Exhibit 10.1

 

 

 

AMENDED AND RESTATED

CREDIT AND SECURITY AGREEMENT

by and among

INTEGRATED ELECTRICAL SERVICES, INC.

IES COMMERCIAL & INDUSTRIAL, LLC

IES COMMERCIAL, INC.

IES MANAGEMENT, LP

IES MANAGEMENT ROO, LP

IES PURCHASING & MATERIALS, INC.

IES RESIDENTIAL, INC.

INTEGRATED ELECTRICAL FINANCE, INC.

IES RENEWABLE ENERGY, LLC

IES SUBSIDIARY HOLDINGS, INC.

HK ENGINE COMPONENTS, LLC

MAGNETECH INDUSTRIAL SERVICES, INC.

as Borrowers,

and

IES CONSOLIDATION, LLC

IES PROPERTIES, INC.

IES SHARED SERVICES, INC.

IES TANGIBLE PROPERTIES, INC.

KEY ELECTRICAL SUPPLY, INC.

IES OPERATIONS GROUP, INC.

ICS HOLDINGS LLC

as Guarantors,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender

Dated as of September 24, 2014

 

 

 

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Table of Contents

 

             Page   1.  

DEFINITIONS AND CONSTRUCTION

     2      1.1  

Definitions, Code Terms, Accounting Terms and Construction

     2    2.  

LOANS AND TERMS OF PAYMENT

     2      2.1  

Revolving Loan Advances

     2      2.2  

[Reserved]

     2      2.3  

Borrowing Procedures

     2      2.4  

Payments; Prepayments

     3      2.5  

Clearance Charge

     4      2.6  

Interest Rates: Rates, Payments, and Calculations

     4      2.7  

Designated Account

     5      2.8  

Maintenance of Loan Account; Statements of Obligations

     6      2.9  

Maturity Termination Dates

     6      2.10  

Effect of Maturity

     6      2.11  

Termination or Reduction by Borrowers

     7      2.12  

Fees

     7      2.13  

Letters of Credit

     7      2.14  

Illegality; Impracticability; Increased Costs

     11      2.15  

Capital Requirements

     11      2.16  

Extent of Each Borrower’s Liability, Contribution

     11      2.17  

Parent as Agent for Borrowers

     12    3.  

SECURITY INTEREST

     13      3.1  

Grant of Security Interest

     13      3.2  

Borrowers Remain Liable

     13      3.3  

Assignment of Insurance

     13      3.4  

Financing Statements

     14    4.  

CONDITIONS

     14      4.1  

Conditions Precedent to the Initial Extension of Credit

     14      4.2  

Conditions Precedent to all Extensions of Credit

     14      4.3  

Conditions Subsequent

     14    5.  

REPRESENTATIONS AND WARRANTIES

     15    6.  

AFFIRMATIVE COVENANTS

     15      6.1  

Financial Statements, Reports, Certificates

     15      6.2  

Collateral Reporting

     15      6.3  

Existence

     15      6.4  

Maintenance of Properties

     16      6.5  

Taxes

     16      6.6  

Insurance

     16      6.7  

Inspections, Exams, Audits and Appraisals

     17      6.8  

Account Verification

     17      6.9  

Compliance with Laws

     17      6.10  

Environmental

     17      6.11  

Disclosure Updates

     18   

 

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  6.12  

Collateral Covenants

   19   6.13  

Material Contracts

   22   6.14  

Location of Inventory, Equipment and Books

   22   6.15  

Further Assurances

   22   6.16  

Formation of Subsidiaries

   23 7.  

NEGATIVE COVENANTS

   23   7.1  

Indebtedness

   23   7.2  

Liens

   24   7.3  

Restrictions on Fundamental Changes

   24   7.4  

Disposal of Assets

   24   7.5  

Change Name

   24   7.6  

Nature of Business

   24   7.7  

Prepayments and Amendments

   25   7.8  

Change of Control

   25   7.9  

Restricted Junior Payments

   25   7.10  

Accounting Methods

   25   7.11  

Investments; Controlled Investments

   26   7.12  

Transactions with Affiliates

   26   7.13  

Use of Proceeds

   26   7.14  

Limitation on Issuance of Stock

   27   7.15  

Consignments

   27   7.16  

Inventory and Equipment with Bailees

   27   7.17  

Use of Proceeds in Connection with Bonded Contracts

   27   7.18  

Surety Bonds

   27 8.  

FINANCIAL COVENANTS

   27 9.  

EVENTS OF DEFAULT

   27 10.  

RIGHTS AND REMEDIES

   30   10.1  

Rights and Remedies

   30   10.2  

Additional Rights and Remedies

   31   10.3  

Disposition of Pledged Interests by Lender

   32   10.4  

Voting and Other Rights in Respect of Pledged Interests

   32   10.5  

Lender Appointed Attorney in Fact

   33   10.6  

Remedies Cumulative

   34   10.7  

Crediting of Payments and Proceeds

   34   10.8  

Marshaling

   34   10.9  

License

   34 11.  

WAIVERS; INDEMNIFICATION

   34   11.1  

Demand; Protest; etc.

   34   11.2  

The Lender’s Liability for Collateral

   35   11.3  

Indemnification

   35 12.  

NOTICES

   36 13.  

CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

   37 14.  

ASSIGNMENTS; SUCCESSORS

   38

 

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15.

 

AMENDMENTS; WAIVERS

     38   

16.

 

TAXES

     38   

17.

 

GENERAL PROVISIONS

     39     

17.1

 

Effectiveness

     39     

17.2

 

Section Headings

     39     

17.3

 

Interpretation

     39     

17.4

 

Severability of Provisions

     39     

17.5

 

Debtor-Creditor Relationship

     39     

17.6

 

Counterparts; Electronic Execution

     39     

17.7

 

Revival and Reinstatement of Obligations

     39     

17.8

 

Confidentiality

     40     

17.9

 

Lender Expenses

     40     

17.10

 

Setoff

     40     

17.11

 

Survival

     41     

17.12

 

Patriot Act

     41     

17.13

 

Integration

     41     

17.14

 

Bank Product Providers

     41     

17.15

 

Non-Applicability of Chapter 346

     42     

17.16

 

Waiver of Rights under Texas Deceptive Trade Practices Act

     42     

17.17

 

Amendment and Restatement

     42   

EXHIBITS AND SCHEDULES

 

Schedule 1.1

  

Definitions

Schedule 2.12

  

Fees

Schedule 6.1

  

Financial Statement, Reports, Certificates

Schedule 6.2

  

Collateral Reporting

Exhibit A

  

Form of Compliance Certificate

Exhibit B

  

Conditions Precedent

Exhibit C

  

Conditions Subsequent

Exhibit D

  

Representations and Warranties

Exhibit E

  

Information Certificate

Exhibit F

  

Pledged Interest Addendum

Schedule A-1

  

Collection Account

Schedule A-2

  

Authorized Person

Schedule D-1

  

Designated Account

Schedule P-1

  

Permitted Investments

Schedule P-2

  

Permitted Liens

 

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AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

THIS AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (this “Agreement”), is
entered into as of September 24, 2014, by and among WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Lender”), INTEGRATED ELECTRICAL SERVICES, INC., a Delaware
corporation; IES COMMERCIAL & INDUSTRIAL, LLC, a Delaware limited liability
company; IES COMMERCIAL, INC., a Delaware corporation; IES MANAGEMENT, LP, a
Texas limited partnership; IES MANAGEMENT ROO, LP, a Texas limited partnership;
IES PURCHASING & MATERIALS, INC., a Delaware corporation; IES RESIDENTIAL, INC.,
a Delaware corporation; INTEGRATED ELECTRICAL FINANCE, INC., a Delaware
corporation; IES SUBSIDIARY HOLDINGS, INC., a Delaware corporation; MAGNETECH
INDUSTRIAL SERVICES, INC., an Indiana corporation; HK ENGINE COMPONENTS, LLC, an
Indiana limited liability company; IES RENEWABLE ENERGY, LLC, a Delaware limited
liability company (each, individually a “Borrower”, and collectively, the
“Borrowers”), IES CONSOLIDATION, LLC, a Delaware limited liability company; IES
PROPERTIES, INC., a Delaware corporation; IES SHARED SERVICES, INC., a Delaware
corporation; IES TANGIBLE PROPERTIES, INC., a Delaware corporation; KEY
ELECTRICAL SUPPLY, INC., a Texas corporation; IES OPERATIONS GROUP, INC., a
Delaware corporation and ICS HOLDINGS LLC, an Arizona limited liability company
(each, individually a (“Guarantor”), and collectively, the “Guarantors”).

RECITALS:

Borrower and Lender are parties to that certain Credit and Security Agreement
dated as of August 9, 2012, executed by and among Borrowers, Guarantors, and
Lender as the same has been amended, restated, modified or supplemented from
time to time prior to the date hereof (the “Existing Credit Agreement”) pursuant
to which Lender made certain revolving and term loans and other financial
accommodations to Borrower (the “Existing Loans”), and Borrower granted to
Lender a security interest in all of the Collateral (as described in the
Existing Credit Agreement, the “Existing Collateral”) as security for all of the
Indebtedness (as defined therein, the “Existing Obligations”). Pursuant to the
Existing Credit Agreement, Lender and Borrower entered into various other Loan
Documents (as defined in the Existing Credit Agreement) (collectively, including
the Existing Credit Agreement, the “Existing Loan Documents”).

Borrower has requested that Lender agree to increase, extend and continue to
provide the Existing Loans other than the Term Loan which is being paid in full
on the date hereof, as well as make certain additional financial accommodations
to Borrower.

The parties have agreed (i) to amend and restate the Existing Credit Agreement
in its entirety as set forth herein, (ii) that, from and after the date hereof,
the Existing Loans and the other Existing Obligations outstanding under the
Existing Credit Agreement shall be governed by and deemed to be outstanding
under the amended and restated terms set forth in this Agreement and the other
Loan Documents, and (iii) that the Existing Obligations are and shall continue
to be (and all Obligations incurred pursuant hereto shall be) secured by, among
other things, the Existing Collateral as well as the other Collateral (as
defined herein).

It is the intent of the parties that the execution and delivery of this
Agreement, which is made for the purposes described in the foregoing recitals,
shall not effectuate a novation of any of the Existing Loan Documents, or except
as set forth herein constitute a release or discharge of the Existing
Obligations or the Existing Collateral, but rather as a substitution of certain
terms governing the payment and performance of such obligations and
indebtedness.

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NOW, THEREFORE, for valuable consideration the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:

1.DEFINITIONS AND CONSTRUCTION.

1.1 Definitions, Code Terms, Accounting Terms and Construction. Capitalized
terms used in this Agreement shall have the meanings specified therefor on
Schedule 1.1. Additionally, matters of (i) interpretation of terms defined in
the Code, (ii) interpretation of accounting terms and (iii) construction are set
forth in Schedule 1.1.

2. LOANS AND TERMS OF PAYMENT.

2.1 Revolving Loan Advances.

(a) Subject to the terms and conditions of this Agreement, and during the term
of this Agreement, Lender agrees to make revolving loans (“Advances”) to
Borrowers in an amount at any one time outstanding not to exceed the lesser of:

(i) the Maximum Revolver Amount less the Letter of Credit Usage at such time,
and

(ii) the Borrowing Base at such time less the Letter of Credit Usage, other than
Letter of Credit Usage in respect of Cash Collateralized Letters of Credit, at
such time.

(b) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to
the terms and conditions of this Agreement, reborrowed at any time during the
term of this Agreement. The outstanding principal amount of the Advances,
together with interest accrued and unpaid thereon, shall be due and payable on
the Termination Date. Lender has no obligation to make an Advance at any time
following the occurrence and during the continuance of a Default or an Event of
Default.

(c) If at any time the Maximum Revolver Amount is less than the amount of the
Borrowing Base, the amount of Advances available under Section 2.1(a) above
shall be reduced by any Reserves established by Lender with respect to amounts
that may be payable by any Borrower to third parties. Lender agrees it shall use
reasonable efforts to promptly notify Borrowers upon establishing any new
Reserves; provided, however, Lender’s failure to do so shall not impact the
amount of Advances available hereunder or impose any liability upon Lender
whatsoever.

2.2 [Reserved].

2.3 Borrowing Procedures.

(a) Procedure for Borrowing. Provided Lender has not separately agreed that
Borrowers may use the Loan Management Service, each Borrowing shall be made by a
written request by an Authorized Person delivered to Lender. Such written
request must be received by Lender no later than 1:00 p.m. (Eastern time) on the
Business Day that is the requested Funding Date specifying (i) the amount of
such Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day. At Lender’s election, in lieu of delivering the above-described written
request, any Authorized Person may give Lender telephonic notice of such request
by the required time. Lender is authorized to make the Advances, and to issue
the Letters of Credit, under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person.

 

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(b) Making of Loans. Promptly after receipt of a request for a Borrowing
pursuant to Section 2.3(a), Lender shall make the proceeds thereof available to
Borrowers on the applicable Funding Date by transferring immediately available
funds equal to such amount to the Designated Account; provided, however, that,
Lender shall not have the obligation to make any Advance if (1) one (1) or more
of the applicable conditions precedent set forth in Section 4 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless such
condition has been waived by Lender, or (2) the requested Borrowing would exceed
the Availability on such Funding Date.

(c) Loan Management Service. If Lender has separately agreed that Borrowers may
use the Loan Management Service, Borrowers shall not request and Lender shall no
longer honor a request for an Advance made in accordance with Section 2.3(a) and
all Advances will instead be initiated by Lender and credited to the Designated
Account as Advances as of the end of each Business Day in an amount sufficient
to maintain an agreed upon ledger balance in the Designated Account, subject
only to Availability as provided in Section 2.1. If Lender terminates Borrowers’
access to the Loan Management Service, Borrowers may continue to request
Advances as provided in Section 2.3(a), subject to the other terms and
conditions of this Agreement. Lender shall have no obligation to make an Advance
through the Loan Management Service after the occurrence and during the
continuance of a Default or an Event of Default, or in an amount in excess of
Availability, and may terminate the Loan Management Service at any time in its
sole discretion.

(d) Protective Advances. Lender may make an Advance for any reason at any time
in its Permitted Discretion, without Borrowers’ compliance with any of the
conditions of this Agreement, and (i) disburse the proceeds directly to third
Persons in order to protect Lender’s interest in the Collateral or to perform
any obligation of Borrowers under this Agreement or otherwise to enhance the
likelihood of repayment of the Obligations, or (ii) apply the proceeds to
outstanding Obligations then due and payable (such Advance, a “Protective
Advance”). Lender agrees it shall use reasonable efforts to promptly notify
Borrowers upon making any Protective Advance (other than during the continuance
of an Event of Default); provided, however, Lender’s failure to do so shall not
impact Borrowers’ obligation to repay such Protective Advance or otherwise
impose any liability upon Lender whatsoever.

2.4 Payments; Prepayments.

(a) Payments by Borrowers. Except as otherwise expressly provided herein, all
payments by Borrowers shall be made as directed by Lender or as otherwise
specified in the applicable Cash Management Documents.

(b) Payments by Account Debtors. From and after the date on which (i) an Event
of Default has occurred or (ii) Borrowers’ Liquidity is at any time less than
$10,000,000 as set forth on the monthly calculation delivered to Lender pursuant
to Section 6.1 of the Agreement (a “Springing Lockbox Event”), Borrowers shall,
unless otherwise notified by Lender in writing, instruct all Account Debtors to
make payments either directly to the Lockbox for deposit by Lender directly to
the Collection Account, or instruct them to deliver such payments to Lender by
wire transfer, ACH, or other means as Lender may direct for deposit to the
Lockbox or Collection Account or for direct application to reduce the
outstanding Advances. If any Borrower receives a payment of the Proceeds of
Collateral directly (whether before or after the occurrence of a Springing
Lockbox Event), such Borrower will promptly deposit the payment or Proceeds into
the Collection Account. Until so deposited, such Borrower will hold all such
payments and Proceeds in trust for Lender without commingling with other funds
or property.

(c) Crediting Payments. For purposes of calculating Availability and the accrual
of interest on outstanding Obligations, unless otherwise provided in the
applicable Cash Management Documents or as otherwise agreed between Borrowers
and Lender, each payment shall be applied to the

 

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Obligations as of the first Business Day following the Business Day of deposit
to the Collection Account of immediately available funds or other receipt of
immediately available funds by Lender provided such payment is received in
accordance with Lender’s usual and customary practices as in effect from time to
time. Any payment received by Lender that is not a transfer of immediately
available funds shall be considered provisional until the item or items
representing such payment have been finally paid under applicable law. Should
any payment item not be honored when presented for payment, then Borrowers shall
be deemed not to have made such payment, and that portion of Borrowers’
outstanding Obligations corresponding to the amount of such dishonored payment
item shall be deemed to bear interest as if the dishonored payment item had
never been received by Lender. Each reduction in outstanding Advances resulting
from the application of such payment to the outstanding Advances shall be
accompanied by an equal reduction in the amount of outstanding Accounts.

(d) Application of Payments. All Collections and all Proceeds of Collateral
received by Lender shall be applied to reduce the outstanding Obligations in the
following manner: (i) so long as no Event of Default has occurred and is
continuing and no Advances are outstanding, as requested by Borrower, and
(ii) otherwise as Lender shall determine in its discretion. For the avoidance of
doubt, to the extent Borrower does not designate its preferred application of
Collection and Proceeds in writing to Lender under clause (i) above, Lender
shall apply such Collections and Proceeds in such manner as determined in its
sole discretion. After payment in full in cash of all Obligations, any remaining
balance shall be transferred to the Designated Account or otherwise to such
other Person entitled thereto under applicable law.

(e) [Reserved].

(f) Mandatory Prepayments. If, at any time, (i) the Revolver Usage exceeds
(A) the Borrowing Base or (B) the Maximum Revolver Amount, less Reserves (in
accordance with Section 2.1(c)) at such time or (ii) (A) the Revolver Usage on
such date exceeds (B) the Maximum Credit, less Reserves (in accordance with
Section 2.1(c)) at such time (such excess amount described in clauses (i) and
(ii) being referred to as the “Overadvance Amount”), then Borrowers shall
immediately upon demand prepay the Obligations in an aggregate amount equal to
the Overadvance Amount. If payment in full of the outstanding revolving loans is
insufficient to eliminate the Overadvance Amount and Letter of Credit Usage
continues to exceed the Borrowing Base, Borrowers shall maintain Letter of
Credit Collateralization of the outstanding Letter of Credit Usage sufficient to
eliminate the Overadvance Amount. Lender shall not be obligated to provide any
Advances during any period that an Overadvance Amount is outstanding.

2.5 Clearance Charge. Collections received by Lender shall be applied as
provided in Sections 2.4(c) and (d), but the Obligations paid with such
Collections shall continue to accrue interest at the rate then applicable to
Advances as provided under Section 2.6 through the end of the first Business Day
following the Business Day that such Collections were applied to the
Obligations. This one (1) Business Day clearance charge on all Collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
the financing of Borrowers and shall apply irrespective of whether or not there
are any outstanding monetary Obligations. The parties acknowledge and agree that
the economic benefit of the foregoing provisions of this Section 2.5 shall
accrue exclusively to Lender.

2.6 Interest Rates: Rates, Payments, and Calculations.

(a) Interest Rates. Except as provided in Section 2.6(b), the principal amount
of all Obligations (except for the undrawn Letters of Credit and Bank Products)
that have been charged to the Loan Account pursuant to the terms hereof shall
bear interest on the Daily Balance thereof at a per annum rate equal to the
Interest Rate plus the applicable Interest Rate Margin.

 

4

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(b) Default Rate. Upon the occurrence and during the continuation of an Event of
Default and at any time following the Termination Date,

(i) the principal amount of all Obligations (except for undrawn Letters of
Credit and Bank Products) that have been charged to the Loan Account pursuant to
the terms hereof shall bear interest on the Daily Balance thereof at a per annum
rate equal to three (3) percentage points above the per annum rate otherwise
applicable thereunder, and

(ii) the Letter of Credit fee provided for in Section 2.12 shall be increased by
three (3) percentage points above the per annum rate otherwise applicable
hereunder.

(c) Payment. Except to the extent provided to the contrary in Section 2.12, all
interest, all Letter of Credit fees, all other fees payable hereunder or under
any of the other Loan Documents, all costs and expenses payable hereunder or
under any of the other Loan Documents, and all Lender Expenses shall be due and
payable, in arrears, on the first day of each month. Each Borrower hereby
authorizes Lender, from time to time without prior notice to Borrowers, to
charge all interest, Letter of Credit fees, and all other fees payable hereunder
or under any of the other Loan Documents (in each case, as and when due and
payable), all costs and expenses payable hereunder or under any of the other
Loan Documents (in each case, as and when accrued or incurred), all Lender
Expenses (as and when accrued or incurred), and all fees and costs provided for
in Section 2.12 (as and when accrued or incurred), and all other payment
obligations as and when due and payable under any Loan Document or any Bank
Product Agreement (including any amounts due and payable to any Bank Product
Provider in respect of Bank Products) to the Loan Account, which amounts shall
thereupon constitute Advances hereunder and, shall accrue interest at the rate
then applicable to Advances. Any interest, fees, costs, expenses, Lender
Expenses, or other amounts payable hereunder or under any other Loan Document or
under any Bank Product Agreement that are charged to the Loan Account shall
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances.

(d) Computation. All interest and fees chargeable under the Loan Documents shall
be computed on the basis of a 360 day year, in each case, for the actual number
of days elapsed in the period during which the interest or fees accrue. In the
event the Interest Rate is changed from time to time hereafter, the rates of
interest hereunder based upon the Interest Rate automatically and immediately
shall be increased or decreased by an amount equal to such change in the
Interest Rate.

(e) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and Lender, in executing and delivering this Agreement,
intend legally to agree upon the rate or rates of interest and manner of payment
stated within it; provided, however, that, anything contained herein to the
contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law (including, without
limitation, the “weekly ceiling” from time to time in effect under Chapter 303
of the Texas Finance Code (Vernon’s Texas Code Annotated), as amended from time
to time, unless preempted by federal law), then, as of the date of this
Agreement, Borrowers are and shall be liable only for the payment of such
maximum amount as is allowed by law, and payment received from Borrowers in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.

2.7 Designated Account. Borrowers agree to establish and maintain one or more
Designated Accounts, each in the name of a single Borrower, for the purpose of
receiving the proceeds of the Advances requested by Borrowers and made by Lender
hereunder. Unless otherwise agreed by Lender and Borrowers, any Advance
requested by Borrowers and made by Lender hereunder shall be made to the
applicable Designated Account.

 

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2.8 Maintenance of Loan Account; Statements of Obligations. Lender shall
maintain an account on its books in the name of Borrowers (the “Loan Account”)
in which will be recorded all Advances made by Lender to Borrowers or for
Borrowers’ account, the Letters of Credit issued or arranged by Lender for
Borrowers’ account, and all other payment Obligations hereunder or under the
other Loan Documents, including accrued interest, fees and expenses, and Lender
Expenses. In accordance with Section 2.4 and Section 2.5, the Loan Account will
be credited with all payments received by Lender from Borrowers or for
Borrowers’ account. All monthly statements delivered by Lender to the Borrowers
regarding the Loan Account, including with respect to principal, interest, fees,
and including an itemization of all charges and expenses constituting Lender
Expenses owing, shall be subject to subsequent adjustment by Lender but shall,
absent manifest error, be conclusively presumed to be correct and accurate and
constitute an account stated between Borrowers and Lender unless, within thirty
(30) days after receipt thereof by Borrowers, Borrowers shall deliver to Lender
written objection thereto describing the error or errors contained in any such
statements.

2.9 Maturity Termination Dates. Lender’s obligations under this Agreement shall
continue in full force and effect for a term ending on the earliest of
(i) August 9, 2018 (the “Maturity Date”) or (ii) the date Borrowers terminate
the Revolving Credit Facility, or (iii) the date the Revolving Credit Facility
terminates pursuant to Sections 10.1 and 10.2 following an Event of Default (the
earliest of these dates, the “Termination Date”). The foregoing notwithstanding,
Lender shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default. Each Borrower jointly and severally promises to pay the
Obligations (including principal, interest, fees, costs, and expenses, including
Lender Expenses) in full on the Termination Date (other than the Hedge
Obligations, which shall be paid in accordance with the applicable Hedge
Agreement).

2.10 Effect of Maturity. On the Termination Date, all obligations of Lender to
provide additional credit hereunder shall automatically be terminated and all of
the Obligations (other than Hedge Obligations which shall be terminated in
accordance with the applicable Hedge Agreement) shall immediately become due and
payable without notice or demand and Borrowers shall immediately repay all of
the Obligations in full. No termination of the obligations of Lender (other than
cash payment in full of the Obligations and termination of the obligations of
Lender to provide additional credit hereunder) shall relieve or discharge any
Loan Party of its duties, obligations, or covenants hereunder or under any other
Loan Document and Lender’s Liens in the Collateral shall continue to secure the
Obligations and shall remain in effect until all Obligations have been paid in
full in cash and Lender’s obligations to provide additional credit hereunder
shall have been terminated. Provided that there are no suits, actions,
proceedings or claims pending or threatened against any Indemnified Person under
this Agreement with respect to any Indemnified Liabilities, Lender shall, at
Borrowers’ expense, release or terminate any filings or other agreements that
perfect the Lender’s Liens in the Collateral, upon Lender’s receipt of each of
the following, in form and content satisfactory to Lender: (i) cash payment in
full of all Obligations and completed performance by Borrowers with respect to
their other obligations under this Agreement (including Letter of Credit
Collateralization with respect to all outstanding Letter of Credit Usage),
(ii) evidence that any obligation of Lender to make Advances to any Borrower or
provide any further credit to any Borrower has been terminated, (iii) a general
release of all claims against Lender and its Affiliates by each Borrower and
each Loan Party relating to Lender’s performance and obligations under the Loan
Documents, and (iv) an agreement by each Borrower, each Guarantor, and any new
lender to any Borrower to indemnify Lender and its Affiliates for any payments
received by Lender or its Affiliates that are applied to the Obligations as a
final payoff that may subsequently be returned or otherwise not paid for any
reason. With respect to any outstanding Hedge Obligations which are not so paid
in full, the

 

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Bank Product Provider may require Borrowers to cash collateralize the then
existing Hedge Obligations in an amount acceptable to Lender prior to releasing
or terminating any filings or other agreements that perfect the Lender’s Liens
in the Collateral.

2.11 Termination or Reduction by Borrowers.

(a) Borrowers may terminate the Credit Facility or reduce the Maximum Revolver
Amount at any time prior to the Maturity Date, if they (i) deliver a notice to
Lender of their intentions at least ten (10) days prior to the proposed action,
(ii) pay to Lender the applicable termination fee, reduction fee or prepayment
fee set forth in Schedule 2.12, and (iii) pay the Obligations (other than the
outstanding Hedge Obligations, which shall be paid in accordance with the
applicable Hedge Agreement) in full or down to the reduced Maximum Revolver
Amount. Any reduction in the Maximum Revolver Amount shall be in multiples of
$100,000, with a minimum reduction of at least $1,000,000; provided that the
aggregate amount of reductions in the Maximum Revolver Amount may not exceed
$5,000,000. Each such termination, reduction or prepayment shall be irrevocable.
Once reduced, the Maximum Revolver Amount may not be increased.

(b) The applicable termination fee, reduction fee and prepayment fee set forth
in Schedule 2.12 shall be presumed to be the amount of damages sustained by
Lender as a result of an early termination, reduction or prepayment, as
applicable and each Borrower agrees that it is reasonable under the
circumstances currently existing (including the borrowings that are reasonably
expected by Borrowers hereunder and the interest, fees and other charges that
are reasonably expected to be received by Lender hereunder). In addition, Lender
shall be entitled to such early termination fee upon the occurrence of any Event
of Default described in Sections 9.4 and 9.5 hereof, even if Lender does not
exercise its right to terminate this Agreement, but elects, at its option, to
provide financing to Borrowers or permit the use of cash collateral during an
Insolvency Proceeding. The early termination fee, reduction fee and prepayment
fee, as applicable, provided for in Schedule 2.12 shall be deemed included in
the Obligations.

2.12 Fees. Borrowers shall pay to Lender the fees set forth on Schedule 2.12
attached hereto.

2.13 Letters of Credit.

(a) Subject to the terms and conditions of this Agreement, upon the request of a
Borrower made in accordance herewith, Lender agrees to issue a requested Letter
of Credit for the account of such Borrower. By submitting a request to Lender
for the issuance of a Letter of Credit, such Borrower shall be deemed to have
requested that Lender issue the requested Letter of Credit. Each request for the
issuance of a Letter of Credit, or the amendment, renewal, or extension of any
outstanding Letter of Credit, shall be made in writing by an Authorized Person
and delivered to Lender via hand delivery, telefacsimile, or other electronic
method of transmission reasonably in advance of the requested date of issuance,
amendment, renewal, or extension. Each such request shall be in form and
substance reasonably satisfactory to Lender, and (i) shall specify (A) the
amount of such Letter of Credit, (B) the date of issuance, amendment, renewal,
or extension of such Letter of Credit, (C) the proposed expiration date of such
Letter of Credit, (D) the name and address of the beneficiary of the Letter of
Credit, and (E) such other information (including, the conditions to drawing,
and, in the case of an amendment, renewal, or extension, identification of the
Letter of Credit to be so amended, renewed, or extended) as shall be necessary
to prepare, amend, renew, or extend such Letter of Credit, and (ii) shall be
accompanied by such Letter of Credit Agreements as Lender may request or
require, to the extent that such requests or requirements are consistent with
the Letter of Credit Agreements that Lender generally requests for Letters of
Credit in similar circumstances.

 

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(b) Lender shall have no obligation to issue, amend, renew or extend a Letter of
Credit if, after giving effect to the requested issuance, amendment, renewal, or
extension, the Letter of Credit Usage would exceed the lesser of (x) the Maximum
Revolver Amount less the outstanding amount of Advances, less Reserves (in
accordance with Section 2.1(c) at such time or (ii) $10,000,000.

(c) Lender shall have no obligation to issue a Letter of Credit if (i) any
order, judgment, or decree of any Governmental Authority or arbitrator shall, by
its terms, purport to enjoin or restrain Lender from issuing such Letter of
Credit or any law applicable to Lender or any request or directive (whether or
not having the force of law) from any Governmental Authority with jurisdiction
over Lender shall prohibit or request that Lender refrain from the issuance of
letters of credit generally or such Letter of Credit in particular, or (ii) the
issuance of such Letter of Credit would violate one or more policies of Lender
applicable to letters of credit generally.

(d) Each Letter of Credit shall be in form and substance reasonably acceptable
to Lender, including the requirement that the amounts payable thereunder must be
payable in Dollars, and shall expire on a date no more than 12 months after the
date of issuance or last renewal of such Letter of Credit, which date shall be
no later than the Maturity Date. If Lender makes a payment under a Letter of
Credit, Borrowers shall pay the Lender an amount equal to the applicable Letter
of Credit Disbursement on the date such Letter of Credit Disbursement is made
and, in the absence of such payment, the amount of the Letter of Credit
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder (notwithstanding any failure to satisfy any condition precedent set
forth in Section 4 or this Section 2.13) and, initially, shall bear interest at
the rate then applicable to Advances. If a Letter of Credit Disbursement is
deemed to be an Advance hereunder, Borrowers’ obligation to pay the amount of
such Letter of Credit Disbursement to Lender shall be automatically converted
into an obligation to pay Lender such resulting Advance.

(e) Each Borrower hereby agrees to indemnify, save, defend, and hold Lender
harmless from any damage, loss, cost, expense, or liability, and reasonable
attorneys fees and expenses incurred by Lender arising out of or in connection
with any Letter of Credit; provided, that Borrowers shall not be obligated
hereunder to indemnify Lender for any damage, loss, cost, expense, or liability
that a court of competent jurisdiction finally determines to have resulted from
the gross negligence or willful misconduct of Lender.

(f) Lender and each Borrower agree that, in paying any drawing under a Letter of
Credit, Lender shall not have any responsibility to obtain any document (other
than any sight draft, certificates and documents expressly required by the
Letter of Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or delivering any
such document. Neither Lender nor any correspondent, participant or assignee of
Lender shall be liable to any Loan Party for any of the following absent gross
negligence or willful misconduct: (i) any action taken or omitted; (ii) any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit
or any error in interpretation of technical terms; or (iii) the due execution,
effectiveness, validity or enforceability of any document or instrument related
to any Letter of Credit or Letter of Credit Agreement. Each Borrower hereby
assumes all risks of the acts or omissions of any beneficiary or transferee with
respect to its use of any Letter of Credit; provided, that this assumption is
not intended to, and shall not, preclude Borrowers from pursuing such rights and
remedies as they may have against the beneficiary or transferee at law or under
any other agreement. Neither Lender nor any correspondent, participant or
assignee of Lender shall be liable or responsible for any of the matters
described in clauses (i) through (vi) of Section 2.13(g) or for any action,
neglect or omission under or in connection with any Letter of Credit or Letter
of Credit Agreement, including in connection with the issuance or any amendment
of any Letter of Credit, the failure to issue or amend any Letter of Credit, the
honoring or dishonoring of any demand under any Letter of Credit, or the

 

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following of any Borrower’s instructions or those contained in the Letter of
Credit or any modifications, amendments, or supplements thereto, and such action
or neglect or omission will bind Borrowers. In furtherance and not in limitation
of the foregoing, Lender may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary (or Lender may refuse to accept and make
payment upon such documents if such documents are not in strict compliance with
the terms of such Letter of Credit and may disregard any requirement in a Letter
of Credit that notice of dishonor be given in a particular manner and any
requirement that presentation be made at a particular place or by a particular
time of day), and Lender shall not be responsible for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a 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. Lender shall not be responsible for the wording of
any Letter of Credit (including any drawing conditions or any terms or
conditions that are ineffective, ambiguous, inconsistent, unduly complicated or
reasonably impossible to satisfy), notwithstanding any assistance Lender may
provide to Borrowers with drafting or recommending text for any letter of credit
application or with the structuring of any transaction related to any Letter of
Credit, and each Borrower hereby acknowledges and agrees that any such
assistance will not constitute legal or other advice by Lender or any
representation or warranty by Lender that any such wording or such Letter of
Credit will be effective. Without limiting the foregoing, Lender may, as it
deems appropriate, use in any Letter of Credit any portion of the language
prepared by any Borrower and contained in the Letter of Credit Agreements
relative to drawings under such Letter of Credit. Each Borrower hereby
acknowledges and agrees that Lender shall not be responsible for delays, errors,
or omissions resulting from the malfunction of equipment in connection with any
Letter of Credit.

(g) The obligation of each Borrower to reimburse Lender for each drawing under
each Letter of Credit shall be absolute, unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including the following:

(i) any lack of validity or enforceability of such Letter of Credit, this
Agreement, or any other Loan Document,

(ii) the existence of any claim, counterclaim, setoff, defense or other right
that any Borrower or any of its Subsidiaries or any other Loan Party may have at
any time against any beneficiary or any transferee of such Letter of Credit (or
any Person for whom any such beneficiary or any such transferee may be acting),
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by such Letter of Credit or any agreement or
instrument relating thereto, or any unrelated transaction,

(iii) any draft, demand, certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect,
or any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under such Letter of Credit,

(iv) any payment by Lender under such Letter of Credit against presentation of a
draft or certificate that does not substantially or strictly comply with the
terms of such Letter of Credit (including, without limitation, any requirement
that presentation be made at a particular place or by a particular time of day),
or any payment made by Lender under such Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the
benefit of creditors, liquidator, receiver or other representative of or
successor to any beneficiary or any transferee of such Letter of Credit,

 

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(v) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or discharge of, any Borrower, any of its
Subsidiaries, or any other Loan Party, or

(vi) the fact that any Default or Event of Default shall have occurred and be
continuing.

(h) Each Borrower acknowledges and agrees that any and all fees, charges, costs,
or commissions in effect from time to time, of Lender relating to Letters of
Credit, upon the payment or negotiation of any drawing under any Letter of
Credit, or upon the occurrence of any other activity with respect to any Letter
of Credit (including the transfer, amendment, or cancellation of any Letter of
Credit), shall be Lender Expenses for purposes of this Agreement and shall be
reimbursable immediately by Borrowers to Lender.

(i) If by reason of (i) any change after the Closing Date in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by Lender with any
direction, request, or requirement (irrespective of whether having the force of
law) of any Governmental Authority or monetary authority including, Regulation D
of the Board of Governors as from time to time in effect (and any successor
thereto):

(i) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letter of Credit issued or caused to be issued
hereunder or hereby, or

(ii) there shall be imposed on Lender any other condition regarding any Letter
of Credit,

and the result of the foregoing is to increase, directly or indirectly, the cost
to Lender of making, participating in, or maintaining any Letter of Credit or to
reduce the amount receivable in respect thereof, then, and in any such case,
Lender may, at any time within a reasonable period after the additional cost is
incurred or the amount received is reduced, notify Borrowers, and Borrowers
shall pay within thirty (30) days after demand therefor, such amounts as Lender
may specify to be necessary to compensate Lender for such additional cost or
reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Advances
hereunder; provided, that (A) Borrowers shall not be required to provide any
compensation pursuant to this Section 2.13(i) for any such amounts incurred more
than one hundred and eighty (180) days prior to the date on which the demand for
payment of such amounts is first made to Borrowers, and (B) if an event or
circumstance giving rise to such amounts is retroactive, then the one hundred
and eighty (180) day period referred to above shall be extended to include the
period of retroactive effect thereof. The determination by Lender of any amount
due pursuant to this Section 2.13(i), as set forth in a certificate setting
forth the calculation thereof in reasonable detail, shall, in the absence of
manifest or demonstrable error, be final and conclusive and binding on all of
the parties hereto.

(j) Unless otherwise expressly agreed by Lender and Borrowers, when a Letter of
Credit is issued, (i) the rules of ISP98 shall apply to each standby Letter of
Credit, and (ii) the rules of the UCP 600 shall apply to each commercial Letter
of Credit.

(k) In the event of a direct conflict between the provisions of this
Section 2.13 and any provision contained in any Letter of Credit Agreement, it
is the intention of the parties hereto that such provisions be read together and
construed, to the fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 2.13 shall control and
govern.

 

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2.14 Illegality; Impracticability; Increased Costs. In the event that (i) any
change in market conditions or any law, regulation, treaty, or directive, or any
change therein or in the interpretation or application thereof make it unlawful
or impractical for Lender to fund or maintain extensions of credit with interest
based upon Daily Three Month LIBOR or to continue such funding or maintaining,
or to determine or charge interest rates based upon Daily Three Month LIBOR,
(ii) Lender determines that by reasons affecting the London interbank Eurodollar
market, adequate and reasonable means do not exist for ascertaining Daily Three
Month LIBOR, or (iii) Lender determines that the interest rate based on the
Daily Three Month LIBOR will not adequately and fairly reflect the cost to
Lender of maintaining or funding Advances at the interest rate based upon Daily
Three Month LIBOR, Lender shall give notice of such changed circumstances to
Borrowers and (i) interest on the principal amount of such extensions of credit
thereafter shall accrue interest at a rate equal to the Prime Rate plus the
Interest Rate Margin, and (ii) Borrowers shall not be entitled to elect Daily
Three Month LIBOR until Lender determines that it would no longer be unlawful or
impractical to do so or that such increased costs would no longer be applicable.

2.15 Capital Requirements. If, after the date hereof, Lender determines that
(i) the adoption of or change in any law, rule, regulation or guideline
regarding capital or reserve requirements for lenders, banks or bank holding
companies, or any change in the interpretation, implementation, or application
thereof by any Governmental Authority charged with the administration thereof,
including those changes resulting from the enactment of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and Basel III, regardless of the date
enacted, adopted or issued, or (ii) compliance by Lender or its parent bank
holding company with any guideline, request or directive of any such entity
regarding capital adequacy (whether or not having the force of law), has the
effect of reducing the return on Lender’s or such holding company’s capital as a
consequence of Lender’s loan commitments hereunder to a level below that which
such Lender or such holding company could have achieved but for such adoption,
change, or compliance (taking into consideration such Lender’s or such holding
company’s then existing policies with respect to capital adequacy and assuming
the full utilization of such entity’s capital) by any amount deemed by Lender to
be material, then Lender may notify Borrowers thereof. Following receipt of such
notice, Borrowers agree to pay Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within 30
days after presentation by Lender of a statement of the amount and setting forth
in reasonable detail Lender’s calculation thereof and the assumptions upon which
such calculation was based (which statement shall be deemed true and correct
absent manifest error). In determining such amount, Lender may use any
reasonable averaging and attribution methods. Failure or delay on the part of
Lender to demand compensation pursuant to this Section shall not constitute a
waiver of Lender’s right to demand such compensation; provided that Borrowers
shall not be required to compensate Lender pursuant to this Section for any
reductions in return incurred more than one hundred and eighty (180) days prior
to the date that Lender notifies Borrowers of such law, rule, regulation or
guideline giving rise to such reductions and of Lender’s intention to claim
compensation therefor; provided further that if such claim arises by reason of
the adoption of or change in any law, rule, regulation or guideline that is
retroactive, then the one hundred and eighty (180) day period referred to above
shall be extended to include the period of retroactive effect thereof.

2.16 Extent of Each Borrower’s Liability, Contribution.

(a) Joint and Several Liability. Each Borrower agrees that it is jointly and
severally liable for, and absolutely and unconditionally guarantees to Lender
the prompt payment and performance of, all Obligations under this Agreement and
all agreements under the Loan Documents. Each Borrower agrees that its guaranty
obligations hereunder constitute a continuing guaranty of payment and not of
collection, that such obligations shall not be discharged until cash payment in
full of the Obligations, and that such obligations are absolute and
unconditional, irrespective of (i) the genuineness,

 

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validity, regularity, enforceability, subordination or any future modification
of, or change in, any Obligations or Loan Document, or any other document,
instrument or agreement to which any Borrower is or may become a party or be
bound; (ii) the absence of any action to enforce this Agreement (including this
Section) or any other Loan Document, or any waiver, consent or indulgence of any
kind by Lender with respect thereto; (iii) the existence, value or condition of,
or failure to perfect any of Lender’s Liens or to preserve rights against, any
security or guaranty for the Obligations or any action, or the absence of any
action, by Lender in respect thereof (including the release of any security or
guaranty); (iv) the insolvency of any Borrower; (v) any election by Lender in an
Insolvency Proceeding for the application of Section 1111(b)(2) of the
Bankruptcy Code; (vi) any borrowing or grant of a Lien by any other Borrower, as
debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise;
(vii) the disallowance of any claims of Lender against any Borrower for the
repayment of any Obligations under Section 502 of the Bankruptcy Code or
otherwise; or (viii) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except cash payment in full of all Obligations.

(b) Contribution. Each Borrower hereby agrees that it will not enforce any of
its rights of contribution or subrogation against any other Borrower with
respect to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to Lender with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against any other Borrower with respect to any payments to Lender hereunder
or under any of the Bank Product Agreements are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.

(c) No Limitation on Liability. Nothing contained in this Section 2.16 shall
limit the liability of any Borrower to pay extensions of credit made directly or
indirectly to that Borrower (including revolving loans advanced to any other
Borrower and then re-loaned or otherwise transferred to, or for the benefit of,
such Borrower), Obligations relating to Letters of Credit issued to support such
Borrower’s business, and all accrued interest, fees, expenses and other related
Obligations with respect thereto, for which such Borrower shall be primarily
liable for all purposes hereunder. Lender shall have the right, at any time in
its discretion, to condition an extension of credit hereunder upon a separate
calculation of borrowing availability for each Borrower and to restrict the
disbursement and use of such extensions of credit to such Borrower.

2.17 Parent as Agent for Borrowers. Each Borrower hereby irrevocably appoints
Parent as the borrowing agent and attorney-in-fact for all Borrowers (the
“Administrative Borrower”) which appointment shall remain in full force and
effect unless and until Lender shall have received prior written notice signed
by each Borrower that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower. Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (a) to provide
Lender with all notices with respect to Advances, Letters of Credit and other
extensions of credit obtained for the benefit of any Borrower and all other
notices and instructions under this Agreement, and (b) to take such action as
the Administrative Borrower deems appropriate on its behalf to obtain Advances,
Letters of Credit and other extensions of credit and to exercise such other
powers as are reasonably incidental thereto to carry out the purposes of this
Agreement. It is understood that the handling of the Loan Account and Collateral
in a combined fashion, as more fully set forth herein, is done solely as an
accommodation to Borrowers in order to utilize the

 

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collective borrowing powers of Borrowers in the most efficient and economical
manner and at their request, and that Lender shall not incur liability to any
Borrower as a result hereof. Each Borrower expects to derive benefit, directly
or indirectly, from the handling of the Loan Account and the Collateral in a
combined fashion since the successful operation of each Borrower is dependent on
the continued successful performance of the integrated group. To induce Lender
to do so, and in consideration thereof, each Borrower hereby jointly and
severally agrees to indemnify Lender and hold Lender harmless against any and
all liability, expense, loss or claim of damage or injury, made against Lender
by any Borrower or by any third party whosoever, arising from or incurred by
reason of (a) the handling of the Loan Account and Collateral of Borrowers as
herein provided, or (b) Lender’s relying on any instructions of the
Administrative Borrower, except that Borrowers will have no liability to Lender
under this Section 2.17 with respect to any liability that has been finally
determined by a court of competent jurisdiction to have resulted solely from the
gross negligence or willful misconduct of Lender.

3. SECURITY INTEREST.

3.1 Grant of Security Interest. Each Loan Party hereby unconditionally grants,
assigns, and pledges to Lender for the benefit of Lender and each Bank Product
Provider, to secure payment and performance of the Obligations, a continuing
security interest (hereinafter referred to as the “Security Interest”) in all of
such Loan Party’s right, title, and interest in and to the Collateral, as
security for the payment and performance of all Obligations. Following request
by Lender, each Loan Party shall grant Lender a Lien and security interest in
all Commercial Tort Claims that it may have against any Person. The Security
Interest created hereby secures the payment and performance of the Obligations,
whether now existing or arising hereafter. Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts which
constitute part of the Obligations and would be owed by any Loan Party to Lender
or any other Bank Product Provider, but for the fact that they are unenforceable
or not allowable (in whole or in part) as a claim in an Insolvency Proceeding
involving any Borrower due to the existence of such Insolvency Proceeding.

3.2 Borrowers Remain Liable. Anything herein to the contrary notwithstanding,
(a) each Loan Party shall remain liable under the contracts and agreements
included in the Collateral, including the Pledged Operating Agreements and the
Pledged Partnership Agreements, to perform all of the duties and obligations
thereunder to the same extent as if this Agreement had not been executed,
(b) the exercise by Lender of any of the rights hereunder shall not release any
Loan Party from any of its duties or obligations under such contracts and
agreements included in the Collateral, and (c) Lender shall not have any
obligation or liability under such contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Lender be obligated to perform
any of the obligations or duties of any Loan Party thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder. Until an
Event of Default shall occur, except as otherwise provided in this Agreement or
any other Loan Document, the Loan Parties shall have the right to possession and
enjoyment of the Collateral for the purpose of conducting the ordinary course of
their respective businesses, subject to and upon the terms hereof and of this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, it is the intention of the parties hereto that record and beneficial
ownership of the Pledged Interests, including all voting, consensual, dividend,
and distribution rights, shall remain in the Loan Parties until (i) the
occurrence and continuance of an Event of Default and (ii) Lender has notified
Loan Parties of Lender’s election to exercise such rights with respect to the
Pledged Interests pursuant to Sections 10.3 and/or 10.4.

3.3 Assignment of Insurance. As additional security for the Obligations, each
Loan Party hereby assigns to Lender for the benefit of Lender and each Bank
Product Provider all rights of such Loan Party under every policy of insurance
covering the Collateral and all other assets and property of each Loan Party
(including, without limitation business interruption insurance and proceeds
thereof) and all

 

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business records and other documents relating to it, and all monies (including
proceeds and refunds) that may be payable under any policy, and each Loan Party
hereby directs the issuer of each policy to pay all such monies directly and
solely to Lender. At any time, (i) upon the occurrence and during the
continuance of a Default or an Event of Default, or (ii) otherwise upon Lender’s
request, Lender may (but need not), in Lender’s or any Loan Party’s name,
execute and deliver proofs of claim, receive payment of proceeds and endorse
checks and other instruments representing payment of the policy of insurance,
and adjust, litigate, compromise or release claims against the issuer of any
policy. Any monies received under any insurance policy assigned to Lender, other
than liability insurance policies, or received as payment of any award or
compensation for condemnation or taking by eminent domain, in each case, in
excess of $250,000, shall be paid to Lender and, as determined by Lender in its
sole discretion, either be applied to prepayment of the Obligations or disbursed
to Loan Parties under payment terms reasonably satisfactory to Lender for
application to the cost of repairs, replacements, or restorations of the
affected Collateral which shall be effected with reasonable promptness and shall
be of a value at least equal to the value of the items or property destroyed.

3.4 Financing Statements. Each Loan Party authorizes Lender to file financing
statements describing Collateral to perfect Lender’s and each Bank Product
Provider’s Security Interest in the Collateral, and Lender may describe the
Collateral as “all personal property” or “all assets” or describe specific items
of Collateral including without limitation any Commercial Tort Claims. All
financing statements filed before the date of this Agreement to perfect the
Security Interest were authorized by such Loan Party and are hereby ratified.

4. CONDITIONS.

4.1 Conditions Precedent to the Initial Extension of Credit. The obligation of
Lender to make the additional extension of credit provided for hereunder is
subject to the fulfillment, to the satisfaction of Lender, of each of the
conditions precedent set forth on Exhibit B.

4.2 Conditions Precedent to all Extensions of Credit. The obligation of Lender
to make any Advances hereunder (or to extend any other credit hereunder) at any
time shall be subject to the following conditions precedent:

(a) the representations and warranties of each Borrower and each other Loan
Party or its Subsidiaries contained in this Agreement or in the other Loan
Documents 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) on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date, in which case such representations
and warranties shall continue to be true and correct as of such earlier date);
and

(b) no Default or Event of Default shall have occurred and be continuing on the
date of such extension of credit, nor shall either result from the making
thereof.

Any request for an extension of credit shall be deemed to be a representation by
each Borrower and each other Loan Party that the statements set forth in this
Section 4.2 are correct as of the time of such request and if such extension of
credit is a request for an Advance or a Letter of Credit, sufficient
Availability exists for such Advance or Letter of Credit pursuant to
Section 2.1(a) and Section 2.13.

4.3 Conditions Subsequent. The obligation of Lender to continue to make Advances
(or otherwise extend credit hereunder) is subject to the fulfillment, on or
before the date applicable thereto, of the conditions subsequent set forth on
Exhibit C (the failure by any Borrower or any other Loan Party to so perform or
cause to be performed such conditions subsequent as and when required by the
terms thereof, shall constitute an Event of Default).

 

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5. REPRESENTATIONS AND WARRANTIES.

In order to induce Lender to enter into this Agreement, each Borrower and each
other Loan Party makes the representations and warranties to Lender set forth on
Exhibit D. Each of such representations and warranties shall be true, correct,
and complete, 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 Closing
Date, and shall be true, correct, and complete, 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 date of the making of each Advance or other extension of
credit made thereafter, as though made on and as of the date of such Advance or
other extension of credit (except to the extent that such representations and
warranties relate solely to an earlier date in which case such representations
and warranties shall continue to be true and correct as of such earlier date)
and such representations and warranties shall survive the execution and delivery
of this Agreement.

6. AFFIRMATIVE COVENANTS.

Each Borrower and each other Loan Party covenants and agrees that, until
termination of all of the commitments of Lender hereunder to provide any further
extensions of credit and payment in full of the Obligations, each Borrower and
each other Loan Party shall and shall cause each of their respective
Subsidiaries to comply with each of the following:

6.1 Financial Statements, Reports, Certificates. Deliver to Lender copies of
each of the financial statements, reports, and other items set forth on Schedule
6.1 no later than the times specified therein. In addition, each Borrower agrees
that no Subsidiary of a Borrower will have a fiscal year different from that of
Borrowers. Each Borrower agrees to maintain a system of accounting that enables
such Borrower to produce financial statements in accordance with GAAP. Each Loan
Party shall also (a) keep a reporting system that shows all additions, sales,
claims, returns, and allowances with respect to the sales of such Loan Party and
its Subsidiaries, and (b) maintain its billing systems/practices substantially
as in effect as of the Closing Date and shall only make material modifications
following prior notice to Lender.

6.2 Collateral Reporting. Provide Lender with each of the reports set forth on
Schedule 6.2 at the times specified therein. In addition, each Borrower agrees
to use commercially reasonable efforts in cooperation with Lender to facilitate
and implement a system of electronic collateral reporting in order to provide
electronic reporting of each of the items set forth on such Schedule.

6.3 Existence. Except as otherwise permitted under Section 7.3 or Section 7.4,
at all times maintain and preserve in full force and effect (a) its existence
(including being in good standing in its jurisdiction of organization) and
(b) all rights and franchises, licenses and permits material to its business;
provided, however, that no Loan Party nor any of its Subsidiaries shall be
required to preserve any such right or franchise, licenses or permits if such
Person’s senior management shall determine that the preservation thereof is no
longer desirable in the conduct of the business of such Person, and that the
loss thereof is not disadvantageous in any material respect to such Person or to
the Lender; provided that Borrowers deliver at least ten (10) days prior written
notice to Lender of the election of such Loan Party or such Subsidiary not to
preserve any such right or franchise, license or permit.

 

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6.4 Maintenance of Properties. Maintain and preserve all of its assets that are
necessary or useful in the proper conduct of its business in good working order
and condition, ordinary wear, tear and casualty excepted and Permitted
Dispositions excepted (and except where the failure to so maintain and preserve
such assets could not reasonably be expected to result in a Material Adverse
Change), and comply with the material provisions of all material leases to which
it is a party as lessee, so as to prevent the loss or forfeiture thereof, unless
such provisions are the subject of a Permitted Protest.

6.5 Taxes.

(a) Cause all assessments and taxes imposed, levied, or assessed against any
Loan Party or its Subsidiaries, or any of their respective assets or in respect
of any of its income, businesses, or franchises to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest and so long as, in the case of an assessment or tax that has
or may become a Lien against any of the Collateral, such contest proceedings
conclusively operate to stay the sale of any portion of the Collateral to
satisfy such assessment or tax.

(b) Make timely payment or deposit of all tax payments and withholding taxes
required of it and them by applicable laws, including those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
taxes, and will, upon request, furnish Lender with proof reasonably satisfactory
to Lender indicating that such Loan Party and its Subsidiaries have made such
payments or deposits.

6.6 Insurance. At Borrowers’ expense, maintain insurance with respect to the
assets of each Loan Party and each of its Subsidiaries wherever located,
covering loss or damage by fire, theft, explosion, and all other hazards and
risks as ordinarily are insured against by other Persons engaged in the same or
similar businesses. Borrowers also shall maintain, with respect to each Loan
Party and each of its Subsidiaries, business interruption insurance, general
liability insurance, flood insurance for Collateral located in a flood plain,
product liability insurance, director’s and officer’s liability insurance,
fiduciary liability insurance, and employment practices liability insurance, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
All such policies of insurance shall be with responsible and reputable insurance
companies acceptable to Lender in its Permitted Discretion and in such amounts
as is carried generally in accordance with sound business practice by companies
in similar businesses similarly situated and located and in any event in amount,
adequacy and scope reasonably satisfactory to Lender. All property insurance
policies covering the Collateral are to be made payable to Lender for the
benefit of Lender, as its interests may appear, in case of loss, pursuant to a
lender loss payable endorsement acceptable to Lender in its Permitted Discretion
and are to contain such other provisions as Lender may reasonably require to
fully protect the Lender’s interest in the Collateral and to any payments to be
made under such policies. Such evidence of property and general liability
insurance shall be delivered to Lender, with the lender loss payable
endorsements (but only in respect of Collateral) and additional insured
endorsements (with respect to general liability coverage) in favor of Lender and
shall provide for not less than thirty (30) days (ten (10) days in the case of
non-payment) prior written notice to Lender of the exercise of any right of
cancellation. If Borrowers fail to maintain such insurance, Lender may arrange
for such insurance, but at Borrowers’ expense and without any responsibility on
Lender’s part for obtaining the insurance, the solvency of the insurance
companies, the adequacy of the coverage, or the collection of claims. Borrowers
shall give Lender prompt notice of any loss exceeding $100,000 covered by their
casualty or business interruption insurance. Upon the occurrence and during the
continuance of an Event of Default, unless otherwise agreed to by Lender in its
sole discretion, Lender shall have the sole right to file claims under any
property and general liability insurance policies in respect of the Collateral,
to receive and give acquittance for any payments that may be payable thereunder,
and to execute any and all endorsements, receipts, releases, assignments,
reassignments or other documents that may be necessary to effect the collection,
compromise or settlement of any claims under any such insurance policies.

 

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6.7 Inspections, Exams, Audits and Appraisals. Permit Lender and each of
Lender’s duly authorized representatives to visit any of its properties and
inspect any of its assets or books and records, to conduct inspections, exams,
audits and appraisals of the Collateral, to examine and make copies of its books
and records, and to discuss its affairs, finances, and accounts with, and to be
advised as to the same by, its officers and employees at such reasonable times
and intervals as Lender may designate and, so long as no Default or Event of
Default exists, with reasonable prior notice to Borrowers. Borrower shall
reimburse Lender in connection with such inspections, exams, audits and
appraisals in accordance with Section 2.12.

6.8 Account Verification. In the event either (i) any Advances are outstanding,
or (ii) a Default or an Event of Default has occurred and is continuing, permit
Lender, in Lender’s name or in the name of a nominee of Lender, to verify the
validity, amount or any other matter relating to any Account, by mail,
telephone, facsimile transmission or otherwise. Further, at the request of
Lender, Borrowers shall send requests for verification of Accounts or send
notices of assignment of Accounts to Account Debtors and other obligors.

6.9 Compliance with Laws. Comply with the requirements of all applicable laws,
rules, regulations, and orders of any Governmental Authority, other than laws,
rules, regulations, and orders the non-compliance with which, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Change.

6.10 Environmental.

(a) Keep any property either owned or operated by any Borrower or any other Loan
Party or its Subsidiaries free of any Environmental Liens or post bonds or other
financial assurances satisfactory to Lender and in an amount sufficient to
satisfy the obligations or liability evidenced by such Environmental Liens;

(b) Comply, in all material respects, with Environmental Laws and provide to
Lender documentation of such compliance which Lender reasonably requests;

(c) Promptly notify Lender of any release of which any Borrower or any other
Loan Party has knowledge of a Hazardous Material in any reportable quantity from
or onto property owned or operated by any Loan Party or any of its Subsidiaries
and take any Remedial Actions required to abate said release or otherwise to
come into compliance, in all material respects, with applicable Environmental
Law; and

(d) Promptly, but in any event within five (5) Business Days of its receipt
thereof, provide Lender with written notice of any of the following: (i) notice
that an Environmental Lien has been filed against any of the real or personal
property of any Loan Party or its Subsidiaries, (ii) commencement of any
Environmental Action or written notice that an Environmental Action will be
filed against any Loan Party or any of its Subsidiaries, and (iii) written
notice of a violation, citation, or other administrative order from a
Governmental Authority.

 

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6.11 Disclosure Updates.

(a) Promptly and in no event later than five (5) Business Days after obtaining
knowledge thereof or after the occurrence thereof, whichever is earlier, notify
Lender:

(i) if any written information, exhibit, or report furnished to Lender
contained, at the time it was furnished, any untrue statement of a material fact
or omitted to state any material fact necessary to make the statements contained
therein, when taken as a whole, not misleading in light of the circumstances in
which made. Any notification pursuant to the foregoing provision will not cure
or remedy the effect of the prior untrue statement of a material fact or
omission of any material fact nor shall any such notification have the effect of
amending or modifying this Agreement or any of the Schedules hereto;

(ii) of all actions, suits, or proceedings brought by or against any Loan Party
or any of its Subsidiaries before any court or Governmental Authority which
reasonably could be expected to result in a Material Adverse Change, provided
that, in any event, such notification shall not be later than five (5) days
after service of process with respect thereto on any Loan Party or any of its
Subsidiaries;

(iii) of (i) any disputes or claims by any Borrower’s customers exceeding
$1,000,000, individually or $2,000,000 in the aggregate during any fiscal year;
or (ii) Goods returned to or recovered by any Borrower outside of the ordinary
course of business, with a fair market value exceeding $1,000,000 individually
or $2,000,000;

(iv) of any material loss or damage to any Collateral or any substantial adverse
change in the Collateral; or

(v) of a violation of any law, rule or regulation, the non-compliance with which
reasonably could be expected to result in a Material Adverse Change.

(vi) (A) with respect to any Account included in the Borrowing Base that would
become a Bonded Account upon the issuance of a proposed Surety Bond, at least
five (5) days prior to any request by any Loan Party for the issuance of a
Surety Bond from any Surety, notice of such Loan Party’s intent to request the
issuance of such Surety Bond from such Surety, which notice shall be in form and
substance satisfactory to Lender, and in any event shall include, without
limitation, (a) the name of the Loan Party requesting such Surety Bond, (b) the
project related to such proposed Surety Bond, (c) the name and address of the
obligee under such proposed Surety Bond, and (d) a certification by a senior
officer of the Parent that (i) the information contained in such notice is true
and correct and (ii) no Account included in the Borrowing Base at the time of
such notice would become a Bonded Account upon the issuance of such proposed
Surety Bond; provided, however, if any Account included in the Borrowing Base at
the time of such notice would become a Bonded Account upon the issuance of such
proposed Surety Bond, then, in lieu of providing the certification described in
clause (d)(ii) above, such senior officer of the Parent may provide an updated
Borrowing Base Certificate that reflects the exclusion of such Account from the
Borrowing Base and certifies that the sum of all outstanding Advances at the
time of such notice does not exceed the Borrowing Base as calculated pursuant to
such updated Borrowing Base Certificate and (B) on the last day of each month,
notice of all Surety Bonds issued at the request of any Loan Party during the
month then ending. Further, with respect to each Surety, Borrowers shall deliver
to Lender a fully executed intercreditor agreement, in form and substance
satisfactory to Lender in its sole discretion.

(b) Immediately upon obtaining knowledge thereof or after the occurrence
thereof, notify Lender of any event or condition which constitutes a Default or
an Event of Default and provide a statement of the action that such Borrower
proposes to take with respect to such Default or Event of Default.

 

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Upon request of Lender, each Loan Party shall deliver to Lender any other
materials, reports, records or information reasonably requested relating to the
operations, business affairs, financial condition of any Loan Party or its
Subsidiaries or the Collateral.

6.12 Collateral Covenants.

(a) Possession of Collateral. In the event that any Collateral, including
Proceeds, is evidenced by or consists of Negotiable Collateral, Investment
Related Property, or Chattel Paper, in each case, having an aggregate value or
face amount of $250,000 or more for all such Negotiable Collateral, Investment
Related Property, or Chattel Paper, the Loan Parties shall promptly (and in any
event within two (2) Business Days after receipt thereof), notify Lender
thereof, and if and to the extent that perfection or priority of Lender’s Liens
is dependent on or enhanced by possession, the applicable Loan Party, promptly
(and in any event within two (2) Business Days) after request by Lender, shall
execute such other documents and instruments as shall be requested by Lender or,
if applicable, endorse and deliver physical possession of such Negotiable
Collateral, Investment Related Property, or Chattel Paper to Lender, together
with such undated powers (or other relevant document of assignment or transfer
acceptable to Lender) endorsed in blank as shall be requested by Lender, and
shall do such other acts or things deemed necessary or desirable by Lender to
enhance, perfect and protect Lender’s Liens therein.

(b) Chattel Paper.

(i) Promptly (and in any event within two (2) Business Days) after request by
Lender, each Loan Party shall take all steps reasonably necessary to grant
Lender control of all electronic Chattel Paper of any Loan Party in accordance
with the Code and all “transferable records” as that term is defined in
Section 16 of the Uniform Electronic Transaction Act and Section 201 of the
federal Electronic Signatures in Global and National Commerce Act as in effect
in any relevant jurisdiction, to the extent that the individual or aggregate
value or face amount of such electronic Chattel Paper equals or exceeds
$100,000; and

(ii) If any Loan Party retains possession of any Chattel Paper or instruments
(which retention of possession shall be subject to the extent permitted hereby),
promptly upon the request of Lender, such Chattel Paper and instruments shall be
marked with the following legend: “This writing and the obligations evidenced or
secured hereby are subject to the Security Interest of Wells Fargo Bank,
National Association, as Lender”.

(c) Control Agreements.

(i) Except to the extent otherwise provided by Section 7.11, each Loan Party
shall obtain a Control Agreement, from each bank (other than Lender) maintaining
a Deposit Account for such Loan Party;

(ii) Except to the extent otherwise provided by Section 7.11, each Loan Party
shall obtain a Control Agreement, from each issuer of uncertificated securities,
securities intermediary, or commodities intermediary issuing or holding any
financial assets or commodities to or for any Loan Party; and

(iii) Except to the extent otherwise provided by Section 7.11, each Loan Party
shall cause Lender to obtain “control”, as such term is defined in the Code,
with respect to all of such Loan Party’s investment property.

 

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(d) Letter-of-Credit Rights. If the Loan Parties (or any of them) are or become
the beneficiary of letters of credit having a face amount or value of $250,000
or more in the aggregate, then the applicable Loan Party or Loan Parties shall
promptly (and in any event within five (5) Business Days after becoming a
beneficiary), notify Lender thereof and, promptly (and in any event within
twenty (20) Business Days) after request by Lender, enter into a tri-party
agreement with Lender and the issuer or confirming bank with respect to
letter-of-credit rights assigning such letter-of-credit rights to Lender and
directing all payments thereunder to the Collection Account unless otherwise
directed by Lender, all in form and substance satisfactory to Lender.

(e) Commercial Tort Claims. If the Loan Parties (or any of them) obtain
Commercial Tort Claims having a value, or involving an asserted claim, in the
amount of $500,000 or more in the aggregate for all Commercial Tort Claims, then
the applicable Loan Party or Loan Parties shall promptly (and in any event
within two (2) Business Days of obtaining such Commercial Tort Claim), notify
Lender upon incurring or otherwise obtaining such Commercial Tort Claims and,
promptly (and in any event within two (2) Business Days) after request by
Lender, amend Schedule 5.6(d) to the Information Certificate to describe such
Commercial Tort Claims in a manner that reasonably identifies such Commercial
Tort Claims and which is otherwise reasonably satisfactory to Lender, and hereby
authorizes the filing of additional financing statements or amendments to
existing financing statements describing such Commercial Tort Claims, and agrees
to do such other acts or things deemed necessary or desirable by Lender to give
Lender a first priority, perfected security interest in any such Commercial Tort
Claim, which Commercial Tort Claim shall not be subject to any other Liens;

(f) Government Contracts. Other than Accounts and Chattel Paper the aggregate
value of which does not at any one time exceed $2,000,000, if any Account or
Chattel Paper of any Loan Party arises out of a contract or contracts with the
United States of America or any State or any department, agency, or
instrumentality thereof, Loan Parties shall promptly (and in any event within
two (2) Business Days of the creation thereof) notify Lender thereof and,
promptly (and in any event within two (2) Business Days) after request by
Lender, execute any instruments or take any steps reasonably required by Lender
in order that all moneys due or to become due under such contract or contracts
shall be assigned to Lender, for the benefit of Lender and each Bank Product
Provider, and shall provide written notice thereof under the Assignment of
Claims Act or other applicable law.

(g) Intellectual Property.

(i) Upon the request of Lender, in order to facilitate filings with the PTO and
the United States Copyright Office, each Loan Party shall execute and deliver to
Lender one or more Copyright Security Agreements or Patent and Trademark
Security Agreements to further evidence Lender’s Lien on such Loan Party’s
Patents, Trademarks, or Copyrights, and the General Intangibles of such Loan
Party relating thereto or represented thereby;

(ii) Each Loan Party shall have the duty, with respect to Intellectual Property
that is necessary in the conduct of such Loan Party’s business, to protect and
diligently enforce and defend at such Loan Party’s expense its Intellectual
Property, including using commercially reasonable efforts to (A) to diligently
enforce and defend, including promptly suing for infringement, misappropriation,
or dilution and to recover any and all damages for such infringement,
misappropriation, or dilution, and filing for opposition, interference, and
cancellation against conflicting Intellectual Property rights of any Person,
(B) to prosecute diligently any trademark application or service mark

 

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application that is part of the Trademarks pending as of the date hereof or
hereafter, (C) to prosecute diligently any patent application that is part of
the Patents pending as of the date hereof or hereafter, (D) to take all
reasonable and necessary action to preserve and maintain all of such Loan
Party’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its
rights therein, including paying all maintenance fees and filing of applications
for renewal, affidavits of use, and affidavits of noncontestability, and (E) to
require all employees, consultants, and contractors of each Loan Party who were
involved in the creation or development of such Intellectual Property to sign
agreements containing assignment to such Loan Party of Intellectual Property
rights created or developed and obligations of confidentiality. No Loan Party
shall abandon any Intellectual Property or Intellectual Property License that is
necessary in the conduct of such Loan Party’s business. Each Loan Party shall
take the steps described in this Section 6.12(g)(ii) with respect to all new or
acquired Intellectual Property to which it or any of its Subsidiaries is now or
later becomes entitled that is necessary in the conduct of such Loan Party’s or
Subsidiary’s business;

(iii) Each Loan Party acknowledges and agrees that Lender shall have no duties
with respect to any Intellectual Property or Intellectual Property Licenses of
any Loan Party. Without limiting the generality of this Section 6.12(g)(iii),
each Loan Party acknowledges and agrees that Lender shall not be under any
obligation to take any steps necessary to preserve rights in the Collateral
consisting of Intellectual Property or Intellectual Property Licenses against
any other Person, but Lender may do so at its option from and after the
occurrence and during the continuance of an Event of Default, and all expenses
incurred in connection therewith (including reasonable fees and expenses of
attorneys and other professionals) shall be for the sole account of Borrowers
and shall be chargeable to the Loan Account;

(iv) Each Loan Party shall promptly file an application with the United States
Copyright Office for any Copyright that has not been registered with the United
States Copyright Office if such Copyright is necessary in connection with the
conduct of such Loan Party’s business. Any expenses incurred in connection with
the foregoing shall be borne by the Loan Parties; and

(v) No Loan Party shall enter into any Intellectual Property License to receive
any license or rights in any Intellectual Property of any other Person unless
such Loan Party has used commercially reasonable efforts to permit the
assignment of or grant of a Lien in such Intellectual Property License (and all
rights of such Loan Party thereunder) to Lender (and any transferees of Lender).

(h) Investment Related Property.

(i) Upon the occurrence and during the continuance of an Event of Default,
following the request of Lender, all sums of money and property paid or
distributed in respect of the Investment Related Property that are received by
any Loan Party shall be held by such Loan Party in trust for the benefit of
Lender segregated from such Loan Party’s other property, and such Loan Party
shall deliver it promptly to Lender in the exact form received; and

(ii) Each Loan Party shall cooperate with Lender in obtaining all necessary
approvals and making all necessary filings under federal, state, local, or
foreign law to effect the perfection of the Security Interest on the Investment
Related Property or to effect any sale or transfer thereof.

(iii) If any Loan Party shall acquire, obtain, receive or become entitled to
receive any Pledged Interests after the Closing Date, it shall promptly (and in
any event within two (2) Business Days of acquiring or obtaining such
Collateral) deliver to Lender a duly executed Pledged Interests Addendum
identifying such Pledged Interests;

 

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(iv) Each Loan Party shall promptly deliver to Lender a copy of each material
notice or other material communication received by it in respect of any Pledged
Interests;

(v) No Loan Party shall make or consent to any amendment or other modification
or waiver with respect to any Pledged Interests, Pledged Operating Agreement or
Pledged Partnership Agreement, or enter into any agreement or permit to exist
any restriction with respect to any Pledged Interests in each case if the same
is prohibited pursuant to the Loan Documents;

(vi) As to all limited liability company or partnership interests, issued under
any Pledged Operating Agreement or Pledged Partnership Agreement, each Loan
Party hereby covenants that the Pledged Interests issued pursuant to such
agreement (A) are not and shall not be dealt in or traded on securities
exchanges or in securities markets, (B) do not and will not constitute
investment company securities, and (C) are not and will not be held by such Loan
Party in a securities account. In addition, none of the Pledged Operating
Agreements, the Pledged Partnership Agreements, or any other agreements
governing any of the Pledged Interests issued under any Pledged Operating
Agreement or Pledged Partnership Agreement, provide or shall provide that such
Pledged Interests are securities governed by Section 8 of the Uniform Commercial
Code as in effect in any relevant jurisdiction.

(i) Controlled Accounts. Each Loan Party shall establish and maintain at Lender
all Cash Management Services, including all deposit accounts (other than the
Permitted Petty Cash Account), and to the extent required hereunder or otherwise
utilized by Borrowers, lockbox services. Such Cash Management Services
maintained by each Loan Party shall be of a type and on terms reasonably
satisfactory to Lender.

6.13 Material Contracts. Contemporaneously with the delivery of each Compliance
Certificate pursuant to Section 6.1, provide Lender with copies of (a) each
Material Contract entered into since the delivery of the previous Compliance
Certificate, (b) each material amendment or modification of any Material
Contract entered into since the delivery of the previous Compliance Certificate.
Borrowers shall maintain all Material Contracts in full force and effect and
shall not default in any material respect in the payment or performance of any
obligations thereunder.

6.14 Location of Inventory, Equipment and Books. Keep the Inventory and
Equipment (other than vehicles and Equipment out for repair) and Books of each
Loan Party and each of its Subsidiaries only at the locations identified on
Schedule 5.29 to the Information Certificate or on any Job Site and keep the
chief executive office of each Loan Party and each of its Subsidiaries only at
the locations identified on Schedule 5.6(b) to the Information Certificate;
provided, however, that Borrowers may amend Schedule 5.29 to the Information
Certificate so long as such amendment occurs by written notice to Lender not
less than ten (10) days prior to the date on which such Inventory, Equipment or
Books are moved to such new location, and, if Lender so requires, so long as, at
the time of such written notification, the applicable Loan Party or Subsidiary
provides Lender a Collateral Access Agreement with respect thereto if such
location is not owned by such Loan Party.

6.15 Further Assurances.

(a) At any time upon the reasonable request of Lender, execute or deliver to
Lender any and all financing statements, fixture filings, security agreements,
pledges, assignments, endorsements of certificates of title, mortgages, deeds of
trust, opinions of counsel, and all other documents (the “Additional Documents”)
that Lender may reasonably request and in form and substance reasonably
satisfactory to Lender, to create, perfect, and continue perfection or to better
perfect Lender’s Liens in all of the assets of each Loan Party (whether now
owned or hereafter arising or acquired, tangible or intangible, real or
personal), and in order to fully consummate all of the transactions contemplated
hereby

 

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and under the other Loan Documents. To the maximum extent permitted by
applicable law, if a Borrower or any other Loan Party refuses or fails to
execute or deliver any reasonably requested Additional Documents within a
reasonable period of time, not to exceed thirty (30) days following the request
to do so such Borrower and such other Loan Party hereby authorizes Lender to
execute any such Additional Documents in the applicable Loan Party’s name, as
applicable, and authorizes Lender to file such executed Additional Documents in
any appropriate filing office. In furtherance and not in limitation of the
foregoing, each Loan Party shall take such actions as Lender may reasonably
request from time to time to ensure that the Obligations are guaranteed by the
Guarantors and are secured by substantially all of the assets of each Loan
Party.

(b) Each Loan Party authorizes the filing by Lender of financing or continuation
statements, or amendments thereto, and such Loan Party will execute and deliver
to Lender such other instruments or notices, as Lender may reasonably request,
in order to perfect and preserve the Security Interest granted or purported to
be granted hereby.

(c) Each Loan Party authorizes Lender at any time and from time to time to file,
transmit, or communicate, as applicable, financing statements and amendments
(i) describing the Collateral as “all personal property of debtor” or “all
assets of debtor” or words of similar effect, (ii) describing the Collateral as
being of equal or lesser scope or with greater detail, or (iii) that contain any
information required by Part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance of such financing statement. Each Loan Party also
hereby ratifies any and all financing statements or amendments previously filed
by Lender in any jurisdiction.

(d) Each Loan Party acknowledges that no Loan Party is authorized to file any
financing statement or amendment or termination statement with respect to any
financing statement filed in connection with this Agreement without the prior
written consent of Lender, subject to such Loan Party’s rights under
Section 9-509(d)(2) of the Code.

6.16 Formation of Subsidiaries. At the time that any Loan Party forms any direct
or indirect Subsidiary or acquires any direct or indirect Subsidiary after the
Closing Date, such Loan Party shall (a) within ten (10) days of such formation
or acquisition (or such later date as permitted by Lender in its sole
discretion) cause any such new Subsidiary to provide to Lender a joinder to this
Agreement, together with such other security documents, as well as appropriate
financing statements, all in form and substance reasonably satisfactory to
Lender (including being sufficient to grant Lender a first priority Lien
(subject to Permitted Liens) in and to the assets of such newly formed or
acquired Subsidiary), (b) within ten (10) days of such formation or acquisition
(or such later date as permitted by Lender in its sole discretion) provide to
Lender a pledge agreement and appropriate certificates and powers or financing
statements, pledging all of the direct or beneficial ownership interest in such
new Subsidiary reasonably satisfactory to Lender, and (c) within ten (10) days
of such formation or acquisition (or such later date as permitted by Lender in
its sole discretion) provide to Lender all other documentation, including if
requested by Lender one or more opinions of counsel reasonably satisfactory to
Lender, which in its opinion is appropriate with respect to the execution and
delivery of the applicable documentation referred to above. Any document,
agreement, or instrument executed or issued pursuant to this Section 6.16 shall
be a Loan Document.

7. NEGATIVE COVENANTS.

Each Borrower and each Loan Party covenants and agrees that, until termination
of all of the commitments of Lender hereunder to provide any further extensions
of credit and payment in full of the Obligations, no Borrower and no other Loan
Party will do, nor will any Borrower or any other Loan party permit any of its
Subsidiaries to do any of the following:

7.1 Indebtedness. Create, incur, assume, suffer to exist, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except for Permitted Indebtedness.

 

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7.2 Liens. Create, incur, assume, or suffer to exist, directly or indirectly,
any Lien on or with respect to any of its assets, of any kind, whether now owned
or hereafter acquired, or any income or profits therefrom, except for Permitted
Liens.

7.3 Restrictions on Fundamental Changes.

(a) Enter into any merger, consolidation, reorganization, or recapitalization,
or reclassify its Stock, except for (i) any merger between Loan Parties,
provided that a Borrower must be the surviving entity of any such merger to
which it is a party, and (ii) any merger between Subsidiaries of a Borrower that
are not Loan Parties.

(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), except for (i) the liquidation or dissolution of non-operating
Subsidiaries of any Borrower with nominal assets and nominal liabilities,
(ii) the liquidation or dissolution of a Loan Party (other than a Borrower) or
any of its wholly-owned Subsidiaries so long as all of the assets (including any
interest in any Stock) of such liquidating or dissolving Loan Party or
Subsidiary are transferred to a Loan Party that is not liquidating or
dissolving, or (iii) the liquidation or dissolution of a Subsidiary of a
Borrower that is not a Loan Party (other than any such Subsidiary the Stock of
which (or any portion thereof) is subject to a Lien in favor of Lender) so long
as all of the assets of such liquidating or dissolving Subsidiary are
transferred to a Subsidiary of a Borrower that is not liquidating or dissolving.

(c) Suspend or cease operation of a substantial portion of its or their
business, except as permitted pursuant to Sections 7.3(a) or (b) above or in
connection with the transactions permitted pursuant to Section 7.4.

7.4 Disposal of Assets. Other than Permitted Dispositions or transactions
expressly permitted by Sections 7.3 or 7.12, sell, assign (by operation of law
or otherwise) or otherwise dispose of, or grant any option with respect to, any
of the Collateral or any other asset except as expressly permitted by this
Agreement. Lender shall not be deemed to have consented to any sale or other
disposition of any of the Collateral or any other asset except as expressly
permitted in this Agreement or the other Loan Documents.

7.5 Change Name. Change the name, organizational identification number, state of
organization, organizational identity or “location” for purposes of
Section 9-307 of the Code of any Loan Party or any of its Subsidiaries.

7.6 Nature of Business. Make any change in the nature of its or their business
as conducted on the date of this Agreement or acquire any properties or assets
that are not reasonably related to the conduct of such business activities;
provided, however, that the foregoing shall not prevent any Borrower or any
other Loan Party or any of its Subsidiaries from engaging in any business that
is reasonably related or ancillary to its business.

 

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7.7 Prepayments and Amendments.

(a) Except in connection with Refinancing Indebtedness permitted by Section 7.1,

(i) optionally prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Loan Party or any of its Subsidiaries, other than (A) the
Obligations in accordance with this Agreement, and (B) Permitted Intercompany
Advances,

(ii) make any payment on account of the Seller Subordinated Debt other than
Purchase Price Payments as and when required to be paid under the Purchase
Agreement, solely to the extent that (a) no Default or Event of Default has
occurred and is continuing or will occur as a result of or immediately following
any such payment, (b) Borrowers are in compliance with the financial covenants
set forth in Section 8 of this Agreement and will remain in compliance
immediately following any such payment, (c) Borrowers shall have Liquidity at
all times during the preceding thirty (30) day period of at least $25,000,000,
(d) Borrowers shall have Liquidity of at least $25,000,000 after giving effect
to such payment, (e) the aggregate amount of Purchase Price Payments made by
Borrowers pursuant to the Purchase Agreement shall not exceed $2,000,000 and
(f) such payments are otherwise permitted pursuant to the terms and conditions
of the Seller Subordination Agreement; or

(iii) make any payment on account of other Indebtedness that has been
contractually subordinated in right of payment to the Obligations if such
payment is not permitted at such time under the subordination terms and
conditions, or

(b) Directly or indirectly, amend, modify, or change any of the terms or
provisions of

(i) any agreement, instrument, document, indenture, or other writing evidencing
or concerning Permitted Indebtedness other than (A) the Obligations in
accordance with this Agreement, (B) Permitted Intercompany Advances, and
(C) Indebtedness permitted under clauses (c), (e), (f) and (k) of the definition
of Permitted Indebtedness;

(ii) any Material Contract except to the extent that such amendment,
modification, or change could not, individually or in the aggregate, reasonably
be expected to be materially adverse to the interests of Lender; or

(iii) the Governing Documents of any Loan Party or any of its Subsidiaries if
the effect thereof, either individually or in the aggregate, could reasonably be
expected to be materially adverse to the interests of Lender.

7.8 Change of Control. Cause, permit, or suffer, directly or indirectly, any
Change of Control.

7.9 Restricted Junior Payments. Make any Restricted Junior Payment; provided,
however, that, so long as it is permitted by law, and so long as no Default or
Event of Default shall have occurred and be continuing or would result therefrom
and so long as such Borrower is a “pass-through” tax entity for United States
federal income tax purposes, and after first providing such supporting
documentation as Lender may request (including the state and federal tax returns
(and all related schedules) of each owner of Stock in such Borrower, such
Borrower may declare and pay Pass-Through Tax Liabilities, net of any prior year
loss carry-forwards.

7.10 Accounting Methods. Modify or change its fiscal year or its method of
accounting (other than as may be required to conform to GAAP).

 

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7.11 Investments; Controlled Investments.

(a) Except for Permitted Investments, directly or indirectly, make or acquire
any Investment or incur any liabilities (including contingent obligations) for
or in connection with any Investment.

(b) Other than (i) the Permitted Petty Cash Account, and (ii) amounts deposited
into Deposit Accounts identified on Schedule 5.15 to the Information Certificate
which are specially and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the employees of any Loan Party or
its Subsidiaries, make, acquire, or permit to exist Permitted Investments
consisting of cash, Cash Equivalents, or amounts credited to Deposit Accounts or
Securities Accounts unless such Borrower and such other Loan Party or its
Subsidiaries, as applicable, and the applicable bank (or as permitted solely
pursuant to Section 6.12(i) or securities intermediary have entered into Control
Agreements with Lender governing such Permitted Investments in order to perfect
(and further establish) Lender’s Liens in such Permitted Investments. Except as
provided in Section 6.12(i) and this Sections 7.11(b), Borrowers and such Loan
Parties shall not, and shall not permit their Subsidiaries to, establish or
maintain any Deposit Account or Securities Account with a banking institution
other than Lender.

7.12 Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any transaction with any Affiliate of any Borrower, any other Loan
Party or any of their Subsidiaries except for:

(a) transactions contemplated by the Loan Documents or transactions with any
Affiliates of any Borrower or any Loan Party in the ordinary course of business
of such Borrower or Loan Party, consistent with past practices and undertaken in
good faith, upon fair and reasonable terms fully disclosed to Lender and no less
favorable than would be obtained in a comparable arm’s length transaction with a
non-Affiliate;

(b) so long as it has been approved by a Loan Party’s board of directors (or
comparable governing body) in accordance with applicable law, any customary
indemnities provided for the benefit of directors (or comparable managers) of
such Loan Party;

(c) so long as it has been approved by a Loan Party’s board of directors (or
comparable governing body) in accordance with applicable law, the payment of
reasonable compensation, severance, or employee benefit arrangements to
employees, officers, and outside directors of a Loan Party in the ordinary
course of business and consistent with industry practice; and

(d) transactions permitted by Section 7.3 or Section 7.9, or any Permitted
Intercompany Advance.

7.13 Use of Proceeds. Use the proceeds of any loan made hereunder for any
purpose other than (a) on the Original Closing Date, (i) to repay, in full, the
outstanding principal, accrued interest, and accrued fees and expenses owing
under or in connection with Borrowers’ existing credit facility with Existing
Lender and (ii) to pay fees, costs, and expenses, including Lender Expenses,
incurred in connection with this Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby, and (b) thereafter, consistent
with the terms and conditions hereof, for general corporate and working capital
purposes for their lawful and permitted purposes (provided that no part of the
proceeds of the loans made to Borrowers will be used to purchase or carry any
such Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any such Margin Stock or for any purpose that violates the provisions
of Regulation T, U or X of the Board of Governors of the Federal Reserve
System), excluding, in each case, repayments of the Seller Subordinated Debt
whether or not permitted hereunder.

 

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7.14 Limitation on Issuance of Stock. Except for the issuance or sale of common
stock, Permitted Preferred Stock by a Borrower or other Loan Party, issue or
sell or enter into any agreement or arrangement for the issuance and sale of any
of their Stock.

7.15 Consignments. Consign any of its Inventory or sell any of its Inventory on
bill and hold, sale or return, sale on approval, or other conditional terms of
sale, except as set forth on Schedule 7.15 to the Information Certificate.

7.16 Inventory and Equipment with Bailees. Store the Inventory or Equipment of
any Loan Party or any of its Subsidiaries at any time now or hereafter with a
bailee, warehouseman, or similar party, except as set forth on Schedule 7.16 to
the Information Certificate.

7.17 Use of Proceeds in Connection with Bonded Contracts. Use proceeds of the
Loans in connection with funding work related to the Bonded Contracts unless
such use is upon terms, provisions and conditions acceptable to Lender, in its
good faith discretion (such as, without limitation, Lender being satisfied with
its Lien priority and right to proceeds relating to Borrowers’ assets and
restrictions on when payments may be made by Borrowers in connection with Bonded
Contracts); provided, however, except as otherwise provided in the Federal
Insurance Company and Liberty Mutual Intercreditor and the Chartis
Intercreditor, Lender agrees that the foregoing shall not be construed to
prevent any ability of Federal Insurance Company, Liberty Mutual or Chartis, as
applicable, to receive payment out of any assets of any Borrower in which
Federal Insurance Company, Liberty Mutual or Chartis has a first priority Lien
in a circumstance where Federal Insurance Company, Liberty Mutual or Chartis has
made a payment on a Surety Bond and Federal Insurance Company, Liberty Mutual or
Chartis is seeking reimbursement for such payment from such Borrower.

7.18 Surety Bonds. Request the issuance of a Surety Bond from any Surety after
the Closing Date without (i) providing prior written notice thereof to Lender in
accordance with Section 6.11(a)(vi) and (ii) (A) if no Event of Default has
occurred and is continuing, obtaining the prior written consent of Lender to the
issuance of such Surety Bond if such Surety Bond would cause any Account
included in the Borrowing Base to become a Bonded Account upon the issuance of
such Surety Bond, which such consent shall be in Lender’s sole discretion or
(B) if an Event of Default has occurred and is continuing, obtaining the prior
written consent of Lender to the issuance of such Surety Bond, which such
consent shall be in Lender’s sole discretion.

8. FINANCIAL COVENANTS.

Each Borrower covenants and agrees that, until termination of all obligations of
Lender to provide extensions of credit hereunder and payment in full of the
Obligations, Borrowers will comply with each of the following financial
covenants:

(a) Fixed Charge Coverage Ratio. Borrowers shall maintain a Fixed Charge
Coverage Ratio, measured monthly on a trailing twelve-month basis at the end of
each month that is an FCCR Testing Period, of at least 1.0 to 1.0.

9. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an event of default
(each, an “Event of Default”) under this Agreement:

9.1 If any Borrower fails to pay when due and payable, or when declared due and
payable, all or any portion of the Obligations consisting of principal,
interest, fees, charges or other amounts due

 

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Lender or any Bank Product Provider, reimbursement of Lender Expenses, or other
amounts constituting Obligations (including any portion thereof that accrues
after the commencement of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any such Insolvency
Proceeding);

9.2 If any Loan Party or any of its Subsidiaries:

(a) fails to perform or observe any covenant or other agreement contained in any
of (i) Sections 4.3, 6.1, 6.2, 6.3 (solely if any Loan Party or any of its
Subsidiaries is not in good standing in its jurisdiction of organization),
6.5(a) (solely with respect to F.I.C.A., F.U.T.A., federal income taxes and any
other taxes or assessments the non-payment of which may result in a Lien having
priority over Lender’s Liens), 6.5(b), 6.6, 6.7 (solely if any Loan Party or any
of its Subsidiaries refuses to allow Lender or its representatives or agents to
visit its properties, inspect its assets or books or records, examine and make
copies of its books and records, or discuss its affairs, finances, and accounts
with its officers and employees), 6.8, 6.11, 6.12, 6.13, 6.14 or 6.17
(ii) Section 7 or (iii) Section 8;

(b) fails to perform or observe any covenant or other agreement contained in any
of Sections 6.3 (other than if a Loan Party is not in good standing in its
jurisdiction of organization), 6.4, 6.5(a) (other than F.I.C.A., F.U.T.A.,
federal income taxes and any other taxes or assessments the non-payment of which
may result in a Lien having priority over Lender’s Liens), 6.7 (other than if
any Loan Party or any of its Subsidiaries refuses to allow Lender or its
representatives or agents to visit its properties, inspect its assets or books
or records, examine and make copies of its books or records or disclose it
affairs, finances and accounts with its officers and employees), 6.9, 6.10, and
6.15 and such failure continues for a period of twenty (20) days after the
earlier of (i) the date on which such failure shall first become known to or
should have been known by any officer of any Loan Party or (ii) the date on
which written notice thereof is given to any Loan Party by Lender; or

(c) fails to perform or observe any covenant or other agreement contained in
this Agreement, or in any of the other Loan Documents, in each case, other than
any such covenant or agreement that is unable to be cured or is the subject of
another provision of this Section 9 (in which event such other provision of this
Section 9 shall govern), and such failure continues for a period of thirty
(30) days after the earlier of (i) the date on which such failure shall first
become known to or should have been known by any officer of any Loan Party or
(ii) the date on which written notice thereof is given to any Loan Party by
Lender;

9.3 If one or more judgments, orders, or awards for the payment of money in an
amount in excess of $500,000 in any one case or in excess of $1,500,000 in the
aggregate, (except to the extent fully covered (other than to the extent of
customary deductibles) by insurance pursuant to which the insurer has not denied
coverage) is entered or filed against a Loan Party or any of its Subsidiaries or
with respect to any of their respective assets, and either (a) there is a period
of thirty (30) consecutive days at any time after the entry of any such
judgment, order, or award during which (1) the same is not discharged,
satisfied, vacated, or bonded pending appeal, or (2) a stay of enforcement
thereof is not in effect, or (b) enforcement proceedings are commenced upon such
judgment, order, or award;

9.4 If an Insolvency Proceeding is commenced by a Loan Party or any of its
Subsidiaries;

9.5 If an Insolvency Proceeding is commenced against a Loan Party or any of its
Subsidiaries and any of the following events occur: (a) such Loan Party or such
Subsidiary consents to the institution of such Insolvency Proceeding against it,
(b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within sixty (60) calendar days of the date of the filing thereof,
(d) an interim trustee is appointed to take possession of

 

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all or any substantial portion of the properties or assets of, or to operate all
or any substantial portion of the business of, such Loan Party or its
Subsidiary, or (e) an order for relief shall have been issued or entered
therein; provided that Lender shall have no obligation to provide any extension
of credit to Borrowers during such 60 calendar day period specified in
subsection (c);

9.6 If any Loan Party is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of the business
affairs of such Loan Party and its Subsidiaries, taken as a whole;

9.7 If there is (a) a default in one or more agreements to which a Loan Party is
a party with one or more third Persons relative to the Indebtedness of such Loan
Party or such Subsidiary involving an aggregate amount of $250,000 or more, and
such default (i) occurs at the final maturity of the obligations thereunder, or
(ii) results in a right by such third Person, irrespective of whether exercised,
to accelerate the maturity of such Loan Party’s or its Subsidiary’s obligations
thereunder, or (b) a default in or an involuntary early termination of one or
more Hedge Agreements to which a Loan Party or any of its Subsidiaries is a
party involving an aggregate amount of $250,000 or more;

9.8 If any warranty, representation, certificate, statement, or Record made
herein or in any other Loan Document or delivered in writing to Lender in
connection with this Agreement or any other Loan Document proves to be untrue in
any material respect (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 date of issuance or
making or deemed making thereof;

9.9 If the obligation of any Guarantor under its Guaranty or any other Loan
Document to which any Guarantor is a party is limited or terminated by operation
of law or by such Guarantor (other than in accordance with the terms of this
Agreement), or if any Guarantor fails to perform any obligation under its
Guaranty or under any such Loan Document, or repudiates or revokes or purports
to repudiate or revoke any obligation under its Guaranty, or under any such Loan
Document, or any Guarantor ceases to exist for any reason;

9.10 If this Agreement or any other Loan Document that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected and,
except to the extent of Permitted Liens which are permitted purchase money
Liens, tax Liens subject to a Permitted Protest or the interests of lessors
under Capital Leases, first priority Lien on the Collateral covered thereby,
except (a) as a result of a disposition of the applicable Collateral in a
transaction permitted under this Agreement, or (b) with respect to Collateral
the aggregate value of which, for all such Collateral, does not exceed at any
time, $1,500,000;

9.11 If any Material Adverse Change occurs;

9.12 If any event or circumstance shall occur which, in the Permitted Discretion
of Lender exercised in good faith, would be reasonably likely to cause Lender to
suspect that any Loan Party has engaged in fraudulent activity with respect to
the Collateral or other material matters;

9.13 Any director, officer, or owner of at least 20% of the issued and
outstanding ownership interests of a Loan Party is indicted for a felony offense
under state or federal law, or, without performing commercially reasonable due
diligence and/or background checks, a Loan Party knowingly hires an officer or
appoints a director who has been convicted of any such felony offense, or a
Person becomes an owner of at least 20% of the issued and outstanding ownership
interests of a Loan Party who has been convicted of any such felony offense;

 

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9.14 If any Loan Party (a) fails to pay any indebtedness or obligation owed to
Lender or its Affiliates which is unrelated to the Credit Facility or this
Agreement as it becomes due and payable (other than indebtedness or obligations
involving an aggregate amount of $100,000 unless such failure continues for a
period of thirty (30) days), or (b) the occurrence of any default or event of
default under any agreement between any Loan Party and Lender or its Affiliates
unrelated to the Loan Documents (other than agreements involving an aggregate
amount less than $100,000, unless such default or event of default continues for
a period of thirty (30) days);

9.15 The validity or enforceability of any Loan Document shall at any time for
any reason be declared to be null and void, or a proceeding shall be commenced
by a Loan Party or any of its Subsidiaries, or by any Governmental Authority
having jurisdiction over a Loan Party or any of its Subsidiaries, seeking to
establish the invalidity or unenforceability thereof, or a Loan Party or any of
its Subsidiaries shall deny that such Loan Party or such Subsidiary has any
liability or obligation purported to be created under any Loan Document;

9.16 If there shall occur any default or event of default under any of the
agreements or documentation among any Surety and any Loan Parties relating to
such Surety’s bonding program with such Loan Parties, and, as a result thereof,
such Surety has ceased issuing Surety Bonds on behalf of any Loan Party (other
than a temporary cessation not arising from a violation or termination of the
applicable Surety Bond documentation; provided that other Sureties are then
issuing requested Surety Bonds on behalf of such Loan Party) and such Surety has
not been replaced within thirty (30) days, or has made demand on any Loan Party
for performance thereunder or has otherwise commenced exercising any remedies
thereunder (including, without limitation, attempting to segregate funds as to
its Surety Collateral), or any unreimbursed claim is made on such Surety related
to any Bonded Contract against the issuer of any Surety Bond; or

9.16 If there shall occur any default or event of default under (a) the
agreements entered into in connection with any Permitted Insurance Premium
Financing Indebtedness, or (b) the Subordinated Debt Documentation.

10. RIGHTS AND REMEDIES.

10.1 Rights and Remedies. Upon the occurrence and during the continuation of an
Event of Default, Lender may, in addition to any other rights or remedies
provided for hereunder or under any other Loan Document or by applicable law, do
any one or more of the following:

(a) declare the Obligations (other than the Hedge Obligations, which may be
accelerated in accordance with the terms of the applicable Hedge Agreement),
whether evidenced by this Agreement or by any of the other Loan Documents
immediately due and payable, whereupon the same shall become and be immediately
due and payable and Borrowers shall be obligated to repay all of such
Obligations in full, without presentment, demand, protest, or further notice or
other requirements of any kind, all of which are hereby expressly waived by each
Borrower and each other Loan Party;

(b) declare the funding obligations of Lender under this Agreement terminated,
whereupon such funding obligations shall immediately be terminated together with
any obligation of Lender hereunder to make Advances, extend any other credit
hereunder or issue Letters of Credit;

(c) give notice to an Account Debtor or other Person obligated to pay an
Account, a General Intangible, Negotiable Collateral, or other amount due,
notice that the Account, General Intangible, Negotiable Collateral or other
amount due has been assigned to Lender for security and must be paid directly to
Lender and Lender may collect the Accounts, General Intangible and Negotiable
Collateral of each Borrower and each other Loan Party directly, and any
collection costs and expenses shall constitute part of the Obligations under the
Loan Documents;

 

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(d) in Lender’s name or in each Loan Party’s name, as such Loan Party’s agent
and attorney-in-fact, notify the United States Postal Service to change the
address for delivery of mail to any address designated by Lender, otherwise
intercept mail, and receive, open and dispose of such Loan Party’s mail,
applying all Collateral as permitted under this Agreement and holding all other
mail for such Loan Party’s account or forwarding such mail to such Loan Party’s
last known address;

(e) without notice to or consent from any Loan Party or any of its Subsidiaries,
and without any obligation to pay rent or other compensation, take exclusive
possession of all locations where any Loan Party or any of its Subsidiaries
conduct its business or has any rights of possession and use the locations to
store, process, manufacture, sell, use, and liquidate or otherwise dispose of
items that are Collateral, and for any other incidental purposes deemed
appropriate by Lender in good faith; and

(f) exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein, in the other Loan Documents, or otherwise
available to it, all the rights and remedies of a secured party on default under
the Code or any other applicable law.

10.2 Additional Rights and Remedies. Without limiting the generality of the
foregoing, each Borrower expressly agrees that upon the occurrence and during
the continuation of an Event of Default:

(a) Lender, without demand of performance or other demand, advertisement or
notice of any kind (except a notice specified below of time and place of public
or private sale) to or upon any Borrower, any other Loan Party or any other
Person (all and each of which demands, advertisements and notices are hereby
expressly waived to the maximum extent permitted by the Code or any other
applicable law), may take immediate possession of all or any portion of the
Collateral and (i) require Loan Parties to, and each Borrower and each other
Loan Party hereby agrees that it will at its own expense and upon request of
Lender forthwith, assemble all or part of the Collateral as directed by Lender
and make it available to Lender at one or more locations designated by Lender
where such Borrower or other Loan Party conducts business, and (ii) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of Lender’s or Loan Party’s
offices or elsewhere, for cash, on credit, and upon such other terms as Lender
may deem commercially reasonable. Each Borrower and each other Loan Party agrees
that, to the extent notice of sale shall be required by law, at least ten
(10) days notice to such Borrower or such other Loan Party of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification and such notice shall constitute a reasonable
“authenticated notification of disposition” within the meaning of Section 9-611
of the Code. Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Lender may adjourn any public or
private sale from time to time, and such sale may be made at the time and place
to which it was so adjourned. Each Borrower and each other Loan Party agrees
that the internet shall constitute a “place” for purposes of Section 9-610(b) of
the Code. Each Borrower and each other Loan Party agrees that any sale of
Collateral to a licensor pursuant to the terms of a license agreement between
such licensor and such Borrower or such other Loan Party is sufficient to
constitute a commercially reasonable sale (including as to method, terms,
manner, and time) within the meaning of Section 9-610 of the Code;

(b) Lender may, in addition to other rights and remedies provided for herein, in
the other Loan Documents, or otherwise available to it under applicable law and
without the requirement of notice to or upon any Loan Party or any other Person
(which notice is hereby expressly waived to the maximum extent permitted by the
Code or any other applicable law), (i) with respect to any Loan Party’s Deposit
Accounts in which Lender’s Liens are perfected by control under Section 9-104 of
the Code,

 

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instruct the bank maintaining such Deposit Account for the applicable Loan Party
to pay the balance of such Deposit Account to or for the benefit of Lender, and
(ii) with respect to any Loan Party’s Securities Accounts in which Lender’s
Liens are perfected by control under Section 9-106 of the Code, instruct the
securities intermediary maintaining such Securities Account for the applicable
Loan Party to (A) transfer any cash in such Securities Account to or for the
benefit of Lender, or (B) liquidate any financial assets in such Securities
Account that are customarily sold on a recognized market and transfer the cash
proceeds thereof to or for the benefit of Lender;

(c) any cash held by Lender as Collateral and all cash proceeds received by
Lender in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied against the Obligations in the
order set forth in Section 10.5. In the event the proceeds of Collateral are
insufficient to satisfy all of the Obligations in full, each Borrower and each
other Loan Party shall remain jointly and severally liable for any such
deficiency; and

(d) the Obligations arise out of a commercial transaction, and that if an Event
of Default shall occur, Lender shall have the right to an immediate writ of
possession without notice of a hearing. Lender shall have the right to the
appointment of a receiver for each Loan Party or for the properties and assets
of each Loan Party, and each Borrower and each other Loan Party hereby consents
to such rights and such appointment and hereby waives any objection such
Borrower or such Loan Party may have thereto or the right to have a bond or
other security posted by Lender.

Notwithstanding the foregoing or anything to the contrary contained in
Section 10.1, upon the occurrence of any Default or Event of Default described
in Section 9.4 or Section 9.5, in addition to the remedies set forth above,
without any notice to any Borrower or any other Person or any act by Lender, all
obligations of Lender to provide any further extensions of credit hereunder
shall automatically terminate and the Obligations (other than the Hedge
Obligations), shall automatically and immediately become due and payable and
each Borrower shall be obligated to repay all of such Obligations in full,
without presentment, demand, protest, or notice of any kind, all of which are
expressly waived by each Borrower.

10.3 Disposition of Pledged Interests by Lender. None of the Pledged Interests
existing as of the date of this Agreement are, and none of the Pledged Interests
hereafter acquired on the date of acquisition thereof will be, registered or
qualified under the various federal or state securities laws of the United
States and disposition thereof after an Event of Default may be restricted to
one or more private (instead of public) sales in view of the lack of such
registration. Each Loan Party understands that in connection with such
disposition, Lender may approach only a restricted number of potential
purchasers and further understands that a sale under such circumstances may
yield a lower price for the Pledged Interests than if the Pledged Interests were
registered and qualified pursuant to federal and state securities laws and sold
on the open market. Each Loan Party, therefore, agrees that: (a) if Lender
shall, pursuant to the terms of this Agreement, sell or cause the Pledged
Interests or any portion thereof to be sold at a private sale, Lender shall have
the right to rely upon the advice and opinion of any nationally recognized
brokerage or investment firm (but shall not be obligated to seek such advice and
the failure to do so shall not be considered in determining the commercial
reasonableness of such action) as to the best manner in which to offer the
Pledged Interest or any portion thereof for sale and as to the best price
reasonably obtainable at the private sale thereof; and (b) such reliance shall
be conclusive evidence that Lender has handled the disposition in a commercially
reasonable manner.

10.4 Voting and Other Rights in Respect of Pledged Interests.

(a) Upon the occurrence and during the continuation of an Event of Default,
(i) Lender may, at its option, and with two (2) Business Days prior notice to
such Borrower or such other Loan Party, and in addition to all rights and
remedies available to Lender under any other agreement, at

 

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law, in equity, or otherwise, exercise all voting rights, or any other ownership
or consensual rights (including any dividend or distribution rights) in respect
of the Pledged Interests owned by any Borrower or any other Loan Party, but
under no circumstances is Lender obligated by the terms of this Agreement to
exercise such rights, and (ii) if Lender duly exercises its right to vote any of
such Pledged Interests, each Borrower and each other Loan Party hereby appoints
Lender, such Borrower’s and such Loan Party’s true and lawful attorney-in-fact
and IRREVOCABLE PROXY to vote such Pledged Interests in any manner Lender deems
advisable for or against all matters submitted or which may be submitted to a
vote of shareholders, partners or members, as the case may be. The
power-of-attorney and proxy granted hereby is coupled with an interest and shall
be irrevocable.

(b) For so long as such Borrower or such other Loan Party shall have the right
to vote the Pledged Interests owned by it, such Borrower and such other Loan
Party covenants and agrees that it will not, without the prior written consent
of Lender, vote or take any consensual action with respect to such Pledged
Interests which would materially adversely affect the rights of Lender or the
value of the Pledged Interests.

10.5 Lender Appointed Attorney in Fact. Each Borrower and each other Loan Party
hereby irrevocably appoints Lender its attorney-in-fact, with full authority in
the place and stead of such Borrower and such Loan Party and in the name of such
Borrower or such Loan Party or otherwise, at such time as an Event of Default
has occurred and is continuing, to take any action and to execute any instrument
which Lender may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement, including:

(a) to ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in connection
with the Accounts or any other Collateral of such Borrower or such other Loan
Party;

(b) to receive, indorse, and collect any drafts or other instruments, documents,
Negotiable Collateral or Chattel Paper;

(c) to file any claims or take any action or institute any proceedings which
Lender may deem necessary or desirable for the collection of any of the
Collateral of such Borrower or such other Loan Party or otherwise to enforce the
rights of Lender with respect to any of the Collateral;

(d) to repair, alter, or supply Goods, if any, necessary to fulfill in whole or
in part the purchase order of any Person obligated to Borrower or such other
Loan Party in respect of any Account of such Borrower or such other Loan Party;

(e) to use any Intellectual Property or Intellectual Property Licenses of such
Borrower or such other Loan Party including but not limited to any labels,
Patents, Trademarks, trade names, URLs, domain names, industrial designs,
Copyrights, or advertising matter, in preparing for sale, advertising for sale,
or selling Inventory or other Collateral and to collect any amounts due under
Accounts, contracts or Negotiable Collateral of such Borrower or such other Loan
Party;

(f) to take exclusive possession of all locations where each Borrower or other
Loan Party conducts its business or has rights of possession, without notice to
or consent of any Borrower or any Loan Party and to use such locations to store,
process, manufacture, sell, use, and liquidate or otherwise dispose of items
that are Collateral, without obligation to pay rent or other compensation for
the possession or use of any location;

 

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(g) Lender shall have the right, but shall not be obligated, to bring suit in
its own name or in the applicable Loan Party’s name, to enforce the Intellectual
Property and Intellectual Property Licenses and, if Lender shall commence any
such suit, the appropriate Borrower or such other Loan Party shall, at the
request of Lender, do any and all lawful acts and execute any and all proper
documents reasonably required by Lender in aid of such enforcement; and

(h) to the extent permitted by law, such Borrower and each other Loan Party
hereby ratifies all that such attorney-in-fact shall lawfully do or cause to be
done by virtue hereof. This power of attorney is coupled with an interest and
shall be irrevocable until all commitments of Lender under this Agreement to
provide extensions of credit are terminated and all Obligations have been paid
in full in cash.

10.6 Remedies Cumulative. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Default or Event of Default shall be deemed a continuing waiver. No delay by
Lender shall constitute a waiver, election, or acquiescence by it.

10.7 Crediting of Payments and Proceeds. In the event that the Obligations
(other than the Hedge Obligations, which may be accelerated in accordance with
the terms of the applicable Hedge Agreement) have been accelerated pursuant to
Section 10.1 or the Lender has exercised any remedy set forth in this Agreement
or any other Loan Document, all payments received by Lender upon the Obligations
and all net proceeds from the enforcement of the Obligations shall be applied in
such manner as Lender shall determine in its discretion and, thereafter, to
Borrowers (to be wired to the Designated Account) or such other Person entitled
thereto under applicable law.

10.8 Marshaling. Lender shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies under this Agreement and under the other Loan
Documents and in respect of such collateral security and other assurances of
payment shall be cumulative and in addition to all other rights and remedies,
however existing or arising. To the extent that it lawfully may, each Borrower
and each other Loan Party hereby agrees that it will not invoke any law relating
to the marshaling of collateral which might cause delay in or impede the
enforcement of Lender’s rights and remedies under this Agreement or under any
other Loan Document or instrument creating or evidencing any of the Obligations
or under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, each Borrower hereby irrevocably waives the
benefits of all such laws.

10.9 License. Each Loan Party hereby grants to Lender a non-exclusive, worldwide
and royalty-free license to use or otherwise exploit all Intellectual Property
rights of such Loan Party for the purpose of: (a) completing the manufacture of
any in-process materials following any Event of Default so that such materials
become saleable Inventory, all in accordance with the same quality standards
previously adopted by such Borrower for its own manufacturing; and (b) selling,
leasing or otherwise disposing of any or all Collateral following any Event of
Default.

11. WAIVERS; INDEMNIFICATION.

11.1 Demand; Protest; etc. Each Borrower and each other Loan Party waives
demand, protest, notice of protest, notice of default or dishonor, notice of
payment and nonpayment, nonpayment

 

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at maturity, release, compromise, settlement, extension, or renewal of
documents, instruments, chattel paper, and guarantees at any time held by Lender
on which such Borrower or such other Loan Party may in any way be liable.

11.2 The Lender’s Liability for Collateral. Each Borrower and each other Loan
Party hereby agrees that: (a) so long as Lender complies with its obligations,
if any, under the Code, Lender shall not in any way or manner be liable or
responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage
thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by each Borrower
and such other Loan Parties.

11.3 Indemnification. Each Borrower and each other Loan Party shall pay,
indemnify, defend, and hold the Lender-Related Persons (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by applicable law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, liabilities, fines, costs, penalties, and damages, and all
reasonable fees and disbursements of attorneys, experts, or consultants and all
other costs and expenses actually incurred in connection therewith or in
connection with the enforcement of this indemnification (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them (a) in connection with or as a
result of or related to the execution and delivery, enforcement, performance, or
administration (including any restructuring, forbearance or workout with respect
hereto) of this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby or the monitoring of compliance by each Borrower
and each other Loan Party and each of its Subsidiaries with the terms of the
Loan Documents, (b) with respect to any investigation, litigation, or proceeding
related to this Agreement, any other Loan Document, or the use of the proceeds
of the credit provided hereunder (irrespective of whether any Indemnified Person
is a party thereto), or any act, omission, event, or circumstance in any manner
related thereto, (c) in connection with the custody, preservation, use or
operation of, or, upon an Event of Default, the sale of, collection from, or
other realization upon, any of the Collateral in accordance with this Agreement
and the other Loan Documents, (d) with respect to the failure by any Borrower or
any other Loan Party to perform or observe any of the provisions hereof or any
other Loan Document, (e) in connection with the exercise or enforcement of any
of the rights of Lender hereunder or under any other Loan Document, and (f) in
connection with or arising out of any presence or release of Hazardous Materials
at, on, under, to or from any assets or properties owned, leased or operated by
any Borrower or any other Loan Party or any Subsidiary of a Borrower or any
other Loan Party or any Environmental Actions, Environmental Liabilities or
Remedial Actions related in any way to any such assets or properties of such
Loan Party or any of its Subsidiaries (each and all of the foregoing, the
“Indemnified Liabilities”). The foregoing to the contrary notwithstanding, no
Borrower or any other Loan Party shall have any obligation to any Indemnified
Person under this Section 11.3 with respect to any Indemnified Liability that
(i) a court of competent jurisdiction finally determines to have resulted from
the gross negligence or willful misconduct of such Indemnified Person or its
officers, directors, employees, or attorneys or (ii) arises solely from disputes
between or among Indemnified Persons. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which a Borrower or any other Loan
Party was required to indemnify the Indemnified Person receiving such payment,
the Indemnified Person making such payment is entitled to be indemnified and
reimbursed by such Borrower or such other Loan Party with respect thereto.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED
PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE
CAUSED BY OR ARISE OUT OF ANY STRICT LIABILITY OR NEGLIGENT ACT OR OMISSION OF
SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

 

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12. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands relating to
this Agreement or any other Loan Document shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
certified mail (postage prepaid, return receipt requested), overnight courier,
electronic mail (at such email addresses as a party may designate in accordance
herewith), or telefacsimile. In the case of notices or demands to Borrowers, any
other Loan Party or Lender, as the case may be, they shall be sent to the
respective address set forth below:

 

If to any Loan Party:   

c/o Integrated Electrical Services, Inc.

5433 Westheimer, Suite 500

Houston, TX 77056

  

Attn: Robert W. Lewey

Fax No. (713) 860-1599

Email: Robert.Lewey@ies-co.com

with courtesy copies to    (which shall not constitute    Notice for purposes of
this    Section 12):   

600 Travis, Suite 4200

Houston, Texas 77002

Attn: Douglas J. Dillon, Esq.

  

Fax No.: 713.238.7122

Email: ddillon@akllp.com

If to Lender:   

MAC S4101-158

100 W Washington St

15th Floor

  

Phoenix, AZ

85003-1808

Attn: Howard I. Handman

  

Fax No.: (602)378-6215

Email: howard.i.handman@wellsfargo.com

with courtesy copies to   

(which shall not constitute

Notice for purposes of this

   Section 12)    Holland & Knight LLP    200 Crescent Court, Suite 1600   

Dallas, TX 75201

Attn: Michelle W. Suarez, Esq.

Fax No. (214) 964-9474

   Email: Michelle.Suarez@hklaw.com

Any party hereto may change the address at which it is to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
parties. All notices or demands sent in accordance with this Section 12 shall be
deemed received on the earlier of the date of actual receipt or three
(3) Business Days after the deposit thereof in the mail; provided, that
(a) notices sent by overnight courier service shall

 

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be deemed to have been given when received, (b) notices by facsimile shall be
deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the
opening of business on the next Business Day for the recipient) and (c) notices
by electronic mail shall be deemed received upon the sender’s receipt of an
acknowledgment from the intended recipient (such as by the “return receipt
requested” function, as available, return email or other written
acknowledgment). Any notice given by Lender to any Borrower as provided in this
Section 12 shall be deemed sufficient notice as to all Loan Parties, regardless
of whether each Loan Party is sent a separate copy of such notice or whether
each Loan Party is specifically identified in such notice.

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO AS WELL
AS ALL CLAIMS, CONTROVERSIES OR DISPUTES ARISING UNDER OR RELATED TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD
TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.

(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE TRIED AND LITIGATED IN THE
STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN
THE CITY OF DALLAS AND THE COUNTY OF DALLAS, STATE OF TEXAS; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER
ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. EACH LOAN PARTY AND LENDER WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13(b).

(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH LOAN PARTY AND
LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL OF ANY
CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON
OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH, A “CLAIM”). EACH
LOAN PARTY AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(d) NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST THE LENDER, OR ANY AFFILIATE
OF LENDER OR ANY DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR
ATTORNEY-IN-FACT OF ANY OF THEM FOR

 

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ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES IN RESPECT OF ANY
CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR
RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND
EACH LOAN PARTY HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM
FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
TO EXIST IN ITS FAVOR.

14. ASSIGNMENTS; SUCCESSORS. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; provided,
however, that no Borrower or any other Loan Party may assign this Agreement or
any rights or duties hereunder without Lender’s prior written consent and any
prohibited assignment shall be absolutely void ab initio. No consent to
assignment by the Lender shall release any Borrower or any other Loan Party from
its Obligations. Lender may assign this Agreement and the other Loan Documents
in whole or in part and its rights and duties hereunder or grant participations
in the Obligations hereunder and thereunder and no consent or approval by any
Borrower or any other Loan Party is required in connection with any such
assignment or participation.

15. AMENDMENTS; WAIVERS. No amendment or modification of this Agreement or any
other Loan Document or any other document or agreement described in or related
to this Agreement shall be effective unless it has been agreed to by Lender in a
writing that specifically states that it is intended to amend or modify specific
Loan Documents, or any other document or agreement described in or related to
this Agreement. No failure by Lender to exercise any right, remedy, or option
under this Agreement or any other Loan Document, or delay by Lender in
exercising the same, will operate as a waiver thereof. No waiver by Lender will
be effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Lender on any occasion shall affect or diminish Lender’s
rights thereafter to require strict performance by Borrowers or any other Loan
Party of any provision of this Agreement. Lender’s rights under this Agreement
and the other Loan Documents will be cumulative and not exclusive of any other
right or remedy that Lender may have.

16. TAXES.

(a) All payments made by any Borrower or any other Loan Party hereunder or under
any note or other Loan Document will be made without setoff, counterclaim, or
other defense. In addition, all such payments will be made free and clear of,
and without deduction or withholding for, any present or future Taxes, and in
the event any deduction or withholding of Taxes is required, each Borrower shall
comply with the next sentence of this Section 16(a). If any Taxes are so levied
or imposed, each Borrower and each other Loan Party agrees to pay the full
amount of such Taxes and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement, any note, or Loan
Document, including any amount paid pursuant to this Section 16(a) after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein; provided, however, that Borrowers or Loan
Parties shall not be required to increase any such amounts if the increase in
such amount payable results from Lender’s willful misconduct or gross negligence
(as finally determined by a court of competent jurisdiction). Each Borrower and
each other Loan Party will furnish to Lender as promptly as possible after the
date the payment of any Tax is due pursuant to applicable law, certified copies
of tax receipts evidencing such payment by such Borrower.

(b) Each Borrower agrees to pay any present or future stamp, value added or
documentary taxes or any other excise or property taxes, charges, or similar
levies that arise from any payment made hereunder or from the execution,
delivery, performance, recordation, or filing of, or otherwise with respect to
this Agreement or any other Loan Document.

 

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17. GENERAL PROVISIONS.

17.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by each Borrower, each other Loan Party and Lender.

17.2 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.

17.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed against the Lender or any Loan Party, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.

17.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

17.5 Debtor-Creditor Relationship. The relationship between the Lender, on the
one hand, and the Loan Parties, on the other hand, is solely that of creditor
and debtor. Lender shall not have (and shall not be deemed to have) any
fiduciary relationship or duty to any Loan Party arising out of or in connection
with the Loan Documents or the transactions contemplated thereby, and there is
no agency or joint venture relationship between Lender, on the one hand, and the
Loan Parties, on the other hand, by virtue of any Loan Document or any
transaction contemplated therein.

17.6 Counterparts; Electronic Execution. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.

17.7 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by any Borrower or any other Loan Party or the transfer to
Lender of any property should for any reason subsequently be asserted, or
declared, to be void or voidable under any state or federal law relating to
creditors’ rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other voidable or recoverable payments
of money or transfers of property (each, a “Voidable Transfer”), and if Lender
is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that Lender is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Lender related thereto, the liability of such Borrower or such
other Loan Party automatically shall be revived, reinstated, and restored and
shall exist as though such Voidable Transfer had never been made and all of
Lender’s Liens in the Collateral shall be automatically reinstated without
further action.

 

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17.8 Confidentiality.

(a) Lender agrees that material, non-public information regarding the Loan
Parties and their Subsidiaries, their operations, assets, and existing and
contemplated business plans (“Confidential Information”) shall be treated by
Lender in a confidential manner, and shall not be disclosed by Lender to Persons
who are not parties to this Agreement, except: (i) to attorneys for and other
advisors, accountants, auditors, and consultants to Lender and to employees,
directors and officers of Lender (the Persons in this clause (i), “Lender
Representatives”) on a “need to know” basis in connection with this Agreement
and the transactions contemplated hereby and on a confidential basis, (ii) to
Subsidiaries and Affiliates of Lender, provided that any such Subsidiary or
Affiliate shall have agreed to receive such information hereunder subject to the
terms of this Section 17.8, (iii) as may be required by regulatory authorities,
(iv) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation; provided that (x) prior to any disclosure under this
clause (iv), the disclosing party agrees to provide Borrowers with prior notice
thereof, to the extent that it is practicable to do so and to the extent that
the disclosing party is permitted to provide such prior notice to Borrowers
pursuant to the terms of the applicable statute, decision, or judicial or
administrative order, rule, or regulation and (y) any disclosure under this
clause (iv) shall be limited to the portion of the Confidential Information as
may be required by such statute, decision, or judicial or administrative order,
rule, or regulation, (v) as may be agreed to in advance in writing by Borrowers,
(vi) as requested or required by any Governmental Authority pursuant to any
subpoena or other legal process, provided, that, (x) prior to any disclosure
under this clause (vi) the disclosing party agrees to provide Borrowers with
prior written notice thereof, to the extent that it is practicable to do so and
to the extent that the disclosing party is permitted to provide such prior
written notice to Borrowers pursuant to the terms of the subpoena or other legal
process and (y) any disclosure under this clause (vi) shall be limited to the
portion of the Confidential Information as may be required by such Governmental
Authority pursuant to such subpoena or other legal process, (vii) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Lender or Lender Representatives),
(viii) in connection with any assignment, participation or pledge of any
Lender’s interest under this Agreement, provided that prior to receipt of
Confidential Information any such assignee, participant, or pledgee shall have
agreed in writing to receive such Confidential Information hereunder subject to
the terms of this Section 17.8, (ix) in connection with any litigation or other
adversary proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties under
this Agreement or the other Loan Documents; (x) to equity owners of each Loan
Party and (xi) in connection with, and to the extent reasonably necessary for,
the exercise of any secured creditor remedy under this Agreement or under any
other Loan Document.

(b) Anything in this Agreement to the contrary notwithstanding, Lender may use
the name, logos, and other insignia of the Loan Parties and the Maximum Credit
provided hereunder in any “tombstone” or comparable advertising, on its website
or in other marketing materials of Lender.

17.9 Lender Expenses. Each Borrower and each other Loan Party agrees to pay the
Lender Expenses on the earlier of (a) the first day of the month following the
date on which such Lender Expenses were first incurred, or (b) the date on which
demand therefor is made by Lender and each Borrower and each other Loan Party
agrees that its obligations contained in this Section 17.9 shall survive payment
or satisfaction in full of all other Obligations.

17.10 Setoff. Lender may at any time, in its sole discretion and without demand
or notice to anyone, setoff any liability owed to any Borrower or any Guarantor
or any other Loan Party by Lender against any of the Obligations, whether or not
due.

 

40

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17.11 Survival. All representations and warranties made by the Loan Parties in
the Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Loan Documents and the making of any
loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that Lender
may have had notice or knowledge of any Default or Event of Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as any of the Obligations is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the
obligation of Lender to provide extensions of credit hereunder has not expired
or been terminated.

17.12 Patriot Act. Lender hereby notifies the Loan Parties that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies each Loan Party, which information includes the name
and address of each Loan Party and other information that will allow such Lender
to identify each Loan Party in accordance with the Patriot Act. In addition, if
Lender is required by law or regulation or internal policies to do so, it shall
have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP
searches, and customary individual background checks for the Loan Parties, and
(b) OFAC/PEP searches and customary individual background checks of the Loan
Parties’ senior management and key principals, and each Borrower and each other
Loan Party agrees to cooperate in respect of the conduct of such searches and
further agrees that the reasonable costs and charges for such searches shall
constitute Lender Expenses hereunder and be for the account of Borrowers.

17.13 Integration. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS,
REFLECTS THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY AND SHALL NOT BE CONTRADICTED OR QUALIFIED BY
ANY OTHER AGREEMENT, ORAL OR WRITTEN, BEFORE THE CLOSING DATE. THE FOREGOING TO
THE CONTRARY NOTWITHSTANDING, ALL BANK PRODUCT AGREEMENTS, IF ANY, ARE
INDEPENDENT AGREEMENTS GOVERNED BY THE WRITTEN PROVISIONS OF SUCH BANK PRODUCT
AGREEMENTS, WHICH WILL REMAIN IN FULL FORCE AND EFFECT, UNAFFECTED BY ANY
REPAYMENT, PREPAYMENTS, ACCELERATION, REDUCTION, INCREASE, OR CHANGE IN THE
TERMS OF ANY CREDIT EXTENDED HEREUNDER, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN SUCH BANK PRODUCT AGREEMENT.

17.14 Bank Product Providers. Each Bank Product Provider shall be deemed a third
party beneficiary hereof and of the provisions of the other Loan Documents for
purposes of any reference in a Loan Document to the parties for whom Lender is
acting. Lender hereby agrees to act as agent for such Bank Product Providers
and, by virtue of entering into a Bank Product Agreement, the applicable Bank
Product Provider shall be automatically deemed to have appointed Lender as its
agent and to have accepted the benefits of the Loan Documents; it being
understood and agreed that the rights and benefits of each Bank Product Provider
under the Loan Documents consist exclusively of such Bank Product Provider’s
being a beneficiary of the Liens and security interests (and, if applicable,
guarantees) granted to Lender and the right to share in payments and collections
of the Collateral as more fully set forth herein and in the other Loan
Documents. In addition, each Bank Product Provider, by virtue of entering into a
Bank Product Agreement, shall be automatically deemed to have agreed that Lender
shall have the right, but shall have no obligation, to establish, maintain,
relax, or release Reserves in respect of the Bank Product Obligations and that
if Reserves are established there is no obligation on the part of Lender to
determine or ensure whether the amount of any such Reserve is appropriate or
not. Notwithstanding anything to the contrary in this Agreement or any other
Loan Document, no Bank Product Provider (other than Lender in its capacity as
lender hereunder) shall have any voting or approval rights hereunder solely by
virtue of its status as the provider or holder of such agreements or products or
the Obligations owing

 

41

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thereunder, nor shall the consent of any such provider or holder be required for
any matter hereunder or under any of the other Loan Documents, including as to
any matter relating to the Collateral or the release of Collateral or any other
Loan Party.

17.15 Non-Applicability of Chapter 346. Each Loan Party and Lender hereby agree
that except for Section 346.004 thereof, the provisions of Chapter 346 of the
Texas Finance Code (Vernon’s Texas Code Annotated), as amended from time to time
(regulating certain revolving credit loans and revolving tri-party accounts)
shall not apply to this Agreement or any of the other Loan Documents.

17.16 Waiver of Rights under Texas Deceptive Trade Practices Act. EACH LOAN
PARTY HEREBY WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES—CONSUMER
PROTECTION ACT, SECTION § 17.41 ET SEQ. TEXAS BUSINESS & COMMERCE CODE, A LAW
THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF EACH LOAN PARTY’S OWN SELECTION, EACH LOAN PARTY VOLUNTARILY
CONSENTS TO THIS WAIVER. EACH LOAN PARTY EXPRESSLY WARRANTS AND REPRESENTS THAT
IT (A) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO
LENDER, AND (B) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

17.17 Amendment and Restatement. This Agreement amends and restates the Existing
Credit Agreement in its entirety. The Existing Loans and the other Existing
Obligations outstanding under the Existing Credit Agreement shall be governed by
and deemed to be outstanding under the amended and restated terms set forth in
this Agreement and the other Loan Documents, and the Existing Obligations (other
than with respect to the Term Loan) are and shall continue to be (and all
Obligations incurred pursuant hereto shall be) secured by, among other things,
the Existing Collateral as well as the other Collateral. The execution and
delivery of this Agreement, which is made for the purposes described in the
foregoing recitals, shall not effectuate a novation of any of the Existing Loan
Documents, or, except as set forth below, constitute a release or discharge of
the Existing Obligations or the Existing Collateral, but rather as a
substitution of certain terms governing the payment and performance of such
obligations and indebtedness.

[Signature pages to follow]

 

42

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered under seal as of the date first above written.

 

BORROWERS: INTEGRATED ELECTRICAL SERVICES, INC. By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Senior Vice President IES COMMERCIAL &
INDUSTRIAL, LLC By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   President IES COMMERCIAL, INC. By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President IES PURCHASING & MATERIALS, INC.
By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   President IES RESIDENTIAL, INC. By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President INTEGRATED ELECTRICAL FINANCE,
INC. By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   President

 

[Credit and Security Agreement Signature Page]

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

IES MANAGEMENT LP By: INTEGRATED ELECTRICAL FINANCE, INC., its General Partner
By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   President IES MANAGEMENT ROO, LP By: IES
OPERATIONS GROUP, INC., its General Partner By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   President IES RENEWABLE ENERGY, LLC By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President IES SUBSIDIARY HOLDINGS, INC.
By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Chief Financial Officer HK ENGINE COMPONENTS,
LLC By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President MAGNETECH INDUSTRIAL SERVICES,
INC. By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President

 

[Credit and Security Agreement Signature Page]

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

GUARANTORS: IES CONSOLIDATION, LLC By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President IES SHARED SERVICES, INC. By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President IES PROPERTIES, INC. By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President KEY ELECTRICAL SUPPLY, INC. By:
 

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President IES TANGIBLE PROPERTIES, INC.
By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President IES OPERATIONS GROUP, INC. By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President ICS HOLDINGS LLC By:  

/s/ Robert W. Lewey

Name:   Robert W. Lewey Title:   Vice President

 

[Credit and Security Agreement Signature Page]

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

LENDER: WELLS FARGO BANK, NATIONAL ASSOCIATION By:  

/s/ Howard Handman

Name:   Howard Handman Title:   Vice President

 

[Credit and Security Agreement Signature Page]

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

Schedule 1.1

a. Definitions. As used in this Agreement, the following terms shall have the
following definitions:

“Account” means an account (as that term is defined in Article 9 of the Code).

“Account Debtor” means an account debtor (as that term is defined in the Code).

“Accounts Availability Amount” means:

(a) as of any date of determination other than during an FCCR Testing Period,
the sum of

(i) 85% (less the amount, if any, of the Dilution Reserve, if applicable) of the
amount of Eligible Accounts, plus

(ii) the lesser of (x) 75% (less the amount, if any, of the Dilution Reserve, if
applicable) of the amount of Eligible Progress Billing Accounts,
(y) $25,000,000, or (z) sixty percent (60%) of an amount equal to the sum of
clause (a)(i) above plus clause (a)(ii)(x) above (after giving effect to any
Reserves); and

(b) as of any date of determination occurring during an FCCR testing period, the
lesser of:

(i) the sum of clauses (a)(i) and (a)(ii) above, and

(ii) an amount equal to Borrowers’ aggregate Collections with respect to
Accounts for the immediately preceding thirty (30) Business Days.

“Additional Documents” has the meaning specified therefor in Section 6.15.

“Advances” has the meaning specified therefor in Section 2.1(a).

“Administrative Borrower” shall mean Parent in its capacity as Administrative
Borrower on behalf of itself and the other Borrowers pursuant to Section 2.17
hereof and its successors and assigns in such capacity.

“Affiliate” means, as applied to any Person, any other Person who controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, “control” means the possession, directly or indirectly through
one or more intermediaries, of the power to direct the management and policies
of a Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, for purposes of the definition of Eligible Accounts and
Section 7.12: (a) any Person which owns directly or indirectly 10% or more of
the Stock having ordinary voting power for the election of the board of
directors or equivalent governing body of a Person or 10% or more of the
partnership or other ownership interests of a Person (other than as a limited
partner of such Person) shall be deemed an Affiliate of such Person, (b) each
director (or comparable manager) of a Person shall be deemed to be an Affiliate
of such Person, and (c) each partnership in which a Person is a general partner
shall be deemed an Affiliate of such Person.

 

Schedule 1.1

Page 1

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“Aged Payables Reserve” shall mean an amount equal to the aggregate amount of
Borrowers’ accounts payable that are outstanding more than sixty (60) days past
the due date or more than ninety (90) days past the original invoice date.

“Agreement” means the Amended and Restated Credit and Security Agreement to
which this Schedule 1.1 is attached.

“Authorized Person” means any one of the individuals identified on Schedule A-2,
as such schedule is updated from time to time by written notice from Borrowers
to Lender.

“Availability” means, as of any date of determination, the amount that Borrowers
are entitled to borrow as Advances under Section 2.1 (after giving effect to all
then outstanding Obligations).

“Bank Product” means any one or more of the following financial products or
accommodations extended to a Loan Party or any of its Subsidiaries by a Bank
Product Provider: (a) commercial credit cards, (b) commercial credit card
processing services, (c) debit cards, (d) stored value cards, (e) purchase cards
(including so-called “procurement cards” or “P-cards”), (f) Cash Management
Services, or (g) transactions under Hedge Agreements.

“Bank Product Agreements” means those agreements entered into from time to time
by a Loan Party or any of its Subsidiaries with a Bank Product Provider in
connection with the obtaining of any of the Bank Products, including all Cash
Management Documents.

“Bank Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Lender) to be held by Lender for the
benefit of the Bank Product Provider in an amount determined by Lender as
sufficient to satisfy the reasonably estimated credit exposure with respect to
the then existing Bank Product Obligations (other than Hedge Obligations).

“Bank Product Obligations” means (a) all obligations, indebtedness, liabilities,
reimbursement obligations, fees, or expenses owing by a Loan Party or any of its
Subsidiaries to Lender or another Bank Product Provider pursuant to or evidenced
by a Bank Product Agreement and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, liquidated or
unliquidated, determined or undetermined, voluntary or involuntary, due, not due
or to become due, incurred in the past or now existing or hereafter arising,
however arising and (b) all Hedge Obligations.

“Bank Product Provider” means Lender or any of its Affiliates that provide Bank
Products to a Loan Party or any of its Subsidiaries.

“Bank Product Reserve Amount” means, as of any date of determination, the Dollar
amount of reserves that Lender has determined it is necessary or appropriate to
establish (based upon Lender’s reasonable determination of the credit and
operating risk exposure to a Loan Party or any of its Subsidiaries in respect of
Bank Product Obligations) in respect of Bank Products then provided or
outstanding.

“Bankruptcy Code” means title 11 of the United States Code, as in effect from
time to time.

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) for which any Borrower or any of its Subsidiaries or ERISA Affiliates has
been an “employer” (as defined in Section 3(5) of ERISA) within the past six
years.

 

Schedule 1.1

Page 2

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“Board of Directors” means the board of directors (or comparable managers) of a
Borrower or any other Loan Party or any committee thereof duly authorized to act
on behalf of the board of directors (or comparable managers).

“Books” means books and records (including a Borrower’s or any other Loan
Party’s Records indicating, summarizing, or evidencing such Borrower’s or such
other Loan Party’s assets (including the Collateral) or liabilities, such
Borrower’s or such other Loan Party’s Records relating to such Borrower’s or
such other Loan Party’s business operations or financial condition, or such
Borrower’s or such other Loan Party’s Goods or General Intangibles related to
such information).

“Bonded Accounts” as to any Borrower, all now owned or hereafter acquired
accounts (as defined in the UCC) and (whether included in such definition)
accounts receivable; and proceeds (other than such proceeds which are negotiable
instruments or cash or Cash Equivalents in the possession or control of Lender),
including without limitation, all insurance proceeds and letter of credit
proceeds, in each case solely to the extent such accounts, accounts receivable,
and proceeds arise out of a Bonded Contract, including, but not limited to,
Bonded Retainage, and all forms of obligations whatsoever owing to any Loan
Party under instruments and documents of title constituting the foregoing or
proceeds thereof; and all rights, securities, and guarantees with respect to
each of the foregoing.

“Bonded Contract” the contracts listed on Schedule 5.33 to the Information
Certificate and any future contract in respect of which any Surety Bond is
issued on behalf of any Borrower and Lender receives written notice of such
Surety Bond from Borrower prior to any Account related thereto being included in
the Borrowing Base or reported on a Borrowing Base Certificate.

“Bonded Equipment” all now owned or hereafter acquired right, title and interest
with respect to Equipment (as defined in the UCC), owned by a Borrower and
(whether or not included in such definition) all other personal property in each
case which is delivered to, prefabricated for or specifically ordered for a
Bonded Job Site, whether or not the same will be deemed to be affixed to, arise
out of or relate to any real property, together with all accessions thereto.

“Bonded Inventory” all now owned and hereafter acquired inventory of Borrowers,
including, without limitation, goods, merchandise and other personal property in
each case which is furnished under any Bonded Contract, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature or
description in each case which is delivered to, prefabricated for or
specifically ordered for a Bonded Job Site.

“Bonded Job Site” the site specified in a Bonded Contract where any Borrower is
to perform the specialized electrical and communication services required
thereunder, including all other labor, materials, equipment and services
provided or to be provided to fulfill its obligations thereunder.

“Bonded Retainage” contract proceeds periodically withheld by an account debtor
to provide further security for the performance by any Borrower of a Bonded
Contract, and as such are payable to it only upon a clear demonstration of
compliance with terms of the Bonded Contract.

“Borrowers” means, jointly and severally, Parent; IES Commercial & Industrial,
LLC, a Delaware limited liability company; IES Commercial, Inc., a Delaware
corporation; IES Management, LP, a Texas limited partnership; IES Management
ROO, LP, a Texas limited partnership; IES Purchasing & Materials, Inc., a
Delaware corporation; IES Residential, Inc., a Delaware corporation; Integrated
Electrical Finance, Inc., a Delaware corporation, IES Renewable Energy, LLC, a
Delaware limited liability company, IES Subsidiary Holdings, Inc., a Delaware
corporation, Magnetech Industrial Services, Inc., an Indiana corporation; HK
Engine Components, LLC, an Indiana limited liability company and any other
Person that becomes a Borrower pursuant to a joinder agreement entered into
pursuant to Section 6.16 hereof.

 

Schedule 1.1

Page 3

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“Borrowing” means a borrowing consisting of Advances (i) requested by Borrowers,
(ii) made automatically pursuant to Section 2.3(c) without the request of
Borrowers, (iii) made by Lender pursuant to Section 2.6(c), or (iv) a Protective
Advance.

“Borrowing Base” means, as of any date of determination, the result of:

(a) the Accounts Availability Amount, plus:

(b) the lowest of

(i) $5,000,000,

(ii) 65% of the Value of Eligible Inventory, or

(iii) 85% times the most recently determined Net Liquidation Percentage times
the Value of Eligible Inventory, plus

(c) Fixed Asset Availability, minus

(d) the General Reserve, minus

(e) the Aged Payables Reserve, minus

(f) the aggregate amount of Reserves, if any, established by Lender.

“Borrowing Base Certificate” means a form of borrowing base certificate in form
and substance acceptable to Lender.

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks are authorized or required to close pursuant to the rules and
regulations of the Federal Reserve System.

“Capital Expenditures” means, with respect to any Person for any period, the
aggregate of all expenditures by such Person and its Subsidiaries during such
period that are capital expenditures as determined in accordance with GAAP,
whether such expenditures are paid in cash or financed.

“Capitalized Lease Obligation” means that portion of the obligations under a
Capital Lease that is required to be capitalized in accordance with GAAP.

“Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

“Cash Collateralized Letter of Credit” means a Letter of Credit for which cash
collateral has been provided pursuant to clause (a) of the definition of “Letter
of Credit Collateralization.”

“Cash Equivalents” means (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 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

 

Schedule 1.1

Page 4

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of any such state or any public instrumentality thereof maturing within 1 year
from the date of acquisition thereof and 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
combined capital and surplus of not less than $250,000,000, (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 $250,000,000, having a term of not more than seven
(7) 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.

“Cash Management Documents” means the agreements governing each of the Cash
Management Services of Lender utilized by a Borrower which agreements shall
currently include the Master Agreement for Treasury Management Services or other
applicable treasury management services agreement, the “Acceptance of Services”,
the “Service Description” governing each such treasury management service used
by a Borrower, and all replacement or successor agreements which govern such
Cash Management Services of Lender.

“Cash Management Services” means any cash management or related services
including treasury, depository, return items, overdraft, controlled
disbursement, merchant stored value cards, e-payables services, electronic funds
transfer, interstate depository network, automatic clearing house transfer
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) and other cash management
arrangements.

“Cash Management Transition Period” has the meaning specified in
Section 6.12(j)(i).

“CFC” means a controlled foreign corporation (as that term is defined in the
IRC).

“Change of Control” means that (a) Permitted Holders fail to own and control,
directly or indirectly, 50%, or more, of the Stock of each Borrower having the
right to vote for the election of members of the Board of Directors, (b) a
majority of the members of the Board of Directors do not constitute Continuing
Directors or (c) each Borrower fails to own and control, directly or indirectly,
100% of the Stock of each of its Subsidiaries.

“Chattel Paper” means chattel paper (as that term is defined in the Code), and
includes tangible chattel paper and electronic chattel paper.

“Chartis” means Chartis Property Casualty Company or any of its Affiliates or
Subsidiaries, including, without limitation, National Union Fire Insurance
Company of Pittsburgh, Pa.

“Chartis Intercreditor” means an Intercreditor Agreement entered into after the
Original Closing Date by and among Lender, Chartis and certain Loan Parties, in
form and substance satisfactory to Lender in its sole and absolute discretion,
as the same may be amended, amended and restated or otherwise modified from time
to time.

 

Schedule 1.1

Page 5

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“Closing Date” means September 24, 2014.

“Code” means the Texas Uniform Commercial Code, as in effect from time to time;
provided, however, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, priority, or remedies with
respect to Lender’s Lien on any Collateral is governed by the Uniform Commercial
Code as enacted and in effect in a jurisdiction other than the State of Texas,
the term “Code” shall mean the Uniform Commercial Code as enacted and in effect
in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies. To the extent
that defined terms set forth herein shall have different meanings under
different Articles under the Uniform Commercial Code, the meaning assigned to
such defined term under Article 9 of the Uniform Commercial Code shall control.

“Collateral” means, other than the Excluded Collateral, all of each Loan Party’s
now owned or hereafter acquired:

(a) Accounts;

(b) Books;

(c) Chattel Paper;

(d) Deposit Accounts;

(e) Goods, including Equipment and Fixtures;

(f) General Intangibles, including, without limitation, Intellectual Property
and Intellectual Property Licenses;

(g) Inventory;

(h) Investment Related Property;

(i) Negotiable Collateral;

(j) Supporting Obligations;

(k) Commercial Tort Claims;

(l) money, Cash Equivalents, or other assets of such Loan Party that now or
hereafter come into the possession, custody, or control of Lender (or its agent
or designee); and

(m) all of the proceeds (as such term is defined in the Code) and products,
whether tangible or intangible, of any of the foregoing, including proceeds of
insurance or Commercial Tort Claims covering or relating to any or all of the
foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts,
Equipment, Fixtures, General Intangibles (including, without limitation,
Intellectual Property and Intellectual Property Licenses), Inventory, Investment
Related Property, Negotiable Collateral, Supporting Obligations, money, or other
tangible or intangible property resulting from the sale, lease, license,
exchange, collection, or other disposition of any of the foregoing, the proceeds
of any award in condemnation with respect to any of the foregoing, any rebates
or refunds, whether for taxes or

 

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otherwise, and all proceeds of any such proceeds, or any portion thereof or
interest therein, and the proceeds thereof, and all proceeds of any loss of,
damage to, or destruction of the above, whether insured or not insured, and, to
the extent not otherwise included, any indemnity, warranty, or guaranty payable
by reason of loss or damage to, or otherwise with respect to any of the
foregoing (collectively, the “Proceeds”). Without limiting the generality of the
foregoing, the term “Proceeds” includes whatever is receivable or received when
Investment Related Property or proceeds are sold, exchanged, collected, or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes proceeds of any indemnity or guaranty payable to such Loan Party or
Lender from time to time with respect to any of the Investment Related Property.

“Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the Books, Equipment, Accounts or Inventory of any Loan Party or any of its
Subsidiaries, in each case, in favor of Lender with respect to the Collateral at
such premises or otherwise in the custody, control or possession of such lessor,
warehouseman, processor, consignee or other Person and in form and substance
reasonably satisfactory to Lender.

“Collateral Assignment of Purchase Agreement” shall mean, individually and
collectively, (i) that certain Collateral Assignment of Purchase Agreement in
form and substance entered into in connection with the Permitted Acquisition, by
and among IES Residential, IES Renewable and Lender, as acknowledged and agreed
to by certain other Persons party to the Purchase Agreement and (ii) that
certain Collateral Assignment of Merger Agreement in form and substance entered
into in connection with the Merger Agreement.

“Collection Account” means the Deposit Account identified on Schedule A-1.

“Collections” means all cash, checks, notes, instruments, and other items of
payment (including insurance Proceeds, cash Proceeds of asset sales, rental
Proceeds, and tax refunds).

“Commercial Tort Claims” means commercial tort claims (as that term is defined
in the Code), and includes those commercial tort claims listed on Schedule
5.6(d) to the Information Certificate.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit A delivered by the chief financial officer of each Borrower to Lender.

“Confidential Information” has the meaning specified therefor in Section 17.8.

“Continuing Director” means (a) any member of the Board of Directors who was a
director (or comparable manager) of Parent on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors Parent after the
Closing Date if such individual was approved, appointed or nominated for
election to the Board of Directors by either the Permitted Holders or a majority
of the Continuing Directors, but excluding any such individual originally
proposed for election in opposition to the Board of Directors in office at the
Closing Date in an actual or threatened election contest relating to the
election of the directors (or comparable managers) of Parent and whose initial
assumption of office resulted from such contest or the settlement thereof.

“Control Agreement” means a control agreement, in form and substance reasonably
satisfactory to Lender, executed and delivered by a Loan Party or any Subsidiary
of a Loan Party, Lender, and the applicable securities intermediary (with
respect to a Securities Account) or bank (with respect to a Deposit Account) or
issuer, (with respect to uncertificated securities).

 

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“Copyrights” means any and all rights in any works of authorship, including
(i) copyrights and moral rights, (ii) copyright registrations and recordings
thereof and all applications in connection therewith including those listed on
Schedule 5.26(b) to the Information Certificate, (iii) income, license fees,
royalties, damages, and payments now and hereafter due or payable under and with
respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past, present, or future
infringements thereof, (iv) the right to sue for past, present, and future
infringements thereof, and (v) all of each Borrower’s and each other Loan
Party’s rights corresponding thereto throughout the world.

“Copyright Security Agreement” means each Copyright Security Agreement executed
and delivered by a Borrower or another Loan Party and Lender, in form and
substance acceptable to Lender.

“Credit Facility” means the Revolving Credit Facility.

“Daily Balance” means, as of any date of determination and with respect to any
Obligation, the amount of such Obligation owed at the end of such day.

“Daily Three Month LIBOR” means, for any day the rate per annum (rounded upward
to the nearest whole 1/8th of 1%) for United States dollar deposits quoted by
Lender for the purpose of calculating the effective Interest Rate for loans that
reference Daily Three Month LIBOR as the Inter-Bank Market Offered Rate in
effect from time to time for the 3 month delivery of funds in amounts
approximately equal to the principal amount of such loans. Borrowers understand
and agree that Lender may base its quotation of the Inter-Bank Market Offered
Rate upon such offers or other market indicators of the Inter-Bank Market as
Lender in its discretion deems appropriate, including but not limited to the
rate offered for U.S. dollar deposits on the London Inter-Bank Market. When
interest is determined in relation to Daily Three Month LIBOR, each change in
the interest rate shall become effective each Business Day that Lender
determines that Daily Three Month LIBOR has changed.

“Default” means an event, condition, or default that, with the giving of notice,
the passage of time, or both, would be an Event of Default.

“Deposit Account” means any deposit account (as that term is defined in the
Code).

“Designated Account” means the operating Deposit Account of Borrowers at Lender
identified on Schedule D-1.

“Dilution” means, as of any date of determination, a percentage that is the
result of dividing the Dollar amount of (a) bad debt write-downs, discounts,
credits, deductions, or other dilutive items as determined by Lender with
respect to Borrowers’ Accounts, by (b) Borrowers’ billings with respect to
Accounts.

“Dilution Reserve” means, as of any date of determination, an amount sufficient
to reduce the advance rate against Eligible Accounts by 1 percentage point for
each percentage point by which Dilution is in excess of 5%.

“Dollars” or “$” means United States dollars.

“EBITDA” means, with respect to any fiscal period, the consolidated net income
(or loss), of Borrowers and their Subsidiaries, minus extraordinary gains,
interest income, non-operating income and income tax benefits and decreases in
any change in LIFO reserves, plus stock compensation

 

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expense, non-cash extraordinary losses, Interest Expense, income taxes,
depreciation and amortization and increases in any change in LIFO reserves for
such period, in each case, determined on a consolidated basis in accordance with
GAAP, plus solely with respect to Borrowers’ fiscal year ending September 30,
2012, the Permitted 2012 Charges.

“Eligible Accounts” means those Accounts, other than Eligible Progress Billing
Accounts, created by each Borrower in the ordinary course of its business, that
arise out of such Borrower’s sale of Goods or rendition of services, that comply
with each of the representations and warranties respecting Eligible Accounts
made in the Loan Documents, and that are not excluded as ineligible by virtue of
one or more of the excluding criteria set forth below. In determining the amount
to be included, Eligible Accounts shall be calculated net of customer deposits,
credits and unapplied cash. Eligible Accounts shall not include the following:

(a) Accounts that the Account Debtor has failed to pay within ninety (90) days
of the original invoice date;

(b) Accounts with selling terms of more than thirty (30) days;

(c) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of
all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clauses (a) or (b) above or clauses (i) or (s) below;

(d) Accounts with respect to which the Account Debtor is an Affiliate, agent or
equity owner of such Borrower or an employee or agent of such Borrower or any
Affiliate of such Borrower;

(e) Accounts arising in a transaction wherein Goods are placed on consignment or
are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, or
any other terms by reason of which the payment by the Account Debtor may be
conditional or contingent;

(f) Accounts that are not payable in Dollars;

(g) Accounts with respect to which the Account Debtor either (i) does not
maintain its chief executive office in the United States or Canada (excluding
the Province of Quebec), or (ii) is not organized under the laws of the United
States or any state thereof or Canada (excluding the Province of Quebec), or
(iii) is the government of any foreign country or sovereign state, or of any
state, province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(x) the Account is supported by an irrevocable letter of credit reasonably
satisfactory to Lender (as to form, substance, and issuer or domestic confirming
bank) that has been delivered to Lender and is directly drawable by Lender (or
Lender is otherwise satisfied in its sole discretion that in can enforce same or
cause Borrower to enforce same for Lender’s benefit), (y) the Account is covered
by credit insurance in form, substance, and amount, and by an insurer,
reasonably satisfactory to Lender, or (z) the Account is guaranteed pursuant to
an approved working capital guarantee from the Export-Import Bank of the United
States in favor of Lender (or Lender is otherwise satisfied in its sole
discretion that in can enforce same or cause Borrower to enforce same for
Lender’s benefit) and acceptable to Lender in all respects;

(h) Accounts with respect to which the Account Debtor is either (i) the United
States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which such Borrower has
complied, to the reasonable satisfaction of Lender, with the Assignment of
Claims Act, 31 USC §3727), or (ii) any state of the United States;

 

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(i) Accounts with respect to which the Account Debtor is a creditor of such
Borrower (unless such Account Debtor has delivered Lender a “non-offset” letter
acceptable to Lender), has or has asserted a right of setoff, or has disputed
its obligation to pay all or any portion of the Account, to the extent of such
claim, right of setoff, or dispute;

(j) That portion of Accounts which reflect a reasonable reserve for warranty
claims or returns or amounts which are owed to account debtors, including those
for rebates, allowances, co-op advertising, new store allowances or other
deductions;

(k) Accounts owing by a single Account Debtor or group of Affiliated Account
Debtors whose total obligations owing to Borrower exceed fifteen (15%) percent
of the aggregate amount of all otherwise Eligible Accounts and Eligible Progress
Billing Accounts (but the portion of the Accounts not in excess of the foregoing
applicable percentages may be deemed Eligible Accounts), such percentages being
subject to reduction in Lenders Permitted Discretion if the creditworthiness of
such Account Debtor deteriorates;

(l) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
such Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor;

(m) Accounts, the collection of which, Lender, in its Permitted Discretion,
believes to be doubtful by reason of the Account Debtor’s financial condition;

(n) Accounts representing credit card sales or “C.O.D.” sales;

(o) Accounts that are not subject to a valid and perfected first priority Lien
in favor of Lender or that are subject to any other Lien;

(p) Accounts that consist of progress billings (such that the obligation of the
Account Debtors with respect to such Accounts is conditioned upon such
Borrower’s satisfactory completion of any further performance under the
agreement giving rise thereto) or retainage invoices;

(q) Accounts with respect to which the Account Debtor is a Sanctioned Person or
Sanctioned Entity;

(r) that portion of Accounts which represent finance charges, service charges,
sales taxes or excise taxes;

(s) that portion of Accounts which has been restructured, extended, amended or
otherwise modified, other than in connection with a change order in the ordinary
course of business;

(t) bill and hold invoices, except those with respect to which Lender shall have
received an agreement in writing from the Account Debtor, in form and substance
satisfactory to Lender, confirming the unconditional obligation of the Account
Debtor to take the Goods related thereto and pay such invoice, so long as such
Accounts satisfy all other criteria for Eligible Accounts hereunder;

(u) Accounts which have not been invoiced;

(v) Accounts constituting (i) Proceeds of copyrightable material unless such
copyrightable material shall have been registered with the United States
Copyright Office, or (ii) Proceeds of patentable inventions unless such
patentable inventions have been registered with the United States Patent and
Trademark Office;

 

Schedule 1.1

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(w) Accounts acquired in connection with the Permitted Acquisition, until the
completion of an examination of such Accounts, in each case, reasonably
satisfactory to Lender;

(x) Accounts that constitute Bonded Accounts;

(y) that portion of Accounts that represent billings in excess of cost; and

(z) Accounts or that portion of Accounts otherwise deemed ineligible by Lender
in its Permitted Discretion.

Any Accounts which are not Eligible Accounts shall nonetheless constitute
Collateral.

“‘Eligible Equipment’ means Equipment owned by IES Subsidiary HK Engine, and/or
Magnetech as of September 13, 2013 designated by Lender as eligible from time to
time in its sole discretion, but excluding Equipment having any of the following
characteristics:

(a) Equipment at premises other than those owned by any Borrower, unless Lender
shall have entered into a Collateral Access Agreement with the owner, operator
or lessor of such premises and shall have received such other documents,
instruments and agreements as Lender may request;

(b) Equipment that is subject to any Lien other than in favor of Lender;

(c) Equipment located outside the United States of America;

(d) Equipment that is not subject to the first priority, valid and perfected
security interest of Lender;

(e) damaged or defective Equipment or Equipment not used or usable in the
ordinary course of Borrowers’ business as presently conducted or Equipment which
is obsolete or not currently saleable or has been removed from service;

(f) Equipment that is not covered by “all risk” hazard insurance for an amount
equal to its replacement cost;

(g) Equipment that requires proprietary software in order to operate in the
manner in which it is intended when such software is not freely assignable to
Lender or any potential purchaser of such Equipment;

(h) Equipment consisting of computer hardware or software,; or

(i) Equipment otherwise deemed unacceptable by Lender in its Permitted
Discretion.

 

 

Schedule 1.1

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Any Equipment which is not Eligible Equipment shall nonetheless constitute
Collateral.

“Eligible Inventory” means Inventory consisting of first quality finished goods
held for sale in the ordinary course of each Borrower’s business, that complies
with each of the representations and warranties respecting Eligible Inventory
made in the Loan Documents, and that is not excluded as ineligible by virtue of
one or more of the excluding criteria set forth below. An item of Inventory
shall not be included in Eligible Inventory if:

(a) such Borrower does not have good, valid, and marketable title thereto;

(b) it consists of work-in-process Inventory, components which are not part of
finished goods, supplies used or consumed in such Borrower’s business, or Goods
that constitute spare parts, maintenance parts, packaging and shipping
materials, or sample inventory or customer supplied parts or Inventory;

(c) it consists of Inventory that is perishable or live or where less than 8
weeks remain until the Inventory’s stated expiration or “sell-by” or “use by”
date;

(d) such Borrower does not have actual and exclusive possession thereof (either
directly or through a bailee or agent of such Borrower);

(e) it is not located at one of the locations in the continental United States
set forth on Schedule 5.29 to the Information Certificate;

(f) it is stored at locations holding less than $50,000 of the aggregate value
of such Borrower’s Inventory;

(g) it is in-transit to or from a location of such Borrower (other than in
transit from one location set forth on Schedule 5.29 to the Information
Certificate to another location set forth on Schedule 5.29 to the Information
Certificate);

(h) it is located on real property leased by such Borrower or in a contract
warehouse, in each case, unless it is subject to a Collateral Access Agreement
executed by the lessor or warehouseman, as the case may be, and unless it is
segregated or otherwise separately identifiable from Goods of others, if any,
stored on the premises;

(i) it is the subject of a bill of lading or other document of title;

(j) it is on consignment from any consignor; or on consignment to any consignee
or subject to any bailment unless the consignee or bailee has (i) executed an
agreement with Lender, and (ii) provided evidence acceptable to Lender that the
applicable Borrower has properly perfected a first priority security interest in
such consigned Inventory and has properly notified in writing the other
creditors of consignee who hold an interest in such Inventory of Borrower’s
security interest in such Inventory, and (iii) the applicable Borrower has taken
such other actions with respect to such consigned Inventory as Lender may
reasonably request;

(k) it is not subject to a valid and perfected first priority Lender’s Lien;

(l) it consists of goods returned or rejected by such Borrower’s customers;

(m) it consists of Goods that are damaged, defective, obsolete or slow moving;

 

Schedule 1.1

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(n) Inventory that such Borrower has returned, has attempted to return, is in
the process of returning or intends to return to the vendor of such Inventory;

(o) it consists of Goods that are restricted or controlled, or regulated items;

(p) it consists of Goods that are bill and hold Goods;

(q) it consists of damaged or defective Goods or “seconds”;

(r) it is subject to third party trademark, licensing or other proprietary
rights, unless Lender is satisfied that such Inventory can be freely sold by
Lender on and after the occurrence of an Event of a Default despite such third
party rights;

(s) it consists of customer-specific Inventory not supported by purchase orders;

(t) it consists of Bonded Inventory;

(u) Lender has not completed an initial appraisal and field examination of such
Inventory, in each case, reasonably satisfactory to Lender; or

(v) Inventory otherwise deemed ineligible by Lender in its Permitted Discretion.

Any Inventory which is not Eligible Inventory shall nonetheless constitute
Collateral.

“Eligible Progress Billing Accounts” means those Accounts, other than Eligible
Accounts, created by each Borrower in the ordinary course of its business, which
represent progress or milestone billings or which are otherwise conditioned upon
the applicable Borrower’s completion of any further performance or service, that
(i) are in accordance with the applicable billing procedures, performance
thresholds and other provisions of an executed contract or other documentation
satisfactory to Lender in its Permitted Discretion with the applicable Account
Debtor, (ii) do not require a period of more than forty-eight (48) months for
the applicable Borrower to start and complete performance or service, (iii) have
been verified to Lender’s satisfaction pursuant to field examinations and other
verifications from time to time performed on behalf of Lender pursuant to the
terms of this Agreement, (iv) are otherwise satisfactory to Lender in its sole
discretion and (v) would otherwise constitute Eligible Accounts in all respects
but for the fact that the services giving rise to such Receivables have not been
fully performed by the applicable Borrower and accepted by the Account Debtor.
Without limiting the foregoing, an Account shall not be deemed an Eligible
Progress Billing Account unless (a) such Receivable is subject to Lender’s first
priority perfected Lien and is not subject to any other Lien or (b) if such
Account (i) would be deemed ineligible under any of clauses (a) through (o) or
clauses (q) through (z) of the definition of “Eligible Accounts, (II) consists
of a retainage invoice or represents billings in excess of cost, (III) does not
comply with each of the representations and warranties respecting Eligible
Accounts (without regard to whether such Account is an Eligible Account), or
(IV) is otherwise deemed ineligible by Lender in its Permitted Discretion.
Notwithstanding anything in this Agreement to the contrary, until such time that
Borrowers have demonstrated an ability to reliably distinguish Accounts
representing progress billings from other Accounts in their Collateral reporting
in a manner satisfactory to Lender in its sole discretion, each Account that
would otherwise constitute an Eligible Account under this Agreement shall be
deemed an Eligible Progress Billing Account.

“Environmental Action” means any written complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other written communication from any
Governmental Authority, or any third party involving violations of

 

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Environmental Laws or releases of Hazardous Materials (a) from any assets,
properties, or businesses of any Loan Party, any Subsidiary of a Loan Party, or
any of their predecessors in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by any Loan Party, any Subsidiary of a Loan Party, or any of
their predecessors in interest.

“Environmental Law” means any applicable federal, state, provincial, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy, or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on any
Loan Party or any of its Subsidiaries, relating to the environment, the effect
of the environment on employee health, or Hazardous Materials, in each case as
amended from time to time.

“Environmental Liabilities” means all liabilities, monetary obligations, losses,
damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts, or consultants, and costs of investigation and
feasibility studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, or Remedial Action required, by any Governmental
Authority or any third party, and which relate to any Environmental Action.

“Environmental Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities.

“Equipment” means equipment (as that term is defined in the Code).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute thereto.

“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of any Loan Party or
its Subsidiaries under IRC Section 414(b), (b) any trade or business subject to
ERISA whose employees are treated as employed by the same employer as the
employees of any Loan Party or its Subsidiaries under IRC Section 414(c),
(c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group of
which any Loan Party or any of its Subsidiaries is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and
Section 412 and 430 of the IRC, any Person subject to ERISA that is a party to
an arrangement with any Loan Party or any of its Subsidiaries and whose
employees are aggregated with the employees of a Loan Party or its Subsidiaries
under IRC Section 414(o).

“Event of Default” has the meaning specified therefor in Section 9.

“Excess Availability” means, as of any date of determination, the amount equal
to Availability minus the aggregate amount, if any, of all trade payables and
other obligations each Borrower and its Subsidiaries aged in excess of sixty
(60) days beyond their terms as of the end of the immediately preceding month,
and all book overdrafts and fees of each Borrower and its Subsidiaries, in each
case as determined by Lender in its Permitted Discretion.

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time
to time.

“Excluded Collateral” means (i) the Surety Collateral to the extent (a) the
issuer of the Surety Bond is Chartis, Liberty Mutual or Federal Insurance
Company or a co-surety of such Person

 

Schedule 1.1

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under the Specified Surety Agreements in effect on the Original Closing Date,
provided that the Chartis Intercreditor or the Federal Insurance Company and
Liberty Mutual Intercreditor, as applicable, is in full force and effect and
(b) such Surety Collateral has not previously been included in a Borrowing Base
Certificate delivered to Lender, (ii) all cash collateral pledged to Federal
Insurance Company, Liberty Mutual or Chartis pursuant to the Specified Surety
Agreements that is in the possession or under the control of Federal Insurance
Company, Liberty Mutual or Chartis, as applicable, provided that the Chartis
Intercreditor or the Federal Insurance Company and Liberty Mutual Intercreditor,
as applicable, is in full force and effect and (iii) cash collateral pledged to
Sureties (other than Federal Insurance Company Liberty Mutual or Chartis) up to
an aggregate amount of $2,000,000 (exclusive of any drawings under letters of
credit issued for the benefit of such Surety) that is in the possession or under
the control of such Surety; provided, however, that in no event shall Excluded
Collateral include any amounts which from time to time may be in the Collection
Account or any Deposit Account in which cash collateral or Qualified Cash is
held.

“Existing Collateral” shall have the meaning set forth in the Recitals.

“Existing Lender” means Bank of America.

“Existing Loan Documents” shall have the meaning set forth in the Recitals.

“Existing Loans” shall have the meaning set forth in the Recitals.

“Existing Obligations” shall have the meaning set forth in the Recitals.

“FCCR Testing Period” means any month during which Borrowers’ Liquidity was at
any time less than $20,000,000 or Excess Availability was at any time less than
$5,000,000.

“Federal Insurance Company” means Federal Insurance Company, an Indiana
corporation, or any of its Affiliates or Subsidiaries.

“Federal Insurance Company and Liberty Mutual Intercreditor” means an
Intercreditor Agreement entered into after the Original Closing Date by and
among Lender, Federal Insurance Company, Liberty Mutual and certain Loan
Parties, in form and substance satisfactory to Lender in its sole and absolute
discretion, as the same may be amended, amended and restated or otherwise
modified from time to time.

“Fixed Asset Availability” means 85% of the Net Forced Liquidation Value of all
Eligible Equipment. The Fixed Asset Availability will be adjusted on the first
Business Day of each month and reduced by $29,125.00 accordingly on such date,
based upon a four (4) year amortization schedule for all Eligible Equipment as
of September 13, 2013.

“Fixed Charge Coverage Ratio” means, with respect to Borrowers and their
Subsidiaries on a consolidated basis, for the trailing twelve-month period
preceding any date of determination, the ratio of (i) EBITDA for such period,
minus (a) Non-Financed Capital Expenditures made (to the extent not already
incurred in a prior period) or incurred during such period, (b) cash taxes paid
during such period, to the extent greater than zero, and (c) all Restricted
Junior Payments consisting of Pass-Through Tax Liabilities to (ii) Fixed Charges
for such period.

“Fixed Charges” means, with respect to any fiscal period and with respect to
Borrowers and their Subsidiaries determined on a consolidated basis in
accordance with GAAP, the sum, without duplication, of (a) cash Interest Expense
paid during such period (other than interest paid-in-kind,

 

Schedule 1.1

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amortization of financing fees, and other non-cash Interest Expense),
(b) principal payments paid in cash in respect of Indebtedness (other than
Advances) paid during such period, including cash payments with respect to
Capital Leases, (c) any management, consulting, monitoring, and advisory fees
paid to an Affiliate (whether or not permitted hereunder), and (d) all
Restricted Junior Payments (other than Pass-Through Tax Liabilities) and other
distributions paid in cash during such period.

“Fixtures” means fixtures (as that term is defined in the Code).

“Funding Date” means the date on which a Borrowing occurs.

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied; provided, however, that all
calculations relative to liabilities shall be made without giving effect to
Statement of Financial Accounting Standards No. 159.

“General Intangibles” means general intangibles (as that term is defined in the
Code), and includes payment intangibles, contract rights, rights to payment,
rights under Hedge Agreements (including the right to receive payment on account
of the termination (voluntarily or involuntarily) of any such Hedge Agreements),
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, Intellectual Property, Intellectual Property Licenses,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, rights to payment and other rights under any royalty or licensing
agreements, including Intellectual Property Licenses, infringement claims,
pension plan refunds, pension plan refund claims, insurance premium rebates, tax
refunds, and tax refund claims, interests in a partnership or limited liability
company which do not constitute a security under Article 8 of the Code, and any
other personal property other than Commercial Tort Claims, money, Accounts,
Chattel Paper, Deposit Accounts, Goods, Investment Related Property, Negotiable
Collateral, and oil, gas, or other minerals before extraction.

“General Reserve” shall mean an amount equal to $4,000,000, which amount shall
be reduced by $1,000,000 upon Borrowers’ Fixed Charge Coverage Ratio exceeding
1.0 to 1.0 as of the last day of any fiscal year (as demonstrated in audited
financial statements delivered in accordance with Schedule 6.1 hereof),
effective as of five (5) Business Days after delivery of such financial
statements.

“Goods” means goods (as that term is defined in the Code).

“Governing Documents” means, with respect to any Person, the certificate or
articles of incorporation, by-laws, or other organizational documents of such
Person.

“Governmental Authority” means any federal, state, local, or other governmental
or administrative body, instrumentality, board, department, or agency or any
court, tribunal, administrative hearing body, arbitration panel, commission, or
other similar dispute-resolving panel or body.

“Guarantors” means IES Shared Services, Inc., a Delaware corporation; IES
Tangible Properties, Inc., a Delaware corporation; IES Consolidation, LLC, a
Delaware limited liability company; IES Properties, Inc., a Delaware
corporation; Key Electrical Supply, Inc., a Texas corporation; IES Operations
Group, Inc., a Delaware corporation; ICS Holdings LLC, an Arizona limited
liability company; and each other Person that becomes a guarantor after the
Closing Date or otherwise executes and delivers a Guaranty pursuant to
Section 6.16, and each of them is a “Guarantor”.

“Guaranty” means that certain general continuing guaranty, dated as of even date
with this Agreement, executed and delivered by each Guarantor in favor of Lender
in form and substance reasonably satisfactory to Lender and any other guaranty
agreement delivered at any time by a Guarantor in favor of Lender, and all of
such guaranties are, collectively, the “Guaranties”.

 

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“HK Engine” means HK ENGINE COMPONENTS, LLC, an Indiana limited liability
company.

“Hazardous Materials” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.

“Hedge Agreement” means a “swap agreement” as that term is defined in
Section 101(53B)(A) of the Bankruptcy Code.

“Hedge Obligations” means any and all obligations or liabilities, whether direct
or indirect, absolute or contingent, liquidated or unliquidated, determined or
undetermined, voluntary or involuntary, due, not due or to become due, incurred
in the past or now existing or hereafter arising, however arising of any
Borrower or any of its Subsidiaries arising under, owing pursuant to, or
existing in respect of Hedge Agreements entered into with Lender or another Bank
Product Provider.

“IES Renewable” means IES Renewable Energy, LLC, a Delaware limited liability
company.

“IES Residential” means IES Residential Inc., a Delaware corporation.

“IES Subsidiary” means IES Subsidiary Holdings, Inc., a Delaware corporation.

“Indebtedness” as to any Person means, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes, or other similar instruments and all reimbursement
or other obligations in respect of letters of credit, bankers acceptances, or
other financial products, (c) all obligations of such Person as a lessee under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of such Person, irrespective of whether such obligation or
liability is assumed, (e) all obligations of such Person to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary
course of business and repayable in accordance with customary trade practices),
(f) all obligations of such Person owing under Hedge Agreements (which amount
shall be calculated based on the amount that would be payable by such Person if
the Hedge Agreement were terminated on the date of determination), (g) any
Prohibited Preferred Stock of such Person, and (h) any obligation of such Person
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation
of any other Person that constitutes Indebtedness under any of clauses (a)
through (g) above. For purposes of this definition, (i) the amount of any
Indebtedness represented by a guaranty or other similar instrument shall be the
lesser of the principal amount of the obligations guaranteed and still
outstanding and the maximum amount for which the guaranteeing Person may be
liable pursuant to the terms of the instrument embodying such Indebtedness, and
(ii) the amount of any Indebtedness described in clause (d) above shall be the
lower of the amount of the obligation and the fair market value of the assets of
such Person securing such obligation.

 

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“Indemnified Liabilities” has the meaning specified therefor in Section 11.3.

“Indemnified Person” has the meaning specified therefor in Section 11.3.

“Information Certificate” means the Information Certificate completed and
executed by the Loan Parties attached hereto as Exhibit E.

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors,
receiverships, formal or informal moratoria, compositions, extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.

“Insurance Premium Lender” shall have the meaning set forth in the definition of
Permitted Insurance Premium Indebtedness.

“Insurance Premium Loan Documents” shall have the meaning set forth in the
definition of Permitted Insurance Premium Indebtedness.

“Intellectual Property” means any and all Patents, Copyrights, Trademarks, trade
secrets, know-how, inventions (whether or not patentable), algorithms, software
programs (including source code and object code), processes, product designs,
industrial designs, blueprints, drawings, data, customer lists, URLs and domain
names, specifications, documentations, reports, catalogs, literature, and any
other forms of technology or proprietary information of any kind, including all
rights therein and all applications for registration or registrations thereof.

“Intellectual Property Licenses” means, with respect to any Person (the
“Specified Party”), (i) any licenses or other similar rights provided to the
Specified Party in or with respect to Intellectual Property owned or controlled
by any other Person, and (ii) any licenses or other similar rights provided to
any other Person in or with respect to Intellectual Property owned or controlled
by the Specified Party, in each case, including (A) any software license
agreements (other than license agreements for commercially available
off-the-shelf software that is generally available to the public which have been
licensed to the Specified Party pursuant to end-user licenses), (B) the license
agreements listed on Schedule 5.26(b) to the Information Certificate, and
(C) the right to use any of the licenses or other similar rights described in
this definition in connection with the enforcement of the Lender’s rights under
the Loan Documents.

“Interest Expense” means, for any period, the aggregate of the interest expense
of Borrowers and their Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

“Interest Rate” means an interest rate equal to Daily Three Month LIBOR, which
interest rate shall change whenever Daily Three Month LIBOR changes.

“Interest Rate Margin” means,

(a) as of any date of determination (with respect to any portion of the
outstanding Advances on such date), the applicable margin set forth in the
following table that

 

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corresponds to the most recent Liquidity and Fixed Charge Coverage Ratio
calculations delivered to Lender pursuant to Section 6.1 and accepted by Lender
in its Permitted Discretion; provided, however, that the Interest Rate Margin
(i) shall be the margin established by the most recent Interest Rate Margin
Redetermination Date pursuant to the Existing Credit Agreement for the period
from the Closing Date through the next Interest Rate Margin Redetermination
Date, and (ii) upon the occurrence and during the continuation of an Event of
Default, shall be the margin set forth below as “Level I” until the next
Interest Rate Margin Redetermination Date (as defined below).

 

Level

  

Liquidity/Excess Availability/Fixed Charge Coverage Ratio

  

Interest
Rate
Margin

I

   If Liquidity is less than or equal to $20,000,000 at any time during such
period OR Excess Availability is less than or equal to $7,500,000 at any time
during such period OR Fixed Charge Coverage Ratio is less than 1.0 to 1.0   
3.00
percentage
points

II

   If Liquidity is greater than $20,000,000 at all times during such period and
less than or equal to $30,000,000 at any time during such period AND Excess
Availability is greater than $7,500,000 at all times during such period AND
Fixed Charge Coverage Ratio is 1.0 to 1.0 or greater    2.50
percentage
points

III

   If Liquidity is greater than $30,000,000 at all times during such period AND
Excess Availability is greater than $7,500,000 at all times during such period
AND Fixed Charge Coverage Ratio is 1.0 to 1.0 or greater    2.00
percentage
points

Except as set forth in the foregoing proviso, the Interest Rate Margin shall be
re-determined quarterly on the first Business Day of each calendar quarter (such
date being the “Interest Rate Margin Redetermination Date”) based upon the
Liquidity and Fixed Charge Coverage Ratio for the immediately preceding calendar
quarter. In the event that the information contained in any certificate
delivered pursuant to Section 6.1 of the Agreement is shown to be inaccurate,
and such inaccuracy, if corrected, would have led to the application of a higher
Interest Rate Margin for any period than the Interest Rate Margin actually
applied for such interest rate period, then (i) Borrowers shall immediately
deliver to Lender a correct certificate for such period, (ii) the Interest Rate
Margin shall be determined as if the correct Interest Rate Margin (as set forth
in the table above) were applicable for such period, and (iii) Borrowers shall
immediately deliver to Lender full payment in respect of the accrued additional
interest as a result of such increased Interest Rate Margin for such interest
rate period, which payment shall be promptly applied by Lender to the affected
Obligations. In the event that the information contained in any certificate
delivered pursuant to Section 6.1 of the Agreement reflects that an Event of
Default existed as of the Interest Rate Margin Redetermination Date, (i) the
Interest Rate Margin shall be determined as if the Interest Rate Margin set
forth above as “Level I” were applicable as the first date of the existence of
such Event of Default and (ii) Borrowers shall immediately deliver to Lender
full payment in respect of the accrued additional interest as a result of such
increased Interest Rate Margin for such interest rate period, which payment
shall be promptly applied by Lender to the affected Obligations. In the event
the Borrowers fail to timely deliver any certificate, report or other
documentation necessary for determination of the Interest Rate Margin, the
Interest Rate Margin shall be the margin set forth above as “Level I” from the
date of such failure until the next Interest Rate Margin Redetermination Date.

 

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“Inventory” means inventory (as that term is defined in the Code).

“Investment” means, with respect to any Person, any investment by such Person in
any other Person (including Affiliates) in the form of loans, guarantees,
advances, capital contributions (excluding (a) commission, travel, and similar
advances to officers and employees of such Person made in the ordinary course of
business not to exceed $250,000 in the aggregate during any fiscal year of
Borrowers, and (b) bona fide Accounts arising in the ordinary course of
business), or acquisitions of Indebtedness, Stock, or all or substantially all
of the assets of such other Person (or of any division or business line of such
other Person), and any other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.

“Investment Related Property” means (i) any and all investment property (as that
term is defined in the Code), and (ii) any and all of the following (regardless
of whether classified as investment property under the Code): all Pledged
Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.

“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

“ISP98” means the International Standby Practices (1998 Revision, effective
January 1, 1999), International Chamber of Commerce Publication No. 590.

“Job Site” any site specified in a contract where any Borrower is to perform the
specialized electrical and communication services required thereunder, including
all other labor, materials, equipment and services provided or to be provided to
fulfill its obligations thereunder.

“Lender” has the meaning specified therefor in the preamble to this Agreement
and its successors and assigns.

“Lender Expenses” means all (a) reasonable costs or expenses (including taxes,
and insurance premiums) required to be paid by any Loan Party or any of its
Subsidiaries or any Guarantor under any of the Loan Documents that are paid,
advanced, or incurred by Lender, (b) reasonable out-of-pocket fees or charges
paid or incurred by Lender in connection with Lender’s transactions with any
Loan Party or any of its Subsidiaries under any of the Loan Documents,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
judgment lien, litigation, bankruptcy and Code searches and including searches
with the patent and trademark office, the copyright office, or the department of
motor vehicles), filing, recording, publication, appraisal (including periodic
collateral appraisals or business valuations to the extent of the fees and
charges (and up to the amount of any limitation contained in this Agreement),
real estate surveys, real estate title insurance policies and endorsements, and
environmental audits, (c) Lender’s customary fees and charges (as adjusted from
time to time) with respect to the disbursement of funds (or the receipt of
funds) to or for the account of Borrowers (whether by wire transfer or
otherwise), together with any out of pocket costs and expenses incurred in
connection therewith, (d) out-of-pocket charges paid or incurred by Lender
resulting from the dishonor of checks payable by or to any Loan Party,
(e) reasonable out-of-pocket costs and expenses paid or incurred by Lender to
correct any default or enforce any provision of the Loan Documents, or during
the continuance of an Event of Default, in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated, (f) fees and expenses to initiate electronic
reporting by Borrowers to Lender,

 

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(g) reasonable out-of-pocket examination fees and expenses (including reasonable
travel, meals, and lodging) of Lender related to any inspections, examinations,
audits or appraisals to the extent of the fees and charges (and up to the amount
of any limitation) contained in this Agreement, (h) reasonable out-of-pocket
costs and expenses of third party claims or any other suit paid or incurred by
Lender in enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or Lender’s relationship with
any Loan Party or any of its Subsidiaries, (i) Lender’s reasonable costs and
expenses (including reasonable attorneys fees) incurred in advising,
structuring, drafting, reviewing, administering (including reasonable travel,
meals, and lodging), or amending the Loan Documents, (j) Lender’s reasonable
costs and expenses (including reasonable attorneys, accountants, consultants,
and other advisors fees and expenses) incurred in terminating, enforcing
(including reasonable attorneys, accountants, consultants, and other advisors
fees and expenses incurred in connection with a “workout,” a “restructuring,” or
an Insolvency Proceeding concerning any Loan Party or any of its Subsidiaries or
in exercising rights or remedies under the Loan Documents), or defending the
Loan Documents, irrespective of whether suit is brought, or in taking any
Remedial Action concerning the Collateral, and (k) usage charges, charges, fees,
costs and expenses for amendments, renewals, extensions, transfers, or drawings
from time to time imposed by Lender in respect of Letters of Credit and
out-of-pocket charges, fees, costs and expenses paid or incurred by Lender in
connection with the issuance, amendment, renewal, extension, or transfer of, or
drawing under, any Letter of Credit or any demand for payment thereunder.

“Lender Representatives” has the meaning specified therefor in Section 17.8(a).

“Lender-Related Persons” means Lender, together with its Affiliates, officers,
directors, employees, attorneys, and agents.

“Lender’s Liens” mean the Liens granted by Borrowers and their Subsidiaries to
Lender under the Loan Documents.

“Letter of Credit” means a letter of credit (as that term is defined in the
Code) issued by Lender.

“Letter of Credit Agreements” means a Letter of Credit Application, together
with any and all related letter of credit agreements pursuant to which Lender
agrees to issue, amend, or extend a Letter of Credit, or pursuant to which
Borrowers agree to reimburse Lender for all Letter of Credit Disbursements, each
such application and related agreement to be in the form specified by Lender
from time to time.

“Letter of Credit Application” means an application requesting Lender to issue,
amend, or extend a Letter of Credit, each such application to be in the form
specified by Lender from time to time.

“Letter of Credit Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Lender, including
provisions that specify that the Letter of Credit fee and all usage charges set
forth in this Agreement and the Letter of Credit Agreements will continue to
accrue while the Letters of Credit are outstanding) to be held by Lender for the
benefit of Lender in an amount equal to 105% of the then existing Letter of
Credit Usage, (b) delivering to Lender the original of each Letter of Credit,
together with documentation executed by all beneficiaries under each Letter of
Credit in form and substance acceptable to Lender terminating all of such
beneficiaries’ rights under such Letters of Credit, or (c) providing Lender with
a standby letter of credit, in form and substance reasonably satisfactory to
Lender, from a commercial bank acceptable to Lender (in its sole discretion) in
an amount equal to 105% of the then existing Letter of Credit Usage (it being
understood that the Letter

 

Schedule 1.1

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of Credit fee and all usage charges set forth in this Agreement will continue to
accrue while the Letters of Credit are outstanding and that any such fees that
accrue must be an amount that can be drawn under any such standby letter of
credit).

“Letter of Credit Disbursement” means a payment made by Lender pursuant to a
Letter of Credit.

“Letter of Credit Usage” means, as of any date of determination, the sum of
(i) the aggregate undrawn amount of all outstanding Letters of Credit, and
(ii) the aggregate amount of outstanding reimbursement obligations with respect
to Letters of Credit which remain unreimbursed or which have not been paid
through an Advance under the Revolving Credit Facility.

“Liberty Mutual” means Safeco Insurance Company of America, a Washington
corporation or any of its Affiliates or Subsidiaries.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, easement, lien (statutory or other),
security interest, or other security arrangement and any other preference,
priority, or preferential arrangement of any kind or nature whatsoever,
including any conditional sale contract or other title retention agreement, the
interest of a lessor under a Capital Lease and any synthetic or other financing
lease having substantially the same economic effect as any of the foregoing.

“Liquidity” means, as of any date of determination, the sum of (i) Borrowers’
Qualified Cash and (ii) Excess Availability.

“Loan Account” has the meaning specified therefor in Section 2.8.

“Loan Documents” means this Agreement, any Borrowing Base Certificate, the
Control Agreements, the Cash Management Documents, the Guaranty, the Federal
Insurance and Liberty Mutual Intercreditor; the Chartis Intercreditor, the
Letters of Credit, each Patent and Trademark Security Agreement, any Copyright
Security Agreement, the Seller Subordination Agreement, the Collateral
Assignment of Purchase Agreement, the Omnibus Reaffirmation, any note or notes
executed by any Borrower in connection with this Agreement and payable to
Lender, any Letter of Credit Applications and other Letter of Credit Agreements
entered into by any Borrower in connection with the Existing Credit Agreement,
and any other instrument or agreement entered into, now or in the future, by any
Loan Party or any of its Subsidiaries and Lender in connection with this
Agreement, but specifically excluding all Hedge Agreements.

“Loan Management Service” means Lender’s proprietary automated loan management
program currently known as “Loan Manager” and any successor service or product
of Lender which performs similar services.

“Loan Parties” means collectively, each Borrower and each Guarantor and each of
them is a “Loan Party”.

“Lockbox” means “Lockbox” as defined and described in the Cash Management
Documents.

“Magnetech” means MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation.

 

Schedule 1.1

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“Margin Stock” as defined in Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.

“Material Adverse Change” means (a) a material adverse change in the business,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) of the Borrowers, Loan Parties and their Subsidiaries taken as a
whole, (b) a material impairment of the ability of any Borrower or any Loan
Party to perform its obligations under the Loan Documents to which it is a party
or of the Lender’s ability to enforce the Obligations or realize upon the
Collateral, (c) a material impairment of the enforceability or priority of
Lender’s Liens with respect to the Collateral as a result of an action or
failure to act on the part of any Borrower any Loan Party or its Subsidiaries,
or (d) any claim is made against any Borrower or any Loan Party which if
determined adversely to any Borrower any Loan Party or any of its Subsidiaries,
would result in the occurrence of an event described in clauses (a), (b) or
(c) above.

“Material Contract” means, an agreement to which a Loan Party is a party (other
than the Loan Documents (i) which is deemed to be a material contract as
provided in Regulation S-K promulgated by the SEC under the Securities Act of
1933 or (ii) for which breach, termination, cancellation, nonperformance or
failure to renew could reasonably be expected to result in a Material Adverse
Change.

“Maturity Date” has the meaning specified therefor in Section 2.9.

“Maximum Credit” means $60,000,000.

“Maximum Revolver Amount” means mean $60,000,000, less permanent reductions in
such amount made in accordance with Section 2.11.

“Merger Agreement” means that certain Agreement and Plan of Merger dated as of
March 13, 2013, by and among Parent, Miscor and IES Subsidiary, as amended b the
First Amendment and Plan of Merger, dated as of July 10, 2013.

“Miscor” means MISCOR Group, Ltd., an Indiana corporation.

“Moody’s” has the meaning specified therefor in the definition of Cash
Equivalents.

“Negotiable Collateral” means letters of credit, letter-of-credit rights,
instruments, promissory notes, drafts and documents (as each such term is
defined in the Code).

“Net Forced Liquidation Value” shall mean, as to Eligible Equipment, at any
time, the value of such Eligible Equipment, determined on a forced liquidation
basis, reduced by such commissions, fees, costs and expenses as may be
reasonably expected in connection with the liquidation thereof, as set forth in
the most recent appraisal delivered, at the sole cost and expense of Borrowers,
to Lender, as to the Eligible Equipment, in form, scope, and methodology
acceptable to Lender in its Permitted Discretion and performed by an appraiser
acceptable to Lender in its Permitted Discretion, addressed to Lender and upon
which Lender is permitted to rely.

“Net Liquidation Percentage” means the percentage of the Value of a Borrower’s
Inventory that is estimated to be recoverable in an orderly liquidation of such
Inventory as set forth in the most recent acceptable appraisal received by
Lender and upon which Lender may rely, net of all operating expenses and
associated costs and expenses of such liquidation, such percentage to be as
determined from time to time by an appraisal company selected or approved by
Lender with such most recent acceptable appraisal to be in form, scope,
methodology and content acceptable to Lender.

 

Schedule 1.1

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“Net Loss” means fiscal year-to-date after-tax net loss from continuing
operations as determined in accordance with GAAP.

“Non-Financed Capital Expenditures” means Capital Expenditures not financed by
the seller of the capital asset, by a third party lender or by means of any
extension of credit by Lender other than by means of an Advance under the
Revolving Credit Facility;

“Obligations” means (a) all loans (including the Advances), debts, principal,
interest (including any interest that accrues after the commencement of an
Insolvency Proceeding, regardless of whether allowed or allowable in whole or in
part as a claim in any such Insolvency Proceeding), reimbursement or
indemnification obligations with respect to Letters of Credit (irrespective of
whether contingent), premiums, liabilities (including all amounts charged to the
Loan Account pursuant to this Agreement), obligations (including indemnification
obligations), fees, Lender Expenses (including any fees or expenses that accrue
after the commencement of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any such Insolvency
Proceeding), guaranties, and all covenants and duties of any other kind and
description in each case owing by any Loan Party to Lender or its Affiliates or
any Bank Product Provider or its Affiliates pursuant to or evidenced by this
Agreement or any of the other Loan Documents and irrespective of whether for the
payment of money, whether direct or indirect, absolute or contingent, liquidated
or unliquidated, determined or undetermined, voluntary or involuntary, due, not
due or to become due, sole, joint, several or joint and several, incurred in the
past or now existing or hereafter arising, however arising, and including all
interest not paid when due, and all other expenses or other amounts that any
Borrower or any other Loan Party is required to pay or reimburse by the Loan
Documents or by law or otherwise in connection with the Loan Documents, and
(b) all Bank Product Obligations. Any reference in this Agreement or in the Loan
Documents to the Obligations shall include all or any portion thereof and any
extensions, modifications, renewals, or alterations thereof, both prior and
subsequent to any Insolvency Proceeding.

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the
Treasury.

“Original Closing Date” means August 9, 2012.

“Overadvance Amount” has the meaning specified therefor in Section 2.4(f).

“Parent” means Integrated Electrical Services, Inc., a Delaware corporation.

“Pass-Through Tax Liabilities” means the amount of state and federal income tax
paid or to be paid by the owner of any Stock in a Borrower on taxable income
earned by a Borrower and attributable to such owner of Stock as a result of such
Borrower’s “pass-through” tax status, assuming the highest marginal income tax
rate for federal and state (for the state or states in which any owner of Stock
is liable for income taxes with respect to such income) income tax purposes,
after taking into account any deduction for state income taxes in calculating
the federal income tax liability and all other deductions, credits, deferrals
and other reductions available to such owners of Stock from or through such
Borrower.

“Patents” means patents and patent applications, including (i) the patents and
patent applications listed on Schedule 5.26(b) to the Information Certificate,
(ii) all continuations, divisionals, continuations-in-part, re-examinations,
reissues, and renewals thereof and improvements thereon, (iii) all income,
royalties, damages and payments now and hereafter due or payable under and with
respect

 

Schedule 1.1

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thereto, including payments under all licenses entered into in connection
therewith and damages and payments for past, present, or future infringements
thereof, (iv) the right to sue for past, present, and future infringements
thereof, and (v) all of each Loan Party’s rights corresponding thereto
throughout the world.

“Patent and Trademark Security Agreement” means each Patent and Trademark
Security Agreement executed and delivered by the applicable Loan Party in favor
of Lender, in form and substance acceptable to Lender.

“Patriot Act” has the meaning specified therefor in Section 5.18 of Exhibit D to
this Agreement.

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA)
maintained for employees of any Borrower or any of its Subsidiaries or any ERISA
Affiliate and covered by Title IV of ERISA.

“Permitted 2012 Charges” means certain non-recurring charges agreed to by Lender
in its sole discretion and not exceeding $1,000,000 in the aggregate, provided
that Lender shall have established a Reserve in at least such amount.

“Permitted Acquisition” means the acquisition described in that certain letter
agreement dated as of February 8, 2012 by and among Lender and the Loan Parties,
to the extent permitted thereunder, and subject to the terms and conditions
therein.

“Permitted Discretion” means a determination made in the exercise of the good
faith judgment of Lender.

“Permitted Dispositions” means:

(a) sales, abandonment, or other dispositions of Equipment that is substantially
worn, damaged, or obsolete in the ordinary course of business or no longer
required in the ordinary course of business;

(b) sales of Inventory to buyers in the ordinary course of business;

(c) the granting of Permitted Liens;

(d) the making of a Restricted Junior Payment that is expressly permitted to be
made pursuant to this Agreement;

(e) the making of a Permitted Investment;

(f) Dispositions consisting of Accounts due to IES Residential that are waived,
released and forgiven pursuant to and in accordance with the terms and
conditions of the Purchase Agreement (as in effect on February 12, 2013);

(g) a disposition of that certain real property located at 220 8th Avenue, Glen
Burnie, Baltimore, MD, provided the net proceeds thereof shall be an amount not
less than $1,000,000; and

(h) other dispositions which do not exceed $500,000 in any fiscal year in the
aggregate.

 

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“Permitted Holder” means Tontine.

“Permitted Indebtedness” means:

(a) Indebtedness evidenced by this Agreement or the other Loan Documents;

(b) Indebtedness set forth on Schedule 5.19 to the Information Certificate and
any Refinancing Indebtedness in respect of such Indebtedness;

(c) Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in
respect of such Indebtedness;

(d) endorsement of instruments or other payment items for deposit;

(e) the incurrence by any Borrower of Indebtedness under Hedge Agreements that
are incurred for the bona fide purpose of hedging the interest rate, commodity,
or foreign currency risks associated with such Borrower’s operations and not for
speculative purposes;

(f) Indebtedness incurred in respect of Bank Products other than pursuant to
Hedge Agreements;

(g) Indebtedness constituting Permitted Investments;

(h) Indebtedness consisting of the Seller Subordinated Debt;

(i) Indebtedness in the form of reimbursement obligations for Surety Bonds
procured in ordinary course of business consistent with past practices, provided
such Surety Bonds are issued pursuant to a bonding program acceptable to Lender;

(j) Indebtedness consisting of Permitted Insurance Premium Financing
Indebtedness; and

(k) other unsecured Indebtedness in an amount that shall not exceed $500,000 in
the aggregate at any time.

“Permitted Insurance Premium Financing Indebtedness” means (a) Indebtedness
evidenced by that certain insurance premium financing agreement with Aon Premium
Finance, LLC dated as of November 1, 2011 and (b) Indebtedness arising under or
in connection with the financing by any Loan Party of any insurance premiums, in
which the insurance premium financier (the “Insurance Premium Lender”) has
agreed in writing for the benefit of Lender that (i) the Insurance Premium
Lender shall provide Lender with 30 days prior written notice of any intended
cancellation of a financed insurance policy (such notice to include a brief
description of the grounds for cancellation and the actions necessary to cure
any breach or default), (ii) Lender shall have the right, but not the
obligation, to cure any breach or default by the Loan Parties under the
insurance premium financing arrangement (the “Insurance Premium Loan Documents”)
(and any fees, expenses, costs, or other sums paid by Lender to effectuate such
a cure shall constitute a Protective Advance), (iii) any Lien of such Insurance
Premium Lender is at all times junior in priority to the Liens in favor of
Lender (except with respect to unearned premiums or otherwise to the extent such
Liens have priority under applicable law), and (iv) if the Insurance Premium
Lender sells, assigns, or otherwise transfers the Insurance Premium Loan
Documents or the loan represented by the Insurance Premium Loan Documents,
whether in whole or in part, the Insurance Premium Lender shall require that any
such purchaser, assignee, or transferee agrees (in writing) to be bound by the
foregoing terms and conditions.

 

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“Permitted Intercompany Advances” means loans made by (a) a Loan Party to a
Borrower, (b) a Borrower to a Loan Party in an amount of up to $500,000 in the
aggregate at any time, (c) a Subsidiary of a Loan Party which is not a Loan
Party to another Subsidiary of a Loan Party which is not a Loan Party, or (c) a
Subsidiary of a Loan Party which is not a Loan Party to a Loan Party, in each
case, unless Lender otherwise agrees, so long as the parties thereto are party
to an intercompany subordination agreement with Lender and/or the rights of the
lending party with respect thereto have been collaterally assigned to Lender, in
each case, in form and substance satisfactory to Lender in its Permitted
Discretion.

“Permitted Investments” means:

(a) Investments in cash and Cash Equivalents;

(b) Investments in negotiable instruments deposited or to be deposited for
collection in the ordinary course of business;

(c) advances made in connection with purchases of Goods or services in the
ordinary course of business;

(d) Investments owned by any Loan Party or any of its Subsidiaries on the
Closing Date and set forth on Schedule P-1;

(e) Permitted Intercompany Advances; and

(f) Investments resulting from entering into (i) Bank Product Agreements, or
(ii) agreements relative to Indebtedness that is permitted under clause (g) of
the definition of Permitted Indebtedness;

“Permitted Liens” means

(a) Liens granted to, or for the benefit of, Lender to secure the Obligations;

(b) Liens for unpaid taxes, assessments, or other governmental charges or levies
that either (i) are not yet delinquent, or (ii) the underlying taxes,
assessments, or charges or levies are the subject of Permitted Protests;

(c) judgment Liens arising solely as a result of the existence of judgments,
orders, or awards that do not constitute an Event of Default under Section 9.3;

(d) Liens set forth on Schedule P-2; provided, however, that to qualify as a
Permitted Lien, any such Lien described on Schedule P-2 shall only secure the
Indebtedness that it secures on the Closing Date and any Refinancing
Indebtedness in respect thereof;

(e) the interests of lessors under operating leases and non-exclusive licensors
under license agreements;

(f) purchase money Liens or the interests of lessors under Capital Leases to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as (i) such

 

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Lien attaches only to the asset purchased or acquired and the proceeds thereof,
and (ii) such Lien only secures the Indebtedness that was incurred to acquire
the asset purchased or acquired or any Refinancing Indebtedness in respect
thereof;

(g) Liens that are replacements of Permitted Liens to the extent that the
original Indebtedness is the subject of permitted Refinancing Indebtedness and
so long as the replacement Liens only encumber those assets that secured the
original Indebtedness;

(h) Reserved,

(i) Liens in favor of Sureties in the Surety Collateral securing reimbursement
obligations for Surety Bonds procured by a Borrower in the ordinary course of
business consistent with past practices pursuant to a bonding program acceptable
to Lender; provided, that such Surety has, pursuant to documentation
satisfactory to Lender in the good faith exercise of its credit judgment:
(a) agreed not to require segregation of funds as to its Bonded Collateral
without the prior written consent of Lender (though Federal Insurance Company,
Liberty Mutual and Chartis will be permitted such segregation upon a default
under the Bonded Contract and notice to Lender from Federal Insurance Company
provided that the Federal Insurance and Liberty Mutual Intercreditor or the
Chartis Intercreditor, as applicable, is in full force and effect) and
(b) (i) acknowledged and agreed that pursuant to the Loan Parties’ cash
management system established in connection with this Agreement, proceeds of the
Surety Collateral, including Accounts arising from the Bonded Contracts
(collectively, “Bonded Contract Proceeds”) may be commingled with proceeds of
other Accounts and other Property of Borrowers in the Collection Account and
other Deposit Accounts in which Lender has, or in the future may have, security
interests, Liens or other rights, and (ii) consented to such commingling and to
security interests, Liens or other rights in the Collection Account and such
other Deposit Accounts, and (iii) released and waived any and all security
interests and other legal and equitable rights and interests that it may then or
thereafter have (as secured party, subrogee, trust fund beneficiary, or
otherwise) in or to (A) the Collection Account and such other Deposit Accounts
and (B) Bonded Account Proceeds that from time to time are in the Collection
Account and such other Deposit Accounts are in the possession of Lender, that
have been applied to indebtedness, liabilities or obligations from time to time
owing to Lender by Borrowers, or have otherwise been removed from, set off
against or applied from the Collection Account and such other Deposit Accounts;

(j) Liens granted to an Insurance Premium Lender as security for Permitted
Insurance Premium Financing Indebtedness;

(k) statutory Liens (excluding any Lien imposed pursuant to any of the
provisions of ERISA) arising in the ordinary course of business of a Loan Party
or a Subsidiary, but only if and for long as (x) payment in respect of any such
Lien is not yet delinquent or any such Lien is subject to a Permitted Protest
and (y) such Liens do not materially detract from the value of the assets of
such Loan Party or Subsidiary and do not materially impair the use thereof in
the operation of such Loan Party’s or such Subsidiary’s business;

(l) Liens securing Indebtedness under clauses (b) and (c) of the definition of
Permitted Intercompany Advances;

(m) Liens incurred or deposits made in the ordinary course of business to secure
the performance of tenders, bids, leases, contracts (other than for the
repayment of borrowed Indebtedness), statutory obligations and other similar
obligations or arising as a result of progress payments under government
contracts, provided that, to the extent any such Liens attach to any of the
Collateral, such Liens are at all times subordinate and junior to the Liens upon
the Collateral in favor of Lender;

 

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(n) general exceptions to title consisting of easements, rights-of-way,
restrictions, covenants or other agreements of record and other similar charges
or encumbrances that are on real property of such Loan Party that do not
materially interfere with the ordinary conduct of the business of such Loan
Party or such Subsidiary;

(o) normal and customary rights of setoff upon deposits of cash in favor of
banks and other depository institutions and Liens of a collection bank arising
under the Code on checks, drafts, or other items of payment in the course of
collection; and

(p) such other Liens as Lender in its sole discretion may hereafter approve in
writing.

“Permitted Petty Cash Account” means Borrowers’ Petty Cash Account #264267 at
Bruning State Bank, provided that the balance in such account at no time exceeds
$100,000.

“Permitted Preferred Stock” means and refers to any Preferred Stock issued by a
Borrower (and not by one or more of its Subsidiaries) that is not Prohibited
Preferred Stock.

“Permitted Protest” means the right of any Borrower or any other Loan Party or
any of their respective Subsidiaries to protest any Lien (other than any Lien
that secures the Obligations), taxes (other than payroll taxes or taxes that are
the subject of a United States federal tax lien), or rental payment, provided
that (a) a reserve with respect to such obligation is established on books and
records of such Borrower, such other Loan Party or such Subsidiary in such
amount as is required under GAAP, (b) any such protest is instituted promptly
and prosecuted diligently by such Borrower, Loan Party or Subsidiary, as
applicable, in good faith, and (c) Lender is satisfied that, while any such
protest is pending, no such Lien has priority over Lender’s Liens and there will
otherwise be no impairment of the enforceability, validity, or priority of any
of Lender’s Liens.

“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Original Closing Date in an
aggregate principal amount outstanding at any one time not in excess of
$750,000.

“Person” means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA)
maintained for employees of any Borrower or any of its Subsidiaries or any ERISA
Affiliate.

“Pledged Companies” means each Person listed on Schedule 5.1(c) to the
Information Certificate as a “Pledged Company”, together with each other Person,
all or a portion of whose Stock is acquired or otherwise owned by a Loan Party
after the Original Closing Date.

“Pledged Interests” means all of each Loan Party’s right, title and interest in
and to all of the Stock now owned or hereafter acquired by such Loan Party,
regardless of class or designation, including in each of the Pledged Companies,
and all substitutions therefor and replacements thereof, all proceeds thereof
and all rights relating thereto, also including any certificates representing
the Stock, the right to receive any certificates representing any of the Stock,
all warrants, options, share appreciation rights and other rights, contractual
or otherwise, in respect thereof and the right to receive all dividends,
distributions of income, profits, surplus, or other compensation by way of
income or liquidating distributions, in cash or in kind, and all cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed in respect of or in addition to, in substitution of, on
account of, or in exchange for any or all of the foregoing.

 

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“Pledged Interests Addendum” means a Pledged Interests Addendum substantially in
the form of Exhibit F.

“Pledged Operating Agreements” means all of each Loan Party’s rights, powers,
and remedies under the limited liability company agreements of each of the
Pledged Companies that are limited liability companies.

“Pledged Partnership Agreements” means all of each Borrower’s rights, powers,
and remedies under the partnership agreements of each of the Pledged Companies
that are partnerships.

“Preferred Stock” means, as applied to the Stock of any Person, the Stock of any
class or classes (however designated) that is preferred with respect to the
payment of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over shares of Stock of
any other class of such Person.

“Prime Rate” means at any time the rate of interest most recently announced by
Lender at its principal office as its Prime Rate, with the understanding that
the Prime Rate is one of Lender’s base rates, and serves as the basis upon which
effective rates of interest are calculated for those loans making reference to
it, and is evidenced by its recording in such internal publication or
publications as Lender may designate. Each change in the rate of interest shall
become effective on the date each Prime Rate change is announced by Lender.

“Proceeds” has the meaning specified therefor in the definition of “Collateral”
set forth in Schedule 1.1.

“Prohibited Preferred Stock” means any Preferred Stock that by its terms is
mandatorily redeemable or subject to any other payment obligation (including any
obligation to pay dividends, other than dividends of shares of Preferred Stock
of the same class and series payable in kind or dividends of shares of common
stock) on or before a date that is less than 1 year after the Maturity Date, or,
on or before the date that is less than 1 year after the Maturity Date, is
redeemable at the option of the holder thereof for cash or assets or securities
(other than distributions in kind of shares of Preferred Stock of the same class
and series or of shares of common stock).

“Projections” means each Borrower’s forecasted (a) balance sheets, (b) profit
and loss statements, (c) Availability projections, and (d) cash flow statements,
all prepared on a basis consistent with such Borrower’s historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.

“Protective Advance” has the meaning specified therefor in Section 2.3(d).

“PTO” means the United States Patent and Trademark Office.

“Purchase Agreement” means the Purchase Agreement described in that certain
letter agreement dated as of February 8, 2012 by and among Lender and the Loan
Parties.

“Purchase Money Indebtedness” means Indebtedness (other than the Obligations,
but including Capitalized Lease Obligations), incurred at the time of, or within
20 days after, the acquisition of any fixed assets for the purpose of financing
all or any part of the acquisition cost thereof.

 

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“Purchase Price Payments” shall have the meaning set forth in the Purchase
Agreement (as in effect on February 12, 2013).

“Qualified Cash” means, as of any date of determination, the amount of
unrestricted cash and Cash Equivalents of each Borrower and its Subsidiaries
that is in Deposit Accounts or in Securities Accounts, or any combination
thereof, and which such Deposit Account or Securities Account is maintained by
Lender and accordingly under the “control” Lender in accordance with
Section 9-104(a)(1) of the Code.

“Real Property” means any estates or interests in real property now owned or
hereafter acquired by a Loan Party and the improvements thereto.

“Record” means information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable form.

“Refinancing Indebtedness” means refinancings, renewals, or extensions of
Indebtedness so long as:

(a) such refinancings, renewals, or extensions do not result in an increase in
the principal amount of the Indebtedness so refinanced, renewed, or extended,
other than by the amount of premiums paid thereon and the fees and expenses
incurred in connection therewith and by the amount of unfunded commitments with
respect thereto,

(b) such refinancings, renewals, or extensions do not result in a shortening of
the average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are or could reasonably be
expected to be materially adverse to the interests of Lender,

(c) if the Indebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension must include subordination
terms and conditions that are at least as favorable to the Lender as those that
were applicable to the refinanced, renewed, or extended Indebtedness, and

(d) the Indebtedness that is refinanced, renewed, or extended is not recourse to
any Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended.

“Remedial Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) restore or reclaim natural resources or the
environment, (d) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (e) conduct any other
actions with respect to Hazardous Materials in each case as required by
Environmental Laws.

“Reserves” means, as of any date of determination, the sum of (a) an amount or
percent of a specified item or category of items that Lender establishes from
time to time in its Permitted Discretion to reduce Availability under the
Borrowing Base or the Maximum Revolver Amount to reflect (i) such matters,
events, conditions, contingencies or risks which affect or which may reasonably
be expected to affect the assets, business or prospects of a Borrower, any other
Loan Party or the Collateral or its value or the enforceability, perfection or
priority of Lender’s Liens in the Collateral, or (ii) Lender’s

 

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judgment that any collateral report or financial information relating to a
Borrower or any other Loan Party delivered to Lender is incomplete, inaccurate
or misleading in any material respect, plus (b) the Dilution Reserve, the Bank
Product Reserve Amount and the Permitted 2012 Charges.

“Restricted Junior Payment” means (a) any declaration or payment of any dividend
or the making of any other payment or distribution on account of Stock issued by
any Loan Party (including any payment in connection with any merger or
consolidation involving any Loan Party) or to the direct or indirect holders of
Stock issued by any Loan Party in their capacity as such (other than dividends
or distributions payable in Stock (other than Prohibited Preferred Stock) issued
by any Loan Party, or (b) any purchase, redemption, or other acquisition or
retirement for value (including in connection with any merger or consolidation
involving any Loan Party) of any Stock issued by any Loan Party; provided so
long as no Default or Event of Default exists or would result therefrom,
repurchases of Stock issued by Parent solely to satisfy federal income tax
withholding obligations of employees with respect to stock-based compensation
issued to them in accordance with applicable compensation plans shall not be
deemed a Restricted Junior Payment so long as such repurchases are made in the
ordinary course of business and in an aggregate amount not to exceed $1,500,000
in any fiscal year of Borrowers.

“Revolver Usage” means, as of any date of determination, the sum of (a) the
amount of outstanding Advances, plus (b) the amount of the Letter of Credit
Usage.

“Revolving Credit Facility” means the revolving line of credit facility
described in Section 2.1 pursuant to which Lender provides Advances to Borrowers
and issues Letters of Credit for the account of Borrowers.

“Sanctioned Entity” means (a) a country or a government of a country, (b) an
agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.

“Sanctioned Person” means a person named on the list of Specially Designated
Nationals maintained by OFAC.

“S&P” has the meaning specified therefor in the definition of Cash Equivalents.

“SEC” means the United States Securities and Exchange Commission and any
successor thereto.

“Securities Account” means a securities account (as that term is defined in the
Code).

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and any successor statute.

“Security Interest” has the meaning specified therefor in Section 3.1.

“Seller Subordinated Debt” shall mean the “Subordinated Indebtedness” as defined
in the Seller Subordination Agreement.

“Seller Subordination Agreement” shall mean that certain Subordination Agreement
entered into in connection with the Permitted Acquisition in form and substance
satisfactory to Lender in its sole and absolute discretion, as the same may be
amended, amended and restated or otherwise modified from time to time.

 

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“Solvent” means, with respect to any Person on a particular date, that, (i) at
fair valuations, the sum of such Person’s assets (and including as assets for
this purpose all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) is greater than all of such
Person’s debts and including subordinated and contingent liabilities computed at
the amount which, such Person has a reasonable basis to believe, represents an
amount which can reasonably be expected to become an actual or matured liability
(and including as to contingent liabilities arising pursuant to any guarantee
the face amount of such liability as reduced to reflect the probability of it
becoming a matured liability); and (ii) such Person is able to pay its debts as
they mature and has (and has a reasonable basis to believe it will continue to
have) sufficient capital (and not unreasonably small capital) to carry on its
business consistent with its practices as of the date hereof.

“Specified Surety Agreements” means the agreements with Chartis, Federal
Insurance Company and/or Liberty Mutual listed on Schedule 5.31 to the
Information Certificate.

“Springing Lockbox Event” has the meaning specified therefor in Section 2.4(b).

“Stock” means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).

“Subsidiary” of a Person means a corporation, partnership, limited liability
company, or other entity in which that Person directly or indirectly owns or
controls the shares of Stock having ordinary voting power to elect a majority of
the board of directors (or appoint other comparable managers) of such
corporation, partnership, limited liability company, or other entity.

“Supporting Obligations” means supporting obligations (as such term is defined
in the Code), and includes letters of credit and guaranties issued in support of
Accounts, Chattel Paper, documents, General Intangibles, instruments or
Investment Related Property.

“Surety” means any Person that issues a Surety Bond.

“Surety Bond” means any surety bond, insurance policy, indemnity agreement,
guaranty, letter or credit or other instrument provided by a third party (i.e.,
excluding an Affiliate of the obligor) to an oblige to assure the payment by
and/or performance of an obligor.

“Surety Collateral” (a) all of the right, title and interest of the Borrowers in
and to all existing and future Bonded Contracts and associated contract rights;
(b) Bonded Accounts; (c) all claims, rights and choses in action against any
account debtor on any Surety Bond or against any other Person with respect to
any Surety Bond or Bonded Contract; (d) to the extent assignable (other than to
the extent that any such prohibition and assignment term would be rendered
ineffective pursuant to applicable law) all rights and actions that any Borrower
may have or acquire in any subcontract, purchase order or other agreement in
connection with any Bonded Contract, and against any subcontract, purchase order
or other agreement with any Person furnishing or agreeing to furnish or supply
vehicles, labor, supplies, machinery or other inventory or equipment in
connection with or on account of any Bonded Contract, and against any surety or
sureties of any such subcontractor, laborer or other Person; (e) Bonded
Equipment; (f) Bonded Inventory; (g) any and all books, accounts, computer
software and other computer-stored information, and any and all drawings, plans,
specifications, shop and as-built drawings, in each case, used in or necessary
to fully perform all obligations and services required of any Borrower under the
Bonded Contracts; (h) all progress schedules, work in process schedules
(including, but not limited to, estimates of completion costs), accounts
receivable ledgers, accounts payable ledgers and estimates of

 

Schedule 1.1

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completion costs relating to any and all Bonded Contracts, and (i) any and all
proceeds (other than such proceeds which are negotiable instruments or cash or
Cash Equivalents in the possession or control of Lender) remaining due to
Borrowers and products arising with respect thereto.

“Taxes” means any taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by
any political subdivision or taxing authority thereof or therein with respect to
such payments and all interest, penalties or similar liabilities with respect
thereto; provided, however, that Taxes shall exclude any tax imposed on the net
income or net profits of Lender (including any branch profits taxes), in each
case imposed by the jurisdiction (or by any political subdivision or taxing
authority thereof in which Lender is organized or the jurisdiction (or by any
political subdivision or taxing authority thereof) in which Lender’s principal
office is located in each case as a result of a present or former connection
between Lender and the jurisdiction or taxing authority imposing the tax (other
than any such connection arising solely from Lender having executed, delivered
or performed its obligations or received payment under, or enforced its rights
or remedies under this Agreement or any other Loan Document).

“Termination Date” has the meaning specified therefor in Section 2.9.

“Term Loan” shall have the meaning ascribed in the Existing Credit Agreement.

“Tontine” means Tontine Capital Partners L.P. and its respective Affiliates

“Trademarks” means any and all trademarks, trade names, registered trademarks,
trademark applications, service marks, registered service marks and service mark
applications, including (i) the trade names, registered trademarks, trademark
applications, registered service marks and service mark applications listed on
Schedule 5.26(b) to the Information Certificate, (ii) all renewals thereof,
(iii) all income, royalties, damages and payments now and hereafter due or
payable under and with respect thereto, including payments under all licenses
entered into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (iv) the right to sue for past, present and
future infringements and dilutions thereof, (v) the goodwill of each Loan
Party’s business symbolized by the foregoing or connected therewith, and
(vi) all of each Loan Party’s rights corresponding thereto throughout the world.

“Uniform Customs” means the Uniform Customs and Practice for Documentary Credits
(2007 Revision), effective July, 2007 International Chamber of Commerce
Publication No. 600.

“United States” means the United States of America.

“Unused Amount” has the meaning specified therefor in Schedule 2.12 of this
Agreement.

“URL” means “uniform resource locator,” an internet web address.

“Value” means, as determined by Lender in good faith, with respect to Inventory,
the lower of (a) cost computed on a first-in first-out basis in accordance with
GAAP or (b) market value, provided that for purposes of the calculation of the
Borrowing Base, (i) the Value of the Inventory shall not include: (A) the
portion of the value of Inventory equal to the profit earned by any Affiliate on
the sale thereof to any Borrower or (B) write-ups or write-downs in value with
respect to currency exchange rates and (ii) notwithstanding anything to the
contrary contained herein, the cost of the Inventory shall be computed in the
same manner and consistent with the most recent appraisal of the Inventory
received and accepted by Lender, if any.

 

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“Voidable Transfer” has the meaning specified therefor in Section 17.7.

b. Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP; provided, however, that if any Borrower
notifies Lender that such Borrower requests an amendment to any provision hereof
to eliminate the effect of any change in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions) (an
“Accounting Change”) occurring after the Closing Date, or in the application
thereof (or if Lender notifies any Borrower that Lender requests an amendment to
any provision hereof for such purpose), regardless of whether any such notice is
given before or after such Accounting Change or in the application thereof, then
Lender and Borrowers agree that they will negotiate in good faith amendments to
the provisions of this Agreement that are directly affected by such Accounting
Change with the intent of having the respective positions of the Lender and each
Borrower after such Accounting Change conform as nearly as possible to their
respective positions as of the date of this Agreement and, until any such
amendments have been agreed upon, the provisions in this Agreement shall be
calculated as if no such Accounting Change had occurred. Whenever used herein,
the term “financial statements” shall include the footnotes and schedules
thereto. Whenever the term “Borrower” is used in respect of a financial covenant
or a related definition, it shall be understood to mean Borrowers and their
respective Subsidiaries on a consolidated basis, unless the context clearly
requires otherwise.

c. Code. Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth in the Code unless otherwise defined herein.
The meaning of any term defined herein by reference to the Code will not be
limited by reason of any limitation set forth on the scope of the Code, whether
under Section 9-109 of the Code, by reason of federal preemption or otherwise.

d. Construction. Unless the context of this Agreement or any other Loan Document
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the terms “includes” and
“including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in any other Loan
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). The words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts, and contract rights. Any reference herein or in any other Loan
Document to the satisfaction, repayment, or payment in full of the Obligations
shall mean the repayment in full in cash or immediately available funds (or,
(a) in the case of contingent reimbursement obligations with respect to Letters
of Credit, providing Letter of Credit Collateralization, and (b) in the case of
obligations with respect to Bank Products (other than Hedge Obligations),
providing Bank Product Collateralization) of all of the Obligations (including
the payment of any Lender Expenses that have accrued irrespective of whether
demand has been made therefor and 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) under Hedge Agreements) other than
unasserted contingent indemnification Obligations. Any reference herein to any
Person shall be construed to include such Person’s successors and assigns. Any
requirement of a writing contained herein or in any other Loan Document shall be

 

Schedule 1.1

Page 35

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satisfied by the transmission of a Record. References herein to any statute or
any provision thereof include such statute or provision (and all rules,
regulations and interpretations thereunder) as amended, revised, re-enacted, and
/or consolidated from time to time and any successor statute thereto.

e. Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.

 

Schedule 1.1

Page 36

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Schedule 2.12

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Borrowers shall pay to Lender each of the following fees:

On the Closing Date:

Origination Fee. A one time origination fee of $150,000 in connection with the
increase to the Maximum Revolver Amount which shall be fully earned and payable
upon the execution of this Agreement.

Monthly:

(a) Unused Fee. An unused line fee of one half of one percent (.50%) per annum
of the daily average of the Maximum Revolver Amount reduced by outstanding
Advances (the “Unused Amount”), from the date of this Agreement to and including
the Termination Date, which unused line fee shall be payable monthly in arrears
on the first day of each month and on the Termination Date.

(b) Collateral Monitoring Fee. A fee equal to the collateral fee rate set forth
in the following table that corresponds to the then applicable “Level”
established pursuant to the definition of Interest Rate Margin. Such collateral
monitoring fee is due and payable monthly in arrears on the first (1st) day of
each month and on the Termination Date.

 

Level Applicable under “Interest Rate Margin Definition

   Collateral Monitoring Fee
Rate  

I

   $ 2,000   

II

   $ 1,500   

III

   $ 1,000   

The collateral monitoring fee rate shall be re-determined on each Interest Rate
Redetermination Date as further described in the definition of Interest Rate
Margin. In the event that the applicable “Level” is subsequently corrected (as
described in the Interest Rate Margin definition) and such change would have led
to the application of a higher collateral monitoring fee rate for any period,
then the collateral monitoring fee rate shall be determined as if the correct
collateral monitoring fee rate (as set forth in the table above) were applicable
for such period, and Borrowers shall immediately deliver to Lender full payment
in respect of the accrued additional collateral monitoring fee as a result of
such increased collateral monitoring fee rate for such period.

(c) Cash Management and Other Service Fees. Service fees to Lender for Cash
Management Services provided pursuant to the Cash Management Documents, Bank
Product Agreements or any other agreement entered into by the parties, including
Lender’s customary fees and charges (as adjusted from time to time) with respect
to the disbursement of funds (or the receipt of funds) to or for the account of
Borrowers (whether by wire transfer or otherwise) in the amount prescribed in
Lender’s current service fee schedule.

(d) Letter of Credit Fees. A Letter of Credit fee (in addition to the charges,
commissions, fees, and costs set forth in Section 2.13(e)) which shall accrue at
a per annum rate equal to the applicable Interest Rate Margin times the Daily
Balance of the undrawn amount of all outstanding Letters of Credit, payable in
arrears on the first day of each month and on the Termination Date and
continuing until all undrawn Letters of Credit have expired or been returned for
cancellation. All fees upon the occurrence of any other activity with respect to
any Letter of Credit (including, without limitation, the issuance, transfer,
amendment, extension or cancellation of any Letter of Credit and honoring of
draws under any Letter of Credit) determined in accordance with Lender’s
standard fees and charges then in effect for such activity.

 

Schedule 2.12

Page 1

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Upon demand by Lender or as otherwise specified in this Agreement:

(a) Collateral Exam Fees, Costs and Expenses. Lender’s fees, costs and expenses
in connection with any collateral exams, audits or inspections conducted by or
on behalf of Lender at the current rates established from time to time by Lender
as its fee for collateral exams, audits or inspections (which fees are currently
$125 per hour per collateral examiner), together with all actual out-of-pocket
costs and expenses incurred in conducting any collateral exam, audit, or
inspection ; provided, however, (i) so long as no Default or Event of Default
shall have occurred and be continuing, Borrowers shall be obligated to reimburse
Lender for fees, costs and expenses related to no more than three (3) such
collateral exams, audits and inspections per fiscal year, and (ii) after the
first anniversary of the Original Closing Date, so long as (x) no Default or
Event of Default shall have occurred and be continuing during such fiscal year
and (y) the applicable Interest Rate Margin has been designated at “Level 2” or
“Level 3” (as described in the definition of Interest Rate Margin) at all times
during such fiscal year, Borrowers shall be obligated to reimburse Lender for
fees, costs and expenses related to not more than two (2) such collateral exams,
audits and inspections for such fiscal year. In addition, Borrowers shall be
obligated to reimburse Lender for all fees, costs and expenses related to any
collateral exams, audits or inspections obtained prior to the Original Closing
Date.

(b) Appraisal Fees, Costs and Expenses. Lender’s fees, costs and expenses
(including any fees, costs and expenses incurred by any appraiser) in connection
with any appraisal of all or any part of the Collateral conducted at the request
of Lender; provided, however, so long as no Default or Event of Default shall
have occurred and be continuing, Borrowers shall be obligated to reimburse
Lender for fees, costs and expenses related to not more than one (1) appraisal
of Borrowers’ Inventory during each fiscal year.

(c) Termination and Reduction Fees. If (i) Lender terminates the Revolving
Credit Facility after the occurrence of an Event of Default, (ii) Borrowers
terminate the Revolving Credit Facility on a date prior to the Maturity Date, or
(iii) Borrowers reduce the Maximum Revolver Amount or if Borrowers and Lender
agree to reduce the Maximum Revolver Amount, then Borrowers shall pay Lender as
liquidated damages (and not as a penalty) a termination, reduction, or
prepayment fee in an amount equal to a percentage of the Maximum Credit in the
case of a termination of the Revolving Credit Facility, a percentage of the
amount of reduction of the Maximum Revolver Amount in the case of a reduction in
the Maximum Revolver Amount calculated as follows: (A) two percent (2.00%) if
the termination, reduction, or prepayment occurs on or before September [    ],
2015 and (B) one percent (1.00%) if the termination, reduction, or prepayment
occurs after September [    ], 2015. If, with the consent of Lender (which
consent may be withheld by Lender in its sole discretion), the Credit Facility
is transferred to another Subsidiary or operating division of Lender within
eighteen (18) months after the Closing Date, such transfer shall not be deemed a
termination, reduction or prepayment resulting in the payment of termination
reduction or prepayment fees provided that Borrowers agree, at the time of
transfer, to the payment of comparable fees in an amount not less than that set
forth in this Agreement in the event that any credit facilities extended after
such transfer are thereafter terminated early, reduced or prepaid.

 

Schedule 2.12

Page 2

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Schedule 6.1

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Deliver to Lender, each of the financial statements, reports, or other items set
forth below at the following times in form satisfactory to Lender:

 

as soon as available, but in any event within 30 days after the end of each
month   

(a) an unaudited consolidated and consolidating balance sheet, income statement,
statement of cash flow, and statement of shareholder’s equity with respect to
the Borrowers and their respective Subsidiaries during such period and compared
to the prior period and plan, prepared in accordance with GAAP, subject to
year-end audit adjustments and the absence of footnotes, together with a
corresponding discussion and analysis of results from management; and

 

(b) a Compliance Certificate along with the underlying calculations, including
the calculations to establish compliance with the financial covenants set forth
in Section 8 and certain other covenants under this Agreement, as well as
calculations of Liquidity, Excess Availability and Fixed Charge Coverage Ratio.

as soon as available, but in any event within 45 days after the end of each
fiscal quarter   

(a) an unaudited consolidated and consolidating balance sheet, income statement,
statement of cash flow, and statement of shareholder’s equity with respect to
the Borrowers and their respective Subsidiaries during such period and compared
to the prior period and plan, prepared in accordance with GAAP, subject to
year-end audit adjustments and the absence of footnotes, together with a
corresponding discussion and analysis of results from management; and

 

(b) a Compliance Certificate along with the underlying calculations, including
the calculations to establish compliance with the financial covenants set forth
in Section 8 and certain other covenants under this Agreement, as well as
calculations of Liquidity, Excess Availability and Fixed Charge Coverage Ratio.

as soon as available, but in any event within 120 days after the end of each
fiscal year   

(a) consolidated and consolidating financial statements of Borrowers and their
respective Subsidiaries for such fiscal year, audited by Ernst & Young or
another independent certified public accountant reasonably acceptable to Lender,
prepared in accordance with GAAP, and certified, without any qualifications
(including any (A) “going concern” or like qualification or exception,
(B) qualification or exception as to the scope of such audit, or
(C) qualification which relates to the treatment or classification of any item
and which, as a condition to the removal of such qualification, would require an
adjustment to such item), by such accountants to have been prepared in
accordance with GAAP (such audited financial statements to include a balance
sheet, income statement, statement of cash flow, and statement of shareholder’s
equity and, if prepared, such accountants’ letter to management); and

 

(b) a Compliance Certificate along with the underlying calculations, including
the calculations to establish compliance with the financial covenants set forth
in Section 8 and certain other covenants under this Agreement, as well as
calculations of Liquidity, Excess Availability and Fixed Charge Coverage Ratio.

 

Schedule 6.1

Page 1

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as soon as available, but in any event on or before the last day of each fiscal
year,    (a) copies of Borrowers’ Projections, in form and substance (including
as to scope and underlying assumptions) satisfactory to Lender, in its Permitted
Discretion, for the forthcoming fiscal year, on a monthly basis, certified by
the chief financial officer of Borrowers as being such officer’s good faith
estimate of the financial performance of the Borrowers and their respective
Subsidiaries during the period covered thereby. if and when filed by any
Borrower,   

(a) Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current
reports;

 

(b) any other filings made by any Borrower with the SEC; and

 

(c) any other information that is provided by any Borrower to its shareholders
generally.

 

Schedule 6.1

Page 2

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Schedule 6.2

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Provide Lender with each of the documents and information set forth below at the
following times in form and substance satisfactory to Lender:

 

On or prior to the twenty-third (23rd) day of each month or more frequently if
Lender requests   

(a) a Borrowing Base Certificate;

 

(b) an Account roll-forward with supporting details to the extent requested by
Lender;

 

(c) to the extent requested by Lender, notice of all claims, offsets, or
disputes asserted by Account Debtors with respect to each Borrower’s and its
Subsidiaries’ Accounts; and

 

(d) to the extent requested by Lender, copies of invoices together with
corresponding shipping and delivery documents and credit memos together with
corresponding supporting documentation with respect to invoices and credit memos
in excess of an amount determined in the sole discretion of Lender from time to
time.

 

On or prior to the twenty-third (23rd) day of each month or more frequently if
Lender requests

  

 

(a) to the extent Borrowers have requested that Lender make any Advances on its
Inventory, Inventory system/perpetual reports specifying the cost of each
Borrower’s and its Subsidiaries’ Inventory, by location and by category, with
additional detail showing additions to and deletions therefrom (delivered
electronically in an acceptable format, if a Borrower has implemented electronic
reporting).

 

On or prior to the twenty-third (23rd) day of each month or more frequently if
Lender requests

  

 

(a) a monthly Account roll-forward, in a format acceptable to Lender in its
discretion;

 

(b) a detailed aging of each Borrower’s Accounts, together with a reconciliation
to the monthly Account roll-forward and supporting documentation for any
reconciling items noted (delivered electronically in an acceptable format, if a
Borrower has implemented electronic reporting);

 

(c) a detailed calculation of those Accounts that are not eligible for the
Borrowing Base;

 

(d) to the extent Borrowers have requested that Lender make any Advances on its
Inventory, a detailed Inventory system/perpetual report (delivered
electronically in an acceptable format, if a Borrower has implemented electronic
reporting);

 

(e) to the extent Borrowers have requested that Lender make any Advances on its
Inventory, a detailed calculation of Inventory categories that are not eligible
for the Borrowing Base;

 

(f) a summary aging, by vendor, of each Borrower’s and its Subsidiaries’
accounts payable (delivered electronically in an acceptable format, if a
Borrower has implemented electronic reporting); and

 

(g) a detailed report regarding each Borrower’s and its Subsidiaries’ cash and
Cash Equivalents, including an indication of which amounts constitute Qualified
Cash.

 

 

Schedule 6.2

Page 1

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On or prior to the twenty-third (23rd) day of each month or more frequently if
Lender requests    (a) a reconciliation of Accounts aging, trade accounts
payable aging, and Inventory perpetual of each Borrower to the general ledger
and the monthly financial statements, including any book reserves related to
each category. Annually, or more frequently, if requested by Lender    (a) a
detailed list of each Borrower’s and its Subsidiaries’ customers, with address
and contact information. Upon request by Lender   

(a) copies of purchase orders and invoices for Inventory and Equipment acquired
by each Borrower or its Subsidiaries, and

 

(b) such other reports and information as to the Collateral and as to each as
Lender may reasonably request.

 

Schedule 6.2

Page 2

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EXHIBIT A

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

[on Borrower’s letterhead]

 

To: Wells Fargo Bank, National Association

[                    ]

Attn: [Portfolio Manager]

 

Re: Compliance Certificate dated [                    ]

Ladies and Gentlemen:

Reference is made to that certain Amended and Restated Credit and Security
Agreement ( as amended, restated, supplemented or otherwise modified from time
to time, the “Credit Agreement”) dated as of September 24, 2014, by and among
WELLS FARGO BANK, NATIONAL ASSOCIATION, (“Lender”), INTEGRATED ELECTRICAL
SERVICES, INC., a Delaware corporation; IES COMMERCIAL & INDUSTRIAL, LLC, a
Delaware limited liability company; IES COMMERCIAL, INC., a Delaware
corporation; IES CONSOLIDATION, LLC, a Delaware limited liability company; IES
MANAGEMENT, LP, a Texas limited partnership; IES MANAGEMENT ROO, LP, a Texas
limited partnership; IES PROPERTIES, INC., a Delaware corporation; IES
PURCHASING & MATERIALS, INC., a Delaware corporation; IES RESIDENTIAL, INC., a
Delaware corporation; IES SHARED SERVICES, INC., a Delaware corporation; IES
TANGIBLE PROPERTIES, INC., a Delaware corporation; INTEGRATED ELECTRICAL
FINANCE, INC., a Delaware corporation; IES SUBSIDIARY HOLDINGS, INC., a Delaware
corporation; MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation; HK
ENGINE COMPONENTS, LLC, an Indiana limited liability company; IES RENEWABLE
ENERGY, LLC, a Delaware limited liability company (each, individually a
“Borrower”, and collectively, the “Borrowers”), IES OPERATIONS GROUP, INC., a
Delaware corporation and ICS HOLDINGS LLC, an Arizona limited liability company
(each, individually a (“Guarantor”), and collectively, the “Guarantors”).
Capitalized terms used in this Compliance Certificate have the meanings set
forth in the Credit Agreement unless specifically defined herein.

Pursuant to Schedule 6.1 of the Credit Agreement, the undersigned officer of
Parent hereby certifies that:

1. Attached is the financial information of Borrowers and their Subsidiaries
which is required to be furnished to Lender pursuant to Section 6.1 of the
Credit Agreement for the period ended                     ,                     
(the “Reporting Date”). Such financial information has been prepared in
accordance with GAAP [(except for year-end adjustments and the lack of
footnotes)]1, and fairly presents in all material respects the financial
condition of Borrowers and their Subsidiaries.

2. Such officer has reviewed the terms of the Credit Agreement and has made, or
caused to be made under his/her supervision, a review in reasonable detail of
the transactions and condition of each Borrower and its Subsidiaries during the
accounting period covered by the financial statements delivered pursuant to
Schedule 6.1 of the Credit Agreement.

3. Such review has not disclosed the existence on and as of the date hereof, and
the undersigned does not have knowledge of the existence as of the date hereof,
of any event or condition that constitutes a Default or Event of Default.

 

1  Exclude bracketed language with annual audits

 

Exhibit A

Page 1

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4. The representations and warranties of each Loan Party and its Subsidiaries
set forth in the Credit Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date hereof (except to the
extent they relate to a specified date).

5. Borrowers’ Liquidity, Excess Availability and Fixed Charge Coverage Ratio
calculations are demonstrated on Schedule 1 hereof.

6. As of the Reporting Date, the Borrowers and their respective Subsidiaries are
in compliance with the applicable covenants contained in Section 8 of the Credit
Agreement, if applicable, as demonstrated on Schedule 1 hereof.

IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned
this [    ] day of [            ], [        ].

 

INTEGRATED ELECTRICAL SERVICES, INC. By:  

 

Name:  

 

Title:  

 

 

Exhibit A

Page 2

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SCHEDULE 1 TO COMPLIANCE CERTIFICATE

Financial Covenants

I further certify that (Please check and complete each of the following):

1. Liquidity and Excess Availability. (a) Borrowers’ and their Subsidiaries’
Liquidity [was][was not] less than $20,000,000, at any time during the subject
period, and Excess Availability [was][was not] less than $5,000,000 at any time
during such period, which [does/does not] result in a FCCR Testing Period and
(b) Borrowers’ and their Subsidiaries Liquidity [was][was not] less than
$10,000,000 at any time during the subject period, which [does/does not] result
in a Springing Lockbox Event. Attached to this Schedule 1 are calculations
supporting the foregoing statements.

2. Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio of the Borrowers
and their Subsidiaries, measured on a trailing twelve-month basis, for the
monthly period ending on the Reporting Date is                      to 1.0
[which [does/does not] satisfy the requirement set forth in Section 8(a) of the
Credit Agreement that the Fixed Charge Coverage Ratio be not less than 1.0 to
1.0 as required during the trailing twelve-month period ending on the Reporting
Date].2 Attached to this Schedule 1 are calculations supporting the foregoing
calculation with respect to the Fixed Charge Coverage Ratio

 

2  Use when calculation in #1 results in a FCCR Testing Period.

 

Exhibit B

Page 1

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EXHIBIT B

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

CONDITIONS PRECEDENT

The obligation of Lender to make its initial extension of credit provided for in
this Agreement is subject to the fulfillment, to the satisfaction of Lender, of
each of the following conditions precedent:

(a) Lender shall have received each of the following documents, in form and
substance satisfactory to Lender, duly executed, and each such document shall be
in full force and effect:

(i) This Agreement

(ii) Fourth Amended and Restated Revolving Note

(iii) Omnibus Ratification to Loan Documents

(iv) Any other Loan Documents requested by Lender;

(b) Lender shall have received a certificate from the Secretary of each Loan
Party (i) attesting to the resolutions of such Loan Party’s Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which such Loan Party is a party, (ii) authorizing
specific officers of such Loan Party to execute the same, and (iii) attesting to
the incumbency and signatures of such specific officers of such Loan Party;

(c) Lender shall have received copies of each Loan Party’s Governing Documents,
as amended, modified, or supplemented to the Closing Date, certified as true,
correct and complete by the Secretary of such Loan Party;

(d) Lender shall have received a certificate of status with respect to each Loan
Party, dated within 30 days of the Closing Date, such certificate to be issued
by the appropriate officer of the jurisdiction of organization of each Loan
Party, which certificate shall indicate that such Loan Party is in good standing
in such jurisdiction;

(e) Lender shall have received copies of the policies of insurance and
certificates of insurance, together with the endorsements thereto, as are
required by Section 6.6, the form and substance of which shall be satisfactory
to Lender;

(f) Lender shall have received an opinion of each Loan Party’s counsel in form
and substance satisfactory to Lender;

(g) Lender shall have completed its business, legal, and collateral due
diligence, including (i) a collateral examination and review of each Borrower’s
and its Subsidiaries Books and verification of each Loan Party’s representations
and warranties to Lender, the results of which must be satisfactory to Lender,
and (ii) an inspection of each of the locations where the Inventory of each Loan
Party and its Subsidiaries is located, the results of which must be satisfactory
to Lender;

(h) Borrowers shall have paid all Lender Expenses incurred in connection with
the transactions evidenced by this Agreement;

 

Exhibit B

Page 2

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(i) since the date of the most recent financial statements delivered to Lender,
no event, circumstance, or change shall have occurred that has or could
reasonably be expected to result in a Material Adverse Change with respect to
the Loan Parties and their Subsidiaries;

(j) all other documents and legal matters in connection with the transactions
contemplated by this Agreement shall have been delivered, executed, or recorded
and shall be in form and substance satisfactory to Lender; and

(k) Lender shall have received final credit approval for the Credit Facility and
the transactions described in this Agreement.

 

Exhibit B

Page 3

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EXHIBIT C

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

CONDITIONS SUBSEQUENT

 

Exhibit D

Page 1

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

EXHIBIT D

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

REPRESENTATIONS AND WARRANTIES

5.1 Due Organization and Qualification; Subsidiaries.

(a) Each Loan Party and each Subsidiary of each Loan Party (i) is duly organized
and existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is qualified to do business in any jurisdiction where the
failure to be so qualified could reasonably be expected to result in a Material
Adverse Change, and (iii) has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents to which it is a
party and to carry out the transactions contemplated thereby.

(b) Set forth on Schedule 5.1(b) to the Information Certificate is a complete
and accurate description of the authorized capital Stock of each Loan Party, by
class, and, as of the Closing Date, a description of the number of shares of
each such class that are issued and outstanding. Other than as described on
Schedule 5.1(b) to the Information Certificate, there are no subscriptions,
options, warrants, or calls relating to any shares of any Loan Party’s capital
Stock, including any right of conversion or exchange under any outstanding
security or other instrument. No Loan Party is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital Stock or any security convertible into or exchangeable for
any of its capital Stock.

(c) Set forth on Schedule 5.1(c) to the Information Certificate (as such
Schedule may be updated from time to time to reflect changes resulting from
transactions permitted under this Agreement), is a complete and accurate list of
the Loan Parties’ direct and indirect Subsidiaries, showing: (i) the number of
shares of each class of common and preferred Stock authorized for each of such
Subsidiaries, and (ii) the number and the percentage of the outstanding shares
of each such class owned directly or indirectly by each Loan Party. All of the
outstanding capital Stock of each such Subsidiary has been validly issued and is
fully paid and non-assessable.

(d) Except as set forth on Schedule 5.1(c) to the Information Certificate, there
are no subscriptions, options, warrants, or calls relating to any shares of any
capital stock or any Loan Party or of any of its Subsidiaries, including any
right of conversion or exchange under any outstanding security or other
instrument. No Loan Party nor any of its Subsidiaries is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of such Loan Party’s Subsidiaries’ capital Stock or any
security convertible into or exchangeable for any such capital Stock.

5.2 Due Authorization; No Conflict.

(a) As to each Loan Party, the execution, delivery, and performance by such Loan
Party of the Loan Documents to which it is a party have been duly authorized by
all necessary action on the part of such Loan Party.

(b) As to each Loan Party, the execution, delivery, and performance by such Loan
Party of the Loan Documents to which it is a party do not and will not
(i) violate any material provision of federal, state, or local law or regulation
applicable to any Loan Party or its Subsidiaries, the Governing Documents of

 

Exhibit D

Page 2

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any Loan Party or its Subsidiaries, or any order, judgment, or decree of any
court or other Governmental Authority binding on any Loan Party or its
Subsidiaries, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any Material Contract of any
Loan Party or its Subsidiaries except to the extent that any such conflict,
breach or default could not individually or in the aggregate reasonably be
expected to cause a Material Adverse Change, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any assets of
any Loan Party, other than Permitted Liens, or (iv) require any approval of any
Loan Party’s interest holders or any approval or consent of any Person under any
Material Contract of any Loan Party, other than consents or approvals that have
been obtained and that are still in force and effect and except, in the case of
Material Contracts, for consents or approvals, the failure to obtain could not
individually or in the aggregate reasonably be expected to cause a Material
Adverse Change.

5.3 Governmental and Other Consents. No consent, approval, authorization, or
other order or other action by, and no notice to or filing with, any
Governmental Authority or any other Person is required (a) for the grant of a
Lien by such Loan Party in and to the Collateral pursuant to this Agreement or
the other Loan Documents or for the execution, delivery, or performance of this
Agreement by such Loan Party, or (b) for the exercise by Lender of the voting or
other rights provided for in this Agreement with respect to the Investment
Related Property or the remedies in respect of the Collateral pursuant to this
Agreement, except as may be required in connection with such disposition of
Investment Related Property by laws affecting the offering and sale of
securities generally. Except as set forth on Schedule 5.3 to the Information
Certificate, no Intellectual Property License of any Loan Party that is
necessary to the conduct of such Loan Party’s business requires any consent of
any other Person in order for such Loan Party to grant the security interest
granted hereunder in such Loan Party’s right, title or interest in or to such
Intellectual Property License.

5.4 Binding Obligations. Each Loan Document has been duly executed and delivered
by each Loan Party that is a party thereto and is the legally valid and binding
obligation of such Loan Party, enforceable against such Loan Party in accordance
with its respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors’ rights generally.

5.5 Title to Assets; No Encumbrances. Each of the Loan Parties and its
Subsidiaries has (a) good, sufficient and legal title to (in the case of fee
interests in Real Property), (b) valid leasehold interests in (in the case of
leasehold interests in real or personal property), and (c) good and marketable
title to (in the case of all other personal property), all of their respective
assets reflected in their most recent financial statements delivered pursuant to
Section 6.1 and most recent collateral reports delivered pursuant to
Section 6.2, in each case except for assets disposed of since the date of such
financial statements to the extent permitted hereby. All of such assets are free
and clear of Liens except for Permitted Liens.

5.6 Jurisdiction of Organization; Location of Chief Executive Office;
Organizational Identification Number; Commercial Tort Claims.

(a) The exact legal name of (within the meaning of Section 9-503 of the Code)
and jurisdiction of organization of each Loan Party and each of its Subsidiaries
is set forth on Schedule 5.6(a) to the Information Certificate (as such Schedule
may be updated from time to time to reflect changes resulting from transactions
permitted under this Agreement).

(b) The chief executive office of each Loan Party and each of its Subsidiaries
is located at the address indicated on Schedule 5.6(b) to the Information
Certificate (as such Schedule may be updated from time to time to reflect
changes resulting from transactions permitted under this Agreement).

 

Exhibit D

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(c) The tax identification number and organizational identification number, if
any, of each Loan Party and each of its Subsidiaries are identified on Schedule
5.6(c) to the Information Certificate (as such Schedule may be updated from time
to time to reflect changes resulting from transactions permitted under this
Agreement).

(d) As of the Closing Date, no Loan Party and no Subsidiary of a Loan Party
holds any asserted Commercial Tort Claims or, to its knowledge, holds any
unasserted Commercial Tort Claims, in either case, that exceed $500,000 in
amount, except as set forth on Schedule 5.6(d) to the Information Certificate.

5.7 Litigation.

(a) There are no actions, suits, or proceedings pending or, to the knowledge of
any Loan Party, after due inquiry, threatened in writing against a Loan Party or
any of its Subsidiaries that either individually or in the aggregate could
reasonably be expected to result in a Material Adverse Change.

(b) Schedule 5.7(b) to the Information Certificate sets forth a complete and
accurate description, with respect to each of the actions, suits, or proceedings
with asserted liabilities in excess of, or that could reasonably be expected to
result in liabilities in excess of, $500,000 in any one case or in excess of
$1,500,000 in the aggregate that, as of the Closing Date, is pending or, to the
knowledge of any Loan Party, after due inquiry, threatened in writing against
any Loan Party or any of its Subsidiaries, including (i) the parties to such
actions, suits, or proceedings, (ii) the nature of the dispute that is the
subject of such actions, suits, or proceedings, (iii) the status, as of the
Closing Date, with respect to such actions, suits, or proceedings, and
(iv) whether any liability of any Loan Party or any Subsidiary in connection
with such actions, suits, or proceedings is covered by insurance.

5.8 Compliance with Laws. No Loan Party nor any of its Subsidiaries (a) is in
violation of any applicable laws, rules, regulations, executive orders, or codes
(including Environmental Laws) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change, or (b) is subject
to or in default with respect to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Change.

5.9 No Material Adverse Change. All historical financial statements relating to
the Loan Parties and their Subsidiaries that have been delivered by Borrowers to
Lender have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and, taken as a whole, present fairly in all
material respects, the consolidated financial condition of the Loan Parties and
their Subsidiaries as of the date thereof and results of operations for the
period then ended. Since the date of the most recent financial statement
delivered to Lender, no event, circumstance, or change has occurred that has or
could reasonably be expected to result in a Material Adverse Change.

5.10 Fraudulent Transfer.

(a) Each Loan Party (other than Guarantors) is Solvent.

(b) No transfer of property is being made by any Loan Party and no obligation is
being incurred by any Loan Party in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of such Loan Party.

(c) No Loan Party that is a Guarantor has any operations or owns any material
assets.

 

Exhibit D

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5.11 Employee Benefits. No Loan Party, none of their Subsidiaries, or any of
their ERISA Affiliates maintains or contributes to any Benefit Plan.

5.12 Environmental Condition. Except as set forth on Schedule 5.12 to the
Information Certificate, (a) to each Loan Party’s knowledge, no properties or
assets of any Loan Party or any of its Subsidiaries have ever been used by a
Loan Party, its Subsidiaries, or by previous owners or operators in the disposal
of, or to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such disposal, production, storage, handling, treatment,
release or transport was in violation, in any material respect, of any
applicable Environmental Law, (b) to each Loan Party’s knowledge, after due
inquiry, no Loan Party’s nor any of its Subsidiaries’ properties or assets have
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, (c) no Loan Party nor
any of its Subsidiaries has received notice that a Lien arising under any
Environmental Law has attached to any revenues or to any Real Property owned or
operated by a Loan Party or its Subsidiaries, and (d) no Loan Party nor any of
its Subsidiaries nor any of their respective facilities or operations is subject
to any outstanding written order, consent decree, or settlement agreement with
any Person relating to any Environmental Law or Environmental Liability that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Change.

5.13 Intellectual Property. Each Loan Party and each of its Subsidiaries own, or
hold licenses in, all trademarks, trade names, copyrights, patents, and licenses
that are necessary to the conduct of its business as currently conducted.

5.14 Leases. Each Loan Party and each of its Subsidiaries enjoy peaceful and
undisturbed possession under all leases material to their business and to which
it is a party or under which it is operating, and, subject to Permitted
Protests, all of such material leases are valid and subsisting and no material
default by the applicable Loan Party or the applicable Subsidiary exists under
any of them.

5.15 Deposit Accounts and Securities Accounts. Set forth on Schedule 5.15 to the
Information Certificate (as updated pursuant to Section 6.12(j)(iv)) is a
listing of all of the Deposit Accounts and Securities Accounts of each Loan
Party and each of its Subsidiaries, including, with respect to each bank or
securities intermediary (a) the name and address of such Person, and (b) the
account numbers of the Deposit Accounts or Securities Accounts maintained with
such Person.

5.16 Complete Disclosure. All factual information taken as a whole (other than
forward-looking information and projections and information of a general
economic nature and general information about the industry of a Loan Party or
any of its Subsidiaries) furnished by or on behalf of a Loan Party or any of its
Subsidiaries in writing to Lender (including all information contained in the
Schedules hereto or in the other Loan Documents) for purposes of or in
connection with this Agreement or the other Loan Documents, and all other such
factual information taken as a whole (other than forward-looking information and
projections and information of a general economic nature and general information
about the industry of a Loan Party or any of its Subsidiaries) hereafter
furnished by or on behalf of a Loan Party or any of its Subsidiaries in writing
to Lender will be, true and accurate, in all material respects, on the date as
of which such information is dated or certified and not incomplete by omitting
to state any fact necessary to make such information (taken as a whole) not
misleading in any material respect at such time in light of the circumstances
under which such information was provided.

 

Exhibit D

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The Projections most recently delivered to Lender represent, and as of the date
on which any other Projections are delivered to Lender, such additional
Projections represent, each Borrowers’ good faith estimate, on the date such
Projections are delivered, of the future performance of a Loan Party or any of
its Subsidiaries for the periods covered thereby based upon assumptions believed
by Borrowers to be reasonable at the time of the delivery thereof to Lender.

5.17 Material Contracts. Set forth on Schedule 5.17 to the Information
Certificate (as such Schedule may be updated from time to time in accordance
herewith) is a reasonably detailed description of the Material Contracts of each
Loan Party and each of its Subsidiaries as of the most recent date on which
Borrowers provided their Compliance Certificate pursuant to Section 6.1;
provided, however, that any Borrower may amend Schedule 5.17 to the Information
Certificate to add additional Material Contracts so long as such amendment
occurs by written notice to Lender on the date that such Borrower provides its
Compliance Certificate. Except for matters which, either individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change, each Material Contract (other than those that have expired at the end of
their normal terms) (a) is in full force and effect and is binding upon and
enforceable against the applicable Loan Party or the applicable Subsidiary and,
to such Borrower’s knowledge, after due inquiry, each other Person that is a
party thereto in accordance with its terms, (b) has not been otherwise amended
or modified (other than amendments or modifications permitted by
Section 7.7(b)), and (c) is not in default due to the action or inaction of the
applicable Loan Party or the applicable Subsidiary.

5.18 Patriot Act. To the extent applicable, each Loan Party and each of its
Subsidiaries is in compliance, in all material respects, with the (a) Trading
with the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (b) Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act
of 2001) (the “Patriot Act”). No part of the proceeds of the loans made
hereunder will be used by any Loan Party or any of its Subsidiaries or any of
their Affiliates, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

5.19 Indebtedness. Set forth on Schedule 5.19 to the Information Certificate is
a true and complete list of all Indebtedness of each Loan Party and each of its
Subsidiaries outstanding immediately prior to the Closing Date that is to remain
outstanding immediately after giving effect to the closing hereunder on the
Closing Date and such Schedule accurately sets forth the aggregate principal
amount of such Indebtedness as of the Closing Date.

5.20 Payment of Taxes. Except as otherwise permitted under Section 6.5, all tax
returns of each Loan Party and each of its Subsidiaries required to be filed by
any of them have been timely filed, and all taxes shown on such tax returns to
be due and payable and all assessments, fees and other governmental charges upon
a Loan Party and its Subsidiaries and upon their respective assets, income,
businesses and franchises that are due and payable have been paid when due and
payable. Each Loan Party and each of its Subsidiaries have made adequate
provision in accordance with GAAP for all taxes not yet due and payable. No
Borrower knows of any proposed tax assessment against a Loan Party or any of its
Subsidiaries that is not being actively contested by such Loan Party or such
Subsidiary diligently, in good faith, and by appropriate proceedings; provided
such reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.

 

Exhibit D

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5.21 Margin Stock. No Loan Party or any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the loans made to Borrowers will be used to purchase or carry
any such Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any such Margin Stock or for any purpose that violates
the provisions of Regulation T, U or X of the Board of Governors of the United
States Federal Reserve.

5.22 Governmental Regulation. No Loan Party or any of its Subsidiaries is
subject to regulation under the Federal Power Act or the Investment Company Act
of 1940 or under any other federal or state statute or regulation which may
limit its ability to incur Indebtedness or which may otherwise render all or any
portion of the Obligations unenforceable. No Loan Party or any of its
Subsidiaries is a “registered investment company” or a company “controlled” by a
“registered investment company” or a “principal underwriter” of a “registered
investment company” as such terms are defined in the Investment Company Act of
1940.

5.23 OFAC. No Loan Party or any of its Subsidiaries is in violation of any of
the country or list based economic and trade sanctions administered and enforced
by OFAC. No Loan Party or any of its Subsidiaries (a) is a Sanctioned Person or
a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or
(c) derives revenues from investments in, or transactions with Sanctioned
Persons or Sanctioned Entities. No proceeds of any loan made hereunder will be
used to fund any operations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Entity.

5.24 Employee and Labor Matters. There is (a) no unfair labor practice complaint
pending or, to the knowledge of Borrowers, threatened against any Loan Party or
any of its Subsidiaries before any Governmental Authority and no grievance or
arbitration proceeding pending or threatened against any Loan Party or any of
its Subsidiaries which arises out of or under any collective bargaining
agreement and that could reasonably be expected to result in a material
liability, (b) no strike, labor dispute, slowdown, stoppage or similar action or
grievance pending or threatened in writing against any Loan Party or any of its
Subsidiaries that could reasonably be expected to result in a material
liability, or (c) to the knowledge of Borrowers, after due inquiry, no union
representation question existing with respect to the employees of any Loan Party
or any of its Subsidiaries and no union organizing activity taking place with
respect to any of the employees of any Loan Party or any of its Subsidiaries. No
Loan Party or any of its Subsidiaries has incurred any liability or obligation
under the Worker Adjustment and Retraining Notification Act or similar state
law, which remains unpaid or unsatisfied. The hours worked and payments made to
employees of each Loan Party and each of its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable legal
requirements, except to the extent such violations could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Change.
All material payments due from any Loan Party or any of its Subsidiaries on
account of wages and employee health and welfare insurance and other benefits
have been paid or accrued as a liability on the books of such Loan Party, except
where the failure to do so could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change.

5.25 [Reserved.]

5.26 Collateral.

(a) Real Property. Schedule 5.26(a) to the Information Certificate sets forth
all Real Property owned by any of the Loan Parties as of the Closing Date.

 

Exhibit D

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(b) Intellectual Property.

(i) As of the Closing Date, Schedule 5.26(b) to the Information Certificate
provides a complete and correct list of: (A) all registered Copyrights owned by
any Loan Party, all applications for registration of Copyrights owned by any
Loan Party, and all other Copyrights owned by any Loan Party and material to the
conduct of the business of any Loan Party; (B) all Intellectual Property
Licenses entered into by any Loan Party pursuant to which (x) any Loan Party has
provided any license or other rights in Intellectual Property owned or
controlled by such Loan Party to any other Person or (y) any Person has granted
to any Loan Party any license or other rights in Intellectual Property owned or
controlled by such Person that is material to the business of such Loan Party,
including any Intellectual Property that is incorporated in any Inventory,
software, or other product marketed, sold, licensed, or distributed by such Loan
Party; (C) all Patents owned by any Loan Party and all applications for Patents
owned by any Loan Party; and (D) all registered Trademarks owned by any Loan
Party, all applications for registration of Trademarks owned by any Loan Party,
and all other Trademarks owned by any Loan Party and material to the conduct of
the business of any Loan Party;

(ii) all employees and contractors of each Loan Party who were involved in the
creation or development of any Intellectual Property for such Loan Party that is
necessary to the business of such Loan Party have signed agreements containing
assignment of Intellectual Property rights to such Loan Party and obligations of
confidentiality;

(iii) to each Loan Party’s knowledge after reasonable inquiry, no Person has
infringed or misappropriated or is currently infringing or misappropriating any
Intellectual Property rights owned by such Loan Party, in each case, that either
individually or in the aggregate could reasonably be expected to result in a
Material Adverse Change;

(iv) to each Loan Party’s knowledge after reasonable inquiry, all registered
Copyrights, registered Trademarks, and issued Patents that are owned by such
Loan Party and necessary in to the conduct of its business are valid, subsisting
and enforceable and in compliance with all legal requirements, filings, and
payments and other actions that are required to maintain such Intellectual
Property in full force and effect; and

(v) each Loan Party has taken reasonable steps to maintain the confidentiality
of and otherwise protect and enforce its rights in all trade secrets owned by
such Loan Party that are necessary in the business of such Loan Party;

(c) Valid Security Interest. This Agreement creates a valid security interest in
the Collateral of each Loan Party, to the extent a security interest therein can
be created under the Code, securing the payment of the Obligations. Except to
the extent a security interest in the Collateral cannot be perfected by the
filing of a financing statement under the Code, all filings and other actions
necessary or desirable to perfect and protect such security interest have been
duly taken or will have been taken upon the filing of financing statements
listing each applicable Loan Party, as a debtor, and Lender for itself and as
agent for the Bank Product Providers, as secured party, in the jurisdictions
listed next to such Loan Party’s name on Schedule 5.6(a) to the Information
Certificate. Upon the making of such filings, Lender shall have a first priority
perfected security interest in the Collateral of each Loan Party to the extent
such security interest can be perfected by the filing of a financing statement,
subject to Permitted Liens which are purchase money Liens. Upon filing of the
Copyright Security Agreement with the United States Copyright Office, filing of
the Patent and Trademark Security Agreement with the PTO, and the filing of
appropriate financing statements in the jurisdictions listed on Schedule 5.6(a)
to the Information Certificate, all action necessary or desirable to protect and
perfect the Security Interest in and to on each Loan Party’s Patents,
Trademarks, or Copyrights has been taken and such perfected Security

 

Exhibit D

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Interest is enforceable as such as against any and all creditors of and
purchasers from any Loan Party. All action by any Loan Party necessary to
protect and perfect such security interest on each item of Collateral has been
duly taken.

(d) Pledged Interests. (i) Except for the Security Interest created hereby, each
Loan Party is and will at all times be the sole holder of record and the legal
and beneficial owner, free and clear of all Liens other than Permitted Liens, of
the Pledged Interests indicated on Schedule 5.1(c) to the Information
Certificate as being owned by such Loan Party and, when acquired by such Loan
Party, any Pledged Interests acquired after the Closing Date; (ii) all of the
Pledged Interests are duly authorized, validly issued, fully paid and
non-assessable and the Pledged Interests constitute or will constitute the
percentage of the issued and outstanding Stock of the Pledged Companies of such
Loan Party identified on Schedule 5.1(c) to the Information Certificate as
supplemented or modified by any Pledged Interests Addendum or any Joinder to
this Agreement; (iii) such Loan Party has the right and requisite authority to
pledge, the Investment Related Property pledged by such Loan Party to Lender as
provided herein; (iv) all actions necessary or desirable to perfect and
establish the first priority of, or otherwise protect, Lender’s Liens in the
Investment Related Property, and the proceeds thereof, have been duly taken,
upon (A) the execution and delivery of this Agreement; (B) the taking of
possession by Lender (or its Lender or designee) of any certificates
representing the Pledged Interests, together with undated powers (or other
documents of transfer acceptable to Lender) endorsed in blank by the applicable
Loan Party; (C) the filing of financing statements in the applicable
jurisdiction set forth on Schedule 5.6(a) to the Information Certificate for
such Loan Party with respect to the Pledged Interests of such Loan Party that
are not represented by certificates, and (D) with respect to any Securities
Accounts, the delivery of Control Agreements with respect thereto; and (v) each
Loan Party has delivered to and deposited with Lender all certificates
representing the Pledged Interests owned by such Loan Party to the extent such
Pledged Interests are represented by certificates, and undated powers (or other
documents of transfer acceptable to Lender) endorsed in blank with respect to
such certificates. None of the Pledged Interests owned or held by such Loan
Party has been issued or transferred in violation of any securities
registration, securities disclosure, or similar laws of any jurisdiction to
which such issuance or transfer may be subject. As to all limited liability
company or partnership interests, issued under any Pledged Operating Agreement
or Pledged Partnership Agreement, each Borrower hereby represents and warrants
that the Pledged Interests issued pursuant to such agreement (A) are not dealt
in or traded on securities exchanges or in securities markets, (B) do not
constitute investment company securities, and (C) are not held by such Loan
Party in a securities account. In addition, none of the Pledged Operating
Agreements, the Pledged Partnership Agreements, or any other agreements
governing any of the Pledged Interests issued under any Pledged Operating
Agreement or Pledged Partnership Agreement, provided that such Pledged Interests
are securities governed by Section 8 of the Uniform Commercial Code as in effect
in any relevant jurisdiction.

5.27 Eligible Accounts. As to each Account that is identified by a Borrower as
an Eligible Account in a Borrowing Base Certificate submitted to Lender, such
Account is (a) a bona fide existing payment obligation of the applicable Account
Debtor created by the sale and delivery of Inventory or the rendition of
services to such Account Debtor in the ordinary course of such Borrower’s
business, (b) owed to such Borrower, and (c) not excluded as ineligible by
virtue of one or more of the excluding criteria (other than Lender-discretionary
criteria) set forth in the definition of Eligible Accounts.

5.28 Eligible Inventory. As to each item of Inventory that is identified by
Borrower as Eligible Inventory in a Borrowing Base Certificate submitted to
Lender, such Inventory is (a) of good and merchantable quality, free from known
defects, and (b) not excluded as ineligible by virtue of one or more of the
excluding criteria (other than Lender-discretionary criteria) set forth in the
definition of Eligible Inventory.

 

Exhibit D

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5.29 Locations of Inventory and Equipment. The Inventory and Equipment (other
than vehicles or Equipment out for repair) of the Loan Parties and their
Subsidiaries are not stored with a bailee, warehouseman, or similar party and
are located only at, or in-transit between or to, the locations identified on
Schedule 5.29 to the Information Certificate (as such Schedule may be updated
pursuant to Section 6.14).

5.30 Inventory Records. Each Loan Party keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and of
the Inventory of its Subsidiaries and the book value thereof.

5.31 Surety Agreements. No Loan Party or any of its Subsidiaries has any Surety
Bond or related agreement (including any intercreditor agreements) with any
Surety except as disclosed on Schedule 5.31 to the Information Certificate
(including all amendments thereto).

5.32 Surety Bonds Cash and LCs. No Loan Party or any of its Subsidiaries has
provided any cash collateral or letters of credit to issuers of Surety Bonds
except as disclosed on Schedule 5.32 to the Information Certificate.

5.33 Bonded Contracts: No Loan Party is subject to any Bonded Contract except as
disclosed on Schedule 5.33 to the Information Certificate.

 

Exhibit D

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EXHIBIT E

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

INFORMATION CERTIFICATE

OF

LOAN PARTIES

 

 

Dated: [                    ]

Wells Fargo Bank, National Association

[                                         ]

[                                         ]

[                                         ]

In connection with certain financing provided or to be provided by Wells Fargo
Bank, National Association (“Lender”), each of the undersigned Borrowers and
Guarantors (each a “Loan Party”)] represents and warrants to Lender the
following information about each Loan Party (capitalized terms not specifically
defined shall have the meaning set forth in the Agreement):

 

1. Attached as Schedule 5.1(b) is a complete and accurate description of (i) the
authorized capital Stock of each Loan Party and each of its Subsidiaries, by
class, and the number of shares issued and outstanding and the names of the
owners thereof (including stockholders, members and partners) and their
holdings, all as of the date of this Agreement, (ii) all subscriptions, options,
warrants or calls relating to any shares of Stock of each Loan Party and each of
its Subsidiaries, including any right of conversion or exchange; (iii) each
stockholders’ agreement, restrictive agreement, voting agreement or similar
agreement relating to any such capital Stock; and (iv) an organization chart of
each Loan Party and all Subsidiaries.

 

2. Each Loan Party is affiliated with, or has ownership in, the entities
(including Subsidiaries) set forth on Schedule 5.1(c).

 

3. The Loan Parties use the following trade name(s) in the operation of their
business (e.g. billing, advertising, etc.):

[                    ]

 

4. Each of the Loan Parties is a registered organization of the following type:

[                    ]

 

5. The exact legal name (within the meaning of Section 9-503 of the Code) of
each Loan Party and each Subsidiary of each Loan Party as set forth in its
respective certificate of incorporation, organization or formation, or other
public organic document, as amended to date is set forth in Schedule 5.6(a).

 

Exhibit E

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6. Each Loan Party and each Subsidiary of each Loan Party is organized solely
under the laws of the State set forth on Schedule 5.6(a). Each Loan Party and
each Subsidiary of each Loan Party is in good standing under those laws and no
Loan Party is organized in any other State.

 

7. The chief executive office and mailing address of each Loan Party and each
Subsidiary of each Loan Party is located at the address set forth on Schedule
5.6(b) hereto.

 

8. The books and records of each Loan Party and each Subsidiary of each Loan
Party pertaining to Accounts, contract rights, Inventory, and other assets are
located at the addresses specified on Schedule 5.6(b).

 

9. The identity and Federal Employer Identification Number of each Loan Party
and each Subsidiary of each Loan party and organizational identification number,
if any, is set forth on Schedule 5.6(c). (Please Use Form Attached)

 

10. No Loan Party has any Commercial Tort Claims, except as set forth on
Schedule 5.6(d).

 

11. There are no judgments, actions, suits, proceedings or other litigation
pending by or against or threatened by or against any Loan Party, any of its
Subsidiaries and/or Affiliates or any of its officers or principals, except as
set forth on Schedule 5.7(b).

 

12. Since its date of organization, the name as set forth in each Loan Party’s
organizational documentation filed of record with the applicable state authority
has been changed as follows:

 

Date

  

Prior Name

[Date]    [Prior Name]

 

13. Since the dates of their respective organization, the Loan Parties have made
or entered into the following mergers or acquisitions:

[                    ]

 

14. The assets of each Loan Party and of each Subsidiary of each Loan Party are
owned and held free and clear of Liens, mortgages, pledges, security interests,
encumbrances or charges except as set forth below:

 

Name and Address

of Secured Party

  

Description of Collateral

  

File No. of Financing

Statement/Jurisdiction

                                   

 

15. Each Loan Party and each Subsidiary of each Loan Party has been and remains
in compliance with all environmental laws applicable to its business or
operations except as set forth on Schedule 5.12.

 

Exhibit E

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

16. No Loan Party and no Subsidiary of any Loan Party has any Deposit Accounts,
investment accounts, Securities Accounts or similar accounts with any bank,
securities intermediary or other financial institution, except as set forth on
Schedule 5.15 for the purposes and of the types indicated therein.

 

17. No Loan Party and no Subsidiary of any Loan Party is a party to or bound by
an collective bargaining or similar agreement with any union, labor organization
or other bargaining agent except as set forth below (indicate date of agreement,
parties to agreement, description of employees covered, and date of termination)

 

    

Name of Agreement

  

Date of

Agreement

  

Parties to Agreement

  

Date of

Expiration /

Termination

                                   

 

18. Set forth on Schedule 5.17 is a reasonably detailed description of each
Material Contract of each Loan Party and its Subsidiaries as of the date of the
Agreement.

 

19. Set forth on Schedule 5.19 is a true and complete list of all Indebtedness
of each Loan Party and its Subsidiaries outstanding immediately prior to the
Closing Date.

 

20. No Loan Party and no Subsidiary of any Loan Party has made any loans or
advances or guaranteed or otherwise become liable for the obligations of any
others, except as set forth below:

 

    

Name / Address of Debtor

  

Outstanding Balance of

Loan as of [Date]

  

Secured /

Unsecured

  

Due Date

                                   

 

21. No Loan Party has any Chattel Paper (whether tangible or electronic) or
instruments as of the date hereof, except as follows:

[                    ]

 

22. No Loan Party owns or licenses any Trademarks, Patents, Copyrights or other
Intellectual Property, and is not a party to any Intellectual Property License
except as set forth on Schedule 5.26(b) (indicate type of Intellectual Property
and whether owned or licensed, registration number, date of registration, and,
if licensed, the name and address of the licensor) and there are no restrictions
in any Intellectual Property License that restrict the sale or other disposition
of any Inventory, Equipment or other property of any Loan Party other than as
set forth in Schedule 5.26.(b).

 

23. Schedule 5.26(a) sets forth all Real Property owned by each Loan Party.

 

24. The Inventory, Equipment and other goods of each Loan Party are located only
at the locations set forth on Schedule 5.29.

 

Exhibit E

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

25. At the present time, there are no delinquent taxes due (including, but not
limited to, all payroll taxes, personal property taxes, real estate taxes or
income taxes) of any Loan Party or any Subsidiary of any Loan Party except as
follows:

[                    ]

 

26. There is no consignment, bill and hold, sale or return, sale on approval or
conditional sale arrangements with respect to any Inventory of any Borrower or
any other Loan or other goods except as set forth in Schedule 7.15.

 

27. No Borrower or other Loan Party has any Inventory stored with or in the
possession of a bailee, warehouseman, processor or other third party except as
set forth in Schedule 7.16.

 

28. Schedule 5.31 sets forth all agreements (including any intercreditor
agreements) with any issuer of a Surety Bond.

 

29. Schedule 5.32 sets forth all cash collateral or letters of credit to issuers
of Surety Bonds.

 

30. Schedule 5.33 sets forth all Bonded Contracts entered into by any Loan
Party.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

Exhibit E

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

Lender shall be entitled to rely upon the foregoing in all respects and the
undersigned is duly authorized to execute and deliver this Information
Certificate on behalf of each Loan Party.

 

Very truly yours,   BORROWERS:   INTEGRATED ELECTRICAL SERVICES, INC.   By:  

 

  Name:   Robert W. Lewey   Title:   Senior Vice President   IES COMMERCIAL &
INDUSTRIAL, LLC   By:  

 

  Name:   Robert W. Lewey   Title:   President   IES COMMERCIAL, INC.   By:  

 

  Name:   Robert W. Lewey   Title:   Vice President   IES PURCHASING &
MATERIALS, INC.   By:  

 

  Name:   Robert W. Lewey   Title:   President   IES RESIDENTIAL, INC.   By:  

 

  Name:   Robert W. Lewey   Title:   Vice President   INTEGRATED ELECTRICAL
FINANCE, INC.   By:  

 

  Name:   Robert W. Lewey   Title:   President

 

Exhibit E

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

IES MANAGEMENT LP By: INTEGRATED ELECTRICAL FINANCE, INC., its General Partner
By:  

 

Name:   Robert W. Lewey Title:   President IES MANAGEMENT ROO, LP By: IES
OPERATIONS GROUP, INC., its General Partner By:  

 

Name:   Robert W. Lewey Title:   President IES RENEWABLE ENERGY, LLC By:  

 

Name:   Robert W. Lewey Title:   Vice President IES SUBSIDIARY HOLDINGS, INC.
By:  

 

Name:   Robert W. Lewey Title:   Chief Financial Officer HK ENGINE COMPONENTS,
LLC By:  

 

Name:   Robert W. Lewey Title:   Vice President MAGNETECH INDUSTRIAL SERVICES,
INC. By:  

 

Name:   Robert W. Lewey Title:   Vice President

 

Exhibit E

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

GUARANTORS: IES CONSOLIDATION, LLC By:  

 

Name:  

 

Title:  

 

IES SHARED SERVICES, INC. By:  

 

Name:  

 

Title:  

 

IES PROPERTIES, INC. By:  

 

Name:  

 

Title:  

 

KEY ELECTRICAL SUPPLY, INC. By:  

 

Name:  

 

Title:  

 

IES TANGIBLE PROPERTIES, INC. By:  

 

Name:  

 

Title:  

 

IES OPERATIONS GROUP, INC. By:  

 

Name:  

 

Title:  

 

ICS HOLDINGS LLC By:  

 

Name:  

 

Title:  

 

 

Exhibit E

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

Schedule 5.1(b)

TO INFORMATION CERTIFICATE

Capitalization of Loan Parties

and Subsidiaries

Organization Chart

 

Loan Party

   Authorized
Shares/
Issued
Shares    Holder    Type of Rights/Stock
(common/preferred/
option/ class)    Number of
Shares (after
exercise of all
rights to
acquire
shares)    Percent
Interest
(on
a fully
diluted
basis)                                                                        
                 

 

Exhibit 5.1(b)

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

Schedule 5.1(c)

TO INFORMATION CERTIFICATE

Subsidiaries; Affiliates; Investments; Pledged Interests

Part 1 - Subsidiaries (More than 50% owned by a Loan Party)

 

Name

   Jurisdiction of Organization    Percentage Owned            

Part 2 - Affiliates (Less than 50% Owned by a Loan Party)

 

Name

   Jurisdiction of Organization    Percentage Owned            

Part 3 - Affiliates (Subject to common ownership with) a Loan Party

 

Name

   Jurisdiction of
Organization    Parent    Percentage Owned                  

Part 4 - Shareholders (If widely held, only holders with more than 10%)

 

Name

   Jurisdiction of
Organization*    Percentage Owned            

Part 5 - Pledged Interests

 

Name of Pledgor

   Name of Pledged
Company    Number of
Shares/Units    Class of
Interests    Percentage of
Class Owned    Certificate
Nos.                              

 

* If Shareholders are individuals, indicate “N/A”

 

Schedule 5.1(c)

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

Schedule 5.3

TO INFORMATION CERTIFICATE

Governmental and Other Consents

 

Schedule 5.3

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

Schedule 5.5(a)

TO INFORMATION CERTIFICATE

Exact Legal Name

 

 

Schedule 5.5(a)

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

Schedule 5.6(a)

TO INFORMATION CERTIFICATE

Jurisdiction of Organization

 

Name

 

Jurisdiction of Organization*

               

 

* If Shareholders are individuals, indicate “N/A”

 

Schedule 5.6(a)

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

Schedule 5.6(b)

TO INFORMATION CERTIFICATE

Locations

Part 1 - Chief Executive Office

[            ]

[            ]

[            ]

Part 2 - Location of Books and Records

[            ]

[            ]

[            ]

 

Schedule 5.6(b)

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

Schedule 5.6(c)

TO INFORMATION CERTIFICATE

Federal Employer Identification Number

Organizational Identification Number

 

Name

  

Federal Employer Identification

Number

  

Organizational Identification

Number

                                   

 

Schedule 5.6(c)

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

Schedule 5.6(d)

TO INFORMATION CERTIFICATE

Commercial Tort Claims

 

Schedule 5.6(d)

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

Schedule 5.7(b)

TO INFORMATION CERTIFICATE

Judgments/ Pending Litigation

 

Schedule 5.7(b)

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

Schedule 5.12

TO INFORMATION CERTIFICATE

Environmental Compliance

 

Schedule 5.12

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

Schedule 5.15

TO INFORMATION CERTIFICATE

Deposit Accounts; Investment Accounts

Part 1 - Deposit Accounts

 

Name and Address of Bank

  

Account No.

  

Purpose¨*

                 

Part 2 - Investment and Other Accounts

 

Name and Address of Broker or
Other Institution

  

Account

No.

  

Purpose

  

Types of Investments

  

Balance as of

[Date]

                                   

 

* For “Purpose” indicate either: “collection account” if proceeds of receivables
or other assets are deposited in it, and note “lockbox” if it is subject to
lockbox servicing arrangements with the applicable bank or “disbursement
account” if it is a checking account or account used for transferring funds to
third parties and note if it is used for a specific purpose, e.g., “payroll”,
“medical”, “insurance”, “escrow” etc. Also, please note any “zero balance” or
other automatic sweep or investment sweep accounts.

 

Schedule 5.15

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

Schedule 5.17

TO INFORMATION CERTIFICATE

Material Contracts

 

Name of Agreement

  

Date of Agreement

  

Parties to Agreement

  

Date of Expiration /

Termination

                          

 

Schedule 5.17

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

Schedule 5.19

TO INFORMATION CERTIFICATE

Existing Indebtedness¨*

Part 1 - Direct Debt

 

Name/Address of Payee

  

Principal Balance

as of [Date]

  

Nature of Debt

  

Term

                          

Part 2 - Guarantees

 

Name/Address of Payee

  

Principal Balance

as of [Date]

  

Nature of Debt

  

Term

                          

 

* Do not indicate debt or existing lender to be repaid with proceeds of initial
disbursements of loans under Wells Fargo facility.

 

Schedule 5.19

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

Schedule 5.26(a)

TO INFORMATION CERTIFICATE

Owned Real Estate

 

Schedule 5.26(a)

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

Schedule 5.26(b)

TO INFORMATION CERTIFICATE

Intellectual Property

Part 1 – Trademarks Owned

 

Trademark

  

Registration

Number

  

Registration

Date

  

Expiration

Date

                 

 

Trademark

Application

  

Application/Serial

Number

  

Application

Date

     

Part 2 – Trademarks Licensed

 

Trademark

  

Registration

Number

  

Registration

Date

  

Expiration

Date

                 

 

Trademark

Application

  

Application/Serial

Number

  

Application

Date

     

Part 3 – Patents Owned

 

Patent

Description

  

Registration

Number

  

Registration

Date

  

Expiration

Date

                 

 

Patent

Application

  

Application/Serial

Number

  

Application

Date

     

 

Schedule 5.26(b)

Page 1

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

Part 4 – Patents Licensed

 

Patent

Description

  

Registration

Number

  

Registration

Date

  

Expiration

Date

                 

 

Patent

Application

  

Application/Serial

Number

  

Application

Date

           

Part 5 – Copyrights Owned

 

Copyright

  

Registration Number

  

Registration Date

           

Part 6 – Copyrights Licensed

 

Copyright

  

Registration Number

  

Registration Date

           

Part 7 – Other License Agreements

 

Name of

Document

  

Date of

Document

  

Licensor

  

Term

  

Licensed Intellectual
Property

           

[Restrictions]

 

Schedule 5.26(b)

Page 2

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

Schedule 5.26(c)

TO INFORMATION CERTIFICATE

Motor Vehicles

 

Schedule 5.26(c)

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

Schedule 5.29

TO INFORMATION CERTIFICATE

Locations of Inventory and Equipment

Locations of Inventory, Equipment and Other Assets

 

Address

  

Owned/Leased/Third Party*¨

  

Name/Address of Lessor or Third

Party, as Applicable

                                               

 

*  Indicate in this column next to applicable address whether the location is
owned by the Company, licensed by the Company or owned and operated by a third
party (e.g., ware house, processor, consignee, etc.)

 

Schedule 5.29

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

Schedule 5.31

TO INFORMATION CERTIFICATE

SURETY AGREEMENTS

 

Schedule 5.31

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

Schedule 5.32

TO INFORMATION CERTIFICATE

Cash Collateral or Letters Of Credit to Issuers of Surety Bonds

 

Schedule 5.32

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

Schedule 5.33

TO INFORMATION CERTIFICATE

Bonded Contracts

 

Schedule 5.33

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

EXHIBIT F

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

FORM OF

PLEDGED INTERESTS ADDENDUM

This Pledged Interests Addendum, dated as of [                    ], is
delivered pursuant to Section 6.12(h)(ii) of the Credit Agreement referred to
below. The undersigned hereby agrees that this Pledged Interests Addendum may be
attached to that certain Amended and Restated Credit and Security Agreement,
dated as of September 24, 2014 (as amended, restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”), made by the undersigned,
together with the other Borrowers and Guarantors named therein, to Wells Fargo
Bank, National Association, as Lender. Initially capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement. The undersigned hereby agrees that the additional interests listed on
this Pledged Interests Addendum as set forth below shall be and become part of
the Pledged Interests pledged by the undersigned to the Lender in the Credit
Agreement and any pledged company set forth on this Pledged Interests Addendum
as set forth below shall be and become a “Pledged Company” under the Credit
Agreement, each with the same force and effect as if originally named therein.

The undersigned hereby certifies that the representations and warranties of the
undersigned set forth in Section 5.26 of Exhibit D to the Credit Agreement are
true and correct as to the Pledged Interests listed herein on and as of the date
hereof.

[Signature Page Follows]

 

Exhibit F

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

IN WITNESS WHEREOF, the undersigned has caused this Pledged Interests Addendum
to be executed and delivered as of the day and year first above written.

 

[                    ]

  By:  

 

    Name:       Title:  

 

Exhibit F

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

SCHEDULE I

TO

PLEDGED INTERESTS ADDENDUM

Pledged Interests

 

Name of Pledgor

   Name of Pledged
Company    Number of
Shares/Units    Class of
Interests    Percentage of
Class Owned    Certificate
Nos.                              

 

Schedule I

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

Schedule A-1

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Collection Account

 

Schedule A-1

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

Schedule A-2

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Authorized Person

 

Schedule A-2

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

Schedule D-1

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Designated Account

 

Schedule D-1

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

Schedule P-1

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Permitted Investments

 

Schedule P-1

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

Schedule P-2

TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Permitted Liens

 

Schedule P-2