METHOD AND APPARATUS FOR REFRIGERANT
RECLAMATION 5721-0041 HTI 682218 946300654 France 31-Mar-99 METHOD AND APPARATUS
FOR REFRIGERANT RECLAMATION 5721-0038 HTI 682218 946300654 Germany 31-Mar-99
METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0042 HTI 682218 946300654
United Kingdom 31-Mar-99 METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION
5721-0043 HTI 111899 111899 Israel 14-Oct-97 METHOD AND APPARATUS FOR
REFRIGERANT RECLAMATION 5721-0044 HTI 682218 946300654 Italy 31-Mar-99 METHOD
AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0033 HTI 3671064 33107094 Japan
METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0045 HTI 192486 949588
Mexico 25-Jun-99 METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0046 HTI
682218 946300654 Netherlands 31-Mar-99 METHOD AND APPARATUS FOR REFRIGERANT
RECLAMATION 5721-0031 HTI 172518 306125 Poland 01-Dec-98 METHOD AND APPARATUS
FOR REFRIGERANT RECLAMATION 5721-0032 HTI 2134851 94044494 Russian Federation
20-Aug-99 METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION 5721-0040 HTI 682218
946300654 Spain 31-Mar-99 METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION
5721-0047 HTI 682218 946300654 Sweden 31-Mar-99 METHOD AND APPARATUS FOR
REFRIGERANT RECLAMATION 5721-0036 HTI 682218 946300654 Switzerland 31-Mar-99
METHOD AND APPARATUS FOR REFRIGERANT RECLAMATION

 

 

 

 

SCHEDULE 5.9

Intellectual Property, Source Code Escrow Agreements

(Trademarks)

 

OF No Reg No Appln No Country File Date Mark Status 5721-0013 85/041,598 United
States 18-May-10 CLEAN EXCHANGE Pending 5721-0063 2,559,214 75/532,327 United
States 06-Aug-98 REFRIGERANTSIDE Registered 5721-0064 2,601,434 75/532,328
United States 06-Aug-98 R-SIDE Registered 5721-0065 3,788,857 77/638,497 United
States 22-Dec-08 FLUID CHEMISTRY Registered 5721-0065 3,788,857 77/638,497
United States 22-Dec-08 FLUID CHEMISTRY Registered 5721-0066 3,184,719
78/591,413 United States 21-Mar-05 CHILLSMART Registered 5721-0066 3,184,719
78/591,413 United States 21-Mar-05 CHILLSMART Registered 5721-0067 2005/19998
South Africa 21-Sep-05 CHILLSMART Registered 5721-0068 2005/19998 South Africa
21-Sep-05 CHILLER CHEMISTRY Registered 5721-0069 3,190,044 78/591,426 United
States 21-Mar-05 CHILLER CHEMISTRY Registered 5721-0069 3,190,044 78/591,426
United States 21-Mar-05 CHILLER CHEMISTRY Registered 5721-0070 878513
International Registration CHILLER CHEMISTRY Registered 5721-0071 878512
International Registration 21-Sep-05 CHILLSMART Registered 5721-0074 1,969,986
74/677,360 United States 19-May-95 HUDSON TECHNOLOGIES, INC. Registered
5721-0075 1,985,422 74/682,909 United States 01-Jun-95 ZUGIBEAST Registered
5721-0076 2,227,148 75/253,240 United States 07-Mar-97 GLACIER Registered
5721-0077 85/428,775 United States 21-Sep-11 AMERI-PURE Published

 

 

 

 

SCHEDULE 5.10

Licenses and Permits

 

NONE

 

 

 

 

SCHEDULE 5.14

Labor Disputes

 

NONE

 

 

 

 

SCHEDULE 7.3

Guarantees

 

1.Obligations to indemnify, defend, and hold harmless customers, general
contractors, owners, agents, architects, and their employees and/or agents
granted by the Borrower in the Ordinary Course of Business in connection with
the performance by the Borrower of the services performed in its Business,
including without limitation, the granting of waivers of subrogation.

 

2.Obligations to indemnify, defend and hold harmless arising out of and in
connection with the April 1, 1999 R11 release at 25 Torne Valley Road, Hillburn,
NY.