Exhibit 10.6

 

TERM LOAN AGREEMENT

 

 

made and entered into

 

as of September 26, 2006

 

by and among

 

 

WALCO INTERNATIONAL, INC.

a Delaware corporation,

 

 

EACH OF THE CREDIT PARTIES WHICH IS NOW OR HEREAFTER A GUARANTOR HEREUNDER FROM
TIME TO TIME,

 

 

EACH OF THE FINANCIAL INSTITUTIONS WHICH IS

A SIGNATORY HERETO OR

WHICH MAY FROM TIME TO TIME

BECOME A PARTY HERETO,

 

and

 

WILMINGTON TRUST COMPANY,
 as Administrative Agent for such Financial Institutions

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

1.

Definitions

1

 

 

 

 

1.1

Certain Defined Terms

1

 

 

 

 

 

1.2

Accounting Terms and Determinations

22

 

 

 

 

 

1.3

UCC and PPSA Changes

24

 

 

 

 

2.

Term Loans; Term Notes; Payments; Prepayments; Interest Rates

24

 

 

 

 

 

2.1

Term Loan Commitments

24

 

 

 

 

 

2.2

Term Loans

24

 

 

 

 

 

2.3

Mandatory and Voluntary Prepayments

25

 

 

 

 

 

2.4

Term Notes; Payments

26

 

 

 

 

 

2.5

Application of Payments and Prepayments

27

 

 

 

 

 

2.6

Interest Rates for Term Loans

28

 

 

 

 

 

2.7

Special Provisions Applicable to LIBOR Borrowings

28

 

 

 

 

 

2.8

Pro-Rata Treatment

31

 

 

 

 

 

2.9

Sharing of Payments, Etc.

31

 

 

 

 

 

2.10

Recapture

32

 

 

 

 

3.

Collateral

32

 

 

 

 

 

3.1

Security Documents

32

 

 

 

 

 

3.2

Filing and Recording

33

 

 

 

 

4.

Conditions

33

 

 

 

 

5.

Representations and Warranties

33

 

 

 

 

 

5.1

Organization

36

 

 

 

 

 

5.2

Financial Statements

36

 

 

 

 

 

5.3

Enforceable Obligations; Authorization

37

 

 

 

 

 

5.4

Other Debt

37

 

 

 

 

 

5.5

Litigation

37

 

 

 

 

 

5.6

Taxes

37

 

 

 

 

 

5.7

No Material Misstatements

38

 

 

 

 

 

5.8

Subsidiaries

38

 

 

 

 

 

5.9

Representations by Others

38

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

 

5.10

Permits, Licenses, Etc.

38

 

 

 

 

 

5.11

ERISA

38

 

 

 

 

 

5.12

Title to Properties; Possession Under Leases

39

 

 

 

 

 

5.13

Assumed Names

39

 

 

 

 

 

5.14

Investment Company Act

39

 

 

 

 

 

5.15

Public Utility Holding Company Act

39

 

 

 

 

 

5.16

Agreements

40

 

 

 

 

 

5.17

Environmental Matters

40

 

 

 

 

 

5.18

Solvency

40

 

 

 

 

 

5.19

Status of Collateral

41

 

 

 

 

 

5.20

Revolving Credit Agreement Debt and Second Lien Debt Documents

41

 

 

 

 

 

5.21

Transactions with Related Parties

41

 

 

 

 

 

5.22

Patents, Trademarks and Copyrights

42

 

 

 

 

6.

Affirmative Covenants

42

 

 

 

 

 

6.1

Businesses and Properties

42

 

 

 

 

 

6.2

Taxes

42

 

 

 

 

 

6.3

Financial Statements and Information

43

 

 

 

 

 

6.4

Inspections; Field Examinations; Appraisals and Physical Counts

44

 

 

 

 

 

6.5

Further Assurances

45

 

 

 

 

 

6.6

Books and Records

45

 

 

 

 

 

6.7

Insurance

45

 

 

 

 

 

6.8

ERISA

46

 

 

 

 

 

6.9

Use of Proceeds

46

 

 

 

 

 

6.10

Guarantors, Joinder Agreements

47

 

 

 

 

 

6.11

Notice of Events

47

 

 

 

 

 

6.12

Environmental Matters

48

 

 

 

 

 

6.13

End of Fiscal Year

49

 

 

 

 

 

6.14

Pay Obligations and Perform Other Covenants

49

 

 

 

 

 

6.15

Cash Dominion; Collection and Application of Accounts

49

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

 

6.16

Accounts and Other Collateral Matters

50

 

 

 

 

 

6.17

Agreements

50

 

 

 

 

7.

Negative Covenants

51

 

 

 

 

 

7.1

Indebtedness

51

 

 

 

 

 

7.2

Liens

53

 

 

 

 

 

7.3

Contingent Liabilities

55

 

 

 

 

 

7.4

Mergers, Consolidations and Dispositions and Acquisitions of Assets

55

 

 

 

 

 

7.5

Nature of Business

57

 

 

 

 

 

7.6

Transactions with Related Parties

58

 

 

 

 

 

7.7

Investments, Loans

58

 

 

 

 

 

7.8

ERISA Compliance

58

 

 

 

 

 

7.9

Change in Accounting Method

59

 

 

 

 

 

7.10

Redemption, Dividends, Issuance of Equity Interests, Distributions and
Restricted Payments

59

 

 

 

 

 

7.11

Fixed Charge Coverage Ratio

60

 

 

 

 

 

7.12

Capital Expenditures

60

 

 

 

 

 

7.13

Sale of Accounts

61

 

 

 

 

 

7.14

Sale and Lease-Back Transactions

61

 

 

 

 

 

7.15

Change of Name or Place of Business

61

 

 

 

 

 

7.16

Restrictive Agreements

61

 

 

 

 

 

7.17

Modification or Waiver of Documents Governing Second Lien Debt

61

 

 

 

 

 

7.18

Anti-Terrorism Laws

61

 

 

 

 

8.

Events of Default and Remedies

62

 

 

 

 

 

8.1

Events of Default

62

 

 

 

 

 

8.2

Remedies Cumulative

65

 

 

 

 

9.

The Agent

65

 

 

 

 

 

9.1

Appointment, Powers and Immunities

65

 

 

 

 

 

9.2

Reliance

66

 

 

 

 

 

9.3

Defaults

66

 

 

 

 

 

9.4

Rights as a Lender

66

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

 

9.5

Indemnification

67

 

 

 

 

 

9.6

Non-Reliance on Agent and Other Lenders

67

 

 

 

 

 

9.7

Failure to Act

68

 

 

 

 

 

9.8

Resignation or Removal of Agent

68

 

 

 

 

10.

Miscellaneous

68

 

 

 

 

 

10.1

No Waiver

68

 

 

 

 

 

10.2

Notices

68

 

 

 

 

 

10.3

Governing Law

69

 

 

 

 

 

10.4

Survival; Parties Bound

69

 

 

 

 

 

10.5

Counterparts

69

 

 

 

 

 

10.6

Limitation of Interest

69

 

 

 

 

 

10.7

Survival

70

 

 

 

 

 

10.8

Captions

70

 

 

 

 

 

10.9

Expenses, Etc.

70

 

 

 

 

 

10.10

Indemnification

71

 

 

 

 

 

10.11

Amendments, Waivers, Etc.

72

 

 

 

 

 

10.12

Successors and Assigns

74

 

 

 

 

 

10.13

Entire Agreement

77

 

 

 

 

 

10.14

Severability

77

 

 

 

 

 

10.15

Disclosures

77

 

 

 

 

 

10.16

Capital Adequacy

77

 

 

 

 

 

10.17

Taxes

78

 

 

 

 

 

10.18

Waiver of Claims

80

 

 

 

 

 

10.19

Right of Setoff

80

 

 

 

 

 

10.20

Waiver of Right to Jury Trial

81

 

 

 

 

 

10.21

Additional Provisions Regarding Collection of Accounts and other Collateral

81

 

 

 

 

 

10.22

Construction

82

 

 

 

 

 

10.23

Joint and Several Obligations

82

 

 

 

 

 

10.24

USA Patriot Act

83

 

iv

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

 

10.25

Confidentiality

83

 

v

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TERM LOAN AGREEMENT

 

THIS TERM LOAN AGREEMENT (together with all amendments, modifications and
supplements hereto and restatements hereof, this “Agreement”) is made and
entered into as of September 26, 2006 by and among WALCO INTERNATIONAL, INC.
(“Borrower”), a Delaware corporation, EACH OF THE CREDIT PARTIES WHICH IS NOW OR
HEREAFTER A GUARANTOR HEREUNDER, EACH OF THE FINANCIAL INSTITUTIONS WHICH IS A
SIGNATORY HERETO OR WHICH MAY FROM TIME TO TIME BECOME A PARTY HERETO
(individually, a “Lender” and collectively, the “Lenders”) and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as Administrative Agent for the Lenders
(in such capacity, together with its successors and assigns, the “Agent”).

 

W I T N E S S E T H:

 

THAT, in consideration of the mutual covenants, agreements and undertakings
herein contained, the parties hereto agree as follows:

 

1.                                       Definitions.

 

1.1                                 Certain Defined Terms.  Unless a particular
word or phrase is otherwise defined or the context otherwise requires,
capitalized words and phrases used in the Loan Documents have the meanings
provided below.

 

Accounts shall have the meaning set forth in Article 9 of the UCC and in the
PPSA.

 

Adjusted LIBO Rate shall mean, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the sum of (a) the product of (i) the LIBO Rate in
effect for such Interest Period and (ii) Statutory Reserves and (b) the
Applicable Margin.

 

Affiliate of any Person shall mean any other Person which controls or is
controlled by or under common control with such Person.  For purposes of this
definition, “control” (including “controlled by” and “under common control
with”) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person through the
ownership of securities or by contract; provided that no Lender shall be an
Affiliate of the Borrower. Without limiting the generality of the foregoing,
control of the right to vote of five percent (5%) or more of all voting
securities of a Person or beneficial ownership of five percent (5%) of the
outstanding equity interests in such Person shall be deemed to be control for
purposes of compliance with the provisions of Section 7.6 hereof; provided,
however, that with respect to any key management employees of the Borrower,
control of the right to vote of five percent (5%) or greater, but less than
fifteen percent (15%), of all voting securities of the Parent and/or the
Borrower or beneficial ownership of five percent (5%) or greater, but less than
fifteen percent (15%), of the outstanding equity interests in the Parent and/or
the Borrower by such key management employee

 

1

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shall not be deemed to be control for purposes of compliance with the provisions
of Section 7.6 hereof.

 

Agent shall have the meaning specified in the preamble to this Agreement.

 

Alternate Base Rate shall mean, for any day, a rate per annum (rounded upwards
to the nearest 1/16 of 1%) equal to the sum of (a) the greater of (i) the Prime
Rate (computed on the basis of the actual number of days elapsed over a 360-day
year) in effect on such day, and (ii) the Federal Funds Effective Rate (computed
on the basis of the actual number of days elapsed over a 360-day year) in effect
for such day plus ½ of 1% and (b) the Applicable Margin.  For purposes of this
Agreement, any change in the Alternate Base Rate due to a change in the Prime
Rate or Federal Funds Effective Rate shall be effective on the effective date of
such change in the Prime Rate or Federal Funds Effective Rate, respectively.  If
for any reason the Agent shall have determined (which determination shall be
conclusive and binding, absent manifest error) that it is unable to ascertain
the Federal Funds Effective Rate for any reason, including the inability or
failure of the Agent to obtain sufficient quotations in accordance with the
terms hereof, the Alternate Base Rate shall be determined without regard to
clause (a)(ii) until the circumstances giving rise to such inability no longer
exist.

 

Alternate Base Rate Borrowing shall mean, as of any date, that portion of the
principal balance of the Term Loans bearing interest at the Alternate Base Rate
as of such date.

 

Annual Audited Financial Statements shall mean (a) the annual financial
statements of the Credit Parties and their Subsidiaries, including all notes
thereto, which statements shall include, on a Consolidated basis, a balance
sheet as of the end of such fiscal year and a statement of operations, a
retained earnings statement and a statement of cash flows for such fiscal year,
all setting forth in comparative form the corresponding figures from the
previous fiscal year and accompanied by a report and opinion of independent
certified public accountants with an accounting firm of national standing and
with a reputation satisfactory to the Agent, which report shall not contain any
material qualification (and be without comment as to the accountants’ opinion
whether the Borrower is a “going concern” or can continue to be a “going
concern”), except that such report may contain qualification with respect to new
accounting principles mandated by the Financial Accounting Standards Board (or
its successor organization), and shall state that such financial statements, in
the opinion of such accountants, present fairly, in all material respects, the
financial position of such Person as of the date thereof and the results of its
operations and cash flows for the period covered thereby in conformity with GAAP
and (b) to the extent required by the Agent, annual consolidating financial
statements of the Credit Parties and their Subsidiaries containing a balance
sheet as of the end of such fiscal year and a statement of operations for such
fiscal year prepared in reasonable detail.  Such statements shall be accompanied
by a certificate of such accountants that in making the appropriate audit and/or
investigation in connection with such report and opinion, such accountants did
not become aware of any Default or Event of Default with respect to any of the
financial covenants set forth in Sections 7.11 and 7.12 hereof, or if in the
opinion of such accountant any such Default or Event of Default exists, a
description of the nature and status thereof.

 

2

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Applicable Lending Office shall mean, with respect to each Lender, such Lender’s
Domestic Lending Office in the case of an Alternate Base Rate Borrowing and such
Lender’s LIBOR Lending Office in the case of a LIBOR Borrowing.

 

Applicable Margin shall mean, a rate per annum of 3.00% for LIBOR Borrowings and
a rate per annum of 2.00% for Alternate Base Rate Borrowings;

 

Approved Fund shall mean any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered, advised or managed by (a) a Lender, (b) an Affiliate of a Lender
or (c) an entity or an Affiliate of an entity that administers, advises or
manages a Lender.

 

Assignment and Acceptance shall have the meaning specified in
Section 10.12(c) hereof.

 

Blocked Person shall mean (i) a Person that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order No. 13224; (ii) a
Person owned or controlled by, or acting for or on behalf of, any Person that is
listed in the annex to, or is otherwise subject to the provisions of, the
Executive Order No. 13224;  (iii) a Person or entity with which any Lender is
prohibited from dealing or otherwise engaging in any transaction by any
Anti-Terrorism Law; (iv) a Person or entity that commits, threatens or conspires
to commit or supports “terrorism” as defined in the Executive Order No. 13224; 
(v) a Person or entity that is named as a “specially designated national” on the
most current list published by the U.S. Treasury Department Office of Foreign
Asset Control at its official website or any replacement website or other
replacement official publication of such list, or (vi) a Person or entity who is
affiliated or associated with a Person or entity listed above.

 

Borrower shall have the meaning specified in the preamble of this Agreement.

 

Business Day shall mean a day when the principal office in Wilmington, Delaware
of the Agent is open for business and the Lenders’ Applicable Lending Offices
are generally open for business; provided, however, that with respect to LIBOR
Borrowings, Business Day shall also mean a day on which transactions in dollar
deposits between lenders may be carried on in the London eurodollar interbank
market.

 

Business Entity shall mean corporations, partnerships, limited liability
companies, joint ventures, joint stock associations, business trusts and other
business entities.

 

Canadian Subsidiary shall mean any Subsidiary of that is organized and domiciled
in the Canada.

 

Capital Expenditures shall mean, with respect to any Person for any period, all
capital expenditures of such Person, on a Consolidated basis, for such period
(including without limitation, the aggregate amount of Capital Lease Obligations
incurred during such period which are required to be capitalized and reported as
a liability on the consolidated balance sheet of such Person), determined in
accordance with GAAP, consistently applied.  For the avoidance of doubt, the
term “Capital Expenditures” shall not include those items described in
Section 7.4(e)(7).

 

3

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Capital Lease Obligations shall mean the obligations of a Person to pay that
portion of rent or other amounts constituting payments of principal under a
lease of (or other agreement conveying the right to use) real and/or personal
Property which obligations are required to be classified and accounted for as a
capital lease on a balance sheet of such Person under GAAP (including Statement
of Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board, as amended), provided that for purposes of this Agreement, the amount of
such obligations shall be only the capitalized amount thereof, determined in
accordance with GAAP (including such Statement No. 13).

 

Cash Dividends shall mean, with respect to any Person for any period, all fixed
and calculable cash dividend payments actually made with respect to any Equity
Interests of such Person for such period.

 

Cash Management Obligations shall mean any and all obligations and liabilities
of Borrower or any of its Subsidiaries to the Revolving Credit Agent or any of
the Revolving Credit Lenders, whether direct, indirect, joint, several, or joint
and several, arising under or in any way relating to or incurred in connection
with (a) any deposit accounts maintained by Borrower or any of its Subsidiaries
with the Revolving Credit Agent or any of the Revolving Credit Lenders or any of
their respective Affiliates, (b) any cash management services or treasury
administration services provided by the Revolving Credit Agent or any of the
Revolving Credit Lenders or any of their respective Affiliates (c) any
documentation relating thereto, or (d) any services or transactions relating
thereto, including without limitation, daylight overdraft exposure and credit
card, debit card and other similar products.

 

Change of Control shall mean the occurrence of any of the following at any time
after the Closing Date:

 

(a)           at any time prior the consummation of an initial public offering
of any Equity Interests in the Parent, Charlesbank and/or its respective
Affiliates shall fail to either (i) beneficially own in the aggregate, directly
or indirectly, more than 50% of the aggregate voting power of all issued and
outstanding classes of Equity Interests in the Parent having the right to elect
Board of Directors of the Parent, or (ii) have the right to cause enough of
their nominees in the aggregate to be elected or appointed, and remain serving
at all times as, Board of Directors of the Parent so as to constitute a majority
of such Board of Directors;

 

(b)           at any time after the consummation of an initial public offering
of any Equity Interests in the Parent, any Person and/or its respective
Affiliates shall either (i) beneficially own in the aggregate, directly or
indirectly, 35% or more of the aggregate voting power of all issued and
outstanding classes of Equity Interests in the Parent having the right to elect
Board of Directors of the Parent, or (ii) have the right to cause enough of
their nominees in the aggregate to be elected or appointed, and remain serving
at all times as, Board of Directors of the Parent so as to constitute a majority
of such Board of Directors;

 

(c)           at any time the Parent shall cease to own directly, free and clear
of all Liens (other than in favor of the Collateral Agent for the ratable
benefit of the Lenders and subordinate and inferior Liens permitted under
Section 7.2), both legal title to and beneficial

 

4

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ownership of 100% of all issued and outstanding Equity Interests of the
Borrower; provided, however, that a transfer of the legal title to and
beneficial ownership of Equity Interests of the Borrower having no more than 10%
of the aggregate voting power of all classes of Equity Interests in the Borrower
or 10% of the total economic equity interests of the Borrower to management
employees of the Borrower shall not trigger a Change of Control;

 

(d)           at any time (i) the Parent shall cease to have the right to elect,
directly or indirectly, by virtue of beneficial ownership of Equity Interests of
the Borrower, contract or otherwise, at least a majority in number of the
members of the Board of Directors of the Borrower or (ii) less than a majority
in number of the members of the Board of Directors of the Borrower shall have
been elected or appointed, directly or indirectly, by the Parent; or

 

(e)           the occurrence of a Change of Control (as defined in the Second
Lien Debt Documents).

 

As used above, “beneficially own” shall have the same meaning as defined in
Rules 13d-3 and 13d-5 of the Securities and Exchange Act of 1934, as amended, or
any successor provision thereto.

 

Charlesbank shall mean Charlesbank Equity Fund VI, Limited Partnership, a
Massachusetts limited partnership.

 

Closing Date shall mean the date on which each requirement of Section 4 is
satisfied or waived by the Agent.

 

Code shall mean the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.

 

Collateral shall mean all collateral and security as described in the Security
Documents.

 

Collateral Agent shall mean JPMorgan Chase Bank, N.A., in its capacity as the
collateral agent of the holders of the Revolving Credit Agreement Debt and the
Obligations with respect to the Collateral in accordance with and pursuant to
the terms of the First Lien Intercreditor Agreement, and any successor
collateral agent under the terms of the First Lien Intercreditor Agreement.

 

Commitment Fee, with respect to any Lender, shall have the meaning assigned to
it in Section 2.3.

 

Consequential Loss shall mean, with respect to (a) the payment of principal of
or interest on a LIBOR Borrowing on a day other than the last day of the
applicable Interest Period, (b) the failure to borrow or convert a LIBOR
Borrowing on the date specified by the Borrower for any reason, or (c) any
cessation of the Adjusted LIBO Rate to apply to the Term Loans or any part
thereof pursuant to Section 2.7 hereof, in each case whether voluntary or
involuntary, any loss, expense, penalty, premium or liability incurred by any of
the Lenders or the Agent as a result thereof, including without limitation, any
interest paid by any of the Lenders to lenders of funds borrowed by it to make

 

5

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or carry the Term Loans and any other costs and expenses sustained or incurred
in liquidating or employing deposits from third parties acquired to effect or
maintain the Term Loans.

 

Consolidated shall mean, for any Person, as applied to any financial or
accounting term, such term determined on a consolidated basis in accordance with
GAAP (except as otherwise required herein) for such Person and all Subsidiaries
thereof.

 

Contingent Obligation shall mean, as to any Person, any obligation of such
Person guaranteeing the payment or performance of any Indebtedness, leases,
dividends or other obligations (collectively “primary obligations”) of any other
Person (the “primary obligor”), whether directly or indirectly, including
without limitation, any obligation of the Person for whom Contingent Obligations
is being determined, (a) to purchase any such primary obligation or other
property constituting direct or indirect security therefor, (b) assume or
contingently agree to become or be secondarily liable in respect of any such
primary obligation, (c) to advance or supply funds (i) for the purchase or
payment of any such primary obligation or (ii) to maintain working capital or
equity capital for the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (d) to 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, or (e) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof; provided, however, that the
term “Contingent Obligation” shall not include endorsements of checks or other
negotiable instruments in the ordinary course of business.

 

Contribution Agreement shall mean any Contribution Agreement executed by and
among the Borrower and its Subsidiaries, as the same may be amended, modified,
supplemented, restated and joined in pursuant to a Joinder Agreement, from time
to time.

 

Credit Parties shall mean the Borrower and the Guarantors, and Credit Party
shall mean any one of such Persons.

 

Debt Service Expense shall mean, with respect to the Credit Parties for any
period, the aggregate of regularly scheduled principal payments of all Funded
Debt (including, without limitation, regularly scheduled principal payments of
the Term Loans and any mandatory principal payments of the Term Loans pursuant
to Section 2.3(a), but excluding any principal payments of the Revolving Loans
(as defined in the Revolving Credit Agreement) to the extent there is not an
equivalent permanent reduction in the Total Revolving Credit Commitment (as
defined in the Revolving Credit Agreement)), made or to be made by such Person
during such period, on a Consolidated basis, in accordance with GAAP,
consistently applied.  Notwithstanding the foregoing, for purposes of
calculating the Debt Service Expense for any period ending prior to the first
anniversary of the Closing Date, the component of the Debt Service Expense for
regularly scheduled principal payments of the Term Loans (but not any other
regularly scheduled principal payments of any other Funded Debt, including
without limitation, any scheduled payments of the Term Loans under
Section 2.3(a)) shall be deemed to be $450,000.

 

Default Rate shall mean, on any day, as follows: (a) with respect to principal
which is outstanding under any Term Note, the sum of the interest applicable
pursuant to the terms of this Agreement on such day plus two percent per annum
(it being understood that the Default Rate with

 

6

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respect to the applicable principal amount shall only be calculated with
reference to the applicable Adjusted LIBO Rate until the Interest Period
applicable thereto expires, and upon the expiration of such applicable Interest
Period, the Default Rate for such applicable principal amount shall be computed
on the basis of the Alternate Base Rate for such day plus two percent per
annum), and (b) with respect to accrued interest, fees and other Obligations
(other than past due principal outstanding under any Term Note), the sum of the
Alternate Base Rate for such day plus two percent per annum.

 

Discontinued Operations shall mean, as of any day, operations of any Credit
Party or any of its Subsidiaries which have been discontinued, and which, as of
such day, have been fully terminated, disposed of or liquidated.

 

Domestic Lending Office shall mean, with respect to any Lender, the office of
such Lender specified as its “Domestic Lending Office” opposite its name on the
signature pages hereof, or such other office of such Lender as such Lender may
from time to time specify to the Borrower and the Agent.

 

Domestic Subsidiary shall mean any Subsidiary of that is organized and domiciled
in the Unites States of America.

 

EBITDA shall mean, with respect to the Credit Parties for any period, Net Income
for such period plus (a) without duplication and to only the extent deducted in
determining Net Income for such period, the sum of (i) Interest Expense,
(ii) federal, state and local income or franchise taxes, (iii) all amounts
attributable to depreciation and amortization expense, (iv) any extraordinary
charges, (v) Permitted Management Fees and customary and reasonable director’s
fees and board expenses for board of directors of the Credit Parties,
(vi) amounts used to repurchase from Charlesbank and/or any of its Affiliates
the equity securities of the Parent to the extent included within Permitted
Affiliate Transactions, and (vii) any other non-cash charges (including without
limitation, (A) the issuance of restricted stock or stock options, (B) equity
losses of Affiliates that are not a Subsidiary of any Credit Party, and (C) all
charges attributable to the use of the purchase accounting method), but
excluding any non-cash charge in respect of an item that was included in Net
Income in a prior period and any non-cash charge that relates to the write-down
or write-off of Inventory, minus (b) without duplication and to the extent
included in Net Income, (i) any cash payments made during such period in respect
of non-cash charges described in clause (a)(vii) taken in a prior period and
(ii) any extraordinary gains and any non-cash items of income, in each case of
such Person for such period, computed and calculated, without duplication, on a
Consolidated basis and in accordance with GAAP, consistently applied.

 

Eligible Assignee shall mean (i) a Lender, (ii) an Affiliate of a Lender,
(iii) an Approved Fund, or (iv) any other commercial lender, finance company,
insurance company, financial institution or fund reasonably acceptable to the
Agent and the Borrower; provided, however, that if an Event of Default has
occurred and is continuing, such approval by the Borrower shall not be required.

 

Environmental Claim shall mean any third party (including any Governmental
Authority) action, lawsuit, claim or proceeding (including claims or proceedings
at common law) which seeks to impose or alleges any liability for (i) pollution
or contamination by, or releases or threatened releases

 

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of, Hazardous Substances into the air, surface water, ground water or land or
the clean-up, abatement, removal, remediation or monitoring of such pollution,
contamination or Hazardous Substances; (ii) generation, recycling, reclamation,
handling, treatment, storage, disposal or transportation of Hazardous
Substances; (iii) exposure to Hazardous Substances; (iv) the safety or health of
employees or other Persons in connection with any of the activities specified in
any other subclause of this definition; or (v) the manufacture, processing,
distribution in commerce, presence or use of Hazardous Substances.  An
“Environmental Claim” includes a common law action, as well as a proceeding to
issue, modify or terminate an Environmental Permit, or to adopt or amend a
regulation, to the extent that such a proceeding attempts to redress violations
of the applicable permit, license, or regulation as alleged by any Governmental
Authority.

 

Environmental Liabilities shall mean all liabilities arising from any
Environmental Claim or Requirement of Environmental Law under any theory of
recovery, at law or in equity, and whether based on negligence, strict liability
or otherwise, including: remedial, removal, response, abatement, restoration
(including natural resources), investigative, or monitoring liabilities,
personal injury and damage to property, natural resources or injuries to
persons, and any other related costs, expenses, losses, damages, penalties,
fines or liabilities, including attorney’s fees and court costs.  Environmental
Liability shall mean any one of them.

 

Environmental Permit shall mean any permit, license, approval or other
authorization under any applicable law or regulation of the United States or of
any state, municipality or other subdivision thereof relating to pollution or
protection of health or the environment, including laws or regulations relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, Hazardous Substances or toxic materials or wastes into ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, recycling, presence, use, treatment,
storage, disposal, transport, or handling of wastes, pollutants, contaminants or
Hazardous Substances.

 

Equipment shall have the meaning set forth in Article 9 of the UCC and in the
PPSA.

 

Equity Interests shall mean as to a Business Entity, all capital stock,
partnership interests, membership interests or other indicia of equity rights,
including without limitation, any warrants, options or other rights to acquire
such interests, issued by such Business Entity from time to time.

 

ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and all rules, regulations, rulings and interpretations
adopted by the Internal Revenue Service or the Department of Labor thereunder.

 

ERISA Affiliate shall mean any trade or business (whether or not incorporated)
which together with the Borrower or any Subsidiary of the Borrower would be
treated as a single employer under the provisions of Title I or Title IV of
ERISA.

 

Event of Default shall mean any of the events specified in Section 8.1 hereof or
otherwise specified as an Event of Default in any other Loan Document, provided
there has been satisfied any requirement in connection with any such event for
the giving of notice or the lapse of time, or both,

 

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and Default shall mean any of such events, whether or not any such requirement
for the giving of notice, or the lapse of any applicable grace or curative
period (if any), or both, has been satisfied.

 

Excess Cash Flow shall mean, for any fiscal year of the Credit Parties, the
amount, if any, of (a) the sum, without duplication, of (i) Net Income for such
fiscal year, (ii) the amount of all non-cash charges (including depreciation and
amortization, but excluding any depreciation and amortization applicable to
Discontinued Operations) deducted in arriving at such Net Income, (iii) the
aggregate net amount of non-cash loss on the disposition of property by the
Credit Parties and their Subsidiaries during such fiscal year (other than sales
of Inventory in the ordinary course of business), but only to the extent
deducted in arriving at such Net Income, (iv) equity losses during such fiscal
year attributable to Affiliates that are not a Subsidiary of any Credit Party,
but only to the extent deducted in arriving at such Net Income, and
(v) decreases, if any, in Net Working Capital as of the end of such fiscal year
when compared to Net Working Capital at the beginning of such fiscal year, minus
(b) the sum, without duplication, of (i) the amount of all non-cash credits
included in arriving at such Net Income, (ii) the aggregate amount Unfinanced
Capital Expenditures of the Credit Parties and their Subsidiaries during such
fiscal year, (iii) Debt Service Expense for such fiscal year, (iv) all optional
prepayments of the Term Loans during such fiscal year, (v) the aggregate net
amount of non-cash gain on the disposition of Property by the Credit Parties and
their Subsidiaries during such fiscal year (other than sales of Inventory in the
ordinary course of business), but only to the extent included in arriving at
such Net Income, (vi) amounts used during such fiscal year to repurchase from
Charlesbank and/or any of its Affiliates the equity securities of the Parent to
the extent included within Permitted Affiliate Transactions, but only to the
extent included in arriving at such Net Income, (vii) equity gains during such
fiscal year attributable to Affiliates that are not a Subsidiary of any Credit
Party, but only to the extent included in arriving at such Net Income,
(viii) increases, if any, in Net Working Capital as of the end of such fiscal
year when compared to Net Working Capital at the beginning of such fiscal year,
and (ix) Cash Dividends during such fiscal year to the extent permitted under
Section 7.10.

 

Excess Interest Amount shall have the meaning attributed to such term in
Section 2.14 hereof.

 

Federal Funds Effective Rate shall mean, for any day, a rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by it.

 

Financed Capital Expenditures shall mean (i) Capital Expenditures which are
financed at the time of purchase with Indebtedness otherwise permitted
hereunder, and (ii) Capital Lease Obligations to the extent the same constitute
Capital Expenditures otherwise permitted hereunder.

 

First Lien Intercreditor Agreement shall mean the Intercreditor and Collateral
Agency Agreement, dated as of the Closing Date, by and among the Borrower, the
other Credit Parties, the Agent, the Collateral Agent, and the Revolving Credit
Agent, as the same may be amended,

 

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modified, supplemented, renewed, restated or replaced in accordance with the
terms of this Agreement.

 

Fixed Charge Coverage Ratio shall mean, with respect to the Credit Parties and
their Subsidiaries for any period, the ratio of (a) EBITDA less (i) Unfinanced
Capital Expenditures less (ii) cash payments of federal, state and local income
or franchise taxes to (b) the sum of (i) Debt Service Expense, (ii) cash
Interest Expense, and (iii) Unfinanced Cash Dividends, in each case of such
Person for the applicable period, computed and calculated on a Consolidated
basis in accordance with GAAP, consistently applied and without duplication. 
All components of the Fixed Charge Coverage Ratio shall be determined (1) on a
Consolidated basis for the twelve (12) most recent consecutive calendar months
ending on or prior to the date of determination and (2) in accordance with GAAP,
consistently applied.

 

Funded Debt shall mean, as to a particular Person at any particular time, the
sum of (a) all obligations for borrowed money (whether as a direct obligor on a
promissory note, bond, debenture or other similar instrument, as a reimbursement
obligor with respect to an issued letter of credit or similar instrument, as an
obligor under a Contingent Obligation in respect of borrowed money, or as any
other type of direct or contingent obligor), and (b) all Capital Lease
Obligations (other than the interest component of such obligations), each
calculated without duplication, on a Consolidated basis, and in accordance with
GAAP.

 

GAAP shall mean, as to a particular Person, those principles and practices
(a) which are recognized as such by the Financial Accounting Standards Board or
successor organization, and (b) which are consistently applied (or with respect
to which any change in principles and practice mandated by the Financial
Accounting Standards Board or successor organization are disclosed in writing to
the Agent) for all periods after the date hereof in a manner consistent with the
manner in which such principles and practices were applied to the most recent
audited financial statements of the relevant Person furnished to the Agent and
the Lenders prior to the Closing Date (or with respect to which any change in
principles and practice mandated by the Financial Accounting Standards Board or
successor organization are disclosed in writing to the Agent).

 

Governmental Authority shall mean any foreign governmental authority, the United
States of America, any state of the United States and any political subdivision
of any of the foregoing, and any agency, instrumentality, department,
commission, board, bureau, central bank, authority, court or other tribunal, in
each case whether executive, legislative, judicial, regulatory or
administrative, having jurisdiction over the Agent, any of the Lenders, any
Credit Party, any Subsidiary of any Credit Party, or their respective Property.

 

Grantor shall mean any Grantor, Assignor, Pledgor or Debtor, as such terms are
defined in any of the Security Documents.

 

Guarantors shall mean the Parent and its Subsidiaries, other than the Borrower
and any non-Domestic Subsidiaries not required to become a Guarantor pursuant to
Section 6.10.  In no event shall Inactive Subsidiaries shall be required to
execute or join in a Guaranty or any applicable Security Agreements except as
required under the terms of Section 6.10.

 

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Guaranty shall mean each and every guaranty of the Obligations from time to time
executed and delivered to the Agent by any Guarantor, as amended, supplemented,
modified, joined in pursuant to a Joinder Agreement and restated from time to
time.

 

Hazardous Substance shall mean any hazardous or toxic waste, substance or
product or material defined or regulated by any Requirements of Environmental
Law, including solid waste (as defined under The Resource Conservation and
Recovery Act or its regulations, as amended), petroleum and any fraction thereof
and any radioactive materials and waste.

 

Hedging Obligations of a Person shall mean any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party’s assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collateral protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.

 

Highest Lawful Rate shall mean, with respect to the Agent or any Lender, the
maximum nonusurious rate of interest permitted to be charged by, as applicable,
the Agent or such Lender under applicable laws (if any) of the United States or
any state from time to time in effect.

 

Inactive Subsidiaries shall mean each of the Subsidiaries listed as inactive on
Schedule 5.8.

 

Indebtedness shall mean, as to any Person, without duplication: (a) all
indebtedness (including principal, interest, fees and charges) of such Person
for borrowed money; (b) any other indebtedness which is evidenced by a bond,
debenture or similar instrument; (c) all Capital Lease Obligations of such
Person; (d) all obligations of such Person for the deferred purchase price of
Property or services (except current trade accounts payable arising in the
ordinary course of business and current accrued expenses, not the result of
borrowing, arising in the ordinary course of business); (e) all reimbursement
obligations of such Person in respect of outstanding letters of credit,
acceptances and similar obligations created for the account of such Person;
(f) all indebtedness, liabilities, and obligations secured by any Lien on any
Property owned by such Person even though such Person has not assumed or has not
otherwise become liable for the payment of any such indebtedness, liabilities or
obligations secured by such Lien, but only to the extent of the value of the
Property subject to such Lien (or, if less, the amount of the underlying
indebtedness, liability or obligation); (g) all Cash Management Obligations of
such Person and net liabilities of such Person in respect of Hedging Obligations
(calculated on a basis satisfactory to the Agent and in accordance with accepted
practice); (h) all liabilities of such Person in respect of unfunded vested
benefits under any Plan; and (i) all other indebtedness, liabilities and
obligations of such Person which are required to be included or listed in the
liabilities section of such Person’s balance sheet according to GAAP; provided,
that such term shall not mean or include (1) any Indebtedness in respect of
which monies sufficient to pay and discharge the same in full (either on the
expressed date of maturity thereof or on such earlier date as such Indebtedness
may be duly called for redemption and payment) shall be

 

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deposited with a depository, agency or trustee acceptable to the Agent in trust
for the payment thereof, (2) any operating leases entered into in the ordinary
course of business (to the extent such operating leases do not constitute
Capital Lease Obligations) or (3) Permitted Management Fees.

 

Interest Expense shall mean, for any period, the total interest expense of the
Credit Parties and their Subsidiaries, determined on a Consolidated basis in
accordance with GAAP, consistently applied, and shall in any event include,
without limitation, (a) the amortization or write-off of debt discounts, (b) the
amortization or write-off of all debt issuance costs, commissions, discounts and
other fees payable in connection with the incurrence, amendment or refinancing
of Indebtedness (including all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers’ acceptance financing),
(c) the portion of payments under Capital Lease Obligation allocable to interest
expense, and (d) net costs under Hedging Obligations in respect of interest
rates to the extent such net costs are allocable to such period in accordance
with GAAP.

 

Interest Payment Dates shall mean (a) for Alternate Base Rate Borrowings,
(1) the last Business Day of each calendar month prior to the Term Loan Maturity
Date, and (2) the Term Loan Maturity Date; and (b) for LIBOR Borrowings, (1) if
the Interest Period applicable to such LIBOR Borrowing is equal to or less than
three (3) months, the end of such Interest Period, and (2) in all other cases,
on that day which is three (3) calendar months following the first day of the
applicable Interest Period (or, if there be no corresponding day, on the next
succeeding day which is a Business Day) and at the end of such Interest Period.

 

Interest Period shall mean the period commencing on the date of the applicable
LIBOR Borrowing and ending on the numerically corresponding day (or, if there is
no numerically corresponding day, on the last day) in the calendar month that is
three (3) months thereafter; provided, however, that (a) if an Interest Period
would end on a day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day, unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (b) no Interest Period
shall end later than the Term Loan Maturity Date, and (c) interest shall accrue
from and including the first day of an Interest Period to, but excluding, the
last day of such Interest Period.

 

Inventory shall have the meaning set forth in Article 9 of the UCC and in the
PPSA.

 

Investment shall mean the purchase or other acquisition of any securities or
Indebtedness of, or the making of any loan, advance, extension of credit,
transfer of Property or capital contribution to, or the incurring of any
Contingent Obligation in respect of the Indebtedness of, any Person.

 

Joinder Agreement shall mean any agreement, in Proper Form, executed by a
Subsidiary of any Credit Party from time to time in accordance with Section 6.10
hereof, pursuant to which such Subsidiary joins in the execution and delivery of
this Agreement, a Guaranty, the applicable Security Documents and the
Contribution Agreement.

 

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Legal Requirement shall mean any law, statute, ordinance, decree, requirement,
order, judgment, rule, regulation (or interpretation of any of the foregoing)
of, and the terms of any license or permit issued by, any Governmental
Authority.

 

Lender or Lenders shall have the meaning specified in the preamble of this
Agreement.

 

Leverage Ratio shall mean, with respect to the Credit Parties and their
Subsidiaries as of any date that the Leverage Ratio is calculated, the ratio of
(a) Funded Debt of the Credit Parties and their Subsidiaries as of such date to
(b)(i) EBITDA for the Credit Parties and their Subsidiaries for the applicable
calculation period.  For purposes of calculating the Leverage Ratio, the
components of the Leverage Ratio shall be determined on a Consolidated basis and
the EBITDA component shall be determined for the four most recent consecutive
fiscal quarters of the Credit Parties ending on or prior to the date of
determination.

 

LIBOR Borrowing shall mean, as of any date, that portion of the principal
balance of the Term Loans bearing interest at the Adjusted LIBO Rate as of such
date.

 

LIBOR Lending Office shall mean, with respect to any Lender, the office of such
Lender specified as its “LIBOR Lending Office” opposite or below its name on the
signature pages hereof, or (if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify in writing to the Borrower and the Agent.

 

LIBO Rate shall mean, with respect to any LIBOR Borrowing for any Interest
Period, an interest rate per annum equal to the rate appearing on page “BBAM 1”
of the Bloomberg Professional service (or, if no such page exists, on any
successor or substitute page providing rate quotations comparable to those
currently provided on such page of the Bloomberg Professional service, as
determined by the Agent from time to time for purposes of providing quotations
of interest rates applicable to dollar deposits in the London interbank market)
at approximately 11:00 a.m., London time, two Business Days before the
commencement of such Interest Period as the composite offered rate for dollar
deposits and for a maturity equal to the applicable Interest Period.  In the
event that such rate is not available at such time for any reason, then the
“LIBO Rate” with respect to such LIBOR Borrowing for such Interest Period shall
be the average interest rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) at which dollar deposits of $5,000,000 and for a maturity equal
to the applicable Interest Period are offered by the principal London office of
JPMorgan Chase Bank, N.A. in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days before the
commencement of such Interest Period.

 

Lien shall mean, with respect to any asset of any Person, (a) any mortgage,
pledge, charge, encumbrance, security interest, collateral assignment or other
lien or restriction of any kind on such asset, whether based on common law,
constitutional provision, statute or contract, (b) the interest of any vendor or
a lessor under any conditional sale agreement, title retention agreement or
capital lease relating to such asset, (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities, or (d) any other right of or arrangement with any creditor to

 

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have such creditor’s claim satisfied out of such assets, or the proceeds
therefrom, prior to the general creditors of such Person owning such assets.

 

Loan Documents shall mean this Agreement, the Term Notes, the Security
Documents, the Guaranties, the Contribution Agreement, the Joinder Agreements,
the First Lien Intercreditor Agreement, the Second Lien Intercreditor Agreement,
all instruments, certificates and agreements now or hereafter executed and
delivered to the Agent and/or the Lenders in connection with or pursuant to any
of the foregoing and all amendments, modifications, renewals, extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.

 

Lockbox Agreement shall collectively mean one or more lockbox agreements
required by the Collateral Agent, in Proper Form, to be executed and delivered
to the Collateral Agent by the Borrower and each of its Subsidiaries required by
the Collateral Agent, together with all modifications and/or replacements
thereof which are approved in writing by the Collateral Agent, for purposes of
facilitating the collection of Accounts in accordance with the terms of
Section 6.15 hereof.  On or prior to the Closing Date, the Borrower and each of
its applicable Subsidiaries has executed and delivered to the Collateral Agent
one or more Lockbox Agreements in Proper Form.  No Inactive Subsidiary shall be
required to execute and deliver any Lockbox Agreement unless and until such
Inactive Subsidiary is required to become a Guarantor under the terms of
Section 6.10.

 

Material Adverse Effect shall mean a material adverse effect on (a) the
business, assets, property, or condition (financial or otherwise) of the Credit
Parties taken as a whole, (b) the ability of the Credit Parties to perform or
pay the Obligations in accordance with the terms hereof or of any other Loan
Document, (c) the validity or enforceability of this Agreement, any of the Term
Notes or any other Loan Documents or the rights or remedies of the Agent or the
Lenders hereunder or thereunder, or (d) the validity or enforceability of the
Agent’s Lien on any material portion of the Collateral or the priority of such
Lien.

 

Monthly Unaudited Financial Statements shall mean the financial statements of
the Credit Parties and their Subsidiaries, including all notes thereto, which
statements shall include (a) a balance sheet as of the end of the respective
calendar month or fiscal quarter, as applicable, (b) a statement of operations
for such respective calendar month or fiscal quarter, as applicable, and for the
fiscal year to date, subject to normal year-end adjustments, all setting forth
in comparative form the corresponding figures for the corresponding period of
the preceding fiscal year and for the Credit Parties’ Consolidated projections
for such period and (c) a statement of cash flows for the fiscal year to date,
subject to normal year-end adjustments, setting forth in comparative form the
corresponding figures in the corresponding period of the preceding fiscal year
and for the Credit Parties’ Consolidated projections for such period, all
prepared in reasonable detail and in accordance with GAAP and certified by a
Responsible Officer of the Parent as fairly and accurately presenting in all
material respects the financial condition and results of operations of the
Credit Parties and their Subsidiaries, on a Consolidated basis, at the dates and
for the periods indicated therein.  The Monthly Unaudited Financial Statements
for the Credit Parties and their Subsidiaries shall be prepared on a
Consolidated basis, and to the extent required by the Agent, a consolidating
basis, the parties recognizing that such consolidating statements will be
prepared in accordance with GAAP only to the extent normal and customary.

 

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Net Income shall mean, for any period, the consolidated net income (or loss) of
the Credit Parties and their Subsidiaries, determined on a Consolidated basis in
accordance with GAAP; provided that there shall be excluded (a) the income (or
deficit) of any Person accrued prior to the date it becomes a Subsidiary of any
Credit Party or is merged into or consolidated with any Credit Party or any of
its Subsidiaries, (b) the income (or deficit) of any Person (other than a
Subsidiary of any Credit Party) in which any Credit Party or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by such Credit Party or such Subsidiary in the form
of dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of any Credit Party to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation (other than under any Loan
Document) or any Legal Requirement applicable to such Subsidiary.

 

Net Working Capital shall mean, on any date of calculation thereof, the
remainder of (a) the aggregate amount of Eligible Accounts and Eligible
Inventory (valued, in each case, at the lower of cost or fair market value on a
first-in first-out basis) as determined in accordance with GAAP consistently
applied, minus (b) the Consolidated current liabilities of all Credit Parties
determined on such date in accordance with GAAP.

 

Net Recovery Rate shall mean the “net recovery value percentage” or “net
recovery rate” under an orderly liquidation scenario for the Inventory or
Equipment, as applicable, of the applicable Credit Parties, as specifically set
forth and described in the most recent “net orderly liquidation value” appraisal
of such Inventory or Equipment, as applicable, received by and acceptable to the
Agent in all respects.

 

Obligations shall mean, without duplication, all obligations, liabilities and
Indebtedness of the Borrower and the Guarantors with respect to the Security
Documents and all other Loan Documents, including without limitation, (i) the
principal of and interest on the Term Loans and (ii) the payment or performance
of all other obligations, liabilities and Indebtedness of the Borrower or the
Guarantors to the Agent and the Lenders hereunder, under the Term Notes, or
under any one or more of the other Loan Documents, including all fees, costs,
expenses and indemnity obligations hereunder and thereunder.  The Obligations
include interest (including post-petition interest, whether or not such interest
would be an allowable claim under any applicable bankruptcy or other similar
proceeding) and other obligations accruing or arising after (a) commencement of
any case under any bankruptcy or similar laws by or against the Borrower or any
Guarantor or (b) the personal liability of the Borrower or any Guarantor for the
Obligations shall be discharged or otherwise cease to exist by operation of law
or for any other reason.

 

Officer’s Certificate shall mean a certificate substantially in the form of
Exhibit B attached hereto.

 

Organizational Documents shall mean, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a limited partnership, the limited partnership
agreement and certificate of limited partnership of such limited partnership;
with respect to a joint venture, the joint venture agreement establishing such
joint venture; with respect to a limited liability company, the articles of
organization or certificate of formation and regulations or limited liability
company agreement of such limited liability company;

 

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and with respect to a trust, the instrument establishing such trust;  in each
case including any and all modifications thereof as of the date of the Loan
Document referring to such Organizational Document and any and all future
modifications thereof which are materially adverse to the Lenders and which are
consented to by the Agent.

 

Parent shall mean collectively Animal Health International, Inc., a Delaware
corporation, Steer Intermediate Corporation, a Delaware corporation, Walco
Holdings, Inc., a Delaware corporation, and Walco Intermediate, Inc., a Delaware
corporation.  When the context of any applicable provision hereof requires that
each such entity be referred to separately and not collectively, the term Parent
shall be construed accordingly.

 

Parties shall mean all Persons other than the Agent, the Collateral Agent or any
Lender executing any Loan Documents.

 

PBGC shall mean the Pension Benefit Guaranty Corporation.

 

Permitted Affiliate Transactions shall mean any of the following: (a)
transactions with or among any Credit Party and any wholly-owned Subsidiary of
any Credit Party that is a Guarantor; (b) reasonable and customary directors’
fees, reasonable and customary directors’ indemnifications and similar
arrangements for directors and officers of the Credit Parties or any of its
Subsidiaries entered into in the ordinary course of business, together with any
payments made under any such indemnification arrangements; (c) customary and
reasonable loans and advances to officers, directors and employees of the Credit
Parties or any of their Subsidiaries for travel, entertainment, moving and other
relocation expenses, in each case made in the ordinary course of business; (d)
the incurrence of intercompany Indebtedness permitted pursuant to Section 7.1(g)
hereof; (e) Permitted Management Fees; and (f) other transactions, contracts or
agreements existing on the date of this Agreement and which are set forth on
Schedule 7.6 attached hereto, together with any renewals and extensions of such
existing transactions, contracts or agreements, so long as such renewals and
extensions are upon terms and conditions substantially identical to the terms
and conditions set forth in such existing transactions, contracts and agreements
(or otherwise no less favorable to the applicable Credit Party and its
Subsidiaries, as applicable).

 

Permitted Investment Securities shall mean each of the following, to the extent
the same is pledged as additional Collateral hereunder and is subject to a first
priority perfected Lien in favor of the Collateral Agent for the ratable benefit
of the Lenders (including a control or dominion agreement from any applicable
Person in favor of the Agent that is in all respects satisfactory to the
Agent):  (a) readily marketable, direct obligations of the United States of
America or any agency or wholly owned corporation thereof which are backed by
the full faith and credit of the United States, maturing within one (1) year
after the date of acquisition thereof, (b) certificates of deposit, commercial
paper (if rated no lower than A-1/P-1) or other short-term direct obligations of
any domestic financial institution having capital and surplus in excess of
$5,000,000,000, maturing within six months after the date of acquisition
thereof, (c) money market funds having aggregate assets in excess of
$5,000,000,000, and (d) other Investments mutually agreed to in writing by the
Borrower and the Agent.

 

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Permitted Management Fees shall mean management fees, monitoring fees and/or
service fees payable to Charlesbank and/or any of its Affiliates in an amount up
to, but not exceeding $250,000 in the aggregate during any fiscal year of the
Credit Parties, plus reimbursement to Charlesbank and/or any of its Affiliates
of reasonable and customary out-of-pocket expenses incurred in connection with
such management services provided by Charlesbank and/or any of its Affiliates,
provided that if any Event of Default has occurred and is continuing at the time
for payment of such fees or expense reimbursement, as applicable (or would occur
after giving effect thereto), such fees and expense reimbursement shall accrue
and be payable only upon the cure (or waiver) of such Event of Default.

 

Person shall mean any individual, corporation, business trust, unincorporated
organization or association, partnership, joint venture, limited liability
company, Governmental Authority or any other form of entity.

 

Plan shall mean any plan subject to Title IV of ERISA and maintained for
employees of the Borrower or of any member of a “controlled group of
corporations”, as such term is defined in the Code, of which the Borrower, any
of its Subsidiaries or any ERISA Affiliate it may acquire from time to time is a
part, or any such plan to which the Borrower, any of its Subsidiaries or any
ERISA Affiliate is required to contribute on behalf of its employees.

 

PPSA shall mean the Personal Property Security Act (Alberta), as amended.

 

Prime Rate shall mean the rate of interest per annum printed from time to time
in the Wall Street Journal as the Prime Rate in effect at such time.  Without
notice to the Borrower or any other Person, the Prime Rate shall change
automatically from time to time as and in the amount by which said Prime Rate
shall fluctuate, with each such change to be effective as of the date of each
change in such Prime Rate.

 

Principal Office shall mean the principal office in Wilmington, Delaware of the
Agent, or such other place as the Agent may from time to time by notice to the
Borrower designate.

 

Prohibited Transaction shall mean any non-exempt prohibited transaction set
forth in Section 406 of ERISA or Section 4975 of the Code.

 

Proper Form shall mean in form and substance satisfactory to the Agent, except
that as used in Section 4(g) hereof with respect to the Lenders, such term shall
mean in form and substance satisfactory to the Lenders.

 

Property shall mean any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.

 

Refinancing Indebtedness shall mean any Indebtedness of any Credit Parties or
any of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund, other Indebtedness
of such Person, provided, that:

 

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(a)                                  such Refinancing Indebtedness is incurred
only by such Persons who are obligors on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded,

 

(b)                                 the principal amount of such Refinancing
Indebtedness does not exceed the then outstanding principal amount of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded;

 

(c)                                  the interest rate or rates to accrue under
such Refinancing Indebtedness do not exceed the lesser of (i) the interest rate
or rates then accruing on the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded or (ii) the prevailing market interest rate or
rates which are then applicable to, and generally available for, Indebtedness
which is similar in type, amount, maturity and other terms to the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded;

 

(d)                                 the maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions (with respect to any
Subordinated Indebtedness), collateral security provisions (or absence thereof)
and other terms of such Refinancing Indebtedness are in each case the same or
more favorable to the applicable Credit Party and/or its applicable Subsidiaries
as those in the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded;

 

(e)                                  no Default or Event of Default has occurred
and is continuing or would result from the issuance or origination of such
Refinancing Indebtedness;

 

(f)                                    if the Indebtedness that is extended,
refinanced, renewed, replaced, defeased or refunded was subordinated in right of
payment to the Obligations and/or priority as to the Liens of the Collateral
Agent for the ratable benefit of the Lenders, then the terms and conditions of
such Refinancing Indebtedness must include subordination terms and conditions
that are at least as favorable to the Agent and the Lenders as those that were
applicable to the extended, refinanced, renewed, replaced, defeased or refunded
Indebtedness; and

 

(g)                                 if the Indebtedness being refinanced is
subject to the First Lien Intercreditor Agreement and the Second Lien
Intercreditor Agreement, such Refinancing Indebtedness is either (1) permitted
under the terms of the First Lien Intercreditor Agreement and the Second Lien
Intercreditor Agreement and will remain subject to the terms of the First Lien
Intercreditor Agreement and the Second Lien Intercreditor Agreement or (2)
subject to an intercreditor agreement on terms no less favorable to the Agent
and the Lenders as those contained in the First Lien Intercreditor Agreement and
the Second Lien Intercreditor Agreement.

 

Regulation D shall mean Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and shall include any successor or
other regulation relating to reserve requirements applicable to member Lenders
of the Federal Reserve System.

 

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Regulatory Change shall mean, with respect to any Lender, any change on or after
the date of this Agreement in any Legal Requirement (including Regulation D) or
the adoption or making on or after such date of any Legal Requirement applying
to a class of Lenders including such Lender under any Legal Requirement (whether
or not having the force of law) by any Governmental Authority charged with the
interpretation or administration thereof.

 

Reportable Event shall mean a “reportable event” as defined in Section 4043(c)
of ERISA for which the notice requirement is not waived by the regulations
thereunder.

 

Required Lenders shall mean Lenders having greater than 66.67% of the Total Term
Loan Commitment; provided that after termination of the Total Term Loan
Commitment, Required Lenders shall mean Lenders having greater than 66.67% of
the aggregate amount of the outstanding Term Loans; provided further, however,
if only two (2) Lenders are then parties to this Agreement, Required Lenders
shall mean both of such Lenders.

 

Requirements of Environmental Law shall mean all requirements imposed by any law
(including The Resource Conservation and Recovery Act, The Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water Act,
the Clean Air Act, and any state analogues of any of the foregoing), rule,
regulation, or order of any Governmental Authority which relate to (i)
pollution, protection or clean-up of the air, surface water, ground water,
soils, or subsurface strata; (ii) solid, liquid or gaseous waste or Hazardous
Substance generation, recycling, reclamation, release, threatened release,
treatment, storage, disposal or transportation; (iii) exposure of Persons or
property to Hazardous Substances; (iv) the manufacture, presence, processing,
distribution in commerce, use, discharge, releases, threatened releases, or
emissions of Hazardous Substances into the environment; or (v) the storage of
any Hazardous Substances.  Requirement of Environmental Law shall mean any one
of them.

 

Responsible Officer shall mean, with respect to any Person, the chief executive
officer, the president, any vice president, the chief financial officer, the
controller or the treasurer of such Person.

 

Revolving Credit Agent shall mean JPMorgan Chase Bank, N.A., in its capacity as
administrative agent under the Revolving Credit Agreement, and any successor
administrative agent under the terms of the Revolving Credit Agreement.

 

Revolving Credit Agreement shall mean that certain Amended and Restated Credit
Agreement, dated as of the date hereof, by and among the Credit Parties, the
Revolving Credit Lenders, JPMorgan Chase Bank, N.A., as administrative agent,
General Electric Capital Corporation, as documentation agent and J.P. Morgan
Securities Inc. as lead arranger and book runner, as amended, restated or
otherwise modified from time to time.

 

Revolving Credit Agreement Debt shall mean any indebtedness issued pursuant to
the Revolving Credit Agreement.

 

Revolving Credit Lenders shall mean the lenders party to the Revolving Credit
Agreement from time to time.

 

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Second Lien Debt shall mean the Indebtedness of the Borrower evidenced by one or
more senior secured notes issued by the Borrower, at a par value of $85,000,000
in aggregate principal amount, said senior notes to be (a) secured by a
secondary Lien against the Collateral which is in all respects inferior and
subordinate to the Collateral Agent’s Lien against the Collateral for the
ratable benefit of the Lenders and (b) due not earlier than (i) June 30, 2011
for the $40,000,000 “Loan A” portion thereof as described in the Second Lien
Debt Purchase Agreement and (ii) five (5) years after the Closing Date for the
$45,000,000 “Loan B” portion thereof as described in the Second Lien Debt
Purchase Agreement, and to otherwise be in Proper Form.

 

Second Lien Debt Documents shall mean the senior secured notes evidencing the
Second Lien Debt, the Second Lien Debt Purchase Agreement and all other
agreements, documents and instruments executed and delivered in connection
therewith, in each case as in effect (i) on June 30, 2005 for the $40,000,000
“Loan A” portion thereof as described in the Second Lien Debt Purchase
Agreement, and (ii) as of the Closing Date for the $45,000,000 “Loan B” portion
thereof as described in the Second Lien Debt Purchase Agreement, as each of the
same may be amended, modified, supplemented, renewed, restated or replaced in
accordance with the terms of this Agreement.

 

Second Lien Debt Purchase Agreement shall mean the Amended and Restated Secured
Term Loan Agreement dated effective as of the Closing Date, by and among the
Borrower, the other Credit Parties and Merrill Lynch PCG, Inc., as the initial
purchaser and holder of all of the Second Lien Debt, as the same may be amended,
modified, supplemented, renewed, restated or replaced in accordance with the
terms of this Agreement.

 

Second Lien Debt Transaction shall mean the transactions contemplated to occur
under or in connection with the Second Lien Debt Documents.

 

Second Lien Intercreditor Agreement shall mean the Amended and Restated
Intercreditor Agreement dated effective as of the Closing Date, by and among the
Borrower, the other Credit Parties, the Collateral Agent, as the representative
of the holders of the Obligations and the holders of the Obligations (as defined
in the Revolving Credit Agreement), and Merrill Lynch PCG, Inc., as the
representative of the holders of the Second Lien Debt, as the same may be
amended, modified, supplemented, renewed, restated or replaced in accordance
with the terms of this Agreement.

 

Security Agreements shall mean (a) the Amended and Restated Security Agreement
(Personal Property-Borrower), dated effective as of the Closing Date, between
the Borrower and the Collateral Agent, for the ratable benefit of the Lenders
and the Revolving Credit Lenders, covering all Accounts, Inventory, Equipment
and all other tangible and intangible personal Property of the Borrower as more
particularly described therein, (b) the Amended and Restated Security Agreement
(Personal Property-Domestic Subsidiaries), dated as of the Closing Date, between
each of the Borrower’s Domestic Subsidiaries that is a Guarantor and the
Collateral Agent, for the ratable benefit of the Lenders and the Revolving
Credit Lenders, covering all Accounts, Inventory, Equipment and other tangible
and intangible personal Property of each of the Borrower’s Domestic Subsidiaries
that is a Guarantor as more particularly described therein, as the same may
hereafter be joined in pursuant to a Joinder Agreement, (c) the Amended and
Restated Security Agreement (Personal Property-Canadian Subsidiaries), dated
effective as of the Closing Date, between each of

 

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the Borrower’s Canadian Subsidiaries that is a Guarantor and the Collateral
Agent, for the ratable benefit of the Lenders and the Revolving Credit Lenders,
covering all Accounts, Inventory, Equipment and other tangible and intangible
personal Property of each of the Borrower’s Canadian Subsidiaries that is a
Guarantor as more particularly described therein, as the same may hereafter be
joined in pursuant to a Joinder Agreement, (d) the Amended and Restated Pledge
Agreement, dated effective as of the Closing Date, between the Borrower and the
Collateral Agent, for the ratable benefit of the Lenders and the Revolving
Credit Lenders, covering (i) all issued and outstanding Equity Interests in each
of the Borrower’s direct Subsidiaries that is a Guarantor and (ii) 65% of all
issued and outstanding Equity Interests in each of the Borrower’s non-Domestic
Subsidiaries that is not a Guarantor, (e) the Amended and Restated Pledge
Agreement, dated effective as of the Closing Date, between Province Livestock
Supply, Ltd. and the Collateral Agent, for the ratable benefit of the Lenders
and the Revolving Credit Lenders, covering all issued and outstanding Equity
Interests in each of the Borrower’s Subsidiaries that is a Guarantor and for
which Province Livestock Supply, Ltd. is the parent, (f) the Amended and
Restated Pledge Agreement, dated effective as of the Closing Date, between Walco
Intermediate, Inc. and the Collateral Agent for the ratable benefit of the
Lenders and the Revolving Credit Lenders, covering all Equity Interests in the
Borrower, (g) any and all other security agreements, pledge agreements,
collateral assignments or other similar documents now or hereafter executed in
favor of the Collateral Agent, for the ratable benefit of the Lenders and the
Revolving Credit Lenders, as security for the payment or performance of any
and/or all of the Obligations, and (h) any amendment, modification, restatement
or supplement of all or any of the above-described agreements and assignments.

 

Security Documents shall mean the Security Agreements, all related financing
statements and any and all other agreements, mortgages, deeds of trust, chattel
mortgages, security agreements, pledges, guaranties, assignments of income,
assignments of contract rights, assignments or pledges of stock or partnership
interests, standby agreements, subordination agreements, undertakings and other
instruments and financing statements now or hereafter executed and delivered as
security for the payment and performance of the Obligations, as any of them may
from time to time be amended, modified, restated or supplemented. 
Notwithstanding the foregoing or any other provision herein or in any Loan
Document or any Security Document to the contrary, the real property Collateral
and the Liens of any Security Documents covering any real property Collateral
shall only secure the Obligations (as defined in the Revolving Credit Agreement)
and the Collateral Obligations (as defined in the First Lien Intercreditor
Agreement) and shall not secure any of the Obligations.

 

Statutory Reserves shall mean a fraction (expressed as a decimal), the numerator
of which is the number one and the denominator of which is the number one minus
the aggregate of the maximum reserve percentage (including without limitation,
any marginal, special, emergency or supplemental reserves) expressed as a
decimal, established by the Board of Governors of the Federal Reserve System of
the United States and any other banking authority to which any Lender is subject
with respect to the Adjusted LIBO Rate for Eurocurrency Liabilities (as defined
in Regulation D), including without limitation, those reserve percentages
imposed under Regulation D.

 

Subordinated Indebtedness shall mean, with respect to any Credit Party,
Indebtedness subordinated in right of payment to the Credit Parties’ monetary
Obligations on terms satisfactory to and approved in writing by the Agent and
the Required Lenders, in their discretion, so long as all other terms thereof
(including without limitation, regularly scheduled payments and financial and

 

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negative covenants) are satisfactory to and approved in writing by the Agent and
the Required Lenders, in their discretion.

 

Subsidiary shall mean, as to a particular parent Business Entity, any Business
Entity of which more than fifty percent (50%) of the Equity Interests issued by
such Business Entity is at the time directly or indirectly owned by such parent
Business Entity or by one or more of its Affiliates.

 

Term Loan Commitment shall mean, as to any Lender, the obligation of such Lender
to make a Term Loan in a principal amount up to, but not exceeding, the amount
set forth as such Lender’s Term Loan Commitment in Schedule 1.1 attached hereto.

 

Term Loan Commitment Percentage shall mean, with respect to any Lender, the
ratio, expressed as a percentage, of such Lender’s Term Loan Commitment to the
Total Term Loan Commitment.

 

Term Loan Maturity Date shall mean the earlier of (a) May 31, 2011 and (b) any
date the Term Loan Maturity Date is accelerated by the Agent pursuant to Section
8.1 hereof.

 

Term Loans shall mean the Term Loans made pursuant to Section 2.1 hereof.  Term
Loan shall mean any one of such Term Loans.

 

Term Notes shall mean the promissory notes, each substantially in the form of
Exhibit A attached hereto, of the Borrower evidencing the Term Loans, payable to
the order of the respective Lenders in the amount of each of said Lender’s Term
Loan Commitment, and all renewals, extensions, modifications, rearrangements and
replacements thereof, and substitutions therefor.  Term Note shall mean any one
of such promissory notes.

 

Total Term Loan Commitment shall mean, on any day, the aggregate of all of the
Lenders’ Term Loan Commitments on such day.  As of the Closing Date, the Total
Term Loan Commitment is $45,000,000.

 

Tri-Party Agreements shall collectively mean tri-party agreements, in Proper
Form, to be executed and delivered by and among the Collateral Agent, the
Borrower (and each of its Subsidiaries required by the Collateral Agent) and the
applicable financial institutions described in Schedule 6.15 attached hereto,
together with all modifications and/or replacements thereof which are approved
in writing by the Agent, for purposes of either (a) facilitating the collection
of Accounts in accordance with the terms of Section 6.15 hereof, to the extent
payments of Accounts are processed through cash management services (including
lockbox arrangements) provided by any such specified financial institution
and/or deposited in one or more accounts maintained by the Borrower or its
applicable Subsidiary with any such specified financial institution or
(b) evidencing control for purposes of perfection of the Collateral Agent’s
Lien, for the ratable benefit of the Lenders, against one or more deposit
accounts maintained by the Borrower or its applicable Subsidiary with any such
specified financial institution.  As of the Closing Date, Schedule 6.15 attached
hereto describes all such accounts to be covered by a Tri-Party Agreement and
specifies whether the applicable Tri-Party Agreement is for purposes of
facilitating the collection of Accounts or perfecting the Collateral Agent’s
Lien against such accounts.  The Borrower agrees that neither the Borrower nor
any of its

 

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Subsidiaries shall establish any additional deposit accounts permitted to be
maintained hereunder with a financial institution other than the Collateral
Agent unless such additional deposit accounts are covered by a Tri-Party
Agreement.

 

UCC shall mean the Uniform Commercial Code as in effect from time to time in the
State of New York or of any other state the laws of which are required as a
result thereof to be applied in connection with the attachment, perfection or
priority of, or remedies with respect to, the Collateral Agent’s or any Lender’s
Lien on any Collateral.

 

Unfinanced Capital Expenditures shall mean all Capital Expenditures other than
Financed Capital Expenditures.

 

Unfinanced Cash Dividends shall mean, with respect to any Person for any period,
all Cash Dividends of such Person for such period that are not paid either from
net proceeds of the Term Loans or from net proceeds of any other permitted
Indebtedness of such Person incurred after the Closing Date.

 

1.2                                 Accounting Terms and Determinations.  Except
where specifically otherwise

 

provided:

 

(a)                                  The symbol “$” and the word “dollars” shall
mean lawful money of the United States of America.

 

(b)                                 Any accounting term not otherwise defined
shall have the meaning ascribed to it under GAAP.  If any of the Credit Parties
are required after the Closing Date to implement any change(s) in its accounting
principles and practice as a result of any changes in GAAP mandated by the
Financial Accounting Standards Board or successor organization, and if such
change(s) result in any material change in the method of calculation of the
Fixed Charge Coverage Ratio, Excess Cash Flow, Leverage Ratio and/or any other
financial covenant under this Agreement, then for all periods after the date of
implementation of such change(s) until one or more appropriate amendments of
this Agreement addressing such change(s) in GAAP are negotiated, executed and
delivered by the parties hereto in a form acceptable to all such parties, the
Fixed Charge Coverage Ratio, Excess Cash Flow, Leverage Ratio and/or such other
financial covenant, as applicable, shall be calculated hereunder utilizing GAAP
as in effect prior to such change(s).

 

(c)                                  Unless otherwise expressly provided, any
accounting concept and all financial covenants shall be determined on a
Consolidated basis, and financial measurements shall be computed without
duplication.

 

(d)                                 Wherever the term “including” or any of its
correlatives appears in the Loan Documents, it shall be read as if it were
written “including (by way of example and without limiting the generality of the
subject or concept referred to)”.

 

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(e)                                  Wherever the word “herein” or “hereof” is
used in any Loan Document, it is a reference to that entire Loan Document and
not just to the subdivision of it in which the word is used.

 

(f)                                    References in any Loan Document to
Section numbers are references to the Sections of such Loan Document.

 

(g)                                 References in any Loan Document to Exhibits,
Schedules, Annexes and Appendices are to the Exhibits, Schedules, Annexes and
Appendices to such Loan Document, and they shall be deemed incorporated into
such Loan Document by reference.

 

(h)                                 Any term defined in the Loan Documents which
refers to a particular agreement, instrument or document shall also mean, refer
to and include all modifications, amendments, supplements, restatements,
renewals, extensions and substitutions of the same; provided, that nothing in
this subsection shall be construed to authorize any such modification,
amendment, supplement, restatement, renewal, extension or substitution except as
may be permitted by other provisions of the Loan Documents.

 

(i)                                     All times of day used in the Loan
Documents mean local time in Wilmington, Delaware.

 

(j)                                     Defined terms may be used in the
singular or plural, as the context requires.

 

1.3                                 UCC and PPSA Changes.  All terms used herein
which are defined in the UCC and/or the PPSA shall, unless otherwise provided,
have the meanings ascribed to them in the UCC and/or the PPSA, as applicable,
both as in effect on the date of this Agreement and as hereafter amended.  The
parties intend that the terms used herein which are defined in the UCC and/or
the PPSA, as applicable, have, at all times, the broadest and most inclusive
meanings possible.  Accordingly, if the UCC and/or the PPSA, as applicable,
shall in the future be amended or held by a court to define any term used herein
more broadly or inclusively than the UCC and/or the PPSA, as applicable, in
effect on the date of this Agreement, then such term as used herein shall be
given such broadened meaning. If the UCC and/or the PPSA, as applicable, shall
in the future be amended or held by a court to define any term used herein more
narrowly, or less inclusively, than the UCC and/or the PPSA, as applicable, in
effect on the date of this Agreement, such amendment or holding shall be
disregarded in defining terms used in this Agreement.

 

2.                                       Term Loans; Term Notes; Payments;
Prepayments; Interest Rates.

 

2.1                                 Term Loan Commitments.  Subject to the terms
and conditions hereof, each Lender, severally and not jointly, agrees to make a
Term Loan to the Borrower on the Closing Date, but in no event on or after 5:00
p.m., Eastern Daylight Time, on the Closing Date, in a principal amount equal to
the amount of such Lender’s Term Loan Commitment.

 

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2.2                                 Term Loans.

 

(a)                                  Subject to Section 4 hereof, the Term Loans
(i) shall be advanced and made ratably by the Lenders in accordance with the
Lenders’ respective Term Loan Commitments, and (ii) the Term Loans shall be made
by the Lenders on the Closing Date but in no event on or after the Term Loan
Commitment Termination Date.

 

(b)                                 Each Lender shall make its Term Loan
available on the proposed dates thereof by causing its Applicable Lending Office
to pay the amount required to a deposit account designated and maintained by the
Borrower with JPMorgan Chase Bank, N.A. in immediately available funds not later
than 1:00 p.m.

 

(c)                                  The obligations of the Lenders hereunder
are several and not joint; therefore, notwithstanding anything herein to the
contrary:  (i) no Lender shall be required to make a Term Loan in excess of such
Lender’s Term Loan Commitment; (ii) if a Lender fails to make its Term Loan as
or when required hereunder and the Borrower subsequently makes a repayment on
the Term Loans, such repayment shall be split among the non-defaulting Lenders
in accordance with their respective Term Loan Commitment Percentages until each
non-defaulting Lender has received its Term Loan Commitment Percentage of all of
the outstanding Term Loans, then the balance of such repayment shall be divided
among all of the Lenders in accordance with their respective Term Loan
Commitments; and (iii) the failure of any Lender to make any Term Loan shall not
in itself relieve any other Lender of its obligation to lend hereunder
(provided, that no Lender shall be responsible for the failure of any other
Lender to make a Term Loan such other Lender is obligated to make hereunder).

 

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2.3                                 Mandatory and Voluntary Prepayments.

 

(a)                                  To the extent permitted by
Section 7.11(f) of the Revolving Credit Agreement, the Borrower shall make a
prepayment of the Term Loans, to the extent the same are then outstanding, in an
amount equal to twenty-five percent (25%) of Excess Cash Flow for each fiscal
year of the Credit Parties (commencing with the fiscal year ending June 30,
2008).  For purposes hereof, Excess Cash Flow will be computed by the Borrower
and be subject to the review and reasonable approval of the Required Lenders,
based on the Credit Parties’ Annual Audited Financial Statements for the
applicable fiscal year. The Borrower shall submit such computation in reasonable
detail to the Agent, along with the amount of such resulting prepayment of the
Terms Loans required by this subparagraph (a) based on such calculations by the
Borrower, at the same time the applicable Annual Audited Financial Statements of
the Credit Parties are delivered to and received by the Agent in accordance with
the terms of Section 6.3 hereof.  Upon receipt of such payment, the Agent shall
immediately apply such payment against the Term Loans in accordance with the
terms hereof, reserving any right to require payment of any deficiency in such
amount. Within ten (10) Business Days after receipt by the Agent of such
calculations of and payment by the Borrower, the Agent, at the request of the
Required Lenders, shall notify the Borrower in writing of any error by the
Borrower in the computation of the amount of the prepayment of the Term Loans
required by this subparagraph (a), and in the event of any such error, the
Borrower shall pay to the Agent any deficiency in the amount of the requisite
prepayment of the Term Loans within five (5) Business Days after receipt of such
notification from the Agent.  Any prepayments required by this subparagraph
(a) shall be applied to outstanding Term Loans (together with any Consequential
Loss resulting from such prepayment); provided, however, that the Borrower shall
not be required to make any prepayment of any LIBOR Borrowings pursuant to this
subparagraph (a) until the last day of the Interest Period with respect thereto
so long as such prepayment is deposited by the Borrower in a cash collateral
account with the Agent to be held in such account on terms satisfactory to the
Agent, with all amounts in such cash collateral account (including any interest
earned thereon, if any) to be automatically applied by the Agent against the
applicable Term LIBOR Borrowings on the last day of the Interest Period with
respect thereto.  Any amount of the Term Loans prepaid in accordance with the
provisions of this subparagraph (a) may not be reborrowed.

 

(b)                                 In addition to the mandatory prepayments
required by Section 2.3(a) above, and to the extent permitted by
Section 7.11(f) of the Revolving Credit Agreement, the Borrower shall have the
right, at its option, to prepay any of the Term Loans in whole at any time or in
part from time to time, without premium or penalty, except as otherwise provided
in this Section 2.3 or subsections (a), (b) or (c) of Section 2.7 hereof.  Each
prepayment of Term Loans under this subsection shall be in a minimum amount of
$100,000, and applied to the prepayment of the aggregate unpaid principal amount
of the Term Notes.  Prepayments under this subsection (b) shall be subject to
the following additional conditions:

 

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(1)                                  In giving notice of prepayment as
hereinafter provided, the Borrower shall specify, for the purpose of paragraphs
(2) and (3) immediately following, the manner of application of such prepayment
as between Alternate Base Rate Borrowings and LIBO Rate Borrowings; provided,
that in no event shall any LIBO Rate Borrowing be partially prepaid.

 

(2)                                  Prepayments applied to any LIBO Rate
Borrowing may be made on any Business Day, provided, that (i) the Borrower shall
have given the Agent at least five (5) Business Days’ prior irrevocable written
or telecopied notice of such prepayment, specifying the principal amount of the
LIBOR Borrowing to be prepaid and the prepayment date; and (ii) if such
prepayment is made on any day other than the last day of the Interest Period
corresponding to the LIBOR Borrowing to be prepaid, the Borrower shall pay upon
demand directly to the Agent for the account of the Lenders the Consequential
Loss as a result of such prepayment.

 

(3)                                  Prepayments applied to any Alternate Base
Rate Borrowing may be made on any Business Day, provided, that with respect
thereto, the Borrower shall have given the Agent prior irrevocable written
notice or notice by telephone (which is to be promptly confirmed in writing) of
any such prepayment on the Business Day of such prepayment, specifying the
principal amount of the Alternate Base Rate Borrowing to be prepaid.

 

(c)                                  If any notice of any prepayment has been
given, the principal amount specified in such notice, together with (in the case
of any prepayment of a LIBOR Borrowing) interest thereon to the date of
prepayment and any resulting Consequential Loss, shall be due and payable on
such prepayment date.

 

2.4                                 Term Notes; Payments.

 

(a)                                  Subject to the provisions of Section 10.12
hereof relating to replacement and substitution of the Term Notes, the Term Loan
made by a Lender shall be evidenced by a single Term Note dated as of the
Closing Date, delivered and payable to such Lender in a principal amount equal
to such Lender’s Term Loan Commitment as of the Closing Date.

 

(b)                                 If not earlier prepaid in full, and to the
extent permitted by Section 7.11(f) of the Revolving Credit Agreement, the
aggregate principal balance of the Term Loans, as evidenced by the Term Notes,
shall be due and payable in quarterly installments of $112,500, each due on each
September 30, December 31, March 31, and June 30 of each calendar year,
commencing on September 30, 2006.  To the extent not previously paid, the
aggregate outstanding principal balance of the Term Loans shall be finally due
and payable on the Term Loan Maturity Date.

 

(c)                                  Subject to Section 10.6 hereof, the
Borrower hereby agrees to pay accrued interest on the unpaid principal balance
of the Term Loans on the Interest Payment Dates, commencing with the first of
such dates to occur after the date hereof.  After the Term

 

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Loan Maturity Date, accrued and unpaid interest on the Term Loans shall be
payable on demand.

 

2.5                                 Application of Payments and Prepayments.

 

(a)                                  Prepayments on the Term Loans, including
without limitation, prepayments in accordance with Sections 2.3(a) hereof, shall
be applied to payment of the aggregate unpaid principal amounts of the Term
Notes in inverse order of maturity, with the balance of any such prepayments, if
any, being applied to accrued interest.  Payments of accrued interest on each
Term Note in accordance with Section 2.4(c) hereof shall be applied to the
aggregate accrued interest then outstanding under the Term Notes.  Payments of
regularly scheduled installments of principal on each Term Note in accordance
with Section 2.4(b) hereof shall be applied to the aggregate principal amount
outstanding under the Term Notes in direct order of maturity, while payment by
the Borrower of the aggregate principal amount outstanding under the Term Notes
on the Term Loan Maturity Date shall be applied to principal.

 

(b)                                 All payments remitted to the Agent, and,
absent the existence of an Event of Default, all such payments not relating to
principal or interest of specific Term Loans, or not constituting payment of
specific fees or other specific Obligations, and all proceeds of Collateral
received by the Agent, shall be applied, ratably, subject to the provisions of
this Agreement, first, to pay any fees, indemnities or expense reimbursements
then due to the Agent hereunder; second, to pay any fees or expense
reimbursements then due to the Lenders from any Credit Party; third, to pay
interest due in respect of all Term Loans; fourth, to pay or prepay principal of
the Term Loans; and fifth, to the payment of any other Obligation due to the
Agent or any Lender.  Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by the Borrower, or unless an Event of Default has
occurred and is continuing, neither the Agent nor any Lender shall apply any
payments which it receives to any LIBOR Borrowing, except (a) on the expiration
date of the Interest Period applicable to any such LIBOR Borrowing, or (b) in
the event, and only to the extent, that there are no outstanding Alternate Base
Rate Borrowings and the Borrower has consented to such application.

 

(c)                                  Each payment or prepayment received by the
Agent hereunder or under any Term Note for the account of a Lender shall be paid
promptly to such Lender, in immediately available funds.

 

(d)                                 All sums payable by the Borrower to the
Agent hereunder or pursuant to the Term Notes or any of the other Loan Documents
for its own account or the account of the Lenders shall be payable in United
States dollars in immediately available funds not later than 12:00 noon on the
date such payment or prepayment is due and shall be made without set-off,
counterclaim or deduction of any kind.  Any such payment or prepayment received
and accepted by the Agent after 12:00 noon shall be considered for all purposes
(including the payment of interest, to the extent permitted by law) as having
been made on the next succeeding Business Day.  All such payments or prepayments
shall be made at the Principal Office.  If any payment or prepayment becomes due
and payable on a day

 

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which is not a Business Day, then the date for the payment thereof shall be
extended to the next succeeding Business Day and interest shall be payable
thereon at the then applicable rate per annum during such extension.

 

2.6                                 Interest Rates for Term Loans.

 

(a)                                  Subject to Section 10.6 hereof, the Term
Notes shall bear interest on their respective outstanding principal balances at
the LIBO Rate; provided, that (1) all principal outstanding, whether then due
and payable, after the occurrence of an Event of Default which has not been
cured to the satisfaction of the Agent and the Required Lenders or waived in
writing by the Agent and the Required Lenders shall bear interest at the Default
Rate, which shall be due and payable upon demand, and (2) past due principal and
interest shall bear interest at the Default Rate, which shall be payable on
demand.  Interest on the Term Loans shall be calculated at the LIBO Rate, except
where it is expressly provided pursuant to this Agreement, the Alternate Base
Rate is to apply.

 

(b)                                 All interest and fees will be computed on
the basis of a year of 360 days and actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable, unless
the effect of so computing shall be to cause the rate of interest to exceed the
Highest Lawful Rate.

 

2.7                                 Special Provisions Applicable to LIBOR
Borrowings.

 

(a)                                  If, after the date of this Agreement, the
adoption of any applicable Legal Requirement or any change in any applicable
Legal Requirement or in the interpretation or administration thereof by any
Governmental Authority or compliance by the Agent or any Lender with any request
or directive (whether or not having the force of law) of any Governmental
Authority shall at any time make it unlawful or impracticable for any Lender to
permit the establishment of or to maintain any LIBOR Borrowing, the commitment
of the Lenders to establish or maintain the Adjusted LIBO Rate affected by such
adoption or change shall forthwith be canceled, the Agent or such Lender shall
use reasonable efforts to give the Borrower written notice thereof within a
reasonable time after discovery of such adoption or change by the Agent or such
Lender, as applicable (it being agreed, however, that any failure to provide
such notice to the Borrower shall not in any manner affect the rights under this
Section 2.7(a) of the Agent or any Lender), and the Borrower shall forthwith,
upon demand by the Agent to the Borrower, (1) convert the Adjusted LIBO Rate
with respect to which such demand was made to the Alternate Base Rate; (2) pay
all accrued and unpaid interest to date on the amount so converted; and (3) pay
any amounts required to compensate the Agent and the Lenders for any additional
cost or expense which the Agent or any Lender may incur as a result of such
adoption of or change in such Legal Requirement or in the interpretation or
administration thereof and any Consequential Loss which the Agent or any Lender
may incur as a result of such conversion to the Alternate Base Rate.

 

(b)                                 If the adoption of any applicable Legal
Requirement or any change in any applicable Legal Requirement or in the
interpretation or administration thereof by any

 

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Governmental Authority or compliance by the Agent or any Lender with any request
or directive (whether or not having the force of law) from any Governmental
Authority shall at any time as a result of any portion of the principal balance
of the Term Notes being maintained on the basis of the Adjusted LIBO Rate:

 

(1)                                  impose, modify, increase or deem applicable
any reserve requirement (excluding that portion of any reserve requirement
included in the calculation of the Statutory Reserves), special deposit
requirement or similar requirement (including state law requirements and
Regulation D) imposed, modified, increased or deemed applicable by any
Governmental Authority against assets held by the Agent or any Lender, or
against deposits or accounts in or for the account of the Agent or any Lender,
or against loans made by the Agent or any Lender, or against any other funds,
obligations or other Property owned or held by the Agent or any Lender; or

 

(2)                                  impose on the Agent or any Lender any other
materially restrictive or limiting condition regarding any LIBOR Borrowing; and
the result of any of the foregoing is to increase the cost to any Lender of
agreeing to make or of making, renewing or maintaining such borrowing on the
basis of the Adjusted LIBO Rate, or reduce the amount of principal or interest
received by any Lender, then the Agent or such Lender shall use reasonable
efforts to give the Borrower written notice thereof within a reasonable time
after discovery of such adoption or change by the Agent or such Lender, as
applicable (it being agreed, however, that any failure to provide such notice to
the Borrower shall not in any manner affect the rights under this
Section 2.7(b) of the Agent or any Lender), and, upon demand by such Lender, the
Borrower shall pay to such Lender, from time to time as specified by such
Lender, additional amounts which shall compensate such Lender for such increased
cost or reduced amount.  Such Lender will promptly notify the Borrower in
writing of any event, upon becoming actually aware of it, which will entitle any
Lender to additional amounts pursuant to this paragraph.  Such Lender’s
determination of the amount of any such increased cost, increased reserve
requirement or reduced amount shall be conclusive and binding, absent manifest
error, provided that the calculation thereof and reason therefore is certified
and is set forth in reasonable detail in such certification by such Lender.

 

The Borrower shall have the right, if it receives from any Lender any notice
referred to in the preceding paragraph, upon three (3) Business Days’ notice to
the Agent, either (i) to repay in full (but not in part) any borrowing with
respect to which such notice was given, together with any accrued interest
thereon, or (ii) to convert the Adjusted LIBO Rate in effect with respect to
such borrowing from such Lender to the Alternate Base Rate; provided, that any
such repayment or conversion shall be accompanied by payment of (x) the amount
required to compensate the appropriate Lender or Lenders for the increased cost
or reduced amount referred to in the preceding paragraph; (y) all accrued and
unpaid interest to date on the amount so repaid or converted; and (z) any
Consequential Loss which may be incurred as a result of such repayment or
conversion.  Additionally, if it receives from any Lender any notice referred to
in the preceding paragraph, the Borrower shall also have the corresponding
rights in Section 10.16(c).

 

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(c)                                  If for any reason with respect to any
Interest Period the Agent shall have in good faith determined (which
determination shall be conclusive and binding upon the Borrower) that: (1) the
Agent is unable through its customary general practices to determine a rate at
which the Agent is offered deposits in United States dollars by prime banks in
the London interbank market, in the appropriate amount for the appropriate
period, or by reason of circumstances affecting the London interbank market,
generally, the Agent is not being offered deposits for the applicable Interest
Period and in an amount equal to the amount of the Agent’s pro-rata portion of
any LIBOR Borrowing requested by the Borrower, or (2) the Adjusted LIBO Rate
will not adequately and fairly reflect the cost to any Lender of making and
maintaining any LIBOR Borrowing hereunder for any proposed Interest Period, then
the Agent shall give the Borrower notice thereof and thereupon each outstanding
LIBOR Borrowing then in effect shall be converted, without any notice to or from
the Borrower, upon the termination of the Interest Period then in effect to an
Alternate Base Rate Borrowing.

 

(d)                                 Each Credit Party, jointly and severally
with all other Credit Parties, hereby agrees to indemnify the Agent and each of
the Lenders against and hold each of them harmless from any Consequential Loss
which it may incur or sustain as a consequence of any prepayment (mandatory or
optional) or default by the Borrower in the payment of any principal amount of
or interest on each Term Note or any failure by the Borrower to convert or to
borrow any LIBOR Borrowing on the date specified by the Borrower.  This
agreement shall survive the payment of each Term Note.  A certificate as to any
additional amounts payable to the Agent or any Lender pursuant to this
paragraph, detailing the basis therefore and submitted by the Agent or such
Lender to the Borrower shall be conclusive and binding upon the Credit Parties,
absent manifest error, provided the calculation thereof is set forth in
reasonable detail in such notice.

 

(e)                                  If the Borrower requests quotes of the
Adjusted LIBO Rate for different Interest Periods being considered for election
by the Borrower, the Agent will use reasonable efforts to provide such quotes to
the Borrower promptly.  However, all such quotes provided shall be
representative only and shall not be binding on the Agent or any Lender, nor
shall they be determinative, directly or indirectly, of any Adjusted LIBO Rate
or any component of any such rate, nor will the Borrower’s failure to receive or
the Agent’s failure to provide any requested quote or quotes either (1) excuse
or extend the time for performance of any obligation of the Borrower or for the
exercise of any right, option or election of the Borrower or (2) impose any duty
or liability on the Agent or any Lender.  If the Borrower requests a list of the
Business Days in any calendar month, the Agent will use reasonable efforts to
provide such list promptly.  However, any such list provided shall be understood
to identify only those days which the Agent believes in good faith at the time
such list is prepared will be the Business Days for such month.  The Agent shall
not have any liability for any failure to provide, delay in providing, error or
mistake in or omission from, any such quote or list.

 

(f)                                    With respect to any Lender having a LIBOR
Lending Office which differs from its Domestic Lending Office, all Term Loans
advanced by such Lender’s LIBOR Lending Office shall be deemed to have been made
by such Lender and the obligation of

 

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the Borrower to repay such Term Loans shall nevertheless be to such Lender and
shall be deemed held by such Lender, to the extent of such portions of the Term
Loan, for the account of such Lender’s LIBOR Lending Office.

 

(g)                                 Notwithstanding any provision of this
Agreement to the contrary, each Lender shall be entitled to fund and maintain
its funding of all or any part of the Term Loans hereunder in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement, all
determinations hereunder shall be made as if such Lender had actually funded and
maintained its portion of each LIBOR Borrowing during each Interest Period for
the Term Loans through the purchase of deposits having a maturity corresponding
to such Interest Period and bearing an interest rate equal to the LIBO Rate for
such Interest Period.

 

(h)                                 The Borrower’s obligation to pay increased
costs and Consequential Loss with regard to each LIBOR Borrowing as specified in
this Section 2.7 hereof shall survive termination of this Agreement.

 

2.8                                 Pro-Rata Treatment.

 

(a)                                  Except to the extent otherwise provided
herein:  (a) each borrowing from the Lenders under Section 2.1 hereof shall be
made pro-rata, according to each Lender’s Term Loan Commitment Percentage as
applicable; and (b) each payment or prepayment by the Borrower of principal of
or interest on Term Loans shall be made to the Agent for the account of the
Lenders pro-rata in accordance with the respective unpaid principal amounts of
such Term Loans held by the Lenders.

 

(b)                                 (a)                                  Unless
the Agent shall have been notified in writing by any Lender prior to the Closing
Date that such Lender will not make the amount that would constitute such
Lender’s Term Loan Commitment Percentage of the Term Loans on the Closing Date
available to the Agent at the Principal Office, the Agent may assume that such
Lender has made such amount available to the Agent on such date, and the Agent
may, in reliance upon such assumption and subject to the terms and conditions of
this Agreement, but shall not be obligated to, make such amount available to the
Borrower by depositing the same, in immediately available funds, in a deposit
account designated and maintained by the Borrower with JPMorgan Chase Bank,
N.A.  Any Lender failing to timely deliver its requisite portion of the Term
Loans shall deliver the same to the Agent as soon as possible thereafter,
together with interest on such amount for each day from the due date for such
payment to the date of payment by such Lender to the Agent of such amount at a
rate of interest per annum equal to the Federal Funds Effective Rate for such
period.  In addition, the Borrower hereby agrees that upon demand by the Agent,
the Borrower shall reimburse the Agent for any such amount which any Lender has
failed to timely deliver to the Agent, but which the Agent may have previously
made available to the Borrower in accordance with the other provisions of this
Section 2.8(b).

 

2.9                                 Sharing of Payments, Etc.  Each of the
Credit Parties agrees that, in addition to (and without limitation of) any right
of set-off, bankers’ lien or counterclaim a Lender may

 

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otherwise have, each Lender shall be entitled, at its option, to offset balances
held by it for the account of any of the Credit Parties at any of its offices
against any principal of or interest on any of such Lender’s Term Loans to the
Borrower hereunder, or any other Obligation of the Borrower hereunder
(regardless of whether such Obligations of the Borrower are then due and
regardless of whether such offset balances are then due to the Borrower), in
which case it shall promptly notify the Borrower and the Agent thereof,
provided, that such Lender’s failure to give such notice shall not affect the
validity thereof.  If a Lender shall obtain payment of any principal of or
interest on any Term Loan made by it under this Agreement, or other obligation
then due to such Lender hereunder, through the exercise of any right of set-off
(including, without limitation, any right of set-off or lien granted under
Section 10.19 hereof), banker’s lien, counterclaim or similar right, or
otherwise, it shall promptly purchase from the other Lenders participations in
the Term Loans made by, or the other obligations of the Borrower hereunder of,
the other Lenders in such amounts, and make such other adjustments from time to
time as shall be equitable to the end that all the Lenders shall share the
benefit of such payment (net of any expenses which may be incurred by such
Lender in obtaining or preserving such benefit) pro-rata in accordance with
their respective Term Loan Commitment Percentages.  To such end all the Lenders
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.  Each of the Credit Parties agrees, to the fullest extent it may
effectively do so under applicable law, that any Lender so purchasing a
participation in the Loans made by or other obligations hereunder of, the other
Lenders may exercise all rights of set-off, bankers’ lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of said Loans or other obligations in the amount of such
participation.  Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower.

 

2.10                           Recapture.  If on any Interest Payment Date the
Agent does not receive for the account of one or more Lenders payment in full of
interest computed at the Alternate Base Rate and/or the Adjusted LIBO Rate, as
applicable (computed without regard to any limitation by the Highest Lawful
Rate), because the sum of the Alternate Base Rate and/or the Adjusted LIBO Rate,
as applicable (so computed), exceeds or has exceeded the Highest Lawful Rate
applicable to such Lenders, the Borrower shall pay to the Agent for the account
of such Lenders, in addition to interest otherwise required, on each Interest
Payment Date thereafter, the Excess Interest Amount (calculated as of each such
subsequent Interest Payment Date); provided, that in no event shall the Borrower
be required to pay, for any computation period, interest at a rate exceeding the
Highest Lawful Rate applicable to such Lenders during such period.  As used
herein, the term “Excess Interest Amount” shall mean, on any day, the amount by
which (a) the amount of all interest which would have accrued prior to such day
on the outstanding principal of the Term Notes of the applicable Lender (had the
Alternate Base Rate and/or the Adjusted LIBO Rate, as applicable, at all times
been in effect without limitation by the Highest Lawful Rate applicable to such
Lender) exceeds (b) the aggregate amount of interest actually paid to the Agent
for the account of such Lender on its Term Notes on or prior to such day.

 

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3.                                       Collateral.

 

3.1                                 Security Documents.  The Term Loans and all
other Obligations shall be secured by the Collateral described in the Security
Documents, the First Lien Intercreditor Agreement and the Second Lien
Intercreditor Agreement, and the Agent and the Lenders are entitled to the
benefits thereof.  The Credit Parties shall duly execute and deliver the
Security Documents, all consents of third parties necessary to permit the
effective granting of the Liens created thereby, and other documents, all in
Proper Form, as may be reasonably required by the Collateral Agent to grant to
the Collateral Agent, for the ratable benefit of the Lenders and the Revolving
Credit Lenders, a valid, perfected and enforceable first priority Lien on and
security interest in the Collateral (subject only to the Liens permitted under
Section 7.2 hereof), including without limitation, any and all original stock
certificates, stock transfer powers, assignments and other documents and
instruments necessary or desirable under the laws of any applicable jurisdiction
with regard to the Equity Interests covered by any Security Agreement.

 

3.2                                 Filing and Recording.  The Credit Parties
shall, at their sole cost and expense, cooperate with the Collateral Agent in
causing all financing statements and other Security Documents pursuant to this
Agreement to be duly recorded and/or filed or otherwise perfected in all places
necessary to perfect the Liens of the Collateral Agent, in the opinion of the
Collateral Agent, and the Credit Parties shall take such other actions as the
Collateral Agent may reasonably request, in order to perfect and protect the
Liens of the Collateral Agent, for the ratable benefit of the Lenders, in the
Collateral.  Each of the Credit Parties, to the extent permitted by law, hereby
authorizes the Collateral Agent to file any financing statement or other
Security Document in respect of any Lien created pursuant to the Security
Documents which may at any time be required to perfect such Liens or which, in
the reasonable opinion of the Collateral Agent, may at any time be desirable,
although the same may have been executed only by the Collateral Agent or, at the
option of the Collateral Agent, to sign such financing statement on behalf of
any Credit Party, and file the same, and each of the Credit Parties hereby
irrevocably designates the Collateral Agent, its agents, representatives and
designees as its agent and attorney-in-fact for this purpose.  In the event that
any re-recording or refiling thereof (or the filing of any statements of
continuation or assignment of any financing statement) is required to protect
and preserve such Lien, the Credit Parties shall, at the Credit Parties’ cost
and expense, cause the same to be recorded and/or refiled at the time and in the
manner requested by the Collateral Agent.

 

4.                                       Conditions. The obligation of the
Lenders to make the Term Loans is subject to the satisfaction of the following
conditions:

 

(a)                                  all representations and warranties of any
of the Credit Parties set forth in this Agreement and in any other Loan Document
shall be true and correct in all material respects with the same effect as
though made on and as of such date, except for (i) those representations and
warranties which relate only to the Closing Date and (ii) those changes in such
representations and warranties otherwise permitted by the terms of this
Agreement;

 

(b)                                 there shall have occurred no Material
Adverse Effect, after giving effect to the Term Loans;

 

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(c)                                  no Default or Event of Default shall have
occurred and be continuing;

 

(d)                                 requested by the Agent, it shall have
received a certificate executed by a Responsible Officer of the Borrower as to
the compliance with subparagraphs (a) through (c) above;

 

(e)                                  the making of the Term Loans shall not be
prohibited by, or subject the Agent or any Lender to, any penalty or onerous
condition under any Legal Requirement; and

 

(f)                                    the Borrower shall have paid all legal
fees and other expenses of the type described in Section 10.9 hereof for which
invoices have been presented through the date of the Term Loans;

 

(g)                                 the Agent and the Lenders shall have
received the following which shall be duly executed and in Proper Form:

 

(1)                                  the Loan Documents executed by the
applicable Credit Parties;

 

(2)                                  a certificate of corporate resolutions and
incumbency executed by the Secretary or an Assistant Secretary of the Borrower
dated as of the date hereof, authorizing (i) the Borrower’s entering into the
transactions contemplated hereby and (ii) the delivery by the Borrower of the
Loan Documents to be executed and delivered by the Borrower;

 

(3)                                  a certificate of corporate resolutions and
incumbency executed by the Secretary or an Assistant Secretary of each of the
Guarantors dated as of the date hereof, authorizing each of the Guarantors to
(i) enter into the transactions contemplated hereby and (ii) deliver the Loan
Documents to be executed and delivered by the Guarantors;

 

(4)                                  certified copies of the Organizational
Documents of the Borrower, each of the Borrower’s Subsidiaries, and the Parent;

 

(5)                                  certificates from the Secretary of State or
other appropriate public official of the State of Delaware as to the continued
existence and good standing of the Borrower in the State of Delaware;

 

(6)                                  certificates from the Secretary of State or
other appropriate public official as to the continued existence and good
standing of each of the Guarantors in its applicable State of formation;

 

(7)                                  certificates from the appropriate public
officials of the States of Texas, Arizona, California, Colorado,
Florida, Idaho, Iowa, Kansas, Nebraska, New Mexico, Oklahoma, South Dakota,
Tennessee, Utah and Wisconsin for the Borrower, Walco Holdings, Inc., Walco
Intermediate, Inc., and/or their Domestic Subsidiaries that are Guarantors, as
to the good standing and qualification as a foreign corporation, to the

 

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extent it is necessary to be qualified to do business as a foreign corporation
in these jurisdictions;

 

(8)                                  one copy of each of the Revolving Credit
Agreement and the Second Lien Debt Documents, including all amendments and
schedules thereto, certified as true and correct copies by a Responsible Officer
of the Borrower, together with evidence that the Revolving Credit Agreement is
in full force and effect, and all material consents, approvals and filings
required by any Governmental Authority in connection therewith have been
obtained and made;

 

(9)                                  copies of the following financial
information: (i) audited consolidated financial statements of the Borrower and
its Subsidiaries for the two most recent fiscal years ended prior to the Closing
Date as to which such financial statements are available, (ii) unaudited interim
consolidated financial statements of the Borrower and its Subsidiaries for each
quarterly period ended subsequent to the date of the latest financial statements
delivered pursuant to clause (i) of this paragraph and (iii) the most recent
projected income statement, balance sheet and cash flows for each of the
Borrower’s fiscal years through June 30, 2010 (setting forth such projections on
both an annual basis and on a monthly basis for the fiscal year ending June 30,
2006 and on an annual basis only for the remaining fiscal years);

 

(10)                            evidence that all material governmental and
third party approvals necessary in connection with the financing thereof and the
continuing operations of the Borrower and its Subsidiaries (including
shareholder approvals, if any) have been obtained on terms satisfactory to the
Lenders and shall be in full force and effect, and all applicable waiting
periods have expired without any action being taken or threatened by any
competent authority that would restrain, prevent or otherwise impose adverse
conditions on the financing thereof or, any of the transactions contemplated
hereby;

 

(11)                            the First Lien Intercreditor Agreement;

 

(12)                            the Second Lien Intercreditor Agreement and the
Second Lien Debt Purchase Agreement executed by Merrill Lynch PCG, Inc. and all
other parties thereto, whereby Merrill Lynch PCG, Inc. and such other parties,
(1) consent to the Obligations, and (2) increase to $210,000,000 the maximum
combined funded principal amount permitted under the Loans (as defined in the
Revolving Credit Agreement) and the Term Loans, all upon terms acceptable to and
approved by the Agent in its discretion;

 

(13)                            evidence that all legal (including tax
implications) and regulatory matters in connection with the Term Loans are
satisfactory to the Agent and the Lenders;

 

(14)                            a legal opinion from Goodwin Procter LLP, the
independent counsel for the Credit Parties, dated as of the Closing Date,
addressed to the Agent and acceptable in all respects to the Agent and the
Lenders in their sole reasonable discretion;

 

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(15)                            certificates of insurance satisfactory to the
Collateral Agent in all respects evidencing the existence of all insurance
required to be maintained by the Borrower and its Subsidiaries pursuant to the
terms of this Agreement and the Security Documents;

 

(16)                            copies of all material employment agreements,
management fee agreements and tax sharing agreements with respect to any of the
Credit Parties which the Agent shall have requested;

 

(h)                                 payment by the Borrower to the Lenders, the
Agent and the Agent’s applicable Affiliates of all fees required to be paid
under the Loan Documents and all expenses required to be paid under the Loan
Documents for which invoices have been presented; and

 

(i)                                     receipt by the Agent and the Lenders of
all other Loan Documents and any other instruments or documents consistent with
the terms of this Agreement and relating to the transactions contemplated hereby
as the Agent may reasonably request, executed by the Credit Parties or any other
Person required by the Agent.

 

5.                                       Representations and Warranties.

 

Each of the Credit Parties represents and warrants to the Agent and the Lenders,
as to itself and each other Credit Party, that:

 

5.1                                 Organization.  Each Credit Party is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation or formation; has all power and authority under its
organizational documents to own its respective Property and assets and to
conduct its respective businesses as presently conducted; and is duly qualified
to do business and in good standing in each and every state jurisdiction where
its respective business requires such qualification, except for those
jurisdictions in which the failure to qualify and/or be in good standing would
not reasonably be expected to result in a Material Adverse Effect.

 

5.2                                 Financial Statements.

 

(a)                                  The Consolidated financial statements of
the Credit Parties and their Subsidiaries delivered to the Agent and the Lenders
in connection with this Agreement, including without limitation, (i) the Annual
Audited Financial Statements dated as of June 30, 2005 and (ii) the Monthly
Unaudited Financial Statements dated as of June 30, 2006, fairly present in all
material respects, in accordance with GAAP, the Consolidated financial condition
and the results of operations of the Credit Parties and their Subsidiaries as of
the dates and for the periods indicated, subject to year-end audit adjustments
and the absence of footnotes in the case of such unaudited or any pro forma
statements, and no Material Adverse Effect has occurred since the dates of such
financial statements.

 

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(b)                                 The Credit Parties have heretofore furnished
to the Agent, for the calendar months from the projected Closing Date through
June 30, 2007 and for each fiscal year of the Credit Parties thereafter through
the Term Loan Maturity Date, projected income statements, balance sheets and
cash flows of the Credit Parties and their Subsidiaries, on a Consolidated
basis, together with one or more schedules demonstrating prospective compliance
with all financial covenants contained in this Agreement, such projections
disclosing all material assumptions made by the Credit Parties in formulating
such projections.  The projections are based upon estimates and assumptions
which the Credit Parties believe are reasonable in light of the conditions which
existed as of the time the projections were made, have been prepared on the
basis of the material assumptions stated therein and reflect as of the Closing
Date an estimate believed reasonable by the Credit Parties as to the results of
operations and other information projected therein.

 

5.3                                 Enforceable Obligations; Authorization.  The
Loan Documents are legal, valid and binding obligations of the respective Credit
Parties executing and delivering the same, enforceable against such Credit
Parties in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, and other similar laws
affecting creditors rights generally and by general equitable principles
regardless of whether considered in a proceeding in equity or at law.  The
execution, delivery and performance of the Loan Documents have all been duly
authorized by all necessary corporate, and if necessary shareholder, action; are
within the power and authority of each of the Credit Parties; do not and will
not violate any Legal Requirement material to the business, assets or operations
of any of the Credit Parties taken as a whole or the Organizational Documents of
any of the Credit Parties; do not and will not constitute a default under, any
material agreement or instrument by which any of the Credit Parties or any
material portion of any of the Credit Parties’ Property is bound or affected;
and do not and will not result in the creation of any Lien upon any Property of
any of the Credit Parties except as expressly contemplated therein.  All
necessary approvals of any Governmental Authority and all other requisite
material permits, registrations and consents for the performance have been
obtained for the delivery and performance of the Loan Documents.

 

5.4                                 Other Debt.  Except as set forth on Schedule
5.4 attached hereto, no Credit Party is in default in the payment of any other
Indebtedness or under any agreement, mortgage, deed of trust, security agreement
or lease to which it is a party, the result of which would or could reasonably
be expected to result in a Material Adverse Effect.

 

5.5                                 Litigation.  Except as set forth on Schedule
5.5 attached hereto, to the knowledge of the Credit Parties, there is no
litigation or administrative proceeding pending or threatened against, nor any
outstanding judgment, order or decree affecting, any of the Credit Parties or
any of their Subsidiaries before or by any Governmental Authority or arbitral
body as to which there is a reasonable possibility of an adverse determination
and which individually or in the aggregate have, or if adversely determined
could reasonably be expected to have, a Material Adverse Effect.  Except as set
forth on Schedule 5.5 attached hereto, as of the Closing Date there is no
litigation or administrative proceeding pending against, nor any outstanding
judgment, order or decree affecting, any of the Credit Parties or any of their
Subsidiaries before or by any Governmental Authority or arbitral body.  Except
as set forth on Schedule 5.5 attached hereto,

 

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none of the Credit Parties, nor any of their Subsidiaries, is knowingly in
material default with respect to any judgment, writ, rule, regulation, order or
decree of any Governmental Authority.

 

5.6                                 Taxes.  Except as set forth on Schedule 5.6
attached hereto, the Credit Parties and their Subsidiaries have filed all
federal, state, local or foreign tax returns required to have been filed by them
and paid all taxes shown thereon to be due, except those for which extensions
have been obtained, and except for those which are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto are
maintained in accordance with GAAP.  There is no outstanding federal audit by
the Internal Revenue Service of the income tax returns of any of the Credit
Parties or any of their Subsidiaries claimed or raised in writing, and none of
the Credit Parties or any of their Subsidiaries have, as of the Closing Date,
any extension of time with respect to an assessment or deficiency relating to
any Federal tax return that is still in effect.  None of the Credit Parties or
any of their Subsidiaries have, as of the Closing Date, any extension of time
with respect to an assessment or deficiency relating to any state, local or
foreign tax return that is still in effect, other than extensions with respect
to tax liabilities where the failure by the applicable Credit Party to pay such
tax liabilities would not have a Material Adverse Effect.  None of the Credit
Parties or any of their Subsidiaries is a party to any tax sharing arrangement
with any Person (other than the affiliated group of which Walco Holdings is the
parent).

 

5.7                                 No Material Misstatements.  No information,
report, financial statement, exhibit or schedule prepared and furnished by or on
behalf of any Credit Party to the Agent or any Lender in connection with this
Agreement or any other Loan Documents knowingly contains any material
misstatement of fact or knowingly omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading at the time prepared or furnished.

 

5.8                                 Subsidiaries.  As of the date hereof, the
Credit Parties have no Subsidiaries other than as listed on Schedule 5.8
attached hereto.  Except as expressly indicated on Schedule 5.8 attached hereto,
as of the Closing Date, each of the Subsidiaries listed on Schedule 5.8 is
wholly owned by the applicable Credit Party. As of the Closing Date, Schedule
5.8 sets forth (a) the jurisdiction of incorporation or organization of each
Subsidiary of the Credit Parties, and (b) the percentage of the applicable
Credit Party’s ownership of the Equity Interests of each Subsidiary of the
Credit Parties.

 

5.9                                 Representations by Others.  All
representations and warranties made by or on behalf of any of the Credit Parties
in any Loan Document shall constitute representations and warranties of the
Credit Parties hereunder.

 

5.10                           Permits, Licenses, Etc.  Each of the Credit
Parties possess all material permits from each applicable Governmental
Authority, licenses from each applicable Governmental Authority, patents, patent
rights, trademarks, trademark rights, trade names, trade name rights and
copyrights which are reasonably required to conduct their respective businesses.

 

5.11                           ERISA.  No Reportable Event has occurred with
respect to any Plan which, when taken together with all other such Reportable
Events for which liability is reasonably expected to

 

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occur, could reasonably be expected to result in any material liability.  Each
Plan complies in all material respects with all applicable provisions of ERISA,
and the Borrower or each ERISA Affiliate have filed all reports required by
ERISA and the Code to be filed with respect to each Plan.  The Borrower does not
have any knowledge of any event which could reasonably be expected to result in
a liability of the Borrower or any ERISA Affiliate to the PBGC other than for
applicable premiums.  No accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Plan.  No event has occurred and no condition exists that
could reasonably be expected to constitute grounds for a Plan to be terminated
under circumstances which would cause the Lien provided under Section 4068 of
ERISA to attach to any Property of the Borrower or any ERISA Affiliate.  No
event has occurred and no condition exists that could reasonably be expected to
cause the Lien provided under Section 302 of ERISA or Section 412 of the Code to
attach to any Property of the Borrower or any ERISA Affiliate.

 

5.12                           Title to Properties; Possession Under Leases.

 

(a)                                  Except as set forth on Schedule 5.12
attached hereto, the Credit Parties and each of their respective Subsidiaries
have good and marketable title to, or a valid leasehold interest in, all of
their respective Property and assets that are material to their respective
business taken as a whole shown on the most recent Consolidated balance sheet
for the Credit Parties and their Subsidiaries provided under the terms of
Section 6.3(a) or Section 6.3(b), and all assets and Property that are material
to their respective business taken as a whole, acquired since the date of such
respective balance sheets, except for such Property as is no longer used or
useful in the conduct of their respective businesses or as have been disposed of
in the ordinary course of business or otherwise in accordance with this
Agreement, and except for minor defects in title that do not interfere with the
ability of the Credit Parties or any of their Subsidiaries to conduct their
respective businesses as now conducted, all such assets and Property are free
and clear of all Liens other than those permitted by Section 7.2 hereof.

 

(b)                                 Except as set forth on Schedule 5.12
attached hereto, the Borrower and each of its Subsidiaries have no knowledge of
any material default under any material leases to which any of them is a party
and under which any of them is in occupancy, except where non-compliance does
not affect the Borrower’s or such Subsidiary’s use or occupancy thereof, as
applicable, and all such material leases are in full force and effect.  
Schedule 5.12 attached hereto sets forth each of such leases of real Property in
existence as of the Closing Date, and upon the request of the Agent, the
Borrower will provide the Agent with complete and correct copies of all of such
leases of real Property then in effect.

 

5.13                           Assumed Names.  As of the Closing Date, neither
the Borrower, nor any of its Subsidiaries, is currently conducting its business
under any assumed name or names, except as set forth on Schedule 5.13 attached
hereto. Upon written request by the Agent, the Borrower shall promptly furnish
the Agent with a then current listing of all assumed names that the Borrower
and/or any of its Subsidiaries is then utilizing in conducting their respective
businesses.

 

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5.14                           Investment Company Act.  None of the Credit
Parties or any of their Subsidiaries is an investment company within the meaning
of the Investment Company Act of 1940, as amended.

 

5.15                           Public Utility Holding Company Act.  None of the
Credit Parties or any of their Subsidiaries is a “public utility company,” or an
“affiliate” or a “subsidiary company” of a “public utility company,” or a
“holding company,” or a “subsidiary company” of a “registered holding company,”
or an “affiliate” of a “registered holding company” as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended (“PUHCA”).

 

5.16                           Agreements.  Schedule 5.16 attached hereto is a
complete and correct list, as of the Closing Date, of (i) all credit agreements
or indentures for borrowed money and capitalized leases to which any of the
Credit Parties or any of their Subsidiaries is a party and all Property of any
of the Credit Parties or any of their Subsidiaries subject to any Lien securing
such Indebtedness or capitalized lease obligation, (ii) each letter of credit
and guaranty to which any of the Credit Parties or any of their Subsidiaries is
a party, (iii) all other material instruments in effect as of the date hereof
providing for, evidencing, securing or otherwise relating to any Indebtedness
for borrowed money of any of the Credit Parties or any of their Subsidiaries
(other than the Indebtedness hereunder), and (iv) all obligations of any of the
Credit Parties or any of their Subsidiaries to issuers of appeal bonds issued
for account of any Credit Party or any of its Subsidiaries.  The Borrower shall,
upon, request by the Agent, deliver to the Agent and the Lenders a complete and
correct copy of all such credit agreements, indentures, capitalized leases,
letters of credit, guarantees and other instruments described in Schedule 5.16
or arising after the date hereof, including any modifications or supplements
thereto, as in effect on the date hereof.

 

5.17                           Environmental Matters.  Except as disclosed on
Schedule 5.17 attached hereto or in any of the environmental assessments or
studies described on Schedule 5.17 attached hereto, to the Credit Parties’
knowledge: (a) each of the Credit Parties and their Subsidiaries are in material
compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Requirement of Environmental Law or Environmental Permit
reasonably necessary to the conduct of any material aspect of the business of
any Credit Party or any of its Subsidiaries; (b) each of the Credit Parties and
their Subsidiaries (i) have obtained and maintained in effect all Environmental
Permits reasonably necessary to the conduct of any material aspect of the
business of any Credit Party or any of its Subsidiaries, (ii) along with their
respective Properties (whether leased or owned) have been and are in material
compliance with all applicable Requirements of Environmental Law and
Environmental Permits, (iii) along with their respective Properties (whether
leased or owned) are not subject to any material (A) Environmental Claims or
(B) Environmental Liabilities arising from or based upon any act, omission,
event, condition or circumstance occurring or existing on or prior to the date
hereof, and (iv) have not received individually or collectively any notice of
any material violation or alleged material violation of any Requirements of
Environmental Law or Environmental Permit or any Environmental Claim in
connection with their respective Properties; and (c) none of the Credit Parties
or any of their Subsidiaries has actual knowledge of any material violation of
any applicable Requirements of Environmental Law and Environmental Permits by,
or of any material Environmental Claims or Environmental Liabilities arising
against,

 

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any of the prior owners or operators and predecessors in interest with respect
to any of the Credit Parties’ or any of their Subsidiaries’ respective Property.

 

5.18                           Solvency.

 

(a)                                  Immediately after the consummation of the
transactions contemplated hereunder to occur on the Closing Date, (i) the fair
value of the assets of each Credit Party, at a fair valuation, will exceed its
debts and liabilities, subordinated, contingent or otherwise; (ii) the present
fair saleable value of the property of each Credit Party will be greater than
the amount that will be required to pay the probable liability of its debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (iii) each Credit Party will be
able to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (iv) each Credit
Party will not have unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted after the Closing Date; provided, however, that for
purposes of the foregoing representations and warranties by the Canadian
Subsidiaries of the Borrower set forth in clauses (i), (ii) and (iii), the
contingent liabilities of such Canadian Subsidiaries under the terms of the
Guaranty and under the terms of the guaranty by such Canadian Subsidiaries of
the Revolving Credit Agreement and the Second Lien Debt shall be excluded. 
Notwithstanding the foregoing proviso, however, each Canadian Subsidiary of the
Borrower represents and warrants that applicable Canadian bankruptcy and
insolvency laws do not provide such Canadian Subsidiary with any fraudulent
conveyance or other similar defense to the enforcement of such Canadian
Subsidiary’s Obligations under the Guaranty or any applicable Security Document
to which such Canadian Subsidiary is a party.

 

(b)                                 No Credit Party intends to, or will permit
any of its Subsidiaries to, and no Credit Party believes that it or any of its
Subsidiaries will, incur debts beyond its ability to pay such debts as they
mature, taking into account the timing of and amounts of cash to be received by
it or any such Subsidiary and the timing of the amounts of cash to be payable on
or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.

 

5.19                           Status of Collateral.  The Credit Parties are and
shall be the sole owners, free and clear of all Liens except in favor of the
Collateral Agent or otherwise permitted under Section 7.2 hereunder, of and
fully authorized to sell, transfer, pledge and/or grant a security interest in
all of the Collateral (other than Excluded Collateral, as defined in the
applicable Security Documents).

 

5.20                           Revolving Credit Agreement Debt and Second Lien
Debt Documents.  Each of the Revolving Credit Agreement and the Second Lien Debt
Documents constitutes the valid and binding obligation of the applicable Credit
Parties, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, and moratorium laws and other laws affecting
creditors’ rights generally and by general principles of equity regardless of
whether considered in a proceeding in equity or at law.  The Credit Parties have
no knowledge that any of the representations and warranties contained in the
Revolving Credit Agreement or any of the Second Lien Debt Documents were not
true and correct in all material respects on and as of the

 

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date given or, except as consented to by the Agent in writing or otherwise
disclosed in writing to the Agent prior to the Closing Date, that any of the
material terms thereof have been modified, amended or waived other than as
permitted under Section 7.19.

 

5.21                           Transactions with Related Parties. Except as set
forth on Schedule 5.21 attached hereto, any and all transactions, contracts, or
other agreements existing on the Closing Date which have been entered into by
and among any Credit Party and any officer, director, shareholder or Affiliate
of any of the Credit Parties (other than Permitted Affiliate Transactions), has
been entered into and made upon terms and conditions not less favorable to the
applicable Credit Parties than those terms which could have been obtained from
wholly independent and unrelated sources.

 

5.22                           Patents, Trademarks and Copyrights.  Schedule
5.22 hereto sets forth a true, accurate and complete listing, as of the date
hereof, of all patents, registered trademarks and copyrights, and applications
therefor, of each of the Credit Parties and each of their Subsidiaries as of the
Closing Date.  Except as created or permitted under the Loan Documents, no Lien
exists with respect to the interest of any Credit Party or any of its
Subsidiaries in any such patents, registered trademarks or copyrights or
applications therefor, and no Credit Party or any of its Subsidiaries has
transferred or subordinated any interest it may have in such patents, registered
trademarks and copyrights and applications therefor.  The Borrower shall, from
time to time as necessary, deliver to the Agent an updated Schedule 5.22 to this
Agreement, together with a certificate of a Responsible Officer of the Borrower
certifying that the information set forth on such schedule is true, correct and
complete as of such date, which schedule may be used to prepare additional
Security Agreements, if necessary.

 

6.                                       Affirmative Covenants.

 

Until the Obligations shall have been paid in full, each Credit Party executing
this Agreement covenants and agrees, jointly and severally with all of the
Credit Parties, to perform and observe (and cause each of its Subsidiaries to
perform and observe) each and all of the following covenants and agreements:

 

6.1                                 Businesses and Properties.  At all times:
(a) do or cause to be done all things necessary to obtain, preserve, renew and
keep in full force and effect the rights, licenses, permits, franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
businesses; (b) maintain and operate such businesses in the same general manner
in which they are presently conducted and operated, provided that the foregoing
shall not prohibit any merger, consolidation, liquidation, dissolution or any
discontinuance or sale of such business permitted under Section 7.4; (c) comply
in all material respects with all Legal Requirements applicable to the operation
of such businesses whether now in effect or hereafter enacted (including without
limitation, all Legal Requirements relating to public and employee health and
safety and all Environmental Laws) and with any and all other Legal
Requirements; and (d) keep and maintain all Property material to the conduct of
such businesses in good repair, working order and condition, ordinary wear and
tear excepted, and from time to time make, or cause to be made, all

 

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necessary repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.

 

6.2                                 Taxes.  Pay and discharge promptly when due
(giving effect to all extensions of time permitted by the applicable
Governmental Authority) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or in respect of its
Property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise, which, if unpaid,
might give rise to Liens upon such properties or any part thereof (except as
otherwise permitted by Section 7.2 hereof), unless being contested in good faith
by appropriate proceedings and as to which adequate reserves in an amount not
less than the aggregate amount secured by such Liens have been established in
accordance with GAAP; provided, however, that such contested amounts giving rise
to such Liens shall be immediately paid upon commencement of any procedure or
proceeding to foreclose any of such Liens unless the same shall be validly
stayed by a court of competent jurisdiction or a surety bond, which is
satisfactory in all respects to the Agent, is delivered to the Agent for the
ratable benefit of the Lenders in an amount no less than such contested amounts.

 

6.3                                 Financial Statements and Information. 
Furnish to the Agent each of the following:

 

(a)                                  as soon as available and in any event
within ninety (90) days after the end of each fiscal year of the Credit Parties,
Annual Audited Financial Statements of the Credit Parties and their
Subsidiaries;

 

(b)                                 as soon as available and in any event within
thirty (30) days after the end of each calendar month, Monthly Unaudited
Financial Statements of the Credit Parties and their Subsidiaries;

 

(c)                                  concurrently with the financial statements
provided for in Subsections 6.3(a) and 6.3(b) hereof, (1) an Officer’s
Certificate, signed by a Responsible Officer of applicable Credit Party, and
(2) if applicable, a written certificate in Proper Form, identifying each
Subsidiary which is otherwise required by the provisions of Section 6.10 hereof
to become a Guarantor at the request of the Agent, but which has not yet done so
as of the date of such certificate, and providing an explanation of the reasons
why each such Subsidiary is not a Guarantor, signed by a Responsible Officer of
the applicable Credit Party;

 

(d)                                 as soon as available and in any event within
five (5) Business Days after the date of issuance thereof (if any such audit
report or management letter is ever issued), any (1) interim or special audit
report made by independent accountants of the books of the Credit Parties or any
of their Subsidiaries or (2) management letter prepared by the independent
public accountants who reported on the financial statements provided for in
Subsection 6.3(a) above, with respect to the internal audit and financial
controls of the Credit Parties and their Subsidiaries;

 

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(e)                                  as soon as available and in any event
within thirty (30) days prior to the commencement of each fiscal year of the
Credit Parties, management-prepared Consolidated financial projections of the
Credit Parties and their Subsidiaries for the immediately following three
(3) fiscal years (setting forth such projections on both an annual basis and on
a monthly basis for the upcoming fiscal year and on an annual basis only for the
two (2) fiscal years thereafter), such projections to be prepared and submitted
in such format and detail as reasonably requested by the Agent; and

 

(f)                                    such other information relating to the
financial condition, operations and business affairs of any Credit Party or any
of its Subsidiaries as from time to time may be reasonably requested by the
Agent.

 

6.4                                 Inspections; Field Examinations; Appraisals
and Physical Counts.

 

(a)                                  Upon reasonable notice (which may be
telephonic notice), at all reasonable times and as often as the Agent may
request, permit any authorized representative designated by the Agent, including
without limitation, any consultant engaged by the Agent, together with any
authorized representatives of any Lender desiring to accompany the Agent, to
visit and inspect the Properties and financial records of the Credit Parties and
to make extracts from such financial records and permit any authorized
representative designated by the Agent (together with any accompanying
representatives of any Lender) to discuss the affairs, finances and condition of
the Credit Parties with any Responsible Officer and the Credit Parties’
independent public accountants, as applicable.  The Agent agrees that it shall
schedule any meeting with any such independent public accountant through the
Borrower, and a Responsible Officer of the Borrower shall have the right to be
present at any such meeting.

 

(b)                                 The Agent and any of its consultants shall
each have the right to examine (and any authorized representatives of any Lender
shall have the right to accompany the Agent during any such examination), as
often as they may request, the existence and condition of the Accounts, books
and records of the Borrower and its Subsidiaries and to review their compliance
with the terms and conditions of this Agreement and the other Loan Documents,
subject to governmental confidentiality requirements.  They shall also have the
right to verify with any and all customers of the Borrower and its Subsidiaries
the existence and condition of the Accounts, as often as they may require,
without prior notice to or consent of the Borrower or any of its Subsidiaries. 
Without in any way limiting the foregoing, the Agent, and any of its consultants
shall have the right to (i) conduct field examinations of the Borrower and its
Subsidiaries operations at the Borrower’s expense as often as they may request
and (ii) to order and obtain an appraisal of the Collateral by an appraisal firm
satisfactory to the Agent, and any of their consultants as often as they may
request.  Without in any way limiting the foregoing, the Borrower agrees to
cooperate and to cause its Subsidiaries to cooperate in all respects with the
Agent, and any of their consultants in connection with any and all inspections,
examinations and other actions taken by them pursuant to this Section 6.4.  The
Borrower hereby agrees to promptly pay, upon demand by the Agent (or the
applicable Lender, if appropriate), any and all fees and expenses incurred by
the Agent or any Lender in

 

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connection with any inspection, examination, appraisal or review permitted by
the terms of this Section 6.4; provided, however, that so long as no Default or
Event of Default is continuing, the Borrower shall only be obligated to pay for
(x) two field examinations during each consecutive 12-month period (limited to
the prevailing rate then charged for field examinations, which is initially
anticipated to be $850.00 per day per examiner, plus all out-of-pocket expenses
of the relevant examiner related to such filed examinations), (y) one Collateral
appraisal (other than the initial field examinations and appraisals for any
Accounts, Equipment and/or Inventory acquired through an acquisition or other
Investment permitted under the terms of this agreement, it being agreed that the
Borrower shall be obligated to pay for each such initial field examination
and/or appraisal, as applicable, conducted with respect to each such acquisition
or Investment); provided further, however, that the Borrower shall only be
obligated to pay or reimburse such fees and expenses of any Lender other than
the Agent to the extent incurred by such Lender after the occurrence of any
Default or Event of Default which has not been cured to the satisfaction of the
Agent or waived in writing by the Agent and the Required Lenders.

 

6.5                                 Further Assurances.  Upon request by the
Agent, promptly execute and deliver any and all other and further agreements and
instruments and take such further action as may be reasonably requested by the
Agent to (a) cure any defect in the execution and delivery of any Loan Document
or more fully to describe particular aspects of any of the Credit Parties’
agreements set forth in the Loan Documents or so intended to be, (b) to carry
out the provisions and purposes of this Agreement an the other Loan Documents,
and (c) grant, preserve, protect and perfect the first priority Liens created or
intended to be created by the Security Documents in the Collateral.

 

6.6                                 Books and Records.  Maintain financial
records and books in accordance with accepted financial practice and GAAP.

 

6.7                                 Insurance.

 

(a)                                  Keep its insurable Properties adequately
insured at all times by financially sound and reputable insurers.

 

(b)                                 Maintain such other insurance, to such
extent and against such risks, including fire and other risks insured against by
extended coverage and employee liability, as is customary with companies
similarly situated and in the same or similar businesses, provided, however,
that such insurance shall insure the Property of the Borrower and each of its
Subsidiaries against all risk of physical damage, including without limitation,
loss by fire, explosion, theft, fraud and such other casualties as may be
reasonably satisfactory to the Agent, but in no event at any time in an amount
less than the replacement value of the Collateral.

 

(c)                                  Maintain in full force and effect worker’s
compensation coverage and public liability insurance against claims for personal
injury or death or property damage occurring upon, in, about or in connection
with its operations and with the use of any

 

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Properties owned, occupied or controlled by the Borrower or any of its
Subsidiaries, in such amounts as the Agent shall reasonably deem necessary.

 

(d)                                 Maintain such other insurance as may be
required by law or as may be reasonably requested by the Agent for purposes of
assuring compliance with this Section 6.7.

 

All insurance covering tangible personal Property subject to a Lien in favor of
the Agent for the benefit of the Lenders granted pursuant to the Security
Documents shall provide that, in the case of each separate loss, the full amount
of insurance proceeds shall be payable to the Agent and shall further provide
for at least 30 days’ prior written notice to the Agent of the cancellation or
substantial modification thereof.

 

6.8                                 ERISA.  At all times, except where a failure
to comply with any of the following, individually or in the aggregate, would or
could reasonably be expected to result in a material obligation or liability of
any Credit Party: (a) make contributions to each Plan in a timely manner and in
an amount sufficient to comply with the minimum funding standards requirements
of ERISA; (b) immediately upon acquiring knowledge of (i) any Reportable Event
in connection with any Plan for which no administrative or statutory exemption
exists or (ii) any Prohibited Transaction in connection with any Plan, that
could result in the imposition of material damages or a material excise tax on
the Borrower or any Subsidiary thereof, furnish the Agent a statement executed
by a Responsible Officer of the Borrower or such Subsidiary setting forth the
details thereof and the action which the Borrower or any such Subsidiary
proposes to take with respect thereto and, when known, any action taken by the
Internal Revenue Service with respect thereto; (c) notify the Agent promptly
upon receipt by the Borrower or any Subsidiary thereof of any notice of the
institution of any proceedings or other actions which may result in the
termination of any Plan by the PBGC and furnish the Agent with copies of such
notice; (d) pay when due, or within any applicable grace period allowed by the
PBGC, all required premium payments to the PBGC; (e) furnish the Agent with
copies of the annual report for each Plan filed with the Internal Revenue
Service not later than ten (10) days after the Agent requests such report;
(f) furnish the Agent with copies of any request for waiver of the funding
standards or extension of the amortization periods required by Sections 303 and
304 of ERISA or Section 412 of the Code promptly after the request is submitted
to the Secretary of the Treasury, the Department of Labor or the Internal
Revenue Service, as the case may be; and (g) pay when due all installment
contributions required under Section 302 of ERISA or Section 412 of the Code or
within 10 days of a failure to make any such required contributions when due
furnish the Agent with written notice of such failure.

 

6.9                                 Use of Proceeds.  Subject to the terms and
conditions contained herein, use the proceeds of the Term Loans for refinancing
the exiting $45,000,000 cash secured term loan by JPMorgan Chase Bank, N.A. to
the Borrower, and upon repayment of such existing cash secured loan, Borrower
shall use the available cash that collateralized such loan for (a) refinancing
of up to $24,750,000 of existing term loan Indebtedness owing to the Revolving
Credit Lenders and (b) repayment of the then outstanding principal balance of
the Revolving Credit Agreement Debt with the balance of such funds, with the
intent being that such funds may thereafter be reborrowed under the Revolving
Credit Agreement for purposes of (i) financing purchases and

 

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acquisitions permitted to be made by the Borrower under the terms of
Section 7.4(e)(7); and (ii) financing dividends and distributions permitted to
be made by the Borrower under the terms of Section 7.10;  provided, that no
proceeds of any Term Loan shall be used (w) for the purpose of purchasing or
carrying directly or indirectly any margin stock as defined in Regulation U
(“Reg U”) of the Board of Governors of the Federal Reserve System, (x) for the
purpose of reducing or retiring any Indebtedness which was originally incurred
to purchase or carry any such margin stock, (y) for any other purpose which
would cause such Loan to be a “purpose credit” within the meaning of Reg U and
(z) for any purpose which would constitute a violation of Reg U or of
Regulations G, T or X of the Board of Governors of the Federal Reserve System or
any successor regulation of any thereof or of any other rule, statute or
regulation governing margin stock from time to time.

 

6.10                           Guarantors, Joinder Agreements.  Promptly inform
the Agent of the creation or acquisition of any Subsidiary of any Credit Party
or the commencement of any business operations by any Inactive Subsidiary after
the Closing Date and, within thirty (30) days after the written request of the
Agent delivered in accordance with Section 10.2 below, cause (a) each such
Subsidiary that is a Domestic Subsidiary or created under the laws of Canada to
become a Guarantor by execution and delivery to the Agent, for the ratable
benefit of the Lenders, of a Guaranty or a Joinder Agreement (if a Joinder
Agreement is requested by the Agent in lieu of a Guaranty), (b) a first priority
perfected security interest (subject to the terms of the First Lien
Intercreditor Agreement) to be granted to the Collateral Agent, for the ratable
benefit of the Lenders, in all of the Equity Interests of such Subsidiary owned
by any Credit Party or any of its other Subsidiaries if such newly acquired or
created Subsidiary or previously Inactive Subsidiary is a Domestic Subsidiary or
created under the laws of Canada, or if such newly acquired or created
Subsidiary or previously Inactive Subsidiary is not a Domestic Subsidiary or a
Subsidiary created under the laws of Canada, then not more than sixty-five
percent (65%) of all issued and outstanding Equity Interests of such Subsidiary
shall be pledged as Collateral pursuant to the foregoing pledge requirement for
Equity Interests, (c) cause each such Subsidiary that is a Domestic Subsidiary
or created under the laws of Canada to grant to the Collateral Agent a security
interest securing the Obligations, for the ratable benefit of the Lenders
(subject only to (i) the First Lien Intercreditor Agreement, (ii) Liens
permitted under Sections 7.2(b) and (e) as to Accounts and Permitted Investment
Securities which do not have priority over the Lien of the Collateral Agent for
the ratable benefit of the Lenders, (ii) Liens permitted under Section 7.2 as to
all other Collateral which do not have priority over the Lien of the Collateral
Agent for the ratable benefit of the Lenders, and (iii) purchase money Liens
existing as of the date of acquisition by Borrower or any other Subsidiary of
the Borrower of such newly acquired Subsidiary, if applicable) in all
Accounts, Inventory, Equipment, general intangibles and other tangible and
intangible personal Property owned at any time by such Subsidiary and all
products and proceeds thereof (subject to similar exceptions as set forth in the
Security Documents), and (d) cause such Subsidiary to deliver to the Agent such
related certificates, legal opinions and documents (including Organizational
Documents) as the Agent may reasonably require; provided, however, that any
Subsidiary that is not a Domestic Subsidiary or created under the laws of Canada
shall not be required to become a Guarantor or grant any Liens hereunder.  To
the extent reasonably feasible, all of the foregoing requirements shall be
affected by the execution and delivery of a Joinder Agreement in a form
acceptable to the Agent.

 

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6.11                           Notice of Events.   Notify the Agent within one
(1) Business Day after any Responsible Officer of any of the Credit Parties
acquires knowledge of the occurrence of, or if any of the Credit Parties causes
or intends to cause, as the case may be, any of the following: (i) the
institution of any lawsuit, administrative proceeding or investigation affecting
any Credit Party or any of its Subsidiaries, including without limitation, any
audit by the Internal Revenue Service, the adverse determination under which
could reasonably be expected to have a Material Adverse Effect; (ii) any
development or change in the business or affairs of any Credit Party or any of
its Subsidiaries which has had or which is likely to have, in the reasonable
judgment of any Responsible Officer of any of the Credit Parties, a Material
Adverse Effect; (iii) any Event of Default or Default, together with a
reasonably detailed statement by a Responsible Officer on behalf of the Borrower
of the steps being taken to cure the effect of such Event of Default or Default;
(iv) the occurrence of a default or event of default by any Credit Party or any
of its Subsidiaries under any agreement or series of related agreements to which
it is a party, which default or event of default could reasonably be expected to
have a Material Adverse Effect; (v) any material violation by, or investigation
of any Credit Party or any of its Subsidiaries in connection with any actual or
alleged material violation of any Legal Requirement imposed by the Environmental
Protection Agency, the Occupational Safety and Health Administration or any
other Governmental Authority which has or is likely to have, in the reasonable
judgment of any Responsible Officer of any Credit Party, a Material Adverse
Effect; (vi) any significant change in the accuracy of any material
representations and warranties of the any Credit Party or any of its
Subsidiaries in this Agreement or any other Loan Document (including without
limitation, the representations and warranties in Section 5.20(b)); (vii) the
delivery of any written notice of default or event of default to any Credit
Party by any representative or holder of any Second Lien Debt or any Revolving
Credit Lender; and (viii) any amendment or modification of the Loan Documents
(as defined in the Revolving Credit Agreement) or the Second Lien Loan
Documents, such notice to be accompanied by copies of the actual amendment or
modification documents; and (ix) any of the following:  (1) the occurrence of a
Reportable Event with respect to any Plan; (2) the institution of any steps by
the Borrower, any ERISA Affiliate, the PBGC or any other Person to terminate any
Plan; (3) the institution of any steps by the Borrower or any ERISA Affiliate to
withdraw from any Plan; (4) a Prohibited Transaction in connection with any
Plan; (5) any material increase in the contingent liability of the Borrower or
any Subsidiary of the Borrower with respect to any post-retirement welfare
liability; or (6) the taking of any action by, or the threatening of the taking
of any action by, the Internal Revenue Service, the Department of Labor or the
PBGC with respect to any of the foregoing.

 

6.12                           Environmental Matters.  Without limiting the
generality of Section 6.1(c) hereof, (a) comply in all material respects with
all material limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Requirement of Environmental Law, or Environmental Permit; (b) obtain and
maintain in effect all Environmental Permits reasonably necessary to the conduct
of any material aspect of its business; and (c) keep its Property free of any
Environmental Claims or Environmental Liabilities, other than Environmental
Claims or Environmental Liabilities, contingent or otherwise, disclosed in
Schedule 5.17 attached hereto or any of the environmental assessments or studies
described in Schedule 5.17 attached hereto.  In the event that any Credit Party
or any of its Subsidiaries receives any demand or claim from any Person,
including without

 

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limitation, any Governmental Authority, asserting the liability of any Credit
Party or any of its Subsidiaries as a result of any Environmental Liabilities or
requesting or requiring that any Environmental Liabilities be remediated by any
Credit Party or any of its Subsidiaries, such Credit Party agrees to promptly
take action and thereafter diligently pursue the same to completion in a manner
necessary to cause the applicable Environmental Liabilities to be remediated as
soon as reasonably possible in accordance with all applicable Requirements of
Environmental Law.  Each Credit Party, jointly and severally with all other
Credit Parties, hereby indemnifies and agrees to hold the Agent and the Lenders
harmless from and against any and all liability, loss, damage, suit, action or
proceeding arising out of its respective business or the business of any of its
Subsidiaries, pertaining to any Environmental Liabilities, including without
limitation, claims of any Governmental Authority or any other Person arising
under any Requirement of Environmental Law; provided, that the foregoing
indemnity shall not apply to the extent, but only to the extent the applicable
liability, loss, damage, suit, action or proceeding is caused by the willful
misconduct, knowing and willful breach of any Loan Document or gross negligence
of the party seeking indemnification.

 

6.13                           End of Fiscal Year.  Cause each of its fiscal
years to end on June 30th of the applicable year.

 

6.14                           Pay Obligations and Perform Other Covenants. 
Make full and timely payment of the Obligations, whether now existing or
hereafter arising, as and when due and payable, duly comply with all of the
terms and covenants contained in this Agreement and in each of the other Loan
Documents at all times and places and in the manner set forth therein, and
except for the filing of continuation statements and the making of other filings
by the Collateral Agent as secured party or assignee, at all times take all
actions necessary to maintain the Liens and security interests provided for
under or pursuant to this Agreement and the Security Documents as valid
perfected first priority Liens on the Collateral intended to be covered thereby
(subject to the terms of the First Lien Intercreditor Agreement and subject only
to the Liens expressly permitted by Section 7.2 hereof) and supply all
information to the Collateral Agent necessary for such maintenance.

 

6.15                           Cash Dominion; Collection and Application of
Accounts.

 

(a)                                  At the Borrower’s own cost and expense,
arrange (and cause each of its Subsidiaries to arrange) for remittances on all
Accounts to be made (i) directly to one or more lockboxes designated by the
Collateral Agent under the terms of the Lockbox Agreement, (ii) directly to one
or more deposit accounts with a third-party financial institution linked to a
lockbox, cash management or similar depository system maintained with a
third-party financial institution, so long as (A) such deposit accounts and
systems are subject to and covered by a Tri-Party Agreement that facilitates the
collection of Accounts by the Collateral Agent in accordance with the terms of
this Section 6.15, and (B) the Borrower and its Subsidiaries cease to utilize
all principal depository accounts and lockbox, cash management and depository
systems maintained with any third-party financial institution on or before
thirty (30) days after the Closing Date, or (iii) in such other manner as the
Collateral Agent may direct.  All remittances on all Accounts

 

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processed through the lockboxes and received by the Collateral Agent in
accordance with this Section 6.15(a) shall at all times be promptly deposited in
one or more controlled disbursement or other accounts designated by the
Collateral Agent, subject to withdrawal by the Collateral Agent only, as
hereinafter provided and in connection therewith, the Collateral Agent is
irrevocably authorized to cause all remittances on all Accounts received by the
Collateral Agent from whatever means, whether pursuant to the Lockbox Agreement,
any Tri-Party Agreement or otherwise, to be promptly deposited in such account
or accounts designated by the Collateral Agent.  All remittances and payments
that are deposited in accordance with the foregoing will be applied by the
Collateral Agent on the same day received (or on the next Business Day in the
case of remittances and payments received after 11:00 a.m.) by the Collateral
Agent to reduce the outstanding balance of the Revolving Credit Agreement Debt
subject to the continued accrual of interest for one (1) Business Day (or two
Business Days in the case of remittances and payments received after 11:00 a.m.)
on the Revolving Credit Agreement Debt balances paid by such remittances and
payments and in any event subject to final collection in cash of the item
deposited.

 

(b)                                 Notwithstanding any provision to the
contrary in this Section 6.15, the Borrower and its Subsidiaries shall be
permitted to have from time to time local depository accounts maintained with
financial institutions other than JPMorgan Chase Bank, N.A. for local
remittances, payroll, trust and escrow services of the Borrower and its
Subsidiaries in the ordinary course of business, with not more than $500,000 in
the aggregate being permitted to be held in all such local depository or
remittance accounts at any one time, provided in each case all such accounts
remain subject to a Tri-Party Agreement and which such permitted amounts in such
accounts shall not be subject to periodic sweeps to a controlled disbursement
account with the Collateral Agent unless an Event of Default then exists.

 

(c)                                  Except as otherwise permitted under
Section 6.15(b) above, the Borrower and its Subsidiaries shall cause all
payments, if any, received by the Borrower or any of its Subsidiaries on account
of Accounts which are not forwarded directly to the above-described lockbox(es)
or accounts (whether in the form of cash, checks, notes, drafts, bills of
exchanges, money orders or otherwise) to be promptly deposited in the form
received (but with any endorsements of the Borrower or the applicable Subsidiary
necessary for deposit or collection) in the account or accounts designated by
the Collateral Agent in accordance with the provisions of Section 6.15(a) above.

 

6.16                           Accounts and Other Collateral Matters.   Maintain
books and records pertaining to the respective Collateral owned by any Credit
Party in detail, form and scope as the Agent shall reasonably require. Each
Credit Party will, promptly after any of its Responsible Officers learns
thereof, report to the Collateral Agent any material loss or destruction of, or
substantial damage to, any of the Collateral, and any other matters materially
affecting the value, enforceability or collectibility of any of the Collateral. 
If any amount payable under or in connection with any Account is evidenced by a
promissory note or other instrument, as such terms are defined in the Uniform
Commercial Code, such promissory note or instrument shall be promptly pledged,
endorsed, assigned and delivered to the Collateral Agent as additional
Collateral if the original

 

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principal amount of such promissory note or instrument is $50,000 or greater. 
No Credit Party shall redate, or allow any of its Subsidiaries to redate, any
invoice or sale or without written notice to the Collateral Agent, make or allow
to be made sales on extended dating beyond that customary in the industry. No
Credit Party nor any of its Subsidiaries shall be entitled to pledge the Agent’s
or any Lender’s credit on any purchases or for any purpose whatsoever.

 

6.17                           Agreements.  Promptly after Agent’s request, the
Borrower shall deliver or cause to be delivered to the Agent copies of all
material employment agreements, management fee agreements, tax sharing
agreements, loan agreements, notes and other documentation evidencing any
Indebtedness of any Credit Party or any of its Subsidiaries which the Agent may
request.

 

7.                                       Negative Covenants.

 

Until the Obligations shall have been paid in full, each Credit Party executing
this Agreement covenants and agrees, jointly and severally with all of the
Credit Parties, that it will not do (and will not suffer or permit any of its
Subsidiaries, if any, to do) any of the following:

 

7.1                                 Indebtedness.  Create, incur, suffer or
permit to exist, or assume or guarantee or become or remain liable with respect
to any Indebtedness, absolute, contingent, or otherwise, except the following:

 

(a)                                  Indebtedness to the Lenders and the Agent
pursuant hereto;

 

(b)                                 Indebtedness secured by Liens permitted by
Section 7.2 hereof;

 

(c)                                  Purchase money Indebtedness (including the
amount of any Capital Lease Obligations required to be capitalized and included
as a liability on the consolidated balance sheet of the Borrower and its
Subsidiaries) incurred to finance Capital Expenditures (to the extent otherwise
permitted hereunder);

 

(d)                                 The Second Lien Debt and Revolving Credit
Agreement Debt, with no renewals, extensions or increases of any thereof being
permitted (other than “payments-in-kind” of accrued and unpaid interest), unless
the same has been approved in writing by the Agent and the Required Lenders or,
in the case of the Revolving Credit Agreement Debt, the same is expressly
permitted under the terms of the First Lien Intercreditor Agreement;

 

(e)                                  Other liabilities or Indebtedness existing
on the date of this Agreement and set forth on Schedule 5.16 attached hereto;

 

(f)                                    Current accounts payable and unsecured
current liabilities (including current accrued expenses), not the result of
borrowings, to vendors, suppliers, landlords, lessors and persons providing
services, for expenditures on ordinary trade terms for goods and services
normally required by the Borrower or any of its Subsidiaries in the ordinary
course of business;

 

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(g)                                 Indebtedness of any Guarantor (other than
the Parent) to the Borrower or to any other Guarantor (other than the Parent),
or the Indebtedness of the Borrower to any Guarantor (other than the Parent),
provided that no such Indebtedness may be cancelled, compromised or otherwise
discounted in any respect without the written consent of the Required Lenders;

 

(h)                                 Current and deferred taxes and other
assessments and governmental charges (to the extent permitted by
Section 7.2(e) hereof).

 

(i)                                     Cash Management Obligations incurred
under the Revolving Credit Agreement and related documents, and customary and
prudent Hedging Obligations entered into with Revolving Credit Lenders for the
sole purpose of protecting the Borrower and its Subsidiaries against
fluctuations in interest rates, currency exchange rates and similar risks, so
long as such Hedging Obligations are not speculative in nature and are incurred
in the normal course of business and consistent with industry practices;

 

(j)                                     Refinancing Indebtedness, to the extent
the same relates to any Indebtedness permitted by Sections 7.1(c) and
7.1(e) hereof;

 

(k)                                  Contingent Liabilities permitted pursuant
to Section 7.3;

 

(l)                                     Indebtedness arising under any
performance or surety bond entered in the ordinary course of business;

 

(m)                               Unsecured Indebtedness assumed, acquired or
incurred pursuant to any acquisition permitted under Section 7.4(e)(7),
provided, that (1) all such Indebtedness constitutes Subordinated Indebtedness
and (2) the aggregate principal amount of all such Indebtedness assumed,
acquired or incurred, together with the cash purchase price paid, in connection
with all such acquisitions permitted under Section 7.4(e)(7) does not exceed in
the aggregate during the period from the Closing Date through the Term Loan
Maturity Date the applicable aggregate consideration limits set forth in
Section 7.4(e)(7);

 

(n)                                 Indebtedness incurred to finance the
purchase or maintenance of publicly-tradable securities owned by any Credit
Party, so long as (1) such Indebtedness is secured by all such securities, and
(2) such Indebtedness does not exceed $500,000 in the aggregate at any one time
outstanding;

 

(o)                                 Subordinated Indebtedness of Animal Health
International, Inc. or Steer Intermediate Corporation, provided, that accrued
and unpaid interest on such Indebtedness shall only be payable in the form of
“payments-in-kind”; and

 

(p)                                 Other Indebtedness in an aggregate amount
not to exceed at any one time outstanding the difference between $3,000,000 and
the principal amount of Indebtedness then outstanding and permitted under
Section 7.1(n).

 

The Agent, the Lenders and each Credit Party agree that, notwithstanding
anything contained in Section 7.1(g) or in any other provision contained in this
Agreement which may

 

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appear to be to the contrary, the payment of any and all Indebtedness permitted
by Sections 7.1(g) hereof, including without limitation, all Indebtedness, now
or hereafter outstanding and owing by any Credit Party to another Credit Party
under the Contribution Agreement (together with any and all Liens from time to
time securing the same as permitted by Section 7.2(i) hereof), is hereby made
and at all times hereafter shall be inferior and subordinate in all respects to
the Obligations from time to time owing to the Agent or any Lender pursuant
hereto and to any Lien against any Collateral from time to time now or hereafter
securing any of such Obligations pursuant to the terms hereof and the Security
Documents.  Each of the Credit Parties agrees to execute and deliver on its own
behalf, and to cause to be executed and delivered by and on behalf of any of its
Subsidiaries, any and all subordination agreements, in form and content
reasonably acceptable to the Agent or the Collateral Agent, which they may
hereafter require to further evidence the subordination of the payment of the
Indebtedness permitted by Section 7.1(g) above, and the Liens permitted by
Section 7.2(i) and any such contractual, statutory or constitutional landlord’s
Liens held by the Borrower.

 

7.2                                 Liens.  Create or suffer to exist any Lien
upon any of its Property (including without limitation, Equity Interests in any
Credit Party’s Subsidiaries) now owned or hereafter acquired, or acquire any
Property upon any conditional sale or other title retention device or
arrangement or any purchase money security agreement; provided, however, that
the Credit Parties and their Subsidiaries (or any of them) may create or suffer
to exist:

 

(a)                                  Liens in effect on the date hereof and
which are described on Schedule 7.2 attached hereto, provided, that the Property
covered thereby does not increase in scope and such Liens may not be renewed and
extended, unless the same relate to Refinancing Indebtedness permitted by
Section 7.1(e) above;

 

(b)                                 Liens against the Collateral in favor of the
Collateral Agent for the ratable benefit of the Lenders as security for the
Obligations and the Revolving Credit Agreement Debt, and subordinate and
inferior Liens against the Collateral securing the Second Lien Debt;

 

(c)                                  Liens incurred and pledges and deposits
made in the ordinary course of business in connection with workers’
compensation, unemployment insurance, old-age pensions and other social security
benefits (not including any lien described in Section 412(m) of the Code);

 

(d)                                 Liens imposed by law, such as carriers’,
warehousemen’s, mechanics’, materialmen’s, vendors’ and landlords’ liens and
other similar liens, incurred in good faith in the ordinary course of business
and securing obligations which are incurred in the ordinary course of business
and are not overdue for a period of more than 30 days or which are being
contested in good faith by appropriate proceedings pursued in good faith and as
to which the Borrower or any of its Subsidiaries, as the case may be, shall, to
the extent required by GAAP, consistently applied, have set aside on its books
adequate reserves;

 

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(e)           Liens securing the payment of taxes, assessments and governmental
charges or levies (excluding any Lien imposed pursuant to any of the provisions
of ERISA), that are not delinquent, are permitted by Section 6.2 hereof, or are
being diligently contested in good faith by appropriate proceedings and as to
which adequate reserves have been established in accordance with GAAP; provided,
however, that the aggregate amount of overdue taxes being diligently contested
in good faith at any one time secured by such Liens shall not exceed $1,000,000;

 

(f)            Zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created, assumed
or permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee) which do not in the
aggregate materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business;

 

(g)           Liens securing the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory obligations, surety,
customs and appeal bonds and other obligations of like nature, incurred as an
incident to and in the ordinary course of business;

 

(h)           Purchase money Liens securing the Indebtedness permitted by
Section 7.1(c) above, provided, as a result of the creation of any such Lien,
(i) no Default or Event of Default shall have occurred and is continuing,
(ii) the principal amount of such Lien does not exceed 100% of the purchase
price of the asset acquired with such permitted Indebtedness plus accrued
interest on such Indebtedness plus protective advances made by the holder of
such permitted Indebtedness, and (iii) such Lien shall not apply to any other
Property other than the asset acquired with such purchase money Indebtedness;

 

(i)            Liens in favor of the Borrower or any Guarantor (other than the
Parent) securing any Indebtedness permitted pursuant to Sections 7.1(g) hereof;

 

(j)            Liens on fixed assets securing Indebtedness permitted to be
assumed, acquired or incurred in connection with acquisitions permitted under
Section 7.4(e)(7), provided, (i) the applicable Lien existed on the applicable
Property prior to the acquisition thereof by the Borrower or any Subsidiary or
existed on any Property of any Person that becomes a Subsidiary of the Borrower
after the date hereof prior to the time such Person becomes a Subsidiary, (ii) 
the applicable Lien shall not apply to any other Property of the Borrower or any
Subsidiary, and (iii) the applicable Lien shall secure only those obligations
which it secures on the date of the applicable acquisition or the date such
Person becomes a Subsidiary, as the case may be;

 

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(k)           Liens consisting of bankers’ liens and rights of setoff, but only
to the extent permitted under any applicable Tri-Party Agreements, and in each
case, arising by operation of law, and Liens on documents presented in letter of
credit drawings; and

 

(l)            Liens on securities securing Indebtedness to the extent permitted
in accordance with Section 7.1(n).

 

Provided, however, notwithstanding anything contained above in this Section 7.2
to the contrary, if any of the permitted Liens are of the type that are being
contested in good faith by appropriate proceedings as to the Borrower or any of
its Subsidiaries, the Indebtedness giving rise to such contested Lien(s) must be
immediately paid upon commencement of any foreclosure process or proceeding with
respect to such Lien(s) unless the same shall be effectively stayed or a surety
bond with respect thereto (which is satisfactory in all respects to the Agent),
is posted.

 

7.3           Contingent Liabilities.  Create, incur, suffer or permit to exist,
directly or indirectly, any Contingent Obligations, other than:

 

(a)           The Obligations of each Guarantor to the Agent and the Lenders
under the terms of any Guaranty;

 

(b)           The guarantees by the Parent and any other Credit Party of the
Borrower of the Second Lien Debt and/or the Revolving Credit Agreement Debt;

 

(c)           Any Contingent Obligations of the Borrower under any Hedging
Obligations permitted by Section 7.1(i) above;

 

(d)           The guarantees by the Borrower of any Indebtedness of any other
Credit Party or by any Credit Party of any Indebtedness of the Borrower if such
Indebtedness so guaranteed is permitted under the terms of Section 7.1 above;

 

(e)           Endorsements of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business;

 

(f)            Obligations in respect of letters of credit under the Revolving
Credit Agreement;

 

(g)           Agreements evidencing any Hedging Obligations to the extent
permitted by Section 7.3(c); and

 

(h)           obligations relating to Liens permitted under Sections 7.2(c),
7(d), 7(e), 7(f) or 7(g).

 

7.4           Mergers, Consolidations and Dispositions and Acquisitions of
Assets.  In any single transaction or series of related transactions, directly
or indirectly:

 

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(a)           Wind up its affairs, liquidate or dissolve;

 

(b)           Be a party to any merger or consolidation;

 

(c)           Sell, convey, lease, transfer or otherwise dispose of all or any
portion of the assets (except for (1) the sale of Inventory in the ordinary
course of business for fair and adequate consideration and (2) the sale of
equipment, fixtures and other assets in accordance with the terms of
Section 7.4(e)(5) below) of the Borrower and/or its Subsidiaries, or agree to
take any such action;

 

(d)           Sell, assign, pledge, transfer or otherwise dispose of, or in any
way part with control of, any Equity Interests of any of its Subsidiaries or any
Indebtedness or obligations of any character of any of its Subsidiaries, or
permit any such Subsidiary to do so with respect to any Equity Interests of any
other Subsidiary or any Indebtedness or obligations of any character of the
Borrower or any of its Subsidiaries, or permit any of its Subsidiaries to issue
any additional Equity Interests other than to the Borrower or any wholly-owned
Subsidiary of the Borrower; or

 

(e)           Purchase or otherwise acquire, directly or indirectly, in a single
transaction or a series of related transactions, all or a substantial portion of
the assets of any Person or any shares of Equity Interests of, or similar
interest in, any Person;

 

provided, however that notwithstanding the foregoing, any of the following
described actions may be undertaken, so long as no Default or Event of Default
then exists or would exist immediately after giving effect to the applicable
event:

 

(1)           any Business Entity comprising the Parent may merge or consolidate
with any other Business Entity comprising the Parent or may be dissolved or
liquidated, so long as such dissolution or liquidation results in all assets of
such Business Entity being owned by another Business Entity comprising the
Parent;

 

(2)           any Subsidiary of the Borrower may merge or consolidate with the
Borrower or any other Subsidiary of the Borrower, provided, that if one or more
of the entities so merging or consolidating was a Guarantor, and if the
surviving entity is not the Borrower or is not yet a Guarantor, such surviving
entity must become a Credit Party simultaneously with such merger by executing
and delivering to the Agent a Joinder Agreement, together with all requested
Security Documents, as required at such time by the Collateral Agent,
appropriately completed in Proper Form;

 

(3)           any of the Borrower’s Subsidiaries may sell, lease, transfer or
otherwise dispose of any of its assets to the Borrower or any other Subsidiary
of the Borrower, provided, that if the entity selling, leasing, transferring or
otherwise disposing of its assets is a Guarantor, and if the entity to whom the
sale, lease, transfer or other disposition was made is not the Borrower or is
not yet a Guarantor, such entity must become a Credit Party simultaneously with
the consummation of such lease, transfer or disposition by executing and
delivering to the Agent a Joinder Agreement, together with

 

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all requested Security Documents, as required at such time by the Collateral
Agent, appropriately completed in Proper Form;

 

(4)           any Subsidiary of the Borrower may be dissolved or liquidated, so
long as such dissolution or liquidation results in all assets of such Subsidiary
being owned by the Borrower or a Subsidiary; provided, that if the entity
dissolving or liquidating is a Guarantor, and if the entity to whom all assets
of such dissolving or liquidating entity are transferred is not the Borrower or
is not yet a Guarantor, such entity to whom such assets are being transferred
must become a Credit Party simultaneously with the consummation of such
dissolution or liquidation by executing and delivering to the Agent a Joinder
Agreement, together with all requested Security Documents, as required at such
time by the Collateral Agent, appropriately completed in Proper Form;

 

(5)           the Borrower and its Subsidiaries may (i) sell, exchange or
otherwise dispose of Permitted Investment Securities in the ordinary course of
business; (ii) terminate, surrender or sublease a lease of real Property by the
Borrower or any of its Subsidiaries in the ordinary course of business;
(iii) sell Equipment that is obsolete, worn out or no longer needed in the
business of the Borrower or any of its Subsidiaries; (iv) enter into
sale-leaseback transactions relating to Property having a fair market value not
to exceed $1,000,000 in the aggregate during the period from the Closing Date
through the Term Loan Maturity Date; and (v) sell any other fixed assets
(including real Property, equipment and fixtures) having a fair market value not
to exceed $1,000,000 in the aggregate during the period from the Closing Date
through the Term Loan Maturity Date; provided that all proceeds of any of the
foregoing (other than Section 7.4(e)(5)(ii) above) shall be paid to the
Collateral Agent for application to outstanding Loans (as defined in the
Revolving Credit Agreement) or Obligations, to the extent then outstanding, in
accordance with the terms of the First Lien Intercreditor Agreement;

 

(6)           to the extent any Collateral is sold or otherwise disposed of as
permitted by this Section 7.4, such Collateral shall be sold or otherwise
disposed of free and clear of the Liens of the Security Documents and the
Collateral Agent shall take such actions, including executing and filing
appropriate releases, as are appropriate in connection therewith, and no
approval of any of Lenders shall be required therefor; and

 

(7)           the Borrower and/or any other Credit Party may purchase or
otherwise acquire, directly or indirectly, in a single transaction or a series
of related transactions, all or a substantial portion of the assets of any
Person or all or a majority of issued and outstanding shares of Equity Interests
of, or similar interest in, any Person, so long as (a) immediately after giving
effect to the applicable purchase or acquisition, no Default or Event of Default
exists (including without limitation, the Credit Parties are in compliance with
the Fixed Charge Coverage Ratio requirements of Section 7.11, tested on a pro
forma basis assuming that such purchase or acquisition had occurred at the
beginning of the four (4) most recent consecutive fiscal quarters of the Credit
Parties ending on or immediately prior to the date of such purchase or
acquisition), (b) the aggregate purchase price paid (including without
limitation, any Indebtedness permitted to be assumed, acquired or incurred by
the Borrower and/or any of its Subsidiaries in

 

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connection therewith under Section 7.1(m)) for all such purchases and
acquisitions does not exceed $60,000,000 in the aggregate during the period from
the Closing Date through the Term Loan Maturity Date for all such other
purchases and acquisitions and (c) if the purchase price paid (including without
limitation, any Indebtedness permitted to be assumed, acquired or incurred by
the Borrower and/or any of its Subsidiaries in connection therewith under
Section 7.1(m)) exceeds $15,000,000 in the aggregate, the Required Lenders shall
have consented in writing to such purchase or acquisition; and

 

(8)           The Credit Parties may make Investments to the extent permitted by
Section 7.7.

 

7.5           Nature of Business.  Materially change the nature of its business
or enter into any business (or at any time own, directly or indirectly, a
majority of the Equity Interests of any entity which is engaged in any business)
which is substantially different from the business in which the Borrower and its
Subsidiaries are engaged in as of the Closing Date.

 

7.6           Transactions with Related Parties.  Except for any Permitted
Affiliate Transactions, enter into or be a party to any other transaction,
contract or agreement of any kind with any officer, director, shareholder,
partner, employee or Affiliate of any Credit Party (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any such Person), unless such transaction,
contract or agreement is in the ordinary course of and pursuant to the
reasonable requirements of the Borrower’s or any of its Subsidiaries’ business
and is made upon fair and reasonable terms and conditions not less favorable to
such Person than those which could have been obtained in a comparable
transaction from wholly independent and unrelated sources.

 

7.7           Investments, Loans.  Make, directly or indirectly, any loan or
advance to or have any Investment in any Person, or make any commitment to make
such loan, advance or Investment, except:

 

(a)           Equity Interests of any Credit Party acquired or issued in
accordance with the other provisions of this Agreement, including without
limitation, the provisions of Section 6.10 above, or Equity Interests of any
other Subsidiary of any Credit Party with the prior written consent of the
Agent;

 

(b)           Permitted Investment Securities;

 

(c)           loans otherwise permitted by the provisions of
Section 7.1(g) above;

 

(d)           loans to employees of the Borrower or any Subsidiary made in the
ordinary course of business, so long as the aggregate amount of all such loans
outstanding at any time does not exceed $100,000;

 

(e)           Investments of the Borrower and the other Credit Parties permitted
under the terms of Section 7.4(e)(7);

 

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(f)            Investments consisting of Guarantees permitted by Section 7.3(d);

 

(g)           Investments consisting of deferred payment obligations in
connection with sales of assets permitted under Section 7.4(e)(5); and

 

(h)           Other Investments, including joint venture interests in
non-Subsidiary entities, in the aggregate amount not to exceed $500,000,
provided that such Investments have been approved by the Agent, such approval
not to be unreasonably withheld if the aggregate amount of such Investments does
not exceed $500,000 in the aggregate during the period from the Closing Date
through the Term Loan Maturity Date.

 

7.8           ERISA Compliance.

 

(a)           At any time engage in any Prohibited Transaction with respect to a
Plan which could reasonably be expected to result in a material liability; or
permit any Plan to be terminated in a manner which could result in the
imposition of a Lien on any Property of the Borrower or any of its Subsidiaries
pursuant to ERISA.

 

(b)           Engage in any transaction in connection with which the Borrower or
any Subsidiary thereof would or could reasonably be expected to be subject to
either a material civil penalty assessed pursuant to the provisions of
Section 502 of ERISA or a material tax imposed under the provisions of
Section 4975 of the Code.

 

(c)           Terminate any Plan in a “distress termination” under Section 4041
of ERISA, or take any other action which could reasonably be expected to result
in a material liability of the Borrower or any Subsidiary thereof to the PBGC.

 

(d)           Fail to make payment when due of all amounts which, under the
provisions of any Plan, the Borrower or any Subsidiary thereof is required to
pay as contributions thereto, or, with respect to any Plan, permit to exist any
material “accumulated funding deficiency” (within the meaning of Section 302 of
ERISA and Section 412 of the Code), whether or not waived, with respect thereto.

 

(e)           Adopt an amendment to any Plan requiring the provision of security
under Section 307 of ERISA or Section 401(a)(29) of the Code.

 

7.9           Change in Accounting Method.  Make or permit any change in
accounting method or financial reporting practices except as may be required by
GAAP, as in effect from time to time.

 

7.10         Redemption, Dividends, Issuance of Equity Interests, Distributions
and Restricted Payments.  At any time, other than any Permitted Affiliate
Transactions:

 

(a)           Redeem (whether as a result of mandatory or optional redemption
obligations or rights), purchase, retire or otherwise acquire, directly or
indirectly, any of

 

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its Equity Interests, any warrants or other similar instruments or set aside any
amount for any such purpose;

 

(b)           Declare or pay, directly or indirectly, (i) any dividend or fund
any redemption, purchase, retirement or other acquisition of its Equity
Interests, except (1) dividends paid to the Borrower or any Guarantor which is a
direct parent of the Subsidiary paying the dividend (other than Cash Dividends
to the Parent, which shall not be paid at any time), and (2) non-cash dividends
paid to the holders of any Equity Interests of the Borrower or the Parent in the
form of additional Equity Interests of the Borrower or the Parent, as
applicable, or (ii) any management, consulting or monitoring fees to any
Affiliate of the Borrower or the Parent or any officer, director, shareholder,
partner or employee of any Affiliate of the Borrower or the Parent, except
management or consulting fees paid to the Borrower or any Guarantor (other than
the Parent, to which no management or consulting fees shall be paid);

 

(c)           Issue any additional Equity Interests in the Borrower, except for
Equity Interests issued to the Parent;

 

(d)           Make any other distribution of any Property, cash, securities or a
combination thereof, with respect to (whether by reduction of capital or
otherwise) any Equity Interests except as permitted in Section 7.10(b) above;

 

(e)           Set apart any money for a sinking fund or other analogous fund for
any dividend or other distribution on its Equity Interests or for any
redemption, purchase, retirement, or other acquisition of any of its Equity
Interests; or

 

(f)            Redeem (whether as a result of mandatory or optional redemption
obligations or rights), purchase, defease or retire for value, or make any
principal payment or prepayment on, the Second Lien Debt or any Subordinated
Indebtedness prior to the Term Loan Maturity Date; provided that regularly
scheduled payments of accrued and unpaid interest (including such payments
prohibited from being paid because of the existence of a Default or Event of
Default when the same were otherwise due and payable) may be made on the Second
Lien Debt, so long as no Default or Event of Default shall have occurred and be
continuing or would otherwise occur as a result of any such payment of accrued
and unpaid interest;

 

provided, however that notwithstanding the foregoing, any payments, dividends or
distributions on and any redemptions, purchases, retirements or other
acquisitions of Equity Interests otherwise prohibited under Sections 7.10(b) or
(e) shall be permitted to be made by the applicable Credit Party, so long as
(1) immediately after giving effect to the applicable payment, dividend or
distribution on or redemption, purchase, retirement or other acquisition of
Equity Interests, no Default or Event of Default exists (including without
limitation, the Credit Parties are in compliance with the Fixed Charge Coverage
Ratio requirements of Section 7.11, tested on a pro forma basis assuming that
payment, dividend, or distribution on or redemption, purchase, retirement or
other acquisition of Equity Interests had occurred at the beginning of the
twelve (12) most recent consecutive calendar months ending on or immediately
prior to the date of such payment, dividend, distribution,

 

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redemption, purchase, retirement or acquisition of Equity Interests), (2) the
aggregate amount of all such payments, dividends or distributions on and
redemptions, purchases, retirements or other acquisitions of Equity Interests
actually made from the Closing Date through the Term Loan Maturity Date
(excluding “payments-in-kind” of accrued and unpaid interest) does not exceed
$55,000,000.  Notwithstanding the foregoing, however, in no event shall any
payment, dividend, distribution, redemption, purchase, retirement or acquisition
of Equity Interests otherwise permitted under the terms of the preceding
sentence be made to the extent the same is prohibited under the terms of the
Loan Documents (as defined in the Revolving Credit Agreement) or the Second Lien
Debt Documents.

 

7.11         Fixed Charge Coverage Ratio.  Permit the Fixed Charge Coverage
Ratio of the Credit Parties and their Subsidiaries, on a Consolidated basis, to
be less than 1.0 to 1.0 at any time.

 

7.12         Capital Expenditures.  Permit the Credit Parties and their
Subsidiaries, on a Consolidated basis, to make or incur Capital Expenditures
(not including in the definition of Capital Expenditures for this purpose any
Capital Expenditures included in any future acquisition permitted under
Section 7.4(e)(7)) in excess of $6,000,000 in the aggregate during each fiscal
year.

 

7.13         Sale of Accounts.  Sell, assign, discount (other than customary and
reasonable discounts in the ordinary course of business), transfer or otherwise
dispose of any Accounts, promissory notes, drafts or trade acceptances or other
rights to receive payment held by it, with or without recourse.

 

7.14         Sale and Lease-Back Transactions.  Except as otherwise permitted
under Section 7.4(e)(5)(iv), enter into any arrangement, directly or indirectly,
with any Person whereby any Credit Party or any of its Subsidiaries shall sell
or transfer any Property, real or personal, which is used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease
such Property or other Property which such Credit Party or such Subsidiary
intends to use for substantially the same purpose or purposes as the Property
being sold or transferred.

 

7.15         Change of Name or Place of Business.  Permit any Credit Party or
any of its Subsidiaries to change its address, name, jurisdiction of
organization, location of its chief executive office or principal place of
business or the place it keeps its material books and records, unless such
Credit Party has (a) notified the Agent and the Collateral Agent of such change
in writing at least thirty (30) days before the effective date of such change,
(b) taken such action, reasonably satisfactory to the Collateral Agent, to have
caused the Liens against all Collateral in favor of the Collateral Agent for the
ratable benefit of the Lenders to be at all times fully perfected and in full
force and effect and (c) delivered such certificates from Governmental
Authorities as the Agent may require substantiating such name change.

 

7.16         Restrictive Agreements.  Other than as imposed by law, identified
on Schedule 7.16, or provided in this Agreement, the Revolving Credit Agreement
and the Second Lien Debt Purchase Agreement, directly or indirectly agree to
restrict or condition (a) the payment of any dividends or other distributions to
the Borrower or any of its Subsidiaries; (b) the payment of any

 

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Indebtedness owed to the Borrower or any of its Subsidiaries; (c) the making of
any loans or advances to the Borrower or any of its Subsidiaries; or (d) the
transfer of any of its properties or assets to the Borrower or any of its
Subsidiaries.

 

7.17         Modification or Waiver of Documents Governing Revolving Credit Debt
and Second Lien Debt.  Request, join in or otherwise consent to any
modification, amendment or waiver of any material term of any of the Second Lien
Debt Documents or the Revolving Credit Agreement, except as expressly permitted
under the terms of the First Lien Intercreditor Agreement.

 

7.18         Anti-Terrorism Laws.  Knowingly conduct any business or engage in
any transaction or dealing with any Blocked Person, including the making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person.

 

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

 

(c)           Knowingly engage in or conspire to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in the Executive Order No. 13224, the
USA PATRIOT Act or any other Anti-Terrorism Law.

 

The Borrower shall, and shall cause each other Credit Party to, deliver to Agent
any certification or other evidence requested from time to time by the Agent in
its sole discretion, confirming such Credit Party’s compliance with this
Section 7.18.

 

8.             Events of Default and Remedies.

 

8.1           Events of Default.  If any of the following events shall occur and
be continuing, then the Agent may (and, if directed by the Required Lenders,
shall), by written notice (or facsimile notice) to the Borrower, take any or all
of the following actions at the same or different times: (1) accelerate the Term
Loan Maturity Date and declare the Term Notes and all other Obligations then
outstanding to be, and thereupon the Term Notes and all other Obligations shall
forthwith become, immediately due and payable, without further notice of any
kind, notice of intention to accelerate, presentment and demand or protest, or
other notice of any kind all of which are hereby expressly WAIVED by the
Borrower; and (2) terminate all or any portion of the Term Loan Commitments and
exercise any and all other rights pursuant to the Loan Documents or available
under applicable law:

 

(a)           The Borrower shall fail to pay or prepay any Obligation (including
principal, interest, fees or any other amount) as and when due and payable,
whether at the due date thereof (by acceleration, lapse of time or otherwise) or
at any date fixed for prepayment thereof in accordance with the other provisions
of this Agreement; or

 

(b)           An Event of Default (as defined in the Revolving Credit Agreement
or Second Lien Debt Documents) shall occur, or the Borrower or any of its
Subsidiaries (i) shall fail to pay when due, or within any applicable period of
grace, any other

 

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Indebtedness (excluding the Revolving Credit Agreement Debt and the Second Lien
Debt and Indebtedness outstanding hereunder) aggregating in excess of $250,000
in principal amount unless such payment is being contested in good faith (by
appropriate proceedings) and adequate reserves have been provided therefor, or
(ii) shall default (beyond any applicable grace and curative periods) in any
other manner with respect to any other Indebtedness (excluding the Revolving
Credit Agreement Debt, the Second Lien Debt and Indebtedness outstanding
hereunder) aggregating in excess of $250,000 in principal amount if the effect
of any such default or Event of Default shall be to accelerate or to permit the
holder of any such other Indebtedness, at its option, to accelerate the maturity
of such Indebtedness prior to the stated maturity thereof; or

 

(c)           Any representation or warranty made or deemed made by the Borrower
or any Guarantor in connection with any Loan Document or in any certificate,
report, notice or financial statement furnished at any time in connection with
this Agreement shall prove to have been incorrect, false or misleading in any
material respect when made or deemed to have been made; or

 

(d)           Except as provided in Sections 8.1(a) or 8.1(e), Default shall
occur in the punctual and complete performance or observance of any covenant,
condition or agreement to be observed or performed on the part of the Borrower,
any of its Subsidiaries or the Parent pursuant to the terms of any provision of
this Agreement or any other Loan Document, and such Default remains uncured five
(5) Business Days after the earlier to occur of (1) the Agent giving written
notice of such Default to the Borrower or (2) any Responsible Officer of the
Borrower or any of its Subsidiaries acquired actual knowledge of the existence
of such Default; or

 

(e)           Default shall occur in the punctual and complete performance or
observance of any covenant, condition or agreement to be observed or performed
on the part of any Credit Party or any of its Subsidiaries pursuant to the terms
of Section 6.2, Section 6.9, Section 6.11 or Article 7 hereof; or

 

(f)            Final judgment or judgments (or any decree or decrees for the
payment of any fine or any penalty) for the payment of an uninsured money award
in excess of $500,000 in the aggregate shall be rendered against any Credit
Party or any of its Subsidiaries and the same shall remain undischarged and
unpaid for a period of thirty (30) days during which execution shall not be
effectively stayed or bonded; or

 

(g)           Any Credit Party or any of its Subsidiaries shall have concealed,
removed, or permitted to be concealed or removed, any part of its Property, with
intent to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its Property which is or could reasonably be
expected to be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or

 

(h)           Any of the following shall occur where such occurrence could
reasonably be expected to result in any material liability of any Credit Party:
(1) a Reportable Event shall have occurred with respect to a Plan; (2) the
filing by the Borrower, any ERISA

 

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Affiliate, or an administrator of any Plan of a notice of intent to terminate
such Plan under the provisions of Section 4041 of ERISA; (3) the receipt of
notice by the Borrower, any ERISA Affiliate or an administrator of a Plan that
the PBGC has instituted proceedings to terminate (or appoint a trustee to
administer) such a Plan; (4) any other event or condition exists which might
reasonably be expected to, in the opinion of the Agent, constitute grounds under
the provisions of Section 4042 of ERISA for the termination of or the
appointment of a trustee to administer any Plan by the PBGC; (5) a Plan shall
fail to maintain a minimum funding standard required by Section 412 of the Code
for any plan year or a waiver of standard is granted under the provisions of
Section 412(d) of the Code; (6) the Borrower or any ERISA Affiliate has
incurred, or is likely to incur, a liability under the provisions of Section
4062, 4063, 4064 or 4201 of ERISA; (7) the Borrower or any ERISA Affiliate fails
to pay the full amount of an installment required under Section 412(m) of the
Code; (8) any Prohibited Transaction involving any Plan; or (9) the occurrence
of any other event or condition with respect to any Plan which would constitute
an event of default or default under any other material agreement entered into
by the Borrower or any ERISA Affiliate; or

 

(i)                                     This Agreement, any Term Note, any of
the Security Documents or any other Loan Documents, or any material provision
thereof, shall for any reason cease to be, or shall be asserted by any Credit
Party, not to be, a legal, valid and binding obligation of any Credit Party,
enforceable in accordance with its terms, or the Lien purported to be created by
any of the Security Documents shall for any reason cease to be, or be asserted
by any Credit Party not to be, a valid, first priority perfected Lien (subject
to the terms of the First Lien Intercreditor Agreement) against any material
portion of the Collateral (except to the extent otherwise permitted under this
Agreement or any of the Security Documents); or

 

(j)                                     The Borrower or any of its Subsidiaries
which is a party to the Lockbox Agreement or any Tri-Party Agreement fails to
perform and observe, and/or cause to be performed and observed, all material
covenants, provisions and conditions to be performed, discharged and observed by
the Borrower or any such Subsidiary under the terms of the Lockbox Agreement or
any Tri-Party Agreement; or

 

(k)                                  Any financial institution which is a party
to any Tri-Party Agreement fails to perform and observe, and/or cause to be
performed and observed, all material covenants, provisions and conditions to be
performed, discharged and observed by such financial institution under the terms
of any Tri-Party Agreement and such failure remains uncured (or such defaulting
financial institution and applicable Tri-Party Agreement is not replaced by the
Borrower with a substitute financial institution and replacement Tri-Party
Agreement both reasonably acceptable to the Agent) five (5) Business Days after
the Collateral Agent gives written notice of such failure to the Borrower; or

 

(l)                                     A Change of Control shall occur; or

 

(m)                               Any Credit Party or any of its Subsidiaries
shall suffer any writ of attachment or execution or any similar process to be
issued or levied against it or any

 

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substantial part of its Property having an aggregate value in excess of $500,000
which is not released, stayed, bonded or vacated within thirty (30) days after
its issue or levy.

 

In addition, if any of the following events shall occur, then (1) the Term
Notes, and all other Obligations then outstanding and payable hereunder shall
automatically, without demand, presentment, protest, notice of intent to
accelerate, notice of acceleration or other notice to any Person of any kind,
all of which are hereby expressly WAIVED by the Borrower, become immediately due
and payable and (2) all Term Loan Commitments shall be immediately and
automatically terminated.

 

(n)                                 Any Credit Party or any of its Subsidiaries
shall commence a voluntary proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian, or other similar
official of it or a substantial part of its property or shall consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail to pay
its debts as they become due or shall take any corporate action to authorize any
of the foregoing; or

 

(o)                                 An involuntary proceeding shall be commenced
against any Credit Party or any of its Subsidiaries seeking liquidation,
reorganization, or other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian, or other
similar official for it or a substantial part of its property, and such
involuntary proceeding shall remain undismissed and unstayed for a period of 60
days; or

 

(p)                                 Any involuntary order shall be entered in
any proceeding against any Credit Party or any of its Subsidiaries decreeing the
dissolution, liquidation or split-up thereof, and such order shall remain in
effect for sixty (60) days; or

 

(q)                                 Any Credit Party or any of its Subsidiaries
shall admit in writing its inability to pay its debts as they become due or fail
generally to pay its debts as they become due.

 

8.2                                 Remedies Cumulative.  No remedy, right or
power conferred upon the Agent or any Lender is intended to be exclusive of any
other remedy, right or power given hereunder or now or hereafter existing at
law, in equity, or otherwise, and all such remedies, rights and powers shall be
cumulative.

 

9.                                       The Agent.

 

9.1                                 Appointment, Powers and Immunities.  Each
Lender hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and the other Loan Documents with such powers as are specifically
delegated to the Agent by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto.  The Agent (which such term as used
in

 

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this Section 9, shall, in each case, include reference to its Affiliates and its
own and its Affiliates’ officers, directors, employees’ and agents) (a) shall
not have duties or responsibilities except those expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee for any Lender; (b) shall not
be responsible to any Lender for, or have any duty to ascertain or inquire into,
any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Loan Document, or the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other certificate or document referred to or provided for herein or therein
or any property covered thereby or any failure by any Party or any other Person
(other than the Agent) to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or any other Loan Document except to the extent
requested by the Required Lenders, provided that the Agent shall not be required
to take any action which exposes the Agent to personal liability or which is
contrary to this Agreement or any other Loan Documents or applicable law, and
(d) shall not be responsible for any action taken or omitted to be taken by it
hereunder or any other Loan Document or any other document or instrument
referred to or provided for herein or therein or in connection herewith or
therewith, INCLUDING PURSUANT TO ITS OWN NEGLIGENCE, except for its own gross
negligence or willful misconduct.  The Agent may engage agents and
attorneys-in-fact for purposes of performing its duties under this Agreement and
the other Loan Documents and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by them with
reasonable care.  In any foreclosure proceeding concerning any collateral for
the Term Notes, each holder of a Term Note if bidding for its own account or for
its own account and the accounts of other Lenders is prohibited from including
in the amount of its bid an amount to be applied as a credit against its Term
Note or the Term Notes of the other Lenders, instead such holder must bid in
cash only.  However, in any such foreclosure proceeding, the Agent may (but
shall not be obligated to) submit a bid for all Lenders (including itself) in
the form of a credit against the Term Notes of all of the Lenders, and the Agent
or its designee may (but shall not be obligated to), with the consent of the
Required Lenders, accept title to such collateral for and on behalf of all
Lenders.  The Lenders hereby empower, authorize and direct the Agent, on behalf
of the Lenders, to execute and deliver this Agreement, the other Loan Documents,
the First Lien Intercreditor Agreement and all related agreements, certificates,
documents, or instruments as shall be necessary or appropriate to effect the
purposes of the Loan Documents.  Each Lender agrees that any action taken by the
Agent in accordance with the terms of this Agreement, the Intercreditor
Agreement or the other Loan Documents, and the exercise by the Agent of its
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders. 
Notwithstanding anything herein or in any other Loan Document to the contrary,
to the extent there is a conflict between this Agreement and any other Loan
Document concerning the provisions of this Section 9, this Agreement shall
govern and control.

 

9.2                                 Reliance.  The Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or

 

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Persons, and upon advice and statements of legal counsel (which may be counsel
for the Borrower), independent accountants and other experts selected by the
Agent.  As to any matters not expressly provided for by this Agreement or any
other Loan Document, the Agent shall in all cases (i) have the right to seek
instruction from the Required Lenders and (ii) be fully protected in acting, or
in refraining from acting, hereunder and thereunder in accordance with
instructions of the Required Lenders, and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders.

 

9.3                                 Defaults.  The Agent shall not be deemed to
have knowledge of the occurrence of a Default or Event of Default (other than
the non-payment of principal of or interest on Term Loans), unless it has
received written notice from a Lender or a Credit Party specifying such Default
or Event of Default and stating that such notice is a “Notice of Default.  “ In
the event that the Agent receives such a notice of the occurrence of a Default
or Event of Default, the Agent shall give prompt notice thereof to the Lenders
(and shall give each Lender prompt notice of each such non-payment).  The Agent
shall (subject to Section 9.7 hereof) take such action with respect to such
Default or Event of Default as shall be directed by the Required Lenders and
within its rights under the Loan Documents and at law or in equity, provided
that, unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, permitted or within its rights under any of the Loan Documents or
under applicable law with respect to such Default or Event of Default.

 

9.4                                 Rights as a Lender.  With respect to its
Term Loan Commitments or the Term Loans, if any, the Agent in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the Agent, and
the term “Lender” or “Lenders” shall, unless the context otherwise indicates,
includes the Agent in its individual capacity.  The Agent may (without having to
account therefor to any Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust, letter of credit, agency or
other business with any Credit Party (and any of its Affiliates) as if it were
not acting as the Agent, and the Agent may accept fees and other consideration
from any Credit Party (in addition to the fees heretofore agreed to between the
Borrower or any other Credit Party and the Agent) for services in connection
with this Agreement or otherwise without having to account for the same to the
Lenders.

 

9.5                                 Indemnification. The Lenders agree to
indemnify the Agent (to the extent not reimbursed under Section 10.9 or Section
10.10 hereof, but without limiting the obligations of the Borrower and the other
Credit Parties under said Sections 10.9 and 10.10), ratably in accordance with
their respective Term Loan Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever (INCLUDING THE
CONSEQUENCES OF THE NEGLIGENCE OF SUCH INDEMNIFIED PERSON, but excluding the
gross negligence or willful misconduct of such indemnified person) which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses which the
Borrower and the other Credit Parties is obligated to pay under Sections 10.9
and 10.10 hereof but excluding, unless a Default or Event of Default has
occurred and is continuing, normal administrative costs and expenses

 

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incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents, INCLUDING
THE NEGLIGENCE OF SUCH INDEMNIFIED PERSON, but excluding the gross negligence or
willful misconduct of such indemnified person.  The obligations of the Lenders
under this Section 9.5 shall survive the termination of this Agreement and the
repayment of the Indebtedness arising in connection with this Agreement.

 

9.6                                 Non-Reliance on Agent and Other Lenders. 
Each Lender agrees that it has received current financial information with
respect to the Borrower and the other Credit Parties and that it has
independently and without reliance on the Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and the other Credit Parties and decision to enter into
this Agreement and that it will, independently and without reliance upon the
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 analysis and
decisions in taking or not taking action under this Agreement or any of the
other Loan Documents.  The Agent shall not be required to keep itself informed
as to the performance or observance by any Party of this Agreement, or any of
the other Loan Documents or any other document referred to or provided for
herein or therein or to inspect the properties or books of the Borrower or any
other Credit Party.  Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent, or
the other Loan Documents, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Borrower or any other Credit Party (or
any of their Affiliates) which may come into the possession of the Agent.

 

9.7                                 Failure to Act.  Notwithstanding anything
herein to the contrary, the Agent shall not be required to advance its own funds
or otherwise incur financial liability in the performance of its duties or the
exercise of its rights under the Loan Documents and shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction by the Lenders of their
indemnification obligations under Section 9.5 hereof and by the Credit Parties
of their indemnification obligations under Section 10.01 hereof against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.

 

9.8                                 Resignation or Removal of Agent.  Subject to
the provisions of this paragraph, the Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower, and the Agent may be removed at
any time with or without cause by the Required Lenders.  Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent reasonably acceptable to the Borrower.  If no successor Agent
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Agent’s giving of notice of
resignation or the Required Lenders’ removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, but in
any event shall be discharged from its duties and obligations hereunder.  Any
successor Agent shall be an Eligible Assignee.  Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent.  Such successor

 

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Agent shall promptly specify by notice to the Borrower and the Lenders its
office for the purpose of any notices and payments hereunder.  After any
retiring Agent’s resignation or removal hereunder as Agent, the provisions of
this Section 9 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.

 

10.                                 Miscellaneous.

 

10.1                           No Waiver.  No waiver of any Default or Event of
Default shall be deemed to be a waiver of any other Default or Event of
Default.  No failure to exercise and no delay on the part of the Agent or any
Lender in exercising any right or power under any Loan Document or at law or in
equity shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or the abandonment or discontinuance of
steps to enforce any such right or power, preclude any further or other exercise
thereof or the exercise of any other right or power.  No course of dealing
between any Credit Party and the Agent or any Lender shall operate as a waiver
of any right or power of the Agent or any Lender.  No notice to or demand on any
Credit Party or any other Person shall entitle any Credit Party or any other
Person to any other or further notice or demand in similar or other
circumstances.

 

10.2                           Notices.  Except as otherwise expressly permitted
hereunder or under any other Loan Document, all notices under the Loan Documents
shall be in writing and either (i) delivered to the intended recipient, (ii)
mailed by registered or certified mail, return receipt requested, or (iii) sent
by facsimile (promptly confirmed by mail, except for any notice pursuant to
Section 4. l(a) hereof which need not be confirmed by mail), in each case to the
intended recipient at the “Address for Notices” specified below its name on the
signature pages hereof; or, as to any Lender who is a signatory hereto, at such
other address as shall be designated by such Lender in a notice to the Borrower
and the Agent given in accordance with this Section 10.2 or to such other
address as a party may designate in a notice given in accordance with the
provisions of this Section 10.2.  The Borrower may change its address for
purposes hereof by providing written notice of such address change to the
Lenders and the Agent in accordance with the provisions of this Section 10.2,
with any such change in address only being effective ten (10) Business Days
after such change of address has been deemed given in accordance with the
provisions hereof.  Notices shall be deemed to have been given (whether actually
received or not) when delivered (or, if mailed, on the next Business Day after
deposit of such notice into the mail); however, the notices required or
permitted by Section 4.1(a) hereof shall be effective only when actually
received by the Agent.

 

10.3                           Governing Law.  Unless otherwise specified
therein, each Loan Document shall be governed by and construed in accordance
with the laws of the State of New York (other than the conflicts of laws
principles thereof) and the United States of America.

 

10.4                           Survival; Parties Bound.  All representations,
warranties, covenants and agreements made by or on behalf of any Credit Party in
connection herewith shall survive the execution and delivery of the Loan
Documents and shall not be affected by any investigation made by any Person. 
The term of this Agreement shall be until the termination or lapse of all

 

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Term Loan Commitments, the final maturity of each Term Note, the payment of all
amounts due under the Loan Documents.

 

10.5                           Counterparts.  This Agreement may be executed in
several identical counterparts, and by the parties hereto on separate
counterparts, and each counterpart, when so executed and delivered, shall
constitute an original instrument, and all such separate counterparts shall
constitute but one and the same instrument.

 

10.6                           Limitation of Interest.  The Borrower, the other
Credit Parties and the Lenders intend to strictly comply with all applicable
laws, including applicable usury laws, if any.  Accordingly, the provisions of
this Section 10.6 shall govern and control over every other provision of this
Agreement or any other Loan Document which conflicts or is inconsistent with
this Section, even if such provision declares that it controls.  As used in this
Section, the term “interest” includes the aggregate of all charges, fees,
benefits or other compensation which constitute interest under applicable law,
provided, that, to the maximum extent permitted by applicable law, (a) any
non-principal payment shall be characterized as an expense or as compensation
for something other than the use, forbearance or detention of money and not as
interest, and (b) all interest at any time contracted for, reserved, charged or
received shall be amortized, prorated, allocated and spread, in equal or in
unequal parts during the full term of the Term Loans and the Term Loan
Commitments so that interest for the entire term does not exceed the Highest
Lawful Rate.  In no event shall the Borrower, any other Credit Party or any
other Person be obligated to pay, or the Agent or any Lender have any right or
privilege to reserve, receive or retain, (Y) any interest in excess of the
maximum amount of nonusurious interest permitted under the laws of the United
Stales or of any state, if any, which are applicable to the Agent or such
Lender, respectively, or (Z) total interest in excess of the amount which the
Agent or such Lender could lawfully have contracted for, reserved, received,
retained or charged had the interest been calculated for the full term of the
Loans at the Highest Lawful Rate, if any, applicable to the Agent or such
Lender.  None of the terms and provisions contained in this Agreement or in any
other Loan Document which directly or indirectly relate to interest shall ever
be construed without reference to this Section 10.6, or be construed to create a
contract to pay any Lender for the use, forbearance or detention of money at an
interest rate in excess of the Highest Lawful Rate applicable to such Lender. 
If the term of any Loans or the Term Notes is shortened by reason of
acceleration of maturity as a result of any Default or Event of Default or by
any other cause, or by reason of any required or permitted prepayment, and if
for that (or any other) reason the Agent or any Lender at any time is owed or
receives (and/or has received) interest in excess of interest calculated at the
Highest Lawful Rate applicable to the Agent or such Lender, then and in any such
event all of any such excess interest owed to or received by the Agent or such
Lender shall be canceled automatically as of the date of such acceleration,
prepayment or other event which produces the excess, and, if such excess
interest has been paid to the Agent or such Lender, it shall be credited pro
tanto against the then-outstanding principal balance of the Obligations to the
Agent or such Lender, effective as of the date or dates when the event occurs
which causes it to be excess interest, until such excess is exhausted or all of
such principal has been fully paid and satisfied, whichever occurs first, and
any remaining balance of such excess shall be promptly refunded to its payor.

 

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10.7                           Survival. The obligations of the Borrower or any
other Credit Party, as applicable, under Sections 2.7, 10.9, 10.10 and 10.17
hereof shall survive the repayment of the Term Loans and all other Obligations,
the termination of the Term Loan Commitments.

 

10.8                           Captions. The headings and captions appearing in
the Loan Documents have been included solely for convenience and shall not be
considered in construing the Loan Documents.

 

10.9                           Expenses, Etc.  The Borrower agrees to pay or
reimburse on demand of the Agent the following: (a) the reasonable fees,
expenses, disbursements and other charges of Morrison & Foerster LLP and any
legal counsel engaged by the Agent in connection with (i) the preparation,
execution and delivery of this Agreement (including the exhibits and schedules
hereto) and the Loan Documents and the making of the Term Loans hereunder and
(ii) any modification, supplement or waiver of any of the terms of this
Agreement or any other Loan Document; (b) all out-of-pocket costs and expenses
(including the fees, disbursements and other charges of counsel to the Agent and
of one separate counsel for Lenders other than the Agent), in connection with
any Default or Event of Default or the enforcement of this Agreement or any
other Loan Documents; (c) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied on or against the Agent or any Lender by
any governmental or revenue authority in respect of this Agreement or any other
Loan Document; and (d) expenses of due diligence incurred by the Agent prior to
or as of the Closing Date and the Borrower agrees to pay or reimburse on demand
the Collateral Agent for all out-of-pocket costs, expenses, taxes, assessments
and other charges incurred by the Collateral Agent in connection with any
filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any other Loan Document.

 

Except as otherwise expressly limited elsewhere in this Agreement or in any
other Loan Document, the Borrower shall pay (i) all reasonable, documented
out-of-pocket expenses incurred by the Agent, the Collateral Agent, or their
Affiliates, including the reasonable fees, charges and disbursements of counsel
for the Agent or the Collateral Agent, in connection with the syndication and
distribution (including, without limitation, via the internet or through a
service such as Intralinks) of the credit facilities provided for herein, the
preparation and administration of the Loan Documents or any amendments,
modifications or waivers of the provisions of the Loan Documents (whether or not
the transactions contemplated hereby or thereby shall be consummated), and (ii)
all reasonable out-of-pocket expenses incurred by the Agent, the Collateral
Agent, or any Lender, including the fees, charges and disbursements of any
counsel for the Agent, the Collateral Agent and of one separate counsel for
Lenders other than the Agent or the Collateral Agent, in connection with the
enforcement, collection or protection of its rights in connection with the Loan
Documents, including its rights under this Section, or in connection with the
Loans made hereunder, including all such out-of pocket expenses incurred during
any workout, restructuring or negotiations in respect of such Loans.  Expenses
being reimbursed by the Borrower under this Section include, without limiting
the generality of the foregoing, costs and expenses (subject to express
limitations set forth elsewhere in this Agreement or in any other Loan Document)
incurred in connection with:

 

(1)                                  appraisals;

 

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(2)                                  field examinations and the preparation of
appraisal, field examination or audit reports based on the fees charged by a
third party retained by the Agent or the internally allocated fees for each
Person employed by the Agent with respect to each field examination;

 

(3)                                  lien and title searches and title
insurance;

 

(4)                                  environmental reviews;

 

(5)                                  taxes, fees and other charges for recording
the Mortgages, filing financing statements and continuations, and other actions
to perfect, protect, and continue the Collateral Agent’s Liens;

 

(6)                                  sums paid or incurred to take any action
required of any Credit Party under the Loan Documents that such Credit Party
fails to pay or take; and

 

(7)                                  forwarding loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the accounts and
lockboxes, and costs and expenses of preserving and protecting the Collateral.

 

10.10                     Indemnification. Each Credit Party, jointly and
severally with all other Credit Parties, hereby agrees to indemnify the Agent,
the Lenders and each Affiliate thereof and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities (including Environmental Liabilities), claims (including
Environmental Claims) or damages to which any of them may become subject,
insofar as such losses, liabilities, claims or damages arise out of or result
from any (a) actual or proposed use by the Borrower or any other Credit Party of
the proceeds of any extension of credit by any Lender hereunder, (b) breach by
any Credit Party of this Agreement or any other Loan Document, (c) violation by
any Credit Party or any of its Subsidiaries of any law, rule, regulation or
order including any Requirements of Environmental Law, (d) Liens or security
interests granted on any Property pursuant to or under the Loan Documents, to
the extent resulting from any Hazardous Substance located in, on or under any
such Property, (e) ownership by the Lenders or the Agent of any Property
following foreclosure under the Loan Documents, to the extent such losses,
liabilities, claims or damages arise out of or result from any Hazardous
Substance, located in, on or under such Property prior to or at the time of such
foreclosure, including losses, liabilities, claims or damages which are imposed
upon Persons under laws relating to or regulating Hazardous Substances, solely
by virtue of ownership, (f) any Lender or the Agent being deemed an operator of
any such Property by a court or other regulatory or administrative agency or
tribunal or other third party, to the extent such losses, liabilities, claims or
damages arise out of or result from any Hazardous Substance, petroleum,
petroleum product or petroleum waste located in on or under such Property at or
prior to the date of any foreclosure thereon under the Loan Document, or (g)
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to any of the foregoing (including any
proceeding brought by any Credit Party against the Agent, any Lender and/or
their respective Affiliates), and each Credit Party, jointly and severally with
all other Credit Parties, agrees to reimburse the Agent and each Lender, and
each Affiliate thereof and their respective directors, officers, employees,

 

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counsel and agents, upon demand for any out-of-pocket expenses (including
reasonable legal fees) incurred in connection with any such investigation or
proceeding, AND WHETHER ANY SUCH LOSS, LIABILITY, CLAIM OR DAMAGE RESULTS FROM
THE NEGLIGENCE OF ANY SUCH INDEMNIFIED PERSON; but excluding any such losses,
liabilities, claims, damages or expenses incurred by a Person or any Affiliate
thereof or their respective directors, officers, employees, counsel or agents by
reason of (i) the gross negligence or willful misconduct of or willful and
knowing breach of any Loan Document by such Person, affiliate, director,
officer, employee or agent or (ii) ownership or operation of any Property by the
Lenders or the Agent following foreclosure under the Loan Documents to the
extent, but only to the extent, such losses, liabilities, etc. are attributable
to the post-foreclosure actions of the Lender or the Agent.  Promptly after
receipt by an indemnified person of notice of any claim or the commencement of
any action, such indemnified person shall, if any claim in respect thereof is to
be made against any Credit Party under this Section 10.10, notify the such
Credit Party in writing of the claim or the commencement of that action.  The
Credit Parties shall not be liable for any settlement of any such claim or
action involving the payment of monetary damages effected without its written
consent not to be unreasonably withheld.  If any such claim or action shall be
brought against an indemnified person, it shall notify the applicable Credit
Parties thereof, and such Credit Parties shall be entitled to participate in the
joint defense thereof.

 

10.11                     Amendments, Waivers, Etc.

 

(a)                                  Neither this Agreement nor any other Loan
Document nor any provision hereof or thereof may be waived, amended or modified
except (i) in the case of this Agreement, pursuant to an agreement or agreements
in writing entered into by the Borrower, the Agent and the Required Lenders or
(ii) in the case of any other Loan Document, pursuant to an agreement or
agreements in writing entered into by the Agent and the Credit Party or Credit
Parties that are parties thereto, with the consent of the Required Lenders;
provided that no such agreement shall (i) increase the Term Loan Commitment of
any Lender without the written consent of such Lender, (ii) reduce or forgive
the principal amount of any Term Loan or reduce the rate of interest thereon, or
reduce or forgive any interest or fees payable hereunder, without the written
consent of each Lender directly affected thereby (provided, that any waiver of
Default Rate interest shall not be considered a reduction of interest), (iii)
postpone any scheduled date of payment of the principal amount of any Term Loan
or any date for the payment of any interest, fees or other Obligations payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Term Loan Commitment, without
the written consent of each Lender directly affected thereby, (iv) change any
provision contained in Sections 2.2(c), 2.5, 2.8, 2.9, 10.9(b) or 10.10 hereof
or this Section 10.11 or Section 10.16 hereof, without the written consent of
each Lender directly affected thereby, (v) change any of the provisions of this
Section or the definition of “Required Lenders” or any other provision of any
Loan Document specifying the number or percentage of Lenders required to waive,
amend or modify any rights thereunder or make any determination or grant any
consent thereunder, without the written consent of each Lender, (vi) release the
Borrower or any Guarantor from its obligation under its Guaranty (except as
otherwise permitted herein or in the other Loan Documents), without the written
consent of each Lender, or (vii) except as otherwise

 

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expressly provided herein, including without limitation, in Section 10.11(b) or
in any Security Document, release any of the Collateral without the written
consent of each Lender.  Anything in this Section 10.11 to the contrary, no
amendment, waiver or consent shall be made with respect to Section 9 without the
written consent of the Agent.

 

(b)                                 The Lenders hereby irrevocably authorize the
Collateral Agent, at its option and in its sole discretion, to release any Liens
granted to the Collateral Agent by the Credit Parties on any Collateral (i) upon
the termination of the all Term Loan Commitments, and payment and satisfaction
in full in cash of all Term Loans and other Obligations, (ii) constituting
Property being sold or disposed of if the Credit Party disposing of such
Property certifies to the Agent that the sale or disposition is made in
compliance with the terms of this Agreement (and the Agent may rely conclusively
on any such certificate, without further inquiry), (iii) constituting Property
leased to a Credit Party under a lease which has expired or been terminated in a
transaction permitted under this Agreement, or (iv) as required to effect any
sale or other disposition of such Collateral in connection with any exercise of
remedies of the Collateral Agent and the Lenders pursuant to Article 8.  Except
as provided in the preceding sentence or in Section 7.4(e)(5), the Collateral
Agent will not release any Liens on Collateral without the prior written
authorization of the Required Lenders; provided that, the Collateral Agent may
in its discretion, release its Liens on Collateral valued in the aggregate not
in excess of $1,000,000 during any calendar year without the prior written
authorization of the Required Lenders.  Any such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of the Credit Parties in respect
of) all interests retained by the Credit Parties, including the proceeds of any
sale, all of which shall continue to constitute part of the Collateral.

 

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10.12                     Successors and Assigns.

 

(a)                                  This Agreement shall be binding upon and
inure to the benefit of the Borrower, the other Credit Parties, the Agent, the
Collateral Agent and the Lenders and their respective successors and permitted
assigns, provided that the undertaking of the Lenders hereunder to make Term
Loans to the Borrower shall not inure to the benefit of any successor of the
Borrower. Neither the Borrower nor any Credit Party may assign or transfer any
of its rights or obligations hereunder without the prior written consent of all
of the Lenders (and any attempted assignment or transfer by any Credit Party
without such consent shall be null and void), and no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 10.12.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than (i) the parties hereto, their
respective successors and assigns permitted hereby, (ii) any participant of a
Lender (to the extent provided in subparagraph (b) below), and (iii) to the
extent expressly set forth herein, the Affiliates of the Agent and each of the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

(b)                                 Each Lender may sell participations to any
Person in all or part of any Term Loan, or all or part of its Term Notes, or
Term Loan Commitments, to another bank or other entity, in which event, without
limiting the foregoing, the provisions of Sections 10.10 and 10.16 shall inure
to the benefit of each purchaser of a participation and the pro-rata treatment
of payments, as described in Section 2.8, shall be determined as if such Lender
had not sold such participation.  In the event any Lender shall sell any
participation, (i) the Borrower, the Agent, the Collateral Agent and the other
Lenders shall continue to deal solely and directly with such selling Lender in
connection with such selling Lender’s rights and obligations under the Loan
Documents (including the Term Note(s) held by such selling Lender), (ii) such
Lender shall retain the sole right and responsibility to enforce the obligations
of the Borrower and the other Credit Parties relating to the Term Loans,
including the right to approve any amendment, modification or waiver of any
provision of this Agreement other than (and then only if expressly permitted by
the applicable participation agreement) amendments, modifications or waivers
with respect to (A) any reduction of fees payable hereunder to the Lender, (B)
any reduction of the amount of principal or the rate of interest payable on, or
the dates fixed for the scheduled repayment of principal of, the Term Loans and
other sums to be paid to the Lenders hereunder, and (C) any postponement of any
date for the payment of any amount payable in respect of the Term Loans of such
Lender, (iii) the Credit Parties each agree, to the fullest extent it may
effectively do so under applicable law, that any participant of a Lender may
exercise all rights of set-off, bankers’ lien, counterclaim or similar rights
with respect to such participation as fully as if such participant were a direct
holder of Term Loans if such Lender has previously given notice of such
participation to the Borrower.

 

(c)                                  Each Lender may assign to one or more
Lenders or Eligible Assignees all or a portion of its interests, rights and
obligations under this Agreement (including all or a

 

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portion of its Term Loan Commitment and or Term Loans at the time owing to it,
the related Term Note or Term Notes held by it) (an “Assignment”); provided,
however, that, (i) the aggregate amount of the applicable Term Loan Commitment,
“Term Loans of the assigning Lender subject to each such assignment (determined
as of the date the Assignment and Acceptance (as defined below) with respect to
such assignment is delivered to the Agent) shall in no event be less than
$500,000 (except for certain exceptions approved by the Agent) and shall be in
an amount that is an integral multiple of $100,000 (unless all of the assigning
Lender’s applicable Term Loan Commitment, or Term Loans is being assigned); and
(ii) the parties to each such assignment shall execute and deliver to the Agent,
for its acceptance and recording in its records, and to the Borrower, an
Assignment and Acceptance in a form required by the Agent (each an “Assignment
and Acceptance”) with blanks appropriately completed, together with any Term
Note or Term Notes and a processing and recordation fee of $1,000 (for which the
Borrower shall have no liability); provided that, (i) no such fee shall be
payable in connection with an assignment to a Lender, an Affiliate of a Lender
or an Approved Fund of a Lender, (ii) only one fee shall be payable in
connection with simultaneous assignments by a Lender to related Approved Funds
and (iii) no such fee shall be payable in connection with assignments during the
five Business Days following the Closing Date.  Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five (5)
Business Days after the execution thereof, unless a shorter period of time may
be agreed to by the Agent in its sole and absolute discretion, (A) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).

 

(d)                                 By executing and delivering an Assignment
and Acceptance, the Lender assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(i) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim, such Lender assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with any Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Loan Document or any other instrument or document furnished pursuant
thereto; (ii) such assignor Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any Credit
Party or any of its Subsidiaries or the performance or observance by the
Borrower or any other Credit Party of any of its obligations hereunder; (iii)
such assignee confirms that it has received a copy of this Agreement and the
other Loan Documents, together with copies of the financial statements of the
Borrower previously delivered in accordance herewith and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment

 

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and Acceptance; (iv) such assignee confirms that it will keep confidential all
information with respect to any Credit Party furnished to it by the Borrower or
such Credit Party, such assignor Lender or the Agent (other than information
generally available to the public or otherwise available to the Agent on a
non-confidential basis or otherwise permitted pursuant to the terms of this
Agreement); (v) such assignee will, independently and without reliance upon the
Agent, such assignor Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all obligations that by the terms of the Loan
Documents are required to be performed by it as a Lender.

 

(e)                                  The Agent shall maintain at its office a
copy of each Assignment and Acceptance delivered to it and a record of the names
and addresses of the Lenders and the Term Loan Commitments of, and principal
amount of the Term Loans, accrued and unpaid interest and other fees due
thereunder owing to, each Lender from time to time.  The entries in the register
shall be conclusive, in the absence of manifest error, and the Borrower, the
Agent and the Lenders may treat each person the name of which is recorded
therein as a Lender hereunder for all purposes of the Loan Documents.  Such
records shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

 

(f)                                    Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and the assignee thereunder together
with the Term Note(s) subject to such assignment, the written consent to such
assignment and the fee, if any, payable with respect thereto, the Agent shall,
if such Assignment and Acceptance has been completed with blanks appropriately
filled, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower and the Lenders.  Contemporaneously with the receipt by the Borrower of
such Assignment and Acceptance and the surrender Term Note(s), the Borrower, at
its own expense, shall execute and deliver to the Agent in exchange for the
surrendered Term Note(s), a new Term Note or Term Notes payable to the order of
such assignee in an amount equal to the applicable Term Loan Commitment, or Term
Loans, assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained Term Loan Commitments, or Term Loans, hereunder, a
new Term Note or Term Notes to the order of the assigning Lender in an amount
equal to the applicable Term Loans retained by it hereunder.  Such new Term
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Term Note(s), shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the surrendered Term Note(s).  Such surrendered Term Note shall be marked
canceled and returned to the Borrower.

 

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(g)                                 Any Lender may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 10.12, disclose to the assignee or participant or proposed assignee
or participant, any information relating to any Credit Party and/or any of its
Subsidiaries furnished to such Lender by or on behalf of such Credit Party or
such applicable Subsidiary.

 

(h)                                 Notwithstanding anything herein to the
contrary, any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

 

10.13                     Entire Agreement.  This Agreement and the other Loan
Documents embody the entire agreement and understanding among the Credit
Parties, the Agent and the Lenders relating to the subject matter hereof and
supersedes all prior proposals, agreements and understandings relating to the
subject matter hereof.  Any conflict between the provisions of this Agreement
and the provisions of any other Loan Documents shall be governed by the
provisions of this Agreement.  The Credit Parties certify that they are relying
on no representation, warranty, covenant or agreement except for those set forth
in this Agreement and the other Loan Documents of even date herewith.

 

10.14                     Severability.  If any provision of any Loan Documents
shall be invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality and enforceability of the remaining provisions shall
not be affected or impaired thereby.

 

10.15                     Disclosures.  Every reference in the Loan Documents to
disclosures of the Borrower or any other Credit Party to the Agent and the
Lenders in writing, to the extent that such references refer to disclosures at
or prior to the execution of this Agreement, shall be deemed strictly to refer
only to written disclosures delivered to the Agent and the Lenders in an orderly
manner prior to or concurrently with the execution hereof.

 

10.16                     Capital Adequacy.

 

(a)                                  If after the date of this Agreement, any
Lender shall have determined that the adoption or effectiveness (regardless of
whether previously announced) of any applicable Legal Requirement or treaty
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such Governmental
Authority, has or would have the effect of increasing the cost of, or reducing
the rate of return on the capital of such Lender (or any holding company of
which such Lender is a part) as a consequence of its obligations hereunder or
its Term Note to a level below that which

 

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such Lender or holding company could have achieved but for such adoption, change
or compliance by an amount deemed by such Lender to be material, then from time
to time, upon demand by such Lender (with a copy to the Agent) in the form of a
certificate stating the cause of such demand and reasonably detailed
calculations therefor, the Borrower (subject to Section 10.6 hereof) agrees to
pay to such Lender such additional amount or amounts as will compensate such
Lender or holding company for such reduction.

 

(b)                                 The certificate of any Lender setting forth
such amount or amounts as shall be necessary to compensate such Lender or its
holding company as specified in Subsection 10.16(a) above (and setting forth the
calculation thereof in reasonable detail) shall be conclusive and binding,
absent manifest error.  The Borrower shall pay such Lender the amount shown as
due on any such certificate within five days after such Lender delivers such
certificate.  In preparing such certificate, such Lender may employ such
assumptions and allocations of costs and expenses as it shall in good faith deem
reasonable and may use any reasonable averaging and attribution method.

 

10.17                     Taxes.

 

(a)                                  As used in this Section 10.17, the
following terms shall have the following meanings:

 

(1)                                  “Indemnifiable Tax” means any Tax, but
excluding, in any case, any Tax that (a) would not be imposed in respect of a
payment to a Lender or the Agent under the Term Notes held by such Lender or the
Agent or under any of the other Loan Documents except for a present or former
connection between the jurisdiction of the Governmental Authority imposing such
Tax and such Lender or the Agent (or a shareholder or other Person with an
interest therein), including a connection arising from such Lender’s or the
Agent’s (or shareholder thereof) being or having been a citizen or resident of
such jurisdiction, or being or having been organized, present or engaged in a
trade or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such Lender or the Agent having executed,
delivered, performed its obligations or received a payment under, or enforced,
this Agreement, the Term Notes held by such Lender or the Agent or any other
Loan Documents, (b) is imposed under United States federal income tax law or any
state income or franchise tax law or (c) is described in the final sentence of
Section 17(e).

 

(2)                                  “Tax” means any present or future tax,
levy, impost, duty, charge, assessment or fee of any nature (including interest
thereon and penalties and additions thereto) that is imposed by any Governmental
Authority in respect of a payment to a Lender or the Agent under the Term Notes
or under any of the other Loan Documents.

 

(b)                                 If the Borrower is required by any
applicable Legal Requirement to make any deduction or withholding for or on
account of any Tax from any payment to be made by it under this Agreement, under
the Term Notes or under any other Loan Documents to

 

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a Lender or the Agent, then the Borrower shall (i) promptly notify the Lender or
the Agent that is entitled to such payment of such requirement to so deduct or
withhold such Tax, (ii) pay to the relevant Governmental Authorities the full
amount required to be so deducted or withheld, (iii) promptly forward to such
Lender or the Agent an official receipt (or copies thereof), or other
documentation reasonably acceptable to such Lender or the Agent, evidencing such
payment to such Governmental Authorities and (iv) if such Tax is an
Indemnifiable Tax, pay, to the extent permitted by law to such Lender or the
Agent, in addition to whatever net amount of such payment is paid to such Lender
or the Agent, such additional amount as is necessary to ensure that the total
amount actually received by such Lender or the Agent (free and clear of
Indemnifiable Tax) will equal the full amount of the payment such Lender or the
Agent would have received had no such deduction or withholding been required. 
If the Borrower pays any additional amount to a Lender or the Agent pursuant to
the preceding sentence and such Lender or the Agent shall receive a refund of an
Indemnifiable Tax with respect to which, in the good faith opinion of such
Lender or the Agent, such payment was made, such Lender or the Agent shall pay
to the Borrower the amount of such refund promptly upon receipt thereof.

 

(c)                                  In the event that any Governmental
Authority notifies the Borrower that it has improperly failed to withhold or
deduct any Tax from a payment received by any Lender or the Agent under the Term
Notes held by such Lender or the Agent or under any other Loan Documents, the
Borrower agrees to timely and fully pay such Tax to such Governmental Authority
and such Lender or the Agent shall, upon receipt of written notice of such
payment with respect to any Tax other than an Indemnifiable Tax, promptly pay to
the Borrower, an amount necessary in order that the amount of such payment to
the Borrower after payment of all Taxes with respect to such payment, shall
equal the amount of any Tax other than an Indemnifiable Tax that the Borrower
paid to such Governmental Authority pursuant to this clause (c).

 

(d)                                 Each Lender or the Agent shall, upon request
by the Borrower, take requested measures to mitigate the amount of Indemnifiable
Tax required to be deducted or withheld from any payment made by the Borrower
under this Agreement, under the Term Notes or under any other Loan Documents if
such measures can, in the sole and absolute opinion of such Lender or the Agent,
be taken without such Lender or the Agent suffering any economic, legal,
regulatory or other disadvantage (provided, however, that no such Lender or the
Agent shall be required to designate a funding office that is not located in the
United States of America).

 

(e)                                  Each Lender or the Agent that (i) is
organized under the laws of a jurisdiction other than the United States of
America and (ii)(A) is a party hereto on the Closing Date or (B) becomes an
assignee of an interest under this Agreement under Section 10.12 after the
Closing Date (unless such Lender or the Agent was already a Lender or the Agent
hereunder immediately prior to such assignment) shall execute and deliver to the
Borrower and the Agent one or more (as the Borrower or the Agent may reasonably
request) Forms W-8ECI, W-8BEN, W-8IMY (as applicable) or other applicable form,
certificate or document prescribed by the United States Internal Revenue Service
certifying as to such Lender’s or the Agent’s entitlement to exemption from

 

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withholding or deduction of Taxes. The Borrower shall not be required to pay
additional amounts to any Lender or the Agent pursuant to this Section 10.17 to
the extent that the obligation to pay such additional amounts would not have
arisen but for the failure of such Lender or the Agent to comply with this
paragraph.

 

(f)                                    Each Lender and the Agent agrees that if
it subsequently recovers, or receives a permanent net tax benefit with respect
to any amounts of Taxes (i) previously paid by it and as to which it has been
indemnified by or on behalf of the Borrower or (ii) previously deducted by the
Borrower (including, without limitation, any Taxes deducted from any additional
sums payable under clause (b) above), the relevant Lender or the Agent, as the
case may be, shall reimburse the Borrower to the extent of the amount of any
such recovery or permanent net tax benefit (but only to the extent of any
indemnity payments made, or additional amounts paid, by or on behalf of the
Borrower under this Section 10.17 with respect to the Taxes giving rise to such
recovery or tax benefit); provided, however, that the Borrower, upon the request
of the Lender or the Agent, agrees to repay to such Term Note Lender or the
Agent, the amount paid over to the Borrower, in the event such Lender or the
Agent is required to repay such amount to the relevant taxing authority.

 

(g)                                 Notwithstanding the foregoing, in no event
shall the amount payable under this Section 10.17 (to the extent, if any,
constituting interest under applicable laws) together with all amounts
constituting interest under applicable laws and payable in connection with this
Agreement or the Term Notes, exceed the Highest Lawful Rate or the maximum
amount of interest permitted to be charged by applicable laws.

 

10.18                     Waiver of Claims.  Each Credit Party hereby waives and
releases the Agent, the Collateral Agent and all Lenders from any and all claims
or causes of action which the Borrower may own, hold or claim in respect of any
of them as of the date hereof.

 

10.19                     Right of Setoff.  The Lenders each are hereby
authorized at any time and from time to time, without notice to any Credit Party
(any such notice being expressly waived by each Credit Party), to setoff and
apply any and all deposits (general or special, time or demand, provisional or
final, whether or not such setoff results in any loss of interest or other
penalty, and including without limitation all certificates of deposit) at any
time held, and any other funds or property at any time held, and other
Indebtedness at any time owing by the Agent or such Lender to or for the credit
or the account of any such Credit Party against any and all of the Obligations
irrespective of whether or not any of the Obligations are then due and
irrespective of whether or not Agent or such Lender shall have made any demand
under this Agreement, the Term Notes or any other Loan Document.  Each Credit
Party also hereby grants to Agent and to each of the Lenders a security interest
in and hereby transfers, assigns, sets over, and conveys to the Agent and to
each of the Lenders, as security for payment of all Obligations, all such
deposits, funds or property of any such Credit Party or Indebtedness of the
Agent or any Lender to any such Credit Party. Should the right of the Agent or
any Lender to realize funds in any manner set forth hereinabove be challenged
and any application of such funds be reversed, whether by court order or
otherwise, the Lenders shall make restitution or refund to such Credit Party,
pro rata in accordance with their respective Term Loan Commitment Percentages. 
Each Lender agrees to

 

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promptly notify the Borrower and the Agent after any such setoff and
application, provided that the failure to give such notice will not affect the
validity of such setoff and application.  The rights of the Agent and the
Lenders under this Section are in addition to other rights and remedies
(including without limitation other rights of setoff) which the Agent or the
Lenders may have.  This Section is subject to the terms and provisions of
Section 2.12 hereof.

 

10.20                     Waiver of Right to Jury Trial.  EXCEPT AS PROHIBITED
BY APPLICABLE LAW, EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES, ANY OF THE OTHER LOAN
DOCUMENTS OR ANY TRANSACTIONS EVIDENCED THEREBY.

 

10.21                     Additional Provisions Regarding Collection of Accounts
and other Collateral.

 

(a)                                  Each Credit Party hereby designates and
constitutes the Collateral Agent or the Collateral Agent’s designee as such
Credit Party’s attorney-in-fact with power to endorse such Credit Party’s name
upon any notes, acceptances, checks, drafts, money orders or other evidence of
payment of any Accounts or any other Collateral that may come into its
possession; to sign or endorse such Credit Party’s name on any invoice, bill of
lading or other title or ownership documents relating to any Accounts or
Inventory, drafts against any customers of any Credit Party, assignments and
verifications of Accounts and notices to customers of any Credit Party; to send
verifications of Accounts; and to notify the U.S. Postal Service authorities to
change the address for delivery of mail addressed to any Credit Party to such
address as the Collateral Agent may designate.  All acts of said attorney or
designee are hereby ratified and approved by each Credit Party, and said
attorneys or designee shall not be liable for any acts of omission or
commission, for any error of judgment or for any mistake of fact or law,
provided that the Agent or its designee shall not be relieved of liability to
the extent it is determined by a final judicial decision that its act, error or
mistake constituted gross negligence or willful misconduct or willful and
knowing breach of any Loan Document.  The power of attorney granted under this
subparagraph is coupled with an interest and is irrevocable until all of the
Obligations are paid in full and this Agreement and the Term Loan Commitments
are terminated.

 

(b)                                 The Collateral Agent, without notice to or
consent of any Credit Party, at any time after the occurrence and during the
continuation of an Event of Default, (i) may sue upon or otherwise collect,
extend the time. of payment of, or compromise or settle for cash, credit or
otherwise upon any terms, any of the Accounts or any instruments or insurance
applicable thereto and/or release any account debtor thereon; (ii) is authorized
and empowered to accept or direct shipments of Inventory and accept the return
of the goods represented by any of the Accounts; and (iii) shall have the right
to receive, endorse, assign and/or deliver in its name or the name of any Credit
Party any and all checks, drafts and other instruments for the payment of money
relating to the Accounts,

 

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and each Credit Party hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed.

 

(c)                                  Nothing herein contained shall be construed
to constitute any Credit Party as agent of the Collateral Agent for any purpose
whatsoever, and the Collateral Agent shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof (except to
the extent it is determined by a final judicial decision that the Collateral
Agent’s or a Lender’s act or omission constituted gross negligence of willful
conduct or willful and knowing breach of any Loan Document).  The Agent and the
Lenders shall not, under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Accounts or any instrument
received in payment thereof or for any damage resulting therefrom (except to the
extent it is determined by a final judicial decision that the Collateral Agent’s
or such Lender’s error, omission or delay constituted gross negligence or
willful misconduct or willful and knowing breach of any Loan Document).  The
Collateral Agent and the Lenders do not, by anything herein or in any assignment
or otherwise, assume any Credit Party’s obligations under any contract or
agreement assigned to the Collateral Agent or the Lender, and the Collateral
Agent and the Lenders shall not be responsible in any way for the performance by
any Credit Party of any of the terms and conditions thereof.

 

(d)                                 Upon the occurrence and during the
continuation of any Event of Default: (i) if any of the Accounts includes a
charge for any tax payable to any governmental tax authority, the Collateral
Agent is hereby authorized (but in no event obligated) in its discretion to pay
the amount thereof to the proper taxing authority for, the account of any Credit
Party and to charge or any Credit Party’s account therefor; and (ii) the
Borrower shall notify the Collateral Agent if any Accounts include any tax due
to any such taxing authority and, in the absence of such notice, the Collateral
Agent shall have the right to retain the full proceeds of such Accounts and
shall not be liable for any taxes that may be due from any Credit Party by
reason of the sale and delivery creating such Accounts.

 

(e)                                  Upon the occurrence and continuation of any
Event of Default, the Collateral Agent may at any time and from time to time
employ and maintain in the premises of any Credit Party a custodian selected by
the Collateral Agent who shall have full authority to do all acts necessary to
protect the Collateral Agent’s and Lenders’ interests and to report to the
Collateral Agent thereon.  Each Credit Party hereby agrees to cooperate with any
such custodian and to do so whatever the Collateral Agent may reasonably request
to preserve the Collateral.  All costs and expenses incurred by the Collateral
Agent by reason of the employment of the custodian shall be charged to the
Borrower’s account and added to the Obligations.

 

10.22                     Construction.  Each Credit Party, the Agent and each
Lender acknowledge that each of them has had the benefit of legal counsel of its
own choice and has been afforded an opportunity to review this Agreement and the
other Loan Documents with its legal counsel and

 

84

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

 

that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by the parties hereto.

 

10.23                     Joint and Several Obligations.  Notwithstanding
anything to the contrary contained herein or in any other Loan Documents, each
Credit Party acknowledges that it and the other Credit Parties are jointly and
severally responsible for their respective agreements, covenants,
representations, warranties and obligations contained and set forth in this
Agreement or in any other Loan Document to which the applicable Credit Party is
a party.

 

10.24                     USA Patriot Act.  Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it may be
required to obtain, verify and record information that identifies the Borrower,
which information includes the name and address of the Borrower and other
information that will allow such Lender to identify the Borrower in accordance
with the Act.

 

10.25                     Confidentiality.  Each Lender agrees to keep
confidential information obtained by it pursuant hereto and the other Loan
Documents confidential in accordance with such Lender’s customary practices and
agrees that it will only use such information in connection with the
transactions contemplated by this Agreement and not disclose any of such
information in connection with the transactions contemplated by this Agreement
and not disclose any of such information other than (a) to such Lender’s
employees, representatives, directors, attorneys, auditors, agents, professional
advisors, trustees or Affiliates who are advised of the confidential nature of
such information, (b) to the extent such information presently is or hereafter
becomes available to such Lender on a non-confidential basis from any source of
such information that is in the public domain at the time of disclosure, (c) to
the extent disclosure is required by law, regulation, subpoena or judicial order
or process (provided that notice of such requirement or order shall be promptly
furnished to the Borrower unless such notice is legally prohibited or such
disclosure is made during an examination of a Lender’s books and records by any
state or federal regulatory agency), (d) to any rating agency to the extent
required in connection with any rating to be assigned to such Lender, (e) to
assignees or participants or prospective assignees or participants, (f) to the
extent required in connection with any litigation between any Credit Party and
any Lender with respect to the Loans or this Agreement and the other Loan
Documents, or (g) with the Borrower’s prior written consent

 

[Remainder of Page Left Blank Intentionally]

 

85

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

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth above.

 

 

WILMINGTON TRUST COMPANY, as Agent

 

 

 

By:

/s/ James A. Hanley

 

Name:

James A. Hanley

 

Title:

Senior Financial Services Officer

 

 

 

 

 

Address for Notices:

 

 

 

Wilmington Trust Company

 

Rodney Square North

 

1100 North Market Square

 

Wilmington, DE 19890-1615

 

Attn: Joseph B. Feil

 

Telecopy No.: (302) 636-4145

 

Email: jfeil@wilmingtontrust.com

 

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

 

 

JPMORGAN CHASE BANK, N.A.,

 

a national banking association, as a Lender

 

 

 

By:

/s/ Kevin D. Padgett

 

Name:

Kevin D. Padgett

 

Title:

Vice President

 

 

 

Address for Notices:

 

2200 Ross Avenue, Sixth Floor

 

Dallas, Texas 75201

 

Attention: Kevin Padgett

 

 

 

Domestic Lending Office:

 

2200 Ross Avenue, Sixth Floor

 

Dallas, Texas 75201

 

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

 

 

WALCO INTERNATIONAL, INC.,

 

a Delaware corporation, as Borrower

 

 

 

By:

/s/ William F. Lacey

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

WALCO HOLDINGS, INC.,

 

a Delaware corporation, as a Guarantor

 

 

 

By:

/s/ William F. Lacey

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

STEER INTERMEDIATE CORPORATION,

 

a Delaware corporation, as a Guarantor

 

 

 

By:

/s/ William F. Lacey

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

ANIMAL HEALTH INTERNATIONAL, INC.,

 

a Delaware corporation, as a Guarantor

 

 

 

By:

/s/ William F. Lacey

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

WALCO INTERMEDIATE, INC.,

 

a Delaware corporation, as a Guarantor

 

 

 

By:

/s/ William F. Lacey

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

AMERICAN LIVESTOCK SUPPLY, INC.,

 

a Delaware corporation, as a Guarantor

 

 

 

By:

/s/ Jon Kuehl

 

Name:

Jon Kuehl

 

Title:

President

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

WALCO TEXAS ANIMAL HEALTH, LLC,

 

a Texas limited liability company, as a Guarantor

 

 

 

By:

/s/ William F. Lacey

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

PROVINCE LIVESTOCK SUPPLY LTD.,

 

an Alberta corporation, as a Guarantor

 

 

 

By:

/s/ Scott Postlewaite

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

WESTERN VETERINARY SUPPLIES LTD.,

 

an Alberta corporation, as a Guarantor

 

 

 

By:

/s/ Scott Postlewaite

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

 

WALCO CANADA ANIMAL HEALTH LTD.,

 

an Alberta corporation, as a Guarantor

 

 

 

By:

/s/ Scott Postlewaite

 

Name:

 

 

Title:

 

 

 

 

Address for Notices:

 

c/o Walco International, Inc.

 

7 Village Circle, Suite 200

 

Westlake, Texas 76262

 

Attention: William F. Lacey

 

Facsimile: (817) 601-6094

 

 

 

With a copy to:

 

Charlesbank Capital Partners

 

200 Clarendon Street, 54th Floor

 

Boston, Massachusetts 02116

 

Attention: Mark Rosen and Brandon White

 

Facsimile: (617) 619-5402

 

 

 

and

 

 

 

Mark D. Smith, Esq.

 

Goodwin Procter LLP

 

Exchange Place

 

53 State Street

 

Boston, MA 02109

 

 

 

and

 

 

 

Animal Health International, Inc

 

Attn: Legal Department

 

7 Village Circle, Ste 200

 

Westlake, TX 76262

 

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

 

SCHEDULE 1.1

 

TERM LOAN COMMITMENTS

 

Lender

 

Commitment

 

 

 

 

 

JPMorgan Chase Bank, N.A.

 

$

45,00,000.00

 

 

 

 

 

Total Commitments

 

$

45,000,000.00

 

 

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

 

EXHIBIT A

 

FORM OF TERM NOTE

 

TERM NOTE

 

Dallas, Texas

 

$                     

 

                          , 2006

 

FOR VALUE RECEIVED, WALCO INTERNATIONAL, INC., a Delaware corporation (herein
called “Borrower”), promises to pay to the order
of                                         (herein called “Payee”), at the
banking office of Wilmington Trust Company, a Delaware banking corporation
acting in its capacity as Agent under the Credit Agreement (as defined below)
(together with its successors and assigns in such capacity being herein called
“Agent”), located at Rodney Square North, 1100 North Market Square, Wilmington,
Delaware 19890-1615, Attn: Joseph B. Feil, or at such other place as Agent may
hereafter designate in writing, in immediately available funds and in lawful
money of the United States of America, the principal sum
of                                      Dollars ($                         ),
(or the unpaid balance of all principal advanced against this note, if that
amount is less), together with interest on the unpaid principal balance of this
note from time to time outstanding until maturity at the rate or rates provided
for in the Credit Agreement and interest on all past due amounts, both principal
and accrued interest, at the Default Rate; provided, that for the full term of
this note, the interest rate produced by the aggregate of all sums paid or
agreed to be paid to the holder of this note for the use, forbearance or
detention of the debt evidenced hereby shall not exceed the Highest Lawful Rate,
if any, applicable to Payee.

 

If, for any reason whatever, the interest paid or received on this note during
its full term produces a rate which exceeds the Highest Lawful Rate, if any,
applicable to Payee, the holder of this note shall refund to the payor or, at
the holder’s option, credit against the principal of this note such portion of
said interest as shall be necessary to cause the interest paid on this note to
produce a rate equal to the Highest Lawful Rate, if any, applicable to Payee. 
All sums paid or agreed to be paid to the holder of this note for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
in equal parts throughout the full term of this note, so that the interest rate
is uniform throughout the full term of this note.

 

This note has been issued pursuant to the terms of a Term Loan Agreement (which,
as it may have been or may be amended, restated, modified or supplemented from
time to time, is herein called the “Credit Agreement”) dated as of September 26,
2006, by and among Borrower, Agent, Payee, each of the Credit Parties which is
now or hereafter a Guarantor thereunder, and certain other signatory financial
institutions named therein or which may be a party thereto from time to time, to
which reference is made for all purposes.  This note is a Term Note under the
terms of the Credit Agreement, and the single advance against this note by Payee
or other holder hereof, payments and prepayments hereunder and acceleration
hereof shall be governed by the Credit Agreement. Capitalized words and phrases
used herein and not defined herein and which are defined in the Credit Agreement
shall have the same meanings herein as are ascribed to them in the Credit
Agreement.

 

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

 

The unpaid principal balance of this note at any time shall be the total of all
principal lent or advanced against this note less the sum of all principal
payments and permitted prepayments made on this note by or for the account of
Borrower.  All loans and advances and all payments and permitted prepayments
made hereon may be endorsed by the holder of this note on the schedule which is
attached hereto (and hereby made a part hereof for all purposes) or otherwise
recorded in the holder’s records; provided, that any failure to make notation of
(a) any advance shall not cancel, limit or otherwise affect Borrower’s
obligations or any holder’s rights with respect to that advance, or (b) any
payment or permitted prepayment of principal shall not cancel, limit or
otherwise affect Borrower’s entitlement to credit for that payment as of the
date received by the holder.

 

Borrower and any and all co-makers, endorsers, guarantors and sureties severally
waive notice (including, but not limited to, notice of intent to accelerate and
notice of acceleration, notice of protest and notice of dishonor), demand,
presentment for payment, protest, diligence in collecting and the filing of suit
for the purpose of fixing liability and consent that the time of payment hereof
may be extended and re-extended from time to time without notice to any of
them.  Each such person agrees that his, her or its liability on or with respect
to this note shall not be affected by any release of or change in any guaranty
or security at any time existing or by any failure to perfect or maintain
perfection of any lien against or security interest in any such security or the
partial or complete unenforceability of any guaranty or other surety obligation,
in each case in whole or in part, with or without notice and before or after
maturity.

 

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF) AND THE
UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.

 

 

WALCO INTERNATIONAL, INC.,

 

a Delaware corporation

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

2

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

 

EXHIBIT B

 

OFFICER’S CERTIFICATE

 

Date:

 

[Name and address of Lender

or Agent, as the case may be]

 

Attention:                           

 

Re:          Financial Statements Required under Term Loan Agreement (as the
same may have been amended, modified and restated from time to time, the “Credit
Agreement”) dated as of September 26, 2006, by and among Walco
International, Inc., the financial institutions or party thereto from time to
time, each of the Credit Parties which is now or hereafter a Guarantor
thereunder, and Wilmington Trust Company, as Agent

 

Ladies and Gentlemen:

 

Capitalized words and phrases used herein and not defined herein and defined in
the Credit Agreement are used herein with the same meanings as are assigned to
them in the Credit Agreement.

 

The undersigned hereby certifies, warrants and represents to the addressee named
above that to the best knowledge of the undersigned:

 

(1)           He or she is the duly appointed and acting [Insert title of
executing Responsible Officer] of Borrower;

 

(2)           The attached financial statements dated as of
                                  were prepared in conformity with GAAP
consistently applied, subject only to normal and customary adjustments, and
present fairly the financial position of Parent and its Subsidiaries, on a
Consolidated and, if applicable, a consolidating basis, as of the date thereof
and the results of its operations for the period covered thereby.

 

(3)           The following constitute true, correct and complete financial
calculations, in accordance with the applicable provisions of the Credit
Agreement (it being understood and agreed that some of such applicable
provisions of the Credit Agreement may cause such financial calculations to not
be in accordance with GAAP), for the Parent and its Subsidiaries, on a
Consolidated basis, as of the end of the period covered by the attached
financial statements:

 

 

(a)

FIXED CHARGE COVERAGE RATIO:

 

 

 

(i)

EBITDA (see calculation below):

$               

 

 

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

 

 

 

(ii)

Unfinanced Capital Expenditures:

$               

 

 

 

 

 

 

 

 

 

(iii)

cash payments of federal, state, and local income or franchise taxes:

$               

 

 

 

 

 

 

 

 

 

(iv)

[Line (i) less Line (ii) less Line (iii)]:

$               

 

 

 

 

 

 

 

 

 

(v)

Debt Service Expense:

$               

 

 

 

 

 

 

 

 

 

(vi)

cash Interest Expense:

$               

 

 

 

 

 

 

 

 

 

(vii)

Unfinanced Cash Dividends

$               

 

 

 

 

 

 

 

 

 

(viii)

[Line (v) plus Line (vi) and Line (vii)]:

$               

 

 

 

 

 

 

 

 

 

(ix)

Actual Fixed Charge Coverage Ratio [ratio of Line (iv) to Line (viii)]:

 

       to 1.00

 

 

 

 

 

 

 

 

(x)

Required Fixed Charge Coverage Ratio:

 

1.00 to 1.00

 

 

 

 

 

 

 

(b)

CAPITAL EXPENDITURES:

 

 

 

 

 

 

 

 

 

 

(i)

Actual Capital Expenditures for current fiscal year:

 

$               

 

 

 

 

 

 

 

 

(ii)

Maximum Allowed Capital Expenditures each fiscal year:

 

$6,000,000

 

 

 

 

 

 

 

(c)

EBITDA:

 

 

 

 

 

 

 

 

 

 

(i)

Net Income:

$               

 

 

 

 

 

 

 

 

 

(ii)

Interest Expense:

$               

 

 

 

 

 

 

 

 

 

(iii)

Federal, state and local income and franchise taxes:

$               

 

 

 

 

 

 

 

 

 

(iv)

depreciation and amortization expense:

$               

 

 

2

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

 

 

 

(v)

any extraordinary charges:

$               

 

 

 

 

 

 

 

 

 

(vi)

Permitted Management Fees:

$               

 

 

 

 

 

 

 

 

 

(vii)

customary and reasonable director’s fees and board expenses for board of
directors of the Credit Parties:

$               

 

 

 

 

 

 

 

 

 

(viii)

amounts used to repurchase from Charlesbank and/or any of its Affiliates the
equity securities of the Parent to the extent included within Permitted
Affiliate Transactions:

$               

 

 

 

 

 

 

 

 

 

(ix)

any other non-cash charges (including without limitation, (A) the issuance of
restricted stock or stock options, (B) equity losses of Affiliates that are not
a Subsidiary of any Credit Party, and (C) all charges attributable to the use of
the purchase accounting method), but excluding any non-cash charge in respect of
an item that was included in Net Income in a prior period and any non-cash
charge that relates to the write-down or write-off of Inventory:

$               

 

 

 

 

 

 

 

 

 

(x)

[Sum of Lines (i) through (ix)]:

$               

 

 

 

 

 

 

 

 

 

(xi)

cash payments made during such period in respect of non-cash charges described
in clause (ix) above taken in a prior period:

$               

 

 

 

 

 

 

 

 

 

(xii)

any extraordinary gains and any non-cash items of income:

$               

 

 

 

 

 

 

 

 

 

(xiii)

[Line (xi) plus Line (xii)]:

$               

 

 

3

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

 

 

 

(xiv)

Actual EBITDA [Line (x) minus Line (xiii)]

 

$               

 

(4)           The undersigned hereby certifies to his or her best knowledge as
follows:

 

(a)       each representation or warranty of the Credit Parties set forth in the
Credit Agreement or any other Loan Document is true and correct in all material
respects on and as of the date hereof with the same effect as though such
representations and warranties had been made on and of this date, except for
(i) those representations and warranties which relate only to the Closing Date
or (ii) such changes in the representations and warranties otherwise permitted
by the terms of the Credit Agreement; and

 

(b)       no Event of Default or Default under the Credit Agreement has occurred
and is still continuing.

 

 

 

 

Name:

 

4

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

 

Schedule 1.1(a)
Real Estate

 

1.                                       550 East Frye Road, Suite I
Chandler, Arizona 85225
(Maricopa County)

 

2.                                       431 W. Amador Street
Fresno, California 93778
(Fresno County)

 

3.                                       303 8th Avenue
Greeley, Colorado 80631
(Weld County)

 

4.                                       10418 Main Street
Thonotosassa, Florida 33592
(Hillsborough County)

 

5.                                       203 4th Avenue West
P.O. Box 1275
Twin Falls, Idaho 83301
(Twin Falls County)

 

6.                                       3390 Jones Avenue
P.O. Box 475
Garden City, Kansas 67846
(Finney County)

 

7.                                       3490 Jones Avenue
Garden City, Kansas 67846
(Finney County)

 

8.                                       901 W. Brady Avenue
P.O. Box 459
Clovis, New Mexico 88101
(Curry County)

 

9.                                       1517 Highway 54 N.E.
P.O. Box 827
Guymon, Oklahoma 73942
(Texas County)

 

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

 

10.                                 7100 West Reno Avenue
Oklahoma City, Oklahoma 73127
(Oklahoma County)

 

11.                                 1601 East Rice Street
Sioux Falls, South Dakota 57103
(Minnehaha County)

 

12.                                 2840 Vanocker Road
P.O. Box 849
Sturgis, South Dakota 57785
(Meade County)

 

13.                                 9602 South Washington Street
Amarillo, Texas 79118
(Randall County)

 

14.                                 25 Dupree Drive
P.O. Box 1440
Buda, Texas 78610
(Hays County)

 

15.                                 806 West 7th Street
P.O. Box 245
Dalhart, Texas 79022
(Dallas County)

 

16.                                 2112 Jo Drive
DeSoto, Texas 79022
(Dallas County)

 

17.                                 11199 Rojas Drive
El Paso, Texas 75115
(El Paso County)

 

18.                                 1802 Pulliam Street
San Angelo, Texas 76905
(Tom Green County)

 

19.                                 3054 W. Washington Street
Highway 377 West
P.O. Box 954
Stephenville, Texas 76401
(Erath County)

 

3

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

 

20.                                 2921 Central Freeway North
P.O. Box 3098
Wichita Falls, Texas 76306
(Wichita County)

 

21.                                 North Highway 36
P.O. Box 360
Sealy, Texas 77474
(Austin County)

 

310 s. Manhattan (1 acre empty lot)
Amarillo, Texas 79104
(Randall County)

 

Excluded Real Estate

 

Main & Lafayette Streets
P.O. Box 298
Mayo, Florida 32066
(Lafayette County)

 

1210 East Trail Street
P.O. Box 1635
Fort Dodge Road
Dodge City, Kansas 67801
(Ford County)

 

1449-A West Old Highway 40
Salina, Kansas 67401
(Salina County)

 

2912 SE 3rd Avenue
P.O. Box 30428
Amarillo, Texas 79104
(Potter County)

 

802 West Oaklawn Road
P.O. Box 89
Pleasanton, Texas 78064
(Atascosa County)

 

426 N. Highway 87
P.O. Box 141
Tulia, Texas 79088
(Swisher County)

 

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

 

640 South Main Street
Spanish Fork, UT 84660
(Utah County)

 

Third Party Rights to Use or Occupy Owned Properties

 

1.                                       On July 27, 2004, Borrower entered into
an Agreement with Newport Laboratories, Inc. (“Newport”) whereby Borrower agreed
to allow Newport to use specified assets (specifically CAVL’s customer list, a
portion of the Amarillo facility, specified equipment, and the “CAVL” name
except in establishing any vendor accounts) in return for a royalty on all
vaccine sales by Newport to CAVL customers existing on March 1, 2004.  In
conjunction with the lease described above, Newport has the right to use a
portion of the property located at 9602 South Washington Street, Amarillo, TX.

 

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

 

Schedule 5.4
Other Debt

 

None.

 

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

 

Schedule 5.5
Litigation

 

Micro Beef Technologies, Inc. v. Lextron, Inc., et al., Civil Action No. 2: 
00CV100 (N.D. Tex.).  Plaintiff, Micro Beef Technologies, Inc. (“MBT”) alleges
that Walco infringed several of MBT’s patents concerning animal health
technologies.  Walco answered, denying infringement, and counterclaimed, seeking
a declaration that certain MBT patents were invalid.  In late 2005, in response
to the on-going settlement discussions, and as a sign of good faith, Walco
redesigned its health management software at issue.  Walco believes all of MBT’s
feed additive patents expired in February 2006, however there is one feed
additive patent which MBT asserts is still active.  However, even if the last
feed additive patent did not expire as MBT asserts, Walco believes it to be
invalid for obvious-type double patenting in view of the expired patents.  On
August 2, 2006, Walco advised Micro Beef of its views on these issues.

 

Multimin USA, Inc., et al. v. Walco International, Inc., et al., Civil Action
No. 4:  06-CV-260A (N.D. Tex.).  Plaintiffs Multimin USA, Inc. and Warburton
Technology, Ltd (collectively “Multimin”) allege trademark infringement,
violation of Lanham Act Section 43a, trademark dilution, trade secret
misappropriation, breach of contract, breach of fiduciary duty, and conspiracy. 
Plaintiff is seeking damages in excess of $1,000,000 for each claim, an
injunction enjoining Walco from using the marks Multimin, Mineral Max and
Mineral Max II, and an injunction enjoining Walco from selling Multimin,
MineralMax, and MineralMax II products.  Walco answered, denying the allegations
and asserting a counterclaim for attorney’s fees under Lanham Act Section 1117. 
This case is currently entering the discovery phase.

 

Ricky Rushing v. Walco International Inc.; Cause Number 05-C-0750-202; State of
Texas; District Court, Bowie County.  Plaintiff, a former employee of Walco,
seeks a declaratory judgment with regard to certain non-solicitation covenants
he agreed to as part of employment with Walco.  Walco filed a cross-complaint
seeking enforcement of the non-competition covenants, and further alleging
misappropriation of trade secrets and breach of fiduciary duty.  This case is
currently in the discovery phase.

 

Walco International v. Chad Spitzer; Cause Number 342-210794-05, State of Texas,
District Court of Tarrant County.  Plaintiff, Walco, alleges breach of contract
and is seeking damages in an unspecified amount and specific performance with
regard to certain non-solicitation covenants Defendant agreed to as part of
employment with Walco.  This case is currently in the discovery phase.

 

In the Matter of Sales of Unregistered Pesticide Products vs. Walco
International, Inc., etc.; Case #E2006/07-l, State of California, Director of
the Department of Pesticide Registration.  The State of California alleges that
Defendant, Walco sold unlicensed pesticides within the state of California.  The
parties are pursuing settlement possibilities.

 

Other Matters:

 

In August 2006, Hays County Texas filed suit against Walco for delinquent
personal property taxes.  Walco is currently investigating the matter.

 

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

 

USPTO Trademark Registration Opposition.  Cargill filed and used a “[ ] Max”
mark for computer software used for livestock feed management in 2000.  In 2003,
Walco filed for trademark protection for the mark “Mineral Max”.  Cargill later
filed the “Golden Max” mark for nutritional supplements.  Cargill opposed
Walco’s registration of the “Mineral Max” mark.  The parties have reached an
agreement in principal to settle this matter.

 

USPTO Trademark Registration Opposition.  Pfizer filed and used a “LS 50” mark
in connection with one of their products.  Pfizer recently opposed Walco’s
registration of the “Linco S 50” mark.  Linco is descriptive of the active
ingredient of Lincomicin.  S is the first initial of the second ingredient of
Spectamicin, and 50, which is the amount of active ingredients (50 mg).

 

This Schedule does not include open insurance claims or products liability
litigation covered by insurance.

 

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

 

Schedule 5.6
Taxes

 

Sales Tax

 

1.                                       The state of Texas is currently
conducting an audit of Borrower’s payment of sales taxes.  Borrower estimates
that its liability is less than $100,000.

 

2.                                       The state of California is currently
conducting an audit of Borrower’s payment of sales taxes.  Borrower estimates
that its liability is less than $100,000.

 

Personal Property Taxes

 

In August 2006, Hays County Texas filed suit against Walco for delinquent
personal property taxes.  Walco is currently investigating the matter.

 

Canada

 

The Canada Customs and Revenue Agency sent notice in August 2005 that they would
conduct an audit beginning in October of 2005 of the corporate tax returns for
RX Veterinary Supplies and Services Ltd for the fiscal years ending 2002 and
2003.  No auditors ever arrived to conduct the audit.  In January 2006, these
operations were sold and ceased to operate.

 

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

 

Schedule 5.8
Subsidiaries

 

Credit Party

 

Subsidiary and Jurisdiction
of Incorporation or
Organization

 

Percentage of the Credit
Party’s Ownership of the
Equity Interests of the
Subsidiary

Walco International, Inc. (Borrower), a California corporation

 

Walco do Brasil Produtos Veterinarios Ltda., a Brazilian corporation*

 

Credit Party owns 999 quotas; Luis Eduardo Schoueri owns 1 quota

 

 

Walco Mexico, S.A. De C.V., a Mexican corporation*

 

Credit Party owns 9,999 shares; Jose Francisco Hinojosa Cuellar owns 1 share

 

 

Province Livestock Supply, Ltd., a Canadian corporation

 

100%

 

 

Western Veterinary Supplies Ltd., a Canadian corporation

 

100%

 

 

American Livestock Supply, Inc., a Delaware corporation

 

100%

 

 

Walco Texas Animal Health, LLC, a Texas limited liability company

 

100%

 

 

Walco Animal Health, Ltd., a U.K. company

 

100%

Walco Holdings, Inc., a Delaware corporation

 

Walco Intermediate, Inc., a Delaware corporation

 

100%

Walco Intermediate, Inc., a Delaware corporation

 

Walco International, Inc., a Delaware corporation

 

100%

Animal Health International, Inc., a Delaware corporation

 

Steer Intermediate Corporation, a Delaware corporation

 

100%

Steer Intermediate Corporation, a Delaware corporation

 

Walco Holdings, Inc., a Delaware corporation

 

100%

 

 

 

 

 

American Livestock Supply, Inc., a Delaware corporation

 

None.

 

Not applicable.

Western Veterinary Supplies Ltd., a Canadian corporation

 

None.

 

Not applicable.

Province Livestock Supply, Ltd., a Canadian corporation

 

RX Veterinary Supplies and Services Ltd., a Canadian corporation*

 

100%

 

 

Walco Canada Animal Health Ltd., a Canadian corporation

 

100%

Walco Canada Animal

 

None.

 

Not applicable.

 

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

 

Health Ltd., a Canadian corporation

 

 

 

 

Walco Texas Animal Health, LLC, a Texas limited liability company

 

None.

 

Not applicable.

 

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

* Inactive.  Information provided is based on records available to the Borrower
that may be incomplete and/or outdated.

 

Inactive Subsidiaries

 

1.         Walco do Brasil Productos Veterinarios Ltda., a Brazilian corporation

2.         Walco Mexico, S.A. De C.V., a Mexican corporation

 

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

 

Schedule 5.12
Title to Properties; Possession Under Leases

 

Leases

 

1.         Lease between Abilene Auction, Inc. (Landlord) and Borrower (Tenant),
dated as of September 1, 2005, for the property located at 3265 Judge Ely Blvd.,
Abilene, Texas 79601.

 

2.         Lease between Dairy Farmers of America, Inc. (Landlord) and Borrower
(Tenant), dated as of January 2, 2002, for the property located at 6350 North
2150 West, Almaga, Utah 84335.

 

3.         Lease between Angelo L. Mazzei and Mary E. Mazzei (Landlord) and
Borrower (Tenant), dated as of August 1, 2004, for the property located at 4840
East Brundage Lane, Bakersfield, California 93307.

 

4.         Lease between Roger Dunn (Landlord) and Borrower (Tenant), dated as
of May 1, 2000, for the property located at 990 River Oaks Road, Boaz, Alabama
35950.

 

5.         Lease between Muenster Livestock Auction Commission, Inc. (Landlord)
and HiPro (Tenant), dated as of February 1, 2003, for the property located at
Business Highway 287 North, Bowie, Texas 76230.

 

6.         Lease between William Nels Smith (Landlord) and Borrower (Tenant),
dated as of November 30, 1987, for the property located at 15760 S.E. 130th
Street, Clackamus, Oregon 97015.

 

7.         Lease between Arrow-Stevens Realty LLC (Landlord) and Borrower
(Tenant), dated as of September 1, 2002, for the property located at 315
Industrial Drive, Clinton, North Carolina 28328.

 

8.         Lease between Daniel C. Porter (Landlord) and Borrower (Tenant),
dated as of June 1, 1997, for the property located at 2540 4th Street East,
Dickinson, North Dakota 58601.

 

9.         Lease between Steven D. Smith and Jody L. Smith (Landlord) and
Borrower (Tenant), dated as of January 1, 2001, for the property located at 2091
Last Chance Road, Elko, Nevada 89801.

 

10.       Lease between 9960 McCombs L.P. (Landlord) and Borrower (Tenant),
dated as of September 1, 2005, for the property located at 11220 Rojas Drive, El
Paso, Texas 79935.

 

11.       Lease between Dan Urquart (Landlord) and Borrower (Tenant), dated as
of November 1, 1991, for the property located at 150 Industrial Way, Fallon,
Nevada 89406.

 

12.       Lease between R. F. Wartig (Landlord) and Borrower (Tenant), dated as
of July 1, 2001, for the property located at 4221 North Broad Street, Fremont,
Nebraska 68025.

 

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

 

13.       Lease between Panhandle Green Inc. (Landlord) and Borrower (Tenant),
dated as of April 1, 1993, for the property located at 2840 N. 10th Street,
Gering, Nebraska 69341 (Mailing address:  2838 N. 10th Street, Gering, Nebraska
69341).

 

14.       Lease between McGuire Partners - Solana Limited Partnership (Landlord)
and Borrower (Tenant), dated as of March 18, 2005, for the property located at 7
Village Circle Westlake, Texas 76262.

 

15.       Lease between Tarrant County Ltd. Partnership (Landlord) and Borrower
(Tenant), dated as of June 5, 2002, for the property located at 1240 E.
Northwest Highway, Grapevine, Texas 76051.

 

16.       Lease between John D. Buchanan (Landlord) and Borrower (Tenant), dated
as of July 1, 1991, for the property located at 4700 10th Avenue South, Great
Falls, Montana 59405.

 

17.       Lease between Nebraska Trust Company, Trustee of the Robert J. McBride
Trust (Landlord) and Borrower (Tenant), dated as of January 1, 2004, for the
property located at 120 S. Lincoln, Hastings, Nebraska 68901.

 

18.       Lease between Ralph Rollin Olson and Mabel M. Olson (Landlord) and
Borrower (Tenant), dated as of May 1, 1993, for the property located at Puukapu,
Waimea South Kohala, HI 96743 (Mailing Address:  1 Kauka Lane, Kamuela, Hawaii
96743).

 

19.       Lease between Maurice N. Waters (Landlord) and Borrower (Tenant),
dated as of July 1, 1994, for the property located at 200 West First Street,
Hereford, Texas 79045.

 

20.       Lease between Triple R Associates LLP (Landlord) and Borrower
(Tenant), dated as of December 15, 1997, for the property located at 613 Atlas
Avenue, Madison, Wisconsin 53708.

 

21.       Lease between Shelby Distribution Park, LLC (Landlord) and Borrower
(Tenant), dated as of February 1, 2004, for the property located at 4605 Hickory
Hill Road, Memphis, Tennessee 38141.

 

22.       Lease between Christopher R. Folk (Landlord) and Borrower (Tenant),
dated as of June 28, 1999, for the property located at 4869 E. Raines Road,
Memphis, Tennessee 38175.

 

23.       Lease between 11 Street Investments, Limited Partnership (Landlord)
and Borrower (Tenant), dated as of June 25, 2004, for the property located at
1908 Rockefeller Drive, Ceres, CA.

 

24.       Lease between Workman Enterprises, Inc. (Landlord) and Borrower
(Tenant), dated as of May 1, 2004, for the property located at 1409 South
University Drive, Nacogdoches, Texas 75961.

 

25.       Lease between Walker, LLC (Landlord) and Borrower (Tenant), dated as
of May 1, 2003, for the property located at 2300 Northwest 9th Street,
Okeechobee, Florida.

 

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

 

26.       Lease between Carl Ross d/b/a Safari Business Center (Landlord) and
Borrower (Tenant), dated as Of April 1, 2004, for the property located at 1906
E. Cedar Avenue, Ontario, California 91761.

 

27.       Lease between Andrew F. Giambroni and Beverly Ann Giambroni, as
trustees of the Giambroni Family Trust (Landlord) and Borrower (Tenant), dated
as of September 1, 1998, for the property located at 115 Metzger Road, Red
Bluff, California 96080.

 

28.       Lease between Joe W. Bevers (Landlord) and Borrower (Tenant), dated as
of December 1, 2001, for the property located at 1709-1713 S. E. Main Street,
Roswell, New Mexico 88201.

 

29.       Sublease between Charlie Schwab (Landlord) and Borrower (Tenant),
dated as of September 1, 2005, for the property located at 1961 S. Highway 83,
Scott City, Kansas 67871.

 

30.       Lease between G F Land Partnership (Landlord) and Borrower (Tenant),
dated as of August 25, 2006, for the property located at 1421 38th Avenue W.,
Spencer, Iowa 51301.

 

31.       Lease between The Oscar M. Hall Revocable Trust, Oscar M. Hall and
Margie L. Hall (Landlord) and Borrower (Tenant), dated as of April 1, 2000, for
the property located at 1202 and 1204 ESI Drive, Springdale, Arkansas 72764.

 

32.       Lease between CBS Real Estate Group Partnership (Landlord) and
Borrower (Tenant), dated as of November 1, 2000, for the property located at
3058 W. Washington Street, Stephenville, Texas 76401.

 

33.       Lease between John W. Eakin and Carl van der Merwe (Landlord) and
Borrower (Tenant), dated as of December 1, 2004, for the property located at 120
E. South Hill Road, Sunnyside, Washington 98944.

 

34.       Lease between Dairyman’s Cooperative Creamery Association (Landlord)
and Borrower (Tenant), dated as of September 1, 1995, for the property located
at 979 Bardsley, Tulare, California.

 

35.       Lease between H & H Properties (Landlord) and Borrower (Tenant), dated
as of May 1, 1994, for the property located at 408 N. Highway 87, Tulia, Texas
79088.

 

36.       Lease between LPR Livestock Auction (Landlord) and Borrower (Tenant),
dated as of May 1, 1996, for the property located at 1815 South Kings Highway,
Texarkana, Texas 75501.

 

37.       Lease between R. S. Properties of Walcott (Landlord) and Borrower
(Tenant), dated as of November 1, 1994, for the property located at 126 E.
Meadow Lane, Walcott, Iowa 52773.

 

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

 

38.       Lease between Bobby and Barbara Nance (Landlord) and Borrower
(Tenant), dated as of October 8, 2001, for the property located at 3031 W.
Pawnee, Suite 400, Wichita, Kansas 67213.

 

39.       Lease between Charles Rose and Ross Zimmerman (Landlord) and Borrower
(Tenant), dated as of November 1, 2002, for the property located at 4320 W.
Winnemucca Blvd., Winnemucca, Nevada 89445.

 

40.       Lease between David Brown and Teresa Brown (Landlord) and Borrower
(Tenant), dated as of February 20, 2003, for the property located at 1615 Avenue
E, Wisner, Nebraska 68791.

 

41.       Lease between Grafton West (Landlord) and Walco (Canada) Animal
Health, Inc. (Tenant), dated as of July 1, 2005, for the property located at
9471 - 49th Street, Edmonton, Alberta T6B 2L8.

 

42.       Lease between Crestline Builders Market (1977) Ltd. (Landlord) and
Western Veterinary Supply Ltd. (Tenant), dated as of November 1, 2003, for the
property located at 3026 -2nd Avenue North, Lethbridge, Alberta T1H 3C6.

 

43.       Oral Lease between J. Mrak and R. Mrak (Landlord) and RX Veterinary
Supplies and Services Ltd. for the property located at 2620 - 2nd Avenue North,
Lethbridge, Alberta T1H3C4.

 

44.       Oral Lease between Warehouse Rentals Ltd. (Landlord) and RX Veterinary
Supplies and Services Ltd. for the property located at 6823 - 52nd Avenue, Red
Deer, Alberta T4N 4L2.

 

45.       Lease between Garden City Leasing Company LLC (Landlord) and Borrower
(Tenant), dated as of January 10, 2005, for the property located at 3997 W.
Jones Avenue, Garden City, Kansas 67846.

 

46.       Lease between Camary Properties L.L.C. (Landlord) and Borrower
(Tenant), dated March 9, 205, for the property located at 1215 E. Morris Street,
Ste. Al, Hammond, Louisiana 70403.

 

47.       Lease between Woodward Livestock Auction, Inc. (Landlord) and Borrower
(Tenant), dated January 1, 2006, for the property located at 900 North Lakeview,
Woodward, Oklahoma.

 

48.       Lease between RJN Properties, Ltd. (Landlord) and Walco International,
Inc. (Tenant), commencing October 2, 2002, for property located at 1412 N.
Getty, Uvalde, Texas 78802.

 

49.       Lease between S&S Dairy Supply, Inc. (Landlord) and Walco Texas Animal
Health, LLC, dated September 18, 2006, for property located at 20115 Texas
Highway 11 East, Winnsboro, Texas 75494.

 

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

 

Walco Holdings, Inc. is also party from time to time to leases for storage space
which are not individually, or in the aggregate, material to the business of
Walco Holdings, Inc..

 

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

 

Schedule 5.13
Assumed Names

 

Sunwest Industries
DVM Resources
Walco Feed Additives
Central Arizona Veterinary Laboratories (“CAVL”)
Holt
Holt Products
InfoTech
ITA
M & M Supply Company of Florida
Paragon
R & R Olson
RXV Products
Walco Technologies

 

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

 

Schedule 5.16
Agreements

 

To the extent not paid off as of the Closing Date:

 

1.             The Credit Agreement, dated as of June 30, 2005, by and among
Walco International, Inc. (“Borrower”) and other Guarantors named therein as
guarantors, the Lenders named therein, JPMorgan Chase Bank, N.A., a national
banking association, as Administrative Agent and General Electric Capital
Corporation, as Documentation Agent.

 

2.             The secured term loan agreement, dated June 30, 2005 by and among
Walco International, Inc. (“Borrower”) and Merrill Lynch PCG, Inc. (the
Lender”).

 

3.             Standby Letter of Credit as amended issued by Borrower in favor
of Employers Insurance of Wausau dated as of July 20, 2005 in the amount of
$300,000.00.

 

4.             Standby Letter of Credit as amended issued by Borrower in favor
of Aetna Life Insurance Company dated as of December 28, 2005 in the amount of
$132,677.10.

 

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

 

Schedule 5.17
Environmental Matters

 

None.

 

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

 

Schedule 5.22
Transactions with Related Parties

 

This Schedule does not include agreements that are expected to terminate as of
the Closing Date, promissory notes that are expected to be paid in full as of
the Closing Date, or agreements with parties that are expected to no longer be
an officer, director, shareholder or Affiliate of any of the Credit Parties as
of the Closing Date.

 

1.                                       Corporate Development and
Administrative Services Agreement, dated as of June 30, 2005, among Charlesbank
Capital Partners, LLC, Animal Health International, Inc., f/k/a Steer Parent
Corporation, and Borrower.

 

2.                                       Employment Agreement by and between
Borrower and Jim Robison, dated as of May 1, 1997, as amended.

 

3.                                       Employment Agreement by and between
Borrower and Greg Eveland, dated as of September 1, 1997, as amended.

 

4.                                       Employment Agreement by and between
Borrower and William Lacey, dated as of August 15, 2003, as amended.

 

5.                                       Employment Agreement by and between
Borrower and Mark Moon, dated as of June 3, 2002, as amended.

 

6.                                       Employment Agreement by and between
Borrower and Damian Olthoff, dated as of April 1, 2006.

 

7.                                       Employment Agreement by and between
Borrower and Nicholas Reid, dated as of February 1, 2006.

 

8.                                       Employment Agreement by and between
Borrower and Scott Postlewaite, dated as of May 13, 2002.

 

9.                                       Stockholders Agreement, dated as of
June 29, 2005, among Animal Health International, Inc., f/k/a Steer Parent
Corporation and the Stockholders (as defined therein).

 

10.                                 Steer Parent Corporation 2005 Stock Option
and Grant Plan and the Restricted Stock Agreements entered into pursuant thereto
and any issuances of equity securities and related agreements thereunder.

 

11.                                 Director Indemnification Agreement by and
between Animal Health International, Inc., f/k/a Steer Parent Corporation and
James C. Robison, dated as of June 30, 2005.

 

12.                                 Director Indemnification Agreement by and
between Animal Health International, Inc., f/k/a Steer Parent Corporation and
Brandon White, dated as of June 30, 2005.

 

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

 

13.                                 Director Indemnification Agreement by and
between Animal Health International, Inc., f/k/a Steer Parent Corporation and
Michael Eisenson, dated as of June 30, 2005.

 

14.                                 Director Indemnification Agreement by and
between Animal Health International, Inc., f/k/a Steer Parent Corporation and
Mark Rosen, dated as of June 30, 2005.

 

15.                                 Borrower has severance agreements in place
with the following additional individuals:

 

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

 

Schedule 5.23
Patents, Trademarks and Copyrights

 

United States Trademark Registrations

 

Trademark

 

Registration No.

 

Filing Date

 

Issuance Date

-50 BELOW

 

2,332,021

 

02/18/99

 

03/21/00

AFTER-BIRTH

 

2,655,779

 

02/28/01

 

12/03/02

AGRI PHARM (words & design)

 

1,027,733

 

07/11/74

 

12/23/75

AGRI BLOCK

 

3,106,174

 

12/14/04

 

06/20/06

AGRI PHARM (standard character)

 

3,060,223

 

02/09/05

 

02/21/06

AMERICAN LIVESTOCK SUPPLY

 

2,249,071

 

11/24/97

 

06/01/99

ANEM-X (stylized)

 

2,448,175

 

10/16/98

 

05/01/01

COCCICOR

 

1,698,740

 

07/24/91

 

07/07/92

COMEBACK

 

2,255,087

 

12/08/97

 

06/22/99

COVERT

 

2,647,268

 

12/18/00

 

11/05/02

DERMALOG

 

2,580,432

 

03/16/01

 

06/11/02

DEXASONE

 

2,857,871

 

12/20/02

 

06/29/04

DUO PEN

 

962,500

 

05/08/72

 

07/03/73

EQUI-DEX CHERRY

 

3,033.11

 

05/06/04

 

12/20/05

EXALT

 

2,456,199

 

06/21/99

 

05/29/01

EXIT

 

2,058,430

 

02/12/96

 

04/29/97

E-Z Tear

 

3140682

 

05/17/05

 

09/05/06

FIRST COMPANION

 

2,392,486

 

10/11/96

 

10/10/00

GOOD START

 

1,955,002

 

03/29/95

 

02/06/96

GUAGE

 

2,644,536

 

12/22/00

 

10/29/02

ITA (and design)

 

2,521,274

 

06/01/00

 

12/18/01

IVERMAX

 

2,733,324

 

08/25/02

 

07/01/03

KETA-STHETIC

 

1,915,956

 

10/17/94

 

09/05/95

LUBISEPTOL

 

1,837,664

 

07/23/93

 

05/31/94

NASAL-VAX

 

2,701,501

 

12/28/01

 

03/25/03

NEOVET

 

1,063,116

 

08/25/76

 

04/12/77

Octagon Logo

 

1,383,793

 

06/12/85

 

02/18/86

ORIGIN

 

2,453,950

 

06/21/99

 

05/22/01

OTO SOOTHE

 

2,656,711

 

02/05/02

 

12/03/02

OXY-MYCIN

 

1,087,993

 

08/17/77

 

03/28/78

PACESETTER (and design)

 

2,751,326

 

04/11/01

 

08/12/03

PARAGON

 

2,069,515

 

05/31/96

 

06/10/97

PERFECT COAT

 

3,074,544

 

05/07/04

 

03/28/06

RE-NU

 

3,088,524

 

05/07/04

 

05/02/06

RESIST

 

2,794,958

 

01/30/03

 

12/16/03

RXV

 

1,408,163

 

06/12/85

 

09/09/86

RXV PRODUCTS

 

1,376,847

 

06/12/85

 

01/07/86

RXV RESCUE

 

2,314,616

 

02/18/99

 

02/01/00

RXV-BP-1

 

1,831,046

 

07/23/93

 

04/19/94

SCOURVAX

 

2,716,602

 

09/13/01

 

05/13/03

SUPPRESSOR

 

2,012,726

 

02/27/95

 

10/29/96

SUPRA-SULFA

 

1,064,285

 

11/07/75

 

04/26/77

TETNI-VAX

 

2,730,779

 

06/24/03

 

06/24/03

 

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

 

Trademark

 

Registration No.

 

Filing Date

 

Issuance Date

TRIPLE-HISTAMINE

 

2,129,878

 

06/10/96

 

01/20/98

VITA-JEC

 

969,052

 

08/02/72

 

09/25/73

VITA-ORAL

 

1,831,045

 

07/23/93

 

04/19/94

WI/WALCO (and design)

 

2,193,857

 

11/04/97

 

10/06/98

 

United States Trademark Applications

 

Trademark

 

Serial No.

 

Filing Date

AGRI-BOND

 

78-532437

 

12/14/04

AMERICAN PET SUPPLY

 

78/313,745

 

10/15/03

ANIMALHEALTHPROS

 

78/260,482

 

06/10/03

ANNEXUS

 

78-756274

 

11/17/05

BOVI FRESH

 

78-554368

 

01/26/05

BOVI-PLAZ

 

78/329,287

 

11/18/03

BP-1

 

78/343,671

 

12/19/03

CANINE IMUNO-VAX

 

78/188,989

 

11/26/02

CEFTI-JEC

 

78/808,086

 

02/06/06

CHORHEXIZOLE

 

78/766,781

 

12/05/05

DIA-ROBE

 

78-793141

 

01/17/06

DIGEST-RITE

 

78-766789

 

12/05/05

D/TOX/BESC

 

78/231,751

 

03/31/03

EQUI/MINTIC/SPR

 

78/219,137

 

02/26/03

EQUI-BOOST

 

78/211,133

 

02/05/03

EQUI-DEX APPLE

 

78/414,155

 

05/06/04

EQUI-SPONGE

 

78/903,864

 

06/08/06

EQUI-THRUSH

 

78/250,992

 

05/16/03

EXCELLENCE IN ANIMAL HEALTH

 

78/208,459

 

01/29/03

EXILE

 

78/907,720

 

06/14/06

FIRST IMPRESSIONS

 

78/573,006

 

02/23/05

GUT CHECK

 

78-766808

 

12/05/05

JUST LIKE MOM

 

78-554372

 

01/26/05

LAST FLIGHT

 

78/863,712

 

04/18/06

LINCO S 50

 

78-434457

 

01/14/04

LINCO-JECT

 

78/226,420

 

03/17/03

MASTI-VAX

 

78-790013

 

01/12/06

MINERAL MAX

 

76/489,397

 

02/11/03

MIRACLE FLX PELLETS

 

78/414,146

 

05/06/04

MIRACLE FLX SOLUTION

 

78/414,141

 

05/06/04

MIRACLE HOOF

 

78/414,150

 

05/06/04

MIRACLE SAND OUT

 

78-809119

 

02/07/06

MIRACLE SHEEN

 

78/861,802

 

04/14/06

MIRACLE WEIGHT GAIN

 

78-793011

 

01/17/06

NAX-C-FUR

 

78/836,278

 

03/14/06

NONE (LOGO ONLY)

 

78-791114

 

01/13/06

NUTRI-SORB

 

78/260,476

 

06/10/03

OUTLAST

 

78-766802

 

12/05/05

RANCH PACK

 

78-593519

 

03/23/05

 

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

 

RESCUE

 

78-590051

 

03/18/05

RXV

 

78-780389

 

12/23/05

SHU FLY

 

78-766793

 

12/05/05

VETQUI CELL

 

78-903,908

 

06/08/06

WI WALCO TECHNOLOGIES EXCELLENCE IN ANIMAL MANAGEMENT

 

78-836276

 

03/14/05

 

United States Patents (owned)

 

Patent

 

Patent Number

 

Filing Date

 

Issuance
Date

“Accurate Metering Control Systems and Method for Livestock Feeding Operation.”

 

5,424,957

 

10/07/93

 

06/13/95

 

State Trademark Registrations

 

Trademark

 

Registration
No.

 

Issue Date

 

State

HOLT PRODUCTS COMPANY

 

061,016

 

12/17/97

 

Wisconsin

HOLT PRODUCTS

 

061,017

 

12/17/97

 

Wisconsin

HOLT

 

061,018

 

12/17/97

 

Wisconsin

 

Canadian Trademark Registrations

 

Trademark

 

Registration No.

 

Issue Date

SUPPRESSOR

 

CA1249362

 

3/3/05

NOROMYCIN

 

CA1249363

 

3/3/05

NOROVET

 

CA1249364

 

3/3/05

 

Patent Applications

 

Patent Title

 

Application
No.

 

Filing Date

Calf Bottle

 

10/995,452

 

11/23/04

 

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

 

Patents

 

Patent

 

Patent No.

 

Filing Date

 

Issue Date

Accurate Metering and Control System and Method for Livestock Feeding Operation
(1)

 

5,424,957

 

10/7/1993

 

6/13/1995

 

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

(1) This patent will be assigned from Info Tech to Borrower.

 

USPTO Trademark Registration Opposition. Cargill filed and used a “[ ] Max” mark
for computer software used for livestock feed management in 2000. In 2003, Walco
International filed for trademark protection for the mark “Mineral Max”. 
Cargill later filed the “Golden Max” mark for nutritional supplements.  Cargill
opposed Walco International’s registration of the “Mineral Max” mark.  The
matter is currently pending before the U.S. Trademark and Trial Appeal Board.

 

USPTO Trademark Registration Opposition. Pfizer filed and used a “LS 50” mark in
connection with one of their products.  Pfizer recently opposed Walco
International’s registration of the “Linco S 50” mark.  Linco is descriptive of
the active ingredient of Lincomicin. S is the first initial of the second
ingredient of Spectamicin, and 50, which is the amount of active ingredients (50
mg).

 

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

 

Schedule 6.15
Financial Institutions and Accounts

 

Division
Name

 

Bank
Name

 

Bank
Location

Guymon, OK

 

The City National Bank & Trust

 

Guymon, OK

Hereford, TX

 

First National Bank

 

Hereford, TX

Pleasanton, TX

 

Texas Champion Bank

 

Charlotte, TX

Greeley, CO

 

Bank of Colorado

 

Sterling, CO

Gering, NE

 

US Bank

 

St. Paul, MN

Fremont, NE

 

US Bank

 

St. Paul, MN

Tulia, TX

 

Wells Fargo Bank

 

Tulia, TX

Wichita Falls, TX

 

State National Bank

 

Iowa Park, TX

Sioux Falls, SD

 

Wells Fargo South Dakota, N.A.

 

Sioux Falls, SD

Hastings, NE

 

Heritage Bank

 

Hastings, NE

Mayo, FL

 

Lafayette County State Bank

 

Mayo, FL

Dunn, NC

 

Centura

 

Dunn, NC

Sturgis, SD

 

First Western Bank

 

Sturgis, SD

Nacogdoches, TX

 

Bancorp South

 

Nacogdoches, TX

Sealy, TX

 

Citizens State Bank

 

Sealy, TX

Texarkana, TX

 

Capital One Bank

 

Texarkana, TX

Bowie, TX

 

Jackboro Nat’l Bank/The Bowie Bank

 

Bowie, TX

Wisner, NE

 

The Citizens Natl Bank of Wisner

 

Wisner, NE

Dickinson, ND

 

Bank of the West

 

Dickinson, ND

Spanish Fork, UT

 

Zions First National Bank

 

Spanish Fork, UT

Billings/Great Fall, MT

 

First Interstate Bank

 

Great Falls, MT

Cache Valley

 

Zions First National Bank

 

Spanish Fork, UT

Kamuela, HI

 

First Hawaiian Bank

 

Kamuela, HI

Holt-Deposits

 

M&l Marshall & llsley Bank #50720

 

Madison, Wl

Canada-Walco

 

Royal Bank of Canada

 

Lethbridge AB

Canada-RX Vet Supplies

 

Royal Bank of Canada

 

Lethbridge AB

Canada-Western Vet

 

Royal Bank of Canada

 

Lethbridge AB

Divisional Depository (Multiple Divisions)

 

Bank of America

 

Fresno, CA

Credit Card Depository

 

Chase Bank

 

Dallas, TX

Credit Card Depository-Holt

 

Chase Bank

 

Dallas, TX

COD Secure Depository

 

Chase Bank

 

Dallas, TX

Lock Box Account

 

Chase Bank

 

Dallas, TX

Corporate Miscellaneous Deposit

 

Chase Bank

 

Dallas, TX

Corporate Petty Cash Account

 

Bank of America

 

Grapevine, TX

Main Concentration Account

 

Chase Bank

 

Dallas, TX

Health Plan Disbursements

 

Chase Bank

 

Dallas, TX

Payroll Disbursements

 

Chase Bank

 

Dallas, TX

FEDI Account

 

Chase Bank

 

Dallas, TX

AP Main Disbursements Pos Pay

 

Chase Bank

 

Dallas, TX

FSA Funding Account

 

Chase Bank

 

Dallas, TX

CAPS Funding Account

 

Chase Bank

 

Dallas, TX

Walco International Holdings Inc.

 

Chase Bank

 

Dallas, TX

Woodward, OK

 

MidFirst Bank

 

Woodward, OK

 

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

 

With the following exceptions, signatories on all above accounts are William F.
Lacey, Henry Moomaw III, and Barry Fischer:

 

1.                                       Signatories on the accounts with Royal
Bank of Canada are Scott Postlewaite, Allen Carmichael.

 

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

 

Schedule 7.2
Liens

 

This Schedule does not include liens of Fleet National Bank, individually and as
administrative agent or collateral agent, with respect to assets of various
entities, because release and termination of such liens are expected to be filed
on the Closing Date.

 

Alberta Registries (Canada)

 

Province Livestock Supply Ltd.

 

1.                                       GMAC LeaseCo Corporation holds a
security interest in several GMC vehicles.  The registration numbers are
04110511997, 04110512060, 04110512607, and 04111513661.

2.                                       Chrysler Financial Canada and
DaimlerChrysler Services Canada Inc. hold a security interest in a 2003 Jeep
Liberty.  The registration number is 03012001263.

3.                                       Ford Credit Canada Leasing Company
holds a security interest in a 2004 Ford F350.  The registration number is
04060112242.

4.                                       Citicorp Vendor Finance, Ltd. holds a
security interest in equipment.  The registration number is 03110619602.

 

Walco International, Inc.

 

1.                                       Citicorp Vendor Finance, Ltd. holds a
security interest in equipment.  The registration number is 03110619602.

 

UCC (United States)

 

Walco International, Inc.

 

1.                                       Bayer Corporation and Bayer Healthcare
LLC hold a security interest in all Baytril 100 Injectible Solution, now owned
or hereafter acquired, and the proceeds and Accounts Receivable arising from the
sale thereof.  The financing statements were filed in California, and the file
numbers are 9829360201, 00076C0196, 0315560782, 04-1006521019, and 0418161115.

2.                                       Crown Credit Company holds a security
interest in specific equipment.  The financing statements were filed in
California, and the file numbers are 0205360593, 0233160846, 04-1003386126,
05-7022314024, and 0205360600.

3.                                       Minolta Business Solutions, Inc. (fka
Minolta Business Systems, Inc.) holds a security interest in specific leased
equipment and specific equipment.  The financing statements were filed in
California, and the file numbers are 0229160559 and 0310060586.

4.                                       IBM Credit Corporation and IBM Credit
LLC hold a security interest in specific leased equipment.  The financing
statements were filed in California, and the file numbers are 0300860032,
0300960480, and 0302760566.

5.                                       Inter-Tel Leasing Inc. holds a security
interest in Axxess Telephone System.  The financing statement was filed in
California, and the file number is 0406160615.

 

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

 

6.                                       Citicorp Del Lease, Inc., DBA Citicorp
Dealer Finance, holds a security interest in specific equipment.  The financing
statement was filed in California, and the file number is 0218160669.

 

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

 

Schedule 7.6
Permitted Affiliate Transactions

 

SEE SCHEDULE 5.22

 

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

 

Schedule 7.18
Restrictive Agreements

 

None.

 

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