EXHIBIT 10.1

 

REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT

 

PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)

 

WITH

 

CTI INDUSTRIES CORPORATION
and the other Borrowers party hereto
(AS BORROWERS),

 

AND

 

THE OTHER CREDIT PARTIES THAT
ARE PARTY HERETO

 

December 14, 2017

 

 

 

 

TABLE OF CONTENTS

 

    Page       I. DEFINITIONS. 1       1.1 Accounting Terms 1 1.2 General Terms
1 1.3 Uniform Commercial Code Terms 41 1.4 Certain Matters of Construction 42
1.5 Currency Matters 43       II. ADVANCES, PAYMENTS. 43       2.1 Revolving
Advances. 43 2.2 Procedures for Requesting Revolving Advances; Procedures for
Selection of Applicable Interest Rates for All Advances. 45 2.3 Term Loans. 47
2.4 Swing Loans. 47 2.5 Disbursement of Advance Proceeds 48 2.6 Making and
Settlement of Advances. 49 2.7 Maximum Advances 51 2.8 Manner and Repayment of
Advances. 51 2.9 Repayment of Excess Advances 52 2.10 Statement of Account 52
2.11 Letters of Credit. 53 2.12 Issuance of Letters of Credit. 53 2.13
Requirements For Issuance of Letters of Credit. 54 2.14 Disbursements,
Reimbursement. 55 2.15 Repayment of Participation Advances. 56 2.16
Documentation 56 2.17 Determination to Honor Drawing Request 57 2.18 Nature of
Participation and Reimbursement Obligations 57 2.19 Liability for Acts and
Omissions. 59 2.20 Voluntary and Mandatory Prepayments. 60 2.21 Use of Proceeds.
62 2.22 Defaulting Lender. 62 2.23 Payment of Obligations 65       III. INTEREST
AND FEES. 65       3.1 Interest 65 3.2 Letter of Credit Fees. 66 3.3 Facility
Fee. 67 3.4 Collateral Monitoring Fee and Collateral Evaluation Fee and Fee
Letter. 67 3.5 Computation of Interest and Fees 68 3.6 Maximum Charges 68 3.7
Increased Costs 68 3.8 Basis For Determining Interest Rate Inadequate or Unfair
69 3.9 Capital Adequacy. 70

 

 -i- 

 

 

3.10 Taxes. 71 3.11 Replacement of Lenders 73       IV. COLLATERAL: GENERAL
TERMS 74     4.1 Security Interest in the Collateral 74 4.2 Perfection of
Security Interest 75 4.3 Preservation of Collateral 75 4.4 Ownership and
Location of Collateral. 76 4.5 Defense of Agent's and Lenders' Interests 76 4.6
Inspection of Premises 76 4.7 Appraisals 77 4.8 Receivables; Deposit Accounts
and Securities Accounts. 77 4.9 Inventory 80 4.10 Maintenance of Equipment 80
4.11 Exculpation of Liability 80       V. REPRESENTATIONS AND WARRANTIES. 80    
  5.1 Authority 80 5.2 Formation and Qualification. 81 5.3 Survival of
Representations and Warranties 81 5.4 Tax Returns 81 5.5 Financial Statements;
No Material Adverse Effect. 82 5.6 Entity Names 82 5.7 O.S.H.A 82 5.8 Solvency;
No Litigation, Violation, Indebtedness or Default; ERISA Compliance. 83 5.9
Patents, Trademarks, Copyrights and Licenses 85 5.10 Licenses and Permits 85
5.11 Default of Indebtedness 85 5.12 No Default 85 5.13 No Burdensome
Restrictions 85 5.14 No Labor Disputes 85 5.15 Margin Regulations 86 5.16
Investment Company Act 86 5.17 Disclosure 86 5.18 Delivery of Shareholder
Subordinated Loan Documents 86 5.19 [Reserved] 86 5.20 Swaps 86 5.21 Business
and Property of Credit Parties 86 5.22 Ineligible Securities 87 5.23 [Reserved]
87 5.24 Equity Interests 87 5.25 Commercial Tort Claims 87 5.26 Letter of Credit
Rights 87 5.27 Material Contracts 87       VI. AFFIRMATIVE COVENANTS. 87      
6.1 Compliance with Laws 87

 

 -ii- 

 

 

6.2 Conduct of Business and Maintenance of Existence and Assets 87 6.3 Books and
Records 88 6.4 Payment of Taxes 88 6.5 Financial Covenants. 88 6.6 Insurance. 89
6.7 Payment of Indebtedness and Leasehold Obligations 90 6.8 Environmental
Matters. 91 6.9 Standards of Financial Statements 92 6.10 [Reserved] 92 6.11
Execution of Supplemental Instruments 92 6.12 [Reserved] 92 6.13 Government
Receivables 92 6.14 Mexican Collateral Matters 93 6.15 Keepwell 93       VII.
NEGATIVE COVENANTS. 93       7.1 Merger, Consolidation, Acquisition and Sale of
Assets. 94 7.2 Creation of Liens 94 7.3 Guarantees 94 7.4 Investments 94 7.5
[Reserved]. 94 7.6 Capital Expenditures 94 7.7 Dividends 94 7.8 Indebtedness 94
7.9 Nature of Business 94 7.10 Transactions with Affiliates 95 7.11 Reserved 95
7.12 Subsidiaries. 95 7.13 Fiscal Year and Accounting Changes 95 7.14 Pledge of
Credit 95 7.15 Amendment of Organizational Documents 95 7.16 Compliance with
ERISA 96 7.17 Prepayment of Indebtedness 96 7.18 Shareholder Subordinated Loan
96       VIII. CONDITIONS PRECEDENT. 96       8.1 Conditions to Initial Advances
96 8.2 Conditions to Each Advance 100       IX. INFORMATION AS TO BORROWERS. 101
      9.1 Disclosure of Material Matters 101 9.2 Schedules 101 9.3 Environmental
Reports. 102 9.4 Litigation 102 9.5 Material Occurrences 103 9.6 Government
Receivables 103 9.7 Annual Financial Statements 103

 

 -iii- 

 

 

9.8 Quarterly Financial Statements 103 9.9 Monthly Financial Statements 104 9.10
Other Reports 104 9.11 Additional Information 104 9.12 Projected Operating
Budget 104 9.13 Variances From Operating Budget 105 9.14 Notice of Suits,
Adverse Events 105 9.15 ERISA Notices and Requests 105 9.16 Additional Documents
106 9.17 Updates to Certain Schedules 106 9.18 Financial Disclosure 106     X.
EVENTS OF DEFAULT. 106       10.1 Nonpayment 106 10.2 Breach of Representation
106 10.3 Financial Information 106 10.4 Judicial Actions 107 10.5 Noncompliance
107 10.6 Judgments 107 10.7 Bankruptcy 107 10.8 Material Adverse Effect 107 10.9
Lien Priority 107 10.10 Shareholder Subordinated Loan Default 108 10.11 Cross
Default 108 10.12 Breach of Guaranty or Pledge Agreement 108 10.13 Change of
Control 108 10.14 Invalidity 108 10.15 Seizures 108 10.16 Reserved 108 10.17
Pension Plans 108 10.18 Anti-Money Laundering/International Trade Law Compliance
109       XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT. 109       11.1 Rights
and Remedies. 109 11.2 Agent's Discretion 110 11.3 Setoff 111 11.4 Rights and
Remedies not Exclusive 111 11.5 Allocation of Payments After Event of Default
111       XII. WAIVERS AND JUDICIAL PROCEEDINGS. 112       12.1 Waiver of Notice
112 12.2 Delay 112 12.3 Jury Waiver 112       XIII. EFFECTIVE DATE AND
TERMINATION. 113       13.1 Term 113 13.2 Termination 114

 

 -iv- 

 

 

XIV. REGARDING AGENT. 114       14.1 Appointment 114 14.2 Nature of Duties 115
14.3 Lack of Reliance on Agent 115 14.4 Resignation of Agent; Successor Agent
115 14.5 Certain Rights of Agent 116 14.6 Reliance 116 14.7 Notice of Default
116 14.8 Indemnification 117 14.9 Agent in its Individual Capacity 117 14.10
Delivery of Documents 117 14.11 Borrowers' Undertaking to Agent 117 14.12 No
Reliance on Agent's Customer Identification Program 117 14.13 Other Agreements
118 14.14 Collateral Matters. 118 14.15 Field Examination Reports;
Confidentiality; Disclaimers by Lenders; Other Reports and Information 119 14.16
Several Obligations; No Liability 120 14.17 Bank Product Providers 121       XV.
BORROWING AGENCY. 121       15.1 Borrowing Agency Provisions; Joint and Several
Liability. 121 15.2 Waiver of Subrogation 124       XVI. MISCELLANEOUS. 124    
  16.1 Governing Law 124 16.2 Entire Understanding. 125 16.3 Successors and
Assigns; Participations; New Lenders. 128 16.4 Application of Payments 131 16.5
Indemnity 131 16.6 Notice 132 16.7 Survival 134 16.8 Severability 134 16.9
Expenses 134 16.10 Injunctive Relief 135 16.11 Consequential Damages 135 16.12
Captions 135 16.13 Counterparts; Facsimile Signatures 135 16.14 Construction 135
16.15 Confidentiality; Sharing Information 136 16.16 Publicity 136 16.17
Certifications From Banks and Participants; USA PATRIOT Act. 136 16.18
Anti-Terrorism Laws 137 16.19 Judgment Currency 137

 

 -v- 

 

 

LIST OF EXHIBITS AND SCHEDULES

 

Exhibits       Exhibit 1.2 Borrowing Base Certificate Exhibit 1.2(a) Compliance
Certificate Exhibit 2.1(a) Revolving Credit Note Exhibit 2.3(a) Term Note
Exhibit 2.4(a) Swing Loan Note Exhibit 5.5(b) Financial Projections Exhibit
8.1(g) Financial Condition Certificate Exhibit 16.3 Commitment Transfer
Supplement

 

Schedules       Schedule 1.2 Permitted Encumbrances Schedule 4.4 Equipment and
Inventory Locations; Place of Business, Chief Executive Office, Real Property
Schedule 4.8(j) Deposit and Investment Accounts Schedule 5.1 Consents Schedule
5.2(a) States of Qualification and Good Standing Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number Schedule 5.6 Prior Names Schedule
5.7 Environmental Schedule 5.8(b)(i) Litigation Schedule 5.8(d) Plans Schedule
5.9 Intellectual Property Schedule 5.10 Licenses and Permits Schedule 5.14 Labor
Disputes Schedule 5.24 Equity Interests Schedule 5.25 Commercial Tort Claims
Schedule 5.26 Letter of Credit Rights Schedule 5.27 Material Contracts Schedule
7.3 Investments Schedule 7.8 Indebtedness

 

 -vi- 

 

 

REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT

 

Revolving Credit, Term Loan and Security Agreement dated as of December 14, 2017
among CTI INDUSTRIES CORPORATION, an Illinois corporation ("Company"; together
with each Person joined hereto as a borrower from time to time, collectively the
"Borrowers", and each a "Borrower"), each other Credit Party party hereto from
time to time, the financial institutions which are now or which hereafter become
a party hereto (collectively, the "Lenders" and each individually a "Lender")
and PNC BANK, NATIONAL ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such
capacity, the "Agent").

 

IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, the other Credit Parties party hereto, Lenders and Agent hereby agree
as follows:

 

I.DEFINITIONS.

 

1.1       Accounting Terms. As used in this Agreement, the Other Documents or
any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined shall have the respective meanings given to them under GAAP; provided,
however that, whenever such accounting terms are used for the purposes of
determining compliance with financial covenants in this Agreement, such
accounting terms shall be defined in accordance with GAAP as in effect on the
Closing Date. If there occurs after the Closing Date any change in GAAP that
affects in any respect the calculation of any covenant contained in this
Agreement or the definition of any term defined under GAAP used in such
calculations, Agent, Lenders and Borrowers shall negotiate in good faith to
amend the provisions of this Agreement that relate to the calculation of such
covenants with the intent of having the respective positions of Agent, Lenders
and Borrowers after such change in GAAP conform as nearly as possible to their
respective positions as of the Closing Date, provided, that, until any such
amendments have been agreed upon, the covenants in this Agreement shall be
calculated as if no such change in GAAP had occurred and Borrowers shall provide
additional financial statements or supplements thereto, attachments to
Compliance Certificates and/or calculations regarding financial covenants as
Agent may reasonably require in order to provide the appropriate financial
information required hereunder both reflecting any applicable changes in GAAP
and as necessary to demonstrate compliance with the financial covenants before
giving effect to the applicable changes in GAAP.

 

1.2       General Terms. For purposes of this Agreement the following terms
shall have the following meanings:

 

"Accountants" shall have the meaning set forth in Section 9.7 hereof.

 

"Advance Rates" shall have the meaning set forth in Section 2.1(a)(y)(ii)
hereof.

 

 

 

 

"Advances" shall mean and include the Revolving Advances (including Protective
Advances and Intentional Overadvances), Letters of Credit, Letter of Credit
Borrowings, the Swing Loans and the Term Loan.

 

"Affected Lender" shall have the meaning set forth in Section 3.11 hereof.

 

"Affiliate" of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, manager, member, managing
member, general partner or officer (i) of such Person, (ii) of any Subsidiary of
such Person or (iii) of any Person described in clause (a) above. For purposes
of this definition, control of a Person shall mean the power, direct or
indirect, (x) to vote five percent (5%) or more of the Equity Interests having
ordinary voting power for the election of directors of such Person or other
Persons performing similar functions for any such Person, or (y) to direct or
cause the direction of the management and policies of such Person whether by
ownership of Equity Interests, contract or otherwise.

 

"Agent" shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.

 

"Agreement" shall mean this Revolving Credit, Term Loan and Security Agreement,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.

 

"Alternate Base Rate" shall mean, for any day, a rate per annum equal to the
highest of (a) the Base Rate in effect on such day, (b) the sum of the Federal
Funds Open Rate in effect on such day plus one-half of one percent (0.5%), and
(c) the sum of the Daily LIBOR Rate in effect on such day plus one percent
(1.0%), so long as a Daily LIBOR Rate is offered, ascertainable and not
unlawful.

 

"Alternate Source" shall have the meaning set forth in the definition of Federal
Funds Open Rate.

 

"Anti-Terrorism Laws" shall mean any Laws relating to terrorism, trade sanctions
programs and embargoes, import/export licensing, money laundering or bribery,
and any regulation, order, or directive promulgated, issued or enforced pursuant
to such Laws, all as amended, supplemented or replaced from time to time.

 

"Applicable Law" shall mean all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, this Agreement, Other Document or
contract in question, including all applicable common law and equitable
principles, all provisions of all applicable state, federal and foreign
constitutions, statutes, rules, regulations, treaties, directives and orders of
any Governmental Body, and all orders, judgments and decrees of all courts and
arbitrators.

 

"Applicable Margin" shall mean (a) with respect to any Revolving Advances and
Swing Loans, (i) as of the Closing Date and through the first day of the first
calendar quarter following delivery of the audited financial statements for the
fiscal year ending December 31, 2017 in accordance with Section 9.7, the
applicable percent per annum set forth in Level II below, and (ii) thereafter,
effective as of the first day of each calendar quarter (each such day, including
the first day of the first calendar quarter following delivery of the audited
financial statements referred to in clause (i) above, an "Adjustment Date"), the
applicable percent per annum set forth in the pricing table below corresponding
to the Average Daily Undrawn Availability for the most recently completed
calendar quarter prior to the applicable Adjustment Date:

 

  -2- 

 

 

 

Level

  Average Daily Undrawn
Availability  Applicable
Eurodollar
Rate Margin   Applicable
Domestic
Rate Margin  I  greater than 50% of the Maximum Revolving Advance Amount 
 4.25%   3.25% II  less than or equal to 50% of the Maximum Revolving Advance
Amount   4.75%   3.75%

 

; and (b) with respect to any Term Loans, (i) an amount equal to 3.75% per annum
for Term Loans consisting of Domestic Rate Loans, and (ii) an amount equal to
4.75% per annum for Term Loans consisting of LIBOR Rate Loans.

 

"Application Date" shall have the meaning set forth in Section 2.8(b) hereof.

 

"Approvals" shall have the meaning set forth in Section 5.7(b) hereof.

 

"Approved Electronic Communication" shall mean each notice, demand,
communication, information, document and other material transmitted, posted or
otherwise made or communicated by e-mail, E-Fax, the StuckyNet System©, or any
other equivalent electronic service agreed to by Agent, whether owned, operated
or hosted by Agent, any Lender, any of their Affiliates or any other Person,
that any party is obligated to, or otherwise chooses to, provide to Agent
pursuant to this Agreement or any Other Document, including any financial
statement, financial and other report, notice, request, certificate and other
information material; provided that Approved Electronic Communications shall not
include any notice, demand, communication, information, document or other
material that Agent specifically instructs a Person to deliver in physical form.

 

"Average Daily Undrawn Availability" shall mean, for any calendar quarter, an
amount equal to the average daily Undrawn Availability during such calendar
quarter.

 

"Base Rate" shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.

 

"Benefited Lender" shall have the meaning set forth in Section 2.6(e) hereof.

 

  -3- 

 

 

"Borrower" or "Borrowers" shall have the meaning set forth in the preamble to
this Agreement and shall extend to all permitted successors and assigns of such
Persons.

 

"Borrowers on a Consolidated Basis" shall mean the consolidation in accordance
with GAAP of the accounts or other items of Borrowers and their respective
Subsidiaries, but expressly excluding any Consolidated Variable Interest
Entities.

 

"Borrowers' Account" shall have the meaning set forth in Section 2.10 hereof.

 

"Borrowing Agent" shall mean Company.

 

"Borrowing Base Certificate" shall mean a certificate in substantially the form
of Exhibit 1.2 hereto duly executed by the President, Chief Financial Officer or
Controller of the Borrowing Agent and delivered to the Agent, appropriately
completed, by which such officer shall certify to Agent the Formula Amount and
calculation thereof as of the date of such certificate.

 

"Business Day" shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey and, if the applicable Business Day
relates to any LIBOR Rate Loans, such day must also be a day on which dealings
are carried on in the London interbank market.

 

"Capital Expenditures" shall mean, with respect to Borrowers on a Consolidated
Basis, expenditures made or liabilities incurred for the acquisition of any
fixed assets or improvements (or of any replacements or substitutions thereof or
additions thereto) which have a useful life of more than one year and which, in
accordance with GAAP, would be classified as capital expenditures. Capital
Expenditures shall include the total principal portion of Capitalized Lease
Obligations.

 

"Capitalized Lease Obligation" shall mean with respect to Borrowers on a
Consolidated Basis, any Indebtedness of any Borrower represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.

 

"Cash Equivalents" shall mean (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one (1) year from the date of acquisition thereof,
(b) marketable direct obligations issued or fully guaranteed by any state of the
United States or any political subdivision of any such state or any public
instrumentality thereof maturing within 1 year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Rating Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"), (c) commercial paper maturing no more than
270 days from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's,
(d) certificates of deposit, time deposits, overnight bank deposits or bankers'
acceptances maturing within 1 year from the date of acquisition thereof issued
by any bank organized under the laws of the United States or any state thereof
or the District of Columbia or any United States branch of a foreign bank having
at the date of acquisition thereof combined capital and surplus of not less than
$1,000,000,000, (e) deposit accounts maintained with (i) any bank that satisfies
the criteria described in clause (d) above, or (ii) any other bank organized
under the laws of the United States or any state thereof so long as the full
amount maintained with any such other bank is insured by the Federal Deposit
Insurance Corporation, (f) repurchase obligations of any commercial bank
satisfying the requirements of clause (d) of this definition or recognized
securities dealer having combined capital and surplus of not less than
$1,000,000,000, having a term of not more than seven days, with respect to
securities satisfying the criteria in clauses (a) or (d) above, (g) debt
securities with maturities of six months or less from the date of acquisition
backed by standby letters of credit issued by any commercial bank satisfying the
criteria described in clause (d) above, and (h) Investments in money market
funds substantially all of whose assets are invested in the types of assets
described in clauses (a) through (g) above.

 

  -4- 

 

 

"Cash Management Products and Services" shall mean agreements or other
arrangements under which Agent or any Lender or any Affiliate of Agent or a
Lender provides any of the following products or services to any Credit Party:
(a) credit cards; (b) credit card processing services; (c) debit cards and
stored value cards; (d) commercial cards, including p-cards; (e) ACH
transactions; and (f) cash management and treasury management services and
products, including without limitation controlled disbursement accounts or
services, lockboxes, automated clearinghouse transactions, overdrafts,
interstate depository network services. The indebtedness, obligations and
liabilities of any Credit Party to the provider of any Cash Management Products
and Services (including all obligations and liabilities owing to such provider
in respect of any returned items deposited with such provider) (the "Cash
Management Liabilities") shall be "Obligations" and otherwise treated as
Obligations for purposes of this Agreement and each of the Other Documents, but
only so long as such provider (if not PNC or an Affiliate of PNC) has notified
Agent in writing of such Cash Management Products and Services within ten (10)
days of entering into such agreement or arrangement.

 

"Cash Management Liabilities" shall have the meaning provided in the definition
of "Cash Management Products and Services."

 

"CEA" shall mean the Commodity Exchange Act (7 U.S.C.§1 et seq.), as amended
from time to time, and any successor statute.

 

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

 

"CFC" means a "controlled foreign corporation" within the meaning of Section 957
of the Code, in which any Credit Party is a "United States shareholder" within
the meaning of Section 951(b) of the Code.

 

"CFC Entity" shall mean, (a) any CFC that has not guaranteed or pledged any of
its assets or suffered a pledge of more than sixty-five percent (65%) of its
voting stock, to secure, directly or indirectly, any indebtedness of any Credit
Party, and (b) any Subsidiary of a Credit Party all or substantially all of the
assets of which consist of stock of one or more CFCs that has not guaranteed or
pledged any of its assets or suffered a pledge of more than sixty-five percent
(65%) of its voting stock, to secure, directly or indirectly, any indebtedness
of any Credit Party.

 

"CFTC" shall mean the Commodity Futures Trading Commission.

 

  -5- 

 

 

"Change in Law" shall mean the occurrence, after the Closing Date, of any of the
following: (a) the adoption or taking effect of any Applicable Law; (b) any
change in any Applicable Law or in the administration, implementation,
interpretation or application thereof by any Governmental Body; or (c) the
making or issuance of any request, rule, guideline or directive (whether or not
having the force of law) by any Governmental Body; provided that notwithstanding
anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and
Consumer Protection Act and all requests, rules, regulations, guidelines,
interpretations or directives thereunder or issued in connection therewith
(whether or not having the force of Applicable Law) and (y) all requests, rules,
regulations, guidelines, interpretations or directives promulgated by the Bank
for International Settlements, the Basel Committee on Banking Supervision (or
any successor or similar authority) or the United States or foreign regulatory
authorities (whether or not having the force of law), in each case pursuant to
Basel III, shall in each case be deemed to be a Change in Law regardless of the
date enacted, adopted, issued, promulgated or implemented.

 

"Change of Control" shall mean: (a) any person or group of persons (within the
meaning of Section 13(d) or 14(a) of the Exchange Act), other than Permitted
Holder, shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the SEC under the Exchange Act) of 25% or more of the
voting Equity Interests of Company; (b)  during any period of 12 consecutive
months, a majority of the members of the board of directors of Company cease to
be composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board was approved by individuals referred to in clause (i)
above constituting at the time of such election or nomination at least a
majority of that board, or (iii) whose election or nomination to that board was
approved by individuals referred to in clauses (i) and (ii) above constituting
at the time of such election or nomination at least a majority of that board;
(c) Jeff Hyland shall cease to hold office as or perform the day-to-day duties
of the President of Company, unless, prior to such event, Company shall have
retained a replacement officer in place of such individual who is acceptable to
Agent as evidenced by written consent, (d) the occurrence of any event (whether
in one or more transactions) which results in Company failing to own one hundred
(100%) percent of the Equity Interests (on a fully diluted basis) of each other
Credit Party, or (e) any merger, consolidation or sale of substantially all of
the property or assets of any Borrower; provided, that the sale by Company of
any Equity Interests of any Borrower shall be deemed a sale of substantially all
of Company's assets. For purposes of this definition, "control of Borrower"
shall mean the power, direct or indirect (x) to vote more than fifty percent
fifty percent (50%) of the Equity Interests having ordinary voting power for the
election of directors (or the individuals performing similar functions) of any
Borrower or (y) to direct or cause the direction of the management and policies
of any Borrower by contract or otherwise.

 

"CIP Regulations" shall have the meaning set forth in Section 14.12 hereof.

 

"Clever Container" means Clever Container Company, LLC, an Illinois limited
liability company.

 

"Closing Date" shall mean December 14, 2017.

 

  -6- 

 

 

"Code" shall mean the Internal Revenue Code of 1986, as the same may be amended
or supplemented from time to time, and any successor statute of similar import,
and the rules and regulations thereunder, as from time to time in effect.

 

"Company" shall have the meaning set forth in the Preamble hereof.

 

"Collateral" shall mean all right, title and interest of each Credit Party in
all of the following property and assets of such Credit Party, in each case
whether now existing or hereafter arising or created and whether now owned or
hereafter acquired and wherever located:

 

(a)       all Receivables and all supporting obligations relating thereto;

 

(b)       all Equipment and fixtures;

 

(c)       all general intangibles (including all payment intangibles and all
software) and all supporting obligations related thereto;

 

(d)       all Inventory;

 

(e)       securities, financial assets and investment property (including all
Equity Interests issued by a Subsidiary to such Credit Party);

 

(f)       all Real Property subject to Mortgages;

 

(g)       all contract rights, rights of payment which have been earned under a
contract rights, chattel paper (including electronic chattel paper and tangible
chattel paper), commercial tort claims (whether now existing or hereafter
arising, including any commercial tort claims set forth on Schedule 5.25);
documents (including all warehouse receipts and bills of lading), deposit
accounts, goods, instruments (including promissory notes), letters of credit
(whether or not the respective letter of credit is evidenced by a writing) and
letter-of-credit rights, cash, certificates of deposit, insurance proceeds
(including hazard, flood and credit insurance), security agreements, eminent
domain proceeds, condemnation proceeds, tort claim proceeds and all supporting
obligations;

 

(h)       all ledger sheets, ledger cards, files, correspondence, records, books
of account, business papers, computers, computer software (owned by any Credit
Party or in which it has an interest), computer programs, tapes, disks and
documents, including all of such property relating to the property described in
clauses (a) through (h) of this definition; and

 

(i)       all proceeds and products of the property described in clauses (a)
through (i) of this definition, in whatever form.

 

It is the intention of the parties that if Agent shall fail to have a perfected
Lien in any particular property or assets of any Credit Party for any reason
whatsoever, but the provisions of this Agreement and/or of the Other Documents,
together with all financing statements and other public filings relating to
Liens filed or recorded by Agent against any Credit Party, would be sufficient
to create a perfected Lien in any property or assets that such Credit Party may
receive upon the sale, lease, license, exchange, transfer or disposition of such
particular property or assets, then all such "proceeds" of such particular
property or assets shall be included in the Collateral as original collateral
that is the subject of a direct and original grant of a security interest as
provided for herein and in the Other Documents (and not merely as proceeds (as
defined in Article 9 of the Uniform Commercial Code) in which a security
interest is created or arises solely pursuant to Section 9-315 of the Uniform
Commercial Code).

 

  -7- 

 

 

Notwithstanding the forgoing, Collateral shall not include any Excluded
Property.

 

"Collection Account" shall mean a deposit account of a Credit Party maintained
at a Controlled Account Bank which is used exclusively for deposits of
collections and proceeds of Collateral and not as a disbursement or operating
account upon which checks or other drafts may be drawn.

 

"Commitment Transfer Supplement" shall mean a document in the form of Exhibit
16.3 hereto, properly completed and otherwise in form and substance satisfactory
to Agent by which the Purchasing Lender purchases and assumes a portion of the
obligation of a Lender to make Advances under this Agreement.

 

"Compliance Certificate" shall mean a compliance certificate substantially in
the form of Exhibit 1.2(a) hereto to be signed by the President, Chief Financial
Officer or Controller of Borrowing Agent.

 

"Consents" shall mean all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Bodies and other third
parties, domestic or foreign, necessary to carry on any Credit Party's business
or necessary (including to avoid a conflict or breach under any agreement,
instrument, other document, license, permit or other authorization) for the
execution, delivery or performance of this Agreement, the Other Documents or the
Shareholder Subordinated Loan Documents.

 

"Consigned Inventory" shall mean Inventory of any Credit Party that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.

 

"Consolidated Variable Interest Entities" shall mean each Person constituting a
"variable interest entity" for purposes of FIN 46 under the United States
Financial Accounting Standards Board (FASB) and subject to consolidation with
the Credit Parties for purposes of GAAP, including without limitation Clever
Container.

 

"Contract Rate" shall have the meaning set forth in Section 3.1 hereof.

 

"Controlled Account Bank" shall have the meaning set forth in Section 4.8(h)
hereof.

 

"Controlled Accounts" shall have the meaning set forth in Section 4.8(h) hereof.

 

"Controlled Group" shall mean, at any time, each Credit Party and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
any Credit Party, are treated as a single employer under Section 414 of the
Code.

 

  -8- 

 

 

"Covered Entity" shall mean (a) each Credit Party, each of Credit Party's
Subsidiaries and all pledgors of Collateral and (b) each Person that, directly
or indirectly, is in control of a Person described in clause (a) above. For
purposes of this definition, control of a Person shall mean the direct or
indirect (x) ownership of, or power to vote, twenty-five percent (25%) or more
of the issued and outstanding equity interests having ordinary voting power for
the election of directors of such Person or other Persons performing similar
functions for such Person, or (y) power to direct or cause the direction of the
management and policies of such Person whether by ownership of equity interests,
contract or otherwise.

 

"Credit Party" means each Borrower and each Guarantor; and "Credit Parties"
means all such Persons, collectively.

 

"CTI Supply" shall mean CTI Supply, Inc., an Illinois corporation.

 

"Current Assets" shall mean, at a particular date, all cash, cash equivalents,
accounts and inventory of Borrowers on a Consolidated Basis and all other items
which would, in conformity with GAAP, be included under current assets on a
balance sheet of Borrowers on a Consolidated Basis as at such date; provided,
however, that such amounts shall not include (a) any amounts for any
Indebtedness owing by an Affiliate of any Credit Party, unless such Indebtedness
arose in connection with the sale of goods or rendition of services in the
Ordinary Course of Business and would otherwise constitute current assets in
conformity with GAAP, (b) any Equity Interests issued by an Affiliate of any
Credit Party, or (c) the cash surrender value of any life insurance policy.

 

"Current Liabilities" shall mean, at a particular date, all amounts which would,
in conformity with GAAP, be included under current liabilities on a balance
sheet of Borrowers on a Consolidated Basis as at such date, but in any event
including the amounts of (a) all Indebtedness of Borrowers on a Consolidated
Basis payable on demand, or, at the option of the Person to whom such
Indebtedness is owed, not more than twelve (12) months after such date, (b) any
payments in respect of any Indebtedness of any Credit Party (whether
installment, serial maturity, sinking fund payment or otherwise) required to be
made not more than twelve (12) months after such date, (c) all reserves in
respect of liabilities or Indebtedness payable on demand or, at the option of
the Person to whom such Indebtedness is owed, not more than twelve (12) months
after such date, the validity of which is not contested at such date, and
(d) all accruals for federal or other taxes measured by income payable within a
twelve (12) month period.

 

"Customer" shall mean the account debtor with respect to any Receivable and/or
the prospective purchaser of goods, services or both with respect to any
contract or contract right, and/or any party who enters into or proposes to
enter into any contract or other arrangement with any Credit Party, pursuant to
which such Credit Party is to deliver any personal property or perform any
services.

 

"Customs" shall have the meaning set forth in Section 2.13(b) hereof.

 

"Daily LIBOR Rate" shall mean, for any day, the rate per annum determined by the
Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the
Reserve Percentage on such day. Notwithstanding the foregoing, if the Daily
LIBOR Rate as determined above would be less than zero (0.00), such rate shall
be deemed to be zero (0.00) for purposes of this Agreement.

 

  -9- 

 

 

"Debt Payments" shall mean for any period, with respect to Borrowers on a
Consolidated Basis, all cash actually expended to make: (a) interest payments on
any Advances or other Indebtedness (including, without limitation, the
Shareholder Subordinated Loan), plus (b) scheduled principal payments on
Indebtedness, including without limitation the Term Loan, plus (c) payments for
all fees, commissions and charges set forth herein or with respect to
Indebtedness, plus (d) payments on Capitalized Lease Obligations, plus (e) other
principal payments with respect to any Indebtedness (including, without
limitation, the Shareholder Subordinated Loan).

 

"Default" shall mean an event, circumstance or condition which, with the giving
of notice or passage of time or both, would constitute an Event of Default.

 

"Default Rate" shall have the meaning set forth in Section 3.1 hereof.

 

"Defaulting Lender" shall mean any Lender that: (a) has failed, within two (2)
Business Days of the date required, to (i) fund any portion of its Revolving
Commitment Percentage or Term Loan Commitment Percentage, as applicable, of
Advances, (ii) if applicable, fund any portion of its Participation Commitment
in Letters of Credit or Swing Loans or (iii) pay over to Agent, Issuer, Swing
Loan Lender or any Lender any other amount required to be paid by it hereunder,
unless, in the case of clause (i) above, such Lender notifies Agent in writing
that such failure is the result of such Lender's good faith determination that a
condition precedent to funding (specifically identified and including a
particular Default or Event of Default, if any) has not been satisfied; (b) has
notified Borrowers or Agent in writing, or has made a public statement to the
effect, that it does not intend or expect to comply with any of its funding
obligations under this Agreement (unless such writing or public statement
indicates that such position is based on such Lender's good faith determination
that a condition precedent (specifically identified and including a particular
Default or Event of Default, if any) to funding a loan under this Agreement
cannot be satisfied) or generally under other agreements in which it commits to
extend credit; (c) has failed, within two (2) Business Days after request by
Agent, acting in good faith, to provide a certification in writing from an
authorized officer of such Lender that it will comply with its obligations (and
is financially able to meet such obligations) to fund prospective Advances and,
if applicable, participations in then outstanding Letters of Credit and Swing
Loans under this Agreement, provided that such Lender shall cease to be a
Defaulting Lender pursuant to this clause (c) upon Agent's receipt of such
certification in form and substance satisfactory to the Agent; (d) has become
the subject of an Insolvency Event; or (e) has failed at any time to comply with
the provisions of Section 2.6(e) with respect to purchasing participations from
the other Lenders, whereby such Lender's share of any payment received, whether
by setoff or otherwise, is in excess of its pro rata share of such payments due
and payable to all of the Lenders.

 

"Designated Lender" shall have the meaning set forth in Section 16.2(d) hereof.

 

  -10- 

 

 

"Document" shall have the meaning given to the term "document" in the Uniform
Commercial Code.

 

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

 

"Dollar Equivalent" shall have the meaning set forth in Section 1.5 hereof.

 

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

 

"Drawing Date" shall have the meaning set forth in Section 2.14(b) hereof.

 

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

 

"Early Termination Fee" shall have the meaning set forth in Section 13.1 hereof.

 

"EBITDA" shall mean for any period with respect to Borrowers on a Consolidated
Basis, the sum of (a) net income (or loss) for such period (excluding
extraordinary gains and non-cash losses), plus (b) all interest expense for such
period, plus (c) all charges against income for such period for federal, state
and local taxes, plus (d) depreciation expenses for such period, plus
(e) amortization expenses for such period, plus (f) all non-cash expenses
incurred in connection with stock compensation plans; provided, that,
notwithstanding anything to the contrary contained herein, (i) for the period
commencing on October 1, 2017 and ending on the Closing Date, EBITDA shall be
EBITDA for such period, as adjusted in a manner consistent with the adjustments
to EBITDA reflected in EBITDA for the months of January 2017 through September
2017 set forth below, and (ii) for each of the calendar quarters set forth
below, EBITDA shall be deemed to be the amount set forth below opposite such
month:

 

Calendar Quarter
Ending  EBITDA  March 31, 2017  $1,172,000  June 30, 2017  $331,000  September
30, 2017  $694,000 

 

"Effective Date" shall mean, with respect to a Swap, the date indicated in a
document or agreement to be the date on which such document or agreement becomes
effective, or, if there is no such indication, the date of execution of such
document or agreement.

 

"Eligible Contract Participant" shall mean an "eligible contract participant" as
defined in the CEA and regulations thereunder.

 

"Eligibility Date" shall mean, with respect to each Borrower and Guarantor and
each Swap, the date on which this Agreement or any Other Document becomes
effective with respect to such Swap (for the avoidance of doubt, the Eligibility
Date shall be the Effective Date of such Swap if this Agreement or any Other
Document is then in effect with respect to such Borrower or Guarantor, and
otherwise it shall be the Effective Date of this Agreement and/or such Other
Document(s) to which such Borrower or Guarantor is a party).

 

  -11- 

 

 

"Eligible Insured Receivables" shall mean Eligible Receivables that are subject
to credit insurance satisfactory to Agent in its Permitted Discretion (including
with respect to the insurance carrier, amount and terms of such insurance, shall
name Agent as beneficiary or loss payee, as applicable).

 

"Eligible Inventory" shall mean Inventory, excluding work in process unless a
work in process conversion scenario is utilized in the applicable appraisal,
valued at the lower of cost or market value, determined on a first-in-first-out
basis, which is not, in Agent's opinion, obsolete, slow moving or unmerchantable
and which Agent, in its Permitted Discretion, shall deem Eligible Inventory,
based on such considerations as Agent may from time to time deem appropriate. In
addition, Inventory shall not be Eligible Inventory if it:

 

(a) is not subject to a perfected, first priority security interest in favor of
Agent and no other Lien (other than a Permitted Encumbrance),

 

(b) does not conform to all standards imposed by any Governmental Body which has
regulatory authority over such goods or the use or sale thereof;

 

(c) is Foreign In-Transit Inventory;

 

(d) is located outside the continental United States or Mexico or at a location
that is not otherwise in compliance with this Agreement (or in-transit between
any such location);

 

(e) constitutes Consigned Inventory unless it is subject to a Lien Waiver
Agreement in favor of Agent; provided, that no more than $150,000 of
availability may be generated hereunder in respect of Consigned Inventory;

 

(f) is the subject of an Intellectual Property Claim;

 

(g) is subject to a License Agreement that limits, conditions or restricts the
applicable Credit Party's or Agent's right to sell or otherwise dispose of such
Inventory, unless Agent is a party to a Licensor/Agent Agreement with the
Licensor under such License Agreement (or Agent shall elect to establish
reserves against the Formula Amount with respect thereto as Agent shall deem
appropriate in its Permitted Discretion);

 

(h) is situated at a location not owned by a Credit Party unless the owner or
occupier of such location has executed in favor of Agent a Lien Waiver Agreement
(or Agent shall elect to establish reserves against the Formula Amount with
respect thereto as Agent shall deem appropriate in its Permitted Discretion); or

 

(i) if the sale of such Inventory would result in an ineligible Receivable.

 

"Eligible Mexican Insured Receivables" shall mean Eligible Insured Receivables,
denominated in Dollars or Mexican pesos, of any Mexican Credit Party.

 

  -12- 

 

 

"Eligible Mexican Receivables" shall mean Eligible Receivables, denominated in
Dollars or Mexican pesos, of any Mexican Credit Party.

 

"Eligible Mexican Inventory" shall mean Eligible Inventory of any Mexican Credit
Party that is located in Mexico.

 

"Eligible Receivables" shall mean each Receivable constituting an account of a
Credit Party arising in the Ordinary Course of Business and which Agent, in its
Permitted Discretion, shall deem to be an Eligible Receivable, based on such
considerations as Agent may from time to time deem appropriate. In addition, no
Receivable shall be an Eligible Receivable if:

 

(a)       it is not subject to Agent's first priority perfected security
interest and no other Lien (other than Permitted Encumbrances), or is not
evidenced by an invoice or other documentary evidence satisfactory to Agent;

 

(b)       it arises out of a sale made by any Credit Party to an Affiliate of
any Credit Party or to a Person controlled by an Affiliate of any Credit Party;

 

(c)       it is due or unpaid more than (i) one hundred twenty (120) days after
the original invoice date (increased to one hundred fifty (150) days solely with
respect to Extended Terms Customers) or (ii) sixty (60) days after the original
due date;

 

(d)       fifty percent (50%) or more of the Receivables from such Customer are
not deemed Eligible Receivables hereunder pursuant to clause (c) above;

 

(e)       any covenant, representation or warranty contained in this Agreement
with respect to such Receivable has been breached;

 

(f)       an Insolvency Event shall have occurred with respect to such Customer;

 

(g)       the sale is to a Customer outside the continental United States of
America or Mexico, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent; provided, that up to
$500,000 of availability may be generated from the sale to a Customer outside
the continental United States of America or Mexico notwithstanding the fact that
the underlying Receivable is not subject to a letter of credit, guaranty, credit
insurance or acceptance terms;

 

(h)       the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper;

 

(i)       Agent believes, in its Permitted Discretion, that collection of such
Receivable is insecure or that such Receivable may not be paid by reason of the
Customer's financial inability to pay;

 

(j)       the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the applicable
Credit Party assigns its right to payment of such Receivable to Agent pursuant
to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727
et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with
other applicable statutes or ordinances;

 

  -13- 

 

 

(k)       the goods giving rise to such Receivable have not been delivered to
and accepted by the Customer or the services giving rise to such Receivable have
not been performed by the applicable Credit Party and accepted by the Customer
or the Receivable otherwise does not represent a final sale;

 

(l)       the Receivables of the Customer exceed a credit limit determined by
Agent to the extent such Receivable exceeds such limit;

 

(m)       the Receivable is subject to any offset, deduction, defense, dispute,
credits or counterclaim (but such Receivable shall only be ineligible to the
extent of such offset, deduction, defense, credit or counterclaim), the Customer
is also a creditor or supplier of a Credit Party or the Receivable is contingent
in any respect or for any reason;

 

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

 

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

 

(p)       such Receivable is not payable to a Credit Party in Dollars (or
Mexican pesos in respect of any Mexican Credit Party);

 

(q)       such Receivable arises from a transaction that is subject to a
performance bond, bid bond, customs bond, appeal bond, surety bond, performance
guarantee, completion guarantee or similar obligation;

 

(r)       such Receivable is not otherwise satisfactory to Agent as determined
by Agent in its Permitted Discretion.

 

"Eligible US Insured Receivables" shall mean Eligible Insured Receivables of any
US Credit Party.

 

"Eligible US Receivables" shall mean Eligible Receivables of any US Credit
Party.

 

"Eligible US Inventory" shall mean Eligible Inventory of any US Credit Party.

 

"Environmental Complaint" shall have the meaning set forth in Section 9.3(b)
hereof.

 

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

 

  -14- 

 

 

"Equipment" shall mean equipment as defined in the Uniform Commercial Code.

 

"Equity Interests" shall mean, with respect to any Person, any and all shares,
rights to purchase, options, warrants, general, limited or limited liability
partnership interests, member interests, participation or other equivalents of
or interest in (regardless of how designated) equity of such Person, whether
voting or nonvoting, including common stock, preferred stock, convertible
securities or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act), including in each case all of the following rights relating to
such Equity Interests, whether arising under the Organizational Documents of the
Person issuing such Equity Interests (the "issuer") or under the applicable laws
of such issuer's jurisdiction of organization relating to the formation,
existence and governance of corporations, limited liability companies or
partnerships or business trusts or other legal entities, as the case may be:
(i) all economic rights (including all rights to receive dividends and
distributions) relating to such Equity Interests; (ii) all voting rights and
rights to consent to any particular action(s) by the applicable issuer;
(iii) all management rights with respect to such issuer; (iv) in the case of any
Equity Interests consisting of a general partner interest in a partnership, all
powers and rights as a general partner with respect to the management,
operations and control of the business and affairs of the applicable issuer;
(v) in the case of any Equity Interests consisting of the membership/limited
liability company interests of a managing member in a limited liability company,
all powers and rights as a managing member with respect to the management,
operations and control of the business and affairs of the applicable issuer;
(vi) all rights to designate or appoint or vote for or remove any officers,
directors, manager(s), general partner(s) or managing member(s) of such issuer
and/or any members of any board of members/managers/partners/directors that may
at any time have any rights to manage and direct the business and affairs of the
applicable issuer under its Organizational Documents as in effect from time to
time or under Applicable Law; (vii) all rights to amend the Organizational
Documents of such issuer, (viii) in the case of any Equity Interests in a
partnership or limited liability company, the status of the holder of such
Equity Interests as a "partner", general or limited, or "member" (as applicable)
under the applicable Organizational Documents and/or Applicable Law; and
(ix) all certificates evidencing such Equity Interests.

 

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended or supplemented from time to time and the rules and
regulations promulgated thereunder.

 

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

 

"Excess Cash Flow" shall mean, for any fiscal period, in each case for Borrowers
on a Consolidated Basis, EBITDA, minus each of the following, to the extent
actually paid in cash during such fiscal period, Unfinanced Capital
Expenditures, taxes, dividends and distributions, and Debt Payments.

 

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

 

  -15- 

 

 

"Excluded Deposit Account" shall mean a deposit account of the Credit Parties
that is (i) a payroll account or (ii) a withholding tax or fiduciary account.

 

"Excluded Equity Issuance" shall mean (a) in the event that Company or any of
its Subsidiaries forms any Subsidiary in accordance with this Agreement, the
issuance by such Subsidiary of Equity Interests to Company or such Subsidiary,
as applicable, (b) the issuance of Equity Interests by Company in order to
finance the purchase consideration (or a portion thereof) in connection with a
Permitted Acquisition (including the issuance of Equity Interests by Company to
the seller in a Permitted Acquisition) or to finance any Capital Expenditures to
the extent permitted under this Agreement, (c) the issuance of Equity Interests
by Company (i) pursuant to the exercise of options or warrants, (ii) pursuant to
the conversion of any debt securities to equity or the conversion of any class
of equity securities to any other class of equity securities, (iii) issued, sold
or granted in lieu of paying management fees or consulting fees in cash, or
(iv) to any member of management, officer, independent director or employee of
any Credit Party, (d) the issuance of any director's qualifying shares, and
(e) the issuance of Equity Interests that is a Permitted Dividend.

 

"Excluded Hedge Liability or Liabilities" shall mean, with respect to each
Borrower and Guarantor, each of its Swap Obligations if, and only to the extent
that, all or any portion of this Agreement or any Other Document that relates to
such Swap Obligation is or becomes illegal under the CEA, or any rule,
regulation or order of the CFTC, solely by virtue of such Borrower's and/or
Guarantor's failure to qualify as an Eligible Contract Participant on the
Eligibility Date for such Swap. Notwithstanding anything to the contrary
contained in the foregoing or in any other provision of this Agreement or any
Other Document, the foregoing is subject to the following provisos: (a) if a
Swap Obligation arises under a master agreement governing more than one Swap,
this definition shall apply only to the portion of such Swap Obligation that is
attributable to Swaps for which such guaranty or security interest is or becomes
illegal under the CEA, or any rule, regulations or order of the CFTC, solely as
a result of the failure by such Borrower or Guarantor for any reason to qualify
as an Eligible Contract Participant on the Eligibility Date for such Swap;
(b) if a guarantee of a Swap Obligation would cause such obligation to be an
Excluded Hedge Liability but the grant of a security interest would not cause
such obligation to be an Excluded Hedge Liability, such Swap Obligation shall
constitute an Excluded Hedge Liability for purposes of the guaranty but not for
purposes of the grant of the security interest; and (c) if there is more than
one Borrower or Guarantor executing this Agreement or the Other Documents and a
Swap Obligation would be an Excluded Hedge Liability with respect to one or more
of such Persons, but not all of them, the definition of Excluded Hedge Liability
or Liabilities with respect to each such Person shall only be deemed applicable
to (i) the particular Swap Obligations that constitute Excluded Hedge
Liabilities with respect to such Person, and (ii) the particular Person with
respect to which such Swap Obligations constitute Excluded Hedge Liabilities.

 

  -16- 

 

 

"Excluded Property" shall mean (i) voting Equity Interests of any CFC, to the
extent that such Equity Interests represent more than sixty-five percent (65%)
of the outstanding voting Equity Interests of such Subsidiary or voting Equity
Interests of any other CFC Entity (other than a CFC); (ii) any rights or
interest in any General Intangible, contract, lease, permit, license, or license
agreement of any Credit Party, if under the terms of such General Intangible,
contract, lease, permit, license, or license agreement, or applicable law with
respect thereto, the grant of a security interest or lien therein is prohibited
as a matter of law or under the terms of such General Intangible, contract,
lease, permit, license, or license agreement (or the grant of a security
interest or lien therein would invalidate such General Intangible, contract,
lease, permit, license, or license agreement or breach, default or create a
right of termination in favor of any other party thereto) and such prohibition
or restriction has not been waived or the consent of the other party to such
General Intangible, contract, lease, permit, license, or license agreement has
not been obtained (provided, that, (A) the foregoing exclusions of this
paragraph shall in no way be construed (1) to apply to the extent that any
described prohibition or restriction is ineffective under Section 9-406, 9-407,
9-408, or 9-409 of the Uniform Commercial Code or other applicable law, or
(2) to apply to the extent that any consent or waiver has been obtained that
would permit Agent's security interest or lien to attach notwithstanding the
prohibition or restriction on the pledge of such General Intangible, contract,
lease, permit, license, or license agreement, and (B) the foregoing exclusions
of this clause (ii) shall in no way be construed to limit, impair, or otherwise
affect any of Agent's continuing security interests in and liens upon any rights
or interests of any Credit Party in or to (1) Receivables or monies due or to
become due under or in connection with any described General Intangible,
contract, lease, permit, license, license agreement, or (2) any proceeds from
the sale, license, lease, or other dispositions of any such General Intangible,
contract, lease, permit, license, license agreement (including any Equity
Interests)); (iii) any United States intent-to-use trademark applications for
which an amendment to allege use or a statement of use has not been filed and
accepted by the Patent and Trademark Office, to the extent that, and solely
during the period in which, the grant of a security interest therein would
impair the validity or enforceability of such intent-to-use trademark
applications under applicable federal law, provided that upon submission and
acceptance by the Patent and Trademark Office of an amendment to allege use or a
statement of use pursuant to 15 U.S.C. Section 1051(c) or (d) (or any successor
provision), such intent-to-use trademark application shall be considered
Collateral; (iv) any Equipment of a Credit Party that is subject to a perfected
Lien that constitutes a Permitted Encumbrance under clause (g), (p) or (q) of
the definition of "Permitted Encumbrance" if and for so long as the grant of a
security interest therein to Agent in such Equipment shall constitute or result
in a breach or termination pursuant to the terms of, or a default under, the
agreement entered into in connection with such Permitted Encumbrance on such
Equipment, provided however that such security interest shall attach immediately
at such time as the term restricting the attachment of a security interest in
such Equipment is no longer operative or the attachment of a security interest
in such Equipment would not constitute or result in a breach or termination
pursuant to the terms of, or a default under, such agreement; and (v) any
Mexican Financed Equipment. For the avoidance of doubt, in no event shall any
Equity Interests of the Mexican Credit Parties be deemed to constitute Excluded
Property.

 

"Excluded Taxes" shall mean, with respect to Agent, any Lender, Participant,
Swing Loan Lender, Issuer or any other recipient of any payment to be made by or
on account of any Obligations, (a) taxes imposed on or measured by its overall
net income (however denominated), and franchise taxes imposed on it (in lieu of
net income taxes), by the jurisdiction (or any political subdivision thereof)
under the laws of which such recipient is organized or in which its principal
office or applicable lending office is located or, in the case of any Lender,
Participant, Swing Loan Lender or Issuer, in which its applicable lending office
is located, (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction in which any Borrower is
located, (c) in the case of a Foreign Lender, any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party hereto (or designates a new lending office) or is
attributable to such Foreign Lender's failure or inability (other than as a
result of a Change in Law) to comply with Section 3.10(e), except to the extent
that such Foreign Lender or Participant (or its assignor or seller of a
participation, if any) was entitled, at the time of designation of a new lending
office (or assignment or sale of a participation), to receive additional amounts
from Borrowers with respect to such withholding tax pursuant to Section 3.10(a),
or (d) any Taxes imposed on any "withholding payment" payable to such recipient
as a result of the failure of such recipient to satisfy the requirements set
forth in the FATCA after December 31, 2012.

 

  -17- 

 

 

"Extended Terms Customers" shall mean Wal-Mart Stores, Inc. and its Affiliates
and Dollar Tree, Inc. and its Affiliates.

 

"Extraordinary Receipts" shall mean any cash received by Company or any of its
Subsidiaries consisting of (a) foreign, United States, state or local tax
refunds, (b) pension plan reversions, (c) judgments, proceeds of settlements or
other consideration of any kind in connection with any cause of action,
(d) indemnity payments (other than to the extent such indemnity payments are
(i) immediately payable to a Person that is not an Affiliate of Company or any
of its Subsidiaries or (ii) received by Company or any of its Subsidiaries as
reimbursement for any costs previously incurred or any payment previously made
by such Person) and (e) any purchase price adjustment received in connection
with any purchase agreement, other than any working capital adjustment in
connection with any Permitted Acquisition.

 

"Facility Fee" shall have the meaning set forth in Section 3.3(b) hereof.

 

"FATCA" shall mean Sections 1471 through 1474 of the Code, as of the date of
this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with) and any current or
future regulations thereunder or official interpretations thereof.

 

"Federal Funds Effective Rate" shall mean for any day the rate per annum (based
on a year of 360 days and actual days elapsed and rounded upward to the nearest
1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

 

"Federal Funds Open Rate" shall mean for any day the rate per annum (based on a
year of 360 days and actual days elapsed) which is the daily federal funds open
rate as quoted by ICAP North America, Inc. (or any successor) as set forth on
the Bloomberg Screen BTMM for that day opposite the caption "OPEN" (or on such
other substitute Bloomberg Screen that displays such rate), or as set forth on
such other recognized electronic source used for the purpose of displaying such
rate as selected by PNC (an "Alternate Source") (or if such rate for such day
does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on
any Alternate Source, or if there shall at any time, for any reason, no longer
exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate
Source, a comparable replacement rate determined by PNC at such time (which
determination shall be conclusive absent manifest error); provided however, that
if such day is not a Business Day, the Federal Funds Open Rate for such day
shall be the "open" rate on the immediately preceding Business Day. If and when
the Federal Funds Open Rate changes, the rate of interest with respect to any
advance to which the Federal Funds Open Rate applies will change automatically
without notice to Borrowers, effective on the date of any such change.

 

  -18- 

 

 

"Fee Letter" shall mean the fee letter dated the Closing Date among Borrowers
and PNC.

 

"Fixed Charge Coverage Ratio" shall mean, with respect to Borrowers on a
Consolidated Basis for any fiscal period, the ratio of (a) EBITDA for such
fiscal period, minus Unfinanced Capital Expenditures made during such period,
minus distributions (including tax distributions) and dividends made during such
period, minus cash taxes paid during such period to (b) all Debt Payments made
during such period.

 

"Flexo Universal" shall mean Flexo Universal, S. de R.L. de C.V., a sociedad de
responsabilidad limitada de capital variable organized under the laws of Mexico.

 

"Flood Laws" shall mean all Applicable Laws relating to policies and procedures
that address requirements placed on federally regulated lenders under the
National Flood Insurance Reform Act of 1994 and other Applicable Laws related
thereto.

 

"Foreign Currency Hedge" shall mean any foreign exchange transaction, including
spot and forward foreign currency purchases and sales, listed or
over-the-counter options on foreign currencies, non-deliverable forwards and
options, foreign currency swap agreements, currency exchange rate price hedging
arrangements, and any other similar transaction providing for the purchase of
one currency in exchange for the sale of another currency entered into by any
Borrower, Guarantor and/or any of their respective Subsidiaries.

 

"Foreign Currency Hedge Liabilities" shall have the meaning assigned in the
definition of Lender-Provided Foreign Currency Hedge.

 

"Foreign In-Transit Inventory" shall mean Inventory of a Credit Party that is in
transit from a location outside the United States or Mexico to any location
within the United States or Mexico of such Credit Party or a Customer of such
Credit Party.

 

"Foreign Lender" shall mean any Lender that is organized under the laws of a
jurisdiction other than that in which Borrowers are resident for tax purposes.
For purposes of this definition, the United States of America, each State
thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.

 

"Foreign Subsidiary" shall mean any Subsidiary of any Person that is not
organized or incorporated in the United States, any State or territory thereof
or the District of Columbia.

 

  -19- 

 

 

"Formula Amount" shall have the meaning set forth in Section 2.1(a) hereof.

 

"Funded Debt" shall mean, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person's
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capitalized Lease Obligations,
current maturities of long-term debt, revolving credit and short term debt
extendible beyond one year at the option of the debtor, and also including, in
the case of Borrowers, the Obligations and, without duplication, Indebtedness
consisting of guaranties of Funded Debt of other Persons; provided however that
for purposes of determining the amount of Funded Debt with respect to the
Obligations, the amount of Funded Debt shall be equal to the sum of (i) the
outstanding Term Loan as of the date of determination, plus (ii) the quotient of
(A) the sum of the outstanding Revolving Advances, Swing Loans and the Maximum
Undrawn Amount of all outstanding Letters of Credit for each day of the most
recently ended fiscal quarter, divided by (B) the number of such days in such
fiscal quarter.

 

"GAAP" shall mean generally accepted accounting principles in the United States
of America in effect from time to time and, as applicable to the Mexican Credit
Parties, the NIFs.

 

"General Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.

 

"Governmental Acts" shall mean any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Body.

 

"Governmental Body" shall mean any nation or government, any state or other
political subdivision thereof or any entity, authority, agency, division or
department exercising the executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to a government
(including any supra-national bodies such as the European Union or the European
Central Bank) and any group or body charged with setting financial accounting or
regulatory capital rules or standards (including, without limitation, the
Financial Accounting Standards Board, the Bank for International Settlements or
the Basel Committee on Banking Supervision or any successor or similar authority
to any of the foregoing).

 

"Guarantor" shall mean each US Guarantor, each Mexican Credit Party and any
other Person who may hereafter guarantee payment or performance of the whole or
any part of the Obligations and "Guarantors" means collectively all such
Persons.

 

"Guaranty" shall mean any guaranty of the Obligations executed by a Guarantor in
favor of Agent for its benefit and for the ratable benefit of Lenders, in form
and substance satisfactory to Agent.

 

"Hazardous Discharge" shall have the meaning set forth in Section 9.3(b) hereof.

 

"Hazardous Materials" shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous or Toxic Substances or related materials
as defined in or subject to regulation under Environmental Laws.

 

  -20- 

 

 

"Hazardous Wastes" shall mean all waste materials subject to regulation under
CERCLA, RCRA or applicable state law, and any other applicable Federal and state
laws now in force or hereafter enacted relating to hazardous waste disposal.

 

"Hedge Liabilities" shall mean collectively, the Foreign Currency Hedge
Liabilities and the Interest Rate Hedge Liabilities.

 

"Indebtedness" shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (a) borrowed money; (b) amounts
received under or liabilities in respect of any note purchase or acceptance
credit facility, and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (c) all Capitalized Lease
Obligations; (d) reimbursement obligations (contingent or otherwise) under any
letter of credit agreement, banker's acceptance agreement or similar
arrangement; (e) obligations under any Interest Rate Hedge, Foreign Currency
Hedge, or other interest rate management device, foreign currency exchange
agreement, currency swap agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement;
(f) any other advances of credit made to or on behalf of such Person or other
transaction (including forward sale or purchase agreements, capitalized leases
and conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements including to finance the purchase price of property or services and
all obligations of such Person to pay the deferred purchase price of property or
services (but not including trade payables and accrued expenses incurred in the
Ordinary Course of Business which are not represented by a promissory note or
other evidence of indebtedness); (g) all Equity Interests of such Person subject
to mandatory repurchase or redemption rights or obligations (excluding
repurchases or redemptions at the sole option of such Person); (h) all
indebtedness, obligations or liabilities constituting Indebtedness of a third
party secured by a Lien on any asset of such Person, whether or not such
indebtedness, obligations or liabilities are otherwise an obligation of such
Person; (i) all obligations of such Person for "earnouts", purchase price
adjustments, profit sharing arrangements, deferred purchase money amounts and
similar payment obligations or continuing obligations of any nature of such
Person arising out of purchase and sale contracts; (j) off-balance sheet
liabilities and/or pension plan liabilities of such Person; (k) obligations
arising under bonus, deferred compensation, incentive compensation or similar
arrangements, other than those arising in the Ordinary Course of Business; and
(l) any guaranty of any indebtedness, obligations or liabilities of a type
described in the foregoing clauses (a) through (k).

 

"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.

 

"Ineligible Security" shall mean any security which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

 

  -21- 

 

 

"Insured Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.

 

"Insolvency Event" shall mean, with respect to any Person, including without
limitation any Lender, such Person or such Person's direct or indirect parent
company (a) becomes the subject of a bankruptcy or insolvency proceeding
(including any proceeding under Title 11 of the United States Code), or
regulatory restrictions, (b) has had a receiver, conservator, trustee,
administrator, custodian, assignee for the benefit of creditors or similar
Person charged with the reorganization or liquidation of its business appointed
for it or has called a meeting of its creditors, (c) admits in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business, (d) with respect to a Lender, such Lender is
unable to perform hereunder due to the application of Applicable Law, or (e) in
the good faith determination of Agent, has taken any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any such
proceeding or appointment of a type described in clauses (a) or (b), provided
that an Insolvency Event shall not result solely by virtue of any ownership
interest, or the acquisition of any ownership interest, in such Person or such
Person's direct or indirect parent company by a Governmental Body or
instrumentality thereof if, and only if, such ownership interest does not result
in or provide such Person with immunity from the jurisdiction of courts within
the United States or from the enforcement of judgments or writs of attachment on
its assets or permit such Person (or such Governmental Body or instrumentality)
to reject, repudiate, disavow or disaffirm any contracts or agreements made by
such Person.

 

"Intellectual Property" shall mean property constituting a patent, copyright,
trademark (or any application in respect of the foregoing), service mark,
copyright, copyright application, trade name, mask work, trade secrets, design
right, assumed name or license or other right to use any of the foregoing under
Applicable Law.

 

"Intellectual Property Claim" shall mean the assertion, by any means, by any
Person of a claim that any Credit Party's ownership, use, marketing, sale or
distribution of any Inventory, Equipment, Intellectual Property or other
property or asset is violative of any ownership of or right to use any
Intellectual Property of such Person.

 

"Intentional Overadvance" shall have the meaning set forth in Section 16.2(e)
hereof.

 

"Intercompany Subordination Agreement" shall mean the Intercompany Subordination
Agreement of even date herewith, as amended from time to time, among Credit
Parties, certain Affiliates of Credit Parties and Agent.

 

"Interest Period" shall mean the period provided for any LIBOR Rate Loan
pursuant to Section 2.2(b) hereof.

 

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

 

  -22- 

 

 

"Interest Rate Hedge Liabilities" shall have the meaning assigned in the
definition of Lender-Provided Interest Rate Hedge.

 

"Inventory" shall mean as to each Credit Party all of such Credit Party's
inventory (as defined in Article 9 of the Uniform Commercial Code) and all of
such Credit Party's goods, merchandise and other personal property, wherever
located, to be furnished under any consignment arrangement, contract of service
or held for sale or lease, all raw materials, work in process, finished goods
and materials and supplies of any kind, nature or description which are or might
be used or consumed in such Credit Party's business or used in selling or
furnishing such goods, merchandise and other personal property, and all
Documents.

 

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

 

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

 

"Investment" shall mean, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests or debt or other securities of another Person,
(b) a loan, advance or capital contribution to, guaranty or assumption of debt
of, or purchase or other acquisition of any other debt or equity participation
or interest in, another Person, including any partnership or joint venture
interest in such other Person and any arrangement pursuant to which the investor
guaranties any obligations of another Person, or (c) the purchase or other
acquisition (in one transaction or a series of transactions) of all or
substantially all of the property and assets or business of another Person or
assets constituting a business unit, line of business or division of such
Person. For purposes of determining the amount of any Investment outstanding for
purposes of this Agreement, such amount shall be deemed to be the amount of such
Investment when made or acquired (without adjustment for subsequent increases or
decreases in the value of such Investment) less any amount realized in respect
of such Investment upon the sale, collection, distribution, return of capital or
repayment of principal (not to exceed the original amount invested).

 

"Issuer" shall mean (i) PNC in its capacity as the issuer of Letters of Credit
under this Agreement and (ii) any other Lender which Agent in its discretion
shall designate as the issuer of and cause to issue any particular Letter of
Credit under this Agreement in place of Agent as issuer.

 

"Law(s)" shall mean any law(s) (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, issued guidance, release, ruling,
order, executive order, injunction, writ, decree, bond, judgment, authorization
or approval, lien or award of or any settlement arrangement, by agreement,
consent or otherwise, with any Governmental Body, foreign or domestic.

 

"Lender" and "Lenders" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender. For the purpose of provision of
this Agreement or any Other Document which provides for the granting of a
security interest or other Lien to the Agent for the benefit of Lenders as
security for the Obligations, "Lenders" shall include any Affiliate of a Lender
to which such Obligation (specifically including any Hedge Liabilities and any
Cash Management Liabilities) is owed.

 

  -23- 

 

 

"Lender-Provided Foreign Currency Hedge" shall mean a Foreign Currency Hedge
which is provided by any Lender and for which such Lender confirms to Agent in
writing prior to the execution thereof that it: (a) is documented in a standard
International Swap Dealers Association, Inc. Master Agreement or another
reasonable and customary manner; (b) provides for the method of calculating the
reimbursable amount of the provider's credit exposure in a reasonable and
customary manner; and (c) is entered into for hedging (rather than speculative)
purposes. The liabilities owing to the provider of any Lender-Provided Foreign
Currency Hedge (the "Foreign Currency Hedge Liabilities") by any Borrower or any
Guarantor that is party to such Lender-Provided Foreign Currency Hedge shall,
for purposes of this Agreement and all Other Documents be Obligations hereunder,
and otherwise treated as Obligations for purposes of the Other Documents, except
to the extent constituting Excluded Hedge Liabilities of such Person, but only
so long as such provider (if not PNC or an Affiliate of PNC) has notified Agent
in writing of such Lender-Provided Foreign Currency Hedge within ten (10) days
of such agreement or arrangement.

 

"Lender-Provided Interest Rate Hedge" shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which such Lender confirms to Agent
in writing prior to the execution thereof that it: (a) is documented in a
standard International Swap Dealers Association, Inc. Master Agreement or
another reasonable and customary manner; (b) provides for the method of
calculating the reimbursable amount of the provider's credit exposure in a
reasonable and customary manner; and (c) is entered into for hedging (rather
than speculative) purposes. The liabilities owing to the provider of any
Lender-Provided Interest Rate Hedge (the "Interest Rate Hedge Liabilities") by
any Borrower or any Guarantor that is party to such Lender-Provided Interest
Rate Hedge shall, for purposes of this Agreement and all Other Documents be
Obligations hereunder, and otherwise treated as Obligations for purposes of the
Other Documents, except to the extent constituting Excluded Hedge Liabilities of
such Person, but only so long as such provider (if not PNC or an Affiliate of
PNC) has notified Agent in writing of such Lender-Provided Interest Rate Hedge
within ten (10) days of such agreement or arrangement.

 

"Letter of Credit Application" shall have the meaning set forth in
Section 2.12(a) hereof.

 

"Letter of Credit Borrowing" shall have the meaning set forth in Section 2.14(d)
hereof.

 

"Letter of Credit Fees" shall have the meaning set forth in Section 3.2 hereof.

 

"Letter of Credit Sublimit" shall mean $1,000,000.

 

"Letters of Credit" shall have the meaning set forth in Section 2.11 hereof.

 

"Leverage Ratio" shall mean, as of any date of determination, the ratio of (a)
Funded Debt (other than the Shareholder Subordinated Loan) as of such date of
determination to (b) EBITDA for the applicable period then ended.

 

  -24- 

 

 

"LGTOC" shall mean the Mexican General Law of Negotiable Instruments and Credit
Transactions (Ley General de Titulos y Operaciones de Crédito), including any
regulations thereto or any other applicable Mexican federal or local statute
pertaining to the granting, perfecting, priority or ranking of security
interests, liens, hypothecs on personal property, as required, and any successor
statutes, together with any regulations thereunder, in each case as in effect
from time to time. References to sections of the LGTOC shall be construed to
also refer to any successor sections.

 

"LIBOR Alternate Source" shall have the meaning set forth in the definition of
LIBOR Rate.

 

"LIBOR Rate" shall mean, with respect to the Advances to which the LIBOR Rate
applies for any Interest Period, the interest rate per annum determined by Agent
by dividing (the resulting quotient rounded upwards, if necessary, to the
nearest 1/100th of one percent (1%) per annum) (i) the rate which appears on the
Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays
rates at which US dollar deposits are offered by leading banks in the London
interbank deposit market), or the rate which is quoted by another source
selected by Agent as an authorized information vendor for the purpose of
displaying rates at which US dollar deposits are offered by leading banks in the
London interbank deposit market (for purposes of this definition, a "LIBOR
Alternate Source"), at approximately 11:00 a.m., London time, two (2) Business
Days prior to the commencement of such Interest Period as the London interbank
offered rate for Dollars for an amount comparable to such LIBOR Rate Loan and
having a borrowing date and a maturity comparable to such Interest Period (or if
there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1
(or any substitute page) or any LIBOR Alternate Source, a comparable replacement
rate determined by Agent at such time (which determination shall be conclusive
absent manifest error)), by (ii) a number equal to 1.00 minus the Reserve
Percentage. Notwithstanding the foregoing, if the LIBOR Rate as determined under
any method above would be less than zero (0.00), such rate shall be deemed to be
zero (0.00) for purposes of this Agreement.

 

The LIBOR Rate shall be adjusted with respect to any Advance to which the LIBOR
Rate applies that is outstanding on the effective date of any change in the
Reserve Percentage as of such effective date. Agent shall give prompt notice to
the Borrowing Agent of the LIBOR Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.

 

"LIBOR Rate Loan" shall mean any Advance that bears interest based on the LIBOR
Rate.

 

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

 

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

 

  -25- 

 

 

"Licensor/Agent Agreement" shall mean an agreement between Agent and a Licensor,
in form and substance satisfactory to Agent, by which Agent is given the
unqualified right, vis-á-vis such Licensor, to enforce Agent's Liens with
respect to and to dispose of any Credit Party's Inventory with the benefit of
any Intellectual Property applicable thereto, irrespective of such Credit
Party's default under any License Agreement with such Licensor.

 

"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction.

 

"Lien Waiver Agreement" shall mean an agreement which is executed in favor of
Agent by a Person who owns or occupies premises at which any Collateral may be
located from time to time in form and substance satisfactory to Agent.

 

"Material Adverse Effect" shall mean a material adverse effect on (a) the
condition (financial or otherwise), results of operations, assets, business, or
properties of the Credit Parties, taken as a whole, (b) any Credit Party's
ability to duly and punctually pay or perform the Obligations in accordance with
the terms thereof, (c) the value of any part of the Collateral, or Agent's Liens
on any part of the Collateral or the priority of any such Lien or (d) the
practical realization of the benefits of Agent's and each Lender's rights and
remedies under this Agreement and the Other Documents.

 

"Material Contract" shall mean any contract, agreement, instrument, permit,
lease or license, written or oral, of any Credit Party, which is material to any
Credit Party's business or which the failure to comply with could reasonably be
expected to result in a Material Adverse Effect.

 

"Maximum Swing Loan Advance Amount" shall mean $1,800,000.

 

"Maximum Revolving Advance Amount" shall mean $18,000,000.

 

"Maximum Undrawn Amount" shall mean, with respect to any outstanding Letter of
Credit as of any date, the amount of such Letter of Credit that is or may become
available to be drawn, including all automatic increases provided for in such
Letter of Credit, whether or not any such automatic increase has become
effective.

 

"Mexican Credit Party" shall mean Flexo Universal and each other Credit Party
that is organized or incorporated under the laws of the country of Mexico or any
state or territory thereof, and "Mexican Credit Parties" means all such Persons,
collectively.

 

  -26- 

 

 

"Mexican Financed Equipment" shall mean Equipment and fixtures of a Mexican
Credit Party that is financed with a third party, provided that such third party
financing shall not exceed $1,000,000 and shall be subject to an intercreditor
agreement reasonably satisfactory to Agent providing for, among other things,
access to such Equipment and fixtures.

 

"Mexican Priority Payables Reserve" shall mean a reserve established in Agent's
reasonable discretion for compensation and benefits payable to employees of any
Mexican Credit Party as specified and required under Section N.19 of NIFS, which
for purposes of this Agreement, shall be in an amount equal to the greater of
(a) one month of the total payroll for all Mexican employees and (b) the accrued
and unpaid employee claims under Mexican law that would reasonably be expected
to have priority over Agent's Liens. As of the Closing Date, the Mexican
Priority Payables Reserve is $0.

 

"Mexican Security Documents" shall mean with respect to any Mexican Credit Party
(i) the applicable stock pledge agreements (contratos de prenda sobra acciones)
pledging the stock of such Mexican Credit Party in favor of the Agent, (ii) the
pledgor-in-possession pledge agreement (contrato de prenda sin transmission de
posesión) between any Mexican Credit Party in favor of the Agent, and (iii) any
other security or guarantee agreements executed by the Mexican Credit Parties,
as Guarantors hereunder, each as modified, amended, restated, or supplemented
from time to time.

 

"Modified Commitment Transfer Supplement" shall have the meaning set forth in
Section 16.3(d) hereof.

 

"Mortgage" shall mean any mortgage on the Real Property securing the
Obligations.

 

"Multiemployer Plan" shall mean a "multiemployer plan" as defined in Sections
3(37) or 4001(a)(3) of ERISA to which contributions are required or, within the
preceding five plan years, were required by any Credit Party or any member of
the Controlled Group.

 

"Multiple Employer Plan" shall mean a Plan which has two or more contributing
sponsors (including any Credit Party or any member of the Controlled Group) at
least two of whom are not under common control, as such a plan is described in
Section 4064 of ERISA.

 

"Negotiable Document" shall mean a Document that is "negotiable" within the
meaning of Article 7 of the Uniform Commercial Code.

 

"Net Cash Proceeds" shall mean, with respect to, any issuance or incurrence of
any Indebtedness, any issuance of Equity Interests, any disposition of assets or
the receipt of any Extraordinary Receipts by Company or any of its Subsidiaries,
the aggregate amount of cash received (directly or indirectly) from time to time
(whether as initial consideration or through the payment or disposition of
deferred consideration) by or on behalf of such Person or such Subsidiary, in
connection therewith after deducting therefrom only (a) in the case of any
disposition of assets, the amount of any Permitted Indebtedness secured by any
Permitted Encumbrance on such assets if such Permitted Encumbrance is senior to
the Lien of Agent securing the Obligations and is required to be, and is, repaid
in connection therewith (other than Indebtedness under this Agreement),
(b) reasonable expenses, transaction fees, underwriting fees and similar fees,
related thereto incurred by such Person or such Subsidiary in connection
therewith, (c) transfer taxes paid to any taxing authorities by such Person or
such Subsidiary in connection therewith, and (d) net income taxes (or a
reasonable reserve therefor) to be paid in connection therewith (after taking
into account any tax credits or deductions available under applicable law,
including by way of being a member of a consolidated, combined or unitary
group), in each case, to the extent, but only to the extent, that the amounts so
deducted are (i) actually paid to a Person that, except in the case of payments
permitted under Section 7.10 hereof, reasonable out-of-pocket expenses or taxes,
is not an Affiliate of such Person or any of its Subsidiaries and (ii) properly
attributable to such transaction or to the asset that is the subject thereof.

 

  -27- 

 

 

"NIFS" shall mean the financial accounting standards (Normas de Información
Financiera) issued by the Mexican Board of Financial Accounting Standards
(Consejo Mexicano de Normas de Información Financiera, A.C.).

 

"Non-Defaulting Lender" shall mean, at any time, any Lender holding a Revolving
Commitment that is not a Defaulting Lender at such time.

 

"Non-Qualifying Party" shall mean any Borrower or any Guarantor that on the
Eligibility Date fails for any reason to qualify as an Eligible Contract
Participant.

 

"Note" shall mean, collectively, the Term Note, the Revolving Credit Note and
the Swing Loan Note.

 

"Obligations" shall mean and include (i) any and all loans (including without
limitation, all Advances and Swing Loans), advances, debts, liabilities,
obligations (including without limitation all reimbursement obligations and cash
collateralization obligations with respect to Letters of Credit issued
hereunder), covenants and duties owing by any Borrower or any Guarantor to
Issuer, Swing Loan Lender, Lenders or Agent (or to any other direct or indirect
subsidiary or affiliate of Issuer, Swing Loan Lender, any Lender or Agent) of
any kind or nature, present or future (including any interest or other amounts
accruing thereon, any fees accruing under or in connection therewith, any costs
and expenses of any Person payable by any Credit Party and any indemnification
obligations payable by any Credit Party arising or payable after maturity, or
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding relating to any Credit Party,
whether or not a claim for post-filing or post-petition interest, fees or other
amounts is allowable or allowed in such proceeding), whether or not for the
payment of money, whether arising by reason of an extension of credit, opening
or issuance of a letter of credit, loan, equipment lease, establishment of any
commercial card or similar facility or guarantee, under any interest or currency
swap, future, option or other similar agreement, or in any other manner, whether
arising out of overdrafts or deposit or other accounts or electronic funds
transfers (whether through automated clearing houses or otherwise) or out of
Agent's or any Lender's non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository transfer check or
other similar arrangements, whether direct or indirect (including those acquired
by assignment or participation), absolute or contingent, joint or several, due
or to become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, in each case arising under or pursuant to this
Agreement, the Other Documents and any amendments, extensions, renewals or
increases thereto, including all costs and expenses of Agent, Issuer, Swing Loan
Lender and any Lender incurred in the documentation, negotiation, modification,
enforcement, collection or otherwise in connection with any of the foregoing,
including but not limited to reasonable attorneys' fees and expenses and all
obligations of any Credit Party to Agent, Issuer, Swing Loan Lender or Lenders
to perform acts or refrain from taking any action, (ii) all Hedge Liabilities
and (iii) all Cash Management Liabilities. Notwithstanding anything to the
contrary contained in the foregoing, the Obligations shall not include any
Excluded Hedge Liabilities.

 

  -28- 

 

 

"Ordinary Course of Business" shall mean, with respect to any Credit Party, the
ordinary course of such Credit Party's business as conducted on the Closing Date
and reasonable extensions thereof.

 

"Organizational Documents" shall mean, with respect to any Person, any charter,
articles or certificate of incorporation, certificate of organization,
registration or formation, certificate of partnership or limited partnership,
bylaws, operating agreement, limited liability company agreement, or partnership
agreement of such Person and any and all other applicable documents relating to
such Person's formation, organization or entity governance matters (including
any shareholders' or equity holders' agreement or voting trust agreement) and
specifically includes, without limitation, any certificates of designation for
preferred stock or other forms of preferred equity.

 

"Other Documents" shall mean any Mortgage, the Note, the Perfection
Certificates, the Fee Letter, any Guaranty, the Intercompany Subordination
Agreement, any Pledge Agreement, any Lender-Provided Interest Rate Hedge any
Lender-Provided Foreign Currency Hedge, the Shareholder Subordination Agreement
and any and all other agreements, instruments and documents, including
intercreditor agreements, guaranties, pledges, powers of attorney, consents,
interest or currency swap agreements or other similar agreements and all other
writings heretofore, now or hereafter executed by any Borrower or any Guarantor
and/or delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement, in each case together with all extensions,
renewals, amendments, supplements, modifications, substitutions and replacements
thereto and thereof.

 

"Other Taxes" shall mean all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any Other Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
Other Document.

 

"Out-of-Formula Loans" shall mean any Advances in excess of the lesser of the
Maximum Revolving Advance Amount and the Formula Amount (calculated without
giving effect to the deductions provided for in Section 2.1(a)(y)(v)).

 

"Participant" shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.

 

"Participation Advance" shall have the meaning set forth in Section 2.14(d)
hereof.

 

"Participation Commitment" shall mean the obligation hereunder of each Lender
holding a Revolving Commitment to buy a participation equal to its Revolving
Commitment Percentage (subject to any reallocation pursuant to
Section 2.22(b)(iii) hereof) in the Swing Loans made by Swing Loan Lender
hereunder as provided for in Section 2.4(c) hereof and in the Letters of Credit
issued hereunder as provided for in Section 2.14(a) hereof.

 

  -29- 

 

 

"Payment Office" shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.

 

"PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor.

 

"Pension Benefit Plan" shall mean at any time any "employee pension benefit
plan" as defined in Section 3(2) of ERISA (including a Multiple Employer Plan,
but not a Multiemployer Plan) which is covered by Title IV of ERISA or is
subject to the minimum funding standards under Sections 412, 430 or 436 of the
Code and either (i) is maintained or to which contributions are required by any
Credit Party or any member of the Controlled Group or (ii) has at any time
within the preceding five years been maintained or to which contributions have
been required by any Credit Party or any entity which was at such time a member
of the Controlled Group.

 

"Perfection Certificates" shall mean, collectively, the information
questionnaires and the responses thereto provided by each Credit Party and
delivered to Agent.

 

"Permitted Acquisitions" shall mean acquisitions of the assets or Equity
Interests of another Person (the "target") so long as: (a) after giving effect
to such acquisition, Borrowers have Undrawn Availability of not less than
$2,000,000; (b) the total consideration (including without limitation, all
assumed Indebtedness, all earn-out payments, deferred payments and the value of
any other stock or assets transferred, assigned or encumbered with respect to
such acquisitions) paid or payable for acquisitions does not exceed $12,000,000
for all such acquisitions or $4,000,000 for any particular acquisition; (c) such
target shall (i) have a positive EBITDA and tangible net worth (i.e., tangible
assets less liabilities), calculated in accordance with GAAP and subject to such
pro forma adjustments as shall be reasonably acceptable to Agent immediately
prior to such acquisition, (ii) be a Person that is organized or incorporated in
the United States, any State or territory thereof or the District of Columbia
and all assets of such Person shall be located in the United States or a
territory thereof other than immaterial assets which, in the aggregate, have de
minimis value and (iii) be added as a Borrower to this Agreement and be jointly
and severally liable for all Obligations; (d) the target and property is used or
useful in the Borrowers' Ordinary Course of Business or a business reasonably
incidental thereto; (e) except to the extent expressly permitted by this
Agreement and the Other Documents, Agent shall have received a first-priority
security interest in all acquired assets and Equity Interests of such target,
subject to documentation reasonably satisfactory to Agent; (f) the board of
directors (or other comparable governing body) or the holders of the Equity
Interests of the target shall have duly approved the transaction; (g) Borrowers
shall have delivered to Agent (i) a standard due diligence package, (ii) a pro
forma balance sheet and pro forma financial statements and a Compliance
Certificate demonstrating that, upon giving effect to such acquisition on a pro
forma basis, Borrowers would be in compliance with the financial covenants set
forth in Section 6.5 as of the most recent fiscal quarter end prior to the
closing date of the acquisition for which Agent has received financial
statements, and (iii) financial statements of the acquired entity for the two
(2) most recent fiscal years then ended, in form and substance reasonably
acceptable to Agent; (h) if such acquisition includes general partnership
interests or any other Equity Interest that does not have a corporate (or
similar) limitation on liability of the owners thereof, then such acquisition
shall be effected by having such Equity Interests acquired by a corporate
holding company directly or indirectly wholly-owned by a Borrower and newly
formed for the sole purpose of effecting such acquisition; (i) no assets
acquired in any such transaction(s) shall be included in the Formula Amount
until Agent has received a field examination and appraisal of such assets, in
form and substance acceptable to Agent; and (j) no Default or Event of Default
shall have occurred or will occur after giving pro forma effect to such
acquisition. For the purposes of calculating Undrawn Availability under this
definition, any assets being acquired in the proposed acquisition shall not be
included in the Formula Amount.

 

  -30- 

 

 

"Permitted Assignees" shall mean: (a) Agent, any Lender or any of their direct
or indirect Affiliates; (b) any fund that is administered or managed by Agent or
any Lender, an Affiliate of Agent or any Lender or a related entity; and (c) any
Person to whom Agent or any Lender assigns its rights and obligations under this
Agreement as part of an assignment and transfer of such Agent's or Lender's
rights in and to a material portion of such Agent's or Lender's portfolio of
asset-based credit facilities.

 

"Permitted Discretion" means a determination made in good faith and in the
exercise (from the perspective of a secured asset-based lender) of commercially
reasonable business judgment.

 

"Permitted Dispositions" shall mean: (a) sale of Inventory in the Ordinary
Course of Business; (b) the granting of intellectual property licenses in the
Ordinary Course of Business, and the granting of leases, licenses, subleases or
sublicenses of real property in the Ordinary Course of Business;
(c) intercompany dispositions of assets from a Credit Party to another Credit
Party; (d) usage of cash or cash equivalents in the Ordinary Course of Business
for purposes not prohibited under this Agreement; (e) issuances of Equity
Interests to the extent not otherwise prohibited hereby; (f) Permitted
Encumbrances; (g) transfers of assets as a result of an involuntary loss
(including any eminent domain proceedings), damage or other casualty event; (h)
dispositions in the Ordinary Course of Business of fixed assets that are
substantially worn, damaged or obsolete, so long as the aggregate value of the
fixed assets disposed of in any fiscal year does not exceed $100,000; and
(i) other dispositions of fixed assets, if all of the following conditions are
met: (i) no Default or Event of Default has occurred and is continuing or will
result from such disposition, (ii) the book value of fixed assets of Company and
its Subsidiaries sold or otherwise disposed of in any fiscal year does not
exceed $100,000, (iii) the consideration received for any such disposition is at
least equal to the fair market value of the applicable assets or the disposition
is otherwise made on arm's length terms, and (iv) at least eighty-five percent
(85%) of the consideration received for any such disposition is cash or cash
equivalents.

 

"Permitted Dividends" shall mean:

 

(a)       dividends and other distributions by any Subsidiary of a Credit Party
to such Credit Party;

 

  -31- 

 

 

(b)       purchases, redemptions, repayment of loans, retirements or other
acquisitions of Equity Interests by Company (and dividends and other
distributions to Company that are used to fund such purchase, redemption,
repayment, retirement or acquisition of Equity Interests) solely to the extent
such Equity Interests are held by any former or present consultant, officer,
employee, director or member of management of any Borrower or Subsidiary so long
as, with respect to any such purchase paid in cash, (i) no Default or Event of
Default has occurred and is continuing or will result from such purchase,
redemption, repayment, retirement or acquisition and (ii) the amount of such
purchases, redemptions, retirements or acquisitions do not exceed $500,000 in
the aggregate during the Term of this Agreement;

 

(c)       purchases, redemptions, retirements and other acquisitions of Equity
Interests of Company, solely out of the proceeds received by Company of the
substantially concurrent sale of, or substantially concurrent exchange for,
Equity Interests of Company or a substantially concurrent cash capital
contribution received by Company.

 

"Permitted Encumbrances" shall mean: (a) Liens in favor of Agent for the benefit
of Agent and Lenders, including without limitation, Liens securing Hedge
Liabilities and Cash Management Liabilities; (b) Liens for taxes, assessments or
other governmental charges not delinquent or being Properly Contested;
(c) deposits or pledges to secure obligations under worker's compensation,
social security or similar laws, or under unemployment insurance; (d) deposits
to secure bids, tenders, contracts (other than contracts for the payment of
money), leases, licenses, statutory obligations, surety, performance, litigation
and appeal bonds and other obligations of like nature arising in the Ordinary
Course of Business; (e) Liens arising by virtue of the rendition, entry or
issuance against any Credit Party or any Subsidiary, or any property of any
Credit Party or any Subsidiary, of any judgment, writ, order, or decree to the
extent the rendition, entry, issuance or continued existence of such judgment,
writ, order or decree (or any event or circumstance relating thereto) has not
resulted in the occurrence of an Event of Default under Section 10.6 hereof;
(f) landlords', warehousemans', carriers', repairmens', mechanics', suppliers'
workers', materialmen's or other like Liens arising in the Ordinary Course of
Business with respect to obligations which are not due or which are being
Properly Contested; (g) Liens placed upon fixed assets hereafter acquired to
secure a portion of the purchase price thereof (including Capitalized Lease
Obligations and Mexican Financed Equipment), including any Lien on any fixed
asset acquired in a Permitted Acquisition, provided that (I) any such Lien shall
not encumber any other property of any Credit Party and (II) the aggregate
amount of Indebtedness secured by such Liens incurred as a result of such
purchases during any fiscal year shall not exceed the amount permitted in
Section 7.6 hereof; (h) Liens solely on earnest money deposits made by any
Credit Party or any Subsidiary in connection with a letter of intent or purchase
agreement with respect to a Permitted Acquisition, (i) Liens in favor of customs
and revenue authorities arising as a matter of law which secure payment of
customs duties in connection with the importation of goods in the Ordinary
Course of Business, (j) zoning restrictions, easements, licenses, rights-of-way
or other restrictions or encumbrances on the use of any real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
property; (k) precautionary Uniform Commercial Code financing statement filings
regarding operating leases; (l) leases or subleases of real or personal property
granted to other Persons (as lessee thereof) not materially interfering with the
conduct of the business of any Credit Party or any Subsidiary of a Credit Party;
(m) Liens on deposit accounts granted or arising in the ordinary course of
business in favor of depositary banks maintaining such deposit accounts solely
to secure customary account fees and charges payable in respect of such deposit
accounts and overdrafts not in violation of this Agreement; (n) Liens on the
unearned portion of insurance premiums in favor of insurers (or other Persons
financing the payment of insurance premiums) securing the premiums payable in
respect of insurance policies issued by such insurers; provided that such Liens
attach solely to returned premiums in respect of such insurance policies and the
proceeds of such policies; (o) Liens disclosed on Schedule 1.2; provided that
such Liens shall secure only those obligations which they secure on the Closing
Date (and extensions, renewals and refinancing of such obligations permitted by
Section 7.8 hereof) and shall not subsequently apply to any other property or
assets of any Credit Party other than the property and assets to which they
apply as of the Closing Date; and (p) other non-consensual Liens not described
above securing obligations, provided the aggregate outstanding amount of the
obligations secured thereby does not exceed $100,000 at any one time.

 

  -32- 

 

 

"Permitted Holder" shall mean John H. Schwan.

 

"Permitted Indebtedness" shall mean: (a) the Obligations; (b) Indebtedness
incurred for Capital Expenditures permitted in Section 7.6 hereof; (c) any
guarantees of Indebtedness permitted under Section 7.3 hereof; (d) Interest Rate
Hedges and Foreign Currency Hedges that are entered into by Credit Parties to
hedge their risks with respect to outstanding Indebtedness of Credit Parties and
not for speculative or investment purposes; (e) Indebtedness outstanding on the
Closing Date and listed on Schedule 7.8 (including any refinancings, extensions,
renewals or refundings thereof); provided that there is no increase in the
amount thereof or other significant change in the terms thereof that are not
favorable to the Credit Parties; (f) Indebtedness constituting Permitted
Intercompany Investments owing by a Credit Party to another Credit Party;
(g) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the Ordinary Course of Business; provided, however, that such
Indebtedness is extinguished within five (5) Business Days of its incurrence;
(h) Indebtedness owed to any Person providing workers' compensation, health,
disability or other employee benefits or property, casualty or liability
insurance, pursuant to reimbursement or indemnification obligations to such
person, in each case incurred in the Ordinary Course of Business;
(i) Indebtedness of a Credit Party in respect of performance bonds, bid bonds,
customs bonds, litigation bonds, appeal bonds, surety bonds, performance and
completion guarantees and similar obligations (other than in respect of other
Indebtedness), in each case, provided that Borrowing Agent provides notice to
Agent of the incurrence of such Indebtedness and such Indebtedness is incurred
in the Ordinary Course of Business; (j) Indebtedness of a Credit Party, the
proceeds of which are used by such Credit Party to finance its insurance
premiums payable on certain insurance policies maintained by such Credit Party
pursuant to an insurance premium finance agreement; provided that such
Indebtedness shall not be in excess of the amount of the unpaid cost of such
insurance and any related interest costs; (k) Indebtedness arising from
agreements of a Credit Party providing for indemnification, adjustment of
purchase price or similar obligations, in each case incurred or assumed in
connection with the Acquisition or a Permitted Acquisition or the disposition of
any assets permitted by this Agreement; (l) deferred taxes; (m) Indebtedness in
respect of netting services, overdraft protection and other similar arrangements
in connection with deposit accounts in the ordinary course of business that are
promptly repaid; (n) accrued expenses (including salaries, accrued vacation and
other reasonable compensation), or other accounts payable and other current
liabilities, in each case not overdue by more than ninety (90) days unless being
contested in good faith, arising in the ordinary course of business and not
incurred through the borrowing of money, in each case above to the extent
constituting Indebtedness; (o) unsecured Indebtedness in respect of the
Shareholder Subordinated Loans; and (p) other unsecured Indebtedness not to
exceed the aggregate principal amount of $500,000 at any one time outstanding.

 

  -33- 

 

 

"Permitted Intercompany Investments" shall mean loans, advances and other
Investments made by:

 

(a)       a Credit Party to another Credit Party;

 

(b)       a Subsidiary of Company that is not a Credit Party to a Credit Party
or a Subsidiary of a Credit Party so long as such Subsidiary is a party to the
Intercompany Subordination Agreement if such loan or Investment is to a Credit
Party;

 

(c)       a Credit Party to a Subsidiary of Company that is not a Credit Party
so long as the aggregate amount of all such loans, advances and other
Investments (by type, not by the borrower) made after the Closing Date does not
exceed $250,000 outstanding at any one time; and

 

(d)       a Credit Party to Clever Container in the form of inventory purchases
by such Credit Party on behalf of Clever Container so long as (i) such inventory
purchases are made in the Ordinary Course of Business consistent with past
practices and (ii) the aggregate amount of all such inventory purchases made
after the Closing Date does not exceed $400,000 outstanding at any one time.

 

"Permitted Investments" shall mean investments in: (a) obligations issued or
guaranteed by the United States of America or any agency thereof; (b) commercial
paper with maturities of not more than one hundred eighty (180) days and a
published rating of not less than A-1 or P-1 (or the equivalent rating);
(c) certificates of time deposit and bankers' acceptances having maturities of
not more than one hundred eighty (180) days from the date of acquisition and
repurchase agreements backed by United States government securities of a
commercial bank if (i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) its debt obligations, or those of a holding company of
which it is a Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency; (d) U.S. money market funds
that invest solely in obligations issued or guaranteed by the United States of
America or an agency thereof; (e) Permitted Intercompany Investments;
(f) Permitted Acquisitions; (g) investments acquired in connection with the
settlement of delinquent accounts in the Ordinary Course of Business or in
connection with the bankruptcy or reorganization of suppliers or customers; (h)
loans made to officers, independent directors and employees which are used by
such Persons to purchase simultaneously equity interests of Company, to the
extent otherwise permitted under this Agreement; (i) investments existing on the
Closing Date and set forth on Schedule 7.4; (j) the maintenance of deposit
accounts in the Ordinary Course of Business and in compliance with the
provisions of this Agreement and the Other Documents; (k) investments in
non-cash consideration issued by the purchaser or acquirer of assets in
connection with a disposition permitted by this Agreement; provided that such
non-cash consideration shall not exceed fifteen percent (15%) of the overall
consideration in connection with the applicable disposition; and (l) other
investments not in excess of $100,000 during the Term of this Agreement.

 

  -34- 

 

 

"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, limited liability
partnership, institution, public benefit corporation, joint venture, entity or
Governmental Body (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).

 

"Plan" shall mean any employee benefit plan within the meaning of Section 3(3)
of ERISA (including a Pension Benefit Plan and a Multiemployer Plan, as defined
herein) maintained by any Credit Party or any member of the Controlled Group or
to which any Credit Party or any member of the Controlled Group is required to
contribute.

 

"Pledge Agreement" shall mean that certain Pledge Agreement executed by Company
in favor of Agent dated as of the Closing Date and any other pledge agreements
(including any Mexican Security Document) executed on or after the Closing Date
by any other Person to secure the Obligations.

 

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

 

"Pro Forma Balance Sheet" shall have the meaning set forth in Section 5.5(a)
hereof.

 

"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.

 

"Projections" shall have the meaning set forth in Section 5.5(b) hereof.

 

"Properly Contested" shall mean, in the case of any Indebtedness, Lien or Taxes,
as applicable, of any Person that are not paid as and when due or payable by
reason of such Person's bona fide dispute concerning its liability to pay the
same or concerning the amount thereof: (a) such Indebtedness, Lien or Taxes, as
applicable, are being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (b) such Person has
established appropriate reserves as shall be required in conformity with GAAP;
(c) the non-payment of such Indebtedness or Taxes will not have a Material
Adverse Effect or will not result in the forfeiture of any assets of such
Person; (d) no Lien is imposed upon any of such Person's assets with respect to
such Indebtedness or taxes unless such Lien (x) does not attach to any
Receivables or Inventory, (y) is at all times junior and subordinate in priority
to the Liens in favor of the Agent (except only with respect to property Taxes
that have priority as a matter of applicable state law) and, (z) enforcement of
such Lien is stayed during the period prior to the final resolution or
disposition of such dispute; and (e) if such Indebtedness or Lien, as
applicable, results from, or is determined by the entry, rendition or issuance
against a Person or any of its assets of a judgment, writ, order or decree,
enforcement of such judgment, writ, order or decree is stayed pending a timely
appeal or other judicial review.

 

"Protective Advances" shall have the meaning set forth in Section 16.2(f)
hereof.

 

  -35- 

 

 

"Published Rate" shall mean the rate of interest published each Business Day in
the Wall Street Journal "Money Rates" listing under the caption "London
Interbank Offered Rates" for a one month period (or, if no such rate is
published therein for any reason, then the Published Rate shall be the LIBOR
Rate for a one month period as published in another publication selected by
Agent).

 

"Purchasing CLO" shall have the meaning set forth in Section 16.3(d) hereof.

 

"Purchasing Lender" shall have the meaning set forth in Section 16.3(c) hereof.

 

"Qualified ECP Loan Party" shall mean each Borrower or Guarantor that on the
Eligibility Date is (a) a corporation, partnership, proprietorship,
organization, trust, or other entity other than a "commodity pool" as defined in
Section 1a(10) of the CEA and CFTC regulations thereunder that has total assets
exceeding $10,000,000 or (b) an Eligible Contract Participant that can cause
another person to qualify as an Eligible Contract Participant on the Eligibility
Date under Section 1a(18)(A)(v)(II) of the CEA by entering into or otherwise
providing a "letter of credit or keepwell, support, or other agreement" for
purposes of Section 1a(18)(A)(v)(II) of the CEA.

 

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

 

"Real Property" shall mean all of the owned or leased premises of any Credit
Party identified on Schedule 4.4 hereto and all of the hereafter owned or leased
premises of any Credit Party.

 

"Receivables" shall mean and include, as to each Credit Party, all of such
Credit Party's accounts (as defined in Article 9 of the Uniform Commercial Code)
and all of such Credit Party's contract rights, instruments (including those
evidencing indebtedness owed to such Credit Party by its Affiliates), documents,
chattel paper (including electronic chattel paper), general intangibles relating
to accounts, contract rights, instruments, documents and chattel paper, and
drafts and acceptances, credit card receivables and all other forms of
obligations owing to such Credit Party arising out of or in connection with the
sale or lease of Inventory or the rendition of services, all supporting
obligations, guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder.

 

"Receivables Advance Rates" shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.

 

"Register" shall have the meaning set forth in Section 16.3(e) hereof.

 

"Reimbursement Obligation" shall have the meaning set forth in Section 2.14(b)
hereof.

 

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

 

  -36- 

 

 

"Reportable Compliance Event" shall mean that any Covered Entity becomes a
Sanctioned Person, or is charged by indictment, criminal complaint or similar
charging instrument, arraigned, or custodially detained in connection with any
Anti-Terrorism Law or any predicate crime to any Anti-Terrorism Law, or has
knowledge of facts or circumstances to the effect that it is reasonably likely
that any aspect of its operations is in actual or probable violation of any
Anti-Terrorism Law.

 

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

 

"Required Lenders" shall mean Lenders (not including Swing Loan Lender (in its
capacity as such Swing Loan Lender) or any Defaulting Lender) holding at least
fifty and one-tenth percent (50.1%) of either (a) the aggregate of (i) the
Revolving Commitment Amounts of all Lenders (excluding any Defaulting Lender)
and, (ii) outstanding principal amount of the Term Loan, or (b) after the
termination of all commitments of Lenders hereunder, the sum of (x) the
outstanding Revolving Advances, Swing Loans and Term Loans, plus the Maximum
Undrawn Amount of all outstanding Letters of Credit; provided, however, if there
are fewer than three (3) Lenders, Required Lenders shall mean all Lenders
(excluding any Defaulting Lender).

 

"Reserve Percentage" shall mean as of any day the maximum effective percentage
in effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities".

 

"Revolving Advances" shall mean Advances other than Letters of Credit, the Term
Loan and the Swing Loans.

 

"Revolving Commitment" shall mean, as to any Lender, the obligation of such
Lender (if applicable), to make Revolving Advances and participate in Swing
Loans and Letters of Credit, in an aggregate principal and/or face amount not to
exceed the Revolving Commitment Amount (if any) of such Lender.

 

"Revolving Commitment Amount" shall mean, (i) as to any Lender other than a New
Lender, the Revolving Commitment amount (if any) set forth below such Lender's
name on the signature page hereto (or, in the case of any Lender that became
party to this Agreement after the Closing Date pursuant to Section 16.3(c) or
(d) hereof, the Revolving Commitment amount (if any) of such Lender as set forth
in the applicable Commitment Transfer Supplement), and (ii) as to any Lender
that is a New Lender, the Revolving Commitment amount provided for in the
joinder signed by such New Lender under Section 2.24(a)(x), in each case as the
same may be adjusted pursuant to the terms hereof.

 

"Revolving Commitment Percentage" shall mean, (i) as to any Lender other than a
New Lender, the Revolving Commitment Percentage (if any) set forth below such
Lender's name on the signature page hereof (or, in the case of any Lender that
became party to this Agreement after the Closing Date pursuant to
Section 16.3(c) or (d) hereof, the Revolving Commitment Percentage (if any) of
such Lender as set forth in the applicable Commitment Transfer Supplement), and
(ii) as to any Lender that is a New Lender, the Revolving Commitment Percentage
provided for in the joinder signed by such New Lender under Section 2.24(a)(ix),
in each case as the same may be adjusted upon any increase in the Maximum
Revolving Advance Amount pursuant to the terms hereof.

 

  -37- 

 

 

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

 

"Revolving Interest Rate" shall mean (a) with respect to Revolving Advances that
are Domestic Rate Loans and Swing Loans, an interest rate per annum equal to the
sum of the Applicable Margin plus the Alternate Base Rate and (b) with respect
to LIBOR Rate Loans, the sum of the Applicable Margin plus the LIBOR Rate.

 

"Sanctioned Country" shall mean a country subject to a sanctions program
maintained under any Anti-Terrorism Law.

 

"Sanctioned Person" shall mean any individual person, group, regime, entity or
thing listed or otherwise recognized as a specially designated, prohibited,
sanctioned or debarred person, group, regime, entity or thing, or subject to any
limitations or prohibitions (including but not limited to the blocking of
property or rejection of transactions), under any Anti-Terrorism Law.

 

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

 

"Secured Parties" shall mean, collectively, Agent, Issuer, Swing Loan Lender and
Lenders, together with any Affiliates of Agent or any Lender to whom any Hedge
Liabilities or Cash Management Liabilities are owed and with each other holder
of any of the Obligations, and the respective successors and assigns of each of
them.

 

"Securities Act" shall mean the Securities Act of 1933, as amended.

 

"Settlement" shall have the meaning set forth in Section 2.6(d) hereof.

 

"Settlement Date" shall have the meaning set forth in Section 2.6(d) hereof.

 

"Shareholder Subordinated Loan" shall mean the unsecured Indebtedness owing
under the Shareholder Subordinated Loan Documents to John H. Schwan in an
aggregate amount not to exceed $1,498,822.01 (plus interest paid in kind) at any
time outstanding, which Shareholder Subordinated Loan is subordinated to the
Obligations pursuant to the Shareholder Subordination Agreement.

 

"Shareholder Subordinated Loan Documents" shall mean that certain Promissory
Note issued on the Closing Date by Company to John H. Schwan in the original
principal amount of $1,498,822.01, together with all other instruments,
agreements and documents executed in connection therewith.

 

"Shareholder Subordination Agreement" shall mean the Subordination Agreement,
dated as of the Closing Date, by and among Agent, the Company and John H.
Schwan.

 

  -38- 

 

 

"Subsidiary" shall mean of any Person a corporation or other entity of whose
Equity Interests having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person.

 

"Supermajority Lenders" shall mean Lenders (not including Swing Loan Lender (in
its capacity as such Swing Loan Lender) or any Defaulting Lender) holding at
least sixty-six and two-thirds percent (66.66%) of either (a) the aggregate of
the Revolving Commitment Amounts of all Lenders (excluding any Defaulting
Lender), or (b) after the termination of all commitments of Lenders hereunder,
the sum of the outstanding Revolving Advances and Swing Loans, plus the Dollar
Equivalent of the Maximum Undrawn Amount of all outstanding Letters of Credit;
provided, however, if there are fewer than three (3) Lenders, Supermajority
Lenders shall mean all Lenders (excluding any Defaulting Lender).

 

"Swap" shall mean any "swap" as defined in Section 1a(47) of the CEA and
regulations thereunder, other than (a) a swap entered into, or subject to the
rules of, a board of trade designated as a contract market under Section 5 of
the CEA, or (b) a commodity option entered into pursuant to CFTC Regulation
32.3(a).

 

"Swap Obligation" shall mean any obligation to pay or perform under any
agreement, contract or transaction that constitutes a Swap which is also a
Lender-Provided Interest Rate Hedge, or a Lender-Provided Foreign Currency
Hedge.

 

"Swing Loan Lender" shall mean PNC, in its capacity as lender of the Swing
Loans.

 

"Swing Loan Note" shall mean the promissory note described in Section 2.4(a)
hereof.

 

"Swing Loans" shall mean the Advances made pursuant to Section 2.4 hereof.

 

"Taxes" shall mean all present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Body, including any interest, additions to tax or penalties
applicable thereto.

 

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

 

"Term Loan" shall have the meaning set forth in Section 2.3(a) hereof.

 

"Term Loan Commitment" shall mean, as to any Lender, the obligation of such
Lender (if applicable), to fund a portion of the Term Loan in an aggregate
principal equal to the Term Loan Commitment Amount (if any) of such Lender.

 

"Term Loan Commitment Amount" shall mean, as to any Lender, the term loan
commitment amount (if any) set forth below such Lender's name on the signature
page hereof (or, in the case of any Lender that became party to this Agreement
after the Closing Date pursuant to Section 16.3(c) or (d) hereof, the term loan
commitment amount (if any) of such Lender as set forth in the applicable
Commitment Transfer Supplement), as the same may be adjusted pursuant to the
terms hereof.

 

  -39- 

 

 

"Term Loan Commitment Percentage" shall mean, as to any Lender, the Term Loan
Commitment Percentage (if any) set forth below such Lender's name on the
signature page hereof (or, in the case of any Lender that became party to this
Agreement after the Closing Date pursuant to Section 16.3(c) or (d) hereof, the
Term Loan Commitment Percentage (if any) of such Lender as set forth in the
applicable Commitment Transfer Supplement), as the same may be adjusted pursuant
to the terms hereof.

 

"Term Loan Rate" shall mean (a) with respect to Term Loans that are Domestic
Rate Loans, an interest rate per annum equal to the sum of the Applicable Margin
plus the Alternate Base Rate and (b) with respect to Term Loans that are LIBOR
Rate Loans, the sum of the Applicable Margin plus the LIBOR Rate.

 

"Term Note" shall mean, collectively, the promissory notes described in
Section 2.3(a) hereof.

 

"Termination Event" shall mean: (a) a Reportable ERISA Event with respect to any
Plan; (b) the withdrawal of any Credit Party or any member of the Controlled
Group from a Plan during a plan year in which such entity was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA or a cessation of operations
that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) the
providing of notice of intent to terminate a Plan in a distress termination
described in Section 4041(c) of ERISA; (d) the commencement of proceedings by
the PBGC to terminate a Plan; (e) any event or condition (a) which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; (f) the
partial or complete withdrawal within the meaning of Section 4203 or 4205 of
ERISA, of any Credit Party or any member of the Controlled Group from a
Multiemployer Plan; (g) notice that a Multiemployer Plan is subject to
Section 4245 of ERISA; or (h) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not diligent, upon any Credit Party
or any member of the Controlled Group.

 

"Toxic Substance" shall mean and include any material present on the Real
Property which has been shown to have significant adverse effect on human health
or which is subject to regulation under the Toxic Substances Control Act (TSCA),
15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal
or state laws now in force or hereafter enacted relating to toxic substances.
"Toxic Substance" includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.

 

"Transactions" shall have the meaning set forth in Section 5.5(a) hereof.

 

"Transferee" shall have the meaning set forth in Section 16.3(d) hereof.

 

"Undrawn Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount minus the Maximum Undrawn Amount of all outstanding Letters of Credit,
minus (b) the sum of (i) the outstanding amount of Advances (other than the Term
Loan).

 

"Unfinanced Capital Expenditures" shall mean, with respect to Borrowers on a
Consolidated Basis, Capital Expenditures funded (a) from such internally
generated cash flow of Borrowers on a Consolidated Basis or (b) with the
proceeds of a Revolving Advance or Swing Loan.

 

  -40- 

 

 

"Uniform Commercial Code" shall have the meaning set forth in Section 1.3
hereof.

 

"US Credit Party" means each Borrower and each US Guarantor.

 

"US Guarantor" shall mean CTI Supply and any other Person organized under the
United States of America or any state thereof who may hereafter guarantee
payment or performance of the whole or any part of the Obligations and "US
Guarantors" means collectively all such Persons.

 

"USA PATRIOT Act" shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

 

"WIP Sublimit" shall mean an amount equal to (i) $1,750,000 during the period
commencing on the Closing Date and ending on March 31, 2018, (ii) $1,500,000
during the period commencing on April 1, 2018 and ending on June 30, 2018, (iii)
$1,250,000 during the period commencing on July 1, 2018 and ending on September
30, 2018, (iv) $1,000,000 duing the period commencing on October 1, 2018 and
ending on December 31, 2018, and (v) $750,000 during the period commencing on
January 1, 2019 and at all times thereafter.

 

"Working Capital" at a particular date, shall mean the excess, if any, of
Current Assets over Current Liabilities at such date.

 

1.3       Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New York from time to
time (the "Uniform Commercial Code") shall have the meaning given therein unless
otherwise defined herein. Without limiting the foregoing, the terms "accounts",
"chattel paper" (and "electronic chattel paper" and "tangible chattel paper"),
"commercial tort claims", "deposit accounts", "documents", "equipment",
"financial asset", "fixtures", "general intangibles", "goods", "instruments",
"inventory", "investment property", "letter-of-credit rights", "payment
intangibles", "proceeds", "promissory note" "securities", "software" and
"supporting obligations" as and when used in the description of Collateral shall
have the meanings given to such terms in Articles 8 or 9 of the Uniform
Commercial Code. To the extent the definition of any category or type of
collateral is expanded by any amendment, modification or revision to the Uniform
Commercial Code, such expanded definition will apply automatically as of the
date of such amendment, modification or revision.

 

  -41- 

 

 

1.4       Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Agent is a
party, including references to any of the Other Documents, shall include any and
all modifications, supplements or amendments thereto, any and all restatements
or replacements thereof and any and all extensions or renewals thereof. Except
as otherwise expressly provided for herein, all references herein to the time of
day shall mean the time in New York, New York. Unless otherwise provided, all
financial calculations shall be performed with Inventory valued on a first-in,
first-out basis. Whenever the words "including" or "include" shall be used, such
words shall be understood to mean "including, without limitation" or "include,
without limitation". A Default or an Event of Default shall be deemed to exist
at all times during the period commencing on the date that such Default or Event
of Default occurs to the date on which such Default or Event of Default is
waived in writing pursuant to this Agreement or, in the case of a Default, is
cured within any period of cure expressly provided for in this Agreement; and an
Event of Default shall "continue" or be "continuing" until such Event of Default
has been waived in writing by Required Lenders. Any Lien referred to in this
Agreement or any of the Other Documents as having been created in favor of
Agent, any agreement entered into by Agent pursuant to this Agreement or any of
the Other Documents, any payment made by or to or funds received by Agent
pursuant to or as contemplated by this Agreement or any of the Other Documents,
or any act taken or omitted to be taken by Agent, shall, unless otherwise
expressly provided, be created, entered into, made or received, or taken or
omitted, for the benefit or account of Agent and Lenders. Wherever the phrase
"to the best of Borrowers' knowledge" or words of similar import relating to the
knowledge or the awareness of any Borrower are used in this Agreement or Other
Documents, such phrase shall mean and refer to (i) the actual knowledge of a
senior officer of any Borrower or (ii) the knowledge that a senior officer would
have obtained if he/she had engaged in a good faith and diligent performance of
his/her duties, including the making of such reasonably specific inquiries as
may be necessary of the employees or agents of such Borrower and a good faith
attempt to ascertain the existence or accuracy of the matter to which such
phrase relates. All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or otherwise
within the limitations of, another covenant shall not avoid the occurrence of a
default if such action is taken or condition exists. In addition, all
representations and warranties hereunder shall be given independent effect so
that if a particular representation or warranty proves to be incorrect or is
breached, the fact that another representation or warranty concerning the same
or similar subject matter is correct or is not breached will not affect the
incorrectness of a breach of a representation or warranty hereunder. Any
reference herein or in any Other Document to the satisfaction, repayment, or
payment in full of the Obligations shall mean (a) the payment or repayment in
full in immediately available funds of (i) the principal amount of, and interest
accrued and unpaid with respect to, all outstanding Advances, together with the
payment of any premium applicable to the repayment of the Advances, (ii) all
expenses to which Agent, any Lender or Issuer is entitled to reimbursement
hereunder or under any Other Document that have accrued and are unpaid
regardless of whether demand has been made therefor, (iii) all fees or charges
that have accrued hereunder or under any Other Document (including the Letter of
Credit fees) and are unpaid, (b) in the case of contingent reimbursement
obligations with respect to Letters of Credit, providing cash collateralization
in an amount equal to one hundred five percent (105%) of the Letters of Credit
in accordance herewith, (c) in the case of Cash Management Liabilities,
providing cash collateralization in an amount equal to the credit exposure (as
reasonably determined by Agent) with respect thereto, (d) the receipt by Agent
of cash collateral in order to secure any other contingent Obligations for which
a claim or demand for payment has been made on or prior to such time or in
respect of matters or circumstances known to Agent or a Lender at such time that
are reasonably expected to result in any loss, cost, damage, or expense
(including attorneys' fees and legal expenses), such cash collateral to be in
such amount as Agent reasonably determines is appropriate to secure such
contingent Obligations, (e) the payment or repayment in full in immediately
available funds of all other outstanding Obligations (including the payment of
any termination amount then applicable (or which would or could become
applicable as a result of the repayment of the other Obligations) with respect
to Hedge Liabilities) other than (i) unasserted contingent indemnification
Obligations for which there is no reasonable basis to assume a claim will be
asserted, (ii) any Cash Management Liabilities that, at such time, are allowed
by the applicable Lender (or Affiliate) to remain outstanding without being
required to be repaid or cash collateralized, and (iii) any Hedge Liabilities
that, at such time, are allowed by the applicable Lender (or Affiliate) to
remain outstanding without being required to be repaid, and (f) the termination
of all of the Revolving Commitments of the Lenders.

 

  -42- 

 

 

1.5       Currency Matters. Unless otherwise provided for herein, all amounts
and calculations set forth in Dollars in this Agreement shall be determined as
of each date of measurement by the Dollar Equivalents thereof as of such date of
measurement. For purposes of the foregoing, "Dollar Equivalent" means, at any
time, (a) as to any amount denominated in Dollars, the amount thereof at such
time, and (b) as to any currency other than Dollars, the equivalent amount in
Dollars as reasonably determined by Agent at such time that such amount could be
converted into Dollars by Agent according to prevailing exchange rates selected
by Agent in its Permitted Discretion. All Advances hereunder shall be made in
Dollars. Principal, interest, reimbursement obligations, fees, and all other
amounts payable under this Agreement and the Other Documents shall be payable in
Dollars. Unless stated otherwise, all calculations, comparisons, measurements or
determinations under this Agreement (including without limitation, calculation
of the Borrowing Base or the determination of whether a repayment is required
under this Agreement), shall be made in Dollars by aggregating the Dollar
Equivalent of each component thereof. For the purpose of such calculations,
comparisons, measurements or determinations, amounts denominated in other
currencies shall be converted to the Dollar Equivalent thereof on the date of
calculation, comparison, measurement or determination. If the Agent shall
receive payment in a currency other than the currency in which the Obligations
are due, whether pursuant to the exercise of control under any Other Document,
or as proceeds or realization of the Collateral or otherwise, then the Agent
shall be authorized to convert such amounts to Dollars according to prevailing
exchange rates selected by Agent in its Permitted Discretion.

 

II.ADVANCES, PAYMENTS.

 

2.1          Revolving Advances.

 

(a)       Amount of Revolving Advances. Subject to the terms and conditions set
forth in this Agreement specifically including Section 2.1(b), each Lender with
a Revolving Commitment, severally and not jointly, will make Revolving Advances
to Borrowers in aggregate amounts outstanding at any time equal to such Lender's
Revolving Commitment Percentage of the lesser of (x) the Maximum Revolving
Advance Amount, less the outstanding amount of Swing Loans, less the aggregate
Maximum Undrawn Amount of all outstanding Letters of Credit or (y) an amount
equal to the sum of:

 

  -43- 

 

 

(i)          the sum of (a) up to eighty five percent (85%) (the "General
Receivables Advance Rate") of Eligible US Receivables and Eligible Mexican
Receivables, other than Eligible Insured Receivables, plus (b) up to ninety
percent (90%) (the "Insured Receivables Advance Rate"; together with the General
Receivables Advance Rate, collectively, the "Receivables Advance Rates") of
Eligible US Insured Receivables and Eligible Mexican Insured Receivables, plus

 

(ii)         the sum of (a) the lesser of (I) up to seventy five percent (75%)
(the "Inventory Advance Rate") of the value of Eligible US Inventory and (II) up
to ninety percent (90%) of the appraised net orderly liquidation value (as
evidenced by an Inventory appraisal satisfactory to Agent in its Permitted
Discretion) (the "Inventory NOLV Advance Rate", together with the Inventory
Advance Rate and the Receivables Advance Rates, collectively, the "Advance
Rates") of Eligible US Inventory, and (b) the lesser of (I) up to the Inventory
Advance Rate of the value of Eligible Mexican Inventory and (II) up to Inventory
NOLV Advance Rate of Eligible Mexican Inventory, plus

 

(iii)        solely during the period commencing on September 1 and ending on
December 31 of each year, an amount equal to the lesser of (a) ten percent (10%)
of the amount calculated at such time under Section 2.1(a)(y)(ii) above and (b)
$1,000,000, plus

 

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

 

(v)         such reserves as Agent may reasonably deem proper and necessary in
its Permitted Discretion from time to time (including, without limitation, a
dilution reserve, a reserve in respect of credit insurance deductibles and the
Mexican Priority Payables Reserve);

 

provided, that in no event shall (1)(A) the aggregate amounts attributable in
subsections (i), (ii), (iii) and (iv) above to Eligible Mexican Receivables
(excluding Eligible Insured Mexican Receivables) and Eligible Mexican Inventory
(after applying the applicable Advance Rates) exceed $4,000,000 or (B) Eligible
Mexican Inventory exceed 50% of the aggregate amounts attributable to the sum of
Eligible Mexican Receivables (excluding Eligible Insured Mexican Receivables)
and Eligible Mexican Inventory (after applying the applicable Advance Rates),
(2) the aggregate amounts attributable in subsections (ii), (iii) and (iv) above
to Eligible Inventory constituting work-in-process exceed the WIP Sublimit, (3)
the aggregate amount attributable in subsection (i) above to Eligible US
Receivables, Eligible Mexican Receivables, Eligilbe US Insured Receivables and
Eligible Mexican Insured Receivables owing by Wal-Mart Stores, Inc. and its
Affiliates exceed $6,000,000, or (4) the aggregate amount attributable in
subsection (i) above to Eligible US Receivables, Eligible Mexican Receivables,
Eligilbe US Insured Receivables and Eligible Mexican Insured Receivables owing
by Dollar Tree, Inc. and its Affiliates exceed $5,000,000.

 

  -44- 

 

 

The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and (iii)
minus (y) Sections 2.1 (a)(y)(iv) and (v) at any time and from time to time
shall be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by one or more secured promissory notes (collectively, the "Revolving
Credit Note") substantially in the form attached hereto as Exhibit 2.1(a).
Notwithstanding anything to the contrary contained in the foregoing or otherwise
in this Agreement, the outstanding aggregate principal amount of Swing Loans and
the Revolving Advances at any one time outstanding shall not exceed an amount
equal to the lesser of (i) the Maximum Revolving Advance Amount less the Maximum
Undrawn Amount of all outstanding Letters of Credit or (ii) the Formula Amount.

 

(b)          Discretionary Rights. The Advance Rates may be increased or
decreased by Agent from time to time in the exercise of its Permitted
Discretion; provided, that, so long as no Event of Default then exists and is
continuing, Agent shall provide Borrowing Agent five (5) Business Days prior
written notice of any such increase or decrease. Each Borrower consents to any
such increases or decreases and acknowledges that decreasing the Advance Rates
or increasing or imposing reserves may limit or restrict Advances requested by
Borrowing Agent. In addition to establishing reserves with respect to the
Formula Amount, Agent may establish reserves against the Maximum Revolving
Advance Amount as Agent may reasonably deem proper and necessary in its
Permitted Discretion from time to time.

 

2.2         Procedures for Requesting Revolving Advances; Procedures for
Selection of Applicable Interest Rates for All Advances.

 

(a)          Borrowing Agent on behalf of any Borrower may notify Agent prior to
1:00 p.m. on a Business Day of a Borrower's request to incur, on that day, a
Revolving Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or Lenders, or with respect to any other Obligation under
this Agreement, become due, same shall be deemed a request for a Revolving
Advance maintained as a Domestic Rate Loan as of the date such payment is due,
in the amount required to pay in full such interest, fee, charge or Obligation,
and such request shall be irrevocable.

 

(b)          Notwithstanding the provisions of subsection (a) above, in the
event any Borrower desires to obtain a LIBOR Rate Loan for any Advance (other
than a Swing Loan), Borrowing Agent shall give Agent written notice by no later
than 1:00 p.m. on the day which is three (3) Business Days prior to the date
such LIBOR Rate Loan is to be borrowed, specifying (i) the date of the proposed
borrowing (which shall be a Business Day), (ii) the type of borrowing and the
amount of such Advance to be borrowed, which amount shall be in a minimum amount
of $500,000 and in integral multiples of $100,000 thereafter, and (iii) the
duration of the first Interest Period therefor. Interest Periods for LIBOR Rate
Loans shall be for one, two or three months; provided that, if an Interest
Period would end on a day that is not a Business Day, it shall end on the next
succeeding Business Day unless such day falls in the next succeeding calendar
month in which case the Interest Period shall end on the next preceding Business
Day. At the election of Required Lenders, no LIBOR Rate Loan shall be made
available to any Borrower during the continuance of a Default or an Event of
Default. After giving effect to each requested LIBOR Rate Loan, including those
which are converted from a Domestic Rate Loan under Section 2.2(e), there shall
not be outstanding more than five (5) LIBOR Rate Loans, in the aggregate.

 

  -45- 

 

 

(c)          Each Interest Period of a LIBOR Rate Loan shall commence on the
date such LIBOR Rate Loan is made and shall end on such date as Borrowing Agent
may elect as set forth in subsection (b)(iii) above, provided that the exact
length of each Interest Period shall be determined in accordance with the
practice of the interbank market for offshore Dollar deposits and no Interest
Period shall end after the last day of the Term.

 

(d)          Borrowing Agent shall elect the initial Interest Period applicable
to a LIBOR Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to
Section 2.2(e), as the case may be. Borrowing Agent shall elect the duration of
each succeeding Interest Period by giving irrevocable written notice to Agent of
such duration not later than 1:00 p.m. on the day which is three (3) Business
Days prior to the last day of the then current Interest Period applicable to
such LIBOR Rate Loan. If Agent does not receive timely notice of the Interest
Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have
elected to convert such LIBOR Rate Loan to a Domestic Rate Loan subject to
Section 2.2(e) below.

 

(e)          Subject to Section 2.2(b) and the other provisions hereof,
Borrowing Agent may, on the last Business Day of the then current Interest
Period applicable to any outstanding LIBOR Rate Loan, or on any Business Day
with respect to Domestic Rate Loans, convert any such loan into a loan of
another type in the same aggregate principal amount provided that any conversion
of a LIBOR Rate Loan shall be made only on the last Business Day of the then
current Interest Period applicable to such LIBOR Rate Loan. If Borrowing Agent
desires to convert a loan, Borrowing Agent shall give Agent written notice by no
later than 1:00 p.m. (i) on the day which is three (3) Business Days prior to
the date on which such conversion is to occur with respect to a conversion from
a Domestic Rate Loan to a LIBOR Rate Loan, or (ii) on the day which is one (1)
Business Day prior to the date on which such conversion is to occur (which date
shall be the last Business Day of the Interest Period for the applicable LIBOR
Rate Loan) with respect to a conversion from a LIBOR Rate Loan to a Domestic
Rate Loan, specifying, in each case, the date of such conversion, the loans to
be converted and if the conversion is to a LIBOR Rate Loan, the duration of the
first Interest Period therefor.

 

(f)          At its option and upon written notice given prior to 1:00 p.m. at
least three (3) Business Days prior to the date of such prepayment, any Borrower
may, subject to Section 2.2(g) hereof, prepay the LIBOR Rate Loans in whole at
any time or in part from time to time with accrued interest on the principal
being prepaid to the date of such repayment. Such Borrower shall specify the
date of prepayment of Advances which are LIBOR Rate Loans and the amount of such
prepayment. In the event that any prepayment of a LIBOR Rate Loan is required or
permitted on a date other than the last Business Day of the then current
Interest Period with respect thereto, such Borrower shall indemnify Agent and
Lenders therefor in accordance with Section 2.2(g) hereof.

 

(g)          Each Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from and against any and all losses or expenses that Agent and
Lenders may sustain or incur as a consequence of any prepayment, conversion of
or any default by any Borrower in the payment of the principal of or interest on
any LIBOR Rate Loan or failure by any Borrower to complete a borrowing of, a
prepayment of or conversion of or to a LIBOR Rate Loan after notice thereof has
been given, including, but not limited to, any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
LIBOR Rate Loans hereunder. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Agent or any Lender to Borrowing
Agent shall be conclusive absent manifest error.

 

  -46- 

 

 

(h)          Notwithstanding any other provision hereof, if any Applicable Law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, including without limitation any Change in Law, shall
make it unlawful for Lenders or any Lender (for purposes of this subsection (h),
the term "Lender" shall include any Lender and the office or branch where any
Lender or any Person controlling such Lender makes or maintains any LIBOR Rate
Loans) to make or maintain its LIBOR Rate Loans, the obligation of Lenders (or
such affected Lender) to make LIBOR Rate Loans hereunder shall forthwith be
cancelled and Borrowers shall, if any affected LIBOR Rate Loans are then
outstanding, promptly upon request from Agent, either pay all such affected
LIBOR Rate Loans or convert such affected LIBOR Rate Loans into loans of another
type. If any such payment or conversion of any LIBOR Rate Loan is made on a day
that is not the last day of the Interest Period applicable to such LIBOR Rate
Loan, Borrowers shall pay Agent, upon Agent's request, such amount or amounts
set forth in clause (g) above. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Lenders to Borrowing
Agent shall be conclusive absent manifest error.

 

2.3         Term Loans.

 

(a)          Subject to the terms and conditions of this Agreement, each Lender,
severally and not jointly, will make a term loan to Borrowers in the amount
equal to such Lender's Term Loan Commitment Percentage of $6,000,000 (the "Term
Loan"). The Term Loan shall be advanced on the Closing Date and shall be, with
respect to principal, payable as follows, subject to acceleration upon the
occurrence of an Event of Default under this Agreement or termination of this
Agreement: sixty (60) consecutive monthly installments each in the amount of One
Hundred Thousand Dollars ($100,000.00) commencing with December 31, 2017 and
continuing on the last day of each month thereafter. The Term Loan shall be
evidenced by one or more secured promissory notes (collectively, the "Term
Note") in substantially the form attached hereto as Exhibit 2.3(a). The Term
Loan may consist of Domestic Rate Loans or LIBOR Rate Loans, or a combination
thereof, as Borrowing Agent may request; and in the event that Borrowers desire
to obtain or extend any portion of the Term Loan as a LIBOR Rate Loan or to
convert any portion of the Term Loan from a Domestic Rate Loan to a LIBOR Rate
Loan, Borrowing Agent shall comply with the notification requirements set forth
in Sections 2.2(b) and/or (e) and the provisions of Sections 2.2(b) through (h)
shall apply.

 

2.4         Swing Loans.

 

(a)          Subject to the terms and conditions set forth in this Agreement,
and in order to minimize the transfer of funds between Lenders and Agent for
administrative convenience, Agent, Lenders holding Revolving Commitments and
Swing Loan Lender agree that in order to facilitate the administration of this
Agreement, Swing Loan Lender may, at its election and option made in its sole
discretion cancelable at any time for any reason whatsoever, make swing loan
advances ("Swing Loans") available to Borrowers as provided for in this
Section 2.4 at any time or from time to time after the date hereof to, but not
including, the expiration of the Term, in an aggregate principal amount up to
but not in excess of the Maximum Swing Loan Advance Amount, provided that the
outstanding aggregate principal amount of Swing Loans and the Revolving Advances
at any one time outstanding shall not exceed an amount equal to the lesser of
(i) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all
outstanding Letters of Credit or (ii) the Formula Amount. All Swing Loans shall
be Domestic Rate Loans only. Borrowers may borrow (at the option and election of
Swing Loan Lender), repay and reborrow (at the option and election of Swing Loan
Lender) Swing Loans and Swing Loan Lender may make Swing Loans as provided in
this Section 2.4 during the period between Settlement Dates.  All Swing Loans
shall be evidenced by a secured promissory note (the "Swing Loan Note")
substantially in the form attached hereto as Exhibit 2.4(a). Swing Loan Lender's
agreement to make Swing Loans under this Agreement is cancelable at any time for
any reason whatsoever and the making of Swing Loans by Swing Loan Lender from
time to time shall not create any duty or obligation, or establish any course of
conduct, pursuant to which Swing Loan Lender shall thereafter be obligated to
make Swing Loans in the future

 

  -47- 

 

 

(b)          Upon either (i) any request by Borrowing Agent for a Revolving
Advance made pursuant to Section 2.2(a) hereof or (ii) the occurrence of any
deemed request by Borrowers for a Revolving Advance pursuant to the provisions
of the last sentence of Section 2.2(a) hereof, Swing Loan Lender may elect, in
its sole discretion, to have such request or deemed request treated as a request
for a Swing Loan, and may advance same day funds to Borrowers as a Swing Loan;
provided that notwithstanding anything to the contrary provided for herein,
Swing Loan Lender may not make Swing Loan Advances if (x) Borrowing Agent has
requested a LIBOR Rate Loan or (y)  Swing Loan Lender has been notified by Agent
or by Required Lenders that one or more of the applicable conditions set forth
in Section 8.2 of this Agreement have not been satisfied or the Revolving
Commitments have been terminated for any reason.

 

(c)          Upon the making of a Swing Loan (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether a
Settlement has been requested with respect to such Swing Loan), each Lender
holding a Revolving Commitment shall be deemed, without further action by any
party hereto, to have unconditionally and irrevocably purchased from Swing Loan
Lender, without recourse or warranty, an undivided interest and participation in
such Swing Loan in proportion to its Revolving Commitment Percentage. Swing Loan
Lender or Agent may, at any time, require the Lenders holding Revolving
Commitments to fund such participations by means of a Settlement as provided for
in Section 2.6(d) below. From and after the date, if any, on which any Lender
holding a Revolving Commitment is required to fund, and funds, its participation
in any Swing Loans purchased hereunder, Agent shall promptly distribute to such
Lender its Revolving Commitment Percentage of all payments of principal and
interest and all proceeds of Collateral received by Agent in respect of such
Swing Loan; provided that no Lender holding a Revolving Commitment shall be
obligated in any event to make Revolving Advances in an amount in excess of its
Revolving Commitment Amount minus its Participation Commitment (taking into
account any reallocations under Section 2.22) of the Maximum Undrawn Amount of
all outstanding Letters of Credit.

 

2.5         Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers' Account on Agent's books. The proceeds of each
Revolving Advance or Swing Loan requested by Borrowing Agent on behalf of any
Borrower or deemed to have been requested by any Borrower under Sections 2.2(a),
2.6(b) or 2.14 hereof shall, (i) with respect to requested Revolving Advances,
to the extent Lenders make such Revolving Advances in accordance with
Section 2.2(a), 2.6(b) or 2.14 hereof, and with respect to Swing Loans made upon
any request by Borrowing Agent for a Revolving Advance to the extent Swing Loan
Lender makes such Swing Loan in accordance with Section 2.4(b) hereof, be made
available to the applicable Borrower on the day so requested by way of credit to
such Borrower's operating account at PNC, or such other bank as Borrowing Agent
may designate following notification to Agent, so long as Agent has agreed to
such other account, in immediately available federal funds or other immediately
available funds or, (ii) with respect to Revolving Advances deemed to have been
requested by any Borrower or Swing Loans made upon any deemed request for a
Revolving Advance by any Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request. During the Term,
Borrowers may use the Revolving Advances and Swing Loans by borrowing, prepaying
and reborrowing, all in accordance with the terms and conditions hereof.

 

  -48- 

 

 

2.6         Making and Settlement of Advances.

 

(a)          Each borrowing of Revolving Advances shall be advanced according to
the applicable Revolving Commitment Percentages of Lenders holding the Revolving
Commitments (subject to any contrary terms of Section 2.22). The Term Loan shall
be advanced according to the applicable Term Loan Commitment Percentages of
Lenders holding the Term Loan Commitments. Each borrowing of Swing Loans shall
be advanced by Swing Loan Lender alone.

 

(b)          Promptly after receipt by Agent of a request or a deemed request
for a Revolving Advance pursuant to Section 2.2(a) and, with respect to
Revolving Advances, to the extent Agent elects not to provide a Swing Loan or
the making of a Swing Loan would result in the aggregate amount of all
outstanding Swing Loans exceeding the maximum amount permitted in
Section 2.4(a), Agent shall notify Lenders holding the Revolving Commitments of
its receipt of such request specifying the information provided by Borrowing
Agent and the apportionment among Lenders of the requested Revolving Advance as
determined by Agent in accordance with the terms hereof. Each Lender shall remit
the principal amount of each Revolving Advance to Agent such that Agent is able
to, and Agent shall, to the extent the applicable Lenders have made funds
available to it for such purpose and subject to Section 8.2, fund such Revolving
Advance to Borrowers in U.S. Dollars and immediately available funds at the
Payment Office prior to the close of business, on the applicable borrowing date;
provided that if any applicable Lender fails to remit such funds to Agent in a
timely manner, Agent may elect in its sole discretion to fund with its own funds
the Revolving Advance of such Lender on such borrowing date, and such Lender
shall be subject to the repayment obligation in Section 2.6(c) hereof.

 

(c)          Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender holding a Revolving Commitment that such Lender will not
make the amount which would constitute its applicable Revolving Commitment
Percentage of the requested Revolving Advance available to Agent, Agent may (but
shall not be obligated to) assume that such Lender has made such amount
available to Agent on such date in accordance with Section 2.6(b) and may, in
reliance upon such assumption, make available to Borrowers a corresponding
amount. In such event, if a Lender has not in fact made its applicable Revolving
Commitment Percentage of the requested Revolving Advance available to Agent,
then the applicable Lender and Borrowers severally agree to pay to Agent on
demand such corresponding amount with interest thereon, for each day from and
including the date such amount is made available to Borrowers through but
excluding the date of payment to Agent, at (i) in the case of a payment to be
made by such Lender, the greater of (A) (x) the daily average Federal Funds
Effective Rate (computed on the basis of a year of 360 days) during such period
as quoted by Agent, times (y) such amount or (B) a rate determined by Agent in
accordance with banking industry rules on interbank compensation, and (ii) in
the case of a payment to be made by Borrower, the Revolving Interest Rate for
Revolving Advances that are Domestic Rate Loans. If such Lender pays its share
of the applicable Revolving Advance to Agent, then the amount so paid shall
constitute such Lender's Revolving Advance. Any payment by Borrowers shall be
without prejudice to any claim Borrowers may have against a Lender holding a
Revolving Commitment that shall have failed to make such payment to Agent. A
certificate of Agent submitted to any Lender or Borrower with respect to any
amounts owing under this paragraph (c) shall be conclusive, in the absence of
manifest error.

 

  -49- 

 

 

(d)          Agent, on behalf of Swing Loan Lender, shall demand settlement (a
"Settlement") of all or any Swing Loans with Lenders holding the Revolving
Commitments on at least a weekly basis, or on any more frequent date that Agent
elects or that Swing Loan Lender at its option exercisable for any reason
whatsoever may request, by notifying Lenders holding the Revolving Commitments
of such requested Settlement by facsimile, telephonic or electronic transmission
no later than 3:00 p.m. on the date of such requested Settlement (the
"Settlement Date"). Subject to any contrary provisions of Section 2.22, each
Lender holding a Revolving Commitment shall transfer the amount of such Lender's
Revolving Commitment Percentage of the outstanding principal amount (plus
interest accrued thereon to the extent requested by Agent) of the applicable
Swing Loan with respect to which Settlement is requested by Agent, to such
account of Agent as Agent may designate not later than 5:00 p.m. on such
Settlement Date if requested by Agent by 3:00 p.m., otherwise not later than
5:00 p.m. on the next Business Day. Settlements may occur at any time
notwithstanding that the conditions precedent to making Revolving Advances set
forth in Section 8.2 have not been satisfied or the Revolving Commitments shall
have otherwise been terminated at such time. All amounts so transferred to Agent
shall be applied against the amount of outstanding Swing Loans and, when so
applied shall constitute Revolving Advances of such Lenders accruing interest as
Domestic Rate Loans. If any such amount is not transferred to Agent by any
Lender holding a Revolving Commitment on such Settlement Date, Agent shall be
entitled to recover such amount on demand from such Lender together with
interest thereon as specified in Section 2.6(c).

 

(e)          If any Lender or Participant (a "Benefited Lender") shall at any
time receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such Benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender's Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under Applicable Law, that each
Lender so purchasing a portion of another Lender's Advances may exercise all
rights of payment (including rights of set-off) with respect to such portion as
fully as if such Lender were the direct holder of such portion, and the
obligations owing to each such purchasing Lender in respect of such
participation and such purchased portion of any other Lender's Advances shall be
part of the Obligations secured by the Collateral, and the obligations owing to
each such purchasing Lender in respect of such participation and such purchased
portion of any other Lender's Advances shall be part of the Obligations secured
by the Collateral.

 

  -50- 

 

 

 

2.7         Maximum Advances. The aggregate balance of Revolving Advances plus
Swing Loans outstanding at any time shall not exceed the lesser of (a) the
Maximum Revolving Advance Amount less the aggregate Maximum Undrawn Amount of
all issued and outstanding Letters of Credit or (b) the Formula Amount.

 

2.8         Manner and Repayment of Advances.

 

(a)          The Revolving Advances and Swing Loans shall be due and payable in
full on the last day of the Term subject to earlier prepayment as herein
provided. The Term Loan shall be due and payable as provided in Section 2.3(a)
hereof and shall be due and payable in full on the last day of the Term, subject
to mandatory prepayments as herein provided. Notwithstanding the foregoing, all
Advances shall be subject to earlier repayment upon (x) acceleration upon the
occurrence of an Event of Default under this Agreement or (y) termination of
this Agreement. Each payment (including each prepayment) by any Borrower on
account of the principal of and interest on the Advances (other than the Term
Loan) shall be applied, first to the outstanding Swing Loans and next, pro rata
according to the applicable Revolving Commitment Percentages of Lenders, to the
outstanding Revolving Advances (subject to any contrary provisions of
Section 2.22). Each payment (including each prepayment) by any Borrower on
account of the principal of and interest on the Term Loan shall be applied to
the Term Loan pro rata according to the Term Loan Commitment Percentages of
Lenders in the inverse order of maturities thereof.

 

(b)          Each Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received by Agent. Agent
shall conditionally credit Borrowers' Account for each item of payment on the
next Business Day after the Business Day on which such item of payment is
received by Agent (and the Business Day on which each such item of payment is so
credited shall be referred to, with respect to such item, as the "Application
Date"). Agent is not, however, required to credit Borrowers' Account for the
amount of any item of payment which is unsatisfactory to Agent and Agent may
charge Borrowers' Account for the amount of any item of payment which is
returned, for any reason whatsoever, to Agent unpaid. Subject to the foregoing,
Borrowers agree that for purposes of computing the interest charges under this
Agreement, each item of payment received by Agent shall be deemed applied by
Agent on account of the Obligations on its respective Application Date.
Borrowers further agree that there is a monthly float charge payable to Agent
for Agent's sole benefit, in an amount equal to (y) the face amount of all items
of payment received during the prior month (including items of payment received
by Agent as a wire transfer or electronic depository check) multiplied by
(z) the Revolving Interest Rate with respect to Domestic Rate Loans for one (1)
Business Day. All proceeds received by Agent shall be applied to the Obligations
in accordance with Section 4.8(h).

 

  -51- 

 

 

(c)          All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Agent at the
Payment Office not later than 1:00 p.m. on the due date therefor in Dollars in
federal funds or other funds immediately available to Agent. Agent shall have
the right to effectuate payment of any and all Obligations due and owing
hereunder by charging Borrowers' Account or by making Advances as provided in
Section 2.2 hereof.

 

(d)          Except as expressly provided herein, all payments (including
prepayments) to be made by any Borrower on account of principal, interest, fees
and other amounts payable hereunder shall be made without deduction, setoff or
counterclaim and shall be made to Agent on behalf of Lenders to the Payment
Office, in each case on or prior to 1:00 p.m., in Dollars and in immediately
available funds.

 

2.9         Repayment of Excess Advances. If at any time the aggregate balance
of outstanding Revolving Advances, Swing Loans, Term Loans and/or Advances taken
as a whole exceeds the maximum amount of such type of Advances and/or Advances
taken as a whole (as applicable) permitted hereunder, such excess Advances shall
be immediately due and payable without the necessity of any demand, at the
Payment Office, whether or not a Default or an Event of Default has occurred.
Without limiting the foregoing, if at any time following one or more
fluctuations in the exchange rate of the Dollar against any other currency, any
part of the Obligations exceeds any limit set forth herein, Borrowers shall
within three (3) Business Days of written notice of same from Agent or, if an
Event of Default has occurred and is continuing, immediately (i) make the
necessary payments or repayments to reduce such Obligations to an amount
necessary to eliminate such excess or (ii) maintain or cause to be maintained
with Agent deposits in an amount equal to or greater than the amount of such
excess, such deposits to be maintained in such form and upon such terms as are
acceptable to Agent; without in any way limiting the foregoing provisions, Agent
shall, weekly or more frequently in Agent's Permitted Discretion, make the
necessary exchange rate calculations to determine whether any such excess exists
on such date.

 

2.10       Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent or Lenders and the date and amount of each payment in respect thereof;
provided, however, the failure by Agent to record the date and amount of any
Advance shall not adversely affect Agent or any Lender. Each month, Agent shall
send to Borrowing Agent a statement showing the accounting for the Advances
made, payments made or credited in respect thereof, and other transactions
between Agent, Lenders and Borrowers during such month. The monthly statements
shall be deemed correct and binding upon Borrowers in the absence of manifest
error and shall constitute an account stated between Lenders and Borrowers
unless Agent receives a written statement of Borrowers' specific exceptions
thereto within thirty (30) days after such statement is received by Borrowing
Agent. The records of Agent with respect to Borrowers' Account shall be
conclusive evidence absent manifest error of the amounts of Advances and other
charges thereto and of payments applicable thereto.

 

  -52- 

 

 

2.11       Letters of Credit.

 

(a)          Subject to the terms and conditions hereof, Issuer shall issue or
cause the issuance of standby and/or trade letters of credit denominated in
Dollars ("Letters of Credit") for the account of any Borrower except to the
extent that the issuance thereof would then cause the sum of (i) the outstanding
Revolving Advances plus (ii) the outstanding Swing Loans, plus (iii) the Maximum
Undrawn Amount of all outstanding Letters of Credit, plus (iv) the Maximum
Undrawn Amount of the Letter of Credit to be issued to exceed the lesser of
(x) the Maximum Revolving Advance Amount or (y) the Formula Amount (calculated
without giving effect to the deductions provided for in Section 2.1(a)(y)(iv)).
The Maximum Undrawn Amount of all outstanding Letters of Credit shall not exceed
in the aggregate at any time the Letter of Credit Sublimit. All disbursements or
payments related to Letters of Credit shall be deemed to be Domestic Rate Loans
consisting of Revolving Advances and shall bear interest at the Revolving
Interest Rate for Domestic Rate Loans. Letters of Credit that have not been
drawn upon shall not bear interest (but fees shall accrue in respect of
outstanding Letters of Credit as provided in Section 3.2 hereof).

 

(b)          Notwithstanding any provision of this Agreement, Issuer shall not
be under any obligation to issue any Letter of Credit if (i) any order, judgment
or decree of any Governmental Body or arbitrator shall by its terms purport to
enjoin or restrain  Issuer from issuing any Letter of Credit, or any Law
applicable to Issuer or any request or directive (whether or not having the
force of law) from any Governmental Body with jurisdiction over Issuer shall
prohibit, or request that Issuer refrain from, the issuance of letters of credit
generally or the Letter of Credit in particular or shall impose upon Issuer with
respect to the Letter of Credit any restriction, reserve or capital requirement
(for which Issuer is not otherwise compensated hereunder) not in effect on the
date of this Agreement, or shall impose upon Issuer any unreimbursed loss, cost
or expense which was not applicable on the date of this Agreement, and which
Issuer in good faith deems material to it, or (ii) the issuance of the Letter of
Credit would violate one or more policies of Issuer applicable to letters of
credit generally.

 

2.12       Issuance of Letters of Credit.

 

(a)          Borrowing Agent, on behalf of any Borrower, may request Issuer to
issue or cause the issuance of a Letter of Credit by delivering to Issuer, with
a copy to Agent at the Payment Office, prior to 1:00 p.m., at least five (5)
Business Days prior to the proposed date of issuance, such Issuer's form of
Letter of Credit Application (the "Letter of Credit Application") completed to
the satisfaction of Agent and Issuer; and, such other certificates, documents
and other papers and information as Agent or Issuer may reasonably request.
Issuer shall not issue any requested Letter of Credit if such Issuer has
received notice from Agent that one or more of the applicable conditions set
forth in Section 8.2 of this Agreement have not been satisfied or the
commitments of Lenders to make Revolving Advances hereunder have been terminated
for any reason.

 

  -53- 

 

 

(b)          Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts, other written demands for payment, or acceptances
of usance drafts when presented for honor thereunder in accordance with the
terms thereof and when accompanied by the documents described therein and
(ii) have an expiry date not later than twelve (12) months after such Letter of
Credit's date of issuance and in no event later than the last day of the Term.
Each standby Letter of Credit shall be subject either to the Uniform Customs and
Practice for Documentary Credits as most recently published by the International
Chamber of Commerce at the time a Letter of Credit is issued (the "UCP") or the
International Standby Practices (International Chamber of Commerce Publication
Number 590) (the "ISP98 Rules"), or any subsequent revision thereof at the time
a standby Letter of Credit is issued, as determined by Issuer, and each trade
Letter of Credit shall be subject to the UCP. In addition, no trade Letter of
Credit may permit the presentation of an ocean bill of lading that includes a
condition that the original bill of lading is not required to claim the goods
shipped thereunder.

 

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

 

2.13       Requirements For Issuance of Letters of Credit.

 

(a)          Borrowing Agent shall authorize and direct any Issuer to name the
applicable Borrower as the "Applicant" or "Account Party" of each Letter of
Credit. If PNC is not the Issuer of any Letter of Credit, Borrowing Agent shall
authorize and direct Issuer to deliver to Agent all instruments, documents, and
other writings and property received by Issuer pursuant to the Letter of Credit
and to accept and rely upon Agent's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit, the application
therefor.

 

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

 

  -54- 

 

 

2.14       Disbursements, Reimbursement.

 

(a)          Immediately upon the issuance of each Letter of Credit, each Lender
holding a Revolving Commitment shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from Issuer a participation in each Letter
of Credit and each drawing thereunder in an amount equal to such Lender's
Revolving Commitment Percentage of the Maximum Undrawn Amount of such Letter of
Credit (as in effect from time to time) and the amount of such drawing,
respectively.

 

(b)          In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, Issuer will promptly notify Agent and
Borrowing Agent. Regardless of whether Borrowing Agent shall have received such
notice, Borrowers shall reimburse (such obligation to reimburse Issuer shall
sometimes be referred to as a "Reimbursement Obligation") Issuer prior to 12:00
Noon, on each date that an amount is paid by Issuer under any Letter of Credit
(each such date, a "Drawing Date") in an amount equal to the amount so paid by
Issuer. In the event Borrowers fail to reimburse Issuer for the full amount of
any drawing under any Letter of Credit by 12:00 Noon, on the Drawing Date,
Issuer will promptly notify Agent and each Lender holding a Revolving Commitment
thereof, and Borrowers shall be automatically deemed to have requested that a
Revolving Advance maintained as a Domestic Rate Loan be made by Lenders to be
disbursed on the Drawing Date under such Letter of Credit, and Lenders holding
the Revolving Commitments shall be unconditionally obligated to fund such
Revolving Advance (all whether or not the conditions specified in Section 8.2
are then satisfied or the commitments of Lenders to make Revolving Advances
hereunder have been terminated for any reason) as provided for in
Section 2.14(c) immediately below. Any notice given by Issuer pursuant to this
Section 2.14(b) may be oral if promptly confirmed in writing; provided that the
lack of such a confirmation shall not affect the conclusiveness or binding
effect of such notice.

 

(c)          Each Lender holding a Revolving Commitment shall upon any notice
pursuant to Section 2.14(b) make available to Issuer through Agent at the
Payment Office an amount in immediately available funds equal to its Revolving
Commitment Percentage (subject to any contrary provisions of Section 2.22) of
the amount of the drawing, whereupon the participating Lenders shall (subject to
Section 2.14(d)) each be deemed to have made a Revolving Advance maintained as a
Domestic Rate Loan to Borrowers in that amount. If any Lender holding a
Revolving Commitment so notified fails to make available to Agent, for the
benefit of Issuer, the amount of such Lender's Revolving Commitment Percentage
of such amount by 2:00 p.m. on the Drawing Date, then interest shall accrue on
such Lender's obligation to make such payment, from the Drawing Date to the date
on which such Lender makes such payment (i) at a rate per annum equal to the
Federal Funds Effective Rate during the first three (3) days following the
Drawing Date and (ii) at a rate per annum equal to the rate applicable to
Revolving Advances maintained as a Domestic Rate Loan on and after the fourth
day following the Drawing Date. Agent and Issuer will promptly give notice of
the occurrence of the Drawing Date, but failure of Agent or Issuer to give any
such notice on the Drawing Date or in sufficient time to enable any Lender
holding a Revolving Commitment to effect such payment on such date shall not
relieve such Lender from its obligations under this Section 2.14(c), provided
that such Lender shall not be obligated to pay interest as provided in
Section 2.14(c)(i) and (ii) until and commencing from the date of receipt of
notice from Agent or Issuer of a drawing.

 

  -55- 

 

 

(d)          With respect to any unreimbursed drawing that is not converted into
a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or
in part as contemplated by Section 2.14(b), because of Borrowers' failure to
satisfy the conditions set forth in Section 8.2 hereof (other than any notice
requirements) or for any other reason, Borrowers shall be deemed to have
incurred from Agent a borrowing (each a "Letter of Credit Borrowing") in the
amount of such drawing. Such Letter of Credit Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the rate per annum
applicable to a Revolving Advance maintained as a Domestic Rate Loan. Each
applicable Lender's payment to Agent pursuant to Section 2.14(c) shall be deemed
to be a payment in respect of its participation in such Letter of Credit
Borrowing and shall constitute a "Participation Advance" from such Lender in
satisfaction of its Participation Commitment in respect of the applicable Letter
of Credit under this Section 2.14.

 

(e)          Each applicable Lender's Participation Commitment in respect of the
Letters of Credit shall continue until the last to occur of any of the following
events: (x) Issuer ceases to be obligated to issue or cause to be issued Letters
of Credit hereunder; (y) no Letter of Credit issued or created hereunder remains
outstanding and uncancelled; and (z) all Persons (other than Borrowers) have
been fully reimbursed for all payments made under or relating to Letters of
Credit.

 

2.15       Repayment of Participation Advances.

 

(a)          Upon (and only upon) receipt by Agent for the account of Issuer of
immediately available funds from Borrowers (i) in reimbursement of any payment
made by Issuer or Agent under the Letter of Credit with respect to which any
Lender has made a Participation Advance to Agent, or (ii) in payment of interest
on such a payment made by Issuer or Agent under such a Letter of Credit, Agent
will pay to each Lender holding a Revolving Commitment, in the same funds as
those received by Agent, the amount of such Lender's Revolving Commitment
Percentage of such funds, except Agent shall retain the amount of the Revolving
Commitment Percentage of such funds of any Lender holding a Revolving Commitment
that did not make a Participation Advance in respect of such payment by Agent
(and, to the extent that any of the other Lender(s) holding the Revolving
Commitment have funded any portion such Defaulting Lender's Participation
Advance in accordance with the provisions of Section 2.22, Agent will pay over
to such Non-Defaulting Lenders a pro rata portion of the funds so withheld from
such Defaulting Lender).

 

(b)          If Issuer or Agent is required at any time to return to any
Borrower, or to a trustee, receiver, liquidator, custodian, or any official in
any insolvency proceeding, any portion of the payments made by Borrowers to
Issuer or Agent pursuant to Section 2.15(a) in reimbursement of a payment made
under the Letter of Credit or interest or fee thereon, each applicable Lender
shall, on demand of Agent, forthwith return to Issuer or Agent the amount of its
Revolving Commitment Percentage of any amounts so returned by Issuer or Agent
plus interest at the Federal Funds Effective Rate.

 

2.16       Documentation. Each Borrower agrees to be bound by the terms of the
Letter of Credit Application and by Issuer's interpretations of any Letter of
Credit issued on behalf of such Borrower and by Issuer's written regulations and
customary practices relating to letters of credit, though Issuer's
interpretations may be different from such Borrower's own. In the event of a
conflict between the Letter of Credit Application and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment), Issuer shall not be liable for
any error, negligence and/or mistakes, whether of omission or commission, in
following Borrowing Agent's or any Borrower's instructions or those contained in
the Letters of Credit or any modifications, amendments or supplements thereto.

 

  -56- 

 

 

2.17       Determination to Honor Drawing Request. In determining whether to
honor any request for drawing under any Letter of Credit by the beneficiary
thereof, Issuer shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit and that any other drawing condition appearing on the face of
such Letter of Credit has been satisfied in the manner so set forth.

 

2.18       Nature of Participation and Reimbursement Obligations. The obligation
of each Lender holding a Revolving Commitment in accordance with this Agreement
to make the Revolving Advances or Participation Advances as a result of a
drawing under a Letter of Credit, and the obligations of Borrowers to reimburse
Issuer upon a draw under a Letter of Credit, shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Section 2.18 under all circumstances, including the following
circumstances:

 

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

 

(ii)         the failure of any Borrower or any other Person to comply, in
connection with a Letter of Credit Borrowing, with the conditions set forth in
this Agreement for the making of a Revolving Advance, it being acknowledged that
such conditions are not required for the making of a Letter of Credit Borrowing
and the obligation of Lenders to make Participation Advances under Section 2.14;

 

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

 

(iv)        any claim of breach of warranty that might be made by any Borrower,
Agent, Issuer or any Lender against the beneficiary of a Letter of Credit, or
the existence of any claim, set-off, recoupment, counterclaim, cross-claim,
defense or other right which any Borrower, Agent, Issuer or any Lender may have
at any time against a beneficiary, any successor beneficiary or any transferee
of any Letter of Credit or assignee of the proceeds thereof (or any Persons for
whom any such transferee or assignee may be acting), Issuer, Agent or any Lender
or any other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between any Borrower or any Subsidiaries of such Borrower and the
beneficiary for which any Letter of Credit was procured);

 

(v)         the lack of power or authority of any signer of (or any defect in or
forgery of any signature or endorsement on) or the form of or lack of validity,
sufficiency, accuracy, enforceability or genuineness of any draft, demand,
instrument, certificate or other document presented under or in connection with
any Letter of Credit, or any fraud or alleged fraud in connection with any
Letter of Credit, or the transport of any property or provision of services
relating to a Letter of Credit, in each case even if Issuer or any of Issuer's
Affiliates has been notified thereof;

 

  -57- 

 

 

(vi)        payment by Issuer under any Letter of Credit against presentation of
a demand, draft or certificate or other document which is forged or does not
fully comply with the terms of such Letter of Credit (provided that the
foregoing shall not excuse Issuer from any obligation under the terms of any
applicable Letter of Credit to require the presentation of documents that on
their face appear to satisfy any applicable requirements for drawing under such
Letter of Credit prior to honoring or paying any such draw);

 

(vii)       the solvency of, or any acts or omissions by, any beneficiary of any
Letter of Credit, or any other Person having a role in any transaction or
obligation relating to a Letter of Credit, or the existence, nature, quality,
quantity, condition, value or other characteristic of any property or services
relating to a Letter of Credit;

 

(viii)      any failure by Issuer or any of Issuer's Affiliates to issue any
Letter of Credit in the form requested by Borrowing Agent, unless Agent and
Issuer have each received written notice from Borrowing Agent of such failure
within three (3) Business Days after Issuer shall have furnished Agent and
Borrowing Agent a copy of such Letter of Credit and such error is material and
no drawing has been made thereon prior to receipt of such notice;

 

(ix)         the occurrence of any Material Adverse Effect;

 

(x)          any breach of this Agreement or any Other Document by any party
thereto;

 

(xi)         the occurrence or continuance of an insolvency proceeding with
respect to any Borrower or any Guarantor;

 

(xii)        the fact that a Default or an Event of Default shall have occurred
and be continuing;

 

(xiii)       the fact that the Term shall have expired or this Agreement or the
obligations of Lenders to make Advances have been terminated; and

 

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

 

  -58- 

 

 

2.19       Liability for Acts and Omissions.

 

(a)          As between Borrowers and Issuer, Swing Loan Lender, Agent and
Lenders, each Borrower assumes all risks of the acts and omissions of, or misuse
of the Letters of Credit by, the respective beneficiaries of such Letters of
Credit. In furtherance and not in limitation of the foregoing, Issuer shall not
be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with the
application for an issuance of any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged (even if Issuer or any of its Affiliates shall have been
notified thereof); (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) the
failure of the beneficiary of any such Letter of Credit, or any other party to
which such Letter of Credit may be transferred, to comply fully with any
conditions required in order to draw upon such Letter of Credit or any other
claim of any Borrower against any beneficiary of such Letter of Credit, or any
such transferee, or any dispute between or among any Borrower and any
beneficiary of any Letter of Credit or any such transferee; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Issuer, including any Governmental Acts, and
none of the above shall affect or impair, or prevent the vesting of, any of
Issuer's rights or powers hereunder. Nothing in the preceding sentence shall
relieve Issuer from liability for Issuer's gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final
non-appealable judgment) in connection with actions or omissions described in
such clauses (i) through (viii) of such sentence. In no event shall Issuer or
Issuer's Affiliates be liable to any Borrower for any indirect, consequential,
incidental, punitive, exemplary or special damages or expenses (including
without limitation attorneys' fees), or for any damages resulting from any
change in the value of any property relating to a Letter of Credit.

 

(b)          Without limiting the generality of the foregoing, Issuer and each
of its Affiliates: (i) may rely on any oral or other communication believed in
good faith by Issuer or such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit; (ii) may honor any presentation
if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a
previously dishonored presentation under a Letter of Credit, whether such
dishonor was pursuant to a court order, to settle or compromise any claim of
wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the
same extent as if such presentation had initially been honored, together with
any interest paid by Issuer or its Affiliates; (iv) may honor any drawing that
is payable upon presentation of a statement advising negotiation or payment,
upon receipt of such statement (even if such statement indicates that a draft or
other document is being delivered separately), and shall not be liable for any
failure of any such draft or other document to arrive, or to conform in any way
with the relevant Letter of Credit; (v) may pay any paying or negotiating bank
claiming that it rightfully honored under the laws or practices of the place
where such bank is located; and (vi) may settle or adjust any claim or demand
made on Issuer or its Affiliate in any way related to any order issued at the
applicant's request to an air carrier, a letter of guarantee or of indemnity
issued to a steamship agent or carrier or any document or instrument of like
import (each an "Order") and honor any drawing in connection with any Letter of
Credit that is the subject of such Order, notwithstanding that any drafts or
other documents presented in connection with such Letter of Credit fail to
conform in any way with such Letter of Credit.

 

  -59- 

 

 

(c)          In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Issuer under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good faith and without
gross negligence (as determined by a court of competent jurisdiction in a final
non-appealable judgment), shall not put Issuer under any resulting liability to
any Borrower, Agent or any Lender.

 

2.20       Voluntary and Mandatory Prepayments.

 

(a)          Borrowers may prepay the Revolving Loans at any time in whole or in
part. Borrowers may permanently reduce the Revolving Commitments (with a
corresponding reduction in the Maximum Revolving Advance Amount) at any time;
provided, that (i) Borrowing Agent shall provide at least three (3) Business
Days prior written notice of such reduction, (ii) such reduction shall be in
increments of $4,000,000, (iii) such reduction shall be permanent, and (iv) in
no event shall the Revolving Commitments be reduced below $10,000,000. Borrowers
may voluntarily prepay all or any portion of the Term Loan at any time;
provided, that Borrowers may not use the proceeds of Revolving Advances to
prepay the Term Loan.

 

(b)          Mandatory Prepayment.

 

(i)          Within fifteen (15) Business Days after the delivery to Agent of
audited annual financial statements pursuant to Section 9.7, commencing with the
delivery to Agent of the financial statements for the fiscal year ended December
31, 2018 or, if such financial statements are not delivered to Agent on the date
such statements are required to be delivered pursuant to Section 9.7, within
fifteen (15) Business Days after the date such statements are required to be
delivered to Agent pursuant to Section 9.7, Borrowers shall, if the information
set forth in the related Compliance Certificate demonstrates that the Leverage
Ratio as of the end of such fiscal year is (A) greater than or equal to
2.00:1.00, prepay the outstanding principal amount of the Term Loan in
accordance with clause (c) below in an amount equal to the amount by which
seventy five percent (75%) of the Excess Cash Flow for such fiscal year exceeds
voluntary prepayments of the Term Loan for such fiscal year, or (B) less than
2.00:1.00, prepay the outstanding principal amount of the Term Loan in
accordance with clause (c) below in an amount equal to the amount by which fifty
percent (50%) of the Excess Cash Flow for such fiscal year exceeds voluntary
prepayments of the Term Loan for such fiscal year.

 

(ii)         Promptly upon any voluntary or involuntary disposition (including
as a result of a casualty or condemnation but excluding dispositions under
clauses (a) through (f) of the definition of Permitted Dispositions) by Company
or any of its Subsidiaries, Borrowers shall prepay the outstanding principal
amount of the Obligations in accordance with clause (c) below in an amount equal
to one hundred percent (100%) of the Net Cash Proceeds received by such Person
in connection with such disposition. Nothing contained in this Section 2.20(b)
shall permit Company or any of its Subsidiaries to make a disposition of any
property other than in accordance with Section 7.1.

 

  -60- 

 

 

(iii)        Promptly upon the issuance or incurrence by Company or any of its
Subsidiaries of any Indebtedness (other than Permitted Indebtedness), or upon an
issuance of Equity interests by Company or any of its Subsidiaries (other than
any Excluded Equity Issuance), Borrowers shall prepay the outstanding principal
amount of the Obligations in accordance with clause (c) below in an amount equal
to one hundred percent (100%) of the Net Cash Proceeds received by such Person
in connection therewith. The provisions of this Section 2.20(b) shall not be
deemed to be implied consent to any such issuance, incurrence or sale otherwise
prohibited by the terms and conditions of this Agreement.

 

(iv)        Promptly upon the receipt by Company or any of its Subsidiaries of
any Extraordinary Receipts, Borrowers shall prepay the outstanding principal of
the Obligations in accordance with clause (c) below in an amount equal to one
hundred percent (100%) of the Net Cash Proceeds received by such Person in
connection therewith.

 

(v)         Notwithstanding the foregoing, with respect to Net Cash Proceeds
received by Company or any of its Subsidiaries in connection with a disposition
(including as a result of a casualty or condemnation) that are otherwise
required to be used to prepay the Obligations pursuant to Section 2.20(b)(ii),
up to $50,000 in the aggregate in any fiscal year of the Net Cash Proceeds from
all such dispositions shall not be required to be so used to prepay the
Obligations to the extent that such Net Cash Proceeds are used to replace,
repair or restore properties or assets that were the subject of such disposition
with like assets, or otherwise reinvest in assets used or useful in such
Person's business, provided that, (A) no Default or Event of Default has
occurred and is continuing on the date such Person receives such Net Cash
Proceeds, (B) Borrowing Agent delivers a certificate to Agent within ten (10)
days after such disposition stating that such Net Cash Proceeds shall be used to
so replace, repair or restore properties or assets as provided above within a
period not to exceed one hundred eighty (180) days after the date of receipt of
such Net Cash Proceeds (which certificate shall set forth estimates of the Net
Cash Proceeds to be so expended), (C) such Net Cash Proceeds are deposited and
maintained in a Controlled Account, and (D) upon the earlier of (1) the
expiration of the one hundred eighty (180) day period pursuant to clause (B)
above or (2) the occurrence of a Default or an Event of Default, such Net Cash
Proceeds, if not theretofore so used, shall be used to prepay the Obligations in
accordance with Section 2.20(b)(ii).

 

(c)          Each prepayment pursuant to Section 2.20(b)(i) shall be applied,
first, to the Term Loan, until paid in full, and second, to the Revolving
Advances, until paid in full; provided, that if an Event of Default has occurred
and is continuing and funds are to be applied pursuant to Section 11.5 as
directed by Required Lenders, such payments shall be applied in respect of the
Obligations in accordance with Section 11.5. Each prepayment pursuant to Section
2.20(b)(ii), (iii) and (iv) shall be applied, first, to the Term Loan, until
paid in full, second, to the Revolving Advances, until paid in full (with, if
the Required Revolving Lenders so elect, a corresponding permanent reduction in
the Revolving Commitments), until paid in full, and third, to cash collateralize
the Letters of Credit in an amount equal to one hundred five percent (105%) of
the aggregate undrawn amount of all outstanding Letters of Credit (with, if the
Required Revolving Lenders so elect, a corresponding permanent reduction in the
Revolving Commitments) except that prepayments under Section 2.20(b)(ii) arising
as a result of a disposition of Receivables or Inventory shall, to the extent of
the proceeds of such Receivables or Inventory, be applied first, to the
Revolving Advances (with, if the Required Revolving Lenders so elect, a
corresponding permanent reduction in the Revolving Commitments), until paid in
full, second, to cash collateralize the Letters of Credit in an amount equal to
one hundred five percent (105%) of the aggregate undrawn amount of all
outstanding Letters of Credit (with, if the Required Revolving Lenders so elect,
a corresponding permanent reduction in the Revolving Commitments), and third, to
the Term Loan, until paid in full; provided, that if an Event of Default has
occurred and is continuing and funds are to be applied pursuant to Section 11.5
as directed by Required Lenders, such payments shall be applied in respect of
the Obligations in accordance with Section 11.5.

 

  -61- 

 

 

(d)          Each prepayment applied to the Term Loan under this Section 2.20
shall be applied to reduce scheduled amortization payments of such Term Loan in
the inverse order of their maturities.

 

2.21       Use of Proceeds.

 

(a)          Borrowers shall apply the proceeds of Advances to (i) repay
existing indebtedness, (ii) pay fees and expenses relating to this transaction,
and (iii) provide for its working capital needs (including funding of Capital
Expenditures) and reimburse drawings under Letters of Credit.

 

(b)          Without limiting the generality of Section 2.21(a) above, neither
the Borrowers, the Guarantors nor any other Person which may in the future
become party to this Agreement or the Other Documents as a Borrower or
Guarantor, intends to use nor shall they use any portion of the proceeds of the
Advances, directly or indirectly, for any purpose in violation of Applicable
Law.

 

2.22       Defaulting Lender.

 

(a)          Notwithstanding anything to the contrary contained herein, in the
event any Lender is a Defaulting Lender, all rights and obligations hereunder of
such Defaulting Lender and of the other parties hereto shall be modified to the
extent of the express provisions of this Section 2.22 so long as such Lender is
a Defaulting Lender.

 

(b)          (i) Except as otherwise expressly provided for in this
Section 2.22, Revolving Advances shall be made pro rata from Lenders holding
Revolving Commitments which are not Defaulting Lenders based on their respective
Revolving Commitment Percentages, and no Revolving Commitment Percentage of any
Lender or any pro rata share of any Revolving Advances required to be advanced
by any Lender shall be increased as a result of any Lender being a Defaulting
Lender. Amounts received in respect of principal of any type of Revolving
Advances shall be applied to reduce such type of Revolving Advances of each
Lender (other than any Defaulting Lender) holding a Revolving Commitment in
accordance with their Revolving Commitment Percentages; provided, that, Agent
shall not be obligated to transfer to a Defaulting Lender any payments received
by Agent for Defaulting Lender's benefit, nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder (including any principal,
interest or fees). Amounts payable to a Defaulting Lender shall instead be paid
to or retained by Agent. Agent may hold and, in its discretion, re-lend to a
Borrower the amount of such payments received or retained by it for the account
of such Defaulting Lender.

 

(ii)         Fees pursuant to Section 3.3 hereof shall cease to accrue in favor
of such Defaulting Lender.

 

  -62- 

 

 

(iii)        If any Swing Loans are outstanding or any Letters of Credit (or
drawings under any Letter of Credit for which Issuer has not been reimbursed)
are outstanding or exist at the time any such Lender holding a Revolving
Commitment becomes a Defaulting Lender, then:

 

(A)         Defaulting Lender's Participation Commitment in the outstanding
Swing Loans and of the Maximum Undrawn Amount of all outstanding Letters of
Credit shall be reallocated among Non-Defaulting Lenders holding Revolving
Commitments in proportion to the respective Revolving Commitment Percentages of
such Non-Defaulting Lenders to the extent (but only to the extent) that (x) such
reallocation does not cause the aggregate sum of outstanding Revolving Advances
made by any such Non-Defaulting Lender holding a Revolving Commitment plus such
Lender's reallocated Participation Commitment in the outstanding Swing Loans
plus such Lender's reallocated Participation Commitment in the aggregate Maximum
Undrawn Amount of all outstanding Letters of Credit to exceed the Revolving
Commitment Amount of any such Non-Defaulting Lender, and (y) no Default or Event
of Default has occurred and is continuing at such time;

 

(B)         if the reallocation described in clause (A) above cannot, or can
only partially, be effected, Borrowers shall within one Business Day following
notice by Agent (x) first, prepay any outstanding Swing Loans that cannot be
reallocated, and (y) second, cash collateralize for the benefit of Issuer,
Borrowers' obligations corresponding to such Defaulting Lender's Participation
Commitment in the Maximum Undrawn Amount of all Letters of Credit (after giving
effect to any partial reallocation pursuant to clause (A) above) in accordance
with Section 3.2(b) for so long as such Obligations are outstanding;

 

(C)         if Borrowers cash collateralize any portion of such Defaulting
Lender's Participation Commitment in the Maximum Undrawn Amount of all Letters
of Credit pursuant to clause (B) above, Borrowers shall not be required to pay
any fees to such Defaulting Lender pursuant to Section 3.2(a) with respect to
such Defaulting Lender's Revolving Commitment Percentage of Maximum Undrawn
Amount of all Letters of Credit during the period such Defaulting Lender's
Participation Commitment in the Maximum Undrawn Amount of all Letters of Credit
are cash collateralized;

 

(D)         if Defaulting Lender's Participation Commitment in the Maximum
Undrawn Amount of all Letters of Credit is reallocated pursuant to clause (A)
above, then the fees payable to Lenders holding Revolving Commitments pursuant
to Section 3.2(a) shall be adjusted and reallocated to Non-Defaulting Lenders
holding Revolving Commitments in accordance with such reallocation; and

 

(E)         if all or any portion of such Defaulting Lender's Participation
Commitment in the Maximum Undrawn Amount of all Letters of Credit is neither
reallocated nor cash collateralized pursuant to clauses (A) or (B) above, then,
without prejudice to any rights or remedies of Issuer or any other Lender
hereunder, all Letter of Credit Fees payable under Section 3.2(a) with respect
to such Defaulting Lender's Revolving Commitment Percentage of the Maximum
Undrawn Amount of all Letters of Credit shall be payable to the Issuer (and not
to such Defaulting Lender) until (and then only to the extent that) such
Participation Commitment in the Maximum Undrawn Amount of all Letters of Credit
is reallocated and/or cash collateralized; and

 

  -63- 

 

 

(iv)        so long as any Lender holding a Revolving Commitment is a Defaulting
Lender, Swing Loan Lender shall not be required to fund any Swing Loans and
Issuer shall not be required to issue, amend or increase any Letter of Credit,
unless such Issuer is satisfied that the related exposure and Defaulting
Lender's Participation Commitment in the Maximum Undrawn Amount of all Letters
of Credit and all Swing Loans (after giving effect to any such issuance,
amendment, increase or funding) will be fully allocated to Non-Defaulting
Lenders holding Revolving Commitments and/or cash collateral for such Letters of
Credit will be provided by Borrowers in accordance with clause (A) and (B)
above, and participating interests in any newly made Swing Loan or any newly
issued or increased Letter of Credit shall be allocated among Non-Defaulting
Lenders in a manner consistent with Section 2.22(b)(iii)(A) above (and such
Defaulting Lender shall not participate therein).

 

(c)          A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters relating to
this Agreement and the Other Documents, and all amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall not be deemed to be a Lender, to have any
outstanding Advances or a Revolving Commitment Percentage or Term Loan
Commitment Percentage; provided, that this clause (c) shall not apply to the
vote of a Defaulting Lender in the case of an amendment, waiver or other
modification described in clauses (i) or (ii) of Section 16.2(b).

 

(d)          Other than as expressly set forth in this Section 2.22, the rights
and obligations of a Defaulting Lender (including the obligation to indemnify
Agent) and the other parties hereto shall remain unchanged. Nothing in this
Section 2.22 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

 

(e)          In the event that Agent, Borrowers, Swing Loan Lender and Issuer
agree in writing that a Defaulting Lender has adequately remedied all matters
that caused such Lender to be a Defaulting Lender, then Agent will so notify the
parties hereto, and, if such cured Defaulting Lender is a Lender holding a
Revolving Commitment, then Participation Commitments of Lenders holding
Revolving Commitments (including such cured Defaulting Lender) of the Swing
Loans and Maximum Undrawn Amount of all outstanding Letters of Credit shall be
reallocated to reflect the inclusion of such Lender's Revolving Commitment, and
on such date such Lender shall purchase at par such of the Revolving Advances of
the other Lenders as Agent shall determine may be necessary in order for such
Lender to hold such Revolving Advances in accordance with its Revolving
Commitment Percentage.

 

(f)          If Swing Loan Lender or Issuer has a good faith belief that any
Lender holding a Revolving Commitment has defaulted in fulfilling its
obligations under one or more other agreements in which such Lender commits to
extend credit, Swing Loan Lender shall not be required to fund any Swing Loans
and Issuer shall not be required to issue, amend or increase any Letter of
Credit, unless Swing Loan Lender or Issuer, as the case may be, shall have
entered into arrangements with Borrowers or such Lender, satisfactory to Swing
Loan Lender or Issuer, as the case may be, to defease any risk to it in respect
of such Lender hereunder.

 

  -64- 

 

 

2.23         Payment of Obligations. Agent may charge to Borrowers' Account as a
Revolving Advance or, at the discretion of Swing Loan Lender, as a Swing Loan
(i) all payments with respect to any of the Obligations required hereunder
(including without limitation principal payments, payments of interest, payments
of Letter of Credit Fees and all other fees provided for hereunder and payments
under Sections 16.5 and 16.9) as and when each such payment shall become due and
payable (whether as regularly scheduled, upon or after acceleration, upon
maturity or otherwise), (ii) without limiting the generality of the foregoing
clause (i), (a) all amounts expended by Agent or any Lender pursuant to Sections
4.2 or 4.3 hereof and (b) all expenses which Agent incurs in connection with the
forwarding of Advance proceeds and the establishment and maintenance of any
Controlled Accounts as provided for in Section 4.8(h), and (iii) any sums
expended by Agent or any Lender due to any Credit Party's failure to perform or
comply with its obligations under this Agreement or any Other Document including
any Credit Party's obligations under Sections 3.3, 3.4, 4.4, 4.7, 6.4, 6.6, 6.7
and 6.8 hereof, and all amounts so charged shall be added to the Obligations and
shall be secured by the Collateral. To the extent Revolving Advances are not
actually funded by the other Lenders in respect of any such amounts so charged,
all such amounts so charged shall be deemed to be Revolving Advances made by and
owing to Agent and Agent shall be entitled to all rights (including accrual of
interest) and remedies of a Lender under this Agreement and the Other Documents
with respect to such Revolving Advances.

 

III.         INTEREST AND FEES.

 

3.1         Interest. Interest on Advances shall be payable in arrears on the
first day of each month with respect to Domestic Rate Loans and, with respect to
LIBOR Rate Loans, at the end of each Interest Period, provided further that all
accrued and unpaid interest shall be due and payable at the end of the Term.
Interest charges shall be computed on the actual principal amount of Advances
outstanding during the month at a rate per annum equal to (i) with respect to
Revolving Advances, the applicable Revolving Interest Rate (ii) with respect to
Swing Loans, the Revolving Interest Rate for Domestic Rate Loans and (iii) with
respect to the Term Loan, the applicable Term Loan Rate (as applicable, the
"Contract Rate"). Except as expressly provided otherwise in this Agreement, any
Obligations other than the Advances that are not paid when due shall accrue
interest at the Revolving Interest Rate for Domestic Rate Loans, subject to the
provision of the final sentence of this Section 3.1 regarding the Default Rate.
Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is
increased or decreased, the applicable Contract Rate shall be similarly changed
without notice or demand of any kind by an amount equal to the amount of such
change in the Alternate Base Rate during the time such change or changes remain
in effect. The LIBOR Rate shall be adjusted with respect to LIBOR Rate Loans
without notice or demand of any kind on the effective date of any change in the
Reserve Percentage as of such effective date. Upon and after the occurrence of
an Event of Default, and during the continuation thereof, at the option of Agent
or at the direction of Required Lenders (or, in the case of any Event of Default
under Section 10.7, immediately and automatically upon the occurrence of any
such Event of Default without the requirement of any affirmative action by any
party), the Obligations shall bear interest at the applicable Contract Rate plus
two percent (2%) per annum the "Default Rate").

 

  -65- 

 

 

3.2         Letter of Credit Fees.

 

(a)          Borrowers shall pay (x) to Agent, for the ratable benefit of
Lenders holding Revolving Commitments, fees for each Letter of Credit for the
period from and excluding the date of issuance of same to and including the date
of expiration or termination, equal to the average daily face amount of each
outstanding Letter of Credit multiplied by the Applicable Margin for Revolving
Advances consisting of LIBOR Rate Loans, such fees to be calculated on the basis
of a 360-day year for the actual number of days elapsed and to be payable
quarterly in arrears on the first day of each calendar quarter and on the last
day of the Term, and (y) to Issuer, a fronting fee of one-quarter of one percent
(0.25%) per annum times the average daily face amount of each outstanding Letter
of Credit for the period from and excluding the date of issuance of same to and
including the date of expiration or termination, to be payable quarterly in
arrears on the first day of each calendar quarter and on the last day of the
Term. (all of the foregoing fees, the "Letter of Credit Fees"). In addition,
Borrowers shall pay to Agent, for the benefit of Issuer, any and all
administrative, issuance, amendment, payment and negotiation charges with
respect to Letters of Credit and all fees and expenses as agreed upon by Issuer
and the Borrowing Agent in connection with any Letter of Credit, including in
connection with the opening, amendment or renewal of any such Letter of Credit
and any acceptances created thereunder, all such charges, fees and expenses, if
any, to be payable on demand. All such charges shall be deemed earned in full on
the date when the same are due and payable hereunder and shall not be subject to
rebate or pro-ration upon the termination of this Agreement for any reason. Any
such charge in effect at the time of a particular transaction shall be the
charge for that transaction, notwithstanding any subsequent change in Issuer's
prevailing charges for that type of transaction. Upon and after the occurrence
of an Event of Default, and during the continuation thereof, at the option of
Agent or at the direction of Required Lenders (or, in the case of any Event of
Default under Section 10.7, immediately and automatically upon the occurrence of
any such Event of Default without the requirement of any affirmative action by
any party), the Letter of Credit Fees described in clause (x) of this
Section 3.2(a) shall be increased by an additional two percent (2.0%) per annum.

 

(b)          At any time following the occurrence of an Event of Default, at the
option of Agent or at the direction of Required Lenders (or, in the case of any
Event of Default under Section 10.7, immediately and automatically upon the
occurrence of such Event of Default, without the requirement of any affirmative
action by any party), or upon the expiration of the Term or any other
termination of this Agreement (and also, if applicable, in connection with any
mandatory prepayment under Section 2.20), Borrowers will cause cash to be
deposited and maintained in an account with Agent, as cash collateral, in an
amount equal to one hundred and five percent (105%) of the Maximum Undrawn
Amount of all outstanding Letters of Credit, and each Borrower hereby
irrevocably authorizes Agent, in its discretion, on such Borrower's behalf and
in such Borrower's name, to open such an account and to make and maintain
deposits therein, or in an account opened by such Borrower, in the amounts
required to be made by such Borrower, out of the proceeds of Receivables or
other Collateral or out of any other funds of such Borrower coming into any
Lender's possession at any time. Agent may, in its discretion, invest such cash
collateral (less applicable reserves) in such short-term money-market items as
to which Agent and such Borrower mutually agree (or, in the absence of such
agreement, as Agent may reasonably select) and the net return on such
investments shall be credited to such account and constitute additional cash
collateral, or Agent may (notwithstanding the foregoing) establish the account
provided for under this Section 3.2(b) as a non-interest bearing account and in
such case Agent shall have no obligation (and Borrowers hereby waive any claim)
under Article 9 of the Uniform Commercial Code or under any other Applicable Law
to pay interest on such cash collateral being held by Agent. No Borrower may
withdraw amounts credited to any such account except upon the occurrence of all
of the following: (x) payment and performance in full of all Obligations;
(y) expiration of all Letters of Credit; and (z) termination of this Agreement.
Borrowers hereby assign, pledge and grant to Agent, for its benefit and the
ratable benefit of Issuer, Lenders and each other Secured Party, a continuing
security interest in and to and Lien on any such cash collateral and any right,
title and interest of Borrowers in any deposit account, securities account or
investment account into which such cash collateral may be deposited from time to
time to secure the Obligations, specifically including all Obligations with
respect to any Letters of Credit. Borrowers agree that upon the coming due of
any Reimbursement Obligations (or any other Obligations, including Obligations
for Letter of Credit Fees) with respect to the Letters of Credit, Agent may use
such cash collateral to pay and satisfy such Obligations.

 

  -66- 

 

 

3.3         Facility Fee.

 

If, for any month during the Term, the average daily unpaid balance of the sum
of Revolving Advances (for purposes of this computation, Swing Loans shall be
deemed to be Revolving Advances made by PNC as a Lender) plus Swing Loans plus
the Maximum Undrawn Amount of all outstanding Letters of Credit for each day of
such month does not equal the Maximum Revolving Advance Amount, then Borrowers
shall pay to Agent, for the ratable benefit of Lenders holding the Revolving
Commitments based on their Revolving Commitment Percentages, a fee at a rate
equal to one-half of one percent (0.50%) per annum on the amount by which the
Maximum Revolving Advance Amount exceeds such average daily unpaid balance (the
"Facility Fee"). Such Facility Fee shall be payable to Agent in arrears on the
first day of each calendar quarter with respect to the previous calendar
quarter.

 

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

 

(a)          Borrowers shall pay to Agent promptly at the conclusion of any
collateral evaluation performed by or for the benefit of Agent - namely any
field examination, collateral analysis or other business analysis, the need for
which is to be determined by Agent and which evaluation is undertaken by Agent
or for Agent's benefit - a collateral evaluation fee in an amount equal to
$1,000 (or such other amount customarily charged by Agent to its customers) per
day for each person employed to perform such evaluation, plus a per examination
manager review fee (whether such examination is performed by Agent's employees
or by a third party retained by agent) in the amount of $1,500 (or such other
amount customarily charged by Agent to its customers), plus all costs and
disbursements incurred by Agent in the performance of such examination or
analysis, and further provided that if third parties are retained to perform
such collateral evaluations, either at the request of another Lender or for
extenuating reasons determined by Agent in its sole discretion, then such fees
charged by such third parties plus all costs and disbursements incurred by such
third party, shall be the responsibility of Borrowers and shall not be subject
to the foregoing limits; provided, that so long as no Event of Default shall
have occurred during a calendar year, Borrowers shall not be obligated to
reimburse Agent for more than three (3) field examinations in such calendar
year, except for field examinations conducted in connection with a proposed
Permitted Acquisition (whether or not consummated).

 

  -67- 

 

 

(b)          Borrowers shall pay the amounts required to be paid in the Fee
Letter in the manner and at the times required by the Fee Letter.

 

(c)          All of the fees and out-of-pocket costs and expenses of any
appraisals conducted pursuant to Section 4.7 hereof shall be paid for when due,
in full and without deduction, off-set or counterclaim by Borrowers.

 

3.5         Computation of Interest and Fees. Interest and fees hereunder shall
be computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Contract Rate during such extension.

 

3.6         Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under Applicable
Law. In the event interest and other charges as computed hereunder would
otherwise exceed the highest rate permitted under Applicable Law: (i) the
interest rates hereunder will be reduced to the maximum rate permitted under
Applicable Law; (ii) such excess amount shall be first applied to any unpaid
principal balance owed by Borrowers; and (iii) if the then remaining excess
amount is greater than the previously unpaid principal balance, Lenders shall
promptly refund such excess amount to Borrowers and the provisions hereof shall
be deemed amended to provide for such permissible rate.

 

3.7          Increased Costs. In the event that any Applicable Law or any Change
in Law or compliance by any Lender (for purposes of this Section 3.7, the term
"Lender" shall include Agent, Swing Loan Lender, any Issuer or Lender and any
corporation or bank controlling Agent, Swing Loan Lender, any Lender or Issuer
and the office or branch where Agent, Swing Loan Lender, any Lender or Issuer
(as so defined) makes or maintains any LIBOR Rate Loans) with any request or
directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority, shall:

 

(a)          subject Agent, Swing Loan Lender, any Lender or Issuer to any tax
of any kind whatsoever with respect to this Agreement, any Letter of Credit, any
participation in a Letter of Credit or any LIBOR Rate Loan, or change the basis
of taxation of payments to Agent, Swing Loan Lender, such Lender or Issuer in
respect thereof (except for Indemnified Taxes or Other Taxes covered by
Section 3.10 and the imposition of, or any change in the rate of, any Excluded
Taxes payable by Agent, Swing Loan Lender, such Lender or the Issuer);

 

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

 

  -68- 

 

 

(c)          impose on Agent, Swing Loan Lender, any Lender or Issuer or the
London interbank LIBOR market any other condition, loss or expense (other than
Taxes) affecting this Agreement or any Other Document or any Advance made by any
Lender, or any Letter of Credit or participation therein;

 

and the result of any of the foregoing is to increase the cost to Agent, Swing
Loan Lender, any Lender or Issuer of making, converting to, continuing, renewing
or maintaining its Advances hereunder by an amount that Agent, Swing Loan
Lender, such Lender or Issuer deems to be material or to reduce the amount of
any payment (whether of principal, interest or otherwise) in respect of any of
the Advances by an amount that Agent, Swing Loan Lender or such Lender or Issuer
deems to be material, then, in any case Borrowers shall promptly pay Agent,
Swing Loan Lender, such Lender or Issuer, upon its demand, such additional
amount as will compensate Agent, Swing Loan Lender or such Lender or Issuer for
such additional cost or such reduction, as the case may be, provided that the
foregoing shall not apply to increased costs which are reflected in the LIBOR
Rate, as the case may be. Agent, Swing Loan Lender, such Lender or Issuer shall
certify the amount of such additional cost or reduced amount to Borrowing Agent,
and such certification shall be conclusive absent manifest error.

 

3.8         Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Agent or any Lender shall have determined that:

 

(a)          reasonable means do not exist for ascertaining the LIBOR Rate
applicable pursuant to Section 2.2 hereof for any Interest Period; or

 

(b)          Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank LIBOR market, with respect to
an outstanding LIBOR Rate Loan, a proposed LIBOR Rate Loan, or a proposed
conversion of a Domestic Rate Loan into a LIBOR Rate Loan; or

 

(c)          the making, maintenance or funding of any LIBOR Rate Loan has been
made impracticable or unlawful by compliance by Agent or such Lender in good
faith with any Applicable Law or any interpretation or application thereof by
any Governmental Body or with any request or directive of any such Governmental
Body (whether or not having the force of law), or

 

(d)          the LIBOR Rate will not adequately and fairly reflect the cost to
such Lender of the establishment or maintenance of any LIBOR Rate Loan,

 

then Agent shall give Borrowing Agent prompt written or telephonic notice of
such determination. If such notice is given, (i) any such requested LIBOR Rate
Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify
Agent no later than 1:00 p.m. two (2) Business Days prior to the date of such
proposed borrowing, that its request for such borrowing shall be cancelled or
made as an unaffected type of LIBOR Rate Loan, (ii) any Domestic Rate Loan or
LIBOR Rate Loan which was to have been converted to an affected type of LIBOR
Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 1:00 p.m. two (2) Business
Days prior to the proposed conversion, shall be maintained as an unaffected type
of LIBOR Rate Loan, and (iii) any outstanding affected LIBOR Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent,
no later than 1:00 p.m. two (2) Business Days prior to the last Business Day of
the then current Interest Period applicable to such affected LIBOR Rate Loan,
shall be converted into an unaffected type of LIBOR Rate Loan, on the last
Business Day of the then current Interest Period for such affected LIBOR Rate
Loans (or sooner, if any Lender cannot continue to lawfully maintain such
affected LIBOR Rate Loan). Until such notice has been withdrawn, Lenders shall
have no obligation to make an affected type of LIBOR Rate Loan or maintain
outstanding affected LIBOR Rate Loans and no Borrower shall have the right to
convert a Domestic Rate Loan or an unaffected type of LIBOR Rate Loan into an
affected type of LIBOR Rate Loan.

 

  -69- 

 

 

3.9         Capital Adequacy.

 

(a)          In the event that Agent, Swing Loan Lender or any Lender shall have
determined that any Applicable Law or guideline regarding capital adequacy, or
any Change in Law or any change in the interpretation or administration thereof
by any Governmental Body, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent, Swing Loan
Lender, Issuer or any Lender (for purposes of this Section 3.9, the term
"Lender" shall include Agent, Swing Loan Lender, Issuer or any Lender and any
corporation or bank controlling Agent , Swing Loan Lender or any Lender and the
office or branch where Agent , Swing Loan Lender or any Lender (as so defined)
makes or maintains any LIBOR Rate Loans) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Agent, Swing Loan Lender or any Lender's capital as a
consequence of its obligations hereunder (including the making of any Swing
Loans) to a level below that which Agent , Swing Loan Lender or such Lender
could have achieved but for such adoption, change or compliance (taking into
consideration Agent's, Swing Loan Lender's and each Lender's policies with
respect to capital adequacy) by an amount deemed by Agent, Swing Loan Lender or
any Lender to be material, then, from time to time, Borrowers shall pay upon
demand to Agent , Swing Loan Lender or such Lender such additional amount or
amounts as will compensate Agent , Swing Loan Lender or such Lender for such
reduction. In determining such amount or amounts, Agent, Swing Loan Lender or
such Lender may use any reasonable averaging or attribution methods. The
protection of this Section 3.9 shall be available to Agent, Swing Loan Lender
and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the Applicable Law, rule, regulation, guideline
or condition.

 

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

 

  -70- 

 

 

3.10       Taxes.

 

(a)          Any and all payments by or on account of any Obligations hereunder
or under any Other Document shall be made free and clear of and without
reduction or withholding for any Indemnified Taxes or Other Taxes; provided that
if Borrowers shall be required by Applicable Law to deduct any Indemnified Taxes
(including any Other Taxes) from such payments, then (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
Agent, Swing Loan Lender, Lender, Issuer or Participant, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrowers shall make such deductions and
(iii) Borrowers shall timely pay the full amount deducted to the relevant
Governmental Body in accordance with Applicable Law.

 

(b)          Without limiting the provisions of Section 3.10(a) above, Borrowers
shall timely pay any Other Taxes to the relevant Governmental Body in accordance
with Applicable Law.

 

(c)          Each Borrower shall indemnify Agent, Swing Loan Lender, each
Lender, Issuer and any Participant, within ten (10) days after demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) paid by Agent, Swing Loan Lender, such
Lender, Issuer, or such Participant, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Body. A certificate as to the
amount of such payment or liability delivered to Borrowers by any Lender, Swing
Loan Lender, Participant, or Issuer (with a copy to Agent), or by Agent on its
own behalf or on behalf of Swing Loan Lender, a Lender or Issuer, shall be
conclusive absent manifest error.

 

(d)          As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by any Borrower to a Governmental Body, Borrowers shall deliver to
Agent the original or a certified copy of a receipt issued by such Governmental
Body evidencing such payment, a copy of the return reporting such payment or
other evidence of such payment reasonably satisfactory to Agent.

 

(e)          Any Foreign Lender (which, for purposes of this Section 3.10(e),
includes Swing Loan Lender, any Lender, any Issuer, or any Participant that is
organized under the laws of a jurisdiction other than that in which the relevant
Borrower is a resident for tax purposes) that is entitled to an exemption from
or reduction of withholding tax with respect to payments hereunder or under any
Other Document shall deliver to Borrowers (with a copy to Agent), at the time or
times prescribed by Applicable Law or reasonably requested by Borrowers or
Agent, such properly completed and executed documentation prescribed by
Applicable Law as will permit such payments to be made without withholding or at
a reduced rate of withholding. Notwithstanding anything to the contrary in this
Section 3.10(e), the completion, execution and submission of such documentation
(other than such documentation set forth in Section 3.10(e)(i), (ii), (iii) (iv)
or (v) and in Section 3.10(f)) shall not be required if in the Lender's
reasonable judgment such completion, execution or submission would subject such
Lender to any material unreimbursed cost or expense or would materially
prejudice the legal or commercial position of such Lender or any of its
Affiliates or agents. Notwithstanding the submission of such documentation
claiming a reduced rate of or exemption from U.S. withholding tax, Agent shall
be entitled to withhold United States federal income taxes at the full thirty
percent (30%) withholding rate if in its reasonable judgment it is required to
do so under the due diligence requirements imposed upon a withholding agent
under § 1.1441-7(b) of the United States Income Tax Regulations or other
Applicable Law. Further, Agent is indemnified under § 1.1461-1(e) of the United
States Income Tax Regulations against any claims and demands of any Lender,
Issuer or assignee or participant of a Lender or Issuer for the amount of any
tax it deducts and withholds in accordance with regulations under § 1441 of the
Code. In addition, any Lender, if requested by Borrowers or Agent, shall deliver
such other documentation prescribed by Applicable Law or reasonably requested by
Borrowers or Agent as will enable Borrowers or Agent to determine whether or not
such Lender is subject to backup withholding or information reporting
requirements. Without limiting the generality of the foregoing, in the event
that any Borrower is resident for tax purposes in the United States of America,
any Foreign Lender (or other Lender) shall deliver to Borrowers and Agent (in
such number of copies as shall be requested by the recipient) on or prior to the
date on which such Foreign Lender (or other Lender) becomes a Lender under this
Agreement (and from time to time thereafter upon the request of Borrowers or
Agent, but only if such Foreign Lender (or other Lender) is legally entitled to
do so), whichever of the following is applicable: two (2) duly completed valid
originals of IRS Form W-8BEN claiming eligibility for each of the applicable
benefits of an income tax treaty to which the United States of America is a
party,

 

  -71- 

 

 

(i)          two (2) duly completed valid originals of IRS Form W-8ECI,

 

(ii)         in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a "bank" within
the meaning of section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder"
of Borrowers within the meaning of section 881(c)(3)(B) of the Code, or (C) a
"controlled foreign corporation" described in section 881(c)(3)(C) of the Code
and (y) two duly completed valid originals of IRS Form W-8BEN,

 

(iii)        any other form prescribed by Applicable Law as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
Applicable Law to permit the Borrowers to determine the withholding or deduction
required to be made,

 

(iv)        To the extent that any Lender (including, for purposes of this
Section 3.10, Swing Loan Lender, any Lender, any Issuer, or any Participant) is
a United States person within the meaning of Section 7701(a)(30) of the Code,
such Lender shall submit to Borrowers and Agent two (2) originals of an IRS Form
W-9 or any other form prescribed by Applicable Law demonstrating that such
Lender is not a Foreign Lender (and, in the case of Form W-9, demonstrating that
no U.S. federal backup withholding is required), or

 

(v)         To the extent a Foreign Lender is not the beneficial owner (and the
Borrower is a U.S. resident), executed originals of IRS Form W-8IMY, accompanied
by IRS Form W-8ECI, IRS Form W-8BEN, a certificate meeting the requirements of
Section 3.10(e)(ii), IRS Form W-9, and/or other certification documents from
each beneficial owner, as applicable.

 

  -72- 

 

 

Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify Borrowers and Agent in writing of its
legal inability to do so.

 

(f)          If a payment made to a Lender, Swing Loan Lender, Participant,
Issuer, or Agent under this Agreement or any Other Document would be subject to
U.S. Federal withholding Tax imposed by FATCA if such Person fails to comply
with the applicable reporting requirements of FATCA (including those contained
in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender, Swing
Loan Lender, Participant, Issuer, or Agent shall deliver to the Agent (in the
case of Swing Loan Lender, a Lender, Participant or Issuer) and Borrowers (A) a
certification signed by the chief financial officer, principal accounting
officer, treasurer or controller of such Person, and (B) other documentation
reasonably requested by Agent or any Borrower sufficient for Agent and Borrowers
to comply with their obligations under FATCA and to determine that Swing Loan
Lender, such Lender, Participant, Issuer, or Agent has complied with such
applicable reporting requirements.

 

(g)          If Agent, Swing Loan Lender, a Lender, a Participant or Issuer
determines, in its sole discretion, that it has received a refund of any
Indemnified Taxes or Other Taxes as to which it has been indemnified by
Borrowers or with respect to which Borrowers have paid additional amounts
pursuant to this Section, it shall pay to Borrowers an amount equal to such
refund (but only to the extent of indemnity payments made, or additional amounts
paid, by Borrowers under this Section with respect to the Indemnified Taxes or
Other Taxes giving rise to such refund); net of all out-of-pocket expenses of
the Agent, Swing Loan Lender, such Lender, Participant, or the Issuer, as the
case may be, and without interest (other than any interest paid by the relevant
Governmental Body with respect to such refund), provided that Borrowers, upon
the request of Agent, Swing Loan Lender, such Lender, Participant, or Issuer,
agrees to repay the amount paid over to Borrowers (plus any penalties, interest
or other charges imposed by the relevant Governmental Body) to Agent, Swing Loan
Lender, such Lender, Participant or the Issuer in the event Agent, Swing Loan
Lender, such Lender, Participant or the Issuer is required to repay such refund
to such Governmental Body. This Section shall not be construed to require Agent,
Swing Loan Lender, any Lender, Participant, or Issuer to make available its tax
returns (or any other information relating to its taxes that it deems
confidential) to Borrowers or any other Person.

 

3.11       Replacement of Lenders. If any Lender (an "Affected Lender")
(a) makes demand upon Borrowers for (or if Borrowers are otherwise required to
pay) amounts pursuant to Section 3.7, 3.9 or 3.10 hereof, (b) is unable to make
or maintain LIBOR Rate Loans as a result of a condition described in
Section 2.2(h) hereof, (c) is a Defaulting Lender, or (d) denies any consent
requested by the Agent pursuant to Section 16.2(b) hereof, Borrowers may, within
ninety (90) days of receipt of such demand, notice (or the occurrence of such
other event causing Borrowers to be required to pay such compensation or causing
Section 2.2(h) hereof to be applicable), or such Lender becoming a Defaulting
Lender or denial of a request by Agent pursuant to Section 16.2(b) hereof, as
the case may be, by notice in writing to the Agent and such Affected Lender
(i) request the Affected Lender to cooperate with Borrowers in obtaining a
replacement Lender satisfactory to Agent and Borrowers (the "Replacement
Lender"); (ii) request the non-Affected Lenders to acquire and assume all of the
Affected Lender's Advances and its Revolving Commitment Percentage and/or Term
Loan Commitment Percentages, as applicable, as provided herein, but none of such
Lenders shall be under any obligation to do so; or (iii) propose a Replacement
Lender subject to approval by Agent in its good faith business judgment. If any
satisfactory Replacement Lender shall be obtained, and/or if any one or more of
the non-Affected Lenders shall agree to acquire and assume all of the Affected
Lender's Advances and its Revolving Commitment Percentage and/or Term Loan
Commitment Percentages, as applicable, then such Affected Lender shall assign,
in accordance with Section 16.3 hereof, all of its Advances and its Revolving
Commitment Percentage and/or Term Loan Commitment Percentages, as applicable,
and other rights and obligations under this Loan Agreement and the Other
Documents to such Replacement Lender or non-Affected Lenders, as the case may
be, in exchange for payment of the principal amount so assigned and all interest
and fees accrued on the amount so assigned, plus all other Obligations then due
and payable to the Affected Lender.]

 

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IV.          COLLATERAL: GENERAL TERMS

 

4.1         Security Interest in the Collateral. To secure the prompt payment
and performance to Agent, Issuer, Swing Loan Lender and each Lender (and each
other holder of any Obligations) of the Obligations, each Credit Party (except
for the Mexican Credit Parties, and the stockholders of the Mexican Credit
Parties with respect to the Equity Interests of any Mexican Credit Party, each
of which will grant their security interests to Agent for its benefit and for
the benefit of Lenders pursuant to the Mexican Security Documents) hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Secured Party, a continuing security interest in and to and Lien on all
of its Collateral, whether now owned or existing or hereafter created, acquired
or arising and wheresoever located. Each Credit Party shall mark its books and
records as may be necessary or appropriate to evidence, protect and perfect
Agent's security interest and shall cause its financial statements to reflect
such security interest. Each Credit Party shall provide Agent with written
notice of all commercial tort claims promptly upon the occurrence of any events
giving rise to any such claim(s) (regardless of whether legal proceedings have
yet been commenced), such notice to contain a brief description of the claim(s),
the events out of which such claim(s) arose and the parties against which such
claims may be asserted and, if applicable in any case where legal proceedings
regarding such claim(s) have been commenced, the case title together with the
applicable court and docket number. Upon delivery of each such notice, such
Credit Party shall be deemed to thereby grant to Agent a security interest and
lien in and to such commercial tort claims described therein and all proceeds
thereof. Each Credit Party shall provide Agent with written notice promptly upon
becoming the beneficiary under any letter of credit or otherwise obtaining any
right, title or interest in any letter of credit rights, and at Agent's request
shall take such actions as Agent may reasonably request for the perfection of
Agent's security interest therein subject to Section 4.2.

 

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4.2         Perfection of Security Interest. Each Credit Party shall take all
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in and Lien on the Collateral or to enable Agent to
protect, exercise or enforce its rights hereunder and in the Collateral,
including, but not limited to, (i) immediately discharging all Liens other than
Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering
to Agent, endorsements of, instruments of assignment as Agent may specify with
respect to, and stamping or marking in such manner as Agent may specify, any and
all chattel paper, instruments, letters of credits and advices thereof and
documents evidencing or forming a part of the Collateral, (iv) entering into
warehousing, customs brokers and freight agreements and other custodial
arrangements satisfactory to Agent, and (v) executing and delivering financing
statements, control agreements, instruments of pledge, mortgages, notices and
assignments, in each case in form and substance satisfactory to Agent, relating
to the creation, validity, perfection, maintenance or continuation of Agent's
security interest and Lien under the Uniform Commercial Code or other Applicable
Law. By its signature hereto, each Credit Party hereby authorizes Agent to file
against such Credit Party, one or more financing, continuation or amendment
statements pursuant to the Uniform Commercial Code in form and substance
satisfactory to Agent (which statements may have a description of collateral
which is broader than that set forth herein, including without limitation a
description of Collateral as "all assets" and/or "all personal property" of any
Credit Party). All charges, expenses and fees Agent may incur in doing any of
the foregoing, and any local taxes relating thereto, shall be charged to
Borrowers' Account as a Revolving Advance of a Domestic Rate Loan and added to
the Obligations. Notwithstanding the foregoing, unless an Event of Default has
occurred and is continuing, the Credit Parties shall not be obligated to
(a) perfect a security interest in any Excluded Deposit Account, (b) motor
vehicles and other assets subject to certificates of title with an aggregate
fair market value not to exceed $50,000, (c) letter of credit rights (other than
those that constitute supporting obligations as to other Collateral) with a
value of less than $50,000, (d) obtain a Lien Waiver Agreement or enter into a
warehouse agreement, freight agreement or other custodial agreement, with
respect to Collateral in the possession or control of a consignee, bailee,
warehouseman, agent or processor that does not have an aggregate value in excess
of $50,000 at any time (provided that if any Collateral with an aggregate value
in excess of $50,000 is at any time in the possession or control of any
warehouse, bailee, agent or processor, the Borrowers shall, upon the request of
Agent, use commercially reasonable efforts to obtain such Person's written
acknowledgement in form and substance reasonably satisfactory to Agent),
(e) deliver to Agent possession of any items of Collateral with a value of less
than $50,000, or (f) deliver a Mortgage on Real Property acquired after the
Closing Date with a fair market value of less than $50,000.

 

4.3         Preservation of Collateral. Following the occurrence of an Event of
Default and in addition to the rights and remedies set forth in Section 11.1
hereof, Agent: (a) may at any time take such steps as Agent deems necessary to
protect Agent's interest in and to preserve the Collateral, including the hiring
of security guards or the placing of other security protection measures as Agent
may deem appropriate; (b) may employ and maintain at any of any Credit Party's
premises a custodian who shall have full authority to do all acts necessary to
protect Agent's interests in the Collateral; (c) may lease warehouse facilities
to which Agent may move all or part of the Collateral; (d) may use any Credit
Party's owned or leased lifts, hoists, trucks and other facilities or equipment
for handling or removing the Collateral; and (e) shall have, and is hereby
granted, a right of ingress and egress to the places where the Collateral is
located, and may proceed over and through any of Credit Parties' owned or leased
property. Each Credit Party shall cooperate fully with all of Agent's efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
Agent may direct. All of Agent's expenses of preserving the Collateral,
including any expenses relating to the bonding of a custodian, shall be charged
to Borrowers' Account as a Revolving Advance maintained as a Domestic Rate Loan
and added to the Obligations.

 

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4.4         Ownership and Location of Collateral.

 

(a)          With respect to the Collateral, at the time the Collateral becomes
subject to Agent's security interest: (i) each Credit Party shall be the sole
owner of or have rights or an interest in, and be fully authorized and able to
sell, transfer, pledge and/or grant a first priority security interest in each
and every item of its respective Collateral to Agent, subject to Permitted
Encumbrances; and, except for Permitted Encumbrances the Collateral shall be
free and clear of all Liens whatsoever; (ii) each document and agreement
executed by each Credit Party or delivered to Agent or any Lender in connection
with this Agreement shall be true and correct in all respects; (iii) all
signatures and endorsements of each Credit Party that appear on such documents
and agreements shall be genuine and each Credit Party shall have full capacity
to execute same; and (iv) each Credit Party's Equipment and Inventory shall be
located as set forth on Schedule 4.4, or at such other locations as a Credit
Party may from time to time notify Agent.

 

(b)          Schedule 4.4(b) hereto sets forth a correct and complete list as of
the Closing Date of (A) each place of business of each Credit Party, (B) the
chief executive office of each Credit Party; (C) the location of any Inventory
or Equipment of a Credit Party, and (D) the location, by state and street
address, of all Real Property owned or leased by each Credit Party, identifying
which properties are owned and which are leased, together with the names and
addresses of any landlords.

 

4.5         Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. Each Credit Party shall defend Agent's interests in the Collateral
against any and all Persons whatsoever. At any time following demand by Agent
for payment of all Obligations after the occurrence and during the continuance
of an Event of Default, Agent shall have the right to take possession of the
indicia of the Collateral and the Collateral in whatever physical form
contained, including: labels, stationery, documents, instruments and advertising
materials. If Agent exercises this right to take possession of the Collateral,
each Credit Party shall, upon demand, assemble it in a manner reasonably
requested by Agent and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other Applicable Law. If an
Event of Default has occurred and is continuing, at Agent's request, each Credit
Party shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehousers or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent's order and if they shall come into any
Credit Party's possession, they, and each of them, shall be held by such Credit
Party in trust as Agent's trustee, and such Credit Party will immediately
deliver them to Agent in their original form together with any necessary
endorsement.

 

4.6         Inspection of Premises. At all reasonable times and from time to
time, Agent shall have full access to and the right to audit, check, inspect and
make abstracts and copies from each Credit Party's books, records, audits,
correspondence and all other papers relating to the Collateral and the operation
of each Credit Party's business. Agent and its agents may enter upon any
premises of any Credit Party upon reasonable notice at any time during business
hours, for the purpose of inspecting the Collateral and any and all records
pertaining thereto and the operation of such Credit Party's business. Borrowers'
obligation to pay fees to Agent in respect of collateral evaluations provided
for under this Section 4.6 shall be limited to the extent set forth in Section
3.3(c).

 

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4.7         Appraisals. Agent may, in its sole discretion, exercised in a
commercially reasonable manner, at any time after the Closing Date and from time
to time, engage the services of an independent appraisal firm or firms of
reputable standing, satisfactory to Agent, for the purpose of appraising Credit
Parties' assets. Absent the occurrence and continuance of an Event of Default at
such time, Agent shall consult with Company as to the identity of any such firm.
Borrowers shall reimburse Agent for the costs, expenses and charges incurred by
Agent in respect of any appraisal; provided, that so long as no Event of Default
shall have occurred during a calendar year, Borrowers shall not be obligated to
reimburse Agent for more than two (2) appraisals of the Inventory in such
calendar year, except for appraisals conducted in connection with a proposed
Permitted Acquisition (whether or not consummated).

 

4.8         Receivables; Deposit Accounts and Securities Accounts.

 

(a)          Each of the Receivables shall be a bona fide and valid account
representing a bona fide indebtedness incurred by the Customer therein named,
for a fixed sum as set forth in the invoice relating thereto (provided
immaterial or unintentional invoice errors shall not be deemed to be a breach
hereof) with respect to an absolute sale or lease and delivery of goods upon
stated terms of a Credit Party, or work, labor or services theretofore rendered
by a Credit Party as of the date each Receivable is created. Same shall be due
and owing in accordance with the applicable Credit Party's terms of sale with
the Customer, without dispute, setoff or counterclaim except as may be stated on
the accounts receivable schedules delivered by Credit Parties to Agent.

 

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

 

(c)          Each Credit Party's chief executive office is located as set forth
on Schedule 4.4(b). Until written notice is given to Agent by Borrowing Agent of
any other office at which any Credit Party keeps its records pertaining to
Receivables, all such records shall be kept at such executive office.

 

(d)          Credit Parties shall instruct their Customers to deliver all
remittances upon Receivables (whether paid by check or by wire transfer of
funds) to such Collection Accounts (and any associated lockboxes) as
contemplated by Section 4.8(h). Notwithstanding the foregoing, to the extent any
Credit Party directly receives any remittances upon Receivables, such Credit
Party shall, as soon as possible and in any event no later than one (1) Business
Day after the receipt thereof (i) in the case of remittances paid by check,
deposit all such remittances in their original form (after supplying any
necessary endorsements) and (ii) in the case of remittances paid by wire
transfer of funds, transfer all such remittances, in each case, into such
Collection Accounts.

 

  -77- 

 

 

(e)          [Reserved].

 

(f)          Agent shall have the right to receive, endorse, assign and/or
deliver in the name of Agent or any Credit Party any and all checks, drafts and
other instruments for the payment of money relating to the Receivables, and each
Credit Party hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Each Credit Party hereby constitutes Agent or Agent's
designee as such Credit Party's attorney with power (i) at any time: (A) to
endorse such Credit Party's name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment or Collateral; (B) to send
verifications of Receivables to any Customer; (C) to sign such Credit Party's
name on all financing statements or any other documents or instruments deemed
necessary or appropriate by Agent to preserve, protect, or perfect Agent's
interest in the Collateral and to file same; and (D) to receive, open and
dispose of all mail addressed to any Credit Party at any post office box/lockbox
maintained by Agent for Credit Parties or at any other business premises of
Agent; and (ii) at any time following the occurrence and during the continuance
of an Event of Default: (A) to sign such Credit Party's name on any invoice or
bill of lading relating to any of the Receivables, drafts against Customers,
assignments and verifications of Receivables, (B) to demand payment of the
Receivables; (C) to enforce payment of the Receivables by legal proceedings or
otherwise; (D) to exercise all of such Credit Party's rights and remedies with
respect to the collection of the Receivables and any other Collateral; (E) to
sue upon or otherwise collect, extend the time of payment of, settle, adjust,
compromise, extend or renew the Receivables; (F) to settle, adjust or compromise
any legal proceedings brought to collect Receivables; (G) to prepare, file and
sign such Credit Party's name on a proof of claim in bankruptcy or similar
document against any Customer; (H) to prepare, file and sign such Credit Party's
name on any notice of Lien, assignment or satisfaction of Lien or similar
document in connection with the Receivables; (I) to accept the return of goods
represented by any of the Receivables; (J) to change the address for delivery of
mail addressed to any Credit Party to such address as Agent may designate; and
(K) to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliciously or with gross (not mere) negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final non-appealable
judgment); this power being coupled with an interest is irrevocable while any of
the Obligations remain unpaid.

 

(g)          Neither Agent nor any Lender shall, under any circumstances or in
any event whatsoever, have any liability for any error or omission or delay of
any kind occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof, or for any damage
resulting therefrom.

 

  -78- 

 

 

(h)          Credit Parties shall (i) establish and maintain their primary
depository and treasury management relationships and all Collection Accounts
with PNC (or, with respect to Flexo Universal, at such other financial
institution reasonably acceptable to PNC) and (ii) deposit or cause to be
deposited promptly, and in any event no later than the first Business Day after
the date of receipt thereof, all of their collections and proceeds of Collateral
into a Collection Account of a Credit Party (or into a lockbox from which
collections received therein are deposited into a Collection Account of a Credit
Party); provided, that, in lieu of the foregoing requirements in respect of
Flexo Universal, collections and proceeds of Collateral received by Flexo
Universal shall be subject to the requirements and limitations set forth in
Section 6.14(a). Each Collection Account and each other deposit or securities
account of a Credit Party (each such Collection Account, deposit account or
securities account, other than an Excluded Deposit Account, a "Controlled
Account") shall be subject to a deposit account control agreement with the
applicable bank, financial or securities intermediary (each, a "Controlled
Account Bank") in form and substance reasonably satisfactory to Agent and shall
provide (unless Agent otherwise agrees), among other things, that (A) the
applicable Controlled Account Bank will comply with any instructions originated
by Agent directing the disposition of the funds in such Controlled Account
without further consent by the applicable Credit Party, (B) the applicable
Controlled Account Bank waives, subordinates, or agrees not to exercise any
rights of setoff or recoupment or any other claim against the applicable
Controlled Account other than for payment of its service fees and other charges
directly related to the administration of such Controlled Account and for
returned checks or other items of payment, and (C) with respect to each
Collection Account, the applicable Controlled Account Bank will forward by daily
sweep all amounts in the applicable Collection Account to the appropriate
account of Agent, and with respect to each Controlled Account (other than a
Collection Account), the applicable Controlled Account Bank will, at the request
of Agent after the occurrence and during the continuance of an Event of Default,
remit funds in such Controlled Account as directed by Agent. Agent shall apply
all funds received by it from the Controlled Accounts to the Revolving Advances;
provided, that if an Event of Default has occurred and is continuing and funds
are to be applied pursuant to Section 11.5, such funds are to be applied in
respect of the obligations in accordance with Section 11.5 to the satisfaction
of the Obligations (including the cash collateralization of the Letters of
Credit) in the manner provided in this Agreement; provided further that, in the
absence of any Event of Default, Agent shall apply all such funds first to the
prepayment of the principal amount of the Swing Loans, if any, and then to the
Revolving Advances. Without limiting the foregoing, Credit Parties shall close
their depository accounts and terminate their treasury management services with
BMO Harris Bank, N.A. and its affiliates within ninety (90) days following the
Closing Date (or such later date agreed to by Agent in its sole discretion).

 

(i)          No Credit Party will, without Agent's consent, compromise or adjust
any Receivables (or extend the time for payment thereof) or accept any material
returns of merchandise or grant any additional discounts, allowances or credits
thereon except for those compromises, adjustments, returns, discounts, credits
and allowances as have been heretofore customary in the Ordinary Course of
Business of such Credit Party.

 

(j)          All deposit accounts, securities accounts and investment accounts
of each Credit Party and its Subsidiaries as of the Closing Date are set forth
on Schedule 4.8(j). No Credit Party shall open any new deposit account,
securities account or investment account unless (i) Borrowers shall have given
at least thirty (30) days prior written notice to Agent and (ii) if such account
is to be maintained with a bank, depository institution or securities
intermediary that is not Agent, such bank, depository institution or securities
intermediary, each applicable Credit Party and Agent shall first have entered
into an account control agreement in form and substance satisfactory to Agent
sufficient to give Agent "control" (for purposes of Articles 8 and 9 of the
Uniform Commercial Code) over such account. Notwithstanding anything herein to
the contrary, this Section 4.8(j) shall not apply to Excluded Deposit Accounts.

 

  -79- 

 

 

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

 

4.10       Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved,
except where the failure to do so would not have a Material Adverse Effect. No
Credit Party shall use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation except to the extent such
violations would not have a Material Adverse Effect.

 

4.11       Exculpation of Liability. Nothing herein contained shall be construed
to constitute Agent or any Lender as any Credit Party's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof unless
caused maliciously or with gross (not mere) negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final non-appealable
judgment). Neither Agent nor any Lender, whether by anything herein or in any
assignment or otherwise, assume any of any Credit Party's obligations under any
contract or agreement assigned to Agent or such Lender, and neither Agent nor
any Lender shall be responsible in any way for the performance by any Credit
Party of any of the terms and conditions thereof.

 

V.REPRESENTATIONS AND WARRANTIES.

 

Each Credit Party represents and warrants as follows:

 

5.1         Authority. Each Credit Party has full power, authority and legal
right to enter into this Agreement and the Other Documents to which it is a
party and to perform all its respective Obligations hereunder and thereunder.
This Agreement and the Other Documents to which it is a party have been duly
executed and delivered by each Credit Party, and this Agreement and the Other
Documents to which it is a party constitute the legal, valid and binding
obligation of such Credit Party enforceable in accordance with their terms,
except as such enforceability may be limited by any applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally.
The execution, delivery and performance of this Agreement and of the Other
Documents to which it is a party (a) are within such Credit Party's corporate or
company powers, as applicable, have been duly authorized by all necessary
corporate or company action, as applicable, are not in contravention of law or
the terms of such Credit Party's Organizational Documents or to the conduct of
such Credit Party's business or of any Material Contract or undertaking to which
such Credit Party is a party or by which such Credit Party is bound, including
the Shareholder Subordinated Loan Documents, (b) will not conflict with or
violate any law or regulation, or any judgment, order or decree of any
Governmental Body, except to the extent such conflict or violation could
reasonably be expected to result in a Material Adverse Effect, (c) will not
require the Consent of any Governmental Body, any party to a Material Contract
or any other Person, except those Consents set forth on Schedule 5.1 hereto, all
of which will have been duly obtained, made or compiled prior to the Closing
Date and which are in full force and effect, except to the extent the failure to
obtain such Consent could reasonably be expected to result in a Material Adverse
Effect, and (d) will not conflict with, nor result in any breach in any of the
provisions of or constitute a default under or result in the creation of any
Lien except Permitted Encumbrances upon any asset of such Credit Party under the
provisions of any agreement, instrument, or other document to which such Credit
Party is a party or by which it or its property is a party or by which it may be
bound, including the Shareholder Subordinated Loan Documents.

 

  -80- 

 

 

5.2         Formation and Qualification.

 

(a)          Each Credit Party is duly incorporated or formed, as applicable,
and in good standing under the laws of the state listed on Schedule 5.2(a) and
is qualified to do business and is in good standing in the states listed on
Schedule 5.2(a) which constitute all states in which qualification and good
standing are necessary for such Credit Party to conduct its business and own its
property and where the failure to so qualify could reasonably be expected to
have a Material Adverse Effect. Each Credit Party has delivered to Agent true
and complete copies of its Organizational Documents as of the Closing Date and
will promptly notify Agent of any amendment or changes thereto.

 

(b)          The only Subsidiaries of Company and each Credit Party are listed
on Schedule 5.2(b).

 

5.3         Survival of Representations and Warranties. All representations and
warranties of such Credit Party contained in this Agreement and the Other
Documents to which it is a party shall be true and correct in all material
respects (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof) at the time of such Credit Party's execution of
this Agreement and the Other Documents to which it is a party and true and
correct in all in all material respects (except that such materiality qualifier
shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) as of the time of any
request for an Advance (except to the extent such representations and warranties
expressly relate to an earlier date, in which case they shall be true and
correct in all material respects (except that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) as of such earlier
date).

 

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

 

  -81- 

 

 

5.5         Financial Statements; No Material Adverse Effect.

 

(a)          The pro forma balance sheet of Borrowers on a Consolidated Basis
(the "Pro Forma Balance Sheet") furnished to Agent on the Closing Date reflects
the consummation of the transactions contemplated by the Shareholder
Subordinated Loan Documents and under this Agreement (collectively, the
"Transactions") and is accurate, complete and correct and fairly reflects the
financial condition of Borrowers on a Consolidated Basis as of the Closing Date
after giving effect to the Transactions, and has been prepared in accordance
with GAAP, consistently applied. The Pro Forma Balance Sheet has been certified
as accurate, complete and correct in all material respects by the President of
Borrowing Agent. All financial statements referred to in this subsection 5.5(a),
including the related schedules and notes thereto, have been prepared in
accordance with GAAP, except as may be disclosed in such financial statements.

 

(b)          The twelve (12) month cash flow and balance sheet projections of
Borrowers on a Consolidated Basis, copies of which are annexed hereto as Exhibit
5.5(b) (the "Projections") were prepared by the Chief Financial Officer of
Company, are based on underlying assumptions which provide a reasonable basis
for the projections contained therein and reflect Borrowers' judgment based on
present circumstances of the most likely set of conditions and course of action
for the projected period. The cash flow Projections together with the Pro Forma
Balance Sheet are referred to as the "Pro Forma Financial Statements".

 

(c)          The consolidated and consolidating balance sheets of Company and
its Subsidiaries, and such other Persons described therein, as of December 31,
2016, and the related statements of income, changes in stockholder's equity, and
changes in cash flow for the period ended on such date, all accompanied by
reports thereon containing opinions without qualification by independent
certified public accountants, copies of which have been delivered to Agent, have
been prepared in accordance with GAAP, consistently applied (except for changes
in application to which such accountants concur and present fairly the financial
position of Company and its Subsidiaries at such date and the results of their
operations for such period.

 

(d)          Since December 31, 2016, there has not occurred any event,
condition or state of facts which has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.

 

5.6         Entity Names. No Credit Party has been known by any other company or
corporate name, as applicable, in the past five (5) years and does not provided
services or sell Inventory under any other name except as set forth on Schedule
5.6, nor has any Credit Party been the surviving corporation or company, as
applicable, of a merger or consolidation or acquired all or substantially all of
the assets of any Person or a business of a Person during the preceding five (5)
years.

 

5.7         O.S.H.A. Environmental Compliance; Flood Insurance.

 

(a)          Except as set forth on Schedule 5.7 hereto, each Credit Party is in
compliance with, and its facilities, business, assets, property, leaseholds,
Real Property and Equipment are in compliance with the Federal Occupational
Safety and Health Act, and Environmental Laws and there are no outstanding
citations, notices or orders of non-compliance issued to any Credit Party or
relating to its business, assets, property, leaseholds or Equipment under any
such laws, rules or regulations.

 

  -82- 

 

 

(b)          Except as set forth on Schedule 5.7 hereto, each Credit Party has
been issued all required federal, state and local licenses, certificates or
permits (collectively, "Approvals") relating to all applicable Environmental
Laws and all such Approvals are current and in full force and effect.

 

(c)          Except as set forth on Schedule 5.7: (i) there have been no
releases, spills, discharges, leaks or disposal (collectively referred to as
"Releases") of Hazardous Materials at, upon, under or migrating from or onto any
Real Property owned, leased or occupied by any Credit Party, except for those
Releases which are in full compliance with Environmental Laws; (ii) there are no
underground storage tanks or polychlorinated biphenyls on any Real Property
owned, leased or occupied by any Credit Party, except for such underground
storage tanks or polychlorinated biphenyls that are present in compliance with
Environmental Laws; (iii) the Real Property including any premises owned, leased
or occupied by any Credit Party has never been used by any Credit Party to
dispose of Hazardous Materials, except as authorized by Environmental Laws; and
(iv) no Hazardous Materials are managed by any Credit Party on any Real Property
including any premises owned, leased or occupied by any Credit Party, excepting
such quantities as are managed in accordance with all applicable manufacturer's
instructions and compliance with Environmental Laws and as are necessary for the
operation of the commercial business of any Credit Party or of its tenants.

 

(d)          All Real Property owned by Credit Parties is insured pursuant to
policies and other bonds which are valid and in full force and effect and which
provide adequate coverage from reputable and financially sound insurers in
amounts sufficient to insure the assets and risks of each such Credit Party in
accordance with prudent business practice in the industry of such Credit Party.
Each Credit Party has taken all actions required under the Flood Laws and/or
requested by Agent to assist in ensuring that each Lender is in compliance with
the Flood Laws applicable to the Collateral, including, but not limited to,
providing Agent with the address and/or GPS coordinates of each structure
located upon any Real Property that will be subject to a Mortgage in favor of
Agent, for the benefit of Lenders, and, to the extent required, obtaining flood
insurance for such property, structures and contents prior to such property,
structures and contents becoming Collateral.

 

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

 

(a)          (i) After giving effect to the Transactions, each Credit Party is
solvent, able to pay its debts as they mature, has capital sufficient to carry
on its business and all businesses in which it is about to engage, (ii) as of
the Closing Date, the fair present saleable value of its assets, calculated on a
going concern basis, is in excess of the amount of its liabilities, and
(iii) subsequent to the Closing Date, the fair saleable value of its assets
(calculated on a going concern basis) will be in excess of the amount of its
liabilities.

 

(b)          Except as disclosed in Schedule 5.8(b)(i), no Credit Party has any
pending or threatened litigation, arbitration, actions or proceedings in excess
of $100,000. No Credit Party has any outstanding Indebtedness other than
Permitted Indebtedness.

 

  -83- 

 

 

(c)          No Credit Party is in violation of any applicable statute, law,
rule, regulation or ordinance in any respect which could reasonably be expected
to have a Material Adverse Effect, nor is any Credit Party in violation of any
order of any court, Governmental Body or arbitration board or tribunal which
could reasonably be expected to a have a Material Adverse Effect. Each Plan is
in compliance in all material respects with the applicable provisions of ERISA,
the Code and other federal or state laws.

 

(d)          No Credit Party or any member of the Controlled Group maintains or
is required to contribute to any Plan other than those listed on Schedule 5.8(d)
hereto. (i) Each Credit Party and each member of the Controlled Group has met
all applicable minimum funding requirements under Section 302 of ERISA and
Section 412 of the Code in respect of each Plan, and each Plan is in compliance
with Sections 412, 430 and 436 of the Code and Sections 206(g), 302 and 303 of
ERISA, without regard to waivers and variances, to the extent such provisions
apply to such Plan; (ii) each Plan which is intended to be a qualified plan
under Section 401(a) of the Code as currently in effect has received a favorable
determination letter from the Internal Revenue Service as to its qualified
status under Section 401(a) of the Code and that the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code or an
application for such a determination is currently being processed by the
Internal Revenue Service or it is a prototype or volume submitted Plan which
language has been pre-approved by the Internal Revenue Service on which the Plan
is entitled to rely; (iii) neither any Credit Party nor any member of the
Controlled Group has incurred any liability to the PBGC other than for the
payment of premiums, and there are no premium payments which have become due
which are unpaid; (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any Plan; (v) the
current value of the assets of each Pension Benefit Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and neither any
Credit Party nor any member of the Controlled Group knows of any facts or
circumstances which would materially change the value of such assets and accrued
benefits and other liabilities; (vi) neither any Credit Party nor any member of
the Controlled Group has breached any of the responsibilities, obligations or
duties imposed on it by ERISA with respect to any Plan; (vii) neither any Credit
Party nor any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4971, 4972 or 4980B of the Code, and no fact
exists which could give rise to any such liability; (viii) neither any Credit
Party nor any member of the Controlled Group nor any fiduciary of, nor any
trustee to, any Plan, has engaged in a "prohibited transaction" described in
Section 406 of the ERISA or Section 4975 of the Code nor taken any action which
would constitute or result in a Termination Event with respect to any such Plan
which is subject to ERISA; (ix) no Termination Event has occurred or is
reasonably expected to occur; (x) there exists no event described in
Section 4043 of ERISA that would require providing notice to the PBGC, for which
the thirty (30) day notice period has not been waived; (xi) neither any Credit
Party nor any member of the Controlled Group has engaged within the preceding
five (5) years in a transaction that could be subject to Section 4069 or 4212(c)
of ERISA; (xii) neither any Credit Party nor any member of the Controlled Group
maintains or is required to contribute to any Plan which provides health,
accident or life insurance benefits to former employees, their spouses or
dependents, other than in accordance with Section 4980B of the Code;
(xiii) neither any Credit Party nor any member of the Controlled Group has
withdrawn, completely or partially, within the meaning of Section 4203 or 4205
of ERISA, from any Multiemployer Plan within the preceding five (5) years so as
to incur liability under the Multiemployer Pension Plan Amendments Act of 1980
and there exists no fact which would reasonably be expected to result in any
such liability; and (xiv) no Plan fiduciary (as defined in Section 3(21) of
ERISA) has any liability for breach of fiduciary duty or for any failure in
connection with the administration or investment of the assets of a Plan.

 

  -84- 

 

 

5.9         Patents, Trademarks, Copyrights and Licenses. All Intellectual
Property owned or utilized by any Credit Party (other than off-the-shelf
Intellectual Property that is generally commercially available which a Credit
Party has a license to use): (i) as of the Closing Date is set forth on Schedule
5.9; (ii) if owned by a Credit Party, is valid and has been duly registered or
filed with all appropriate Governmental Bodies; and (iii) constitutes all of the
intellectual property rights which are necessary for the operation of its
business. There is no objection to, pending challenge to the validity of, or
proceeding by any Governmental Body to suspend, revoke, terminate or adversely
modify, any such Intellectual Property and no Credit Party is aware of any
grounds for any challenge or proceedings, except as set forth in Schedule 5.9
hereto. All Intellectual Property owned or held by any Credit Party consists of
original material or property developed by such Credit Party or to the knowledge
of such Credit Party was lawfully acquired by such Credit Party from the proper
and lawful owner thereof. Each of such items has been maintained so as to
preserve the value thereof from the date of creation or acquisition thereof
unless a Credit Party has determined that an item is no longer necessary for its
business.

 

5.10       Licenses and Permits. Except as set forth in Schedule 5.10, each
Credit Party (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state or local law, rule or regulation for the operation of its
business in each jurisdiction wherein it is now conducting or proposes to
conduct business and where the failure to be so in compliance or to procure such
licenses or permits could reasonably be expected to have a Material Adverse
Effect.

 

5.11       Default of Indebtedness. No Default or Event of Default exists as a
result of (i) a Credit Party being in default in the payment of the principal of
or interest on any Indebtedness or under any instrument or agreement under or
subject to which any Indebtedness has been issued or (ii) an event that has
occurred under the provisions of any such instrument or agreement which with or
without the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.

 

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

 

5.13       No Burdensome Restrictions. No Credit Party is party to any contract
or agreement the performance of which could reasonably be expected to have a
Material Adverse Effect. Each Credit Party has heretofore delivered to Agent
true and complete copies of all Material Contracts to which it is a party or to
which it or any of its properties is subject. No Credit Party has agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property, whether now owned or hereafter acquired, to
be subject to a Lien which is not a Permitted Encumbrance.

 

5.14       No Labor Disputes. No Credit Party is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Credit Party's
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto.

 

  -85- 

 

 

5.15       Margin Regulations. No Credit Party is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation U of such
Board of Governors.

 

5.16       Investment Company Act. No Credit Party is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.

 

5.17       Disclosure. No representation or warranty made by any Credit Party in
this Agreement or in the Shareholder Subordinated Loan Documents, or in any
financial statement, report, certificate or any other document furnished in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading. There is no fact known to any Credit Party or which
reasonably should be known to such Credit Party which such Credit Party has not
disclosed to Agent in writing with respect to the transactions contemplated by
this Agreement which could reasonably be expected to have a Material Adverse
Effect.

 

5.18       Delivery of Shareholder Subordinated Loan Documents. Agent has
received complete copies of the Shareholder Subordinated Loan Documents and
related documents (including all exhibits, schedules and disclosure letters
referred to therein or delivered pursuant thereto, if any) and all amendments
thereto, waivers relating thereto and other side letters or agreements affecting
the terms thereof. None of such documents and agreements has been amended or
supplemented, nor have any of the provisions thereof been waived, except
pursuant to a written agreement or instrument which has heretofore been
delivered to Agent.

 

5.19        [Reserved].

 

5.20       Swaps. Except as otherwise agreed in respect of any swap agreement
entered into with or provided by PNC or one of its Affiliates, if applicable, no
Credit Party is a party to, nor will it be a party to, any swap agreement
whereby such Credit Party has agreed or will agree to swap interest rates or
currencies unless same provides that damages upon termination following an event
of default thereunder are payable on an unlimited "two-way basis" without regard
to fault on the part of either party.

 

5.21       Business and Property of Credit Parties. Upon and after the Closing
Date, Credit Parties do not propose to engage in any business other than the
production and sale of film products for novelty, packaging and container
applications and activities necessary to conduct the foregoing. On the Closing
Date, each Credit Party will own all the property and possess all of the rights
and Consents necessary for the conduct of the business of such Credit Party.

 

  -86- 

 

 

5.22       Ineligible Securities. Borrowers do not intend to use and shall not
use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for thirty (30) days thereafter,
Ineligible Securities being underwritten by a securities Affiliate of Agent or
any Lender.

 

5.23       [Reserved].

 

5.24       Equity Interests. The authorized and outstanding Equity Interests of
each Credit Party, and each legal and beneficial holder thereof as of the
Closing Date, are as set forth on Schedule 5.24(a) hereto. All of the Equity
Interests of each Credit Party have been duly and validly authorized and issued
and are fully paid and non-assessable and have been sold and delivered to the
holders hereof in compliance with, or under valid exemption from, all federal
and state laws and the rules and regulations of each Governmental Body governing
the sale and delivery of securities. Except for the rights and obligations set
forth on Schedule 5.24(b), there are no subscriptions, warrants, options, calls,
commitments, rights or agreement by which any Credit Party or any of the
shareholders of any Credit Party is bound relating to the issuance, transfer,
voting or redemption of shares of its Equity Interests or any pre-emptive rights
held by any Person with respect to the Equity Interests of Credit Parties.
Except as set forth on Schedule 5.24(c), Credit Parties have not issued any
securities convertible into or exchangeable for shares of its Equity Interests
or any options, warrants or other rights to acquire such shares or securities
convertible into or exchangeable for such shares.

 

5.25       Commercial Tort Claims. No Credit Party has any commercial tort
claims except as set forth on Schedule 5.25 hereto.

 

5.26       Letter of Credit Rights. As of the Closing Date, no Credit Party has
any letter of credit rights except as set forth on Schedule 5.26 hereto.

 

5.27       Material Contracts. Schedule 5.27 sets forth all Material Contracts
of the Credit Parties. All Material Contracts are in full force and effect and
no material defaults currently exist thereunder.

 

VI.          AFFIRMATIVE COVENANTS.

 

Each Credit Party shall, until payment in full of the Obligations and
termination of this Agreement:

 

6.1         Compliance with Laws. Comply in all material respects with all
Applicable Laws with respect to the Collateral or any part thereof or to the
operation of such Credit Party's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect (except to the extent
any separate provision of this Agreement shall expressly require compliance with
any particular Applicable Law(s) pursuant to another standard).

 

6.2         Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including all Intellectual Property and take all actions necessary
to enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof where the failure to do so could reasonably be
expected to have a Material Adverse Effect.

 

  -87- 

 

 

6.3         Books and Records. Keep proper books of record and account in which
full, true and correct entries will be made of all dealings or transactions of
or in relation to its business and affairs (including without limitation
accruals for taxes, assessments, charges, levies and claims, allowances against
doubtful Receivables and accruals for depreciation, obsolescence or amortization
of assets), all in accordance with, or as required by, GAAP consistently applied
in the opinion of such independent public accountant as shall then be regularly
engaged by Borrowers.

 

6.4         Payment of Taxes. Pay, when due, all taxes, assessments and other
charges lawfully levied or assessed upon such Credit Party or any of the
Collateral, including real and personal property taxes, assessments and charges
and all franchise, income, employment, social security benefits, withholding,
and sales taxes, except where the same are being Properly Contested or the
failure to make such payment could not reasonably be expected to result in a
liability to any Credit Party in excess of $50,000. If any tax by any
Governmental Body is or may be imposed on or as a result of any transaction
between any Credit Party and Agent or any Lender which Agent or any Lender may
be required to withhold or pay (and for which a Credit Party is liable under
Applicable Law) or if any taxes, assessments, or other charges of a Governmental
Body (for which a Credit Party is liable under Applicable Law) remain unpaid
after the date fixed for their payment, or if any claim shall be made which, in
Agent's reasonable opinion, may possibly create a valid Lien on the Collateral,
Agent may, without notice to the Credit Parties, make a Protective Advance as
provided in Section 16.2(f) to pay the taxes, assessments or other charges and
each Credit Party hereby indemnifies and holds Agent and each Lender harmless in
respect thereof.

 

6.5         Financial Covenants.

 

(a)          Fixed Charge Coverage Ratio. Cause to be maintained as of the end
of each fiscal quarter set forth below, a Fixed Charge Coverage Ratio of not
less than the ratio set forth opposite such fiscal quarter below, for the
applicable period then ended:

 

Applicable Period  Ratio      One fiscal quarter ended March 31, 2018  1.10 to
1.00      Two fiscal quarters ended June 30, 2018  1.10 to 1.00      Three
fiscal quarters ended September 30, 2018  1.10 to 1.00      Four fiscal quarters
ended December 31, 2018 and each four fiscal quarter period ending on March 31,
June 30, September 30 and December 31 thereafter  1.10 to 1.00

 

  -88- 

 

 

(b)          Leverage Ratio. Cause to be maintained as of the end of each fiscal
quarter (commencing with the fiscal quarter ending December 31, 2017) a Leverage
Ratio of not greater than the ratio set forth opposite such fiscal quarter
below, measured on a rolling four (4) quarter basis:

 

Fiscal Quarter  Ratio December 31, 2017  4.75 to 1.00 March 31, 2018  4.50 to
1.00 June 30, 2018  4.25 to 1.00 September 30, 2018  3.75 to 1.00 December 31,
2018  3.50 to 1.00 March 31, 2019  3.25 to 1.00 June 30, 2019  3.00 to 1.00
September 30, 2019 and each December 31, March 31, June 30 and September 30
thereafter  2.75 to 1.00

 

6.6         Insurance.

 

(a)          (i) Keep all its insurable properties and properties in which such
Credit Party has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to such Credit Party's including business
interruption insurance; (ii) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to such Credit Party
insuring against larceny, embezzlement or other criminal misappropriation of
insured's officers and employees who may either singly or jointly with others at
any time have access to the assets or funds of such Credit Party either directly
or through authority to draw upon such funds or to direct generally the
disposition of such assets; (iii) maintain public and product liability
insurance against claims for personal injury, death or property damage suffered
by others for such amounts, as is customary in the case of companies engaged in
businesses similar to such Credit Party's; (iv) maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which such Credit Party is engaged in business; and
(v) furnish Agent with (A) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (B) appropriate endorsements (including loss
payable endorsements) in form and substance reasonably satisfactory to Agent,
naming Agent as an additional insured and Agent as mortgagee and/or lender loss
payee (as applicable) as its interests may appear with respect to all insurance
coverage referred to in clauses (i), and (iii) above, and providing (I) that all
proceeds thereunder shall be payable to Agent, (II) no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such policy, and (III) that such policy and loss payable clauses may not be
cancelled, amended or terminated unless at least thirty (30) days prior written
notice is given to Agent (or in the case of non-payment, at least ten (10) days
prior written notice). In the event of any loss thereunder, the carriers named
therein hereby are directed by Agent and the applicable Credit Party to make
payment for such loss to Agent and not to such Credit Party and Agent jointly.
If any insurance losses are paid by check, draft or other instrument payable to
any Credit Party and Agent jointly, Agent may endorse such Credit Party's name
thereon and do such other things as Agent may deem advisable to reduce the same
to cash.

 

  -89- 

 

 

(b)          Each Credit Party shall take all actions required under the Flood
Laws and/or reasonably requested by Agent to assist in ensuring that each Lender
is in compliance with the Flood Laws applicable to the Collateral, including,
but not limited to, providing Agent with the address and/or GPS coordinates of
each structure on any real property that will be subject to a mortgage in favor
of Agent, for the benefit of Lenders, and, to the extent required, obtaining
flood insurance for such property, structures and contents prior to such
property, structures and contents becoming Collateral, and thereafter
maintaining such flood insurance in full force and effect for so long as
required by the Flood Laws.

 

(c)          If an Event of Default has occurred and is continuing, Agent is
hereby authorized to adjust and compromise claims under insurance coverage
referred to in Sections 6.6(a)(i), and (iii) and 6.6(b) above. Except as
provided in Section 2.20(b)(vi) all loss recoveries received by Agent under any
such insurance may be applied to the Obligations in the manner provided in this
Agreement. Any surplus shall be paid by Agent to Borrowers or applied as may be
otherwise required by Applicable Law. Any deficiency thereon shall be paid by
the Credit Parties to Agent, on demand. If any Credit Party fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor on behalf of
such Credit Party, which payments shall be charged to Borrowers' Account and
constitute part of the obligations.

 

6.7         Payment of Indebtedness and Leasehold Obligations. Pay, discharge or
otherwise satisfy (i) at or before maturity (subject, where applicable, to
specified grace periods) all its Indebtedness, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being Properly Contested, subject at all
times to any applicable subordination arrangement in favor of Lenders and
(ii) when due its rental obligations under all leases under which it is a
tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect.

 

  -90- 

 

 

6.8         Environmental Matters.

 

(a)          Ensure that the Real Property and all operations and businesses
conducted thereon are in compliance and remain in compliance in all material
respects with all Environmental Laws and it shall manage any and all Hazardous
Materials on any Real Property in compliance in all material respects with
Environmental Laws.

 

(b)          Establish and maintain an environmental management and compliance
system to assure and monitor continued compliance with all applicable
Environmental Laws which system shall include periodic environmental compliance
audits to be conducted by knowledgeable environmental professionals. All
potential violations and violations of Environmental Laws shall be reviewed with
legal counsel to determine any required reporting to applicable Governmental
Bodies and any required corrective actions to address such potential violations
or violations.

 

(c)          Respond promptly to any Hazardous Discharge or Environmental
Complaint and take all necessary action in order to safeguard the health of any
Person and to avoid subjecting the Collateral or Real Property to any Lien. If
any Credit Party shall fail to respond promptly to any Hazardous Discharge or
Environmental Complaint or any Credit Party shall fail to comply in any material
respect with any of the requirements of any Environmental Laws, Agent on behalf
of Lenders may, but without the obligation to do so, for the sole purpose of
protecting Agent's interest in the Collateral: (i) give such notices or
(ii) enter onto the Real Property (or authorize third parties to enter onto the
Real Property) and take such actions as Agent (or such third parties as directed
by Agent) reasonably deem necessary or advisable, to remediate, remove, mitigate
or otherwise manage with any such Hazardous Discharge or Environmental
Complaint. All reasonable out-of-pocket costs and expenses incurred by Agent and
Lenders (or such third parties) in the exercise of any such rights, including
any sums paid in connection with any judicial or administrative investigation or
proceedings, fines and penalties, together with interest thereon from the date
expended at the Default Rate for Domestic Rate Loans constituting Revolving
Advances shall be paid upon demand by Borrowers, and until paid shall be added
to and become a part of the Obligations secured by the Liens created by the
terms of this Agreement or any other agreement between Agent, any Lender and any
Credit Party.

 

(d)          Promptly upon the reasonable written request of Agent from time to
time, the Credit Parties shall provide Agent, at the Credit Parties' expense,
with an environmental site assessment or environmental compliance audit report
prepared by an environmental engineering firm acceptable in the reasonable
opinion of Agent, to assess with a reasonable degree of certainty the existence
of a Hazardous Discharge and the potential costs in connection with abatement,
remediation and removal of any Hazardous Materials found on, under, at or within
the Real Property. Any report or investigation of such Hazardous Discharge
proposed and acceptable to the responsible Governmental Body shall be acceptable
to Agent. If such estimates, individually or in the aggregate, exceed $100,000,
Agent shall have the right to require the Credit Parties to post a bond, letter
of credit or other security reasonably satisfactory to Agent to secure payment
of these costs and expenses.

 

  -91- 

 

 

6.9         Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, and 9.13 as to which
GAAP is applicable to be complete and correct in all material respects (subject,
in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
disclosed therein and agreed to by such reporting accountants or officer, as
applicable).

 

6.10       SCJ License Agreement. Ensure that each Credit Party fully complies
with all product quality terms, conditions and requirements set forth in that
certain Trademark License Agreement, dated as of December 9, 2011, by and
between Company and S. C. Johnson & Sons, Inc. ("SCJ") (as amended, restated,
supplemented or otherwise modified from time to time, together with any
successor or replacement license agreement, the "SCJ License"), including
without limitation provisioning of samples in accordance with Section 6 of the
SCJ License. Each Credit Party further agrees to (i) maintain complete and
accurate records in respect of all product quality inspection, monitoring and
reporting matters related to Inventory produced under the SCJ License, including
without limitation records of product samples provided to SCJ and SCJs
approvals, records of SCJ’s inspections of any facilities at which Inventory is
manufactured (in whole or in part), and records of all products submitted to
third parties for legal compliance or quality inspection (e.g., Consumer Testing
Labs) and the results of any such third party tests, and (ii) deliver to Agent,
on an annual basis together with delivery of the audited financial statements
required under Section 9.7 and as more frequently as may be reasonably requested
by Agent, copies of such records and reporting.

 

6.11       Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect. Without limiting the
foregoing, Credit Parties shall take such actions as are necessary or as the
Agent or the Required Lenders may reasonably request from time to time to ensure
that the Obligations are secured by substantially all of the Collateral of
Borrowers and each Credit Party and guaranteed by each Subsidiary other than CFC
Entities, in each case as the Agent may determine, including (i) the execution
and delivery of guaranties, security agreements, pledge agreements, mortgages,
financing statements and other documents, and the filing or recording of any of
the foregoing, (ii) the delivery of opinions of counsel, and (iii) the delivery
of certificated securities and other Collateral with respect to which perfection
is obtained by possession.

 

6.12       Post-Closing Obligations. Within thirty (30) days following the
Closing Date (or such later date agreed to by Agent), use commercially
reasonable efforts to deliver to Agent evidence that the following security
assignments have been terminated of record with the United States Patent and
Trademark Office: (i) security assignment in favor of Cole Taylor Bank dated as
of December 31, 2003 and recorded at Reel 2901, Frame 0848; and (ii) security
assignment in favor of Congress Financial Corporation (Central) dated as of
January 12, 2001 and recorded at Reel 011474, Frame 0154.

 

6.13       Government Receivables. Take all steps necessary to protect Agent's
interest in the Collateral under the Federal Assignment of Claims Act, the
Uniform Commercial Code and all other applicable state or local statutes or
ordinances and deliver to Agent appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of any contract between
any Credit Party and the United States, any state or any department, agency or
instrumentality of any of them.

 

  -92- 

 

 

6.14       Mexican Collateral Matters.

 

(a)          Each Mexican Credit Party shall ensure that not more than an
aggregate amount of $200,000 for more than three (3) consecutive Business Days
shall be maintained in the deposit accounts of the Mexican Credit Parties and
such amount shall be held by the Mexican Credit Parties only for use by the
Mexican Credit Parties to make payments in respect of accounts payable, payroll
and other working capital expenses in each case in the Ordinary Course of
Business (it being understood that any amounts in excess of such amount shall be
promptly repatriated to a deposit account of a Borrower).

 

(b)          As of the Closing Date, (i) no Mexican Credit Party maintains any
employees directly and (ii) all employees working on behalf of the Mexican
Credit Parties are leased from a third party provider. Each Mexican Credit Party
shall promptly (and in any event within two (2) Business Days) notify Agent if
it hires or otherwise maintains any employees directly so that Agent can
establish an appropriate Mexican Priority Payables Reserve in respect thereof.

 

6.15       Keepwell. If it is a Qualified ECP Loan Party, then jointly and
severally, together with each other Qualified ECP Loan Party, hereby absolutely
unconditionally and irrevocably (a) guarantees the prompt payment and
performance of all Swap Obligations owing by each Non-Qualifying Party (it being
understood and agreed that this guarantee is a guaranty of payment and not of
collection), and (b) undertakes to provide such funds or other support as may be
needed from time to time by any Non-Qualifying Party to honor all of such
Non-Qualifying Party's obligations under this Agreement or any Other Document in
respect of Swap Obligations (provided, however, that each Qualified ECP Loan
Party shall only be liable under this Section 6.15 for the maximum amount of
such liability that can be hereby incurred without rendering its obligations
under this Section 6.15, or otherwise under this Agreement or any Other
Document, voidable under applicable law, including applicable law relating to
fraudulent conveyance or fraudulent transfer, and not for any greater amount).
The obligations of each Qualified ECP Loan Party under this Section 6.15 shall
remain in full force and effect until payment in full of the Obligations and
termination of this Agreement and the Other Documents. Each Qualified ECP Loan
Party intends that this Section 6.15 constitute, and this Section 6.15 shall be
deemed to constitute, a guarantee of the obligations of, and a "keepwell,
support, or other agreement" for the benefit of each other Borrower and
Guarantor for all purposes of Section 1a(18(A)(v)(II) of the CEA.

 

VII.         NEGATIVE COVENANTS.

 

No Credit Party shall, until satisfaction in full of the Obligations and
termination of this Agreement:

 

  -93- 

 

 

7.1         Merger, Consolidation, Acquisition and Sale of Assets.

 

(a)          Enter into any merger, consolidation or other reorganization with
or into any other Person or acquire all or a substantial portion of the assets
or Equity Interests of any Person or permit any other Person to consolidate with
or merge with it, except (i) any Borrower may merge, consolidate or reorganize
with another Borrower or a Borrower may acquire the assets or Equity Interest of
another Borrower so long as such Borrower provides Agent with ten (10) days
prior written notice of such merger, consolidation or reorganization and
delivers all of the relevant documents evidencing such merger, consolidation or
reorganization, (ii) any Subsidiary of a Borrower that is not a Credit Party may
merge or consolidate with a Credit Party if such Credit Party is the surviving
entity and (iii) Permitted Acquisitions.

 

(b)          Sell, lease, transfer or otherwise dispose of any of its properties
or assets, except Permitted Dispositions.

 

7.2         Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter created or
acquired, except Permitted Encumbrances.

 

7.3         Guarantees. Become liable upon the obligations or liabilities of any
other Person by assumption, endorsement or guaranty thereof or otherwise (other
than to Lenders) except (a) as disclosed on Schedule 7.3, (b) guarantees made in
the Ordinary Course of Business and not otherwise referred to in clauses (a),
(c) or (d) of this Section 7.3 up to an aggregate amount of $50,000 at any one
time outstanding, (c) guarantees by one or more Credit Party(ies) of the
Indebtedness or obligations of any other Credit Party(ies) that is a Domestic
Subsidiary to the extent such Indebtedness or obligations are permitted to be
incurred and/or outstanding pursuant to the provisions of this Agreement and (d)
the endorsement of checks in the Ordinary Course of Business.

 

7.4         Investments. Purchase or acquire obligations or Equity Interests of,
or any other interest in, any Person, other than Permitted Investments.

 

7.5         [Reserved].

 

7.6         Capital Expenditures. Contract for, purchase or make any expenditure
or commitments for Capital Expenditures in an aggregate amount for all Credit
Parties in excess of $1,250,000 for any fiscal year.

 

7.7         Dividends. Declare, pay or make any dividend or distribution on any
Equity Interests of any Credit Party (other than dividends or distributions
payable in its Equity Interests, or split-ups or reclassifications of its Equity
Interests) or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any Equity Interest, or of any options to
purchase or acquire any Equity Interest of any Credit Party other than Permitted
Dividends.

 

7.8         Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness other than Permitted Indebtedness.

 

7.9         Nature of Business. Substantially change the nature of the business
in which it is presently engaged, nor except as specifically permitted hereby or
businesses related or incidental thereto, purchase or invest, directly or
indirectly, in any assets or property other than in the Ordinary Course of
Business for assets or property which are useful in, necessary for and are to be
used in its business as presently conducted.

 

  -94- 

 

 

7.10       Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise enter into any transaction or deal with, any Affiliate, except for
(i) transactions among Credit Parties which are not expressly prohibited by the
terms of this Agreement and which are in the Ordinary Course of Business, (ii)
transactions among Credit Parties and Clever Container constituting Permitted
Intercompany Investments, (iii) payment by Credit Parties of dividends and
distributions permitted under Section 7.7 hereof, (iv) transactions which are in
the Ordinary Course of Business, on an arm's-length basis on terms and
conditions no less favorable than terms and conditions which would have been
obtainable from a Person other than an Affiliate; and (v) payment of reasonable
and customary independent directors' fees and expenses, including, without
limitation, travel expenses, and indemnities, provided that the amount of such
fees and expenses does not exceed $75,000 in the aggregate (excluding the value
of any payments to directors consisting of Equity Interests of Company) during
any fiscal year, and reasonable compensation to employees and members of its
management.

 

7.11       Reserved.

 

7.12       Subsidiaries.

 

(a)          Form any Subsidiary, except a Domestic Subsidiary that expressly
joins in this Agreement as a borrower and becomes jointly and severally liable
for the Obligations of Borrowers hereunder. Borrowers shall provide all
documents, including without limitation, legal opinions and appraisals as Agent
may reasonably require to establish compliance with each of the foregoing
conditions in connection therewith.

 

(b)          Enter into any partnership, joint venture or similar arrangement.

 

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

 

7.14       Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases, commitments or contracts or for any purpose whatsoever
or use any portion of any Advance in or for any business other than such Credit
Party's business operations as permitted by this Agreement.

 

7.15       Amendment of Organizational Documents. (i) Change its legal name,
(ii) change its form of legal entity (e.g., converting from a corporation to a
limited liability company or vice versa), (iii) change its jurisdiction of
organization or become (or attempt or purport to become) organized in more than
one jurisdiction, or (iv) otherwise amend, modify or waive any term or material
provision of its Organizational Documents in a manner adverse to Lenders unless
required by law, in any such case without (x) giving at least thirty (30) days
prior written notice of such intended change to Agent, (y) having received from
Agent confirmation that Agent has taken all steps necessary for Agent to
continue the perfection of and protect the enforceability and priority of its
Liens in the Collateral belonging to such Credit Party and in the Equity
Interests of such Credit Party and (z) in any case under clause (iv), having
received the prior written consent of Required Lenders to such amendment,
modification or waiver.

 

  -95- 

 

 

7.16       Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Pension Benefit Plan, Multiple Employer Plan or Multiemployer Plan, other than
those Plans disclosed on Schedule 5.8(d), (ii) engage, or permit any member of
the Controlled Group to engage, in any non-exempt "prohibited transaction", as
that term is defined in Section 406 of ERISA or Section 4975 of the Code that
results in material liability to such members of the Controlled Group,
(iii) terminate, or permit any member of the Controlled Group to terminate, any
Plan where such event could result in any material liability of any Credit Party
or any member of the Controlled Group or the imposition of a lien on the
property of any Credit Party or any member of the Controlled Group pursuant to
Section 4068 of ERISA, (iv) incur, or permit any member of the Controlled Group
to incur, any withdrawal liability to any Multiemployer Plan; (v) fail promptly
to notify Agent of the occurrence of any Termination Event, (vi) fail to
materially comply, or permit a member of the Controlled Group to fail to comply,
with the requirements of ERISA or the Code or other Applicable Laws in respect
of any Plan, (vii) fail to meet, permit any member of the Controlled Group to
fail to meet, or permit any Plan to fail to meet minimum funding requirements
under ERISA and the Code, without regard to any waivers or variances, or
postpone or delay or allow any member of the Controlled Group to postpone or
delay any funding requirement with respect of any Plan, or (viii) cause, or
permit any member of the Controlled Group to cause, a representation or warranty
in Section 5.8(d) to cease to be true and correct.

 

7.17       Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders subject to Section 2.20 and the
Shareholder Subordinated Loans subject to Section 7.18), or repurchase, redeem,
retire or otherwise acquire any Indebtedness of any Credit Party, except for
payments in respect of intercompany Indebtedness to the extent constituting
Permitted Intercompany Investments.

 

7.18       Shareholder Subordinated Loan. At any time, directly or indirectly,
pay, prepay, repurchase, redeem, retire or otherwise acquire, or make any
payment on account of any principal of, interest on or premium payable in
connection with the repayment or redemption of the Shareholder Subordinated
Loan, except as expressly permitted in the Shareholder Subordination Agreement
and except for the non-cash conversion of any portion of such loan to an Equity
Interest in Company.

 

VIII.         CONDITIONS PRECEDENT.

 

8.1         Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:

 

(a)          Note. Agent shall have received the Notes duly executed and
delivered by an authorized officer of each Borrower;

 

  -96- 

 

 

(b)          Other Documents. Agent shall have received each of the executed
Other Documents, as applicable;

 

(c)          Mortgage and Surveys. Agent shall have received in form and
substance satisfactory to Lenders (i) an executed Mortgage and (ii) surveys;

 

(d)          Title Insurance. Agent shall have received fully paid mortgagee
title insurance policies (or binding commitments to issue title insurance
policies, marked to Agent's satisfaction to evidence the form of such policies
to be delivered with respect to the Mortgage), in standard ALTA form, issued by
a title insurance company satisfactory to Agent, each in an amount equal to not
less than the fair market value of the Real Property subject to the Mortgage,
insuring the Mortgage to create a valid Lien on the Real Property with no
exceptions which Agent shall not have approved in writing and no survey
exceptions;

 

(e)          Environmental Reports. Agent shall have received all environmental
studies and reports prepared by independent environmental engineering firms with
respect to all Real Property owned or leased by any Borrower;

 

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

 

(g)          Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, and (ii) on such date no Default or Event of Default has occurred or is
continuing;

 

(h)          Undrawn Availability. After giving effect to both the initial
Advances hereunder and the payment of all fees, costs and expenses on the
Closing Date, Borrowers shall have Undrawn Availability (less all trade payable
sixty (60) days or more past due) of at least $2,000,000;

 

(i)          Leverage Ratio. The Leverage Ratio of Company and its Subsidiaries
as of the Closing Date is not greater than 4.75 to 1.00, calculated based on
EBITDA for the twelve (12) month period ended September 30, 2017 and after
giving effect to the initial Advances hereunder and the use of proceeds thereof;

 

(j)          Controlled Accounts. Borrowers shall have opened the Controlled
Accounts with PNC or with financial institutions acceptable to Agent for the
collection or servicing of the Receivables and proceeds of the Collateral and
Agent shall have entered into control agreements with the applicable financial
institutions in form and substance satisfactory to Agent with respect to such
Controlled Accounts;

 

(k)          Shareholder Subordinated Loan Documents. Agent shall have received
final executed copies of the Shareholder Subordinated Loan Documents, and all
related agreements, documents and instruments as in effect on the Closing Date
all of which shall be satisfactory in form and substance to Agent.

 

  -97- 

 

 

(l)          Filings, Registrations and Recordings. Each document (including any
Uniform Commercial Code financing statement) required by this Agreement, any
related agreement or under law or reasonably requested by Agent to be filed,
registered or recorded in order to create, in favor of Agent, a perfected
security interest in or lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received
an acknowledgment copy, or other evidence satisfactory to it, of each such
filing, registration or recordation and satisfactory evidence of the payment of
any necessary fee, tax or expense relating thereto;

 

(m)          Lien Waiver Agreements. Agent shall have received Lien Waiver
Agreements with respect to all locations or places at which Inventory, Equipment
and books and records are located;

 

(n)          Secretary's Certificates, Authorizing Resolutions and Good
Standings of Borrowers. Agent shall have received a certificate of the Secretary
or Assistant Secretary (or other equivalent officer, partner or manager) of each
Borrower in form and substance satisfactory to Agent dated as of the Closing
Date which shall certify (i) copies of resolutions in form and substance
reasonably satisfactory to Agent, of the board of directors (or other equivalent
governing body, member or partner) of such Borrower authorizing (x) the
execution, delivery and performance of this Agreement, the Notes and each Other
Document to which such Borrower is a party (including authorization of the
incurrence of indebtedness, borrowing of Revolving Advances and Term Loan on a
joint and several basis with all Borrowers as provided for herein), and (y) the
granting by such Borrower of the security interests in and liens upon the
Collateral to secure all of the joint and several Obligations of Borrowers (and
such certificate shall state that such resolutions have not been amended,
modified, revoked or rescinded as of the date of such certificate), (ii) the
incumbency and signature of the officers of such Borrower authorized to execute
this Agreement and the Other Documents, (iii) copies of the Organizational
Documents of such Borrower as in effect on such date, complete with all
amendments thereto, and (iv) the good standing (or equivalent status, if
available) of such Borrower in its jurisdiction of organization and each
applicable jurisdiction where the conduct of such Borrower's business activities
or the ownership of its properties necessitates qualification, as evidenced by
good standing certificate(s) (or the equivalent thereof issued by any applicable
jurisdiction) dated not more than thirty (30) days prior to the Closing Date,
issued by the Secretary of State or other appropriate official of each such
jurisdiction;

 

(o)          Secretary's Certificates, Authorizing Resolutions and Good
Standings of Guarantors. Agent shall have received a certificate of the
Secretary or Assistant Secretary (or other equivalent officer, partner or
manager) of each Guarantor in form and substance satisfactory to Agent dated as
of the Closing Date which shall certify (i) copies of resolutions in form and
substance reasonably satisfactory to Agent, of the board of directors (or other
equivalent governing body, member or partner) of each Guarantor authorizing (x)
the execution, delivery and performance of such Guarantor's Guaranty and each
Other Document to which such Guarantor is a party and (y) the granting by such
Guarantor of the security interests in and liens upon the Collateral to secure
its obligations under its Guaranty (and such certificate shall state that such
resolutions have not been amended, modified, revoked or rescinded as of the date
of such certificate), (ii) the incumbency and signature of the officers of such
Guarantor authorized to execute this Agreement and the Other Documents,
(iii) copies of the Organizational Documents of such Guarantor as in effect on
such date, complete with all amendments thereto, and (iv) the good standing (or
equivalent status) of such Guarantor in its jurisdiction of organization and
each applicable jurisdiction where the conduct of such Guarantor's business
activities or the ownership of its properties necessitates qualification, as
evidenced by good standing certificate(s) (or the equivalent thereof issued by
any applicable jurisdiction) dated not more than thirty (30) days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
each such jurisdiction;

 

  -98- 

 

 

(p)          Legal Opinion. Agent shall have received the executed legal opinion
of Vanasco Genelly & Miller in form and substance satisfactory to Agent which
shall cover such matters incident to the transactions contemplated by this
Agreement, the Notes, the Other Documents, and related agreements as Agent may
reasonably require and each Borrower hereby authorizes and directs such counsel
to deliver such opinions to Agent and Lenders;

 

(q)          No Litigation. No litigation, investigation or proceeding before or
by any arbitrator or Governmental Body shall be continuing or threatened against
any Borrower or against the officers or directors of any Borrower (A) in
connection with this Agreement, the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature materially adverse to any Borrower or the conduct of its business
or inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;

 

(r)          Collateral Examination. Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to Agent, of the Receivables, Inventory, Real Property and
Equipment of each Credit Party and all books and records in connection
therewith;

 

(s)          Fees. Agent shall have received all fees payable to Agent and
Lenders on or prior to the Closing Date hereunder, including pursuant to Article
III hereof and the Fee Letter;

 

(t)          Pro Forma Financial Statements. Agent shall have received a copy of
the Pro Forma Financial Statements which shall be satisfactory in all respects
to Agent;

 

(u)          Insurance. Agent shall have received in form and substance
satisfactory to Agent, (i) evidence that adequate insurance, including without
limitation, casualty and liability insurance, required to be maintained under
this Agreement is in full force and effect, (ii) insurance certificates issued
by Borrowers' insurance broker containing such information regarding Borrowers'
casualty and liability insurance policies as Agent shall request and naming
Agent as an additional insured, lenders loss payee and/or mortgagee, as
applicable, and (iii) loss payable endorsements issued by Borrowers' insurer
naming Agent as lenders loss payee and mortgagee, as applicable;

 

  -99- 

 

 

(v)         Flood Insurance. Evidence that adequate flood insurance required to
be maintained under this Agreement is in full force and effect, with additional
insured, mortgagee and lender loss payable special endorsements attached thereto
in form and substance satisfactory to Agent and its counsel naming Agent as
additional insured, mortgagee and lender loss payee, as applicable, and evidence
that Borrowers have taken all actions required under the Flood Laws and/or
requested by Agent to assist in ensuring that each Lender is in compliance with
the Flood Laws applicable to the Collateral, including, but not limited to,
providing Agent with the address and/or GPS coordinates of each structure on any
Real Property that will be subject to a Mortgage in favor of Agent, for the
benefit of Lenders, and, to the extent required, obtaining flood insurance for
such property, structures and contents prior to such property, structures and
contents becoming Collateral.

 

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

 

(x)          Consents. Agent shall have received any and all Consents necessary
to permit the effectuation of the transactions contemplated by this Agreement
and the Other Documents; and, Agent shall have received such Consents and
waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;

 

(y)          No Adverse Material Change. (i) Since December 31, 2016, there
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent or Lenders shall have been
proven to be inaccurate or misleading in any material respect;

 

(z)          Contract Review. Agent shall have received and reviewed all
Material Contracts of Borrowers including leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;

 

(aa)         Compliance with Laws. Agent shall be reasonably satisfied that each
Borrower is in compliance with all pertinent federal, state, local or
territorial regulations, including those with respect to the Federal
Occupational Safety and Health Act, the Environmental Protection Act, ERISA and
the Anti-Terrorism Laws; and

 

(bb)         Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions shall be
satisfactory in form and substance to Agent and its counsel.

 

8.2         Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including the initial Advance), is
subject to the satisfaction of the following conditions precedent as of the date
such Advance is made:

 

(a)          Representations and Warranties. Each of the representations and
warranties made by any Borrower or any other Credit Party in or pursuant to this
Agreement, the Other Documents and any related agreements to which it is a
party, and each of the representations and warranties contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement, the Other Documents or any related
agreement shall be true and correct in all respects on and as of such date as if
made on and as of such date (except to the extent any such representation or
warranty expressly relates only to any earlier and/or specified date);

 

  -100- 

 

 

(b)          No Default. No Event of Default or Default shall have occurred and
be continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however that Agent, in its sole
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default; and

 

(c)          Maximum Advances. In the case of any type of Advance requested to
be made, after giving effect thereto, the aggregate amount of such type of
Advance shall not exceed the maximum amount of such type of Advance permitted
under this Agreement.

 

Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.

 

Notwithstanding anything contained herein to the contrary, at the direction of
Required Lenders, Lenders with a Revolving Commitment shall continue to make
Revolving Advances notwithstanding whether the foregoing conditions precedent
have been satisfied.

 

IX.          INFORMATION AS TO BORROWERS.

 

Each Borrower shall, or (except with respect to Section 9.11) shall cause
Borrowing Agent on its behalf to, until satisfaction in full of the Obligations
and the termination of this Agreement:

 

9.1         Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectability of any portion of the Collateral, including any Borrower's
reclamation or repossession of, or the return to any Borrower of, a material
amount of goods or claims or disputes asserted by any Customer or other obligor.

 

9.2         Schedules. Deliver to Agent (i) on or before the twentieth (20th)
day of each month (or such later date as Agent shall agree to in its sole
discretion) as and for the prior month (a) accounts receivable ageings inclusive
of reconciliations to the general ledger, (b) accounts payable schedules
inclusive of reconciliations to the general ledger, (c) Inventory reports
(including a summary of Consigned Inventory) and (d) a Borrowing Base
Certificate in form and substance satisfactory to Agent (which shall be
calculated as of the last day of the prior month and which shall not be binding
upon Agent or restrictive of Agent's rights under this Agreement) and (ii) on or
before Tuesday of each week, a sales report and sales roll forward for the prior
week. In addition, each Borrower will deliver to Agent at such intervals as
Agent may require: (i) confirmatory assignment schedules; (ii) copies of
Customer's invoices; (iii) evidence of shipment or delivery; and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may require including trial balances and test verifications. Agent shall
have the right to confirm and verify all Receivables by any manner and through
any medium it considers advisable and do whatever it may deem reasonably
necessary to protect its interests hereunder. The items to be provided under
this Section are to be in form satisfactory to Agent and executed by each
Borrower and delivered to Agent from time to time solely for Agent's convenience
in maintaining records of the Collateral, and any Borrower's failure to deliver
any of such items to Agent shall not affect, terminate, modify or otherwise
limit Agent's Lien with respect to the Collateral. Unless otherwise agreed to by
Agent, the items to be provided under this Section 9.2 shall be delivered to
Agent by the specific method of Approved Electronic Communication designated by
Agent.

 

  -101- 

 

 

9.3         Environmental Reports.

 

(a)          Furnish Agent, concurrently with the delivery of the financial
statements referred to in Sections 9.7 and 9.8, with a certificate signed by the
President of Borrowing Agent stating, to the best of his knowledge, that each
Borrower is in compliance in all material respects with all applicable
Environmental Laws. To the extent any Borrower is not in compliance with the
foregoing laws, the certificate shall set forth with specificity all areas of
non-compliance and the proposed action such Borrower will implement in order to
achieve full compliance.

 

(b)          In the event any Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous Materials
at the Real Property (any such event being hereinafter referred to as a
"Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower's interest therein or the operations or the business (any of the
foregoing is referred to herein as an "Environmental Complaint") from any
Person, including any Governmental Body, then Borrowing Agent shall, within five
(5) Business Days, give written notice of same to Agent detailing facts and
circumstances of which any Borrower is aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to be provided to
allow Agent to protect its security interest in and Lien on the Collateral and
is not intended to create nor shall it create any obligation upon Agent or any
Lender with respect thereto.

 

(c)          Borrowing Agent shall promptly forward to Agent copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Materials at any other site owned, operated or used by any
Credit Party to manage of Hazardous Materials and shall continue to forward
copies of correspondence between any Credit Party and the Governmental Body
regarding such claims to Agent until the claim is settled. Borrowing Agent shall
promptly forward to Agent copies of all documents and reports concerning a
Hazardous Discharge or Environmental Complaint at the Real Property, operations
or business that any Credit Party is required to file under any Environmental
Laws. Such information is to be provided solely to allow Agent to protect
Agent's security interest in and Lien on the Collateral.

 

9.4         Litigation. Promptly notify Agent in writing of any claim,
litigation, suit or administrative proceeding affecting any Borrower or any
Guarantor, whether or not the claim is covered by insurance, and of any
litigation, suit or administrative proceeding, which in any such case affects
the Collateral or which could reasonably be expected to have a Material Adverse
Effect.

 

  -102- 

 

 

9.5         Material Occurrences. Immediately notify Agent in writing upon the
occurrence of: (a) any Event of Default or Default; (b) any event of default
under the Shareholder Subordinated Loan Documents; (c) any event which with the
giving of notice or lapse of time, or both, would constitute an event of default
under the Shareholder Subordinated Loan Documents; (d) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (e) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (f) each and every
default by any Borrower which might result in the acceleration of the maturity
of any Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (g) any other development in the business or affairs of any
Borrower or any Guarantor, which could reasonably be expected to have a Material
Adverse Effect; in each case describing the nature thereof and the action
Borrowers propose to take with respect thereto.

 

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

 

9.7         Annual Financial Statements. Furnish Agent and Lenders within one
hundred twenty (120) days after the end of each fiscal year of Borrowers,
financial statements of Borrowers on a consolidating and consolidated basis
(which may include, for the avoidance of doubt, the Consolidated Variable
Interest Entities) including, but not limited to, statements of income and
stockholders' equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and reported upon without
qualification by an independent certified public accounting firm selected by
Borrowers and satisfactory to Agent (the "Accountants"). The report of the
Accountants shall be accompanied by a statement of the Accountants certifying
that (i) they have caused this Agreement to be reviewed, (ii) in making the
examination upon which such report was based either no information came to their
attention which to their knowledge constituted an Event of Default or a Default
under this Agreement or any related agreement or, if such information came to
their attention, specifying any such Default or Event of Default, its nature,
when it occurred and whether it is continuing, and such report shall contain or
have appended thereto calculations which set forth Borrowers' compliance with
the requirements or restrictions imposed by Sections 6.5 and 7.6 hereof. In
addition, the reports shall be accompanied by a Compliance Certificate.

 

9.8         Quarterly Financial Statements. Furnish Agent and Lenders within
forty five (45) days after the end of each fiscal quarter (or such later date as
Agent shall agree to in its sole discretion), an unaudited balance sheet of
Borrowers on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year-end adjustments that individually
and in the aggregate are not material to Borrowers' business operations and
setting forth in comparative form the respective financial statements for the
corresponding date and period in the previous fiscal year. The reports shall be
accompanied by a Compliance Certificate.

 

  -103- 

 

 

9.9         Monthly Financial Statements. Furnish Agent and Lenders within
thirty (30) days after the end of each month (including for the months of March,
June, September and December) (or such later date as Agent shall agree to in its
sole discretion), an unaudited balance sheet of Borrowers on a consolidated and
consolidating basis and unaudited statements of income and stockholders' equity
and cash flow of Borrowers on a consolidated and consolidating basis reflecting
results of operations from the beginning of the fiscal year to the end of such
month and for such month, prepared on a basis consistent with prior practices
and complete and correct in all material respects, subject to normal and
recurring year-end adjustments that individually and in the aggregate are not
material to Borrowers' business operations and setting forth in comparative form
the respective financial statements for the corresponding date and period in the
previous fiscal year. The reports shall be accompanied by a Compliance
Certificate.

 

9.10       Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as each Borrower shall send to its
stockholders and (ii) copies of all notices, reports, financial statements and
other materials sent pursuant to the Shareholder Subordinated Loan Documents.

 

9.11       Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement have been complied with by Borrowers including, without the necessity
of any request by Agent, (a) copies of all environmental audits and reviews,
(b) at least thirty (30) days prior thereto, notice of any Borrower's opening of
any new office or place of business or any Borrower's closing of any existing
office or place of business, and (c) promptly upon any Borrower's learning
thereof, notice of any labor dispute to which any Borrower may become a party,
any strikes or walkouts relating to any of its plants or other facilities, and
the expiration of any labor contract to which any Borrower is a party or by
which any Borrower is bound.

 

9.12       Projected Operating Budget. Furnish Agent and Lenders, no later than
thirty (30) days prior to the beginning of each Borrower's fiscal years
commencing with fiscal year 2018, a month by month projected operating budget
and cash flow of Borrowers on a consolidated and consolidating basis for such
fiscal year (including an income statement for each month and a balance sheet as
at the end of the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by the President or Chief Financial Officer
of each Borrower to the effect that such projections have been prepared on the
basis of sound financial planning practice consistent with past budgets and
financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared.

 

  -104- 

 

 

9.13       Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, a
written report summarizing all material variances from budgets submitted by
Borrowers pursuant to Section 9.12 and a discussion and analysis by management
with respect to such variances.

 

9.14       Notice of Suits, Adverse Events. Furnish Agent with prompt written
notice of (i) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any other Person that is material to the
operation of any Borrower's business, (ii) any refusal by any Governmental Body
or any other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by any Borrower or any Guarantor with any
Governmental Body or Person, if such reports indicate any material change in the
business, operations, affairs or condition of any Borrower or any Guarantor, or
if copies thereof are requested by Lender, and (iv) copies of any material
notices and other communications from any Governmental Body or Person which
specifically relate to any Borrower or any Guarantor.

 

9.15       ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or any member of the Controlled Group has taken, is taking,
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under the Code or
ERISA on or before the due date for such installment or payment; or (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, (c) the PBGC has
instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan or (d) a Multiemployer Plan is subject to
Section 432 of the Code or Section 305 of ERISA.

 

  -105- 

 

 

9.16       Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.

 

9.17       Updates to Certain Schedules. Deliver to Agent promptly as shall be
required to maintain the related representations and warranties as true and
correct, updates to Schedules 4.4 (Locations of Equipment and Inventory), 5.9
(Intellectual Property), 5.24 (Equity Interests), 5.25 (Commercial Tort Claims),
and 5.26 (Letter-of-Credit Rights); provided, that absent the occurrence and
continuance of any Event of Default, Borrower shall only be required to provide
such updates on a monthly basis in connection with delivery of a Compliance
Certificate with respect to the applicable month. Any such updated Schedules
delivered by Borrowers to Agent in accordance with this Section 9.17 shall
automatically and immediately be deemed to amend and restate the prior version
of such Schedule previously delivered to Agent and attached to and made part of
this Agreement.

 

9.18       Financial Disclosure. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
such Borrower's financial statements, trial balances or other accounting records
of any sort in the accountant's or auditor's possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower's financial status and business operations. Each Borrower hereby
authorizes all Governmental Bodies to furnish to Agent and each Lender copies of
reports or examinations relating to such Borrower, whether made by such Borrower
or otherwise; however, Agent and each Lender will attempt to obtain such
information or materials directly from such Borrower prior to obtaining such
information or materials from such accountants or Governmental Bodies.

 

X.           EVENTS OF DEFAULT.

 

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

 

10.1       Nonpayment. Failure by any Borrower to pay (a) when due any principal
or interest on the Obligations (including without limitation pursuant to
Section 2.9), or (b) within five (5) days of when due, any other fee, charge,
amount or liability provided for herein or in any Other Document, in each case
whether at maturity, by reason of acceleration pursuant to the terms of this
Agreement, by notice of intention to prepay or by required prepayment.

 

10.2       Breach of Representation. Any representation or warranty made or
deemed made by any Borrower or any Guarantor in this Agreement, any Other
Document or any related agreement or in any certificate, document or financial
or other statement furnished at any time in connection herewith or therewith
shall prove to have been incorrect or misleading in any material respect on the
date when made or deemed to have been made;

 

10.3       Financial Information. Failure by any Borrower to (i) furnish
financial information when due or when requested, or (ii) permit the inspection
of its books or records or access to its premises for audits and appraisals in
accordance with the terms hereof;

 

  -106- 

 

 

10.4       Judicial Actions. Issuance of a notice of Lien, levy, assessment,
injunction or attachment (a) against any Borrower's Inventory or Receivables or
(b) against a material portion of any Borrower's other property which is not
stayed or lifted within thirty (30) days;

 

10.5       Noncompliance. Except as otherwise provided for in Sections 10.1,
10.3 and 10.5(ii), (i) failure or neglect of any Borrower, any Guarantor or any
Person to perform, keep or observe any term, provision, condition, covenant
herein contained, or contained in any Other Document or any other agreement or
arrangement, now or hereafter entered into between any Borrower, any Guarantor
or such Person, and Agent or any Lender, or (ii) failure or neglect of any
Borrower to perform, keep or observe any term, provision, condition or covenant,
contained in Sections 4.5, 6.1, 6.3, 6.11, 6.13, 9.4 or 9.6 hereof which is not
cured within ten (10) days from the earlier of (a) the knowledge of any senior
member of management of Company thereof or (b) written notice from Agent to
Borrowing Agent of the occurrence of such failure or neglect;

 

10.6       Judgments. Any (a) judgment or judgments, writ(s), order(s) or
decree(s) for the payment of money are rendered against any Borrower or any
Guarantor for an aggregate amount in excess of $100,000 or against all Borrowers
or Guarantors for an aggregate amount in excess of $200,000 and (b) (i) action
shall be legally taken by any judgment creditor to levy upon assets or
properties of any Borrower or any Guarantor to enforce any such judgment,
(ii) such judgment shall remain undischarged for a period of thirty (30)
consecutive days during which a stay of enforcement of such judgment, by reason
of a pending appeal or otherwise, shall not be in effect, or (iii) any Liens
arising by virtue of the rendition, entry or issuance of such judgment upon
assets or properties of any Borrower or any Guarantor shall be senior to any
Liens in favor of Agent on such assets or properties;

 

10.7       Bankruptcy. Any Borrower, any Guarantor, any Subsidiary or Affiliate
of any Borrower shall (i) apply for, consent to or suffer the appointment of, or
the taking of possession by, a receiver, custodian, trustee, liquidator or
similar fiduciary of itself or of all or a substantial part of its property,
(ii) admit in writing its inability, or be generally unable, to pay its debts as
they become due or cease operations of its present business, (iii) make a
general assignment for the benefit of creditors, (iv) commence a voluntary case
under any state or federal bankruptcy or receivership laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent (including by entry of
any order for relief in any involuntary bankruptcy or insolvency proceeding
commenced against it), (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;

 

10.8       Material Adverse Effect. The occurrence of any event or development
which could reasonably be expected to have a Material Adverse Effect;

 

10.9       Lien Priority. Any Lien created hereunder or provided for hereby or
under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest (subject only to Permitted
Encumbrances that have priority as a matter of Applicable Law to the extent such
Liens only attach to Collateral other than Receivables or Inventory);

 

  -107- 

 

 

10.10      Shareholder Subordinated Loan Default. An event of default has
occurred under the Shareholder Subordinated Loan Documents, which default shall
not have been cured or waived within any applicable grace period, or if any
Person party to a Shareholder Subordination Agreement breaches or violates, or
attempts to terminate or challenge the validity of, such agreement;

 

10.11      Cross Default. Either (x) any specified "event of default" under any
Indebtedness (other than the Obligations) of any Borrower with a
then-outstanding principal balance (or, in the case of any Indebtedness not so
denominated, with a then-outstanding total obligation amount) of $50,000 or
more, or any other event or circumstance which would permit the holder of any
such Indebtedness of any Borrower to accelerate such Indebtedness (and/or the
obligations of Borrower thereunder) prior to the scheduled maturity or
termination thereof, shall occur (regardless of whether the holder of such
Indebtedness shall actually accelerate, terminate or otherwise exercise any
rights or remedies with respect to such Indebtedness) or (y) a default of the
obligations of any Borrower under any other agreement to which it is a party
shall occur which has or is reasonably likely to have a Material Adverse Effect;

 

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

 

10.13     Change of Control. Any Change of Control shall occur;

 

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

 

10.15     Seizures. Any (a) portion of the Collateral shall be seized, subject
to garnishment or taken by a Governmental Body, or any Borrower or any
Guarantor, or (b) the title and rights of any Borrower, any Guarantor or any
shareholder of a Credit Party which is the owner of any material portion of the
Collateral shall have become the subject matter of claim, litigation, suit,
garnishment or other proceeding which might, in the opinion of Agent, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;

 

10.16     Reserved.

 

10.17     Pension Plans. An event or condition specified in Sections 7.16 or
9.15 hereof shall occur or exist with respect to any Plan and, as a result of
such event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Agent, would have a Material Adverse
Effect; or the occurrence of any Termination Event, or any Borrower's failure to
immediately report a Termination Event in accordance with Section 9.15 hereof;
or

 

  -108- 

 

 

10.18         Anti-Money Laundering/International Trade Law Compliance. Any
representation or warranty contained in Section 16.18 is or becomes false or
misleading at any time.

 

XI.          LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.

 

11.1       Rights and Remedies.

 

(a)          Upon the occurrence of: (i) an Event of Default pursuant to
Section 10.7 (other than Section 10.7(vii)), all Obligations shall be
immediately due and payable and this Agreement and the obligation of Lenders to
make Advances shall be deemed terminated, (ii) any of the other Events of
Default and at any time thereafter, at the option of Agent or at the direction
of Required Lenders all Obligations shall be immediately due and payable and
Agent or Required Lenders shall have the right to terminate this Agreement and
to terminate the obligation of Lenders to make Advances; and (iii) without
limiting Section 8.2 hereof, any Default under Sections 10.7(vii) hereof, the
obligation of Lenders to make Advances hereunder shall be suspended until such
time as such involuntary petition shall be dismissed. Upon the occurrence of any
Event of Default, Agent shall have the right to exercise any and all rights and
remedies provided for herein, under the Other Documents, under the Uniform
Commercial Code and at law or equity generally, including the right to foreclose
the security interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any or all of
the Collateral with or without judicial process. At any time following the
occurrence and during the continuance of an Event of Default, Agent shall have
the right to send notice of the assignment of, and Agent's security interest in
and Lien on, the Receivables to any and all Customers or any third party holding
or otherwise concerned with any of the Collateral. At any time after the
occurrence and during the continuance of an Event of Default, Agent shall have
the sole right to collect the Receivables, take possession of the Collateral, or
both. Agent's reasonable and documented out-of-pocket collection expenses may be
charged to Borrowers' Account and added to the Obligations. Agent may enter any
of any Borrower's premises or other premises without incurring liability to any
Borrower therefor, and Agent may thereupon, or at any time thereafter, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require Borrowers to make the Collateral available to Agent at a
convenient place. With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Borrowers reasonable notification of such sale or
sales, it being agreed that in all events written notice mailed to Borrowing
Agent at least ten (10) days prior to such sale or sales is reasonable
notification. At any public sale Agent or any Lender may bid (including credit
bid) for and become the purchaser, and Agent, any Lender or any other purchaser
at any such sale thereafter shall hold the Collateral sold absolutely free from
any claim or right of whatsoever kind, including any equity of redemption and
all such claims, rights and equities are hereby expressly waived and released by
each Borrower. In connection with the exercise of the foregoing remedies,
including the sale of Inventory, Agent is granted a perpetual nonrevocable,
royalty free, nonexclusive license and Agent is granted permission to use all of
each Borrower's (a) Intellectual Property which is used or useful in connection
with Inventory for the purpose of marketing, advertising for sale and selling or
otherwise disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The cash proceeds realized from
the sale of any Collateral shall be applied to the Obligations in the order set
forth in Section 11.5 hereof. Noncash proceeds will only be applied to the
Obligations as they are converted into cash. If any deficiency shall arise,
Borrowers shall remain liable to Agent and Lenders therefor.

 

  -109- 

 

 

(b)          To the extent that Applicable Law imposes duties on Agent to
exercise remedies in a commercially reasonable manner, each Borrower
acknowledges and agrees that it is not commercially unreasonable for Agent:
(i) to fail to incur expenses reasonably deemed significant by Agent to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition; (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain governmental or
third party consents for the collection or disposition of Collateral to be
collected or disposed of; (iii) to fail to exercise collection remedies against
Customers or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral; (iv) to exercise collection remedies against
Customers and other Persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists; (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature; (vi) to contact other
Persons, whether or not in the same business as any Borrower, for expressions of
interest in acquiring all or any portion of such Collateral; (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature; (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets; (ix) to dispose of assets
in wholesale rather than retail markets; (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure Agent against risks of loss, collection or
disposition of Collateral or to provide to Agent a guaranteed return from the
collection or disposition of Collateral; or (xii) to the extent deemed
appropriate by the Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Agent in the collection
or disposition of any of the Collateral. Each Borrower acknowledges that the
purpose of this Section 11.1(b) is to provide non-exhaustive indications of what
actions or omissions by Agent would not be commercially unreasonable in Agent's
exercise of remedies against the Collateral and that other actions or omissions
by Agent shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section 11.1(b). Without limitation upon the foregoing,
nothing contained in this Section 11.1(b) shall be construed to grant any rights
to any Borrower or to impose any duties on Agent that would not have been
granted or imposed by this Agreement or by Applicable Law in the absence of this
Section 11.1(b).

 

11.2       Agent's Discretion. During the continuance of an Event of Default,
Agent shall have the right in its sole discretion to determine which rights,
Liens, security interests or remedies Agent may at any time pursue, relinquish,
subordinate, or modify, which procedures, timing and methodologies to employ,
and what any other action to take with respect to any or all of the Collateral
and in what order, thereto and such determination will not in any way modify or
affect any of Agent's or Lenders' rights hereunder as against Borrowers or each
other.

 

  -110- 

 

 

11.3       Setoff. Subject to Section 14.13, in addition to any other rights
which Agent or any Lender may have under Applicable Law, upon the occurrence of
an Event of Default hereunder, Agent and such Lender shall have a right,
immediately and without notice of any kind, to apply any Borrower's property
held by Agent and such Lender or any of their Affiliates to reduce the
Obligations and to exercise any and all rights of setoff which may be available
to Agent and such Lender with respect to any deposits held by Agent or such
Lender.

 

11.4       Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
rights or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.

 

11.5       Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by Agent on account of the Obligations (including without limitation any amounts
on account of any of Cash Management Liabilities or Hedge Liabilities), or in
respect of the Collateral may, at Agent's discretion, be paid over or delivered
as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees) of Agent in connection with enforcing its
rights and the rights of Lenders under this Agreement and the Other Documents,
and any Intentional Overadvances and Protective Advances funded by Agent with
respect to the Collateral under or pursuant to the terms of this Agreement;

 

SECOND, to payment of any fees owed to Agent;

 

THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees) of each of the Lenders to the extent
owing to such Lender pursuant to the terms of this Agreement;

 

FOURTH, to the payment of all of the Obligations consisting of accrued interest
on account of the Swing Loans;

 

FIFTH, to the payment of the outstanding principal amount of the Obligations
consisting of Swing Loans;

 

SIXTH, to the payment of all Obligations arising under this Agreement and the
Other Documents consisting of accrued fees and interest (other than interest in
respect of Swing Loans paid pursuant to clause FOURTH above);

 

SEVENTH, to the payment of the outstanding principal amount of the Obligations
(other than principal in respect of Swing Loans paid pursuant to clause FIFTH
above) arising under this Agreement (including Cash Management Liabilities and
Hedge Liabilities) (including the payment or cash collateralization of any
outstanding Letters of Credit in accordance with Section 3.2(b) hereof);

 

  -111- 

 

 

EIGHTH, to all other Obligations arising under this Agreement which shall have
become due and payable (hereunder, under the Other Documents or otherwise) and
not repaid pursuant to clauses "FIRST" through "SEVENTH" above; AND

 

NINTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.

 

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances, Cash Management Liabilities and
Hedge Liabilities held by such Lender bears to the aggregate then outstanding
Advances, Cash Management Liabilities and Hedge Liabilities) of amounts
available to be applied pursuant to clauses "SIXTH", "SEVENTH", and "EIGHTH"
above; (iii) notwithstanding anything to the contrary in this Section 11.5, no
Swap Obligations of any Non-Qualifying Party shall be paid with amounts received
from such Non-Qualifying Party under its Guaranty (including sums received as a
result of the exercise of remedies with respect to such Guaranty) or from the
proceeds of such Non-Qualifying Party's Collateral if such Swap Obligations
would constitute Excluded Hedge Liabilities, provided, however, that to the
extent possible appropriate adjustments shall be made with respect to payments
and/or the proceeds of Collateral from other Borrowers and/or Guarantors that
are Eligible Contract Participants with respect to such Swap Obligations to
preserve the allocation to Obligations otherwise set forth above in this
Section 11.5; and (iv) to the extent that any amounts available for distribution
pursuant to clause "SEVENTH" above are attributable to the issued but undrawn
amount of outstanding Letters of Credit, such amounts shall be held by Agent as
cash collateral for the Letters of Credit pursuant to Section 3.2(b) hereof and
applied (A) first, to reimburse Issuer from time to time for any drawings under
such Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses "SEVENTH" and
"EIGHTH" above in the manner provided in this Section 11.5.

 

XII.         WAIVERS AND JUDICIAL PROCEEDINGS.

 

12.1       Waiver of Notice. Each Borrower hereby waives notice of non-payment
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.

 

12.2       Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any Default or Event of Default.

 

12.3       Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, COUNTERCLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM,
COUNTERCLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

  -112- 

 

 

XIII.       EFFECTIVE DATE AND TERMINATION.

 

13.1       Term. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until December 14, 2022 (the "Term")
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) days prior written notice to Agent upon
payment in full of the Obligations. In the event the Obligations are prepaid in
full (whether voluntary or involuntary, including after acceleration thereof)
and this Agreement is terminated prior to the last day of the Term or the
Revolving Commitments are permanently reduced pursuant to Section 2.20 (the date
of such prepayment or permanent commitment reduction hereinafter referred to as
an "Early Termination Date"), Borrowers shall concurrently pay to Agent for the
benefit of Lenders an early termination fee (the "Early Termination Fee") in an
amount equal to (x)  2.0% of the sum of the Maximum Revolving Advance Amount (or
amount of permanent reduction to the Revolving Commitments under Section 2.20,
as applicable) and the outstanding principal balance of the Term Loan if the
Early Termination Date occurs on or after the Closing Date to and including the
date immediately preceding the first anniversary of the Closing Date, (y) 1.0%
of the sum of the Maximum Revolving Advance Amount (or amount of permanent
reduction to the Revolving Commitments under Section 2.20, as applicable) and
the outstanding principal balance of the Term Loan if the Early Termination Date
occurs on or after the first anniversary of the Closing Date to and including
the date immediately preceding the second anniversary of the Closing Date, and
(z) $0.00 if the Early Termination Date occurs on or after the second
anniversary of the Closing Date to and including the date immediately preceding
the third anniversary of the Closing Date; provided, that the Early Termination
Fee shall be deemed to be $0.00 for all purposes hereunder if the Early
Termination Date occurs as a result of a refinancing transaction provided or
agented by PNC. For the avoidance of doubt, the automatic or declared
acceleration of the Obligations constitutes an involuntary prepayment for which
the Early Termination Fee shall be due and payable. The Early Termination Fee
shall be due and owing if following an acceleration of the Obligations, (i)
Borrowers tender payment (voluntarily or involuntarily), (ii) Lenders obtain a
recovery through an exercise of remedies or otherwise, or (iii) the Obligations
are satisfied as a result of a foreclosure sale, deed in lieu, or by any other
means. Each Borrower acknowledges and agrees that the Early Termination Fee
constitutes liquidated damages, and not a claim for unmatured interest or a
penalty, and that the Early Termination Fee represents a reasonable forecast of
the damages caused by prepayment. Each Borrower further acknowledges and agrees
that any Early Termination Fee due hereunder is secured by the Collateral.

 

  -113- 

 

 

13.2       Termination. The termination of the Agreement shall not affect
Agent's or any Lender's rights, or any of the Obligations having their inception
prior to the effective date of such termination or any Obligations which
pursuant to the terms hereof continue to accrue after such date, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created and Obligations have been fully and
indefeasibly paid, disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Agent and Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrowers'
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of each Borrower have been indefeasibly paid and
performed in full after the termination of this Agreement or each Borrower has
furnished Agent and Lenders with an indemnification satisfactory to Agent and
Lenders with respect thereto. Accordingly, each Borrower waives any rights which
it may have under the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to each Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations have been
indefeasibly paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are indefeasibly paid and performed in
full.

 

XIV.       REGARDING AGENT.

 

14.1       Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
2.8(b), 3.3, 3.4 and the Fee Letter), charges and collections received pursuant
to this Agreement, for the ratable benefit of Lenders. Agent may perform any of
its duties hereunder by or through its agents or employees. As to any matters
not expressly provided for by this Agreement (including collection of the Note)
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of Required
Lenders, and such instructions shall be binding; provided, however, that Agent
shall not be required to take any action which, in Agent's discretion, exposes
Agent to liability or which is contrary to this Agreement or the Other Documents
or Applicable Law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.

 

  -114- 

 

 

14.2       Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment), or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
due execution, enforceability or sufficiency of this Agreement, or any of the
Other Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement or the transactions described herein
except as expressly set forth herein.

 

14.3       Lack of Reliance on Agent. Independently and without reliance upon
Agent or any other Lender, each Lender has made and shall continue to make
(i) its own independent investigation of the financial condition and affairs of
each Borrower and each Guarantor in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
each Borrower and each Guarantor. Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before making of the Advances or at any time or times thereafter except as shall
be provided by any Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any Other Document, or of the financial condition of any Borrower
or any Guarantor, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement, the Note, the Other Documents or the financial condition or prospects
of any Borrower, or the existence of any Event of Default or any Default.

 

14.4       Resignation of Agent; Successor Agent. Agent may resign on sixty (60)
days written notice to each Lender (or such shorter notice as Required Lenders
may agree to) and Borrowing Agent (provided, no notice shall be required to be
given to Borrowing Agent if an Event of Default exists) and upon such
resignation, Required Lenders will promptly designate a successor Agent
reasonably satisfactory to Borrowers (provided that no such approval by
Borrowers shall be required (i) in any case where the successor Agent is one of
the Lenders or (ii) after the occurrence and during the continuance of any Event
of Default). Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and shall in particular succeed to all of Agent's right, title
and interest in and to all of the Liens in the Collateral securing the
Obligations created hereunder or any Other Document (including the Mortgages,
Pledge Agreement and all account control agreements), and the term "Agent" shall
mean such successor agent effective upon its appointment, and the former Agent's
rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent. However, notwithstanding
the foregoing, if at the time of the effectiveness of the new Agent's
appointment, any further actions need to be taken in order to provide for the
legally binding and valid transfer of any Liens in the Collateral from former
Agent to new Agent and/or for the perfection of any Liens in the Collateral as
held by new Agent or it is otherwise not then possible for new Agent to become
the holder of a fully valid, enforceable and perfected Lien as to any of the
Collateral, former Agent shall continue to hold such Liens solely as agent for
perfection of such Liens on behalf of new Agent until such time as new Agent can
obtain a fully valid, enforceable and perfected Lien on all Collateral, provided
that Agent shall not be required to or have any liability or responsibility to
take any further actions after such date as such agent for perfection to
continue the perfection of any such Liens (other than to forego from taking any
affirmative action to release any such Liens). After any Agent's resignation as
Agent, the provisions of this Article XIV, and any indemnification rights under
this Agreement, including without limitation, rights arising under Section 16.5
hereof, shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement (and in the event resigning
Agent continues to hold any Liens pursuant to the provisions of the immediately
preceding sentence, the provisions of this Article XIV and any indemnification
rights under this Agreement, including without limitation, rights arising under
Section 16.5 hereof, shall inure to its benefit as to any actions taken or
omitted to be taken by it in connection with such Liens).

 

  -115- 

 

 

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

 

14.6       Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, email, facsimile, telex, teletype or telecopier message, cablegram,
order or other document or telephone message believed by it to be genuine and
correct and to have been signed, sent or made by the proper person or entity,
and, with respect to all legal matters pertaining to this Agreement and the
Other Documents and its duties hereunder, upon advice of counsel selected by it.
Agent may employ agents and attorneys-in-fact and shall not be liable for the
default or misconduct of any such agents or attorneys-in-fact selected by Agent
with reasonable care.

 

14.7       Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrowing
Agent referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by Required Lenders;
provided, that, unless and until Agent shall have received such directions,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of Lenders.

 

  -116- 

 

 

14.8       Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the outstanding Advances and its
respective Participation Commitments in the outstanding Letters of Credit and
outstanding Swing Loans (or, if no Advances are outstanding, pro rata according
to the percentage that its Revolving Commitment Amount constitutes of the total
aggregate Revolving Commitment Amounts), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in performing its duties
hereunder, or in any way relating to or arising out of this Agreement or any
Other Document; provided that Lenders shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross (not mere)
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment).

 

14.9       Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with any Borrower
as if it were not performing the duties specified herein, and may accept fees
and other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.

 

14.10     Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing
Base Certificates from any Borrower pursuant to the terms of this Agreement
which any Borrower is not obligated to deliver to each Lender, Agent will
promptly furnish such documents and information to Lenders.

 

14.11     Borrowers' Undertaking to Agent. Without prejudice to their respective
obligations to Lenders under the other provisions of this Agreement, each
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.

 

14.12      No Reliance on Agent's Customer Identification Program. To the extent
the Advances or this Agreement is, or becomes, syndicated in cooperation with
other Lenders, each Lender acknowledges and agrees that neither such Lender, nor
any of its Affiliates, participants or assignees, may rely on Agent to carry out
such Lender's, Affiliate's, participant's or assignee's customer identification
program, or other obligations required or imposed under or pursuant to the USA
PATRIOT Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the "CIP Regulations"), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with any of Borrowers, their
Affiliates or their agents, the Other Documents or the transactions hereunder or
contemplated hereby: (i) any identity verification procedures, (ii) any
recordkeeping, (iii) comparisons with government lists, (iv) customer notices or
(v) other procedures required under the CIP Regulations or such Anti-Terrorism
Laws.

 

  -117- 

 

 

14.13      Other Agreements. Each of the Lenders agrees that it shall not,
without the express consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to any Borrower or any deposit
accounts of any Borrower now or hereafter maintained with such Lender. Anything
in this Agreement to the contrary notwithstanding, each of the Lenders further
agrees that it shall not, unless specifically requested to do so by Agent, take
any action to protect or enforce its rights arising out of this Agreement or the
Other Documents, it being the intent of Lenders that any such action to protect
or enforce rights under this Agreement and the Other Documents shall be taken in
concert and at the direction or with the consent of Agent or Required Lenders.

 

14.14      Collateral Matters.

 

(a)          The Lenders hereby irrevocably authorize Agent to release any Lien
on any Collateral (i) upon the termination of the Revolving Commitments and
payment and satisfaction in full of all of the Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if Borrowers certify to Agent that the sale or
disposition is permitted hereunder (and Agent may rely conclusively on any such
certificate, without further inquiry), (iii) constituting property released
pursuant to Section 4.13, (iv) constituting property in which no Credit Party or
any of its Subsidiaries owned any interest at the time Agent's Lien was granted
nor at any time thereafter, (v) constituting property leased or licensed to a
Credit Party or its Subsidiaries under a lease or license that has expired or is
terminated in a transaction permitted under this Agreement, or (vi) in
connection with a credit bid or purchase authorized under this Section 14.14.
The Credit Parties and the Lenders hereby irrevocably authorize Agent, based
upon the instruction of the Required Lenders, to (A) consent to the sale of,
credit bid, or purchase (either directly or indirectly through one or more
entities) all or any portion of the Collateral at any sale thereof conducted
under the provisions of the Bankruptcy Code, including Section 363 of the
Bankruptcy Code, (B) credit bid or purchase (either directly or indirectly
through one or more entities) all or any portion of the Collateral at any sale
or other disposition thereof conducted under the provisions of the Uniform
Commercial Code, including pursuant to Sections 9-610 or 9-620 of the Uniform
Commercial Code, or (C) credit bid or purchase (either directly or indirectly
through one or more entities) all or any portion of the Collateral at any other
sale or foreclosure conducted or consented to by Agent in accordance with
applicable law in any judicial action or proceeding or by the exercise of any
legal or equitable remedy. In connection with any such credit bid or purchase,
(i) the Obligations owed to the Lenders shall be entitled to be, and shall be,
credit bid on a ratable basis (with Obligations with respect to contingent or
unliquidated claims being estimated for such purpose if the fixing or
liquidation thereof would not impair or unduly delay the ability of Agent to
credit bid or purchase at such sale or other disposition of the Collateral and,
if such contingent or unliquidated claims cannot be estimated without impairing
or unduly delaying the ability of Agent to credit bid at such sale or other
disposition, then such claims shall be disregarded, not credit bid, and not
entitled to any interest in the Collateral that is the subject of such credit
bid or purchase) and the Lenders whose Obligations are credit bid shall be
entitled to receive interests (ratably based upon the proportion of their
Obligations credit bid in relation to the aggregate amount of Obligations so
credit bid) in the Collateral that is the subject of such credit bid or purchase
(or in the Equity Interests of the any entities that are used to consummate such
credit bid or purchase), and (ii) Agent, based upon the instruction of the
Required Lenders, may accept non-cash consideration, including debt and equity
securities issued by any entities used to consummate such credit bid or purchase
and in connection therewith Agent may reduce the Obligations owed to the Lenders
(ratably based upon the proportion of their Obligations credit bid in relation
to the aggregate amount of Obligations so credit bid) based upon the value of
such non-cash consideration. Except as provided above, Agent will not execute
and deliver a release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral (other than pursuant to a disposition of such Collateral consented to
by Required Lenders), all of the Lenders or (z) otherwise, the Required Lenders.
Upon request by Agent or Borrowers at any time, the Lenders will confirm in
writing Agent's authority to release any such Liens on particular types or items
of Collateral pursuant to this Section 14.14; provided, that (1) anything to the
contrary contained in this Agreement or any of the Other Documents
notwithstanding, Agent shall not be required to execute any document or take any
action necessary to evidence such release on terms that, in Agent's opinion,
could expose Agent to liability or create any obligation or entail any
consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly released) upon (or obligations of Borrowers in respect of) any and all
interests retained by any Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.

 

  -118- 

 

 

(b)          Agent shall have no obligation whatsoever to any of the Lenders
(i) to verify or assure that the Collateral exists or is owned by a Credit Party
or any of its Subsidiaries or is cared for, protected, or insured or has been
encumbered, (ii) to verify or assure that Agent's Liens have been properly or
sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, (iii) to verify or assure that any
particular items of Collateral meet the eligibility criteria applicable in
respect thereof, (iv) to impose, maintain, increase, reduce, implement, or
eliminate any particular reserve hereunder or to determine whether the amount of
any reserve is appropriate or not, or (v) to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to this Agreement or any Other Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission,
or event related thereto, subject to the terms and conditions contained herein,
Agent may act in any manner it may deem appropriate, in its sole discretion
given Agent's own interest in the Collateral in its capacity as one of the
Lenders and that Agent shall have no other duty or liability whatsoever to any
Lender as to any of the foregoing, except as otherwise expressly provided
herein.

 

14.15      Field Examination Reports; Confidentiality; Disclaimers by Lenders;
Other Reports and Information. By becoming a party to this Agreement, each
Lender:

 

(a)          is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field examination report
respecting any Credit Party or its Subsidiaries (each, a "Report") prepared by
or at the request of Agent, and Agent shall so furnish each Lender with such
Reports,

 

  -119- 

 

 

(b)          expressly agrees and acknowledges that Agent does not (i) make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report,

 

(c)          expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any field examination will inspect only specific information regarding the
Credit Parties and their Subsidiaries and will rely significantly upon Credit
Parties' and their Subsidiaries' books and records, as well as on
representations of Credit Parties' personnel,

 

(d)          agrees to keep all Reports and other material, non-public
information regarding the Credit Parties and their Subsidiaries and their
operations, assets, and existing and contemplated business plans in a
confidential manner in accordance with Section 16.15, and

 

(e)          without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or fail to take or any conclusion the indemnifying Lender may reach or draw
from any Report in connection with any loans or other credit accommodations that
the indemnifying Lender has made or may make to Credit Parties, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrowers, and (ii) to pay and protect, and indemnify,
defend and hold Agent, and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses,
and other amounts (including, attorneys' fees and costs) incurred by Agent and
any such other Lender preparing a Report as the direct or indirect result of any
third parties who might obtain all or part of any Report through the
indemnifying Lender.

 

In addition to the foregoing, (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by any Credit Party or its Subsidiaries to Agent that has not
been contemporaneously provided by such Credit Party or such Subsidiary to such
Lender, and, upon receipt of such request, Agent promptly shall provide a copy
of same to such Lender, (y) to the extent that Agent is entitled, under any
provision of this Agreement or any Other Documents, to request additional
reports or information from any Credit Party or its Subsidiaries, any Lender
may, from time to time, reasonably request Agent to exercise such right as
specified in such Lender's notice to Agent, whereupon Agent promptly shall
request of Borrowers the additional reports or information reasonably specified
by such Lender, and, upon receipt thereof from such Credit Party or such
Subsidiary, Agent promptly shall provide a copy of same to such Lender, and
(z) any time that Agent renders to Borrowers a statement regarding the Loan
Account, Agent shall send a copy of such statement to each Lender.

 

14.16     Several Obligations; No Liability. Notwithstanding that certain of the
Other Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such, and not by or in favor of the Lenders,
any and all obligations on the part of Agent (if any) to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Revolving Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Revolving Commitments. Nothing contained herein shall confer upon any Lender any
interest in, or subject any Lender to any liability for, or in respect of, the
business, assets, profits, losses, or liabilities of any other Lender. Each
Lender shall be solely responsible for notifying its participants of any matters
relating to this Agreement and the Other Documents to the extent any such notice
may be required, and no Lender shall have any obligation, duty, or liability to
any participant of any other Lender.

 

  -120- 

 

 

14.17     Bank Product Providers. Each Secured Party that provides Cash
Management Products and Services, Lender-Provided Interest Rate Hedges or
Lender-Provided Foreign Currency Hedges (each a "Bank Product Provider") in its
capacity as such shall be deemed a third party beneficiary hereof and of the
provisions of the Other Documents for purposes of any reference in this
Agreement or any Other Document to the parties for whom Agent is acting. Agent
hereby agrees to act as agent for such Bank Product Provider and, by virtue of
entering into an agreement or arrangement to provide Cash Management Products
and Services, Lender-Provided Interest Rate Hedges or Lender-Provided Foreign
Currency Hedges, the applicable Bank Product Provider shall be automatically
deemed to have appointed Agent as its agent and to have accepted the benefits of
this Agreement and the Other Documents. It is understood and agreed that the
rights and benefits of each Bank Product Provider under this Agreement and the
Other Documents consist exclusively of such Bank Product Provider's being a
beneficiary of the Liens and security interests (and, if applicable, guarantees)
granted to Agent and the right to share in payments and collections out of the
Collateral as more fully set forth herein. In addition, each Bank Product
Provider, by virtue of entering into an agreement or arrangement to provide Cash
Management Products and Services, Lender-Provided Interest Rate Hedges or
Lender-Provided Foreign Currency Hedges, shall be automatically deemed to have
agreed that Agent shall have the right, but shall have no obligation, to
establish, maintain, relax, or release reserves in respect of the Cash
Management Liabilities, Interest Rate Hedge Liabilities and Foreign Currency
Hedge Liabilities and that if reserves are established there is no obligation on
the part of Agent to determine or insure whether the amount of any such reserve
is appropriate or not. Notwithstanding anything to the contrary in this
Agreement or any Other Document, no provider or holder of any Cash Management
Products and Services, Lender-Provided Interest Rate Hedges or Lender-Provided
Foreign Currency Hedges shall have any voting or approval rights hereunder (or
be deemed a Lender) solely by virtue of its status as the provider or holder of
such agreements or products or the Obligations owing thereunder, nor shall the
consent of any such provider or holder be required (other than in their
capacities as Lenders, to the extent applicable) for any matter hereunder or
under any of the Other Documents, including as to any matter relating to the
Collateral or the release of Collateral or Guarantors.

 

XV.        BORROWING AGENCY.

 

15.1       Borrowing Agency Provisions; Joint and Several Liability.

 

(a)          Each Borrower hereby irrevocably designates Borrowing Agent to be
its attorney and agent and in such capacity to (i) borrow, (ii) request
advances, (iii) request the issuance of Letters of Credit, (iv) sign and endorse
notes, (v) execute and deliver all instruments, documents, applications,
security agreements, reimbursement agreements and letter of credit agreements
for Letters of Credit and all other certificates, notice, writings and further
assurances now or hereafter required hereunder, (vi) make elections regarding
interest rates, (vii) give instructions regarding Letters of Credit and agree
with Issuer upon any amendment, extension or renewal of any Letter of Credit and
(viii) otherwise take action under and in connection with this Agreement and the
Other Documents, all on behalf of and in the name such Borrower or Borrowers,
and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in
accordance with the request of Borrowing Agent.

 

  -121- 

 

 

(b)          The handling of this credit facility as a co-borrowing facility
with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 15.1 except due to willful misconduct or gross (not
mere) negligence by the indemnified party (as determined by a court of competent
jurisdiction in a final and non-appealable judgment).

 

(c)          All Borrowers shall be jointly and severally liable for all amounts
due to Agent and Lenders under this Agreement and the Other Documents,
regardless of which Borrower actually receives the Advances or other financial
accommodations hereunder or the amount of such Advances or financial
accommodations received or the manner in which Agent and Lenders account for
such Advances or financial accommodations on its books and records. The
Obligations shall be primary obligations of all Borrowers. The Obligations
arising as a result of the joint and several liability of a Borrower shall, to
the fullest extent permitted by law, be unconditional irrespective of (i) the
validity or enforceability, avoidance or subordination of the Obligations of the
other Borrowers or of any promissory note or other document evidencing all or
any part of the Obligations of the other Borrowers, (ii) the absence of any
attempt to collect the Obligations from the other Borrowers or any other
security therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension, forbearance or granting of any indulgence
by Agent or Lenders with respect to any provisions of any instrument evidencing
the Obligations of the other Borrowers, or any part thereof, or any other
agreement now or hereafter executed by the other Borrowers and delivered to
Agent, for itself and on behalf of Lenders, except to the extent such waiver,
consent, extension, forbearance or granting of any indulgence explicitly is
effective with respect to such Borrower, (iv) the failure by Agent or Lenders to
take any steps to perfect and maintain its security interest in, or to preserve
its rights and maintain its security or collateral for the Obligations of the
other Borrowers, (v) the election of Agent or Lenders in any proceeding
instituted under the Bankruptcy Code, of the application of Section 1111(b)(2)
of the Bankruptcy Code, (vi) the disallowance of all or any portion of the
claim(s) of Agent or Lenders for the repayment of the Obligations of the other
Borrowers under Section 502 of the Bankruptcy Code, or (vii) any other
circumstances which might constitute a legal or equitable discharge or defense
of the other Borrowers other than payment in full of the Obligations. With
respect to the Obligations arising as a result of the joint and several
liability of a Borrower, each Borrower waives, until payment in full of the
Obligations and this Agreement, any right to enforce any right of subrogation or
any remedy which Agent or Lenders now has or may hereafter have against
Borrowers, any endorser or any guarantor of all or any part of the Obligations,
and any benefit of, and any right to participate in, any security or collateral
given to Agent and Lenders. Upon any Event of Default and for so long as the
same is continuing, Agent and Lenders may proceed directly and at once, without
notice, against any Borrower to collect and recover the full amount, or any
portion of the Obligations, without first proceeding against the other Borrowers
or any other Person, or against any security or collateral for the Obligations.
Each Borrower consents and agrees that Agent and Lenders shall be under no
obligation to marshal any assets in favor of Borrower(s) or against or in
payment of any or all of the Obligations.

 

  -122- 

 

 

(d)          Each Borrower expressly subordinates any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution of any other
claim which such Borrower may now or hereafter have against the other Borrowers
or other Person directly or contingently liable for the Obligations hereunder,
or against or with respect to the other Borrowers' property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement until payment in full of the
Obligations.

 

(e)          Each Borrower expressly subordinates all rights that it may have
now or in the future under any statute, at common law, in equity or otherwise,
to compel Agent or Lenders to marshal assets or to proceed against any Credit
Party, other Person or security for the payment or performance of any
Obligations before, or as a condition to, proceeding against such Borrower. It
is agreed among each Borrower, Agent and Lenders that the provisions of this
Section are of the essence of the transaction contemplated by this Agreement and
the Other Documents and that, but for such provisions, Agent and Lenders would
decline to make Loans and issue Letters of Credit.

 

(f)          Agent and Lenders may, in their discretion, pursue such rights and
remedies as they deem appropriate, including realization upon Collateral by
judicial foreclosure or nonjudicial sale or enforcement, without affecting any
rights and remedies under this Agreement and the Other Documents. If, in the
exercise of any rights or remedies, Agent or any Lender shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Credit Party, whether because of any Applicable Laws pertaining to "election
of remedies" or otherwise, each Borrower consents to such action by Agent or
such Lender and waives (to the extent permitted by Applicable Law) any claim
based upon such action, even if the action may result in loss of any rights of
subrogation that any Borrower might otherwise have had but for such action. Any
election of remedies that results in denial or impairment of the right of Agent
or any Lender to seek a deficiency judgment against any Borrower shall not
impair any other Borrower's obligation to pay the full amount of the
Obligations. Each Borrower waives all rights and defenses arising out of an
election of remedies, such as nonjudicial foreclosure with respect to any
security for the Obligations, even though that election of remedies destroys
such Borrower's rights of subrogation against any other Person. If Agent bids at
any foreclosure or trustee's sale or at any private sale, Agent may bid all or a
portion (in Agent's discretion) of the Obligations and the amount of such bid
need not be paid by Agent but shall be credited against the Obligations. Subject
to Applicable Law, the amount of the successful bid at any such sale, whether
Agent or any other Person is the successful bidder, shall be conclusively deemed
to be commercially reasonable, and the difference between such bid amount and
the remaining balance of the Obligations shall be conclusively deemed to be the
amount of such Borrower's Obligations to Agent and Lenders, notwithstanding that
any present or future law or court decision may have the effect of reducing the
amount of any deficiency claim to which Agent or any Lender might otherwise be
entitled but for such bidding at any such sale.

 

  -123- 

 

 

(g)          Notwithstanding any other provision of this Section 15, the joint
and several liability of each Borrower hereunder shall be limited to a maximum
amount as would not, after giving effect to such maximum amount, render its
obligations hereunder subject to avoidance under Section 548 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or comparable law. In determining the limitations, if
any, on the amount of any Borrower's obligations hereunder pursuant to the
preceding sentence, it is the intention of the parties hereto that any rights of
subrogation, indemnification or contribution which such Borrower may have under
this Section 15, any other agreement or applicable law shall be taken into
account. Subject to the restrictions, limitations and other terms of this
Agreement, each Borrower hereby agrees that to the extent that a Borrower shall
have paid more than its proportionate share of any payment made hereunder, such
Borrower shall be entitled to seek and receive contribution from and against any
other Borrower hereunder which has not paid its proportionate share of such
payment.

 

15.2       Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or any other Person directly or contingently liable for the
Obligations hereunder, or against or with respect to any other Borrowers'
property (including, without limitation, any property which is Collateral for
the Obligations), arising from the existence or performance of this Agreement,
until termination of this Agreement and repayment in full of the Obligations.

 

XVI.       MISCELLANEOUS.

 

16.1       Governing Law. This Agreement and each Other Document (unless and
except to the extent expressly provided otherwise in any such Other Document),
and all matters relating hereto or thereto or arising herefrom or therefrom
(whether arising under contract law, tort law or otherwise) shall, in accordance
with Section 5-1401 of the General Obligations Law of the State of New York, be
governed by and construed in accordance with the laws of the State of New York.
Any judicial proceeding brought by or against any Credit Party with respect to
any of the Obligations, this Agreement, the Other Documents or any related
agreement may be brought in any court of competent jurisdiction in the State of
New York, United States of America, and, by execution and delivery of this
Agreement, each Credit Party accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Each Credit Party hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by certified or registered mail (return receipt
requested) directed to Borrowing Agent at its address set forth in Section 16.6
and service so made shall be deemed completed five (5) days after the same shall
have been so deposited in the mails of the United States of America, or, at
Agent's option, by service upon Borrowing Agent which each Credit Party
irrevocably appoints as such Credit Party's Agent for the purpose of accepting
service within the State of New York. Nothing herein shall affect the right to
serve process in any manner permitted by law or shall limit the right of Agent
or any Lender to bring proceedings against any Credit Party in the courts of any
other jurisdiction. Each Credit Party waives any objection to jurisdiction and
venue of any action instituted hereunder and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum non conveniens. Each Credit
Party waives the right to remove any judicial proceeding brought against such
Credit Party in any state court to any federal court. Any judicial proceeding by
any Credit Party against Agent or any Lender involving, directly or indirectly,
any matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the County of New York, State of New York.

 

  -124- 

 

 

16.2       Entire Understanding.

 

(a)          This Agreement and the documents executed concurrently herewith
contain the entire understanding between each Credit Party, Agent and each
Lender and supersedes all prior agreements and understandings, if any, relating
to the subject matter hereof. Any promises, representations, warranties or
guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing, signed by each Borrower's and Agent's and each
Lender's respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived, supplemented,
discharged, cancelled or terminated orally or by any course of dealing, or in
any manner other than by an agreement in writing, signed by the party to be
charged. Each Credit Party acknowledges that it has been advised by counsel in
connection with the execution of this Agreement and Other Documents and is not
relying upon oral representations or statements inconsistent with the terms and
provisions of this Agreement.

 

(b)          Required Lenders, Agent with the consent in writing of Required
Lenders, and Borrowers may, subject to the provisions of this Section 16.2(b),
from time to time enter into written supplemental agreements to this Agreement
or the Other Documents executed by Borrowers, for the purpose of adding or
deleting any provisions or otherwise changing, amending, varying or waiving in
any manner the rights of Lenders, Agent or Borrowers hereunder or thereunder or
the conditions, provisions or terms hereof or thereof or waiving any Event of
Default thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall:

 

(i)          increase or extend the Revolving Commitment, the Revolving
Commitment Percentage or the Revolving Commitment Amount of any Lender without
the consent of such Lender;

 

(ii)         waive, extend or postpone the Maturity Date or any date fixed by
this Agreement or any Other Document for any scheduled payment of principal or
interest of any Advance (excluding the due date of any mandatory prepayment of
an Advance), or any fee payable to any Lender, or reduce the principal amount of
or the rate of interest borne by any Advances or reduce any fee payable to any
Lender, without the consent of each Lender directly affected thereby (except
that Required Lenders may elect to waive or rescind any imposition of the
Default Rate under Section 3.1 or of default rates of Letter of Credit fees
under Section 3.2 (unless imposed by Agent));

 

(iii)        except in connection with any increase pursuant to Section 2.24
hereof, increase the Maximum Revolving Advance Amount without the consent of all
Lenders;

 

  -125- 

 

 

(iv)        alter the definition of the term Required Lenders or Supermajority
Lenders or alter, amend or modify this Section 16.2(b) or any provision of this
Agreement providing for consent or other action by all Lenders, without the
consent of all Lenders;

 

(v)         alter, amend or modify the provisions of Section 2.20 or 11.5
without the consent of all Lenders;

 

(vi)        except as permitted by Section 14.14, release all or substantially
all of the Collateral without the consent of all Lenders;

 

(vii)       other than in connection with a liquidation, dissolution or
disposition of a Credit Party permitted by the terms hereof or otherwise
consented to by Required Lenders or the payment in full of the Obligations,
release any Credit Party from its liability for the Obligations without the
consent of all of the Lenders; or

 

(viii)      increase the Advance Rates above the Advance Rates in effect on the
Closing Date or otherwise modify the Formula Amount if the effect thereof is to
increase the amount available to be borrowed by Borrowers without the consent of
the Supermajority Lenders.

 

Notwithstanding the foregoing:

 

(A)         No amendment, waiver, modification, elimination, or consent shall
amend, modify, or waive any provision of this Agreement or the Other Documents
pertaining to Issuer, or any other rights or duties of Issuer under this
Agreement or the Other Documents, without the written consent of Issuer, Agent,
Borrowers and the Required Lenders;

 

(B)         No amendment, waiver, modification, elimination, or consent shall
amend, modify, or waive any provision of this Agreement or the Other Documents
pertaining to Swing Loan Lender, or any other rights or duties of Swing Loan
Lender under this Agreement or the Other Documents, without the written consent
of Swing Loan Lender, Agent, Borrowers and the Required Lenders;

 

(C)         No amendment, waiver, modification, elimination, or consent shall
amend, modify, or waive any provision of this Agreement or the Other Documents
pertaining to Agent, or any other rights or duties of Agent under this Agreement
or the Other Documents, without the written consent of Agent, Borrowers and the
Required Lenders;

 

(D)         Anything in this Section 16.2(b) to the contrary notwithstanding,
(i) any amendment, modification, elimination, waiver, consent, termination, or
release of, or with respect to, any provision of this Agreement or any Other
Document that relates only to the relationship of the Lenders among themselves,
and that does not affect the rights or obligations of any Credit Party, shall
not require consent by or the agreement of any Credit Party, and (ii) any
amendment, waiver, modification, elimination, or consent of or with respect to
any provision of this Agreement or any Other Document may be entered into
without the consent of, or over the objection of, any Defaulting Lender; and

 

  -126- 

 

 

(E)         The Fee Letter may only be amended with the consent of Agent and
Borrowers (it being understood that no Lender's consent shall be required).

 

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

 

(d)          In the event that Agent requests the consent of a Lender pursuant
to this Section 16.2 and such consent is denied, then Agent may, at its option,
require such Lender to assign its interest in the Advances to Agent or to
another Lender or to any other Person designated by Agent in compliance with
Sections 3.11 and 16.3 (the "Designated Lender"), for a price equal to (i) the
then outstanding principal amount thereof plus (ii) accrued and unpaid interest
and fees due such Lender, which interest and fees shall be paid when collected
from Borrowers. In the event Agent elects to require any Lender to assign its
interest to Agent or to the Designated Lender, Agent will so notify such Lender
in writing within ten (10) days following such Lender's denial, and such Lender
will assign its interest to Agent or the Designated Lender no later than five
(5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender, Agent or the Designated Lender, as
appropriate, and Agent.

 

(e)          Notwithstanding (i) the existence of a Default or an Event of
Default, (ii) that any of the other applicable conditions precedent set forth in
Section 8.2 hereof have not been satisfied or the commitments of Lenders to make
Revolving Advances hereunder have been terminated for any reason, or (iii) any
other contrary provision of this Agreement at any time an Out-of-Formula Loan
exists or Borrowers make a request for an Advance that would result in an
Out-of-Formula Loan, Agent may in its discretion and without the consent of any
Lender, knowingly and intentionally, continue to make Revolving Advances (any
such intentional Revolving Advance, an "Intentional Overadvance") to Borrowers
unless such authorization is revoked by Required Lenders effective upon receipt
by Agent of written notice of such revocation from Required Lenders; provided,
that Agent may not make any Intentional Overadvance if, after giving effect to
such Intentional Overadvance, the aggregate outstanding Intentional Overadvances
would exceed ten percent (10%) of the Maximum Revolving Advance Amount (or such
higher amount as Required Lenders may consent to) or would cause the Advances to
exceed the Maximum Revolving Advance Amount. If Agent is willing in its sole and
absolute discretion to make Intentional Overadvances, Lenders holding the
Revolving Commitments shall be obligated to fund such Intentional Overadvances
in accordance with their respective Revolving Commitment Percentages, and such
Intentional Overadvances shall be payable on demand and shall bear interest at
the rate applicable for Revolving Advances consisting of Domestic Rate Loans;
provided that, if Agent does make Intentional Overadvances, neither Agent nor
Lenders shall be deemed thereby to have changed the limits of Section 2.1(a) nor
shall any Lender be obligated to fund Revolving Advances in excess of its
Revolving Commitment Amount. For purposes of this paragraph, the discretion
granted to Agent hereunder to make Intentional Overadvances shall not be limited
by the amount of the Out-of-Formula Loan. To the extent any Intentional
Overadvances are not actually funded by the other Lenders as provided for in
this Section 16.2(e), Agent may elect in its discretion to fund such Intentional
Overadvances and any such Intentional Overadvances so funded by Agent shall be
deemed to be Revolving Advances made by and owing to Agent, and Agent shall be
entitled to all rights (including accrual of interest) and remedies of a Lender
holding a Revolving Commitment under this Agreement and the Other Documents with
respect to such Revolving Advances. Subject to Section 11.5, payments and
proceeds of Collateral to be applied to the Revolving Advances shall be applied
first to the Intentional Overadvances and then to the other Revolving Advances.

 

  -127- 

 

 

(f)          In addition to (and not in substitution of) the discretionary
Revolving Advances permitted above in this Section 16.2, Agent is hereby
authorized by Borrowers and Lenders, at any time in Agent's sole discretion,
regardless of (i) the existence of a Default or an Event of Default,
(ii) whether any of the other applicable conditions precedent set forth in
Section 8.2 hereof have not been satisfied or the commitments of Lenders to make
Revolving Advances hereunder have been terminated for any reason, (iii) whether
an Out-of-Formula exists, or (iv) any other contrary provision of this
Agreement, to make Revolving Advances (the "Protective Advances") to Borrowers
on behalf of Lenders which Agent, in its Permitted Discretion, deems necessary
or desirable (a) to preserve or protect the Collateral, or any portion thereof,
(b) to enhance the likelihood of, or maximize the amount of, repayment of the
Advances and other Obligations, or (c) to pay any other amount chargeable to
Borrowers pursuant to the terms of this Agreement; provided, that the Protective
Advances made hereunder shall not exceed ten percent (10%) of the Maximum
Revolving Amount (unless Required Lenders agree to a higher amount). Lenders
holding the Revolving Commitments shall be obligated to fund such Protective
Advances and effect a settlement with Agent therefor upon demand of Agent in
accordance with their respective Revolving Commitment Percentages. To the extent
any Protective Advances are not actually funded by the other Lenders as provided
for in this Section 16.2(f), any such Protective Advances funded by Agent shall
be deemed to be Revolving Advances made by and owing to Agent, and Agent shall
be entitled to all rights (including accrual of interest) and remedies of a
Lender holding a Revolving Commitment under this Agreement and the Other
Documents with respect to such Revolving Advances.

 

16.3       Successors and Assigns; Participations; New Lenders.

 

(a)          This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.

 

  -128- 

 

 

(b)          Each Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other Persons (each such transferee
or purchaser of a participating interest, a "Participant"). Each Participant may
exercise all rights of payment (including rights of set-off) with respect to the
portion of such Advances held by it or other Obligations payable hereunder as
fully as if such Participant were the direct holder thereof provided that
(i) Borrowers shall not be required to pay to any Participant more than the
amount which it would have been required to pay to Lender which granted an
interest in its Advances or other Obligations payable hereunder to such
Participant had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder unless the sale of the participation to such
Participant is made with Borrower's prior written consent, and (ii) in no event
shall Borrowers be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Participant. Each Borrower hereby grants
to any Participant a continuing security interest in any deposits, moneys or
other property actually or constructively held by such Participant as security
for the Participant's interest in the Advances.

 

(c)          Any Lender, with the consent of Agent, may sell, assign or transfer
all or any part of its rights and obligations under or relating to Revolving
Advances and/or Term Loans under this Agreement and the Other Documents to one
or more additional Persons and one or more additional Persons may commit to make
Advances hereunder (each a "Purchasing Lender"), in minimum amounts of not less
than $5,000,000, pursuant to a Commitment Transfer Supplement, executed by a
Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for
recording under this Agreement in which such Lender has an interest]. Upon such
execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement,
(i) Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and obligations
of a Lender thereunder with a Revolving Commitment Percentage and/or Term Loan
Commitment Percentage, as applicable, as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Revolving Commitment
Percentages and/or Term Loan Commitment Percentages, as applicable, arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Each Borrower hereby consents to the addition of such Purchasing
Lender and the resulting adjustment of the Revolving Commitment Percentages
and/or Term Loan Commitment Percentages, as applicable, arising from the
purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing; provided,
however, that the consent of Borrowers (such consent not to be unreasonably
withheld or delayed) shall be required unless (x) an Event of Default has
occurred and is continuing at the time of such assignment or (y) such assignment
is to a Permitted Assignee; provided that Borrowers shall be deemed to have
consented to any such assignment unless it shall object thereto by written
notice to Agent within five (5) Business Days after having received prior notice
thereof.

 

  -129- 

 

 

(d)          Any Lender, with the consent of Agent which shall not be
unreasonably withheld or delayed, may directly or indirectly sell, assign or
transfer all or any portion of its rights and obligations under or relating to
Revolving Advances and/or Term Loans under this Agreement and the Other
Documents to an entity, whether a corporation, partnership, trust, limited
liability company or other entity that (i) is engaged in making, purchasing,
holding or otherwise investing in bank loans and similar extensions of credit in
the ordinary course of its business and (ii) is administered, serviced or
managed by the assigning Lender or an Affiliate of such Lender (a "Purchasing
CLO" and together with each Participant and Purchasing Lender, each a
"Transferee" and collectively the "Transferees"), pursuant to a Commitment
Transfer Supplement modified as appropriate to reflect the interest being
assigned ("Modified Commitment Transfer Supplement"), executed by any
intermediate purchaser, the Purchasing CLO, the transferor Lender, and Agent as
appropriate and delivered to Agent for recording. Upon such execution and
delivery, from and after the transfer effective date determined pursuant to such
Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder shall be
a party hereto and, to the extent provided in such Modified Commitment Transfer
Supplement, have the rights and obligations of a Lender thereunder and (ii) the
transferor Lender thereunder shall, to the extent provided in such Modified
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Modified Commitment Transfer Supplement creating a novation for
that purpose. Such Modified Commitment Transfer Supplement shall be deemed to
amend this Agreement to the extent, and only to the extent, necessary to reflect
the addition of such Purchasing CLO. Each Borrower hereby consents to the
addition of such Purchasing CLO. Borrowers shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.

 

(e)          Agent shall maintain at its address a copy of each Commitment
Transfer Supplement and Modified Commitment Transfer Supplement delivered to it
and a register (the "Register") for the recordation of the names and addresses
of each Lender and the outstanding principal, accrued and unpaid interest and
other fees due hereunder. The entries in the Register shall be conclusive, in
the absence of manifest error, and each Borrower, Agent and Lenders may treat
each Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowing Agent or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Agent shall receive a fee in
the amount of $3,500 payable by the applicable Purchasing Lender and/or
Purchasing CLO upon the effective date of each transfer or assignment (other
than to an intermediate purchaser) to such Purchasing Lender and/or Purchasing
CLO.

 

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

 

(g)          Notwithstanding anything to the contrary contained in this
Agreement, any Lender may at any time and from time to time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

 

  -130- 

 

 

16.4       Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.

 

16.5       Indemnity. Each Borrower shall defend, protect, indemnify, pay and
save harmless Agent, Issuer, each Lender and each of their respective officers,
directors, Affiliates, attorneys, employees and agents (each an "Indemnified
Party") for and from and against any and all claims, demands, liabilities,
obligations, losses, damages, penalties, fines, actions, judgments, suits,
costs, charges, expenses and disbursements of any kind or nature whatsoever
(including fees and disbursements of counsel (including allocated costs of
internal counsel)) (collectively, "Claims") which may be imposed on, incurred
by, or asserted against any Indemnified Party in arising out of or in any way
relating to or as a consequence, direct or indirect, of: (i) this Agreement, the
Other Documents, the Advances and other Obligations and/or the transactions
contemplated hereby including the Transactions, (ii) any action or failure to
act or action taken only after delay or the satisfaction of any conditions by
any Indemnified Party in connection with and/or relating to the negotiation,
execution, delivery or administration of the Agreement and the Other Documents,
the credit facilities established hereunder and thereunder and/or the
transactions contemplated hereby including the Transactions, (iii) any
Borrower's or any Guarantor's failure to observe, perform or discharge any of
its covenants, obligations, agreements or duties under or breach of any of the
representations or warranties made in this Agreement and the Other Documents,
(iv) the enforcement of any of the rights and remedies of Agent, Issuer or any
Lender under the Agreement and the Other Documents, (v) any threatened or actual
imposition of fines or penalties, or disgorgement of benefits, for violation of
any Anti-Terrorism Law by any Borrower, any Affiliate or Subsidiary of any
Borrowers, or any Guarantor, and (vi) any claim, litigation, proceeding or
investigation instituted or conducted by any Governmental Body or
instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement or the Other Documents, whether or not Agent or any Lender is a party
thereto. Without limiting the generality of any of the foregoing, each Borrower
shall defend, protect, indemnify, pay and save harmless each Indemnified Party
from (x) any Claims which may be imposed on, incurred by, or asserted against
any Indemnified Party arising out of or in any way relating to or as a
consequence, direct or indirect, of the issuance of any Letter of Credit
hereunder and (y) any Claims which may be imposed on, incurred by, or asserted
against any Indemnified Party under any Environmental Laws with respect to or in
connection with the Real Property, any Hazardous Discharge, the presence of any
Hazardous Materials affecting the Real Property (whether or not the same
originates or emerges from the Real Property or any contiguous real estate),
including any Claims consisting of or relating to the imposition or assertion of
any Lien on any of the Real Property under any Environmental Laws and any loss
of value of the Real Property as a result of the foregoing except to the extent
such loss, liability, damage and expense is attributable to any Hazardous
Discharge resulting from actions on the part of Agent or any Lender. Borrowers'
obligations under this Section 16.5 shall arise upon the discovery of the
presence of any Hazardous Materials at the Real Property, whether or not any
federal, state, or local environmental agency has taken or threatened any action
in connection with the presence of any Hazardous Materials, in each such case
except to the extent that any of the foregoing arises out of the gross
negligence or willful misconduct of the Indemnified Party (as determined by a
court of competent jurisdiction in a final and non-appealable judgment). Without
limiting the generality of the foregoing, this indemnity shall extend to any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including
fees and disbursements of counsel) asserted against or incurred by any of the
Indemnified Parties by any Person under any Environmental Laws or similar laws
by reason of any Borrower's or any other Person's failure to comply with laws
applicable to solid or hazardous waste materials, including Hazardous Materials
and Hazardous Waste, or other Toxic Substances. Additionally, if any taxes
(excluding taxes imposed upon or measured solely by the net income of Agent and
Lenders, but including any intangibles taxes, stamp tax, recording tax or
franchise tax) shall be payable by Agent, Lenders or Borrowers on account of the
execution or delivery of this Agreement, or the execution, delivery, issuance or
recording of any of the Other Documents, or the creation or repayment of any of
the Obligations hereunder, by reason of any Applicable Law now or hereafter in
effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for
payment of) all such taxes, including interest and penalties thereon, and will
indemnify and hold the Indemnified Parties harmless from and against all
liability in connection therewith.

 

  -131- 

 

 

16.6       Notice. Any notice or request hereunder may be given to Borrowing
Agent or any Borrower or to Agent or any Lender at their respective addresses
set forth below or at such other address as may hereafter be specified in a
notice designated as a notice of change of address under this Section. Any
notice, request, demand, direction or other communication (for purposes of this
Section 16.6 only, a "Notice") to be given to or made upon any party hereto
under any provision of this Agreement shall be given or made by telephone or in
writing (which includes by means of electronic transmission (i.e., "e-mail") or
facsimile transmission or by setting forth such Notice on a website to which
Borrowers are directed (an "Internet Posting") if Notice of such Internet
Posting (including the information necessary to access such site) has previously
been delivered to the applicable parties hereto by another means set forth in
this Section 16.6) in accordance with this Section 16.6. Any such Notice must be
delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Section 16.6 hereof or in accordance with
any subsequent unrevoked Notice from any such party that is given in accordance
with this Section 16.6. Any Notice shall be effective:

 

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

 

(b)          If given by mail, four (4) days after such Notice is deposited with
the United States Postal Service, with first-class postage prepaid, return
receipt requested;

 

(c)          In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, an
Internet Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);

 

  -132- 

 

 

(d)          In the case of a facsimile transmission, when sent to the
applicable party's facsimile machine's telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;

 

(e)          In the case of electronic transmission, when actually received;

 

(f)          In the case of an Internet Posting, upon delivery of a Notice of
such posting (including the information necessary to access such site) by
another means set forth in this Section 16.6; and

 

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

 

Any Lender giving a Notice to Borrowing Agent or any Borrower shall concurrently
send a copy thereof to Agent, and Agent shall promptly notify the other Lenders
of its receipt of such Notice.

 

(A)         If to Agent or PNC at:

 

PNC Bank, National Association

c/o PNC Business Credit

One North Franklin Street

Chicago, Illinois 60606

Attention:       Account Manager – CTI Industries

Telephone:     (312) 454-2920

Facsimile:        (312) 454-2919

 

with a copy to:

 

PNC Bank, National Association

PNC Agency Services

PNC Firstside Center

500 First Avenue, 4th Floor

Pittsburgh, Pennsylvania 15219

Attention:      Lisa Pierce

Telephone:    (412) 762-6442

Facsimile:       (412) 762-8672

 

with an additional copy to:

 

Goldberg Kohn Ltd.

55 East Monroe, Suite 3300

Chicago, Illinois 60603

Attention:      Jeffrey Dunlop

Telephone:    (312) 863-7128

Facsimile:       (312) 863-7828

 

  -133- 

 

 

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

 

(C)         If to Borrowing Agent or any Borrower:

 

c/o CTI Industries Corporation

22160 N. Pepper Road

Barrington, Illinois 60010

Attention:       ________________

Telephone:     _______________

Facsimile:        _______________

 

with a copy to:

 

Vanasco Genelly & Miller

33 North LaSalle Street, Suite 2200

Chicago, Illinois 60602

Attention:       Gerald Miller

Telephone:     (312) 786-5100

Facsimile:        (312) 786-5111

 

16.7       Survival. The obligations of Borrowers under Sections 2.2(f), 2.2(g),
2.2(h), 3.7, 3.8, 3.9, 3.10, 16.5 and 16.9 and the obligations of Lenders under
Sections 2.2, 2.15(b), 2.16, 2.18, 2.19, 14.8 and 16.5, shall survive
termination of this Agreement and the Other Documents and payment in full of the
Obligations.

 

16.8       Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under Applicable Laws, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.

 

16.9       Expenses. Borrowers shall pay (i) all out-of-pocket expenses incurred
by Agent and its Affiliates (including the reasonable fees, charges and
disbursements of counsel for Agent), and shall pay all fees and time charges and
disbursements for attorneys who may be employees of Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
Other Documents or any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all out-of-pocket expenses incurred by
Issuer in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder, (iii) all out-of-pocket
expenses incurred by Agent, any Lender or Issuer (including the fees, charges
and disbursements of any counsel for Agent, any Lender or Issuer), and shall pay
all fees and time charges for attorneys who may be employees of Agent, any
Lender or Issuer, in connection with the enforcement or protection of its rights
(A) in connection with this Agreement and the Other Documents, including its
rights under this Section, or (B) in connection with the Advances made or
Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit, and (iv) all reasonable out-of-pocket expenses of
Agent's regular employees and agents engaged periodically to perform audits of
the any Borrower's or any Borrower's Affiliate's or Subsidiary's books, records
and business properties.

 

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16.10     Injunctive Relief. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or threatens to fail to perform, observe or
discharge such obligations or liabilities, any remedy at law may prove to be
inadequate relief to Lenders; therefor, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.

 

16.11     Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to any Borrower, or any Guarantor (or
any Affiliate of any such Person) for indirect, punitive, exemplary or
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations
or as a result of any transaction contemplated under this Agreement or any Other
Document.

 

16.12     Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.

 

16.13     Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of and by different parties hereto on separate counterparts, all of
which, when so executed, shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile or electronic transmission (including email transmission of a PDF
image) shall be deemed to be an original signature hereto.

 

16.14     Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.

 

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16.15     Confidentiality; Sharing Information. Agent, each Lender and each
Transferee shall hold all non-public information obtained by Agent, such Lender
or such Transferee pursuant to the requirements of this Agreement in accordance
with Agent's, such Lender's and such Transferee's customary procedures for
handling confidential information of this nature; provided, however, Agent, each
Lender and each Transferee may disclose such confidential information (a) to its
examiners, Affiliates, outside auditors, counsel and other professional
advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by Applicable Law, Agent, each Lender and each Transferee shall use
its reasonable best efforts prior to disclosure thereof, to notify the
applicable Borrower of the applicable request for disclosure of such non-public
information (A) by a Governmental Body or representative thereof (other than any
such request in connection with an examination of the financial condition of a
Lender or a Transferee by such Governmental Body) or (B) pursuant to legal
process and (ii) in no event shall Agent, any Lender or any Transferee be
obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated. Each Borrower acknowledges that from
time to time financial advisory, investment banking and other services may be
offered or provided to such Borrower or one or more of its Affiliates (in
connection with this Agreement or otherwise) by any Lender or by one or more
Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes
each Lender to share any information delivered to such Lender by such Borrower
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Lender to enter into this Agreement, to any such Subsidiary or
Affiliate of such Lender, it being understood that any such Subsidiary or
Affiliate of any Lender receiving such information shall be bound by the
provisions of this Section 16.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement. Notwithstanding any non-disclosure agreement or
similar document executed by Agent in favor of any Borrower or any of any
Borrower's affiliates, the provisions of this Agreement shall supersede such
agreements.

 

16.16     Publicity. Each Borrower and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including announcements which are commonly known
as tombstones, in such publications and to such selected parties as Agent shall
in its sole and absolute discretion deem appropriate.

 

16.17     Certifications From Banks and Participants; USA PATRIOT Act.

 

(a)          Each Lender or assignee or participant of a Lender that is not
incorporated under the Laws of the United States of America or a state thereof
(and is not excepted from the certification requirement contained in Section 313
of the USA PATRIOT Act and the applicable regulations because it is both (i) an
affiliate of a depository institution or foreign bank that maintains a physical
presence in the United States or foreign country, and (ii) subject to
supervision by a banking authority regulating such affiliated depository
institution or foreign bank) shall deliver to the Agent the certification, or,
if applicable, recertification, certifying that such Lender is not a "shell" and
certifying to other matters as required by Section 313 of the USA PATRIOT Act
and the applicable regulations: (1) within ten (10) days after the Closing Date,
and (2) as such other times as are required under the USA PATRIOT Act.

 

(b)          The USA PATRIOT Act requires all financial institutions to obtain,
verify and record certain information that identifies individuals or business
entities which open an "account" with such financial institution. Consequently,
Lender may from time to time request, and each Borrower shall provide to Lender,
such Borrower's name, address, tax identification number and/or such other
identifying information as shall be necessary for Lender to comply with the USA
PATRIOT Act and any other Anti-Terrorism Law.

 

  -136- 

 

 

 

16.18     Anti-Terrorism Laws.

 

(a)          Each Borrower represents and warrants that (i) no Covered Entity is
a Sanctioned Person and (ii) no Covered Entity, either in its own right or
through any third party, (A) has any of its assets in a Sanctioned Country or in
the possession, custody or control of a Sanctioned Person in violation of any
Anti-Terrorism Law; (B) does business in or with, or derives any of its income
from investments in or transactions with, any Sanctioned Country or Sanctioned
Person in violation of any Anti-Terrorism Law; or (C) engages in any dealings or
transactions prohibited by any Anti-Terrorism Law.

 

(b)          Each Borrower covenants and agrees that (i) no Covered Entity will
become a Sanctioned Person, (ii) no Covered Entity, either in its own right or
through any third party, will (A) have any of its assets in a Sanctioned Country
or in the possession, custody or control of a Sanctioned Person in violation of
any Anti-Terrorism Law; (B) do business in or with, or derive any of its income
from investments in or transactions with, any Sanctioned Country or Sanctioned
Person in violation of any Anti-Terrorism Law; (C) engage in any dealings or
transactions prohibited by any Anti-Terrorism Law or (D) use the Advances to
fund any operations in, finance any investments or activities in, or, make any
payments to, a Sanctioned Country or Sanctioned Person in violation of any
Anti-Terrorism Law, (iii) the funds used to repay the Obligations will not be
derived from any unlawful activity, (iv) each Covered Entity shall comply with
all Anti-Terrorism Laws and (v) the Borrowers shall promptly notify the Agent in
writing upon the occurrence of a Reportable Compliance Event.

 

16.19     Judgment Currency. If, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder or any Other Document in
one currency into another currency, the rate of exchange used shall be that at
which in accordance with normal banking procedures Agent could purchase the
first currency with such other currency on the Business Day preceding that on
which final judgment is given. The obligation of each Borrower in respect of any
such sum due from it to Agent or any Lender hereunder or under the Other
Documents shall, notwithstanding any judgment in a currency (the "Judgment
Currency") other than that in which such sum is denominated in accordance with
the applicable provisions of this Agreement (the "Agreement Currency"), be
discharged only to the extent that on the Business Day following receipt by
Agent or such Lender, as the case may be, of any sum adjudged to be so due in
the Judgment Currency, Agent or such Lender, as the case may be, may in
accordance with normal banking procedures purchase the Agreement Currency with
the Judgment Currency. If the amount of the Agreement Currency so purchased is
less than the sum originally due to Agent or any Lender from any Borrower in the
Agreement Currency, such Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify Agent or such Lender, as the
case may be, against such loss. If the amount of the Agreement Currency so
purchased is greater than the sum originally due to Agent or any Lender in such
currency, Agent or such Lender, as the case may be, agrees to return the amount
of any excess to such Borrower (or to any other Person who may be entitled
thereto under applicable law).

 

[signature page follows]

 

  -137- 

 

 

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

 

  BORROWER:       CTI INDUSTRIES CORPORATION         By: /s/ Stephen M. Merrick
  Name: Stephen M. Merrick   Title: CEO

 

  GUARANTORS:       CTI SUPPLY, INC.         By: /s/ Stephen M. Merrick   Name:
Stephen M. Merrick   Title: President

 

    FLEXO UNIVERSAL, S. DE R.L. DE C.V.           By:  /s/ Stephen M. Merrick  
  Name: Stephen M. Merrick     Title: Secretary

 

Signature Page to Revolving Credit and Term Loan and Security Agreement

 

 

 

 

  PNC BANK, NATIONAL ASSOCIATION,   as Agent and as the sole Lender       By:
/s/ James Clifton   Name: James Clifton   Title: Senior Vice President      
Revolving Commitment Percentage: 100%   Revolving Commitment Amount $18,000,000
      Term Loan Commitment Percentage: 100%   Term Loan Commitment Amount
$6,000,000

 

Signature Page to Revolving Credit and Term Loan and Security Agreement