Exhibit 10.1

 

 

SENIOR SECURED, SUPER-PRIORITY

 

DEBTOR-IN-POSSESSION

 

CREDIT AGREEMENT

 

Dated as of December 2, 2004

 

among

 

APPLIED EXTRUSION TECHNOLOGIES, INC.

as Borrower,

 

THE OTHER CREDIT PARTIES SIGNATORY HERETO

 

FROM TIME TO TIME,

 

as Credit Parties,

 

 

THE LENDERS SIGNATORY HERETO

 

FROM TIME TO TIME,

 

as Lenders,

 

and

 

GENERAL ELECTRIC CAPITAL CORPORATION,

 

as Agent and Lender

 

 

GECC CAPITAL MARKETS GROUP, INC.
as Lead Arranger

 

 

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

 

TABLE OF CONTENTS

 

1.

AMOUNT AND TERMS OF CREDIT

 

 

 

 

 

 

1.1

Credit Facilities

 

 

 

 

 

 

1.2

Letters of Credit

 

 

 

 

 

 

1.3

Prepayments

 

 

 

 

 

 

1.4

Use of Proceeds

 

 

 

 

 

 

1.5

Interest and Applicable Margins

 

 

 

 

 

 

1.6 [a04-14459_1ex10d1.htm#Eligible]

Eligible Accounts [a04-14459_1ex10d1.htm#Eligible]

 

 

 

 

 

 

1.7 [a04-14459_1ex10d1.htm#EligibleInventory]

Eligible Inventory [a04-14459_1ex10d1.htm#EligibleInventory]

 

 

 

 

 

 

1.8 [a04-14459_1ex10d1.htm#Cash]

Cash Management Systems [a04-14459_1ex10d1.htm#Cash]

 

 

 

 

 

 

1.9 [a04-14459_1ex10d1.htm#Fees]

Fees [a04-14459_1ex10d1.htm#Fees]

 

 

 

 

 

 

1.10 [a04-14459_1ex10d1.htm#Receipt]

Receipt of Payments [a04-14459_1ex10d1.htm#Receipt]

 

 

 

 

 

 

1.11 [a04-14459_1ex10d1.htm#Application]

Application and Allocation of Payments. [a04-14459_1ex10d1.htm#Application]

 

 

 

 

 

 

1.12 [a04-14459_1ex10d1.htm#Loan]

Loan Account and Accounting [a04-14459_1ex10d1.htm#Loan]

 

 

 

 

 

 

1.13 [a04-14459_1ex10d1.htm#Indemnity]

Indemnity [a04-14459_1ex10d1.htm#Indemnity]

 

 

 

 

 

 

1.14 [a04-14459_1ex10d1.htm#Access]

Access [a04-14459_1ex10d1.htm#Access]

 

 

 

 

 

 

1.15 [a04-14459_1ex10d1.htm#Taxes]

Taxes [a04-14459_1ex10d1.htm#Taxes]

 

 

 

 

 

 

1.16 [a04-14459_1ex10d1.htm#Capital]

Capital Adequacy; Increased Costs; Illegality [a04-14459_1ex10d1.htm#Capital]

 

 

 

 

 

 

1.17 [a04-14459_1ex10d1.htm#Single]

Single Loan [a04-14459_1ex10d1.htm#Single]

 

 

 

 

 

 

1.18 [a04-14459_1ex10d1.htm#Super]

Super-Priority Nature of Obligations and Lenders’ Liens
[a04-14459_1ex10d1.htm#Super]

 

 

 

 

 

 

1.19 [a04-14459_1ex10d1.htm#Payment]

Payment of Obligations [a04-14459_1ex10d1.htm#Payment]

 

 

 

 

 

 

1.20 [a04-14459_1ex10d1.htm#No]

No Discharge; Survival of Claims [a04-14459_1ex10d1.htm#No]

 

 

 

 

 

 

1.21 [a04-14459_1ex10d1.htm#Release]

Release [a04-14459_1ex10d1.htm#Release]

 

 

 

 

 

 

1.22 [a04-14459_1ex10d1.htm#Waiver]

Waiver of any Primary Rights [a04-14459_1ex10d1.htm#Waiver]

 

 

 

 

 

2. [a04-14459_1ex10d1.htm#Conditions]

CONDITIONS PRECEDENT [a04-14459_1ex10d1.htm#Conditions]

 

 

 

 

 

 

2.1 [a04-14459_1ex10d1.htm#ConditionsToThe]

Conditions to the Initial Loans [a04-14459_1ex10d1.htm#ConditionsToThe]

 

 

 

 

 

 

2.2 [a04-14459_1ex10d1.htm#Further]

Further Conditions to Each Loan [a04-14459_1ex10d1.htm#Further]

 

 

 

 

 

 

2.3 [a04-14459_1ex10d1.htm#FurtherConditions]

Further Conditions to Each Export-Related Advance
[a04-14459_1ex10d1.htm#FurtherConditions]

 

 

 

 

 

 

2.4 [a04-14459_1ex10d1.htm#FurtherCond]

Further Conditions to Funding of Last Out Term Loan
[a04-14459_1ex10d1.htm#FurtherCond]

 

 

 

 

 

3. [a04-14459_1ex10d1.htm#Representations]

REPRESENTATIONS AND WARRANTIES [a04-14459_1ex10d1.htm#Representations]

 

 

 

 

 

 

3.1 [a04-14459_1ex10d1.htm#Corporate]

Corporate Existence; Compliance with Law [a04-14459_1ex10d1.htm#Corporate]

 

 

i

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

 

 

3.2 [a04-14459_1ex10d1.htm#Executive]

Executive Offices, Collateral Locations, FEIN [a04-14459_1ex10d1.htm#Executive]

 

 

 

 

 

 

3.3 [a04-14459_1ex10d1.htm#CorporatePower]

Corporate Power, Authorization, Enforceable Obligations
[a04-14459_1ex10d1.htm#CorporatePower]

 

 

 

 

 

 

3.4 [a04-14459_1ex10d1.htm#Financial]

Financial Statements, Projections and Net Cash Flow Forecast
[a04-14459_1ex10d1.htm#Financial]

 

 

 

 

 

 

3.5 [a04-14459_1ex10d1.htm#MaterialAdverseEffect]

Material Adverse Effect [a04-14459_1ex10d1.htm#MaterialAdverseEffect]

 

 

 

 

 

 

3.6 [a04-14459_1ex10d1.htm#Ownership]

Ownership of Property; Liens [a04-14459_1ex10d1.htm#Ownership]

 

 

 

 

 

 

3.7 [a04-14459_1ex10d1.htm#Labor]

Labor Matters [a04-14459_1ex10d1.htm#Labor]

 

 

 

 

 

 

3.8 [a04-14459_1ex10d1.htm#Ventures]

Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness
[a04-14459_1ex10d1.htm#Ventures]

 

 

 

 

 

 

3.9 [a04-14459_1ex10d1.htm#Government]

Government Regulation [a04-14459_1ex10d1.htm#Government]

 

 

 

 

 

 

3.10 [a04-14459_1ex10d1.htm#Margin]

Margin Regulations [a04-14459_1ex10d1.htm#Margin]

 

 

 

 

 

 

3.11 [a04-14459_1ex10d1.htm#Taxes_]

Taxes [a04-14459_1ex10d1.htm#Taxes_]

 

 

 

 

 

 

3.12 [a04-14459_1ex10d1.htm#Erisa]

ERISA and Canadian Plans [a04-14459_1ex10d1.htm#Erisa]

 

 

 

 

 

 

3.13 [a04-14459_1ex10d1.htm#NoLitigation]

No Litigation [a04-14459_1ex10d1.htm#NoLitigation]

 

 

 

 

 

 

3.14 [a04-14459_1ex10d1.htm#Brokers]

Brokers [a04-14459_1ex10d1.htm#Brokers]

 

 

 

 

 

 

3.15 [a04-14459_1ex10d1.htm#Intellectual]

Intellectual Property [a04-14459_1ex10d1.htm#Intellectual]

 

 

 

 

 

 

3.16 [a04-14459_1ex10d1.htm#Full]

Full Disclosure [a04-14459_1ex10d1.htm#Full]

 

 

 

 

 

 

3.17 [a04-14459_1ex10d1.htm#Environmental]

Environmental Matters [a04-14459_1ex10d1.htm#Environmental]

 

 

 

 

 

 

3.18 [a04-14459_1ex10d1.htm#Insurance]

Insurance [a04-14459_1ex10d1.htm#Insurance]

 

 

 

 

 

 

3.19 [a04-14459_1ex10d1.htm#Deposit]

Deposit and Disbursement Accounts [a04-14459_1ex10d1.htm#Deposit]

 

 

 

 

 

 

3.20 [a04-14459_1ex10d1.htm#GovernmentContracts]

Government Contracts [a04-14459_1ex10d1.htm#GovernmentContracts]

 

 

 

 

 

 

3.21 [a04-14459_1ex10d1.htm#Customer]

Customer and Trade Relations [a04-14459_1ex10d1.htm#Customer]

 

 

 

 

 

 

3.22 [a04-14459_1ex10d1.htm#Agreements]

Agreements and Other Documents [a04-14459_1ex10d1.htm#Agreements]

 

 

 

 

 

 

3.23 [a04-14459_1ex10d1.htm#Intentionally]

Intentionally Omitted [a04-14459_1ex10d1.htm#Intentionally]

 

 

 

 

 

 

3.24 [a04-14459_1ex10d1.htm#Senior]

Senior Note Documents [a04-14459_1ex10d1.htm#Senior]

 

 

 

 

 

 

3.25 [a04-14459_1ex10d1.htm#Reorganization]

Reorganization Matters [a04-14459_1ex10d1.htm#Reorganization]

 

 

 

 

 

4. [a04-14459_1ex10d1.htm#FinancialStatementsAndInformation]

FINANCIAL STATEMENTS AND INFORMATION
[a04-14459_1ex10d1.htm#FinancialStatementsAndInformation]

 

 

 

 

 

 

4.1 [a04-14459_1ex10d1.htm#Reports]

Reports and Notices [a04-14459_1ex10d1.htm#Reports]

 

 

 

 

 

 

4.2 [a04-14459_1ex10d1.htm#Communication]

Communication with Accountants [a04-14459_1ex10d1.htm#Communication]

 

 

 

 

 

5. [a04-14459_1ex10d1.htm#Affirmative]

AFFIRMATIVE COVENANTS [a04-14459_1ex10d1.htm#Affirmative]

 

 

 

 

 

 

5.1 [a04-14459_1ex10d1.htm#Maintenance]

Maintenance of Existence and Conduct of Business
[a04-14459_1ex10d1.htm#Maintenance]

 

 

 

 

 

 

5.2 [a04-14459_1ex10d1.htm#PaymentOfCharges]

Payment of Charges [a04-14459_1ex10d1.htm#PaymentOfCharges]

 

 

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

 

 

5.3 [a04-14459_1ex10d1.htm#Books]

Books and Records [a04-14459_1ex10d1.htm#Books]

 

 

 

 

 

 

5.4 [a04-14459_1ex10d1.htm#InsuranceDamag]

Insurance; Damage to or Destruction of Collateral
[a04-14459_1ex10d1.htm#InsuranceDamag]

 

 

 

 

 

 

5.5 [a04-14459_1ex10d1.htm#Compliance]

Compliance with Laws [a04-14459_1ex10d1.htm#Compliance]

 

 

 

 

 

 

5.6 [a04-14459_1ex10d1.htm#IntentionallyOmitte]

Intentionally Omitted. [a04-14459_1ex10d1.htm#IntentionallyOmitte]

 

 

 

 

 

 

5.7 [a04-14459_1ex10d1.htm#NtellectualProperty]

Intellectual Property [a04-14459_1ex10d1.htm#NtellectualProperty]

 

 

 

 

 

 

5.8 [a04-14459_1ex10d1.htm#EnvironmentalMatters]

Environmental Matters [a04-14459_1ex10d1.htm#EnvironmentalMatters]

 

 

 

 

 

 

5.9 [a04-14459_1ex10d1.htm#Landlords]

Landlords’ Agreements, Mortgagee Agreements, Bailee Letters and Real Estate
Purchases [a04-14459_1ex10d1.htm#Landlords]

 

 

 

 

 

 

5.10 [a04-14459_1ex10d1.htm#Erisa2]

ERISA [a04-14459_1ex10d1.htm#Erisa2]

 

 

 

 

 

 

5.11 [a04-14459_1ex10d1.htm#FurtherAssurances]

Further Assurances [a04-14459_1ex10d1.htm#FurtherAssurances]

 

 

 

 

 

6. [a04-14459_1ex10d1.htm#Negative]

NEGATIVE COVENANTS [a04-14459_1ex10d1.htm#Negative]

 

 

 

 

 

 

6.1 [a04-14459_1ex10d1.htm#Mergers]

Mergers, Subsidiaries, Etc [a04-14459_1ex10d1.htm#Mergers]

 

 

 

 

 

 

6.2 [a04-14459_1ex10d1.htm#Investments]

Investments; Loans and Advances [a04-14459_1ex10d1.htm#Investments]

 

 

 

 

 

 

6.3 [a04-14459_1ex10d1.htm#Indebtedness]

Indebtedness [a04-14459_1ex10d1.htm#Indebtedness]

 

 

 

 

 

 

6.4 [a04-14459_1ex10d1.htm#Employee]

Employee Loans and Affiliate Transactions [a04-14459_1ex10d1.htm#Employee]

 

 

 

 

 

 

6.5 [a04-14459_1ex10d1.htm#CapitalStructureAndBusiness]

Capital Structure and Business
[a04-14459_1ex10d1.htm#CapitalStructureAndBusiness]

 

 

 

 

 

 

6.6 [a04-14459_1ex10d1.htm#Guaranteed]

Guaranteed Indebtedness [a04-14459_1ex10d1.htm#Guaranteed]

 

 

 

 

 

 

6.7 [a04-14459_1ex10d1.htm#Liens]

Liens [a04-14459_1ex10d1.htm#Liens]

 

 

 

 

 

 

6.8 [a04-14459_1ex10d1.htm#Sale]

Sale of Stock and Assets [a04-14459_1ex10d1.htm#Sale]

 

 

 

 

 

 

6.9 [a04-14459_1ex10d1.htm#Erisa_No]

ERISA [a04-14459_1ex10d1.htm#Erisa_No]

 

 

 

 

 

 

6.10 [a04-14459_1ex10d1.htm#FinancialCovenants_B]

Financial Covenants [a04-14459_1ex10d1.htm#FinancialCovenants_B]

 

 

 

 

 

 

6.11 [a04-14459_1ex10d1.htm#Hazardous]

Hazardous Materials [a04-14459_1ex10d1.htm#Hazardous]

 

 

 

 

 

 

6.12 [a04-14459_1ex10d1.htm#Leasebacks]

Sale-Leasebacks [a04-14459_1ex10d1.htm#Leasebacks]

 

 

 

 

 

 

6.13 [a04-14459_1ex10d1.htm#Cancellation]

Cancellation of Indebtedness [a04-14459_1ex10d1.htm#Cancellation]

 

 

 

 

 

 

6.14 [a04-14459_1ex10d1.htm#Restricted]

Restricted Payments; Employee Benefit Plan Contributions
[a04-14459_1ex10d1.htm#Restricted]

 

 

 

 

 

 

6.15 [a04-14459_1ex10d1.htm#Change]

Change of Corporate Name or Location; Change of Fiscal Year
[a04-14459_1ex10d1.htm#Change]

 

 

 

 

 

 

6.16 [a04-14459_1ex10d1.htm#NoImpairmentOfIntercompanyTransfers]

No Impairment of Intercompany Transfers
[a04-14459_1ex10d1.htm#NoImpairmentOfIntercompanyTransfers]

 

 

 

 

 

 

6.17 [a04-14459_1ex10d1.htm#Speculative]

No Speculative Transactions [a04-14459_1ex10d1.htm#Speculative]

 

 

 

 

 

 

6.18 [a04-14459_1ex10d1.htm#Changes]

Changes Relating to Subordinated Debt, Material Contracts
[a04-14459_1ex10d1.htm#Changes]

 

 

 

 

 

 

6.19 [a04-14459_1ex10d1.htm#Aet]

AET Limited [a04-14459_1ex10d1.htm#Aet]

 

 

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

 

 

6.20 [a04-14459_1ex10d1.htm#Repayment]

Repayment of Indebtedness [a04-14459_1ex10d1.htm#Repayment]

 

 

 

 

 

 

6.21 [a04-14459_1ex10d1.htm#Reclamation]

Reclamation Claims [a04-14459_1ex10d1.htm#Reclamation]

 

 

 

 

 

7. [a04-14459_1ex10d1.htm#Term]

TERM [a04-14459_1ex10d1.htm#Term]

 

 

 

 

 

 

7.1 [a04-14459_1ex10d1.htm#Termination]

Termination [a04-14459_1ex10d1.htm#Termination]

 

 

 

 

 

 

7.2 [a04-14459_1ex10d1.htm#Survival]

Survival of Obligations Upon Termination of Financing Arrangements
[a04-14459_1ex10d1.htm#Survival]

 

 

 

 

 

8. [a04-14459_1ex10d1.htm#Events]

EVENTS OF DEFAULT; RIGHTS AND REMEDIES [a04-14459_1ex10d1.htm#Events]

 

 

 

 

 

 

8.1 [a04-14459_1ex10d1.htm#EventsOfDef]

Events of Default [a04-14459_1ex10d1.htm#EventsOfDef]

 

 

 

 

 

 

8.2 [a04-14459_1ex10d1.htm#Remedies]

Remedies [a04-14459_1ex10d1.htm#Remedies]

 

 

 

 

 

 

8.3 [a04-14459_1ex10d1.htm#Waivers]

Waivers by Credit Parties [a04-14459_1ex10d1.htm#Waivers]

 

 

 

 

 

9. [a04-14459_1ex10d1.htm#Assignment]

ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
[a04-14459_1ex10d1.htm#Assignment]

 

 

 

 

 

 

9.1 [a04-14459_1ex10d1.htm#AssignmentAndPar]

Assignment and Participations [a04-14459_1ex10d1.htm#AssignmentAndPar]

 

 

 

 

 

 

9.2 [a04-14459_1ex10d1.htm#Appointment]

Appointment of Agent [a04-14459_1ex10d1.htm#Appointment]

 

 

 

 

 

 

9.3 [a04-14459_1ex10d1.htm#Agents]

Agent’s Reliance, Etc [a04-14459_1ex10d1.htm#Agents]

 

 

 

 

 

 

9.4 [a04-14459_1ex10d1.htm#Ge]

GE Capital and Affiliates [a04-14459_1ex10d1.htm#Ge]

 

 

 

 

 

 

9.5 [a04-14459_1ex10d1.htm#Lender]

Lender Credit Decision [a04-14459_1ex10d1.htm#Lender]

 

 

 

 

 

 

9.6 [a04-14459_1ex10d1.htm#Indemnification]

Indemnification [a04-14459_1ex10d1.htm#Indemnification]

 

 

 

 

 

 

9.7 [a04-14459_1ex10d1.htm#Successor]

Successor Agent [a04-14459_1ex10d1.htm#Successor]

 

 

 

 

 

 

9.8 [a04-14459_1ex10d1.htm#Setoff]

Setoff and Sharing of Payments [a04-14459_1ex10d1.htm#Setoff]

 

 

 

 

 

 

9.9 [a04-14459_1ex10d1.htm#Advances]

Advances; Payments; Non-Funding Lenders; Information; Actions in Concert
[a04-14459_1ex10d1.htm#Advances]

 

 

 

 

 

10. [a04-14459_1ex10d1.htm#Successors]

SUCCESSORS AND ASSIGNS [a04-14459_1ex10d1.htm#Successors]

 

 

 

 

 

 

10.1 [a04-14459_1ex10d1.htm#SuccessorsAndAss]

Successors and Assigns [a04-14459_1ex10d1.htm#SuccessorsAndAss]

 

 

 

 

 

11. [a04-14459_1ex10d1.htm#Miscellaneous]

MISCELLANEOUS [a04-14459_1ex10d1.htm#Miscellaneous]

 

 

 

 

 

 

11.1 [a04-14459_1ex10d1.htm#Complete]

Complete Agreement; Modification of Agreement [a04-14459_1ex10d1.htm#Complete]

 

 

 

 

 

 

11.2 [a04-14459_1ex10d1.htm#Amendments]

Amendments and Waivers [a04-14459_1ex10d1.htm#Amendments]

 

 

 

 

 

 

11.3 [a04-14459_1ex10d1.htm#FeesAndExpen]

Fees and Expenses [a04-14459_1ex10d1.htm#FeesAndExpen]

 

 

 

 

 

 

11.4 [a04-14459_1ex10d1.htm#NoWaive]

No Waiver [a04-14459_1ex10d1.htm#NoWaive]

 

 

 

 

 

 

11.5 [a04-14459_1ex10d1.htm#Remedies_Agents]

Remedies [a04-14459_1ex10d1.htm#Remedies_Agents]

 

 

 

 

 

 

11.6 [a04-14459_1ex10d1.htm#Severability]

Severability [a04-14459_1ex10d1.htm#Severability]

 

 

 

 

 

 

11.7 [a04-14459_1ex10d1.htm#Conflict]

Conflict of Terms [a04-14459_1ex10d1.htm#Conflict]

 

 

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

 

 

11.8 [a04-14459_1ex10d1.htm#Confidentiality]

Confidentiality [a04-14459_1ex10d1.htm#Confidentiality]

 

 

 

 

 

 

11.9 [a04-14459_1ex10d1.htm#Governing]

GOVERNING LAW [a04-14459_1ex10d1.htm#Governing]

 

 

 

 

 

 

11.10 [a04-14459_1ex10d1.htm#Notices]

Notices [a04-14459_1ex10d1.htm#Notices]

 

 

 

 

 

 

11.11 [a04-14459_1ex10d1.htm#Section]

Section Titles [a04-14459_1ex10d1.htm#Section]

 

 

 

 

 

 

11.12 [a04-14459_1ex10d1.htm#Counterparts]

Counterparts [a04-14459_1ex10d1.htm#Counterparts]

 

 

 

 

 

 

11.13 [a04-14459_1ex10d1.htm#WaiverOfJuryTria]

WAIVER OF JURY TRIAL [a04-14459_1ex10d1.htm#WaiverOfJuryTria]

 

 

 

 

 

 

11.14 [a04-14459_1ex10d1.htm#Press]

Press Releases and Related Matters [a04-14459_1ex10d1.htm#Press]

 

 

 

 

 

 

11.15 [a04-14459_1ex10d1.htm#Reinstatement]

Reinstatement [a04-14459_1ex10d1.htm#Reinstatement]

 

 

 

 

 

 

11.16 [a04-14459_1ex10d1.htm#Advice]

Advice of Counsel [a04-14459_1ex10d1.htm#Advice]

 

 

 

 

 

 

11.17 [a04-14459_1ex10d1.htm#Judgment]

Judgment Currency [a04-14459_1ex10d1.htm#Judgment]

 

 

 

 

 

 

11.18 [a04-14459_1ex10d1.htm#Subordinati]

Subordination [a04-14459_1ex10d1.htm#Subordinati]

 

 

 

 

 

 

11.19 [a04-14459_1ex10d1.htm#NoStrictConstruct]

No Strict Construction [a04-14459_1ex10d1.htm#NoStrictConstruct]

 

 

 

 

 

 

11.20 [a04-14459_1ex10d1.htm#PartiesIncludingTrusteesBankruptcyC]

Parties Including Trustees; Bankruptcy Court Proceedings
[a04-14459_1ex10d1.htm#PartiesIncludingTrusteesBankruptcyC]

 

 

 

 

 

 

11.21 [a04-14459_1ex10d1.htm#PrepetitionLoanAgre]

Prepetition Loan Agreement [a04-14459_1ex10d1.htm#PrepetitionLoanAgre]

 

 

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

 

INDEX OF APPENDICES

 

Annex A (Recitals) [a04-14459_1ex10d1.htm#AnnexARecit]

- [a04-14459_1ex10d1.htm#AnnexARecit]

Definitions [a04-14459_1ex10d1.htm#AnnexARecit]

 

Annex B (Section 1.2) [a04-14459_1ex10d1.htm#AnnexBSection1_2]

- [a04-14459_1ex10d1.htm#AnnexBSection1_2]

Letters of Credit [a04-14459_1ex10d1.htm#AnnexBSection1_2]

 

Annex C (Section 1.8) [a04-14459_1ex10d1.htm#AnnexC]

- [a04-14459_1ex10d1.htm#AnnexC]

Cash Management System [a04-14459_1ex10d1.htm#AnnexC]

 

Annex D (Section 2.1(a)) [a04-14459_1ex10d1.htm#AnnexD]

- [a04-14459_1ex10d1.htm#AnnexD]

Closing Checklist [a04-14459_1ex10d1.htm#AnnexD]

 

Annex D-1 (Annex D) [a04-14459_1ex10d1.htm#AnnexD1]

- [a04-14459_1ex10d1.htm#AnnexD1]

Mortgaged Properties [a04-14459_1ex10d1.htm#AnnexD1]

 

Annex E (Section 4.1(a)) [a04-14459_1ex10d1.htm#AnnexE]

- [a04-14459_1ex10d1.htm#AnnexE]

Financial Statements and Projections — Reporting [a04-14459_1ex10d1.htm#AnnexE]

 

Annex F (Section 4.1(b)) [a04-14459_1ex10d1.htm#AnnexF]

- [a04-14459_1ex10d1.htm#AnnexF]

Collateral Reports [a04-14459_1ex10d1.htm#AnnexF]

 

Annex G (Section 6.10) [a04-14459_1ex10d1.htm#AnnexG]

- [a04-14459_1ex10d1.htm#AnnexG]

Financial Covenants [a04-14459_1ex10d1.htm#AnnexG]

 

Annex H (Section 9.9(a)) [a04-14459_1ex10d1.htm#AnnexH]

- [a04-14459_1ex10d1.htm#AnnexH]

Lenders’ Wire Transfer Information [a04-14459_1ex10d1.htm#AnnexH]

 

Annex I (Section 11.10) [a04-14459_1ex10d1.htm#AnnexI]

- [a04-14459_1ex10d1.htm#AnnexI]

Notice Addresses [a04-14459_1ex10d1.htm#AnnexI]

 

Annex J (from Annex A - Commitments definition) [a04-14459_1ex10d1.htm#AnnexJ]

 

Commitments as of Closing Date [a04-14459_1ex10d1.htm#AnnexJ]

 

 

 

 

 

Exhibit 1.1(a)(i)

-

Form of Notice of Revolving Credit Advance

 

Exhibit 1.1(a)(ii)

-

Form of Revolving Note

 

Exhibit 1.1(b)

-

Form of Term Note

 

Exhibit 1.1(c)

-

Form of Last Out Term Note

 

Exhibit 1.1(d)(ii)

-

Form of Swing Line Note

 

Exhibit 1.1(e)(i)

-

Form of Notice of Export-Related Advance

 

Exhibit 1.1(e)(ii)

-

Form of Export-Related Loan Note

 

Exhibit 1.5(e)

-

Form of Notice of Conversion/Continuation

 

Exhibit 4.1(b)

-

Form of Borrowing Base Certificate

 

Exhibit 9.1(a)

-

Form of Assignment Agreement

 

Exhibit A-1

-

Master Documentary Agreement

 

Exhibit A-2

-

Master Standby Agreement

 

Exhibit A-3

-

Ex-Im Bank Borrower Agreement

 

Exhibit A-4

-

Interim Order

 

Exhibit B

-

Material Contracts

 

Schedule 1.1

-

Agent’s Representatives

 

Disclosure Schedule 1.4

-

Sources and Uses; Funds Flow Memorandum

 

Disclosure Schedule 2.1

-

First Day Orders

 

Disclosure Schedule 3.1

-

Type of Entity; State of Organization

 

Disclosure Schedule 3.2

-

Executive Offices, Collateral Locations, FEIN

 

Disclosure Schedule 3.4(a)

-

Financial Statements

 

Disclosure Schedule 3.4(c)

-

Net Cash Flow Forecast

 

Disclosure Schedule 3.5

-

Material Adverse Effect

 

Disclosure Schedule 3.6

-

Ownership of Properties; Real Estate and Leases; Purchase Options and similar
rights

 

 

vi

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Disclosure Schedule 3.7

-

Labor Matters

Disclosure Schedule 3.8

-

Ventures, Subsidiaries and Affiliates; Outstanding Stock; Indebtedness

Disclosure Schedule 3.8(a)

-

Former Subsidiaries

Disclosure Schedule 3.11

-

Tax Matters

Disclosure Schedule 3.12

-

ERISA Plans

Disclosure Schedule 3.12(c)

-

Canadian Plans

Disclosure Schedule 3.13

-

Litigation

Disclosure Schedule 3.15

-

Intellectual Property

Disclosure Schedule 3.17

-

Hazardous Materials

Disclosure Schedule 3.18

-

Insurance

Disclosure Schedule 3.19

-

Deposit and Disbursement Accounts

Disclosure Schedule 3.20

-

Government Contracts

Disclosure Schedule 3.21

-

Customer Trade Relations

Disclosure Schedule 3.22

-

Material Agreements

Disclosure Schedule 3.22(b)

-

Customers and Clients

Disclosure Schedule 3.22(c)

-

Suppliers and Vendors

Disclosure Schedule 5.1

-

Trade Names

Disclosure Schedule 5.9

 

Excluded Locations

Disclosure Schedule 6.3

-

Indebtedness

Disclosure Schedule 6.4(a)

-

Transactions with Affiliates

Disclosure Schedule 6.7

-

Existing Liens

 

vii

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This SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT (this
“Agreement”), dated as of December 2, 2004 among APPLIED EXTRUSION TECHNOLOGIES,
INC., a Delaware corporation and a debtor and debtor-in-possession (the
“Borrower”); the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation (in its individual capacity, “GE Capital”),
for itself, as Lender, and as Agent for Lenders, the other Lenders signatory
hereto from time to time and GECC CAPITAL MARKETS GROUP, INC., as Lead Arranger
(“GECMG”).

 

RECITALS

 

WHEREAS, on December 1, 2004 (the “Petition Date”), the Borrower commenced
Chapter 11 Case No. 04-13388 and Applied Extrusion Technologies (Canada), Inc.,
a Delaware corporation (“AET Canada”) commenced Chapter 11 Case No. 04-13389
which together with Chapter 11 Case No. 04-13388 has been administratively
consolidated as Chapter 11 Case No. 04-13388 (each a “Chapter 11 Case” and
collectively, the “Chapter 11 Cases”) by filing voluntary petitions for
reorganization under Chapter 11 of Title 11 of the United States Code, 11 U.S.C.
§§101 et seq. (the “Bankruptcy Code”), with the United States Bankruptcy Court
for the District of Delaware (the “Bankruptcy Court”), and each of the Borrower
and AET Canada continues to operate its business and manage its properties as a
debtor and debtor-in-possession pursuant to Sections 1107(a) and 1108 of the
Bankruptcy Code;

 

WHEREAS, prior to the Petition Date, pursuant to that certain Credit Agreement,
dated as of October 3, 2003, among the Borrower, the other credit parties
signatory thereto, GE Capital, as Agent and Lender, and the lenders from time to
time signatory thereto (the “Prior Lenders”) (as amended, modified or
supplemented prior to the Petition Date, the “Prepetition Loan Agreement”), the
Prior Lenders provided financing to the Borrower;

 

WHEREAS, the Borrower has requested that the Lenders provide a senior secured,
super-priority debtor-in-possession revolving and term credit facility to the
Borrower of up to One Hundred and Twenty-Five Million Dollars ($125,000,000) in
the aggregate to fund the working capital requirements of the Borrower and its
Subsidiaries during the pendency of the Chapter 11 Cases and to repay in full
all obligations under the Prepetition Loan Agreement;

 

WHEREAS, Lenders are willing to make certain loans and other extensions of
credit to Borrower of up to such amount upon the terms and conditions set forth
herein;

 

WHEREAS, Borrower has agreed to secure all of its obligations under the Loan
Documents by granting to Agent, for the benefit of Agent and Lenders, a first
priority security interest in and lien upon all of its existing and
after-acquired personal and real property;

 

WHEREAS, AET Canada is willing to guarantee all of the obligations of Borrower
to Agent and Lenders under the Loan Documents and to grant a first priority
security interest in all of its assets in favor of Agent to secure such
guarantee; and

 

WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A and, for purposes of this Agreement and the other
Loan Documents, the rules of construction set forth in Annex A shall govern. 
All Annexes, Disclosure Schedules, Exhibits and other attachments (collectively,
“Appendices”) hereto, or expressly identified to this

 

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

 

Agreement, are incorporated herein by reference, and taken together with this
Agreement, shall constitute but a single agreement.  These recitals shall be
construed as part of the Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:

 

1.                                      AMOUNT AND TERMS OF CREDIT

 

1.1                                 Credit Facilities.

 

(a)                                  Revolving Credit Facility.

 

(i)                                     (A)  Subject to the terms and conditions
hereof, each Revolving Lender agrees to make available to Borrower from time to
time until the Commitment Termination Date its Pro Rata Share of advances (each,
a “Revolving Credit Advance”).  The Pro Rata Share of the Revolving Loan of any
Revolving Lender shall not at any time exceed its separate Revolving Loan
Commitment (less its Pro Rata Share of the Export-Related Loan Participations). 
The obligations of each Revolving Lender hereunder shall be several and not
joint.  Until the Commitment Termination Date, Borrower may borrow, repay and
reborrow under this Section 1.1(a)(i)(A); provided, that the amount of any
Revolving Credit Advance to be made at any time shall not exceed Borrowing
Availability at such time.  Borrowing Availability may be reduced by Reserves
imposed by Agent in its reasonable credit judgment.

 

(B)                                Each Revolving Credit Advance shall be made
on notice by Borrower to one of the representatives of Agent identified in
Schedule 1.1 at the address specified therein.  Any such notice must be given no
later than: (1) 11:00 a.m. (New York time) on the Business Day of the proposed
Revolving Credit Advance, in the case of an Index Rate Loan; or (2) 11:00 a.m.
(New York time) on the date which is three (3) Business Days prior to the
proposed Revolving Credit Advance, in the case of a LIBOR Loan.  Each such
notice (a ”Notice of Revolving Credit Advance”) must be given in writing (by
telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i),
and shall include the information required in such Exhibit and such other
information as may be required by Agent.  If Borrower desires to have the
Revolving Credit Advances bear interest by reference to a LIBOR Rate, Borrower
must comply with Section 1.5(e).

 

(ii)                                  Except as provided in Section 1.12,
Borrower shall execute and deliver to each Revolving Lender a note to evidence
the Revolving Loan Commitment of that Revolving Lender.  Each note shall be in
the principal amount of the Revolving Loan Commitment of the applicable
Revolving Lender, dated the Closing Date and substantially in the form of
Exhibit 1.1(a)(ii) (each a “Revolving Note” and, collectively, the “Revolving
Notes”). Each Revolving Note shall represent the obligation of Borrower to pay
the amount of the applicable Revolving Lender’s Revolving Loan Commitment or, if
less, such Revolving Lender’s Pro Rata Share of the aggregate unpaid principal
amount of all Revolving Credit Advances to Borrower together with interest
thereon as prescribed in Section 1.5.  The entire unpaid balance of the
aggregate Revolving Loan and all other non-contingent Obligations shall

 

2

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

 

be immediately due and payable in full in immediately available funds on the
Commitment Termination Date.

 

(iii)                               Anything in this Agreement to the contrary
notwithstanding, at the request of Borrower, Agent in its discretion may (but
shall have absolutely no obligation to), make Revolving Credit Advances to
Borrower on behalf of Revolving Lenders in amounts that cause the outstanding
balance of the aggregate Revolving Loan to exceed the Borrowing Base (less the
Swing Line Loan) (any such excess Revolving Credit Advances are herein referred
to collectively, as “Overadvances”); provided, that, (A) no such event or
occurrence shall cause or constitute a waiver of Agent’s, Swing Line Lender’s or
Revolving Lenders’ right to refuse to make any further Overadvances, Swing Line
Advances or Revolving Credit Advances, or incur any Letter of Credit
Obligations, as the case may be, at any time that an Overadvance exists, and (B)
no Overadvance shall result in a Default or Event of Default based on Borrower’s
failure to comply with Section 1.3(b)(i) for so long as Agent permits such
Overadvance to be outstanding, but solely with respect to the amount of such
Overadvance.  In addition, Overadvances may be made even if the conditions to
lending set forth in Section 2 have not been met.  All Overadvances shall
constitute Index Rate Loans, shall bear interest at the Default Rate and shall
be payable on demand.  Except as otherwise provided in Section 1.11(b), the
authority of Agent to make Overadvances is limited to an aggregate amount not to
exceed $2,500,000 at any time and shall not cause the aggregate Revolving Loan
to exceed the Maximum Amount less the principal amount of the Swing Line Loan
and the Export-Related Loan.

 

(b)                                 Term Loan.

 

(i)                                     Subject to the terms and conditions
hereof, each Term Lender agrees to make a term loan (collectively, the “Term
Loan”) on the Closing Date to Borrower in the amount of the applicable Term
Lender’s Term Loan Commitment.  The obligations of each Term Lender hereunder
shall be several and not joint.  Each such Term Loan shall be evidenced by a
promissory note substantially in the form of Exhibit 1.1(b) (each a “Term Note”
and collectively, the “Term Notes”), and, except as provided in Section 1.12,
Borrower shall execute and deliver the Term Note to the applicable Term Lender. 
Each Term Note shall represent the obligation of Borrower to pay the applicable
Term Lender’s Term Loan Commitment, together with interest thereon as prescribed
in Section 1.5.

 

(ii)                                  Borrower shall repay the Term Loan in four
consecutive quarterly installments of $875,000 each on the last day of March,
June and September, with the remaining principal balance due and payable on the
Commitment Termination Date.

 

(iii)                               Notwithstanding Section 1.1(b)(ii), the
aggregate outstanding principal balance together with accrued interest on the
Term Loan shall be due and payable in full in immediately available funds on the
Commitment Termination Date, if not sooner paid in full.  No payment with
respect to the Term Loan may be reborrowed.

 

(iv)                              Each payment of principal with respect to the
Term Loan shall be paid to Agent for the ratable benefit of each Term Lender,
ratably in proportion to each such Term Lender’s respective Term Loan
Commitment.

 

3

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

 

(c)                                  Last Out Term Loan.

 

(i)                                     Subject to the terms and conditions
hereof, each Last Out Term Lender agrees to make a last out term loan
(collectively, the “Last Out Term Loan”) on the Closing Date to Borrower in the
amount of the applicable Last Out Term Lender’s Last Out Term Loan Commitment;
provided that Borrower acknowledges and agrees that a portion of the aggregate
Last Out Term Loan in an amount of $15,000,000 may not be funded until such time
as the conditions set forth in Section 2.4 are satisfied.  The obligations of
each Last Out Term Lender hereunder shall be several and not joint.  Each such
Last Out Term Loan shall be evidenced by a promissory note substantially in the
form of Exhibit 1.1(c) (each a “Last Out Term Note” and collectively, the “Last
Out Term Notes”), and, except as provided in Section 1.12, Borrower shall
execute and deliver the Last Out Term Note to the applicable Last Out Term
Lender.  Each Last Out Term Note shall represent the obligation of Borrower to
pay the applicable Last Out Term Lender’s Last Out Term Loan Commitment,
together with interest thereon as prescribed in Section 1.5.

 

(ii)                                  Borrower shall repay the aggregate
outstanding principal balance, together with accrued interest, on the Last Out
Term Loan in one lump sum payment on the Commitment Termination Date, if not
sooner paid in full.  No payment with respect to the Last Out Term Loan may be
reborrowed.

 

(iii)                               Each payment of principal with respect to
the Last Out Term Loan shall be paid to Agent for the ratable benefit of each
Last Out Term Lender, ratably in proportion to each such Last Out Term Lender’s
respective Last Out Term Loan Commitment.

 

(d)                                 Swing Line Facility.

 

(i)                                     Agent shall notify the Swing Line Lender
upon Agent’s receipt of any Notice of Revolving Credit Advance.  Subject to the
terms and conditions hereof, the Swing Line Lender may, in its discretion, make
available from time to time until the Commitment Termination Date advances
(each, a “Swing Line Advance”) in accordance with any such notice. The
provisions of this Section 1.1(d) shall not relieve Revolving Lenders of their
obligations to make Revolving Credit Advances under Section 1.1(a); provided,
that if the Swing Line Lender makes a Swing Line Advance pursuant to any such
notice, such Swing Line Advance shall be in lieu of any Revolving Credit Advance
that otherwise may be made by Revolving Credit Lenders pursuant to such notice. 
The aggregate amount of Swing Line Advances outstanding shall not exceed at any
time the lesser (“Swing Line Availability”) of (A) the Swing Line Commitment,
(B) the Maximum Amount less the sum of the outstanding balance of the Revolving
Loan and the Export-Related Loan at such time and (C) the Aggregate Borrowing
Base less the aggregate outstanding balance of the Revolving Loan and the
Export-Related Loan (except for Overadvances) at such time.  Until the
Commitment Termination Date, Borrower may from time to time borrow, repay and
reborrow under this Section 1.1(d).  Each Swing Line Advance shall be made
pursuant to a Notice of Revolving Credit Advance delivered to Agent by Borrower
in accordance with Section 1.1(a).  Any such notice must be given no later than
11:00 a.m. (New York time) on the Business Day of the proposed Swing Line
Advance.  Unless the Swing Line Lender has received at least one Business Day’s
prior written notice from Requisite Revolving Lenders instructing it not to make
a Swing Line Advance, the Swing Line Lender shall,

 

4

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

 

notwithstanding the failure of any condition precedent set forth in Sections
2.2, be entitled to fund that Swing Line Advance, and to have each Revolving
Lender make Revolving Credit Advances in accordance with Section 1.1(d)(iii). 
Notwithstanding any other provision of this Agreement or the other Loan
Documents, the Swing Line Loan shall constitute an Index Rate Loan.  Swing Line
Lender, subject to the terms hereof, shall make the requested Swing Line Advance
to Borrower not later than 3:00 p.m. (New York time) on the requested funding
date.  Borrower shall repay the aggregate outstanding principal amount of the
Swing Line Loan upon demand therefor by Agent.

 

(ii)                                  Borrower shall execute and deliver to the
Swing Line Lender a promissory note to evidence the Swing Line Commitment.  Such
note shall be in the principal amount of the Swing Line Commitment of the Swing
Line Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(d)(ii)  (the “Swing Line Note”).  The Swing Line Note shall represent the
obligation of Borrower to pay the amount of the Swing Line Commitment or, if
less, the aggregate unpaid principal amount of all Swing Line Advances made to
Borrower together with interest thereon as prescribed in Section 1.5.  The
entire unpaid balance of the Swing Line Loan and all other noncontingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date if not sooner paid in full.

 

(iii)                               The Swing Line Lender, at any time and from
time to time in its sole and absolute discretion, but not less frequently than
weekly and upon any demand by Agent to Borrower to repay the Swing Line Loan,
shall on behalf of Borrower (and Borrower hereby irrevocably authorizes the
Swing Line Lender to so act on its behalf) request each Revolving Lender
(including the Swing Line Lender) to make a Revolving Credit Advance to Borrower
(which shall be an Index Rate Loan) in an amount equal to that Revolving
Lender’s Pro Rata Share of the principal amount of Borrower’s Swing Line Loan
(the “Refunded Swing Line Loan”) outstanding on the date such notice is given. 
Regardless of whether the conditions precedent set forth in this Agreement to
the making of a Revolving Credit Advance are then satisfied, each Revolving
Lender shall disburse directly to Agent, its Pro Rata Share of a Revolving
Credit Advance on behalf of the Swing Line Lender prior to 3:00 p.m. (New York
time) in immediately available funds on the Business Day next succeeding the
date that notice is given.  The proceeds of those Revolving Credit Advances
shall be immediately paid to the Swing Line Lender and applied to repay the
Refunded Swing Line Loan of Borrower.

 

(iv)                              Intentionally Omitted

 

(v)                                 Each Revolving Lender’s obligation to make
Revolving Credit Advances in accordance with Section 1.1(d)(iii) shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right that
such Revolving Lender may have against the Swing Line Lender, Borrower or any
other Person for any reason whatsoever; (B) the occurrence or continuance of any
Default or Event of Default; (C) any inability of Borrower to satisfy the
conditions precedent to borrowing set forth in this Agreement at any time or (D)
any other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.  If any Revolving Lender does not make available to Agent
or the Swing Line Lender, as applicable, the amount required pursuant to Section
1.1(d)(iii), the Swing Line Lender shall be entitled to recover such amount on
demand

 

5

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

 

from such Revolving Lender, together with interest thereon for each day from the
date of non-payment until such amount is paid in full at the Federal Funds Rate
for the first two (2) Business Days and at the Index Rate thereafter.

 

(e)                                  Export-Related Loan.

 

(i)                                     Subject to the terms and conditions
hereof, the Export-Related Loan Lender agrees to make available to Borrower from
time to time until the Commitment Termination Date export-related advances
(each, an “Export-Related Advance”) in accordance with any such notice.  Until
the Commitment Termination Date, Borrower may from time to time borrow, repay
and reborrow under this Section 1.1(e)(i); provided, that (A) the amount of any
Export-Related Advance to be made at any time shall not exceed Export-Related
Borrowing Availability at such time, and (B) the aggregate amount of
Export-Related Advances outstanding shall not exceed at any the Maximum Amount
less the outstanding balances of the Revolving Loan (except for Overadvances)
and the Swing Line Loan at such time.  Export-Related Borrowing Availability may
be further reduced by Reserves imposed by Agent in its reasonable credit
judgment.  Each Export-Related Advance shall be made on notice by Borrower to
one of the representatives of Agent identified in Schedule 1.1 at the address
specified therein.  Any such notice must be given no later than: (1) 11:00 a.m.
(New York time) on the Business Day of the proposed Export-Related Advance, in
the case of an Index Rate Loan; or (2) 11:00 a.m. (New York time) on the date
which is three (3) Business Days prior to the proposed Export-Related Advance,
in the case of a LIBOR Loan.  Each such notice (a ”Notice of Export-Related
Advance”) must be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(e)(i), and shall include the
information required in such Exhibit and such other information as may be
required by Agent.  If Borrower desires to have the Export-Related Advances bear
interest by reference to a LIBOR Rate, Borrower must comply with Section
1.5(e).  Agent shall notify the Export-Related Loan Lender upon Agent’s receipt
of any Notice of Export-Related Advance which requests an Export-Related
Advance.  Unless the Export-Related Loan Lender has received at least one
Business Day’s prior written notice from Requisite Revolving Lenders instructing
it not to make a Export-Related Advance, the Export-Related Loan Lender shall,
notwithstanding the failure of any condition precedent set forth in Sections
2.2, be entitled to fund that Export-Related Advance, and to have each Revolving
Lender purchase participating interests in accordance with Section 1.1(e)(iii). 
The Export-Related Loan Lender, subject to the terms hereof, shall make the
requested Export-Related Advance to Borrower not later than 3:00 p.m. (New York
time) on the requested funding date.

 

(ii)                                  Borrower shall execute and deliver to the
Export-Related Loan Lender a promissory note to evidence the Export-Related Loan
Commitment.  Such note shall be in the principal amount of the Export-Related
Loan Commitment of the Export-Related Loan Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(e)(ii)  (the “Export-Related Loan
Note”).  The Export-Related Loan Note shall represent the obligation of Borrower
to pay the amount of the Export-Related Loan Commitment or, if less, the
aggregate unpaid principal amount of all Export-Related Advances made to
Borrower together with interest thereon as prescribed in Section 1.5.  The
entire unpaid balance of the Export-Related Loan and all other noncontingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date if not sooner paid in full.

 

6

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

 

(iii)                               Immediately upon the making of any
Export-Related Advance by the Export-Related Loan Lender, each Revolving Lender
(including the Export-Related Loan Lender) shall be deemed to have irrevocably
and unconditionally purchased from the Export-Related Loan Lender an undivided
interest and participation in such Export-Related Advance in an amount equal to
its Pro Rata Share of the principal amount of such Export-Related Advance (each
an “Export-Related Loan Participation” and collectively, the “Export-Related
Loan Participations”).  Each Revolving Lender shall fund its participation in
such Export-Related Advance in the same manner as provided in the Agreement with
respect to Revolving Credit Advances, regardless of whether the conditions
precedent set forth in this Agreement to the making of a Revolving Credit
Advance are then satisfied, and as set forth in this Section 1.3(d).  The
Export-Related Loan Lender, at any time and from time to time in its sole and
absolute discretion, but not less frequently than weekly, shall request each
Revolving Lender (including the Export-Related Loan Lender) to fund its
participation in outstanding Export-Related Advances which have not been
previously funded in an amount equal to its Pro Rata Share of the principal
amount of such Export-Related Advances (a “Funded Export-Related Loan
Participation”), regardless of whether the conditions precedent set forth in
this Agreement to the making of a Revolving Credit Advance are then satisfied. 
Each Revolving Lender shall disburse directly to the Agent such amount prior to
3:00 p.m. (New York time) in immediately available funds on the Business Day
next succeeding the date that notice is given, and the Agent shall be
immediately pay such amount to the Export-Related Loan Lender.

 

(iv)                              Each Revolving Lender’s obligation to purchase
participation interests in accordance with Section 1.1(e)(iii) shall be absolute
and unconditional and shall not be affected by any circumstance, including (A)
any setoff, counterclaim, recoupment, defense or other right that such Revolving
Lender may have against the Export-Related Loan Lender, Borrower or any other
Person for any reason whatsoever; (B) the occurrence or continuance of any
Default or Event of Default; (C) any inability of Borrower to satisfy the
conditions precedent to borrowing set forth in this Agreement at any time or (D)
any other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.  If any Revolving Lender does not make available to Agent
the amount required pursuant to Sections 1.1(e)(iii) the Export-Related Loan
Lender shall be entitled to recover such amount on demand from such Revolving
Lender, together with interest thereon for each day from the date of non-payment
until such amount is paid in full at the Federal Funds Rate for the first two
(2) Business Days and at the Index Rate thereafter.

 

(v)                                 Any principal or interest received by the
Agent in respect of any Export-Related Advance shall be promptly paid by the
Agent to the Revolving Lenders which have a Funded Export-Related Loan
Participation in such Export-Related Advance in an amount equal to its Pro Rata
Share of such principal or interest (and to the Export-Related Loan Lender with
respect to any such Export-Related Advance as to which a Funded Export-Related
Loan Participation does not exist).

 

(f)                                    Reliance on Notices.  Agent shall be
entitled to rely upon, and shall be fully protected in relying upon, any Notice
of Revolving Credit Advance, Notice of Export-Related Advance, Notice of
Conversion/Continuation or similar notice believed by Agent to be genuine. 
Agent may assume that each Person executing and delivering any notice in
accordance

 

7

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herewith was duly authorized, unless the responsible individual acting thereon
for Agent has actual knowledge to the contrary.

 

1.2                                 Letters of Credit.

 

(a)                                  Subject to and in accordance with the terms
and conditions contained herein and in Annex B, Borrower shall have the right to
request, and Revolving Lenders agree to incur, or purchase participations in,
Letter of Credit Obligations in respect of Borrower.

 

(b)                                 On and as of the Closing Date, all letters
of credit issued for the account of Borrower under the Prepetition Loan
Agreement (the “Existing Letters of Credit”) shall continue in place as Letters
of Credit under this Agreement and shall be subject to the terms and conditions
of this Agreement, including, without limitation, Annex B.  All obligations
under or in connection with the Existing Letters of Credit shall constitute
Letter of Credit Obligations hereunder.

 

1.3                                 Prepayments.

 

(a)                                  Voluntary Prepayments; Reductions in
Revolving Loan Commitments.  Borrower may at any time on at least ten (10) days’
prior written notice to Agent (i) voluntarily prepay all or part of the Term
Loan and/or (ii) permanently reduce (but not terminate) the Revolving Loan
Commitment; provided, that (A) any such prepayments or reductions of the Term
Loan shall be in a minimum amount of $1,000,000 and integral multiples of
$250,000 in excess of such amount and any such prepayments or reductions of the
Revolver Loan Commitment shall be in a minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess of such amount, (B) the Revolving Loan
Commitment shall not be reduced to an amount less than the greater of (x)
$30,000,000 and (y) the amount of the Revolving Loan then outstanding, and (C)
after giving effect to such reductions, Borrower shall comply with Section
1.3(b)(i).  In addition, Borrower may at any time on at least ten (10) days’
prior written notice to Agent terminate the Revolving Loan Commitment; provided,
that upon such termination, all Loans and other Obligations shall be immediately
due and payable in full and all Letter of Credit Obligations shall be cash
collateralized or otherwise satisfied in accordance with Annex B hereto.  Any
voluntary prepayment and any reduction or termination of the Revolving Loan
Commitment must be accompanied by payment of the Fee required by Section 1.9(c),
if any, plus the payment of any LIBOR funding breakage costs in accordance with
Section 1.13(b).  Upon any termination of the Revolving Loan Commitment,
Borrower’s right to request Revolving Credit Advances, or request that Letter of
Credit Obligations be incurred on its behalf, or request Swing Line Advances or
Export-Related Advances, shall simultaneously be permanently terminated, and
upon any such reduction of the Revolving Loan Commitment, Borrower’s right to
request Revolving Credit Advances, or request that Letter of Credit Obligations
be incurred on its behalf, or request Swing Line Advances, shall simultaneously
be permanently reduced; provided, that a permanent reduction of the Revolving
Loan Commitment shall not require a corresponding pro rata reduction in the L/C
Sublimit and/or the Export-Related Loan Commitment.  Each notice of partial
prepayment shall designate the Loans or other Obligations to which such
prepayment is to be applied; provided, that any partial prepayments of the Term
Loan made by or on behalf of Borrower shall be applied to prepay the scheduled
installments of Borrower’s Term Loan in inverse order of maturity.

 

8

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(b)                                 Mandatory Prepayments.

 

(i)                                     If on any day the aggregate outstanding
balances of the Revolving Loan, the Swing Line Loan and the Export-Related Loan
exceed the Maximum Amount, Borrower shall on such day repay the aggregate
outstanding Revolving Credit Advances to the extent required to eliminate such
excess.  If any such excess remains after repayment in full of the aggregate
outstanding Revolving Credit Advances, Borrower shall provide cash collateral
for the Letter of Credit Obligations in the manner set forth in Annex B to the
extent required to eliminate such excess.  If on any day the aggregate
outstanding balances of the Revolving Loan and the Swing Line Loan exceed the
Borrowing Base, Borrower shall on such day repay the aggregate outstanding
Revolving Credit Advances to the extent required to eliminate such excess;
provided, that solely for purposes of this sentence, any reduction in the
Borrowing Base due to the establishment or modification of Reserves (other than
pursuant to Section 5.4(a)), or the adjustment of any criteria in Section 1.6 or
1.7, or the establishment of any new criteria for, or adjustment of advance
rates with respect to, Eligible Accounts or Eligible Inventory, shall be
effective on the second Business Day after receipt by Borrower of notice from
the Agent of such reduction.  If any such excess remains after repayment in full
of the aggregate outstanding Revolving Credit Advances, Borrower shall provide
cash collateral for the Letter of Credit Obligations in the manner set forth in
Annex B to the extent required to eliminate such excess.  If on any day the
outstanding balance of the Export-Related Loan exceeds the lesser of (A) the
Export-Related Loan Commitment and (B) the Export-Related Borrowing Base,
Borrower shall on such day repay the aggregate outstanding Export-Related
Advances to the extent required to eliminate such excess.  Notwithstanding the
foregoing, any Overadvance made pursuant to Section 1.1(a)(iii) shall be repaid
only on demand.

 

(ii)                                  On the date of receipt by any Credit Party
of proceeds of any asset disposition (excluding proceeds of asset dispositions
permitted by Section 6.8 (a), (d) and (f), and proceeds of asset dispositions
permitted by Section 6.8(c) in an aggregate amount not exceeding $300,000 in any
Fiscal Year) or any sale of Stock of any Subsidiary of any Credit Party,
Borrower shall prepay the Loans in an amount equal to all such proceeds, net of
(A) commissions and other reasonable and customary transaction costs, fees and
expenses properly attributable to such transaction and payable by Borrower in
connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes,
(C) amounts payable to holders of senior Liens (to the extent such Liens
constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate
reserve for income taxes in accordance with GAAP in connection therewith.  Any
such prepayment shall be applied in accordance with Section 1.3(c).

 

(iii)                               If any Credit Party issues Stock (other than
proceeds in an aggregate amount not exceeding $1,000,000 received upon issuance
or sale of Stock to directors, management or employees of any Credit Party under
any employment or similar agreement or stock option, stock purchase or benefit
plan) or any debt securities (other then Indebtedness permitted under Section
6.3), no later than the Business Day following the date of receipt of the
proceeds thereof, Borrower shall prepay the Loans in an amount equal to the
product of (x) 75% multiplied by (y) all such proceeds, net of underwriting
discounts and commissions and other reasonable costs, fees and expenses paid to
non-Affiliates in connection therewith.  Any such prepayment shall be applied in
accordance with Section 1.3(c).

 

9

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(iv)                              Borrower shall prepay the Term Loan on the
date that is 10 days after (a) the date on which the Borrower’s annual audited
financial statements for the Fiscal Year ending September 30, 2005 are delivered
pursuant to Annex E or (b) the date on which such annual audited financial
statements were required to be delivered pursuant to Annex E in an amount equal
to twenty-five percent (25%) of Excess Cash Flow for the immediately preceding
Fiscal Year; provided, that the sum of any such prepayments pursuant to this
Section 1.3(b)(iv) along with the aggregate amount of payment pursuant to
Section 1.1(b)(ii) shall not exceed, in the aggregate, $6,250,000.  Any
prepayments from Excess Cash Flow paid pursuant to this clause (iv) shall be
applied in accordance with Section 1.3(c).  Each such prepayment shall be
accompanied by a certificate signed by Borrower’s chief financial officer or
treasurer certifying the manner in which Excess Cash Flow was calculated and the
resulting prepayment, which certificate shall be in form and substance
reasonably satisfactory to Agent.

 

(c)                                  Application of Certain Mandatory
Prepayments.  Any prepayments made by Borrower pursuant to Sections 1.3(b)(ii),
(b)(iii) or (b)(iv) above shall be applied as follows: first, to prepay the
scheduled principal installments of the Term Loan in inverse order of maturity,
until paid in full; second, to the principal balance of the Swing Line Loan
outstanding until the same has been repaid in full; third, to the principal
balance of Revolving Credit Advances outstanding until the same has been paid in
full; fourth, to the principal balance of Export-Related Advances outstanding
until the same has been paid in full; fifth, to any Letter of Credit Obligations
to provide cash collateral therefor in the manner set forth in Annex B, until
all such Letter of Credit Obligations have been fully cash collateralized in the
manner set forth in Annex B; and sixth, to prepay the principal and any accrued
interest on the Last Out Term Loan, until paid in full; provided, however, any
Term Lender may elect by written notice to the Agent prior to the date of any
prepayment made pursuant to Section 1.3(b)(iv) to decline any or all of such
prepayment of its Term Loan, in which case the aggregate amount which would have
been applied to prepay the Term Loan but was so declined shall be applied as
follows: first, to the principal balance of the Swing Line Loan outstanding
until the same has been repaid in full; second, to the principal balance of
Revolving Credit Advances outstanding until the same has been paid in full;
third, to the principal balance of Export-Related Advances outstanding until the
same has been paid in full; fourth, to any Letter of Credit Obligations to
provide cash collateral therefor in the manner set forth in Annex B, until all
such Letter of Credit Obligations have been fully cash collateralized in the
manner set forth in Annex B; and fifth, to prepay the principal and any accrued
interest on the Last Out Term Loan, until paid in full.  None of the Revolving
Loan Commitment, the Export-Related Loan Commitment or the Swing Line Commitment
shall be permanently reduced by the amount of any such prepayments.

 

(d)                                 Application of Prepayments from Insurance
and Condemnation Proceeds.  Prepayments from insurance or condemnation proceeds
in accordance with Section 5.4(c) and the Mortgages, respectively, shall be
applied as follows:  (i) insurance proceeds from casualties or losses to
Inventory shall be applied, first, to the Swing Line Loan, second, to Revolving
Credit Advances, third, to Export-Related Advances, fourth, to the Term Loan;
and (ii) insurance or condemnation proceeds from casualties or losses to
Equipment, Fixtures and Real Estate shall be applied, first, to prepay the
scheduled principal installments of the Term Loan in inverse order of maturity,
until paid in full; second, to the principal balance of the Swing Line Loan
outstanding until the same has been repaid in full; third, to the principal
balance of Revolving Credit Advances outstanding until the same has been paid in
full; fourth, to the principal balance of

 

10

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Export-Related Advances outstanding until the same has been paid in full; fifth,
to any Letter of Credit Obligations to provide cash collateral therefor in the
manner set forth in Annex B, until all such Letter of Credit Obligations have
been fully cash collateralized in the manner set forth in Annex B; and sixth to
prepay the principal and any accrued interest on the Last Out Term Loan, until
paid in full.  Neither the Revolving Loan Commitment, the Export-Related Loan
Commitment or the Swing Line Loan Commitment shall be permanently reduced by the
amount of any such prepayments.

 

(e)                                  To the extent consistent with Sections
1.3(c) and (d), amounts to be applied pursuant to Sections 1.3(b) and (d) to the
prepayment of Loans shall be applied, as applicable, first to prepay outstanding
Index Rate Loans, and then any amounts remaining after each such application
shall, at the option of Borrower, be applied to prepay LIBOR Loans, and/or shall
be deposited in the Prepayment Account (as defined below).  The Agent shall
apply any cash deposited in the Prepayment Account (i) allocable to Term Loans
to prepay Term Loans which are LIBOR Loans, (ii) allocable to Revolving Loans to
prepay Revolving Loans which are LIBOR Loans and (iii) allocable to Last Out
Term Loans to prepay Last Out Term Loans which are LIBOR Loans in each case on
the last day of their respective LIBOR Periods (or, at the direction of
Borrower, on any earlier date) until all outstanding Term Loans, Revolving Loans
or Last Out Term Loans, as the case may be, have been prepaid or until all the
allocable cash on deposit with respect to such Loans has been fully applied. 
For purposes of this Agreement, the term “Prepayment Account” shall mean a cash
collateral account maintained at a bank or financial institution acceptable to
Agent.  The Prepayment Account shall be in the name of Borrower and shall be
pledged to, and subject to the control of, Agent, for the benefit of Agent and
Lenders, in manner satisfactory to Agent.  Borrower hereby pledges and grants to
Agent, on behalf of itself and Lenders, a first priority security interest in
all funds held in the Prepayment Account from time to time and all proceeds
thereof, as security for the payment of all Obligations, whether or not then
due.  The Agreement, including this Section 1.3(e), shall constitute a security
agreement under applicable law.  After the occurrence of and during the
continuance of an Event of Default, Agent will apply funds then held in the
Prepayment Account to the payment of Term Loans, Last Out Term Loans and
Revolving Loans (allocated to such Loans as provided above in this Section
1.3(e)), and any remaining funds shall, subject to Section 1.11(b), be applied,
in such order as Agent may elect, to any other Obligations then due and
payable.  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
Prepayment Account, except as provided above in this Section 1.3(e).  Interest
earned on deposits in the Prepayment Account shall be for the account of Lenders
ratably based upon their Pro Rata Shares of all of the Loans.

 

(f)                                    No Implied Consent.  Nothing in this
Section 1.3 shall be construed to constitute Agent’s or any Lender’s consent to
any transaction that is not permitted by other provisions of this Agreement or
the other Loan Documents.

 

1.4                                 Use of Proceeds.  Borrower shall utilize the
proceeds of the Loans (net of any amounts used on the Closing Date to pay Fees)
(a) to the extent permitted by the Interim Order or the Final Order, as the case
may be, to repay in full the outstanding principal, accrued interest, and
accrued fees and expenses, if any, owing to Prior Lenders under the Prepetition
Loan Agreement, (b) for working capital and general corporate purposes including
certain fees and expenses of professionals retained by the Borrower and the
Committee (within the meaning

 

11

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of clause (a) of the definition thereof), subject to the Carve-Out Amount and
the procedures set forth in the Interim Order and Final Order, as applicable,
but excluding in any event the making of any Restricted Payment not specifically
permitted by Section 6.14) and (c) certain other Prepetition expenses that are
approved by the Bankruptcy Court and consented to by the Agent.  Borrower shall
not be permitted to use the proceeds of the Loans: (i) for the payment of
interest and principal with respect to Subordinated Debt, (ii) to finance in any
way any adversary action, suit, arbitration, proceeding, application, motion or
other litigation of any type relating to or in connection with the Prepetition
Loan Agreement or any of the loan documents or in instruments entered into in
connection therewith, including, without limitation, any challenges to the
obligations under the Prepetition Loan Agreement, or the validity, perfection,
priority, or enforceability of any Lien securing such claims or any payment made
thereunder, (iii) to finance in any way any action, suit, arbitration,
proceeding, application, motion or other litigation of any type adverse to the
interests of Agent and Lenders or their rights and remedies under this
Agreement, the other Loan Documents, the Interim Order or the Final Order (it
being understood that funds used to pay professionals retained by the Committee
(within the meaning of clause (a) of the definition thereof) to investigate
causes of action against the Agent and the Lenders pursuant to an order of the
Bankruptcy Court and consistent with the terms of the Interim Order and the
Final Order shall not constitute a violation of this clause (iii)), (iv) to make
any distribution under a plan of reorganization in any Chapter 11 Case and (v)
to make any payment in settlement of any claim, action or proceeding before any
court, arbitrator or other governmental body without the prior written consent
of Agent.  Disclosure Schedule (1.4) contains a description of Borrower’s
sources and uses of funds as of the Closing Date, including Loans and Letter of
Credit Obligations to be made or incurred on that date, and a funds flow
memorandum detailing how funds from each source are to be transferred to
particular uses.

 

1.5                                 Interest and Applicable Margins.

 

(a)                                  Borrower shall pay interest to Agent, for
the ratable benefit of Lenders in accordance with the various Loans being made
by each Lender, in arrears on each applicable Interest Payment Date, at the
following rates:  (i) with respect to the Revolving Credit Advances, the Index
Rate plus the Applicable Revolver Index Margin per annum or, at the election of
Borrower, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin
per annum, based on the aggregate Revolving Credit Advances outstanding from
time to time;  (ii) with respect to the Export-Related Advances, the Index Rate
plus the Applicable Revolver Index Margin per annum or, at the election of
Borrower, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin
per annum, based on the aggregate Export-Related Advances outstanding from time
to time; (iii) with respect to the Term Loan, the Index Rate plus the Applicable
Term Loan Index Margin per annum or, at the election of Borrower, the applicable
LIBOR Rate plus the Applicable Term Loan LIBOR Margin per annum; (iv) with
respect to the Last Out Term Loan, the Index Rate plus the Applicable Last Out
Term Loan Index Margin per annum or, at the election of Borrower, the applicable
LIBOR Rate plus the Applicable Last Out Term Loan LIBOR Margin per annum; and
(v) with respect to the Swing Line Loan, the Index Rate plus the Applicable
Revolver Index Margin per annum.

 

12

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As of the Closing Date, the Applicable Margins are as follows:

 

Applicable Revolver Index Margin

 

2.00

%

 

 

 

 

Applicable Revolver LIBOR Margin

 

3.50

%

 

 

 

 

Applicable Term Loan Index Margin

 

3.00

%

 

 

 

 

Applicable Term Loan LIBOR Margin

 

4.50

%

 

 

 

 

Applicable Last Out Term Loan Index Margin

 

5.00

%

 

 

 

 

Applicable Last Out Term Loan LIBOR Margin

 

6.50

%

 

 

 

 

Applicable L/C Margin

 

3.50

%

 

 

 

 

Applicable Unused Facility Fee Margin

 

0.50

%

 

The Applicable Margins may be adjusted by reference to the following grids:

 

If Senior Leverage Ratio is:

 

Level of
Applicable Margins:

 

< 2.0

 

Level I

 

<2.5, but > 2.0

 

Level II

 

>2.5, but < 3.0

 

Level III

 

>3.0, but < 4.0

 

Level IV

 

>4.0, but < 5.0

 

Level V

 

>5.0

 

Level VI

 

 

 

 

Applicable Margins

 

 

 

Level I

 

Level II

 

Level III

 

Level IV

 

Level V

 

Level VI

 

Applicable Revolver Index Margin

 

1.00

%

1.25

%

1.50

%

1.75

%

2.00

%

2.25

%

Applicable Revolver LIBOR Margin

 

2.50

%

2.75

%

3.00

%

3.25

%

3.50

%

3.50

%

Applicable Term Loan Index Margin

 

2.00

%

2.25

%

2.50

%

2.75

%

3.00

%

3.25

%

Applicable Term Loan LIBOR Margin

 

3.50

%

3.75

%

4.00

%

4.25

%

4.50

%

4.75

%

Applicable Last Out Term Loan Index Margin4.25%

 

4.25

%

4.25

%

4.25

%

4.50

%

5.00

%

5.50

%

Applicable Last Out Term Loan LIBOR Margin

 

5.75

%

5.75

%

5.75

%

6.00

%

6.50

%

7.00

%

Applicable L/C Margin

 

2.50

%

2.75

%

3.00

%

3.25

%

3.50

%

3.50

%

Applicable Unused Facility Fee Margin

 

0.50

%

0.50

%

0.50

%

0.50

%

0.50

%

0.50

%

 

13

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Adjustments in the Applicable Margins commencing with the Fiscal Quarter ending
December 31, 2004 shall be implemented quarterly on a prospective basis based on
Borrower’s consolidated financial performance for the trailing four (4) Fiscal
Quarters most recently ended, for each calendar month commencing at least five
(5) days after the date of delivery to Lenders of the quarterly unaudited or
annual audited (as applicable) Financial Statements evidencing the need for an
adjustment.  Concurrently with the delivery of those Financial Statements,
Borrower shall deliver to Agent and Lenders a certificate, signed by its chief
financial officer, setting forth in reasonable detail the basis for the
continuance of, or any change in, the Applicable Margins.  Failure to timely
deliver such Financial Statements shall, in addition to any other remedy
provided for in this Agreement (including the application of the Default Rate),
result in an increase in the Applicable Margins to the highest level set forth
in the foregoing grid, until the first day of the first calendar month following
the delivery of those Financial Statements demonstrating that such an increase
is not required.  If a Default or Event of Default has occurred and is
continuing at the time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the first day of the first
calendar month following the date on which such Default or Event of Default is
waived or cured.

 

Notwithstanding the foregoing, (A) commencing on the Closing Date until the date
on which the Last Out Term Lenders advance the unfunded portion of the Last Out
Term Loan in an aggregate amount of $15,000,000 following satisfaction of the
condition set forth in Section 2.4, the Applicable Term Loan Index Margin, the
Applicable Term Loan LIBOR Margin, the Applicable Last Out Term Loan Index
Margin and the Applicable Last Out Term Loan LIBOR Margin shall each be
increased by an additional 100 basis points (it being understood that, in the
event that the conditions set forth in Section 2.4 are not satisfied on or prior
to the entry of the Final Order, such increases in the Applicable Term Loan
Index Margin, the Applicable Term Loan LIBOR Margin, the Applicable Last Out
Term Loan Index Margin and the Applicable Last Out Term Loan LIBOR Margin shall
remain in effect), and (B) commencing on the ninety first (91st) day after the
earlier to occur of (i) the Closing Date and (ii) the tenth (10th) day after the
entry of the Interim Order, the Applicable Term Loan Index Margin, the
Applicable Term Loan LIBOR Margin, the Applicable Last Out Term Loan Index
Margin and the Applicable Last Out Term Loan LIBOR Margin shall each be
increased by an additional 100 basis points.

 

(b)                                 If any payment on any Loan becomes due and
payable on a day other than a Business Day, the maturity thereof will be
extended to the next succeeding Business Day (except as set forth in the
definition of LIBOR Period) and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.

 

(c)                                  All computations of Fees calculated on a
per annum basis and interest shall be made by Agent on the basis of a 360-day
year, in each case for the actual number of days occurring in the period for
which such interest and Fees are payable.  The Index Rate is a

 

14

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floating rate determined for each day.  Each determination by Agent of an
interest rate and Fees hereunder shall be final, binding and conclusive on
Borrower, absent manifest error.

 

(d)                                 So long as an Event of Default has occurred
and is continuing under Section 8.1(a) or so long as any other Event of Default
has occurred and is continuing and at the election of Agent (or upon the written
request of Requisite Lenders or any individual Lender holding at least 33% of
either the Revolving Loan Commitment or the Term Loan Commitment) confirmed by
written notice from Agent to Borrower, the interest rates applicable to the
Loans and the Letter of Credit Fees shall be increased by two percentage points
(2%) per annum above the rates of interest or the rate of such Fees otherwise
applicable hereunder (“Default Rate”), and all outstanding Obligations shall
bear interest at the Default Rate applicable to such Obligations. Interest and
Letter of Credit Fees at the Default Rate shall accrue from the initial date of
such Event of Default (or, with respect to any Event of Default under Section
8.1(d), from the earlier of (i) the initial date any Credit Party has knowledge
of the occurrence of such Event of Default and (ii) the date the Borrower
receives notice of such Event of Default from the Agent or any Lender) until
that Event of Default is cured or waived and shall be payable upon demand.

 

(e)                                  Subject to the conditions precedent set
forth in Section 2.2, Borrower shall have the option to (i) request that any
Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all
or any part of outstanding Loans (other than the Swing Line Loan) from Index
Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan,
subject to payment of LIBOR breakage costs in accordance with Section 1.13(b) if
such conversion is made prior to the expiration of the LIBOR Period applicable
thereto, or (iv) continue all or any portion of any Loan (other than the Swing
Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period
and the succeeding LIBOR Period of that continued Loan shall commence on the
first day after the last day of the LIBOR Period of the Loan to be continued. 
Any Loan or group of Loans having the same proposed LIBOR Period to be made or
continued as, or converted into, a LIBOR Loan must be in a minimum amount of
$2,000,000 and integral multiples of $500,000 in excess of such amount.  Any
such election must be made by 11:00 a.m. (New York time) on the 3rd Business Day
prior to: (1) the date of any proposed Advance which is to bear interest at the
LIBOR Rate; (2) the end of each LIBOR Period with respect to any LIBOR Loans to
be continued as such; or (3) the date on which Borrower wishes to convert any
Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in
such election.  If no election is received with respect to a LIBOR Loan by 11:00
a.m. (New York time) on the 3rd Business Day prior to the end of the LIBOR
Period with respect thereto (or if a Default or an Event of Default has occurred
and is continuing or if the additional conditions precedent set forth in Section
2.2 shall not have been satisfied), that LIBOR Loan shall be converted to an
Index Rate Loan at the end of its LIBOR Period.  Borrower must make such
election by notice to Agent in writing, by telecopy or overnight courier.  In
the case of any conversion or continuation, such election must be made pursuant
to a written notice (a “Notice of Conversion/Continuation”) in the form of
Exhibit 1.5(e).

 

(f)                                    Notwithstanding anything to the contrary
set forth in this Section 1.5, if a court of competent jurisdiction determines
in a final order that the rate of interest payable hereunder exceeds the highest
rate of interest permissible under law (the “Maximum Lawful Rate”), then so long
as the Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if
at any

 

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time thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had the
interest rate payable hereunder been (but for the operation of this paragraph)
the interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of
interest and in the manner provided in Sections 1.5(a) through (e), unless and
until the rate of interest again exceeds the Maximum Lawful Rate, and at that
time this paragraph shall again apply.  In no event shall the total interest
received by any Lender pursuant to the terms hereof exceed the amount that such
Lender could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate.  If the Maximum
Lawful Rate is calculated pursuant to this paragraph, such interest shall be
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made.  If,
notwithstanding the provisions of this Section 1.5(f), a court of competent
jurisdiction shall finally determine that a Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent
permitted by applicable law, promptly apply such excess in the order specified
in Section 1.11 and thereafter shall refund any excess to Borrower or as a court
of competent jurisdiction may otherwise order.

 

(g)                                 If any provision of this Agreement or any of
the other Loan Documents would obligate Borrower to make any payment of interest
or other amount payable to the Agent or any Lender in an amount or calculated at
a rate which would be prohibited by law or would result in a receipt by the
Agent or any Lender of interest at a criminal rate (as such terms are construed
under the Criminal Code (Canada)) then, notwithstanding such provision, such
amount or rate shall be deemed to have been adjusted with retroactive effect to
the maximum amount or rate of interest, as the case may be, as would not be so
prohibited by law or so result in a receipt by the Agent or any Lender of
interest at a criminal rate, such adjustment to be effected, to the extent
necessary, as follows:  (1) firstly, by reducing the amount or rate of interest
required to be paid to the Agent or any Lender under the Notes; and (2)
thereafter, by reducing any fees, commissions, premiums and other amounts
required to be paid to the Agent or any Lender which would constitute interest
for purposes of Section 347 of the Criminal Code (Canada).  Notwithstanding the
foregoing, and after giving effect to all adjustments contemplated thereby, if
the Agent or any Lender shall have received an amount in excess of the maximum
permitted by that section of the Criminal Code (Canada), then the Borrower shall
be entitled, by notice in writing to the Agent or such Lender, as applicable, to
obtain reimbursement from the Agent or such Lender, as applicable, in an amount
equal to such excess, and pending such reimbursement, such amount shall be
deemed to be an amount payable by the Agent or such Lender to the Borrower.  Any
amount or rate of interest referred to in this Section 1.5 shall be determined
in accordance with generally accepted actuarial practices and principles as an
effective annual rate of interest over the term that any Loan remains
outstanding on the assumption that any charges, fees or expenses that fall
within the meaning of “interest” (as defined in the Criminal Code (Canada))
shall, if they relate to a specific period of time, be pro-rated over that
period of time and otherwise be pro-rated over the period from the Closing Date
to the Termination Date and, in the event of a dispute, a certificate of a
Fellow of the Canadian Institute of Actuaries appointed by the Agent shall be
conclusive for the purposes of such determination.

 

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For purposes of disclosure pursuant to the Interest Act (Canada), the annual
rates of interest or fees to which the rates of interest or fees provided in
this Agreement and the other Loan Documents (and stated herein or therein, as
applicable, to be computed on the basis of a 360 day year or any other period of
time less than a calendar year) are equivalent are the rates so determined
multiplied by the actual number of days in the applicable calendar year and
divided by 360 or such other period of time, respectively

 

1.6                                 Eligible Accounts.  All of the Accounts
(other than Export-Related Accounts) owned by Borrower and AET Canada and
reflected in the most recent Borrowing Base Certificate delivered by Borrower to
Agent shall be “Eligible Accounts” for purposes of this Agreement, except any
Account to which any of the exclusionary criteria set forth below applies. 
Agent shall have the right (upon prior or contemporaneous notice to Borrower) to
establish, modify or eliminate Reserves against Eligible Accounts from time to
time in its reasonable credit judgment.  In addition, Agent reserves the right
(upon prior or contemporaneous notice to Borrower), at any time and from time to
time after the Closing Date, to adjust any of the criteria set forth below, to
establish new criteria and to adjust advance rates with respect to Eligible
Accounts, in its reasonable credit judgment.  Eligible Accounts shall not
include any Account of Borrower or AET Canada:

 

(a)                                  that does not arise from the sale of goods
or the performance of services by such Credit Party in the ordinary course of
its business;

 

(b)                                 (i) upon which such Credit Party’s right to
receive payment is not absolute or is contingent upon the fulfillment of any
condition whatsoever or (ii) as to which such Credit Party is not able to bring
suit or otherwise enforce its remedies against the Account Debtor through
judicial process or (iii) if the Account represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant to
a contract under which the Account Debtor’s obligation to pay that invoice is
subject to such Credit Party’s completion of further performance under such
contract or is subject to the equitable lien of a surety bond issuer;

 

(c)                                  in the event that any defense,
counterclaim, setoff or dispute is asserted as to such Account other than as
provided in clause (j);

 

(d)                                 that is not a true and correct statement of
bona fide indebtedness incurred in the amount of the Account for merchandise
sold to or services rendered and accepted by the applicable Account Debtor;

 

(e)                                  with respect to which an invoice,
reasonably acceptable to Agent in form and substance, has not been sent to the
applicable Account Debtor;

 

(f)                                    that (i) is not owned by such Credit
Party or (ii) is subject to any Prior Claim, right, claim, security interest or
other interest of any other Person, other than Liens in favor of Agent, on
behalf of itself and Lenders;

 

(g)                                 that arises from a sale to any director,
officer, other employee or Affiliate of any Credit Party;

 

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(h)                                 that is the obligation of an Account Debtor
that is (i) the United States government or a political subdivision thereof, or
any state, county or municipality or department, agency or instrumentality
thereof or (ii) the Canadian government (Her Majesty the Queen in Right of
Canada) or a political subdivision thereof, or any province, territory,
municipality or department, agency or instrumentality thereof, unless Agent, in
its sole discretion, has agreed to the contrary in writing and Borrower, if
necessary or desirable, has complied with respect to such obligation with the
Federal Assignment of Claims Act of 1940, the Financial Administration Act
(Canada) or any applicable provincial or state, county or municipal law
restricting assignment thereof;

 

(i)                                     that is the obligation of an Account
Debtor located in a foreign country other than Canada (excluding the province of
Newfoundland, the Northwest Territories and the Territory of Nunavit) unless
payment thereof is assured by a letter of credit assigned and delivered to
Agent, reasonably satisfactory to Agent as to form, amount and issuer;

 

(j)                                     to the extent Borrower or any Subsidiary
thereof is liable for goods sold or services rendered by the applicable Account
Debtor to Borrower or any Subsidiary thereof but only to the extent of the
potential offset;

 

(k)                                  that arises with respect to goods that are
delivered on a bill-and-hold, cash-on-delivery basis or placed on consignment,
guaranteed sale or other terms by reason of which the payment by the Account
Debtor is or may be conditional;

 

(l)                                     that is not eligible for any of the
following reasons:

 

(i)                                     the Account is not paid within the
earlier of: sixty (60) days following its due date or ninety (90) days following
its original invoice date;

 

(ii)                                  the Account Debtor obligated upon such
Account suspends business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come due; or

 

(iii)                               a petition is filed by or against any
Account Debtor obligated upon such Account under any bankruptcy law or any other
federal, state or foreign (including any provincial) receivership, insolvency
relief or other law or laws for the relief of debtors;

 

(m)                               that is the obligation of an Account Debtor if
50% or more of the Dollar amount of all Accounts owing by that Account Debtor
are ineligible under the other criteria set forth in this Section 1.6;

 

(n)                                 as to which Agent’s Lien thereon, on behalf
of itself and Lenders, is not a first priority perfected Lien;

 

(o)                                 as to which any of the representations or
warranties in Section 4(f) of the Security Agreement are untrue;

 

(p)                                 to the extent such Account is evidenced by a
judgment, Instrument or Chattel Paper;

 

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(q)                                 to the extent such Account exceeds any
credit limit established by Agent, in its reasonable credit judgment;

 

(r)                                    to the extent that such Account, together
with all other Accounts owing by such Account Debtor and its Affiliates as of
any date of determination, exceed 15% of all Eligible Accounts (unless otherwise
agreed to by Agent), it being agreed that any such excess above 15% shall be
excluded;

 

(s)                                  that is payable in any currency other than
Dollars or Canadian Dollars; or

 

(t)                                    that is otherwise unacceptable to Agent
in its reasonable credit judgment.

 

1.6A                       Eligible Export-Related Accounts.  All of the
Export-Related Accounts of Borrower reflected in the most recent Borrowing Base
Certificate delivered by Borrower to Agent shall be “Eligible Export-Related
Accounts” for purposes of this Agreement, except any Account to which any of the
exclusionary criteria set forth below apply. Agent shall have the right (upon
prior or contemporaneous notice to Borrower) to establish, modify or eliminate
Reserves against Eligible Export-Related Accounts from time to time in its
reasonable credit judgment.  In addition, Agent reserves the right (upon prior
or contemporaneous notice to Borrower), at any time and from time to time after
the Closing Date, to adjust any of the criteria set forth below, to establish
new criteria and to adjust advance rates with respect to Eligible Export-Related
Accounts, in its reasonable credit judgment.  Eligible Export-Related Accounts
shall not include any Export-Related Account of Borrower that does not satisfy
the criteria set forth in the definition of “Eligible Export-Related Account
Receivable” contained in the Ex-Im Borrower Agreement.

 

1.7                                 Eligible Inventory.  All of the Inventory
owned by the Borrower and AET Canada and reflected in the most recent Borrowing
Base Certificate delivered by Borrower to Agent shall be “Eligible Inventory”
for purposes of this Agreement, except any Inventory to which any of the
exclusionary criteria set forth below applies.  Agent shall have the right (upon
prior or contemporaneous notice to Borrower) to establish, modify or eliminate
Reserves against Eligible Inventory from time to time in its reasonable credit
judgment.  In addition, Agent reserves the right (upon prior or contemporaneous
notice to Borrower), at any time and from time to time after the Closing Date,
to adjust any of the criteria set forth below, to establish new criteria and to
adjust advance rates with respect to Eligible Inventory, in its reasonable
credit judgment.  Eligible Inventory shall not include any Inventory of Borrower
or AET Canada that:

 

(a)                                  is not owned by such Credit Party free and
clear of all Liens and rights of any other Person (including the rights of a
purchaser that has made progress payments and the rights of a surety that has
issued a bond to assure such Credit Party’s performance with respect to that
Inventory), except the Liens in favor of Agent, on behalf of itself and Lenders,
and Permitted Encumbrances in favor of landlords and bailees to the extent
permitted in Section 5.9 hereof (subject to Reserves established by Agent in
accordance with Section 5.9 hereof);

 

(b)                                 (i) is not located on premises owned, leased
or rented by such Credit Party and set forth in Disclosure Schedule (3.2), or
(ii) is stored at a leased location, unless either (x) a reasonably satisfactory
landlord waiver has been delivered to Agent, or (y) Reserves reasonably

 

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satisfactory to Agent have been established with respect thereto or (iii) is
stored with a processor, toller or toll converter, warehouseman or other bailee,
unless either (x) a reasonably satisfactory, acknowledged bailee letter has been
received by Agent, or (y) Reserves reasonably satisfactory to Agent have been
established with respect thereto, or (iv) is located at an owned location
subject to a mortgage in favor of a lender other than Agent unless a reasonably
satisfactory mortgagee waiver has been delivered to Agent, or (v) is located at
any site if the aggregate book value of Inventory at any such location is less
than $50,000;

 

(c)                                  is placed on consignment, unless (i) a
reasonably satisfactory consignment agreement among the Borrower, the Agent and
the consignee has been delivered to Agent, (ii) the Borrower’s and Agent’s
interest in the consigned inventory is fully perfected under the Code by the
filing of appropriate financing statements or other action required by Agent,
(iii) prior to delivery of such consigned Inventory to the consignee any Person
holding a security interest in Goods of such consignee has been properly
notified of the Borrower’s and Agent’s interest in the consigned Inventory in
accordance with section 9-324(b) of the Code, and (iv) such Inventory is located
in the United States at a location of the consignee satisfactory to the Agent
and as to which the requirements of Section 1.7(b) have been satisfied;

 

(d)                                 is in transit (other than Inventory of
Borrower or AET Canada which is in transit in the ordinary course of business
within or between the United States and Canada between locations owned by the
Borrower or AET Canada or with respect to which Agent has received a
satisfactory landlord waiver or bailee letter, as applicable;

 

(e)                                  is covered by a negotiable document of
title, unless such document has been delivered to Agent with all necessary
endorsements, free and clear of all Liens except those in favor of Agent and
Lenders;

 

(f)                                    is excess, obsolete, unsalable, shopworn,
damaged or unfit for sale;

 

(g)                                 consists of display items or packing or
shipping materials, manufacturing supplies, work-in-process Inventory or
replacement parts;

 

(h)                                 consists of goods which have been returned
by the buyer unless such Inventory is not excess, obsolete, unsalable, shopworn,
damaged or unfit for sale;

 

(i)                                     is not of a type held for sale in the
ordinary course of such Credit Party’s business;

 

(j)                                     is not subject to a first priority lien
in favor of Agent on behalf of itself and Lenders, subject to Permitted
Encumbrances;

 

(k)                                  as to which any of the representations or
warranties in Section 4(g) of the Security Agreement are untrue;

 

(l)                                     consists of Hazardous Materials or goods
that can be transported or sold only with licenses that are not readily
available;

 

(m)                               is not covered by casualty insurance
reasonably acceptable to Agent; or

 

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(n)                                 is otherwise unacceptable to Agent in its
reasonable credit judgment.

 

1.8                                 Cash Management Systems.  On or prior to the
Closing Date, Borrower and the other Credit Parties will establish and will
maintain until the Termination Date, the cash management systems described in
Annex C (the “Cash Management Systems”).

 

1.9                                 Fees.

 

(a)                                  Borrower shall pay to GE Capital,
individually, the Fees specified in that certain amended and restated fee
letter, dated as of October 20, 2004, by and between Borrower and GE Capital (as
amended, restated, supplemented or otherwise modified from time to time, the “GE
Capital Fee Letter”), at the times specified for payment therein.

 

(b)                                 As additional compensation for the Revolving
Lenders, Borrower shall pay to Agent, for the ratable benefit of such Lenders,
in arrears, on the first Business Day of each month prior to the Commitment
Termination Date and on the Commitment Termination Date, a Fee for Borrower’s
non-use of available funds in an amount equal to the Applicable Unused Facility
Fee Margin multiplied by the difference between (x) the Maximum Amount (as it
may be reduced from time to time) and (y) the average for the period of the
daily closing balances of the aggregate Revolving Loan, the Export-Related Loan
and the Swing Line Loan outstanding during the period for which such Fee is due.

 

(c)                                  If Borrower pays after acceleration or
prepays all or any portion of the Term Loan or prepays the Revolving Loan and
reduces or terminates the Revolving Loan Commitment, whether voluntarily or
involuntarily and whether before or after acceleration of the Obligations, or if
any of the Commitments are otherwise terminated, in either case prior to the
first anniversary of the Closing Date, Borrower shall pay to Agent, for the
benefit of Lenders as liquidated damages and compensation for the costs of being
prepared to make funds available hereunder an amount equal to the Applicable
Percentage multiplied by the sum of (i) the principal amount of the Term Loan
paid after acceleration or prepaid, and (ii) the amount of the reduction of the
Revolving Loan Commitment.  As used herein, the term “Applicable Percentage”
shall mean one percent (1.0%).  The Credit Parties agree that the Applicable
Percentage is a reasonable calculation of Lenders’ lost profits in view of the
difficulties and impracticality of determining actual damages resulting from an
early termination of the Commitments.  Notwithstanding the foregoing, (i) no
prepayment fee shall be payable if the Obligations are repaid in full with the
proceeds of an exit credit facility in which the Agent acts as agent for the
lenders thereunder, and (ii) no prepayment fee shall be payable by Borrower upon
a mandatory prepayment made pursuant to Sections 1.3(b)(ii), 1.3(d) or 1.16(c);
provided that Borrower does not permanently reduce or terminate the Revolving
Loan Commitment upon any such prepayment and, in the case of prepayments made
pursuant to Section 1.3(b)(ii), the transaction giving rise to the applicable
prepayment is expressly permitted under Section 6.

 

(d)                                 Borrower shall pay to Agent, for the ratable
benefit of Revolving Lenders, the Letter of Credit Fee as provided in Annex B.

 

1.10                           Receipt of Payments.  Borrower shall make each
payment under this Agreement not later than 2:00 p.m. (New York time) on the day
when due in immediately

 

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available funds in Dollars to the Collection Account.  For purposes of computing
interest and determining Borrowing Availability and Export-Related Borrowing
Availability as of any date, all payments shall be deemed received on the first
Business Day following the Business Day on which immediately available funds
therefor are received in the Collection Account prior to 2:00 p.m. (New York
time).  Payments received after 2:00 p.m. (New York time) on any Business Day or
on a day that is not a Business Day shall be deemed to have been received on the
following Business Day.

 

1.11                           Application and Allocation of Payments.

 

(a)                                  So long as no Default or Event of Default
has occurred and is continuing, (i) payments consisting of proceeds of Accounts
(other than Export-Related Accounts) received in the ordinary course of business
shall be applied, first, to the Swing Line Loan, second, the Revolving Credit
Advances, and third, to the Export-Related Advances, (ii) payments consisting of
proceeds of Export-Related Accounts received in the ordinary course of business
shall be applied, first, to the Export-Related Advances, second, to the Swing
Line Loan, and third, to the Revolving Credit Advances; (iii) payments matching
specific scheduled payments then due shall be applied to those scheduled
payments; (iv) voluntary prepayments shall be applied as determined by Borrower,
subject to the provisions of Section 1.3(a); and (v) mandatory prepayments shall
be applied as set forth in Sections 1.3(c) and 1.3(d).  All payments and
prepayments applied to a particular Loan shall be applied ratably to the portion
thereof held by each Lender as determined by its Pro Rata Share. As to any other
payment, and as to all payments made when a Default or Event of Default has
occurred and is continuing or following the Commitment Termination Date,
Borrower hereby irrevocably waives the right to direct the application of any
and all payments received from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Agent shall have the continuing exclusive right to apply
any and all such payments against the Obligations of Borrower as Agent may deem
advisable notwithstanding any previous entry by Agent in the Loan Account or any
other books and records.  In the absence of a specific determination by Agent
with respect thereto and except as provided in Section 1.11(b), payments shall
be applied to amounts then due and payable in the following order: (1) to Fees
and Agent’s expenses reimbursable hereunder; (2) to interest on the Swing Line
Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on the
other Loans, ratably in proportion to the interest accrued as to each Loan; (5)
to principal payments on the other Loans and to provide cash collateral for
Letter of Credit Obligations in the manner described in Annex B, ratably to the
aggregate, combined principal balance of the other Loans and outstanding Letter
of Credit Obligations; and (6) to all other Obligations, including expenses of
Lenders to the extent reimbursable under Section 11.3.

 

(b)                                 The Lenders hereby agree that so long as any
of the Loans have been declared to be immediately due and payable, all proceeds
of the Collateral shall be applied first to Fees and Agent’s expenses
reimbursable hereunder; and (i) with respect to proceeds of Term Loan Priority
Collateral, second to interest on the Term Loan, third to principal payments on
the Term Loan, fourth to all other Obligations of the Term Lenders, including
expenses of Term Lenders to the extent reimbursable under Section 11.3, fifth to
interest on the Swing Line Loan, sixth to principal payments on the Swing Line
Loan, seventh to interest on the other Loans (other than the Last Out Term
Loan), ratably in proportion to the interest accrued as to each Loan, eighth to
principal payments on the other Loans (other than the Last Out Term Loan) and to

 

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provide cash collateral for Letter of Credit Obligations in the manner described
in Annex B, ratably to the aggregate, combined principal balance of the other
Loans (other than the Last Out Term Loan) and outstanding Letter of Credit
Obligations, ninth to all other Obligations of the Revolving Lenders, including
expenses of Revolving Lenders to the extent reimbursable under Section 11.3, 
tenth to interest on the Last Out Term Loan, eleventh to principal payments on
the Last Out Term Loan, twelfth to all other Obligations of the Last Out Term
Lenders, including expenses of Last Out Term Lenders to the extent reimbursable
under Section 11.3, and (ii) (A) with respect to proceeds of Revolving Loan
Priority Collateral which constitutes Export-Related Accounts, second to
interest on the Export-Related Loan, third to principal payments on the
Export-Related Loan, fourth to interest on the Swing Line Loan, fifth to
principal payments on the Swing Line Loan, sixth to interest on the Revolving
Loan, seventh to principal payments on the Revolving Loan and to provide cash
collateral for Letter of Credit Obligations in the manner described in Annex B,
eighth to all other Obligations of the Revolving Lenders, including expenses of
Revolving Lenders to the extent reimbursable under Section 11.3, ninth to
interest on the Term Loan, tenth to principal payments on the Term Loan,
eleventh to all other Obligations of the Term Lenders, including expenses of
Term Lenders to the extent reimbursable under Section 11.3, twelfth to interest
on the Last Out Term Loan, thirteenth to principal payments on the Last Out Term
Loan, fourteenth to all other Obligations of the Last Out Term Lenders,
including expenses of the Last Out Term Lenders to the extent reimbursable under
Section 11.3, and (B) with respect to proceeds of Revolving Loan Priority
Collateral (other than Export-Related Accounts), second to interest on the
Revolving Loan, third to principal payments on the Revolving Loan, fourth to
interest on the Swing Line Loan, fifth to principal payments on the Swing Line
Loan, sixth to interest on the Export-Related Loan, seventh to principal
payments on the Export-Related Loan and to provide cash collateral for Letter of
Credit Obligations in the manner described in Annex B, eighth to all other
Obligations of the Revolving Lenders, including expenses of Revolving Lenders to
the extent reimbursable under Section 11.3, ninth to interest on the Term Loan,
tenth to principal payments on the Term Loan, eleventh to all other Obligations
of the Term Lenders, including expenses of Term Lenders to the extent
reimbursable under Section 11.3, twelfth to interest on the Last Out Term Loan,
thirteenth to principal payments on the Last Out Term Loan, fourteenth to all
other Obligations of the Last Out Term Lenders, including expenses of Last Out
Term Lenders to the extent reimbursable under Section 11.3.  The provisions of
this clause (b) is for the benefit of the Lenders and Borrower shall have no
rights with respect hereto.  Agent shall use commercially reasonable efforts to
apply, promptly upon receipt, as provided herein, all payments and proceeds of
Collateral which are required to be paid to a Lender or applied to a Loan under
this Agreement.

 

(c)                                  Agent is authorized to (and at its sole
election may) charge to the Revolving Loan balance on behalf of Borrower and
cause to be paid all Fees, expenses, Charges, costs (including insurance
premiums in accordance with Section 5.4(a)), interest and other Obligations (but
not principal on the Revolving Loan), owing by Borrower under this Agreement or
any of the other Loan Documents if and to the extent Borrower fails to pay
promptly any such amounts as and when due, even if the amount of such charges
would exceed Borrowing Availability at such time.

 

1.12                           Loan Account and Accounting.  Agent shall
maintain a loan account (the “Loan Account”) on its books to record: all
Advances, the Term Loan and the Last Out Term Loan, all payments made by
Borrower, and all other debits and credits as provided in this

 

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Agreement with respect to the Loans or any other Obligations.  All entries in
the Loan Account shall be made in accordance with Agent’s customary accounting
practices as in effect from time to time. The balance in the Loan Account, as
recorded on Agent’s most recent printout or other written statement, shall,
absent manifest error, be presumptive evidence of the amounts due and owing to
Agent and Lenders by Borrower; provided, that any failure to so record or any
error in so recording shall not limit or otherwise affect Borrower’s duty to pay
the Obligations.  Agent shall render to Borrower a monthly accounting of
transactions with respect to the Loans setting forth the balance of the Loan
Account as to Borrower for the immediately preceding month.  Unless Borrower
notifies Agent in writing of any objection to any such accounting (specifically
describing the basis for such objection), within thirty (30) days after the date
thereof, each and every such accounting shall (absent manifest error) be deemed
final, binding and conclusive on Borrower in all respects as to all matters
reflected therein.  Only those items expressly objected to in such notice shall
be deemed to be disputed by Borrower.  Notwithstanding any provision herein
contained to the contrary, any Lender may elect (which election may be revoked)
to dispense with the issuance of Notes to that Lender and may rely on the Loan
Account as evidence of the amount of Obligations from time to time owing to it.

 

1.13                           Indemnity.

 

(a)                                  Each Credit Party that is a signatory
hereto shall jointly and severally indemnify and hold harmless each of Agent,
Lenders and their respective Affiliates, and each such Person’s respective
officers, directors, employees, attorneys, agents and representatives (each, an
“Indemnified Person”), from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses (including reasonable
attorneys’ fees and disbursements and other out-of-pocket costs of investigation
or defense, including those incurred upon any appeal) that may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
credit having been extended, suspended or terminated under this Agreement and
the other Loan Documents and the administration of such credit, and in
connection with or arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection therewith, including
any and all Environmental Liabilities, and any and all reasonable out-of-pocket
legal costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively,
“Indemnified Liabilities”); provided, that no such Credit Party shall be liable
for any indemnification to an Indemnified Person to the extent that any such
suit, action, proceeding, claim, damage, loss, liability or expense results from
that  Indemnified Person’s gross negligence or willful misconduct.  NO
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN
DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR
ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR
AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

 

(b)                                 To induce Lenders to provide the LIBOR Rate
option on the terms provided herein, if (i) any LIBOR Loans are repaid in whole
or in part prior to the last day of any applicable LIBOR Period (whether that
repayment is made pursuant to any provision of this

 

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Agreement or any other Loan Document or occurs as a result of acceleration, by
operation of law or otherwise); (ii) Borrower shall default in payment when due
of the principal amount of or interest on any LIBOR Loan; (iii) Borrower shall
refuse to accept any borrowing of, or shall request a termination of, any
borrowing of, conversion into or continuation of, LIBOR Loans after Borrower has
given notice requesting the same in accordance herewith; or (iv) Borrower shall
fail to make any prepayment of a LIBOR Loan after Borrower has given a notice
thereof in accordance herewith, then Borrower shall indemnify and hold harmless
each Lender from and against all losses, costs and expenses resulting from or
arising from any of the foregoing.  Such indemnification shall include any loss
(including loss of margin) or expense arising from the reemployment of funds
obtained by it or from fees payable to terminate deposits from which such funds
were obtained.  For the purpose of calculating amounts payable to a Lender under
this subsection, each Lender shall be deemed to have actually funded its
relevant LIBOR Loan through the purchase of a deposit bearing interest at the
LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a
maturity comparable to the relevant LIBOR Period; provided, that each Lender may
fund each of its LIBOR Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this subsection.  This covenant shall survive the termination of this Agreement
and the payment of the Notes and all other amounts payable hereunder.  As
promptly as practicable under the circumstances, each Lender shall provide
Borrower with its written calculation of all amounts payable pursuant to this
Section 1.13(b), and such calculation shall be binding on the parties hereto
unless Borrower shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.

 

1.14                           Access.  Each Credit Party that is a party hereto
shall, during normal business hours, from time to time upon one Business Day’s
prior notice as frequently as Agent or any Lender reasonably determines to be
appropriate: (a) provide Agent or such Lender (at such Lender’s own cost and
expense), as applicable, and any of its officers, employees and agents access to
its properties, facilities, advisors and employees (including officers) of each
Credit Party and to the Collateral, (b) permit Agent or such Lender (at such
Lender’s own cost and expense), as applicable, and any of its officers,
employees and agents, to inspect, audit and make extracts from any Credit
Party’s books and records, and (c) permit Agent, and its officers, employees and
agents, to inspect, review, evaluate and make test verifications and counts of
the Accounts, Inventory and other Collateral of any Credit Party.  If a Default
or Event of Default has occurred and is continuing or if access is necessary to
preserve or protect the Collateral as determined by Agent, each such Credit
Party shall provide such access to Agent and to each Lender at all times and
without advance notice.  Furthermore, so long as any Event of Default has
occurred and is continuing, Borrower shall use commercially reasonable efforts
to provide Agent and each Lender with access to their suppliers and customers. 
Each Credit Party shall make available to Agent and its counsel, as quickly as
is possible under the circumstances, originals or copies of all books and
records that Agent may reasonably request.  Each Credit Party shall deliver any
document or instrument necessary for Agent, as it may from time to time
reasonably request, to obtain records from any service bureau or other Person
that maintains records for such Credit Party, and shall maintain duplicate
records or supporting documentation on media, including computer tapes and discs
owned by such Credit Party.  Agent will give Lenders at least 5 days’ prior
written notice of regularly scheduled audits.  Representatives of other Lenders
may (at their own cost and expense) accompany Agent’s representatives on
regularly scheduled audits at no charge to Borrower.  Each Lender shall give
Agent at least five

 

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(5) days’ prior written notice of its intention to exercise access rights under
this Section 1.14 and Agent’s representatives may accompany Lender’s
representatives in exercising such access rights.

 

1.15                           Taxes.

 

(a)                                  Any and all payments by Borrower or any
other Credit Party hereunder or under the Notes or any other Loan Document shall
be made, in accordance with this Section 1.15, free and clear of and without
deduction for any and all present or future Taxes.  If Borrower or any other
Credit Party shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or under the Notes or any other Loan Document, (i) the
sum payable shall be increased as much as shall be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 1.15) Agent or Lenders, as applicable, receive
an amount equal to the sum they would have received had no such deductions been
made, (ii) Borrower or such other Credit Party shall make such deductions, and
(iii) Borrower or such other Credit Party shall pay the full amount deducted to
the relevant taxing or other authority in accordance with applicable law. 
Within thirty (30) days after the date of any payment of Taxes, Borrower or such
other Credit Party shall furnish to Agent the original or a certified copy of a
receipt evidencing payment thereof. Except as set forth in Section 1.15(e),
Agent and Lenders shall not be obligated to return or refund any amounts
received pursuant to this Section.

 

(b)                                 Each Credit Party that is a signatory hereto
shall jointly and severally indemnify and, within ten (10) days of demand
therefor, pay Agent and each Lender for the full amount of Taxes (including any
Taxes imposed by any jurisdiction on amounts payable under this Section 1.15)
paid by Agent or such Lender, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally asserted.

 

(c)                                  Each Lender organized under the laws of a
jurisdiction outside the United States (a “Foreign Lender”) as to which payments
to be made under this Agreement or under the Notes are exempt from United States
withholding tax under an applicable statute or tax treaty shall provide to
Borrower and Agent prior to becoming a party to this Agreement a properly
completed and executed IRS Form W-8ECI or Form W-8BEN or other applicable form,
certificate or document prescribed by the IRS or the United States certifying as
to such Foreign Lender’s entitlement to a complete exemption from U.S.
withholding taxes (a “Certificate of Exemption”).  Any foreign Person that seeks
to become a Lender under this Agreement shall provide a Certificate of Exemption
to Borrower and Agent prior to becoming a Lender hereunder.  No foreign Person
may become a Lender hereunder if such Person fails to deliver a Certificate of
Exemption in advance of becoming a Lender. In addition, each Foreign Lender
shall deliver such forms upon the obsolescence or invalidity of any form
previously delivered by such Foreign Lender.  Notwithstanding any other
provision of this Section 1.15(c), a Foreign Lender shall not be required to
deliver any form pursuant to this Section 1.15(c) (other than the form required
to be delivered pursuant to the first sentence of this clause) that such Foreign
Lender is not legally able to deliver.

 

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(d)                                 The Borrower shall not be required to
indemnify any Foreign Lender, or to pay any additional amounts to any Foreign
Lender, in respect of United States federal, state or local withholding Tax
pursuant to paragraph (a) or (b) above to the extent that (i) the obligation to
withhold amounts with respect to United States federal, state or local
withholding Tax existed on the date such Foreign Lender became a party to this
Agreement (or, in the case of a transferee, on the effective date of the
Assignment Agreement pursuant to which such transferee becomes a Lender) or,
with respect to payments to a new lending office, the date such Foreign Lender
designated such new lending office; provided, however, that this clause (i)
shall not apply to any Lender that becomes a Lender or new lending office that
becomes a new lending office as a result of an assignment or designation made at
the request of the Borrower; and provided, further, that this clause (i) shall
not apply to the extent that the indemnity payment or additional amounts any
Lender, the Agent or any Lender through a new lending office would be entitled
to receive (without regard to this clause (i)) do not exceed the indemnity
payment or additional amounts that the person making the assignment or transfer
to such Lender, the Agent or such Lender making the designation of such new
lending office would have been entitled to receive in the absence of such
assignment, transfer or designation or (ii) the obligation to pay such
additional amounts or such indemnity payments would not have arisen but for a
failure by such Foreign Lender to comply with the provisions of 1.15(c) above.

 

(e)                                  If any of Agent or any Lender, as
applicable, determines, in its sole discretion, that it has received a refund of
any Taxes as to which it has been indemnified by the Borrower or a Credit Party
or with respect to which the Borrower or a Credit Party has paid additional
amounts pursuant to this Section 1.15, it shall pay over such refund to the
Borrower (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrower or Credit Party under this Section 1.15 with
respect to the Taxes giving rise to such refund), net of all Charges imposed on
such refund, out-of-pocket expenses of such Agent or Lender and without interest
(other than any interest paid by the relevant Governmental Authority with
respect to such refund).

 

1.16                           Capital Adequacy; Increased Costs; Illegality.

 

(a)                                  If any Lender shall have determined that
any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not
having the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender’s capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction.  A certificate in
reasonable detail as to the amount of that reduction and showing the basis of
the computation thereof submitted by such Lender to Borrower and to Agent shall,
absent manifest error, be final, conclusive and binding for all purposes.

 

(b)                                 If, due to either (i) the introduction of or
any change in any law or regulation (or any change in the interpretation
thereof) or (ii) the compliance with any guideline

 

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or request from any central bank or other Governmental Authority (whether or not
having the force of law), in each case adopted after the Closing Date, there
shall be any increase in the cost to any Lender of agreeing to make or making,
funding or maintaining any Loan, then Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to Agent), pay to Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost.  A certificate in reasonable detail as to the
amount of such increased cost, submitted to Borrower and to Agent by such
Lender, shall be conclusive and binding on Borrower for all purposes, absent
manifest error.  Each Lender agrees that, as promptly as practicable after it
becomes aware of any circumstances referred to above which would result in any
such increased cost, the affected Lender shall, to the extent not inconsistent
with such Lender’s internal policies of general application, use reasonable
commercial efforts to change its lending office or otherwise minimize costs and
expenses incurred by it and payable to it by Borrower pursuant to this Section
1.16(b).

 

(c)                                  Notwithstanding anything to the contrary
contained herein, if the introduction of or any change in any law or regulation
(or any change in the interpretation thereof) shall make it unlawful, or any
central bank or other Governmental Authority shall assert that it is unlawful,
for any Lender to agree to make or to make or to continue to fund or maintain
any LIBOR Loan, then, unless that Lender is able to make or to continue to fund
or to maintain such LIBOR Loan at another branch or office of that Lender
without, in that Lender’s opinion, adversely affecting it or its Loans or the
income obtained therefrom, on notice thereof and demand therefor by such Lender
to Borrower through Agent, (i) the obligation of such Lender to agree to make or
to make or to continue to fund or maintain LIBOR Loans shall terminate and
(ii) Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing
by Borrower to such Lender, together with interest accrued thereon, unless
Borrower, within five (5) Business Days after the delivery of such notice and
demand, converts all LIBOR Loans into Index Rate Loans.

 

(d)                                 Within fifteen (15) days after receipt by
Borrower of written notice and demand from any Lender (an “Affected Lender”) for
payment of additional amounts or increased costs as provided in Sections
1.15(a), 1.16(a) or 1.16(b), or of its inability to fund as provided in Section
1.16(c), Borrower may, at its option, notify Agent and such Affected Lender of
its intention to replace the Affected Lender.  So long as no Default or Event of
Default has occurred and is continuing, Borrower, with the consent of Agent
(which consent shall not be unreasonably withheld or delayed with respect to a
Qualified Assignee), may obtain, at Borrower’s expense, a replacement Lender
(“Replacement Lender”) for the Affected Lender.  If Borrower obtains a
Replacement Lender within ninety (90) days following notice of its intention to
do so, the Affected Lender must sell and assign its Loans and Commitments to
such Replacement Lender for an amount equal to the principal balance of all
Loans held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale; provided, that Borrower shall have
reimbursed such Affected Lender for the additional amounts or increased costs
that it is entitled to receive under this Agreement through the date of such
sale and assignment.  Notwithstanding the foregoing, Borrower shall not have the
right to obtain a Replacement Lender if the Affected Lender rescinds its demand
for increased costs or additional amounts within fifteen (15) days following its
receipt of Borrower’s notice of intention to replace such Affected Lender. 
Furthermore, if Borrower gives a notice of intention to replace and does not so
replace such Affected Lender within ninety (90) days thereafter, Borrower’s
rights under

 

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this Section 1.16(d) shall terminate and Borrower shall promptly pay all
increased costs or additional amounts demanded by such Affected Lender pursuant
to Sections 1.15(a), 1.16(a) and 1.16(b).

 

1.17                           Single Loan.  All Loans to Borrower and all of
the other Obligations of Borrower arising under this Agreement and the other
Loan Documents shall constitute one general obligation of Borrower secured,
until the Termination Date, by all of the Collateral.

 

1.18                           Super-Priority Nature of Obligations and Lenders’
Liens.

 

(a)                                  The priority of Lenders’ Liens on the
Collateral owned by the Borrower and the Guarantor shall be set forth in the
Interim Order, the Final Order, the Canadian Interim Order and the Canadian
Final Order.

 

(b)                                 All Obligations shall constitute
administrative expenses of Borrower and, where applicable, any Credit Party in
their respective Chapter 11 Cases, with administrative priority and senior
secured status under Sections 364(c) and 364(d) of the Bankruptcy Code.  Subject
to the Carve-Out Expenses up to the Carve-Out Amount, such administrative claim
shall have priority over all other costs and expenses of the kinds specified in,
or ordered pursuant to, Sections 105, 326, 330, 331, 503(b), 507(a), 507(b) or
726 of the Bankruptcy Code and shall at all times be senior to the rights of
Borrower or any Credit Party, Borrower’s or any Credit Parties’ estate, and any
successor trustee or estate representative in their Chapter 11 Cases or any
subsequent proceeding or case under the Bankruptcy Code.  The liens and security
interests granted to Lenders on the Collateral owned by the Borrower and the
other Credit Parties, and the priorities accorded to the Obligations shall have
the priority and senior secured status afforded by Sections 364(c) and 364(d)(1)
of the Bankruptcy Code (all as more fully set forth in the Interim Order, Final
Order, Canadian Interim Order and Canadian Final Order) senior to all claims and
interests other than Permitted Encumbrances and the Carve-Out Expenses up to the
Carve-Out Amount.

 

(c)                                  Lenders’ Liens on the Collateral owned by
the Borrower or the other Credit Parties filing a Chapter 11 Case and the
Lenders’ administrative claim under Sections 364(c)(1) and 364(d) of the
Bankruptcy Code afforded the Obligations shall also have priority over any
claims arising under Section 506(c) of the Bankruptcy Code subject and
subordinate only to the following (hereafter referred to as the “Carve-Out
Expenses”): fees and disbursements incurred and allowed on and after the
Petition Date by professionals retained by the Borrower or the other Credit
Parties filing a Chapter 11 Case, the Committee (within the meaning of clause
(a) of the definition thereof) and any statutorily mandated costs and fees of
the U.S. Trustee with respect to the Chapter 11 Cases, up to a maximum unpaid
aggregate amount not to exceed $2,000,000 (such dollar amount being referred to
herein as the “Carve-Out Amount”) (determined without regard to fees and
expenses which may be awarded and paid on an interim basis or paid pursuant to
procedures for the payment of fees and expenses of professionals approved by the
Bankruptcy Court after notice to the Agent and a hearing or any Prepetition
retainer paid to Borrower’s counsel, any other Credit Party filing a Chapter 11
Case’s counsel or the Committees’ counsel (as “Committee” is defined in clause
(a) of the definition thereof) in connection with a Chapter 11 Case), provided,
that the Carve-Out Expenses shall not include any other claims that are or may
be senior to or pari passu with any of the Carve-Out

 

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Expenses or any professional fees and expenses of a Chapter 7 trustee and,
provided, further, that Carve-Out Expenses shall not include any fees or
disbursements (A) arising after the conversion of any Chapter 11 Case to a case
under Chapter 7 of the Bankruptcy Code or (B) related to the investigation of,
preparation for, or commencement or prosecution of, any claims or proceedings
against (i) the Agent or the Lenders or their claims or security interests in or
Liens on, the Collateral whether under this Agreement or any other Loan
Document. and (ii) any agent or lender under the Prepetition Loan Agreement or
their claims or security interests in connection with the Prepetition Loan
Agreement or any of the loan documents or instruments entered into in connection
therewith. Except as set forth herein or in the Final Order, no other claim
having a priority superior or pari passu to that granted to Lenders by the Final
Order shall be granted or approved while any Obligations under this Agreement
remain outstanding.

 

1.19                           Payment of Obligations.  Subject to the
provisions of the Interim Order and the Final Order, upon the maturity (whether
by acceleration or otherwise) of any of the Obligations under this Agreement or
any of the other Loan Documents, Lenders shall be entitled to immediate payment
of such Obligations without further application to or order of the Bankruptcy
Court.

 

1.20                           No Discharge; Survival of Claims.  Borrower
agrees that (a) the Obligations hereunder shall not be discharged by the entry
of an order confirming a plan of reorganization in any Chapter 11 Case (and
Borrower pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waives
any such discharge) and (b) the super-priority administrative claim granted to
Agent and Lenders pursuant to the Interim Order and Final Order and described in
Section 1.18, the Liens granted to Agent pursuant to the Interim Order and Final
Order and described in Section 1.18 and the priority and the Liens set forth in
the Canadian Interim Order and the Canadian Final Order shall not be affected in
any manner by the entry of an order confirming a plan of reorganization in any
Chapter 11 Case.

 

1.21                           Release.  Borrower hereby acknowledges effective
upon entry of the Final Order, that neither Borrower nor any of its Subsidiaries
have any defense, counterclaim, offset, recoupment, cross-complaint, claim or
demand of any kind or nature whatsoever that can be asserted to reduce or
eliminate all of any part of the Borrower’s or its Subsidiaries’ liability to
repay Agent or any Lender as provided in this Agreement or to seek affirmative
relief or damages of any kind or nature from Agent or any Lender.  Borrower and
the other Credit Parties filing a Chapter 11 Case, in their own right and with
respect to the Borrower and the other Credit Parties filing a Chapter 11 Case,
on behalf of their bankruptcy estates, and on behalf of all such parties,
successors, assigns, Subsidiaries and any Affiliates and any Person acting for
and on behalf of, or claiming through them, (collectively, the “Releasing
Parties”), hereby fully, finally and forever release and discharge Agent and
Lenders and all of Agent’s and Lenders’ past and present officers, directors,
servants, agents, attorneys, assigns, heirs, parents, subsidiaries, and each
Person acting for or on behalf of any of them (collectively, the “Released
Parties”) of and from any and all past, present and future actions, causes of
action, demands, suits, claims, liabilities, Liens, lawsuits, adverse
consequences, amounts paid in settlement, costs, damages, debts, deficiencies,
diminution in value, disbursements, expenses, losses and other obligations of
any kind or nature whatsoever, whether in law, equity or otherwise (including,
without limitation, those arising under Sections 541 through 550 of the
Bankruptcy Code and interest or other carrying costs, penalties, legal,
accounting and other professional fees and expenses, and

 

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incidental, consequential and punitive damages payable to third parties, but
excluding those caused by the Released Parties’ gross negligence, willful
misconduct or criminal misconduct), whether known or unknown, fixed or
contingent, direct, indirect, or derivative, asserted or unasserted, foreseen or
unforeseen, suspected or unsuspected, now existing, heretofore existing or which
may heretofore accrue against any of the Released Parties, whether held in a
personal or representative capacity, and which are based on any act, fact, event
or omission or other matter, cause or thing occurring at or from any time prior
to and including the date hereof in any way, directly or indirectly arising out
of, connected with or relating to this Agreement, the Interim Order, the Final
Order, the Canadian Interim Order, the Canadian Final Order and the transactions
contemplated hereby, and all other agreements, certificates, instruments and
other documents and statements (whether written or oral) related to any of the
foregoing.

 

1.22                           Waiver of any Primary Rights.  Upon the Closing
Date, and on behalf of themselves and their estates, and for so long as any
Obligation shall be outstanding, Borrower and each other Credit Party filing a
Chapter 11 Case hereby irrevocably waives any right, pursuant to Sections 364(c)
or 364(d) of the Bankruptcy Code or otherwise, to grant any Lien of equal or
greater priority than the Lien securing the Obligations, or to approve a claim
of equal or greater priority than the Obligations.

 

2.                                      CONDITIONS PRECEDENT

 

2.1                                 Conditions to the Initial Loans.  No Lender
shall be obligated to make any Loan or incur any Letter of Credit Obligations on
the Closing Date, or to take, fulfill, or perform any other action hereunder,
until the following conditions have been satisfied or provided for in a manner
satisfactory to Agent, or waived in writing by Agent and Lenders:

 

(a)                                  Credit Agreement; Loan Documents.  This
Agreement or counterparts hereof shall have been duly executed by, and delivered
to, Borrower, each other Credit Party, Agent and Lenders; and Agent shall have
received such documents, instruments, agreements and legal opinions as Agent
shall reasonably request in connection with the transactions contemplated by
this Agreement and the other Loan Documents, including all those listed in the
Closing Checklist attached hereto as Annex D, each in form and substance
reasonably satisfactory to Agent.

 

(b)                                 Approvals.  Agent shall have received (i)
satisfactory evidence that the Credit Parties have obtained all required
consents and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this Agreement and
the other Loan Documents and the consummation of the Related Transactions or
(ii) an officer’s certificate in form and substance reasonably satisfactory to
Agent affirming that no such consents or approvals are required.

 

(c)                                  Payment of Fees. Borrower shall have paid
the Fees required to be paid on the Closing Date in the respective amounts
specified in Section 1.9 (including the Fees specified in the GE Capital Fee
Letter), and shall have reimbursed Agent for all out-of-pocket fees, costs and
expenses of closing (including all reasonable attorneys’ fees) presented as of
the Closing Date.

 

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(d)                                 Due Diligence.  Agent shall have completed
its business and legal due diligence, including a roll forward of its previous
Collateral audit, with results reasonably satisfactory to Agent.

 

(e)                                  Consummation of Related Transactions. 
Agent shall have received fully executed copies of the Related Transactions
Documents, each of which shall be in form and substance reasonably satisfactory
to Agent and its counsel.  The Related Transactions shall have been consummated
in accordance with the terms of the Related Transactions Documents.

 

(f)                                    Entry of Interim Order and Issuance of
Canadian Interim Order. Entry by the Bankruptcy Court of the Interim Order and,
by no later than two (2) days after the entry of the Interim Order, issuance of
the Canadian Interim Order, approving the transactions contemplated hereby and
granting a first priority perfected security interest in the Collateral subject
only to Permitted Encumbrances and the Carve-Out Expenses up to the Carve-Out
Amount (it being understood that the entry of the Canadian Interim Order shall
not be a condition precedent to any Lender’s obligation to make any Loan or
incur any Letter of Credit Obligations on the Closing Date).

 

(g)                                 Corporate Structure. Agent shall be
reasonably satisfied with the corporate structure, capital structure, debt
instruments, material contracts, and governing documents of Borrower and its
Subsidiaries, and the tax effects resulting from the commencement of the Chapter
11 Cases and the credit facility evidenced by this Agreement.

 

(h)                                 Cash Management System. Borrower shall have
established the Cash Management System described in Annex C and Borrower shall
have obtained appropriate court orders approving such system, all as reasonably
acceptable to Agent; and

 

(i)                                     First Day Orders.  The “first day”
orders described on Disclosure Schedule (2.1) in form and substance reasonably
satisfactory to Agent shall have been entered in the Chapter 11 Cases.

 

2.2                                 Further Conditions to Each Loan.  Except as
otherwise expressly provided herein, no Lender shall be obligated to fund any
Advance, convert or continue any Loan as a LIBOR Loan or incur any Letter of
Credit Obligation, if, as of the date thereof:

 

(a)                                  the Advance, Loan or Letter of Credit
Obligation requested would cause the aggregate outstanding amount of the Loans
and/or Letter of Credit Obligations to exceed the amount then authorized by the
Interim Order or the Final Order, as the case may be, or any order modifying or
vacating such order shall have been entered, or any appeal of such order shall
have been timely filed;

 

(b)                                 any representation or warranty by any Credit
Party contained herein or in any other Loan Document is untrue or incorrect as
of such date, except to the extent that such representation or warranty
expressly relates to an earlier date and except for changes therein expressly
permitted or expressly contemplated by this Agreement, and Agent or Requisite
Revolving Lenders (or (i) Requisite Term Lenders, with respect to the making of
any Term Loan or the conversion or continuation of any Term Loan as a LIBOR Loan
or (ii) Requisite Last Out Term Lenders, with respect to the making of any Last
Out Term Loan or the conversion or

 

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continuation of any Last Out Term Loan as a LIBOR Loan)  have determined not to
make such Advance, convert or continue any Loan as LIBOR Loan or incur such
Letter of Credit Obligation as a result of the fact that such warranty or
representation is untrue or incorrect;

 

(c)                                  any event or circumstance having a Material
Adverse Effect has occurred since the date hereof as determined by the Requisite
Revolving Lenders and Agent or Requisite Revolving Lenders (or (i) Requisite
Term Lenders, with respect to the making of any Term Loan or the conversion or
continuation of any Term Loan as a LIBOR Loan or (ii) Requisite Last Out Term
Lenders, with respect to the making of any Last Out Term Loan or the conversion
or continuation of any Last Out Term Loan as a LIBOR Loan) have determined not
to make such Advance, convert or continue any Loan as a LIBOR Loan or incur such
Letter of Credit Obligation as a result of the fact that such event or
circumstance has occurred;

 

(d)                                 any Default or Event of Default has occurred
and is continuing or would result after giving effect to any Advance (or the
incurrence of any Letter of Credit Obligation), and Agent or Requisite Revolving
Lenders (or (i) Requisite Term Lenders, with respect to the making of any Term
Loan or the conversion or continuation of any Term Loan as a LIBOR Loan or (ii)
Requisite Last Out Term Lenders, with respect to the making of any Last Out Term
Loan or the conversion or continuation of any Last Out Term Loan as a LIBOR
Loan) shall have determined not to make any Advance, convert or continue any
Loan as a LIBOR Loan or incur any Letter of Credit Obligation as a result of
that Default or Event of Default;

 

(e)                                  after giving effect to any Advance (or the
incurrence of any Letter of Credit Obligations), (i) the outstanding principal
amount of the aggregate Revolving Loan would exceed the Maximum Amount less the
then outstanding principal amount of the Swing Line Loan and the Export-Related
Loan, (ii) the outstanding principal amount of the aggregate Revolving Credit
Advances would exceed the Borrowing Base less the then outstanding principal
amount of the Swing Line Loan, or (iii) the outstanding principal amount of the
Export-Related Loan would exceed the lesser of the Export-Related Borrowing
Availability and the Export-Related Loan Commitment; or

 

(f)                                    (i) (x) in the case of Advances, Loans or
Letters of Credit made or issued prior to the date that is twenty-five (25) days
after the Petition Date, the Interim Order or the Canadian Interim Order shall
not be in full force and effect and, if the Interim Order or the Canadian
Interim Order has expired prior to such date, the Final Order and the Canadian
Final Order shall not have been entered prior to or immediately following such
expiration, or (y) in the case of Advances, Loans or Letters of Credit made or
issued from and after the date that is twenty-five (25) days after the Petition
Date, the Bankruptcy Court shall not have entered the Final Order, (iii) the
Interim Order, the Canadian Interim Order, the Final Order or the Canadian Final
Order, as the case may be, shall have been vacated, reversed, modified or
amended without Lenders’ consent, (iv) a motion for reconsideration of any such
order shall have been timely filed or (v) an appeal of any such order shall have
been timely filed and if such order is the subject of a pending appeal in any
respect, either the making of any Loans, the granting of super-priority claim
status with respect to the Obligations, the granting of the Liens described
herein, or the performance by the Borrower or any Credit Party of any of their
obligations under this Agreement or any other Loan Document or under any other
instrument or agreement referred to in this Agreement shall be the subject of a
presently effective stay pending appeal.

 

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Without limiting the foregoing, no Lender shall be obligated to fund any
Advance, convert or continue any Loan as a LIBOR Loan or incur any Letter of
Credit Obligation, if as of the date of entry of the Final Order, Borrower shall
have Borrowing Availability of less than (i) $22,500,000 in the event that the
unfunded portion of the Last Out Term Loan is advanced by such date following
satisfaction of the conditions set forth in Section 2.4, or (ii) $7,500,000 in
the event that the unfunded portion of the Last Out Term Loan is not advanced by
such date.

 

The request and acceptance by Borrower of the proceeds of any Advance, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan shall be deemed to constitute, as of the
date thereof, (i) a representation and warranty by Borrower that the conditions
in this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrower of
the granting and continuance of Agent’s Liens, on behalf of itself and Lenders,
pursuant to the Collateral Documents.

 

2.3                                 Further Conditions to Each Export-Related
Advance.  Except as otherwise expressly provided herein, no Lender shall be
obligated to fund any Export-Related Advance, if, as of the date thereof:

 

(a)                                  Agent has not received satisfactory
evidence that Borrower has obtained all consents and approvals from Ex-Im Bank;

 

(b)                                 Agent has not received duly executed copies
of all Ex-Im Bank Documents, each in form and substance satisfactory to Agent
and signed by each party thereto;

 

(c)                                  Borrower has not duly executed any
necessary application forms required by Ex-Im Bank;

 

(d)                                 any Ex-Im Bank Document is not in full force
and effect; or

 

(e)                                  with respect to any Export-Related Advance
requested after the date of any scheduled termination of any Ex-Im Bank
Guarantee, Agent has not received written notice at least ninety (90) days prior
to such scheduled termination (or such lesser time as may be agreed to by Agent)
that the Ex-Im Bank Guarantee has been renewed.

 

The request and acceptance by Borrower of the proceeds of any Export-Related
Advance as of the date thereof, (i) a representation and warranty by Borrower
that the conditions in this Section 2.3 have been satisfied and (ii) a
reaffirmation by Borrower of the granting and continuance of Agent’s Liens, on
behalf of itself and Lenders, pursuant to the Collateral Documents.

 

2.4                                 Further Conditions to Funding of Last Out
Term Loan.  No Lender shall be obligated to advance any portion of the Last Out
Term Loan in an aggregate amount equal to $15,000,000 unless and until Agent and
GECMG shall have syndicated such portion of the Last Out Term Loan to the
Agent’s satisfaction in its sole discretion.

 

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3.                                      REPRESENTATIONS AND WARRANTIES

 

To induce Lenders to make the Loans and to incur Letter of Credit Obligations,
the Credit Parties executing this Agreement, jointly and severally, make the
following representations and warranties to Agent and each Lender with respect
to all Credit Parties, each and all of which shall survive the execution and
delivery of this Agreement.

 

3.1                                 Corporate Existence; Compliance with Law. 
Each Credit Party (a) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation or organization set forth in
Disclosure Schedule (3.1); (b) is duly qualified to conduct business and is in
good standing in each other jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not result in exposure to losses,
damages or liabilities in excess of $250,000; (c) subject to the entry of the
Interim Order (or the Final Order, when applicable) by the Bankruptcy Court, has
the requisite power and authority and the legal right to own, pledge, mortgage
or otherwise encumber and operate its properties, to lease the property it
operates under lease and to conduct its business as now, heretofore and proposed
to be conducted; (d) subject to specific representations regarding Environmental
Laws, has all licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental Authorities
having jurisdiction, to the extent required for such ownership, operation and
conduct, except where the failure to have such licenses, permits, consents or
approvals, make such filings or give such notices, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect;
(e) is in compliance with its charter and bylaws or partnership or operating
agreement, as applicable; and (f) subject to specific representations set forth
herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance
with all applicable provisions of law, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

 

3.2                                 Executive Offices, Collateral Locations,
FEIN.  As of the Closing Date, the current location of each Credit Party’s chief
executive office and the processor, toller or toll converter locations,
warehouses, consignment, and other premises at which any Collateral is located
are set forth in Disclosure Schedule (3.2).  In addition, Disclosure Schedule
(3.2) lists the federal employer identification number of each Credit Party.

 

3.3                                 Corporate Power, Authorization, Enforceable
Obligations.  Upon the entry by the Bankruptcy Court of the Interim Order (or
the Final Order, when applicable) the execution, delivery and performance by
each Credit Party of the Loan Documents to which it is a party and the creation
of all Liens provided for therein: (a) are within such Person’s power; (b) have
been duly authorized by all necessary corporate, limited liability company or
limited partnership action; (c) do not contravene any provision of such Person’s
charter, bylaws or partnership or operating agreement as applicable; (d) do not
violate any applicable law or regulation, or any applicable order or decree of
any court of competent jurisdiction or Governmental Authority; (e) do not
conflict with or result in the breach or termination of, constitute a default
under or accelerate or permit the acceleration of any performance required by,
any indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (f) do not result in the creation or imposition of any Lien upon any of
the property of such Person other than those in favor of Agent, on behalf of
itself and Lenders, pursuant to the Loan Documents; and (g) do not

 

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require the consent or approval of any Governmental Authority or any other
Person, except those referred to in Section 2.1(c), all of which will have been
duly obtained, made or complied with prior to the Closing Date.  Each of the
Loan Documents shall be duly executed and delivered by each Credit Party that is
a party thereto and subject to the entry of the Interim Order and the Final
Order, each such Loan Document shall constitute a legal, valid and binding
obligation of such Credit Party enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws relative to or affecting
the enforcement of creditors’ rights generally in effect from time to time.

 

3.4                                 Financial Statements, Projections and Net
Cash Flow Forecast.  Except for the Projections and the Net Cash Flow Forecast,
all Financial Statements concerning Borrower and its Subsidiaries that are
referred to below have been prepared in accordance with GAAP consistently
applied throughout the periods covered (except as disclosed therein and except,
with respect to unaudited Financial Statements, for the absence of footnotes and
normal year-end audit adjustments) and present fairly in all material respects
the financial position of the Persons covered thereby as at the dates thereof
and the results of their operations and cash flows for the periods then ended.

 

(a)                                  Financial Statements.  The following
Financial Statements attached hereto as Disclosure Schedule (3.4(a)) have been
delivered on the date hereof:

 

(i)                                     The audited consolidated balance sheets
at September 30, 2002 and September 30, 2003 and the related statements of
income and cash flows of Borrower and its Subsidiaries for the Fiscal Years then
ended, certified by Deloitte and Touche, LLP.

 

(ii)                                  The unaudited balance sheet at October 31,
2004 and the related statement(s) of income and cash flows of Borrower and its
Subsidiaries for the one-month period then ended.

 

(iii)                               The unaudited balance sheet at September 30,
2004 and the related statement(s) of income and cash flows of Borrower and its
Subsidiaries for the Fiscal Year then ended.

 

(b)                                 Projections.  The Projections delivered on
the date hereof have been prepared by Borrower in light of the past operations
of its businesses, but including future payments of known contingent
liabilities, and reflect projections for the three-year period beginning on
October 1, 2004 on a month-by-month basis for the first year and on a
year-by-year basis thereafter.  The Projections are based upon estimates and
assumptions stated therein, all of which Borrower believes to be reasonable and
fair in light of current conditions and current facts known to Borrower and, as
of the Closing Date, reflect Borrower’s good faith and reasonable estimates of
the future financial performance of Borrower and of the other information
projected therein for the period set forth therein, it being understood by the
Lenders that such Projections relate to future events and not to present facts,
and that actual results during the period covered therein may differ from such
Projections by a material amount.

 

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(c)                                  Net Cash Flow Forecast.  The Net Cash Flow
Forecast delivered on the date hereof and attached hereto as Disclosure Schedule
(3.4(c)) has been prepared by Borrower in light of the past operations of its
businesses, but including future payments of known contingent liabilities, and
reflects Borrower’s net cash flow forecast for the year period beginning on the
Closing Date on a month-by-month basis and ending on the first anniversary of
the Closing Date.  The Net Cash Flow Forecast is based upon estimates and
assumptions which Borrower believes to be reasonable and fair in light of
current conditions and current facts known to Borrower as of the Closing Date,
and reflects Borrower’s good faith and reasonable estimates of the future
financial performance of Borrower, it being understood by the Lenders that the
Net Cash Flow Forecast relates to future events and not to present facts, and
that actual results during the period covered therein may differ from the Net
Cash Flow Forecast by a material amount.

 

3.5                                 Material Adverse Effect.  Between June 30,
2004 and the Closing Date: (a) no Credit Party has incurred any obligations,
contingent or noncontingent liabilities, liabilities for Charges, long-term
leases or unusual forward or long-term commitments that are not reflected in the
Pro Forma and that, alone or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, (b) no contract, lease or other agreement or
instrument has been entered into by any Credit Party or has become binding upon
any Credit Party’s assets and no law or regulation applicable to any Credit
Party has been adopted that has had or could reasonably be expected to have a
Material Adverse Effect, and (c) other than in connection with the commencement
of the Chapter 11 Cases or as set forth in Disclosure Schedule (3.5), no Credit
Party is in default and to Borrower’s knowledge no third party is in default
under any material contract, lease or other agreement or instrument, that alone
or in the aggregate could reasonably be expected to have a Material Adverse
Effect.  Between June 30, 2004 and the Closing Date no event has occurred, that
alone or together with other events, could reasonably be expected to have a
Material Adverse Effect other in connection with the commencement of the Chapter
11 Cases or as set forth in Disclosure Schedule (3.5).

 

3.6                                 Ownership of Property; Liens.  As of the
Closing Date, the real estate (“Real Estate”) listed in Disclosure Schedule
(3.6) constitutes all of the real property owned, leased, subleased, or used by
any Credit Party.  Each Credit Party owns good and marketable fee simple title
to all of its owned Real Estate, and valid and marketable leasehold interests in
all of its leased Real Estate, all as described on Disclosure Schedule (3.6),
and copies of all such leases or a summary of terms thereof reasonably
satisfactory to Agent have been delivered to Agent.  Disclosure Schedule (3.6)
further describes any Real Estate with respect to which any Credit Party is a
lessor, sublessor or assignor as of the Closing Date.  Each Credit Party also
has good and marketable title to, or valid leasehold interests in, all of its
personal property and assets.  As of the Closing Date, none of the properties
and assets of any Credit Party are subject to any Liens other than Permitted
Encumbrances, and there are no facts, circumstances or conditions known to any
Credit Party that may result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances.  Each Credit Party has
received all deeds, assignments, waivers, consents, nondisturbance and
attornment or similar agreements, bills of sale and other documents, and has
duly effected all recordings, filings and other actions necessary to establish,
protect and perfect such Credit Party’s right, title and interest in and to all
such Real Estate and other properties and assets.  Disclosure Schedule (3.6)
also describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real

 

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Estate.  As of the Closing Date, no portion of any Credit Party’s Real Estate
has suffered any material damage by fire or other casualty loss that has not
heretofore been repaired and restored in all material respects to its original
condition or otherwise remedied.  As of the Closing Date, all material permits
required to have been issued or appropriate to enable the Real Estate to be
lawfully occupied and used for all of the purposes for which it is currently
occupied and used have been lawfully issued and are in full force and effect.

 

3.7                                 Labor Matters.  As of the Closing Date (a)
no strikes or other material labor disputes against any Credit Party are pending
or, to any Credit Party’s knowledge, threatened; (b) hours worked by and payment
made to employees of each Credit Party comply in all material respects with the
Fair Labor Standards Act and each other federal, state, local or foreign law
applicable to such matters; (c) all payments due from any Credit Party for
employee health and welfare insurance have been paid or accrued as a liability
on the books of such Credit Party; (d) except as set forth in Disclosure
Schedule (3.7), no Credit Party is a party to or bound by any collective
bargaining agreement, management agreement, consulting agreement, employment
agreement, bonus, restricted stock, stock option, or stock appreciation plan or
agreement or any similar plan, agreement or arrangement (and true and complete
copies of any agreements described on Disclosure Schedule (3.7) have been
delivered to Agent); (e) there is no organizing activity involving any Credit
Party pending or, to any Credit Party’s knowledge, threatened by any labor union
or group of employees; (f) there are no representation proceedings pending or,
to any Credit Party’s knowledge, threatened with the National Labor Relations
Board, and no labor organization or group of employees of any Credit Party has
made a pending demand for recognition; and (g) except as set forth in Disclosure
Schedule (3.7), there are no material complaints or charges against any Credit
Party pending or, to the knowledge of any Credit Party, threatened to be filed
with any Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.

 

3.8                                 Ventures, Subsidiaries and Affiliates;
Outstanding Stock and Indebtedness.  Except as set forth in Disclosure Schedule
(3.8), as of the Closing Date, no Credit Party has any Subsidiaries, is engaged
in any joint venture or partnership with any other Person, or is an Affiliate of
any other Person.  All of the issued and outstanding Stock of each Subsidiary of
Borrower is owned by the Borrower in the amounts set forth in Disclosure
Schedule (3.8).  Except as set forth in Disclosure Schedule (3.8), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries.  All outstanding Indebtedness and
Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for
the Obligations) is described in Section 6.3 (including Disclosure Schedule
(6.3)).  As of the Closing Date, AET Limited is an inactive Subsidiary and does
not have any assets (other than the bank account referred to in Annex C and cash
on deposit therein in an amount not exceeding $50,000) or any Indebtedness or
Guaranteed Indebtedness or other material liabilities and does not conduct any
business or operations.  Except as set forth in Disclosure Schedule (3.8(a)),
Applied Extrusion Technologies Holdings, Inc., Applied Extrusion Technologies
Australia Holdings, Inc., Applied Extrusion Technologies Belgium, Inc., and
Applied Extrusion Technologies, Scotland, Inc. (collectively, the “Former
Subsidiaries”), each a corporation organized in Delaware and prior to the date
hereof merged into Borrower, did not own any assets.  At the time of the
applicable merger of

 

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each Foreign Subsidiary into Borrower, such Former Subsidiary did not have any
liabilities or other obligations to any Person.

 

3.9                                 Government Regulation.  No Credit Party is
an “investment company” or an “affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment company,” as such terms are defined
in the Investment Company Act of 1940.  No Credit Party is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, or
any other federal or state statute that restricts or limits its ability to incur
Indebtedness or to perform its obligations hereunder. The making of the Loans by
Lenders to Borrower, the incurrence of the Letter of Credit Obligations on
behalf of Borrower, the application of the proceeds thereof and repayment
thereof and the consummation of the Related Transactions will not violate any
provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.

 

3.10                           Margin Regulations.  No Credit Party is engaged,
nor will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of “purchasing” or “carrying” any
“margin stock” as such terms are defined in Regulation U of the Federal Reserve
Board as now and from time to time hereafter in effect (such securities being
referred to herein as “Margin Stock”).  No Credit Party owns any Margin Stock,
and none of the proceeds of the Loans or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any Margin Stock
or for any other purpose that might cause any of the Loans or other extensions
of credit under this Agreement to be considered a “purpose credit” within the
meaning of Regulations T, U or X of the Federal Reserve Board.  No Credit Party
will take or permit to be taken any action that might cause any Loan Document to
violate any regulation of the Federal Reserve Board.

 

3.11                           Taxes.  All income tax returns and all other
material property tax returns, reports and statements, including information
returns, required by any Governmental Authority (“Tax Returns”) to be filed by
any Credit Party have been filed with the appropriate Governmental Authority;
all such Tax Returns are true, correct and complete in all material respects;
and all Charges have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof (or any such
fine, penalty, interest, late charge or loss has been paid),  excluding Charges
or other amounts being contested in accordance with Section 5.2(b).  There are
no Liens for Charges (other than for current Charges not yet due and payable or
being contested in good faith in accordance with Section 5.2(b)) upon the assets
of any Credit Party.  No adjustment relating to such Tax Returns has been
proposed formally or informally by any Governmental Authority and, to the
knowledge of each Credit Party, no basis exists for any such adjustment.  
Proper and accurate amounts have been withheld by each Credit Party from its
respective employees, independent contractors, creditors, members, partners and
other third parties for all periods in full and complete compliance with all
applicable federal, state, local and foreign laws and such withholdings have
been timely paid to the respective Governmental Authorities. Disclosure Schedule
(3.11) sets forth as of the Closing Date those taxable years for which any
Credit Party’s tax returns are currently being audited by the IRS or any other
applicable Governmental Authority, and any assessments or threatened assessments
in connection with such audit, or otherwise currently outstanding. Except as

 

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indicated on Disclosure Schedule (3.11), as of the Closing Date all, Charges
that have been claimed, proposed, asserted or assessed against any Credit Party
(or with respect to any of their assets) have been fully paid or finally settled
or are being contested in good faith in accordance with Section 5.2(b).  Except
as described in Disclosure Schedule (3.11), as of the Closing Date, no Credit
Party has executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any Charges.  None of the Credit Parties
and their respective predecessors are liable for any Charges: (a) under any
agreement (including any tax sharing agreements) or (b) to each Credit Party’s
knowledge, as a transferee.  As of the Closing Date, no Credit Party has agreed
or been requested to make any adjustment under IRC Section 481(a), by reason of
a change in accounting method or otherwise, which would have a Material Adverse
Effect.

 

3.12                           ERISA and Canadian Plans.

 

(a)                                  Disclosure Schedule (3.12) lists (i) all
ERISA Affiliates and (ii) all Plans and separately identifies all Pension Plans,
including Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans,
including all Retiree Welfare Plans.  As of the Closing Date, copies of all such
listed Plans, together with a copy of the latest IRS/DOL 5500-series form for
each such Plan, have been delivered to Agent.  Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of the IRC,
and nothing has occurred that would cause the loss of such qualification or
tax-exempt status.  Each Plan is in compliance with the applicable provisions of
ERISA and the IRC, including the timely filing of all reports required under the
IRC or ERISA, including the statement required by 29 C.F.R. Section
2520.104-23.  Neither any Credit Party nor ERISA Affiliate has failed to make
any contribution or pay any amount due as required by either Section 412 of the
IRC or Section 302 of ERISA or the terms of any such Plan.  Neither any Credit
Party nor ERISA Affiliate has engaged in a “prohibited transaction,” as defined
in Section 406 of ERISA and Section 4975 of the IRC, in connection with any
Plan, that would subject any Credit Party to a material tax on prohibited
transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC.

 

(b)                                 Except as set forth in Disclosure Schedule
(3.12): (i) no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA
Event or event described in Section 4062(e) of ERISA with respect to any Title
IV Plan has occurred or is reasonably expected to occur; (iii) there are no
pending, or to the knowledge of any Credit Party, threatened claims (other than
claims for benefits in the normal course), sanctions, actions or lawsuits,
asserted or instituted against any Plan or any Person as fiduciary or sponsor of
any Plan; (iv) no Credit Party or ERISA Affiliate has incurred or reasonably
expects to incur any liability as a result of a complete or partial withdrawal
from a Multiemployer Plan; (v) within the last five years no Title IV Plan of
any Credit Party or ERISA Affiliate has been terminated, whether or not in a
“standard termination” as that term is used in Section 4041(b)(1) of ERISA, nor
has any Title IV Plan of any Credit Party or any ERISA Affiliate (determined at
any time within the last five years) with Unfunded Pension Liabilities been
transferred outside of the “controlled group” (within the meaning of Section
4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate (determined at such
time); (vi) except in the case of any ESOP, Stock of all Credit Parties and
their ERISA

 

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Affiliates makes up, in the aggregate, no more than 10% of fair market value of
the assets of any Plan measured on the basis of fair market value as of the
latest valuation date of any Plan; and (vii) no liability under any Title IV
Plan has been satisfied with the purchase of a contract from an insurance
company that is not rated AAA by the Standard & Poor’s Corporation or an
equivalent rating by another nationally recognized rating agency

 

(c)                                  Disclosure Schedule 3.12(c) sets forth all
Canadian Benefit Plans (other than, for greater certainty, universal plans
created by and to which any Credit Party is obligated to contribute by statute)
and Canadian Pension Plans adopted by each Credit Party.  The Canadian Pension
Plans are duly registered under the ITA and all other applicable laws which
require registration and no event has occurred which is reasonably likely to
cause the loss of such registered status.  All material obligations of each
Credit Party (including fiduciary, funding, investment and administration
obligations) required to be performed in connection with the Canadian Pension
Plans and the funding agreements therefor have been performed in a timely
fashion.  There have been no improper withdrawals or applications of the assets
of the Canadian Pension Plans or the Canadian Benefit Plans.  There are no
outstanding disputes concerning the assets of the Canadian Pension Plans or the
Canadian Benefit Plans.  Each of the Canadian Pension Plans is fully funded on a
solvency basis (using actuarial methods and assumptions which are consistent
with the valuations last filed with the applicable Governmental Bodies and which
are consistent with generally accepted actuarial principles).

 

3.13                           No Litigation.  Other than the commencement of
the Chapter 11 Cases, no action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Credit Party, threatened
against any Credit Party, before any Governmental Authority or before any
arbitrator or panel of arbitrators (collectively, “Litigation”), (a) that
challenges any Credit Party’s right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) that
has a reasonable risk of being determined adversely to any Credit Party and that
, if so determined, could be reasonably be expected to have a Material Adverse
Effect.  Except as set forth on Disclosure Schedule (3.13), as of the Closing
Date there is no Litigation pending or, to any Credit Party’s knowledge,
threatened, that seeks damages in excess of $100,000 or injunctive relief
against, or alleges criminal misconduct of, any Credit Party.

 

3.14                           Brokers.  No broker or finder brought about the
obtaining, making or closing of the Loans or the Related Transactions, and no
Credit Party or Affiliate thereof has any obligation to any Person in respect of
any finder’s or brokerage fees in connection therewith.

 

3.15                           Intellectual Property.  As of the Closing Date,
each Credit Party owns or has rights to use all Intellectual Property necessary
to continue to conduct its business as now or heretofore conducted by it or
proposed to be conducted by it, and each Patent, Trademark, Copyright and
License is listed, together with application or registration numbers, as
applicable, in Disclosure Schedule (3.15).  Each Credit Party conducts its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect.  Except as
set forth in Disclosure Schedule (3.15), as of the Closing Date, no Credit Party
is aware of any infringement claim by any other Person with respect to any
Intellectual Property.

 

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3.16                           Full Disclosure.  No information contained in
this Agreement, any of the other Loan Documents, any Projections, Financial
Statements or Collateral Reports or other written reports from time to time
delivered hereunder or any written statement furnished by or on behalf of any
Credit Party to Agent or any Lender pursuant to the terms of this Agreement
contains or will contain when made any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.  The Liens granted to Agent, on behalf of itself and
Lenders, pursuant to the Collateral Documents will at all times be fully
perfected first priority Liens in and to the Collateral described therein,
subject, as to priority, only to Permitted Encumbrances and Carve-Out Expenses
up to the Carve-Out Amount.

 

3.17                           Environmental Matters.

 

(a)                                  Except as set forth in Disclosure Schedule
(3.17), as of the Closing Date: (i) the Real Estate is free of contamination
from, or presence of, any Hazardous Material except for such contamination that
would not adversely impact the value or marketability of such Real Estate and
that would not result in Environmental Liabilities that could reasonably be
expected to exceed $100,000; (ii) no Credit Party has caused or suffered to
occur any Release of Hazardous Materials on, at, in, under, above, to, from or
about any of its Real Estate and that could reasonably be expected to result in
Environmental Liabilities in excess of  $100,000; (iii) the Credit Parties are
and have been in compliance with all Environmental Laws, except for such
noncompliance that would not result in Environmental Liabilities which could
reasonably be expected to exceed $100,000; (iv) the Credit Parties have
obtained, and are in compliance with, all Environmental Permits required by
Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to
so obtain or comply with such Environmental Permits would not result in
Environmental Liabilities that could reasonably be expected to exceed $100,000,
and all such Environmental Permits are valid, uncontested and in good standing;
(v) no Credit Party is involved in operations or knows of any facts,
circumstances or conditions, including any Releases of Hazardous Materials, that
are likely to result in any Environmental Liabilities of such Credit Party which
could reasonably be expected to exceed $100,000, and no Credit Party has
permitted any current or former tenant or occupant of the Real Estate to engage
in any such operations; (vi) there is no Litigation arising under or related to
any Environmental Laws, Environmental Permits or Hazardous Material that seeks
damages, penalties, fines, costs or expenses in excess of $100,000 or injunctive
relief against, that orders characterization or rehabilitative work, or that
alleges criminal misconduct by, any Credit Party; (vii) no notice has been
received by any Credit Party identifying it as a “potentially responsible party”
or requesting information under CERCLA or analogous state statutes or other
Environmental Law, and to the knowledge of the Credit Parties, there are no
facts, circumstances or conditions that may result in any Credit Party being
identified as a “potentially responsible party” under CERCLA or analogous state
statutes or other Environmental Laws; and (viii) as of the Closing Date, the
Credit Parties have provided to Agent copies of all existing environmental
reports, studies, reviews and audits and all written information pertaining to
actual or potential Environmental Liabilities, in each case relating to any
Credit Party.

 

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(b)                                 Each Credit Party hereby acknowledges and
agrees that Agent is not now, and to Credit Party’s knowledge, has not ever
been, in control of any of the Real Estate or any Credit Party’s affairs.

 

3.18                           Insurance.  Disclosure Schedule (3.18) lists all
insurance policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.

 

3.19                           Deposit and Disbursement Accounts.  Disclosure
Schedule (3.19) lists all banks and other financial institutions at which any
Credit Party and AET Limited maintains deposit or other accounts as of the
Closing Date, including any Disbursement Accounts, and such Schedule correctly
identifies the name, address and telephone number of each depository, the name
in which the account is held, a description of the purpose of the account, and
the complete account number therefor.  Borrower acknowledges and agrees that
Annex C hereto is substantially the same as the Borrower’s Prepetition cash
management system and that such system, including all accounts established
thereto, shall continue to govern the rights of the respective parties thereto,
and shall be applicable under this Agreement subject to the approval of the
Bankruptcy Court.

 

3.20                           Government Contracts.  Except as set forth in
Disclosure Schedule (3.20), as of the Closing Date, no Credit Party is a party
to any contract or agreement with any Governmental Authority and no Credit
Party’s Accounts are subject to the Federal Assignment of Claims Act (31 U.S.C.
§3727) or any similar state or local law.

 

3.21                           Customer and Trade Relations.  Except as set
forth in Disclosure Schedule (3.21), as of the Closing Date, there exists no
actual or, to the knowledge of any Credit Party, threatened termination or
cancellation of, or any material adverse modification or change in: the business
relationship of any Credit Party with any customer or group of customers whose
purchases during the preceding 12 months caused them to be ranked among the ten
largest customers of such Credit Party; or the business relationship of any
Credit Party with any supplier material to its operations.

 

3.22                           Agreements and Other Documents.

 

(a)                                  As of the Closing Date, each Credit Party
has provided to Agent or its counsel, on behalf of Lenders, accurate and
complete copies (or summaries) of all of the following agreements or documents
to which it is subject and each of which is listed in Disclosure Schedule
(3.22):  rebate agreements with end users who annually purchase $15,000,000 or
more of products sold by any Credit Party or whose purchases account for 5% or
more of the total annual sales volume of the Credit Parties; supply agreements
and purchase agreements not terminable by such Credit Party within sixty (60)
days following written notice issued by such Credit Party and involving
transactions in excess of $1,000,000 per annum;  leases of Equipment having a
remaining term of one year or longer and requiring aggregate rental and other
payments in excess of $500,000 per annum;  licenses and permits held by the
Credit Parties, the absence of which could be reasonably likely to have a
Material Adverse Effect;  instruments and documents evidencing any Indebtedness
or Guaranteed Indebtedness of such Credit Party and any Lien granted by such
Credit Party with respect thereto; and

 

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instruments and agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such Credit Party.

 

(b)                                 Set forth in Disclosure Schedule (3.22(b))
is a list, as of the Closing Date of the ten largest customers and clients of
the Credit Parties, taken as a whole as measured by gross revenues of the Credit
Parties generated by such customers and clients, for the two years ended as of
September 30, 2003 and September 30, 2004.  Except as disclosed in Disclosure
Schedule 3.22(b), as of the Closing Date, no significant customer or client (or
group of related customers or clients which in the aggregate is significant) of
the Credit Parties, taken as a whole, has given them notice or, to the knowledge
of the Credit Parties, has taken any other action which has given any Credit
Party any reason to believe that such customer or client (or group of related
customers or clients) will materially reduce the amount of its purchases or
materially adversely change the price or terms of such purchases.  For such
purposes, a customer or client (or group of related customers or clients) shall
be deemed “significant” if such customer or client (or group of related
customers or clients) has accounted for more than 5% of the total gross revenues
of the Credit Parties (taken as a whole) during the past Fiscal Year.

 

(c)                                  Set forth in Disclosure Schedule 3.22(c) is
a list, as of the Closing Date, of the ten largest suppliers and vendors of the
Credit Parties, taken as a whole, as measured by the cost of purchases made by
the Credit Parties for the two years ended as of September 30, 2003 and
September 30, 2004.  Except as disclosed in Disclosure Schedule 3.22(c), as of
the Closing Date, no significant supplier or vendor (or group of related
suppliers or vendors which in the aggregate is significant) of the Credit
Parties, taken as a whole, has given them notice or, to the knowledge of the
Credit Parties, has taken any other action which has given any Credit Party any
reason to believe that such supplier or vendor (or group of related suppliers or
vendors) will cease to supply or materially restrict the amount supplied or
materially adversely change its price or terms to any Credit Party of any
products or services.  For such purposes, a supplier or vendor (or group of
related suppliers or vendors) shall be deemed “significant” if such supplier or
vendor (or group of related suppliers or vendors) has accounted for more than 5%
of such total cost of purchases of the Credit Parties (taken as a whole) during
the past Fiscal Year.

 

(d)                                 Neither the Borrower nor any other Credit
Party is subject to any derivative or forward contract that can be terminated
based upon the bankruptcy filing of such Person.

 

3.23                           Intentionally Omitted.

 

3.24                           Senior Note Documents.  As of the Closing Date,
Borrower has delivered to Agent a complete and correct copy of the Senior Note
Documents (including all schedules and exhibits thereto and all amendments,
supplements or modifications, as in effect on the Closing Date).

 

3.25                           Reorganization Matters.

 

(a)                                  The Chapter 11 Cases were commenced on the
Petition Date in accordance with applicable law and proper notice thereof and
the proper notice for the hearing

 

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for the approval of the Interim Order has been given and proper notice for the
hearing for the approval of the Final Order will be given.

 

(b)                                 After the entry of the Interim Order, and
pursuant to and to the extent permitted in the Interim Order and the Final
Order, the Obligations will constitute allowed administrative expense claims in
the Chapter 11 Cases having priority over all administrative expense claims,
reclamation claims and unsecured claims against the Borrower or the Credit
Parties filing a Chapter 11 Case now existing or hereafter arising, of any kind
whatsoever, including, without limitation, all administrative expense claims of
the kind specified in Sections 105, 326, 330, 331, 503(b), 506(c), 507(a),
507(b), 546(c) or 726 of the Bankruptcy Code, as provided under Section
364(c)(1) of the Bankruptcy Code, subject, as to priority only to the Carve-Out
Expenses up to the Carve-Out Amount.

 

(c)                                  After the entry of the Interim Order and
pursuant to and to the extent provided in the Interim Order and the Final Order,
the Obligations will be secured by a valid and perfected first priority Lien on
all of the Collateral.

 

(d)                                 The Interim Order and the Canadian Interim
Order (with respect to the period prior to entry of the Final Order) or the
Final Order and the Canadian Final Order (with respect to the period on and
after entry of the Final Order), as the case may be, are in full force and
effect and have not been reversed, stayed, modified or amended.

 

(e)                                  Notwithstanding the provisions of Section
362 of the Bankruptcy Code, subject to the provisions of the Interim Order and
the Final Order, upon the maturity (whether by acceleration or otherwise) of any
of the Obligations, Agent and Lenders shall be entitled to immediate payment of
such Obligations and to enforce the remedies provided for hereunder, without
further application to or order by the Bankruptcy Court.

 

4.                                      FINANCIAL STATEMENTS AND INFORMATION

 

4.1                                 Reports and Notices.

 

(a)                                  Each Credit Party executing this Agreement
hereby agrees that from and after the Closing Date and until the Termination
Date, it shall deliver to Agent or to Agent and Lenders, as required, the
Financial Statements, notices, Projections and other information at the times,
to the Persons and in the manner set forth in Annex E.

 

(b)                                 Each Credit Party executing this Agreement
hereby agrees that, from and after the Closing Date and until the Termination
Date, it shall deliver to Agent or to Agent and Lenders, as required, the
various Collateral Reports (including Borrowing Base Certificates in the form of
Exhibit 4.1(b) at the times, to the Persons and in the manner set forth in Annex
F.

 

4.2                                 Communication with Accountants.  Each Credit
Party executing this Agreement authorizes Agent to communicate directly with its
independent certified public accountants, including Deloitte and Touche, LLP
(after such prior notice to Borrower and provided Borrower may participate in
any such communications), and authorizes and, at Agent’s request, shall instruct
those accountants and advisors to disclose and make available to Agent and each
Lender any and all Financial Statements and other supporting financial
documents,

 

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schedules and information relating to any Credit Party (including copies of any
issued management letters) with respect to the business, financial condition and
other affairs of any Credit Party.

 

5.                                      AFFIRMATIVE COVENANTS

 

Each Credit Party executing this Agreement jointly and severally agrees as to
all Credit Parties that from and after the date hereof and until the Termination
Date:

 

5.1                                 Maintenance of Existence and Conduct of
Business.  Except as occasioned by the Chapter 11 Cases, each Credit Party
shall: do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and its material rights and franchises;
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; at all times, in the exercise of its reasonable business
judgment, maintain, preserve and protect all of its assets and properties used
or useful in the conduct of its business, and keep the same in good repair,
working order and condition in all material respects (taking into consideration
ordinary wear and tear) and from time to time make, or cause to be made, all
necessary or appropriate repairs, replacements and improvements thereto
consistent with industry practices; and  transact business only in such
corporate and trade names as are set forth in Disclosure Schedule (5.1).

 

5.2                                 Payment of Charges.

 

(a)                                  Subject to Section 5.2(b), each Credit
Party shall pay and discharge or cause to be paid and discharged promptly all
Charges payable by it, including (i) Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed) and all Charges with
respect to tax, social security and unemployment withholding with respect to its
employees, (ii) lawful claims for labor, materials, supplies and services or
otherwise, and (iii) all storage or rental charges payable to warehousemen or
bailees, in each case, before any thereof shall become past due; provided,
Borrower shall not be required to pay any Charges, Taxes or Claims the
nonpayment of which is permitted by the Bankruptcy Code.

 

(b)                                 Each Credit Party may in good faith contest,
by appropriate proceedings, the validity or amount of any Charges, Taxes or
claims described in Section 5.2(a); provided, that (i) adequate reserves with
respect to such contest are maintained on the books of such Credit Party, in
accordance with GAAP; (ii) no Lien shall be imposed to secure payment of such
Charges (other than payments to warehousemen and/or bailees) that is superior to
any of the Liens securing the Obligations and such contest is maintained and
prosecuted continuously and with diligence and operates to suspend collection or
enforcement of such Charges; (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest; (iv) such Credit Party shall
promptly pay or discharge such contested Charges, Taxes or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence reasonably acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Credit Party or the conditions set forth in this Section 5.2(b) are no longer
met; and (v) Agent has not advised Borrower in writing that Agent reasonably
believes that nonpayment or nondischarge thereof could have or result in a
Material Adverse Effect.

 

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5.3                                 Books and Records.  Each Credit Party shall
keep adequate books and records with respect to its business activities in which
proper entries, reflecting in all material respects all financial transactions,
are made in accordance with GAAP and on a basis consistent with the Financial
Statements attached as Disclosure Schedule (3.4(a)).

 

5.4                                 Insurance; Damage to or Destruction of
Collateral.

 

(a)                                  The Credit Parties shall, at their sole
cost and expense, maintain the policies of insurance described on Disclosure
Schedule (3.18) as in effect on the date hereof or otherwise in form and amounts
and with insurers reasonably acceptable to Agent.  Such policies of insurance
(or the loss payable and additional insured endorsements delivered to Agent)
shall contain provisions pursuant to which the insurer agrees to provide thirty
(30) days prior written notice to Agent in the event of any non-renewal,
cancellation or amendment of any such insurance policy.  If any Credit Party at
any time or times hereafter shall fail to obtain or maintain any of the policies
of insurance required above, or to pay all premiums relating thereto, Agent may
at any time or times thereafter obtain and maintain such policies of insurance
and pay such premiums and take any other action with respect thereto that Agent
deems advisable in its reasonable judgment.  Agent shall have no obligation to
obtain insurance for any Credit Party or pay any premiums therefor.  By doing
so, Agent shall not be deemed to have waived any Default or Event of Default
arising from any Credit Party’s failure to maintain such insurance or pay any
premiums therefor.  All sums so disbursed, including reasonable attorneys’ fees,
court costs and other charges related thereto, shall be payable on demand by
Borrower to Agent and shall be additional Obligations hereunder secured by the
Collateral.

 

(b)                                 Agent reserves the right at any time upon
any change in any Credit Party’s risk profile (including any change in the
product mix maintained by any Credit Party or any laws affecting the potential
liability of such Credit Party) to require additional forms and limits of
insurance to, in Agent’s reasonable opinion, adequately protect both Agent’s and
Lenders’ interests in all or any portion of the Collateral and to ensure that
each Credit Party is protected by insurance in amounts and with coverage
customary for its industry.  If reasonably requested by Agent, each Credit Party
shall deliver to Agent from time to time a report of a reputable insurance
broker, reasonably satisfactory to Agent, with respect to its insurance
policies.

 

(c)                                  Each Credit Party (other than AET Limited)
shall deliver to Agent, in form and substance reasonably satisfactory to Agent,
endorsements to (i) all “All Risk” and business interruption insurance naming
Agent, on behalf of itself and Lenders, as loss payee, and (ii) all general
liability and other liability policies naming Agent, on behalf of itself and
Lenders, as additional insured.  Each Credit Party irrevocably makes,
constitutes and appoints Agent (and all officers, employees or agents designated
by Agent), so long as any Event of Default has occurred and is continuing, as
such Credit Party’s true and lawful agent and attorney-in-fact for the purpose
of making, settling and adjusting claims under such “All Risk” policies of
insurance, endorsing the name of such Credit Party on any check or other item of
payment for the proceeds of such “All Risk” policies of insurance and for making
all determinations and decisions with respect to such “All Risk” policies of
insurance.  Agent shall have no duty to exercise any rights or powers granted to
it pursuant to the foregoing power-of-attorney.  Borrower shall promptly notify
Agent of any loss, damage, or destruction to the Collateral in the amount of
$250,000 or more, whether or not covered by insurance.  After deducting from
such proceeds the expenses, if

 

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any, incurred by Agent in the collection or handling thereof, Agent may, at its
option, apply such proceeds to the reduction of the Obligations in accordance
with Section 1.3(d), or permit or require the applicable Credit Party to use
such money, or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction. Notwithstanding the foregoing, if the casualty giving rise to such
insurance proceeds could not reasonably be expected to have a Material Adverse
Effect and such insurance proceeds do not exceed $2,000,000 in the aggregate,
Agent shall permit the applicable Credit Party to replace, restore, repair or
rebuild the property; provided that if such Credit Party shall not have
completed such replacement, restoration, repair or rebuilding within three
hundred and sixty (360) days of such casualty or entered into binding agreements
within one hundred and eighty (180) days of such casualty to complete, such
replacement, restoration, repair or rebuilding within three hundred and sixty
(360) days of such casualty, Agent may apply such insurance proceeds to the
Obligations in accordance with Section 1.3(d).  All insurance proceeds that are
to be made available to any Credit Party to replace, repair, restore or rebuild
the Collateral shall be applied by Agent to reduce the outstanding principal
balance of the Revolving Loan (which application shall not result in a permanent
reduction of the Revolving Loan Commitment) and upon such application, Agent
shall establish a Reserve against the Borrowing Base in an amount equal to the
amount of such proceeds so applied.  Thereafter, such funds shall be made
available to Borrower to provide funds to replace, repair, restore or rebuild
the Collateral as follows: (i) Borrower shall request a Revolving Credit Advance
be made to Borrower in the amount requested to be released; (ii) so long as the
conditions set forth in Section 2.2 have been met, Revolving Lenders shall make
such Revolving Credit Advance; and (iii) in the case of insurance proceeds
applied against the Revolving Loan, the Reserve established with respect to such
insurance proceeds shall be reduced by the amount of such Revolving Credit
Advance.  To the extent not used to replace, repair, restore or rebuild the
Collateral, such insurance proceeds shall be applied in accordance with Section
1.3(d).

 

5.5                                 Compliance with Laws.  Each Credit Party
shall comply with all federal, state, provincial, regional, municipal, local and
foreign laws and regulations applicable to it, including those relating to ERISA
and labor matters and Environmental Laws and Environmental Permits, except to
the extent that the failure to comply, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.

 

5.6                                 Intentionally Omitted.

 

5.7                                 Intellectual Property.  Each Credit Party
will conduct its business and affairs without infringement of or interference
with any Intellectual Property of any other Person in any material respect.

 

5.8                                 Environmental Matters.  Each Credit Party
shall and shall cause each Person within its control to: (a) conduct its
operations and keep and maintain its Real Estate in compliance with all
Environmental Laws and Environmental Permits other than noncompliance that could
not reasonably be expected to have a Material Adverse Effect; (b) implement any
and all investigation, remediation, removal and response actions that are
appropriate or necessary to maintain the value and marketability of the Real
Estate or to otherwise comply with Environmental Laws and Environmental Permits
pertaining to the presence, generation,

 

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treatment, storage, use, recovery, recycling, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate and shall at all times employ a qualified environmental
manager to have primary responsibility for compliance with the provisions of
this Section 5.8; (c) notify Agent promptly after such Credit Party becomes
aware of any violation of Environmental Laws or Environmental Permits or any
Release on, at, in, under, above, to, from or about any Real Estate that is
reasonably likely to result in Environmental Liabilities in excess of $100,000;
and (d) promptly forward to Agent a copy of any order, notice, request for
information or any communication or report received by such Credit Party in
connection with any such violation or Release or any other matter relating to
any Environmental Laws or Environmental Permits that could reasonably be
expected to result in Environmental Liabilities in excess of $100,000, in each
case whether or not the Environmental Protection Agency or any Governmental
Authority has taken or threatened any action in connection with any such
violation, Release or other matter.  If Agent at any time has a reasonable basis
to believe that there may be a violation of any Environmental Laws or
Environmental Permits by any Credit Party or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate, that, in each case, could reasonably be
expected to have a Material Adverse Effect, then each Credit Party shall, upon
Agent’s written request (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrower’s expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Agent and shall be in form and
substance reasonably acceptable to Agent, and (ii) permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent deems appropriate, including
subsurface sampling of soil and groundwater.  Borrower shall reimburse Agent for
the costs of such audits and tests and the same will constitute a part of the
Obligations secured hereunder.

 

5.9                                 Landlords’ Agreements, Mortgagee Agreements,
Bailee Letters and Real Estate Purchases.  As reasonably requested by Agent and
to the extent not otherwise addressed to Agent’s reasonable satisfaction in the
Final Order and except for the locations set forth in Disclosure Schedule (5.9)
as of the Closing Date, each Credit Party shall obtain a landlord’s agreement,
mortgagee agreement or bailee letter, as applicable, from the lessor of each
leased property, mortgagee of owned property or bailee with respect to any
warehouse, processor, toller or toll converter facility or other location where
Collateral is stored or located as of the Closing Date, which agreement or
letter shall contain a waiver or subordination of all Liens or claims that the
landlord, mortgagee or bailee may assert against the Collateral at that
location, and shall otherwise be reasonably satisfactory in form and substance
to Agent.  With respect to such locations set forth in Disclosure Schedule (5.9)
as of the Closing Date, so long as Agent has not received a satisfactory
landlord or mortgagee agreement or bailee letter, or entry of the Final Order
providing for collateral access, Borrower’s Eligible Inventory at that location
shall, unless otherwise determined by Agent in its discretion, be excluded from
the Borrowing Base.  After the Closing Date, no real property shall be leased by
any Credit Party (nor shall the Credit Parties conduct any business or
activities or store any material property at its leased locations in Norcross,
Georgia and Peabody, Massachusetts), without the prior written consent of Agent
(which consent, in Agent’s reasonable credit judgment, may be conditioned upon
the exclusion from the Borrowing Base of Eligible Inventory at that location or
the establishment of Reserves acceptable to Agent) or, unless and until a
reasonably satisfactory landlord agreement shall first

 

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have been obtained with respect to such location.  After the Closing Date, no
Inventory shall be shipped to or located at any third party warehouse location
for which reasonably satisfactory bailee letters have not been obtained if the
aggregate amount of all such Inventory held at all such third party warehouse
locations at any time would exceed $250,000, without the prior written consent
of Agent (which consent, in Agent’s reasonable credit judgment, may be
conditioned upon the exclusion from the Borrowing Base of Eligible Inventory at
that location or the establishment of Reserves acceptable to Agent).  After the
Closing Date, no Inventory shall be shipped to a processor, toller or toll
converter if the aggregate amount of all such Inventory held by such processor,
toller or toll converter at any time would exceed $500,000 without the prior
written consent of Agent (which consent, in Agent’s reasonable credit judgment,
may be conditioned upon the exclusion from the Borrowing Base of Eligible
Inventory at that location or the establishment of Reserves acceptable to Agent)
or, unless and until a reasonably satisfactory bailee letter shall first have
been obtained with respect to such location.  Each Credit Party shall timely and
fully pay and perform in all material respects its obligations under all leases
and other agreements with respect to each leased location or public warehouse
where any Collateral is or may be located.  To the extent otherwise permitted
hereunder, if any Credit Party proposes to acquire after the Closing Date a fee
ownership interest in Real Estate or any other material leasehold interest in
Real Estate, it shall first provide to Agent a Mortgage granting Agent a first
priority Lien on such Real Estate, together with environmental audits and
studies, mortgage title insurance commitment, real property survey, local
counsel opinion(s), and, if required by Agent, supplemental casualty insurance
and flood insurance, and, with respect to all of Borrower’s leasehold interests,
agreements from their landlords satisfactory to Agent and an acceptable
non-disturbance agreement from the landlords’ fee mortgagees, and such other
documents, instruments or agreements reasonably requested by Agent, in each
case, in form and substance reasonably satisfactory to Agent.

 

5.10                           ERISA.

 

(a)                                  Each Credit Party shall comply in all
material respects with the applicable provisions of ERISA and the IRC, except to
the extent such failure to company, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Affect.  Each Credit Party
shall furnish to the Agent written notice as soon as possible, and in any event
within ten (10) Business Days after any Credit Party knows or has reason to
know, of: (a) a material increase in the benefits of any existing Plan, the
establishment of any new Plan, or the commencement of contributions to any Plan;
or (b) an ERISA Event, together with a statement of an officer setting forth the
details of such ERISA Event and action which the Credit Parties propose to take
with respect thereto.  The Credit Parties shall furnish to the Agent, within
thirty (30) Business Days after the filing thereof with the Department of Labor,
IRS or PBGC, copies of each annual report (From 5500 series) filed for each
Plan.  The Credit Parties shall furnish to the Agent, within thirty (30) days
after receipt by any Credit Party or ERISA Affiliate, copies of each actuarial
report for each Title IV Plan or Multiemployer Plan and each annual report for
any Multiemployer Plan.

 

(b)                                 For each existing Canadian Pension Plan,
each Credit Party shall ensure that such plan retains its registered status
under and is administered in a timely manner in all respects in accordance with
the applicable pension plan text, funding agreement, the ITA and all other
applicable laws.

 

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(c)                                  For each Canadian Pension Plan hereafter
adopted by any Credit Party which is required to be registered under the ITA or
any other applicable laws, that Credit Party shall use its best efforts to seek
and receive confirmation in writing from the applicable Governmental Authority
to the effect that such plan is unconditionally registered under the ITA and
such other applicable laws.

 

(d)                                 For each existing Canadian Pension Plan and
Canadian Benefit Plan hereafter adopted, each Credit Party shall in a timely
fashion perform in all material respects all obligations (including fiduciary,
funding, investment and administration obligations) required to be performed in
connection with such plan and the funding media therefor.

 

(e)                                  Each Credit Party shall deliver to the
Agent if requested by the Agent promptly after the filing thereof by any Credit
Party with any applicable Governmental Authority, copies of each annual and
other return, report or valuation with respect to each Canadian Pension Plan;
promptly after receipt thereof, a copy of any direction, order, notice, ruling
or opinion that any Credit Party may receive from any applicable Governmental
Authority with respect to any Canadian Pension Plan; and notification within
thirty (30) days of any increases having a cost to such Credit Party in excess
of $100,000 per annum, in the benefits of any existing Canadian Pension Plan or
Canadian Benefit Plan, or the establishment of any new Canadian Pension Plan or
Canadian benefit Plan, or the commencement of contributions to any such plan to
which any Credit Party was not previously contributing.

 

5.11                           Further Assurances.  Each Credit Party executing
this Agreement agrees that it shall and shall cause each other Credit Party to,
at such Credit Party’s expense and upon request of Agent, duly execute and
deliver, or cause to be duly executed and delivered, to Agent such further
instruments and do and cause to be done such further acts as may be necessary or
proper in the reasonable opinion of Agent to carry out more effectively the
provisions and purposes of this Agreement or any other Loan Document.

 

6.                                      NEGATIVE COVENANTS

 

Each Credit Party executing this Agreement jointly and severally agrees as to
all Credit Parties that from and after the date hereof until the Termination
Date:

 

6.1                                 Mergers, Subsidiaries, Etc.  No Credit Party
shall directly or indirectly, by operation of law or otherwise, (a) form or
acquire any Subsidiary, or (b) merge with, consolidate with, acquire all or
substantially all of the assets or Stock of, or otherwise combine with or
acquire, any Person.

 

6.2                                 Investments; Loans and Advances.  Except as
otherwise expressly permitted by this Section 6, no Credit Party shall make or
permit to exist any investment in, or make, accrue or permit to exist loans or
advances of money to, any Person, through the direct or indirect lending of
money, holding of securities or otherwise, except that: (a) Borrower and AET
Canada may hold investments comprised of notes payable, or stock or other
securities issued by Account Debtors to Borrower or AET Canada, as applicable
pursuant to negotiated agreements with respect to settlement of such Account
Debtor’s Accounts (which are not Eligible Accounts) in the ordinary course of
business, so long as the aggregate amount of such Accounts so settled

 

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by Borrower and AET Canada do not exceed $1,000,000 in any Fiscal Year; and (b)
each Credit Party may maintain its existing investments in its Subsidiaries as
of the Closing Date; and (c) so long as no Default or Event of Default has
occurred and is continuing AET Canada may, with respect to any amounts permitted
to remain on deposit in the AET Canada Account as set forth in Annex C, make
investments, subject to Control Letters in favor of Agent for the benefit of
Lenders or otherwise subject to a first priority perfected security interest in
favor of Agent for the benefit of Lenders, in (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency thereof maturing within one year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor’s Ratings Group or Moody’s Investors Service, Inc., (iii) certificates of
deposit maturing no more than one year from the date of creation thereof issued
by commercial banks incorporated under the laws of the United States of America,
each having combined capital, surplus and undivided profits of not less than
$300,000,000 and having a senior unsecured rating of “A” or better by a
nationally recognized rating agency (an “A Rated Bank”), (iv) time deposits
maturing no more than thirty (30) days from the date of creation thereof with A
Rated Banks and (v) mutual funds that invest solely in one or more of the
investments described in clauses (i) through (iv) above.

 

6.3                                 Indebtedness.

 

(a)                                  No Credit Party shall create, incur, assume
or permit to exist any Indebtedness, except (without duplication) (i)
Indebtedness secured by purchase money security interests and Capital Leases
permitted in Section 6.7(c), (ii) the Loans and the other Obligations, (iii)
unfunded pension fund and other employee benefit plan obligations and
liabilities to the extent they are permitted to remain unfunded under applicable
law, (iv) the Senior Notes, (v) existing Indebtedness described in Disclosure
Schedule (6.3) and refinancings thereof or amendments or modifications thereto
that do not have the effect of increasing the principal amount thereof or
changing the amortization thereof (other than to extend the same) and that are
otherwise on terms and conditions no less favorable (taken as a whole) to any
Credit Party, Agent or any Lender, as reasonably determined by Agent, than the
terms of the Indebtedness being refinanced, amended or modified, (vi)
Indebtedness consisting of intercompany loans and advances made by Borrower to
AET Canada and by AET Canada to Borrower; provided, that: (A) each such Credit
Party shall have executed and delivered to each other such Credit Party, on the
Closing Date, a demand note (the “Intercompany Note”) to evidence any such
intercompany Indebtedness owing at any time by each such Credit Party to such
other Credit Party which Intercompany Note shall be in form and substance
reasonably satisfactory to Agent and shall be pledged and delivered to Agent
pursuant to the applicable Pledge Agreement or Security Agreement as additional
collateral security for the Obligations; (B) each such Credit Party shall record
all intercompany transactions on its books and records in a manner reasonably
satisfactory to Agent; (C) the obligations of each such Credit Party under the
Intercompany Notes shall be subordinated to its Obligations hereunder in a
manner reasonably satisfactory to Agent; (D) no Default or Event of Default
would occur and be continuing after giving effect to any such proposed
intercompany loan; and (E) with respect to intercompany loans and advances made
by Borrower to AET Canada: (1) Borrower shall have Borrowing Availability of at
least $5,000,000 after giving effect to any such loan or advance; and (2) the
aggregate amount of all Indebtedness, together with all intercompany payables,
owing by AET Canada to Borrower shall not exceed $80,000,000 at any one time
outstanding; (vii) unsecured Indebtedness of AET Canada to

 

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Investissement Quebec in an aggregate principal amount not exceeding
CDN$3,000,000 at any one time outstanding, provided that (x) such Indebtedness
is unsecured and contains no covenant or event of default the effect of which is
to impose a restriction, limitation or obligation in favor of the lender not
imposed in favor of the Lenders hereunder and (y) payments with respect to the
principal thereof or interest thereon are not required prior to the third
anniversary of the date of incurrence thereof; and (viii) Indebtedness permitted
under Section 6.17.

 

(b)                                 No Credit Party shall, directly or
indirectly, voluntarily purchase, redeem, defease or prepay any principal of,
premium, if any, interest or other amount payable in respect of any
Indebtedness, other than (i) the Obligations; (ii) Indebtedness secured by a
Permitted Encumbrance if the asset securing such Indebtedness has been sold or
otherwise disposed of in accordance with Sections 6.8(b) or (c); (iii)
Indebtedness permitted by Section 6.3(a)(v) upon any refinancing thereof in
accordance with Section 6.3(a)(v); (iv) the Senior Notes to the extent permitted
in Section 6.14; and (v) as otherwise permitted in Section 6.14.

 

6.4                                 Employee Loans and Affiliate Transactions.

 

(a)                                  Except as set forth on Disclosure Schedule
6.4(a) and except as expressly permitted in this Section 6 with respect to
Affiliates, no Credit Party shall enter into or be a party to any transaction
with any other Credit Party or any Affiliate thereof except in the ordinary
course of and pursuant to the reasonable requirements of such Credit Party’s
business and upon fair and reasonable terms that are no less favorable to such
Credit Party than would be obtained in a comparable arm’s length transaction
with a Person not an Affiliate of such Credit Party.  In addition, if any such
transaction or series of related transactions involves payments in excess of
$1,000,000 in the aggregate, the terms of these transactions must be disclosed
in advance to Agent and Lenders.  All such transactions existing as of the date
hereof are described in Disclosure Schedule (6.4(a)).

 

(b)                                 No Credit Party shall enter into any lending
or borrowing transaction with any employees of any Credit Party, except loans to
its respective employees in the ordinary course of business consistent with past
practices for travel and entertainment expenses, relocation costs and similar
purposes up to a maximum of $250,000 to any employee and up to a maximum of
$1,000,000 in the aggregate at any one time outstanding.

 

6.5                                 Capital Structure and Business.  No Credit
Party shall (a) make any changes in any of its business objectives, purposes or
operations that could in any way adversely affect the repayment of the Loans or
any of the other Obligations or could reasonably be expected to have or result
in a Material Adverse Effect, (b) make any change in its capital structure as
described in Disclosure Schedule (3.8), including the issuance or sale of any
shares of Stock, warrants or other securities convertible into Stock or any
revision of the terms of its outstanding Stock; provided, that Borrower may
issue or sell shares of its Stock for cash so long as (i) the proceeds thereof
are applied in prepayment of the Obligations as required by Section 1.3(b)(iii),
and (ii) no Change of Control occurs after giving effect thereto, or (c) amend
its charter or bylaws in a manner that would adversely affect Agent or Lenders
or such Credit Party’s duty or ability to repay the Obligations.  No Credit
Party shall engage in any business other than the businesses currently engaged
in by it and those reasonably related thereto.

 

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6.6                                 Guaranteed Indebtedness.  No Credit Party
shall create, incur, assume or permit to exist any Guaranteed Indebtedness
except (a) by endorsement of instruments or items of payment for deposit to the
general account of any Credit Party, and (b) for Guaranteed Indebtedness
incurred for the benefit of any other Credit Party if the primary Indebtedness
or other obligation (other than Indebtedness permitted under Sections 6.3(a)(vi)
and (vii)) is expressly permitted by this Agreement.

 

6.7                                 Liens.  No Credit Party shall create, incur,
assume or permit to exist any Lien on or with respect to its Accounts or any of
its other properties or assets (whether now owned or hereafter acquired) except
for (a) Permitted Encumbrances;  (b) Liens in existence on the date hereof and
summarized on Disclosure Schedule (6.7) including those Liens securing the
Indebtedness described on Disclosure Schedule (6.3), if any, and permitted
refinancings, extensions and renewals thereof, including extensions or renewals
of any such Liens; provided, that the principal amount of the Indebtedness so
secured is not increased and the Lien does not attach to any other property; and
(c) Liens created after the date hereof by conditional sale or other title
retention agreements (including Capital Leases) or in connection with purchase
money Indebtedness with respect to Equipment and Fixtures acquired by any Credit
Party in the ordinary course of business, involving the incurrence of an
aggregate amount of purchase money Indebtedness and Capital Lease Obligations of
not more than $2,000,000 outstanding at any one time for all such Liens
(provided, that such Liens attach only to the assets subject to such purchase
money debt and such Indebtedness is incurred within twenty (20) days following
such purchase and does not exceed 100% of the purchase price of the subject
assets).  In addition, no Credit Party shall become a party to any agreement,
note, indenture or instrument, or take any other action, that would prohibit the
creation of a Lien on any of its properties or other assets in favor of Agent,
on behalf of itself and Lenders, as additional collateral for the Obligations,
except operating leases, purchase money Indebtedness, Capital Leases or Licenses
which prohibit Liens upon the assets that are subject thereto.  The prohibition
provided for in this Section 6.7 specifically includes, without limitation, any
effort by Borrower or any other Credit Party (whether alone or by providing
assistance or other support to any other party-in-interest in the Chapter 11
Cases) to prime or create pari passu to any claims or interests of Lenders any
Lien (other than for the Carve-Out Expenses up to the Carve-Out Amount)
irrespective of whether such claims or interest may be “ adequately protected.”

 

6.8                                 Sale of Stock and Assets.  No Credit Party
shall sell, transfer, convey, assign or otherwise dispose of any of its
properties or other assets, including the Stock of any of its Subsidiaries
(whether in a public or a private offering or otherwise) or any of its Accounts,
other than (a) the sale of Inventory in the ordinary course of business and the
transfer of inventory in the ordinary course of business between Borrower and
AET Canada; (b) the sale, transfer, conveyance or other disposition by a Credit
Party of Equipment or Fixtures that are obsolete or no longer used or useful in
such Credit Party’s business and having a book value not exceeding $1,000,000 in
any single transaction or $2,000,000 in the aggregate in any Fiscal Year; (c)
other Equipment and Fixtures having a value not exceeding $1,000,000 in any
single transaction or $2,000,000 in the aggregate in any Fiscal Year; and (d)
the making and repayment of intercompany loans and advances permitted under
Section 6.3(a)(vi).  With respect to any disposition of assets or other
properties permitted pursuant to clauses (b) and (c) above, subject to
Section 1.3(b), Agent agrees on reasonable prior written notice to release its
Lien on such assets or other properties in order to permit the applicable Credit
Party to effect such disposition

 

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and shall execute and deliver to Borrower, at Borrower’s expense, appropriate
UCC-3 termination statements and other releases as reasonably requested by
Borrower.

 

6.9                                 ERISA.  No Credit Party shall, or shall
cause or permit any ERISA Affiliate to, cause or permit to occur an event that
could result in the imposition of a Lien under Section 412 of the IRC or Section
302 or 4068 of ERISA or cause or permit to occur an ERISA Event to the extent
such ERISA Event could reasonably be expected to have a Material Adverse Effect.

 

6.10                           Financial Covenants.  Borrower shall not breach
or fail to comply with any of the Financial Covenants.

 

6.11                           Hazardous Materials.  No Credit Party shall cause
or permit a Release of any Hazardous Material on, at, in, under, above, to, from
or about any of the Real Estate where such Release would (a) violate in any
respect, or form the basis for any Environmental Liabilities under, any
Environmental Laws or Environmental Permits or (b) otherwise adversely impact
the value or marketability of any of the Real Estate or any of the Collateral,
other than such violations or Environmental Liabilities that could not
reasonably be expected to have a Material Adverse Effect.

 

6.12                           Sale-Leasebacks.  No Credit Party shall engage in
any sale-leaseback, synthetic lease or similar transaction involving any of its
assets.

 

6.13                           Cancellation of Indebtedness.  No Credit Party
shall cancel any claim or debt owing to it, except for reasonable consideration
negotiated on an arm’s length basis and in the ordinary course of its business
consistent with past practices.

 

6.14                           Restricted Payments; Employee Benefit Plan
Contributions.  No Credit Party shall make any Restricted Payment, except
(a) intercompany loans and advances between Credit Parties to the extent
permitted by Section 6.3 and any payments in respect thereof; (b) dividends and
distributions by Subsidiaries of Borrower paid to Borrower, (c) employee loans
permitted under Section 6.4(b); and (d) payments of principal and interest of
Intercompany Notes issued in accordance with Section 6.3.  No Credit Party shall
make any payments or other contributions to any grantor trusts (also known
as rabbi trusts) associated with any Nonqualified Benefit Plans (or directly
to participants in such Plans) to the extent the amount of such payment or other
contribution would exceed the expense that such Credit Party recognizes with
respect to a Nonqualified Benefit Plan or Plans and deducts as a current
expense in determining net income of such Credit Party in accordance with GAAP
for the period in which such payment or other contribution is made; provided,
that nothing in this sentence shall prevent an existing grantor trust associated
with one or more Nonqualified Plans from making benefit payments to
beneficiaries in accordance with the terms of such trust, as in effect on the
Closing Date.

 

6.15                           Change of Corporate Name or Location; Change of
Fiscal Year.  No Credit Party shall (a) change its name as it appears in
official filings in the state of its incorporation or other organization, (b)
change its chief executive office, principal place of business, corporate
offices or warehouses or locations (other than third party converter or
processor locations) at which Collateral is held or stored, or the location of
its records concerning

 

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the Collateral, (c) change the type of entity that it is, (d) change its
organization identification number, if any, issued by its state of incorporation
or other organization, or (e) change its state of incorporation or organization,
in each case, without at least thirty (30) days prior written notice to Agent
and after Agent’s written acknowledgment that any reasonable action requested by
Agent in connection therewith, including to continue the perfection of any Liens
in favor of Agent, on behalf of Lenders, in any Collateral, has been completed
or taken, and provided, that any such new location shall be in the continental
United States.  No Credit Party shall change its Fiscal Year.

 

6.16                           No Impairment of Intercompany Transfers.  No
Credit Party shall directly or indirectly enter into or become bound by any
agreement, instrument, indenture or other obligation (other than this Agreement
and the other Loan Documents) that could directly or indirectly restrict,
prohibit or require the consent of any Person with respect to the payment of
dividends or distributions or the making or repayment of intercompany loans by a
Subsidiary of Borrower to Borrower.

 

6.17                           No Speculative Transactions.  No Credit Party
shall engage in any transaction involving commodity options, futures contracts
or similar transactions, except solely to hedge against fluctuations in the
prices of commodities owned or purchased by it and the values of foreign
currencies receivable or payable by it and interest swaps, caps or collars.

 

6.18                           Changes Relating to Subordinated Debt, Material
Contracts.  No Credit Party shall change or amend the terms of any Subordinated
Debt or any Material Contract (other than immaterial amendments and waivers as
consented in writing to by the Agent).  No Credit Party shall change or amend
the terms of any early payment provisions of any Nonqualified Benefit Plans
without the prior written consent of the Agent.

 

6.19                           AET Limited.  Borrower shall cause AET Limited to
not engage in any trade or business, or own or hold any assets (other than, for
a period of 60 days following the Closing Date, the bank account referenced in
Annex C and cash on deposit therein in an amount not exceeding $50,000 at any
time), or incur any Indebtedness or Guaranteed Indebtedness or other material
liabilities.

 

6.20                           Repayment of Indebtedness.  Except pursuant to a
confirmed reorganization plan and except as specifically permitted hereunder,
Borrower shall not, without the express prior written consent of Lenders or
pursuant to an order of the Bankruptcy Court after notice and hearing, make any
payment or transfer with respect to any Lien or Indebtedness incurred or arising
prior to the filing of the Chapter 11 Cases that is subject to the automatic
stay provisions of the Bankruptcy Code whether by way of “adequate protection”
under the Bankruptcy Code or otherwise.

 

6.21                           Reclamation Claims.  No Credit Party shall enter
into any agreement to return any of its Inventory to any of its creditors for
application against any Prepetition Indebtedness, Prepetition trade payables or
other Prepetition claims under Section 546(g) of the Bankruptcy Code or allow
any creditor to take any setoff or recoupment against any of its Prepetition
Indebtedness, Prepetition trade payables or other Prepetition claims based upon
any such return pursuant to Section 553(b)(1) of the Bankruptcy Code or
otherwise if, after giving

 

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effect to any such agreement, setoff or recoupment, the aggregate amount of
Prepetition Indebtedness, Prepetition trade payables and other Prepetition
claims subject to all such agreements, setoffs and recoupments since the
Petition Date would exceed $5,000,000. Subject to the foregoing limitation, the
Borrower shall be permitted to make payments in respect of Prepetition trade
payables that are in the ordinary course of business so long as such payments
are approved by the Bankruptcy Court.

 

7.                                      TERM

 

7.1                                 Termination.  The financing arrangements
contemplated hereby shall be in effect until the Commitment Termination Date,
and the Loans and all other Obligations shall be automatically due and payable
in full on such date.

 

7.2                                 Survival of Obligations Upon Termination of
Financing Arrangements.  Except as otherwise expressly provided for in the Loan
Documents, no termination or cancellation (regardless of cause or procedure) of
any financing arrangement under this Agreement shall in any way affect or impair
the obligations, duties and liabilities of the Credit Parties or the rights of
Agent and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date.  Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that the
provisions of Section 11, the payment obligations under Sections 1.15 and 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.

 

8.                                      EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

8.1                                 Events of Default.  Notwithstanding the
provisions of Section 362 of the Bankruptcy Code and without application or
motion to the Bankruptcy Court or any notice to any Credit Party, and subject to
Section 8.2(b), the occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an “Event of Default”
hereunder:

 

(a)                                  Borrower (i) fails to make any payment of
principal of, or interest on, or Fees owing in respect of, the Loans or any of
the other Obligations when due and payable, or (ii) fails to pay or reimburse
Agent or Lenders for any expense reimbursable hereunder or under any other Loan
Document within ten (10) days following Agent’s demand for such reimbursement or
payment of expenses.

 

(b)                                 Any Credit Party fails or neglects to
perform, keep or observe any of the provisions of Sections 1.4, 1.8, 1.18, 1.21,
1.22, 5.4(a) or 6, or any of the provisions set forth in Annexes C or G,
respectively.

 

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(c)                                  Borrower fails or neglects to perform, keep
or observe any of the provisions of Section 4 or any provisions set forth in
Annexes E or F, respectively, and the same shall remain unremedied for five (5)
days or more.

 

(d)                                 Any Credit Party or any Guarantor fails or
neglects to perform, keep or observe any other provision of this Agreement or of
any of the other Loan Documents (other than any provision embodied in or covered
by any other clause of this Section 8.1) and the same shall remain unremedied
for thirty (30) days or more.

 

(e)                                  Except for defaults occasioned by the
filing of the Chapter 11 Cases and defaults resulting from obligations with
respect to which the Bankruptcy Code prohibits any Credit Party from complying
or permits any Credit Party not to comply, a default or breach occurs under any
other agreement, document or instrument  entered into either (x) Prepetition and
which is affirmed after the Petition Date or (y) Postpetition, to which any
Credit Party or any Guarantor is a party that is not cured within any applicable
grace period therefor, and such default or breach (i) involves the failure to
make any payment when due in respect of any Indebtedness or Guaranteed
Indebtedness (other than the Obligations) of any Credit Party or any Guarantor
in excess of $500,000 in aggregate principal amount (including (x) undrawn
committed or available amounts and (y) amounts owing to all creditors under any
combined or syndicated credit arrangements), or (ii) causes, or permits any
holder of such Indebtedness or Guaranteed Indebtedness or a trustee to cause,
Indebtedness or Guaranteed Indebtedness or a portion thereof in excess of
$500,000 in the aggregate to become due prior to its stated maturity or prior to
its regularly scheduled dates of payment, or cash collateral in respect thereof
to be demanded, in each case, regardless of whether such default is waived, or
such right is exercised, by such holder or trustee.

 

(f)                                    Any information contained in any
Borrowing Base Certificate is untrue or incorrect in any respect (other than
inadvertent, immaterial errors not exceeding $100,000 in the aggregate in any
Borrowing Base Certificate), or any representation or warranty herein or in any
Loan Document is untrue or incorrect in any material respect when made or any
representation or warranty in any written statement, report, financial statement
or certificate (other than a Borrowing Base Certificate) made or delivered to
Agent or any Lender by any Credit Party or any Guarantor is untrue or incorrect
in any material respect as of the date when made or deemed made.

 

(g)                                 Assets of any Credit Party or any Guarantor
with a fair market value of $250,000 or more are attached, seized, levied upon
or subjected to a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors of any
Credit Party or any Guarantor and such condition continues for thirty (30) days
or more.

 

(h)                                 Any Event of Default under and as defined in
any Mortgage shall occur and be continuing.

 

(i)                                     Any “default”, “event of default” or
“termination event” under and as defined in any of the Material Contracts shall
have occurred.

 

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(j)                                     A final judgment or judgments for the
payment of money in excess of $250,000 in the aggregate at any time are
outstanding against one or more of the Credit Parties and the same are not,
within thirty (30) days after the entry thereof, discharged or execution thereof
stayed or bonded pending appeal, or such judgments are not discharged prior to
the expiration of any such stay.

 

(k)                                  Any material provision of any Loan Document
for any reason ceases to be valid, binding and enforceable in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relative to or
affecting the enforcement of creditors’ rights generally in effect from time to
time) or any Credit Party or any Guarantor shall challenge the enforceability of
any Loan Document or shall assert in writing, or engage in any action or
inaction based on any such assertion, that any provision of any of the Loan
Documents has ceased to be or otherwise is not valid, binding and enforceable in
accordance with its terms, or any Lien created under any Loan Document ceases to
be a valid and perfected first priority Lien (except as otherwise permitted
herein or therein) in any of the Collateral purported to be covered thereby,
other than Collateral having a fair market value of less than $100,000 in the
aggregate.

 

(l)                                     Any Change of Control or Senior Note
Remedy Event occurs.

 

(m)                               Any event occurs, whether or not insured or
insurable, as a result of which revenue-producing activities cease or are
substantially curtailed at any facility of any Credit Party generating more than
7.5% of Borrower’s consolidated revenues for the Fiscal Year preceding such
event and such cessation or curtailment continues for more than twenty (20)
days.

 

(n)                                 (i) The Ex-Im Bank Guarantee is terminated
(other than as a result of the scheduled maturity of the Ex-Im Bank Guarantee)
or any material provision of the Ex-Im Bank Guarantee for any reason ceases to
be valid, binding and enforceable in accordance with its terms (or Ex-Im Bank
shall challenge the enforceability of the Ex-Im Bank Guarantee or shall assert
in writing, or engage in any action or inaction based on any such assertion,
that any provision of the Ex-Im Bank Guarantee has ceased to be or otherwise is
not valid, binding and enforceable in accordance with its terms) and (ii) any
Export Related Advances remain outstanding as of 5:00 p.m. (New York time) on
the first (1st) Business Day following any event referred to in the foregoing
clause (i).

 

(o)                                 The occurrence of any of the following in
any Chapter 11 Case:

 

(i)                                     the bringing of a motion, taking of any
action or the filing of any plan of reorganization or disclosure statement
attendant thereto by Borrower or, as applicable, any Credit Party, in a Chapter
11 Case:  (w) to obtain additional financing under Section 364(c) or (d) of the
Bankruptcy Code not otherwise permitted pursuant to this Agreement; (x) to grant
any Lien other than Permitted Encumbrances upon or affecting any Collateral; (y)
except as provided in the Interim or Final Order, as the case may be, to use
cash collateral of Agent under Section 363(c) of the Bankruptcy Code without the
prior written consent of the Agent and the Lenders; or (z) any other action or
actions adverse to the Agent and the Lenders or their rights and remedies
hereunder or their interest in the Collateral;

 

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(ii)                                  the filing of any plan of reorganization
or disclosure statement attendant thereto by Borrower, any Credit Party or any
other Person to which the Lenders do not consent or otherwise agree to the
treatment of their claims;

 

(iii)                               the entry of an order in any Chapter 11 Case
confirming a plan or plans of reorganization that does not contemplate the
repayment in full in cash of all of the Obligations under this Agreement as a
condition precedent to the effectiveness of such plan of reorganization;

 

(iv)                              the entry of an order amending, supplementing,
staying, vacating or otherwise modifying the Loan Documents or the Interim Order
or the Canadian Interim Order or the Final Order or the Canadian Final Order
without the written consent of the Agent or the filing of a motion for
reconsideration with respect to the Interim Order, the Canadian Interim Order,
the Final Order or the Canadian Final Order;

 

(v)                                 the Final Order is not entered before or
immediately following the expiration of the Interim Order;

 

(vi)                              the payment of, or application for authority
to pay, any Prepetition claim without the Lenders’ prior written consent or
pursuant to an order of the Bankruptcy Court after notice and hearing unless
otherwise permitted under this Agreement;

 

(vii)                           the allowance of any claim or claims under
Section 506(c) of the Bankruptcy Code against or with respect to any of the
Collateral, other than the Carve-Out Expenses;

 

(viii)                        the appointment of an interim or permanent trustee
in any Chapter 11 Case or the appointment of a receiver or an examiner in any
Chapter 11 Case with expanded powers to operate or manage the financial affairs,
the business, or reorganization of Borrower or any other Credit Party; or the
sale without the Agent and Lenders’ consent, of all or substantially all of
Borrower’s or other Credit Parties’ assets either through a sale under Section
363 of the Bankruptcy Code, through a confirmed plan of reorganization in any
Chapter 11 Case, or otherwise that does not provide for payment in full of the
Obligations and termination of Lenders’ commitment to make Loans;

 

(ix)                                the dismissal of any Chapter 11 Case, or the
conversion of any Chapter 11 Case from one under Chapter 11 to one under Chapter
7 of the Bankruptcy Code or any credit party shall file a motion or other
pleading seeking the dismissal of any Chapter 11 Case under Section 1112 of the
Bankruptcy Code or otherwise;

 

(x)                                   the entry of an order by the Court
granting relief from or modifying the automatic stay of Section 362 of the
Bankruptcy Code (x) to allow any creditor to execute upon or enforce a Lien on
any Collateral, or (y) with respect to any Lien of or the granting of any Lien
on any Collateral to any state or local environmental or regulatory agency or
authority, which  in either case would have a Material Adverse Effect;

 

(xi)                                the commencement of a suit or action against
Agent or any Lender and, as to any suit or action brought by any Person other
than a Credit Party or a Subsidiary,

 

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officer or employee of a Credit Party, the continuation thereof without
dismissal for thirty (30) days after service thereof on Agent or such Lender,
that asserts by or on behalf of Borrower or any other Credit Party, the
Environmental Protection Agency, any state environmental protection or health
and safety agency, or any official committee in any Chapter 11 Case, any claim
or legal or equitable remedy which seeks subordination of the claim or Lien of
Agent or the Lenders;

 

(xii)                             the entry of an order in any Chapter 11 Case
avoiding or requiring repayment of any portion of the payments made on account
of the Obligations owing under this Agreement;

 

(xiii)                          the failure of Borrower to comply with the terms
of the Interim Order, the Canadian Interim Order, the Final Order or the
Canadian Final Order; or

 

(xiv)                         the entry of an order in any Chapter 11 Case
granting any other super-priority administrative claim or Lien equal or superior
to that granted to Agent, on behalf of itself and Lenders.

 

8.2                                 Remedies.

 

(a)                                  If any Default or Event of Default has
occurred and is continuing, Agent may (and at the written request of the
Requisite Revolving Lenders shall), notwithstanding the provisions of Section
362 of the Bankruptcy Code, without any application, motion or notice to or
order from the Bankruptcy Court but subject to the Interim Order and the Final
Order, suspend the Revolving Loan facility with respect to additional Advances
and/or the incurrence of additional Letter of Credit Obligations, whereupon any
additional Advances and additional Letter of Credit Obligations shall be made or
incurred in Agent’s sole discretion (or in the sole discretion of the Requisite
Revolving Lenders, if such suspension occurred at their direction) so long as
such Default or Event of Default is continuing.  If any Default or Event of
Default has occurred and is continuing, Agent may (i) (and at the written
request of Requisite Revolving Lenders shall), notwithstanding the provisions of
Section 362 of the Bankruptcy Code, without any application, motion or notice to
or order from the Bankruptcy Court but subject to the Interim Order and the
Final Order, except as otherwise expressly provided herein, increase the rate of
interest applicable to the Revolving Loans and the Letter of Credit Fees to the
Default Rate and (ii) (and at the written request of Requisite Term Lenders
shall), without notice except as otherwise expressly provided herein, increase
the rate of interest applicable to the Term Loans and Last Out Term Loans to the
Default Rate.

 

(b)                                 If any Event of Default has occurred and is
continuing, Agent may (and at the written request of the Requisite Revolving
Lenders shall), notwithstanding the provisions of Section 362 of the Bankruptcy
Code, without any application, motion or notice to or order from, the Bankruptcy
Court but subject to the Interim Order and the Final Order: (i) terminate the
Revolving Loan facility with respect to further Advances or the incurrence of
further Letter of Credit Obligations; and (ii) Agent may (and at the written
request of the Requisite Lenders (or at the request of the Requisite Term
Lenders, Requisite Last Out Lenders or Requisite Revolving Lenders as provided
in clause (c)(i) below) shall), (x) declare all or any portion of the
Obligations, including all or any portion of any Loan to be forthwith due and
payable, and require that the Letter of Credit Obligations be cash
collateralized as provided in Annex B, all

 

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without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by Borrower and each other Credit Party; and/or
(y) exercise any rights and remedies provided to Agent under the Loan Documents
or at law or equity, including all remedies provided under the Code; and
pursuant to the Interim Order and the Final Order, the automatic stay of Section
362 of the Bankruptcy Code shall be modified and vacated to permit Lenders to
exercise their remedies under this Agreement and the Loan Documents, without
further application or motion to, or order from, the Bankruptcy Court, provided,
however, notwithstanding anything to the contrary contained herein, the Agent
shall be permitted to exercise any remedy in the nature of a liquidation of, or
foreclosure on, any interest of Borrower or any other Credit Party in the
Collateral only upon three (3) Business Days’ prior written notice to Borrower
or such other Credit Party, the Committee, the United States Trustee and counsel
for the Committee.  Upon the occurrence of an Event of Default and the exercise
by Lenders of their rights and remedies under this Agreement and the other Loan
Documents, Borrower and each other Credit Party shall assist Lenders in
effecting a sale or other disposition of the Collateral upon such terms as are
designed to maximize the proceeds obtainable from such sale or other
disposition.

 

(c)                                  Notwithstanding anything herein or in the
other Loan Documents to the contrary, Agent and Lenders hereby agree that, (i)
at any time after the occurrence of any Event of Default which is continuing,
(x) Requisite Term Lenders (without consent of any Revolving Lender or Last Out
Term Lender and without regard to the vote of the Requisite Lenders) shall be
permitted to declare the Term Loan to be forthwith due and payable, (y)
Requisite Revolving Lenders (without consent of any Term Lender or Last Out Term
Lender and without regard to the vote of the Requisite Lenders) shall be
permitted to declare the Revolving Loan and the Export-Related Loan to be
forthwith due and payable and require that the Letter of Credit Obligations be
cash collateralized as provided in Annex B, and (z) Requisite Last Out Term
Lenders (without consent of any Revolving Lender and without regard to the vote
of the Requisite Lenders) shall be permitted to declare the Last Out Term Loan
to be forthwith due and payable, and (ii) if any of the Loans become or are
declared to be immediately due and payable in accordance with this Section 8.2,
(x) Requisite Term Lenders (without consent of any Revolving Lender or Last Out
Term Lender and without regard to the vote of the Requisite Lenders) shall have
the exclusive right to (and to direct the Agent to) enforce rights and remedies
with respect to the Term Loan Priority Collateral pursuant to the Loan Documents
and no Revolving Lender or Last Out Term Lender shall take any Collateral
Enforcement Action and (y) Requisite Revolving Lenders (without consent of any
Term Lender or Last Out Term Lender and without regard to the vote of the
Requisite Lenders) shall have the exclusive right to (and to direct the Agent
to) enforce rights and remedies with respect to the Revolving Loan Priority
Collateral pursuant to the Loan Documents and no Term Lender or Last Out Term
Lender shall take any Collateral Enforcement Action.

 

8.3                                 Waivers by Credit Parties.  Except as
otherwise provided for in this Agreement or by applicable law, each Credit Party
waives:  (a) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Agent on which any
Credit Party may in any way be liable, and hereby ratifies and confirms whatever
Agent may do in this regard, (b) all rights to notice and a

 

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hearing prior to Agent’s taking possession or control of, or to Agent’s replevy,
attachment or levy upon, the Collateral or any bond or security that might be
required by any court prior to allowing Agent to exercise any of its remedies,
and (c) the benefit of all valuation, appraisal, marshaling and exemption laws.

 

9.                                      ASSIGNMENT AND PARTICIPATIONS;
APPOINTMENT OF AGENT

 

9.1                                 Assignment and Participations.

 

(a)                                  Subject to the terms of this Section 9.1,
any Lender may make an assignment to a Qualified Assignee of, or sell
participations in, at any time or times, the Loan Documents, Loans, Letter of
Credit Obligations and any Commitment or any portion thereof or interest
therein, including any Lender’s rights, title, interests, remedies, powers or
duties thereunder.  Any assignment by a Lender shall: (i) require the consent of
Agent (which consent shall not be unreasonably withheld or delayed with respect
to a Qualified Assignee) and the execution of an assignment agreement (an
“Assignment Agreement”) substantially in the form attached hereto as Exhibit
9.1(a) and otherwise in form and substance reasonably satisfactory to, and
acknowledged by, Agent; (ii) be conditioned on such assignee Lender representing
to the assigning Lender and Agent that it is purchasing the applicable Loans to
be assigned to it for its own account, for investment purposes and not with a
view to the distribution thereof; (iii) after giving effect to any such partial
assignment, the assignee Lender shall have Commitments in an amount at least
equal to $5,000,000 and the assigning Lender shall have retained Commitments in
an amount at least equal to $10,000,000; (iv) include a payment to Agent of an
assignment fee of $3,500; and (v) so long as no Event of Default has occurred
and is continuing, require the consent of Borrower, which shall not be
unreasonably withheld or delayed.  In the case of an assignment by a Lender
under this Section 9.1, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as all other Lenders
hereunder.  The assigning Lender shall be relieved of its obligations hereunder
with respect to its Commitments or assigned portion thereof from and after the
date of such assignment.  Borrower hereby acknowledges and agrees that any
assignment shall give rise to a direct obligation of Borrower to the assignee
and that the assignee shall be considered to be a “Lender”.  In all instances,
each Lender’s liability to make Loans hereunder shall be several and not joint
and shall be limited to such Lender’s Pro Rata Share of the applicable
Commitment.  In the event Agent or any Lender assigns or otherwise transfers all
or any part of the Obligations, Agent or any such Lender shall so notify
Borrower and Borrower shall, upon the request of Agent or such Lender, execute
new Notes in exchange for the Notes, if any, being assigned, which shall be
cancelled upon return.  Notwithstanding the foregoing provisions of this Section
9.1(a), any Lender may at any time pledge the Obligations held by it and such
Lender’s rights under this Agreement and the other Loan Documents to a Federal
Reserve Bank, and any Lender that is an investment fund may assign the
Obligations held by it and such Lender’s rights under this Agreement and the
other Loan Documents to another investment fund managed by the same investment
advisor; provided, that no such pledge to a Federal Reserve Bank shall release
such Lender from such Lender’s obligations hereunder or under any other Loan
Document.

 

(b)                                 Any participation by a Lender of all or any
part of its Commitments shall be made with the understanding that all amounts
payable by Borrower hereunder shall be determined as if that Lender had not sold
such participation, and that the holder of any such

 

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participation shall not be entitled to require such Lender to take or omit to
take any action hereunder except actions directly affecting (i) any reduction in
the principal amount of, or interest rate or Fees payable with respect to, any
Loan in which such holder participates, (ii) any extension of the scheduled
amortization of the principal amount of any Loan in which such holder
participates or the final maturity date thereof, and (iii) any release of all or
substantially all of the Collateral (other than in accordance with the terms of
this Agreement, the Collateral Documents or the other Loan Documents).  Solely
for purposes of Sections 1.13, 1.15, 1.16 and 9.8, Borrower acknowledges and
agrees that a participation shall give rise to a direct obligation of Borrower
to the participant and the participant shall be considered to be a “Lender”
provided, that no participant shall be entitled to receive any greater amount
pursuant to Sections 1.13, 1.15 and 1.16 than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such participant had no such transfer
occurred.  Except as set forth in the preceding sentence no Borrower or Credit
Party shall have any obligation or duty to any participant.  Neither Agent nor
any Lender (other than the Lender selling a participation) shall have any duty
to any participant and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.

 

(c)                                  Except as expressly provided in this
Section 9.1, no Lender shall, as between Borrower and that Lender, or Agent and
that Lender, be relieved of any of its obligations hereunder as a result of any
sale, assignment, transfer or negotiation of, or granting of participation in,
all or any part of the Loans, the Notes or other Obligations owed to such
Lender.

 

(d)                                 Each Credit Party executing this Agreement
shall assist Agent to sell assignments or participations under this Section 9.1
as reasonably required to enable the assigning or selling Lender to effect any
such assignment or participation, including the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and, if requested by Agent, the preparation of informational materials
for, and the participation of management in meetings with, potential assignees
or participants.  Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their respective affairs contained in any selling materials provided by them
and all other information provided by them and included in such materials,
except that any Projections delivered by Borrower shall only be certified by
Borrower as having been prepared by Borrower in compliance with the
representations contained in Section 3.4(b).

 

(e)                                  Any Lender may furnish any information
concerning Credit Parties in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants);
provided, that such Lender shall obtain from assignees or participants
confidentiality covenants substantially equivalent to those contained in Section
11.8.

 

(f)                                    Notwithstanding anything to the contrary
contained herein, any Lender (a “Granting Lender”), may grant to a special
purpose funding vehicle (an “SPC”), identified as such in writing by the
Granting Lender to Agent and Borrower, the option to provide to Borrower all or
any part of any Loans that such Granting Lender would otherwise be obligated to
make to Borrower pursuant to this Agreement; provided, that (i) nothing herein
shall constitute a commitment by any SPC to make any Loan; and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any part
of such Loan, the Granting Lender shall be obligated

 

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to make such Loan pursuant to the terms hereof.  The making of a Loan by an SPC
hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if such Loan were made by such Granting Lender.  No SPC shall be
liable for any indemnity or similar payment obligation under this Agreement (all
liability for which shall remain with the Granting Lender).  Any SPC may (i)
with notice to, but without the prior written consent of, Borrower and Agent
assign all or a portion of its interests in any Loans to the Granting Lender or
to any financial institutions (consented to by Borrower and Agent) providing
liquidity and/or credit support to or for the account of such SPC to support the
funding or maintenance of Loans and (ii) disclose on a confidential basis any
non-public information relating to its Loans to any rating agency, commercial
paper dealer or provider of any surety, guarantee or credit or liquidity
enhancement to such SPC.  This Section 9.1(g) may not be amended without the
prior written consent of each Granting Lender, all or any of whose Loans are
being funded by an SPC at the time of such amendment.  For the avoidance of
doubt, the Granting Lender shall for all purposes, including without limitation,
the approval of any amendment or waiver of any provision of any Loan Document or
the obligation to pay any amount otherwise payable by the Granting Lender under
the Loan Documents, continue to be the Lender of record hereunder.

 

(g)                                 So long as no Event of Default has occurred
and is continuing, no Lender shall assign or sell participations in any portion
of its Loans or Commitments to a potential Lender or participant, if, as of the
date of the proposed assignment or sale, the assignee Lender or participant
would be subject to capital adequacy or similar requirements under Section
1.16(a), increased costs under Section 1.16(b), an inability to fund LIBOR Loans
under Section 1.16(c), or withholding taxes in accordance with Section 1.15(a).

 

9.2                                 Appointment of Agent.  GE Capital is hereby
appointed to act on behalf of all Lenders as Agent under this Agreement and the
other Loan Documents.  Without limiting the generality of the foregoing, each
Lender hereby authorizes GE Capital to consent, on behalf of each Lender, to an
Interim Order substantially in the form attached as Exhibit A-4 hereto, to the
Canadian Interim Order, to the Final Order and to the Canadian Final Order.  The
provisions of this Section 9.2 are solely for the benefit of Agent and Lenders
and no Credit Party nor any other Person shall have any rights as a third party
beneficiary of any of the provisions hereof.  In performing its functions and
duties under this Agreement and the other Loan Documents, Agent shall act solely
as an agent of Lenders and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
Credit Party or any other Person.  Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents.  The duties of Agent shall be mechanical and
administrative in nature and Agent shall not have, or be deemed to have, by
reason of this Agreement, any other Loan Document or otherwise a fiduciary
relationship in respect of any Lender.  Except as expressly set forth in this
Agreement and the other Loan Documents, Agent shall not have any duty to
disclose, and shall not be liable for failure to disclose, any information
relating to any Credit Party or any of their respective Subsidiaries or any
Account Debtor that is communicated to or obtained by GE Capital or any of its
Affiliates in any capacity.  Neither Agent nor any of its Affiliates nor any of
their respective officers, directors, employees, agents or representatives shall
be liable to any Lender for any action taken or omitted to be taken by it
hereunder or under any other Loan Document, or in connection herewith or
therewith, except for damages caused by its or their own gross negligence or
willful misconduct.  The Agent is authorized to hold any Collateral on behalf of
the Lenders and to execute in their name any Loan

 

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Document.  For greater certainty, the Agent is authorized to act as
representative (fondé de pouvoir) of the Lenders (notwithstanding that the Agent
is also a Lender) for the purposes of any hypothec granted by any Credit Party
pursuant to article 2692 of the Civil Code of Quebec to secure debentures or
similar instruments issued for the benefit of the Lenders pursuant to the Quebec
Hypothec.

 

If Agent shall request instructions from Requisite Lenders, Requisite Revolving
Lenders, Requisite Term Lenders, Requisite Last Out Term Lenders or all affected
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any other Loan Document, then Agent shall be
entitled to refrain from such act or taking such action unless and until Agent
shall have received instructions from Requisite Lenders, Requisite Revolving
Lenders, Requisite Term Lenders, Requisite Last Out Term Landers or all affected
Lenders, as the case may be, and Agent shall not incur liability to any Person
by reason of so refraining.  Agent shall be fully justified in failing or
refusing to take any action hereunder or under any other Loan Document (a) if
such action would, in the opinion of Agent, be contrary to law or the terms of
this Agreement or any other Loan Document, (b) if such action would, in the
opinion of Agent, expose Agent to Environmental Liabilities or (c) if Agent
shall not first be indemnified to its satisfaction against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.  Without limiting the foregoing, no Lender shall have any
right of action whatsoever against Agent as a result of Agent acting or
refraining from acting hereunder or under any other Loan Document in accordance
with the instructions of Requisite Lenders, Requisite Revolving Lenders,
Requisite Term Lenders, Requisite Last Out Term Lenders or all affected Lenders,
as applicable.

 

9.3                                 Agent’s Reliance, Etc.  Neither Agent nor
any of its Affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement or the other Loan Documents,
except for damages caused by its or their own gross negligence or willful
misconduct.  Without limiting the generality of the foregoing, Agent:  (a) may
treat the payee of any Note as the holder thereof until Agent receives written
notice of the assignment or transfer thereof signed by such payee and in form
reasonably satisfactory to Agent; (b) may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith 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 made in or in
connection with this Agreement or the other 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 this Agreement or the other Loan
Documents on the part of any Credit Party or to inspect the Collateral
(including the books and records) of any Credit Party; (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; and (f) shall incur no liability under or in respect of this Agreement
or the other Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.

 

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9.4                                 GE Capital and Affiliates.  With respect to
its Commitments hereunder, GE Capital shall have the same rights and powers
under this Agreement and the other Loan Documents as any other Lender and may
exercise the same as though it were not Agent; and the term “Lender” or
“Lenders” shall, unless otherwise expressly indicated, include GE Capital in its
individual capacity.  GE Capital and its Affiliates may lend money to, invest
in, and generally engage in any kind of business with, any Credit Party, any of
their Affiliates and any Person who may do business with or own securities of
any Credit Party or any such Affiliate, all as if GE Capital were not Agent and
without any duty to account therefor to Lenders.  GE Capital and its Affiliates
may accept fees and other consideration from any Credit Party for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.  Each Lender acknowledges the potential conflict of interest
between GE Capital as a Lender holding disproportionate interests in the Loans
and GE Capital as Agent.

 

9.5                                 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 referred to in Section 3.4(a)
and such other documents and information as it has deemed appropriate, made its
own credit and financial analysis of the Credit Parties and its own 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.  Each Lender acknowledges the potential conflict of interest of
each other Lender as a result of Lenders holding disproportionate interests in
the Loans, and expressly consents to, and waives any claim based upon, such
conflict of interest.

 

9.6                                 Indemnification.  Lenders agree to indemnify
Agent (to the extent not reimbursed by Credit Parties and without limiting the
obligations of Credit Parties hereunder), ratably according to their respective
Pro Rata Shares, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever, including Environmental Liability that may be
imposed on, incurred by, or asserted against Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted to be taken by Agent in connection therewith; provided, 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 Agent’s gross negligence or willful misconduct. Without limiting
the foregoing, each Lender agrees to reimburse Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including reasonable counsel
and consultants’ fees) incurred by Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement and each
other Loan Document, to the extent that Agent is not reimbursed for such
expenses by Credit Parties.

 

9.7                                 Successor Agent.  Agent may resign at any
time by giving not less than thirty (30) days’ prior written notice thereof to
Lenders and Borrower.  Upon any such resignation, the Requisite Lenders shall
have the right to appoint a successor Agent, with, so long as no Event of
Default has occurred and is continuing, the consent of Borrower, which shall not

 

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be unreasonably withheld or delayed.  If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within thirty (30) days after the resigning Agent’s giving notice of
resignation, then the resigning Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a Lender, if a Lender is willing to accept such
appointment, or otherwise shall be a commercial bank or financial institution or
a subsidiary of a commercial bank or financial institution if such commercial
bank or financial institution is organized under the laws of the United States
of America or of any State thereof and has a combined capital and surplus of at
least $300,000,000.  If no successor Agent has been appointed pursuant to the
foregoing, within thirty (30) days after the date such notice of resignation was
given by the resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above.  Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default has occurred and is continuing. 
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the resigning Agent.  Upon the earlier of the
acceptance of any appointment as Agent hereunder by a successor Agent or the
effective date of the resigning Agent’s resignation, the resigning Agent shall
be discharged from its duties and obligations under this Agreement and the other
Loan Documents, except that any indemnity rights or other rights in favor of
such resigning Agent shall continue.  After any resigning Agent’s resignation
hereunder, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was acting as Agent under
this Agreement and the other Loan Documents.

 

9.8                                 Setoff and Sharing of Payments.  In addition
to any rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default and subject to Section 9.9(f), each Lender is hereby
authorized (notwithstanding the provisions of Section 362 of the Bankruptcy Code
and without any application, motion or notice to, or order from, the Bankruptcy
Court but subject to the Interim Order and the Final Order) at any time or from
time to time, without notice to any Credit Party or to any other Person, any
such notice being hereby expressly waived, to offset and to appropriate and to
apply any and all balances held by it at any of its offices for the account of
Borrower or any Guarantor (regardless of whether such balances are then due to
Borrower or Guarantor) and any other properties or assets at any time held or
owing by that Lender or that holder to or for the credit or for the account of
Borrower or any Guarantor against and on account of any of the Obligations that
are not paid when due.  Any Lender exercising a right of setoff or otherwise
receiving any payment on account of the Obligations in excess of its Pro Rata
Share thereof shall purchase for cash (and the other Lenders or holders shall
sell) such participations in each such other Lender’s or holder’s Pro Rata Share
of the Obligations as would be necessary to cause such Lender to share the
amount so offset or otherwise received with each other Lender or holder in
accordance with their respective Pro Rata Shares (other than offset rights
exercised by any Lender with respect to Sections 1.13, 1.15 or 1.16).  Each
Lender’s obligation under this Section 9.8 shall be in addition to and not in
limitation of its obligations to purchase a participation in an amount equal to
its Pro Rata Share of the Swing Line Loans under Section 1.1(d) and to purchase
a participation in an amount equal to its Pro Rata Share (based on Revolving
Loan Commitments) of the Export-Related Loan

 

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under Section 1.1(e).  Each Credit Party that is a Borrower or Guarantor agrees,
to the fullest extent permitted by law (notwithstanding the provisions of
Section 362 of the Bankruptcy Code and without any application, motion or notice
to, or order from, the Bankruptcy Court but subject to the Interim Order and the
Final Order), that (a) any Lender may exercise its right to offset with respect
to amounts in excess of its Pro Rata Share of the Obligations and may sell
participations in such amounts so offset to other Lenders and holders and (b)
any Lender so purchasing a participation in the Loans made or other Obligations
held by other Lenders or holders may exercise all rights of offset, bankers’
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participation.  Notwithstanding the foregoing,
if all or any portion of the offset amount or payment otherwise received is
thereafter recovered from the Lender that has exercised the right of offset, the
purchase of participations by that Lender shall be rescinded and the purchase
price restored without interest.

 

9.9                                 Advances; Payments; Non-Funding Lenders;
Information; Actions in Concert.

 

(a)                                  Advances; Payments.

 

(i)                                     Revolving Lenders shall refund or
participate in the Swing Line Loan in accordance with clause (iii) of Section
1.1(d).  If the Swing Line Lender declines to make a Swing Line Loan or if Swing
Line Availability is zero, Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00
p.m. (New York time) on the date such Notice of Revolving Advance is received,
by telecopy, telephone or other similar form of transmission.  Each Revolving
Lender shall make the amount of such Lender’s Pro Rata Share of such Revolving
Credit Advance available to Agent in same day funds by wire transfer to Agent’s
account as set forth in Annex H not later than 2:00 p.m. (New York time) on the
requested funding date, in the case of an Index Rate Loan, and not later than
11:00 a.m. (New York time) on the requested funding date, in the case of a LIBOR
Loan.  After receipt of such wire transfers (or, in the Agent’s sole discretion,
before receipt of such wire transfers), subject to the terms hereof, Agent shall
make the requested Revolving Credit Advance to Borrower not later than 3:00 p.m.
(New York time) on the requested funding date.  All payments by each Revolving
Lender shall be made without setoff, counterclaim or deduction of any kind.

 

(ii)                                  On the 2nd Business Day of each calendar
week or more frequently at Agent’s election (each, a “Settlement Date”), Agent
shall advise each Lender by telephone, or telecopy of the amount of such
Lender’s Pro Rata Share of principal, interest and Fees paid for the benefit of
Lenders with respect to each applicable Loan.  Provided that each Lender has
funded all payments or Advances required to be made by it and has purchased all
participations required to be purchased by it under this Agreement and the other
Loan Documents as of such Settlement Date, Agent shall pay to each Lender such
Lender’s Pro Rata Share of principal, interest and Fees paid by Borrower since
the previous Settlement Date for the benefit of such Lender on the Loans held by
it.  To the extent that any Lender (a “Non-Funding Lender”) has failed to fund
all such payments and Advances or failed to fund the purchase of all such
participations, Agent shall be entitled to set off the funding short-fall
against that Non-Funding Lender’s Pro Rata Share of all payments received from
Borrower.  Such payments

 

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shall be made by wire transfer to such Lender’s account (as specified by such
Lender in Annex H or the applicable Assignment Agreement) not later than 2:00
p.m. (New York time) on the next Business Day following each Settlement Date.

 

(b)                                 Availability of Lender’s Pro Rata Share. 
Agent may assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Agent on each funding date.  If such Pro
Rata Share is not, in fact, paid to Agent by such Revolving Lender when due,
Agent will be entitled to recover such amount on demand from such Revolving
Lender without setoff, counterclaim or deduction of any kind.  If any Revolving
Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent’s
demand, Agent shall promptly notify Borrower and Borrower shall immediately
repay such amount to Agent.  Nothing in this Section 9.9(b) or elsewhere in this
Agreement or the other Loan Documents shall be deemed to require Agent to
advance funds on behalf of any Revolving Lender or to relieve any Revolving
Lender from its obligation to fulfill its Commitments hereunder or to prejudice
any rights that Borrower may have against any Revolving Lender as a result of
any default by such Revolving Lender hereunder.  To the extent that Agent
advances funds to Borrower on behalf of any Revolving Lender and is not
reimbursed therefor on the same Business Day as such Advance is made, Agent
shall be entitled to retain for its account all interest accrued on such Advance
until reimbursed by the applicable Revolving Lender.

 

(c)                                  Return of Payments.

 

(i)                                     If Agent pays an amount to a Lender
under this Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrower and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from such
Lender on demand without setoff, counterclaim or deduction of any kind.

 

(ii)                                  If Agent determines at any time that any
amount received by Agent under this Agreement must be returned to Borrower or
paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender.  In addition, each Lender will repay to Agent on demand any portion of
such amount that Agent has distributed to such Lender, together with interest at
such rate, if any, as Agent is required to pay to Borrower or such other Person,
without setoff, counterclaim or deduction of any kind.

 

(d)                                 Non-Funding Lenders.  The failure of any
Non-Funding Lender to make any Revolving Credit Advance or any payment required
by it hereunder or to purchase any participation in any Swing Line Loan or
Export-Related Loan to be made or purchased by it on the date specified therefor
shall not relieve any other Lender (each such other Revolving Lender, an “Other
Lender”) of its obligations to make such Advance or purchase such participation
on such date, but neither any Other Lender nor Agent shall be responsible for
the failure of any Non-Funding Lender to make an Advance, purchase a
participation or make any other payment required hereunder.  Notwithstanding
anything set forth herein to the contrary, a Non-Funding Lender shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a “Lender” or a “Revolving Lender” (or be included in the calculation
of “Requisite Lenders”, “Requisite Revolving Lenders”, “Requisite Term Lenders”
or “Requisite Last Out

 

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Term Lenders” hereunder) for any voting or consent rights under or with respect
to any Loan Document.  At Borrower’s request, Agent or a Person reasonably
acceptable to Agent shall have the right with Agent’s consent and in Agent’s
sole discretion (but shall have no obligation) to purchase from any Non-Funding
Lender, and each Non-Funding Lender agrees that it shall, at Agent’s request,
sell and assign to Agent or such Person, all of the Commitments of that
Non-Funding Lender for an amount equal to the principal balance of all Loans
held by such Non-Funding Lender and all accrued interest and fees with respect
thereto through the date of sale, such purchase and sale to be consummated
pursuant to an executed Assignment Agreement.

 

(e)                                  Dissemination of Information.  Agent shall
use reasonable efforts to provide Lenders with any notice of Default or Event of
Default received by Agent from, or delivered by Agent to, any Credit Party, with
notice of any Event of Default of which Agent has actually become aware and with
notice of any action taken by Agent following any Event of Default; provided,
that Agent shall not be liable to any Lender for any failure to do so, except to
the extent that such failure is attributable to Agent’s gross negligence or
willful misconduct.  Lenders acknowledge that Borrower is required to provide
Collateral Reports to Agent in accordance with Annex F hereto and agree that
Agent shall have no duty to provide the same to Lenders; provided, that Agent
shall, upon request of any Lender, provide to such Lender copies of the
Borrowing Base Certificates delivered to Agent (and upon Agent’s request
Borrower shall provide to Agent sufficient copies thereof for each such
requesting Lender).

 

(f)                                    Actions in Concert.  Anything in this
Agreement to the contrary notwithstanding, each Lender hereby agrees with each
other Lender that no Lender shall take any action to protect or enforce its
rights arising out of this Agreement or the Notes (including exercising any
rights of setoff) without first obtaining the prior written consent of Agent and
Requisite Lenders, it being the intent of Lenders that any such action to
protect or enforce rights under this Agreement and the Notes shall be taken in
concert and at the direction or with the consent of Agent or Requisite Lenders.

 

9.10                           Acknowledgements Regarding Collateral Bonds.  For
greater certainty, and without limiting the powers of the Agent hereunder or
under any of the other Loan Documents, it is hereby acknowledged and agreed that
each of the Credit Parties may issue and pledge to the Agent, as security for
any of its indebtedness and liabilities under any of the Loan Documents, bonds
or debentures (any such bond or debenture so issued and pledged, individually, a
“Collateral Bond” and, collectively, the “Collateral Bonds”) secured by a
hypothec charging any and all of their property and assets and granted pursuant
to the laws of the Province of Quebec to a fondé de pouvoir (holder of the power
of attorney) of the holder(s) of the related Collateral Bonds.  In that respect,
each Lender acknowledges and agrees that the Agent shall hold each of the
Collateral Bonds so issued to it in pledge for its benefit and for the benefit
of each of the Lenders, and to the full extent necessary, each Lender, acting in
the aforesaid manner, hereby appoints the Agent for such purposes.  Each
assignee of any Lender shall be deemed to have confirmed and ratified the
constitution of the Agent to act in the manner set out in this Section 9.10 upon
becoming a Lender under this Agreement.  Notwithstanding the provisions of
Section 32 of An Act Respecting the Special Powers of Legal Persons (Quebec),
the fondé de pouvoir (person holding the power of attorney) of the holder(s) of
any of the Collateral Bonds in whose favor a hypothec securing any such
Collateral Bond is granted may (but need not) be the Agent to whom such
Collateral Bond has been issued and pledged.  Each

 

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Lender (by accepting the benefits of each Loan Document) acknowledges that each
Collateral Bond constitutes a title of indebtedness, as such term is used in
Article 2692 of the Civil Code of Quebec, as amended.

 

10.                               SUCCESSORS AND ASSIGNS

 

10.1                           Successors and Assigns.  This Agreement and the
other Loan Documents shall be binding on and shall inure to the benefit of each
Credit Party, Agent, Lenders and their respective successors and assigns, except
as otherwise provided herein or therein.  No Credit Party may assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Agent and Lenders.  Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Agent and Lenders shall be void.  The terms and provisions of
this Agreement are for the purpose of defining the relative rights and
obligations of each Credit Party, Agent and Lenders with respect to the
transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement or any of the
other Loan Documents.

 

11.                               MISCELLANEOUS

 

11.1                           Complete Agreement; Modification of Agreement. 
The Loan Documents constitute the complete agreement between the parties with
respect to the subject matter thereof and may not be modified, altered or
amended except as set forth in Section 11.2.  Any letter of interest, commitment
letter, or fee letter (other than the GE Capital Fee Letter and other than terms
under any commitment letter which expressly survive the execution of this
Agreement) or confidentiality agreement, if any, between any Credit Party and
Agent or any Lender or any of their respective Affiliates, predating this
Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement.

 

11.2                           Amendments and Waivers.

 

(a)                                  Except for actions expressly permitted to
be taken by Agent, no amendment, modification, termination or waiver of any
provision of this Agreement or any other Loan Document, or any consent to any
departure by any Credit Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by Agent and Borrower, and by Requisite
Lenders, Requisite Revolving Lenders, Requisite Term Lenders, Requisite Last Out
Lenders or all affected Lenders, as applicable.  Except as set forth in clauses
(b) and (c) below, all such amendments, modifications, terminations or waivers
requiring the consent of any Lenders shall require the written consent of
Requisite Lenders.

 

(b)                                 No amendment, modification, termination or
waiver of or consent with respect to any provision of this Agreement that waives
compliance with the conditions precedent set forth in Section 2.2 to the making
of any Revolving Credit Advance, the incurrence of any Letter of Credit
Obligations or the continuation or conversion of any Loan as a LIBOR Loan shall
be effective unless the same shall be in writing and signed by Agent, Requisite
Revolving Lenders (or (i) with respect to the making of any Term Loan or the
continuation or conversion of a Term Loan as a LIBOR Loan, the Requisite Term
Lenders or (ii) with respect to the making of

 

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any Last Out Term Loan or the continuation or conversion of a Last Out Term Loan
as a LIBOR Loan, the Requisite Last Out Term Lenders) and Borrower. 
Notwithstanding anything contained in this Agreement to the contrary, no waiver
or consent with respect to any Default or any Event of Default shall be
effective for purposes of the conditions precedent to the making of Term Loans,
Last Out Term Loans, Revolving Credit Advances or the incurrence of Letter of
Credit Obligations set forth in Section 2.2 unless the same shall be in writing
and signed by Agent, Requisite Term Lenders, Requisite Last Out Term Lenders or
Requisite Revolving Lenders, as applicable, and Borrower.

 

(c)                                  No amendment, modification, termination or
waiver shall, unless in writing and signed by Agent and each Lender directly
affected thereby: (i) increase the principal amount of any Lender’s Commitment,
which action shall be deemed only to affect those Lenders whose Commitments are
increased and may be approved by Requisite Lenders, including those Lenders
whose Commitments are increased; (ii) reduce the principal of, rate of interest
on or Fees payable with respect to any Loan or Letter of Credit Obligations of
any affected Lender; (iii) extend any scheduled payment date (other than payment
dates of mandatory prepayments under Section 1.3(b)(ii)-(iv)) or final maturity
date of the principal amount of any Loan of any affected Lender; (iv) waive,
forgive, defer, extend or postpone any payment of interest or Fees as to any
affected Lender; (v) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans that shall be required for
Lenders or any of them to take any action hereunder; and (vi) amend or waive
this Section 11.2 or the definitions of the terms “Requisite Lenders”,
“Requisite Revolving Lenders”, “Requisite Term Lenders” or “Requisite Last Out
Term Lenders” insofar as such definitions affect the substance of this Section
11.2.  Furthermore, no amendment, modification, termination or waiver affecting
the rights or duties of Agent or L/C Issuer under this Agreement or any other
Loan Document shall be effective unless in writing and signed by Agent or L/C
Issuer, as the case may be, in addition to Lenders required hereinabove to take
such action.  Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.  No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document. 
No amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note. 
No notice to or demand on any Credit Party in any case shall entitle such Credit
Party or any other Credit Party to any other or further notice or demand in
similar or other circumstances.  Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 11.2 shall be binding
upon each holder of the Notes at the time outstanding and each future holder of
the Notes.

 

(d)                                 If, in connection with any proposed
amendment, modification, waiver or termination (a “Proposed Change”):

 

(i)                                     requiring the consent of all affected
Lenders, the consent of Requisite Lenders is obtained, but the consent of other
Lenders whose consent is required is not obtained (any such Lender whose consent
is not obtained as described in this clause (i) and in clauses (ii), and (iii)
below being referred to as a “Non-Consenting Lender”),

 

(ii)                                  requiring the consent of Requisite Term
Lenders (including any vote of the Required Lenders), the consent of Term
Lenders holding 51% or more of the

 

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outstanding principal amount of the Term Loan is obtained, but the consent of
Requisite Term Lenders is not obtained, or

 

(iii)                               requiring the consent of Requisite Last Out
Term Lenders (including any vote of the Required Lenders), the consent of Last
Out Term Lenders holding 51% or more of the outstanding principal amount of the
Last Out Term Loan is obtained, but the consent of Requisite Last Out Term
Lenders is not obtained,

 

then, so long as Agent is not a Non-Consenting Lender, at Borrower’s request,
Agent or a Person reasonably acceptable to Agent shall have the right with
Agent’s consent and in Agent’s sole discretion (but shall have no obligation) to
purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree
that they shall, upon Agent’s request, sell and assign to Agent or such Person,
all of the Commitments of such Non-Consenting Lenders for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lenders and all
accrued interest and Fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.

 

(e)                                  Upon payment in full in cash and
performance of all of the Obligations (other than indemnification Obligations),
termination of the Commitments, and so long as no suits, actions, proceedings or
claims are pending or threatened against any Indemnified Person asserting any
damages, losses or liabilities that are Indemnified Liabilities, Agent shall
deliver to Borrower termination statements, mortgage releases and other
documents necessary or appropriate (as reasonably requested by Borrower) to
evidence the termination of the Liens securing payment of the Obligations.

 

11.3                           Fees and Expenses.  Borrower shall reimburse
Agent (and, with respect to clauses (c) and (d) below, all Lenders) for all
out-of-pocket fees, costs and expenses, including the reasonable fees, costs and
expenses of counsel, consultants, auditors or other advisors (including
environmental and management consultants and appraisers), incurred in connection
with the negotiation and preparation of the Loan Documents and incurred in
connection with:

 

(a)                                  the forwarding to Borrower or any other
Person on behalf of Borrower by Agent of the proceeds of any Loan (including a
wire transfer fee of $25 per wire transfer);

 

(b)                                 any amendment, modification or waiver of,
consent with respect to, or termination of, any of the Loan Documents or Related
Transactions Documents or advice in connection with the syndication and
administration of the Loans made pursuant hereto or its rights hereunder or
thereunder;

 

(c)                                  any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Agent, any Lender, Borrower or any
other Person and whether as a party, witness or otherwise) in any way relating
to the Collateral, any of the Loan Documents or any other agreement to be
executed or delivered in connection herewith or therewith, including any
litigation, contest, dispute, suit, case, proceeding or action, and any appeal
or review thereof, in connection with a case commenced by or against any or all
of the Borrower or any other Person that may be obligated to Agent by virtue of
the Loan Documents; including any such litigation, contest, dispute, suit,
proceeding or action arising in connection with any work-out or

 

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restructuring of the Loans during the pendency of one or more Events of Default;
provided, that in the case of reimbursement of counsel for Lenders other than
Agent, such reimbursement shall be limited to one counsel for all such Lenders;
provided, further, that no Person shall be entitled to reimbursement under this
clause (c) in respect of any litigation, contest, dispute, suit, proceeding or
action to the extent any of the foregoing results from such Person’s gross
negligence or willful misconduct;

 

(d)                                 any attempt to enforce any remedies of Agent
against any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan Documents,
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default; provided, that in the case of reimbursement of counsel for Lenders
other than Agent, such reimbursement shall be limited to one counsel for all
such Lenders;

 

(e)                                  any workout or restructuring of the Loans
during the pendency of one or more Events of Default;

 

(f)                                    the obtaining of approval of the Loan
Documents by the Bankruptcy Court;

 

(g)                                 the preparation and review of pleadings,
documents and reports related to any Chapter 11 Case and any subsequent case
under Chapter 7 of the Bankruptcy Code, attendance at meetings, court hearings
or conferences related to any Chapter 11 Case and any subsequent case under
Chapter 7 of the Bankruptcy Code, and general monitoring of any Chapter 11 Case
and any subsequent case under Chapter 7 of the Bankruptcy Code; and

 

(h)                                 efforts to (i) monitor the Loans or any of
the other Obligations, (ii) evaluate, observe or assess any of the Credit
Parties or their respective affairs, and (iii) verify, protect, evaluate,
assess, appraise, collect, sell, liquidate or otherwise dispose of any of the
Collateral; including, as to each of clauses (a) through (h) above, all
reasonable attorneys’ and other professional and service providers’ fees arising
from such services and other advice, assistance or other representation,
including those in connection with any appellate proceedings, and all expenses,
costs, charges and other fees incurred by such counsel and others in connection
with or relating to any of the events or actions described in this Section 11.3,
all of which shall be payable, on demand, by Borrower to Agent.  Without
limiting the generality of the foregoing, such out-of-pocket fees expenses,
costs, charges and fees may include: fees, costs and expenses of accountants,
environmental consultants and advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram or telecopy
charges; secretarial overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal or other
advisory services.

 

11.4                           No Waiver.  Agent’s or any Lender’s failure, at
any time or times, to require strict performance by the Credit Parties of any
provision of this Agreement or any other Loan Document shall not waive, affect
or diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance herewith or therewith.  Any suspension or waiver

 

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of an Event of Default shall not suspend, waive or affect any other Event of
Default whether the same is prior or subsequent thereto and whether the same or
of a different type.  Subject to the provisions of Section 11.2, none of the
undertakings, agreements, warranties, covenants and representations of any
Credit Party contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Credit Party shall be deemed to have been
suspended or waived by Agent or any Lender, unless such waiver or suspension is
by an instrument in writing signed by an officer of or other authorized employee
of Agent and the applicable required Lenders, and directed to Borrower
specifying such suspension or waiver.

 

11.5                           Remedies.  Agent’s and Lenders’ rights and
remedies under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies that Agent or any Lender may have under any other agreement,
including the other Loan Documents, by operation of law or otherwise.  Recourse
to the Collateral shall not be required.

 

11.6                           Severability.  Wherever possible, each provision
of this Agreement and the other Loan Documents shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of this Agreement or any other Loan Document shall be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement or such other Loan
Document.

 

11.7                           Conflict of Terms.  Except as otherwise provided
in this Agreement or any of the other Loan Documents by specific reference to
the applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any provision in any of the other Loan Documents (other
than the Interim Order and the Final Order), the provision contained in this
Agreement shall govern and control.  If any provision contained in this
Agreement, the Canadian Interim Order or the Canadian Final Order conflicts with
any provision in the Interim Order or the Final Order, the provision contained
in the Interim Order or the Final Order, as the case may be, shall govern and
control.

 

11.8                           Confidentiality.  Agent and each Lender agree to
use commercially reasonable efforts (equivalent to the efforts Agent or such
Lender applies to maintaining the confidentiality of its own confidential
information) to maintain as confidential all information provided to them by the
Credit Parties for a period of 2 years following receipt thereof, except that
Agent and any Lender may disclose such information (a) to Persons employed or
engaged by Agent or such Lender under commercially reasonable obligations of
confidentiality; (b) to any bona fide assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained in
this Section 11.8 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any Governmental Authority or reasonably believed by Agent or such Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any Litigation to which Agent or such
Lender is a party; or (f) which is information already in its possession prior
to delivery in accordance herewith or which is available to the public other
than as a result of the failure of

 

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Agent or any Lender to comply with the covenant contained in this Section 11.8,
or which otherwise ceases to be confidential through no fault of Agent or any
Lender.

 

Notwithstanding anything to the contrary set forth herein or in any other
agreement to which the parties hereto are parties or by which they are bound,
the obligations of confidentiality contained herein and therein, as they relate
to the transactions contemplated by this Agreement and the other loan documents
(the “Transaction”), shall not apply to the federal tax structure or federal tax
treatment of the Transaction, and each party hereto (and any employee,
representative, agent of any party hereto) may disclose to any and all persons,
without limitation of any kind, the federal tax structure and federal tax
treatment of the Transaction.  The preceding sentence is intended to cause the
Transaction to be treated as not having been offered under conditions of
confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor
provision) of the Treasury Regulations promulgated under Section 6011 of the
Internal Revenue Code of 1986, as amended, and shall be construed in a manner
consistent with such purpose.  In addition, each party hereto acknowledges that
it has no proprietary or exclusive rights to the federal tax structure of the
Transaction or any federal tax matter or federal tax idea related to the
Transaction.

 

11.9                           GOVERNING LAW.  EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.  EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE BANKRUPTCY COURT
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ALL CLAIMS OR DISPUTES
BETWEEN THE PARTIES HERETO PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT THE PARTIES HERETO ACKNOWLEDGE THAT
ANY APPEALS FROM THE BANKRUPTCY COURT MAY HAVE TO BE HEARD BY A COURT OTHER THAN
THE BANKRUPTCY COURT;  PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF AGENT.  EACH PARTY HERETO EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
PARTY HEREBY WAIVES ANY OBJECTION THAT PARTY MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT.  EACH PARTY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY

 

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REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN
ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

 

11.10                     Notices.  Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to or served
upon any of the parties by any other parties, or whenever any of the parties
desires to give or serve upon any other parties any communication with respect
to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered: (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid; (b) upon transmission, when sent by telecopy or other similar facsimile
transmission (with such telecopy or facsimile promptly confirmed by delivery of
a copy by personal delivery or United States Mail as otherwise provided in this
Section 11.10); (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number indicated in Annex I or to
such other address (or facsimile number) as may be substituted by notice given
as herein provided.  The giving of any notice required hereunder may be waived
in writing by the party entitled to receive such notice.  Failure or delay in
delivering copies of any notice, demand, request, consent, approval, declaration
or other communication to any Person (other than Borrower or Agent) designated
in Annex I to receive copies shall in no way adversely affect the effectiveness
of such notice, demand, request, consent, approval, declaration or other
communication.

 

11.11                     Section Titles.  The Section titles and Table of
Contents contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto.

 

11.12                     Counterparts.  This Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.

 

11.13                     WAIVER OF JURY TRIAL.  BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY
CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP

 

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ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

 

11.14                     Press Releases and Related Matters.  Each Credit Party
executing this Agreement agrees that neither it nor its Subsidiaries will in the
future issue any press releases or other public disclosure using the name of GE
Capital or its affiliates without at least two (2) Business Days’ prior notice
to GE Capital and without the prior written consent of GE Capital unless (and
only to the extent that) such Credit Party or Subsidiary is required to do so
under law and then, in any event, such Credit Party or Subsidiary will consult
with GE Capital before issuing such press release or other public disclosure
(other than disclosure of the fact that GE Capital is the Agent under this
Agreement and the filing of Loan Documents with the Securities and Exchange
Commission, in each case, to the extent required under applicable law).  Each
Credit Party consents to the publication by Agent or any Lender of a tombstone
or similar advertising material relating to the financing transactions
contemplated by this Agreement.  Agent or such Lender shall provide a draft of
any such tombstone or similar advertising material to each Credit Party for
review and comment prior to the publication thereof.  Agent reserves the right
to provide to industry trade organizations information necessary and customary
for inclusion in league table measurements.

 

11.15                     Reinstatement.  This Agreement shall remain in full
force and effect and shall continue to be effective or to be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all
as though such payment or performance had not been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

 

11.16                     Advice of Counsel.  Each of the parties represents to
each other party hereto that it has discussed this Agreement and, specifically,
the provisions of Sections 11.9 and 11.13, with its counsel.

 

11.17                     Judgment Currency.

 

(a)                                  If, for the purpose of obtaining or
enforcing judgment against any Credit Party in any court in any jurisdiction, it
becomes necessary to convert into any other currency (such other currency being
hereinafter in this Section 11.17 referred to as the “Judgment Currency”) an
amount due under any Loan Document in any currency (the “Obligation Currency”)
other than the Judgment Currency, the conversion shall be made at the rate of
exchange prevailing on the Business Day immediately preceding (a) the date of
actual payment of the amount due, in the case of any proceeding in the courts of
the Province of Quebec or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date, or (b) the date on which the
judgment is given, in the case of any proceeding in the courts of any other
jurisdiction (the applicable date as of which such conversion is made pursuant
to this Section 11.17 being hereinafter in this Section 11.17 referred to as the
“Judgment Conversion Date”).

 

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(b)                                 If, in the case of any proceeding in the
court of any jurisdiction referred to in Section 11.17 (a), there is a change in
the rate of exchange prevailing between the Judgment Conversion Date and the
date of actual receipt of the amount due in immediately available funds, the
applicable Credit Party shall pay such additional amount (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount
actually received in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of the
Judgment Currency stipulated in the judgment or judicial order at the rate of
exchange prevailing on the Judgment Conversion Date.  Any amount due from a
Credit Party under the Section 11.17(b) shall be due as a separate debt and
shall not be affected by judgment being obtained for any other amounts due under
or in respect of any of the Loan Documents.

 

(c)                                  The term “rate of exchange” in this Section
11.17 means the rate of exchange at which the Agent would, on the relevant date
at or about 11:00 a.m. (New York time), be prepared to sell the Obligation
Currency against the Judgment Currency.

 

11.18                     Subordination.

 

(a)                                  Each Credit Party executing this Agreement
covenants and agrees that the payment of all indebtedness, principal, interest
(including interest which accrues after the commencement of any case or
proceeding in bankruptcy, or for the reorganization of any Credit Party), fees,
charges, expenses, attorneys’ fees and any other sum, obligation or liability
owing by any other Credit Party to such Credit Party, including any intercompany
trade payables or royalty or licensing fees (collectively, the “Intercompany
Obligations”), is subordinated, to the extent and in the manner provided in this
Section 11.18, to the prior payment in full of all Obligations (herein, the
“Senior Obligations”) and that the subordination is for the benefit of the Agent
and Lenders, and Agent may enforce such provisions directly.

 

(b)                                 Each Credit Party executing this Agreement
hereby (i) authorizes Agent to demand specific performance of the terms of this
Section 11.18, whether or not any other Credit Party shall have complied with
any of the provisions hereof applicable to it, at any time when such Credit
Party shall have failed to comply with any provisions of this Section 11.18
which are applicable to it and (ii) irrevocably waives any defense based on the
adequacy of a remedy at law, which might be asserted as a bar to such remedy of
specific performance.

 

(c)                                  Upon any distribution of assets of any
Credit Party in any dissolution, winding up, liquidation or reorganization
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise):

 

(i)                                     The Agent and Lenders shall first be
entitled to receive payment in full in cash of the Senior Obligations before any
Credit Party is entitled to receive any payment on account of the Intercompany
Obligations.

 

(ii)                                  Any payment or distribution of assets of
any Credit Party of any kind or character, whether in cash, property or
securities, to which any other Credit Party would be entitled except for the
provisions of this Section 11.18(c), shall be paid by the liquidating trustee or
agent or other Person making such payment or distribution directly to the Agent,
to the

 

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extent necessary to make payment in full of all Senior Obligations remaining
unpaid after giving effect to any concurrent payment or distribution or
provisions therefor to the Agent and Lenders.

 

(iii)                               In the event that notwithstanding the
foregoing provisions of this Section 11.18(c), any payment or distribution of
assets of any Credit Party of any kind or character, whether in cash, property
or securities, shall be received by any other Credit Party on account of the
Intercompany Obligations before all Senior Obligations are paid in full, such
payment or distribution shall be received and held in trust for and shall be
paid over to the Agent for application to the payment of the Senior Obligations
until all of the Senior Obligations shall have been paid in full, after giving
effect to any concurrent payment or distribution or provision therefor to the
Agent and Lenders.

 

(d)                                 No right of the Agent and Lenders or any
other present or future holders of any Senior Obligations to enforce the
subordination provisions herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of any Credit Party or by any
act or failure to act, in good faith, by any such holder, or by any
noncompliance by any Credit Party with the terms hereof, regardless of any
knowledge thereof which any such holder may have or be otherwise charged with.

 

(e)                                  The Intercompany Obligations shall also be
subordinated in right of payment to the Senior Notes (and the Credit Parties’
obligations under the Senior Note Documents) to the same extent, mutatis,
mutandis as the Senior Obligations hereunder.

 

11.19                     No Strict Construction.  The parties hereto have
participated jointly in the negotiation and drafting of this Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.

 

11.20                     Parties Including Trustees; Bankruptcy Court
Proceedings.  This Agreement, the other Loan Documents, and all Liens created
hereby or pursuant hereto or to any other Loan Document shall be binding upon
each Credit Party, the estate of Borrower, the estate of any Credit Party filing
a Chapter 11 Case, and any trustee or successor in interest of Borrower or any
other Credit Party in a Chapter 11 Case or any subsequent case commenced under
Chapter 7 of the Bankruptcy Code, and shall not be subject to Section 365 of the
Bankruptcy Code.  This Agreement and the other Loan Documents shall be binding
upon, and inure to the benefit of, the permitted successors of Agent and Lenders
and their respective permitted assigns, transferees and endorsees.  The Liens
created by the Loan Documents shall be and remain valid and perfected in the
event of the substantive consolidation or conversion of any Chapter 11 Case or
any other bankruptcy case of any Credit Party to a case under Chapter 7 of the
Bankruptcy Code or in the event of dismissal of any Chapter 11 Case or the
release of any Collateral from the jurisdiction of the Bankruptcy Court for any
reason, without the necessity that Lenders file financing statements or
otherwise perfect its security interests or Liens under applicable law.

 

11.21                     Prepetition Loan Agreement.  Borrower hereby agrees
that (i) this Agreement is separate and distinct from the Prepetition Loan
Agreement and (ii) the Prepetition Loan Agreement is in full force and effect. 
Borrower further agrees that by entering into this Agreement, Lenders do not
waive any Default or Event of Default under the Prepetition Loan Agreement.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.

 

 

BORROWER

 

 

 

 

APPLIED EXTRUSION TECHNOLOGIES,
INC.

 

 

 

 

By:

/s/ Brian P. Crescenzo

 

 

Name:

Brian P. Crescenzo

 

Title:

 CFO, Secretary & Treasurer

 

 

 

 

 

 

 

GENERAL ELECTRIC CAPITAL
CORPORATION,

 

as Agent and Lender

 

 

 

 

By:

/s/ Christopher Cox

 

 

 

Duly Authorized Signatory

 

 

 

 

 

 

 

By:

/s/ James  H. Kaufman

 

 

 

Duly Authorized Signatory

 

 

 

 

 

 

 

MERRILL LYNCH CAPITAL, a division of
Merrill Lynch Business Financial Services Inc.

 

 

 

 

By:

/s/ Steve Coley

 

 

Name:

Steve Coley

 

Title:

 VP, Group Credit Manager

 

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The following Person is a signatory to this
Agreement in its capacity as a Credit Party and not
as Borrower.

 

 

 

 

APPLIED EXTRUSION TECHNOLOGIES
(CANADA), INC.

 

 

 

 

By:

/s/ Brian P. Crescenzo

 

 

Name:

Brian P. Crescenzo

 

Title:

 VP Finance, Secretary & Treasurer

 

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ANNEX A (RECITALS)
TO
CREDIT AGREEMENT

 

DEFINITIONS

 

Capitalized terms used in the Loan Documents shall have (unless otherwise
provided elsewhere in the Loan Documents) the following respective meanings, and
all references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to the
Agreement:

 

“Account Debtor” means any Person who may become obligated to any Credit Party
under, with respect to, or on account of, an Account, Chattel Paper or General
Intangibles (including a payment intangible).

 

“Accounting Changes” has the meaning ascribed thereto in Annex G.

 

“Accounts” means all “accounts,” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, or Instruments),
(including any such obligations that may be characterized as an account or
contract right under the Code), (b) all of each Credit Party’s rights in, to and
under all purchase orders or receipts for goods or services, (c) all of each
Credit Party’s rights to any goods represented by any of the foregoing
(including unpaid sellers’ rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods), (d)
all rights to payment due to any Credit Party for property sold, leased,
licensed, assigned or otherwise disposed of, for a policy of insurance issued or
to be issued, for a secondary obligation incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for
services rendered or to be rendered by such Credit Party or in connection with
any other transaction (whether or not yet earned by performance on the part of
such Credit Party), (e) all health care insurance receivables and (f) all
collateral security of any kind, given by any Account Debtor or any other Person
with respect to any of the foregoing.

 

“Advance” means any Revolving Credit Advance, Export-Related Advance or Swing
Line Advance, as the context may require.

 

“AET Canada” has the meaning ascribed thereto in the recitals to the Agreement.

 

“AET Limited” means Applied Extrusion Technologies Limited, a company organized
under the laws of the United Kingdom.

 

“Affected Lender” has the meaning ascribed to it in Section 1.16(d).

 

“Affiliate” means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian or
other fiduciary, 5% or more of the Stock having ordinary voting power in the
election of directors of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person, (c) each

 

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of such Person’s officers, directors, joint venturers and partners and (d) in
the case of Borrower, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of Borrower.  For the purposes of
this definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term “Affiliate” shall specifically
exclude Agent and each Lender.

 

“Agent” means GE Capital in its capacity as Agent for Lenders or its successor
appointed pursuant to Section 9.7.

 

 “Aggregate Borrowing Base” means, at any date of determination by Agent, the
sum of the Borrowing Base and the Export-Related Borrowing Base.

 

“Agreement” means the Senior Secured, Super-Priority Debtor-in-Possession Credit
Agreement by and among Borrower, the other Credit Parties party thereto, GE
Capital, as Agent and Lender and the other Lenders from time to time party
thereto, as the same may be amended, supplemented, restated or otherwise
modified from time to time.

 

“Appendices” has the meaning ascribed to it in the recitals to the Agreement.

 

“Applicable Margins” means collectively, the Applicable Revolver Index Margin,
the Applicable Term Loan Index Margin, the Applicable Last Out Term Loan Index
Margin, the Applicable Revolver LIBOR Margin, the Applicable Last Out Term Loan
LIBOR Margin, the Applicable Term Loan LIBOR Margin, the Applicable L/C Margin
and the Applicable Unused Facility Fee Margin.

 

“Applicable Last Out Term Loan Index Margin” means the per annum interest rate
margin from time to time in effect and payable in addition to the Index Rate
applicable to the Last Out Term Loan, as determined by reference to Section
1.5(a).

 

“Applicable Last Out Term Loan LIBOR Margin” means the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Last Out Term Loan, as determined by reference to Section 1.5(a).

 

“Applicable L/C Margin” means the per annum fee from time to time in effect
payable with respect to outstanding Letter of Credit Obligations as determined
by reference to Section 1.5(a).

 

“Applicable Revolver Index Margin” means the per annum interest rate margin from
time to time in effect and payable in addition to the Index Rate applicable to
the Revolving Loan, as determined by reference to Section 1.5(a).

 

“Applicable Revolver LIBOR Margin” means the per annum interest rate from time
to time in effect and payable in addition to the LIBOR Rate applicable to the
Revolving Loan, as determined by reference to Section 1.5(a).

 

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“Applicable Term Loan Index Margin” means the per annum interest rate from time
to time in effect and payable in addition to the Index Rate applicable to the
Term Loan, as determined by reference to Section 1.5(a).

 

“Applicable Term Loan LIBOR Margin” means the per annum interest rate from time
to time in effect and payable in addition to the LIBOR Rate applicable to the
Term Loan, as determined by reference to Section 1.5(a).

 

“Applicable Unused Facility Fee Margin” means the per annum fee from time to
time in effect payable in respect of Borrower’s non-use of committed funds
pursuant to Section 1.9(b), which fee is as determined by reference to Section
1.5(a).

 

“A Rated Bank” has the meaning ascribed to it in Section 6.2.

 

“Assignment Agreement” has the meaning ascribed to it in Section 9.1(a).

 

“Bankruptcy Code” shall have the meaning ascribed to it in the recitals to the
Agreement.

 

“Bankruptcy Court” shall have the meaning ascribed to it in the recitals to the
Agreement.

 

“Blocked Accounts” has the meaning ascribed to it in Annex C.

 

“Borrower” has the meaning ascribed thereto in the preamble to the Agreement.

 

“Borrowing Availability” means as of any date of determination the lesser of
(i) the Maximum Amount and (ii) the Aggregate Borrowing Base, in each case less
the sum of the aggregate Revolving Loan, Export-Related Loan and Swing Line Loan
then outstanding, provided, that an Overadvance in accordance with Section
1.1(a)(iii) may cause the Revolving Loan, the Export-Related Loan and the Swing
Line Loan to exceed the Aggregate Borrowing Base by the amount of such permitted
Overadvance.

 

“Borrowing Base” means, as of any date of determination by Agent, from time to
time, an amount equal to the sum at such time of:

 

(a)                                  85% of the book value of Borrower’s and AET
Canada’s Eligible Accounts; and

 

(b)                                 the lesser of (i) 60% of the book value of
Borrower’s and AET Canada’s Eligible Inventory valued at the lower of average
cost or market or (ii) 85% of the appraised net orderly liquidation value of
Borrower’s and AET Canada’s Eligible Inventory;

 

in each case, less any Reserves established by Agent at such time in its
reasonable credit judgment upon prior or contemporaneous notice to Borrower.

 

“Borrowing Base Certificate” means any certificate to be executed and delivered
from time to time by Borrower in the form attached to the Agreement as Exhibit
4.1(b).

 

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“Business Day” means any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the State of New York and in
reference to LIBOR Loans shall mean any such day that is also a LIBOR Business
Day.

 

“Canadian Benefit Plans” shall mean all material employee benefit plans of any
nature or kind whatsoever that are not Canadian Pension Plans and are maintained
or contributed to by any Credit Party having employees in Canada.

 

“Canadian Collateral Documents” means the Quebec Hypothec and the AET Canada
Blocked Account Agreement and any other document relating thereto.

 

“Canadian Final Order” means, collectively, the order of the Superior Court of
the Province of Quebec to be issued upon AET Canada’s motion under Section 18 of
the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”),
together with all extensions, modifications and amendments thereto, in each case
in form and substance reasonably satisfactory to Agent, which, among other
matters but not by way of limitation, recognizes and declares the Final Order
enforceable in Canada.

 

“Canadian Interim Order” means, collectively, the order of the Superior Court of
the Province of Quebec to be issued upon AET Canada’s motion under Section 18 of
the CCAA, together with all extensions, modifications and amendments thereto, in
each case in form and substance reasonably satisfactory to Agent, which, among
other matters but not by way of limitation, recognizes and declares the Interim
Order enforceable in Canada.

 

“Canadian Pension Plans” shall mean each plan which is considered to be a
pension plan for the purposes of any applicable pension benefits standards
statute and/or regulation in Canada established, maintained or contributed to by
any Credit Party for its employees or former employees.

 

“Capital Expenditures” means, with respect to any Person, all expenditures (by
the expenditure of cash or the incurrence of Indebtedness) by such Person during
any measuring period for any fixed assets or improvements or for replacements,
substitutions or additions thereto that have a useful life of more than one year
and that are required to be capitalized under GAAP (excluding any capitalized
Interest Expense and excluding expenditures made with proceeds of any casualty
or condemnation in accordance with Section 5.4(c)).

 

“Capital Lease” means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.

 

“Capital Lease Obligation” means, with respect to any Capital Lease of any
Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.

 

“Carve-Out Amount” shall have the meaning ascribed to it in Section 1.18(c).

 

“Carve-Out Expenses” shall have the meaning ascribed to it in Section 1.18(c).

 

A-4

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“Cash Collateral Account” has the meaning ascribed to it Annex B.

 

“Cash Equivalents” has the meaning ascribed to it in Annex B.

 

“Cash Management Systems” has the meaning ascribed to it in Section 1.8.

 

“CCAA” has the meaning ascribed to it in the definition of “Canadian Final
Order”.

 

“Certificate of Exemption” has the meaning ascribed to it in Section 1.15(c).

 

“Change of Control” means any of the following:  (a) any person or group of
persons (within the meaning of the Securities Exchange Act of 1934,) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934,) of 25% or more of the issued and outstanding shares of capital Stock of
Borrower having the right to vote for the election of directors of Borrower
under ordinary circumstances; (b) during any period of twelve consecutive
calendar months, individuals who at the beginning of such period constituted the
board of directors of Borrower (together with any new directors whose election
by the board of directors of Borrower or whose nomination for election by the
Stockholders of Borrower was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office; (c) Borrower ceases to own and control
all of the economic and voting rights associated with all of the outstanding
capital Stock of any of its Subsidiaries; or (d) the occurrence of a “Change of
Control” under and as defined in the Senior Note Indenture.

 

“Chapter 11 Case” and “Chapter 11 Cases” shall have the meaning ascribed to such
terms in the recitals to the Agreement.

 

“Charges” means all federal, state, county, city, municipal, local, foreign or
other governmental taxes (including taxes owed to the PBGC at the time due and
payable), levies, assessments, charges, liens, claims or encumbrances upon or
relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll,
income or gross receipts of any Credit Party, (d) any Credit Party’s ownership
or use of any properties or other assets, or (e) any other aspect of any Credit
Party’s business.

 

“Chattel Paper” means any “chattel paper,” as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Credit Party.

 

“Closing Date” means December 2, 2004.

 

“Closing Checklist” means the schedule, including all appendices, exhibits or
schedules thereto, listing certain documents and information to be delivered in
connection with the Agreement, the other Loan Documents and the transactions
contemplated thereunder, substantially in the form attached hereto as Annex D.

 

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“Code” means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with
respect to, Agent’s or any Lender’s Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or remedies
and for purposes of definitions related to such provisions.

 

“Collateral” means the property covered by the Security Agreement, the Mortgages
and the other Collateral Documents and any other property, real or personal,
tangible or intangible, now existing or hereafter acquired, that may at any time
be or become subject to a security interest or Lien in favor of Agent, on behalf
of itself and Lenders, to secure the Obligations.

 

“Collateral Bonds” and “Collateral Bond” shall have the meaning ascribed to such
terms in Section 9.10.

 

“Collateral Documents” means the Interim Order, the Final Order, the Security
Agreement, the Pledge Agreements, the Guaranties, the Mortgages, the
Intellectual Property Security Agreement, the Canadian Collateral Documents and
all similar agreements entered into guaranteeing payment of, or granting a Lien
upon property as security for payment of, the Obligations.

 

“Collateral Enforcement Action” means (a) with respect to any Revolving Lender,
any action by such Revolving Lender to (i) exercise or seek to exercise any
rights or exercise any remedies with respect to any Term Loan Priority
Collateral, (ii) institute any action or proceeding with respect to such rights
or remedies, including any action of foreclosure or (iii) contest, protest or
object to any foreclosure proceeding, use of cash collateral or action brought
by the Agent or any Term Lender or to any other exercise by the Agent or any
Term Lender of any rights and remedies under any Loan Documents with respect to
the Term Loan Priority Collateral, (b) with respect to any Term Lender, any
action by such Term Lender to (i) exercise or seek to exercise any rights or
exercise any remedies with respect to any Revolving Loan Priority Collateral,
(ii) institute any action or proceeding with respect to such rights or remedies,
including any action of foreclosure or (iii) contest, protest or object to any
foreclosure proceeding use of cash collateral or action brought by the Agent or
any Revolving Lender or to any other exercise by the Agent or any Revolving
Lender of any rights and remedies under any Loan Documents with respect to the
Revolving Loan Priority Collateral or (c) with respect to any Last Out Term
Lender, any action by such Last Out Term Lender to (i) exercise or seek to
exercise any rights or exercise any remedies with respect to any Term Loan
Priority Collateral or Revolving Loan Priority Collateral, (ii) institute any
action or proceeding with respect to such rights or remedies, including any
action of foreclosure or (iii) contest, protest or object to any foreclosure
proceeding, use of cash collateral or action brought by the Agent or any Term
Lender or any Revolving Lender or to any other exercise by the Agent or any Term
Lender or any

 

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Revolving Lender of any rights and remedies under any Loan Documents with
respect to the Term Loan Priority Collateral or the Revolving Loan Priority
Collateral.

 

“Collateral Reports” means the reports with respect to the Collateral referred
to in Annex F.

 

“Collection Account” means that certain account of Agent, account number
502-328-54 in the name of Agent at Deutsche Bank Trust Company Americas in New
York, New York ABA No. 021 001 033, or such other account as may be specified in
writing by Agent as the “Collection Account.”

 

“Commercial Tort Claim” means a claim arising in tort with respect to which: (a)
the claimant is an organization; or (b) the claimant is an individual and the
claim: (i) arose in the course of the claimant’s business or profession; and
(ii) does not include damages arising out of personal injury to or the death of
an individual.

 

“Commitment Termination Date” means the earliest of (a) December 2, 2005, (b)
the date of termination of Lenders’ obligations to make Advances and to incur
Letter of Credit Obligations or permit existing Loans to remain outstanding
pursuant to Section 8.2(b), (c) the date of indefeasible prepayment in full by
Borrower of the Loans and the cancellation and return (or stand-by guarantee) of
all Letters of Credit or the cash collateralization of all Letter of Credit
Obligations pursuant to Annex B, and the permanent reduction of all Commitments
to zero dollars ($0), (d) five (5) days following the Petition Date if the
Interim Order has not been entered by the Bankruptcy Court or if the Canadian
Interim Order has not been issued by such date, (e) twenty-five (25) days
following the Petition Date if the Final Order has not been entered by the
Bankruptcy Court or if the Canadian Final Order has not been issued by such
date, (f) the date upon which the Interim Order or the Canadian Interim Order
expires, unless the Final Order shall have been entered and become effective by
such date, (g) the close of business on the first Business Day after the entry
of the Final Order and the Canadian Final Order, if by that time Borrower has
not paid Agent the fees required under the GE Capital Fee Letter, unless the
Agent and the Lenders agree otherwise, (h) the date of the closing of a sale of
all or substantially all of  Borrower’s assets pursuant to Section 363 of the
Bankruptcy Code or a liquidation pursuant to Chapter 7 of the Bankruptcy Code,
(i) the date a plan of reorganization is confirmed in any Chapter 11 Case that
does not provide for the payment in full in cash of all amounts owed to the
Agent and the Lenders under this Agreement and the other Loan Documents as of
the effective date of such plan, and (j) the effective date of a plan of
reorganization or arrangement in any Chapter 11 Case.

 

“Commitments” means (a) as to any Lender, the aggregate of such Lender’s
Revolving Loan Commitment (including without duplication the Swing Line Lender’s
Swing Line Commitment and the Export-Related Loan Lender’s Export-Related Loan
Commitment as subsets of their respective Revolving Loan Commitments), Last Out
Term Loan Commitment and Term Loan Commitment as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Lender and
(b) as to all Lenders, the aggregate of all Lenders’ Revolving Loan Commitments
(including without duplication the Swing Line Lender’s Swing Line Commitment as
a subset of its Revolving Loan Commitment), Last Out Term Loan Commitments and
Term Loan Commitments, which aggregate commitment shall be One

 

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Hundred and Twenty Five Million Dollars ($125,000,000) on the Closing Date, as
to each of clauses (a) and (b), as such Commitments may be reduced, amortized or
adjusted from time to time in accordance with the Agreement.

 

 “Committee” and “Committees” means (a) an official committee of unsecured
creditors if such a committee is appointed in the Chapter 11 Cases, or (b) the
ad hoc committee of holders of the Senior Notes and certain other holders of
Senior Notes.

 

“Compliance Certificate” has the meaning ascribed to it in Annex E.

 

“Concentration Account” has the meaning ascribed to it in Annex C.

 

“Contracts” means all “contracts,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.

 

“Control Letter” means a letter agreement between Agent and (i) the issuer of
uncertificated securities with respect to uncertificated securities in the name
of any Credit Party, (ii) a securities intermediary with respect to securities,
whether certificated or uncertificated, securities entitlements and other
financial assets held in a securities account in the name of any Credit Party,
(iii) a futures commission merchant or clearing house, as applicable, with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant disclaims any security interest in the applicable financial
assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such
financial assets, and agrees to follow the instructions or entitlement orders of
Agent without further consent by the affected Credit Party.

 

“Copyright License” means any and all rights now owned or hereafter acquired by
any Credit Party under any written agreement granting any right to use any
Copyright or Copyright registration.

 

“Copyrights” means all of the following now owned or hereafter adopted or
acquired by any Credit Party: (a) all copyrights and General Intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.

 

“Credit Party Pledge Agreement” means the Pledge Agreement of even date herewith
executed by each of the Credit Parties in favor of Agent, on behalf of itself
and Lenders, pledging all Stock of its Subsidiaries, if any, and all
Intercompany Notes owing to or held by it.

 

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“Credit Parties” means Borrower and AET Canada and each other Subsidiary of
Borrower (other than AET Limited).

 

“Default” means any event that, with the passage of time or notice or both,
would, unless cured or waived, become an Event of Default.

 

“Default Rate” has the meaning ascribed to it in Section 1.5(d).

 

“Deposit Accounts” means all “deposit accounts” as such term is defined in the
Code, now or hereafter held in the name of any Credit Party.

 

“Disbursement Accounts” has the meaning ascribed to it in Annex C.

 

“Disclosure Schedules” means the Schedules prepared by Borrower and denominated
as Disclosure Schedules (1.4) through (6. 8(f)) in the Index to the Agreement.

 

“Documents” means all “documents,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located.

 

“Dollars” or “$” means lawful currency of the United States of America.

 

“EBITDA” means, for any fiscal period, the sum (determined on a consolidated
basis for the Borrower and its Subsidiaries) of (a) the net income of the
Borrower and its Subsidiaries for such period computed in accordance with GAAP,
plus (b) Interest Expense for such period as reported on the Borrower’s
consolidated financial statements for such period, plus (c) the income tax
expense of the Borrower and its Subsidiaries for such period as reported on the
Borrower’s consolidated financial statements for such period, plus (d) the
amount reported on the Borrower’s consolidated financial statements as the
depreciation of the assets of the Borrower and its Subsidiaries for such period
computed in accordance with GAAP, plus (e) the amount reported on the Borrower’s
consolidated financial statements as the amortization of intangibles assets of
the Borrower and its Subsidiaries for such period computed in accordance with
GAAP, plus (f) the amount reported on the Borrower’s consolidated financial
statements as the write-down of intangible assets of the Borrower and its
Subsidiaries that consist of goodwill for such period computed in accordance
with GAAP, plus (g) all cash and non-cash extraordinary expenses and losses of
the Borrower and its Subsidiaries for such period computed in accordance with
GAAP, and plus (h) cash restructuring fees paid or incurred by the Borrower or
any other Credit Party during such period, minus (i) all cash and non-cash
extraordinary income and gains of the Borrower and its Subsidiaries for such
period, in each case as such item is used in the computation of net income of
the Borrower and its Subsidiaries for such period.

 

“Eligible Accounts” has the meaning ascribed to it in Section 1.6.

 

“Eligible Export-Related Accounts” has the meaning ascribed to it in
Section 1.6A of the Agreement.

 

“Eligible Inventory” has the meaning ascribed to it in Section 1.7.

 

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“Environmental Laws” means all applicable federal, state, local and foreign
laws, statutes, ordinances, codes, rules, standards, policies, guidelines,
directives and regulations, now or hereafter in effect, and any applicable
judicial or administrative interpretation thereof, including any applicable
judicial or administrative order, consent decree, order or judgment, imposing
liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation).  Environmental
Laws include the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the Hazardous
Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.);
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et
seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the Toxic
Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air Act (42 U.S.C.
§§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et
seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.); and
the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any and all
regulations promulgated thereunder, and all analogous state, provincial,
regional, municipal, local and foreign counterparts or equivalents and any
transfer of ownership notification or approval statutes.

 

“Environmental Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, characterization, rehabilitation,
remedial and removal costs, investigation and feasibility study costs, capital
costs, operation and maintenance costs, losses, damages, punitive damages,
property damages, natural resource damages, consequential damages, treble
damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants), fines, penalties, sanctions,
charges, debts and interest incurred as a result of or related to any claim,
suit, action, investigation, proceeding or demand by any Person, whether based
in contract, tort, implied or express warranty, strict liability, criminal or
civil statute or common law, including any arising under or related to any
Environmental Laws, Environmental Permits, or in connection with any Release or
threatened Release or presence of a Hazardous Material whether on, at, in,
under, from or about or in the vicinity of any real or personal property.

 

“Environmental Permits” means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.

 

“Equipment” means all “equipment,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located and, in any
event, including all such Credit Party’s machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,

 

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instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.

 

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

 

“ERISA Affiliate” means, with respect to any Credit Party, any trade or business
(whether or not incorporated) that, together with such Credit Party, are treated
as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of
the IRC.

 

“ERISA Event” means, with respect to any Credit Party or any ERISA Affiliate,
(a) any event described in Section 4043(c) of ERISA with respect to a Title IV
Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a Title IV
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Credit Party or any ERISA Affiliate from
any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party
or ERISA Affiliate to make when due required contributions to a Multiemployer
Plan or Title IV Plan unless such failure is cured within thirty (30) days; (g)
any other event or condition that might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245
of ERISA; or (i) the revocation or threatened revocation of a Qualified Plan’s
qualification or tax exempt status; or (j) the termination of a Plan described
in Section 4064 of ERISA.

 

“ESOP” means a Plan that is intended to satisfy the requirements of
Section 4975(e)(7) of the IRC.

 

“Event of Default” has the meaning ascribed to it in Section 8.1.

 

“Excess Cash Flow” means, without duplication, with respect to a Fiscal Year of
Borrower, EBITDA for such Fiscal Year minus (a) taxes paid or payable in cash in
respect of such Fiscal Year, minus (b) Capital Expenditures paid in cash during
such Fiscal Year (excluding the financed portion), minus (c) Interest Expense
paid in cash during such Fiscal Year, minus (d) scheduled principal payments
paid or payable in respect of Funded Debt, minus (e) cash restructuring fees
paid or incurred by the Borrower during such Fiscal Year.

 

“Ex-Im Bank” shall mean the Export-Import Bank of the United States.

 

“Ex-Im Bank Borrower Agreement” means an agreement executed by Borrower in favor
of Ex-Im Bank and Lender the form of which is attached hereto as Exhibit A-3.

 

“Ex-Im Bank Documents” shall mean collectively, the Ex-Im Bank Guarantee, any
Loan Authorization Agreement between Agent and Ex-Im Bank and the Ex-Im Bank
Borrower Agreement.

 

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“Ex-Im Bank Guarantee” shall mean any Guarantee executed by Ex-Im Bank in favor
of GE Capital in form and substance satisfactory to Agent, together with all
amendments, modifications and supplements thereto.

 

“Existing Letters of Credit” has the meaning ascribed to it in Section 1.2(b).

 

“Export-Related Accounts” shall mean those Accounts of Borrower that are an
obligation of an Account Debtor located in a foreign country (other than Canada)
which arise from the sale of goods or services which are intended for export
pursuant to written export orders or contracts for the purchase by the Account
Debtor of such goods or services.

 

“Export-Related Advance” has the meaning ascribed to it in Section 1.1(e).

 

“Export-Related Borrowing Availability” means as of the date of determination
the lesser of (i) the Export-Related Loan Commitment and (ii) the Export-Related
Borrowing Base, in each case, less the aggregate Export-Related Loan then
outstanding.

 

“Export-Related Borrowing Base” means, as of any date of determination by Agent,
from time to time, an amount equal to 90% of the book value of Borrower’s
Eligible Export-Related Accounts at such time, less any Reserves established by
Agent at such time with respect to the Export-Related Borrowing Base.

 

“Export-Related Loan Lender” means GE Capital.

 

“Export-Related Loan” means, at any time, the aggregate amount of Export-Related
Advances outstanding to Borrower.

 

“Export-Related Loan Commitment” means Five Million Dollars ($5,000,000).

 

“Export-Related Loan Note” has the meaning ascribed to it in Section 1.1(e)(ii).

 

“Export-Related Loan Participation” and  “Export-Related Loan Participations”
has the meaning ascribed to it in Section 1.1(e)(iii).

 

“Export-Related Revolving Loan Reserve” means a reserve established by Agent
against the Borrowing Base in an amount equal to ten percent (10%) of the amount
of the Export-Related Loan.

 

“Fair Labor Standards Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et
seq.

 

“Federal Funds Rate” means, for any day, a floating rate equal to the weighted
average of the rates on overnight Federal funds transactions among members of
the Federal Reserve System, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided, that (a) if such day is
not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day, and (b) if no such rate is
so published on the next succeeding Business Day, the Federal Funds

 

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Rate for such day shall be the average of the rate quotations for such day for
such transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by it.

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System.

 

“Fees” means any and all fees payable to Agent or any Lender pursuant to the
Agreement or any of the other Loan Documents.

 

“Final Order” means, collectively, the order of the Bankruptcy Court entered in
the Chapter 11 Cases after a final hearing under Bankruptcy Rule 4001(c)(2) or
such other procedures as approved by the Court which order shall be reasonably
satisfactory in form and substance to the Agent and the Requisite Term Lenders,
and from which no appeal or motion to reconsider has been timely filed, or if
timely filed, such appeal or motion to reconsider has been dismissed or denied
(unless the Agent and the Lenders waive such requirement), together with all
extensions, modifications and amendments thereto, which, among other matters but
not by way of limitation, authorizes the Borrower and the other Credit Parties
to obtain credit, incur (or Guarantee) Indebtedness, and grant Liens under this
Agreement and the other Loan Documents, as the case may be, and provides for the
super-priority of the Agent’s and the Lenders’ claims.

 

“Financial Covenants” means the financial covenants set forth in Annex G.

 

“Financial Statements” means the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Borrower delivered in
accordance with Section 3.4 and Annex E.

 

“Fiscal Month” means any of the monthly accounting periods of Borrower.

 

“Fiscal Quarter” means any of the quarterly accounting periods of Borrower,
ending on March 31, June 30, September 30 and December 31 of each year.

 

“Fiscal Year” means any of the annual accounting periods of Borrower ending on
September 30 of each year.

 

“Fixed Charges” means, with respect to any Person for any fiscal period, (a) the
aggregate of all Interest Expense paid or payable in cash during such period
plus (b) scheduled payments of principal with respect to Indebtedness during
such period, plus (c) all Taxes, paid or payable in cash during such period.

 

“Fixed Charge Coverage Ratio” means, with respect to any Person for any fiscal
period, the ratio of (a) EBITDA minus Capital Expenditures to (b) Fixed Charges.

 

“Fixtures” means all “fixtures” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party.

 

“Foreign Lender” has the meaning ascribed to it in Section 1.15(c).

 

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“Funded Debt” means, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s sole
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including,  in the case of
Borrower, the Loans and, without duplication, Guaranteed Indebtedness consisting
of guaranties of Funded Debt of other Persons.

 

“Funded Export-Related Loan Participation” has the meaning ascribed to it in
Section 1.1(e)(iii).

 

“GAAP” means generally accepted accounting principles in the United States of
America consistently applied, as such term is further defined in Annex G to the
Agreement.

 

“GE Capital” means General Electric Capital Corporation, a Delaware corporation.

 

“GE Capital Fee Letter” has the meaning ascribed to it in Section 1.9(a).

 

“General Intangibles” means all “general intangibles,” as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party, including all
right, title and interest that such Credit Party may now or hereafter have in or
under any Contract, all payment intangibles, customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefore and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License), all
rights and claims in or under insurance policies (including insurance for fire,
damage, loss and casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), uncertificated securities,
causes in action, deposit, checking and other bank accounts, rights to receive
tax refunds and other payments, rights to receive dividends, distributions,
cash, Instruments and other property in respect of or in exchange for pledged
Stock and Investment Property, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Credit Party or any computer bureau or
service company from time to time acting for such Credit Party.

 

“Goods” means all “goods” as defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located, including embedded software to
the extent included in “goods” as defined in the Code, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.

 

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“Governmental Authority” means any nation or government, any state or province
or other political subdivision thereof, and any agency, tribunal, commission,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.

 

“Granting Lender” has the meaning ascribed to it in Section 9.1(f).

 

“Guaranteed Indebtedness” means as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease,
dividend, or other obligation (“primary obligation”) of any other Person (the
“primary obligor”) in any manner, including any obligation or arrangement of
such Person to (a) purchase or repurchase any such primary obligation, (b)
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, (d) protect the beneficiary of such arrangement from loss (other
than product warranties given in the ordinary course of business) or (e)
indemnify the owner of such primary obligation against loss in respect thereof. 
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
amount equal to the lesser at such time of (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
incurred and (y) the maximum amount for which such Person may be liable pursuant
to the terms of the instrument embodying such Guaranteed Indebtedness, or, if
not stated or determinable, the maximum reasonably anticipated liability
(assuming full performance) in respect thereof.

 

“Guaranties” means, collectively, each Subsidiary Guarantee and any other
guarantee executed by any Guarantor in favor of Agent and Lenders in respect of
the Obligations.

 

“Guarantors” means each Subsidiary of Borrower (other than AET Limited) and each
other Person, if any, that executes a guarantee or other similar agreement in
favor of Agent, for itself and the ratable benefit of Lenders, in connection
with the transactions contemplated by the Agreement and the other Loan
Documents.

 

“Hazardous Material” means any substance, material or waste that is regulated
by, or forms the basis of liability now or hereafter under, any Environmental
Laws, including any material or substance that is (a) defined as a “solid
waste,” “hazardous waste,” “hazardous material,” “residual hazardous material,”
“hazardous substance,” “extremely hazardous waste,”  “restricted hazardous
waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,”
“toxic substance” or other similar term or phrase under any Environmental Laws,
or (b) petroleum or any fraction or by-product thereof, asbestos,
polychlorinated biphenyls (PCB’s), or any radioactive substance.

 

“Indebtedness” means, with respect to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred 6 months or more, but excluding
obligations to trade creditors

 

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incurred in the ordinary course of business that are unsecured and not overdue
by more than 6 months from the due date unless being contested in good faith,
(b) all reimbursement and other obligations with respect to letters of credit,
bankers’ acceptances and surety bonds, whether or not matured, (c) all
obligations evidenced by notes, bonds, debentures or similar instruments, (d)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Index
Rate as in effect on the Closing Date) of future rental payments under all
synthetic leases, (f) all net liabilities of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured, (g) all net liabilities of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement designed
to alter the risks of that Person arising from fluctuations in currency values
or interest rates, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the Obligations.

 

“Indemnified Liabilities” has the meaning ascribed to it in Section 1.13.

 

“Indemnified Person” has the meaning ascribed to it in Section 1.13.

 

“Index Rate” means, for any day, a floating rate equal to the higher of (i) the
rate publicly quoted from time to time by The Wall Street Journal in the Money
Rate section as the “Prime Rate” (or, if The Wall Street Journal ceases quoting
a base rate of the type described, the highest per annum rate of interest
published by the Federal Reserve Board in Federal Reserve statistical release
H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its
equivalent), and (ii) the Federal Funds Rate plus 50 basis points per annum.  
Each change in any interest rate provided for in the Agreement based upon the
Index Rate shall take effect at the time of such change in the Index Rate.

 

“Index Rate Loan” means a Loan or portion thereof bearing interest by reference
to the Index Rate.

 

“Industrial Revenue Bonds” means The City of Salem, Massachusetts Flexible Mode
Industrial Development Revenue Bonds in the original principal amount of
$6,500,000.

 

“Insolvency Law” shall mean any of the Bankruptcy and Insolvency Act (Canada),
the CCAA and titles 7 and 11 of the United States Code entitled “Bankruptcy,”
each as now and hereafter in effect, any successors to such statutes and any
other applicable insolvency or other similar law of any jurisdiction.

 

“Instruments” means all “instruments,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located, and, in any
event, including all certificated securities, all certificates of deposit, and
all promissory notes and other evidences

 

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of indebtedness, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper.

 

“Interim Order” means, collectively, the order of the Bankruptcy Court entered
in the Chapter 11 Cases after an interim hearing (assuming satisfaction of the
standards prescribed in Section 364 of the Bankruptcy Code and Bankruptcy Rule
4001 and other applicable law), together with all extension, modifications, and
amendments thereto, in form and substance reasonably satisfactory to Agent,
which, among other matters but not by way of limitation, authorizes, on an
interim basis, the Borrower to execute and perform under the terms of the
Agreement and the other Loan Documents, substantially in the form of Exhibit
A-4.

 

“ITA” shall mean the Income Tax Act (Canada), as the same may, from time to
time, be in effect.

 

“Intellectual Property” means any and all Licenses, Patents, Copyrights,
Trademarks, and the goodwill associated with such Trademarks.

 

“Intellectual Property Security Agreements” means the Intellectual Property
Security Agreements made in favor of Agent, on behalf of itself and Lenders, by
each applicable Credit Party.

 

“Intercompany Note” has the meaning ascribed to it in Section 6.3.

 

“Interest Expense” means, with respect to any Person for any fiscal period,
interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including,
interest expense with respect to any Funded Debt of such Person and interest
expense for the relevant period that has been capitalized on the balance sheet
of such Person.

 

“Interest Payment Date” means (a) as to any Index Rate Loan, the first Business
Day of each month to occur while such Loan is outstanding, and (b) as to any
LIBOR Loan, the last day of the applicable LIBOR Period; provided that, in
addition to the foregoing, each of (x) the date upon which all of the
Commitments have been terminated and the Loans have been paid in full and
(y) the Commitment Termination Date shall be deemed to be an “Interest Payment
Date” with respect to any interest that has then accrued under the Agreement.

 

“Inventory” means all “inventory,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located, and in any
event including inventory, merchandise, goods and other personal property that
are held by or on behalf of any Credit Party for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party’s business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
and embedded software.

 

“Investment Property” means all “investment property” as such term is defined in
the Code now owned or hereafter acquired by any Credit Party, wherever located,
including (i) all securities, whether certificated or uncertificated, including
stocks, bonds, interests in

 

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limited liability companies, partnership interests, treasuries, certificates of
deposit, and mutual fund shares; (ii) all securities entitlements of any Credit
Party, including the rights of any Credit Party to any securities account and
the financial assets held by a securities intermediary in such securities
account and any free credit balance or other money owing by any securities
intermediary with respect to that account; (iii) all securities accounts of any
Credit Party; (iv) all commodity contracts of any Credit Party; and (v) all
commodity accounts held by any Credit Party.

 

“IRC” means the Internal Revenue Code of 1986 and all regulations promulgated
thereunder.

 

“IRS” means the Internal Revenue Service.

 

“Last Out Term Lenders” means those Lenders having Last Out Term Loan
Commitments.

 

“Last Out Term Loan” has the meaning ascribed to it in Section 1.1(c)(i).

 

“Last Out Term Loan Commitment” means (a) as to any Lender with a Last Term Loan
Commitment, the commitment of such Lender to make its Pro Rata Share of the Last
Out Term Loan as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Lender, and (b) as to all Lenders with a
Last Out Term Loan Commitment, the aggregate commitment of all Lenders to make
the Last Out Term Loan, which aggregate commitment shall be Twenty Million
Dollars ($20,000,000) on the Closing Date.  After advancing the Last Out Term
Loan, each reference to a Lender’s Last Out Term Loan Commitment shall refer to
that Lender’s Pro Rata Share of the outstanding Last Out Term Loan.

 

“Last Out Term Note” has the meaning ascribed to it in Section 1.1(c)(i).

 

“L/C Issuer” has the meaning ascribed to it in Annex B.

 

“L/C Sublimit” has the meaning ascribed to it in Annex B.

 

“Lenders” means GE Capital, the other Lenders named on the signature pages of
the Agreement, and, if any such Lender shall decide to assign all or any portion
of the Obligations, such term shall include any assignee of such Lender.

 

“Letter of Credit Fee” has the meaning ascribed to it in Annex B.

 

“Letter of Credit Obligations” means all outstanding obligations incurred by
Agent and Lenders at the request of Borrower, whether direct or indirect,
contingent or otherwise, due or not due, in connection with the issuance of
Letters of Credit by Agent or another L/C Issuer or the purchase of a
participation as set forth in Annex B with respect to any Letter of Credit.  The
amount of such Letter of Credit Obligations shall equal the maximum amount that
may be payable at such time or at any time thereafter by Agent or Lenders
thereupon or pursuant thereto.

 

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“Letters of Credit” means documentary or standby letters of credit issued for
the account of Borrower by any L/C Issuer, and bankers’ acceptances issued by
Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.

 

“Letter-of-Credit Rights” means “letter-of-credit rights” as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
including rights to payment or performance under a letter of credit, whether or
not such Credit Party, as beneficiary, has demanded or is entitled to demand
payment or performance.

 

“LIBOR Business Day” means a Business Day on which banks in the City of London
are generally open for interbank or foreign exchange transactions.

 

“LIBOR Loan” means a Loan or any portion thereof bearing interest by reference
to the LIBOR Rate.

 

“LIBOR Period” means, with respect to any LIBOR Loan, each period commencing on
a LIBOR Business Day selected by Borrower pursuant to the Agreement and ending
one, two or three months thereafter, as selected by Borrower’s irrevocable
notice to Agent as set forth in Section 1.5(e); provided, that the foregoing
provision relating to LIBOR Periods is subject to the following:

 

(a)                                  if any LIBOR Period would otherwise end on
a day that is not a LIBOR Business Day, such LIBOR Period shall be extended to
the next succeeding LIBOR Business Day unless the result of such extension would
be to carry such LIBOR Period into another calendar month in which event such
LIBOR Period shall end on the immediately preceding LIBOR Business Day;

 

(b)                                 any LIBOR Period that would otherwise extend
beyond the Commitment Termination Date shall end two (2) LIBOR Business Days
prior to such date;

 

(c)                                  any LIBOR Period that begins on the last
LIBOR Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Period) shall end on the last LIBOR Business Day of a calendar month;

 

(d)                                 Borrower shall use reasonable efforts to
select LIBOR Periods so as not to require a payment or prepayment of any LIBOR
Loan during a LIBOR Period for such Loan; and

 

(e)                                  Borrower shall select LIBOR Periods so that
there shall be no more than 7 separate LIBOR Loans in existence at any one time.

 

“LIBOR Rate” means for each LIBOR Period, a rate of interest determined by Agent
equal to:

 

(a)                                  the offered rate for deposits in United
States Dollars for the applicable LIBOR Period that appears on Telerate Page
3750 as of 11:00 a.m. (London time), on the second

 

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full LIBOR Business Day next preceding the first day of such LIBOR Period
(unless such date is not a Business Day, in which event the next succeeding
Business Day will be used); divided by

 

(b)                                 a number equal to 1.0 minus the aggregate
(but without duplication) of the rates (expressed as a decimal fraction) of
reserve requirements in effect on the day that is two (2) LIBOR Business Days
prior to the beginning of such LIBOR Period (including basic, supplemental,
marginal and emergency reserves under any regulations of the Federal Reserve
Board or other Governmental Authority having jurisdiction with respect thereto,
as now and from time to time in effect) for Eurocurrency funding (currently
referred to as “Eurocurrency Liabilities” in Regulation D of the Federal Reserve
Board that are required to be maintained by a member bank of the Federal Reserve
System.

 

If such interest rates shall cease to be available from Telerate News Service,
the LIBOR Rate shall be determined from such financial reporting service or
other information as shall be mutually acceptable to Agent and Borrower.

 

“License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Credit Party.

 

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

 

“Litigation” has the meaning ascribed to it in Section 3.13.

 

“Loan Account” has the meaning ascribed to it in Section 1.12.

 

“Loan Documents” means the Agreement, the Notes, the Collateral Documents, the
GE Capital Fee Letter, the Master Standby Agreement, the Master Documentary
Agreement, and all other agreements, instruments, documents and certificates
identified in the Closing Checklist executed and delivered to, or in favor of,
Agent or any Lenders and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated thereby
(including the terms of any commitment letter which expressly survive the
execution of this Agreement).  Any reference in the Agreement or any other Loan
Document to a Loan Document shall include all appendices, exhibits or schedules
thereto, and all amendments, restatements, supplements or other modifications
thereto, and shall refer to the Agreement or such Loan Document as the same may
be in effect at any and all times such reference becomes operative.

 

“Loans” means the Revolving Loan, the Swing Line Loan, the Export-Related Loan,
the Last Out Term Loan and the Term Loan.

 

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“Lock Boxes” has the meaning ascribed to it in Annex C.

 

“Margin Stock” has the meaning ascribed to it in Section 3.10.

 

“Master Documentary Agreement” means the Master Agreement for Documentary
Letters of Credit dated as of the Closing Date among Borrower, as Applicant(s),
and GE Capital, attached as Exhibit A-1 hereto.

 

“Master Standby Agreement” means the Master Agreement for Standby Letters of
Credit dated as of the Closing Date among Borrower, as Applicant(s), and GE
Capital, as issuer, attached as Exhibit A-2 hereto.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, prospects or financial or other condition of the Credit
Parties considered as a whole, (b) any Credit Party’s ability to pay any of the
Loans or any of the other Obligations in accordance with the terms of the
Agreement, (c) the Collateral (taken as a whole) or Agent’s Liens, on behalf of
itself and Lenders, on the Collateral (taken as a whole) or the priority of such
Liens, or (d) Agent’s or any Lender’s rights and remedies under the Agreement
and the other Loan Documents.  Without limiting the generality of the foregoing,
any event or occurrence adverse to one or more Credit Parties which results or
could reasonably be expected to result in costs and/or liabilities or loss of
revenues, individually or in the aggregate, to any Credit Party in any 30-day
period in excess of the lesser of $ 10,000,000 and 20% of the lesser of the
Maximum Amount and the Borrowing Base at any date of determination shall
constitute a Material Adverse Effect.

 

“Material Contracts” means the agreements set forth in Exhibit B.

 

“Maximum Amount” means, as of any date of determination, an amount equal to the
Revolving Loan Commitment of all Lenders as of that date.

 

“Mortgaged Properties” has the meaning ascribed to it in Annex D.

 

“Mortgages” means each of the mortgages, deeds of trust, leasehold mortgages,
leasehold deeds of trust, collateral assignments of leases or other real estate
security documents delivered by any Credit Party to Agent on behalf of itself
and Lenders with respect to the Mortgaged Properties or other Real Estate
pursuant to Section 5.9, all in form and substance reasonably satisfactory to
Agent.

 

“Multiemployer Plan” means a “multiemployer plan” as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated to make or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.

 

“Net Cash Flow Forecast” means the Borrower’s net cash flow forecast for the
period from the Closing Date through the end of the month immediately preceding
the first anniversary after the Closing Date, attached hereto as Disclosure
Schedule 3.4(c).

 

“Non-Funding Lender” has the meaning ascribed to it in Section 9.9(a)(ii).

 

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“Nonqualified Benefit Plans” means, collectively, Borrower’s Supplemental
Executive Retirement Plan, Executive Deferred Compensation Plan, 1999 Deferred
Compensation Plan Trust, and any other Plan described in Section 201(2) of
ERISA.

 

“Notes” means, collectively, the Revolving Notes, the Export-Related Loan Note,
Swing Line Notes, the Term Notes and the Last Out Term Notes.

 

“Notice of Conversion/Continuation” has the meaning ascribed to it in
Section 1.5(e).

 

“Notice of Export-Related Advance” has the meaning ascribed to it in
Section 1.1(e).

 

“Notice of Revolving Credit Advance” has the meaning ascribed to it in
Section 1.1(a).

 

“Obligations” means all loans, advances, debts, liabilities and obligations for
the performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such amounts
are liquidated or determinable) owing by any Credit Party to Agent or any
Lender, and all covenants and duties regarding such amounts, of any kind or
nature, present or future, whether or not evidenced by any note, agreement or
other instrument, arising under the Agreement or any of the other Loan
Documents.  This term includes all principal, accrued and unpaid interest
(including all interest that accrues after the commencement of any case or
proceeding by or against any Credit Party in bankruptcy (including any Chapter
11 Case), whether or not allowed in such case or proceeding), Fees, Charges,
expenses, attorneys’ fees and any other sum chargeable to any Credit Party under
the Agreement or any of the other Loan Documents.

 

“Overadvance” has the meaning ascribed to it in Section 1.1(a)(iii).

 

“Patent License” means rights under any written agreement now owned or hereafter
acquired by any Credit Party granting any right with respect to any invention on
which a Patent is in existence.

 

“Patent Security Agreements” means the Patent Security Agreements made in favor
of Agent, on behalf of itself and Lenders, by each applicable Credit Party.

 

“Patents” means all of the following in which any Credit Party now holds or
hereafter acquires any interest: (a) all letters patent of the United States or
of any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State, or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Plan” means a Plan described in Section 3(2) of ERISA.

 

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“Permitted Encumbrances” means the following encumbrances: (a) Liens for taxes
or assessments or other governmental Charges not yet due and payable or which
are being contested in accordance with Section 5.2(b) or to the extent that
nonpayment thereof is permitted under the Bankruptcy Code; (b) pledges or
deposits of money securing statutory obligations under workmen’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) workers’, mechanics’ or similar liens arising
in the ordinary course of business which attach only to Equipment, Fixtures
and/or Real Estate and which are either inchoate and unperfected or payment of
which is being contested in accordance with Section 5.2(b); (e) carriers’,
warehousemen’s, suppliers’, custom’s brokers’, or other similar possessory liens
arising in the ordinary course of business and securing liabilities in an
outstanding aggregate amount not in excess of $100,000 at any time, so long as
such Liens attach only to Inventory; (f) deposits securing, or in lieu of,
surety, appeal or customs bonds in proceedings to which any Credit Party is a
party; (g) any attachment or judgment lien not constituting an Event of Default
under Section 8.1(j); (h) zoning restrictions, servitudes, easements, licenses,
or other restrictions on the use of any Real Estate or other minor
irregularities in title (including leasehold title) thereto, including, those
matters set forth on the title insurance policies insuring the Mortgages, so
long as the same do not materially impair the use, value, or marketability of
such Real Estate; (i) Liens arising from precautionary UCC-1 financing statement
filings regarding operating leases entered into by the Credit Parties in the
ordinary course of business; (j) presently existing or hereafter created Liens
in favor of Agent, on behalf of Lenders; (k) a Lien for Carve-Out Expenses not
exceeding the Carve-Out Amount, (l) Liens expressly permitted under clauses (b)
and (c) of Section 6.7 of the Agreement and (m) with respect to the Real Estate
located in Terre Haute, Indiana, that certain (i) Notice of Intention to Hold
Mechanic’s Lien filed by Steel Services Inc. and (ii) Notice of Intention to
Hold Mechanic’s Lien filed by JRA Architecture, LLC.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department thereof).

 

“Petition Date” shall have the meaning ascribed to it in the recitals to this
Agreement.

 

“Plan” means, at any time, an “employee benefit plan”, as defined in
Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to or has maintained,
contributed to or had an obligation to contribute to at any time within the past
7 years on behalf of participants who are or were employed by any Credit Party
or ERISA Affiliate.

 

“Pledge Agreements” means, collectively, the Credit Party Pledge Agreement and
any pledge agreements entered into after the Closing Date by any Credit Party
(as required by the Agreement or any other Loan Document).

 

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“Postpetition” means the time period beginning immediately after the filing of
the Chapter 11 Cases.

 

“Prepayment Account” has the meaning ascribed to it in Section 1.3(e).

 

“Prepetition” means the time period ending immediately prior to the filing of
the Chapter 11 Cases.

 

“Prepetition Indebtedness” means all Indebtedness of the Borrower outstanding on
the Petition Date immediately prior to the filing of the Chapter 11 Cases other
than Indebtedness under the Prepetition Loan Agreement.

 

“Prepetition Loan Agreement” shall have the meaning ascribed to it in the
recitals to the Agreement.

 

“Principal Financial Officer” means at any time the chief financial officer,
treasurer or other officer of Borrower then primarily responsible for the
Borrower’s finance and treasury matters.

 

“Prior Claims” means all Liens created by applicable law (in contrast with Liens
voluntarily granted) which rank or are capable of ranking prior to or pari passu
with Agent’s and Lenders’ security interest (or the applicable equivalent
thereof) against all or part of the Collateral, including for amounts owing for
wages employee deductions, goods and services taxes, sales taxes, employer
health taxes, municipal taxes, workers’ compensation, pension fund obligations
and overdue rents.

 

“Prior Lenders” has the meaning ascribed to it in the recitals to the Agreement.

 

“Prior Lender Obligations” means all obligations of any Credit Party and any of
their Subsidiaries to the Prior Lenders pursuant to the Prepetition Loan
Agreement, and all instruments and documents executed pursuant thereto or in
connection therewith.

 

“Proceeds” means “proceeds,” as such term is defined in the Code, including (a)
any and all proceeds of any insurance, indemnity, warranty or guarantee payable
to any Credit Party from time to time with respect to any of the Collateral, (b)
any and all payments (in any form whatsoever) made or due and payable to any
Credit Party from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of governmental
authority), (c) any claim of any Credit Party against third parties (i) for
past, present or future infringement of any Patent or Patent License, or  (ii)
for past, present or future infringement or dilution of any Copyright, Copyright
License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries by any
Credit Party against third parties with respect to any litigation or dispute
concerning any of the Collateral including claims arising out of the loss or
nonconformity of, interference with the use of, defects in, or infringement of
rights in, or damage to, Collateral, (e) all amounts collected on, or
distributed on account of, other Collateral, including dividends, interest,
distributions and Instruments with respect to Investment Property and pledged
Stock, and (f) any and all other

 

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amounts, rights to payment or other property acquired upon the sale, lease,
license, exchange or other disposition of Collateral and all rights arising out
of Collateral.

 

“Pro Forma” means the unaudited consolidated balance sheet of Borrower and its
Subsidiaries as of September 30, 2004 after giving pro forma effect to the
Related Transactions.

 

“Projections” means Borrower’s forecasted consolidated and consolidating:  (a)
balance sheets; (b) profit and loss statements; and (c) cash flow statements,
all prepared on a Subsidiary by Subsidiary or division-by-division basis, if
applicable, and otherwise consistent with the historical Financial Statements of
Borrower, together with appropriate supporting details and a statement of
underlying assumptions.

 

“Pro Rata Share” means with respect to all matters relating to any Lender, (a)
with respect to the Revolving Loan and the Export Related Loan Participation,
the percentage obtained by dividing (i) the Revolving Loan Commitment of that
Lender by (ii) the aggregate Revolving Loan Commitments of all Lenders, (b) with
respect to the Term Loans, the percentage obtained by dividing (i) the Term Loan
Commitment of that Lender by (ii) the aggregate Term Loan Commitments of all
Lenders, as any such percentages may be adjusted by assignments permitted
pursuant to Section 9.1, (c) with respect to the Last Out Term Loans, the
percentage obtained by dividing (i) the Last Out Term Loan Commitment of that
Lender by (ii) the aggregate Last Out Term Loan Commitments of all Lenders, as
any such percentages may be adjusted by assignments permitted pursuant to
Section 9.1, (d) with respect to all Loans, the percentage obtained by dividing
(i) the aggregate Commitments of that Lender by (ii) the aggregate Commitments
of all Lenders, and (d) with respect to all Loans on and after the Commitment
Termination Date, the percentage obtained by dividing (i) the aggregate
outstanding principal balance of the Loans held by that Lender, by (ii) the
outstanding principal balance of the Loans held by all Lenders.

 

 “Qualified Plan” means a Pension Plan that is intended to be tax-qualified
under Section 401(a) of the IRC.

 

“Qualified Assignee” means (a) any Lender, any Affiliate of any Lender and, with
respect to any Lender that is an investment fund that invests in commercial
loans, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, and (b) any commercial bank, savings and
loan association or savings bank or any other entity which is an “accredited
investor” (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a rating of BBB or higher from S&P and a
rating of Baa2 or higher from Moody’s at the date that it becomes a Lender and
which, through its applicable lending office, is capable of lending to Borrower
without the imposition of any withholding or similar taxes; provided that no
Person determined by Agent to be acting in the capacity of a vulture fund or
distressed debt purchaser shall be a Qualified Assignee, and no Person or
Affiliate of such Person (other than a Person that is already a Lender) holding
Subordinated Debt or Stock issued by any Credit Party shall be a Qualified
Assignee.

 

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“Quebec Hypothec” means (i) the Deed of Movable and Immovable Hypothec dated on
or about the Closing Date granted by AET Canada in favor of the Agent, (ii) the
Collateral Mortgage Demand Bond issued thereunder in the principal amount of
CDN$200,000,000 made by AET Canada and registered in the name of the Agent, and
(iii) the Bond Pledge Agreement dated on or about the Closing Date granted by
AET Canada in favor of the Agent.

 

“Real Estate” has the meaning ascribed to it in Section 3.6.

 

“Refunded Swing Line Loan” has the meaning ascribed to it in
Section 1.1(d)(iii).

 

“Related Transactions” means the initial borrowing under the Revolving Loan, the
Term Loan and the Last Out Term Loan on the Closing Date, the payment of all
fees, costs and expenses associated with all of the foregoing and the execution
and delivery of all of the Related Transactions Documents.

 

“Related Transactions Documents” means the Loan Documents and all other
agreements or instruments executed in connection with the Related Transactions
and all other agreements or instruments executed in connection therewith.

 

“Release” means any release, threatened release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material in
the indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.

 

“Replacement Lender” has the meaning ascribed to it in Section 1.16(d).

 

“Requisite Last Out Term Lenders” means Lenders having more than 66 2/3% of the
aggregate outstanding amount of the Term Loan and the Last Out Term Loan.

 

“Requisite Lenders” means collectively, (a) the Requisite Revolving Lenders, (b)
the Requisite Term Lenders and (c) the Requisite Last Out Term Lenders.

 

“Requisite Revolving Lenders” means Lenders having (a) more than 51% of the
Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan
Commitments have been terminated, more than 51% of the aggregate outstanding
amount of the Revolving Loan.

 

“Requisite Term Lenders” means Lenders having more than 66 2/3% of the aggregate
outstanding amount of the Term Loan.

 

“Reserves” means (a) reserves established by Agent from time to time against
Eligible Inventory pursuant to Section 5.9, (b) reserves established pursuant to
Section 5.4(c), (c) the Export-Related Loan Reserve, (d) a reserve or reserves
in the full amount of the Carve-Out Amount as established by Agent on the
Closing Date and thereafter modified, as and to the extent, Agent determines to
do so, and (e) such other reserves against Eligible Accounts, Eligible
Export-Related Accounts, Eligible Inventory, Borrowing Availability or
Export-Related

 

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Borrowing Availability of Borrower that Agent may, in its reasonable credit
judgment and upon prior or contemporaneous notice to Borrower, establish from
time to time.

 

“Restricted Payment” means, with respect to any Credit Party (a) the declaration
or payment of any dividend or the incurrence of any liability to make any other
payment or distribution of cash or other property or assets in respect of Stock;
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement of such Credit Party’s Stock or any other payment or
distribution made in respect thereof, either directly or indirectly; (c) any
payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to, any Subordinated Debt; (d) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Stock of such Credit Party now or hereafter
outstanding; (e) any payment of a claim for the rescission of the purchase or
sale of, or for material damages arising from the purchase or sale of, any
shares of such Credit Party’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (f) any payment, loan, contribution, or other transfer of
funds or other property to any Stockholder of such Credit Party other than
payment of compensation in the ordinary course of business to Stockholders who
are employees of such Person; and (g) any payment of management fees (or other
fees of a similar nature) by such Credit Party to any Stockholder of such Credit
Party or its Affiliates.

 

“Restructuring Agreement” means that certain Restructuring Agreement, dated as
of August 24, 2004, as amended prior to the date hereof, by and among Borrower,
AET Canada, AET Limited and the Participating Holders.

 

“Restructuring Agreement Noteholders” means DDJ Capital Management, LLC, Pequot
Capital Management, Inc., Post Advisory Group LLC, Trust Company of the West,
Xerion Capital Partners, Barclays Capital, and each other holder of Senior Notes
that was a “Participating Holder” in accordance with the terms of the
Restructuring Agreement immediately prior to the filing of the Chapter 11 Cases.

 

“Retiree Welfare Plan” means, at any time, a Welfare Plan that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant’s termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.

 

“Revolving Credit Advance” has the meaning ascribed to it in Section 1.1(a)(i).

 

“Revolving Lenders” means, as of any date of determination, Lenders having a
Revolving Loan Commitment.

 

“Revolving Loan” means, at any time, the sum of (i) the aggregate amount of
Revolving Credit Advances outstanding to Borrower plus (ii) the aggregate Letter
of Credit Obligations incurred on behalf of Borrower.  Unless the context
otherwise requires, references to

 

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the outstanding principal balance of the Revolving Loan shall include the
outstanding balance of Letter of Credit Obligations.

 

“Revolving Loan Commitment” means (a) as to any Lender, the aggregate commitment
of such Lender to make Revolving Credit Advances, incur Letter of Credit
Obligations or purchase Export-Related Loan Participations as set forth on
Annex J to the Agreement or in the most recent Assignment Agreement executed by
such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders
to make Revolving Credit Advances, incur Letter of Credit Obligations, or
purchase Export-Related Loan Participations which aggregate commitment shall be
Fifty-Five Million Dollars ($55,000,000) on the Closing Date, as such amount may
be adjusted, if at all, from time to time in accordance with the Agreement.

 

“Revolving Loan Priority Collateral” means any Collateral consisting of Accounts
or Inventory or any Proceeds thereof.

 

“Revolving Note” has the meaning ascribed to it in Section 1.1(a)(ii)(A).

 

“Security Agreement” means the Security Agreement of even date herewith entered
into by and among Agent, on behalf of itself and Lenders, and each Credit Party
that is a signatory thereto.

 

“Senior Leverage Ratio” means with respect to the Borrower the ratio of (a)
Funded Debt as of the date of determination (other than Subordinated Debt) to
(b) the sum of EBITDA for the twelve (12) months ending at the date of
determination.

 

“Senior Note Documents” means the Senior Notes, the Senior Note Indenture, any
Guarantee (as defined in the Senior Note Indenture) and the Registration Rights
Agreement (as defined in the Senior Note Indenture).

 

“Senior Note Indenture” means the Senior Note Indenture, dated, June 19, 2001
made by the Borrower and AET Canada in favor of Wells Fargo Bank Minnesota,
National Association, as trustee.

 

“Senior Note Remedy Event” shall mean any of the following by any holders of the
Senior Notes: (a) the acceleration of the Senior Notes or the taking of actions
to collect or enforce all or any part of the Senior Notes or any claims in
respect thereof against any Credit Party or any of its property or assets, (b)
the application of any property or assets of any Credit Party to the Senior
Notes or the repossession of, foreclosure on, or the exercise of any other
remedy (judicially or nonjudicially) with respect to any Credit Party or any of
its property or assets; (c) the taking of control or possession of, or the
exercise of any right of setoff with respect to, any property or assets of any
Credit Party or the sale or other disposition of any interest in such property
or assets; (d) the taking of any action to interfere with any rights in respect
of such property or assets of the Agent and Lenders or their ability to realize
upon or otherwise deal with such property or assets; or (e) the commencement or
maintenance of any action, suit or other proceeding at law, in equity or
otherwise in furtherance of any of the foregoing or to otherwise enforce rights
against any Credit Party or any of its property or assets

 

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or to direct the owner of such property or assets to sell or otherwise dispose
of any interest therein.

 

“Senior Notes” means those certain 10 3/4% Senior Notes due 2011 and 10 ¾%
Series B Senior Notes due 2011 issued by Borrower pursuant to the Senior Note
Indenture.

 

“Software” means all “software” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, other than software embedded in any
category of Goods, including all computer programs and all supporting
information provided in connection with a transaction related to any program.

 

“SPC” has the meaning ascribed to it in Section 9.1(f).

 

“Stock” means all shares, options, warrants, general or limited partnership
interests, membership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership, limited liability company or
equivalent entity whether voting or nonvoting, including common stock, preferred
stock or any other “equity security” (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934).

 

“Stockholder” means, with respect to any Person, each holder of Stock of such
Person.

 

“Subordinated Debt” means collectively, the Indebtedness evidenced by the Senior
Note Documents and any Indebtedness of any Credit Party subordinated to the
Obligations in a manner and form satisfactory to Agent and Lenders in their sole
discretion, as to right and time of payment and as to any other rights and
remedies thereunder.

 

“Subsidiary” means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person or one or more Subsidiaries of such Person, or with
respect to which any such Person has the right to vote or designate the vote of
50% or more of such Stock whether by proxy, agreement, operation of law or
otherwise, and (b) any partnership or limited liability company in which such
Person and/or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or may exercise the powers of a general partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary of
Borrower.

 

“Subsidiary Guarantee” means the Subsidiary Guarantee of even date herewith
executed by each Subsidiary of Borrower (other than AET Limited)  in favor of
Agent, on behalf of itself and Lenders.

 

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“Supporting Obligations” means all “supporting obligations” as such term is
defined in the Code, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.

 

“Swing Line Advance” has the meaning ascribed to it in Section 1.1(d)(i).

 

“Swing Line Availability” has the meaning ascribed to it in Section 1.1(d)(i).

 

“Swing Line Commitment” means, as to the Swing Line Lender, the commitment of
the Swing Line Lender to make Swing Line Advances as set forth on Annex J to the
Agreement, which commitment constitutes a subfacility of the Revolving Loan
Commitment of the Swing Line Lender.

 

“Swing Line Lender” means GE Capital.

 

“Swing Line Loan” means, as the context may require, at any time, the aggregate
amount of Swing Line Advances outstanding to Borrower.

 

“Swing Line Note” has the meaning ascribed to it in Section 1.1(d)(ii).

 

“Taxes” means taxes, levies, imposts, deductions, Charges or withholdings, and
all liabilities with respect thereto, excluding franchise or other taxes imposed
on or measured by the net income of Agent or a Lender by the jurisdictions under
the laws of which Agent and Lenders are organized or conduct business or any
political subdivision thereof.

 

“Tax Returns” has the meaning ascribed to it in Section 3.11.

 

“Termination Date” means the date on which (a) the Loans have been indefeasibly
repaid in full, (b) all other Obligations under the Agreement and the other Loan
Documents have been completely discharged (other than indemnification
Obligations and so long as no suits, actions, proceedings or claims are pending
or threatened against any Indemnified Person asserting any damages, losses or
liabilities that are Indemnified Liabilities), (c) all Letter of Credit
Obligations have been cash collateralized, canceled or backed by standby letters
of credit in accordance with Annex B, and (d) the Borrower shall not have any
further right to borrow any monies under the Agreement.

 

“Term Lenders” means those Lenders having Term Loan Commitments.

 

“Term Loan” has the meaning ascribed to it in Section 1.1(b)(i).

 

 “Term Loan Commitment” means (a) as to any Lender with a Term Loan Commitment,
the commitment of such Lender to make its Pro Rata Share of the Term Loan as set
forth on Annex J to the Agreement or in the most recent Assignment Agreement
executed by such Lender, and (b) as to all Lenders with a Term Loan Commitment,
the aggregate commitment of all Lenders to make the Term Loan, which aggregate
commitment shall be Fifty Million Dollars ($50,000,000) on the Closing Date. 
After advancing the Term Loan, each reference to a Lender’s Term Loan Commitment
shall refer to that Lender’s Pro Rata Share of the outstanding Term Loan.

 

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“Term Loan Priority Collateral” means all Collateral other than Revolving Loan
Priority Collateral.

 

“Term Note” has the meaning ascribed to it in Section 1.1(b)(i).

 

“Title IV Plan” means a Pension Plan (other than a Multiemployer Plan), that is
covered by Title IV of ERISA, and that any Credit Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.

 

“Trademark License” means rights under any written agreement now owned or
hereafter acquired by any Credit Party granting any right to use any Trademark.

 

“Trademarks” means all of the following now owned or hereafter existing or
adopted or acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; and (c) all goodwill associated with or symbolized by any
of the foregoing.

 

“Unfunded Pension Liability” means, at any time, the aggregate amount, if any,
of the sum of (a) the amount by which the present value of all accrued benefits
under each Title IV Plan exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
all determined as of the most recent valuation date for each such Title IV Plan
using the actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of 5 years following a transaction which might
reasonably be expected to be covered by Section 4069 of ERISA, the liabilities
(whether or not accrued) that could be avoided by any Credit Party or any ERISA
Affiliate as a result of such transaction.

 

“Welfare Plan” means a Plan described in Section 3(i) of ERISA.

 

Rules of construction with respect to accounting terms used in the Agreement or
the other Loan Documents shall be as set forth in Annex G.  All other undefined
terms contained in any of the Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code to the extent the same are
used or defined therein; in the event that any term is defined differently in
different Articles or Divisions of the Code, the definition contained in
Article or Division 9 shall control.  Unless otherwise specified, references in
the Agreement or any of the Appendices to a Section, subsection or clause refer
to such Section, subsection or clause as contained in the Agreement.  The words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.

 

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Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
feminine and neuter genders.  The words “including”, “includes” and “include”
shall be deemed to be followed by the words “without limitation”; the word “or”
is not exclusive; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations.  Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are intended
to signify that a member of management or officer or member of the board of
directors of such Credit Party has actual knowledge or awareness of a particular
fact or circumstance or a member of management or officer or director of such
Credit Party, if it had exercised reasonable diligence, would have known or been
aware of such fact or circumstance.

 

With respect to the amount of any obligation or liability denominated in a
currency other than Dollars, for purposes of making calculations or
determinations under the Loan Documents on any date, the amount of such
obligation or liability shall be measured in Dollars by converting such amount
in such other currency to Dollars at the conversion rate quoted on the
applicable Reuters Monitor Screen or other service selected by the Agent on such
date or, if such date is not a Business Day, on the Business Day immediately
preceding such date of determination, or at such other rate as may have been
agreed in writing between the Borrower and the Agent.

 

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ANNEX B (SECTION 1.2)

TO

CREDIT AGREEMENT

 

LETTERS OF CREDIT

 

(a)                                  Issuance. Subject to the terms and
conditions of the Agreement, Agent and Revolving Lenders agree to incur, from
time to time prior to the Commitment Termination Date, upon the request of
Borrower and for Borrower’s account, Letter of Credit Obligations by causing
Letters of Credit to be issued by GE Capital or a Subsidiary thereof or a bank
or other legally authorized Person selected by or acceptable to Agent in its
sole discretion (each, an “L/C Issuer”) for Borrower’s account and guaranteed by
Agent; provided, that if the L/C Issuer is a Revolving Lender, then such Letters
of Credit shall not be guaranteed by Agent but rather each Revolving Lender
shall, subject to the terms and conditions hereinafter set forth, purchase (or
be deemed to have purchased) risk participations in all such Letters of Credit
issued with the written consent of Agent, as more fully described in paragraph
(b)(ii) below.  The aggregate amount of all such Letter of Credit Obligations
shall not at any time exceed the least of (i) Ten Million Dollars ($10,000,000)
(the “L/C Sublimit”) and (ii) the Maximum Amount less the aggregate outstanding
principal balance of the Revolving Credit Advances, the Export-Related Loan and
the Swing Line Loan, and (iii) the Borrowing Base less the aggregate outstanding
principal balance of the Revolving Credit Advances and the Swing Line Loan.  No
such Letter of Credit shall have an expiry date that is more than one year
following the date of issuance thereof, unless otherwise determined by the
Agent, in its sole discretion, and neither Agent nor Revolving Lenders shall be
under any obligation to incur Letter of Credit Obligations in respect of, or
purchase risk participations in, any Letter of Credit having an expiry date that
is later than the Commitment Termination Date.  All letters of credit issued
under the Prepetition Loan Agreement shall be deemed to have been issued under
this Agreement and shall for all purposes constitute “Letters of Credit”
hereunder (provided that no additional issuance fees shall be applicable in
respect of such Letters of Credit).

 

(b)                                 (i)                                    
Advances Automatic; Participations.  In the event that Agent or any Revolving
Lender shall make any payment on or pursuant to any Letter of Credit Obligation,
such payment shall then be deemed automatically to constitute a Revolving Credit
Advance to Borrower under Section 1.1(a) of the Agreement regardless of whether
a Default or Event of Default has occurred and is continuing and notwithstanding
Borrower’s failure to satisfy the conditions precedent set forth in Section 2,
and each Revolving Lender shall be obligated to pay its Pro Rata Share thereof
in accordance with the Agreement.  The failure of any Revolving Lender to make
available to Agent for Agent’s own account its Pro Rata Share of any such
Revolving Credit Advance or payment by Agent under or in respect of a Letter of
Credit shall not relieve any other Revolving Lender of its obligation hereunder
to make available to Agent its Pro Rata Share thereof, but no Revolving Lender
shall be responsible for the failure of any other Revolving Lender to make
available such other Revolving Lender’s Pro Rata Share of any such payment.

 

(ii)                                  If it shall be illegal or unlawful for
Borrower to incur Revolving Credit Advances as contemplated by paragraph (b)(i)
above or if it shall be illegal or unlawful for any Revolving Lender to be
deemed to have assumed a ratable share of the reimbursement

 

B-1

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obligations owed to an L/C Issuer, or if the L/C Issuer is a Revolving Lender,
then (A) immediately and without further action whatsoever, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation equal to such Revolving Lender’s Pro Rata Share (based on the
Revolving Loan Commitments) of the Letter of Credit Obligations in respect of
all Letters of Credit then outstanding and (B) thereafter, immediately upon
issuance of any Letter of Credit, each Revolving Lender shall be deemed to have
irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the
case may be) an undivided interest and participation in such Revolving Lender’s
Pro Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations with respect to such Letter of Credit on the date of such issuance. 
Each Revolving Lender shall fund its participation in all payments or
disbursements made under the Letters of Credit in the same manner as provided in
the Agreement with respect to Revolving Credit Advances.

 

(c)                                  Cash Collateral.

 

(i)                                     If Borrower is required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, Borrower will pay to Agent for the ratable
benefit of itself and Revolving Lenders cash or cash equivalents acceptable to
Agent (“Cash Equivalents”) in an amount equal to 105% of the maximum amount then
available to be drawn under each applicable Letter of Credit outstanding for the
benefit of Borrower.  Such funds or Cash Equivalents shall be held by Agent in a
cash collateral account (the “Cash Collateral Account”) maintained at a bank or
financial institution acceptable to Agent.  The Cash Collateral Account shall be
in the name of Borrower and shall be pledged to, and subject to the control of,
Agent, for the benefit of Agent and Lenders, in a manner satisfactory to Agent. 
Borrower hereby pledges and grants to Agent, on behalf of itself and Lenders, a
first priority security interest in all such funds and Cash Equivalents held in
the Cash Collateral Account from time to time and all proceeds thereof, as
security for the payment of all amounts due in respect of the Letter of Credit
Obligations and other Obligations, whether or not then due.  The Agreement,
including this Annex B, shall constitute a security agreement under applicable
law.

 

(ii)                                  If any Letter of Credit Obligations,
whether or not then due and payable, shall for any reason be outstanding on the
Commitment Termination Date, Borrower shall either (A) provide cash collateral
therefor in the manner described above, or (B) cause all such Letters of Credit
and guaranties thereof, if any, to be canceled and returned, or (C) deliver a
stand-by letter (or letters) of credit in guarantee of such Letter of Credit
Obligations, which stand-by letter (or letters) of credit shall be of like tenor
and duration (plus thirty (30) additional days) as, and in an amount equal to
105% of, the aggregate maximum amount then available to be drawn under, the
Letters of Credit to which such outstanding Letter of Credit Obligations relate
and shall be issued by a Person, and shall be subject to such terms and
conditions, as are be satisfactory to Agent in its sole discretion.

 

(iii)                               From time to time after funds are deposited
in the Cash Collateral Account by Borrower, whether before or after the
Commitment Termination Date, Agent may apply such funds or Cash Equivalents then
held in the Cash Collateral Account to the payment of any amounts, and in such
order as Agent may elect, as shall be or shall become due and payable

 

B-2

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by Borrower to Agent and Lenders with respect to such Letter of Credit
Obligations of Borrower and, upon the satisfaction in full of all Letter of
Credit Obligations of Borrower, to any other Obligations of Borrower then due
and payable.

 

(iv)                              Neither Borrower nor any Person claiming on
behalf of or through Borrower shall have any right to withdraw any of the funds
or Cash Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the payment of all amounts
payable by Borrower to Agent and Lenders in respect thereof, any funds remaining
in the Cash Collateral Account shall be applied to other Obligations then due
and owing and upon payment in full of such Obligations, any remaining amount
shall be paid to Borrower or as otherwise required by law.  Interest earned on
deposits in the Cash Collateral Account shall be for the account of Agent.

 

(d)                                 Fees and Expenses.  Borrower agrees to pay
to Agent for the benefit of Revolving Lenders, as compensation to such Lenders
for Letter of Credit Obligations incurred hereunder, (i) all costs and expenses
incurred by Agent or any Lender on account of such Letter of Credit Obligations,
and (ii) for each month during which any Letter of Credit Obligation shall
remain outstanding, a fee (the “Letter of Credit Fee”) in an amount equal to the
Applicable L/C Margin multiplied by the maximum amount available from time to
time to be drawn under the applicable Letter of Credit.  Such fee shall be paid
to Agent for the benefit of the Revolving Lenders in arrears, on the first day
of each month and on the Commitment Termination Date.  In addition, Borrower
shall pay to any L/C Issuer, on demand, such fees (including all per annum
fees), charges and expenses of such L/C Issuer in respect of the issuance,
negotiation, acceptance, amendment, transfer and payment of such Letter of
Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.

 

(e)                                  Request for Incurrence of Letter of Credit
Obligations.  Borrower shall give Agent at least two (2) Business Days’ prior
written notice requesting the incurrence of any Letter of Credit Obligation. 
The notice shall be accompanied by the form of the Letter of Credit (which shall
be acceptable to the L/C Issuer) and a completed Application for Standby Letter
of Credit or Application for Documentary Letter of Credit (as applicable) in the
form customarily used by the L/C Issuer.  Notwithstanding anything contained
herein to the contrary, Letter of Credit applications by Borrower and approvals
by Agent and the L/C Issuer may be made and transmitted pursuant to electronic
codes and security measures mutually agreed upon and established by and among
Borrower, Agent and the L/C Issuer.

 

(f)                                    Obligation Absolute.  The obligation of
Borrower to reimburse Agent and Revolving Lenders for payments made with respect
to any Letter of Credit Obligation shall be absolute, unconditional and
irrevocable, without necessity of presentment, demand, protest or other
formalities, and the obligations of each Revolving Lender to make payments to
Agent with respect to Letters of Credit shall be unconditional and irrevocable. 
Such obligations of Borrower and Revolving Lenders shall be paid strictly in
accordance with the terms hereof under all circumstances including the
following:

 

(i)                                     any lack of validity or enforceability
of any Letter of Credit or the Agreement or the other Loan Documents or any
other agreement;

 

B-3

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(ii)                                  the existence of any claim, setoff,
defense or other right that Borrower or any of its Affiliates or any Lender may
at any time have against a beneficiary or any transferee of any Letter of Credit
(or any Persons or entities for whom any such transferee may be acting), Agent,
any Lender, or any other Person, whether in connection with the Agreement, the
Letter of Credit, the transactions contemplated herein or therein or any
unrelated transaction (including any underlying transaction between Borrower or
any of its Affiliates and the beneficiary for which the Letter of Credit was
procured);

 

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

 

(iv)                              payment by Agent (except as otherwise
expressly provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any
Letter of Credit or guarantee thereof against presentation of a demand, draft or
certificate or other document that does not comply with the terms of such Letter
of Credit or such guarantee;

 

(v)                                 any other circumstance or event whatsoever,
that is similar to any of the foregoing; or

 

(vi)                              the fact that a Default or an Event of Default
has occurred and is continuing.

 

(g)                                 Indemnification; Nature of Lenders’ Duties.

 

(i)                                     In addition to amounts payable as
elsewhere provided in the Agreement, Borrower hereby agree to pay and to
protect, indemnify, and save harmless Agent and each Lender from and against any
and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys’ fees and allocated costs of internal
counsel) that Agent or any Lender may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of any Letter of Credit or guarantee
thereof, or (B) the failure of Agent or any Lender seeking indemnification or of
any L/C Issuer to honor a demand for payment under any Letter of Credit or
guarantee thereof as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
Governmental Authority, in each case other than to the extent solely as a result
of the gross negligence or willful misconduct of Agent or such Lender (as
finally determined by a court of competent jurisdiction).

 

(ii)                                  As between Agent and any Lender and
Borrower, Borrower assume all risks of the acts and omissions of, or misuse of
any Letter of Credit by beneficiaries, of any Letter of Credit.  In furtherance
and not in limitation of the foregoing, to the fullest extent permitted by law,
neither Agent nor any Lender shall be responsible for:  (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document issued by any
party in connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or

 

B-4

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assign any Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or ineffective for
any reason; (C) failure of the beneficiary of any Letter of Credit to comply
fully with conditions required in order to demand payment under such Letter of
Credit; provided, that in the case of any payment by Agent under any Letter of
Credit or guarantee thereof, Agent shall be liable to the extent such payment
was made solely as a result of its gross negligence or willful misconduct (as
finally determined by a court of competent jurisdiction) in determining that the
demand for payment under such Letter of Credit or guarantee thereof complies on
its face with any applicable requirements for a demand for payment under such
Letter of Credit or guarantee thereof; (D) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they may be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the transmission or
otherwise of any document required in order to make a payment under any Letter
of Credit or guarantee thereof or of the proceeds thereof; (G) the credit of the
proceeds of any drawing under any Letter of Credit or guarantee thereof; and (H)
any consequences arising from causes beyond the control of Agent or any Lender.
None of the above shall affect, impair, or prevent the vesting of any of Agent’s
or any Lender’s rights or powers hereunder or under the Agreement.

 

(iii)                               Nothing contained herein shall be deemed to
limit or to expand any waivers, covenants or indemnities made by Borrower in
favor of any L/C Issuer in any letter of credit application, reimbursement
agreement or similar document, instrument or agreement between or among Borrower
and such L/C Issuer, including any Application For Standby Letter of Credit or
Documentary Letter of Credit, the Master Documentary Agreement and the Master
Standby Agreement entered into with Agent.

 

B-5

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ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT

 

CASH MANAGEMENT SYSTEM

 

Borrower shall, and shall cause its Subsidiaries to, establish and maintain the
Cash Management Systems described below:

 

On or before the Closing Date and until the Termination Date, Borrower and AET
Canada shall (i) establish lock boxes (“Lock Boxes”) or at Agent’s discretion,
blocked accounts (“Blocked Accounts”) at one or more of the banks set forth in
Disclosure Schedule (3.19), and shall request in writing and otherwise take such
reasonable steps to ensure that all Account Debtors forward payment directly to
such Lock Boxes, (ii) deposit and cause its Subsidiaries to deposit or cause to
be deposited promptly, and in any event no later than the first Business Day
after the date of receipt thereof, all cash, checks, drafts or other similar
items of payment relating to or constituting payments made in respect of any and
all Collateral (whether or not otherwise delivered to a Lock Box)
(“Collections”) into one or more Blocked Accounts in Borrower’s name or any such
Subsidiary’s name and at a bank identified in Disclosure Schedule (3.19) (each,
a “Relationship Bank”).  At all times when any Export-Related Advance is
outstanding, Borrower shall (i) take all such reasonable steps to ensure that
all Account Debtors with respect to Export-Related Accounts forward payment
directly to a separate Lock Box established solely for receipt of Export-Related
Accounts, and (ii) deposit and cause its Subsidiaries to deposit or cause to be
deposited promptly, and in any event no later than the first Business Day after
the date of receipt thereof, all Collections with respect to Export-Related
Accounts (whether or not otherwise delivered to a Lock Box) into a separate
Blocked Account established solely for receipt of such Collections (the
“Export-Related Blocked Account”, in Borrower’s name and at a Relationship Bank
identified in Disclosure Schedule (3.19) as the “Export-Related Blocked
Account”.  In the event either Borrower or AET Canada establishes more than one
Blocked Account for its Collections, Borrower shall establish a concentration
account in its name, which account may be a Blocked Account referred to in
clause (a)(i) above (the “Concentration Account”), at the bank designated as the
Concentration Account bank for Borrower in Disclosure Schedule (3.19) (the
“Concentration Account Bank”), which bank shall be reasonably satisfactory to
Agent.

 

(b)                                 Each of Borrower and AET Canada may
maintain, in its name, accounts (each a “Disbursement Account” and collectively,
the “Disbursement Accounts”) at banks reasonably acceptable to Agent which shall
be used by such Credit Parties for payments and disbursements.  Borrower’s
Disbursement Account (Account No. 8543522469 with PNC Bank, National
Association) shall be used by Agent, from time to time, to deposit proceeds of
Revolving Credit Advances, Export-Related Advances and Swing Line Advances made
to Borrower pursuant to Section 1.1 for use by Borrower solely in accordance
with the provisions of Section 1.4.

 

(c)                                  On or before the Closing Date (or such
later date as Agent shall consent to in writing), the Concentration Account
Bank, each bank where a Disbursement Account is maintained and all other
Relationship Banks, shall have entered into tri-party blocked account

 

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agreements with Agent, for the benefit of itself and Lenders, and Borrower and
Subsidiaries thereof, as applicable, in form and substance reasonably acceptable
to Agent, which shall become operative on or prior to the Closing Date.  Each
such blocked account agreement shall provide, among other things, that (i) all
Collections deposited in account and proceeds thereof deposited in the
applicable Blocked Account or Concentration Account are held by such bank as
agent or bailee-in-possession for Agent, on behalf of itself and Lenders,
(ii) the bank executing such agreement has no rights of setoff or recoupment or
any other claim against such account, as the case may be, other than for payment
of its service fees and other charges directly related to the administration of
such account and for returned checks or other items of payment, and (iii) from
and after the Closing Date (A) with respect to the banks at which a Blocked
Account of Borrower is maintained, such bank agrees to forward immediately all
amounts in each such Blocked Account (other than the Export-Related Blocked
Account) to Borrower’s Concentration Account Bank and to commence the process of
daily sweeps from such Blocked Account (other than the Export-Related Blocked
Account) into the Concentration Account (or if no Concentration Account has been
established directly to the Collection Account), (B) with respect to the Blocked
Account established at Royal Bank of Canada bearing Account Number 102-628-5
(the “AET Canada Account”), such bank agrees that at any time following three
(3) Business Days after Agent delivers an activation notice thereunder (which
activation notice may be given by Agent at any time at which a Default or Event
of Default has occurred and is continuing), to forward immediately all amounts
in the AET Canada Account and, to the extent requested by Agent, the
Disbursement Accounts of AET Canada to a Blocked Account of Borrower (or, if
established, the Concentration Account) or to such other account designated by
Agent, and (C) with respect to each Concentration Account Bank and the
Export-Related Account Bank, such bank agrees to immediately forward all amounts
received in the Concentration Account or the Export-Related Blocked Account,
respectively, to the Collection Account through daily sweeps from such
Concentration Account or Export-Related Blocked Account, as applicable, into the
Collection Account.  Borrower and AET Canada shall transfer or cause to be
transferred prior to the end of each Business Day from the AET Canada Account
and/or the Disbursement Accounts of AET Canada the aggregate balance in (or held
for the benefit of) AET Canada in the AET Canada Account and such Disbursement
Accounts in excess of CDN$3,000,000 to a Blocked Account of Borrower (or, if
established, the Concentration Account).

 

(d)                                 So long as no Default or Event of Default
has occurred and is continuing, Borrower may amend Disclosure Schedule (3.19) to
add or replace a Relationship Bank, Lock Box or Blocked Account or to replace
any Concentration Account or any Disbursement Account; provided, that (i) Agent
shall have consented in writing in advance to the opening of such account or
Lock Box with the relevant bank and (ii) prior to the time of the opening of
such account or Lock Box, Borrower or its Subsidiaries, as applicable, and such
bank shall have executed and delivered to Agent a tri-party blocked account
agreement, in form and substance reasonably satisfactory to Agent. Borrower
shall close any of their accounts (and establish replacement accounts in
accordance with the foregoing sentence) promptly and in any event within thirty
(30) days following notice from Agent that the creditworthiness of any bank
holding an account is no longer acceptable in Agent’s reasonable judgment, or as
promptly as practicable and in any event within sixty (60) days following notice
from Agent that the operating performance, funds transfer or availability
procedures or performance with respect to accounts or Lock Boxes of the bank
holding such accounts or Agent’s liability under any

 

C-2

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tri-party blocked account agreement with such bank is no longer acceptable in
Agent’s reasonable judgment.

 

(e)                                  The Lock Boxes, Blocked Accounts,
Disbursement Accounts and the Concentration Accounts shall be cash collateral
accounts, with all cash, checks and other similar items of payment in such
accounts securing payment of the Loans and all other Obligations, and in which
Borrower and each Subsidiary thereof shall have granted a Lien to Agent, on
behalf of itself and Lenders, pursuant to the Security Agreement.

 

(f)                                    All amounts deposited in the Collection
Account shall be deemed received by Agent in accordance with Section 1.10 and
shall be applied (and allocated) by Agent in accordance with Section 1.11.  In
no event shall any amount be so applied unless and until such amount shall have
been credited in immediately available funds to the Collection Account.

 

(g)                                 Borrower shall and shall cause its
Subsidiaries, officers, employees, agents, directors or other Persons acting for
or in concert with Borrower (each a “Related Person”) to (i) hold in trust for
Agent, for the benefit of itself and Lenders, all checks, cash and other items
of payment payable to or for the benefit of Borrower or any of its Subsidiaries,
and (ii) within one (1) Business Day after receipt by Borrower, any Subsidiary
or any such Related Person of any checks, cash or other items of payment,
deposit the same into a Blocked Account of Borrower or Subsidiary, as applicable
(and with respect to any payments in respect of Export-Related Accounts, the
Export-Related Blocked Account).  Borrower, each Subsidiary and each Related
Person thereof acknowledges and agrees that all cash, checks or other items of
payment constituting proceeds of Collateral are part of the Collateral.  All
proceeds of the sale or other disposition of any Collateral, shall be deposited
directly into the applicable Blocked Accounts.

 

(h)                                 Borrower shall not and shall not permit or
cause its Subsidiaries to establish or permit to exist any bank accounts other
than (i) the Blocked Accounts, the Concentration Accounts, and the Disbursement
Accounts, and (ii) the other Accounts listed on Disclosure Schedule (3.19)
provided that as the close of business for any two (2) consecutive Business Days
amounts on deposit in such Accounts shall not exceed the following: (A) all
Accounts of AET Limited - $50,000, (B) the Borrower’s Account at First Virginia
Bank -$300,000, (C) the Borrower’s Account at Old National Bank - $600,000, (D)
all other Disbursement Accounts of the Borrower - $300,000, (E) Borrower’s
government account with Merrill Lynch - $75,000, and (F) Borrower’s inactive
account with UBS (#05520 21)-$0.  Borrower shall not, and shall not cause or
permit any Subsidiary thereof to accumulate or maintain cash in Disbursement
Accounts or payroll accounts as of any date of determination in excess of checks
outstanding against such accounts as of that date and amounts necessary to meet
minimum balance requirements.

 

C-3

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ANNEX D (SECTION 2.1(A))
TO
CREDIT AGREEMENT

 

CLOSING CHECKLIST

 

In addition to, and not in limitation of, the conditions described in
Section 2.1 of the Agreement, pursuant to Section 2.1(a), the following items
must be received by Agent in form and substance satisfactory to Agent on or
prior to the Closing Date (each capitalized term used but not otherwise defined
herein shall have the meaning ascribed thereto in Annex A to the Agreement):

 

A.                                   Appendices.  All Appendices to the
Agreement, in form and substance satisfactory to Agent.

 

B.                                     Revolving Notes, Export-Related Loan
Note, Swing Line Notes, Last Out Term Notes and Term Notes.  Duly executed
originals of the Revolving Notes, Export-Related Loan Note, Swing Line Notes,
Last Out Term Notes and Term Notes for each applicable Lender, dated the Closing
Date.

 

C.                                     Security Agreement.  Duly executed
originals of the Security Agreement, dated the Closing Date, and all
instruments, documents and agreements executed pursuant thereto.

 

D.                                    Insurance.  Satisfactory evidence that the
insurance policies required by Section 5.4 are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements, as requested by Agent, in favor of Agent, on
behalf of Lenders.

 

E.                                      Security Interests and Code Filings.

 

(a)                                  Evidence satisfactory to Agent that Agent
(for the benefit of itself and Lenders) has a valid and perfected first priority
security interest in the Collateral, including (i) such documents duly executed
by each Credit Party (including financing statements under the Code and other
applicable documents under the laws of any jurisdiction with respect to the
perfection of Liens) as Agent may request in order to perfect its security
interests in the Collateral and (ii) copies of Code search reports listing all
effective financing statements that name any Credit Party as debtor, together
with copies of such financing statements, none of which shall cover the
Collateral, except for those relating to the Prior Lender Obligations.

 

(b)                                 Evidence satisfactory to Agent, including
copies, of all UCC-1 and other financing statements filed in favor of any Credit
Party with respect to each location, if any, at which Inventory may be
consigned.

 

(c)                                  Control Letters from (i) all issuers of
uncertificated securities and financial assets held by Borrower, (ii) all
securities intermediaries with respect to all securities accounts and securities
entitlements of Borrower, and (iii) all futures commission agents and clearing
houses with respect to all commodities contracts and commodities accounts held
by Borrower.

 

D-1

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F.                                      Intentionally Omitted.

 

G.                                     Intellectual Property Security
Agreements.  Duly executed originals of Intellectual Property Security
Agreement, dated the Closing Date and signed by each Credit Party which owns
Trademarks, Copyrights and/or Patents, as applicable, all in form and substance
reasonably satisfactory to Agent, together with all instruments, documents and
agreements executed pursuant thereto.

 

H.                                    Intentionally Omitted.

 

I.                                         Subsidiary Guaranties.  Guaranties
executed by and each direct and indirect Subsidiary of Borrower (other than AET
Limited) in favor of Agent, for the benefit of Lenders.

 

J.                                        Initial Borrowing Base Certificate. 
Duly executed originals of an initial Borrowing Base Certificate from Borrower,
dated the Closing Date, reflecting information concerning Eligible Accounts,
Eligible Inventory and Eligible Export-Related Accounts of Borrower and, as
applicable, AET Canada as of a date acceptable to Agent.

 

K.                                    Initial Notice of Revolving Credit
Advance.  Duly executed originals of a Notice of Revolving Credit Advance, dated
the Closing Date, with respect to the initial Revolving Credit Advance to be
requested by Borrower on the Closing Date.

 

L.                                      Letter of Direction.  Duly executed
originals of a letter of direction from Borrower addressed to Agent, on behalf
of itself and Lenders, with respect to the disbursement on the Closing Date of
the proceeds of the Term Loan, the Last Out Term Loan and the initial Revolving
Credit Advance.

 

M.                                 Cash Management System; Blocked Account
Agreements.  Evidence satisfactory to Agent that, as of the Closing Date, Cash
Management Systems complying with Annex C to the Agreement have been established
and are currently being maintained in the manner set forth in such Annex C,
together with copies of duly executed tri-party blocked account and lock box
agreements, reasonably satisfactory to Agent, with the banks as required by
Annex C or on or prior to the Closing Date, the Interim Order shall have been
entered by the Bankruptcy Court providing the Agent, on behalf of the Lenders,
with a first priority priming security interest in Borrower’s cash receipts and
bank accounts.

 

N.                                    Charter and Good Standing.  For each
Credit Party, such Person’s (a) charter and all amendments thereto, (b) good
standing certificates in its state of incorporation and (c) good standing
certificates and certificates of qualification to conduct business in each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, each dated a recent date prior to the
Closing Date and certified by the applicable Secretary of State or other
authorized Governmental Authority.

 

O.                                    Bylaws and Resolutions.  For each Credit
Party, (a) such Person’s bylaws, together with all amendments thereto and (b)
resolutions of such Person’s Board of Directors, approving and authorizing the
execution, delivery and performance of the Loan Documents to which such Person
is a party and the transactions to be consummated in connection therewith,

 

D-2

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each certified as of the Closing Date by such Person’s corporate secretary or an
assistant secretary as being in full force and effect without any modification
or amendment.

 

P.                                      Incumbency Certificates.  For each
Credit Party, signature and incumbency certificates of the officers of each such
Person executing any of the Loan Documents, certified as of the Closing Date by
such Person’s corporate secretary or an assistant secretary as being true,
accurate, correct and complete.

 

Q.                                    Opinions of Counsel.  Duly executed
originals of opinions of (i) Shearman & Sterling LLP and (ii) Ogilvy Renault,
counsel for the Credit Parties, together with any other local counsel opinions
reasonably requested by Agent, each in form and substance reasonably
satisfactory to Agent and its counsel, dated the Closing Date.

 

R.                                     Pledge Agreements.  Duly executed
originals of each of the Pledge Agreements accompanied by (as applicable) (a)
share certificates representing all of the outstanding Stock being pledged
pursuant to such Pledge Agreement and stock powers for such share certificates
executed in blank and (b) the original Intercompany Notes and other instruments
evidencing Indebtedness being pledged pursuant to such Pledge Agreement, duly
endorsed in blank.

 

S.                                      Accountants’ Letters.  A letter from the
Credit Parties to their independent auditors authorizing the independent
certified public accountants of the Credit Parties to communicate with Agent and
Lenders in accordance with Section 4.2.

 

T.                                     Net Cash Flow Forecast.  A copy of a
Borrower’s Net Cash Flow Forecast.

 

U.                                    Fee Letter.  Duly executed originals of
the GE Capital Fee Letter.

 

V.                                     Officer’s Certificate.  Agent shall have
received duly executed originals of a certificate of the President and Principal
Financial Officer of Borrower, dated the Closing Date, stating that, except for
circumstances relating to the commencement of the Chapter 11 Cases and as
disclosed in the Credit Agreement, since June 30, 2004 (a) no event or condition
has occurred or is existing which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect; (b) there has been no
material adverse change in the industry in which any Credit Party operates; (c)
no Litigation has been commenced which, if successful, would have a Material
Adverse Effect or could challenge any of the transactions contemplated by the
Agreement and the other Loan Documents; (d) there have been no Restricted
Payments made by any Credit Party; and (e) there has been no material increase
in liabilities, liquidated or contingent, and no material decrease in assets of
the Credit Parties, taken as a whole.

 

W.                                Waivers.  Agent, on behalf of Lenders, shall
have received landlord waivers and consents, bailee letters and mortgagee
agreements in form and substance reasonably satisfactory to Agent, in each case
as required pursuant to Section 5.9.

 

X.                                    Mortgages.  The Borrower shall deliver
Mortgages covering the Real Estate identified on Annex D-1 to the Agreement
(each a “Mortgaged Property,” and collectively, the “Mortgaged Properties”)
together with: (a) title insurance policies, current

 

D-3

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as-built surveys, zoning letters and certificates of occupancy, in each case
reasonably satisfactory in form and substance to Agent in its sole discretion;
(b) evidence that counterparts of the Mortgages have been recorded in all places
to the extent necessary or desirable, in the judgment of Agent, to create a
valid and enforceable first priority Lien (subject only to Permitted
Encumbrances) on each Mortgaged Property in favor of Agent for the benefit of
itself and Lenders (or in favor or such other trustee as may be required or
desired under local law); and (c) an opinion of counsel in each state in which
any Mortgaged Property is located in form and substance and from counsel
reasonably satisfactory to Agent.  On or prior to the Closing Date, the Interim
Order shall have been entered by the Bankruptcy Court providing the Agent, on
behalf of the Lenders, with a first priority priming security interest in the
Mortgaged Properties.

 

Y.                                     Subordination and Intercreditor
Agreements.  Agent and Lenders shall have received any and all subordination
and/or intercreditor agreements, all in form and substance reasonably
satisfactory to Agent, in its sole discretion, as Agent shall have deemed
necessary or appropriate with respect to any Indebtedness of any Credit Party.

 

Z.                                     Intentionally omitted.

 

AA.                         Intentionally omitted.

 

BB.                             Audited Financials; Financial Condition.  Agent
shall have received the Financial Statements, Projections and other materials
set forth in Section 3.4, certified by Borrower’s Principal Financial Officer,
in each case in form and substance reasonably satisfactory to Agent, and Agent
shall be satisfied, in its sole discretion, with all of the foregoing.  Agent
shall have further received a certificate of the President and/or the Principal
Financial Officer of Borrower, based on such Pro Forma and Projections, to the
effect that (a) the Pro Forma fairly presents the financial condition of
Borrower as of the date thereof after giving effect to the transactions
contemplated by the Loan Documents; and (b) the Projections are based upon
estimates and assumptions stated therein, all of which Borrower believes to be
reasonable and fair in light of current conditions and current facts known to
Borrower and, as of the Closing Date, reflect Borrower’s good faith and
reasonable estimates of its future financial performance and of the other
information projected therein for the period set forth therein.

 

CC.                             Master Standby Agreement.  A Master Agreement
for Standby Letters of Credit among Borrower and GE Capital.

 

DD.                           Master Documentary Agreement.  A Master Agreement
for Documentary Letters of Credit among Borrower and GE Capital.

 

EE.                               Other Documents.  Such other certificates,
documents and agreements respecting any Credit Party as Agent may, in its sole
discretion, request.

 

D-4

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ANNEX D-1

 

MORTGAGED PROPERTIES

 

Property Name

 

Owner

 

Address

 

 

 

 

 

Terre Haute, Indiana

 

Borrower

 

3600 East Head Road, Terre Haute, Indiana

 

 

 

 

 

Varennes, Canada

 

Borrower

 

3362 Chemin de la Baronnie, Varennes, Quebec J3X 1T2

 

 

 

 

 

Covington, Virginia

 

Borrower

 

901 West Edgemont Drive, Covington, Virginia

 

D-1-1

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ANNEX E (SECTION 4.1(A))
TO
CREDIT AGREEMENT

 

FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING

 

Borrower shall deliver or cause to be delivered to Agent (with sufficient copies
for each Lender other than Black Diamond International Funding Ltd. (“Black
Diamond”)) and Agent shall forward to each Lender, as indicated, the following:

 

(a)                                  Net Cash Flow Forecast.  To Agent and Black
Diamond, on or prior to 10:00 a.m. (New York time) on each Monday, an updated
net cash flow forecast showing Borrower’s cumulative actual and forecasted cash
receipts and cash disbursements for the period from the Closing Date, together
with the actual variance for such period and such other information as may be
reasonably requested by Agent and Black Diamond, in form and satisfactory
reasonably satisfactory to Agent and Black Diamond.

 

(b)                                 Monthly Financials.  To Agent and Black
Diamond, within thirty (30) days after the end of each Fiscal Month, financial
information regarding Borrower and its Subsidiaries, certified by the Principal
Financial Officer of Borrower, consisting of consolidated (i) unaudited balance
sheets as of the close of such Fiscal Month and the related statements of income
and cash flows for that portion of the Fiscal Year ending as of the close of
such Fiscal Month; (ii) unaudited statements of income and cash flows for such
Fiscal Month, setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments); and (iii) a summary of the outstanding balance
of all Intercompany Notes as of the last day of that Fiscal Month.  Such
financial information shall be accompanied by (A) a statement in reasonable
detail (each, a “Compliance Certificate” showing the calculations used in
determining compliance with each of the Financial Covenants that is tested on a
monthly basis and (B) the certification of the Principal Financial Officer of
Borrower that (i) such financial information presents fairly in all material
respects in accordance with GAAP (subject to normal year-end adjustments) the
financial position and results of operations of Borrower and its Subsidiaries,
on a consolidated basis, in each case as at the end of such Fiscal Month and for
that portion of the Fiscal Year then ended and (ii) any other information
presented is true, correct and complete in all material respects and that to his
knowledge there was no Default or Event of Default in existence as of such time
or, if a Default or Event of Default has occurred and is continuing, describing
the nature thereof and all efforts undertaken to cure such Default or Event of
Default.

 

(c)                                  Quarterly Financials.  To Agent and Black
Diamond, within forty-five (45) days after the end of each Fiscal Quarter,
consolidated financial information regarding Borrower and its Subsidiaries,
certified by the Principal Financial Officer of Borrower, including (i)
unaudited balance sheets as of the close of such Fiscal Quarter (including a
balance sheet for each Credit Party) and the related statements of income and
cash flow for that portion of the Fiscal Year ending as of the close of such
Fiscal Quarter and (ii) unaudited statements of income and cash flows for such
Fiscal Quarter, in each case setting forth in comparative form the figures for
the corresponding period in the prior year and the figures contained in the
Projections for

 

E-1

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such Fiscal Year, all prepared in accordance with GAAP (subject to normal
year-end adjustments).  Such financial information shall be accompanied by the
certification of the Principal Financial Officer of Borrower that (A) such
financial information presents fairly in all material respects in accordance
with GAAP (subject to normal year-end adjustments) the financial position,
results of operations and statements of cash flows of Borrower and its
Subsidiaries, on a consolidated basis, as at the end of such Fiscal Quarter and
for that portion of the Fiscal Year then ended and (B) any other information
presented is true, correct and complete in all material respects and that there
was no Default or Event of Default in existence as of such time or, if a Default
or Event of Default has occurred and is continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default.  In
addition, Borrower shall deliver to Agent and Black Diamond, within forty-five
(45) days after the end of each Fiscal Quarter, a management discussion and
analysis that includes a comparison to budget for that Fiscal Quarter and a
comparison of performance for that Fiscal Quarter to the corresponding period in
the prior year.

 

(d)                                 Operating Plan. To Agent and Black Diamond,
as soon as available, but not later than thirty (30) days prior to the beginning
of each Fiscal Year, an annual operating plan for Borrower, on a consolidated
and consolidating basis approved by the Board of Directors of Borrower, for such
Fiscal Year, which (i) includes a statement of all of the material assumptions
on which such plan is based, (ii) includes monthly balance sheets, income
statements and statements of cash flows for the following year and
(iii) integrates sales, gross profits, operating expenses, operating profit,
cash flow projections and Borrowing Availability and Export-Related Borrowing
Availability projections, all prepared on the same basis and in similar detail
as that on which operating results are reported (and in the case of cash flow
projections, representing management’s good faith estimates of future financial
performance based on historical performance), and including plans for personnel,
Capital Expenditures and facilities.

 

(e)                                  Annual Audited Financials. To Agent and
Black Diamond, within ninety (90) days after the end of each Fiscal Year,
audited Financial Statements for Borrower and its Subsidiaries on a consolidated
basis, consisting of balance sheets and statements of income and retained
earnings and cash flows, setting forth in comparative form in each case the
figures for the previous Fiscal Year, which Financial Statements shall be
prepared in accordance with GAAP and certified without qualification, by
Deloitte and Touche, LLP or another independent certified public accounting firm
of national standing or otherwise reasonably acceptable to Agent and Black
Diamond.  Such Financial Statements shall be accompanied by (i) a statement
prepared by the Principal Financial Officer in reasonable detail showing the
calculations used in determining compliance with each of the Financial
Covenants, (ii) a report from such accounting firm to the effect that, in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has occurred (or
specifying those Defaults and Events of Default that they became aware of), it
being understood that such audit examination extended only to accounting matters
and that no special investigation was made with respect to the existence of
Defaults or Events of Default, (iii) the annual letters to such accountants in
connection with their audit examination detailing contingent liabilities and
material litigation matters, and (iv) the certification of the President or
Principal Financial Officer of Borrower that all such Financial Statements
present fairly in all material respects in accordance with GAAP the financial
position, results of operations and statements of cash flows of Borrower and its
Subsidiaries on a consolidated basis, as at the end of such Fiscal Year and

 

E-2

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for the period then ended, and that to his knowledge there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.

 

(f)                                    Management Letters.  To Agent and Black
Diamond, within five (5) Business Days after receipt thereof by any Credit
Party, copies of all management letters, exception reports or similar letters or
reports received by such Credit Party from its independent certified public
accountants.

 

(g)                                 Default Notices.  To Agent and Black
Diamond, as soon as practicable, and in any event within five (5) Business Days
after an executive officer of Borrower has actual knowledge of the existence of
any Default, Event of Default or other event that has had a Material Adverse
Effect, telephonic or telecopied notice specifying the nature of such Default or
Event of Default or other event, including the anticipated effect thereof, which
notice, if given telephonically, shall be promptly confirmed in writing on the
next Business Day.

 

(h)                                 SEC Filings and Press Releases.  To Agent
and Black Diamond, promptly upon their becoming available, copies of:  (i) all
Financial Statements, reports, notices and proxy statements made publicly
available by any Credit Party to its security holders; (ii) all regular and
periodic reports and all registration statements and prospectuses, if any, filed
by any Credit Party with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority; and
(iii) all press releases and other statements made available by any Credit Party
to the public concerning material changes or developments in the business of any
such Person.

 

(i)                                     Senior Note Documents and Equity
Notices.  To Agent and Black Diamond, as soon as practicable, copies of all
material written notices given or received by any Credit Party with respect to
the Senior Note Documents or Stock of such Person, and, within two (2) Business
Days after any Credit Party obtains knowledge of any matured or unmatured event
of default or termination event with respect to any Senior Note Document, notice
of such event of default or termination event.

 

(j)                                     Supplemental Schedules.  From time to
time as may be reasonably requested by Agent (which request will not be made
more frequently than once each year absent the occurrence and continuance of a
Default or an Event of Default), supplements to each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify the term “Disclosure Schedule” as used herein or
any representation with respect thereto, or be or be deemed a waiver of any
Default or Event of Default resulting from the matters disclosed therein, except
as consented to by Agent and Requisite Lenders in writing, and (b) no

 

E-3

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supplement shall be required or permitted as to representations and warranties
that relate solely to the Closing Date.

 

(k)                                  Litigation.  To Agent and Black Diamond in
writing, promptly upon obtaining knowledge thereof, notice of any Litigation
commenced or threatened in writing against any Credit Party that (i) seeks
damages in excess of $100,000, (ii) seeks injunctive relief, (iii) is asserted
or instituted against any Plan, its fiduciaries or its assets or against any
Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges
criminal misconduct by any Credit Party, (v) alleges the violation of any law
regarding, or seeks remedies in connection with, any Environmental Liabilities
or (vi) involves any product recall.

 

(l)                                     Insurance Notices.  To Agent, disclosure
of losses or casualties required by Section 5.4.

 

(m)                               Lease Default Notices.  To Agent, within two
(2) Business Days after receipt thereof, copies of (i) any and all default
notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Agent may reasonably request.

 

(n)                                 Lease Amendments.  To Agent, within two (2)
Business Days after receipt thereof, copies of all material amendments to any
real estate leases.

 

(o)                                 Other Documents.  To Agent and Lenders, such
other financial and other information respecting any Credit Party’s business or
financial condition as Agent or any Lender shall from time to time reasonably
request.

 

(p)                                 Bankruptcy Matters.  Copies of all monthly
reports, projections, or other information respecting Borrower’s or any
Subsidiary of Borrower’s business or financial condition or prospects as well as
all pleadings, motions, applications and judicial information filed by or on
behalf of Borrower or any other Credit Party filing a Chapter 11 Case with the
Bankruptcy Court or provided by or to the U.S. Trustee (or any monitor or
interim receiver, if any, appointed in the Chapter 11 Cases) or the Committee,
at the time such document is filed with the Bankruptcy Court, or provided by or,
to the U.S. Trustee (or any monitor or interim receiver, if any, appointed in
the Chapter 11 Cases) or the Committee.

 

E-4

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ANNEX F (SECTION 4.1(B))
TO
CREDIT AGREEMENT

 

COLLATERAL REPORTS

 

Borrower shall deliver or cause to be delivered the following:

 

(a)                                  To Agent and Black Diamond, upon their
request, and in any event no less frequently than ten (10) Business Days after
the end of each Fiscal Month (together with a copy of all or any part of the
following reports requested by any Lender in writing after the Closing Date),
each of the following reports, each of which shall be prepared by Borrower as of
the last day of the immediately preceding Fiscal Month or the date two (2) days
prior to the date of any such request:

 

(i)                                     with respect to Borrower and AET Canada,
a summary of Inventory by location and type with a supporting perpetual
Inventory report, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion; and

 

(ii)                                 with respect to Borrower and AET Canada, a
monthly trial balance showing Accounts outstanding aged by due date as follows: 
one (1) to thirty (30) days past due, thirty one (31) to sixty (60) days past
due, sixty one (61) to ninety (90) days and ninety one (91) days or more past
due, accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion.

 

(b)                                 To Agent and Black Diamond, promptly
following their request therefor, and in any event no less frequently than by
3:00 p.m. (New York time) on Friday of every other week, a Borrowing Base
Certificate with respect to Borrower and AET Canada accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion and prepared by Borrower as of such Friday or the date
which is two (2) days prior to the date of any such request, as the case may be.

 

(c)                                  To Agent and Black Diamond, at the time of
delivery of each of the monthly Financial Statements delivered pursuant to Annex
E:

 

(i)                                     a reconciliation of the Accounts trial
balance of Borrower to Borrower’s most recent Borrowing Base Certificate,
general ledger and monthly Financial Statements delivered pursuant to Annex E,
in each case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;

 

(ii)                                  a reconciliation of the perpetual
inventory by location of Borrower to Borrower’s most recent Borrowing Base
Certificate, general ledger and monthly Financial Statements delivered pursuant
to Annex E, in each case accompanied by such supporting detail and documentation
as shall be requested by Agent in its reasonable discretion; and

 

F-1

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(iii)                               a reconciliation of the outstanding Loans as
set forth in the monthly Loan Account statement provided by Agent to Borrower’s
general ledger and monthly Financial Statements delivered pursuant to Annex E,
in each case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;

 

(d)                                 To Agent and Black Diamond, at the time of
delivery of each of the quarterly Financial Statements delivered pursuant to
Annex E, an aging of accounts payable, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;

 

(e)                                  To Agent and Black Diamond, at the time of
delivery of each of the annual Financial Statements delivered pursuant to Annex
E, (i) a listing of government contracts of Borrower subject to the Federal
Assignment of Claims Act of 1940; and (ii) a list of any applications for the
registration of any Patent, Trademark or Copyright filed by any Credit Party
with the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency in the prior Fiscal Quarter;

 

(f)                                    Borrower, at its own expense, shall
deliver to Agent the results of each physical verification, if any, that
Borrower or any of its Subsidiaries may in their discretion have made, or caused
any other Person to have made on their behalf, of all or any portion of their
Inventory (and, if a Default or an Event of Default has occurred and is
continuing, Borrower shall, upon the request of Agent, conduct, and deliver the
results of, such physical verifications as Agent may require);

 

(g)                                 Borrower, at its own expense, shall deliver
to Agent such appraisals of its assets as Agent may request such appraisals to
be conducted by an appraiser, and in form and substance reasonably satisfactory
to Agent; provided that Borrower shall not be liable for the cost of more than
one appraisal per year from the date of this Agreement unless there exists a
Default or an Event of Default; and

 

(h)                                 Such other reports, statements and
reconciliations with respect to the Borrowing Base, Collateral or Obligations of
any or all Credit Parties as Agent shall from time to time request in its
reasonable discretion.

 

F-2

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

 

ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT

 

FINANCIAL COVENANTS

 

Borrower shall not breach or fail to comply with any of the following financial
covenants, each of which shall be calculated in accordance with GAAP
consistently applied:

 

(a)                                  Maximum Senior Leverage Ratio.  Borrower
and its Subsidiaries shall have on a consolidated basis at the end of each
Fiscal Month set forth below, a Senior Leverage Ratio for the 12-month period
then ended of not more than the following:

 

Fiscal Month ending

 

Maximum Senior Leverage Coverage Ratio

 

 

 

 

 

December 31, 2004

 

5.50:1.00

 

January 31, 2005

 

5.50:1.00

 

February 28, 2005

 

5.50:1.00

 

March 31, 2005

 

5.50:1.00

 

April 30, 2005

 

5.50:1.00

 

May 31, 2005

 

5.50:1.00

 

June 30, 2005

 

5.50:1.00

 

July 31, 2005

 

5.50:1.00

 

August 31, 2005

 

5.50:1.00

 

September 30, 2005

 

5.50:1.00

 

 

(b)                                 Minimum Fixed Charge Coverage Ratio. 
Borrower and its Subsidiaries shall have on a consolidated basis at the end of
each Fiscal Month set forth below, a Fixed Charge Coverage Ratio for the
12-month period then ended of not less than the following:

 

Fiscal Month ending

 

Minimum Fixed Charge Coverage Ratio

 

 

 

 

 

December 31, 2004

 

1.72:1.00

 

January 31, 2005

 

1.45:1.00

 

February 28, 2005

 

1.36:1.00

 

March 31, 2005

 

1.32:1.00

 

April 30, 2005

 

1.25:1.00

 

May 31, 2005

 

1.24:1.00

 

June 30, 2005

 

1.19:1.00

 

July 31, 2005

 

1.24:1.00

 

August 31, 2005

 

1.32:1.00

 

September 30, 2005

 

1.64:1.00

 

 

(c)                                  Minimum EBITDA.   Borrower and its
Subsidiaries on a consolidated basis shall have, at the end of each Fiscal Month
set forth below, EBITDA for the 12-month period then ended of not less than the
following:

 

G-1

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

 

Fiscal Month ending

 

Minimum EBITDA

 

 

 

 

 

December 31, 2004

 

$

21,303,000

 

January 31, 2005

 

$

18,928,000

 

February 28, 2005

 

$

18,264,000

 

March 31, 2005

 

$

18,228,000

 

April 30, 2005

 

$

18,451,000

 

May 31, 2005

 

$

19,185,000

 

June 30, 2005

 

$

19,586,000

 

July 31, 2005

 

$

20,244,000

 

August 31, 2005

 

$

21,221,000

 

September 30, 2005

 

$

23,426,000

 

 

(d)                                 Net Cash Flow.  For any month, on a
cumulative basis for the period commencing on November 29, 2004 and ending on
the date set forth in the table below, Borrower and its Subsidiaries on a
consolidated basis shall have “Net Cash Flow” (as such term is referenced for
such period in the Net Cash Flow Forecast), of not less than the following:

 

Month ending

 

Net Cash Flow

 

 

 

 

 

December 31, 2004

 

$

(4,336,000

)

January 28, 2005

 

$

(3,899,000

)

February 25, 2005

 

$

(8,512,000

)

March 31, 2005

 

$

(6,313,000

)

April 30, 2005

 

$

(12,412,000

)

May 31, 2005

 

$

(9,812,000

)

June 30, 2005

 

$

(5,012,000

)

July 31, 2005

 

$

(5,912,000

)

August 31, 2005

 

$

1,016,000

 

September 30, 2005

 

$

4,302,000

 

 

(e)                                  Minimum Borrowing Availability.  From and
after the date of entry of the Final Order, Borrower shall have Borrowing
Availability of at least (i) $2,500,000 on the date of entry of the Final Order
and at any time the Applicable Margins are at Level V as set forth in the grid
in Section 1.5 of the Agreement and (ii) $5,000,000 at any time the Applicable
Margins are at Level VI as set forth in the grid in Section 1.5 of the
Agreement.

 

Unless otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied.  That certain items or computations are
explicitly modified by the phrase ‘in accordance with GAAP’ shall in no way be
construed to limit the foregoing.  If any ‘Accounting Changes’ (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that

 

G-2

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

 

the criteria for evaluating Borrower’s and its Subsidiaries’ financial condition
shall be the same after such Accounting Changes as if such Accounting Changes
had not been made; provided, however, that the agreement of Requisite Lenders to
any required amendments of such provisions shall be sufficient to bind all
Lenders.  ‘Accounting Changes’ means (i) changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (ii) changes in accounting principles concurred in by Borrower’s
certified public accountants; (iii) purchase accounting adjustments under A.P.B.
16 or 17 and EITF 88-16, and the application of the accounting principles set
forth in FASB 109, including the establishment of reserves pursuant thereto and
any subsequent reversal (in whole or in part) of such reserves; and (iv) the
reversal of any reserves established as a result of purchase accounting
adjustments.  All such adjustments resulting from expenditures made subsequent
to the Closing Date (including capitalization of costs and expenses or payment
of pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made and deducted as part of the calculation of EBITDA in such
period.  If Agent, Borrower and Requisite Lenders agree upon the required
amendments, then after appropriate amendments have been executed and the
underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in the Agreement or in any other Loan Document
shall, only to the extent of such Accounting Change, refer to GAAP, consistently
applied after giving effect to the implementation of such Accounting Change.  If
Agent, Borrower and Requisite Lenders cannot agree upon the required amendments
within 30 days following the date of implementation of any Accounting Change,
then all Financial Statements delivered and all calculations of financial
covenants and other standards and terms in accordance with the Agreement and the
other Loan Documents shall be prepared, delivered and made without regard to the
underlying Accounting Change.  For purposes of Section 8.1, a breach of a
Financial Covenant contained in this Annex G shall be deemed to have occurred as
of any date of determination by Agent or as of the last day of any specified
measurement period, regardless of when the Financial Statements reflecting such
breach are delivered to Agent.

 

G-3

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ANNEX H (SECTION 9.9(A))
TO
CREDIT AGREEMENT

 

WIRE TRANSFER INFORMATION

 

Name:

General Electric Capital Corporation

Bank:

Deutsche Bank Trust Company Americas

 

New York, New York

ABA #:

021001033

Account #:

50232854

Account Name:

GECC/CAF Depository

Reference:

Applied Extrusion Technologies

 

H-1

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

 

ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT

 

NOTICE ADDRESSES

 

(A)                              If to Agent or GE Capital, at

General Electric Capital Corporation

401 Merritt Seven, 2nd Floor

Norwalk, Connecticut 06856

Attention: Jim Kaufman, Applied Extrusion Technologies, Inc, Account Manager

Telecopier No.: 203-229-1992

Telephone No.: 203-229-1832

 

and to:

 

General Electric Capital Corporation

335 Madison Avenue

12th Floor

New York, New York 10017

Attention:  Applied Extrusion Technologies, Inc, Account Manager

Telecopier No.: 212-309-8798

Telephone No.: 212-370-8035

 

and, with respect to any Default or Event of Default, to:

 

Paul, Hastings, Janofsky & Walker LLP

600 Peachtree Street N.E.,

Atlanta, GA 30308

Attention: Jesse H. Austin, III

Telecopier No.: 404-815-2424

Telephone No.: 404-815-2400

 

and

 

Paul, Hastings, Janofsky & Walker LLP

1055 Washington Boulevard

Stamford, Connecticut 06901

Attention: Leslie A. Plaskon

Telecopier No.: 203-674-7620

Telephone No.: 203-961-7420

 

and

 

General Electric Capital Corporation

 

I-1

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

 

401 Merritt Seven, 2nd Floor

Norwalk, Connecticut 06856

Attention:  Corporate Counsel – Commercial Industrial Finance

Telecopier No.: 203-229-1991

Telephone No.: 203-229-1923

 

and

 

General Electric Capital Corporation

401 Merritt Seven, 2nd Floor

Norwalk, Connecticut 06856

Attention:  Corporate Counsel - Commercial Finance

Telecopier No.: 203-373-3008

Telephone No.:  203-956-4383

 

(B)                                If to Borrower, at

Applied Extrusion Technologies, Inc.

15 Read’s Way

New Castle, Delaware 19720

Attention: Brian Crescenzo

Telecopier No.: (302) 326-5561

Telephone No.: (302) 326-5525

 

and, with respect to any Default or Event of Default, to:

 

Shearman & Sterling LLP

599 Lexington Avenue

New York, New York 10022

Attention: Douglas P. Bartner

Telecopier No.: 646-848-8190

Telephone No.: 212-848-4000

 

and

 

Sutherland Asbill & Brennan LLP

153 East 53rd Street

New York, New York 10022

Attention: Jeffrey L. Dunetz

Telecopier No.: 212-389-5040

Telephone No.: 212-389-5099

 

I-2

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

 

ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)
TO
CREDIT AGREEMENT

 

 

 

Lender(s)

 

Revolving Loan Commitment

 

 

 

(including a Swing Line Commitment

 

 

 

of $5,000,000 an Export-Related

 

 

 

Loan Commitment of $5,000,000

 

 

 

and a Letter of Credit Commitment

 

 

 

of up to $10,000,000):

 

 

 

$55,000,000

 

General Electric Capital Corporation

 

 

 

 

 

Term Loan Commitment:
$42,500,000

 

 

 

 

 

 

 

Last Out Term Loan Commitment:
$20,000,000

 

 

 

 

 

 

 

Term Loan Commitment:
$7,500,000

 

Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services,
Inc.

 

 

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