Exhibit 10.2
(WACHOVIA LOGO) [f14912f1491200.gif]
EXECUTION VERSION
$20,000,000
SECOND LIEN CREDIT AGREEMENT
among
AMERICAN PACIFIC CORPORATION,
as Borrower,
and
THE DOMESTIC SUBSIDIARIES OF THE BORROWER
FROM TIME TO TIME PARTIES HERETO,
as Guarantors,
THE LENDERS PARTIES HERETO,
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent,
and
BANK OF AMERICA, N.A.,
as Syndication Agent
Dated as of November 30, 2005
WACHOVIA CAPITAL MARKETS, LLC,
as Sole Lead Arranger and Sole Book Runner
(MOORE AND VAN ALLEN LOGO) [f14912f1491201.gif]

 

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TABLE OF CONTENTS

              Page  
ARTICLE I DEFINITIONS
    1  
Section 1.1 Defined Terms
    1  
Section 1.2 Other Definitional Provisions
    29  
Section 1.3 Accounting Terms
    30  
Section 1.4 Resolution of Drafting Ambiguities
    30  
Section 1.5 Time References
    30    
ARTICLE II THE TERM LOAN; AMOUNT AND TERMS
    31  
Section 2.1 Term Loan
    31  
Section 2.2 Fees
    32  
Section 2.3 Prepayments
    32  
Section 2.4 Default Rate and Payment Dates
    35  
Section 2.5 Conversion Options
    35  
Section 2.6 Computation of Interest and Fees; Usury
    36  
Section 2.7 Pro Rata Treatment and Payments
    38  
Section 2.8 Non-Receipt of Funds by the Administrative Agent
    39  
Section 2.9 Inability to Determine Interest Rate
    40  
Section 2.10 Illegality
    41  
Section 2.11 Requirements of Law
    41  
Section 2.12 Indemnity
    43  
Section 2.13 Taxes
    43  
Section 2.14 Replacement of Lenders
    45    
ARTICLE III REPRESENTATIONS AND WARRANTIES
    46  
Section 3.1 Financial Condition
    46  
Section 3.2 No Change
    47  
Section 3.3 Corporate Existence; Compliance with Law
    47  
Section 3.4 Corporate Power; Authorization; Enforceable Obligations
    47  
Section 3.5 No Legal Bar; No Default
    48  
Section 3.6 No Material Litigation
    48  
Section 3.7 Investment Company Act; PUHCA, Etc.
    48  
Section 3.8 Margin Regulations
    48  
Section 3.9 ERISA
    49  
Section 3.10 Environmental Matters
    49  
Section 3.11 Use of Proceeds
    50  
Section 3.12 Subsidiaries
    50  
Section 3.13 Ownership
    51  
Section 3.14 Indebtedness
    51  
Section 3.15 Taxes
    51  
Section 3.16 Intellectual Property Rights
    51  
Section 3.17 Solvency
    51  
Section 3.18 Investments
    52  
Section 3.19 Location of Collateral
    52  
Section 3.20 No Burdensome Restrictions
    52  

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              Page  
Section 3.21 Brokers’ Fees
    52  
Section 3.22 Labor Matters
    52  
Section 3.23 Accuracy and Completeness of Information
    53  
Section 3.24 Material Contracts
    53  
Section 3.25 Insurance
    54  
Section 3.26 Security Documents
    54  
Section 3.27 Regulation H
    54  
Section 3.28 Classification of Senior Indebtedness
    54  
Section 3.29 Anti-Terrorism Laws.
    54  
Section 3.30 Compliance with OFAC Rules and Regulations
    55  
Section 3.31 Directors; Capitalization
    55  
Section 3.32 Consummation of Acquisition; Representations and Warranties from
Other Documents
    55  
Section 3.33 Compliance with FCPA
    55    
ARTICLE IV CONDITIONS PRECEDENT
    56  
Section 4.1 Conditions to Closing Date
    56    
ARTICLE V AFFIRMATIVE COVENANTS
    62  
Section 5.1 Financial Statements
    62  
Section 5.2 Certificates; Other Information
    63  
Section 5.3 Payment of Taxes and Other Obligations
    65  
Section 5.4 Conduct of Business and Maintenance of Existence
    65  
Section 5.5 Maintenance of Property; Insurance
    65  
Section 5.6 Inspection of Property; Books and Records; Discussions
    66  
Section 5.7 Notices
    66  
Section 5.8 Environmental Laws
    68  
Section 5.9 Financial Covenants
    68  
Section 5.10 Additional Guarantors
    69  
Section 5.11 Compliance with Law
    70  
Section 5.12 Pledged Assets
    70  
Section 5.13 Hedging Agreements
    71  
Section 5.14 Covenants Regarding Patents, Trademarks and Copyrights
    71  
Section 5.15 Credit Facility Ratings
    73  
Section 5.16 Real Property Collateral
    73  
Section 5.17 Federal Assignment of Claims Act
    74  
Section 5.18 Post-Closing Covenant; Further Assurances
    75    
ARTICLE VI NEGATIVE COVENANTS
    75  
Section 6.1 Indebtedness
    75  
Section 6.2 Liens
    77  
Section 6.3 Nature of Business
    77  
Section 6.4 Consolidation, Merger, Sale or Purchase of Assets, etc.
    77  
Section 6.5 Advances, Investments and Loans
    79  
Section 6.6 Transactions with Affiliates
    79  
Section 6.7 Ownership of Subsidiaries; Restrictions
    79  
Section 6.8 Corporate Changes; Material Contracts
    80  
Section 6.9 Limitation on Restricted Actions
    80  

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              Page  
Section 6.10 Restricted Payments
    81  
Section 6.11 Amendments to First Lien Credit Documents; Amendments to
Subordinated Debt
    81  
Section 6.12 Sale Leasebacks
    82  
Section 6.13 No Further Negative Pledges
    82  
Section 6.14 Deposit Account Control Agreements; Additional Bank Accounts
    82    
ARTICLE VII EVENTS OF DEFAULT
    83  
Section 7.1 Events of Default
    83  
Section 7.2 Acceleration; Remedies
    86    
ARTICLE VIII THE ADMINISTRATIVE AGENT
    87  
Section 8.1 Appointment
    87  
Section 8.2 Delegation of Duties
    87  
Section 8.3 Exculpatory Provisions
    88  
Section 8.4 Reliance by Administrative Agent
    88  
Section 8.5 Notice of Default
    89  
Section 8.6 Non-Reliance on Administrative Agent and Other Lenders
    89  
Section 8.7 Indemnification
    89  
Section 8.8 Administrative Agent in Its Individual Capacity
    90  
Section 8.9 Successor Administrative Agent
    90  
Section 8.10 Nature of Duties
    91  
Section 8.11 Intercreditor Agreement
    91  
Section 8.12 Releases
    91    
ARTICLE IX MISCELLANEOUS
    92  
Section 9.1 Amendments, Waivers and Release of Collateral
    92  
Section 9.2 Notices
    94  
Section 9.3 No Waiver; Cumulative Remedies
    96  
Section 9.4 Survival of Representations and Warranties
    96  
Section 9.5 Payment of Expenses and Taxes
    96  
Section 9.6 Successors and Assigns; Participations; Purchasing Lenders
    97  
Section 9.7 Adjustments; Set-off
    100  
Section 9.8 Table of Contents and Section Headings
    101  
Section 9.9 Counterparts
    102  
Section 9.10 Effectiveness
    102  
Section 9.11 Severability
    102  
Section 9.12 Integration
    102  
Section 9.13 Governing Law
    102  
Section 9.14 Consent to Jurisdiction and Service of Process
    102  
Section 9.15 Confidentiality
    103  
Section 9.16 Acknowledgments
    104  
Section 9.17 Waivers of Jury Trial; Waiver of Consequential Damages
    104  
Section 9.18 Patriot Act Notice
    105    
ARTICLE X GUARANTY
    105  
Section 10.1 The Guaranty
    105  
Section 10.2 Bankruptcy
    105  
Section 10.3 Nature of Liability
    106  

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              Page  
Section 10.4 Independent Obligation
    106  
Section 10.5 Authorization
    106  
Section 10.6 Reliance
    107  
Section 10.7 Waiver
    107  
Section 10.8 Limitation on Enforcement
    108  
Section 10.9 Confirmation of Payment
    108  

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Schedules
 
Schedule 1.1(a) Account Designation Letter
Schedule 1.1(b) Investments
Schedule 1.1(c) Liens
Schedule 1.1(d) Consolidated EBITDA
Schedule 2.1(d) Form of Term Loan Note
Schedule 2.5 Form of Notice of Conversion/Extension
Schedule 3.3 Jurisdictions of Organization and Qualification
Schedule 3.12 Subsidiaries
Schedule 3.16 Intellectual Property
Schedule 3.19(a) Location of Real Property
Schedule 3.19(b) Location of Collateral
Schedule 3.19(c) Chief Executive Offices
Schedule 3.19(d) Mortgaged Properties
Schedule 3.21 Broker’s Fees
Schedule 3.22 Labor Matters
Schedule 3.24 Material Contracts
Schedule 3.25 Insurance
Schedule 3.31 Directors; Capitalization
Schedule 4.1(b) Form of Secretary’s Certificate
Schedule 4.1(h) Form of Solvency Certificate
Schedule 5.2(b) Form of Officer’s Compliance Certificate
Schedule 5.10 Form of Joinder Agreement
Schedule 6.1(b) Indebtedness
Schedule 6.14 Deposit Accounts
Schedule 9.6(c) Form of Assignment Agreement

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     SECOND LIEN CREDIT AGREEMENT, dated as of November 30, 2005, among AMERICAN
PACIFIC CORPORATION, a Delaware corporation (the “Borrower”), each of those
Domestic Subsidiaries of the Borrower identified as a “Guarantor” on the
signature pages hereto and such other Domestic Subsidiaries of the Borrower as
may from time to time become a party hereto (collectively the “Guarantors” and
individually a “Guarantor”), the several banks and other financial institutions
from time to time parties to this Credit Agreement (collectively the “Lenders”
and individually a “Lender”), WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking association, as administrative agent for the Lenders hereunder (in such
capacity, the “Administrative Agent” or the “Agent”), and BANK OF AMERICA, N.A.,
as Syndication Agent.
W I T N E S S E T H:
     WHEREAS, the Borrower has requested that the Lenders make a term loan to
the Credit Parties in an amount equal to $20,000,000, as more particularly
described herein; and
     WHEREAS, the Lenders have agreed to make such loans and other financial
accommodations to the Credit Parties on the terms and conditions contained
herein.
     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
     Section 1.1 Defined Terms.
     As used in this Credit Agreement, terms defined in the preamble to this
Credit Agreement have the meanings therein indicated, and the following terms
have the following meanings:
     “2006 Charges” shall mean non-recurring charges in fiscal year 2006 in an
amount not to exceed $600,000 comprised of (a) consulting expenses related to
perchlorate environmental remediation, (b) expenses incurred in connection with
Sarbanes-Oxley reporting requirements and (c) integration costs related to the
In-Space Propulsion Acquisition.
     “ABR Default Rate” shall have the meaning set forth in Section 2.4.
     “Account Designation Letter” shall mean the Account Designation Letter
dated as of the Closing Date from the Borrower to the Administrative Agent in
substantially the form attached hereto as Schedule 1.1(a).

 

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     “Acquired Company” shall mean Aerojet Fine Chemicals LLC, a Delaware
limited liability company.
     “Acquiring Company” shall mean Ampac Fine Chemicals LLC, a California
limited liability company.
     “Acquisition” shall mean the acquisition of all or substantially all of the
assets of the Acquired Company pursuant to the Acquisition Documents.
     “Acquisition Documents” shall mean (a) that certain purchase agreement
dated as of July 12, 2005, among the Acquired Company and Aerojet-General
Corporation, as the sellers, and the Acquiring Company, as assignee of the
Borrower, as the buyer, together with any schedules and exhibits thereto, in
each case as amended, modified or supplemented from time to time in accordance
with the terms hereof, and (b) any other material agreement, document or
instrument executed in connection with the foregoing, in each case as amended,
modified or supplemented from time to time.
     “Additional Credit Party” shall mean each Person that becomes a Guarantor
by execution of a Joinder Agreement in accordance with Section 5.10.
     “Administrative Agent” or “Agent” shall have the meaning set forth in the
first paragraph of this Credit Agreement and any successors in such capacity.
     “Administrative Details Form” shall mean, with respect to any Lender, a
document containing such Lender’s contact information for purposes of notices
provided under this Credit Agreement and account details for purposes of
payments made to such Lender under this Credit Agreement.
     “AFC Guaranty” shall mean the guaranty delivered by the Borrower to
GenCorp, Inc., an Ohio corporation, to guaranty the obligations of the Acquiring
Company pursuant to the Acquisition Documents.
     “Affiliate” shall mean as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, a Person shall be deemed to be
“controlled by” a Person if such Person possesses, directly or indirectly, power
either (a) to vote 10% or more of the securities having ordinary voting power
for the election of directors of such Person or (b) to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise.
     “Agreement” or “Credit Agreement” shall mean this Second Lien Credit
Agreement, as amended, restated, amended and restated, modified or supplemented
from time to time in accordance with its terms.
     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
“Prime Rate” shall mean, at any time, the rate of

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interest per annum publicly announced or otherwise identified from time to time
by Wachovia at its principal office in Charlotte, North Carolina as its prime
rate. The parties hereto acknowledge that the rate announced publicly by
Wachovia as its Prime Rate is an index or base rate and shall not necessarily be
its lowest or best rate charged to its customers or other banks; and “Federal
Funds Effective Rate” shall mean, for any day, 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 on the next succeeding Business Day, the average of the quotations for
the day of such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it. If for any reason
the Administrative Agent shall have determined (which determination shall be
conclusive in the absence of manifest error) that it is unable to ascertain the
Federal Funds Effective Rate, for any reason, including the inability or failure
of the Administrative Agent to obtain sufficient quotations in accordance with
the terms above, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective on the opening of business on the date of such change.
     “Alternate Base Rate Loans” shall mean Loans that bear interest at an
interest rate based on the Alternate Base Rate.
     “Applicable Percentage” shall mean (a) for Term Loans that are Alternate
Base Rate Loans, 7.75% (provided that only 6.75% of such amount shall be payable
in cash and the remaining 1% shall accrue as pay-in-kind interest as set forth
in Section 2.6(b)) and (b) for Term Loans that are LIBOR Rate Loans, 9.00% (8%
of such amount shall be payable in cash and the remaining 1% shall accrue as
pay-in-kind interest as set forth in Section 2.6(b)).
     “Approved Fund” shall mean, with respect to any Lender, any fund or trust
or entity that invests in commercial bank loans in the ordinary course of
business and is advised or managed by (a) such Lender, (b) an Affiliate of such
Lender, (c) any other Lender or any Affiliate thereof or (d) the same investment
advisor as any Person described in clauses (a) — (c).
     “Arranger” shall mean Wachovia Capital Markets, LLC, together with its
successors and assigns.
     “Asset Disposition” shall mean the disposition of any or all of the assets
(including, without limitation, the Capital Stock of a Subsidiary or any
ownership interest in a joint venture) of any Credit Party or any Subsidiary
whether by sale, lease, transfer or otherwise. The term “Asset Disposition”
shall not include (a) the sale, lease or transfer of assets permitted by
Subsections 6.4(a)(i) through (vii), or (b) any Equity Issuance.
     “Assignment Agreement” shall mean an Assignment Agreement, in substantially
the form of Schedule 9.6(c).

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     “Bankruptcy Code” shall mean the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
     “Bankruptcy Event” shall mean any of the events described in
Section 7.1(f).
     “Borrower” shall have the meaning set forth in the first paragraph of this
Credit Agreement.
     “Borrowing Date” shall mean, in respect of any Loan, the date such Loan is
made.
     “Business” shall have the meaning set forth in Section 3.10.
     “Business Day” shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina or New York, New York are
authorized or required by law to close; provided, however, that when used in
connection with a rate determination, borrowing or payment in respect of a LIBOR
Rate Loan, the term “Business Day” shall also exclude any day on which banks in
London, England are not open for dealings in Dollar deposits in the London
interbank market.
     “Capital Lease” shall mean any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a balance
sheet of the lessee in accordance with GAAP.
     “Capital Lease Obligations” shall mean the capitalized lease obligations
relating to a Capital Lease determined in accordance with GAAP.
     “Capital Stock” shall mean (a) in the case of a corporation, capital stock,
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (c) in the case of a partnership, partnership interests (whether
general or limited), (d) in the case of a limited liability company, membership
interests and (e) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
     “Cash Equivalents” shall mean (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition (“Government Obligations”),
(b) Dollar denominated (or foreign currency fully hedged to the Dollar) time
deposits, certificates of deposit, Eurodollar time deposits and Eurodollar
certificates of deposit of (i) any domestic commercial bank of recognized
standing having capital and surplus in excess of $250,000,000 or (ii) any bank
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof
(any such bank being an “Approved Bank”), in each case with maturities of not
more than 364 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or

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P-1 (or the equivalent thereof) or better by Moody’s and maturing within six
months of the date of acquisition, (d) repurchase agreements with a bank or
trust company (including a Lender) or a recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations issued by
or fully guaranteed by the United States of America, (e) obligations of any
State of the United States or any political subdivision thereof for the payment
of the principal and redemption price of and interest on which there shall have
been irrevocably deposited Government Obligations maturing as to principal and
interest at times and in amounts sufficient to provide such payment, (f) auction
preferred stock rated in the highest short-term credit rating category by S&P or
Moody’s, (g) readily marketable tax-free municipal bonds of a domestic issuer
rated Aaa by Moody’s, or AAA by S&P, and maturing within one year from the date
of issuance (and investments in mutual funds investing primarily in those
bonds), (h) investments in money market funds substantially all of whose assets
are comprised of securities of the types described in subparts (a) through
(g) above, and (i) demand deposit accounts maintained in the ordinary course of
business.
     “Change of Control” shall mean at any time the occurrence of any of the
following events: (a) any “person” or “group” (as such terms are used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934), is or becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, except that a person shall be deemed to have “beneficial
ownership” of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of 25% or more of the then outstanding Voting Stock of
the Borrower; or (b) the replacement of a majority of the Board of Directors of
the Borrower over a two-year period from the directors who constituted the Board
of Directors at the beginning of such period, and such replacement shall not
have been approved by a vote of at least a majority of the Board of Directors of
the Borrower then still in office who either were members of such Board of
Directors at the beginning of such period or whose election as a member of such
Board of Directors was previously so approved.
     “Closing Date” shall mean the date of this Credit Agreement.
     “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time.
     “Collateral” shall mean a collective reference to the collateral which is
identified in, and at any time will be covered by, the Security Documents and
any other property or assets of a Credit Party, whether tangible or intangible
and whether real or personal, that may from time to time secure the Credit Party
Obligations.
     “Commitment” shall mean the Term Loan Commitment.
     “Commitment Percentage” shall mean the Term Loan Commitment Percentage.
     “Commonly Controlled Entity” shall mean an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group that includes the Borrower and
that is treated as a single employer under Section 414 of the Code.

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     “Consolidated” shall mean, when used with reference to financial statements
or financial statement items of the Credit Parties and their Subsidiaries or any
other Person, such statements or items on a consolidated basis in accordance
with the consolidation principles of GAAP.
     “Consolidated Capital Expenditures” shall mean, as of any date of
determination for the four quarter period ending on such date, all expenditures
of the Credit Parties and their Subsidiaries on a Consolidated basis for such
period that in accordance with GAAP would be classified as capital expenditures,
including without limitation, Capital Lease Obligations. The term “Consolidated
Capital Expenditures” shall not include (a) any Permitted Acquisition, (b)
Environmental Remediation Equipment Payments in an amount not to exceed
$6,300,000 during the term of this Agreement, (c) capital expenditures to the
extent reimbursed by a third party (that is not an Affiliate of a Credit Party
or any Subsidiary thereof) in the ordinary course of business, (d) capital
expenditures in respect of the reinvestment of proceeds from Asset Dispositions
in accordance with the terms of Section 2.3(b)(ii) or Recovery Events in
accordance with the terms of Section 2.3(b)(v) or (e) any such expenditures of
ESI.
     “Consolidated Cash Taxes” shall mean, as of any date of determination for
the four quarter period ending on such date, the aggregate of all taxes
(including, without limitation, any federal, state, local and foreign income and
similar taxes) actually paid (net of any tax refund) by the Credit Parties and
their Subsidiaries on a Consolidated basis during such period; provided, that
Consolidated Cash Taxes shall not include any such taxes of ESI. Notwithstanding
the foregoing, for purposes of calculating Consolidated Cash Taxes for the
fiscal quarters ending December 31, 2005, March 31, 2006 and June 30, 2006,
Consolidated Cash Taxes shall be annualized during such fiscal quarters such
that (a) for the calculation of Consolidated Cash Taxes as of December 31, 2005,
Consolidated Cash Taxes for the fiscal quarter then ending will be multiplied by
four (4), (b) for the calculation of Consolidated Cash Taxes as of March 31,
2006, Consolidated Cash Taxes for the two fiscal quarter period then ending will
be multiplied by two (2) and (c) for the calculation of Consolidated Cash Taxes
as of June 30, 2006, Consolidated Cash Taxes for the three fiscal quarter period
then ending will be multiplied by one and one-third (1 1/3).
     “Consolidated EBITDA” shall mean, as of any date of determination for the
four quarter period ending on such date, without duplication, (a) Consolidated
Net Income for such period plus (b) the sum of the following to the extent
deducted in calculating Consolidated Net Income: (i) Consolidated Interest
Expense for such period, (ii) income tax expense (including, without limitation,
any federal, state, local and foreign income and similar taxes) of the Credit
Parties and their Subsidiaries for such period, (iii) depreciation and
amortization expense (including amortization of debt discount and debt issuance
costs to the extent permitted by GAAP) of the Credit Parties and their
Subsidiaries for such period, (iv) other non-cash charges (excluding reserves
for future cash payments during the term of this Agreement) of the Credit
Parties and their Subsidiaries for such period, (v) 2006 Charges for such
period, (vi) non-cash compensation expense, or other non-cash expenses or
charges, arising from the granting of stock options to employees, officers and
directors and similar arrangements (including repricing, amendment,
modification, substitution or change of any such options or similar
arrangements) for such period, (vii) payment-in-kind interest payments related
to the Seller Subordinated Note and the

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Term Loan for such period and (viii) increases in reserves for Environmental
Remediation Payments for such period, minus (c) non-cash charges previously
added back to Consolidated Net Income in determining Consolidated EBITDA to the
extent such non-cash charges have become cash charges during such period, minus
(d) payments for Environmental Remediation OM Payments for such period (net of
cash recovered), minus (e) any other non-recurring cash or non-cash gains in
excess of $50,000 during such period; provided that, notwithstanding the
foregoing, Consolidated EBITDA for the fiscal quarters ending December 31, 2004,
March 31, 2005, June 30, 2005 and September 30, 2005 shall be the amounts
corresponding to such fiscal quarters set forth on Schedule 1.1(d).
Further, (1) for any four-quarter period, Consolidated EBITDA shall be
calculated on a pro forma basis to exclude the effects of any sales of real
property assets owned by the Borrower or any of its Subsidiaries, (2) for any
four-quarter period ending on or after the closing date of the ESI Sale (to the
extent that such date occurs), Consolidated EBITDA shall be calculated on a pro
forma basis to exclude the effects of ESI and (3) for any four-quarter period
ending on after the closing date of any Permitted Acquisition, Consolidated
EBITDA shall be calculated on a pro forma basis assuming the consummation of
such Permitted Acquisition as of the first day of such period.
     “Consolidated Fixed Charges” shall mean, as of any date of determination
for the four quarter period ending on such date, the sum of (a) Consolidated
Interest Expense for such period plus (b) Consolidated Scheduled Debt Payments
for such period plus (c) Consolidated Cash Taxes for such period, in each case
for the Borrower and its Subsidiaries on a Consolidated basis; provided, that
Consolidated Fixed Charges shall not include any such charges described above in
clauses (a) through (c) of ESI.
     “Consolidated Funded Debt” shall mean, on any date of calculation, Funded
Debt of the Borrower and its Subsidiaries on a Consolidated basis.
     “Consolidated Interest Expense” shall mean, as of any date of determination
for the four quarter period ending on such date, all interest expense (excluding
(i) amortization of debt discount, other debt issue costs and premium and
(ii) any payment-in-kind interest related to the Seller Subordinated Note and
the Term Loan, but including the interest component under Capital Leases and
synthetic leases, tax retention operating leases, off-balance sheet loans and
similar off-balance sheet financing products) for such period of the Credit
Parties and their Subsidiaries on a Consolidated basis; provided, that
Consolidated Interest Expense shall not include any such interest expense of
ESI. Notwithstanding the foregoing, for purposes of calculating Consolidated
Interest Expense for the fiscal quarters ending December 31, 2005, March 31,
2006 and June 30, 2006, Consolidated Interest Expense shall be annualized during
such fiscal quarters such that (a) for the calculation of Consolidated Interest
Expense as of December 31, 2005, Consolidated Interest Expense for the fiscal
quarter then ending will be multiplied by four (4), (b) for the calculation of
Consolidated Interest Expense as of March 31, 2006, Consolidated Interest
Expense for the two fiscal quarter period then ending will be multiplied by two
(2) and (c) for the calculation of Consolidated Interest Expense as of June 30,
2006, Consolidated Interest Expense for the three fiscal quarter period then
ending will be multiplied by one and one-third (1 1/3).

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     “Consolidated Net Income” shall mean, as of any date of determination for
the four quarter period ending on such date, the net income (before discontinued
operations, extraordinary items, and changes in accounting principals) or loss
of Borrower and its Subsidiaries, determined in accordance with GAAP of the
Borrower and its Subsidiaries on a Consolidated basis for such period; provided
that Consolidated Net Income shall not include (a) the net income of any
corporation, partnership, limited liability company, joint venture or other
legal arrangement (whether created by contract or conducted through a separate
legal entity) now or hereafter formed by the Borrower or any Subsidiary with
another Person that is not the Borrower or any Subsidiary and (b) any such net
income of ESI.
     “Consolidated Scheduled Debt Payments” shall mean, as of any date of
determination for the four quarter period ending on such date, the sum of all
scheduled payments of principal on Consolidated Funded Debt for such period
(including the principal component of payments due on Capital Leases during the
applicable period ending on such date); it being understood that Consolidated
Scheduled Debt Payments shall not include optional prepayments or the mandatory
prepayments required pursuant to Section 2.3 (but shall include scheduled
payments of principal under the First Lien Credit Agreement).
     “Consolidated Subsidiaries” shall mean Subsidiaries of the Borrower which
are included on a consolidated basis in the financial statements of the Borrower
in accordance with GAAP.
     “Consolidated Working Capital” shall mean, as of any date of determination,
the excess of (a) current assets (excluding cash and Cash Equivalents) of the
Credit Parties and their Subsidiaries on a Consolidated basis as of such date of
determination less (b) current liabilities (excluding the current portion of
long term Indebtedness) of the Credit Parties and their Subsidiaries on a
Consolidated basis as of such date of determination, all as determined in
accordance with GAAP; provided, that Consolidated Working Capital shall not
include any such excess amount described above of ESI.
     “Contractual Obligation” shall mean, as to any Person, any provision of any
security issued by such Person or of any contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
     “Control Agent” shall have the meaning assigned to such term in the
Intercreditor Agreement.
     “Copyright Licenses” shall mean any written agreement providing for the
grant by or to a Person of any right under any Copyright, including, without
limitation, any thereof referred to in Schedule 3.16 to this Credit Agreement.
     “Copyrights” shall mean all copyrights of the Credit Parties and their
Subsidiaries in all works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Copyright Office or in any similar
office or agency of the United States, any state thereof or any other country or
any political subdivision thereof, or otherwise, including, without limitation,
any thereof referred to in Schedule 3.16 and all renewals thereof.

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     “Credit Documents” shall mean this Credit Agreement, the Intercreditor
Agreement, each of the Notes, any Joinder Agreement and the Security Documents
and all other agreements, documents, certificates and instruments delivered to
the Administrative Agent or any Lender by any Credit Party in connection
therewith (other than any agreement, document, certificate or instrument related
to a Hedging Agreement).
     “Credit Party” shall mean any of the Borrower or the Guarantors; provided
that ESI shall not be a Guarantor hereunder and shall not be considered a Credit
Party.
     “Credit Party Obligations” shall mean, without duplication, (a) all of the
obligations, indebtedness and liabilities of the Credit Parties to the Lenders
and the Administrative Agent, whenever arising, under this Credit Agreement, the
Notes or any of the other Credit Documents, including principal, interest, fees,
prepayment premiums (if any), expenses, reimbursements and indemnification
obligations and other amounts (including, but not limited to, any interest
accruing after the occurrence of a filing of a petition of bankruptcy under the
Bankruptcy Code with respect to any Credit Party, regardless of whether such
interest is an allowed claim under the Bankruptcy Code) and (b) all liabilities
and obligations, whenever arising, owing from any Credit Party or any of their
Subsidiaries to any Hedging Agreement Provider arising under any Secured Hedging
Agreement.
     “Debt Issuance” shall mean the issuance of any Indebtedness by the Credit
Parties or any of their Subsidiaries (excluding any issuance of Indebtedness by
ESI to the extent such Indebtedness is non-recourse to any Credit Party, any
Equity Issuance and any Indebtedness of the Credit Parties and their
Subsidiaries permitted to be incurred pursuant to Section 6.1(a)-(m) hereof).
     “Default” shall mean any of the events specified in Section 7.1, whether or
not any requirement for the giving of notice or the lapse of time, or both, or
any other condition, has been satisfied.
     “Defaulting Lender” shall mean, at any time, any Lender that, at such time
(a) has failed to make a Loan pursuant to the terms of this Credit Agreement,
(b) has failed to pay to the Administrative Agent or any Lender an amount owed
by such Lender pursuant to the terms of this Credit Agreement and such default
remains uncured, or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or similar
official.
     “Deposit Account Control Agreement” shall mean an agreement among a Credit
Party, a depository institution, and the Administrative Agent or the Control
Agent, as applicable, which agreement is in a form reasonably acceptable to the
Administrative Agent or the Control Agent, as applicable, and which provides the
Administrative Agent or the Control Agent, as applicable, with “control” (as
such term is used in Article 9 of the Uniform Commercial Code) over the deposit
accounts described therein, as the same may be amended, restated, supplemented,
extended, replaced or otherwise modified from time to time.

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     “Dollars” and “$” shall mean dollars in lawful currency of the United
States of America.
     “Domestic Lending Office” shall mean, initially, the office of each Lender
designated as such Lender’s Domestic Lending Office shown in such Lender’s
Administrative Details Form; and thereafter, such other office of such Lender as
such Lender may from time to time specify to the Administrative Agent and the
Borrower as the office of such Lender at which Alternate Base Rate Loans of such
Lender are to be made.
     “Domestic Subsidiary” shall mean any Subsidiary that is organized and
existing under the laws of the United States or any state or commonwealth
thereof or under the laws of the District of Columbia.
     “Environmental Laws” shall mean any and all applicable foreign, federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or other
Requirement of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health or the
environment, as now or may at any time be in effect during the term of this
Credit Agreement.
     “Environmental Lien” shall mean a Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws, or any limitations or
restrictions placed upon any real property owned, leased or operated by the
Borrower or any of its Subsidiaries by any Governmental Authority, or
(b) damages relating to, or costs incurred by such Governmental Authority in
response to, a release or threatened release of Materials of Environmental
Concern into the environment.
     “Environmental Remediation Equipment Payments” shall mean the Environmental
Remediation Payments consisting of payments made for equipment costs.
     “Environmental Remediation OM Payments” shall mean the Environmental
Remediation Payments consisting of payments made for the operating and
maintenance costs.
     “Environmental Remediation Payments” shall mean payments made by the
Borrower or any of its Subsidiaries in connection with the implementation of a
remediation program together with the operation and maintenance of such program
and equipment acquired under such program involving (a) any liability under
Environmental Laws, or any limitations or restrictions placed upon any real
property owned, leased or operated by the Borrower or any of its Subsidiaries by
any Government Authority or court, or (b) damages relating to, or costs incurred
by such Governmental Authority in response to, a release or threatened release
of Materials of Environmental Concern into the environment with respect to the
Athens Road Project Site and the Valley Drive Site.
     “Equity Issuance” shall mean any issuance by any Credit Party or any
Subsidiary (other than ESI) to any Person which is not a Credit Party of
(a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to
the exercise of options or warrants, (c) any shares of its Capital Stock
pursuant to the conversion of any debt securities to equity or (d) warrants or

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options that are exercisable for shares of its Capital Stock. The term “Equity
Issuance” shall not include (i) any equity issued constituting consideration for
a Permitted Acquisition, (ii) any Asset Disposition, (iii) any Debt Issuance, or
(iv) any equity issuance made in connection with any director or employee stock
option plan, stock award plan or dividend rights plan of any Credit Party.
     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
     “ESI” shall mean Energetic Systems, Inc., LLC and any subsidiary of ESI.
     “ESI Indebtedness” shall mean the Indebtedness owed by ESI to Energetic
Additives, Inc., LLC and other third parties.
     “ESI Sale” shall mean the sale or other disposition of all or substantially
all of the Borrower’s direct or indirect ownership interest in ESI.
     “Eurodollar Reserve Percentage” shall mean for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities, as defined in Regulation D of such Board as
in effect from time to time, or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.
     “Event of Default” shall mean any of the events specified in Section 7.1;
provided, however, that any requirement for the giving of notice or the lapse of
time, or both, or any other condition, has been satisfied.
     “Excess Cash Flow” shall mean, with respect to any fiscal year period of
the Borrower and its Subsidiaries on a Consolidated basis, an amount equal to
(a) Consolidated EBITDA for such period plus (b) decreases in Consolidated
Working Capital for such period minus (c) Consolidated Capital Expenditures to
the extent not financed for such period minus (d) Consolidated Interest Expense
for such period to the extent paid or payable in cash minus (e) Consolidated
Cash Taxes paid during such period minus (f) Consolidated Scheduled Debt
Payments made during such period minus (g) increases in Consolidated Working
Capital for such period minus (h) Environmental Remediation Payments for such
period minus (i) voluntary prepayments of the Term Loan and minus (j) 2006
Charges for such period.
     “Extension of Credit” shall mean, as to any Lender, the making of a Loan by
such Lender.
     “Federal Funds Effective Rate” shall have the meaning set forth in the
definition of “Alternate Base Rate”.
     “Fee Letter” shall mean the letter agreement dated July 12, 2005, addressed
to the Borrower from Wachovia and the Arranger, as amended, modified or
otherwise supplemented.

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     “First Lien Administrative Agent” shall mean Wachovia, together with its
successors and assigns.
     “First Lien Credit Agreement” shall mean the First Lien Credit Agreement,
dated as of the date hereof, entered into by the Credit Parties, the First Lien
Administrative Agent and the First Lien Lenders, as the same may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms of the Intercreditor Agreement.
     “First Lien Credit Documents” shall have the meaning set forth in the
Intercreditor Agreement.
     “First Lien Event of Default” shall have the meaning assigned to the term
“Event of Default” in the First Lien Credit Agreement.
     “First Lien Lender” shall have the meaning assigned to the term “Lender” in
the First Lien Credit Agreement.
     “First Lien Obligations” shall have the meaning assigned to the term “First
Lien Obligations” in the Intercreditor Agreement up to the Maximum First Lien
Indebtedness.
     “Fixed Charge Coverage Ratio” shall mean the ratio of (i) Consolidated
EBITDA minus Consolidated Capital Expenditures to (ii) Consolidated Fixed
Charges.
     “Flood Hazard Property” any Mortgaged Property that is in an area
designated by the Federal Emergency Management Agency as having special flood or
mud slide hazards.
     “Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic
Subsidiary.
     “Funded Debt” shall mean, with respect to any Person, without duplication,
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations (including, without limitation, the
noncontingent amount of earnout obligations) of such Person incurred, issued or
assumed as the deferred purchase price of property or services purchased by such
Person (other than trade debt incurred in the ordinary course of business and
due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (e) the unreimbursed amount of
all letters of credit issued or bankers’ acceptances facilities created for the
account of such Person, (f) the principal portion of all Capital Lease
Obligations of such Person, (g) all net obligations of such Person under Hedging
Agreements, excluding any portion thereof which would be accounted for as
interest expense under GAAP, (h) all preferred Capital Stock issued by such
Person and which by the terms thereof could be (at the request of the holders
thereof or otherwise) subject to mandatory sinking fund payments, redemption or
other acceleration, (i) the principal balance outstanding under any synthetic
lease, tax retention

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operating lease, off-balance sheet loan or similar off-balance sheet financing
product, (j) all Indebtedness of others of the type described in clauses
(a) through (i) hereof secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on,
or payable out of the proceeds of production from, property owned or acquired by
such Person, whether or not the obligations secured thereby have been assumed,
(k) all Guaranty Obligations of such Person with respect to Indebtedness of
another Person of the type described in clauses (a) through (i) hereof, and
(l) all Indebtedness of the type described in clauses (a) through (i) hereof of
any partnership or unincorporated joint venture in which such Person is a
general partner or a joint venturer (to the extent such Person is liable
therefor) calculated based on the percentage of such Indebtedness for which such
Person is liable; provided, however, that Funded Debt shall not include
Indebtedness among the Credit Parties, the ESI Indebtedness or the Subordinated
Seller Obligations.
     “GAAP” shall mean generally accepted accounting principles in effect in the
United States of America applied on a consistent basis, subject, however, in the
case of determination of compliance with the financial covenants set out in
Section 5.9 to the provisions of Section 1.3.
     “GenCorp Earn Out Obligations” shall have the meaning set forth in
Section 6.1(j).
     “Government Contract” shall mean any contract entered into between the
Borrower or any of its Subsidiaries and the government of the United States of
America, or any department, agency, public corporation, or other instrumentality
or agent thereof or any state government or any department, agency or
instrumentality or agent thereof.
     “Governmental Approvals” shall mean all authorizations, consents,
approvals, permits, licenses and exemptions of, registrations and filings with,
and reports to, all Governmental Authorities.
     “Governmental Authority” shall mean any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
     “Guarantor” shall have the meaning set forth in the first paragraph of this
Credit Agreement.
     “Guaranty” shall mean the guaranty of the Guarantors set forth in
Article X.
     “Guaranty Obligations” shall mean, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
any property constituting security therefor, (ii) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including without limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of

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Indebtedness of such other Person, (iii) to lease or purchase property,
securities or services primarily for the purpose of assuring the holder of such
Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such
Indebtedness against loss in respect thereof, but excluding ordinary course
indemnification obligations not constituting financial undertakings. The amount
of any Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Guaranty Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith.
     “Hedging Agreement Provider” shall mean any Person that enters into a
Secured Hedging Agreement with a Credit Party or any of its Subsidiaries that is
permitted by Section 6.1(d) to the extent such Person is a Lender, an Affiliate
of a Lender or any other Person that was a Lender (or an Affiliate of a Lender)
at the time it entered into the Secured Hedging Agreement but has ceased to be a
Lender (or whose Affiliate has ceased to be a Lender) under the Credit
Agreement.
     “Hedging Agreements” shall mean, with respect to any Person, any agreement
entered into to protect such Person against fluctuations in interest rates, or
currency or raw materials values, including, without limitation, any interest
rate swap, cap or collar agreement or similar arrangement between such Person
and one or more counterparties, any foreign currency exchange agreement,
currency protection agreements, commodity purchase or option agreements or other
interest or exchange rate hedging agreements.
     “Indebtedness” shall mean, with respect to any Person, without duplication,
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations (including, without limitation, the
reasonably anticipated amount of earnout obligations) of such Person incurred,
issued or assumed as the deferred purchase price of property or services
purchased by such Person (other than trade debt incurred in the ordinary course
of business and due within six months of the incurrence thereof) which would
appear as liabilities on a balance sheet of such Person, (e) the maximum amount
of all letters of credit issued or bankers’ acceptances facilities created for
the account of such Person and, without duplication, all drafts drawn thereunder
(to the extent unreimbursed), (f) the principal portion of all Capital Lease
Obligations of such Person, (g) all net obligations of such Person under Hedging
Agreements, excluding any portion thereof which would be accounted for as
interest expense under GAAP, (h) all preferred Capital Stock issued by such
Person and which by the terms thereof could be (at the request of the holders
thereof or otherwise) subject to mandatory sinking fund payments, redemption or
other acceleration, (i) the principal balance outstanding under any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product, (j) all obligations of such Person under
take-or-pay or similar arrangements or under commodities agreements, (k) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on,
or payable out of the proceeds of production from,

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property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (l) all Guaranty Obligations of such Person
with respect to Indebtedness of another Person and (m) the Indebtedness of any
partnership or unincorporated joint venture in which such Person is a general
partner or a joint venturer (to the extent such Person is liable therefor)
calculated based on the percentage of such Indebtedness for which such Person is
liable.
     “Insolvency” shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
     “In-Space Propulsion Acquisition” shall mean the acquisition contemplated
by the Purchase Agreement, dated as of April 26, 2004, by and between the
Borrower and Aerojet-General Corporation.
     “Intellectual Property” shall mean the Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trademarks and Trademark Licenses of the Credit
Parties and their Subsidiaries, all goodwill associated therewith and all rights
to sue for infringement thereof.
     “Intercreditor Agreement” means the Intercreditor Agreement, dated as of
November 30, 2005, by and among the Administrative Agent, the First Lien
Administrative Agent, the Control Agent and the Credit Parties, as amended,
modified, supplemented or restated from time to time.
     “Interest Payment Date” shall mean (a) as to any Alternate Base Rate Loan,
the last day of each March, June, September and December and on the Maturity
Date, (b) as to any LIBOR Rate Loan having an Interest Period of three months or
less, the last day of such Interest Period, (c) as to any LIBOR Rate Loan having
an Interest Period longer than three months, (i) each three (3) month
anniversary following the first day of such Interest Period and (ii) the last
day of such Interest Period and (d) as to any Loan which is the subject of a
mandatory prepayment required pursuant to Section 2.3(b), the date on which such
mandatory prepayment is due.
“Interest Period” shall mean, with respect to any LIBOR Rate Loan,
     (a) initially, the period commencing on the Borrowing Date or conversion
date, as the case may be, with respect to such LIBOR Rate Loan and ending one,
two, three or six months thereafter, subject to availability to all applicable
Lenders, as selected by the Borrower in the Notice of Borrowing or Notice of
Conversion given with respect thereto; and
     (b) thereafter, each period commencing on the last day of the immediately
preceding Interest Period applicable to such LIBOR Rate Loan and ending one,
two, three or six months thereafter, subject to availability to all applicable
Lenders, as selected by the Borrower by irrevocable notice to the Administrative
Agent not less than three Business Days prior to the last day of the then
current Interest Period with respect thereto; provided that the foregoing
provisions are subject to the following:
     (i) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise
end on a day that is not a Business Day, such Interest Period shall be

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extended to the next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding Business Day;
     (ii) any Interest Period pertaining to a LIBOR Rate Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the relevant calendar month;
     (iii) if the Borrower shall fail to give notice as provided above, the
Borrower shall be deemed to have selected an Alternate Base Rate Loan to replace
the affected LIBOR Rate Loan;
     (iv) no Interest Period in respect of the Term Loan shall extend beyond the
Maturity Date; and
     (v) no more than four (4) LIBOR Rate Loans may be in effect at any time.
For purposes hereof, LIBOR Rate Loans with different Interest Periods shall be
considered as separate LIBOR Rate Loans, even if they shall begin on the same
date, although borrowings, extensions and conversions may, in accordance with
the provisions hereof, be combined at the end of existing Interest Periods to
constitute a new LIBOR Rate Loan with a single Interest Period.
     “Investment” shall mean (a) the acquisition (whether for cash, property,
services, assumption of Indebtedness, securities or otherwise) of shares of
Capital Stock, other ownership interests or other securities of any Person or
bonds, notes, debentures or all or substantially all of the assets of any Person
or (b) any deposit with, or advance, loan or other extension of credit to, any
Person (other than deposits made in the ordinary course of business) or (c) any
other capital contribution to or investment in any Person, including, without
limitation, any Guaranty Obligation (including any support for a letter of
credit issued on behalf of such Person) incurred for the benefit of such Person.
     “Joinder Agreement” shall mean a Joinder Agreement in substantially the
form of Schedule 5.10, executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 5.10.
     “Lender” shall have the meaning set forth in the first paragraph of this
Credit Agreement.
     “Lender Commitment Letter” shall mean, with respect to any Lender, the
letter (or other correspondence) to such Lender from the Administrative Agent
notifying such Lender of its Term Loan Commitment Percentage.
     “LIBOR” shall mean, for any LIBOR Rate Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately
11:00 A.M. (London time) two Business Days prior to the first day of such
Interest

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Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term “LIBOR” shall mean, for any LIBOR Rate Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates (rounded upwards, if necessary, to the
nearest 1/100 of 1%). If, for any reason, neither of such rates is available,
then “LIBOR” shall mean the rate per annum at which, as determined by the
Administrative Agent, Dollars in an amount comparable to the Loans then
requested are being offered to leading banks at approximately 11:00 A.M. London
time, two (2) Business Days prior to the commencement of the applicable Interest
Period for settlement in immediately available funds by leading banks in the
London interbank market for a period equal to the Interest Period selected.
     “LIBOR Lending Office” shall mean, initially, the office of each Lender
designated as such Lender’s LIBOR Lending Office in such Lender’s Administrative
Details Form; and thereafter, such other office of such Lender as such Lender
may from time to time specify to the Administrative Agent and the Borrower as
the office of such Lender at which the LIBOR Rate Loans of such Lender are to be
made.
     “LIBOR Rate” shall mean a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the Administrative Agent pursuant
to the following formula:

     
LIBOR Rate =
  LIBOR
 
   
 
  1.00 – Eurodollar Reserve Percentage

     “LIBOR Rate Loan” shall mean Loans the rate of interest applicable to which
is based on the LIBOR Rate.
     “Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the foregoing).
     “Loan” shall mean the Term Loan.
     “Material Adverse Effect” shall mean a material adverse effect on (a) the
business, operations, property, assets or financial condition of the Borrower
and its Subsidiaries taken as a whole, (b) the ability of the Borrower or any
Guarantor to perform its obligations, when such obligations are required to be
performed, under this Credit Agreement, any of the Notes or any other Credit
Document or (c) the validity or enforceability of this Credit Agreement, any of
the Notes or any of the other Credit Documents or the rights or remedies of the
Administrative Agent or the Lenders hereunder or thereunder.

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     “Material Contract” shall mean (a) any contract or other written agreement
listed on Schedule 3.24, (b) any contract or other agreement of the Credit
Parties or any of their Subsidiaries involving monetary liability of or to any
such Person in an amount in excess of $10,000,000 per annum, (c) any contract or
other agreement of the Credit Parties or any of their Subsidiaries representing
at least $10,000,000 of the total Consolidated revenues of the Credit Parties
and their Subsidiaries for any fiscal year and (d) any other contract,
agreement, permit or license, written or oral, of the Credit Parties or any of
their Subsidiaries as to which the breach, nonperformance, cancellation of
failure to renew by any party thereto, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
     “Materials of Environmental Concern” shall mean any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
perchlorate, polychlorinated biphenyls and urea-formaldehyde insulation.
     “Maturity Date” shall mean the date that is six (6) years after the Closing
Date.
     “Material IP” shall mean all material Intellectual Property of each Credit
Party reasonably necessary for each of them to conduct its business as currently
conducted or with a fair market value in excess of $500,000 (other than
non-exclusive licenses for off-the-shelf software, and other non-exclusive
licenses in intellectual property, in each case, obtained in the ordinary course
of business).
     “Maximum First Lien Indebtedness” shall have the meaning set forth in the
Intercreditor Agreement.
     “Moody’s” shall mean Moody’s Investors Service, Inc.
     “Mortgage Instrument” shall mean any mortgage, deed of trust or deed to
secure debt executed by a Credit Party in favor of the Administrative Agent
pursuant to the terms of Section 5.12 or 5.16, as the same may be amended,
modified, restated or supplemented from time to time.
     “Mortgage Policy” shall mean, with respect to any Mortgage Instrument, an
ALTA mortgagee title insurance policy issued by a title insurance company (the
“Title Insurance Company”) selected by the Administrative Agent in an amount
satisfactory to the Administrative Agent, in form and substance satisfactory to
the Administrative Agent.
     “Mortgaged Property” shall mean any owned or leased real property of a
Credit Party (a) as of the Closing Date which is set forth on Schedule 3.19(d),
or (b) that is acquired by a Credit Party after the Closing Date and that
(i) has an appraised value (to the extent such appraisal is less than two years
old at the time of determination) in excess of $2,000,000 or (ii) if an
appraised value is not available in accordance with the terms of clause (i), has
a fair market value in excess of $2,000,000 (as reasonably determined by the
Borrower) and, in each case, with

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respect to which such Credit Party executes a Mortgage Instrument in favor of
the Administrative Agent.
     “Multiemployer Plan” shall mean a Plan that is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
     “Net Cash Proceeds” shall mean the aggregate cash proceeds received by any
Credit Party or any Subsidiary (other than ESI) in respect of any Asset
Disposition, Equity Issuance, Debt Issuance or Recovery Event, net of (a) direct
costs (including, without limitation, legal, accounting and investment banking
fees, and sales commissions) associated therewith, (b) amounts held in escrow to
be applied as part of the purchase price of any Asset Disposition, (c) taxes
paid or payable as a result thereof, (d) amounts applied to the First Lien
Obligations in accordance with the terms of the First Lien Credit Agreement and
(e) in the case of any Asset Disposition or Recovery Event, the amount of any
Indebtedness secured by a Lien on the asset that is the subject of the Asset
Disposition or Recovery Event and which, by the terms of the transaction, is
required to be repaid in connection with the Asset Disposition or Recovery
Event; it being understood that “Net Cash Proceeds” shall include, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received by any Credit Party or any Subsidiary in any Asset
Disposition, Equity Issuance, Debt Issuance or Recovery Event and any cash
released from escrow as part of the purchase price in connection with any Asset
Disposition.
     “Note” or “Notes” shall mean the Term Loan Notes, collectively or
individually, as appropriate.
     “Notice of Conversion/Extension” shall mean the written notice of
conversion of a LIBOR Rate Loan to an Alternate Base Rate Loan or an Alternate
Base Rate Loan to a LIBOR Rate Loan, or extension of a LIBOR Rate Loan, in each
case substantially in the form of Schedule 2.5.
     “Obligations” shall mean, collectively, Loans and all other obligations of
the Credit Parties to the Administrative Agent and the Lenders under the Credit
Documents.
     “OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign
Assets Control.
     “Operating Lease” shall mean, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) which is not a
Capital Lease other than any such lease in which that Person is the lessor.
     “Participant” shall have the meaning set forth in Section 9.6(b).
     “Patent Licenses” shall mean all written agreements providing for the grant
by or to a Person of any license to manufacture, use or sell any invention
covered by a Patent, including, without limitation, any thereof referred to in
Schedule 3.16 to the Credit Agreement.

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     “Patents” shall mean all letters patent of the United States or any other
country, now existing or hereafter arising, and all improvement patents,
reissues, reexaminations, patents of additions, renewals and extensions thereof,
including, without limitation, any thereof referred to in Schedule 3.16 to this
Credit Agreement, and (ii) all applications for letters patent of the United
States or any other country, now existing or hereafter arising, and all
provisionals, divisions, continuations and continuations-in-part and substitutes
thereof, including, without limitation, any thereof referred to in Schedule 3.16
to this Credit Agreement.
     “PBGC” shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
     “Permitted Acquisition” shall mean an acquisition or any series of related
acquisitions by a Credit Party of (a) all or substantially all of the assets or
a majority of the Voting Stock and other ownership interests of a Person by a
merger, amalgamation or consolidation or any other combination with such Person
or (b) any division, line of business or other business unit of a Person (such
Person or such division, line of business or other business unit of such Person
shall be referred to herein as the “Target”), in each case that is a type of
business (or assets used in a type of business) permitted to be engaged in by
the Credit Parties and their Subsidiaries pursuant to Section 6.3, so long as
(i) no Default or Event of Default shall then exist or would exist after giving
effect thereto, (ii) the Credit Parties shall demonstrate to the reasonable
satisfaction of the Administrative Agent and the Required Lenders that, after
giving effect to the acquisition on a Pro Forma Basis, (A) the Total Leverage
Ratio shall be less than or equal to the ratio that is 0.25 lower than the Total
Leverage Ratio then required under Section 5.9(a) and (B) the Credit Parties are
in compliance with each of the financial covenants set forth in Section 5.9,
(iii) the Administrative Agent, on behalf of the Lenders, shall have received
(or shall receive in connection with the closing of such acquisition) a
perfected security interest (except for Permitted Liens) in all property
(including, without limitation, Capital Stock) acquired with respect to the
Target in accordance with the terms of Sections 5.10 and 5.12 and the Target, if
a Person, shall have executed a Joinder Agreement in accordance with the terms
of Section 5.10, subject to the exceptions in Section 5.10 and 5.12 in the case
of any non-U.S. assets acquired as a part of such acquisition, (iv) the
Administrative Agent and the Lenders shall have received (A) a description of
the material terms of such acquisition, (B) audited financial statements (or, if
unavailable, management-prepared financial statements) of the Target for its two
most recent fiscal years and for any fiscal quarters ended within the fiscal
year to date and (C) consolidated projected income statements of the Borrower
and its Consolidated Subsidiaries (giving effect to such acquisition), all in
form and substance reasonably satisfactory to the Administrative Agent;
provided, however, that if the aggregate purchase price for such acquisition is
less than or equal to $2,000,000, the requirements set forth in this subclause
(iv) may be waived by the Administrative Agent upon receipt of such other
financial information reasonably acceptable to the Administrative Agent, (v) the
Target shall have earnings before interest, taxes, depreciation and amortization
for the four fiscal quarter period prior to the acquisition date in an amount
greater than $0, (vi) such acquisition shall not be a “hostile” acquisition and
shall have been approved by the Board of Directors and/or shareholders of the
applicable Credit Party and the Target, (vii) after giving effect to such
acquisition, either (A) there shall be at least $5,000,000 of borrowing
availability under the “Revolving Committed Amount” (as defined in the First
Lien

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Credit Agreement) or (B) if the commitments under the First Lien Credit
Agreement have been terminated and all amounts owing thereunder shall have been
paid in full, there shall be at least $5,000,000 of cash on the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries and (viii) the
aggregate consideration (including without limitation equity consideration, earn
outs or deferred compensation or non-competition arrangements and the amount of
Indebtedness and other liabilities assumed by the Credit Parties and their
Subsidiaries) paid by the Credit Parties and their Subsidiaries (A) in
connection with any such acquisition shall not exceed $10,000,000, (B) for all
acquisitions made during the term of this Agreement shall not exceed $25,000,000
and (c) for all acquisitions made during any fiscal year of the Borrower of a
Persons that are not incorporated, formed or organized in the United States
shall not exceed $5,000,000.
     “Permitted Investments” shall mean:
     (a) cash and Cash Equivalents;
     (b) Investments set forth on Schedule 1.1(b);
     (c) receivables owing to the Credit Parties or any of their Subsidiaries or
any receivables and advances to suppliers, in each case if created, acquired or
made in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms;
     (d) Investments in and loans to any Credit Party;
     (e) loans and advances to officers, directors and employees in an aggregate
amount not to exceed $500,000 at any time outstanding; provided that such loans
and advances shall comply with all applicable Requirements of Law;
     (f) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business;
     (g) Investments, acquisitions or transactions permitted under
Section 6.4(b) (including any Investments owned by a Person acquired in a
Permitted Acquisition);
     (h) Hedging Agreements to the extent permitted hereunder;
     (i) Investments (including debt obligations) received in connection with
the permitted disposition of any assets;
     (j) Guaranty Obligations to the extent permitted hereunder;
     (k) the AFC Guaranty;

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     (l) Investments in and loans to AmPac ISP UK Ltd. in an aggregate amount
not to exceed $2,000,000 at any time outstanding; and
     (m) additional loan advances and/or Investments of a nature not
contemplated by the foregoing clauses hereof; provided that such loans, advances
and/or Investments made pursuant to this clause shall not exceed an aggregate
amount of $3,000,000 at any time outstanding; provided that, if the Total
Leverage Ratio as of the most recently ended fiscal year (commencing with the
fiscal year ending September 30, 2006) is less than or equal to 3.00 to 1.00,
then such loans, advances and/or Investments made pursuant to this clause shall
not exceed an aggregate amount of $3,000,000 per fiscal year so long as after
giving effect to any such Investment on a pro forma basis, the Credit Parties
are in compliance with the financial covenants set forth in Section 5.9.
     “Permitted Liens” shall mean:
     (a) Liens created by or otherwise existing under or in connection with this
Credit Agreement or the other Credit Documents in favor of the Administrative
Agent on behalf of the Secured Parties;
     (b) Liens in favor of a Hedging Agreement Provider in connection with a
Secured Hedging Agreement; provided that such Liens shall secure the Credit
Party Obligations and the obligations under such Secured Hedging Agreement on a
pari passu basis;
     (c) Liens securing purchase money indebtedness and Capital Lease
Obligations (and refinancings thereof) to the extent permitted under
Section 6.1(c); provided, that (i) any such Lien attaches to such property
concurrently with or within 30 days after the acquisition thereof and (ii) such
Lien attaches solely to the property so acquired in such transaction;
     (d) Liens for taxes, assessments, charges or other governmental levies not
yet due or as to which the period of grace, if any, related thereto has not
expired or which are being contested in good faith by appropriate proceedings;
provided that adequate reserves with respect thereto are maintained on the books
of any Credit Party or its Subsidiaries, as the case may be, in conformity with
GAAP (or, in the case of Foreign Subsidiaries with significant operations
outside the United States of America, generally accepted accounting principles
in effect from time to time in their respective jurisdictions of incorporation);
     (e) statutory Liens such as carriers’, warehousemen’s, mechanics’,
materialmen’s, landlords’, repairmen’s or other like Liens arising in the
ordinary course of business which are not overdue for a period of more than
90 days or which are being contested in good faith by appropriate proceedings;
provided that a reserve or other appropriate provision shall have been made
therefor in an amount consistent with historical practices and normal course of
business of the Credit Parties and their Subsidiaries;

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     (f) pledges or deposits in connection with workers’ compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements in an aggregate amount consistent with historical practices and
normal course of business of the Credit Parties and their Subsidiaries;
     (g) deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
     (h) Liens granted pursuant to the First Lien Credit Documents and any
Hedging Agreement with respect to the First Lien Obligations;
     (i) easements, rights of way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the applicable Person;
     (j) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in this
definition (other than Liens set forth on Schedule 1.1(c)); provided that such
extension, renewal or replacement Lien shall be limited to all or a part of the
property which secured the Lien so extended, renewed or replaced (plus
improvements on such property);
     (k) Liens existing on the Closing Date and set forth on Schedule 1.1(c);
provided that (i) no such Lien shall at any time be extended to cover property
or assets other than the property or assets subject thereto on the Closing Date
and improvements thereon and (ii) the principal amount of the Indebtedness
secured by such Lien may be extended, renewed, refunded and refinanced; however,
such principal amount may not be increased;
     (l) Liens arising in the ordinary course of business by virtue of any
contractual, statutory or common law provision relating to banker’s Liens,
rights of set-off or similar rights and remedies covering deposit or securities
accounts (including funds or other assets credited thereto) or other funds
maintained with a depository institution or securities intermediary;
     (m) any zoning, building or similar laws or rights reserved to or vested in
any Governmental Authority;
     (n) restrictions on transfers of securities imposed by applicable
securities laws;

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     (o) Liens arising out of judgments or awards not resulting in an Event of
Default; provided that the applicable Credit Party or Subsidiary shall in good
faith be prosecuting an appeal or proceedings for review;
     (p) Liens on the property of a Person existing at the time such Person
becomes a Subsidiary of a Credit Party in a transaction permitted hereunder
securing Indebtedness permitted hereunder; provided, however, that any such Lien
may not extend to any other property of any Credit Party or any other Subsidiary
that is not a Subsidiary of such Person; provided, further, that any such Lien
was not created in anticipation of or in connection with the transaction or
series of transactions pursuant to which such Person became a Subsidiary of a
Credit Party;
     (q) any interest or title of a lessor, licensor, sublessor, sublicensor or
licensee under any lease, license or sublease entered into by any Credit Party
or any Subsidiary thereof in the ordinary course of its business and covering
only the assets so leased, licensed or subleased;
     (r) assignments of insurance or condemnation proceeds provided to landlords
(or their mortgagees) pursuant to the terms of any lease and Liens or rights
reserved in any lease for rent or for compliance with the terms of such lease;
     (s) Liens on assets of ESI granted in connection with the ESI Indebtedness
and any refinancing thereof; and
     (t) additional Liens so long as the principal amount of Indebtedness and
other obligations secured thereby does not exceed $500,000 in the aggregate.
     “Person” shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
     “Plan” shall mean, as of any date of determination, any employee benefit
plan which is covered by Title IV of ERISA and in respect of which any Credit
Party or a Commonly Controlled Entity is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an “employer” as
defined in Section 3(5) of ERISA.
     “Pledge Agreement” shall mean the Second Lien Pledge Agreement dated as of
the Closing Date executed by the Credit Parties in favor of the Administrative
Agent and the Control Agent, for the benefit of the Secured Parties, as the same
may from time to time be amended, restated, amended and restated, supplemented
or otherwise modified in accordance with the terms hereof and thereof.
     “Prime Rate” shall have the meaning set forth in the definition of
Alternate Base Rate.

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     “Pro Forma Basis” shall mean, with respect to any transaction, that such
transaction shall be deemed to have occurred as of the first day of the
twelve-month period ending as of the most recent quarter end preceding the date
of such transaction.
     “Properties” shall have the meaning set forth in Section 3.10(a).
     “Purchasing Lenders” shall have the meaning set forth in Section 9.6(c).
     “Recovery Event” shall mean the receipt by the Credit Parties or any of
their Subsidiaries of any cash insurance proceeds or condemnation or
expropriation award payable by reason of theft, loss, physical destruction or
damage, taking or similar event with respect to any of their respective property
or assets other than obsolete property or assets no longer used or useful in the
business of the Credit Parties or any of their Subsidiaries.
     “Register” shall have the meaning set forth in Section 9.6(d).
     “Reorganization” shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of such term as
used in Section 4241 of ERISA.
     “Replaced Lender” shall have the meaning set forth in Section 2.14.
     “Replacement Lender” shall have the meaning set forth in Section 2.14.
     “Reportable Event” shall mean any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty-day notice
period is waived under PBGC Reg. §4043.
     “Required Lenders” shall mean, as of any date of determination, Lenders
holding at least a majority of the outstanding Term Loan; provided, however,
that if any Lender shall be a Defaulting Lender at such time, then there shall
be excluded from the determination of Required Lenders, the percentage of the
Term Loan owing to such Defaulting Lender.
     “Requirement of Law” shall mean, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and each law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
     “Responsible Officer” shall mean, as to (a) the Borrower, the President,
any Vice-President, the Chief Executive Officer, Chief Financial Officer,
Treasurer or the Chief Operating Officer or (b) any other Credit Party, any duly
authorized officer thereof.
     “Restricted Payment” shall mean (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of Capital Stock of
any Credit Party or any of its Subsidiaries, now or hereafter outstanding,
(b) any redemption, retirement, sinking fund or

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similar payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of Capital Stock of any Credit Party or any of its
Subsidiaries, now or hereafter outstanding, (c) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of any Credit Party or any of its
Subsidiaries, now or hereafter outstanding, (d) any payment with respect to any
earnout obligation, (e) any payment or prepayment of principal of, premium, if
any, or interest (other than pay-in-kind interest) on, redemption, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, any
Subordinated Debt of any Credit Party or any of its Subsidiaries and (f) the
payment by any Credit Party or any of its Subsidiaries of any management,
advisory or consulting fee to any Person or the payment of any extraordinary
salary, bonus or other form of compensation to any Person who is directly or
indirectly a significant partner, shareholder, owner or executive officer of any
such Person, to the extent such extraordinary salary, bonus or other form of
compensation is not included in the corporate overhead of such Credit Party or
such Subsidiary.
     “SEC” shall mean the Securities and Exchange Commission or any successor
thereto.
     “S&P” shall mean Standard & Poor’s Ratings Services, a division of The
McGraw Hill Companies, Inc.
     “Sanctioned Country” shall mean a country subject to a sanctions program
identified on the list maintained by OFAC and available at
http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html, or as otherwise
published from time to time.
     “Sanctioned Person” shall mean (i) a Person named on the list of “Specially
Designated Nationals and Blocked Persons” maintained by OFAC available at
http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or
(C) a person resident in a Sanctioned Country, to the extent subject to a
sanctions program administered by OFAC.
     “Second Priority” shall mean, with respect to any Lien purported to be
created in any Collateral pursuant to any Security Document, that such Lien is
the only Lien to which such Collateral is subject, other than any Permitted
Lien, and is second in priority to the Liens granted by the Credit Parties under
the First Lien Credit Documents.
     “Secured Hedging Agreement” shall mean any Hedging Agreement between a
Credit Party and a Hedging Agreement Provider (other than any Hedging Agreement
with respect to the First Lien Obligations), as amended, restated, amended and
restated, modified, supplemented or extended from time to time.
     “Secured Hedging Obligations” shall mean, without duplication, all of the
obligations, indebtedness and liabilities of the Credit Parties to the Hedging
Agreement Providers, whenever arising, under the Secured Hedging Agreements,
including principal, interest, fees, premiums, scheduled periodic payments,
breakage, termination and other payments, reimbursements and

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indemnification obligations and other amounts (including, but not limited to,
any interest accruing after the occurrence of a filing of a petition of
bankruptcy under the Bankruptcy Code with respect to any Credit Party,
regardless of whether such interest is an allowed claim under the Bankruptcy
Code).
     “Secured Parties” shall mean the Administrative Agent, the Lenders and the
Hedging Agreement Providers.
     “Security Agreement” shall mean the Second Lien Security Agreement dated as
of the Closing Date executed by the Credit Parties in favor of the
Administrative Agent and the Control Agent, for the benefit of the Secured
Parties, as amended, restated, amended and restated, modified or supplemented
from time to time in accordance with its terms.
     “Security Documents” shall mean the Security Agreement, the Pledge
Agreement, the Mortgage Instruments and all other agreements, documents and
instruments relating to, arising out of, or in any way connected with any of the
foregoing documents or granting to the Administrative Agent, Liens or security
interests to secure, inter alia, the Credit Party Obligations whether now or
hereafter executed and/or filed, each as may be amended from time to time in
accordance with the terms hereof, executed and delivered in connection with the
granting, attachment and perfection of the Administrative Agent’s security
interests and liens arising thereunder, including, without limitation, UCC
financing statements.
     “Single Employer Plan” shall mean any Plan that is not a Multiemployer
Plan.
     “Subordinated Debt” shall mean any Indebtedness (i) owing by a Credit Party
to another Credit Party or (ii) owing by a Credit Party to any other Person
which is unsecured and non-amortizing, and in each case by its terms is
specifically subordinated in right of payment to the prior payment of the Credit
Party Obligations and contains subordination and other terms acceptable to the
Administrative Agent, including, without limitation, the Subordinated Seller
Note.
     “Subordinated Seller Note” shall mean the promissory note from the Borrower
or any of its Subsidiaries to GenCorp Inc., an Ohio corporation, subordinated in
right of payment to the prior payment of the Credit Party Obligations and
containing subordination and other terms acceptable to the Administrative Agent.
     “Subordinated Seller Obligations” shall mean, collectively, the GenCorp
Earn Out Obligations and all obligations of the Borrower and its Subsidiaries
with respect to the Subordinated Seller Note.
     “Subsidiary” shall mean, as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, limited liability company, partnership or other entity are at
the time owned, or the management of which is otherwise controlled, directly or
indirectly through

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one or more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a “Subsidiary” or to “Subsidiaries” in this Credit Agreement
shall refer to a Subsidiary or Subsidiaries of the Borrower.
     “Taxes” shall have the meaning set forth in Section 2.13.
     “Term Loan” shall have the meaning set forth in Section 2.1(a).
     “Term Loan Commitment” shall mean, with respect to each Term Loan Lender,
the commitment of such Term Loan Lender to make its portion of the Term Loan in
a principal amount equal to such Term Loan Lender’s Term Loan Commitment
Percentage of the Term Loan Committed Amount, which commitment shall terminate
upon the funding of the Term Loan.
     “Term Loan Commitment Percentage” shall mean, for any Term Loan Lender, the
percentage identified as its Term Loan Commitment Percentage in its Lender
Commitment Letter.
     “Term Loan Committed Amount” shall have the meaning set forth in
Section 2.1(a).
     “Term Loan Lender” shall mean a Lender holding a Term Loan Commitment or a
portion of the outstanding Term Loan.
     “Term Loan Note” or “Term Loan Notes” shall mean the promissory notes of
the Borrower (if any) in favor of any of the Term Loan Lenders evidencing the
portion of the Term Loan provided by any such Term Loan Lender pursuant to
Section 2.1(a), individually or collectively, as appropriate, as such promissory
notes may be amended, modified, restated, amended and restated, supplemented,
extended, renewed or replaced from time to time.
     “Total Leverage Ratio” shall mean, as of the end of each fiscal quarter of
the Borrower, for the Borrower and its Subsidiaries on a consolidated basis for
the four consecutive quarters ending on such date, the ratio of (a) Funded Debt
of the Borrower and its Subsidiaries on a consolidated basis on the last day of
such period to (b) Consolidated EBITDA for such four fiscal quarter period.
     “Trademark License” shall mean any written agreement providing for the
grant by or to a Person of any right to use any Trademark, including, without
limitation, any thereof referred to in Schedule 3.16 to this Credit Agreement.
     “Trademarks” shall mean (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, service marks,
elements of package or trade dress of goods or services, logos and other source
or business identifiers, together with the goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, including, without limitation,

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any thereof referred to in Schedule 3.16 to this Credit Agreement, and (b) all
renewals thereof including, without limitation, any thereof referred to in
Schedule 3.16.
     “Tranche” shall mean the collective reference to LIBOR Rate Loans whose
Interest Periods begin and end on the same day.
     “Transactions” shall mean the closing of this Agreement and the other
Credit Documents, the closing of the First Lien Credit Documents and the
consummation of the Acquisition and the other transactions contemplated hereby
to occur in connection with such closing and Acquisition (including, without
limitation, the initial borrowings under the Credit Documents and the First Lien
Credit Documents and the payment of fees and expenses in connection with all of
the foregoing).
     “Transfer Effective Date” shall have the meaning set forth in each
Assignment Agreement.
     “Type” shall mean, as to any Loan, its nature as an Alternate Base Rate
Loan or LIBOR Rate Loan, as the case may be.
     “UCC” shall mean the Uniform Commercial Code from time to time in effect in
any applicable jurisdiction.
     “Voting Stock” shall mean, with respect to any Person, Capital Stock issued
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
may be or have been suspended by the happening of such a contingency.
     “Wachovia” shall mean Wachovia Bank, National Association, a national
banking association, together with its successors and/or assigns.
     “Works” shall mean all works which are subject to copyright protection
pursuant to Title 17 of the United States Code.
     Section 1.2 Other Definitional Provisions.
     (a) Unless otherwise specified therein, all terms defined in this Credit
Agreement shall have the defined meanings when used in the Notes or other Credit
Documents or any certificate or other document made or delivered pursuant
hereto.
     (b) The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Credit Agreement shall refer to this Credit Agreement
as a whole and not to any particular provision of this Credit Agreement, and
Section, subsection, Schedule and Exhibit references are to this Credit
Agreement unless otherwise specified.

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     (c) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
     Section 1.3 Accounting Terms.
     Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent with the most recent audited
Consolidated financial statements of the Borrower delivered to the Lenders;
provided that, if the Borrower shall notify the Administrative Agent that it
wishes amend the definitions of Consolidated Cash Taxes, Consolidated EBITDA,
Consolidated Interest Expense, Consolidated Net Income, Funded Debt, Excess Cash
Flow, any definitions incorporated in the foregoing defined terms or Section 5.9
to eliminate the effect of any change in GAAP on the operation of any such
definition or provision (or if the Administrative Agent notifies the Borrower
that the Required Lenders wish to amend any such definition or provision for
such purpose), then the Borrower’s compliance with such provisions shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such
definition or provision is amended in a manner satisfactory to the Borrower and
the Required Lenders.
     The Borrower shall deliver to the Administrative Agent and each Lender at
the same time as the delivery of any annual or quarterly financial statements
given in accordance with the provisions of Section 5.1, (i) a description in
reasonable detail of any material change in the application of accounting
principles employed in the preparation of such financial statements from those
applied in the most recently preceding quarterly or annual financial statements
as to which no objection shall have been made in accordance with the provisions
above and (ii) a reasonable estimate of the effect on the financial statements
on account of such changes in application.
     Section 1.4 Resolution of Drafting Ambiguities.
     Each Credit Party acknowledges and agrees that it was represented by
counsel in connection with the execution and delivery of this Credit Agreement
and the other Credit Documents to which it is a party, that it and its counsel
reviewed and participated in the preparation and negotiation hereof and thereof
and that any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
hereof or thereof.
     Section 1.5 Time References.
     Unless otherwise specified, all references herein to times of day shall be
references to Eastern time (daylight or standard, as applicable).

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ARTICLE II
THE TERM LOAN; AMOUNT AND TERMS
     Section 2.1 Term Loan.
     (a) Term Loan. Subject to the terms and conditions hereof and in reliance
upon the representations and warranties set forth herein, each Term Loan Lender
severally agrees to make available to the Borrower (through the Administrative
Agent) on the Closing Date such Term Loan Lender’s Term Loan Commitment
Percentage of a term loan in Dollars (the “Term Loan”) in the aggregate
principal amount of TWENTY MILLION DOLLARS ($20,000,000) (the “Term Loan
Committed Amount”) for the purposes hereinafter set forth. Upon receipt by the
Administrative Agent of the proceeds of the Term Loan, such proceeds will then
be made available to the Borrower by the Administrative Agent by crediting the
account of the Borrower on the books of the office of the Administrative Agent
specified in Section 9.2, or at such other office as the Administrative Agent
may designate in writing, with the aggregate of such proceeds made available to
the Administrative Agent by the Term Loan Lenders and in like funds as received
by the Administrative Agent (or by crediting such other account(s) as directed
by the Borrower). The Term Loan may consist of Alternate Base Rate Loans or
LIBOR Rate Loans, or a combination thereof, as the Borrower may request;
provided, however, on the Closing Date the Term Loan may only consist of
Alternate Base Rate Loans unless the Borrower delivers a funding indemnity
letter reasonably acceptable to the Administrative Agent not less than three
(3) Business Days prior to the Closing Date. Amounts repaid or prepaid on the
Term Loan may not be reborrowed.
     (b) Repayment of Term Loan. The principal amount of the Term Loan shall be
repaid in full on the Maturity Date.
     (c) Interest on the Term Loan. Subject to the provisions of Section 2.9,
the Term Loan shall bear interest as follows:
     (i) Alternate Base Rate Loans. During such periods as the Term Loan shall
be comprised of Alternate Base Rate Loans, each such Alternate Base Rate Loan
shall bear interest at a per annum rate equal to the sum of the Alternate Base
Rate plus the Applicable Percentage; and
     (ii) LIBOR Rate Loans. During such periods as the Term Loan shall be
comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at
a per annum rate equal to the sum of the LIBOR Rate plus the Applicable
Percentage.
     Interest on the Term Loan shall be payable in arrears on each Interest
Payment Date.

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     (d) Term Loan Notes. Each Term Loan Lender’s Term Loan Commitment shall be
evidenced, upon such Term Loan Lender’s request, by a duly executed promissory
note of the Borrower to such Term Loan Lender in substantially the form of
Schedule 2.1(d).
     Section 2.2 Fees.
     The Borrower agrees to pay to the Administrative Agent the annual
administrative fee as described in the Fee Letter.
     Section 2.3 Prepayments.
     (a) Optional Prepayments. Subject to the provisions of the Intercreditor
Agreement, the Borrower shall have the right to prepay the Term Loan in whole or
in part from time to time as the Borrower may elect; provided, however, that
each partial prepayment of the Term Loan shall be in a minimum principal amount
of $1,000,000 and integral multiples of $500,000 in excess thereof. The Borrower
shall give three Business Days’ irrevocable notice in the case of LIBOR Rate
Loans and same day irrevocable notice on any Business Day in the case of
Alternate Base Rate Loans, to the Administrative Agent (which shall notify the
Lenders thereof as soon as practicable). Amounts prepaid under this
Section 2.3(a) shall be applied first to the Alternate Base Rate Loans and then
to LIBOR Rate Loans in direct order of Interest Period maturities, and shall be
applied to each Lender’s portion of the Term Loan on a pro rata basis. All
prepayments under this Section 2.3(a) shall be subject to Section 2.3(d) and
Section 2.12, but otherwise without premium or penalty. Interest on the
principal amount prepaid shall be payable on the next occurring Interest Payment
Date that would have occurred had such loan not been prepaid or, at the request
of the Administrative Agent, interest on the principal amount prepaid shall be
payable on any date that a prepayment is made hereunder through the date of
prepayment.
     (b) Mandatory Prepayments. Subject to the provisions of the Intercreditor
Agreement, the Borrower shall prepay the Term Loan in the amounts set forth
below. For the avoidance of doubt, it is understood and agreed that,
notwithstanding anything to the contrary in this Credit Agreement, the Borrower
shall not be required to prepay Loans hereunder as a result of any Excess Cash
Flow, Asset Disposition, Debt Issuance, Equity Issuance or Recovery Event if any
First Lien Obligations remain outstanding, unless the requisite First Lien
Lenders waive such prepayment under Section 2.8 of the First Lien Credit
Agreement.
     (i) Excess Cash Flow. Within ninety (90) days after the end of each fiscal
year (commencing with the fiscal year ending September 30, 2006), the Borrower
shall prepay the Loans in an amount equal to 75% of the Excess Cash Flow earned
during such prior fiscal year; provided, that if the Total Leverage Ratio is
less than or equal to 3.00 to 1.0 as of the end of any fiscal year, the Borrower
shall not be required to prepay the Loans on account of the Excess Cash

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Flow earned during such prior fiscal year. Any payments of Excess Cash Flow
shall be applied as set forth in clause (vi) below.
     (ii) Asset Dispositions. Promptly (and in any event within one Business
Day) following any Asset Disposition (or related series of Asset Dispositions),
the Borrower shall prepay the Loans in an aggregate amount equal to one hundred
percent (100%) of the Net Cash Proceeds derived from such Asset Disposition (or
related series of Asset Dispositions) (such prepayment to be applied as set
forth in clause (vi) below); provided, however, that, so long as no Default or
Event of Default has occurred and is continuing, such Net Cash Proceeds shall
not be required to be so applied (A) until the aggregate amount of Asset
Dispositions in any fiscal year is equal to or greater than $500,000, except in
any fiscal year the Total Leverage Ratio is equal to or less than 3:00 to 1:00
(as most recently reported hereunder), then such minimum amount shall be
$1,000,000 for the remainder of such fiscal year and (B) to the extent the
Borrower delivers to the Administrative Agent a certificate stating that the
Credit Parties intend to use such Net Cash Proceeds to acquire assets useful to
the business of the Credit Parties within 270 days of the receipt of such Net
Cash Proceeds, it being expressly agreed that Net Cash Proceeds not so
reinvested shall be applied to prepay the Loans.
     (iii) Debt Issuances. Promptly (and in any event within one Business Day)
upon receipt by any Credit Party or any of its Subsidiaries of proceeds from any
Debt Issuance, the Borrower shall prepay the Loans in an aggregate amount equal
to one hundred percent (100%) of the Net Cash Proceeds of such Debt Issuance
(such prepayment to be applied as set forth in clause (vi) below); provided,
however, that, so long as no Default or Event of Default has occurred and is
continuing, such Net Cash Proceeds shall not be required to be so applied until
the aggregate amount of Debt Issuances in any fiscal year is equal to or greater
than $500,000, except in any fiscal year the Total Leverage Ratio is equal to or
less than 3:00 to 1:00 (as most recently reported hereunder), then such minimum
amount shall be $1,000,000 for the remainder of such fiscal year.
     (iv) Issuances of Equity. Promptly (and in any event within one Business
Day) upon receipt by any Credit Party or any of its Subsidiaries of proceeds
from any Equity Issuance, the Borrower shall prepay the Loans in an aggregate
amount equal to fifty percent (50%) of the Net Cash Proceeds of such Equity
Issuance (such prepayment to be applied as set forth in clause (vi) below);
provided, however, that, so long as no Default or Event of Default has occurred
and is continuing, such Net Cash Proceeds shall not be required to be so applied
until the aggregate amount of Equity Issuances in any fiscal year is equal to or
greater than $500,000, except in any fiscal year the Total Leverage Ratio is
equal to or less than 3:00 to 1:00 (as most recently reported hereunder), then
such minimum amount shall be $1,000,000 for the remainder of such fiscal year.

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     (v) Recovery Event. Promptly (and in any event within one Business Day)
upon receipt by any Credit Party or any of its Subsidiaries of proceeds from any
Recovery Event, the Borrower shall prepay the Loans in an aggregate amount equal
to one hundred percent (100%) of the Net Cash Proceeds of such Recovery Event
(such prepayment to be applied as set forth in clause (vi) below); provided,
however, that, so long as no Default or Event of Default has occurred and is
continuing, such Net Cash Proceeds shall not be required to be so applied
(A) until the aggregate amount of such Recovery Event, in any fiscal year, is
equal to or greater than $500,000, except in any fiscal year the Total Leverage
Ratio is equal to or less than 3:00 to 1:00 (as most recently reported
hereunder), then such minimum amount shall be $1,000,000 for the remainder of
such fiscal year, and (B) to the extent the Borrower delivers to the
Administrative Agent a certificate stating that Credit Parties intend to use
such Net Cash Proceeds to acquire assets useful to the business of the Credit
Parties within 270 days of the receipt of such Net Cash Proceeds, it being
expressly agreed that any Net Cash Proceeds not so reinvested shall be applied
to prepay the Loans immediately thereafter (such prepayment to be applied as set
forth in clause (vi) below).
     (vi) Application of Mandatory Prepayments. All amounts required to be paid
pursuant to this Section 2.3(b) shall be applied first to Alternate Base Rate
Loans and then to LIBOR Rate Loans in direct order of Interest Period
maturities. All prepayments under this Section 2.3(b) shall be subject to
Section 2.3(d) and Section 2.12 and be accompanied by interest on the principal
amount prepaid through the date of prepayment. Notwithstanding the terms of this
subsection (b) to the contrary, so long as (x) no Default or Event of Default
exists and (y) the amount of any prepayments required under
Sections 2.3(b)(i)-(v) has been transferred to the Administrative Agent to be
held by it as Collateral pursuant to the terms of the Security Agreement, at the
election of the Borrower, if there are not sufficient Alternate Base Rate Loans
outstanding to effect any prepayment required under Sections 2.3(b)(i)-(v), such
prepayment may be deferred until the end of the Interest Period of any LIBOR
Rate Loan being prepaid, in respect of the amount of such prepayment which would
otherwise be required to be used to prepay such LIBOR Rate Loan (after giving
effect to any prepayment of outstanding Alternate Base Rate Loans).
     (c) Hedging Obligations Unaffected. Any repayment or prepayment made
pursuant to this Section 2.3 shall not affect the Borrower’s obligation to
continue to make payments under any Secured Hedging Agreement, which shall
remain in full force and effect notwithstanding such repayment or prepayment,
subject to the terms of such Secured Hedging Agreement.
     (d) Prepayments Prior to the Second Anniversary of the Closing Date. There
shall be no prepayments of the Term Loan (whether voluntary or mandatory) that
are made in accordance with Sections 2.3(a) and 2.3(b)(ii)-(v) prior to the
first anniversary of the Closing Date. All prepayments of the Term Loan (whether
voluntary or mandatory) that are made in accordance with Sections 2.3(a) and
2.3(b)(ii)-(v) prior to the third

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anniversary of the Closing Date shall be subject to an additional premium equal
to the amount of such prepayment multiplied by (i) 3%, with respect to
prepayments made on or after the first anniversary of the Closing Date but prior
to the second anniversary of the Closing Date and (ii) 1.5%, with respect to
prepayments made on or after the second anniversary of the Closing Date but
prior to the third anniversary of the Closing Date. On or after the third
anniversary of the Closing Date, no premiums or penalties shall be payable
pursuant to this Section 2.3(d) in connection with any prepayments of the Term
Loan.
Section 2.4 Default Rate and Payment Dates.
     (a) If all or a portion of the principal amount of any Loan which is a
LIBOR Rate Loan shall not be paid when due or continued as a LIBOR Rate Loan in
accordance with the provisions of Section 2.5 (whether at the stated maturity,
by acceleration or otherwise), such overdue principal amount of such Loan shall
be converted to an Alternate Base Rate Loan at the end of the Interest Period
applicable thereto.
     (b) (i) If all or a portion of the principal amount of any LIBOR Rate Loan
shall not be paid when due, such overdue amount shall bear interest at a rate
per annum which is equal to the rate that would otherwise be applicable thereto
plus 2%, until the end of the Interest Period applicable thereto, and thereafter
at a rate per annum which is equal to the Alternate Base Rate plus the sum of
the Applicable Percentage then in effect for Alternate Base Rate Loans and 2%
(the “ABR Default Rate”) or (ii) if any interest payable on the principal amount
of any Loan or any fee or other amount, including the principal amount of any
Alternate Base Rate Loan, payable hereunder shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), such overdue amount shall
bear interest at a rate per annum which is equal to the ABR Default Rate, in
each case from the date of such non-payment until such amount is paid in full
(after as well as before judgment). Upon the occurrence, and during the
continuance, of any other Event of Default hereunder, at the option of the
Required Lenders, the principal of and, to the extent permitted by law, interest
on the Loans and any other amounts owing hereunder or under the other Credit
Documents shall bear interest, payable on demand, at a per annum rate which is
(A) in the case of principal, the rate that would otherwise be applicable
thereto plus 2% or (B) in the case of interest, fees or other amounts, the ABR
Default Rate (after as well as before judgment).
     (c) Interest on each Loan shall be payable in arrears on each Interest
Payment Date; provided that interest accruing pursuant to paragraph (b) of this
Section 2.4 shall be payable from time to time on demand.
Section 2.5 Conversion Options.
     (a) The Borrower may elect from time to time to convert Alternate Base Rate
Loans to LIBOR Rate Loans, by delivering a Notice of Conversion/Extension to the
Administrative Agent at least three (3) Business Days prior to the proposed date
of conversion. In addition, the Borrower may elect from time to time to convert
all or any

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portion of a LIBOR Rate Loan to an Alternate Base Rate Loan by giving the
Administrative Agent irrevocable written notice thereof by 1:00 P.M. one
Business Day prior to the proposed date of conversion. If the date upon which an
Alternate Base Rate Loan is to be converted to a LIBOR Rate Loan is not a
Business Day, then such conversion shall be made on the next succeeding Business
Day and during the period from such last day of an Interest Period to such
succeeding Business Day such Loan shall bear interest as if it were an Alternate
Base Rate Loan. LIBOR Rate Loans may only be converted to Alternate Base Rate
Loans on the last day of the applicable Interest Period. If the date upon which
a LIBOR Rate Loan is to be converted to an Alternate Base Rate Loan is not a
Business Day, then such conversion shall be made on the next succeeding Business
Day and during the period from such last day of an Interest Period to such
succeeding Business Day such Loan shall bear interest as if it were an Alternate
Base Rate Loan. All or any part of outstanding Alternate Base Rate Loans may be
converted as provided herein; provided that (i) no Loan may be converted into a
LIBOR Rate Loan when any Default or Event of Default has occurred and is
continuing and (ii) partial conversions shall be in an aggregate principal
amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. All or
any part of outstanding LIBOR Rate Loans may be converted as provided herein;
provided that partial conversions shall be in an aggregate principal amount of
$1,000,000 or a whole multiple of $500,000 in excess thereof.
     (b) Any LIBOR Rate Loans may be continued as such upon the expiration of an
Interest Period with respect thereto by compliance by the Borrower with the
notice provisions contained in Section 2.5(a); provided, that no LIBOR Rate Loan
may be continued as such when any Default or Event of Default has occurred and
is continuing, in which case such Loan shall be automatically converted to an
Alternate Base Rate Loan at the end of the applicable Interest Period with
respect thereto. If the Borrower shall fail to give timely notice of an election
to continue a LIBOR Rate Loan, or the continuation of LIBOR Rate Loans is not
permitted hereunder, such LIBOR Rate Loans shall be automatically converted to
Alternate Base Rate Loans at the end of the applicable Interest Period with
respect thereto.
Section 2.6 Computation of Interest and Fees; Usury.
     (a) Interest payable hereunder with respect to any Alternate Base Rate Loan
based on the Prime Rate shall be calculated on the basis of a year of 365 days
(or 366 days, as applicable) for the actual days elapsed. All other fees,
interest and all other amounts payable hereunder shall be calculated on the
basis of a 360 day year for the actual days elapsed. The Administrative Agent
shall as soon as practicable notify the Borrower and the Lenders of each
determination of a LIBOR Rate on the Business Day of the determination thereof.
Any change in the interest rate on a Loan resulting from a change in the
Alternate Base Rate shall become effective as of the opening of business on the
day on which such change in the Alternate Base Rate shall become effective. The
Administrative Agent shall as soon as practicable notify the Borrower and the
Lenders of the effective date and the amount of each such change.

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     (b) At the beginning of each quarter, the then outstanding principal
balance of the Term Loan shall be increased by an amount (the “PIK Amount”)
equal to the difference between: (i) interest accruing on the principal balance
of the Term Loan and (ii) interest paid in cash on the principal balance of the
Term Loan. At the end of each quarter, interest accrued and interest payable
shall be calculated on the then outstanding principal balance of the Term Loan,
as increased by all PIK Amounts and decreased by all principal repayments and
prepayments, with the end result that interest shall be compounded quarterly.
     (c) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Credit Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the computations used by the Administrative Agent
in determining any interest rate.
     (d) It is the intent of the Lenders and the Credit Parties to conform to
and contract in strict compliance with applicable usury law from time to time in
effect. All agreements between the Lenders and the Credit Parties are hereby
limited by the provisions of this subsection which shall override and control
all such agreements, whether now existing or hereafter arising and whether
written or oral. In no way, nor in any event or contingency (including but not
limited to prepayment or acceleration of the maturity of any Credit Party
Obligation), shall the interest taken, reserved, contracted for, charged, or
received under this Credit Agreement, under the Notes or otherwise, exceed the
maximum nonusurious amount permissible under applicable law. If, from any
possible construction of any of the Credit Documents or any other document,
interest would otherwise be payable in excess of the maximum nonusurious amount,
any such construction shall be subject to the provisions of this paragraph and
such interest shall be automatically reduced to the maximum nonusurious amount
permitted under applicable law, without the necessity of execution of any
amendment or new document. If any Lender shall ever receive anything of value
which is characterized as interest on the Loans under applicable law and which
would, apart from this provision, be in excess of the maximum nonusurious
amount, an amount equal to the amount which would have been excessive interest
shall, without penalty, be applied to the reduction of the principal amount
owing on the Loans and not to the payment of interest, or refunded to the
Borrower or the other payor thereof if and to the extent such amount which would
have been excessive exceeds such unpaid principal amount of the Loans. The right
to demand payment of the Loans or any other Indebtedness evidenced by any of the
Credit Documents does not include the right to receive any interest which has
not otherwise accrued on the date of such demand, and the Lenders do not intend
to charge or receive any unearned interest in the event of such demand. All
interest paid or agreed to be paid to the Lenders with respect to the Loans
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term (including any renewal or
extension) of the Loans so that the amount of interest on account of such
Indebtedness does not exceed the maximum nonusurious amount permitted by
applicable law.

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Section 2.7 Pro Rata Treatment and Payments.
     (a) Allocation of Payments Prior to Exercise of Remedies. Unless otherwise
required by the terms of this Credit Agreement, each payment under this Credit
Agreement or any Note shall be applied, first, to any fees then due and owing by
the Borrower pursuant to Section 2.2, second, to interest then due and owing
hereunder and under the Notes of the Borrower and, third, to principal then due
and owing hereunder and under the Notes of the Borrower. Each payment (other
than prepayments) by the Borrower on account of principal of and interest on the
Term Loan shall be applied to the Term Loan on a pro rata basis in accordance
with the terms of Section 2.3(a) hereof. Each optional prepayment on account of
principal of the Term Loan shall be applied in accordance with Section 2.3(a).
Each mandatory prepayment on account of principal of the Term Loan shall be
applied in accordance with Section 2.3(b). All payments (including prepayments)
to be made by the Borrower on account of principal, interest and fees shall be
made without defense, set-off or counterclaim (except as provided in
Section 2.13(b)) and shall be made to the Administrative Agent for the account
of the Lenders at the Administrative Agent’s office specified on Section 9.2 in
Dollars and in immediately available funds not later than 1:00 P.M. on the date
when due. The Administrative Agent shall distribute such payments to the Lenders
entitled thereto promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the LIBOR Rate Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a LIBOR Rate Loan becomes due and payable on a day other than a
Business Day, such payment date shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
     (b) Allocation of Payments After Exercise of Remedies. Notwithstanding any
other provisions of this Credit Agreement to the contrary, after the exercise of
remedies (other than the invocation of default interest pursuant to
Section 2.4(b)) by the Administrative Agent or the Lenders pursuant to
Section 7.2 (or after the Term Loan (with accrued interest thereon) and all
other amounts under the Credit Documents shall automatically become due and
payable in accordance with the terms of such Section), except as otherwise
required pursuant to the terms of the Intercreditor Agreement, all amounts
collected or received by the Administrative Agent or any Lender on account of
the Credit Party Obligations or any other amounts outstanding under any of the
Credit Documents or in respect of the Collateral shall be paid over or delivered
as follows (irrespective of whether the following costs, expenses, fees,
interest, premiums, scheduled periodic payments or Credit Party Obligations are
allowed, permitted or recognized as a claim in any proceeding resulting from the
occurrence of a Bankruptcy Event):
     FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation reasonable attorneys’ fees) of the Administrative

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Agent in connection with enforcing the rights of the Lenders under the Credit
Documents and any protective advances made by the Administrative Agent with
respect to the Collateral under or pursuant to the terms of the Security
Documents;
     SECOND, to the payment of any fees owed to the Administrative Agent;
     THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys’ fees) of each of the
Lenders in connection with enforcing its rights under the Credit Documents or
otherwise with respect to the Credit Party Obligations owing to such Lender;
     FOURTH, to the payment of all of the Credit Party Obligations consisting of
accrued fees and interest, and including, with respect to any Secured Hedging
Agreement, any fees, premiums and scheduled periodic payments due under such
Secured Hedging Agreement and any interest accrued thereon;
     FIFTH, to the payment of the outstanding principal amount of the Credit
Party Obligations, and including with respect to any Secured Hedging Agreement,
any breakage, termination or other payments due under such Secured Hedging
Agreement and any interest accrued thereon;
     SIXTH, to all other Credit Party Obligations and other obligations which
shall have become due and payable under the Credit Documents or otherwise and
not repaid pursuant to clauses “FIRST” through “FIFTH” above; and
     SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
     In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans held
by such Lender bears to the aggregate then outstanding Loans) of amounts
available to be applied pursuant to clauses “THIRD”, “FOURTH”, “FIFTH” and
“SIXTH” above. Notwithstanding the foregoing terms of this Section 2.7, only
Collateral proceeds and payments under the Guaranty (as opposed to ordinary
course principal, interest and fee payments hereunder) shall be applied to
obligations under any Secured Hedging Agreement.
Section 2.8 Non-Receipt of Funds by the Administrative Agent.
     (a) Unless the Administrative Agent shall have been notified in writing by
a Lender prior to the date a Loan is to be made by such Lender (which notice
shall be effective upon receipt) that such Lender does not intend to make the
proceeds of such Loan available to the Administrative Agent, the Administrative
Agent may assume that such Lender has made such proceeds available to the
Administrative Agent on such date,

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and the Administrative Agent may in reliance upon such assumption (but shall not
be required to) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Agent,
the Administrative Agent shall be able to recover such corresponding amount from
such Lender. If such Lender does not pay such corresponding amount forthwith
upon the Administrative Agent’s demand therefor, the Administrative Agent will
promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent. The Administrative Agent shall
also be entitled to recover from the Lender or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent at a per annum rate equal to (i) from the Borrower at the
applicable rate for the applicable borrowing pursuant to the Notice of Borrowing
and (ii) from a Lender at the Federal Funds Effective Rate.
     (b) Unless the Administrative Agent shall have been notified in writing by
the Borrower, prior to the date on which any payment is due from the Borrower
hereunder (which notice shall be effective upon receipt) that the Borrower does
not intend to make such payment, the Administrative Agent may assume that the
Borrower has made such payment when due, and the Administrative Agent may in
reliance upon such assumption (but shall not be required to) make available to
each Lender on such payment date an amount equal to the portion of such assumed
payment to which such Lender is entitled hereunder, and if the Borrower has not
in fact made such payment to the Administrative Agent, such Lender shall, on
demand, repay to the Administrative Agent the amount made available to such
Lender. If such amount is repaid to the Administrative Agent on a date after the
date such amount was made available to such Lender, such Lender shall pay to the
Administrative Agent on demand interest on such amount in respect of each day
from the date such amount was made available by the Administrative Agent to such
Lender to the date such amount is recovered by the Administrative Agent at a per
annum rate equal to the Federal Funds Effective Rate.
     (c) A certificate of the Administrative Agent submitted to the Borrower or
any Lender with respect to any amount owing under this Section 2.8 shall be
conclusive in the absence of manifest error.
     Section 2.9 Inability to Determine Interest Rate.
     Notwithstanding any other provision of this Credit Agreement, if (i) the
Administrative Agent shall reasonably determine (which determination shall be
conclusive and binding absent manifest error) that, by reason of circumstances
affecting the relevant market, reasonable and adequate means do not exist for
ascertaining LIBOR for such Interest Period, or (ii) the Required Lenders shall
reasonably determine (which determination shall be conclusive and binding absent
manifest error) that the LIBOR Rate does not adequately and fairly reflect the
cost to such Lenders of funding LIBOR Rate Loans that the Borrower has requested
be outstanding as a LIBOR Tranche during such Interest Period, the
Administrative Agent shall forthwith give telephone notice of such
determination, confirmed in writing, to the Borrower, and the Lenders

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at least two Business Days prior to the first day of such Interest Period.
Unless the Borrower shall have notified the Administrative Agent upon receipt of
such telephone notice that it wishes to rescind or modify its request regarding
such LIBOR Rate Loans, any Loans that were requested to be made as LIBOR Rate
Loans shall be made as Alternate Base Rate Loans and any Loans that were
requested to be converted into or continued as LIBOR Rate Loans shall remain as
or be converted into Alternate Base Rate Loans. Until any such notice has been
withdrawn by the Administrative Agent, no further Loans shall be made as,
continued as, or converted into, LIBOR Rate Loans for the Interest Periods so
affected.
     Section 2.10 Illegality.
     Notwithstanding any other provision of this Credit Agreement, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof by the relevant Governmental Authority to any Lender shall
make it unlawful for such Lender or its LIBOR Lending Office to make or maintain
LIBOR Rate Loans as contemplated by this Credit Agreement or to obtain in the
interbank eurodollar market through its LIBOR Lending Office the funds with
which to make such Loans, (a) such Lender shall promptly notify the
Administrative Agent and the Borrower thereof, (b) the commitment of such Lender
hereunder to make LIBOR Rate Loans or continue LIBOR Rate Loans as such shall
forthwith be suspended until the Administrative Agent shall give notice that the
condition or situation which gave rise to the suspension shall no longer exist,
and (c) such Lender’s Loans then outstanding as LIBOR Rate Loans, if any, shall
be converted on the last day of the Interest Period for such Loans or within
such earlier period as required by law as Alternate Base Rate Loans. The
Borrower hereby agrees promptly to pay any Lender, upon its demand, any
additional amounts necessary to compensate such Lender for actual and direct
costs (but not including anticipated profits) reasonably incurred by such Lender
in making any repayment in accordance with this Section including, but not
limited to, any interest or fees payable by such Lender to lenders of funds
obtained by it in order to make or maintain its LIBOR Rate Loans hereunder. A
certificate as to any additional amounts payable pursuant to this Section
submitted by such Lender, through the Administrative Agent, to the Borrower
shall be conclusive in the absence of manifest error. Each Lender agrees to use
reasonable efforts (including reasonable efforts to change its LIBOR Lending
Office) to avoid or to minimize any amounts which may otherwise be payable
pursuant to this Section; provided, however, that such efforts shall not cause
the imposition on such Lender of any additional costs or legal or regulatory
burdens deemed by such Lender in its sole discretion to be material.
     Section 2.11 Requirements of Law.
     (a) If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:
     (i) shall subject such Lender to any tax of any kind whatsoever with
respect to any LIBOR Rate Loan made by it, or change the basis of taxation of

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payments to such Lender in respect thereof (except for changes in the rate of
tax on the overall net income of such Lender);
     (ii) shall impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of such Lender which
is not otherwise included in the determination of the LIBOR Rate hereunder; or
     (iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender of
making or maintaining LIBOR Rate Loans to reduce any amount receivable hereunder
or under any Note, then, in any such case, the Credit Parties shall promptly pay
such Lender, upon its demand, any additional amounts necessary to compensate
such Lender for such additional cost or reduced amount receivable which such
Lender reasonably deems to be material as determined by such Lender with respect
to its LIBOR Rate Loans. A certificate as to any additional amounts payable
pursuant to this Section submitted by such Lender, through the Administrative
Agent, to the Borrower shall be conclusive in the absence of manifest error.
Each Lender agrees to use reasonable efforts (including reasonable efforts to
change its Domestic Lending Office or LIBOR Lending Office, as the case may be)
to avoid or to minimize any amounts which might otherwise be payable pursuant to
this paragraph of this Section; provided, however, that such efforts shall not
cause the imposition on such Lender of any additional costs or legal or
regulatory burdens deemed by such Lender to be material.
     (b) If any Lender shall have reasonably determined that the adoption of or
any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central bank
or Governmental Authority made subsequent to the date hereof does or shall have
the effect of reducing the rate of return on such Lender’s or such corporation’s
capital as a consequence of its obligations hereunder to a level below that
which such Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration such Lender’s or such
corporation’s policies with respect to capital adequacy) by an amount reasonably
deemed by such Lender to be material, then from time to time, within fifteen
(15) days after demand by such Lender, the Credit Parties shall pay to such
Lender such additional amount as shall be certified by such Lender as being
required to compensate it for such reduction. Such a certificate as to any
additional amounts payable under this Section submitted by a Lender (which
certificate shall include a description of the basis for the computation),
through the Administrative Agent, to the Borrower shall be conclusive absent
manifest error.
     (c) The Borrower shall not be required to compensate a Lender pursuant to
the foregoing provisions of this Section for any additional amount incurred more
than

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ninety (90) days after the Lender obtains knowledge of the change in law giving
rise to such additional amount and of such Lender’s intention to claim
compensation therefor (except that, if the change in law giving rise to such
additional amount is retroactive, then the ninety (90) day period referred to
above shall be extended to include the period of retroactive effect thereof).
     (d) The agreements in this Section 2.11 shall survive the termination of
this Credit Agreement and payment of the Credit Party Obligations.
     Section 2.12 Indemnity.
     The Credit Parties hereby agree to indemnify each Lender and to hold such
Lender harmless from any funding loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in payment of the
principal amount of or interest on any Loan by such Lender in accordance with
the terms hereof, (b) default by the Borrower in accepting a borrowing after the
Borrower has given a notice in accordance with the terms hereof, (c) default by
the Borrower in making any prepayment after the Borrower has given a notice in
accordance with the terms hereof, and/or (d) the making by the Borrower of a
prepayment of a Loan, or the conversion thereof, on a day which is not the last
day of the Interest Period with respect thereto, in each case including, but not
limited to, any such loss or expense arising from interest or fees payable by
such Lender to lenders of funds obtained by it in order to maintain its Loans
hereunder (but excluding loss of margin). A certificate as to any additional
amounts payable pursuant to this Section submitted by any Lender, through the
Administrative Agent, to the Borrower (which certificate must be delivered to
the Administrative Agent within thirty days following such default, prepayment
or conversion) shall be conclusive in the absence of manifest error. The
agreements in this Section shall survive termination of this Credit Agreement
and payment of the Credit Party Obligations.
     Section 2.13 Taxes.
     (a) All payments made by the Credit Parties hereunder or under any Note
shall be, except as provided in Section 2.13(b), made free and clear of, and
without deduction or withholding for, any present or future taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any Governmental Authority or by any political subdivision
or taxing authority thereof or therein with respect to such payments (but
excluding any tax imposed on or measured by the net income or profits of a
Lender pursuant to the laws of the jurisdiction in which it is organized or the
jurisdiction in which the principal office or applicable lending office of such
Lender is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as “Taxes”). If any Taxes are so levied or imposed, the
Credit Parties agree to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Credit Agreement or under any Note, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or in
such Note. The Credit Parties will furnish to the Administrative Agent as

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soon as practicable after the date the payment of any Taxes is due pursuant to
applicable law certified copies (to the extent reasonably available and required
by law) of tax receipts evidencing such payment by the Credit Parties. The
Credit Parties agree to indemnify and hold harmless each Lender, and reimburse
such Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Lender, except for, in the event such Lender or the
Administrative Agent fails to deliver notice of any assertion of Taxes to the
Borrower within ninety (90) days after it has knowledge of such assertion or
imposition of Taxes, any penalties, interest or expenses which would not have
arisen but for the failure of the Lender or the Administrative Agent to so
notify the Borrower of such assertion or imposition of Taxes.
     (b) Each Lender that is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower and the
Administrative Agent on or prior to the Closing Date, or in the case of a Lender
that is an assignee or transferee of an interest under this Credit Agreement
pursuant to Section 9.6(d) (unless the respective Lender was already a Lender
hereunder immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Lender two accurate and complete original signed
copies of Internal Revenue Service Form W-8BEN or W-8ECI (or successor or other
necessary or appropriate forms) certifying such Lender’s entitlement to a
complete exemption from United States withholding tax with respect to payments
to be made under this Credit Agreement and under any Note. In addition, each
Lender agrees that it will deliver upon the Borrower’s request updated versions
of the foregoing, as applicable, whenever the previous certification has become
obsolete or inaccurate in any material respect, together with such other forms
as may be required in order to confirm or establish the entitlement of such
Lender to a continued exemption from or reduction in United States withholding
tax with respect to payments under this Credit Agreement and any Note.
Notwithstanding anything to the contrary contained in Section 2.13(a), but
subject to the immediately succeeding sentence, (A) the Borrower shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
Taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income
tax purposes to the extent that such Lender has not provided to the Borrower
U.S. Internal Revenue Service Forms that establish a complete exemption from
such deduction or withholding and (B) the Borrower shall not be obligated
pursuant to Section 2.13(a) hereof to gross-up payments to be made to a Lender
in respect of Taxes imposed by the United States if (I) such Lender has not
provided to the Borrower the Internal Revenue Service Forms required to be
provided to the Borrower pursuant to this Section 2.13(b) or (II) in the case of
a payment, other than interest, to a Lender described in clause (ii) above, to
the extent that such Forms do not establish a complete exemption from
withholding of such Taxes. Notwithstanding anything to the contrary contained in
the preceding sentence or elsewhere in this Section 2.13, the Credit Parties
agree to pay additional amounts and to indemnify each Lender in the manner set
forth in Section 2.13(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any amounts deducted or
withheld by it as described in the

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immediately preceding sentence as a result of any changes after the Closing Date
in any applicable law, treaty, governmental rule, regulation, guideline or
order, or in the interpretation thereof, relating to the deducting or
withholding of Taxes.
     (c) Each Lender agrees to use reasonable efforts (including reasonable
efforts to change its Domestic Lending Office or LIBOR Lending Office, as the
case may be) to avoid or to minimize any amounts which might otherwise be
payable pursuant to this Section; provided, however, that such efforts shall not
cause the imposition on such Lender of any additional costs or legal or
regulatory burdens deemed by such Lender in its sole discretion to be material.
     (d) If the Credit Parties pay any additional amount pursuant to this
Section 2.13 with respect to a Lender, such Lender shall use reasonable efforts
to obtain a refund of tax or credit against its tax liabilities on account of
such payment; provided that such Lender shall have no obligation to use such
reasonable efforts if either (i) it is in an excess foreign tax credit position
or (ii) it believes in good faith, in its sole discretion, that claiming a
refund or credit would cause adverse tax consequences to it. In the event that
such Lender receives such a refund or credit, such Lender shall pay to the
Credit Parties an amount that such Lender reasonably determines is equal to the
net tax benefit obtained by such Lender as a result of such payment by the
Credit Parties. In the event that no refund or credit is obtained with respect
to the Credit Parties’ payments to such Lender pursuant to this Section 2.13,
then such Lender shall upon request provide a certification that such Lender has
not received a refund or credit for such payments. Nothing contained in this
Section 2.13 shall require a Lender to disclose or detail the basis of its
calculation of the amount of any tax benefit or any other amount or the basis of
its determination referred to in the proviso to the first sentence of this
Section 2.13 to the Credit Parties or any other party.
     (e) The agreements in this Section 2.13 shall survive the termination of
this Credit Agreement and the payment of the Credit Party Obligations.
     Section 2.14 Replacement of Lenders.
     If any Lender shall become affected by any of the changes or events
described in Sections 2.10, 2.11, or 2.13 (any such Lender being hereinafter
referred to as a “Replaced Lender”) and shall petition the Borrower for any
increased cost or amounts thereunder, then in such case, the Borrower may, upon
at least thirty (30) Business Days’ notice to the Administrative Agent and such
Replaced Lender and so long as no Default or Event of Default has occurred and
is continuing, designate a replacement lender (a “Replacement Lender”)
acceptable to the Administrative Agent in its reasonable discretion, to which
such Replaced Lender shall, subject to its receipt of all amounts owed to such
Replaced Lender under Sections 2.10, 2.11, 2.12 or 2.13, assign at par all (but
not less than all) of its rights, obligations and portion of the Term Loan
hereunder; provided, that all amounts owed to such Replaced Lender by the
Borrower (except liabilities which by the terms hereof survive the payment in
full of the Loans and termination of this Agreement) shall be paid in full as of
the date of such assignment. Upon any assignment by any Lender pursuant to this
Section 2.14 becoming effective, the

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Replacement Lender shall thereupon be deemed to be a “Lender” for all purposes
of this Agreement and such Replaced Lender shall thereupon cease to be a
“Lender” for all purposes of this Agreement and shall have no further rights or
obligations hereunder (other than pursuant to Sections 2.10, 2.11, or 2.13, and
9.5 while such Replaced Lender was a Lender). If any Replaced Lender shall
refuse to assign its rights, obligations and portion of the Term Loan in
accordance with the terms of this Section 2.14, the Replaced Lender shall cease
to be a “Lender” for all purposes of this Agreement upon payment to the Replaced
Lender of all amounts owing to such Replaced Lender in accordance with the terms
of this Section 2.14 without any further action of such Replaced Lender and so
long as no Default or Event of Default shall have occurred and be continuing,
the Borrower shall have the right to designate a Replacement Lender acceptable
to the Administrative Agent in its reasonable discretion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
     To induce the Lenders to enter into this Credit Agreement and to make the
Extensions of Credit herein provided for, the Credit Parties hereby represent
and warrant to the Administrative Agent and to each Lender that:
     Section 3.1 Financial Condition.
     (a) (i) The audited Consolidated and consolidating balance sheets of the
Borrower and its Consolidated Subsidiaries as of September 30, 2002, 2003 and
2004, and the Acquired Company and its Consolidated Subsidiaries as of
November 30, 2002, 2003 and 2004, together with the related Consolidated and
consolidating statements of income or operations, and Consolidated statements of
shareholders’ equity and cash flows for the fiscal years ended on such dates,
(ii) the unaudited Consolidated and consolidating balance sheets of the Borrower
and its Consolidated Subsidiaries and of the Acquired Company as of the last day
of the month immediately preceding the Closing Date, together with the related
unaudited Consolidated and consolidating statements of income or operations and
Consolidated cash flows (to the extent available) for the twelve-month period
ending on such date and (iii) an unaudited pro forma consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries and of the Acquired Company
and its Subsidiaries as of the last day of the month immediately preceding the
Closing Date:
     (A) were prepared in accordance with GAAP consistently applied throughout
the period covered thereby, except as otherwise expressly noted therein;
     (B) fairly present the financial condition of the Borrower and its
Consolidated Subsidiaries and of the Acquired Company and its Consolidated
Subsidiaries as of the date thereof (subject, in the case of the unaudited
financial

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statements, to normal year-end adjustments) and results of operations for the
period covered thereby; and
     (C) show all material indebtedness and other liabilities, direct or
contingent, of the Borrower and its Subsidiaries and of the Acquired Company and
its Subsidiaries as of the date thereof, including liabilities for taxes,
material commitments and contingent obligations required to be included in
accordance with GAAP.
     (b) The four-year projections of the Borrower and its Subsidiaries
delivered to the Lenders on or prior to the Closing Date have been prepared in
good faith based upon reasonable assumptions.
     Section 3.2 No Change.
     Since September 30, 2004, there has been no development or event which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect.
     Section 3.3 Corporate Existence; Compliance with Law.
     Each of the Credit Parties (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization or
formation, (b) has the requisite power and authority and the legal right to own
and operate all its material property, to lease the material properties it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified to conduct business and in good standing under the laws of
(i) the jurisdiction of its organization or formation, (ii) the jurisdiction
where its chief executive office is located and (iii) each other jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification except to the extent that the failure to so
qualify or be in good standing could not reasonably be expected to have a
material adverse effect on the business or operations of the Credit Parties and
their Subsidiaries (in the aggregate taken as a whole) in such jurisdiction,
(d) is in compliance with all Requirements of Law, government permits and
government licenses (including, without limitation, all Food and Drug
Administration regulations and requirements) except to the extent that the
failure to comply therewith could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect and (e) has all
material permits, licenses and governmental authorizations necessary to run
their business. The jurisdictions in which the Credit Parties as of the Closing
Date are organized and qualified to do business are described on Schedule 3.3.
     Section 3.4 Corporate Power; Authorization; Enforceable Obligations.
     Each of the Credit Parties has full power and authority and the legal right
to make, deliver and perform the Credit Documents to which it is party and has
taken all necessary limited liability company, partnership or corporate action
to authorize the execution, delivery and performance by it of the Credit
Documents to which it is party. No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the borrowings hereunder or with the
execution, delivery

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or performance of any Credit Document by any of the Credit Parties (other than
those that have been obtained) or with the validity or enforceability of any
Credit Document against any of the Credit Parties (except such filings as are
necessary in connection with the perfection of the Liens created by such Credit
Documents). Each Credit Document to which it is a party has been duly executed
and delivered on behalf of each Credit Party. Each Credit Document to which it
is a party constitutes a legal, valid and binding obligation of each Credit
Party, enforceable against such Credit Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
     Section 3.5 No Legal Bar; No Default.
     The execution, delivery and performance by each Credit Party of the Credit
Documents to which such Credit Party is a party, the borrowings thereunder and
the use of the proceeds of the Loans will not violate any Requirement of Law or
any material Contractual Obligation of any Credit Party (except those as to
which waivers or consents have been obtained), and will not result in, or
require, the creation or imposition of any Lien on any Credit Party’s properties
or revenues pursuant to any Requirement of Law or material Contractual
Obligation other than the Liens arising under or contemplated in connection with
the Credit Documents. No Credit Party is in default under or with respect to any
of its material Contractual Obligations in any material respect. No Default or
Event of Default has occurred and is continuing.
     Section 3.6 No Material Litigation.
     No litigation, investigation, claim, criminal prosecution, civil
investigative demand, imposition of criminal or civil fines and penalties, or
any other proceeding of or before any arbitrator or Governmental Authority is
pending or, to the best knowledge of the Credit Parties, threatened by or
against any Credit Party or any of its Subsidiaries or against any of its or
their respective properties or revenues (a) with respect to the Credit Documents
or any Loan or any of the Transactions contemplated hereby, or (b) which, if
adversely determined, could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
     Section 3.7 Investment Company Act; PUHCA, Etc.
     No Credit Party is an “investment company”, or a company “controlled” by an
“investment company”, within the meaning of the Investment Company Act of 1940,
as amended. No Credit Party is a subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate
Commerce Act, or any federal or state statute or regulation limiting its ability
to incur the Credit Party Obligations.
     Section 3.8 Margin Regulations.
     No part of the proceeds of any Extension of Credit hereunder will be used
directly or indirectly for any purpose that violates, or that would be
inconsistent with, the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System as now and from

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time to time hereafter in effect. The Credit Parties and their Subsidiaries
(a) are not engaged, principally or as one of their important activities, in the
business of extending credit for the purpose of “purchasing” or “carrying”
“margin stock” within the respective meanings of each of such terms under
Regulation U and (b) taken as a group do not own “margin stock” except as
identified in the financial statements referred to in Section 3.1 and the
aggregate value of all “margin stock” owned by the Credit Parties and their
Subsidiaries taken as a group does not exceed 25% of the value of their assets.
     Section 3.9 ERISA.
     Neither a Reportable Event nor an “accumulated funding deficiency” (within
the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Plan, and each Plan has complied in all
material respects with the applicable provisions of ERISA and the Code, except
to the extent that any such occurrence or failure to comply could not,
individually or in the aggregate, reasonably be expected to result in liability
to the Credit Parties and their Subsidiaries in excess of $1,000,000. No
termination of a Single Employer Plan has occurred resulting in any liability in
excess of $1,000,000 that has remained underfunded, and no Lien in favor of the
PBGC or a Plan has arisen, during such five-year period. The present value of
all accrued benefits under each Single Employer Plan (based on those assumptions
used to fund such Plans) did not, as of the last annual valuation date prior to
the date on which this representation is made or deemed made, exceed the value
of the assets of such Plan allocable to such accrued benefits by an amount
which, as determined in accordance with GAAP, could reasonably be expected to
have a Material Adverse Effect. Neither any Credit Party nor any Commonly
Controlled Entity is currently subject to any liability in excess of $1,000,000
for a complete or partial withdrawal from a Multiemployer Plan.
     Section 3.10 Environmental Matters.
     (a) Except where such violation or liability could not reasonably be
expected to have a Material Adverse Effect, the facilities and properties owned,
leased or operated by the Credit Parties or any of their Subsidiaries (the
“Properties”) do not contain any Materials of Environmental Concern in amounts
or concentrations which (i) constitute a violation of, or (ii) could give rise
to liability under, any Environmental Law.
     (b) Except where such violation, contamination or non-compliance could not
reasonably be expected to have a Material Adverse Effect, the Properties and all
operations of the Credit Parties and/or their Subsidiaries at the Properties are
in compliance, and have in the last five years been in compliance with all
applicable Environmental Laws, and there is no contamination at, under or about
the Properties or violation of any Environmental Law with respect to the
Properties or the business operated by the Credit Parties or any of their
Subsidiaries (the “Business”).
     (c) Neither the Credit Parties nor their Subsidiaries have received any
written or actual notice of violation, alleged violation, non-compliance,
liability or potential liability with respect to environmental matters or
Environmental Laws regarding any of

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the Properties or the Business, nor does the Credit Parties and their
Subsidiaries have knowledge or reason to believe that any such notice will be
received or is being threatened which could reasonably be expected to have a
Material Adverse Effect.
     (d) Except where such violation or liability could not reasonably be
expected to have a Material Adverse Effect, Materials of Environmental Concern
have not been transported or disposed of from the Properties in violation of, or
in a manner or to a location that could give rise to liability under any
Environmental Law, and no Materials of Environmental Concern have been
generated, treated, stored or disposed of at, on or under any of the Properties
in violation of, or in a manner that could give rise to liability under, any
applicable Environmental Law.
     (e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Credit Parties and their Subsidiaries,
threatened, under any Environmental Law to which any Credit Party or any
Subsidiary is or will be named as a party with respect to the Properties or the
Business, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Properties or the Business which could reasonably be expected to have a Material
Adverse Effect.
     (f) Except where such violation or liability could not reasonably be
expected to have a Material Adverse Effect, there has been no release or threat
of release of Materials of Environmental Concern at or from the Properties, or
arising from or related to the operations of any Credit Party or any Subsidiary
in connection with the Properties or otherwise in connection with the Business,
in violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws.
     Section 3.11 Use of Proceeds.
     The proceeds of the Extensions of Credit shall be used by the Borrower
solely (a) to finance the Acquisition, (b) to pay certain costs, fees and
expenses in connection with the Acquisition, (c) to refinance certain existing
Indebtedness of the Borrower and the Acquired Company, and (d) to pay any fees
and expenses associated with this Credit Agreement and the Second Lien Credit
Agreement on the Closing Date.
     Section 3.12 Subsidiaries.
     Set forth on Schedule 3.12 is a complete and accurate list of all
Subsidiaries of the Credit Parties as of the Closing Date. Information on the
attached Schedule includes the following: (a) the number of shares of each class
of Capital Stock or other equity interests outstanding; (b) the number and
percentage of outstanding shares of each class of Capital Stock owned by the
Borrower or any of its Subsidiaries; and (c) the number and effect, if
exercised, of all outstanding options, warrants, rights of conversion or
purchase and similar rights. The outstanding Capital Stock and other equity
interests of all such Subsidiaries is validly issued, fully paid and
non-assessable and is owned free and clear of all Liens (other than those
arising under or

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contemplated in connection with the Credit Documents or Permitted Liens). The
Borrower shall update Schedule 3.12 from time to time in accordance with
Section 5.2(c).
     Section 3.13 Ownership.
     Each of the Credit Parties and its Subsidiaries has good and marketable
title to all of its material assets, or if any Property is leased by such Credit
Party or any of its Subsidiaries, such Person has a valid leasehold interest
enforceable against the ground lessor of such Property in accordance with the
terms of such lease, and none of the assets of the Credit Parties and their
Subsidiaries is subject to any Lien other than Permitted Liens.
     Section 3.14 Indebtedness.
     Except as otherwise permitted under Section 6.1, the Credit Parties and
their Subsidiaries have no Indebtedness.
     Section 3.15 Taxes.
     Each of the Credit Parties and their Subsidiaries has filed, or caused to
be filed or timely filed for extension of payment of, all material federal and
state income tax returns and all other tax returns required to be filed and paid
(a) all amounts of taxes shown thereon to be due (including interest and
penalties) and (b) all other material taxes, fees, assessments and other
governmental charges (including mortgage recording taxes, documentary stamp
taxes and intangibles taxes) owing by it, except for such taxes (i) that are not
yet delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. None of the Credit Parties and their Subsidiaries is aware
as of the Closing Date of any proposed material tax assessments against it or
any of its Subsidiaries.
     Section 3.16 Intellectual Property Rights.
     Each of the Credit Parties and their Subsidiaries owns, or has the legal
right to use, all Material IP. Set forth on Schedule 3.16 is a list of all
Material IP owned by each of the Credit Parties and their Subsidiaries or that
the Credit Parties or any of their Subsidiaries has the right to use as of the
Closing Date. Except as provided on Schedule 3.16, no material claim has been
asserted in writing and is pending by any Person challenging or questioning the
use of any such Material IP or the validity or effectiveness of any such
Material IP, nor do the Credit Parties or any of their Subsidiaries know of any
such claim, and, to the knowledge of the Credit Parties and their Subsidiaries,
the use of such Material IP by the Credit Parties or any of their Subsidiaries
does not infringe on the rights of any Person in any material respect. The
Borrower may update Schedule 3.16 in accordance with the terms of
Section 5.2(c).
     Section 3.17 Solvency.
     After giving effect to the Transactions, the fair saleable value of each
Credit Party’s assets, measured on a going concern basis, exceeds all probable
liabilities, including those to be

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incurred pursuant to this Credit Agreement. After giving effect to the
Acquisition, the extensions of credit under the First Lien Credit Agreement and
other Transactions contemplated by this Credit Agreement, the Credit Parties
(taken as a whole) (a) do not have unreasonably small capital in relation to the
business in which they are or propose to be engaged and (b) have not incurred,
or do not believe that they will incur, debts beyond their ability to pay such
debts as they become due. In executing the Credit Documents and consummating the
Transactions, none of the Credit Parties intends to hinder, delay or defraud
either present or future creditors or other Persons to which one or more of the
Credit Parties is or will become indebted.
     Section 3.18 Investments.
     All Investments of each of the Credit Parties and their Subsidiaries are
Permitted Investments.
     Section 3.19 Location of Collateral.
     Set forth on Schedule 3.19(a) is a list of all Properties of the Credit
Parties and their Subsidiaries (other than ESI) as of the Closing Date with
street address, county and state where located. Set forth on Schedule 3.19(b) is
a list of all locations not otherwise set forth on Schedule 3.19(a) where any
tangible personal property of the Credit Parties and their Subsidiaries (other
than ESI) is located as of the Closing Date, including county and state where
located. Set forth on Schedule 3.19(c) is the state of incorporation or
organization, the chief executive office and the principal place of business of
each of the Credit Parties and their Subsidiaries as of the Closing Date.
     Section 3.20 No Burdensome Restrictions.
     None of the Credit Parties and their Subsidiaries is a party to any
agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any provision of any applicable law, rule or regulation
which could reasonably be expected to have a Material Adverse Effect.
     Section 3.21 Brokers’ Fees.
     Except as set forth on Schedule 3.21, none of the Credit Parties and their
Subsidiaries has any obligation to any Person in respect of any finder’s,
broker’s, investment banking or other similar fee in connection with any of the
transactions contemplated under the Credit Documents other than the closing and
other fees payable pursuant to this Credit Agreement and as set forth in the Fee
Letter.
     Section 3.22 Labor Matters.
     There are no collective bargaining agreements or Multiemployer Plans in
which any of the Credit Parties or their Subsidiaries are participating
employers as of the Closing Date, other than as set forth in Schedule 3.22
hereto, and none of the Credit Parties and their Subsidiaries (i) has suffered
any strikes, walkouts, work stoppages or other material labor difficulty within
the

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last five (5) years prior to the Closing Date, other than as set forth in
Schedule 3.22 hereto, (ii) has knowledge as of the Closing Date of any pending
strike, walkout or work stoppage, or (iii) has knowledge of any existing strike,
walkout or work stoppage, except (with respect to any specific matters set forth
in clauses (i), (ii) and (iii) above) which in the aggregate could not
reasonably be expected to cause a Material Adverse Effect. Other than as set
forth on Schedule 3.22, no unfair labor practice complaint is pending against
any Credit Party or any of its Subsidiaries as of the Closing Date.
     Section 3.23 Accuracy and Completeness of Information.
     All factual information heretofore, contemporaneously or hereafter
furnished by or on behalf of any Credit Party or any of its Subsidiaries to the
Administrative Agent, the Arranger or any Lender for purposes of or in
connection with this Credit Agreement or any other Credit Document, or any
transaction contemplated hereby or thereby when taken together with the
Borrower’s filings with the SEC, as modified or supplemented by other
information so furnished, is or will be true and accurate in all material
respects and does not contain any material misstatement of fact or omit to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with
respect to projected financial information, the Borrower represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time. There are no facts now known to the Borrower (other
than matters of general economic nature) that has had, or could reasonably be
expected to have, a Material Adverse Effect, which fact has not been set forth
herein, in the financial statements of the Borrower and its Subsidiaries
furnished to the Administrative Agent and the Lenders, or in any certificate,
opinion or other written statement made or furnished by or on behalf of a Credit
Party to the Administrative Agent and/or the Lenders.
     Section 3.24 Material Contracts.
     Schedule 3.24 sets forth a complete and accurate list of all Material
Contracts (other than the First Lien Credit Documents) of the Credit Parties and
their Subsidiaries (other than ESI) in effect as of the Closing Date. As of the
Closing Date, each such Material Contract is, and after giving effect to the
Transactions will be, in full force and effect in accordance with the terms
thereof. The Credit Parties and their Subsidiaries (other than ESI) have
delivered to the Administrative Agent a true and complete copy of each Material
Contract, except to the extent the disclosure of such Material Contract is then
prohibited by any Requirement of Law, the directive of any applicable
Governmental Authority or any Contractual Obligation binding on any Credit Party
as of the Closing Date; provided that the Borrower may redact or summarize
certain portions of such Material Contracts containing non-financial trade
secrets or non-financial proprietary information with the consent of the
Administrative Agent (such consent not to be unreasonably withheld).
Schedule 3.24 may be updated from time to time by the Borrower to include new
Material Contracts by giving written notice thereof to the Administrative Agent.

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     Section 3.25 Insurance.
     The present insurance coverage of the Credit Parties and their Subsidiaries
(other than ESI) as of the Closing Date is outlined as to carrier, policy
number, expiration date, type and amount on Schedule 3.25 and such insurance
coverage complies the requirements set forth in Section 5.5(b). Schedule 3.25
may be updated from time to time by the Borrower to include additional insurance
coverage by giving written notice thereof to the Administrative Agent.
     Section 3.26 Security Documents.
     The Security Documents create valid security interests in, and Liens on,
the Collateral purported to be covered thereby. Except as set forth in the
Security Documents, such security interests and Liens are perfected security
interests and Liens (to the extent that such perfection can be accomplished upon
(a) the filing of appropriate financing statements with the Secretary of State
of the state of incorporation for each Credit Party, the filing of appropriate
assignments or notices with the United States Patent and Trademark Office and
the United States Copyright Office, and the recordation of the applicable
Mortgage Instruments, in each case in favor of the Administrative Agent, on
behalf of the Lenders, and (b) the Administrative Agent obtaining Control (as
defined in the Security Agreement) over those items of Collateral in which a
security interest is perfected through Control), prior to all other Liens other
than Permitted Liens.
     Section 3.27 Regulation H.
     No Mortgaged Property is a Flood Hazard Property.
     Section 3.28 Classification of Senior Indebtedness.
     The Credit Party Obligations constitute “Senior Indebtedness” under and as
defined in any agreement governing any Subordinated Debt and the subordination
provisions set forth in each such agreement are legally valid and enforceable
against the parties thereto.
     Section 3.29 Anti-Terrorism Laws.
     Neither any Credit Party nor any of its Subsidiaries is an “enemy” or an
“ally of the enemy” within the meaning of Section 2 of the Trading with the
Enemy Act of the United States of America (50 U.S.C. App. §§ 1 et seq.), as
amended. Neither any Credit Party nor any or its Subsidiaries is in violation of
(a) the Trading with the Enemy Act, as amended, (b) any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto or (c) the Patriot Act (as defined in Section 9.18). None of
the Credit Parties (i) is a blocked person described in section 1 of the
Anti-Terrorism Order or (ii) to the best of its knowledge, engages in any
dealings or transactions, or is otherwise associated, with any such blocked
person.

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     Section 3.30 Compliance with OFAC Rules and Regulations.
     None of the Credit Parties or their Subsidiaries or their respective
Affiliates (i) is a Sanctioned Person, (ii) has more than 15% of its assets in
Sanctioned Countries, or (iii) derives more than 15% of its operating income
from investments in, or transactions with Sanctioned Persons or Sanctioned
Countries. No part of the proceeds of any Extension of Credit hereunder will be
used directly or indirectly to fund any operations in, finance any investments
or activities in or make any payments to, a Sanctioned Person or a Sanctioned
Country.
     Section 3.31 Directors; Capitalization.
     Set forth on Schedule 3.31 is a list of the directors of the Borrower’s
board of directors as of the Closing Date. As of November 25, 2005, the
capitalization of the Borrower shall be as set forth on Schedule 3.31.
     Section 3.32 Consummation of Acquisition; Representations and Warranties
from Other Documents.
     The Acquisition and related transactions have been consummated
substantially in accordance with the terms of the Acquisition Documents. As of
the Closing Date, the Acquisition Documents have not been altered, amended or
otherwise modified or supplemented in any material respect or any material
condition thereof waived without the prior written consent of the Administrative
Agent. Each of the representations and warranties made in the Acquisition
Documents by the Borrower and its Subsidiaries or, to the best knowledge of the
Borrower, made by any third party is true and correct in all material respects.
     Section 3.33 Compliance with FCPA.
     To the best of its knowledge, each of the Credit Parties and their
Subsidiaries (a) is in compliance with the Foreign Corrupt Practices Act, 15
U.S.C. §§ 78dd-1, et seq., and any foreign counterpart thereto and (b) has not
made a payment, offering, or promise to pay, or authorized the payment of, money
or anything of value (i) in order to assist in obtaining or retaining business
for or with, or directing business to, any foreign official, foreign political
party, party official or candidate for foreign political office, (ii) to a
foreign official, foreign political party or party official or any candidate for
foreign political office, and (iii) with the intent to induce the recipient to
misuse his or her official position to direct business wrongfully to such Credit
Party or its Subsidiary or to any other Person, in violation of the Foreign
Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq., in each case to the extent
such non-compliance, payment, offering or promise to pay could, individually or
in the aggregate, reasonably be expected to result in liability to the Credit
Parties and their Subsidiaries in excess of $1,000,000.

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ARTICLE IV
CONDITIONS PRECEDENT
     Section 4.1 Conditions to Closing Date.
     This Credit Agreement shall become effective upon, and the obligation of
each Lender to make its portion of the Term Loan on the Closing Date is subject
to, the satisfaction of the following conditions precedent:
     (a) Execution of Credit Agreement and Credit Documents. The Administrative
Agent shall have received (i) counterparts of this Credit Agreement, executed by
a duly authorized officer of each party hereto, (ii) for the account of each
Lender requesting a promissory note, a Term Loan Note, (iii) counterparts of the
Security Agreement, the Pledge Agreement and each Mortgage Instrument, in each
case conforming to the requirements of this Credit Agreement and executed by
duly authorized officers of the Credit Parties or other Person, as applicable,
(iv) counterparts of the Intercreditor Agreement, executed by a duly authorized
officer of each party thereto and (v) counterparts of any other Credit Document,
executed by the duly authorized officers of the parties thereto.
     (b) Authority Documents. The Administrative Agent shall have received the
following:
     (i) Articles of Incorporation. Copies of the articles of incorporation or
other charter documents, as applicable, of each Credit Party certified (A) by a
secretary or assistant secretary of such Credit Party (pursuant to a secretary’s
certificate in substantially the form of Schedule 4.1(b) attached hereto) as of
the Closing Date to be true and correct and in force and effect as of such date,
and (B) to be true and complete as of a recent date by the appropriate
Governmental Authority of the state of its incorporation or organization, as
applicable.
     (ii) Resolutions. Copies of resolutions of the board of directors or
comparable managing body of each Credit Party approving and adopting the Credit
Documents, the transactions contemplated therein and authorizing execution and
delivery thereof, certified by a secretary or assistant secretary of such Credit
Party (pursuant to a secretary’s certificate in substantially the form of
Schedule 4.1(b) attached hereto) as of the Closing Date to be true and correct
and in force and effect as of such date.
     (iii) Bylaws. A copy of the bylaws or comparable operating agreement of
each Credit Party certified by a secretary or assistant secretary of such Credit
Party (pursuant to a secretary’s certificate in substantially the form of
Schedule 4.1(b) attached hereto) as of the Closing Date to be true and correct
and in force and effect as of such date.

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     (iv) Good Standing. Copies of certificates of good standing, existence or
its equivalent with respect to each Credit Party certified as of a recent date
by the appropriate Governmental Authorities of the state of incorporation or
organization and each other state in which the failure to so qualify and be in
good standing could reasonably be expected to have a Material Adverse Effect on
the business or operations of the Credit Parties and their Subsidiaries in such
state.
     (v) Incumbency. An incumbency certificate of each Credit Party certified by
a secretary or assistant secretary (pursuant to a secretary’s certificate in
substantially the form of Schedule 4.1(b) attached hereto) to be true and
correct as of the Closing Date.
     (c) Legal Opinion of Counsel. The Administrative Agent shall have received
an opinion or opinions of counsel for the Credit Parties, dated the Closing Date
and addressed to the Administrative Agent and the Lenders, in form and substance
reasonably acceptable to the Administrative Agent (which shall include, without
limitation, opinions with respect to the due organization and valid existence of
each Credit Party, opinions as to perfection of the Liens granted to the
Administrative Agent and the Control Agent pursuant to the Security Documents
and opinions as to the non-contravention of the Credit Parties’ organizational
documents and Material Contracts).
     (d) Personal Property Collateral. The Administrative Agent (or the Control
Agent in the case of Collateral where perfection of a security interest requires
possession of such Collateral) shall have received, in form and substance
satisfactory to the Administrative Agent:
     (i) (A) searches of Uniform Commercial Code filings in the jurisdiction of
the chief executive office of each Credit Party and each jurisdiction where any
Collateral is located or where a filing would need to be made in order to
perfect the Lenders’ security interest in the Collateral, copies of the
financing statements on file in such jurisdictions and evidence that no Liens
exist other than Permitted Liens and (B) tax lien, judgment and pending
litigation searches as reasonably required by the Administrative Agent;
     (ii) searches of ownership of Intellectual Property in the appropriate
governmental offices and such patent/trademark/copyright filings as reasonably
requested by the Administrative Agent in order to perfect the Administrative
Agent’s security interest in the Material IP;
     (iii) completed UCC financing statements for each appropriate jurisdiction
as is necessary, in the Administrative Agent’s sole discretion, to perfect the
Lenders’ security interest in the Collateral;
     (iv) with respect to the stock or membership certificates, if any,
evidencing the Capital Stock pledged to the Administrative Agent pursuant to the
Pledge Agreement, duly executed in blank undated stock or transfer powers;

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     (v) duly executed consents as are necessary, in the Administrative Agent’s
sole discretion, to perfect the Lenders’ security interest in the Collateral;
and
     (vi) Deposit Account Control Agreements satisfactory to the Administrative
Agent with respect to each account set forth on Schedule 6.14, except payroll
accounts set forth thereon and to the extent otherwise determined by the
Administrative Agent.
     (e) Liability, Casualty, Property and Business Interruption Insurance. The
Administrative Agent shall have received copies of insurance policies or
certificates of insurance evidencing liability, casualty, property and business
interruption insurance meeting the requirements set forth herein or in the
Security Documents. The Administrative Agent shall be named as loss payee and/or
additional insured with respect to any such insurance providing liability
coverage or coverage in respect of any Collateral, and each provider of any such
insurance shall agree, by endorsement upon the policy or policies issued by it
or by independent instruments furnished to the Administrative Agent, that it
will give thirty (30) days prior written notice before any such policy or
policies shall be cancelled.
     (f) Reports. The Administrative Agent shall have received a copy of each
material opinion and report required to be delivered pursuant to the Acquisition
Documents in connection with the Acquisition and related transactions (and the
Borrower will use reasonable efforts to obtain evidence that the Administrative
Agent and the Lenders have been authorized to rely on each such opinion and
report), all in form and substance reasonably satisfactory to the Administrative
Agent.
     (g) Litigation. There shall not exist any pending litigation or
investigation affecting or relating to (i) any Credit Party or any of its
Subsidiaries that in the reasonable judgment of the Administrative Agent and
Lenders could materially adversely affect the any Credit Party or any of its
Subsidiaries, this Agreement or the other Credit Documents, that has not been
settled, dismissed, vacated, discharged or terminated prior to the Closing Date
or (ii) this Agreement, the other Credit Documents, the First Lien Credit
Documents or the Acquisition that has not been settled, dismissed, vacated,
discharged or terminated prior to the Closing Date.
     (h) Solvency Certificate. The Administrative Agent shall have received an
officer’s certificate prepared by the chief financial officer of the Borrower as
to the financial condition, solvency and related matters of the Borrower and the
Credit Parties and their Subsidiaries, taken as a whole, after giving effect to
the Acquisition, the initial extensions of credit under the First Lien Credit
Agreement and the borrowings under the Credit Documents, in substantially the
form of Schedule 4.1(h) hereto.
     (i) Account Designation Letter. The Administrative Agent shall have
received the executed Account Designation Letter in the form of Schedule 1.1(a)
hereto.

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     (j) Corporate Structure. The number of shares of each class of Capital
Stock issued and outstanding and the ownership thereof of the Credit Parties and
their Subsidiaries as of the Closing Date (after giving effect to the
Acquisition) shall be as described in Schedule 3.12 and Schedule 3.31, and shall
otherwise be reasonably satisfactory to the Administrative Agent. The
Administrative Agent and the Lenders shall be reasonably satisfied with the
management of the Credit Parties and their Subsidiaries and of the Acquired
Company and with all legal, tax, accounting, business and other matters relating
to the Acquisition or to the Credit Parties and their Subsidiaries or the
Acquired Company, in each case after giving effect to the Acquisition.
     (k) Acquisition Documents. The Administrative Agent shall have reviewed and
approved in its sole discretion all of the Acquisition Documents and there shall
not have been any material modification, amendment, supplement or waiver to the
Acquisition Documents without the prior written consent of the Administrative
Agent, and the Acquisition shall have been consummated in accordance with the
terms of the Acquisition Documents (without waiver of any conditions precedent
to the obligations of any party thereto). The Administrative Agent shall have
received a copy, certified by an officer of the Borrower as true and complete,
of each Acquisition Document as originally executed and delivered, together with
all exhibits and schedules thereto. The Administrative Agent shall have received
evidence that the estimated purchase accounting adjustments and asset write-ups
(collectively, the “Accounting Adjustments”) in connection with the Acquisition
are equal to or substantially similar to the Accounting Adjustments previously
delivered to the Administrative Agent, if any, or otherwise acceptable to the
Administrative Agent. The aggregate consideration for the Acquisition shall not
exceed $114,000,000 (excluding the GenCorp Earnout Obligations) and a portion of
such consideration shall consist of the Subordinated Seller Note in the
principal amount of $25,500,000.
     (l) Consents. The Administrative Agent shall have received evidence that
all boards of directors (including, without limitation, the board of directors
of the Acquired Company prior to Acquisition), governmental, shareholder and
material third party consents and approvals necessary in connection with the
Transactions have been obtained and all applicable waiting periods have expired
without any action being taken by any authority that could restrain, prevent or
impose any material adverse conditions on such transactions or that could seek
or threaten any of the foregoing.
     (m) Compliance with Laws. The Transactions contemplated hereby shall be in
compliance with all applicable laws and regulations (including all applicable
securities and banking laws, rules and regulations).
     (n) Bankruptcy. There shall be no bankruptcy or insolvency proceedings with
respect to Credit Parties or any of their Subsidiaries.
     (o) First Lien Term Loan. The Administrative Agent shall have received duly
executed copies of the First Lien Credit Documents, each in form and substance
reasonably

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acceptable to the Lenders in their sole discretion, and evidence that the
Borrower has received gross proceeds of the First Lien Term Loan in an amount
equal to $65,000,000.
     (p) Existing Indebtedness of the Credit Parties. All of the existing
Indebtedness for borrowed money of the Borrower and its Subsidiaries (other than
Indebtedness permitted to exist pursuant to Section 6.1) shall be repaid in full
and all security interests related thereto shall be terminated on the Closing
Date.
     (q) Financial Statements. The Administrative Agent and the Lenders shall
have received copies of the financial statements referred to in Section 3.1
hereof, each in form and substance satisfactory to it.
     (r) No Material Adverse Change. Since September 30, 2004, there has been no
material adverse change in the business, properties, prospects, operations or
condition (financial or otherwise) of the Borrower or any of its Subsidiaries
and there shall not have occurred any material disruption or material adverse
change in the financial, banking or capital markets (including the loan
syndication market) that has materially impaired or would materially impair the
Arranger’s ability to syndicate the facilities.
     (s) Financial Condition Certificate. The Administrative Agent shall have
received a certificate or certificates executed by a Responsible Officer of the
Borrower as of the Closing Date stating that (i) no action, suit, investigation
or proceeding is pending, ongoing or, to the knowledge of any Credit Party,
threatened in any court or before any other Governmental Authority that purports
to affect any Credit Party or any transaction contemplated by the Credit
Documents, which action, suit, investigation or proceeding could reasonably be
expected to have a Material Adverse Effect and (ii) immediately after giving
effect to this Credit Agreement, the other Credit Documents, and all the
Transactions contemplated to occur on such date, (A) no Default or Event of
Default exists, (B) all representations and warranties contained herein and in
the other Credit Documents are true and correct in all material respects, and
(C) the Credit Parties are in pro forma compliance with each of the initial
financial covenants set forth in Section 5.9 (as evidenced through detailed
calculations of such financial covenants on a schedule to such certificate) as
of the last day of the month immediately preceding the Closing Date
     (t) Total Leverage Ratio and First Lien Leverage Ratio. The Administrative
Agent shall have received evidence that, as of the last day of the month
immediately preceding the Closing Date (i) the Total Leverage Ratio of the
Credit Parties and their Subsidiaries is not greater than 4.25 to 1.00 and
(ii) the First Lien Leverage Ratio (as defined in the First Lien Credit
Agreement) of the Credit Parties and their Subsidiaries is not greater than 3.25
to 1.00, in each case, calculated on a Pro Forma Basis after giving effect to
the Transactions.
     (u) Consolidated EBITDA. The Administrative Agent shall have received
evidence reasonably satisfactory thereto provided by the Credit Parties that
Consolidated EBITDA is not less than $20,400,000 for the twelve month period
ending as of the last

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day of the month immediately preceding the Closing Date, calculated on a Pro
Forma Basis after giving effect to the Transaction.
     (v) Cash Reserves. The Administrative Agent shall have received evidence
that the Borrower shall have a minimum balance of excess unrestricted cash as of
the last day of the month immediately preceding the Closing Date equal to
$24,000,000 less the amount of Capital Expenditures funded by the Acquired
Company between December 1, 2004 and the Closing Date that exceeds $19,000,000,
calculated after giving effect to the Transactions.
     (w) Subordinated Seller Note. The Administrative Agent shall have received
evidence that not less than $25,500,000 of the aggregate consideration for the
Acquisition shall have been in the form of the Subordinated Seller Note.
     (x) Material Contracts. The Administrative Agent shall have received true
and complete copies, certified by an officer of the Borrower as true and
complete, of all Material Contracts, together with all exhibits and schedules
except to the extent the disclosure of such Material Contract is then prohibited
by any Requirement of Law, the directive of any applicable Governmental
Authority or any Contractual Obligation binding on any Credit Party as of the
Closing Date; provided that the Borrower may redact certain portions of such
Material Contracts containing non-financial trade secrets or non-financial
proprietary information with the consent of the Administrative Agent (such
consent not to be unreasonably withheld).
     (y) Patriot Act Certificate. The Administrative Agent shall have received a
certificate satisfactory thereto, for benefit of itself and the Lenders,
provided by the Borrower that sets forth information required by the Patriot Act
(as defined in Section 9.18) including, without limitation, the identity of the
Borrower, the name and address of the Borrower and other information that will
allow the Administrative Agent or any Lender, as applicable, to identify the
Borrower in accordance with the Patriot Act.
     (z) Fees. The Administrative Agent and the Lenders shall have received all
fees, if any, owing pursuant to the Fee Letter and Section 2.2.
     (aa) Representations and Warranties. The representations and warranties
made by the Credit Parties herein, in the Security Documents or which are
contained in any certificate furnished at any time under or in connection
herewith shall be true and correct on and as of the date of such Extension of
Credit as if made on and as of such date (except for those which expressly
relate to an earlier date).
     (bb) No Default or Event of Default. No Default or Event of Default shall
have occurred and be continuing on such date or after giving effect to the
Extension of Credit to be made on such date unless such Default or Event of
Default shall have been waived in accordance with this Credit Agreement.

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     (cc) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Credit Agreement shall be
reasonably satisfactory in form and substance to the Administrative Agent and
its counsel.
ARTICLE V
AFFIRMATIVE COVENANTS
     Each of the Credit Parties hereby covenants and agrees that on the Closing
Date, and thereafter for so long as this Credit Agreement is in effect, no Note
remains outstanding and unpaid and the Credit Party Obligations and all other
amounts owing to the Administrative Agent or any Lender hereunder are paid in
full (other than inchoate indemnity obligations), such Credit Party shall, and
shall cause each of its Subsidiaries (other than in the case of Sections 5.1 or
5.2 hereof), to:
     Section 5.1 Financial Statements.
     Furnish to the Administrative Agent for distribution to the Lenders:
     (a) Annual Financial Statements. As soon as available and in any event no
later than the earlier of (i) to the extent applicable, the date the Borrower is
required by the SEC to deliver its Form 10-K for any fiscal year of the Borrower
and (ii) ninety (90) days after the end of each fiscal year of the Borrower, a
copy of the consolidated and consolidating balance sheets of the Borrower and
its Consolidated Subsidiaries as at the end of such fiscal year, the related
Consolidated and consolidating statements of income or operations and the
related consolidated statements of shareholders’ equity and of cash flows (to
the extent available) of the Borrower and its Consolidated Subsidiaries for such
year, which other than in the case of the consolidating statements shall be
audited by Deloitte & Touche LLP or a firm of independent certified public
accountants of nationally recognized standing reasonably acceptable to the
Administrative Agent, setting forth in each case in comparative form the figures
for the previous fiscal year, reported on without a “going concern” or like
qualification or exception, or qualification indicating that the scope of the
audit was inadequate to permit such independent certified public accountants to
certify such financial statements without such qualification;
     (b) Quarterly Financial Statements. As soon as available and in any event
no later than the earlier of (i) to the extent applicable, the date the Borrower
is required by the SEC to deliver its Form 10-Q for any fiscal quarter of the
Borrower and (ii) forty-five (45) days after the end of each fiscal quarter of
the Borrower, a copy of the consolidated and consolidating balance sheets of the
Borrower and its Consolidated Subsidiaries as at the end of such period and
related consolidated and consolidating statements of income or operations and
Consolidated statements of cash flows (to the extent available) for the Borrower
and its Consolidated Subsidiaries for such quarterly period and for the portion
of the fiscal year ending with such period, in each case setting forth in
comparative form

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consolidated figures for the corresponding period or periods of the preceding
fiscal year (subject to normal recurring year-end audit adjustments);
     (c) Monthly Financial Statements. As soon as available and in any event no
later than thirty (30) days after the end of each fiscal month of the Borrower,
a copy of the consolidated and consolidating balance sheets of the Borrower and
its Consolidated Subsidiaries as at the end of such period and related
consolidated and consolidating statements of income or operations and
consolidated statements of cash flows (to the extent available) for the Borrower
and its Consolidated Subsidiaries for such monthly period and for the portion of
the fiscal year ending with such period, in each case setting forth in
comparative form consolidated figures for the corresponding period or periods of
the preceding fiscal year (subject to normal recurring year-end audit
adjustments and in the case of statements of cash flows, if available); and
     (d) Annual Operating Budget and Cash Flow. As soon as available, but in any
event within fifteen (15) days after the end of each fiscal year, a copy of the
detailed annual operating budget or plan including cash flow projections of the
Borrower and its Subsidiaries for the next four fiscal quarter period prepared
on a monthly basis, in form and detail reasonably acceptable to the
Administrative Agent and the Lenders, together with a summary of the material
assumptions made in the preparation of such annual budget or plan;
all such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and to be prepared in reasonable detail and, in the
case of the annual and quarterly financial statements provided in accordance
with subsections (a) and (b) above, in accordance with GAAP applied consistently
throughout the periods reflected therein and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change, if any, in the application of accounting principles as
provided in Section 1.3.
Notwithstanding the foregoing, financial statements and reports required to be
delivered pursuant to the foregoing provisions of this Section may be delivered
electronically and if so, shall be deemed to have been delivered on the date on
which the Administrative Agent receives such reports from the Borrower through
electronic mail; provided that, upon the Administrative Agent’s request, the
Borrower shall provide paper copies of any documents required hereby to the
Administrative Agent.
     Section 5.2 Certificates; Other Information.
     Furnish to the Administrative Agent for distribution to the Lenders:
     (a) concurrently with the delivery of the financial statements referred to
in Section 5.1(a) above, a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;

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     (b) concurrently with the delivery of the financial statements referred to
in Sections 5.1(a) and 5.1(b) above, a certificate of a Responsible Officer
substantially in the form of Schedule 5.2(b) stating that, to the best of such
Responsible Officer’s knowledge, each of the Credit Parties during such period
observed or performed in all material respects all of its covenants and other
agreements, and satisfied in all material respects every condition, contained in
this Credit Agreement to be observed, performed or satisfied by it, and that
such Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate and such certificate shall
include the calculations in reasonable detail required to indicate compliance
with Section 5.9 as of the last day of such period;
     (c) concurrently with or prior to the delivery of the financial statements
referred to in Sections 5.1(a) and 5.1(b) above, (i) an updated copy of
Schedule 3.12 if the Borrower or any of its Subsidiaries has formed or acquired
a new Subsidiary since the Closing Date or since Schedule 3.12 was last updated,
as applicable, (ii) an updated copy of Schedule 3.16 if the Borrower or any of
its Subsidiaries has registered, applied for registration of, acquired or
otherwise obtained ownership of any new Material IP since the Closing Date or
since Schedule 3.16 was last updated, as applicable, and (iii) an updated copy
of Schedule 3.25 if any new Material Contract has been entered into since the
Closing Date or since Schedule 3.25 was last updated, as applicable, together
with a copy of each new Material Contract;
     (d) promptly upon their becoming available, (i) copies of all reports
(other than those otherwise provided pursuant to Section 5.1 and those which are
of a promotional nature) and other financial information which the Borrower
sends to its shareholders, (ii) copies of all reports and all registration
statements and prospectuses, if any, which the Borrower may make to, or file
with, the Securities and Exchange Commission (or any successor or analogous
Governmental Authority) or any securities exchange or other private regulatory
authority and (iii) all press releases and other statements made available by
any of the Credit Parties to the public concerning material developments in the
business of any of the Credit Parties;
     (e) within ninety (90) days after the end of each fiscal year of the
Borrower, a certificate containing information regarding the amount of all Asset
Dispositions, Debt Issuances, and Equity Issuances that were made during the
prior fiscal year and amounts received in connection with any Recovery Event
during the prior fiscal year together with a statement demonstrating a
calculation of Excess Cash Flow;
     (f) promptly upon receipt thereof, a copy or summary of any other report,
or “management letter” or similar report submitted by independent accountants to
the Borrower or any of its Subsidiaries in connection with any annual, interim
or special audit of the books of such Person (to the extent the Borrower is
authorized to deliver such management letter);

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     (g) promptly upon receipt or delivery thereof, copies of all notices in
writing (other than notices of borrowing, extension or conversion and any notice
that is duplicative of a notice delivered hereunder) delivered to the Borrower
or sent by or on behalf of the Borrower under the First Lien Credit Documents;
and
     (h) promptly, such additional financial and other information as the
Administrative Agent, on behalf of any Lender, may from time to time reasonably
request.
     Section 5.3 Payment of Taxes and Other Obligations.
     Pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, subject, where applicable, to specified
grace periods, (a) its Federal and state income taxes and other material taxes
and (b) its other material obligations and liabilities of whatever nature in
accordance with industry practice and (c) any additional material costs that are
imposed as a result of any failure to so pay, discharge or otherwise satisfy
such taxes, obligations and liabilities, except when the amount or validity of
any such taxes, obligations and liabilities is currently being contested in good
faith by appropriate proceedings and reserves, if applicable, in conformity with
GAAP with respect thereto have been provided on the books of the Credit Parties.
     Section 5.4 Conduct of Business and Maintenance of Existence.
     (a) Continue to engage in business of the same general type as now
conducted by it on the Closing Date and preserve, renew and keep in full force
and effect its legal existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business; (b) comply in all material respects with all material
Contractual Obligations (other than Contractual Obligations under the First Lien
Credit Documents which are addressed by Section 7.1(d) hereof); and (c) comply
with all Requirements of Law applicable to it except to the extent that failure
to comply therewith could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; provided that the Borrower may
liquidate or dissolve any Subsidiary in the exercise of its reasonable business
judgment to the extent permitted hereunder and such liquidation or dissolution
is not materially adverse to the Lenders.
     Section 5.5 Maintenance of Property; Insurance.
     (a) Keep all material property useful and necessary in its business in good
working order and condition (ordinary wear and tear and obsolescence excepted).
     (b) Maintain with financially sound and reputable insurance companies
liability, casualty, property and business interruption insurance (including,
without limitation, insurance with respect to its tangible Collateral) in at
least such amounts and against at least such risks as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to the Administrative

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Agent, upon the request of the Administrative Agent, full information as to the
insurance carried. The Administrative Agent shall be named as loss payee or
mortgagee, as its interest may appear, and/or additional insured with respect to
any such casualty, property and liability insurance, as applicable, and each
provider of any such insurance shall agree, by endorsement upon the policy or
policies issued by it or by independent instruments furnished to the
Administrative Agent, that it will give the Administrative Agent thirty
(30) days prior written notice before any such policy or policies shall be
altered or canceled, and such policies shall provide that no act or default of
the Credit Parties or any of their Subsidiaries or any other Person shall affect
the rights of the Administrative Agent or the Lenders under such policy or
policies.
     (c) In case of any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Administrative Agent generally
describing the nature and extent of such damage or destruction. In case of any
such material loss, damage to or destruction of the Collateral of any Credit
Party or any part thereof, if required by the Administrative Agent or the
Required Lenders, such Credit Party (whether or not the insurance proceeds, if
any, received on account of such damage or destruction shall be sufficient for
that purpose), at such Credit Party’s cost and expense, will (in the exercise of
its reasonable business judgment) promptly repair or replace the Collateral of
such Credit Party so lost, damaged or destroyed.
     Section 5.6 Inspection of Property; Books and Records; Discussions.
     Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its businesses and activities; and
permit, during regular business hours and upon reasonable notice by the
Administrative Agent or any Lender, the Administrative Agent or any Lender to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time and as often as may reasonably
be desired, and to discuss any information or other matter, unless disclosure to
the Administrative Agent or any Lender (or designated representative) is then
prohibited by a Requirement of Law, a directive of any Governmental Authority or
a Contractual Obligation binding on a Credit Party as of the Closing Date;
provided, that, a representative of the Borrower may be present at such meeting.
     Section 5.7 Notices.
     Give notice in writing to the Administrative Agent (which shall promptly
transmit such notice to each Lender) of:
     (a) promptly, but in any event within two (2) Business Days after any
Credit Party knows of the occurrence of any Default or Event of Default;
     (b) promptly, any default or event of default under any material
Contractual Obligation of any Credit Party or any of their Subsidiaries which,
individually or in the

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aggregate, could reasonably be expected to have a Material Adverse Effect or
involve a monetary claim in excess of $2,500,000;
     (c) promptly, any litigation, or any investigation or proceeding known to
any Credit Party (i) affecting any Credit Party or any of their Subsidiaries
which, if adversely determined, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or involve a monetary
claim in excess of $2,500,000, (ii) affecting or with respect to this Credit
Agreement, any other Credit Document or any security interest or Lien created
thereunder or (iii) involving an environmental claim or potential liability
under Environmental Laws which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
     (d) any labor controversy that has resulted in, or threatens to result in,
a strike or other work action against any Credit Party which could reasonably be
expected to have a Material Adverse Effect;
     (e) any attachment, judgment, lien, levy or order exceeding $2,500,000 that
may be assessed against or threatened against any Credit Party other than
Permitted Liens;
     (f) as soon as possible and in any event within thirty (30) days after any
Credit Party knows of: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, a failure to make any material
required contribution to a Plan, the creation of any Lien in favor of the PBGC
(other than a Permitted Lien) or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC or any
Credit Party, any Commonly Controlled Entity or any Multiemployer Plan, with
respect to the withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan, in either case, resulting in any liability in excess of
$1,000,000;
     (g) promptly, any notice of any violation received by any Credit Party from
any Governmental Authority including, without limitation, any notice of
violation of Environmental Laws; and
     (h) promptly, any other development or event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Credit Parties propose to take with respect thereto.
In the case of any notice of a Default or Event of Default, the Borrower shall
specify that such notice is a Default or Event of Default notice on the face
thereof.

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     Section 5.8 Environmental Laws.
     (a) Comply in all material respects with all applicable Environmental Laws
and obtain and comply with and maintain any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws where the failure to do so could reasonably be expected to have a Material
Adverse Effect;
     (b) Conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental Laws
and promptly comply with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws, where the failure to do so could
reasonably be expected to have a Material Adverse Effect, except to the extent
that the same are being contested in good faith by appropriate proceedings; and
     (c) Defend, indemnify and hold harmless the Administrative Agent, the
Control Agent and the Lenders, and their respective employees, agents, officers
and directors, from and against any and all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature
known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Credit Parties or any of
their Subsidiaries or the Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorney’s and consultant’s fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing arise out of the gross negligence, bad faith or willful
misconduct of the party seeking indemnification therefor. The agreements in this
paragraph shall survive repayment of the Credit Party Obligations and all other
amounts payable hereunder and termination of the Commitments and the Credit
Documents.
     Section 5.9 Financial Covenants.
     Comply with the following financial covenants:
     (a) Total Leverage Ratio. The Total Leverage Ratio, as of the last day of
each fiscal quarter of the Borrower occurring during the periods indicated
below, shall be less than or equal to the following:

          Period   Maximum Ratio
Closing Date through December 31, 2006
    5.00 to 1.00  
January 1, 2006 through March 31, 2006
    4.75 to 1.00  
April 1, 2006 through June 30, 2006
    4.50 to 1.00  
July 1, 2006 through September 30, 2006
    4.00 to 1.00  
October 1, 2006 through September 30, 2007
    3.50 to 1.00  
October 1, 2007 through September 30, 2008
    3.25 to 1.00  
October 1, 2008 and thereafter
    3.00 to 1.00  

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     (b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as of the
last day of each fiscal quarter of the Borrower occurring during the periods
indicated below, shall be greater than or equal to the following:

          Period   Minimum Ratio
October 1, 2006 through September 30, 2007
    1.20 to 1.00  
October 1, 2007 through September 30, 2008
    1.00 to 1.00  
October 1, 2008 through September 30, 2009
    1.30 to 1.00  
October 1, 2010 and thereafter
  No Requirement

     (c) Minimum Consolidated EBITDA. Consolidated EBITDA, as of the last day of
each fiscal quarter of the Borrower occurring during the periods indicated
below, shall be greater than or equal to the following:

              Minimum Consolidated Period   EBITDA
Closing Date through December 31, 2005
  $ 15,500,000  
January 1, 2006 through March 31, 2006
  $ 17,500,000  
April 1, 2006 through June 30, 2006
  $ 19,000,000  
July 1, 2006 through September 30, 2006
  $ 21,500,000  

     Notwithstanding the above, the parties hereto acknowledge and agree that,
for purposes of all calculations made in determining compliance for any
applicable period with the financial covenants set forth in this Section 5.9,
(i) after consummation of any Permitted Acquisition, (A) income statement items
and other balance sheet items (whether positive or negative) attributable to the
Target acquired in such transaction shall be included in such calculations to
the extent relating to such applicable period, subject to adjustments reasonably
acceptable to the Borrower and the Required Lenders, and (B) Indebtedness of a
Target which is retired in connection with a Permitted Acquisition shall be
excluded from such calculations and deemed to have been retired as of the first
day of such applicable period and (ii) after any Asset Disposition permitted by
Section 6.4(a)(vi), (A) income statement items, cash flow statement items and
other balance sheet items (whether positive or negative) attributable to the
property or assets disposed of shall be excluded in such calculations to the
extent relating to such applicable period, subject to adjustments reasonably
acceptable to the Borrower and the Administrative Agent (after consultation with
the Lenders) and (B) Indebtedness that is repaid with the proceeds of such Asset
Disposition shall be excluded from such calculations and deemed to have been
repaid as of the first day of such applicable period.
     Section 5.10 Additional Guarantors.
     The Credit Parties will cause each of their Domestic Subsidiaries (other
than ESI), whether newly formed, after acquired or otherwise existing, and each
other entity that guarantees the First Lien Obligations to promptly (and in any
event within thirty (30) days after such Domestic Subsidiary is formed or
acquired (or such longer period of time as agreed to by the Administrative Agent
in its reasonable discretion)) become a Guarantor hereunder by way of execution
of a Joinder Agreement. In connection therewith, the Credit Parties shall give
notice

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to the Administrative Agent not less than ten (10) days prior to creating a
Domestic Subsidiary (or such shorter period of time as agreed to by the
Administrative Agent in its reasonable discretion), or acquiring the Capital
Stock of any other Person. The Credit Party Obligations shall be secured by,
among other things, a perfected security interest (subject only to the Lien of
the First Lien Administrative Agent in favor of the holders of the First Lien
Obligations and any other Permitted Liens) in the Collateral of such new
Guarantor and a pledge of 100% of the Capital Stock of such new Guarantor and
its Domestic Subsidiaries and 65% (or such higher percentage that would not
result in adverse tax consequences for such new Guarantor) of the voting Capital
Stock and 100% of the non-voting Capital Stock of its first-tier Foreign
Subsidiaries held by the Borrower or any Guarantor. In connection with the
foregoing, the Credit Parties shall deliver to the Administrative Agent or the
Control Agent, as applicable, with respect to each new Guarantor to the extent
applicable, substantially the same documentation required pursuant to
Sections 4.1(b)-(e), 5.12 and 5.16 and such other documents or agreements as the
Administrative Agent may reasonably request.
     Section 5.11 Compliance with Law.
     Comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
Property if noncompliance with any such law, rule, regulation, order or
restriction could reasonably be expected to have a Material Adverse Effect.
     Section 5.12 Pledged Assets.
     (a) Cause 100% of the Capital Stock in each of its direct or indirect
Domestic Subsidiaries (other than ESI) and 65% of the voting Capital Stock and
100% of the non-voting Capital Stock in each of its first-tier Foreign
Subsidiaries, in each case, held by the Borrower or any Guarantor, to be subject
at all times to a perfected Lien (except for Permitted Liens) in favor of the
Administrative Agent or the Control Agent, as applicable, (subject only to the
Lien of the First Lien Administrative Agent in favor of the holders of the First
Lien Obligations) pursuant to the terms and conditions of the Security Documents
or such other security documents as the Administrative Agent shall reasonably
request; provided that with respect to any Capital Stock of any first-tier
Foreign Subsidiaries to be pledged to the Administrative Agent, for the benefit
of the Lenders, on or after the Closing Date, the Administrative Agent, in its
reasonable discretion after consultation with Borrower, shall be entitled to
determine that the cost of perfecting, in a foreign jurisdiction, the security
interest of the Administrative Agent, for the benefit of the Lenders, in such
Capital Stock is impractical, illegal or cost-prohibitive, and may agree to
forego the foreign perfection of such security interest.
     (b) If, subsequent to the Closing Date, a Credit Party shall acquire any
real property or any securities, instruments, chattel paper or other personal
property required for perfection to be delivered to the Administrative Agent or
the Control Agent, as applicable, as Collateral hereunder or under any of the
Security Documents, promptly (and in any event within three (3) Business Days)
after any Responsible Officer of a Credit Party acquires knowledge of same
notify the Administrative Agent of same. Each

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Credit Party shall, and shall cause each of its Subsidiaries (other than ESI)
to, take such action at its own expense as reasonably requested by the
Administrative Agent (including, without limitation, any of the actions
described in Section 4.1(d) or (e) hereof) to ensure that the Administrative
Agent or the Control Agent, as applicable, has a perfected Lien (except for
Permitted Liens) to secure the Credit Party Obligations in (i) all personal
property of the Credit Parties located in the United States, (ii) to the extent
deemed to be material by the Administrative Agent or the Required Lenders in its
or their sole reasonable discretion, all other personal property of the Credit
Parties, subject in each case only to Permitted Liens; provided that, such Lien
shall not result in materially adverse tax consequences to the Borrower or its
Subsidiaries, and (iii) to the extent required by Section 5.16, all real
property of the Credit Parties. Each Credit Party shall, and shall cause each of
its Subsidiaries to, adhere to the covenants set forth in the Security
Documents.
     Section 5.13 Hedging Agreements.
     Within 180 days following the Closing Date, cause at least 50% of the
principal amount of the Term Loan then outstanding and the term loan under the
First Lien Credit Agreement then outstanding, and projected to be outstanding,
to be hedged pursuant to Hedging Agreements for a term of at least two (2) years
with a counterparty and on terms reasonably acceptable to the Administrative
Agent.
     Section 5.14 Covenants Regarding Patents, Trademarks and Copyrights.
     (a) Concurrently with the delivery of quarterly and annual financial
statements of the Borrower pursuant to Section 5.1 hereof, notify the
Administrative Agent promptly if it knows that any application, letters patent
or registration relating to any Material IP of the Credit Parties or any of
their Subsidiaries may become abandoned, or of any material adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court) regarding any Credit Party’s or any of
its Subsidiary’s ownership of any Patent or Trademark constituting Material IP,
its right to patent or register the same, or to enforce, keep and maintain the
same, or its rights under any Patent License or Trademark License constituting
Material IP.
     (b) Concurrently with the delivery of quarterly and annual financial
statements of the Borrower pursuant to Section 5.1 hereof, notify the
Administrative Agent promptly after it knows of any material adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in any court)
regarding any Copyright or Copyright License constituting Material IP of the
Credit Parties or any of their Subsidiaries, whether (i) such Copyright or
Copyright License may become invalid or unenforceable prior to its expiration or
termination, or (ii) any Credit Party’s or any of its Subsidiary’s ownership of
such Copyright, its right to register the same or to enforce, keep and maintain
the same, or its rights under such Copyright License, may become affected.

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     (c) (i) Concurrently with the delivery of quarterly and annual financial
statements of the Borrower pursuant to Section 5.1 hereof, notify the
Administrative Agent of any filing by any Credit Party or any of its
Subsidiaries, either itself or through any agent, employee, licensee or
designee, of any application for registration of any Material IP with the United
States Copyright Office or United States Patent and Trademark Office or any
similar office or agency in any other country or any political subdivision
thereof.
     (ii) Concurrently, with the delivery of quarterly and annual financial
statements of the Borrower pursuant to Section 5.1 hereof, provide the
Administrative Agent and its counsel a complete and correct list of all Material
IP owned by or licensed to the Credit Parties or any of their Subsidiaries, that
have not been set forth as annexes of such documents and instruments showing all
filings and recordings for the protection of the security interest of the
Administration Agent therein pursuant to the agreements of the United States
Patent and Trademark Office or the United States Copyright Office.
     (iii) Upon reasonable request of the Administrative Agent, execute and
deliver any and all agreements, instruments, documents, and papers as the
Administrative Agent may reasonably request to evidence the Administrative
Agent’s security interest in the Material IP and the general intangibles
referred to in clauses (i) and (ii), including, without limitation, the goodwill
of the Credit Parties and their Subsidiaries relating thereto or represented
thereby (or such other Material IP or the general intangibles relating thereto
or represented thereby as the Administrative Agent may reasonably request.
     (d) Take all necessary actions, including, without limitation, in any
proceeding before the United States Patent and Trademark Office or the United
States Copyright Office, to maintain each item of Material IP of the Credit
Parties and their Subsidiaries, including, without limitation, payment of
maintenance fees, filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings, as shall be reasonable and appropriate in accordance with prudent
business practice.
     (e) In the event that any Credit Party becomes aware that any Material IP
is infringed, misappropriated or diluted by a third party in any material
respect, notify the Administrative Agent promptly after it learns thereof and,
unless the Credit Parties shall reasonably determine that such Material IP is
not material to the business of the Credit Parties and their Subsidiaries taken
as a whole or as to which the Credit Parties reasonably conclude that the cost
or the strategic impact of such proceeding or its likelihood of success does not
justify its prosecution, promptly sue for infringement, misappropriation or
dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and take such other actions as the Credit Parties
shall reasonably deem appropriate under the circumstances to protect such
Intellectual Property.

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     Section 5.15 Credit Facility Ratings.
     Use its best efforts to cause the credit facilities set forth in this
Credit Agreement to be rated by each of Moody’s and S&P.
     Section 5.16 Real Property Collateral.
     Within ninety (90) days of the Closing Date or within one hundred twenty
(120) days of the acquisition of any such Mortgaged Property, the Administrative
Agent shall have received, in form and substance satisfactory to the
Administrative Agent and the Lenders:
     (a) fully executed and notarized Mortgage Instruments encumbering the
Mortgaged Properties listed in Schedule 3.19(d) as to properties owned by the
Credit Parties and, to the extent required by the Administrative Agent, the
leasehold interest in the Mortgaged Properties listed in Schedule 3.19(d) as to
properties that are warehouses, plants or other real properties material to the
conduct of the Credit Parties’ business and are leased by the Credit Parties;
     (b) a title report in respect of each of the Mortgaged Properties;
     (c) with respect to each Mortgaged Property listed in Schedule 3.19(d), a
Mortgage Policy assuring the Administrative Agent that the Mortgage Instrument
with respect to such Mortgaged Property creates a valid and enforceable mortgage
lien on such Mortgaged Property, free and clear of all defects and encumbrances
except Permitted Liens, which Mortgage Policy shall be in form and substance
reasonably satisfactory to the Administrative Agent and shall provide for
affirmative insurance and such reinsurance as the Administrative Agent may
reasonably request, all of the foregoing in form and substance reasonably
satisfactory to the Administrative Agent;
     (d) evidence as to (i) whether any Mortgaged Property listed in Schedule
3.19(d) is a Flood Hazard Property and (ii) if any Mortgaged Property is a Flood
Hazard Property, (x) whether the community in which such Mortgaged Property is
located is participating in the National Flood Insurance Program, (y) the
applicable Credit Party’s written acknowledgment of receipt of written
notification from the Administrative Agent (I) as to the fact that such
Mortgaged Property is a Flood Hazard Property and (II) as to whether the
community in which each such Flood Hazard Property is located is participating
in the National Flood Insurance Program and (z) copies of insurance policies or
certificates of insurance of the Credit Parties and their Subsidiaries
evidencing flood insurance reasonably satisfactory to the Administrative Agent
and naming the Administrative Agent as loss payee on behalf of the Lenders;
     (e) maps or plats of an as-built survey (or aerial survey to the extent
permitted by the Administrative Agent) of the sites of the Mortgaged Properties
listed in Schedule 3.19(d) certified to the Administrative Agent and the Title
Insurance Company in a manner reasonably satisfactory to them, dated a date
satisfactory to each of the Administrative Agent and the Title Insurance Company
by an independent professional

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licensed land surveyor reasonably satisfactory to each of the Administrative
Agent and the Title Insurance Company, which maps or plats and the surveys on
which they are based shall be sufficient to delete any standard printed survey
exception contained in the applicable title policy and be made in accordance
with the Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the American
Congress on Surveying and Mapping in 1992, and, without limiting the generality
of the foregoing, there shall be surveyed and shown on such maps, plats or
surveys the following (to the extent applicable): (i) the locations on such
sites of all the buildings, structures and other improvements and the
established building setback lines; (ii) the lines of streets abutting the sites
and width thereof; (iii) all access and other easements appurtenant to the sites
necessary to use the sites; (iv) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar encumbrances affecting the
site, whether recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (v) any encroachments on any adjoining property
by the building structures and improvements on the sites; and (vi) if the site
is described as being on a filed map, a legend relating the survey to said map;
     (f) satisfactory environmental reviews of all owned Mortgaged Properties
listed in Schedule 3.19(d) and, to the extent requested by the Administrative
Agent, all leased Mortgaged Properties listed in Schedule 3.19(d), including but
not limited to Phase I environmental assessments, together with reliance letters
in favor of the Lenders;
     (g) opinions of counsel to the Credit Parties for each jurisdiction in
which the Mortgaged Properties are located;
     (h) to the extent available, zoning letters from each municipality or other
Governmental Authority for each jurisdiction in which the Mortgaged Properties
listed in Schedule 3.19(d) are located;
     (i) an appraisal of each owned Mortgaged Property, in form and substance
satisfactory to the Administrative Agent; and
     (j) to the extent requested by the Administrative Agent, with respect to
each leased Mortgaged Property, (i) a survey certified to the Administrative
Agent by a firm of surveyors reasonably satisfactory to the Administrative Agent
and (ii) a landlord lien waiver in form and substance satisfactory to the
Administrative Agent.
     Section 5.17 Federal Assignment of Claims Act.
     Deliver such documentation as may be reasonably required by the
Administrative Agent to comply with the Federal Assignment of Claims Act; and
the Credit Parties shall take such actions as may be required by the
Administrative Agent to file such documentation with the appropriate
Governmental Authorities.

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     Section 5.18 Post-Closing Covenant; Further Assurances.
     (a) Landlord Waivers. Within 30 days of the Closing Date (or such extended
period of time as approved by the Administrative Agent), the Credit Parties
shall use commercially reasonable efforts to the deliver to the Administrative
Agent, in the case of any books and records or material personal property
Collateral located at premises leased by a Credit Party, such estoppel letters,
consents and waivers from the landlords on such real property as may be
reasonably required by the Administrative Agent.
     (b) Intellectual Property. Within sixty days (60) days after the Closing
Date (or such extended period of time as agreed to by the Administrative Agent),
to the extent required by the Administrative Agent, the Credit Parties shall
provide evidence satisfactory to the Administrative Agent, in form and substance
reasonably satisfactory to the Administrative Agent, that all chain of title
issues (including unreleased security interests related to Liens that have
previously been terminated) with respect to the Intellectual Property have been
corrected in the appropriate records of the United States Patent and Trademark
Office.
     (c) Account Control Agreements. Within fifteen (15) days after the Closing
Date (or such extended period of time as agreed to by the Administrative Agent),
the Credit Parties shall deliver to the Control Agent an account control
agreement with respect to the deposit accounts and/or securities accounts of the
Credit Parties held at Merrill Lynch, Pierce, Fenner & Smith Incorporated, such
account control agreement to be in form and substance reasonably satisfactory to
the Administrative Agent.
     (d) Further Assurances. Upon the reasonable request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute or
cause to be executed any and all documents for filing under the provisions of
the Uniform Commercial Code or any other Requirement of Law which are necessary
or advisable to maintain in favor of the Administrative Agent, for the benefit
of the Secured Parties, Liens on the Collateral that are duly perfected in
accordance with the requirements of, or the obligations of the Credit Parties
under, the Credit Documents and all applicable Requirements of Law.
ARTICLE VI
NEGATIVE COVENANTS
     The Credit Parties hereby covenant and agree that on the Closing Date, and
thereafter for so long as this Credit Agreement is in effect and until no Note
remains outstanding and unpaid and the Credit Party Obligations and all other
amounts owing to the Administrative Agent or any Lender hereunder are paid in
full (other than inchoate indemnity obligations), that:
     Section 6.1 Indebtedness.
     The Credit Parties will not, nor will they permit any Subsidiary to,
contract, create, incur, assume or permit to exist any Indebtedness, except:
     (a) Indebtedness arising or existing under this Credit Agreement and the
other Credit Documents;
     (b) Indebtedness of the Credit Parties and their Subsidiaries existing as
of the Closing Date as referenced in the financial statements referenced in
Section 3.1 (and set out more specifically in Schedule 6.1(b)) hereto and
renewals, refinancings or extensions thereof in a principal amount not in excess
of that outstanding as of the date of such renewal, refinancing or extension;
     (c) Indebtedness of the Credit Parties and their Subsidiaries incurred
after the Closing Date consisting of Capital Leases or Indebtedness incurred to
provide all or a portion of the purchase price or cost of construction of an
asset; provided that (i) such Indebtedness when incurred shall not exceed the
purchase price or cost of construction of

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such asset; (ii) no such Indebtedness shall be refinanced for a principal amount
in excess of the principal balance outstanding thereon at the time of such
refinancing; and (iii) the total amount of all such Indebtedness shall not
exceed a principal amount of $2,000,000 at any time outstanding;
     (d) Unsecured intercompany Indebtedness among the Credit Parties; provided,
that, any such Indebtedness shall be (i) fully subordinated to the Credit Party
Obligations hereunder on terms reasonably satisfactory to the Administrative
Agent and (ii) if such intercompany Indebtedness to such Credit Party is in
excess of $1,000,000, evidenced by promissory notes which shall be pledged to
the Administrative Agent as Collateral for the Credit Party Obligations;
     (e) Unsecured intercompany Indebtedness owed by AmPac ISP UK Ltd. to a
Credit Party in an amount, together with Investments pursuant to clause (l) of
the definition of Permitted Investments, in amount not to exceed $2,000,000 at
any one time outstanding; provided, that, any such Indebtedness shall be
(i) fully subordinated to the Credit Party Obligations hereunder on terms
reasonably satisfactory to the Administrative Agent and (ii) if such
intercompany Indebtedness to such Credit Party is in excess of $1,000,000,
evidenced by promissory notes which shall be pledged to the Administrative Agent
as Collateral for the Credit Party Obligations;
     (f) Indebtedness and obligations owing under Secured Hedging Agreements,
Hedging Agreements entered into in connection with the First Lien Credit
Agreement and other Hedging Agreements entered into in order to manage existing
or anticipated interest rate, exchange rate or commodity price risks and not for
speculative purposes;
     (g) Indebtedness under the First Lien Credit Agreement in a principal
amount not to exceed the Maximum First Lien Indebtedness at any time
outstanding;
     (h) Indebtedness arising or existing under the Subordinated Seller Note in
an aggregate principal amount not to exceed $25,500,000 (plus any pay-in-kind
interest that is capitalized pursuant to the terms of such Subordinated Seller
Note); provided that such Indebtedness shall be unsecured and non-amortizing
(except as permitted by Section 6.10);
     (i) Guaranty Obligations in respect of Indebtedness of a Credit Party to
the extent such Indebtedness is permitted to exist or be incurred pursuant to
this Section 6.1;
     (j) earn out obligations owed by the Borrower to GenCorp Inc. pursuant to
the Acquisition Documents, as in effect on the Closing Date, in an aggregate
amount not to exceed $5,000,000, on terms acceptable to the Administrative Agent
and as permitted hereunder (the “GenCorp Earn Out Obligations”);
     (k) other Indebtedness incurred by the Borrower or any of its Subsidiaries
arising from agreements providing for indemnification, adjustment of purchase
price or similar obligations, or from guaranties, surety bonds or performance
bonds securing the

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performance of the Borrower or any such Subsidiary pursuant to such agreements,
in connection with the Acquisition, any Permitted Acquisition or any Asset
Dispositions permitted pursuant to Section 6.4 below, including Indebtedness
payable pursuant to the Acquisition Documents;
     (l) other secured Indebtedness not otherwise permitted in subsections
(a) through (l) above, which does not exceed $500,000 in the aggregate principal
amount at any time outstanding;
     (m) other unsecured Indebtedness of Credit Parties not otherwise permitted
in subsections (a) through (l) above which does not exceed $1,000,000 in the
aggregate at any time outstanding;
     (n) unsecured Guaranty Obligations of the Borrower or any of its
Subsidiaries with respect to refinanced ESI Indebtedness, other than capital
leases, so long as the Loans are prepaid by an amount equal to the Net Cash
Proceeds of such guaranteed ESI Indebtedness; and
     (o) unsecured letters of credit of the Borrower or any of its Subsidiaries
in an aggregate principal amount not to exceed $3,000,000 at any time
outstanding.
     Section 6.2 Liens.
     The Credit Parties will not, nor will they permit any Subsidiary to,
contract, create, incur, assume or permit to exist any Lien with respect to any
of their respective property or assets of any kind (whether real or personal,
tangible or intangible), whether now owned or hereafter acquired, except for
Permitted Liens.
     Section 6.3 Nature of Business.
     The Credit Parties will not, nor will they permit any Subsidiary to, alter
the character of the business of the Credit Parties and their Subsidiaries, when
taken as a whole, in any material respect from that conducted as of the Closing
Date.
     Section 6.4 Consolidation, Merger, Sale or Purchase of Assets, etc.
     The Credit Parties will not, nor will they permit any Subsidiary to,
     (a) dissolve, liquidate or wind up its affairs, or sell, transfer, lease or
otherwise dispose of its property or assets or agree to do so at a future time,
except the following, without duplication, shall be expressly permitted:
     (i) (A) the sale, transfer, lease or other disposition of inventory and
materials in the ordinary course of business and (B) the conversion of cash into
Cash Equivalents and Cash Equivalents into cash;

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     (ii) Recovery Events;
     (iii) the sale, lease, transfer or other disposition of machinery, parts
and equipment no longer used or useful in the conduct of the business of the
Credit Parties or any of their Subsidiaries or where machinery, parts and
equipment shall be replaced by other machinery, parts and equipment;
     (iv) the sale, lease or transfer of property or assets (at fair value)
between the Borrower and any Guarantor;
     (v) the sale, lease or transfer of property or assets from a Credit Party
other than the Borrower to another Credit Party;
     (vi) the licenses of Intellectual Property rights in the ordinary course of
business;
     (vii) the termination of any Hedging Agreement permitted pursuant to
Section 6.1;
     (viii) the ESI Sale; provided that at the time of such sale (A) no Default
or Event of Default has occurred and is continuing and no Default or Event of
Default would result therefrom and (B) such sale is for fair market value as
determined by the board of directors of the Borrower;
     (ix) the consolidation, liquidation or merger of a Credit Party into
another Credit Party or any Subsidiary into a Credit Party; provided, that
(A) prior to or simultaneously with any such consolidation, liquidation or
merger, all actions required by the Administrative Agent shall be taken to
ensure the continued perfection and priority of the Administrative Agent’s Liens
on the property and assets of each such Credit Party and (B) if such
consolidation, liquidation or merger involves the Borrower, the Borrower shall
be the surviving entity;
     (x) the dissolution, liquidation or winding up of a Subsidiary that is not
a Credit Party; provided that prior to or simultaneously with any such
dissolution, liquidation or winding up, all assets of such Subsidiary are
transferred to a Credit Party or a Subsidiary thereof;
     (xi) the liquidation of any inactive or dormant Subsidiary; and
     (xii) the sale, lease or transfer of property or assets not to exceed
$2,000,000 in the aggregate in any fiscal year.
provided that (A) with respect to clauses (i)(A), (ii), (iii) and (vi) above, at
least 75% of the consideration received therefor by the Credit Parties or any
such Subsidiary shall be in the form of cash or Cash Equivalents, (B) after
giving effect to any Asset Disposition

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pursuant to clause (vi) above, the Credit Parties shall be in compliance on a
Pro Forma Basis with the financial covenants set forth in Section 5.9 hereof,
recalculated for the most recently ended month for which information is
available, and (C) with respect to clauses (iv), (v) and (vi) above, no Default
or Event of Default shall exist or shall result therefrom; provided, further,
that with respect to sales of assets permitted hereunder only, the
Administrative Agent shall be entitled, without the consent of the Required
Lenders, to release its Liens relating to the particular assets sold and, in the
case of a Guarantor which is the subject of the asset sale, to release it from
its Guaranty; or
     (b) (i) purchase, lease or otherwise acquire (in a single transaction or a
series of related transactions) the property or assets of any Person, other than
(A) Permitted Acquisitions and (B) except as otherwise limited or prohibited
herein, purchases or other acquisitions of Intellectual Property, inventory,
materials, property and equipment in the ordinary course of business, or
(ii) enter into any transaction of merger or consolidation, except for
(A) Investments or acquisitions permitted pursuant to Section 6.5 and (B) the
merger or consolidation of a Credit Party with and into another Credit Party;
provided that if the Borrower is a party thereto, the Borrower will be the
surviving Person.
     Section 6.5 Advances, Investments and Loans.
     The Credit Parties will not, nor will they permit any Subsidiary to, make
any Investment except for Permitted Investments.
     Section 6.6 Transactions with Affiliates.
     The Credit Parties will not, nor will they permit any Subsidiary to, enter
into any transaction or series of transactions, whether or not in the ordinary
course of business, with any officer, director, shareholder or Affiliate (other
than compensation arrangements with any officer or director that is in the
ordinary course of business and consistent with historical past practices of
compensation for officers and directors, and reasonable and customary directors’
indemnification and similar arrangements) other than on terms and conditions
substantially as favorable as would be obtainable in a comparable arm’s-length
transaction with a Person other than an officer, director, shareholder or
Affiliate.
     Section 6.7 Ownership of Subsidiaries; Restrictions.
     The Credit Parties will not, nor will they permit any Subsidiary to,
create, form or acquire any Subsidiaries, except for Domestic Subsidiaries that
are joined as Additional Credit Parties as required by the terms hereof. The
Credit Parties will not sell, transfer, pledge or otherwise dispose of any
Capital Stock or other equity interests in any of their Subsidiaries, nor will
they permit any of their Subsidiaries (other than ESI) to issue, sell, transfer,
pledge or otherwise dispose of any of their Capital Stock or other equity
interests, except in a transaction permitted by Section 6.4.

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     Section 6.8 Corporate Changes; Material Contracts.
     No Credit Party will, nor will it permit any of its Subsidiaries to,
(a) change its fiscal year except to change the fiscal year of a Subsidiary to
conform its fiscal year to the Borrower’s, (b) amend, modify or change its
articles of incorporation, certificate of designation (or corporate charter or
other similar organizational document) operating agreement or bylaws (or other
similar document) in any respect adverse to the interests of the Lenders without
the prior written consent of the Required Lenders, (c) amend, modify, cancel or
terminate or fail to renew or extend or permit the amendment, modification,
cancellation or termination of any of its Material Contracts or Acquisition
Documents in any respect that could reasonably be expected to have a Material
Adverse Effect, (d) change its state of incorporation, organization or formation
of a Credit Party to a non-U.S. jurisdiction or without giving such notice as is
required under the Security Agreement or have more than one state of
incorporation, organization or formation or (e) materially change its accounting
method (except in accordance with GAAP) in any manner materially adverse to the
interests of the Lenders without the prior written consent of the Required
Lenders.
     Section 6.9 Limitation on Restricted Actions.
     The Credit Parties will not, nor will they permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any such Person to
(a) pay dividends or make any other distributions to any Credit Party on its
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness or other obligation owed to
any Credit Party, (c) make loans or advances to any Credit Party, (d) sell,
lease or transfer any of its properties or assets to any Credit Party, or
(e) act as a Guarantor and pledge its assets pursuant to the Credit Documents or
any renewals, refinancings, exchanges, refundings or extension thereof, except
(in respect of any of the matters referred to in clauses (a)-(d) above) for such
encumbrances or restrictions existing under or by reason of (i) this Credit
Agreement and the other Credit Documents, (ii) applicable law, (iii) any
document or instrument governing Indebtedness incurred pursuant to
Section 6.1(c) (provided that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection therewith),
(iv) any Permitted Lien or any document or instrument governing any Permitted
Lien (provided that any such restriction contained therein relates only to the
asset or assets subject to such Permitted Lien), (v) customary non-assignment
provisions of leases, subleases, licenses and sublicenses, (vi) restrictions in
joint venture and partnership agreements (other than such existing restrictions
contained in the charter documents of ESI), (vii) restrictions on property to be
transferred or optioned that are or were created by virtue of the transfer
thereof, including restrictions with respect to the disposition or transfer of
assets or property in asset sale agreements, stock sale agreements and other
similar agreements, and (viii) restrictions and conditions applicable to any
Subsidiary acquired after the date hereof if such restrictions and conditions
existed at the time such Subsidiary was acquired, were not created in
anticipation of such acquisition, and apply solely to such acquired Subsidiary.

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     Section 6.10 Restricted Payments.
     The Credit Parties will not, nor will they permit any Subsidiary to,
directly or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment, except (a) to make dividends payable solely in the same
class of Capital Stock of such Person, (b) to make dividends or other
distributions payable to the Borrower (directly or indirectly through its
Subsidiaries), (c) to make non-cash payment-in-kind interest payments related to
the Seller Subordinated Note, (d) any repurchase or other acquisition of the
Borrower’s Capital Stock under the terms of stock purchase agreements or similar
agreements or arrangements pursuant to which the Borrower has or may in the
future have the right to repurchase options in respect of the Borrower’s Capital
Stock from former directors or employees of, or former consultants to, the
Borrower as a result of a termination of any such person’s employment by or
service to the Borrower or otherwise in accordance with similar provisions of
any option awards or similar arrangements entered into by the Borrower from time
to time, if after giving effect thereto the aggregate amount of such purchases,
redemptions, retirements and acquisitions paid or made in any fiscal year is not
in excess of $1,000,000, (e) payments made by ESI to its owners or on the ESI
Indebtedness, (f) payments on Subordinated Debt incurred pursuant to and in
accordance with Section 6.1(d) and (e), subject to the terms and conditions of
any subordination agreement entered into pursuant to Section 6.1(d) and (e) in
favor of the Lenders, (g) payments on the GenCorp Earn Out Obligations so long
as (i) the Administrative Agent and the Lenders have received the audited
financial statements required to be delivered pursuant to Section 5.1(a) for the
fiscal year ending September 30, 2006, and (ii) the Borrower shall have
demonstrated to the reasonable satisfaction of the Administrative Agent that,
after giving effect to any such payment on a pro forma basis, (A) no Default or
Event of Default exists, (B) the Credit Parties and their Subsidiaries are in
compliance with the financial covenants set forth in Section 5.9 and (C) the
Total Leverage Ratio does not exceed 3.00 to 1.00 (it being understood and
agreed that such payment may be made up to the amount that would not exceed a
Total Leverage Ratio of 3.00 to 1.00 in the quarter with respect to which the
calculation is then being made with additional installments to be made in
subsequent quarters, if necessary, up to such amount) and (h) to repay up to
$6,500,000 of the outstanding principal amount of the Subordinated Seller Note
together with any accrued and unpaid interest on the principal amount being paid
so long as (i) the Administrative Agent and the Lenders have received the
audited financial statements required to be delivered pursuant to Section 5.1(a)
for the fiscal year ending September 30, 2007, and (ii) the Borrower shall have
demonstrated to the reasonable satisfaction of the Administrative Agent that,
after giving effect to any such payment on a pro forma basis, (A) no Default or
Event of Default exists, (B) the Credit Parties and their Subsidiaries are in
compliance with the financial covenants set forth in Section 5.9 and (C) the
Total Leverage Ratio does not exceed 2.75 to 1.00.
      Section 6.11 Amendments to First Lien Credit Documents; Amendments to
Subordinated Debt.
     (a) Without the prior written consent of the Required Lenders, no First
Lien Credit Document may be amended, supplemented or otherwise modified or
entered into and no obligations under the First Lien Credit Documents may be
refinanced, except that the First Lien Credit Documents may be amended or the
obligations thereunder may be refinanced in a manner that (i) is subject to, and
in compliance with, the requirements of

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the Intercreditor Agreement, and (ii) does not materially impair the ability of
the Credit Parties to perform their obligations under this Credit Agreement.
     (b) The Credit Parties will not, nor will it permit any Subsidiary to,
without the prior written consent of the Required Lenders, amend, modify, waive
or extend or permit the amendment, modification, waiver or extension of any term
of any document governing or relating to any Subordinated Debt in a manner that
is materially adverse to the interests of the Lenders.
     Section 6.12 Sale Leasebacks.
     The Credit Parties will not, nor will they permit any Subsidiary to,
directly or indirectly, become or remain liable as lessee or as guarantor or
other surety with respect to any lease, whether an Operating lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (a) which any Credit Party or any Subsidiary has sold or
transferred or is to sell or transfer to a Person which is not a Credit Party or
a Subsidiary or (b) which any Credit Party or any Subsidiary intends to use for
substantially the same purpose as any other property which has been sold or is
to be sold or transferred by a Credit Party or a Subsidiary to another Person
which is not a Credit Party or a Subsidiary in connection with such lease.
     Section 6.13 No Further Negative Pledges.
     The Credit Parties will not, nor will they permit any Subsidiary to, enter
into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon any of their properties
or assets, whether now owned or hereafter acquired, or requiring the grant of
any security for such obligation if security is given for some other obligation,
except (a) pursuant to this Credit Agreement and the other Credit Documents, (b)
pursuant to the First Lien Credit Documents, (c) pursuant to any document or
instrument governing Indebtedness incurred pursuant to Section 6.1(c) (provided
that any such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith), (f) and (g), (d) any Permitted
Lien or any document or instrument governing any Permitted Lien (provided that
any such restriction contained therein relates only to the asset or assets
subject to such Permitted Lien), (e) customary non-assignment provisions of
leases, subleases, licenses and sublicenses, (f) restrictions in joint venture
and partnership agreements, (g) restrictions on property to be transferred or
optioned that are or were created by virtue of the transfer thereof, including
restrictions with respect to the disposition or transfer of assets or property
in asset sale agreements, stock sale agreements and other similar agreements,
and (h) restrictions and conditions applicable to any Subsidiary acquired after
the date hereof if such restrictions and conditions existed at the time such
Subsidiary was acquired, were not created in anticipation of such acquisition,
and applying solely to such acquired Subsidiary.
     Section 6.14 Deposit Account Control Agreements; Additional Bank Accounts.
     Each of the Credit Parties will not, nor will it permit any Domestic
Subsidiary to, open, maintain or otherwise have any checking, savings or other
accounts at any bank or other

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financial institution, or any other account where money is or may be deposited
or maintained with any Person, other than (a) the accounts set forth on
Schedule 6.14, (b) demand deposit accounts established after the Closing Date
that are subject to a Deposit Account Control Agreement, (c) other demand
deposit accounts established after the Closing Date solely as payroll and other
zero balance accounts and (d) other deposit accounts so long as at any time the
balance in any such account does not exceed $100,000 and the aggregate balance
in all such accounts does not exceed $250,000.
ARTICLE VII
EVENTS OF DEFAULT
     Section 7.1 Events of Default.
     An Event of Default shall exist upon the occurrence of any of the following
specified events (each an “Event of Default”):
     (a) Payment. (i) The Borrower shall fail to pay any principal on any Loan
when due in accordance with the terms hereof; (ii) the Borrower shall fail to
pay any interest on any Loan or any fee or other amount payable hereunder when
due in accordance with the terms hereof and such failure shall continue
unremedied for three (3) Business Days; or (iv) or any Guarantor shall fail to
pay on the Guaranty in respect of any of the foregoing or in respect of any
other Guaranty Obligations hereunder (after giving effect to the grace period in
clause (iii)); or
     (b) Misrepresentation. Any representation or warranty made or deemed made
herein, in the Security Documents or in any of the other Credit Documents or
which is contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Credit Agreement shall
prove to have been incorrect, false or misleading on or as of the date made or
deemed made; or
     (c) Covenant Default. (i) Any Credit Party shall fail to perform, comply
with or observe any term, covenant or agreement applicable to it contained in
Sections 5.1, 5.2, 5.4, 5.7, 5.9, 5.11, 5.13 or Article VI hereof; or (ii) any
Credit Party shall fail to comply with any other covenant contained in this
Credit Agreement or the other Credit Documents or any other agreement, document
or instrument among any Credit Party, the Administrative Agent and the Lenders
or executed by any Credit Party in favor of the Administrative Agent or the
Lenders (other than as described in Sections 7.1(a) or 7.1(c)(i) above), and
such breach or failure to comply is not cured within thirty (30) days of its
occurrence; or
     (d) Debt Cross-Default. (i) (A) Any Credit Party shall fail to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise, but after the expiration of any applicable
grace period) in respect of the First Lien Credit Agreement or any other First
Lien Event of Default shall have

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occurred and remain continuing forty-five (45) days after the First Lien
Administrative Agent received notice thereof or (B) any portion of the First
Lien Credit Agreement is declared to be due and payable (or automatically
becomes due and payable) prior to the stated maturity of the First Lien Credit
Agreement as a result of a First Lien Event of Default; (ii) any Credit Party
shall default in any payment of principal of or interest on any Indebtedness
(other than the Term Loan, the Guaranty and the First Lien Obligations) in a
principal amount outstanding of at least $1,500,000 for the Borrower and any of
its Subsidiaries in the aggregate beyond any applicable grace period (not to
exceed 30 days), if any, provided in the instrument or agreement under which
such Indebtedness was created; (iii) any Credit Party shall default in the
observance or performance of any other agreement or condition relating to any
Indebtedness (other than the Term Loan, the Guaranty and the First Lien
Obligations) in a principal amount outstanding of at least $1,500,000 in the
aggregate for the Credit Parties and their Subsidiaries or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause such Indebtedness to become due prior to its stated
maturity; (iv) the First Lien Administrative Agent, on behalf of the First Lien
Lenders, exercises any of the remedies pursuant to Section 7.2 of the First Lien
Credit Agreement with respect to any First Lien Event of Default; or (v) any
Credit Party shall breach or default any Secured Hedging Agreement; or
     (e) Other Cross-Defaults. The Credit Parties or any of their Subsidiaries
shall default in (i) the payment when due under any Material Contract the effect
of any non-payment of which is already addressed by Section 7.1(d) hereof or
(ii) in the performance or observance, of any obligation or condition of any
Material Contract (other than any First Lien Credit Document the effect of any
non-compliance of which is already addressed by Section 7.1(d) hereof) and such
failure to perform or observe such other obligation or condition continues
unremedied for a period of thirty (30) days after notice of the occurrence of
such default, unless the existence of any such default is being contested by the
Credit Parties in good faith and, if applicable, by appropriate proceedings,
adequate reserves in respect thereof have been established on the books of the
Credit Parties to the extent required by GAAP and the existence of such default
could not reasonably be expected to have a Material Adverse Effect; or
     (f) Bankruptcy Default. (i) A Credit Party or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts (other than such events occurring in accordance with the terms of Section
6.4), or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or a Credit Party or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against a Credit Party or any of its Subsidiaries any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in

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the entry of an order for relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against a Credit Party or any of its Subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of their assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) a Credit Party or
any of its Subsidiaries shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) a Credit Party or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing their inability to, pay its debts as they become due; or
     (g) Judgment Default. One or more judgments or decrees shall be entered
against a Credit Party or any of its Subsidiaries involving in the aggregate a
liability (to the extent not covered by insurance) of $1,000,000 or more and all
such judgments or decrees shall not have been paid and satisfied, vacated,
discharged, stayed or bonded pending appeal within 30 Business Days from the
entry thereof or any injunction, temporary restraining order or similar decree
shall be issued against a Credit Party or any of its Subsidiaries that could
reasonably be expected to result in a Material Adverse Effect; or
     (h) ERISA Default. (i) Any Person shall engage in any “prohibited
transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan with liability to the Credit Parties and their Subsidiaries
in excess of $1,000,000 in the aggregate, (ii) any “accumulated funding
deficiency” (as defined in Section 302 of ERISA) with liability to the Credit
Parties and their Subsidiaries in excess of $1,000,000 in the aggregate, whether
or not waived, shall exist with respect to any Plan or any Lien in favor of the
PBGC or a Plan (other than a Permitted Lien) shall arise on the assets of the
Credit Parties or any Commonly Controlled Entity, (iii) a Reportable Event with
liability to the Credit Parties and their Subsidiaries in excess of $1,000,000
in the aggregate shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes
of Title IV of ERISA, or (v) a Credit Party, any of its Subsidiaries or any
Commonly Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a withdrawal from,
or the Insolvency or Reorganization of, any Multiemployer Plan by an amount
which, as determined in accordance with GAAP, could reasonably be expected to
have a Material Adverse Effect; or
     (i) Change of Control. There shall occur a Change of Control; or
     (j) Invalidity of Guaranty. At any time after the execution and delivery
thereof, the Guaranty, for any reason other than the satisfaction in full of all
Credit Party

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Obligations, shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared to be null and void, or any
Credit Party shall contest the validity or enforceability of the Guaranty or any
Credit Document in writing or deny in writing that it has any further liability,
including with respect to future advances by the Lenders, under any Credit
Document to which it is a party; or
     (k) Invalidity of Credit Documents. Any other Credit Document shall fail to
be in full force and effect or to give the Administrative Agent and/or the
Lenders the security interests, liens, rights, powers and privileges purported
to be created thereby (except as such documents may be terminated or no longer
in force and effect in accordance with the terms thereof, other than those
indemnities and provisions which by their terms shall survive) or any Lien shall
fail to be a second priority (other than as a result of the payment in full of
the First Lien Obligations, upon which the Lien in favor of the Lenders shall
become a first priority perfected Lien), perfected Lien on a material portion of
the Collateral (subject only to the Lien of the First Lien Administrative Agent
in favor of the holders of the First Lien Obligations); or
     (l) Hedging Agreement. Any termination payment shall be due by a Credit
Party under any Hedging Agreement and such amount is not paid within the later
to occur of five (5) Business Days after the due date thereof or the expiration
of grace periods, if any, in such Hedging Agreement; or
     (m) Subordinated Debt. Any default (which is not waived or cured within the
applicable period of grace) or event of default shall occur under any
Subordinated Debt or the subordination provisions contained therein shall cease
to be in full force and effect or to give the Lenders the rights, powers and
privileges purported to be created thereby;
     (n) Uninsured Loss. Any uninsured damage to or loss, theft or destruction
of any assets of the Credit Parties or any of their Subsidiaries shall occur
that is in excess of $2,500,000; or
     (o) Government Contracts. (i) The Borrower or any Subsidiary thereof is
debarred or suspended from contracting with any Governmental Authority which
individually, or together with any other pending or suspected debarments or
suspensions could reasonably be expected to have a Material Adverse Effect; or
(ii) an investigation by any Governmental Authority relating to the Borrower or
any Subsidiary thereof and involving fraud, deception or willful misconduct
shall have been commenced in connection with any Government Contract or the
Borrower’s or any Subsidiary’s activities that could reasonably be expected to
have a Material Adverse Effect; or (iii) the actual termination of a Government
Contract due to alleged fraud, deception or willful misconduct that could
reasonably be expected to have a Material Adverse Effect.
     Section 7.2 Acceleration; Remedies.
     Subject to the terms and conditions of the Intercreditor Agreement, upon
the occurrence and during the continuance of an Event of Default, then, and in
any such event, (a) if such event

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is an Event of Default specified in Section 7.1(e) above, automatically the
Loans (with accrued interest thereon), and all other amounts under the Credit
Documents shall immediately become due and payable, and (b) if such event is any
other Event of Default, any or all of the following actions may be taken:
(i) the Administrative Agent may, or upon the written request of the Required
Lenders, the Administrative Agent shall, declare the Loans (with accrued
interest thereon) and all other amounts owing under this Credit Agreement and
the Notes to be due and payable forthwith; and/or (ii) with the written consent
of the Required Lenders, the Administrative Agent may, or upon the written
request of the Required Lenders, the Administrative Agent shall, exercise such
other rights and remedies as provided under the Credit Documents and under
applicable law.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
     Section 8.1 Appointment.
     Each Lender hereby irrevocably designates and appoints Wachovia as the
Administrative Agent of such Lender under this Credit Agreement, and each such
Lender irrevocably authorizes Wachovia, as the Administrative Agent for such
Lender, to take such action on its behalf under the provisions of this Credit
Agreement and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Credit Agreement,
together with such other powers as are reasonably incidental thereto. Each
Lender acknowledges that the Credit Parties may rely on each action taken by the
Administrative Agent on behalf of the Lenders hereunder. Notwithstanding any
provision to the contrary elsewhere in this Credit Agreement, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Credit Agreement or otherwise exist against the Administrative
Agent.
     Section 8.2 Delegation of Duties.
     The Administrative Agent may execute any of its duties under this Credit
Agreement by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care. Without
limiting the foregoing, the Administrative Agent may appoint one of its
affiliates as its agent to perform the functions of the Administrative Agent
hereunder relating to the advancing of funds to the Borrower and distribution of
funds to the Lenders and to perform such other related functions of the
Administrative Agent hereunder as are reasonably incidental to such functions.

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     Section 8.3 Exculpatory Provisions.
     Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact, Subsidiaries or affiliates shall be
(a) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Credit Agreement (except for its or such
Person’s own gross negligence or willful misconduct) or (b) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by any Credit Party or any officer thereof contained in this
Credit Agreement or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection with, this Credit Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any of the Credit
Documents or for any failure of any Credit Party to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance by any Credit Party of any of the agreements contained in, or
conditions of, this Credit Agreement, or to inspect the properties, books or
records of any Credit Party.
     Section 8.4 Reliance by Administrative Agent.
     (a) The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it in
good faith to be genuine and correct and to have been signed, sent or made by
the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Credit Parties), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless an executed Assignment Agreement has been filed
with the Administrative Agent pursuant to Section 9.6(c) with respect to the
Loans evidenced by such Note. The Administrative Agent shall be fully justified
in failing or refusing to take any action under this Credit Agreement unless it
shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under any of the Credit Documents in accordance with a request of the Required
Lenders or all of the Lenders, as may be required under this Credit Agreement,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and all future holders of the Notes.
     (b) For purposes of determining compliance with the conditions specified in
Section 4.1, each Lender that has signed this Credit Agreement shall be deemed
to have consented to, approved or accepted or to be satisfied with, each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender.

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     Section 8.5 Notice of Default.
     The Administrative Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Credit Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”. In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided, however, that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders except to the extent that
this Credit Agreement expressly requires that such action be taken, or not
taken, only with the consent or upon the authorization of the Required Lenders,
or all of the Lenders, as the case may be.
     Section 8.6 Non-Reliance on Administrative Agent and Other Lenders.
     Each Lender expressly acknowledges that neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
any Credit Party, shall be deemed to constitute any representation or warranty
by the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower or any other Credit Party and
made its own decision to make its Loans hereunder and enter into this Credit
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Credit Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and other condition and creditworthiness of the Borrower and the other Credit
Parties. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower or any other Credit Party which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
     Section 8.7 Indemnification.
     The Lenders agree to indemnify the Administrative Agent, the Control Agent,
and their Affiliates and their respective officers, directors, agents and
employees (to the extent not

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reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the Credit Party Obligations) be imposed on,
incurred by or asserted against any such indemnitee in any way relating to or
arising out of any Credit Document or any documents contemplated by or referred
to herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by any such indemnitee under or in connection with any
of the foregoing; provided, however, that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent resulting from such indemnitee’s gross negligence or willful misconduct,
as determined by a court of competent jurisdiction. The agreements in this
Section 8.7 shall survive the termination of this Credit Agreement and payment
of the Notes and all other amounts payable hereunder.
     Section 8.8 Administrative Agent in Its Individual Capacity.
     The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower as
though the Administrative Agent were not the Administrative Agent hereunder.
With respect to its Loans made or renewed by it and any Note issued to it, the
Administrative Agent shall have the same rights and powers under this Credit
Agreement as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms “Lender” and “Lenders” shall include the
Administrative Agent in its individual capacity.
     Section 8.9 Successor Administrative Agent.
     The Administrative Agent may resign as Administrative Agent upon 30 days’
prior notice to the Borrower and the Lenders. The Required Lenders may remove
the Administrative Agent at any time. Such removal shall be effective upon the
receipt of such notice requesting the Administrative Agent’s removal. If the
Administrative Agent shall resign as Administrative Agent under this Credit
Agreement and the Notes or if the Administrative Agent enters or becomes subject
to receivership or is removed by the Required Lenders, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall be approved by the Borrower with such approval not to be
unreasonably withheld (provided, however, if a Default or an Event of Default
shall exist at such time, no approval of the Borrower shall be required
hereunder), whereupon such successor agent shall succeed to the rights, powers
and duties of the Administrative Agent, and the term “Administrative Agent”
shall mean such successor agent effective upon such appointment and approval,
and the former Administrative Agent’s rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Credit Agreement or any holders of the Notes. Such successor agent shall
become a party to the Intercreditor Agreement in connection with its replacement
of the Administrative Agent. After any retiring Administrative Agent’s
resignation as Administrative Agent, the provisions of this Section 8.9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Credit Agreement.

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     Section 8.10 Nature of Duties.
     Except as otherwise expressly stated herein, any agent (other than the
Administrative Agent) or co-lead arranger listed from time to time on the cover
page of this Credit Agreement shall have no obligations, responsibilities or
duties under this Credit Agreement or under any other Credit Document other than
obligations, responsibilities and duties applicable to all Lenders in their
capacity as Lenders; provided, however, that such agents and co-lead arrangers
shall be entitled to the same rights, protections, exculpations and
indemnifications granted to the Administrative Agent under this Article VIII in
their capacity as an agent or co-lead arranger.
     Section 8.11 Intercreditor Agreement.
     Each of the Lenders hereby acknowledges that it has received and reviewed
the Intercreditor Agreement and agrees to be bound by the terms thereof. Each
Lender (and each Person that becomes a Lender hereunder pursuant to
Section 9.6(c)) hereby authorizes the Administrative Agent to enter into the
Intercreditor Agreement on behalf of such Lender and agrees that the
Administrative Agent may take such actions on its behalf as is contemplated by
the terms of the Intercreditor Agreement. Each Lender (and each Person that
becomes a Lender hereunder pursuant to Section 9.6(c)) hereby (i) acknowledges
that Wachovia is acting under the Intercreditor Agreement in multiple capacities
as the Administrative Agent, the Second Lien Administrative Agent and the
Control Agent and (ii) waives any conflict of interest, now contemplated or
arising hereafter, in connection therewith and agrees not to assert against
Wachovia any claims, causes of action, damages or liabilities of whatever kind
or nature relating thereto.
     Section 8.12 Releases.
     The Administrative Agent will release any Guarantor and any Lien on any
Collateral that is sold as permitted by the Credit Agreement or as otherwise
permitted by the Lenders or Required Lenders, as applicable, or that is required
to be released pursuant to the terms of Section 5.1 of the Intercreditor
Agreement.
     In connection with the granting of Liens of the type described in clause
(c) of the definition of “Permitted Liens”, by the Borrower or any of its
Subsidiaries, at the reasonable request of the Borrower, and at the Borrower’s
expense, the Administrative Agent shall take (and is hereby authorized to take)
any actions reasonably requested by the Borrower in connection therewith
(including, without limitation, executing appropriate lien subordinations in
favor of the holder or holders of such Liens solely with respect to the item or
items of equipment or other assets subject to such Liens).

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ARTICLE IX
MISCELLANEOUS
     Section 9.1 Amendments, Waivers and Release of Collateral.
     Neither this Credit Agreement nor any of the other Credit Documents, nor
any terms hereof or thereof may be amended, supplemented, waived or modified (by
amendment, waiver, consent or otherwise) except in accordance with the
provisions of this Section nor may Collateral be released except as specifically
provided herein or in the Security Documents or in accordance with the
provisions of this Section 9.1. The Required Lenders may or, with the written
consent of the Required Lenders, the Administrative Agent may, from time to
time, (x) enter into with the Borrower written amendments, supplements or
modifications hereto and to the other Credit Documents for the purpose of adding
any provisions to this Credit Agreement or the other Credit Documents or
changing in any manner the rights of the Lenders or of the Borrower hereunder or
thereunder or (b) waive or consent to the departure from, on such terms and
conditions as the Required Lenders may specify in such instrument, any of the
requirements of this Credit Agreement or the other Credit Documents or any
Default or Event of Default and its consequences; provided, however, that no
such amendment, supplement, modification, release, waiver or consent shall:
     (i) reduce the amount or extend the scheduled date of maturity of any Loan
or Note or any installment thereon, or reduce the stated rate of any interest or
fee payable hereunder (except in connection with a waiver of interest at the
increased post-default rate set forth in Section 2.4 which shall be determined
by a vote of the Required Lenders) or extend the scheduled date of any payment
thereof or increase the amount or extend the expiration date of any Lender’s
Commitment, in each case without the written consent of each Lender directly
affected thereby; provided that, it is understood and agreed that (A) no waiver,
reduction or deferral of a mandatory prepayment required pursuant to
Section 2.3(b), nor any amendment of Section 2.3(b) or the definitions of Asset
Disposition, Debt Issuance, Equity Issuance, Excess Cash Flow, or Recovery
Event, or any definitions incorporated in the foregoing defined terms, shall
constitute a reduction of the amount of, or an extension of the scheduled date
of, the scheduled date of maturity of, or any installment of, any Loan or Note,
and (B) any reduction in the stated rate of interest on the Term Loan shall only
require the written consent of each Lender holding a portion of the outstanding
Term Loan; or
     (ii) amend, modify or waive any provision of this Section 9.1 or reduce the
percentage specified in the definition of Required Lenders, without the written
consent of all the Lenders; or
     (iii) amend, modify or waive any provision of Article VIII without the
written consent of the then Administrative Agent; or

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     (iv) release the Borrower or all or substantially all of the Guarantors
from obligations under the Guaranty, without the written consent of all of the
Lenders and Hedging Agreement Providers; or
     (v) release all or substantially all of the Collateral without the written
consent of all of the Lenders and Hedging Agreement Providers; or
     (vi) subordinate the Loans to any other Indebtedness without the written
consent of all of the Lenders; or
     (vii) permit the Borrower to assign or transfer any of its rights or
obligations under this Credit Agreement or other Credit Documents without the
written consent of all of the Lenders; or
     (viii) amend, modify or waive any provision of the Credit Documents
requiring consent, approval or request of the Required Lenders or all Lenders
without the written consent of the Required Lenders or all the Lenders as
appropriate; or
     (ix) amend, modify or waive any provision of the Credit Documents requiring
consent, approval or request of the Required Lenders or all Lenders, without the
written consent of all of the Required Lenders or Lenders as appropriate; or
     (x) amend, modify or waive any provision of the Credit Documents affecting
the rights or duties of the Administrative Agent under any Credit Document
without the written consent of the Administrative Agent in addition to the
Lenders required hereinabove to take such action; or
     (xi) amend, modify or waive the order in which Credit Party Obligations are
paid in Section 2.3(b) without the written consent of each Lender and each
Hedging Agreement Provider directly affected thereby; or
     (xii) amend the definitions of “Hedging Agreement,” “Secured Hedging
Agreement,” or “Hedging Agreement Provider” without the consent of any Hedging
Agreement Provider that would be adversely affected thereby; or
     (xiii) amend, modify or waive any provision of Article XI, without the
written consent of all the Lenders (other than for purposes of curing any formal
defect, omission or ambiguity).
     provided, further, that no amendment, waiver or consent affecting the
rights or duties of the Administrative Agent under any Credit Document shall in
any event be effective, unless in writing and signed by the Administrative Agent
in addition to the Lenders required hereinabove to take such action.

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     Any such waiver, any such amendment, supplement or modification and any
such release shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the other Credit Parties, the Lenders, the Administrative
Agent and all future holders of the Notes. In the case of any waiver, the
Borrower, the other Credit Parties, the Lenders and the Administrative Agent
shall be restored to their former position and rights hereunder and under the
outstanding Loans and Notes and other Credit Documents, and any Default or Event
of Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
     Notwithstanding any of the foregoing to the contrary, the consent of the
Borrower and the other Credit Parties shall not be required for any amendment,
modification or waiver of the provisions of Article VIII (other than the
provisions of Section 8.9); provided, however, that the Administrative Agent
shall provide written notice to the Borrower of any such amendment, modification
or waiver.
     Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans, and each Lender acknowledges that the provisions of Section 1126(c) of
the Bankruptcy Code supersedes the unanimous consent provisions set forth herein
and (y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.
     Section 9.2 Notices.
     (a) Except as otherwise provided in Article II, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy or other electronic communications as provided
below), and, unless otherwise expressly provided herein, shall be deemed to have
been duly given or made (a) when delivered by hand, (b) when transmitted via
telecopy (or other facsimile device) to the number set out herein, (c) the
Business Day following the day on which the same has been delivered prepaid (or
pursuant to an invoice arrangement) to a reputable national overnight air
courier service, or (d) the third Business Day following the day on which the
same is sent by certified or registered mail, postage prepaid, in each case,
addressed as follows in the case of the Borrower, the other Credit Parties and
the Administrative Agent, and, in the case of each of the Lenders, as set forth
in such Lender’s Administrative Details Form, or to such other address as may be
hereafter notified by the respective parties hereto and any future holders of
the Notes:

         
 
  The Borrower   American Pacific Corporation
 
  and the other   3770 Howard Hughes Parkway #300
 
  Credit Parties:   Las Vegas, Nevada 89109
 
       
 
      Attention: Seth L. Van Voorhees, Vice President, Chief Financial Officer
and Treasurer
 
      Telecopier: (702) 699-4181
 
      Telephone: (702) 699-4166

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  The Administrative    
 
            Agent:   Wachovia Bank, National Association, as Administrative
Agent
 
      Charlotte Plaza
 
      201 South College Street, CP8
 
      Charlotte, North Carolina 28288-0680
 
      Attention: Syndication Agency Services
 
      Telecopier: (704) 383-0288
 
      Telephone: (704) 374-2698
 
       
 
      with a copy to:
 
       
 
      Wachovia Bank, National Association
 
      1339 Chestnut Street
 
      Mailcode PA4152
 
      Philadelphia, Pennsylvania 19107
 
       
 
      Attention: James M. Travagline
 
      Telecopier: 267-321-6702
 
      Telephone: 267-321-6711

provided, that notices given by the Borrower pursuant to Section 2.1 or
Section 2.5 hereof shall be effective only upon receipt thereof by the
Administrative Agent.
     (b) Notices and other communications to the Lenders or the Administrative
Agent hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices to any Lender pursuant to Article II if such Lender, as
applicable, has notified the Administrative Agent that it is incapable of
receiving notices under such Section by electronic communication. The
Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.
     Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement); provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as

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described in the foregoing clause (i) of notification that such notice or
communication is available and identifying the website address therefor.
     Section 9.3 No Waiver; Cumulative Remedies.
     No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
     Section 9.4 Survival of Representations and Warranties.
     All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Credit Agreement and the Notes
and the making of the Loans; provided that all such representations and
warranties shall terminate on the date upon which all amounts owing hereunder
and under any Notes have been paid in full.
     Section 9.5 Payment of Expenses and Taxes.
     The Credit Parties agree (a) to pay or reimburse the Administrative Agent,
the Control Agent and the Arranger for all their reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation,
negotiation, printing and execution of, and any amendment, supplement or
modification to, this Credit Agreement and the other Credit Documents and any
other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, together with the reasonable fees and disbursements of counsel to the
Administrative Agent, the Control Agent and the Arranger, (b) to pay or
reimburse each Lender, the Administrative Agent and the Control Agent for all
its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Credit Agreement and the other Credit
Documents, including, without limitation, the reasonable fees and disbursements
of counsel to the Administrative Agent, the Control Agent and to the Lenders
(including reasonable allocated costs of in-house legal counsel), and (c) on
demand, to pay, indemnify, and hold each Lender, the Administrative Agent, the
Control Agent and the Arranger harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, the Credit Documents and any such other documents, (d) to pay,
indemnify, and hold each Lender, the Administrative Agent, the Control Agent,
the Arranger and their Affiliates and their respective officers, directors,
employees, partners, members, counsel, agents, representatives, advisors and
affiliates (collectively called the “Indemnitees”) harmless from and against,
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or

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nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of the Credit Documents and any such other
documents and the use, or proposed use, of proceeds of the Loans and (e) to pay
any civil penalty or fine assessed by the U.S. Department of the Treasury’s
Office of Foreign Assets Control against, and all reasonable costs and expenses
(including counsel fees and disbursements) incurred in connection with defense
thereof by the Administrative Agent, the Control Agent or any Lender as a result
of the funding of Loans, the acceptance of payments or of Collateral due under
the Credit Documents (all of the foregoing, collectively, the “Indemnified
Liabilities”); provided, however, that the Borrower shall not have any
obligation hereunder to an Indemnitee with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of such Indemnitee, as
determined by a court of competent jurisdiction pursuant to a final
non-appealable judgment. The agreements in this Section 9.5 shall survive
repayment of the Loans, Notes and all other amounts hereunder.
     Section 9.6 Successors and Assigns; Participations; Purchasing Lenders.
     (a) This Credit Agreement shall be binding upon and inure to the benefit of
the Credit Parties, the Lenders, the Administrative Agent, all future holders of
the Notes and their respective successors and assigns, except that the Credit
Parties may not assign or transfer any of their rights or obligations under this
Credit Agreement or the other Credit Documents without the prior written consent
of each Lender.
     (b) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
entities (“Participants”) participating interests in any Loan owing to such
Lender, any Note held by such Lender, or any other interest of such Lender
hereunder. In the event of any such sale by a Lender of participating interests
to a Participant, such Lender’s obligations under this Credit Agreement to the
other parties to this Credit Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Note for all purposes under this Credit Agreement, and
the Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Credit Agreement. No Lender shall transfer or grant any
participation under which the Participant shall have rights to approve any
amendment to or waiver of this Credit Agreement or any other Credit Document
except to the extent such amendment or waiver would (i) extend the scheduled
maturity of any Loan or Note or any installment thereon in which such
Participant is participating, or reduce the stated rate or extend the time of
payment of interest or fees thereon (except in connection with a waiver of
interest at the increased post-default rate set forth in Section 2.4 which shall
be determined by a vote of the Required Lenders) or reduce the principal amount
thereof, or increase the amount of the Participant’s participation over the
amount thereof then in effect; provided that, it is understood and agreed that
(A) no waiver, reduction or deferral of a mandatory prepayment required pursuant
to Section 2.3(b), nor any amendment of Section 2.3(b) or the definitions of
Asset Disposition, Debt Issuance, Equity Issuance, Excess Cash Flow, or Recovery
Event, or any definitions incorporated in the foregoing defined terms, shall
constitute a reduction of the amount of, or an extension of the scheduled date
of, the scheduled date of maturity of, or any installment of, any Loan or Note,
(B) a waiver of

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any Default or Event of Default shall not constitute a change in the terms of
such participation, and (C) an increase in any Loan shall be permitted without
consent of any participant if the Participant’s participation is not increased
as a result thereof, (ii) release all or substantially all of the Guarantors
from their obligations under the Guaranty, (iii) release all or substantially
all of the Collateral, or (iv) consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Credit Agreement. In
the case of any such participation, the Participant shall not have any rights
under this Credit Agreement or any of the other Credit Documents (the
Participant’s rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
Participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Lender had not sold such participation; provided
that each Participant shall be entitled to the benefits of Sections 2.11, 2.12,
2.13 and 9.5 with respect to its participation in the Term Loan outstanding from
time to time; provided further, that no Participant shall be entitled to receive
any greater amount pursuant to such Sections than the transferor Lender would
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
     (c) Any Lender may, in accordance with applicable law, at any time, sell or
assign to any Lender or any Affiliate or Approved Fund thereof and to one or
more additional banks, insurance companies, financial institutions, investment
funds or other entities (“Purchasing Lenders”), all or any part of its rights
and obligations under this Credit Agreement and the Notes in minimum amounts of
$1,000,000 (or such lesser amount approved by the Administrative Agent) with
respect to its Term Loan (or, if less, the entire amount of such Lender’s Term
Loan), pursuant to an Assignment Agreement, executed by such Purchasing Lender,
such transferor Lender and, unless an Event of Default has occurred and is
continuing, the Administrative Agent; provided, however, that any sale or
assignment to an existing Lender, or Affiliate or Approved Fund thereof, shall
not be subject to the minimum assignment amounts specified herein. Upon such
execution, delivery and recording, from and after the Transfer Effective Date
specified in such Assignment Agreement, (1) the Purchasing Lender thereunder
shall be a party hereto and, to the extent provided in such Assignment
Agreement, have the rights and obligations of a Lender hereunder with a Loan as
set forth therein, and (2) the transferor Lender thereunder shall, to the extent
provided in such Assignment Agreement, be released from its obligations under
this Credit Agreement (and, in the case of an Assignment Agreement covering all
or the remaining portion of a transferor Lender’s rights and obligations under
this Credit Agreement, such transferor Lender shall cease to be a party hereto;
provided, however, that such Lender shall continue to be entitled to any
indemnification rights that expressly survive hereunder). Such Assignment
Agreement shall be deemed to amend this Credit Agreement to the extent, and only
to the extent, necessary to reflect the addition of such Purchasing Lender and
the resulting adjustment of Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Credit Agreement and the Notes. On or prior to the
Transfer Effective Date specified in such Assignment Agreement, the Borrower, at
its own expense, shall execute and deliver to the Administrative Agent in
exchange for the Note delivered to the Administrative Agent

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pursuant to such Assignment Agreement a new Note to the order of such Purchasing
Lender in an amount equal to the portion of the Term Loan assumed by it pursuant
to such Assignment Agreement and, unless the transferor Lender has not retained
any portion of the Term Loan hereunder, a new Note to the order of the
transferor Lender in an amount equal to the portion of the Term Loan retained by
it hereunder. Such new Note shall be dated the Closing Date and shall otherwise
be in the form of the Note replaced thereby. Notwithstanding anything to the
contrary contained in this Section 9.6, a Lender may assign any or all of its
rights under this Credit Agreement to an Affiliate or a Approved Fund of such
Lender without delivering an Assignment Agreement to the Administrative Agent;
provided, however, that (x) the Credit Parties and the Administrative Agent may
continue to deal solely and directly with such assigning Lender until an
Assignment Agreement has been delivered to the Administrative Agent for
recordation on the Register, (y) the failure of such assigning lender to deliver
a Assignment Agreement to the Administrative Agent shall not affect the
legality, validity or binding effect of such assignment and (z) an Assignment
Agreement between the assigning Lender an Affiliate or Approved Fund of such
Lender shall be effective as of the date specified in such Assignment Agreement.
     (d) The Administrative Agent shall maintain at its address referred to in
Section 9.2 a copy of each Assignment Agreement delivered to it and a register
(the “Register”) for the recordation of the names and addresses of the Lenders
and the principal amount of the Term Loan owing to, each Lender from time to
time. A Loan (and the related Note) recorded on the Register may be assigned or
sold in whole or in part upon registration of such assignment or sale on the
Register. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Loan recorded therein for all purposes of this Credit Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice. In the case
of an assignment pursuant to the last sentence of Section 9.6(c) as to which an
Assignment Agreement is not delivered to the Administrative Agent, the assigning
Lender shall, acting solely for this purpose as a non-fiduciary agent of the
Credit Parties, maintain a comparable register on behalf of the Credit Parties.
In the event that any Lender sells participations in a Loan recorded on the
Register, such Lender shall maintain a register on which it enters the name of
all participants in such Loans held by it (the “Participant Register”). A Loan
recorded on the Register (and the registered Note, if any, evidencing the same)
may be participated in whole or in part only by registration of such
participation on the Participant Register (and each registered Note shall
expressly so provide). Any participation of such Loan recorded on the Register
(and the registered Note, if any, evidencing the same) may be effected only by
the registration of such participation on the Participant Register.
     (e) Upon its receipt of a duly executed Assignment Agreement, together with
payment to the Administrative Agent by the transferor Lender or the Purchasing
Lender, as agreed between them, of a registration and processing fee of $3,500
for each Purchasing Lender (other than a Purchasing Lender that is an Affiliate
or Approved Fund

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of the transferor Lender) listed in such Assignment Agreement and the Notes
subject to such Assignment Agreement, the Administrative Agent shall (i) accept
such Assignment Agreement, (ii) record the information contained therein in the
Register and (iii) give prompt notice of such acceptance and recordation to the
Lenders and the Borrower.
     (f) The Borrower authorizes each Lender to disclose to any Participant or
Purchasing Lender (each, a “Transferee”) and any prospective Transferee any and
all financial information in such Lender’s possession concerning the Borrower
and its Subsidiaries which has been delivered to such Lender by or on behalf of
the Borrower pursuant to this Credit Agreement or which has been delivered to
such Lender by or on behalf of the Borrower in connection with such Lender’s
credit evaluation of the Borrower and its Affiliates prior to becoming a party
to this Credit Agreement, in each case subject to Section 9.15.
     (g) At the time of each assignment pursuant to this Section 9.6 to a Person
which is not already a Lender hereunder and which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Code) for Federal income
tax purposes, the respective assignee Lender shall provide to the Borrower and
the Administrative Agent the appropriate Internal Revenue Service Forms
described in Section 2.13.
     (h) Nothing herein shall prohibit any Lender from pledging or assigning any
of its rights under this Credit Agreement (including, without limitation, any
right to payment of principal and interest under any Note) to secure obligations
of such Lender, including without limitation, (i) any pledge or assignment to
secure obligations to a Federal Reserve Bank and (ii) in the case of any Lender
that is a fund or trust or entity that invests in commercial bank loans in the
ordinary course of business, any pledge or assignment to any holders of
obligations owed, or securities issued, by such Lender including to any trustee
for, or any other representative of, such holders; it being understood that the
requirements for assignments set forth in this Section 9.6 shall not apply to
any such pledge or assignment of a security interest, except with respect to any
foreclosure or similar action taken by such pledgee or assignee with respect to
such pledge or assignment; 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 and
no such pledgee or assignee shall have any voting rights under this Credit
Agreement unless and until the requirements for assignments set forth in this
Section 9.6 are complied with in connection with any foreclosure or similar
action taken by such pledgee or assignee.
     Section 9.7 Adjustments; Set-off.
     (a) Each Lender agrees that if any Lender (a “benefited Lender”) shall at
any time receive any payment of all or part of its Loans, or interest thereon,
or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to a Bankruptcy Event or otherwise) in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender’s Loans, or interest thereon,
such benefited Lender shall purchase for cash from the other Lenders

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a participating interest in such portion of each such other Lender’s Loan, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such benefited Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such benefited Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest. The Borrower agrees that
each Lender so purchasing a portion of another Lender’s Loans may exercise all
rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
     (b) In addition to any rights and remedies of the Lenders provided by law
(including, without limitation, other rights of set-off), each Lender shall have
the right, without prior notice to the Borrower or the applicable Credit Party,
any such notice being expressly waived by the Credit Parties to the extent
permitted by applicable law, upon the occurrence of any Event of Default, to
setoff and appropriate and apply any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held by or
owing to such Lender or any branch or agency thereof to or for the credit or the
account of the Borrower or any other Credit Party, or any part thereof in such
amounts as such Lender may elect, against and on account of the Loans and other
Credit Party Obligations of the Borrower and the other Credit Parties to the
Administrative Agent and the Lenders and claims of every nature and description
of the Administrative Agent and the Lenders against the Borrower and the other
Credit Parties, in any currency, whether arising hereunder, under any other
Credit Document or any Secured Hedging Agreement pursuant to the terms of this
Credit Agreement, as such Lender may elect, whether or not the Administrative
Agent or the Lenders have made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. The
aforesaid right of set-off may be exercised by such Lender against the Borrower,
any other Credit Party or against any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver or execution,
judgment or attachment creditor of the Borrower or any other Credit Party, or
against anyone else claiming through or against the Borrower, any other Credit
Party or any such trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the occurrence of any Event of Default. Each
Lender agrees promptly to notify the Borrower and the Administrative Agent after
any such set-off and application made by such Lender; provided, however, that
the failure to give such notice shall not affect the validity of such set-off
and application.
     Section 9.8 Table of Contents and Section Headings.
     The table of contents and the Section and subsection headings herein are
intended for convenience only and shall be ignored in construing this Credit
Agreement.

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     Section 9.9 Counterparts.
     This Credit Agreement may be executed by one or more of the parties to this
Credit Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Credit Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
     Section 9.10 Effectiveness.
     This Credit Agreement shall become effective on the date on which all of
the parties have signed a copy hereof (whether the same or different copies) and
shall have delivered the same to the Administrative Agent pursuant to
Section 9.2 or, in the case of the Lenders, shall have given to the
Administrative Agent written, telecopied or telex notice (actually received) at
such office that the same has been signed and mailed to it.
     Section 9.11 Severability.
     Any provision of this Credit Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
     Section 9.12 Integration.
     This Credit Agreement and the other Credit Documents represent the
agreement of the Borrower, the other Credit Parties, the Administrative Agent
and the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent, the Borrower, the other Credit Parties, or any Lender relative to the
subject matter hereof not expressly set forth or referred to herein or therein.
     Section 9.13 Governing Law.
     This Credit Agreement and, unless otherwise specified therein, each other
Credit Document and the rights and obligations of the parties under this Credit
Agreement and such other Credit Document shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York without regard
to conflict of laws principles thereof (other than Sections 5-1401 and 5-1402 of
The New York General Obligations Law).
     Section 9.14 Consent to Jurisdiction and Service of Process.
     All judicial proceedings brought against the Borrower and/or any other
Credit Party with respect to this Credit Agreement, any Note or any of the other
Credit Documents may be brought in any state or federal court of competent
jurisdiction in the State of New York, and, by execution and delivery of this
Credit Agreement, the Borrower and each of the other Credit

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Parties accepts, for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with this Credit Agreement from which no appeal has been taken or is
available. The Borrower and each of the other Credit Parties irrevocably agree
that all service of process in any such proceedings in any such court may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to it at its address set
forth in Section 9.2 or at such other address of which the Administrative Agent
shall have been notified pursuant thereto, such service being hereby
acknowledged by the Borrower and the other Credit Parties to be effective and
binding service in every respect. The Borrower, the other Credit Parties, the
Administrative Agent and the Lenders irrevocably waive any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens which it may now or hereafter have to the bringing of
any such action or proceeding in any such jurisdiction. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of any Lender to bring proceedings against the Borrower or the
other Credit Parties in the court of any other jurisdiction.
     Section 9.15 Confidentiality.
     The Administrative Agent and each of the Lenders agrees that it will use
its best efforts not to disclose without the prior consent of the Borrower any
information (the “Information”) with respect to the Credit Parties and their
Subsidiaries which is furnished pursuant to this Credit Agreement, any other
Credit Document or any documents contemplated by or referred to herein or
therein and which is designated by the Borrower to the Lenders in writing as
confidential or as to which it is otherwise reasonably clear such information is
not public, except that any Lender may disclose any such Information (a) to its
employees, affiliates, auditors or counsel or to another Lender, (b) as has
become generally available to the public other than by a breach of this
Section 9.15, (c) as may be required or appropriate in any report, statement or
testimony submitted to any municipal, state or federal regulatory body having or
claiming to have jurisdiction over such Lender or to the Federal Reserve Board
or the Federal Deposit Insurance Corporation or the Office of the Comptroller of
the Currency or the National Association of Insurance Commissioners or similar
organizations (whether in the United States or elsewhere) or their successors,
(d) as may be required or appropriate in response to any summons or subpoena or
any law, order, regulation or ruling applicable to such Lender, (e) to (i) any
prospective Participant or assignee in connection with any contemplated transfer
pursuant to Section 9.6 or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrower,
provided that such prospective transferee shall have been made aware of this
Section 9.15 and shall have agreed to be bound by its provisions as if it were a
party to this Credit Agreement, (f) to Gold Sheets and other similar bank trade
publications; such information to consist of deal terms and other information
regarding the credit facilities evidenced by this Credit Agreement customarily
found in such publications, (g) in connection with any suit, action or
proceeding for the purpose of defending itself, reducing its liability, or
protecting or exercising any of its claims, rights, remedies or interests under
or in connection with the Credit Documents or any Secured Hedging Agreement,
(h) to any direct or indirect contractual counterparty in swap agreements or
such contractual counterparty’s professional advisor (so long as such
contractual counterparty or professional advisor to such contractual

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counterparty agrees to be bound by the provisions of this Section 9.15), (i) any
nationally recognized rating agency that requires access to information about a
Lender’s investment portfolio in connection with ratings issued with respect to
such Lender, (j) to a Person that is an investor or prospective investor in a
Securitization (as defined below) that agrees that its access to information
regarding the Borrower and the Loans is solely for purposes of evaluating an
investment in such Securitization; provided that such Person shall have been
made aware of this Section 9.15 and shall have agreed to be bound by its
provisions as if it were a party to this Credit Agreement, or (k) to a Person
that is a trustee, collateral manager, servicer, noteholder or secured party in
a Securitization in connection with the administration, servicing and reporting
on the assets serving as collateral for such Securitization; provided that such
Person shall have been made aware of this Section 9.15 and shall have agreed to
be bound by its provisions as if it were a party to this Credit Agreement. For
purposes of this Section “Securitization” shall mean a public or private
offering by a Lender or any of its affiliates or their respective successors and
assigns, of securities which represent an interest in, or which are
collateralized in whole or in part by, the Loans.
     Section 9.16 Acknowledgments.
     The Borrower and the other Credit Parties each hereby acknowledges that:
     (a) it has been advised by counsel in the negotiation, execution and
delivery of each Credit Document;
     (b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower or any other Credit Party arising out
of or in connection with this Credit Agreement and the relationship between the
Administrative Agent and the Lenders, on one hand, and the Borrower and the
other Credit Parties, on the other hand, in connection herewith is solely that
of debtor and creditor; and
     (c) no joint venture exists among the Lenders or among the Borrower or the
other Credit Parties and the Lenders.
     Section 9.17 Waivers of Jury Trial; Waiver of Consequential Damages.
     THE BORROWER, THE OTHER CREDIT PARTIES, THE ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
Each of the Borrower, the other Credit Parties, the Administrative Agent and the
Lenders agree not to assert any claim against any other party to this Credit
Agreement or any their respective directors, officers, employees, attorneys,
Affiliates or agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to any of
the transactions contemplated herein.

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     Section 9.18 Patriot Act Notice.
     Each Lender and the Administrative Agent (for itself and not on behalf of
any other party) 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 “Patriot Act”), it is 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 or
the Administrative Agent, as applicable, to identify the Borrower in accordance
with the Patriot Act.
ARTICLE X
GUARANTY
     Section 10.1 The Guaranty.
     In order to induce the Lenders to enter into this Credit Agreement and any
Hedging Agreement Provider to enter into any Secured Hedging Agreement and to
extend credit hereunder and thereunder and in recognition of the direct benefits
to be received by the Guarantors from the Extensions of Credit hereunder and any
Secured Hedging Agreement, each of the Guarantors hereby agrees with the
Administrative Agent, the Lenders and the Hedging Agreement Providers as
follows: the Guarantor hereby unconditionally and irrevocably jointly and
severally guarantees as primary obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, by acceleration or otherwise, of
any and all Credit Party Obligations. If any or all of the indebtedness becomes
due and payable hereunder or under any Secured Hedging Agreement, each Guarantor
unconditionally promises to pay such indebtedness to the Administrative Agent,
the Lenders, the Hedging Agreement Providers, or their respective order, or
demand, together with any and all reasonable expenses which may be incurred by
the Administrative Agent or the Lenders in collecting any of the Credit Party
Obligations. The Guaranty set forth in this Article X is a guaranty of timely
payment and not of collection.
     Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, to the extent the obligations of a Guarantor
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).
     Section 10.2 Bankruptcy.
     Additionally, each of the Guarantors unconditionally and irrevocably
guarantees jointly and severally the payment of any and all Credit Party
Obligations of the Borrower to the Lenders and any Hedging Agreement Provider
whether or not due or payable by the Borrower upon the occurrence of any of the
events specified in Section 7.1(f), and unconditionally promises to pay such
Credit Party Obligations to the Administrative Agent for the account of the
Lenders and to

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any such Hedging Agreement Provider, or order, on demand, in lawful money of the
United States. Each of the Guarantors further agrees that to the extent that the
Borrower or a Guarantor shall make a payment or a transfer of an interest in any
property to the Administrative Agent, any Lender or any Hedging Agreement
Provider, which payment or transfer or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, or otherwise is avoided,
and/or required to be repaid to the Borrower or a Guarantor, the estate of the
Borrower or a Guarantor, a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such avoidance or repayment, the obligation or part thereof intended
to be satisfied shall be revived and continued in full force and effect as if
said payment had not been made.
     Section 10.3 Nature of Liability.
     The liability of each Guarantor hereunder is exclusive and independent of
any security for or other guaranty of the Credit Party Obligations of the
Borrower whether executed by any such Guarantor, any other guarantor or by any
other party, and no Guarantor’s liability hereunder shall be affected or
impaired by (a) any direction as to application of payment by the Borrower or by
any other party, or (b) any other continuing or other guaranty, undertaking or
maximum liability of a guarantor or of any other party as to the Credit Party
Obligations of the Borrower, or (c) any payment on or in reduction of any such
other guaranty or undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by the Borrower, or (e) any payment made to the
Administrative Agent, the Lenders or any Hedging Agreement Provider on the
Credit Party Obligations which the Administrative Agent, such Lenders or such
Hedging Agreement Provider repay the Borrower pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and each of the Guarantors waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding.
     Section 10.4 Independent Obligation.
     The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor or the Borrower, and a separate action or
actions may be brought and prosecuted against each Guarantor whether or not
action is brought against any other Guarantor or the Borrower and whether or not
any other Guarantor or the Borrower is joined in any such action or actions.
     Section 10.5 Authorization.
     Each of the Guarantors authorizes the Administrative Agent, each Lender and
each Hedging Agreement Provider without notice or demand (except as shall be
required by applicable statute and cannot be waived), and without affecting or
impairing its liability hereunder, from time to time to (a) renew, compromise,
extend, increase, accelerate or otherwise change the time for payment of, or
otherwise change the terms of the Credit Party Obligations or any part thereof
in accordance with this Credit Agreement and any Secured Hedging Agreement, as
applicable, including any increase or decrease of the rate of interest thereon,
(b) take and hold security from any Guarantor or any other party for the payment
of this Guaranty or the Credit

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Party Obligations and exchange, enforce waive and release any such security,
(c) apply such security and direct the order or manner of sale thereof as the
Administrative Agent and the Lenders in their discretion may determine and
(d) release or substitute any one or more endorsers, Guarantors, the Borrower or
other obligors.
     Section 10.6 Reliance.
     It is not necessary for the Administrative Agent, the Lenders or any
Hedging Agreement Provider to inquire into the capacity or powers of the
Borrower or the officers, directors, members, partners or agents acting or
purporting to act on its behalf, and any Credit Party Obligations made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
     Section 10.7 Waiver.
     (a) Each of the Guarantors waives any right (except as shall be required by
applicable statute and cannot be waived) to require the Administrative Agent,
any Lender or any Hedging Agreement Provider to (i) proceed against the
Borrower, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from the Borrower, any other guarantor or any other
party, or (iii) pursue any other remedy in the Administrative Agent’s, any
Lender’s or any Hedging Agreement Provider’s power whatsoever. Each of the
Guarantors waives any defense based on or arising out of any defense of the
Borrower, any other guarantor or any other party other than payment in full of
the Credit Party Obligations (other than contingent indemnity obligations),
including without limitation any defense based on or arising out of the
disability of the Borrower, any other guarantor or any other party, or the
unenforceability of the Credit Party Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of the Borrower other
than payment in full of the Credit Party Obligations. The Administrative Agent
may, at its election, foreclose on any security held by the Administrative Agent
by one or more judicial or nonjudicial sales (to the extent such sale is
permitted by applicable law), or exercise any other right or remedy the
Administrative Agent or any Lender may have against the Borrower or any other
party, or any security, without affecting or impairing in any way the liability
of any Guarantor hereunder except to the extent the Credit Party Obligations
have been paid in full. Each of the Guarantors waives any defense arising out of
any such election by the Administrative Agent or any of the Lenders, even though
such election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of the Guarantors against the Borrower or
any other party or any security.
     (b) Each of the Guarantors waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notice of protest, notices of dishonor, notices of acceptance of
this Guaranty, and notices of the existence, creation or incurring of new or
additional Credit Party Obligations. Each Guarantor assumes all responsibility
for being and keeping itself informed of the Borrower’s financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Credit Party Obligations and the nature,

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scope and extent of the risks which such Guarantor assumes and incurs hereunder,
and agrees that neither the Administrative Agent nor any Lender shall have any
duty to advise such Guarantor of information known to it regarding such
circumstances or risks.
     (c) Each of the Guarantors hereby agrees it will not exercise any rights of
subrogation which it may at any time otherwise have as a result of this Guaranty
(whether contractual, under Section 509 of the U.S. Bankruptcy Code, or
otherwise) to the claims of the Lenders or any Hedging Agreement Provider
against the Borrower or any other guarantor of the Credit Party Obligations of
the Borrower owing to the Lenders or such Hedging Agreement Provider
(collectively, the “Other Parties”) and all contractual, statutory or common law
rights of reimbursement, contribution or indemnity from any Other Party which it
may at any time otherwise have as a result of this Guaranty until such time as
the Credit Party Obligations shall have been paid in full. Each of the
Guarantors hereby further agrees not to exercise any right to enforce any other
remedy which the Administrative Agent, the Lenders or any Hedging Agreement
Provider now have or may hereafter have against any Other Party, any endorser or
any other guarantor of all or any part of the Credit Party Obligations of the
Borrower and any benefit of, and any right to participate in, any security or
collateral given to or for the benefit of the Lenders and/or the Hedging
Agreement Providers to secure payment of the Credit Party Obligations of the
Borrower until such time as the Credit Party Obligations (other than contingent
indemnity obligations) shall have been paid in full.
     Section 10.8 Limitation on Enforcement.
     The Lenders and the Hedging Agreement Providers agree that this Guaranty
may be enforced only by the action of the Administrative Agent acting upon the
instructions of the Required Lenders or such Hedging Agreement Provider (only
with respect to obligations under the applicable Secured Hedging Agreement) and
that no Lender or Hedging Agreement Provider shall have any right individually
to seek to enforce or to enforce this Guaranty, it being understood and agreed
that such rights and remedies may be exercised by the Administrative Agent for
the benefit of the Lenders under the terms of this Credit Agreement and for the
benefit of any Hedging Agreement Provider under any Secured Hedging Agreement.
The Lenders and the Hedging Agreement Providers further agree that this Guaranty
may not be enforced against any director, officer, employee or stockholder of
the Guarantors.
     Section 10.9 Confirmation of Payment.
     The Administrative Agent and the Lenders will, upon request after payment
of the Credit Party Obligations which are the subject of this Guaranty, confirm
to the Borrower, the Guarantors or any other Person that such indebtedness and
obligations have been paid, subject to the provisions of Section 10.2.
[Signature Pages Follow]

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     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed and delivered by its proper and duly authorized officers as of
the day and year first above written.

              BORROWER:   AMERICAN PACIFIC CORPORATION,         a Delaware
corporation    
 
           
 
  By:   /s/ Seth L. Van Voorhees    
 
                Name: Seth L. Van Voorhees         Title:   Chief Financial
Officer    
 
            GUARANTORS:   AMERICAN PACIFIC CORPORATION,         a Nevada
corporation    
 
           
 
  By:   /s/ Seth L. Van Voorhees    
 
                Name: Seth L. Van Voorhees         Title:   Treasurer    
 
                AMPAC FINE CHEMICALS LLC,         a California limited liability
company    
 
           
 
  By:   /s/ Seth L. Van Voorhees    
 
                Name: Seth L. Van Voorhees         Title:   Chief Financial
Officer    
 
                ENERGETIC ADDITIVES INC., LLC,         a Nevada limited
liability company    
 
           
 
  By:   /s/ Seth L. Van Voorhees    
 
                Name: Seth L. Van Voorhees         Title:   Manager    
 
                AMPAC-ISP CORP.,         a Delaware corporation    
 
           
 
  By:   /s/ Seth L. Van Voorhees    
 
                Name: Seth L. Van Voorhees         Title:   Treasurer    

 

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                  AMERICAN AZIDE CORPORATION,         a Nevada corporation    
 
           
 
  By:   /s/ Seth L. Van Voorhees    
 
                Name: Seth L. Van Voorhees         Title:   Treasurer    
 
                AMPAC FARMS, INC.,         a Nevada corporation    
 
           
 
  By:   /s/ Seth L. Van Voorhees    
 
                Name: Seth L. Van Voorhees         Title:   Treasurer    

 

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ADMINISTRATIVE AGENT AND LENDERS:
                WACHOVIA BANK, NATIONAL         ASSOCIATION,         as
Administrative Agent and as a Lender    
 
           
 
  By:   /s/ John Linker    
 
                Name: John Linker         Title:   Officer    

(Excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Securities and Exchange Commission upon request)