Exhibit 10.6

 

CREDIT AGREEMENT

 

DATED AS OF DECEMBER 16, 2002

 

PEMCO AVIATION GROUP, INC.,

PEMCO WORLD AIR SERVICES, INC.,

PEMCO AEROPLEX, INC.,

PEMCO ENGINEERS, INC.,

SPACE VECTOR CORPORATION,

 

SOUTHTRUST BANK, AS AGENT,

and

 

THE LENDERS IDENTIFIED HEREIN

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Table of Contents

 

                   

Page

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Article I

  

1

    

1.

  

DEFINITIONS

  

1

         

1.1

  

Defined Terms

  

1

         

1.2

  

Accounting Terms

  

24

         

1.3

  

UCC Terms

  

24

         

1.4

  

Construction of Terms

  

25

         

1.5

  

Computation of Time Periods

  

25

         

1.6

  

Reference to Borrowers and Borrower Parties

  

25

         

1.7

  

Reference to Lender and Lender Party

  

25

         

1.8

  

Reference to Revolving Loan Lenders

  

25

         

1.9

  

Reference to Term Loan Lenders

  

25

         

1.10

  

Computation of Applicable Margins and Financial Covenants

  

25

Article II

  

26

    

2.

  

THE REVOLVING LOAN

  

26

         

2.1

  

General Terms

  

26

         

2.2

  

Disbursement of the Revolving Loan

  

26

         

2.3

  

The Revolving Notes

  

27

         

2.4

  

Interest Rate

  

27

         

2.5

  

Payments of Principal and Interest

  

27

         

2.6

  

Use of Proceeds of Revolving Loan

  

27

Article III

  

28

    

3.

  

THE SWING LINE LOAN

  

28

         

3.1

  

General Terms.

  

28

         

3.2

  

Disbursement of the Swing Line Loan.

  

28

         

3.3

  

The Swing Line Note

  

29

         

3.4

  

Interest Rate

  

29

         

3.5

  

Payments of Principal and Interest

  

29

         

3.6

  

Use of Proceeds of Swing Line Loan

  

29

Article IV

  

29

    

4.

  

THE TERM LOAN

  

29

         

4.1

  

General Terms

  

29

         

4.2

  

The Term Notes

  

29

         

4.3

  

Interest Rate

  

29

         

4.4

  

Payments of Principal and Interest

  

30

 

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4.5

  

Use of Proceeds of Term Loan

  

30

       

Article V

  

30

       

5.

  

LETTERS OF CREDIT

  

30

                

5.1

  

General Terms

  

30

                

5.2

  

Issuance of a Letter of Credit

  

30

                

5.3

  

Reimbursement and Other Payments

  

31

                

5.4

  

Upon an Event of Default

  

31

                

5.5

  

No Liability of Issuing Lender

  

32

                

5.6

  

Indemnification

  

32

                

5.7

  

Pro Rata Participation, Drawing and Reimbursement

  

33

                

5.8

  

Failure to Purchase Pro Rata Share of Letter of Credit Advances

  

34

                

5.9

  

Letter of Credit Reports

  

34

       

Article VI

  

34

       

6.

  

PAYMENTS, ADDITIONAL COSTS, ETC.

  

34

                

6.1

  

Payment to Agent

  

34

                

6.2

  

Late Payments

  

34

                

6.3

  

Prepayment

  

34

                

6.4

  

Default Rate

  

35

                

6.5

  

No Setoff or Deduction

  

35

                

6.6

  

Payment on Non-Business Day; Payment Computations

  

35

                

6.7

  

Indemnification

  

35

                

6.8

  

360-Day Year

  

36

                

6.9

  

No Requirement to Actually Obtain Funds

  

36

                

6.10

  

Usury Limitation

  

36

       

Article VII

  

36

       

7.

  

CONDITIONS PRECEDENT

  

36

                

7.1

  

Documents Required for the Closing

  

36

                

7.2

  

Certain Events Required for Closing and for all Advances

  

38

                

7.3

  

Legal Matters

  

39

                

7.4

  

Election to Make Advances Prior to Satisfaction of Conditions Precedent

  

39

       

Article VIII

  

39

       

8.

  

COLLATERAL SECURITY

  

39

                

8.1

  

Grant of Lien and Security Interest

  

39

                

8.2

  

Maintenance of Lien

  

39

       

Article IX

       

40

 

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9.

  

REPRESENTATIONS AND WARRANTIES.

  

40

         

9.1

  

Borrower’s Existence

  

40

         

9.2

  

Borrower’s Authority

  

40

         

9.3

  

Borrower’s Owners

  

40

         

9.4

  

Borrower’s Name

  

40

         

9.5

  

Consents or Approvals

  

40

         

9.6

  

Violations or Actions Pending

  

41

         

9.7

  

Borrower Parties’ Subsidiaries and Affiliates

  

41

         

9.8

  

Existing Indebtedness

  

41

         

9.9

  

Tax Returns

  

41

         

9.10

  

Financial Statements

  

41

         

9.11

  

Good and Marketable Title

  

42

         

9.12

  

Borrower’s Real Property Locations

  

42

         

9.13

  

Solvency

  

42

         

9.14

  

ERISA

  

42

         

9.15

  

Priority of Liens

  

42

         

9.16

  

Patents, Copyrights, Etc

  

42

         

9.17

  

Accuracy of Documents

  

42

         

9.18

  

Environmental Matters

  

42

         

9.19

  

Restrictions and Covenants Affecting the Mortgaged Property

  

43

         

9.20

  

Condemnation

  

43

         

9.21

  

Mortgaged Property Documents

  

43

         

9.22

  

Full Disclosure

  

43

         

9.23

  

Regulated Industries

  

44

         

9.24

  

Insurance

  

44

         

9.25

  

Continuing Effectiveness

  

44

Article X

  

44

    

10.

  

THE BORROWER’S COVENANTS

  

44

         

10.1

  

Affirmative Covenants

  

44

         

10.2

  

Negative Covenants

  

46

         

10.3

  

Financial Covenants

  

47

         

10.4

  

Insurance and Condemnation Covenants

  

48

         

10.5

  

Mortgaged Property Document Covenants

  

52

         

10.6

  

Escrow Deposits

  

53

         

10.7

  

Borrower’s General Covenants and Agreements Pertaining to the Collateral

  

53

         

10.8

  

Collection of Accounts; Segregation of Proceeds, Etc

  

54

         

10.9

  

Collection Methods

  

55

         

10.10

  

Verification of Accounts

  

55

         

10.11

  

Notice Regarding Disputed Accounts

  

55

         

10.12

  

Records, Schedules and Assignments

  

55

         

10.13

  

Visitation

  

55

         

10.14

  

Use of Tangible Property

  

56

 

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10.15

  

Collateral Evidenced by Instruments or Documents

  

56

         

10.16

  

Maintaining Bank Accounts

  

56

         

10.17

  

Filing Fees and Taxes

  

56

         

10.18

  

Assigned Agreements

  

57

         

10.19

  

Underlying Documentation

  

57

         

10.20

  

Further Assurances

  

57

Article XI

  

57

    

11.

  

DEFAULT

  

57

         

11.1

  

Events of Default

  

57

         

11.2

  

No Advances After Default

  

59

         

11.3

  

Acceleration

  

59

         

11.4

  

General Remedies

  

59

         

11.5

  

Agent’s Additional Rights and Remedies

  

59

         

11.6

  

Right of Set-Off

  

61

         

11.7

  

No Limitation on Rights and Remedies

  

62

         

11.8

  

Repossession of the Collateral; Care and Custody of the Collateral, Etc

  

62

         

11.9

  

Application of Proceeds

  

63

         

11.10

  

Attorney-in-Fact

  

63

         

11.11

  

Default Costs

  

64

Article XII

  

64

    

12.

  

THE AGENT

  

64

         

12.1

  

Authorization and Action

  

64

         

12.2

  

Agent’s Notices, Etc

  

65

         

12.3

  

Agent’s Reliance, Etc

  

65

         

12.4

  

SouthTrust and Affiliates

  

66

         

12.5

  

Lender Credit Decision

  

66

         

12.6

  

Indemnification

  

66

         

12.7

  

Successor Agent

  

67

         

12.8

  

No Third Party Beneficiary

  

68

Article XIII

  

68

    

13.

  

MISCELLANEOUS

  

68

         

13.1

  

Termination of Agent’s Lien

  

68

         

13.2

  

Construction

  

68

         

13.3

  

Indemnity

  

69

         

13.4

  

Lender Party’s Consent

  

69

         

13.5

  

Enforcement and Waiver by Lender Party

  

69

         

13.6

  

No Representation, Assumption, or Duty

  

69

         

13.7

  

Expenses of Lender Parties

  

69

 

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13.8

  

Attorneys’ Fees

  

70

         

13.9

  

Exclusiveness

  

70

         

13.10

  

Waiver and Release by Borrower

  

70

         

13.11

  

Limitation on Waiver of Notice, Etc

  

70

         

13.12

  

Additional Costs

  

70

         

13.13

  

Illegality and Impossibility

  

71

         

13.14

  

Assignments and Participations.

  

71

         

13.15

  

Binding Effect, Assignment

  

73

         

13.16

  

Entire Agreement, Amendments

  

73

         

13.17

  

Severability

  

74

         

13.18

  

Headings

  

74

         

13.19

  

Counterparts

  

74

         

13.20

  

Seal

  

74

Article XIV

  

74

    

14.

  

SUBMISSION TO JURISDICTION, GOVERNING LAW AND NOTICES

  

74

         

14.1

  

Notices

  

74

         

14.2

  

Governing Law

  

76

         

14.3

  

SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL, ETC.

  

76

 

                

EXHIBIT A

  

APPROVED CONTRACTS

    

EXHIBIT B

  

ASSETS EXCLUDED AS COLLATERAL

    

EXHIBIT C

  

FORM OF ASSIGNMENT AND ACCEPTANCE

    

EXHIBIT D

  

FORM OF COLLATERAL REPORT

    

EXHIBIT E

  

FORM OF COMPLIANCE CERTIFICATE

    

EXHIBIT F

  

LENDERS' INITIAL CREDIT PERCENTAGES

    

EXHIBIT G

  

PERMITTED LIENS

    

SCHEDULE 9.3

  

LIST OF EQUITY AGREEMENTS

    

SCHEDULE 9.4

  

LIST OF NAMES USED BY BORROWER AND PERSONS ACQUIRED IN LAST SIX YEARS

    

SCHEDULE 9.9

  

DISPUTED TAX MATTERS

    

SCHEDULE 9.12

  

LISTING OF REAL PROPERTY OWNED OR LEASED BY BORROWER

    

SCHEDULE 9.16

  

LISTING OF PATENTS, COPYRIGHTS, ETC.

    

SCHEDULE 9.24

  

INSURANCE POLICIES IN EFFECT

    

SCHEDULE 10.2(B)

  

PERMITTED TRANSFERS OF COLLATERAL

    

SCHEDULE 10.2(G)

  

PERMITTED EQUITY TRANSACTIONS

    

SCHEDULE 10.3(G)

  

LISTING OF AGREEMENTS CURRENTLY IN EFFECT WITH AFFILIATES AND PERMITTED
POST-CLOSING

    

SCHEDULE 10.7(A)

  

LISTING OF LOCATIONS OF COLLATERAL

    

SCHEDULE 10.16

  

ADDITIONAL APPROVED BANK ACCOUNTS

           

 

v

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CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”), dated as of December             ,
2002, is made by and among PEMCO AVIATION GROUP, INC., a Delaware corporation,
PEMCO AEROPLEX, INC., an Alabama corporation, PEMCO ENGINEERS, INC., a Delaware
corporation, PEMCO WORLD AIR SERVICES, INC., a Delaware corporation, SPACE
VECTOR CORPORATION, a Delaware corporation (collectively, the “Borrowers”),
SOUTHTRUST BANK, an Alabama banking corporation (the “Agent”), those lenders
executing this Agreement as Lenders, and such other lenders as may become a
party hereto (collectively, the “Lenders”). As used herein, capitalized words
and phrases shall have the meanings ascribed thereto in Article I of this
Agreement.

 

W I T N E S S E T H:

 

WHEREAS, Borrowers have requested that Lenders extend certain credit to
Borrowers, and Lenders are willing to do so on the condition that, among other
things, Borrowers enter into this Agreement, and, subject to the terms and
conditions of this Agreement, Lenders have agreed to extend the following
credit: (i) a revolving loan to Borrowers of up to Twenty Million and 00/100
Dollars ($20,000,000.00), (ii) a swing line loan to Borrowers of up to Five
Million and 00/100 Dollars ($5,000,000.00), and (iii) a term loan to Borrowers
of up to Five Million and 00/100 Dollars ($5,000,000.00).

 

NOW, THEREFORE, in consideration of the promises herein contained, and each
intending to be legally bound hereby, the parties hereto agree as follows:

 

DEFINITIONS.

 

Defined Terms. As used herein, the following terms shall have the meanings set
forth below (such meanings to be equally applicable to the singular and plural
forms thereof):

 

“Acquisition” means any acquisition (whether in a single transaction or series
of related transactions) of (i) any going business, or all or substantially all
of the assets of any Person, whether through purchase, merger or otherwise; or
(ii) Equity Interests of any Person of five percent (5%) or more of the Equity
Interests or Voting Power of such Person.

 

“Adjusted Funded Debt” means, for any applicable Person as of an applicable
date, Funded Debt less Long-Term Unfunded Pension Liability.

 

“Adjusted Liabilities” means, for any applicable Person as of an applicable
date, Liabilities less Long-Term Unfunded Pension Liability.

 

“Adjusted Tangible Net Worth” means, for any applicable Person as of an
applicable date, (a) the total Equity Owner’s Equity of such Person (adjusted to
take into account the Unfunded Pension Liability Adjustment), plus (b) the
Subordinated Debt of such Person, and (c) excluding, without duplication (to the
extent reflected in determining Equity Owner’s Equity of such Person) (i)
accumulated depreciation and amortization; and (ii) the aggregate amount of
Intangible Assets of such Person and the aggregate amount of Affiliate Assets of
such Person (other than Intangible Assets taken into account with respect to the
Unfunded Pension Liability Adjustment).

 

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“Advance” means each loan of money or credit made or extended to or for the
benefit of Borrower by any Lender Party pursuant to this Agreement.

 

“Affiliate” means, with respect to any applicable Person, (a) any officers or
directors of such Person, or (b) any other Person that has a relationship with
the applicable Person whereby either of such Persons directly or indirectly
controls or is controlled by or is under common control with the other of such
Persons. The term “control” means the possession, directly or indirectly, of the
power, whether or not exercised to direct or cause the direction of the
management or policies of any Person, whether through ownership of voting
securities, by contract or otherwise.

 

“Affiliate Assets” means, for any applicable Person as of an applicable date,
the total amount of all assets of the applicable Person arising out of contracts
or agreements with Affiliates, including, but not limited to, any notes
receivable.

 

“Agent” means SouthTrust, in its capacity as Agent hereunder, its successors and
assigns, and unless the context may clearly require to the contrary, any
reference to “Agent” in any Loan Document shall mean the Agent in its capacity
as the Agent for the Lenders.

 

“Agent’s Account” means the account of Agent at its office in Birmingham,
Alabama established pursuant to the terms of this Agreement.

 

“Agent’s Fee” means an annual fee payable by Borrowers to Agent, such annual fee
to be paid in advance at the Closing and annually thereafter, all as more
specifically set forth in that certain letter from Agent to Mr. John Lee dated
November 8, 2002.

 

“Agent’s Lien” means the Lien granted to Agent by Borrowers pursuant to this
Agreement and the other Security Documents.

 

“Agreement” means this Credit Agreement, as amended or supplemented from time to
time.

 

“ALTA” means the American Land Title Association.

 

“Amortization Expense” means the amortization expense of Borrowers for the
applicable period (to the extent included in the computation of Net Income
(Loss)), according to Generally Accepted Accounting Principles.

 

“Annualized Rolling Period” means the period from the date one year prior to the
applicable date through the applicable date.

 

“Approved Contracts” means those agreements listed on the attached Exhibit “A”
and any other agreement between Borrower and any other Person which is approved
by Agent as an Approved Contract under this Agreement, provided that upon the
occurrence of (i) the suspension, revocation or termination of an Approved
Contract, or (ii) a default or event of default (after the expiration of any
applicable grace and cure period) under any such Approved Contract, such
Approved Contract shall no longer be considered an Approved Contract under this
Agreement.

 

“Assets Excluded From Collateral” means those assets of Borrower which are
specifically described on the attached Exhibit “B”.

 

“Assigned Agreements” means all leases, contracts, agreements, Documents,
Instruments and Chattel Paper included in the Collateral (including the
Mortgaged Property Documents).

 

“Assigned Leases” means all leases presently existing or hereafter made, whether
written or verbal, or any letting of, or agreement for the use or occupancy of,
any part of the Mortgaged Property, and each modification, extension, renewal
and guarantee thereof, including the Rents.

 

“Assignment and Acceptance” means an assignment and acceptance entered into by a
Lender and an Eligible Assignee, and accepted by Agent, in accordance with
Section 13.14 and in substantially the form of Exhibit “C” hereto.

 

2

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“Assignment of Claims Act” means the Assignment of Claims Act, as amended (31
U.S.C. Sections 3727 et. seq. and 41 U.S.C. Sections 15 et. seq.).

 

“Assignment of Rents” means that certain Assignment of Rents and Leases dated of
even date herewith, executed by Borrowers in favor of Agent, and includes any
and all extensions, revisions, modifications or amendments at any time made
thereto.

 

“Availability Reserves” means as of the next Business Day after the date of
written notice of any determination thereof to Borrower by Agent, such amounts
as Agent may from time to time establish against the Revolving Loan, in Agent’s
discretion, in order either (a) to preserve the value of the Collateral, the
Agent’s Lien thereon or the amount realizable therefrom or (b) to provide for
the payment of unanticipated liabilities of Borrower or for the discharge of the
Obligations to the extent not paid when due.

 

“Available Amount” of any Letter of Credit means, at any time, the maximum
amount available to be drawn under such Letter of Credit at such time.

 

“Bankruptcy Law” means Title 11, U.S. Code, or any similar Laws of any
Jurisdiction for the relief of debtors, and “Bankruptcy” means the commencement
of any case or other action for relief under Bankruptcy Law.

 

“Base Rate” means the rate of interest periodically designated by SouthTrust as
its Base Rate. The Base Rate is not necessarily the lowest interest rate charged
by SouthTrust.

 

“Borrowers” means Pemco Aviation, Pemco Aeroplex, Pemco Engineers, Pemco World
and Space Vector.

 

“Borrower Parties” means Borrowers and any other Person that hereafter becomes a
party to this Agreement and/or any other Loan Document, and which Person is
responsible in whole or in part for any of the Obligations.

 

“Borrower’s Closing Affidavits” means affidavits in form and substance
acceptable to Agent, and signed by a duly authorized representative of each
Borrower.

 

“Borrower’s Interest” means all right, title and interest of Borrower of
whatever kind, nature or description.

 

“Borrower’s Representatives” means the president, chief executive officer, chief
financial officer, and vice president of finance of Borrower, and any other
Person designated by Borrower as Borrower’s Representatives under this
Agreement.

 

“Borrowing Base” means, at any time, the amount computed on the Collateral
Report most recently delivered to, and accepted by, Agent in accordance with
this Agreement and equal to the aggregate of:

 

Eighty-five percent (85%) of Eligible Accounts due from prime contractors on all
U.S. Government contracts; plus

 

Eighty-five percent (85%) of Eligible Accounts due from governmental and
commercial contracts; plus

 

Fifty percent (50%) of Eligible Accounts which are unbilled due to the terms of
an applicable contract, but with respect to which work has been performed and
completed; plus

 

The lesser of (i) fifty percent (50%) of Eligible Inventory, or (ii)
$12,000,000.00.

 

“Business Day” means any day of the year, other than Saturday or Sunday, on
which dealings in United States Dollars are carried on in the London interbank
market and banks open for business in Birmingham, Alabama are not required or
authorized to close.

 

“Capital Expenditures” means the sum of (i) all expenditures made by a Person,
directly or

 

3

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indirectly for equipment, fixed assets, real property or improvements, or for
replacements or substitutions therefor or additions thereto, that should be, in
accordance with Generally Accepted Accounting Principles, reflected as additions
to property, plant or equipment on a balance sheet of such Person or which have
a useful life of more than one Year plus (ii) the aggregate principal amount of
all Indebtedness (including Capitalized Leases) assumed or incurred in
connection with any such expenditures.

 

“Capitalized Lease” means a lease that is required to be capitalized for
financial reporting purposes in accordance with Generally Accepted Accounting
Principles.

 

“Cash Collateral Account” means the special cash collateral account established
pursuant to Section 5.4 of this Agreement.

 

“Cash Equivalents” means (i) securities issued or unconditionally guaranteed by
the United States of America or any agency or instrumentality thereof, backed by
the full faith and credit of the United States of America and maturing within 90
days from the date of acquisition, (ii) commercial paper issued by any Person
organized under the Laws of the United States of America, maturing within 90
days from the date of acquisition and, at the time of acquisition, having a
rating of at least “A-1” or the equivalent thereof by Standard & Poor’s Ratings
Services or at least “P-1” or the equivalent thereof by Moody’s Investors
Service, Inc., (iii) time deposits (which shall not include demand deposit
accounts) and certificates of deposit maturing within 90 days from the date of
issuance and issued by a bank or trust company organized under the Laws of the
United States of America or any state thereof that has combined capital and
surplus of at least $500,000,000 and that has (or is a subsidiary of a bank
holding company that has) a long-term unsecured debt rating of at least “A” or
the equivalent thereof by Standard & Poor’s Ratings Services or at least “A2” or
the equivalent thereof by Moody’s Investors Service, Inc., (iv) repurchase
obligations with a term not exceeding seven (7) days with respect to underlying
securities of the types described in clause (i) above entered into with any bank
or trust company meeting the qualifications specified in clause (iii) above, and
(v) money market funds substantially all of whose assets are comprised of
securities of the types described in clauses (i) through (iv) above.

 

“Change in Control” means a change in the Equity Interests or Voting Power of
Borrower after the date of this Agreement so that, after the change, any Person
and such Person’s Affiliates (other than Michael Tennenbaum and Mass Mutual Life
Insurance Company) own collectively more than twenty percent (20.0%) of the
outstanding Equity Interests or Voting Power of Borrower.

 

“Closing” means the time and place of actual execution and delivery of this
Agreement, the Notes, and except as waived by Agent, the other documents,
instruments, and things required by Section 7.1 hereof.

 

“Collateral” means all of the assets of Borrower of every kind, nature and
description, wherever located, whether now owned or hereafter acquired (other
than the Assets Excluded From Collateral), including the following:

 

Borrower’s Interest in the Mortgaged Property;

 

the Assigned Agreements;

 

all amounts that may be owing from time to time by any Lender Party to Borrower
in any capacity, including, without limitation, any balance or share belonging
to Borrower, of any Deposit Accounts or other account with any Lender Party; and

 

all of Borrower’s assets which are or may be subject to Article 9 of the Uniform
Commercial

 

4

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Code, together with all replacements therefor, additions and accessions thereto,
and proceeds (including, but without limitation, insurance proceeds) and
products thereof, including, without limitation, the following:

 

Accounts (including, without limitation, notes, drafts, acceptances, letters of
credit, and other rights to payment);

 

Chattel Paper;

 

Contract Rights;

 

Commercial Tort Claims;

 

Deposit Accounts and Lockbox Accounts;

 

Documents;

 

Equipment (including, without limitation, all motor vehicles, trucks, trailers,
rolling stock and mobile goods);

 

General Intangibles;

 

Instruments;

 

Intellectual Property Rights;

 

Inventory;

 

Investment Property;

 

Letter-of-Credit Rights;

 

Payment Intangibles;

 

Supporting Obligations;

 

Rights as seller of Goods and rights to returned or repossessed Goods;

 

All existing and future leases and use agreements of personal property entered
into by Borrower as lessor with other Persons as lessees, including without
limitation the right to receive and collect all rentals and other monies,
including security deposits, at any time payable under such leases and
agreements;

 

Any existing and future leases and use agreements of personal property entered
into by Borrower as lessee with other Persons as lessors, including without
limitation the leasehold interest of Borrower in such property, and all options
to purchase such property or to extend any such lease or agreement;

 

All fixtures of Borrower (including, but not limited to, all fixtures now or
hereafter located on the Mortgaged Property);

 

All moneys of Borrower and all bank accounts, deposit accounts, lock boxes and
other accounts in which such moneys may at any time be on deposit or held and
all investments or securities in which such moneys may at any time be invested
and all certificates, instruments and documents from time to time representing
or evidencing any of the same;

 

All claims of Borrower in any pending litigation and/or claims for any insurance
proceeds;

 

All Records pertaining to any of the Collateral;

 

any and all other assets of Borrower of any kind, nature, or description and
which are intended to serve as collateral for the Loans under any one or more of
the Security Documents; and

 

All interest, dividends, Proceeds, products, rents, royalties, issues and
profits of any of the property described above, including, without limitation,
all monies due and to become due with respect to such property, together with
all rights to receive the same, and all notes, certificates of deposit, checks
and other instruments and property from time to time delivered to or otherwise
possessed by any Lender Party for or on behalf of Borrower in substitution for
or in addition to

 

5

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any of said property.

 

“Collateral Report” means a fully completed and duly executed Collateral Report
and Borrowing Base Certificates delivered by Borrowers to Agent and in the form
attached hereto as Exhibit “D”.

 

“Commitment Fee” means a fee payable at the Closing by Borrowers to Agent for
the account of the Lenders in the amount of $125,000.00.

 

“Commitments” means the Revolving Loan Commitment, the Swing Line Loan
Commitment, the Term Loan Commitment, and the Letter of Credit Commitment.

 

“Compass” means Compass Bank, an Alabama banking corporation.

 

“Compliance Certificate” means a fully completed and duly executed certificate
delivered by Borrowers to Agent and in the form attached hereto as Exhibit “E”.

 

“Consolidated Basis” means the consolidation of the assets, liabilities, income
and losses, as applicable, of Borrowers, together with a separate statement of
each of the foregoing for each Borrower whose assets, liabilities, income and
losses are the subject of the consolidation.

 

“Credit Percentage” means, with respect to each Lender, a percentage based on a
fraction, the numerator of which shall be the sum of (a) the aggregate principal
amount of the Advances outstanding at such time and owing to such Lender at such
time, and (b) such Lender’s Pro Rata Share of the aggregate Available Amount of
all Letters of Credit outstanding at such time, and the denominator of which
shall be the sum of (a) the aggregate principal amount of all Advances
outstanding at such time and owing to the Lenders at such time, and (b) the
aggregate Available Amount of all Letters of Credit outstanding at such time;
provided, that in calculating such percentage and each Lender’s Pro Rata Share,
the aggregate principal amount of Swing Line Loan Advances owing to the Swing
Line Lender and of Letter of Credit Advances owing to Issuing Lender shall, at
such time, be considered to be owed to the Lenders that purchase, are obligated
to purchase, or if the demand required under Section 3.2(C) or 5.7(C) were made
would be obligated to purchase, Swing Line Loan Advances and Letter of Credit
Advances from the Swing Line Lender and Issuing Lender under the terms of this
Agreement (the Credit Percentage of Lenders as of the date of this Agreement
being set forth on the attached Exhibit “F”).

 

“Default” means the occurrence of an event described in Section 11.1 hereof
regardless of whether there shall have occurred any passage of time or giving of
notice that would be necessary in order to constitute such event as an Event of
Default.

 

“Default Costs” means all Indemnified Losses incurred by any Lender Party by
reason of a Default.

 

“Defaulting Lender” means any Lender that has failed to make any Advance or
purchase its Pro Rata Share of any Swing Line Loan Advance or Letter of Credit
Advance as and when required under the terms of this Agreement.

 

“Default Rate” means a variable per annum rate of interest equal to the lesser
of (1) three percent (3%) in excess of the highest Interest Rate otherwise
payable on any Loan hereunder, or (2) the maximum rate allowed by applicable
Laws.

 

“Deposit Accounts” means all bank accounts and other deposit accounts and lock
boxes included in the Collateral or established for the benefit of any Lender
Party pursuant to the terms of any of the Loan Documents.

 

“Depreciation Expense” means the depreciation expense of Borrowers for the
applicable period (to the extent included in the computation of Net Income
(Loss)), according to Generally

 

6

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Accepted Accounting Principles.

 

“EBITDA” means, for any applicable Person for any applicable period, the Net
Income (Loss) of such Person for such period, plus (a) the sum of the following
amounts of such Person for such period to the extent included in the
determination of such Net Income (Loss): (i) Depreciation Expense, (ii)
Amortization Expense and other noncash charges, (iii) Interest Expense, (iv)
Income Tax Expense, and (v) non-cash losses on asset sales for such Person; less
(b) Extraordinary Receipts (and other gains on asset sales not otherwise
included in Extraordinary Receipts) for such Person.

 

“Eligible Account” means, at any time, an Account of Borrower that conforms and
continues to conform to the following conditions:

 

The Account is part of the Collateral and the Agent’s Lien has been perfected in
accordance with applicable Laws (including, without limitation, the perfection
of the Lien as provided for in Section 10.7(K) of this Agreement), provided,
however, that if such Account arises under an Approved Contract, such Account
will not be ineligible under this paragraph (A) until such time as Borrower
fails or refuses to take the action requested by Agent to perfect the Lien as
provided under Section 10.7(K) of this Agreement;

 

All representations and warranties of Borrower contained in the Loan Documents
with respect to such Account are true and correct in all material respects;

 

The Account arose from a bona fide outright sale of Goods by Borrower or from
services performed by Borrower in the Ordinary Course of Business, and such
Goods have been shipped to the appropriate Purchaser or its designees (or the
sale has otherwise been consummated), or the services have been fully performed
for the appropriate Purchaser;

 

The Account is based upon an enforceable order or contract, written or oral, for
Goods shipped or held for services performed and the same were shipped, held, or
performed in accordance with such order or contract;

 

The title of Borrower to the Account is absolute and is not subject to any Lien
except Agent’s Lien;

 

The amount shown on the books of Borrower and on any invoice or statement
delivered to Agent is owing to Borrower, less any partial payment that has been
made thereon by any Person;

 

The Account shall be eligible only to the extent that it is not subject to any
claim of reduction, counterclaim, set off, recoupment, or any claim for credits,
allowances, or adjustments by the Purchaser because of return, inferior, or
damaged goods or unsatisfactory services, or for any other reason;

 

The Purchaser has not returned or refused to retain, or otherwise notified
Borrower of any dispute concerning, or claimed nonconformity of, any of the
Goods or services from the sale of which the Account arose;

 

The Account is due and payable not more than ninety (90) days from the date of
the invoice therefor;

 

The Account is not more than sixty (60) days past due;

 

The Account does not arise out of a contract with, or order from, a Purchaser
that, by its terms, forbids or makes void or unenforceable the assignment by
Borrower to Agent of the Account arising with respect thereto;

 

Borrower has not received any note, trade acceptance, draft or other instrument
with respect to, or in payment of, the Account nor any Chattel Paper with
respect to the Goods giving rise to the

 

7

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Account, unless, if any such instrument or Chattel Paper has been received,
Borrower immediately notifies Agent and endorses or assigns and delivers the
same to Agent;

 

Borrower has not received any notice of the death of the Purchaser or a partner
thereof; nor of the dissolution, termination of existence, insolvency, business
failure, appointment of a receiver for any part of the property of, assignment
for the benefit of creditors by, or the filing of a petition in Bankruptcy, or
the commencement of any proceeding under any Bankruptcy or insolvency laws by or
against, the Purchaser;

 

The Purchaser is not a foreign entity, unless (i) the Account arises pursuant to
a commercial cargo conversion or maintenance of a particular aircraft, (ii) the
aircraft is under the sole possession and control of Borrower, (iii) the owner
of the aircraft has no right to have possession and control of the aircraft
returned to it until the Account is paid in full, (iv) the aircraft has an
estimated value of at least five times the total amount to be paid for work
performed by Borrower, and (v) the Account is not more than thirty days past
due; provided, however, that the total amount of Eligible Accounts under this
subparagraph (N) shall not exceed ten percent (10%) of the total amount of all
Accounts;

 

The Purchaser is not an Affiliate of Borrower;

 

The Account is not an Account of a Purchaser with respect to which fifteen
percent (15%) or more of all the Accounts from the Purchaser are not Eligible
Accounts hereunder for any reason (unless the Purchaser is the United States
Government, in which case the applicable percentage shall be 50% (instead of
15%) and in making such determination, Accounts of the United States Government
more than 60 days past due shall be deemed eligible until such Accounts are more
than 150 days past due);

 

The Account does not arise from a sale to the Purchaser on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis;

 

If the Account, when combined with the total other Eligible Accounts of the
Purchaser, exceeds five percent (5%) of the Eligible Accounts of the Borrower at
such time, then the Account will be ineligible to the extent of such excess
(except in the case of an Account arising under an Approved Contract); and

 

Agent has not deemed such Account ineligible because of uncertainty about the
creditworthiness of the Purchaser or because Agent otherwise considers the
collateral value thereof to Agent to be impaired or its ability to realize such
value to be insecure.

 

In the event of any dispute under the foregoing criteria about whether an
Account is or has ceased to be an Eligible Account, the decision of Agent, to be
made in Agent’s discretion, shall control.

 

“Eligible Assignee” means (i) a Lender; (ii) an Affiliate of a Lender; (iii) a
commercial bank organized under the laws of the United States, or any State
thereof, and having combined capital and surplus of at least $250,000,000.00;
(iv) a savings and loan association or savings bank organized under the laws of
the United States, or any State thereof, and having combined capital and surplus
of at least $250,000,000.00; (v) a finance company, insurance company or other
financial institution or fund (whether a corporation, partnership, trust or
other entity) organized under the laws of the United States, or any State
thereof, that is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business and having combined
capital and surplus of at least $250,000,000.00; and (vi) any other Person
approved by Agent and Borrower, such approval not to be unreasonably withheld or
delayed.

 

8

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“Eligible Inventory” means the Inventory of Borrower (including work in process,
finished goods and raw materials), valued at the lesser of cost (as established
on the FIFO method of accounting) or fair market value, provided, however, that
Agent may consider any of the following classes of inventory not to be Eligible
Inventory:

 

Inventory which is not part of the Collateral, or which is part of the
Collateral but with respect to which the Agent’s Lien has not been perfected in
accordance with applicable Laws.

 

Inventory with respect to which any representation or warranty contained in any
of the Loan Documents has been breached.

 

Inventory consisting of “perishable agricultural commodities” within the meaning
of the Perishable Agricultural Commodities Act of 1930, as amended, and the
regulations thereunder, or on which a Lien has arisen or may arise in favor of
agricultural producers under comparable state or local laws;

 

Inventory located on leaseholds as to which the lessor has not entered into a
consent and agreement providing Agent with the right to receive notice of
default, the right to repossess such Inventory at any time and such other rights
as may be required by Agent;

 

Inventory to which the title of Borrower is not absolute, or which is subject to
any Lien, except Agent’s Lien;

 

Inventory that is obsolete, unusable or otherwise unavailable for sale;

 

Inventory consisting of promotional, marketing, packaging or shipping materials
and supplies;

 

Inventory that fails to meet all standards imposed by any governmental agency,
or department or division thereof, having regulatory authority over such
Inventory or its use and sale;

 

Inventory that is subject to any licensing, patent, royalty, trademark, trade
name or copyright agreement with any Third Person from whom Borrower has
received notice of a dispute in respect of any such agreement;

 

Inventory located outside the United States;

 

Inventory that is not in the possession of or under the sole control of
Borrower, unless all Persons exercising dominion or control over such Inventory
shall have entered into such agreements as may be required by Agent, including
agreements providing for the right of Agent to repossess such Inventory at any
time and such other rights as may be required by Agent;

 

Inventory in transit (unless otherwise determined to be eligible by Agent in its
discretion after a request for such determination from Borrower);

 

Inventory returned or repossessed by Purchasers other than Inventory that is
resalable in Borrower’s Ordinary Course of Business; and

 

Inventory with respect to which deposits or other monies have been received from
any Person and with respect to which work has not commenced or has not been
performed so that the conditions to the release of such deposit or other monies
have been satisfied.

 

Additionally, Agent may exclude from Eligible Inventory all or a proportionate
part of any particular portion of Borrower’s Inventory which Agent deems
ineligible because its market value has declined or because Agent otherwise
considers the collateral value thereof to Agent to be impaired or its ability to
realize such value to be insecure.

 

“Environmental Laws” means all Laws of any Jurisdiction relating to the
governance or protection of the environment, including without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980
(“CERCLA”), as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et

 

9

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seq.), the Resource Conservation and Recovery Act (“RCRA”), as amended (42
U.S.C. Sections 6901, et seq.), the Clean Water Act, as amended (42 U.S.C.
Sections 7401, et seq.), the Toxic Substances Control Act, as amended (15 U.S.C.
Sections 2601, et seq.).

 

“Equity Agreements” means any and all agreements of whatever kind by, between
and among any Borrower Party and relating to the Equity Interests of any
Borrower Party.

 

“Equity Interests” means any and all ownership or other equitable interests in
the applicable Person, including any interest represented by any capital stock,
membership interest, partnership interest, or similar interest, but specifically
excluding any interest of any Person solely as a creditor of the applicable
Person.

 

“Equity Owner” means any Person owning an Equity Interest.

 

“Equity Owners’ Equity” means, at any time, the sum of the following accounts
set forth in a balance sheet of Borrower, adjusted to U.S. Dollars by means of
applicable foreign currency exchange rates and prepared in accordance with
Generally Accepted Accounting Principles consistently applied:

 

The par or stated value of all outstanding Equity Interests;

 

Capital surplus; and

 

Retained earnings.

 

“ERISA” means the Federal Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time, and the regulations and published
interpretations thereof.

 

“ERISA Affiliate” means any Person that would be deemed to be under “common
control” with, or a member of the same “controlled group” as, Borrower or any of
its subsidiaries, within the meaning of the Internal Revenue Code (as applicable
to Plans) or ERISA.

 

“ERISA Event” means any of the following with respect to a Plan: (i) a
Reportable Event, (ii) a complete or partial withdrawal by Borrower or any ERISA
Affiliate from a Plan that results in liability under ERISA, or the receipt by
Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is
in reorganization or insolvency pursuant to ERISA or that it intends to
terminate or has terminated under ERISA, (iii) the distribution by Borrower or
any ERISA Affiliate under ERISA of a notice of intent to terminate any Plan or
the taking of any action to terminate any Plan, (iv) the commencement of
proceedings by the PBGC under ERISA for the termination of, or the appointment
of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA
Affiliate of a notice from any Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan, (v) the institution
of a proceeding by any fiduciary of any Multiemployer Plan against Borrower or
any ERISA Affiliate to enforce Section 515 of ERISA, which is not dismissed
within thirty (30) days, (vi) the imposition upon Borrower or any ERISA
Affiliate of any liability under Title IV of ERISA, other than for PBGC premiums
due but not delinquent under ERISA, or the imposition or threatened imposition
of any Lien upon any assets of Borrower or any ERISA Affiliate as a result of
any alleged failure to comply with the Internal Revenue Code or ERISA in respect
of any Plan, (vii) the engaging in or otherwise becoming liable for a nonexempt
Prohibited Transaction by Borrower or any ERISA Affiliate, (viii) a violation of
the applicable requirements of Section 404 or 405 of ERISA or the exclusive
benefit rule under Section 401(a) of the Internal Revenue Code by any fiduciary
of any Plan for which Borrower or any of its ERISA Affiliates may be directly or
indirectly liable, or (ix) the adoption of an amendment to any Plan that,
pursuant to the Internal Revenue Code or ERISA, would result in the loss of a
tax-exempt status of the trust of which such Plan is a part of, and

 

10

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Borrower or an ERISA Affiliate fails to timely provide security to such Plan in
accordance with the provisions of ERISA.

 

“Event of Default” means the occurrence of an event described in Section 11.1
hereof provided that there shall have occurred any passage of time or giving of
notice that would be necessary in order to constitute such event as an Event of
Default under Section 11.1.

 

“Existing Indebtedness” means Indebtedness of Borrowers as reflected on the Most
Recent Financial Statements, and which Indebtedness is not being paid or
defeased with the proceeds of the Loans at Closing.

 

“Existing Investments” means Investments of Borrowers as reflected on the Most
Recent Financial Statements.

 

“Extraordinary Receipt” means any cash received by or paid to or for the account
of any Person not in the Ordinary Course of Business, including, without
limitation, tax refunds, pension plan reversions, proceeds of insurance (other
than proceeds of business interruption insurance to the extent such proceeds
constitute compensation for lost earnings), condemnation awards (and payments in
lieu thereof) and indemnity payments.

 

“Federal Funds Rate” means, for any period, a fluctuating per annum interest
rate (rounded upwards, if necessary, to the nearest 1/100 of one percentage
point) equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three federal funds brokers of recognized
standing selected by Agent.

 

“Fees” means the Agent’s Fee, the Commitment Fee, the Unused Fee, the Letter of
Credit Facility Fee and the Letter of Credit Issuance Fee.

 

“Financial Statements” means the Most Recent Financial Statements and the income
statements, balance sheets and other financial statements required to be
delivered by Borrowers in accordance with this Agreement.

 

“Financing Statements” means the UCC-1 financing statements (including any
amendments and continuations) and UCC-3 financing statements required hereunder
or under any other Security Document.

 

“Fiscal Year” means a twelve-month period of time commencing on the first day of
January.

 

“Fiscal Year-End” means the end of each Fiscal Year.

 

“Fixed Charge Coverage Ratio” means, for any applicable Person for any
applicable period, the ratio of (a) the Operating Income of such Person, to (b)
the Fixed Charges incurred by such Person.

 

“Fixed Charges” means, for any applicable Person for any applicable period, the
sum of (without duplication) (a) Interest Expense and Lease Expense for such
period; plus (b) regularly scheduled principal payments on Indebtedness of such
Person during such period, including, without limitation, the principal
component of all payments made in respect of capitalized lease obligations, but
excluding any scheduled balloon, bullet or similar principal payment which
repays such Indebtedness in full; plus (c) all payments made in respect of any
Unfunded Pension Liability.

 

“Funded Debt” means, for any applicable Person as of an applicable date, all
Indebtedness of such Person, other than Indebtedness that is accounts payable,
accrued expenses or other current

 

11

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liabilities not incurred through the borrowing of money (provided that Funded
Debt shall include all Unfunded Pension Liability).

 

“Generally Accepted Accounting Principles” means generally accepted principles
of accounting in effect from time to time in the United States applied in a
manner consistent with those used in preparing such financial statements as have
heretofore been furnished to Agent by the applicable Person.

 

“Governing Body” means the board of directors of a Person (or any Person or
group of Persons exercising similar authority).

 

“Governmental Approvals” means all authorizations, consents, approvals, licenses
and exemptions of, registrations and filings with, and reports to, any
Governmental Authority.

 

“Governmental Authority” means any nation or government and any political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining thereto, which has or
asserts jurisdiction over Lender Party, Borrower, or any property of any of
them.

 

“Hazardous Materials” and “Hazardous Substances” means “hazardous materials” and
“hazardous substances” as defined under any applicable Environmental Law.

 

“Improvements” means the “Improvements” as defined in the Mortgage.

 

“Income Tax Expense” means the income tax expense of Borrower for the applicable
period (to the extent included in the computation of Net Income (Loss)),
determined in accordance with Generally Accepted Accounting Principles.

 

“Indebtedness” means all items of indebtedness, obligation or liability, whether
matured or unmatured, liquidated or unliquidated, direct or contingent, joint or
several, including, but without limitation or duplication:

 

All indebtedness guaranteed, directly or indirectly, in any manner, or endorsed
(other than for collection or deposit in the Ordinary Course of Business) or
discounted with recourse;

 

All indebtedness in effect guaranteed, directly or indirectly, through
agreements, contingent or otherwise:

 

to purchase such indebtedness; or

 

to purchase, sell or lease (as lessee or lessor) property, products, materials
or supplies or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such indebtedness or to assure the owner
of the indebtedness against loss; or

 

to supply funds to or in any other manner invest in the debtor;

 

All indebtedness secured by (or which the holder of such indebtedness has a
right, contingent or otherwise, to be secured by) any Lien upon property owned
or acquired subject thereto, whether or not the liabilities secured thereby have
been assumed; and

 

All indebtedness incurred as the lessee of goods or services under leases that,
in accordance with Generally Accepted Accounting Principles, should not be
reflected on the lessee’s balance sheet.

 

“Indemnified Losses” means all damages, dues, penalties, fines, costs, amounts
paid in settlement, taxes, losses, expenses, and fees, including court costs and
attorneys’ fees and expenses.

 

“Intangible Assets” means, for any applicable Person as of an applicable date,
the total amount of all assets of such Person consisting of goodwill patents,
trade names, trademarks, copyrights, franchises, experimental expense,
organization expense, unamortized debt discount and expense, deferred assets
(other than prepaid insurance and prepaid taxes), the excess of cost of shares
acquired over book value of related assets and such other assets as are properly
classified as

 

12

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“intangible assets” in accordance with Generally Accepted Accounting Principles.

 

“Interest Expense” means the interest expense of Borrower for the applicable
period (to the extent included in the computation of Net Income (Loss)),
determined in accordance with Generally Accepted Accounting Principles.

 

“Interest Rate” means the actual interest rate at which all or any portion of
the outstanding principal amount of a Note bears interest from time to time
during the term of such Note.

 

“Investment” means any loan or advance to any Person, any purchase or other
acquisition of any capital stock or other ownership or profit interest,
warrants, rights, options, obligations or other securities of such Person, any
capital contribution to such Person or any other investment in such Person.

 

“Issuing Lender” means SouthTrust and any other Person that becomes the Issuing
Lender with respect to a Letter of Credit pursuant to the terms of this
Agreement.

 

“Jurisdiction” means each and every nation or any political subdivision thereof.

 

“Land” means the “Land” as defined in the Mortgage.

 

“Laws” means each and all laws, treaties, ordinances, statutes, rules,
regulations, orders, injunctions, writs or decrees of any Governmental
Authority, or any court or similar entity established by any thereof, whether
now in effect or hereafter enacted.

 

“Lease Expense” means the lease expense of Borrower with respect to operating
leases for the applicable period (to the extent included in the computation of
Net Income (Loss)), determined in accordance with Generally Accepted Accounting
Principles (and specifically excluding any capitalized lease obligations).

 

“Lender Parties” means Agent, Lenders and Issuing Lender.

 

“Lenders” means SouthTrust, Compass and any other Person that shall become a
Lender hereunder pursuant to the terms hereof.

 

“Letter of Credit” means any Letter of Credit that is issued pursuant to this
Agreement (it being understood that the SouthTrust Bond Issue Letter of Credit
is not a Letter of Credit under this Agreement).

 

“Letter of Credit Advances” means all amounts owing to Issuing Lender under any
Letter of Credit Agreement, including, without limitation, all drafts paid by
Issuing Lender under any Letter of Credit and with respect to which and to the
extent that Issuing Lender has not been reimbursed, and all amounts owing to
Lenders who purchase their Pro Rata Share of Letter of Credit Advances in
accordance with this Agreement.

 

“Letter of Credit Agreement” means this Agreement and any other agreement
providing for the issuance of the Letters of Credit as contemplated hereunder,
together with any and all extensions, revisions, modifications or amendments at
any time made thereto.

 

“Letter of Credit Commitment” means the commitment of Issuing Lender, subject to
the terms of this Agreement, to issue for the account of Borrowers Letters of
Credit up to the lesser of (i) Five Hundred Thousand and 00/100 Dollars
($500,000.00), or (ii) the Unused Revolving Loan Commitment.

 

“Letter of Credit Facility Fee” means an annual fee payable by Borrowers with
respect to each Letter of Credit, in advance upon the issuance of such Letter of
Credit and on the first day of each Year thereafter, and equal to one and
one-quarter percent (1.25%) of the Available Amount of such Letter of Credit.

 

“Letter of Credit Issuance Fee” means a fee payable by Borrowers with respect to
each Letter of

 

13

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Credit, in advance upon the issuance of such Letter of Credit, as is customarily
charged by Issuing Lender (but not more than $250.00).

 

“Liabilities” means all Indebtedness that, in accordance with Generally Accepted
Accounting Principles, should be classified as liabilities on a balance sheet of
a Person.

 

“LIBOR Rate Interest Period” means any applicable 30-Day LIBOR Rate Interest
Period, 60-Day LIBOR Rate Interest Period, or 90-Day LIBOR Rate Interest Period.

 

“LIBOR Rate Notice” means any applicable 60-Day LIBOR Rate Notice or 90-Day
LIBOR Rate Notice.

 

“Lien” means any mortgage, pledge, encumbrance, charge, security interest, lien,
assignment or other preferential arrangement of any nature whatsoever, including
any conditional sale agreement or other title retention agreement.

 

“Loans” means the loans and other extensions of credit, if any, being made by
any Lender to Borrowers pursuant to this Agreement, including but not limited to
the Revolving Loan, the Swing Line Loan, the Term Loan and the Letters of
Credit.

 

“Loan Documents” means this Agreement, the Notes, the Subordination Agreement,
the Security Documents, the Letter of Credit Agreements, the Borrower’s Closing
Affidavits, and any and all other agreements, documents and instruments of any
kind executed or delivered in connection with, or evidencing, securing,
guaranteeing or relating to, the Loans, whether heretofore, simultaneously
herewith or hereafter delivered, together with any and all extensions,
revisions, modifications or amendments at any time made to any of the foregoing.

 

“Lockbox Accounts” means the lockbox accounts established pursuant to Section
10.16 of this Agreement.

 

“Long-Term Unfunded Pension Liability” means, for any applicable Person as of an
applicable date, any Unfunded Pension Liability with respect to which no payment
is required to be made within one (1) year of the applicable date.

 

“Material Adverse Change” means the occurrence of an event giving rise to a
Material Adverse Effect.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any Borrower Party, (b) the rights and remedies of any Lender Party
under any Loan Document, or (c) the ability of any Borrower Party to perform its
Obligations under any Loan Document to which it is or is to be a party.

 

“Month-End” means the last day of each calendar month during the term of this
Agreement.

 

“Mortgage” means that certain Leasehold Mortgage / Mortgage and Security
Agreement of even date herewith, executed by Borrowers in favor of Agent, and
includes any and all extensions, revisions, modifications or amendments at any
time made thereto.

 

“Mortgaged Property” means the “Mortgaged Property” as defined in the Mortgage.

 

“Mortgaged Property Documents” means (i) the Assigned Leases; (ii) any and all
other agreements entered into by Borrower with any Person relating to the
Mortgaged Property; (iii) any and all Governmental Approvals with respect to the
Mortgaged Property; and (iv) any and all operating, service, supply, and
maintenance contracts with respect to the Mortgaged Property.

 

“Most Recent Financial Statements” means the audited balance sheet and income
statement of Borrowers dated as of December 31, 2001, as supplemented by the
10-Qs filed by Borrowers with the Securities and Exchange Commission for the
Quarter-End of each March, June and

 

14

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

September of 2002.

 

“Net Income (Loss)” means, for any applicable Person for any applicable period,
the net income (loss) of such Person for such period as determined in accordance
with Generally Accepted Accounting Principles, but excluding for purposes of
determining any financial ratios under this Agreement, all Extraordinary
Receipts and any Income Tax Expense on such Extraordinary Receipts and any tax
deductions or credits on account of such Extraordinary Receipts.

 

“Non-Capitalized Lease” means any lease other than a Capitalized Lease.

 

“Notes” means the Revolving Notes, the Swing Line Note and the Term Notes.

 

“Notice of Borrowing” means a notice from Borrower in form and substance
satisfactory to Agent (and, in the case of a Swing Line Loan Advance, in form
and substance satisfactory to Swing Line Lender), to be made by telephone and
confirmed in writing, specifying therein the information as may be reasonably
required by Agent (and, in the case of a Swing Line Loan Advance, as may be
reasonably required by Swing Line Lender) with respect to any borrowing under
this Agreement.

 

“Notice of Issuance” means a notice from Borrowers to Agent and Issuing Lender
to be made by telephone and confirmed in writing, specifying therein the
information as may be reasonably required by Agent and Issuing Lender with
respect to the issuance of any Letter of Credit under this Agreement.

 

“Obligations” means the obligations (including obligations of performance) and
liabilities of any Borrower Party to any Lender Party of every kind and
description whatsoever, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, contracted or arising, or
acquired by any Lender Party from any source, joint or several, liquidated or
unliquidated, regardless of how they arise or by what agreement or instrument
they may be evidenced or whether they are evidenced by any agreement or
instrument, and whether incurred as maker, endorser, surety, guarantor, general
partner, drawer, tort-feasor, indemnitor, account party with respect to a letter
of credit or otherwise, and arising out of, incurred pursuant to and/or in
connection with any Loan Document, and any and all extensions and renewals of
any of the same, including but not limited to the obligation:

 

To pay the principal of and interest on the Notes in accordance with the
respective terms thereof and/or hereof, including any and all extensions,
modifications, and renewals thereof and substitutions therefor;

 

To pay, repay or reimburse the Lender Parties for all amounts owing hereunder
and/or under any of the other Loan Documents, including the Reimbursement
Obligation and all Indemnified Losses and Default Costs;

 

To pay, repay or reimburse to the Lender Parties all obligations under any
agreements designed to provide protection for fluctuations in interest rates,
exchange rates, or forward rates, including, without limitation, interest rate
exchange agreements, foreign currency exchange agreements, foreign rate currency
or interest rate options, puts, warrants, and those commonly known as interest
rate “swap” agreements, and any interest rate cap or collar protection
agreements.

 

“Operating Income” means, for any applicable Person for any applicable period,
EBITDA of such Person for such period, less Income Tax Expense (to the extent
included in the determination of Net Income (Loss) of such Person), plus Lease
Expense (to the extent included in the determination of Net Income (Loss) of
such Person).

 

“Ordinary Course of Business” means an action taken by a Person only if:

 

15

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

 

Such action is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person;

 

Such action is not required to be authorized by the Governing Body of such
Person; and

 

Such action is similar in nature and magnitude to actions customarily taken,
without any authorization by any Governing Body, in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.

 

“Organizational Documents” means (i) the articles of incorporation and the
bylaws of a corporation, (ii) the partnership agreement and any statement of
partnership of a general partnership, (iii) the limited partnership agreement
and the certificate of limited partnership of a limited partnership, (iv) the
articles of organization and the operating agreement of a limited liability
company, (v) any charter or similar document adopted or filed in connection with
the creation, formation, or organization of a Person, and (vi) any amendment to
any of the foregoing.

 

“Participant” means any bank, financial institution, Affiliate of Lender Party,
or other entity which enters into a participation agreement with Lender Party
and/or to whom Lender Party assigns all or a portion of its rights and
obligations under this Agreement.

 

“Payment Due Date” means each Month-End.

 

“Pemco Aeroplex” means Pemco Aeroplex, Inc., an Alabama corporation.

 

“Pemco Aviation” means Pemco Aviation Group, Inc., a Delaware corporation.

 

“Pemco Engineers” means Pemco Engineers, Inc., a Delaware corporation.

 

“Pemco World” means Pemco World Air Services, Inc., a Delaware corporation.

 

“Permitted Indebtedness” means:

 

The Loans;

 

The Existing Indebtedness;

 

Indebtedness otherwise expressly permitted under the terms of this Agreement or
any other Loan Document, if any;

 

Indebtedness incurred in Borrower’s Ordinary Course of Business and not incurred
through the borrowing of money, provided that such Indebtedness is either
Unsecured Indebtedness or Indebtedness secured by a Permitted Lien;

 

Subordinated Debt; and

 

Capitalized Leases, so long as the aggregate annual payments under all
Capitalized Leases do not exceed $350,000.00.

 

“Permitted Investments” means:

 

Cash Equivalents if Agent is satisfied in Agent’s discretion that the same
constitute part of the Collateral and that Agent’s Lien is properly perfected
with respect thereto;

 

Purchases and acquisitions of inventory, supplies, materials and equipment in
the Ordinary Course of Business;

 

Investments consisting of loans and advances to employees for reasonable travel,
relocation and business expenses in the Ordinary Course of Business or prepaid
expenses incurred in the Ordinary Course of Business;

 

Without duplication, Investments consisting of Permitted Indebtedness;

 

Investments existing on the Closing Date and reflected in the Most Recent
Financial Statements;

 

Investments in connection with Acquisitions if Agent is satisfied in Agent’s
discretion that the same constitute part of the Collateral and that Agent’s Lien
is properly perfected with respect thereto, and such Acquisition is otherwise
permitted under this Agreement;

 

16

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

 

Investments (other than Investments specified in clauses (A) through (F) above)
in an aggregate amount that shall not exceed $100,000.00 for all such
Investments from and after the Closing Date;

 

Investments in any Equity Interest of Borrower accomplished pursuant to a
purchase, redemption or retirement of such Equity Interest not in violation of
Section 10.2(G) of this Agreement or otherwise giving rise to a Default; and

 

Any other Investments that may be approved in writing by Agent from time to
time.

 

“Permitted Liens” means:

 

The Agent’s Lien;

 

The Lien of the SouthTrust Bond Issue Letter of Credit Mortgage and those Liens
identified on the attached Exhibit “G”;

 

The following Liens, if the granting of such Lien or the attachment of such Lien
to the Collateral (i) does not otherwise constitute a Default under the terms of
this Agreement, and (ii) does not give rise to a Material Adverse Change:

 

if the validity or amount thereof is being contested in good faith by
appropriate and lawful proceedings, so long as levy and execution thereon have
been stayed and continue to be stayed, and with respect to which adequate
reserves or other appropriate provisions are being maintained to the extent
required by Generally Accepted Accounting Principles:

 

Liens for taxes, assessments or charges due and payable and subject to interest
or penalty;

 

Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens;
and

 

Adverse judgments on appeal;

 

Pledges or deposits made in the Ordinary Course of Business to secure payment of
workmen’s compensation; and

 

Purchase money security interests granted in the Ordinary Course of Business to
secure not more than one hundred percent (100%) of the purchase price of assets;

 

Easements arising by reason of zoning restrictions, easements, licenses,
reservations, covenants, rights-of-way, utility easements, building restrictions
and other similar encumbrances on the use of real property which do not
materially detract from the value of such real property or interfere with the
ordinary conduct of the business conducted and proposed to be conducted at such
real property; and

 

Liens set forth in the Title Insurance Policies.

 

“Permitted Line of Business” means aircraft maintenance and related services for
governmental and commercial aircraft, and the design and manufacture of
proprietary aerospace products.

 

“Permitted Transfers of Collateral” means transfers, leases or other
dispositions of the Collateral on normal and ordinary terms and at normal prices
in the Ordinary Course of Business.

 

“Person” means any individual, corporation, partnership, limited partnership,
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, court or Governmental Authority.

 

“Place for Payment” means a place for payment as from time to time designated by
Agent, which place for payment currently is at the address of Agent as
hereinafter provided for with respect to notices.

 

“Plans” means all Single Employer Plans and Multiple Employer Plans, both as
defined in ERISA.

 

“Prohibited Transaction” means a “prohibited transaction” as defined in ERISA.

 

“Pro Rata” or “Pro Rata Share” of any amount means, with respect to any Lender
at any time (A)

 

17

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

when referring to the Advances, the Loans or the Lenders, the product of such
amount times such Lender’s Credit Percentage; (B) when referring to Revolving
Loan Advances, the Revolving Loan or the Revolving Loan Lenders, the product of
such amount times such Revolving Loan Lender’s Revolving Loan Credit Percentage;
(C) when referring to Term Loan Advances, the Term Loan or the Term Loan
Lenders, the product of such amount times such Term Loan Lender’s Term Loan
Credit Percentage; and (D) when referring to Letter of Credit Advances or the
Available Amount of the Letters of Credit, the product of such amount times such
Lender’s Revolving Loan Credit Percentage.

 

“Purchase Order” means a valid and binding order for goods to be purchased from
Borrower, which order shall be evidenced by an executed purchase order of the
respective Purchaser.

 

“Purchaser” means any buyer or lessee of Inventory from Borrower, any customer
for whom services have been rendered or materials furnished by Borrower, and any
other Person that is now or may become obligated to Borrower on an Account.

 

“Quarter” means a period of time of three consecutive calendar months.

 

“Quarter-End” means the last day of each of March, June, September, and
December.

 

“Records” means correspondence, memoranda, tapes, discs, microfilm, microfiche,
papers, books and other documents, or transcribed information of any type,
whether expressed in ordinary or machine language, and all filing cabinets and
other containers in which any of the foregoing is stored or maintained.

 

“Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to reserve requirements applicable to member banks of the Federal Reserve
System.

 

“Regulation “G”, Regulation “T”, Regulation “U”, and Regulation “X” means
Regulation G, Regulation T, Regulation U, and Regulation X, respectively, of the
Board of Governors of the Federal Reserve System as now or from time to time
hereafter in effect and shall include any successor or other regulation or
official interpretation of said Board of Governors relating to the extension of
credit by banks for the purpose of purchasing or carrying margin stocks
applicable to member banks of the Federal Reserve System.

 

“Reimbursement Obligation” means the obligation of Borrower to pay the amounts
required under Section 5.3 of this Agreement.

 

“Rents” means all the rents, issues, and profits now due and which may hereafter
become due under or by virtue of the Assigned Leases, together with all claims
and rights to the payment of money at any time arising in connection with any
rejection or breach of any of the Assigned Leases under Bankruptcy Law,
including without limitation, all rights to recover damages arising out of such
breach or rejection, all rights to charges payable by a tenant or trustee in
respect of the leased premises following the entry of an order for relief under
Bankruptcy Law in respect of a tenant and all rentals and charges outstanding
under the Assigned Leases as of the date of entry of such order for relief.

 

“Reportable Event” means a “reportable event” as defined in ERISA, but excluding
events for which reporting has been waived.

 

“Required Lenders” means at any time (i) so long as there are only two Lenders,
both such Lenders; and (ii) otherwise, Lenders holding Credit Percentages of at
least sixty-six and two-thirds percent; provided, however, that in determining
the foregoing, a Defaulting Lender shall

 

18

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

not be considered a Required Lender, and a Defaulting Lender’s Credit Percentage
shall be deemed to be zero percent (0%).

 

“Reserve Requirement” with respect to a LIBOR Rate Interest Period means the
weighted average during the LIBOR Rate Interest Period of the maximum aggregate
reserve requirement (including all basic, supplemental, marginal and other
reserves and taking into account any transitional adjustments or other scheduled
changes in reserve requirements during the LIBOR Rate Interest Period) which is
imposed under Regulation D.

 

“Revolving Loan” means the loan which the Lenders have agreed to advance to
Borrowers in accordance with the terms of Article III of this Agreement.

 

“Revolving Loan Advancement Termination Date” means the earlier of (i) the
Revolving Loan Maturity Date, or (ii) the date of the occurrence of an Event of
Default.

 

“Revolving Loan Advances” means all the Advances of the Revolving Loan.

 

“Revolving Loan Applicable Margin” means a percentage based upon Borrowers’
ratio of Adjusted Funded Debt to EBITDA, as follows:

 

Ratio of Adjusted Funded Debt

to EBITDA

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

    

Revolving Loan

Applicable Margin

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

 

Less than 0.5 to 1.0

    

2.0

%

Equal to or greater than 0.5 to 1.0, but less than 1.0 to 1.0

    

2.25

%

Equal to or greater than 1.0 to 1.0, but less than 1.5 to 1.0

    

2.5

%

Equal to or greater than 1.5 to 1.0

    

2.75

%

 

“Revolving Loan Borrowing” means a borrowing consisting of simultaneous
Revolving Loan Advances made by the Revolving Loan Lenders.

 

“Revolving Loan Commitment” means the commitment of the Revolving Loan Lenders,
subject to the terms of this Agreement, to lend Borrowers up to the lesser of
(x) Twenty Million and 00/100 Dollars ($20,000,000.00) in principal amount
outstanding from time to time until the Revolving Loan Advancement Termination
Date, or (y) the Borrowing Base, less the sum of (i) the Available Amount of the
Letters of Credit, plus (ii) any outstanding Letter of Credit Advances.

 

“Revolving Loan Credit Percentage” means a percentage based on a fraction, the
numerator of which shall be the aggregate principal amount of Revolving Loan
Advances and Letter of Credit Advances outstanding at a particular time and
owing to a Revolving Loan Lender at such time, and the denominator of which
shall be the aggregate principal amount of all Revolving Loan Advances and
Letter of Credit Advances outstanding at such time and owing to all the
Revolving Loan Lenders at such time (the Revolving Loan Credit Percentages of
the Revolving Loan Lenders as of the date of this Agreement being as set forth
on the attached Exhibit “F” ).

 

“Revolving Loan Lenders” means the Revolving Loan Lenders identified on Exhibit
“F” attached to this Agreement, and any other Person that becomes a Revolving
Loan Lender pursuant to the terms of this Agreement.

 

“Revolving Loan Maturity Date” means the earlier of (a) December             ,
2004 (viz., the date two Years from the date of this Agreement), or (b) the
occurrence of an Event of Default.

 

“Revolving Notes” means those certain Revolving Notes from Borrowers to the
Revolving Loan

 

19

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Lenders, dated of even date herewith, in the aggregate principal amount of
$20,000,000.00, and includes any amendment to or modification of any such note
and any promissory note given in extension or renewal of, or in substitution
for, such note.

 

“Security Documents” means all documents or instruments of any kind executed or
delivered in connection with the Loans, whether delivered prior to, at, or after
the Closing, wherein Agent is granted a Lien in Borrower’s assets, and all
documents and instruments executed and delivered in connection with any of the
foregoing, together with any and all extensions, revisions, modifications or
amendments at any time made to any of such documents or instruments, including
but not limited to this Agreement, the Mortgage, the Assignment of Rents and the
Financing Statements.

 

“Solvent” and “Solvency” mean, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small capital. The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

 

“SouthTrust” means SouthTrust Bank, an Alabama banking corporation, its
successors and assigns.

 

“SouthTrust Bond Issue Letter of Credit” means any letter of credit issued
pursuant to that certain Letter of Credit Application and Reimbursement
Agreement dated as of October 1, 2002, between Pemco Aviation and SouthTrust.

 

“SouthTrust Bond Issue Letter of Credit Mortgage” means that certain Leasehold
Mortgage / Mortgage and Security Agreement dated as of October 1, 2002, executed
by Pemco Aviation and Pemco World in favor of SouthTrust Bank, and includes any
and all extensions, revisions, modifications or amendments at any time made
thereto.

 

“Space Vector” means Space Vector Corporation, a Delaware corporation.

 

“Subordinated Debt” means, for any applicable Person as of an applicable date,
Indebtedness of such Person that is expressly subordinated and made junior in
right and time of payment to the obligations of Borrowers with respect to the
Loans, and that is evidenced by one or more written agreements having terms,
conditions and provisions (including, without limitation, provisions relating to
the principal amount, maturity, covenants, defaults, interest, subordination,
and repayment) satisfactory in form and substance to Agent in its sole
discretion (and subject to the approval of the Required Lenders), which shall
provide, at a minimum and without limitation, that such Indebtedness (a) shall
mature no earlier than one year after the Term Loan Maturity Date, (b) shall not
require any scheduled payment of principal prior to one year after the Term Loan
Maturity Date, and (c) shall have covenants and undertakings that, taken as a
whole, are materially less restrictive than those contained in the Loan
Documents.

 

“Subordination Agreement” means any agreement with respect to Subordinated Debt
at any time

 

20

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

entered into and approved by Agent as a Subordination Agreement under this
Agreement.

 

“Subsidiary” means, as to any Person (the “first person”), another Person (the
“second person”) with respect to which more than fifty percent (50%) of the
outstanding Equity Interests of such second person shall, at the time of
determination, be owned by such first person, indirectly or indirectly, through
one or more intermediaries.

 

“Swing Line Lender” means SouthTrust.

 

“Swing Line Loan” means the loan which the Swing Line Lender has agreed to
advance to Borrowers in accordance with the terms of Article III of this
Agreement.

 

“Swing Line Loan Advances” means all the Advances of the Swing Line Loan.

 

“Swing Line Loan Commitment” means the commitment of the Swing Line Lender,
subject to the terms of this Agreement, until the Revolving Loan Advancement
Termination Date, to lend Borrowers in principal amount outstanding from time to
time up to the lesser of (i) Five Million and 00/100 Dollars ($5,000,000.00), or
(ii) the aggregate of the Unused Revolving Loan Commitments of the Lenders.

 

“Swing Line Loan Maturity Date” means the earlier of (a) the date one (1)
Business Day prior to the Revolving Loan Maturity Date, (b) the occurrence of an
Event of Default, or (c) the date of demand for payment of the Swing Line Loan
by the Swing Line Lender.

 

“Swing Line Note” means that certain Swing Line Note from Borrowers to the Swing
Line Lender dated of even date herewith in the principal amount of
$5,000,000.00, and includes any amendment to or modification of such note and
any promissory note given in extension or renewal of, or in substitution for,
such note.

 

“Tangible Property” means all equipment, machinery, goods, furniture,
furnishings, fixtures, supplies, tools, materials, vehicles, books, records, and
other tangible personal property that are part of the Collateral.

 

“Term Loan” means the loan which the Term Loan Lenders have agreed to advance to
Borrower in accordance with the terms of Article IV of this Agreement.

 

“Term Loan Advances” means all the Advances of the Term Loan.

 

“Term Loan Amount” means Five Million and 00/100 Dollars ($5,000,000.00).

 

“Term Loan Applicable Margin” means a percentage based upon Borrowers’ ratio of
Adjusted Funded Debt to EBITDA, as follows:

 

Ratio of Adjusted Funded Debt

to EBITDA

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

    

Term Loan

Applicable Margin

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

 

Less than 0.5 to 1.0

    

2.25

%

Equal to or greater than 0.5 to 1.0, but less than 1.0 to 1.0

    

2.5

%

Equal to or greater than 1.0 to 1.0, but less than 1.5 to 1.0

    

2.75

%

Equal to or greater than 1.5 to 1.0

    

3.0

%

 

“Term Loan Commitment” means the commitment of the Term Loan Lenders, subject to
the terms of this Agreement, to lend Borrowers up to the Term Loan Amount in
accordance with Section 4.1 of this Agreement.

 

“Term Loan Credit Percentage” means a percentage based on a fraction, the
numerator of which

 

21

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

shall be the aggregate principal amount of Term Loan Advances outstanding at a
particular time and owing to a Term Loan Lender at such time, and the
denominator of which shall be the aggregate principal amount of all Term Loan
Advances outstanding at such time and owing to all the Term Loan Lenders at such
time (the Term Loan Credit Percentages of the Term Loan Lenders as of the date
of this Agreement being as set forth on the attached Exhibit “F” ).

 

“Term Loan Lenders” means the Term Loan Lenders identified on Exhibit “F”
attached to this Agreement, and any other Person that becomes a Term Loan Lender
pursuant to the terms of this Agreement.

 

“Term Loan Maturity Date” means the earlier of (a) December             , 2007
(viz., the date five Years from the date of this Agreement), or (b) the
occurrence of an Event of Default.

 

“Term Notes” means those certain Term Notes from Borrowers to the Term Loan
Lenders, dated of even date herewith, in the aggregate principal amount of
$5,000,000.00, and includes any amendment to or modification of any such note
and any promissory note given in extension or renewal of, or in substitution
for, such note.

 

“Third Person” means a Person not a party to this Agreement.

 

“Title Insurance Company” means a title insurance company acceptable to Agent in
its discretion and authorized under applicable Law to issue the Title Insurance
Policy.

 

“Title Insurance Policy” means a standard ALTA form title insurance policy with
respect to the Mortgaged Property and acceptable to Agent in its discretion,
dated the date of Closing, and issued by the Title Insurance Company to Agent
upon the Mortgaged Property, subject only to those exceptions and matters of
title acceptable to Agent, in Agent’s discretion.

 

“Unfunded Pension Liability” means, with respect to any Plan or Multiemployer
Plan of any applicable Person as of an applicable date, the excess of its
benefit liabilities under ERISA over the current value of its assets, determined
in accordance with the applicable assumptions used for funding under the
Internal Revenue Code for the applicable plan year.

 

“Unfunded Pension Liability Adjustment” means the amount by which the balance
sheet of Borrowers is affected on account of Borrowers’ Unfunded Pension
Liability arising under Borrowers’ Defined Benefit Pension Plan, including
balance sheet entries for long-term pension benefit liability, comprehensive
loss, intangible pension asset, and deferred tax.

 

“Unsecured Indebtedness” means Indebtedness not secured by any Lien.

 

“Unused Fee” means the fee payable by Borrowers to Agent for the account of the
Revolving Loan Lenders (based on each such Revolving Loan Lender’s Pro Rata
Share of the Revolving Loan Commitment at the applicable time) on each
Quarter-End, as determined by Agent as of such Quarter-End in an amount equal to
the product of (A) one-quarter of one percent (.25%) multiplied by (B) the daily
average of the Unused Revolving Loan Commitment during such Quarter.

 

“Unused Revolving Loan Commitment” means, with respect to (i) any Revolving Loan
Lender at any time, (a) such Revolving Loan Lender’s Revolving Loan Commitment
at such time, minus (b) the sum of (x) the aggregate principal amount of all
Revolving Loan Advances, Swing Line Loan Advances and Letter of Credit Advances
made by such Revolving Loan Lender and outstanding at such time, plus (y) such
Revolving Loan Lender’s Pro Rata Share of the aggregate Available Amount of all
Letters of Credit outstanding at such time; and (ii) the Revolving Loan Lenders
at any time (in the aggregate), (a) the Revolving Loan Lenders’ Revolving Loan
Commitments at such time, minus (b) the sum of (x) the aggregate principal
amount of all Revolving Loan

 

22

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

Advances, Swing Line Loan Advances and Letter of Credit Advances made by the
Revolving Loan Lenders and outstanding at such time, plus (y) the aggregate
Available Amount of all Letters of Credit outstanding at such time.

 

“Voting Power” means, with respect to any Person, the right to vote for the
election of the Governing Body of such Person under ordinary circumstances.

 

“Without Notice” means without demand of performance or other demand,
advertisement, or notice of any kind to or upon the applicable Person, except as
may be required under applicable Laws or by express provision of any Loan
Document.

 

“Year” means a period of time of twelve consecutive calendar months.

 

“Year-End” means the end of each Year.

 

“30-Day Adjusted LIBOR Rate” means, for each respective 30-Day LIBOR Rate
Interest Period, an interest rate equal to (A) with respect to the Revolving
Loan, the sum of (i) the applicable 30-Day LIBOR Rate, plus (ii) the Revolving
Loan Applicable Margin; and (B) with respect to the Term Loan, the sum of (i)
the applicable 30-Day LIBOR Rate, plus (ii) the Term Loan Applicable Margin.

 

“30-Day LIBOR Rate” means, as applicable to each respective 30-Day LIBOR Rate
Interest Period, a per annum rate of interest equal to the quotient obtained
(stated as an annual percentage rate rounded upward to the next higher 100th of
1%) by dividing (A) the London Interbank Offered Rate (“LIBOR”) for a period of
thirty (30) days as determined by Agent from Telerate (or such other source as
Agent may select if such a rate index is not available from Telerate), by (B)
1.00 minus any Reserve Requirement for the 30-Day LIBOR Rate Interest Period
(expressed as a decimal).

 

“30-Day LIBOR Rate Interest Period” means a period of one month from the first
day of the applicable 30-Day LIBOR Rate Interest Period to the date one month
thereafter.

 

“60-Day Adjusted LIBOR Rate” means, for each respective 60-Day LIBOR Rate
Interest Period, an interest rate equal to (A) with respect to the Revolving
Loan, the sum of (i) the applicable 60-Day LIBOR Rate, plus (ii) the Revolving
Loan Applicable Margin; and (B) with respect to the Term Loan, the sum of (i)
the applicable 60-Day LIBOR Rate, plus (ii) the Term Loan Applicable Margin.

 

“60-Day LIBOR Rate” means, as applicable to each respective 60-Day LIBOR Rate
Interest Period, a per annum rate of interest equal to the quotient obtained
(stated as an annual percentage rate rounded upward to the next higher 100th of
1%) by dividing (A) the London Interbank Offered Rate (“LIBOR”) for a period of
sixty (60) days as determined by Agent from Telerate (or such other source as
Agent may select if such a rate index is not available from Telerate), by (B)
1.00 minus any Reserve Requirement for the 60-Day LIBOR Rate Interest Period
(expressed as a decimal).

 

“60-Day LIBOR Rate Interest Period” means a period of two months from the first
day of the applicable 60-Day LIBOR Rate Interest Period to the date two months
thereafter, and with respect to which a 60-Day LIBOR Rate Notice has been given.

 

“60-Day LIBOR Rate Notice” means a written notice given to Agent by a Borrower’s
Representative providing for Borrower’s election for the outstanding principal
balance of a Note to bear interest at the applicable 60-Day Adjusted LIBOR Rate
for a 60-Day LIBOR Rate Interest Period, such notice to be given at least two
(2) Business Days prior to and specifying the date of the commencement of the
applicable 60-Day LIBOR Rate Interest Period; provided, however,

 

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that, except as may be waived by Agent in Agent’s discretion, in no event may
any 60-Day LIBOR Rate Interest Period begin until the expiration of any current
LIBOR Rate Interest Period and in no event may a 60-Day Adjusted LIBOR Rate be
elected at any time when the corresponding 60-Day LIBOR Rate Interest Period
would extend beyond the maturity date of the applicable Loan, and if any such
60-Day LIBOR Rate Notice is not timely received or is otherwise not properly
made, such 60-Day LIBOR Rate Notice, at Agent’s election, shall not be
effective.

 

“90-Day Adjusted LIBOR Rate” means, for each respective 90-Day LIBOR Rate
Interest Period, an interest rate equal to (A) with respect to the Revolving
Loan, the sum of (i) the applicable 90-Day LIBOR Rate, plus (ii) the Revolving
Loan Applicable Margin; and (B) with respect to the Term Loan, the sum of (i)
the applicable 90-Day LIBOR Rate, plus (ii) the Term Loan Applicable Margin.

 

“90-Day LIBOR Rate” means, as applicable to each respective 90-Day LIBOR Rate
Interest Period, a per annum rate of interest equal to the quotient obtained
(stated as an annual percentage rate rounded upward to the next higher 100th of
1%) by dividing (A) the London Interbank Offered Rate (“LIBOR”) for a period of
ninety (90) days as determined by Agent from Telerate (or such other source as
Agent may select if such a rate index is not available from Telerate), by (B)
1.00 minus any Reserve Requirement for the 90-Day LIBOR Rate Interest Period
(expressed as a decimal).

 

“90-Day LIBOR Rate Interest Period” means a period of three months from the
first day of the applicable 90-Day LIBOR Rate Interest Period to the date three
months thereafter, and with respect to which a 90-Day LIBOR Rate Notice has been
given.

 

“90-Day LIBOR Rate Notice” means a written notice given to Agent by a Borrower’s
Representative providing for Borrower’s election for the outstanding principal
balance of a Note to bear interest at the applicable 90-Day Adjusted LIBOR Rate
for a 90-Day LIBOR Rate Interest Period, such notice to be given at least two
(2) Business Days prior to and specifying the date of the commencement of the
applicable 90-Day LIBOR Rate Interest Period; provided, however, that, except as
may be waived by Agent in Agent’s discretion, in no event may any 90-Day LIBOR
Rate Interest Period begin until the expiration of any current LIBOR Rate
Interest Period and in no event may a 90-Day Adjusted LIBOR Rate be elected at
any time when the corresponding 90-Day LIBOR Rate Interest Period would extend
beyond the maturity date of the applicable Loan, and if any such 90-Day LIBOR
Rate Notice is not timely received or is otherwise not properly made, such
90-Day LIBOR Rate Notice, at Agent’s election, shall not be effective.

 

Accounting Terms. Accounting terms used and not otherwise defined in this
Agreement have the meanings determined by, and all calculations with respect to
accounting or financial matters unless otherwise provided herein shall be
computed in accordance with, Generally Accepted Accounting Principles.

 

UCC Terms. As used herein, unless the context clearly requires to the contrary,
terms not specifically defined herein shall have the same respective meanings as
are given to those terms in the Uniform Commercial Code as presently adopted and
in effect in the State of Delaware (except in cases and with respect to
Collateral when the perfection, the effect of perfection or nonperfection, and
the priority of a Lien in the Collateral is governed by another Jurisdiction, in
which case such capitalized words and phrases shall have the meanings attributed
to those terms under such other Jurisdiction).

 

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Construction of Terms. Whenever used in this Agreement, the singular number
shall include the plural and the plural the singular, pronouns of one gender
shall include all genders, use of the terms “herein”, “hereof”, and “hereunder”
shall be deemed to be references to this Agreement in its entirety unless
otherwise specifically provided, and the word “discretion” means in the sole and
absolute discretion of the applicable Person(s).

 

Computation of Time Periods. For purposes of computation of periods of time
hereunder, the word “from” means “from and including”, the words “to” and
“until” each mean “to but excluding”, and the word “through” means “through and
including”.

 

Reference to Borrowers and Borrower Parties. Any reference in this Agreement to
“Borrower” shall mean each and any Borrower, singularly, and any reference to
“Borrowers” shall mean all the Borrowers, collectively; and any reference in
this Agreement to “Borrower Party” shall mean each and any Borrower Party,
singularly, and any reference to “Borrower Parties” shall mean all the Borrower
Parties, collectively.

 

Reference to Lender and Lender Party. Any reference in this Agreement to
“Lender” or “Lender Party” shall mean, respectively, each and any Lender or
Lender Party, singularly, and any reference to “Lenders” or “Lender Parties”
shall mean, respectively, all Lenders or Lender Parties, collectively, and shall
include any Person becoming a Lender or a Lender Party pursuant to an Assignment
and Acceptance.

 

Reference to Revolving Loan Lenders. Any reference in this Agreement to
“Revolving Loan Lender” shall mean, respectively, each and any Revolving Loan
Lender, singularly, and any reference to “Revolving Loan Lenders” shall mean,
respectively, all Revolving Loan Lenders, collectively, and shall include any
Person becoming a Revolving Loan Lender pursuant to an Assignment and
Acceptance.

 

Reference to Term Loan Lenders. Any reference in this Agreement to “Term Loan
Lender” shall mean, respectively, each and any Term Loan Lender, singularly, and
any reference to “Term Loan Lenders” shall mean, respectively, all Term Loan
Lenders, collectively, and shall include any Person becoming a Term Loan Lender
pursuant to an Assignment and Acceptance.

 

Computation of Applicable Margins and Financial Covenants.

 

For purposes of computation of the Revolving Loan Applicable Margin, the Term
Loan Applicable Margin and the financial covenants set forth in this Agreement,
such computation shall be (i) determined by Agent as of each Quarter-End, based
on the Compliance Certificate most recently delivered by Borrowers in accordance
with the terms of this Agreement, (ii) determined on a Consolidated Basis, and
(iii) based on an Annualized Rolling Period, if applicable.

 

Any adjustment in the Revolving Loan Applicable Margin and the Term Loan
Applicable Margin shall be prospective and shall commence as of the tenth
Business Day after the delivery of the Compliance Certificate most recently
delivered by Borrowers until such time as the Revolving Loan Applicable Margin
and Term Loan Applicable Margin are subsequently adjusted pursuant to this
Agreement (provided that should Borrowers fail to so timely deliver a required
Compliance

 

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Certificate, Agent at its option may adjust the Revolving Loan Applicable Margin
and the Term Loan Applicable Margin to the highest applicable percentage as of
the date the Compliance Certificate was due to be delivered). Until the
Quarter-End following the Closing, the Revolving Loan Applicable Margin and the
Term Loan Applicable Margin shall be determined by reference to a Compliance
Certificate delivered by Borrowers at Closing.

 

THE REVOLVING LOAN

 

General Terms. Subject to the terms hereof, the Revolving Loan Lenders will lend
Borrowers, from time to time until the Revolving Loan Advancement Termination
Date, such amounts which shall not exceed, in the aggregate principal amount at
any one time outstanding, the Revolving Loan Commitment, less the Swing Line
Loan Advances outstanding at such time, less the Availability Reserves.

 

Each Revolving Loan Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Revolving Loan Advances to Borrowers from time to
time on any Business Day during the period from the date hereof until the
Revolving Loan Advancement Termination Date. Each Revolving Loan Borrowing shall
be in an aggregate amount of $100,000.00 or an integral multiple of $100,000.00
in excess thereof (other than a Revolving Loan Borrowing the proceeds of which
shall be used solely to repay or prepay in full outstanding Swing Line Loan
Advances and a Revolving Loan Borrowing in an amount equal to the entire Unused
Revolving Loan Commitment) and shall consist of Revolving Loan Advances made
simultaneously by the Revolving Loan Lenders Pro Rata.

 

Subject to the terms hereof, Borrowers may borrow, repay without penalty or
premium, and reborrow hereunder, from the date of this Agreement until the
Revolving Loan Advancement Termination Date. If at any time the unpaid principal
balance of the Revolving Loan exceeds the amount Borrowers could borrow at such
time as set forth herein, Borrowers shall forthwith (but no later than the end
of the Business Day following notice from Agent) pay or cause to be paid such
amounts to Agent for the account of the Revolving Loan Lenders (based on each
Revolving Loan Lender’s Pro Rata Share of the Revolving Loan Commitment at such
time), to the extent necessary to reduce the Revolving Loan to an amount which
Borrowers could borrow at that time.

 

Disbursement of the Revolving Loan.

 

In order to obtain a Revolving Loan Advance, a Borrower’s Representative shall
deliver a Notice of Borrowing to Agent not later than (i) with respect to
Revolving Loan Advances to be made at Closing, the time of Closing, and (ii)
with respect to any other Revolving Loan Advances, 10:30 a.m. (Birmingham,
Alabama time) on a date not less than two (2) Business Days prior to the date
such Revolving Loan Advance is sought.

 

Upon Agent’s receipt of a Notice of Borrowing, Agent shall deliver a Notice of
Funding to each Revolving Loan Lender at least one (1) Business Day prior to the
date the Revolving Loan Advance is to be made, and each Revolving Loan Lender
shall, before 10:30 A.M. (Birmingham, Alabama time) on the date of such
Revolving Loan Advance, make available to Agent at Agent’s Account, in same day
funds, such Lender’s Pro Rata Share of such Revolving Loan Advance.

 

After Agent’s receipt of such funds and upon fulfillment of any applicable
conditions set forth in this Agreement, Agent will make such funds available to
Borrowers by crediting Borrower’s

 

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deposit account with Agent; provided, however, that upon (i) written notice to
Agent from the Swing Line Lender given prior to the funding of the Revolving
Loan Advance, Agent shall first make a portion of such funds equal to the
aggregate principal amount of any Swing Line Loan Advances (plus interest
accrued and unpaid thereon) available to the Swing Line Lender (and, if
applicable, each other Lender that has made a Swing Line Loan Advance that
remains outstanding) for repayment of such Swing Line Loan Advances; and (ii)
written notice to Agent from Issuing Lender given prior to the funding of the
Revolving Loan Advance, Agent shall first make a portion of such funds equal to
the aggregate principal amount of any Letter of Credit Advances (plus interest
accrued and unpaid thereon) available to Issuing Lender (and, if applicable,
each other Lender that has made a Letter of Credit Advance that remains
outstanding) for repayment of such Letter of Credit Advances.

 

The Revolving Notes. Borrowers’ obligation to repay the Revolving Loan shall be
evidenced by the Revolving Notes.

 

Interest Rate. Interest on the Revolving Loan shall be calculated as follows:

 

During the entire term of the Revolving Notes, except during any applicable
60-Day LIBOR Rate Interest Period or 90-Day LIBOR Rate Interest Period, the
outstanding principal balance of the Revolving Notes shall bear interest at the
applicable 30-Day Adjusted LIBOR Rate for each applicable 30-Day LIBOR Rate
Interest Period.

 

A Borrower’s Representative may from time to time deliver to Agent (i) a 60-Day
LIBOR Rate Notice, in which case the outstanding principal balance of the
Revolving Notes shall bear interest at the applicable 60-Day Adjusted LIBOR Rate
during the applicable 60-Day LIBOR Rate Interest Period, or (ii) a 90-Day LIBOR
Rate Notice, in which case the outstanding principal balance of the Revolving
Notes shall bear interest at the applicable 90-Day Adjusted LIBOR Rate during
the applicable 90-Day LIBOR Rate Interest Period. Following the expiration of
any applicable LIBOR Rate Interest Period, if a Borrower’s Representative shall
not have timely and properly delivered a LIBOR Rate Notice for a LIBOR Rate
Interest Period to commence as of the expiration of the applicable expiring
LIBOR Rate Interest Period, then the outstanding principal balance of the
Revolving Notes shall automatically bear interest at the 30-Day Adjusted LIBOR
Rate until the commencement of the next 60-Day LIBOR Rate Interest Period or
90-Day LIBOR Rate Interest Period, if any.

 

Payments of Principal and Interest. Principal and interest on the Revolving Loan
shall be payable as follows:

 

On the first Payment Due Date following the date of the Revolving Notes, and on
each successive Payment Due Date thereafter until the entire indebtedness
evidenced by the Revolving Notes is paid in full, Borrowers shall pay to Agent
for the account of the Revolving Loan Lenders (based on each Revolving Loan
Lender’s Pro Rata Share of the Revolving Loan Commitment at such time) all
accrued and unpaid interest on the outstanding principal balance of the
Revolving Notes.

 

If not earlier demanded pursuant to Section 11.3 hereof, the outstanding
principal balance of the Revolving Loan, together with all accrued and unpaid
interest thereon, shall be due and payable to Agent for the account of the
Revolving Loan Lenders (based on each Revolving Loan Lender’s Pro Rata Share at
such time) on the Revolving Loan Maturity Date.

 

Use of Proceeds of Revolving Loan. The proceeds of the Revolving Loan shall be
used for

 

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general corporate purposes, including working capital needs of Borrowers, to pay
fees and expenses associated with the closing of the Loans, and to repay Swing
Line Loan Advances.

 

THE SWING LINE LOAN.

 

General Terms.

 

Subject to the terms hereof, the Swing Line Lender will lend Borrowers, from
time to time until the Revolving Loan Advancement Termination Date, such amounts
which shall not exceed, in the aggregate principal amount at any one time
outstanding, the Swing Line Loan Commitment.

 

Subject to the terms hereof, Borrowers may borrow, repay without penalty or
premium, and reborrow hereunder, from the date of this Agreement until the
Revolving Loan Advancement Termination Date. If at any time the unpaid principal
balance of the Swing Line Loan exceeds the amount Borrowers could borrow at such
time as set forth herein, Borrowers shall immediately and Without Notice pay or
cause to be paid such amounts to the Swing Line Lender, to the extent necessary
to reduce the Swing Line Loan to an amount which Borrowers could borrow at that
time.

 

Disbursement of the Swing Line Loan.

 

Swing Line Lender will credit or pay the proceeds of each Swing Line Loan
Advance to Borrower’s deposit account with Swing Line Lender or in such other
manner as Borrowers and Swing Line Lender may agree.

 

Subject to the terms of any other agreement among Swing Line Lender and
Borrowers to the contrary (including any cash management agreement), in order to
obtain a Swing Line Loan Advance, a Borrower’s Representative shall deliver a
Notice of Borrowing to Agent and Swing Line Lender not later than 10:30 a.m.
(Birmingham, Alabama time) on the Business Day such Swing Line Loan Advance is
sought. Upon Swing Line Lender’s receipt of such Notice of Borrowing and upon
satisfaction of the terms and conditions of this Agreement, Swing Line Lender
will make such funds available to Borrowers as provided for above.
Notwithstanding anything contained herein to the contrary, Borrowers shall not
be entitled to receive nor shall Swing Line Lender be required to disburse any
Swing Line Loan Advance after the Revolving Loan Advancement Termination Date.

 

Upon written demand by Swing Line Lender, with a copy of such demand to Agent,
each Revolving Loan Lender shall purchase from Swing Line Lender, and Swing Line
Lender shall sell and assign to each such Revolving Loan Lender, such Revolving
Loan Lender’s Pro Rata Share of any outstanding Swing Line Loan Advance as so
demanded by Agent, by making available for the account of the Swing Line Lender,
by deposit to Agent’s Account, in same day funds, an amount equal to the portion
of the outstanding principal amount of such Swing Line Loan Advance to be
purchased by such Revolving Loan Lender, it being agreed by Lender Parties that
any Lender shall have the right to request Swing Line Lender to give such
written demand not more than twice in any consecutive thirty-day period.
Borrowers hereby agree to each such sale and assignment. Each Revolving Loan
Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line Loan
Advance on (i) the Business Day on which demand therefor is made by Swing Line
Lender, provided that notice of such demand is given not later than 1:00 P.M.
(Birmingham, Alabama time) on such Business Day or (ii) the first Business Day
next succeeding

 

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such demand if notice of such demand is given after such time. Upon any such
assignment by Swing Line Lender to any Revolving Loan Lender of a portion of a
Swing Line Loan Advance, Swing Line Lender represents and warrants to such
Revolving Loan Lender that Swing Line Lender is the legal and beneficial owner
of such interest being assigned by it, but makes no other representation or
warranty and assumes no responsibility with respect to such Swing Line Loan
Advance, the Loan Documents or any Revolving Loan Lender. If and to the extent
that any Revolving Loan Lender shall not have so made the amount of such Swing
Line Loan Advance available to Agent, such Revolving Loan Lender agrees to pay
to Agent forthwith on demand such amount together with interest thereon, for
each day from the date of demand by Swing Line Lender until the date such amount
is paid to Agent, at the Federal Funds Rate. If such Revolving Loan Lender shall
pay to Agent such amount for the account of Swing Line Lender on any Business
Day, such amount so paid in respect of principal shall constitute a Swing Line
Loan Advance made by such Revolving Loan Lender on such Business Day for
purposes of this Agreement, and the outstanding principal amount of the Swing
Line Loan Advance made by Swing Line Lender shall be reduced by such amount on
such Business Day.

 

The Swing Line Note. Borrowers’ obligation to repay the Swing Line Loan shall be
evidenced by the Swing Line Note.

 

Interest Rate. During the entire term of the Swing Line Note, the outstanding
principal balance of the Swing Line Note shall bear interest at the same
Interest Rate as the outstanding principal balance of the Revolving Note.

 

Payments of Principal and Interest. If not earlier demanded by Swing Line Lender
or pursuant to Section 11.3 hereof, the outstanding principal balance of the
Swing Line Loan, together with all accrued and unpaid interest thereon, shall be
due and payable to Agent for the account of Swing Line Lender (and each other
Lender that has made a Swing Line Loan Advance which remains outstanding) on the
Swing Line Loan Maturity Date, and Borrowers shall repay to Agent for the
account of the Swing Line Lender (and each other Lender that has made a Swing
Line Loan Advance which remains outstanding) the outstanding principal amount of
each Swing Line Loan Advance made by each of them upon demand of Agent.

 

Use of Proceeds of Swing Line Loan. The proceeds of the Swing Line Loan shall be
used for general corporate purposes, including working capital needs of
Borrowers, and to pay fees and expenses associated with the closing of the
Loans.

 

THE TERM LOAN.

 

General Terms. Subject to the terms hereof, the Term Loan Lenders will lend
Borrowers in a single Advance at the Closing an amount not to exceed the Term
Loan Commitment, such Term Loan Advance to be made simultaneously by the Term
Loan Lenders Pro Rata.

 

The Term Notes. Borrowers’ obligation to repay the Term Loan Advances shall be
evidenced by the Term Notes.

 

Interest Rate. Interest on the Term Loan shall be calculated as follows:

 

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During the entire term of the Term Notes, except during any applicable 60-Day
LIBOR Rate Interest Period or 90-Day LIBOR Rate Interest Period, the outstanding
principal balance of the Term Notes shall bear interest at the applicable 30-Day
Adjusted LIBOR Rate for each applicable 30-Day LIBOR Rate Interest Period.

 

A Borrower’s Representative may from time to time deliver to Agent (i) a 60-Day
LIBOR Rate Notice, in which case the outstanding principal balance of the Term
Notes shall bear interest at the applicable 60-Day Adjusted LIBOR Rate during
the applicable 60-Day LIBOR Rate Interest Period, or (ii) a 90-Day LIBOR Rate
Notice, in which case the outstanding principal balance of the Term Notes shall
bear interest at the applicable 90-Day Adjusted LIBOR Rate during the applicable
90-Day LIBOR Rate Interest Period. Following the expiration of any applicable
LIBOR Rate Interest Period, if a Borrower’s Representative shall not have timely
and properly delivered a LIBOR Rate Notice for a LIBOR Rate Interest Period to
commence as of the expiration of the applicable expiring LIBOR Rate Interest
Period, then the outstanding principal balance of the Term Notes shall
automatically bear interest at the 30-Day Adjusted LIBOR Rate until the
commencement of the next 60-Day LIBOR Rate Interest Period or 90-Day LIBOR Rate
Interest Period, if any.

 

Payments of Principal and Interest. Principal and interest on the Term Loan
shall be payable as follows:

 

On the first Payment Due Date following the date of the Term Notes, and on each
successive Payment Due Date thereafter until the entire indebtedness evidenced
by the Term Notes is paid in full, Borrowers shall pay to Agent for the account
of the Term Loan Lenders (based on each Term Loan Lender’s Pro Rata Share) a
principal payment of $83,333.33, plus all accrued and unpaid interest thereon.

 

If not earlier demanded pursuant to Section 11.3 hereof, the outstanding
principal balance of the Term Loan, together with all accrued and unpaid
interest thereon, shall be due and payable to Agent for the account of the Term
Loan Lenders (based on each Term Loan Lender’s Pro Rata Share) on the Term Loan
Maturity Date.

 

Use of Proceeds of Term Loan. The proceeds of the Term Loan shall be used to
refinance existing term and other debt of Borrowers.

 

LETTERS OF CREDIT

 

General Terms. Subject to the terms hereof, Borrower may request Issuing Lender,
on the terms and conditions hereinafter set forth, to issue, and Issuing Lender
shall issue, Letters of Credit for the account of Borrower from time to time on
any Business Day in an aggregate Available Amount for all Letters of Credit not
to exceed at any time the Letter of Credit Commitment on such Business Day. No
Letter of Credit shall have an expiration date (including all rights of
Borrowers or the beneficiary to require renewal) later than the earlier of (i)
60 days before the Revolving Loan Maturity Date, or (ii) one year after the date
of issuance thereof.

 

Issuance of a Letter of Credit. In order for a Letter of Credit to be issued, a
Borrower’s Representative shall deliver a Notice of Issuance to Agent and
Issuing Lender not later than 10:30 a.m. (Birmingham, Alabama time) on a date
not less than three (3) Business Days prior to the date the issuance of such
Letter of Credit is sought, such Notice of Issuance to be accompanied by the

 

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form of the Letter of Credit to be issued. If (i) the requested form of such
Letter of Credit is acceptable to Issuing Lender in its discretion, and, (ii) if
required by Agent and Issuing Lender, upon execution and delivery of a Letter of
Credit Agreement in form and substance satisfactory to Agent and Issuing Lender,
Issuing Lender will, subject to the other terms and conditions hereof, issue
such Letter of Credit. In the event and to the extent that the provisions of any
Letter of Credit Agreement shall conflict with this Agreement, the provisions of
this Agreement shall govern.

 

Reimbursement and Other Payments. Borrower agrees to pay to Agent immediately
upon demand of Agent or Issuing Lender for reimbursement to Issuing Lender (i)
at the time when Issuing Lender shall pay any draft presented under any Letter
of Credit, a sum equal to the amount so paid under such Letter of Credit, plus
(ii) interest at the Default Rate on any amount remaining unpaid by Borrower to
Issuing Lender under clause (i) above from such time until payment in full.

 

Upon an Event of Default. In addition to any rights and remedies the Lender
Parties may otherwise have under this Agreement, if any Event of Default shall
have occurred, Agent or Issuing Lender may in their discretion (i) by notice to
Borrower, declare the obligation of Issuing Lender to issue any Letter of Credit
to be terminated, whereupon the obligation of Issuing Lender to issue any Letter
of Credit shall forthwith terminate, and (ii) make demand upon Borrower to, and
forthwith (but no later than the end of the Business Day following notice from
Agent) Borrower will pay to Agent in same day funds at Agent’s office designated
in such demand, for deposit in a special Cash Collateral Account to be
maintained at such office of Agent, an amount equal to the maximum amount then
available to be drawn under any Letter of Credit. The Cash Collateral Account
shall be in the name of Borrower, but under the sole dominion and control of
Agent, and shall be held and disbursed as follows:

 

Agent may from time to time invest funds on deposit in the Cash Collateral
Account, reinvest proceeds of any such investments which may mature or be sold,
and invest interest or other income received from any such investments, and all
such investments and reinvestments shall, for purposes of this Agreement,
constitute part of the funds held in the Cash Collateral Account.

 

If at any time Agent determines that any funds held in the Cash Collateral
Account are subject to any right or claim of any Person other than claims
arising under this Agreement and/or that the total amount of such funds is less
than the maximum amount at such time available to be drawn under the Letters of
Credit, Borrower will, forthwith upon demand by the Agent, pay to the Agent, as
additional funds to be deposited and held in the Cash Collateral Account, an
amount equal to the excess of (i) such maximum amount at such time available to
be drawn under the Letters of Credit over (ii) the total amount of funds, if
any, then held in the Cash Collateral Account which Agent determines to be free
and clear of any such right and claim.

 

Borrower hereby assigns, transfers and sets over, and grants to Agent a Lien on
and upon, the Cash Collateral Account, including all funds held in the Cash
Collateral Account from time to time and all proceeds thereof, as security for
the Obligations. Borrower agrees that, to the extent notice of sale of any
securities shall be required by Law, at least five Business Days’ Notice to
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. Agent may
adjourn any public or private sale from

 

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time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it will so
adjourned.

 

Agent may, at any time or from time to time, apply funds from time to time held
in the Cash Collateral Account to the payment of (i) any Reimbursement
Obligation and (ii) upon termination of all Letters of Credit and payment in
full of all the Reimbursement Obligation, in such order as Agent may elect, as
shall have become or shall become due and payable by Borrower to Agent under
this Agreement.

 

Neither Borrower nor any Person claiming on behalf of or through Borrower shall
have any right to withdraw any of the funds held in the Cash Collateral Account
after and during the continuance of any Default.

 

No Liability of Issuing Lender. Borrower assumes all risks of the acts or
omissions of any beneficiary or transferee of any Letter of Credit with respect
to its use of such Letter of Credit. Neither Issuing Lender nor any of its
officers or directors shall be liable or responsible for (a) the use that may be
made of any Letter of Credit or any acts or omissions of any beneficiary or
transferee in connection therewith; (b) the validity, sufficiency or genuineness
of documents, or of any endorsement thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by Issuing Lender against presentation of documents that do not comply
with the terms of a Letter of Credit, including failure of any documents to bear
any reference or adequate reference to the Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit. In furtherance and not in limitation of the foregoing, Issuing Lender
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.

 

Indemnification. In addition to any other indemnification obligation of Borrower
under this Agreement or any other Loan Document, Borrower hereby agrees to
indemnify and hold the Lender Parties harmless from and against any and all
Indemnified Losses which the Lender Parties may incur or which may be claimed
against the Lender Parties by any Person by reason of or in connection with the
execution and delivery or transfer of, or payment or failure to make lawful
payment under, any Letter of Credit, except Borrower shall not be required to
indemnify Issuing Lender for any action taken or omitted to be taken by Issuing
Lender if the same constitutes gross negligence or willful misconduct on the
part of Issuing Lender.

 

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Pro Rata Participation, Drawing and Reimbursement.

 

Without any further action on the part of any Lender Party, effective
immediately upon the issuance of any Letter of Credit issued under this
Agreement, Issuing Lender will be deemed to have sold, transferred, and assigned
to each Revolving Loan Lender at such time, and each Revolving Loan Lender will
have been deemed to have purchased and accepted from Issuing Lender, such
Revolving Loan Lender’s Pro Rata Share of Issuing Lender’s interest in the
applicable Letter of Credit (such Pro Rata Share to be determined without taking
into account such Revolving Loan Lender’s obligation to purchase as provided in
this Section 5.7), which purchase shall obligate each Revolving Loan Lender to
purchase from Issuing Lender such Revolving Loan Lender’s Pro Rata Share of any
Letter of Credit Advance in accordance with the provisions of Section 5.7(C)
below, and upon such purchase, shall entitle each Revolving Loan Lender, in
accordance with and subject to the provisions of this Agreement, to receive such
Revolving Loan Lender’s Pro Rata Share of any and all payments made by Borrower
with respect to the applicable Letter of Credit and whether required hereunder
or under any Letter of Credit Agreement.

 

The payment by Issuing Lender of a draft drawn under any Letter of Credit shall
constitute for all purposes of this Agreement the making by Issuing Lender of a
Letter of Credit Advance in the amount of such draft and shall bear interest at
the Default Rate from the date of payment until the date of reimbursement by
Borrower as provided hereunder.

 

Upon written demand by Issuing Lender, with a copy of such demand to the Agent,
each Revolving Loan Lender shall purchase from Issuing Lender, and Issuing
Lender shall sell and assign to each such Revolving Loan Lender, such Revolving
Loan Lender’s Pro Rata Share of any outstanding Letter of Credit Advance as of
the date of such purchase, by making available to Agent for the account of
Issuing Lender, by deposit to the Agent’s Account, in same day funds, an amount
equal to the portion of the outstanding principal amount of such Letter of
Credit Advance to be purchased by such Revolving Loan Lender. Promptly after
receipt thereof, Agent shall transfer such funds to Issuing Lender. Borrower
hereby agrees to each such sale and assignment. Each Revolving Loan Lender
agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance
on (i) the Business Day on which demand therefor is made by Issuing Lender which
made such Advance, provided notice of such demand is given not later than 11:00
a.m. (Birmingham, Alabama time) on such Business Day or (ii) the first Business
Day next succeeding such demand if notice of such demand is given after such
time. Upon any such assignment by Issuing Lender to any Revolving Loan Lender of
a portion of a Letter of Credit Advance, Issuing Lender represents and warrants
to such Revolving Loan Lender that Issuing Lender is the legal and beneficial
owner of such interest being assigned by it, free and clear of any Liens, but
makes no other representation or warranty and assumes no responsibility with
respect to such Letter of Credit Advance, the Loan Documents or any Lender
Party. If and to the extent that any Revolving Loan Lender shall not have so
made the amount of such Letter of Credit Advance available to the Agent, such
Revolving Loan Lender agrees to pay to the Agent forthwith on demand of Agent
such amount together with interest thereon, for each day from the date of demand
by Issuing Lender until the date such amount is paid to the Agent, at the
Federal Funds Rate for its account or the account of Issuing Lender, as
applicable. If such Revolving Loan Lender shall pay to Agent such amount for the
account of Issuing Lender on any Business Day, such amount so paid in respect of
principal shall constitute a Letter of Credit Advance made by

 

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such Revolving Loan Lender on such Business Day for purposes of this Agreement,
and the outstanding principal amount of the Letter of Credit Advance made by
Issuing Lender shall be reduced by such amount on such Business Day.

 

Failure to Purchase Pro Rata Share of Letter of Credit Advances. The failure of
any Revolving Loan Lender to purchase its Pro Rata Share of any Letter of Credit
Advance as required in Section 5.7 shall not relieve any other Revolving Loan
Lender of its obligation hereunder to purchase its Pro Rata Share of such Letter
of Credit Advance, but no Revolving Loan Lender shall be responsible for the
failure of any other Revolving Loan Lender to purchase its Pro Rata Share of any
Letter of Credit Advance.

 

Letter of Credit Reports. Issuing Lender shall furnish to Agent and each Lender
on request (such request to be made not more frequently than monthly) a written
report summarizing issuance and expiration dates of the Letters of Credit issued
by Issuing Lender and drawings under all Letters of Credit.

 

PAYMENTS, ADDITIONAL COSTS, ETC.

 

Payment to Agent

 

All monies payable to Agent under this Agreement or under the Notes shall be
paid directly to Agent in immediately available funds at the Place for Payment.
If Agent shall send Borrower statements of amounts due hereunder, such
statements shall be considered correct and conclusively binding on Borrower
unless Borrower notifies Agent to the contrary within thirty (30) days of its
receipt of any statement which it deems to be incorrect. Alternatively, at its
discretion, Agent may charge against any deposit account of Borrower all or any
part of any amount owed by Borrower hereunder.

 

All payments to be made by Borrower hereunder will be made to Agent not later
than 1:00 p.m. at the Place for Payment. Payments received after 1:00 p.m. at
the Place for Payment shall be deemed to be payments made prior to 1:00 p.m. at
the Place for Payment on the next succeeding Business Day. Borrower hereby
authorizes Agent to charge its accounts with Agent in order to cause timely
payment of amounts due hereunder to be made.

 

At the time of making each such payment, Borrower shall, subject to the other
terms and conditions of this Agreement, specify to Agent the Loan or other
obligation of Borrower hereunder to which such payment is to be applied. In the
event that Borrower fails to so specify the relevant Loan or if an Event of
Default shall have occurred and be continuing, Agent may apply such payments as
it may determine in its discretion.

 

Late Payments. If any scheduled payment, whether principal, interest or
principal and interest, is late ten (10) days or more, Borrower agrees to pay a
late charge equal to five percent (5%) of the amount of the payment which is
late, but not more than the maximum amount allowed by applicable Laws. The
foregoing provision shall not be deemed to excuse a late payment or be deemed a
waiver of any other rights Lender Parties may have under this Agreement,
including, subject to the terms hereof, the right to declare the entire unpaid
principal and interest on all Loans immediately due and payable.

 

Prepayment. Subject to any contrary provision herein or in any other Loan
Document, Borrower

 

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may prepay or cause to be prepaid the principal of any Loan in whole or, from
time to time, in part, without premium or penalty. All partial prepayments,
whether voluntary or mandatory, shall be applied against principal and interest
as Agent may determine in its discretion, provided that no prepayment shall
entitle Borrower to cease making any payment as otherwise scheduled hereunder.

 

Default Rate. Notwithstanding any provision herein or in any other Loan Document
to the contrary, upon the occurrence and during the continuance of an Event of
Default, the Interest Rate payable on the Loans shall be the Default Rate.

 

No Setoff or Deduction. All payments of principal of and interest on the Loans
and other amounts payable by Borrower hereunder shall be made by Borrower
without setoff or counterclaim, and, subject to the next succeeding sentence,
free and clear of, and without deduction or withholding for, or on account of,
any present or future taxes, levies, imposts, duties, fees, assessments, or
other charges of whatever nature, imposed by any Governmental Authority, or by
any department, agency or other political subdivision or taxing authority. If
any such taxes, levies, imposts, duties, fees, assessments or other charges are
imposed, Borrower will pay such additional amounts as may be necessary so that
payment of principal of and interest on the Loans and other amounts payable
hereunder, after withholding or deduction for or on account thereof, will not be
less than any amount provided to be paid hereunder and, in any such case,
Borrower will furnish to Agent certified copies of all tax receipts evidencing
the payment of such amounts within 30 days after the date any such payment is
due pursuant to applicable Laws.

 

Payment on Non-Business Day; Payment Computations. Except as otherwise provided
in this Agreement to the contrary, whenever any installment of principal of, or
interest on, the Loans or other amount due hereunder becomes due and payable on
a day which is not a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day and, in the case of any installment of principal,
interest shall be payable thereon at the rate per annum determined in accordance
with this Agreement during such extension.

 

Indemnification. If Borrower makes any payment of principal with respect to any
Loan on any other date than the last day of an interest period applicable
thereto, or if Borrower fails to borrow any Loan after notice has been given to
Agent in accordance with this Agreement, or if Borrower fails to make any
payment of principal or interest in respect of any Loan when due, Borrower shall
reimburse Agent on demand for any resulting loss or expense incurred by Agent,
including without limitation any loss incurred in obtaining, liquidating or
employing deposits from third parties, whether or not Agent shall have funded or
committed to fund such loan. A statement as to the amount of such loss or
expense, prepared in good faith and in reasonable detail by Agent and submitted
by Agent to Borrower, shall be conclusive and binding for all purposes absent
manifest error in computation. Calculation of all amounts payable to Agent under
this Section shall be made as though Agent shall have actually funded or
committed to fund such Loan through the purchase of an underlying deposit in an
amount equal to the amount of such Loan in the relevant market and having a
maturity comparable to the related interest period and through the transfer of
such deposit to a domestic office of Agent in the United States; provided,
however, that Agent may fund such Loan in any manner it sees fit and the
foregoing assumption shall be

 

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utilized only for the purpose of calculation of amounts payable under this
Section.

 

360-Day Year. All interest payable under the Notes shall be calculated on the
basis of a 360-day year by multiplying the outstanding principal amount by the
applicable per annum rate, multiplying the product thereof by the actual number
of days elapsed, and dividing the product so obtained by 360.

 

No Requirement to Actually Obtain Funds. Notwithstanding the fact that the
Interest Rate pursuant to the Loans may be calculated based upon Lender’s cost
of funds, Borrower agrees that Lender shall not be required actually to obtain
funds from such source at any time.

 

Usury Limitation. If, at any time, the Interest Rate payable on any Loan shall
be deemed by any competent court of law or any Governmental Authority to exceed
the maximum rate of interest permitted by any applicable Laws, then, for such
time as the Interest Rate would be deemed excessive, its application shall be
suspended and there shall be charged instead the maximum rate of interest
permissible under such Laws, and any excess interest actually collected by
Lender shall be credited as a partial prepayment of principal.

 

CONDITIONS PRECEDENT

 

The obligation of Lenders to make the Loans and any Advance hereunder, and the
obligation of Issuing Lender to issue the Letters of Credit, is subject to the
following conditions precedent:

 

Documents Required for the Closing. Prior to or concurrently with the Closing,
the following instruments and documents, duly executed by all proper Persons and
in form and substance satisfactory to Agent and Lenders, shall have been
delivered to Agent:

 

This Agreement;

 

The Notes;

 

The Mortgage, together with the following:

 

evidence that the Mortgage has been duly recorded in all filing or recording
offices that Agent may deem necessary or desirable in order to create a valid
Lien on the Mortgaged Property in favor of Agent subject to no other Liens
except the SouthTrust Bond Issue Letter of Credit Mortgage, and that all filing
and recording taxes and fees have been paid;

 

the Title Insurance Policy, with the Required Endorsements and in an amount
acceptable to Agent, issued, coinsured and reinsured by the Title Insurance
Company, insuring the Mortgage to be a valid Lien on the Mortgaged Property,
free and clear of all Liens (including, but not limited to, mechanics’ and
materialmen’s Liens), excepting only Permitted Liens and other Liens approved by
Agent in its discretion, and providing for such other affirmative insurance and
such coinsurance and direct access reinsurance as Agent may deem necessary or
desirable;

 

such consents and agreements of lessors, lessees, and other Third Parties, and
such estoppel letters and other confirmations, as Agent may deem necessary or
desirable;

 

evidence that all other action that Agent may deem necessary or desirable in
order to create a valid Lien on the Mortgaged Property has been taken;

 

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The Assignment of Rents, together with evidence that the Assignment of Rents has
been duly recorded in all filing or recording offices that Agent may deem
necessary or desirable in order to create a valid Lien on the property described
therein in favor of Agent and that all filing and recording taxes and fees have
been paid;

 

The Borrower’s Closing Affidavits;

 

The Financing Statements, together with evidence that the Financing Statements
have been duly recorded in all filing or recording offices that Agent may deem
necessary or desirable in order to create a valid Lien on the Collateral
described therein, and that all filing and recording taxes and fees have been
paid;

 

With respect to each Borrower Party (other than a Borrower Party that is an
individual), a certificate of an officer or other representative acceptable to
Agent dated as of the date of this Agreement, certifying as to the incumbency
and signatures of the representative(s) of such Borrower Party signing, as
applicable, this Agreement and each of the other Loan Documents, and each other
document to be delivered pursuant hereto, together with the following documents
attached thereto:

 

A copy of the resolutions of such applicable Person’s Governing Body authorizing
the execution, delivery and performance of this Agreement, each of the Loan
Documents, and each other document to be delivered pursuant hereto, as
applicable;

 

A copy, certified as of the most recent date practicable by the secretary of
state (or similar Governmental Authority) of the state, province, or other
Jurisdiction where such Person is organized, of such Person’s Organizational
Documents filed with such secretary of state (or similar Governmental
Authority);

 

A copy of such Person’s other Organizational Documents;

 

A certificate, as of the most recent date practicable, of the secretary of state
(or similar appropriate Governmental Authority) and department of revenue or
taxation (or similar appropriate Governmental Authority) of each Jurisdiction in
which each Borrower Party (other than a Borrower Party that is an individual) is
organized as to the existence and good standing of each such Person within such
Jurisdiction (unless such Governmental Authorities do not issue such
certificates of existence and/or good standing), and a certificate, as of the
most recent date practicable, of the secretary of state (or similar appropriate
Governmental Authority) of each state where any of the Collateral is located as
to the qualification and good standing of each Borrower Party (other than a
Borrower Party that is an individual) as a foreign entity doing business in each
such state (unless such Governmental Authorities do not issue such certificates
of existence and/or good standing);

 

Written opinions of counsel to Borrower Parties, dated as of the date of Closing
and addressed to Lender Parties, in form and substance acceptable to the Lender
Parties;

 

The Most Recent Financial Statements;

 

Letters and/or certificates, in form and substance satisfactory to Agent,
attesting to the Solvency of Borrower and after giving effect to the
transactions contemplated hereby, from the chief financial officer of Borrower;

 

UCC-11 reports showing no Liens superior to the Agent’s Lien, except for the
Permitted Liens;

 

Evidence satisfactory to the Lender Parties that Borrower has obtained all
insurance policies as required under this Agreement and/or any of the other Loan
Documents, together with evidence satisfactory to the Lender Parties that all
premiums therefor have been paid and that all such

 

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policies are in full force and effect;

 

An ALTA form survey of the Mortgaged Property dated no more than thirty (30)
days before the Closing, certified to the Lender Parties and the Title Insurance
Company in a manner satisfactory to Agent by a land surveyor duly registered and
licensed in the state in which the Mortgaged Property is located and acceptable
to Agent, showing all buildings and other improvements, any off-site
improvements, the location of any easements, parking spaces, rights of way,
building set-back lines and other dimensional regulations and the absence of
encroachments, either by such improvements or on to such property, and other
defects, other than encroachments and other defects acceptable to Agent, and
either (i) evidence satisfactory to the Lender Parties that none of the
Mortgaged Property is located in a flood hazard area, or (ii) a flood insurance
policy satisfactory to Agent;

 

An appraisal of the Collateral, made at Borrower’s expense, which must be by an
appraiser engaged and approved by Agent, and must be in form and substance
satisfactory to the Lender Parties and meeting the requirements of the Lender
Parties;

 

An environmental/hazardous substances survey and report with respect to the
Mortgaged Property, as approved by the Lender Parties; and

 

Receipt and approval by Agent of any other items reasonably required to be
provided to Agent, and not otherwise set forth above.

 

Certain Events Required for Closing and for all Advances. At the time of the
Closing and at the time of each Advance, Agent shall be satisfied that:

 

No Default shall have occurred or be continuing;

 

No Material Adverse Change shall have occurred;

 

All of the Loan Documents shall have remained in full force and effect, and no
Borrower Party shall have questioned or challenged the enforceability of any
provision of any of the Loan Documents;

 

Borrower shall have paid all fees, expenses, costs, and other amounts then owing
to Lender Parties, including, but not limited to the Fees;

 

All Indebtedness to be prepaid, redeemed or defeased with the proceeds of any
Advance shall have been satisfied and extinguished;

 

There shall exist no action, suit, investigation, litigation or proceeding
affecting any Borrower Party pending or threatened before any court,
governmental agency or arbitrator that (i) could reasonably be expected to have
a Material Adverse Effect or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any other Loan Document or the consummation
of the transactions contemplated hereby;

 

All Governmental Approvals necessary in connection with the Loan Documents and
the transactions contemplated hereby and thereby shall have been obtained
(without the imposition of any conditions that are not acceptable to the Lender
Parties) and shall remain in effect other than such Governmental Approvals the
failure to obtain which shall not affect the enforceability, validity or binding
effect of any of the Loan Documents; all applicable waiting periods shall have
expired without any action being taken by any competent authority; and no Law
shall be applicable in the judgment of Agent that restrains, prevents or imposes
materially adverse conditions upon the Loan Documents and the transactions
contemplated hereby and thereby;

 

Borrower will be able to meet its obligations under all Plans, that the Plans
are, in all material respects, funded in accordance with the minimum statutory
requirements, that no material

 

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“reportable event” (as defined in ERISA, but excluding events for which
reporting has been waived) has occurred as to any such Plan and that no
termination of, or withdrawal from, any such Plan has occurred or is
contemplated that could result in a material liability;

 

There shall have been delivered to Agent evidence of insurance naming Agent as
insured and loss payee (as applicable) with such responsible and reputable
insurance companies or associations, and in such amounts and covering such
risks, as is satisfactory to Agent or as otherwise required under any Loan
Document; and

 

There shall have been delivered to Agent the Collateral Reports and Compliance
Certificates as required under this Agreement and reflecting compliance with the
terms of this Agreement.

 

Legal Matters. At the time of Closing, all legal matters incidental thereto
shall be reasonably satisfactory to Burr & Forman LLP, counsel to Agent and
reasonably satisfactory to the counsel to the Lenders; and at the time of each
disbursement of each Advance, all legal matters incidental thereto shall be
reasonably satisfactory to Burr & Forman LLP, counsel to Agent (it being
acknowledged and agreed that Agent has no intention of consulting Burr & Forman
LLP with respect to Advances after the Closing except in cases where Agent has
an issue with respect to whether or not the Advance is being made in compliance
with the terms and conditions of this Agreement).

 

Election to Make Advances Prior to Satisfaction of Conditions Precedent. In the
event Lender Party, at its option, elects to make one or more Advances prior to
receipt and approval of all items required by this Article, such election shall
not constitute any commitment or agreement of Lender Party to make any
subsequent Advance until all items required by this Article have been delivered.

 

COLLATERAL SECURITY

 

Grant of Lien and Security Interest.

 

As security for the prompt satisfaction of all Obligations, Borrower hereby
assigns, transfers, and sets over to Agent, as agent for Lenders hereunder, all
of Borrower’s right, title and interest in and to, and grants Agent, as agent
for Lenders hereunder, a Lien on, upon and in the Collateral.

 

No submission by Borrower to Agent of a schedule or other particular
identification of Collateral shall be necessary to vest in Agent security title
to and a security interest in each and every item of Collateral now existing or
hereafter created and acquired, but rather such title and security interest
shall vest in Agent immediately upon the creation or acquisition or any item of
Collateral hereafter created or acquired, without the necessity for any other or
further action by Borrower or by Agent.

 

Maintenance of Lien.

 

In connection with the Agent’s Lien, Borrower will:

 

Execute and cause to be executed such documents and instruments, including
amendments to the Security Documents and Financing Statements (including
amendments thereto and continuation statements thereof) in form satisfactory to
Agent as Agent, from time to time, may specify, and pay, or reimburse Agent upon
demand for paying, all costs and taxes of filing or recording the same in such
Jurisdictions as Agent may designate; and

 

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Take such other steps as Agent, from time to time, may direct to protect,
perfect, and maintain Agent’s Lien; and

 

In addition to the foregoing, and not in limitation thereof, Borrower agrees
that:

 

A carbon, photographic, or other reproduction of this Agreement shall be
sufficient as a Financing Statement and may be filed in any appropriate office
in lieu thereof; and

 

Borrower hereby appoints Agent as its attorney-in-fact (without requiring Agent
to act as such) to execute any Financing Statement in the name of Borrower, and
to perform all other acts that Agent deems appropriate to perfect and continue
Agent’s Lien and to protect and preserve the Collateral.

 

REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants to Lender Parties, knowing that Lender Parties
will rely on such representations and warranties as an inducement to make the
Loans, that:

 

Borrower’s Existence. Each Borrower (other than Pemco Aeroplex) is a duly
organized and existing Delaware corporation in good standing and has full power
and authority to consummate the transactions contemplated by this Agreement.
Pemco Aeroplex is a duly organized and existing Alabama corporation in good
standing and has full power and authority to consummate the transactions
contemplated by this Agreement.

 

Borrower’s Authority. The execution, delivery and performance of all of the Loan
Documents have been duly authorized by all requisite action by each Borrower
Party a party thereto. All of the Loan Documents have been duly executed and
delivered and constitute valid and binding obligations of the Borrower Parties a
party thereto, enforceable in accordance with their respective terms (except as
may be limited by applicable Bankruptcy Laws and other Laws affecting the
enforceability of creditors’ rights generally and principles of equity), and
Lender Parties will be entitled to the benefits of all of the Loan Documents.

 

Borrower’s Owners. Set forth on Schedule 9.3 is a complete and accurate list of
all the Equity Agreements.

 

Borrower’s Name. Set forth on Schedule 9.4 is a complete and accurate list of
(i) all names under which Borrower has done business in the last six years, and
(ii) the names of all Persons whose assets were acquired in the last six years
by Borrower outside of such Person’s Ordinary Course of Business and which
assets are included as assets of Borrower on the Most Recent Financial
Statements.

 

Consents or Approvals.

 

Except for consents and approvals already obtained and which remain in effect,
no consent or approval of any Third Person, and no authorization, approval or
other action by, and no notice to or filing with, any Governmental Authority or
other Third Person is required with respect to the operation of Borrower’s
business.

 

Except for the consents and approvals already obtained and which remain in
effect, no consent of any Third Person and no authorization, approval or other
action by, and no notice to or filing

 

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with, any Governmental Authority or other Third Person that is required has not
been obtained either (i) for the due execution, delivery, recordation, filing or
performance by any Borrower Party of this Agreement or any other Loan Document
or for the consummation of the transaction contemplated hereby, (ii) for the
mortgage, pledge, assignment, or grant by Borrower of the Agent’s Lien, (iii)
for the perfection or maintenance of the Agent’s Lien, except for the recording
of the Mortgage, the Assignment of Rents and the Financing Statements (and
filings required under the Assignment of Claims Act), or (iv) for the exercise
by Lender Parties of their rights or remedies provided for in this Agreement or
in any of the other Loan Documents (except as may be required by applicable Laws
in connection with the foreclosure and disposition of the Collateral). All
applicable waiting periods, if any, in connection with the transactions
contemplated hereby have expired without any action having been taken by any
Person restraining, preventing or imposing materially adverse conditions upon
the rights of Borrower to enter into and perform its obligations under this
Agreement.

 

Violations or Actions Pending. There are no actions, suits, or proceedings
pending or, to the best of Borrower’s knowledge, threatened, which might
reasonably be expected to have a Material Adverse Effect or which might impair
the value of the Collateral. No Borrower Party is in violation of any agreement
the violation of which will or might reasonably be expected to have a Material
Adverse Effect, and no Borrower Party is in violation of any order, judgment, or
decree of any court, or any statute or governmental regulation to which any
Borrower Party is subject. The execution and performance of any Loan Document by
any Borrower Party will not result in any breach of or default under any
mortgage, lease, credit or loan agreement, contract or any other instrument
which may bind or affect any Borrower Party.

 

Borrower Parties’ Subsidiaries and Affiliates. No Borrower Party has any
Subsidiaries or Affiliates other than as disclosed on the Most Recent Financial
Statements.

 

Existing Indebtedness. Borrower is not in default with respect to any of the
Existing Indebtedness.

 

Tax Returns. Except as set forth on Schedule 9.9, all federal, state, local and
other tax returns and reports of Borrower required by Laws have been completed
in full and have been duly filed, and all taxes, assessments and withholdings
shown on such returns or billed to Borrower have been paid, and Borrower
maintains adequate provisions and accruals in respect of all such federal,
state, local and other taxes, assessments and withholdings. There are no unpaid
assessments pending against Borrower for any taxes or withholdings, and Borrower
knows of no basis therefor.

 

Financial Statements. All Financial Statements heretofore given and hereafter
given to Lender Party are and will be true and complete in all material respects
as of their respective dates and prepared in accordance with Generally Accepted
Accounting Principles, and fairly represent and will fairly represent the
financial conditions of the Persons to which they pertain, and no Material
Adverse Change has or will have occurred in the financial conditions reflected
therein after the respective date thereof upon delivery to Lender Party, except
as may be disclosed in writing to Lender Party. Except as disclosed in the Most
Recent Financial Statements, there has been no Material Adverse Change since
December 31, 2001, and there exists no event, condition or state

 

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of facts that could reasonably be expected to result in a Material Adverse
Change.

 

Good and Marketable Title. Borrower has good and marketable title to all of its
assets, including, without limitation, the Collateral, subject to no Liens,
except for Permitted Liens.

 

Borrower’s Real Property Locations. Set forth on Schedule 9.12 is a complete and
accurate list of all real property owned by Borrower or in which Borrower has a
leasehold interest, showing as of the date hereof the street address, county or
other relevant jurisdiction, state, and record owner thereof.

 

Solvency. Each Borrower Party is Solvent.

 

ERISA. Each Plan is and has been administered in compliance in all material
respects with all applicable Laws, including without limitation, the applicable
provisions of ERISA and the Internal Revenue Code. No ERISA Event has occurred
and is continuing or, to the knowledge of Borrower, is reasonably expected to
occur with respect to any Plan, in either case that would be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. Except as
reflected in the Most Recent Financial Statements, no Plan has any Unfunded
Pension Liability, and neither Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA, in either
instance where the same would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect. Except as reflected in the Most
Recent Financial Statements, neither Borrower nor any ERISA Affiliate is
required to contribute to or has, or has at any time had, any liability to a
Plan.

 

Priority of Liens. The Agent’s Lien constitutes a first Lien against the
Collateral, prior to all other Liens, including those which may hereafter
accrue, except for the Permitted Liens.

 

Patents, Copyrights, Etc. Set forth on Schedule 9.16 is a complete and accurate
list of all patents, trademarks, trade names, service marks, and copyrights, and
all applications therefor and licenses thereof, of Borrower, reflecting the
Jurisdiction in which registered, the registration number, the date of
registration and the expiration date, and Borrower owns or has the right to use
all such patents, trademarks, trade names, service marks, and copyrights, and
all applications therefor and licenses thereof; and except as set forth on
Schedule 9.16, no Collateral is subject to any license agreement relating to
patents, trademarks, trade names, service marks, or copyrights which could,
directly or indirectly, preclude or render impracticable the realization of the
Agent’s Lien or materially diminish the value of such Collateral.

 

Accuracy of Documents. All documents furnished to Lender Party by or on behalf
of Borrower as part of or in support of the application for the Loans or the
Loan Documents are true, correct, complete and accurately represent the matters
to which they pertain.

 

Environmental Matters. Neither the Mortgaged Property nor Borrower is in
violation of or subject to any existing, pending or threatened investigation or
inquiry by any Governmental Authority or any remedial obligations under any
applicable Environmental Laws, and there are no facts, conditions or
circumstances which could result in any such investigation or inquiry if such
facts, conditions and circumstances, if any, were fully disclosed to the
applicable Governmental

 

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Authority, and Borrower will promptly notify Agent if Borrower becomes aware of
any such facts, conditions or circumstances or any such investigation or
inquiry; Borrower has not obtained and is not required to obtain any
Governmental Approvals to construct, occupy, operate or use any buildings,
improvements, fixtures or equipment in connection with the Mortgaged Property by
reason of any Environmental Laws; and no Petroleum Products, Hazardous
Substance, Hazardous Materials or Solid Wastes have been disposed of or released
on the Mortgaged Property, and Borrower covenants and agrees that it will not
cause there to be any violation of any Environmental Law in connection with its
ownership and use of the Mortgaged Property, including any violation arising
from the disposal or release of Petroleum Products, Hazardous Substances,
Hazardous Materials or Solid Wastes on the Mortgaged Property. Notwithstanding
anything to the contrary herein, Borrower shall indemnify and hold Lender
Parties harmless from and against any fines, charges, expenses, fees, attorney
fees and costs incurred by Lender Parties in the event Borrower or the Mortgaged
Property (whether or not due to any fault of Borrower) is hereafter determined
to be in violation of any Environmental Laws applicable thereto. This indemnity
shall survive any foreclosure or deed in lieu of foreclosure and repayment of
the Loans.

 

Restrictions and Covenants Affecting the Mortgaged Property. Neither Borrower
nor the Mortgaged Property is in violation of any easements, covenants or
restrictions affecting the Mortgaged Property.

 

Condemnation. There are no proceedings pending, or, to the best of Borrower’s
knowledge, threatened, to exercise any power of condemnation or eminent domain,
with respect to the Mortgaged Property, or any interest therein.

 

Mortgaged Property Documents.

 

Borrower is (or, with respect to any Mortgaged Property Documents hereafter
made, will be) the sole owner and holder of Borrower’s Interest in each
Mortgaged Property Document, and Borrower has not transferred or otherwise
assigned any interest of Borrower as a party to any Mortgaged Property Document;

 

each of the Mortgaged Property Documents is (or, with respect to any Mortgaged
Property Documents hereafter made, will be) valid and enforceable and in full
force and effect, and has not been (or, with respect to any Mortgaged Property
Documents hereafter made, will not be) altered, modified or amended in any
manner whatsoever except as permitted in this Agreement,

 

none of the Rents has been or will be assigned, pledged or in any manner
transferred or hypothecated, except pursuant to this Agreement, and

 

none of the Rents, for any period subsequent to the date of this Agreement, has
been or will be collected in advance of the time when such Rents become due
under the terms of the Assigned Leases.

 

Full Disclosure. All factual information heretofore or contemporaneously
furnished to any Lender Party in writing by or on behalf of any Borrower Party
for purposes of or in connection with this Agreement and the transactions
contemplated hereby is, and all other such factual information hereafter
furnished to any Lender Party by or on behalf of any Borrower Party will be,
true and accurate in all material respects on the date as of which such
information is supplied, dated or certified (or, if such information has been
amended or supplemented, on the date as of which any

 

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such amendment or supplement is supplied, dated or certified) and not made
incomplete by omitting to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which such information
was provided, not misleading.

 

Regulated Industries. No Borrower Party is (i) required to register as an
“investment company” under the Investment Company Act of 1940, as amended, or
(ii) a “holding company,” a “subsidiary company” of a “holding company,” or an
“affiliate” of a “holding company,” or an “affiliate” of a “holding company” or
of a “subsidiary company” of a “holding company,” within the meaning of the
public Utility Holding Company Act of 1935, as amended.

 

Insurance. Schedule 9.24 sets forth a true and complete summary of all insurance
policies or arrangements carried or maintained by Borrower. The assets,
properties and business of Borrower are insured against such hazards and
liabilities, under such coverages and in such amounts, as are customarily
maintained by prudent companies similarly situated and under policies issued by
insurers of recognized responsibility.

 

Continuing Effectiveness. All representations and warranties contained herein
shall be deemed continuing, continually republished, and in effect at all times
while Borrower remains indebted to Lender Party pursuant to the Loans and shall
be deemed to be incorporated by reference at the time of each Advance to
Borrower unless Borrower specifically notifies Agent of any change therein.

 

THE BORROWER’S COVENANTS

 

Borrower does hereby covenant and agree with each Lender Party that, so long as
any of the Obligations remain unsatisfied or any commitments hereunder remain
outstanding, Borrower at all times will comply or cause to be complied with the
following covenants:

 

Affirmative Covenants.

 

Borrower will duly and promptly pay and perform all of Borrower’s Obligations to
Lender Party according to the terms of this Agreement and the other Loan
Documents, and will cause each other Borrower Party to perform such other
Borrower Party’s Obligations to Lender Party according to the terms of this
Agreement and the other Loan Documents.

 

Borrower will use the proceeds of the Loans only for the purposes permitted
herein, or as Agent may have otherwise approved from time to time; and Borrower
will furnish Agent such evidence as it may reasonably require with respect to
such uses.

 

Borrower will furnish or cause to be furnished to the Lender Parties:

 

Within forty-five (45) days after each Quarter-End (a) an unaudited
(management-prepared) income statement and statement of cash flows of Borrowers
(on a Consolidated Basis) for such Quarter, and (b) an unaudited
(management-prepared) balance sheet of Borrowers (on a Consolidated Basis) for
such Quarter, all in reasonable detail with Agent having full access to all
supporting schedules and comments, and certified by Borrower’s president or
principal financial officer to have been prepared in accordance with Generally
Accepted Accounting Principles consistently applied by Borrowers, except for any
inconsistencies explained in such certificate;

 

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Within ninety (90) days after each Fiscal Year-End (a) a statement of Equity
Owners’ Equity and a statement of cash flows of Borrowers (on a Consolidated
Basis) for such Fiscal Year, (b) an income statement of Borrowers (on a
Consolidated Basis) for such Fiscal Year, and (c) a balance sheet of Borrowers
(on a Consolidated Basis) as of such Fiscal Year-End, all in reasonable detail,
including all supporting schedules and comments; such statements and balance
sheets to be audited by an independent certified public accountant acceptable to
Agent, and certified by such accountants to have been prepared in accordance
with Generally Accepted Accounting Principles consistently applied by Borrowers,
except for any inconsistencies explained in such certificate; and Agent shall
have the right, from time to time, to discuss any Borrower Party’s affairs
directly with Borrower Party’s accountants, and any such accountants are
authorized and directed to give Agent any information Agent may request at any
time regarding the financial affairs of Borrower Party and are authorized and
directed to furnish Agent with copies of any documents in their possession
related thereto;

 

On or before the last day of each month, a Collateral Report for the immediately
preceding month, certified to be correct by the principal financial officer or
vice president of finance of Borrower; and

 

On or before the forty-fifth (45th) day after each Quarter-End, a Compliance
Certificate for the immediately preceding Quarter, certified to be correct by
the principal financial officer or vice president of finance of Borrower,
together with the Schedule of Accounts, Schedule of Inventory, and such other
matters as may be required pursuant to Section 10.12 of this Agreement; and

 

Promptly after sending or making available or filing of the same, copies of all
reports, proxy statements and financial statements that Borrower sends or makes
available to its Equity Owners and all registration statements and reports that
Borrower files with the Securities and Exchange Commission (or any other similar
Governmental Authority) or any successor Person.

 

Borrower will pay or cause to be paid when due (i) the Fees and all other fees
or expenses owing to Lender Party; and (ii) all expenses involved in perfecting
the Agent’s Lien or the priority of the Agent’s Lien and all other expenses of
Lender Party related to the Loans, or the protection and preservation of the
Collateral, or the interpretation, administration and enforcement of any
provision of this Agreement or any other Loan Document, or the preparation and
negotiation of this Agreement, any of the other Loan Documents, or amendments to
any of them, including, without limitation, recording fees and taxes, tax, title
and lien search charges, title insurance charges, and attorneys’ fees (including
attorneys’ fees at trial and on any appeal by Borrower or Lender Party), real
property taxes and insurance premiums.

 

Borrower will permit the Lender Parties and their respective agents to have
access to the Collateral at reasonable times.

 

Borrower will cause, or permit Agent to cause, the Mortgaged Property to be
reappraised at Borrower’s expense (i) after an Event of Default, or (ii) if
required by regulatory authorities.

 

Borrower will certify to Agent upon request by Agent that:

 

Borrower has complied with and is in compliance with all terms, covenants and
conditions of this Agreement which are binding upon it;

 

there exists no Default; or, if such is not the case, that one or more specified
Defaults have occurred; and

 

the representations and warranties contained in this Agreement are true with the
same effect as though made on the date of such certificate.

 

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Borrower will, when requested so to do, make available for inspection and audit
by duly authorized representatives of Agent any of its Records, and will furnish
Agent any information regarding its business affairs and financial condition
within a reasonable time after written request therefor; provided that until the
occurrence of a Default, an audit shall not be conducted more than twice in any
consecutive twelve-month period unless Agent, in its discretion, determines that
there exists a need for such audit to verify financial information reported by
Borrower. Borrower shall reimburse Agent for all costs associated with (i) one
such audit during any consecutive twelve-month period, and (ii) any other audit
if the audit reveals a material discrepancy in any financial report, statement
or other document provided to Lender Party pursuant to this Agreement.

 

Borrower will keep accurate and complete Records, consistent with sound business
practices.

 

Within ten (10) days of Agent’s request therefor, Borrower will furnish or cause
to be furnished to Agent copies of income tax returns filed by any Borrower
Party.

 

Borrower will pay when due (or within applicable grace periods) all Indebtedness
due Third Parties, unless the failure so to pay such Indebtedness would not give
rise to a Material Adverse Change.

 

Borrower will notify Agent thirty (30) days in advance of any change in the
location of any place of business or state of incorporation of Borrower or of
the establishment of any new place of business, or the discontinuance of any
existing place of business.

 

Borrower will notify Agent immediately if it becomes aware of the occurrence of
any Default, or if it becomes aware of any Material Adverse Change or the
occurrence of any event that might have or give rise to a Material Adverse
Effect.

 

Borrower will collect its Accounts and sell its Inventory only in the Ordinary
Course of Business.

 

Borrower will:

 

Fund all its Plans in accordance with no less than the minimum funding standards
of Section 302 of ERISA;

 

Furnish Agent, promptly after the filing of the same, with copies of all reports
or other statements filed with the United States Department of Labor or the
Internal Revenue Service with respect to all such Plans; and

 

Promptly advise Agent of the occurrence of any Reportable Event or Prohibited
Transaction with respect to any such Plan.

 

Borrower will cause the Mortgaged Property to be maintained in good and safe
condition and repair and shall promptly repair, replace or rebuild any part of
the Mortgaged Property which may be destroyed by any casualty, or become
damaged, worn or dilapidated or which may be affected by any condemnation or
similar proceeding.

 

Borrower will, subject to the terms and conditions of any Subordination
Agreement, (i) pay or cause to be paid as and when due all Subordinated Debt,
(ii) otherwise comply with all of its covenants under any agreement relating to
Subordinated Debt, and (iii) promptly provide to Agent notice of each default or
claim of default given or received by Borrower with respect to any Subordinated
Debt.

 

Negative Covenants.

 

No Borrower will, without Agent’s prior written consent (and subject to the
approval of the Required Lenders, which consent and approval shall not be
unreasonably withheld or delayed),

 

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change its name or enter into any merger or consolidation.

 

No Borrower will, without Agent’s prior written consent (and subject to the
approval of the Required Lenders), liquidate, reorganize, recapitalize or
dissolve.

 

Except as disclosed on Schedule 10.2(B), no Borrower will, without Agent’s prior
written consent (and subject to the approval of the Required Lenders, which
consent and approval shall not be unreasonably withheld or delayed), sell,
transfer, lease or otherwise dispose of, or enter into any agreement to sell,
lease, transfer, assign or otherwise dispose of, all or any part of its assets,
including, without limitation, the Collateral (other than Permitted Transfers of
Collateral).

 

No Borrower will, without Agent’s prior written consent (and subject to the
approval of the Required Lenders, which consent and approval shall not be
unreasonably withheld or delayed), consummate any Acquisition (i) outside the
Permitted Line of Business, or (ii) if the consideration paid with respect to
such Acquisition is more than $2,500,000.00.

 

No Borrower will, without Agent’s prior consent (and subject to the approval of
the Required Lenders, which consent and approval shall not be unreasonably
withheld or delayed), create or acquire any Affiliate in connection with an
Acquisition or otherwise.

 

No Borrower will become liable, directly or indirectly, as guarantor or
otherwise for any obligation of any Person not a Borrower Party in an amount
exceeding $100,000.00 in the aggregate.

 

No Borrower will, directly or indirectly, make, create, incur, assume or suffer
to exist, or enter into or suffer to exist any agreement or restriction that
prohibits or conditions the creation, incurrence or assumption of, any Lien upon
or with respect to any part of the Collateral, whether now owned or hereafter
acquired, or agree to do any of the foregoing, other than Permitted Liens.

 

Except for transactions described on Schedule 10.2(G), no Borrower will, without
Agent’s prior written consent (and subject to the approval of the Required
Lenders, which consent and approval shall not be unreasonably withheld or
delayed), issue, redeem, purchase or retire any of its Equity Interests or grant
or issue any warrant, right or option pertaining thereto or any other security
convertible into any of the foregoing if the same would give rise to a Default
or result in a Change in Control.

 

No Borrower will amend or modify any of its Organizational Documents without the
prior written consent of Agent (and subject to the approval of the Required
Lenders, which consent and approval shall not be unreasonably withheld or
delayed).

 

No Borrower will directly or indirectly apply any part of the proceeds of any
Loan to the purchasing or carrying of any “margin stock” within the meaning of
Regulation G, Regulation T, Regulation U, or Regulation X, or any regulations,
interpretations or rulings thereunder.

 

No Borrower will treat, store, handle, discharge, or dispose of any Hazardous
Materials, Petroleum Products, or Solid Wastes except in compliance with all
Environmental Laws.

 

Financial Covenants.

 

Borrower will maintain or cause to be maintained at all times during the term of
this Agreement:

 

A Fixed Charge Coverage of not less than 1.2 to 1.0;

 

Adjusted Tangible Net Worth of not less than $24,300,000.00, plus 60% of the Net
Income as of each Quarter-End beginning March 31, 2003; and

 

A ratio of Adjusted Liabilities to Adjusted Tangible Net Worth of not more than
2.5 to 1.0; and

 

A Borrowing Base such that the balance of the Revolving Loan will not, at any
time, exceed the Borrowing Base;

 

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No Borrower will declare or pay any dividends, or make any other payment or
distribution on account of its Equity Interests in an amount such that such
payment or other distribution shall give rise to a Default.

 

No Borrower will make any other Investment other than Permitted Investments.

 

No Borrower will, without Agent’s prior written consent (and subject to the
approval of the Required Lenders, which consent and approval shall not be
unreasonably withheld or delayed), incur, create, assume, or permit to exist any
other Indebtedness except Permitted Indebtedness.

 

Except as the same may relate to the Loans, no Borrower will enter into any
agreement with respect to any of its Existing Indebtedness which is Indebtedness
for borrowed money if the effect of such agreement is to

 

Increase the interest rate on such Indebtedness;

 

Change the dates upon which payments of principal, interest or other scheduled
payments are due on such Indebtedness (other than to extend such dates);

 

Change any default or event of default (other than to delete or make less
restrictive any default provision) with respect to such Indebtedness;

 

Add any covenant with respect to such Indebtedness;

 

Change the redemption or prepayment provisions of such Indebtedness (other than
to extend the dates therefor or to reduce the premiums payable in connection
therewith); or

 

Materially increase the obligations of Borrower or confer additional material
rights to the holder of such Indebtedness in a manner adverse to Borrower or
Lender Parties.

 

Except as otherwise approved by Agent (and subject to the approval of the
Required Lenders, which approval shall not be unreasonably withheld or delayed),
Borrowers (in the aggregate) will not make Capital Expenditures in an aggregate
amount in any Fiscal Year after the Fiscal Year ending December 31, 2002 in
excess of $6,000,000.00.

 

Except for agreements reflected in the Most Recent Financial Statements,
agreements currently in effect and listed on Schedule 10.3 (G) attached hereto,
agreements which provide only for either Permitted Investments or Permitted
Indebtedness, and agreements which are the subject of the Subordination
Agreement, no Borrower will enter into any agreement, transaction or series of
transactions where any Affiliate, Subsidiary, shareholder, director, or officer
of Borrower Party is a party thereto, except in the Ordinary Course of Business
and upon fair and reasonable terms that are no less favorable to it than would
obtain in a comparable arm’s length transaction with a Person other than an
Affiliate, Subsidiary, shareholder, director, or officer of Borrower Party.

 

Insurance and Condemnation Covenants.

 

Borrower will obtain and maintain, or cause to be obtained and maintained, at
all times while Borrower is indebted to Lenders, at Borrower’s sole expense: (a)
the Title Insurance Policy; (b) all-risk insurance with respect to all insurable
property comprising the Tangible Property, against loss or damage by fire,
lightning, windstorm, explosion, hail, tornado and such hazards as are presently
included in so-called “all-risk” coverage and against such other insurable
hazards as Agent may require, in an amount not less than 100% of the full
replacement cost, including the cost of debris removal, without deduction for
depreciation and sufficient to prevent Agent and Borrower from becoming a
coinsurer, such insurance to be in builder’s risk (non-reporting) form during
and with respect to any construction on the Land; (c) if and to the extent any
portion of the Improvements is in a special flood hazard area, a flood insurance
policy in an amount equal to the lesser of the aggregate principal face amount
of the Notes or the maximum amount available;

 

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(d) comprehensive general public liability insurance, on an “occurrence” basis,
for the benefit of Borrower and Agent as named insureds; (e) statutory workers’
compensation insurance with respect to any work on or about the Mortgaged
Property; and (f) such other insurance as may from time to time be required by
Agent (including but not limited to boiler and machinery insurance, earthquake
insurance, and war risk insurance) and against other insurable hazards or
casualties which at the time are commonly insured against in the case of
premises similarly situated, due regard being given to the height, type,
construction, location, use and occupancy of buildings and improvements. All
insurance policies shall be issued and maintained by insurers, in amounts, with
deductibles, and in form satisfactory to Agent, and shall require not less than
thirty (30) days’ prior written notice to Agent of any cancellation or change of
coverage. All insurance policies maintained, or caused to be maintained, by
Borrower with respect to Borrower’s Tangible Property, except for public
liability insurance, shall provide that each such policy shall be primary
without right of contribution from any other insurance that may be carried by
Borrower or Agent and that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured. If any insurer which has issued a policy of title,
hazard, liability or other insurance required pursuant to this Agreement or any
other Loan Document becomes insolvent or the subject of any Bankruptcy,
receivership or similar proceeding or if in Agent’s opinion the financial
responsibility of such insurer is or becomes inadequate, Borrower shall, in each
instance promptly upon the request of Agent and at Borrower’s expense, obtain
and deliver to Agent a like policy (or, if and to the extent permitted by Agent,
a certificate of insurance) issued by another insurer, which insurer and policy
meet the requirements of this Agreement or such other Loan Documents, as the
case may be. Without limiting the discretion of Agent with respect to required
endorsements to insurance policies, all such policies for loss of or damage to
the Mortgaged Property shall contain a standard mortgage clause (without
contribution) naming Agent as mortgagee with loss proceeds payable to Agent
notwithstanding (i) any act, failure to act or negligence of or violation of any
warranty, declaration or condition contained in any such policy by any named
insured; (ii) the occupation or use of the Mortgaged Property for purposes more
hazardous than permitted by the terms of any such policy; (iii) any foreclosure
or other action by Agent under the Loan Documents; or (iv) any change in title
to or ownership of the Mortgaged Property or any portion thereof, and shall
further contain the agreement of the insurer waiving all rights of set off,
counterclaim or deductions against Borrower. The originals of each initial
insurance policy (or to the extent permitted by Agent, a copy of the original
policy and a satisfactory certificate of insurance) shall be delivered to Agent
at the time of execution of this Agreement, with premiums fully paid, and each
renewal or substitute policy (or certificate) shall be delivered to Agent, with
premiums fully paid, at least ten (10) days before the termination of the policy
it renews or replaces. Borrower shall pay all premiums on policies required
hereunder as they become due and payable and promptly deliver to Agent evidence
satisfactory to Agent of the timely payment thereof. In the event Borrower fails
to provide, maintain, keep in force or deliver and furnish to Agent the
insurance required by this Section, Agent may procure such insurance or
single-interest insurance for such risks covering Agent’s interest, and Borrower
will pay all premiums thereon promptly upon demand by Agent. Until such payment
is made by Borrower, the amount of all such premiums shall be added to and
become part of the Obligations. If any loss occurs at any time when Borrower has
failed to perform Borrower’s covenants and agreements in this Section, Agent
shall nevertheless be entitled

 

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to the benefit of all insurance covering the loss and held by or for Borrower,
to the same extent as if it had been made payable to Agent. Upon any foreclosure
of the Mortgage or transfer of title to the Mortgaged Property in extinguishment
of the whole or any part of the Loans or any other amounts owing by Borrower to
Lender Party, all of Borrower’s right, title and interest in and to the
insurance policies referred to in this Section (including unearned premiums) and
all proceeds payable thereunder shall thereupon vest in the purchaser at
foreclosure or other such transferee, to the extent permissible under such
policies, and Agent is hereby irrevocably appointed by Borrower as
attorney-in-fact for Borrower to assign any such policy to said purchaser or
other such transferee without accounting to Borrower for any unearned premiums
thereon. Agent shall have the right (but not the obligation) to make proof of
loss for, settle and adjust any claim under, and receive the proceeds of, all
insurance for loss of or damage to the Mortgaged Property, and the expenses
incurred by Agent in the adjustment and collection of insurance proceeds shall
be added to and become part of the Obligations and shall be due and payable to
Agent on demand. Agent shall not be, under any circumstances, liable or
responsible for failure to collect or exercise diligence in the collection of
any of such proceeds or for the obtaining, maintaining or adequacy of any
insurance or for failure to see to the proper application of any amount paid
over to Borrower. Any such proceeds received by Agent shall be applied and
disbursed as provided in this Agreement. Borrower appoints Agent as Borrower’s
attorney-in-fact to cause the issuance of or an endorsement of any policy and to
otherwise bring Borrower into compliance with the provisions of this Section and
to make any claim for, receive payment for, and execute and endorse any
documents, checks or other instruments in payment for loss, theft, or damage
under any such insurance policy.

 

Subject to the provisions of the immediately succeeding paragraph and any
contrary provisions in any Mortgage, after deducting from any casualty insurance
proceeds all of its expenses incurred in the collection and administration of
such sums, including attorney’s fees, Agent shall apply the same at its option
(i) to the payment of the Obligations, whether or not due and in whatever order
Agent elects, (in which case a portion of or the entire Obligations shall, at
Agent’s option, immediately become due and payable), (ii) to the repair and/or
restoration of the Improvements, or (iii) for any other purposes or objects for
which Agent is entitled to advance funds under any Loan Document, all without
affecting any Lien created by any Security Document, and any balance of such
monies then remaining shall be paid to Borrower or the Person lawfully entitled
thereto. Agent shall not be held responsible for any failure to collect any
insurance proceeds due under the terms of any policy regardless of the cause of
such failure.

 

Notwithstanding the provisions of the immediately preceding paragraph to the
contrary, Agent agrees that the proceeds of any casualty insurance or any part
thereof (after deducting therefrom all of its expenses incurred in the
collection and administration of such sums, including reasonable attorney’s
fees) payable on account of loss or damage to the Improvements will be made
available by Agent to be applied by Borrower to restoration or repair of the
Improvements provided the following conditions are met:

 

there exists no Default and Agent is satisfied that the occurrence of such event
(after making the insurance proceeds available as provided herein) will not give
rise to a Default;

 

Borrower presents sufficient evidence satisfactory to Agent that (A) the
Improvements are capable of being, and will be, restored in compliance with all
applicable Laws to an architectural whole and to substantially the same
condition and value as prior to the casualty, (B) restoration of

 

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the Improvements to an architectural whole will be completed on or before the
Term Loan Maturity Date, (C) there are sufficient funds from such insurance
proceeds and other available monies, to completely restore or repair the
Improvements to an architectural whole, and (D) Agent will not incur any
liability to any other Person as a result of such use or release of insurance
proceeds;

 

all parties having existing or expected possessory interests in the Improvements
agree to continue, in a manner satisfactory to Agent, to fulfill the contract
terms then in effect following the restoration or repair (including, without
limitation, the payment of rent or other sums without abatement or reduction
except as approved by Agent in its discretion), or Borrower shall deliver
security satisfactory to Agent in its discretion, to substitute for the loss of
income caused by the failure of any such possessory interest to agree to
continue to fulfill the contract terms then in effect following restoration or
repair; and

 

Borrower shall enter into such agreements and deliver such other documents and
other things as may reasonably be required by Agent in connection with the
disbursement of all such proceeds.

 

If the foregoing conditions are satisfied within ninety (90) days of the date of
loss, then the insurance proceeds shall be held by Agent and, after deducting
from said insurance proceeds all of its expenses incurred in the collection and
administration of such sums, including attorney’s fees, Agent shall disburse the
net insurance proceeds to or on behalf of Borrower (pursuant to a procedure
satisfactory to Agent) as repair or restoration progresses and to the extent
such proceeds are required to defray the expenses of such restoration or repair;
and to the extent any such proceeds are not required to defray the expenses of
such restoration or repair, Agent may, at its option, apply any such unused
proceeds as provided for in the immediately preceding paragraph (B) of this
Section. At all times during such restoration or repair, Borrower shall deposit
with Agent funds which, when added to insurance proceeds on deposit with Agent,
are sufficient to complete the restoration or repair of the Improvements to an
architectural whole, as determined by Agent, in Agent’s discretion, in
accordance with the approved plans and specifications and all applicable Laws.

 

If the conditions set forth in clauses (1) through (4) of this Section are not
satisfied within ninety (90) days of the date of loss, then the insurance
proceeds shall be disbursed as provided for in the immediately preceding
paragraph (B) of this Section.

 

If all or any portion of the Mortgaged Property shall be damaged or taken
through condemnation (which term shall include any damage or taking by any
Governmental Authority and any transfer by private sale in lieu thereof), either
temporarily or permanently, other than an insubstantial taking for the purpose
of widening existing roads bordering the Land which does not adversely affect
access or the use of the Mortgaged Property for its intended purposes, then a
portion of or the entire Obligations shall, at the option of Agent, immediately
become due and payable. Borrower, immediately upon obtaining knowledge of the
institution, or the proposed, contemplated or threatened institution of any
action or proceeding for the taking through condemnation of the Mortgaged
Property or any part thereof will notify Agent, and Agent is hereby authorized,
at its option, to commence, appear in and prosecute, through counsel selected by
Agent, in its own or in Borrower’s name, any action or proceeding relating to
any condemnation. Borrower may compromise or settle any claim for compensation,
but shall not make any compromise or settlement for an award unless all of the
Obligations are paid and

 

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satisfied in full, without the prior written consent of Agent. All such
compensation, awards, damages, claims, rights of action and proceeds and the
right thereto are hereby assigned by Borrower to Agent, and Agent is authorized,
at its option, to collect and receive all such compensation, awards or damages
and to give proper receipts and acquittances therefor without any obligation to
question the amount of any such compensation, awards or damages. After deducting
from said condemnation proceeds all of its expenses incurred in the collection
and administration of such sums, including reasonable attorney’s fees, the net
proceeds shall be dealt with by Agent in accordance with, and subject to, the
same terms and conditions as set forth in Paragraph (B) or Paragraph (C), as
applicable, of Section 10.4 hereof as if the condemnation proceeds were
insurance proceeds and as if the date the condemnation proceeds become payable
to Borrower was the date of loss.

 

Mortgaged Property Document Covenants.

 

Except as may otherwise be expressly provided for in this Agreement, including
the immediately following paragraph, Borrower shall (a) observe and perform all
the obligations imposed upon Borrower under each Mortgaged Property Document;
(b) not do, or permit to be done, anything to impair the security of any
Mortgaged Property Document; (c) promptly send to Agent copies of each notice of
default which Borrower shall send or receive under the Mortgaged Property
Documents; (d) enforce the performance and observance of the provisions of each
Mortgaged Property Documents; (e) not collect any of the Rents except as set
forth in this Agreement; (f) not subordinate any Mortgaged Property Document to
any Lien, or permit, consent, or agree to any such subordination without the
prior written consent of Agent; (g) not materially alter, modify or change the
terms of any Mortgaged Property Document, nor give any consent to exercise any
option required or permitted by such terms, without the prior written consent of
Agent in each such case (and subject to the approval of the Required Lenders);
(h) not cancel or terminate any Mortgaged Property Document, or accept a
surrender of any Mortgaged Property Document without the prior written consent
of Agent in each such case (and subject to the approval of the Required
Lenders); (i) not convey or transfer, and shall not suffer or permit a
conveyance or transfer of, the Mortgaged Property, or of any interest in the
Mortgaged Property, so as to effect directly or indirectly, approximately or
remotely, a merger of the estates and rights of, or a termination or diminution
of the obligations of any other party to and under any Assigned Lease; (j) not
alter, modify or change the terms of any guaranty of any Mortgaged Property
Document, and shall not cancel or terminate any such guaranty, without the prior
written consent of Agent in each such case (and subject to the approval of the
Required Lenders); (k) not consent to any assignment of, or subletting under,
any Assigned Lease without the prior written consent of Agent; (l) at Agent’s
request, execute any documentation confirming the assignment and transfer to
Agent of each Mortgaged Property Document; and (m) execute and deliver, at the
request of Agent, all other further assurances, confirmations and assignments in
the Mortgaged Property Documents as Agent shall, from time to time, reasonably
require in order to evidence or secure the rights of Agent hereunder.

 

Notwithstanding the provisions of the immediately preceding paragraph, so long
as there shall not exist any Default, then Borrower shall have the right to
continue to exercise all its rights and perform its obligations under the
Mortgaged Property Documents, including the right to collect each payment of
Rents at the time of the date provided in the applicable Assigned Lease for such
payment.

 

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Escrow Deposits. Upon the occurrence of an Event of Default and at the option of
Agent and further to secure the payment of taxes, assessments, other charges,
and insurance premiums applicable or attributable to the Mortgaged Property,
Borrower shall upon request of Agent deposit with Agent, on the first day of
each month, such amounts as, in the estimation of Agent, shall be necessary to
pay such taxes, assessments, charges and premiums as they become due; said
deposits to be held and to be used by Agent to pay such taxes, assessments,
charges and premiums as the same accrue and are payable. Payment from said sums
for said purposes shall be made by Agent at its discretion and may be made even
though such payments will benefit subsequent owners of the Mortgaged Property.
Said deposits shall not be, nor be deemed to be, trust funds, but may be, to the
extent permitted by applicable Law, commingled with the general funds of Agent,
and no interest shall be payable in respect thereof. If said deposits are
insufficient to pay the taxes and assessments, insurance premiums and other
charges in full as the same become payable, Borrower will deposit with Agent
such additional sum or sums as may be required in order for Agent to pay such
taxes and assessments, insurance premiums and other charges in full. Upon any
Event of Default, Agent may, at its option, apply any money in the fund relating
from said deposits to the payment of the Obligations in such manner as it may
elect.

 

Borrower’s General Covenants and Agreements Pertaining to the Collateral.
Borrower covenants and agrees that:

 

The addresses of Borrower’s principal place of business (or chief executive
office if more than one), the office where Borrower keeps and will keep
Borrower’s Records, including, without limitation, those Records concerning all
of Borrower’s Accounts and the other Collateral, and the place or places at
which all of Borrower’s Inventory, Equipment and other Tangible Property is and
will be located are correctly set forth on Schedule 10.7(A); and Borrower shall
immediately advise Agent in writing of any change in any of said addresses.
Borrower shall not remove such Records or any of the Collateral from the place
or places set forth on Schedule 10.7(A), except for removal of Inventory upon
its sale in Borrower’s Ordinary Course of Business, nor shall Borrower keep any
of such Records or the Collateral at any other locations unless (i) Borrower
gives Agent at least 10 days’ written notice thereof and of the new location,
and (ii) the new location is within the continental United States of America.
Borrower shall give Agent at least 10 days’ prior written notice of Borrower’s
opening of any new office or place of business or of its closing of any existing
office or place of business, and any such office or place of business shall be
within the continental United States of America.

 

Borrower is and shall remain the owner of all real estate on which any of the
locations described in subparagraph (A) next above are located; or if not,
except as otherwise agreed to by Agent, Borrower has heretofore obtained from
each owner of said real estate a written waiver or subordination (in form and
substance satisfactory to Agent) of any landlord’s Lien or other Lien said owner
might have with respect to the Collateral, and Borrower has delivered the same
to Agent.

 

Upon request of Agent, Borrower shall promptly deliver to Agent the certificates
of title for any motor vehicles now or hereafter included in the Collateral that
are subject to the title Laws of any state of the United States of America or
any other Jurisdiction and shall join with Agent in executing any applications
and other documents and taking any other actions necessary or desirable in
Agent’s opinion to perfect Agent’s Lien in such vehicles. Agent may retain
possession

 

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of such certificates of title until payment in full of all the Obligations
and/or until Agent’s Lien is terminated.

 

Agent may correct any and all patent errors in this Agreement or any financing
statements or other documents executed in connection herewith.

 

Borrower shall diligently perform all of its material obligations under each and
every contract or Purchase Order in connection with which Accounts are created
or exist in accordance with the terms thereof and will not commit or permit any
breach on Borrower’s part in connection with any such contract or Purchase
Order.

 

Borrower shall furnish to Agent from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as Agent may reasonably request, all in
reasonable detail.

 

Borrower shall keep and maintain at its own cost and expense satisfactory and
complete Records of the Collateral at its principal place of business, including
without limitation, a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral. Upon
request of Agent, Borrower shall make proper entries in its books disclosing the
assignment of the Collateral to Agent, and Borrower shall segregate its Records
concerning the Collateral and mark the same with Agent’s name or in such other
manner as shall be satisfactory to Agent. After the occurrence of and during the
continuance of any Default, Borrower shall deliver and turn over to Agent any
such Records at any time on demand of Agent.

 

Borrower shall obtain a waiver of any lien claims or rights that any owners or
mortgagees of any real estate (or of any possessory interest therein) on which
the Collateral, or any part thereof, is now or hereafter may be located, may
have with respect to the Collateral, or shall secure an agreement wherein such
Persons subordinate their rights, titles, interests and lien claims to Agent’s
Lien in, on and upon the Collateral.

 

Promptly after Borrower’s learning thereof, Borrower shall inform Agent in
writing of any material delay or default in Borrower’s performance of any of its
obligations to any Purchaser or under any Assigned Agreement, if such delay or
default may give rise to any assertion of any material claims, offsets or
counterclaims by any Purchaser, or any Material Adverse Change.

 

Borrower shall provide Agent with copies of all agreements between Borrower and
any warehouse at which any Collateral may, from time to time, be kept and all
lease or similar agreements between Borrower and any other Person, whether
Borrower is lessor or lessee thereunder.

 

If any Account arises out of a contract with the United States of America, or
any other Governmental Authority (other than an Account arising under an
Approved Contract), Borrower shall promptly notify Agent thereof in writing; and
upon demand of Agent, and with respect to all Accounts, Borrower shall execute
any instruments and take any other action required or requested by Agent to
perfect Agent’s Lien on and right to collect such Account under the provisions
of the Assignment of Claims Act or other applicable Law.

 

Collection of Accounts; Segregation of Proceeds, Etc. Borrower covenants and
agrees that, except to the extent that Agent’s exercise of its rights and
remedies hereunder or under any other Loan Document shall prevent Borrower from
doing so, Borrower will, at Borrower’s sole expense, collect from the Purchaser
on each Account all amounts due thereon as and when the same shall become due;
and in the event of any default by any Purchaser justifying such action,
Borrower shall have the authority, at Borrower’s sole expense, to repossess any
merchandise

 

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covered by any such Account in accordance with the terms thereof and any
applicable Law and to take such other action with respect to any such Account or
the merchandise covered thereby as Borrower, in the absence of instructions from
Agent, may deem advisable.

 

Collection Methods. Borrower agrees that no court action or other legal
proceedings for garnishment, attachment, repossession of property, detinue, or
any attempt to repossess any merchandise covered by any Account other than
through legal proceedings, shall be done or attempted to be done by Borrower
except by or under the direction of competent legal counsel. Borrower agrees to
indemnify and hold Agent harmless from any loss or liability of any kind or
character which may be asserted or sought to be asserted against Agent by virtue
of any suit filed, process issued or any repossession or attempted repossession
done or attempted by Borrower or at Borrower’s direction or any endeavors that
Borrower may make to collect or enforce any Accounts or repossess any goods
covered by any Account.

 

Verification of Accounts. Borrower agrees that any of Agent’s officers,
employees or agents shall have the right, at any time or times hereafter, in
Agent’s name or in the name of Borrower, to verify with any Purchaser the
validity or amount of, or any other matter relating to, any Accounts by mail,
telephone, telegraph or otherwise, provided that until the occurrence of a
Default, Agent shall give Borrower prior notice of such verification.

 

Notice Regarding Disputed Accounts. Borrower covenants and agrees that if any
Purchaser disputes amounts owing to Borrower by such Purchaser in excess of the
lesser of (i) $200,000.00 (in the aggregate), or (ii) 2.5% of the total amount
of the Accounts of such Purchaser, Borrower shall promptly provide Agent with
written notice thereof, explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy.

 

Records, Schedules and Assignments. Borrower covenants and agrees that Borrower
shall keep accurate Records of Borrower’s Accounts and Inventory, and shall
promptly deliver to Agent (i) within 30 days after each Month-End (except after
an Event of Default, in which case such delivery shall be made on demand of
Agent), a detailed aged trial balance, in form and substance acceptable to
Agent, of all then-existing Accounts (“Schedule of Accounts”), (ii) within 30
days after each Month-End (except after an Event of Default, in which case such
delivery shall be made on demand of Agent), a current schedule of Inventory
(“Schedule of Inventory”), (iii) upon Agent’s demand, the original or a copy of
all Documents evidencing or relating to the Accounts or Inventory so scheduled,
(iv) upon Agent’s demand, such other information relating to the then-existing
Accounts and Inventory as Agent shall reasonably request, and (v) upon Agent’s
demand, formal written assignments or schedules specifically describing the
Accounts and Inventory and confirming Agent’s Lien thereon.

 

Visitation. Borrower agrees to permit representatives of the Lender Parties from
time to time to visit and inspect the Collateral, all Records related thereto,
the premises upon which any of the Collateral is located, and any of the other
offices and properties of Borrower; to examine the assets, books of account, and
Records of Borrower; to discuss the affairs and finances of Borrower with and be
advised as to the same by the officers thereof; and to verify the amount,
quantity, value and condition of, or any other matter relating to, the
Collateral, all at such

 

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reasonable times and intervals as Agent may desire.

 

Use of Tangible Property. Borrower covenants and agrees (a) to comply with all
applicable Laws governing the use of all Tangible Property, (b) to maintain all
Tangible Property in good condition and repair (normal wear and tear excepted),
(c) to comply with the terms of any lease covering the premises wherein any
Tangible Property is located and all orders, ordinances or Laws of any
Governmental Authority concerning such premises or the conduct of business
therein; and (d) not to lease or hire any of the Tangible Property to any Person
or permit the same to be leased or used for hire otherwise than pursuant to any
Permitted Liens (it being understood that a sublease of any premises being
leased by Borrower shall not be a violation of this Section).

 

Collateral Evidenced by Instruments or Documents. Borrower covenants and agrees
that upon Borrower’s receipt of any Collateral which is evidenced or secured by
an agreement, Instrument, Document or Chattel Paper and upon demand of Agent,
Borrower shall deliver the original thereof (or each executed or original
counterpart if more than one) to Agent, together with appropriate endorsements
and/or assignments in form and substance acceptable to Agent.

 

Maintaining Bank Accounts. Borrower covenants and agrees that until the
termination of Agent’s Lien:

 

Except as may otherwise be agreed by Lender Parties or as set forth on Schedule
10.16, Borrower shall maintain all of its operating, disbursement and lockbox
accounts only with SouthTrust, and all of its other bank accounts (including
payroll accounts) with SouthTrust or other Lender Parties (the “Approved Bank
Accounts”).

 

Upon an Event of Default and demand of Agent, Borrower shall maintain lockboxes
(each a “Lockbox Account”) only with SouthTrust and with other banks (each a
“Lockbox Bank”) that have entered into a letter or other agreement (each a
“Lockbox Agreement”) approved by and acceptable to Agent in its discretion.
Neither Borrower nor any Person claiming on behalf of or through Borrower shall
have any right to withdraw any of the funds held in a Lockbox Account and in
connection therewith:

 

Borrower shall immediately instruct each Person obligated at any time to make
any payment to Borrower for any reason to make such payment to a Lockbox
Account, and shall pay to Agent for deposit in an Approved Bank Account as may
be from time to time designated by Agent, at the end of each Business Day, all
proceeds of Collateral and all other cash received by it on such day;

 

Borrower shall instruct each Lockbox Bank to transfer to an Approved Bank
Account designated by Agent, at the end of each Business Day, in same day funds,
an amount equal to the credit balance of the Lockbox Account in such Lockbox
Bank; and

 

Upon any termination of any Lockbox Agreement or other agreement with respect to
the maintenance of a Lockbox Account by Borrower or any Lockbox Bank, Borrower
shall immediately notify all Persons that were making payments to such Lockbox
Account to make all future payments to another Lockbox Account or to an Approved
Bank Account designated by Agent. Borrower agrees to terminate any or all
Lockbox Account and Lockbox Agreements upon request by Agent.

 

Filing Fees and Taxes. Borrower covenants and agrees to pay all recording and
filing fees, revenue stamps, taxes and other expenses and charges payable in
connection with the execution

 

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and delivery to Lender Parties of this Agreement and the other Loan Documents,
and the recording, filing, satisfaction, continuation and release of any
mortgages, financing statements or other instruments filed or recorded in
connection herewith or therewith.

 

Assigned Agreements. Except in Borrower’s Ordinary Course of Business, Borrower
covenants and agrees that it shall not (a) cancel or terminate any Assigned
Agreement or consent to or accept any cancellation or termination thereof; (b)
amend or otherwise modify any Assigned Agreement or give any consent, waiver or
approval thereunder; (c) waive any default or breach of any Assigned Agreement;
or (d) take any other action in connection with any Assigned Agreement, and,
notwithstanding the foregoing, in each case where any such action (i) may give
rise to a Material Adverse Change, or (ii) arises under an Approved Contract,
such action shall only be taken with Agent’s prior written consent (and subject
to the approval of the Required Lenders).

 

Underlying Documentation. Borrower covenants and agrees that Borrower will, upon
the request therefor by Agent, promptly deliver possession to Agent of any or
all of the Assigned Agreements (and, if requested by Agent, endorsed to Agent).

 

Further Assurances. Borrower covenants and agrees that, at Borrower’s cost and
expense, upon request of Agent, Borrower shall duly execute and deliver, or
cause to be duly executed and delivered, to Agent such further instruments and
documents and do and cause to be done such further acts as may be reasonably
necessary or proper in the opinion of Agent or its counsel to carry out more
effectively the provisions and purposes of this Agreement.

 

DEFAULT

 

Events of Default. The occurrence of any one or more of the following events
shall constitute an Event of Default hereunder:

 

Borrower shall fail to pay as and when due any installment of principal or
interest or fee or any other amount payable under this Agreement or any Note,
which failure is not cured within ten (10) days of written notice thereof given
by Agent to Borrower, provided, however, that Agent shall not be required to
give such notice more than twice in any consecutive twelve-month period, nor
upon maturity of any Note.

 

Any Borrower Party shall fail to pay, perform or observe any other obligation,
condition, or covenant to be observed or performed by it under this Agreement or
any other Loan Document, and such failure shall continue for ten (10) days after
the earlier of:

 

Notice of such failure from Agent; or

 

Any Borrower Party knows of any such failure; or

 

Agent is notified of such failure or should have been so notified pursuant to
the provisions of this Agreement or any other Loan Document.

 

There shall occur any Event of Default as defined and provided under the
SouthTrust Bond Issue Letter of Credit Mortgage or any Loan Document.

 

There shall occur any default or event of default (after any applicable grace or
cure period) as provided under any agreement relating to Subordinated Debt.

 

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There shall occur any default or event of default (after the expiration of any
applicable grace and cure period) under any agreement of Borrower with any
Person and relating to the borrowing of money.

 

The validity or enforceability of this Agreement or any other Loan Document, or
any part thereof, shall be contested by any Borrower Party, and/or any Borrower
Party shall deny that it has any or further liability or obligation hereunder or
thereunder.

 

Assignment or attempted assignment by Borrower of this Agreement, any rights
hereunder, or any Advance to be made hereunder, or the conveyance, lease,
mortgage, or any other alienation or encumbrance of the Collateral or any
interest therein without the prior written consent of Agent (and subject to the
approval of all Lenders), except for transfers permitted hereunder or under any
other Loan Document.

 

Except as otherwise permitted herein, the transfer of Borrower’s interest in, or
rights under, this Agreement by operation of law or otherwise, including,
without limitation, such transfer by Borrower as debtor in possession under the
Bankruptcy Code, or by a trustee for Borrower under the Bankruptcy Code, to any
Third Person, whether or not the obligations of Borrower under this Agreement
are assumed by such Third Person.

 

The institution of a foreclosure or other possessory action against Collateral
having a value in excess of $250,000.00.

 

Substantial damage to, or partial or total destruction of, the Improvements by
fire or other casualty or the taking of any of the Improvements, temporarily or
permanently, by eminent domain, and Borrower’s failure to restore, repair,
replace, or rebuild the Improvements as and when required under the terms of any
Loan Document (so long as such failure to restore, repair, replace or rebuild is
not attributable to Lender Party’s failure to comply with its obligations under
the Loan Documents with respect thereto).

 

Failure or refusal by the Title Insurance Company, by reason of any matter
affecting title to the Collateral, to insure any Advance as giving rise to a
valid first Lien, subject only to the Permitted Liens.

 

The dissolution of any Borrower Party, or any Change in Control.

 

Any financial statement, representation, warranty or certificate made or
furnished by any Borrower Party to Lender Party in connection with this
Agreement, or as inducement to Lender Party to enter into this Agreement, or in
any separate statement or document to be delivered hereunder to Lender Party,
shall be materially false, incorrect, or incomplete when made.

 

Any Material Adverse Change, or the existence of any other condition which in
Agent’s reasonable determination, constitutes an impairment of any Borrower
Party’s ability to perform its obligations under this Agreement or any other
Loan Document.

 

Any Borrower Party shall admit its inability to pay its debts as they mature, or
shall make an assignment for the benefit of itself or any of its creditors.

 

Proceedings in Bankruptcy, or for reorganization of any Borrower Party, or for
the readjustment of any of its debts, under the Bankruptcy Code, as amended, or
any part thereof, or under any other Laws, whether state or federal, for the
relief of debtors, now or hereafter existing, shall be commenced by any Borrower
Party, or shall be commenced against any Borrower Party and shall not be
discharged within sixty (60) days of commencement.

 

A receiver or trustee shall be appointed for any Borrower Party or for any
substantial part of its assets, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of

 

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any Borrower Party, and such receiver or trustee shall not be discharged within
thirty (30) days of his appointment, or such proceedings shall not be discharged
within sixty (60) days of its commencement, or any Borrower Party shall
discontinue business or materially change the nature of its business.

 

Borrower shall suffer a final judgment for payment of money in excess of
$100,000.00 and shall not discharge the same within a period of thirty (30) days
unless, pending further proceedings, execution has not been commenced or if
commenced has been effectively stayed.

 

Provided that with respect to each of the foregoing, an Event of Default will be
deemed to have occurred upon the occurrence of the applicable event without
notice being required if Agent is prevented from giving notice by Bankruptcy or
other applicable Law.

 

No Advances After Default. Upon the occurrence and during the continuance of any
Default, and notwithstanding any provision contained herein or in any other Loan
Document to the contrary, Lender Parties shall have the absolute right to refuse
to make, and shall be under no obligation to make, any further Advances or issue
any Letters of Credit.

 

Acceleration. All Obligations shall, at the option of Agent, become immediately
due and payable, Without Notice, upon the occurrence of an Event of Default
without further action of any kind.

 

General Remedies. Upon the occurrence of any Event of Default, Lender Parties
shall have, in addition to the rights and remedies given them by this Agreement
and the other Loan Documents, all those allowed by all applicable Laws,
including but without limitation, the Uniform Commercial Code as enacted in any
Jurisdiction in which any Collateral may be located. Without limiting the
generality of the foregoing, Agent may immediately, Without Notice, sell at
public or private sale or otherwise realize upon, the whole or, from time to
time, any part of the Collateral, or any interest which Borrower may have
therein.

 

Agent’s Additional Rights and Remedies. Upon the occurrence of any Event of
Default and except as may otherwise be prohibited or expressly provided for to
the contrary under applicable Law, in addition to any rights or remedies Lender
Parties may otherwise have under this Agreement, any other Loan Documents, or
under applicable Laws, Without Notice, Agent shall have the right to take any or
all of the following actions at the same or different times:

 

To cancel Lender Parties’ obligations arising under this Agreement;

 

To institute appropriate proceedings to specifically enforce performance of the
terms and conditions of this Agreement;

 

To take immediate possession of the Collateral;

 

To appoint or seek appointment of a receiver, Without Notice and without regard
to the solvency of Borrower or the adequacy of the security, for the purpose of
preserving the Collateral, preventing waste, and to protect all rights accruing
to Lender Parties by virtue of this Agreement and the other Loan Documents. All
expenses incurred in connection with the appointment of such receiver, or in
protecting, preserving, or improving the Collateral, shall be charged against
Borrower and shall be secured by the Agent’s Lien;

 

To proceed to perform any and all of the duties and obligations and exercise all
the rights and remedies of Borrower contained in the Assigned Agreements as
fully as Borrower could itself;

 

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To take possession of the Mortgaged Property and/or the Rents and have, hold,
manage, lease and operate the Mortgaged Property on such terms and for such
period of time as Agent may in its discretion deem proper, and, either with or
without taking possession of the Mortgaged Property in Agent’s own name:

 

make any payment or perform any act which Borrower has failed to make or
perform, in such manner and to such extent as Agent may deem necessary to
protect the security provided for in this Agreement, or otherwise, including
without limitation, the right to appear in and defend any action or proceeding
purporting to affect the security provided for in this Agreement, or the rights
or powers of Agent;

 

lease the Mortgaged Property or any portion thereof in such manner and for such
Rents as Agent shall determine in its discretion; or

 

demand, sue for, or otherwise collect and receive from all Persons all Rents,
including those past due and unpaid, with full power to make from time to time
all alterations, renovations, repairs or replacements of and to the Mortgaged
Property (or any part thereof) as may seem proper to Agent and to apply the
Rents to the payment of (in such order of priority as Agent, in its discretion,
may determine):

 

all expenses of managing the Mortgaged Property, including, without limitation,
the salaries, fees and wages of a managing agent and such other employees as
Agent may deem necessary or desirable;

 

all taxes, charges, claims, assessments, water rents, sewer rents, and any other
liens, and premiums for all insurance which Agent may deem necessary or
desirable, and the cost of all alterations, renovations, repairs, or
replacements, and all expenses incidental to taking and retaining possession of
the Mortgaged Property;

 

all or any portion of the Loans; and/or

 

all costs and attorneys’ fees incurred in connection therewith.

 

In connection with the foregoing, Borrower hereby authorizes and directs each
party to any Mortgaged Property Document (other than Borrower), upon receipt
from Agent of written notice to the effect that an Event of Default exists, to
perform all of its obligations under the Mortgaged Property Document as directed
by Agent, and to continue to do as so directed until otherwise notified by
Agent.

 

To notify Purchasers that Accounts have been assigned to Agent, demand and
receive information from Purchasers with respect to Accounts, forward invoices
to Purchasers directing them to make payments to Agent, collect all Accounts in
Agent’s or Borrower’s name and take control of any cash or non-cash proceeds of
Collateral;

 

To enforce payment of any Accounts, to prosecute any action or proceeding with
respect to Accounts, to extend the time of payment of any and all Accounts, to
make allowances and adjustments with respect thereto and to issue credits in the
name of Agent or Borrower;

 

To settle, compromise, extend, renew, release, terminate or discharge, in whole
or in part, any Account or deal with the same as Agent may deem advisable;

 

To require Borrower to open all mail only in the presence of a representative of
Agent, who may take therefrom any remittance on Collateral;

 

To charge, set-off and otherwise apply all or any part of the Obligations
against the Deposit Accounts, or any part thereof;

 

To exercise any and all rights and remedies of Borrower under or in connection
with any

 

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Assigned Agreement or otherwise in respect of the Collateral, including, without
limitation, any and all rights of Borrower to demand or otherwise require
payment of any amount under, or performance of any provision of, any Assigned
Agreement;

 

To enter upon the premises of Borrower or any other place or places where the
Collateral is located and kept, and through self-help and without judicial
process, without first obtaining a final judgment or giving Borrower notice and
opportunity for a hearing on the validity of Agent’s claim, without any
pre-seizure hearing as a condition to repossession through court action and
without any obligation to pay rent to Borrower, to remove the Collateral
therefrom to the premises of Agent or of any agent of Agent, for such time as
Agent may desire, in order effectively to collect or liquidate the Collateral;

 

To require Borrower, upon the request of Agent, to assemble the Inventory,
Equipment and any other property included in the Collateral and make it
available to Agent at places which Agent shall select, whether at Borrower’s
premises or elsewhere, and to make available to Agent all of Borrower’s premises
and facilities for the purpose of Agent’s taking possession of, removing or
putting the Inventory and such other goods in salable form;

 

To collect, receive, appropriate, repossess and realize upon the Collateral, or
any part thereof, and to sell, lease, assign, give option or options to
purchase, or sell or otherwise dispose of and deliver the Collateral (or
contract to do so), or any part thereof, in one or more parcels, at public or
private sale or sales, at any exchange broker’s board or at any of Agent’s
offices or elsewhere, at such prices as Agent may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. Agent shall
have the right upon any such public sale or sales, and to the extent permitted
by Law, to purchase the whole or any part of the Collateral so sold, free of any
right or equity of redemption, which equity of redemption Borrower hereby
releases. Borrower waives all claims, damages, and demands against Agent arising
out of the repossession, retention or sale of the Collateral;

 

To use, and to permit any purchaser of any of the Collateral from Agent to use
without charge, Borrower’s labels, General Intangibles, and advertising matter
or any property of a similar nature, as it pertains to, or is included in, any
of the Collateral, in advertising for sale, preparing for sale and selling any
Collateral, and finishing the manufacture, processing, fabrication, packaging
and delivery of the Inventory, and Borrower’s rights under all licenses and all
franchise agreements shall inure to Agent’s benefit;

 

To send any written notice to Borrower required by Law or this Agreement in the
manner set forth in this Agreement; and any notice sent by Agent in such manner
at least ten (10) Business Days (counting the date of sending) prior to the date
of a proposed disposition of the Collateral shall be deemed to be reasonable
notice (provided, however, that nothing contained herein shall be deemed to
require 10 days’ notice if, under the applicable circumstances, a shorter period
of time would be allowed under applicable Law); and

 

To exercise, in addition to all other rights which it has under this Agreement
or other applicable Law, all of the rights and remedies of a secured party upon
default under the Uniform Commercial Code or other applicable Law.

 

Right of Set-Off. Upon the occurrence of and during the continuance of any Event
of Default, Lender Party may, and is hereby authorized by Borrower, at any time
and from time to time, to the fullest extent permitted by applicable Laws, and
Without Notice to Borrower, set-off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time

 

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held and any other Indebtedness at any time owing by Lender Party to, or for the
credit or the account of, Borrower against any or all of the Obligations of
Borrower now or hereafter existing whether or not such Obligations have matured
and irrespective of whether Lender Party has exercised any other rights that it
has or may have with respect to such Obligations, including without limitation
any acceleration rights. The aforesaid right of set-off may be exercised by
Lender Party against Borrower or against any trustee in Bankruptcy, debtor in
possession, assignee for the benefit of the creditors, receiver, or execution,
judgment or attachment creditor of Borrower, or such trustee in Bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the fact that such
right of set-off shall not have been exercised by Lender Party prior to the
making, filing or issuance, or service upon Lender Party of, or of notice of,
any such petition; assignment for the benefit of creditors; appointment or
application for the appointment of a receiver; or issuance of execution,
subpoena, order or warrant. Lender Party agrees to promptly notify Borrower
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of Lender Party under this Section are in addition to the other rights and
remedies (including, without limitation, other rights of set-off) which Lender
Party may have.

 

No Limitation on Rights and Remedies. The enumeration of the powers, rights and
remedies in this Article shall not be construed to limit the exercise thereof to
such time as an Event of Default occurs if, under applicable Law or any other
provision of this Agreement or any other Loan Document, Lender Party has any of
such powers, rights and remedies regardless of whether an Event of Default has
occurred, and any limitation contained herein or in any of the other Loan
Documents as to Lender Party’s exercise of any power, right or remedy for a
period of time only during the continuance of an Event of Default shall only be
applicable at such time as Lender Party shall have actual knowledge that such
Event of Default is no longer continuing and for a reasonable time thereafter as
may be necessary for Lender Party to cease the exercise of such powers, rights
and remedies (it being expressly understood and agreed that until such time as
Lender Party shall obtain such knowledge and after the expiration of such
reasonable time, Lender Party shall have no liability whatsoever for the
commencement of or continuing exercise of any such power, right or remedy).

 

Repossession of the Collateral; Care and Custody of the Collateral, Etc.
Borrower agrees to give Agent notice in the manner set forth in this Agreement
within 24 hours of the time of repossession of the Collateral, or any part
thereof, by Agent as to any other property of Borrower alleged to have been left
on, upon or in the repossessed Collateral at the time of repossession; and such
notice shall be an express condition precedent to any action or suit for loss or
damages in connection therewith. Borrower further agrees that Agent may hold any
such property of Borrower without liability for a reasonable time after any such
notice is received, and that Agent will have a reasonable time to notify
Borrower as to where Borrower can collect such property. Borrower agrees that if
Agent shall repossess the Collateral, or any part thereof, at a time when no
Event of Default shall have occurred hereunder, and the repossessed Collateral
is thereafter returned to Borrower, the damages therefor, if any, shall not
exceed the fair rental value of the repossessed Collateral for the time it was
in Agent’s possession. Borrower hereby expressly and irrevocably consents to,
and to the extent that Borrower may lawfully do so, invites Agent and its

 

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agents to come upon any premises on which the Collateral, or any part thereof,
is now or hereafter located for any and all purposes related to the Collateral
including without limitation repossession of the Collateral, or any part
thereof. To the extent that Borrower may lawfully do so, Borrower further
covenants and warrants that (a) any entry by Agent and its agents upon such
premises for the purpose of repossessing the Collateral, or any part thereof,
shall not be trespass upon such premises, and (b) any such repossession shall
not constitute conversion of the Collateral, or any part thereof, and Borrower
further agrees to indemnify and hold Agent harmless against, and hereby releases
Agent from any actions, costs, obligations or expenses arising directly,
indirectly or remotely from any attempt to enter such premises and repossess the
Collateral, or any part thereof. Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if it takes such reasonable actions for that purpose as Borrower
shall request in writing, but Agent shall have sole power to determine whether
such actions are reasonable. Any omission to do any act not requested by
Borrower shall not be deemed a failure to exercise reasonable care. Borrower
shall at all times be responsible for the preservation of the Collateral and
shall be liable for any failure to realize upon, or to exercise any right or
power with respect to, the Collateral, or for any delay in so doing, whether or
not the Collateral is in Borrower’s possession.

 

Application of Proceeds. Except as otherwise expressly required to the contrary
by applicable Law or any Loan Document, the net cash proceeds resulting from the
exercise of any of the rights and remedies of Lender Parties under this
Agreement, after deducting all charges, expenses, costs and attorneys’ fees
relating thereto, shall be applied by Agent to the payment of the Obligations,
whether due or to become due, in such order and in such proportions as Agent may
elect; and Borrower shall remain liable to Lender Parties for any deficiency.

 

Attorney-in-Fact. Borrower hereby constitutes and appoints Agent, or any other
Person whom Agent may designate, as Borrower’s attorney-in-fact (such
appointment being coupled with an interest and being irrevocable until Agent’s
Lien shall have been terminated in writing as set forth in this Agreement), at
Borrower’s sole cost and expense, to exercise any one or more of the following
rights and powers at any time after the occurrence and during the continuance of
an Event of Default (and all acts of such attorney-in-fact or designee taken
pursuant to this Section are hereby ratified and approved by Borrower, and said
attorney or designee shall not be liable for any acts or omissions nor for any
error of judgment or mistake of fact or law):

 

To take or to bring, in the name of Agent or in the name of Borrower, all steps,
action, suits or proceeding deemed by Agent necessary or desirable to effect
collection of the Accounts;

 

To settle, adjust, compromise, extend, renew, discharge, terminate or release
the Accounts in whole or in part;

 

To settle, adjust or compromise any legal proceedings brought to collect the
Accounts;

 

To notify Purchasers to make payments on the Accounts directly to Agent or to a
Lockbox designated by Agent;

 

To transmit to Purchasers notice of Agent’s interest in the Accounts and to
demand and receive from such Purchasers at any time, in the name of Agent or of
Borrower or of the designee of Agent, information concerning the Accounts and
the amounts owing thereon;

 

To use Borrower’s stationery and sign the name of Borrower to verifications of
the Accounts and

 

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notices thereof to Purchasers;

 

To sell or assign any of the Collateral upon such terms, for such amounts and at
such time or times as Agent deems advisable, and to execute any bills of sale or
assignments in the name of Borrower in relation thereto;

 

To take control, in any manner, of any item of payment on, or proceeds of,
Collateral;

 

To prepare, file and sign Borrower’s name on any proof of claim in Bankruptcy or
similar document against any Purchaser;

 

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 Collateral;

 

To sign or endorse the name of Borrower upon any Chattel Paper, Document,
Instrument, invoice, freight bill, bill of lading, warehouse receipt or similar
document or agreement relating to the Collateral;

 

To use the information recorded on or contained in any data processing equipment
and computer hardware and software relating to the Collateral to which Borrower
has access;

 

To enter into contracts or agreements for the processing, fabrication, packaging
and delivery of the Collateral as said attorney-in-fact or designee or Agent may
from time to time deem appropriate and charge Borrower’s account for any
reasonable costs thereby incurred;

 

To receive, take, endorse, assign and deliver in Agent’s name or in the name of
Borrower any and all checks, notes, drafts and other instruments;

 

To receive, open and dispose of all mail addressed to Borrower and to notify
postal authorities to change the address for the delivery thereof to such
address as Agent may designate; and

 

To do all acts and things necessary, in Agent’s discretion, to fulfill
Borrower’s obligations under this Agreement and to otherwise carry out the
purposes of this Agreement.

 

Default Costs. Borrower hereby agrees to pay to each Lender Party upon demand
all Default Costs incurred by such Lender Party, which agreement shall be a
continuing agreement and shall survive payment of the Loans and termination of
this Agreement.

 

THE AGENT.

 

Authorization and Action. Each Lender hereby appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement and the other Loan Documents as are delegated to
Agent by the terms hereof and thereof, together with such powers and discretion
as are reasonably incidental thereto. As to any matters expressly provided for
in the Loan Documents as being subject to the consent, discretion or approval of
Agent without the requirement of the approval of any Lender, such matters shall
be subject to the sole discretion of Agent, its directors, officers, agents and
employees. As to any matters expressly provided for in the Loan Documents as
being subject to the consent, discretion or approval of the Required Lenders or
of all of the Lenders, such matters shall be subject to the sole discretion of
each Lender. In addition to the other matters specifically provided for herein
as requiring approval or consent of all of the Lenders or of the Required
Lenders, Agent shall not take any of the following actions without the prior
written consent of all of the Lenders:

 

modify, amend or waive compliance with any provision of this Agreement or any of
the other Loan Documents;

 

release any obligor or any of the Obligations or any of the Collateral; or

 

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waive any Default or Event of Default under Section 11.1(A) of this Agreement.

 

As to any other matters not expressly provided for by the Loan Documents, Agent
shall be entitled to request instructions from the Required Lenders in
exercising any discretion or taking any action 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 upon all Lender Parties and all
holders of Notes; provided, however, that Agent shall not be required to take
any action that exposes Agent to personal liability or that is contrary to this
Agreement or applicable Law.

 

In the event that the Agent has knowledge of a Default or Event of Default or
receives a notice thereof from a Lender or a Borrower, the Agent shall give
prompt notice thereof to the Lenders (provided that Agent shall be deemed to
have knowledge only if the officers of Agent primarily responsible for
administration of the Loans have actual knowledge of such Default or Event of
Default, and in no event shall any knowledge of a Default or Event of Default be
imputed to Agent). Agent may, in its discretion, or shall upon direction of the
Required Lenders, give any notice pursuant to this Agreement that is necessary
for commencement of any cure period. Upon the occurrence of an Event of Default,
the Lenders shall consult with each other as to a course of action to pursue
with regard to such Event of Default. After the Lenders shall have consulted
with one another, Agent shall promptly propose a course of action (the “Initial
Proposal”) to be taken by Lenders including but not limited to:

 

(A)    declaring an Event of Default, sending appropriate notices, or
accelerating payment under the Notes; or

 

commencing collection proceedings against one or more of the Borrowers; or

 

waiving such Event of Default.

 

The Initial Proposal shall be in writing and given to Lenders in the manner
specified for giving notice hereunder. After five (5) Business Days from the
Lenders’ receipt of the Initial Proposal, Agent shall commence steps to carry
out the Initial Proposal, unless Agent shall have received written notice from
any of the Lenders that the Initial Proposal has been rejected. If the Initial
Proposal is rejected by any of the Lenders, and an alternate proposal is not
agreed upon by all of the Lenders within ten (10) days of the date of the
Initial Proposal, Agent shall, and it is hereby authorized, empowered, directed
and instructed to take any action consistent with ordinary and prudent
commercial banking standards to collect the amounts due under the Loans and to
protect and preserve the respective rights and interest of the Lenders as is
authorized by any of the Loan Documents. Lenders agree that any actions taken by
Agent pursuant to this paragraph shall be deemed a reasonable course of conduct,
and the Lenders hereby, approve, ratify and affirm such actions. Once a course
of action has been approved, as required herein, it may be withdrawn with
approval of all of the Lenders.

 

Agent’s Notices, Etc. Agent agrees to give to each Lender prompt notice of each
notice of Default given to it by Borrower pursuant to the terms of this
Agreement.

 

Agent’s Reliance, Etc. Neither Agent (nor any of its directors, officers, agents
or employees) shall be liable for any action taken or omitted to be taken under
or in connection with the Loan Documents, except for its own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing,
Agent: (a) may treat the payee of any Note as the holder thereof until

 

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Agent receives and accepts an Assignment and Acceptance entered into by the
Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as
assignee; (b) may consult with legal counsel (including counsel for any Lender
Party), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (c)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with the Loan Documents; (d) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of any Loan Document on the part of any
Lender Party or to inspect the property (including the books and records) of any
Lender Party; (e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any Lien created or purported to be created under or
in connection with, any Loan Document or any other instrument or document
furnished pursuant thereto; and (f) shall incur no liability under or in respect
of any Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopy or telex) believed by
it to be genuine and signed or sent by the proper Person.

 

SouthTrust and Affiliates. With respect to its Commitments, the Advances made by
it and the Notes issued to it, SouthTrust shall have the same rights and powers
under the Loan Documents as any other Lender and may exercise the same as though
it were not an Agent; and the term “Lender” shall, unless otherwise expressly
indicated, include SouthTrust in its capacity as a lender under this Agreement.
SouthTrust and its Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with, Borrower and any other Lender,
any of their respective Subsidiaries and any Person who may do business with or
own securities of any such Person, all as if SouthTrust were not Agent and
without any duty to account therefor to any Person.

 

Lender Credit Decision. Each Lender acknowledges that it has, independently and
without reliance upon Agent or any other Lender and based on the financial
statements of Borrower and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.

 

Indemnification

 

Each Lender severally agrees to indemnify Agent (to the extent not promptly
reimbursed by Borrower) from and against such Lender’s Pro Rata Share of any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by, or asserted against Agent in any way relating to
or arising out of the Loan Documents or any action taken or omitted by Agent
under the Loan Documents; provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or

 

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disbursements resulting from Agent’s gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender agrees to reimburse Agent
promptly upon demand for its Pro Rata Share of any costs and expenses
(including, without limitation, fees and expenses of counsel) payable by
Borrower under this Agreement, to the extent that Agent is not promptly
reimbursed for such costs and expenses by Borrower. The failure of any Lender to
reimburse Agent promptly upon demand for its Pro Rata Share of any amount
required to be paid by Lender to Agent as provided herein shall not relieve any
other Lender of its obligation hereunder to reimburse Agent for its Pro Rata
Share of such amount, but no Lender shall be responsible for the failure of any
other Lender to reimburse Agent for such other Lender’s Pro Rata Share of such
amount. Without prejudice to the survival of any other agreement of any Lender
hereunder, the agreement and obligations of each Lender contained in this
Section shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under the other Loan Documents.

 

Each Lender severally agrees to indemnify Issuing Lender (to the extent not
promptly reimbursed by Borrower) from and against such Lender’s Pro Rata Share
of any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against Issuing
Lender in any way relating to or arising out of the Loan Documents or any action
taken or omitted by Issuing Lender under the Loan Documents; provided, however,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Issuing Lender’s gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to reimburse
Issuing Lender promptly upon demand for its Pro Rata Share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by Borrower under this Agreement, to the extent that Issuing Lender is not
promptly reimbursed for such costs and expenses by Borrower. The failure of any
Lender to reimburse Issuing Lender promptly upon demand for its Pro Rata Share
of any amount required to be paid by the Lender Parties to Issuing Lender as
provided herein shall not relieve any other Lender of its obligation hereunder
to reimburse Issuing Lender for its Pro Rata Share of such amount, but no Lender
shall be responsible for the failure of any other Lender to reimburse Issuing
Lender for such other Lender’s Pro Rata Share of such amount. Without prejudice
to the survival of any other agreement of any Lender hereunder, the agreement
and obligations of each Lender contained in this Section shall survive the
payment in full of principal, interest and all other amounts payable hereunder
and under the other Loan Documents.

 

Successor Agent. Agent may resign at any time by giving written notice thereof
to the Lender Parties and Borrower, and may be removed at any time with or
without cause by the Required Lenders. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent’s giving
of notice of resignation or the Required Lenders’ removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lender Parties, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States or of any State thereof and having a combined capital and
surplus of at least $250,000,000.00. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent and upon the execution and filing or
recording of such financing statements, or amendments thereto, and such
amendments or supplements to the Security Documents, and such other instruments
or notices, as may be

 

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necessary or desirable, or as the Required Lenders may request, in order to
continue the perfection of the Liens granted or purported to be granted by the
Security Documents, such successor Agent shall succeed to and become vested with
all the rights, powers, discretion, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
the Loan Documents. After any retiring Agent’s resignation or removal hereunder
as Agent, the provisions of this Article XVII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement.

 

No Third Party Beneficiary. The provisions of this Article 12 are solely for the
benefit of the Lender Parties, and no Person other than the Lender Parties is
intended to be a beneficiary of the rights and obligations of Lender Parties
under this Article 12, and Lender Parties shall have the right to amend or
modify this Article 12, or waive any requirement under this Article 12, without
the consent or approval of any other Person (except Lender Parties shall notify
Borrowers as to any such amendment or modification).

 

MISCELLANEOUS

 

Termination of Agent’s Lien. This Agreement and the Agent’s Lien will not be
terminated until one of Agent’s officers signs a written termination or
satisfaction agreement to such effect. Even if all of the Obligations owing to
Lender Parties at any time should be paid, Agent’s Lien will continue to secure
any Obligation of Borrower thereafter arising until the written termination or
satisfaction agreement referred to above has been executed by Agent. Except as
otherwise expressly provided for in this Agreement, no termination of this
Agreement shall in any way affect or impair the representations, warranties,
agreements, covenants, obligations, duties and Obligations of Borrower or the
powers, rights, and remedies of Lender Party under this Agreement with respect
to any transaction or event occurring prior to such termination, all of which
shall survive such termination. Except as may otherwise expressly be provided
herein to the contrary, in no event shall Agent be obligated to terminate
Agent’s Lien or return or release the Collateral or any portion thereof to
Borrower (a) until payment in full of the Obligations, or (b) if Lender Party is
obligated to extend credit to or for the benefit of Borrower under this
Agreement.

 

Construction. The provisions of this Agreement shall be in addition to those of
any other Loan Document and any guaranty, pledge or security agreement,
mortgage, deed of trust, security deed, note or other evidence of liability
given by Borrower to Lender Party to or for the benefit of, all of which shall
be construed as complementary to each other, and all existing liabilities and
obligations of Borrower to Lender Party and any Liens heretofore granted to or
for the benefit of Lender Party shall, except and only to the extent expressly
provided herein to the contrary, remain in full force and effect, and shall not
be released, impaired, diminished, or in any other way modified or amended as a
result of the execution and delivery of this Agreement or any other Loan
Document or by the agreements and undertaking of Borrower contained herein and
therein. Nothing herein contained shall prevent Lender Party from enforcing any
or all other notes, guaranties, pledges or security agreements, mortgages, deeds
of trust, or security deeds in accordance with their respective terms. In the
event of a conflict between any of the provisions of this Agreement, the Notes,
any one or more of the Security Documents or any other Loan

 

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Document, the provisions most favorable to Lender Party shall control.

 

Indemnity. Borrower hereby agrees to indemnify Lender Party and its officers,
directors, agents, and attorneys against, and to hold Lender Party and all such
other Persons harmless from all Indemnified Losses resulting from any
representation or warranty made by Borrower or on Borrower’s behalf pursuant to
this Agreement having been false when made, or resulting from Borrower’s breach
of any of the covenants set forth in this Agreement, which indemnification is in
addition to, and not in derogation of, any statutory, equitable, or common law
right or remedy Lender Party may have for breach of representation, warranty,
statement or covenant or otherwise may have under any of the Loan Documents.
This agreement of indemnity shall be a continuing agreement and shall survive
payment of the Loans and termination of this Agreement.

 

Lender Party’s Consent. Except where otherwise expressly provided in the Loan
Documents, in any instance where the approval, consent, or the exercise of
Lender Party’s judgment or discretion is required or permitted, the granting or
denial of such approval or consent and the exercise of such judgment or
discretion shall be (a) within the sole discretion of the applicable Lender
Party; and (b) deemed to have been given only by a specific writing intended for
the purpose given and executed by the applicable Lender Party.

 

Enforcement and Waiver by Lender Party. Subject to the terms and conditions of
this Agreement, Lender Party shall have the right at all times to enforce the
provisions of this Agreement, the Notes, and each of other Loan Documents in
strict accordance with the terms hereof and thereof, notwithstanding any conduct
or custom on the part of Lender Party in refraining from so doing at any time or
times. The failure of Lender Party at any time or times to enforce its rights
under such provisions, strictly in accordance with the same, shall not be
construed as having created a custom in any way or manner contrary to specific
provisions of this Agreement or as having in any way or manner modified or
waived the same. All rights and remedies of Lender Party are cumulative and the
exercise of one right or remedy shall not be deemed a waiver or release of any
other right or remedy.

 

No Representation, Assumption, or Duty. Nothing, including any Advance or
acceptance of any document or instrument, shall be construed as a representation
or warranty, express or implied, to any Person by Lender Party. Any inspection
or audit of the Collateral or the Records of Borrower, or the procuring of
documents and financial and other information, by or on behalf of Lender Party
shall be for Lender Party’s protection only, and shall not constitute any
assumption of responsibility by Lender Party with respect thereto or relieve
Borrower of any of Borrower’s obligations.

 

Expenses of Lender Parties. Borrower will, on demand, reimburse Lender Party for
all expenses incurred by Lender Party in connection with the closing of the
Loans (except the legal fees of Compass incurred in connection with the closing
of the Loans shall be limited to $5,000.00) and the preparation, negotiation,
amendment, modification, interpretation, administration, and/or enforcement of
this Agreement and the other Loan Documents and/or in the collection of any
amounts owing from Borrower or any other Person to Lender Party under this
Agreement or any other Loan Document and, until so paid, the amount of such
expenses shall be added to and

 

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become part of the amount of the Obligations.

 

Attorneys’ Fees. If at any time or times hereafter Lender Party employs counsel
to advise or provide other representation with respect to this Agreement, any
Loan Document, or any other agreement, document or instrument heretofore, now or
hereafter executed by Borrower Party and delivered to Lender Party with respect
to the Obligations, or to commence, defend or intervene, file a petition,
complaint, answer, motion or other pleadings or to take any other action in or
with respect to any pending, threatened or anticipated suit or proceeding
relating to this Agreement, any Loan Document, or any other agreement,
instrument or document heretofore, now or hereafter executed by Borrower and
delivered to Lender Party with respect to the Obligations, or to represent
Lender Party in any litigation with respect to the affairs of Borrower, or to
enforce any rights of Lender Party or obligations of Borrower or any other
Person which may be obligated to Lender Party by virtue of this Agreement, any
Loan Document, or any other agreement, document or instrument heretofore, now or
hereafter delivered to Lender Party by or for the benefit of Borrower with
respect to the Obligations, or to collect from Borrower any amounts owing
hereunder, then in any such event, all of the attorneys’ fees incurred by Lender
Party arising from such services and any expenses, costs and charges relating
thereto shall constitute additional obligations of Borrower payable on demand
and, until so paid, shall be added to and become part of the Obligations.

 

Exclusiveness. This Agreement, the Notes, the Security Documents, and any other
Loan Documents made pursuant hereto are made for the sole protection of
Borrower, Lender Party, and Lender Party’s successors and assigns, and no other
Person shall have any right of action hereunder.

 

Waiver and Release by Borrower. Borrower (A) waives protest of all commercial
paper at any time held by Lender Party on which Borrower is any way liable; (B)
waives notice of acceleration and of intention to accelerate; (C) waives notice
and opportunity to be heard, after acceleration, before exercise by Lender Party
of the remedies of self-help, set-off, or of other summary procedures permitted
by any applicable Laws or by any agreement with Borrower, and except where
required hereby or by any applicable Laws which requirement cannot be waived,
notice of any other action taken by Lender Party; and (D) releases the Lender
Parties and their respective officers, attorneys, agents and employees from all
claims for loss or damage caused by any act or omission on the part of any of
them except willful misconduct or gross negligence.

 

Limitation on Waiver of Notice, Etc. Notwithstanding any provision of this
Agreement to the contrary, to the extent that any applicable Law expressly
limits any waiver of any right contained herein or in any other Loan Document
(including any waiver of any notice or other demand), such waiver shall be
ineffective to such extent.

 

Additional Costs. In the event that any applicable Law now or hereafter in
effect and whether or not presently applicable to Lender Party, or any
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by Lender Party
with any guideline, request or directive of any such Governmental Authority
(whether or not having the force of law), shall (i) affect the basis of taxation
of payments to

 

70

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Lender Party of any amounts payable by Borrower under this Agreement (other than
taxes imposed on the overall net income of Lender Party), or (ii) impose, modify
or deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by Lender
Party, or (iii) impose any other condition with respect to this Agreement, the
Notes or the Loans, or (iv) affect the amount of capital required or expected to
be maintained by Lender Party, and the result of any of the foregoing is to
increase the cost to Lender Party of making, funding or maintaining the Loans or
to reduce the amount of any amount receivable by Lender Party thereon, then
Borrower shall pay to Lender Party from time to time, upon request by Lender
Party, additional amounts sufficient to compensate Lender Party for such
increased cost or reduced amount receivable to the extent Lender Party is not
compensated therefor in the computation of the interest rate applicable to the
Loans. A statement as to the amount of such increased cost or reduced amount
receivable, prepared in good faith and in reasonable detail by Lender Party and
submitted by Lender Party to Borrower, shall be conclusive and binding for all
purposes absent manifest error in computation.

 

Illegality and Impossibility. In the event that any applicable Law now or
hereafter in effect and whether or not presently applicable to Lender Party, or
any interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by
Lender Party with any guideline, request or directive of such Governmental
Authority (whether or not having the force of law), including without limitation
exchange controls, shall make it unlawful or impossible for Lender Party to
maintain any Loan under this Agreement, Borrower shall upon receipt of
reasonable notice thereof from Lender Party repay in full the then outstanding
principal amount of such Loan, together with all accrued interest thereon to the
date of payment and all amounts owing to Lender Party, (a) on the last day of
the then current interest period applicable to such Loan if Lender Party may
lawfully continue to maintain such Loan to such day, or (b) immediately if
Lender Party may not continue to maintain such Loan to such day.

 

Assignments and Participations.

 

Each Lender may assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment or Commitments, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) each such assignment
shall be of a uniform, and not a varying, percentage of all rights and
obligations under this Agreement and the other Loan Documents, (ii) except in
the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender’s rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $1,000,000.00, (iii) each such assignment shall be to an
Eligible Assignee, and (iv) the parties to each such assignment shall execute
and deliver to Agent, for its acceptance, an Assignment and Acceptance, together
with any Note or Notes subject to such assignment and a processing fee of
$5,000.00.

 

Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in such Assignment and Acceptance, (i) the assignee
thereunder shall be a party hereto

 

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and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
of a Lender hereunder, and (ii) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).

 

By executing and delivering an Assignment and Acceptance, the Lender assignor
thereunder and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection or priority of any Lien
created or purported to be created under or in connection with, this Agreement
or any other Loan Document or any other instrument or document furnished
pursuant hereto or thereto; (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of Borrower or any other Lender Party or the performance or observance
by any Lender Party of any of its obligations under any Loan Document or any
other instrument or document furnished pursuant thereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the Financial Statements and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon Agent, such assigning Lender or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Loan Documents as
are delegated to Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.

 

Agent shall maintain at its principal office a copy of each Assignment and
Acceptance delivered to and accepted by it and a record of the names and
addresses of the Lender Parties and the Commitment of, and principal amount of
the Advances owing to, each Lender from time to time (the “Register”). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and Borrower, Agent and Lender Parties may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by Borrower or
Lender at any reasonable time and from time to time upon reasonable prior
notice.

 

Upon its receipt of an Assignment and Acceptance executed by an assigning Lender
and an assignee, together with any Note or Notes subject to such assignment,
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form as required by this Agreement, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to Borrower and each Lender. In the

 

72

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case of any assignment by Lender, within five Business Days after its receipt of
such notice, Borrower, at its own expense, shall execute and deliver to Agent in
exchange for the surrendered Note or Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained a
Commitment hereunder, a new Note to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the Note or Notes so surrendered.

 

Each Lender may sell participations to one or more Persons (other than any
Lender Party or any of its Affiliates) in or to all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitments, the Advances owing to it and the Note or Notes (if
any) held by it); provided, however, that (i) such Lender’s obligations under
this Agreement (including, without limitation, its Commitments) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any such Note for all purposes of this Agreement, (iv) Borrower,
Agent and the other Lender Parties shall continue to deal solely and directly
with such Lender in connection with such Lender’s rights and obligations under
this Agreement and (v) no participant under any such participation shall have
any right to approve any amendment or waiver of any provision of any Loan
Document, or any consent to any departure by any Lender Party therefrom, except
to the extent that such amendment, waiver or consent would reduce the principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation, postpone any date fixed
for any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or release all or substantially all of the Collateral.

 

Any Lender may, in connection with any assignment or participation or proposed
assignment or participation pursuant to this Section, disclose to the assignee
or participant or proposed assignee or participant, any information relating to
Borrower furnished to such Lender by or on behalf of any Borrower Party;
provided, however, that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information received by it from such Lender.

 

Notwithstanding any other provision set forth in this Agreement, any Lender may
at any time create a Lien in all or any portion of its rights under this
Agreement (including, without limitation, the Advances owing to it and the Note
or Notes held by it) in favor of any Federal Reserve Lenders in accordance with
Regulation A of the Board of Governors of the Federal Reserve System.

 

Binding Effect, Assignment. This Agreement shall inure to the benefit of, and
shall be binding upon, the respective successors and permitted assigns of the
parties hereto. Borrower has no right to assign any of its rights or obligations
hereunder without the prior written consent of the Lender Parties.

 

Entire Agreement, Amendments. This Agreement, including the Exhibits hereto, all
of which are hereby incorporated herein by reference, and the documents executed
and delivered pursuant hereto, constitute the entire agreement between the
parties, and may be amended only by a writing signed on behalf of each party.

 

73

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Severability. If any provision of this Agreement, the Notes, or any of the other
Loan Documents shall be held invalid under any applicable Laws, such invalidity
shall not affect any other provision of this Agreement or such other instrument
or agreement that can be given effect without the invalid provision, and, to
this end, the provisions hereof are severable.

 

Headings. The section and paragraph headings hereof are inserted for convenience
of reference only, and shall not alter, define, or be used in construing the
text of such sections and paragraphs.

 

Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute but one and the same instrument.

 

Seal. This Agreement is intended to take effect as an instrument under seal.

 

SUBMISSION TO JURISDICTION, GOVERNING LAW AND NOTICES

 

Notices. Any notices or consents required or permitted by this Agreement shall
be in writing and shall be deemed delivered if delivered in person or if sent by
certified mail, postage prepaid, return receipt requested, or telegraph, or
facsimile, as follows, unless such address is changed by written notice
hereunder:

 

If to Borrowers

 

Pemco Aviation Group, Inc.

1943 50th Street North

Birmingham, Alabama 35212

Attention: Mr. John Lee

Facsimile #205-592-0195

 

Pemco Aeroplex, Inc.

1943 50th Street North

Birmingham, Alabama 35212

Attention: Mr. John Lee

Facsimile #205-592-0195

 

Pemco World Air Services, Inc.

1943 50th Street North

Birmingham, Alabama 35212

Attention: Mr. John Lee

Facsimile #205-592-0195

 

Pemco Engineers, Inc.

1943 50th Street North

Birmingham, Alabama 35212

Attention: Mr. John Lee

Facsimile #205-592-0195

 

74

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Space Vector Corporation

1943 50th Street North

Birmingham, Alabama 35212

Attention: Mr. John Lee

Facsimile #205-592-0195

 

with a copy to:

 

Thomas C. Clark, III, Esq.

Maynard, Cooper & Gale, P.C.

2400 AmSouth/Harbert Plaza, 1901 Sixth Avenue North

Birmingham, Alabama 35203-2618

Facsimile #(205) 254-1999

 

If to SouthTrust (whether as a Lender or as Agent):

 

SouthTrust Bank

P.O. Box 2554

Birmingham, Alabama 35290

Attention: Alabama Corporate Banking Department

Facsimile #(205) 254-5911

 

with a copy to:

 

Ray D. Gibbons, Esq.

Burr & Forman LLP

3100 SouthTrust Tower

Birmingham, Alabama 35203

Facsimile #(205) 458-5100

 

If to Compass:

 

Compass Bank

Corporate Banking Center

15 South 20th Street, Suite 201

Birmingham, Alabama 35233

Attention: Corporate Banking

Facsimile #(205) 297-3926

 

with a copy to:

 

William S. Wright, Esq.

Balch & Bingham LLP

1710 Sixth Avenue North, P.O. Box 306

Birmingham, Alabama 35201-0306

Facsimile #205-226-8798

 

and with a copy to Agent

 

75

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Governing Law. This Agreement is entered into and performable in Jefferson
County, Alabama, and the substantive Laws, without giving effect to principles
of conflict of laws, of the United States and the State of Alabama shall govern
the construction of this Agreement and the documents executed and delivered
pursuant hereto, and the rights and remedies of the parties hereto and thereto,
except to the extent that the location of any Collateral in a state or
Jurisdiction other than Alabama requires that the perfection of Agent’s Lien,
and the enforcement of certain of Agent’s remedies with respect to the
Collateral, be governed by the Laws of such other state or Jurisdiction.

 

SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL, ETC.

 

BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY:

 

SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
ALABAMA, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF
ALABAMA, AND APPELLATE COURTS FROM ANY THEREOF;

 

CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS, AND
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

 

AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED
BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY
SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET FORTH IN
THIS AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH AGENT SHALL HAVE BEEN NOTIFIED
PURSUANT THERETO; AND

 

AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY
OTHER JURISDICTION.

 

BORROWER AND LENDER PARTY HEREBY:

 

IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING
DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT, THE NOTE, ANY
OF THE OTHER LOAN DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION
HEREWITH OR THEREWITH; AND

 

AGREES THAT ANY OF THEM MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED FOR AGREEMENT BETWEEN
THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY, AND THAT ANY DISPUTE OR
CONTROVERSY OF ANY KIND WHATSOEVER BETWEEN THEM SHALL INSTEAD BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

76

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

 

[SIGNATURE PAGES TO FOLLOW]

 

 

77

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SIGNATURE PAGE—BORROWERS

 

PEMCO AVIATION GROUP, INC.

By:

 

/s/    John R. Lee        

 

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

Its:

     

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

 

PEMCO AEROPLEX, INC.

By:

 

/s/    John R. Lee        

 

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

Its:

     

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

 

PEMCO ENGINEERS, INC.

By:

 

/s/    John R. Lee        

 

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

Its:

     

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

 

PEMCO WORLD AIR SERVICES, INC.

By:

 

/s/    John R. Lee        

 

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

Its:

     

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

 

SPACE VECTOR CORPORATION

By:

 

/s/    John R. Lee        

 

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

Its:

     

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

 

 

 

78

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STATE OF ALABAMA

COUNTY OF                                         

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that                                         , whose name as
                                         of Pemco Aviation Group, Inc., a
Delaware corporation, is signed to the foregoing instrument, and who is known to
me, acknowledged before me that, being informed of the contents of such
instrument, he/she, as such officer and with full authority, executed the same
voluntarily for and as the act of said corporation.

 

Given under my hand and official seal, this the              day of December,
2002.

 

[SEAL]

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

Notary Public

My Commission Expires:                                     

 

STATE OF ALABAMA

COUNTY OF                                         

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that                                         , whose name as
                                         of Pemco Aeroplex, Inc., an Alabama
corporation, is signed to the foregoing instrument, and who is known to me,
acknowledged before me that, being informed of the contents of such instrument,
he/she, as such officer and with full authority, executed the same voluntarily
for and as the act of said corporation.

 

Given under my hand and official seal, this the              day of December,
2002.

 

[SEAL]

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

Notary Public

My Commission Expires:                                     

 

STATE OF ALABAMA

COUNTY OF                                         

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that                                         , whose name as
                                         of Pemco Engineers, Inc., a Delaware
corporation, is signed to the foregoing instrument, and who is known to me,
acknowledged before me that, being informed of the contents of such instrument,
he/she, as such officer and with full authority, executed the same voluntarily
for and as the act of said corporation.

 

Given under my hand and official seal, this the              day of December,
2002.

 

[SEAL]

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

Notary Public

My Commission Expires:                                     

 

 

79

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STATE OF ALABAMA

COUNTY OF                                         

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that                                         , whose name as
                                         of Pemco World Air Services, Inc., a
Delaware corporation, is signed to the foregoing instrument, and who is known to
me, acknowledged before me that, being informed of the contents of such
instrument, he/she, as such officer and with full authority, executed the same
voluntarily for and as the act of said corporation.

 

Given under my hand and official seal, this the              day of December,
2002.

 

[SEAL]

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

Notary Public

My Commission Expires:                                     

 

STATE OF ALABAMA

COUNTY OF                                         

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that                                         , whose name as
                                         of Space Vector Corporation, a Delaware
corporation, is signed to the foregoing instrument, and who is known to me,
acknowledged before me that, being informed of the contents of such instrument,
he/she, as such officer and with full authority, executed the same voluntarily
for and as the act of said corporation.

 

Given under my hand and official seal, this the              day of December,
2002.

 

[SEAL]

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

Notary Public

My Commission Expires:                                     

 

80

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

 

SIGNATURE PAGE—SOUTHTRUST

 

 

SOUTHTRUST BANK, as a Revolving Loan

Lender, as a Term Loan Lender, as Swing Line

Lender, and as Issuing Lender

By:

 

/s/    Austin Davis        

 

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

Its:

     

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

 

STATE OF ALABAMA

COUNTY OF JEFFERSON

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that                                         , whose name as
                                                      of SouthTrust Bank, an
Alabama banking corporation, is signed to the foregoing instrument, and who is
known to me, acknowledged before me that, being informed of the contents of such
instrument, he/she, as such officer and with full authority, executed the same
voluntarily for and as the act of said banking corporation.

 

Given under my hand and official seal, this the              day of December,
2002.

 

[SEAL]

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

Notary Public

My Commission Expires:                                     

 

Instructions for Wire Transfers to Agent:

SouthTrust Bank—Birmingham, Alabama

ABA #062 0000 90

Account No.:                                                      

Reference:                                                          

Attention:                                                            

 

81

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SIGNATURE PAGE—COMPASS

 

 

COMPASS BANK, as a Revolving Loan Lender

and as a Term Loan Lender

By

 

/s/    Alex Morton        

 

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

Its:

     

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

 

 

STATE OF ALABAMA

COUNTY OF JEFFERSON

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that                                         , whose name as
                                         of Compass Bank, an Alabama banking
corporation, is signed to the foregoing instrument, and who is known to me,
acknowledged before me that, being informed of the contents of such instrument,
he/she, as such officer and with full authority, executed the same voluntarily
for and as the act of said banking corporation.

 

Given under my hand and official seal, this the              day of December,
2002.

 

[SEAL]

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

Notary Public

My Commission Expires:                                     

 

 

82

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EXHIBIT A

APPROVED CONTRACTS

 

Current contracts with The Government of the United States of America

 

Current contracts with Northwest Airlines

 

Current contracts with General Electric Capital Aviation Services (GECAS)

 

Current contracts with Lockheed Martin

 

Current contracts with McDonnell Douglas Corporation, A Wholly Owned Subsidiary
of the Boeing Company

 

Current contracts with The Boeing Company

 

New contracts with entities listed above on this Exhibit A will be deemed
automatically an Approved Contract if (i) the new contract is for similar
services with reasonably similar terms and conditions, (ii) Borrower gives
written notice to Agent that such contract is intended to be an Approved
Contract, and (iii) Agent approves such contract as an Approved Contract (and as
a condition of such approval, Agent may require, among other things, a copy of
the new contract and financial information regarding the party to the contract
to evidence that such party and such party’s creditworthiness are acceptable to
Agent).

 

83

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EXHIBIT B

ASSETS EXCLUDED AS COLLATERAL

 

None

 

84

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EXHIBIT C

FORM OF ASSIGNMENT AND ACCEPTANCE

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to that certain Credit Agreement dated as of December
        , 2002 (as amended, supplemented or otherwise modified from time to
time, the “Credit Agreement”) among Pemco Aviation Group, Inc., Pemco Aeroplex,
Inc., Pemco World Air Services, Inc., Pemco Engineers, Inc., Space Vector
Corporation (the “Borrowers”), the Agent and the other Lender Parties (both as
defined in the Credit Agreement). Terms defined in the Credit Agreement are used
herein with the same meaning.

 

The “Assignor” and the “Assignee” referred to on Schedule 1 hereto agree as
follows:

 

1.     The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, an interest in and to the
Assignor’s rights and obligations under the Credit Agreement as of the date
hereof equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement and the other Loan
Documents. After giving effect to such sale and assignment, the Assignee’s
Commitments and the amount of the Advances owing to the Assignee will be as set
forth on Schedule 1 hereto.

 

2.    The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) 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 Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of, or the perfection or priority of any lien or security interest
created or purported to be created under or in connection with, the Loan
Documents or any other instrument or document furnished pursuant thereto; and
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Loan Party or the performance or
observance by any Loan Party of any of its obligations under any Loan Document
or any other instrument or document furnished pursuant thereto; and (iv)
attaches the Note or Notes held by the Assignor and requests that Agent exchange
such Note or Notes for a new Note or Notes payable to the order of the Assignee
in an amount equal to the Commitments assumed by the Assignee pursuant hereto or
new Notes payable to the order of the Assignee in an amount equal to the
Commitments assumed by the Assignee pursuant hereto and the Assignor in an
amount equal to the Commitments retained by the Assignor under the Credit
Agreement, respectively, as specified on Schedule 1 hereto.

 

3.    The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with such financial information and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon Agent, the Assignor or any other Lender
Party and based on such documents and information as it shall deem

 

85

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

appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is an
Eligible Assignee; (iv) appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers and discretion under the Loan
Documents as are delegated to Agent by the terms thereof, together with such
powers and discretion as are reasonably incidental thereto; and (v) agrees that
it will perform in accordance with their terms all of the obligations that by
the terms of the Credit Agreement are required to be performed by it as a Lender
Party.

 

4.    Following the execution of this Assignment and Acceptance, this document
will be delivered to Agent for acceptance and recording by Agent. The effective
date for this Assignment and Acceptance (the “Effective Date”) shall be the date
of acceptance hereof by Agent, unless otherwise specified on Schedule 1 hereto.

 

5.    Upon such acceptance and recording by Agent, as of the Effective Date, (i)
the Assignee shall be a party to the Credit Agreement and the other Loan
Documents and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Lender Party thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Credit Agreement and the
other Loan Documents.

 

6.    Upon such acceptance and recording by Agent, from and after the Effective
Date, Agent shall make all payments under the Credit Agreement and the Notes in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement and the Notes for periods prior to the
Effective Date directly between themselves.

 

7.    This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Alabama.

 

8.    This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.

 

IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this
Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.

 

 

[NAME OF ASSIGNOR], as Assignor

 

[NAME OF ASSIGNEE], as Assignee

By:                                     
                                                

 

Title:                                    
                                              

 

Date:                                                                      ,
20      

 

By:                                     
                                                

 

Title:                                    
                                              

 

Date:                                                                      ,
20      

 

86

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

 

Accepted and Approved this             

day of                     , 20            

 

[NAME OF AGENT]

 

By:                                     
                                                

 

Title:                                    
                                              

 

Date:                                                                      ,
20      

 

 

87

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

 

SCHEDULE 1

to

ASSIGNMENT AND ACCEPTANCE

 

A.

  

Assignor’s Credit Percentage before assignment

  

 

%

B.

  

Assignor’s Credit Percentage being assigned

  

 

%

C.

  

Assignor’s Credit Percentage remaining after assignment

  

 

%

    

Note: The sum of B and C must total A.

      

A.

  

Aggregate outstanding Advances of Assignor before assignment

  

$

                

B.

  

Aggregate outstanding Advances of Assignor after assignment

  

$

 

C.

  

Aggregate outstanding Advances of Assignee after assignment

  

$

 

A.

  

Maximum principal amount of Revolving Note payable to Assignor before assignment

  

$

 

B.

  

Maximum principal amount of Revolving Note payable to Assignor after assignment

  

$

 

C.

  

Maximum principal amount of Revolving Note payable to Assignee after assignment

  

$

 

A.

  

Maximum principal amount of Term Note payable to Assignor before assignment

  

$

 

B.

  

Maximum principal amount of Term Note payable to Assignor after assignment

  

$

 

C.

  

Maximum principal amount of Term Note payable to Assignee after assignment

  

$

 

 

[NAME OF ASSIGNOR], as Assignor

 

[NAME OF ASSIGNEE], as Assignee

By:                                     
                                                

 

Title:                                    
                                              

 

Date:                                                                      ,
20      

 

By:                                     
                                                

 

Title:                                    
                                              

 

Date:                                                                      ,
20      

 

Accepted and Approved this             

day of                     , 20            

 

[NAME OF AGENT]

 

By:                                     
                                                

 

Title:                                    
                                              

 

88

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

 

Date:                                                                      ,
20      

 

 

 

 

EXHIBIT D

FORM OF COLLATERAL REPORT

 

COLLATERAL REPORT AND BORROWING BASE CERTIFICATE

 

To:  SouthTrust Bank, as Agent

P.O. Box 2554

Birmingham, Alabama 35290

Attention: Corporate Banking Department

 

Pursuant to that certain Credit Agreement, dated as of December         , 2002
(as amended from time to time, the “Credit Agreement”) among PEMCO AVIATION
GROUP, INC., a Delaware corporation, PEMCO AEROPLEX, INC., an Alabama
corporation, PEMCO ENGINEERS, INC., a Delaware corporation, PEMCO WORLD AIR
SERVICES, INC., a Delaware corporation, SPACE VECTOR CORPORATION, a Delaware
corporation (the “Borrowers”), SOUTHTRUST BANK, an Alabama banking corporation,
as Agent (the “Agent”), and the other Lender Parties identified therein, the
undersigned submits this Collateral Report and Borrowing Base Certificate. As
used herein, capitalized words and phrases shall have the meanings set forth in
the Credit Agreement.

 

I.

  

Borrowing Base

      

A.

  

Accounts Receivable due from prime contractors on all U.S. Government contracts

    

1. Total unpaid balances of Accounts Receivable due from prime contractors on
all U.S. Government Contracts at                 , 20    .

  

$

                    

    

2. All such Accounts which are not Eligible Accounts

  

$

 

    

3. Item I.A.1. minus I.A.2.

  

$

 

    

4. 85% of Item I.A.3

  

$

 

B.

  

Accounts Receivable due from governmental and commercial contracts

    

1. Total unpaid balances of Accounts Receivable due from governmental and
commercial contracts at                 , 20    .

  

$

 

    

2. All such Accounts which are not Eligible Accounts

  

$

 

    

3. Item I.B.1. minus I.B.2.

  

$

 

    

4. 85% of Item I.B.3

  

$

 

 

89

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

C.

  

Accounts Receivable which are unbilled due to the terms of an applicable
contract, but with respect to which work has been performed and completed

           

1. Total unpaid balances of Accounts Receivable which are unbilled due to the
terms of an applicable contract, but with respect to which work has been
performed and completed at                 , 20    .

  

$

                    

    

2. All such Accounts which are not Eligible Accounts

  

$

 

    

3. Item I.C.1. minus I.C.2.

  

$

 

    

4. 50% of Item I.C.3

  

$

 

D.

  

Inventory

           

1. Total value of Inventory at            ,20.

  

$

 

    

2. Amount of Inventory which is not Eligible Inventory

  

$

 

    

3. Item I.D.1. minus Item I.D.2.

  

$

 

    

4. The lesser of (i) $12,000,000.00, or (ii) 50% of Item I.D.3

  

$

 

II.

  

Availability

      

A.

  

1. Accounts Availability, Item I.A.4.

  

$

 

    

2. Accounts Availability, Item I.B.4.

  

$

 

    

3. Accounts Availability, Item I.C.4.

  

$

 

    

4. Inventory Availability, Item I.D.4.

  

$

 

    

5. Total Availability (total of Item II.A.1., plus Item II.A.2., plus Item
II.A.3, plus Item II.A.4)

  

$

 

B.

  

Outstanding Revolving Loan Advances and Availability Reserves

           

1. Outstanding Revolving Loan Advances

  

$

 

    

2. Availability Reserves

  

$

 

    

3. Total Outstanding Advances and Reserves Item II.B.1, plus Item II.B.2

  

$

 

C.

  

Availability

           

The lesser of (a) Item II.A.5. minus Item II.B.3. or (b) $20,000,000.00 minus
Item II B.3. (mandatory prepayment if less than $0; availability if greater than
$0)

  

$

 

 

The undersigned represents and warrants to Agent that:

 

90

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

 

A.   The representations and warranties contained in the Credit Agreement are
true and correct on and as of the date hereof.

 

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

 

C.   All information set forth in this Collateral Report and Borrowing Base
Certificate is true, complete, and accurate.

 

Executed   this              day of                                         
        , 20    .

 

PEMCO AVIATION GROUP, INC.

By:

     

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

Its:

     

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

 

PEMCO AEROPLEX, INC.

By:

     

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

Its:

     

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

 

 

PEMCO ENGINEERS, INC.

By:

     

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

Its:

     

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

 

 

PEMCO WORLD AIR SERVICES, INC.

By:

     

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

Its:

     

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

 

SPACE VECTOR CORPORATION

By:

     

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

Its:

     

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

 

 

 

 

91

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

 

EXHIBIT E

FORM OF COMPLIANCE CERTIFICATE

 

COMPLIANCE CERTIFICATE

FOR THE PERIOD ENDING                             

 

To:    SouthTrust Bank, as Agent

          P.O. Box 2554

          Birmingham, Alabama 35290

          Attention: Corporate Banking Department

 

Pursuant to that certain Credit Agreement, dated as of December             ,
2002 (as amended from time to time, the “Credit Agreement”) among PEMCO AVIATION
GROUP, INC., a Delaware corporation, PEMCO AEROPLEX, INC., an Alabama
corporation, PEMCO ENGINEERS, INC., a Delaware corporation, PEMCO WORLD AIR
SERVICES, INC., a Delaware corporation, SPACE VECTOR CORPORATION, a Delaware
corporation (the “Borrowers”), SOUTHTRUST BANK, an Alabama banking corporation,
as Agent (the “Agent”), and the other Lender Parties identified therein, the
undersigned submits this Compliance Certificate and certifies that the covenants
and financial tests described in the Credit Agreement are as follows:

 

I.

  

Financial Statements and Reports

  

Compliance (Please Indicate)

A.

  

Annual CPA audited, Fiscal Year-End financial statements within 90 days after
each Fiscal Year-End

  

Yes

  

No

B.

  

Quarterly unaudited financial statements within 45 days after each Quarter-End

  

Yes

  

No

C.

  

On or before the last day of each month, a Collateral Report for the immediately
preceding month

  

Yes

  

No

II.

  

Adjusted Tangible Net Worth

              

Minimum of $24,300,000, plus 60% of Net Income as of each Quarter-End beginning
March 31, 2003

              

Actual Adjusted Tangible Net Worth for this reporting period equals $
                    

  

Yes

  

No

III.

  

Adjusted Liabilities to Adjusted Tangible Net Worth

              

Maximum of 2.5 to 1.0 allowed.

              

As of the month ending                              

              

$                            /$                               =                
              

  

Yes

  

No

    

    Adjusted                 Adjusted

         

 

92

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

    

    Liabilities                 TNW                         Ratio

              

IV.

  

Fixed Charge Coverage Ratio

                   

A minimum of 1.2 to 1.0 required at end of each calculated period.

                   

Numerator (Operating Income):

                   

EBITDA

  

$                    

              

Less:    Income Tax Expense

  

$                    

              

Plus:     Lease Expense

  

$                    

              

TOTAL:

  

$                    

              

Denominator (Fixed Charges):

                   

Regularly Scheduled Debt Payments

  

$                    

              

Plus:    Interest Expense

  

$                    

              

            Lease & Rental Expense

  

$                    

              

            All payments on Unfunded Pension Liability

  

$                    

              

TOTAL:

  

$                    

              

$                             divided by
        $                             =                                     

  

Yes

  

No

    

    Numerator                                
        Denominator                    Ratio

              

 

A.    The undersigned represents and warrants to Agent that the undersigned has
individually reviewed the provisions of the Credit Agreement and that a review
of the activities of Borrowers during the period covered by this Compliance
Certificate has been made by or under the supervision of the undersigned with a
view to determining whether Borrowers have kept, observed, performed and
fulfilled all of its obligations under the Credit Agreement.

 

B.    Borrowers have observed and performed each and every undertaking contained
in the Credit Agreement, and no Default or Event of Default has occurred and is
continuing.

 

C.    That all information set forth in this Compliance Certificate is true,
complete, and accurate.

 

Executed this                      day of                     , 20        .

 

PEMCO AVIATION GROUP, INC.

By:

     

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

Its:

     

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

 

PEMCO AEROPLEX, INC.

 

93

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

By:

     

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

Its:

     

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

 

PEMCO ENGINEERS, INC.

By:

     

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

Its:

     

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

 

 

PEMCO WORLD AIR SERVICES, INC.

By:

     

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

Its:

     

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

 

 

SPACE VECTOR CORPORATION

By:

     

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

Its:

     

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

 

94

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

 

EXHIBIT F

LENDERS’ INITIAL CREDIT PERCENTAGES

 

Lender

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

  

Revolving Loan Commitment

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

  

Term Loan Commitment

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

  

Total Commitments

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

    

Revolving Loan Credit Percentage

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

      

Term Loan Credit Percentage

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

      

Credit Percentage

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

 

SouthTrust

  

$

12,500,000

  

$

2,500,000

  

$

15,000,000

    

62.5

%

    

50

%

    

60

%

Compass

  

$

7,500,000

  

$

2,500,000

  

$

10,000,000

    

37.5

%

    

50

%

    

40

%

Total

  

$

20,000,000

  

$

5,000,000

  

$

25,000,000

    

100

%

    

100

%

    

100

%

 

95

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

 

EXHIBIT G

PERMITTED LIENS

 

 

96

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

 

SCHEDULE 9.3

LIST OF EQUITY AGREEMENTS

 

Pemco Aviation - None, except as reflected in Pemco Aviation’s filings with the
Securities and Exchange Commission

 

Pemco Aeroplex - None

 

Pemco World - None

 

Pemco Engineers - None

 

Space Vector - None

 

97

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

 

SCHEDULE 9.4

LIST OF NAMES USED BY BORROWER AND PERSONS

ACQUIRED IN LAST SIX YEARS

 

Name of Borrower

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

    

Other Names Used

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

Pemco Aviation Group, Inc.

    

Precision Standard, Inc.*

Pemco Aeroplex, Inc

    

None

Pemco Engineers, Inc.

    

Precision Standard Corp. (former name)

Pemco World Air Services, Inc.

    

None

Space Vector Corporation

    

None

 

*   Pemco Aviation Group, Inc. is the surviving corporation of a merger with
Precision

Standard, Inc., a Colorado corporation

 

(ii)   None

 

98

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

 

SCHEDULE 9.9

DISPUTED TAX MATTERS

 

Notice from Alabama Department of Revenue regarding Precision Standard, Inc., a
Colorado corporation, not filing an Alabama tax return in 1998—notice dated July
15, 2002.

 

99

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

 

SCHEDULE 9.12 

LISTING OF REAL PROPERTY OWNED OR LEASED BY BORROWER

 

TYPE OF

FACILITY

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

  

STREET

ADDRESS

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

  

COUNTY/

PARISH

AND STATE

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

  

APPLICABLE

BORROWER

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

  

RECORD

OWNER

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

Industrial Building

  

9223 Deering Ave.

Chatsworth, CA 91311-5804

  

Los Angeles County, California

  

Space Vector Corporation

  

Siegel &

Associates, Inc.

Industrial Building

  

9223 Eton Ave.

Chatsworth, CA 91311-5808

  

Los Angeles County, California

  

Space Vector Corporation

  

Siegel &

Associates, Inc.

Industrial Building

  

9207 Deering Ave #B

Chatsworth, CA 91311-6960

  

Los Angeles County, California

  

Space Vector Corporation

  

Siegel &

Associates, Inc.

Industrial Building

  

2398 Railroad St.

Corona, CA

92880-5410

  

Riverside County, California

  

Pemco Engineers, Inc.

  

Marie Cook

Office Building

  

12000 E. 47th Ave. #400

Denver, CO

80239-3115

  

Denver County, Colorado

  

Pemco World Air Services, Inc.

  

Omni Development Corporation

Aircraft Manufacturing

& Maintenance Facility

  

1943 50th St. North

Birmingham, AL

35212-1098

  

Jefferson County, Alabama

  

Pemco Aeroplex, Inc.

  

City of Birmingham, Alabama

Land

  

50th St. North

Birmingham, AL

35212

  

Jefferson County, Alabama

  

Pemco Aeroplex, Inc.

  

CSX Transportation

Aircraft Manufacturing &

Maintenance Facility

  

100 Pemco Dr.

Dothan, AL

36303-9617

  

Houston County, Alabama

  

Pemco World Air Services, Inc.

  

Dothan-Houston County Airport Authority

Aircraft Maintenance Facility

  

4311 General Howard Dr.

Clearwater, FL

33762-3533

  

Pinellas County, Florida

  

Air International, Inc.

  

Pinellas County, Florida

—  —  —  —  —  Nothing Follows—  —  —  —  —  

 

100

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

 

SCHEDULE 9.16

LISTING OF PATENTS, COPYRIGHTS, ETC.

 

101

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

 

SCHEDULE 9.24

INSURANCE POLICIES IN EFFECT

 

TYPE OF COVERAGE

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

  

CARRIER

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

  

POLICY PERIOD

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

  

LIMITS

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

Products/Aviation General Liability

  

Lloyd’s Aircraft Builders Council

  

04/16/02-04/16/03

  

Limits of Liability

Combined Single Limit

Personal Injury/Property

Damage $500,000,000 Grounding $125,000,000 Combined Single Limit Military and
non Military $500,000,000

Property

  

Zurich

  

04/01/02-04/01/03

  

$275,000,000 Limit on Any one occurrence

Commercial Auto

  

Hartford

  

04/01/02-04/01/03

  

Limits of Liability $1,000,000

Workers Compensation

  

American International

  

04/01/02-04/01/03

  

Limits $1,000,000 each accident

Directors and Officers Liability

  

American International

  

04/01/02-04/01/03

  

Limit of Liability $10,000,000 Defense Cost, Securities Claims $250,000

Comprehensive Dishonesty Disappearance & Destruction

  

National Union Fire

  

04/01/02-04/01/03

  

Limits of Liability $5,000,000

Foreign General Liability

  

Chubb

  

04/01/02-04/01/03

  

Limits of Liability $1,000,000 Per occurrence

Fiduciary Liability

  

National Union Fire

  

04/01/02-04/01/03

  

Limit of Liability $5,000,000

Kidnap and Ransom Extortion

  

National Union Fire

  

04/01/02-04/01/03

  

Limits $20,000,000

 

102

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

 

SCHEDULE 10.2(B)

PERMITTED TRANSFERS OF COLLATERAL

 

Sale of Borrower’s lease and related leasehold improvements on the facility
located at 4311 General Howard Dr., Clearwater, Florida 33762-3533.

 

103

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

 

SCHEDULE 10.2(G)

PERMITTED EQUITY TRANSACTIONS

 

Transaction under Borrower’s Non-Qualified Stock Option Plan dated June 1, 1999,
as amended and restated May 17, 2001.

 

Treasury stock transaction as permitted in this Agreement.

 

104

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

 

SCHEDULE 10.3(G)

LISTING OF AGREEMENTS CURRENTLY IN EFFECT

WITH AFFILIATES AND PERMITTED POST-CLOSING

 

None

 

105

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

 

SCHEDULE 10.7(A)

LISTING OF LOCATIONS OF COLLATERAL

 

Pemco Aviation Group, Inc.

 

1943 North 50th Street Birmingham, Alabama 35201

Pemco Aeroplex, Inc.

 

1943 North 50th Street Birmingham, Alabama 35201

Pemco World Air Services, Inc.

 

100 Pemco Drive Dothan, Alabama 36303

Pemco Engineers, Inc.

 

2398 Railroad Street Corona, California 92880

Space Vector Corporation

 

9223 Deering Avenue Chatsworth, California 91311

Source One Spares - (Consignment Inventory)

 

15370 Vickery Drive Houston, Texas 77032

 

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

 

SCHEDULE 10.16

ADDITIONAL APPROVED BANK ACCOUNTS

 

Lock Box Account

  

Wells Fargo Bank - ABA 1020-0007-6 - 2648019142

Lock Box Account

  

Wells Fargo Bank - ABA 1020-0007-6 - 0578128209

Lock Box Account

  

Wells Fargo Bank - ABA 1020-0007-6 - 0578128191

Lock Box Account

  

Wells Fargo Bank - ABA 1020-0007-6 - 0578128290

Lock Box Account

  

Wells Fargo Bank - ABA 1020-0007-6 - 0578128225

Tax Account

  

Wells Fargo Bank - ABA 1020-0007-6 - 2648019150

 

Current ACH arrangement with AmSouth for Payroll to remain in effect.