EXECUTION VERSION

 

 

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CREDIT AGREEMENT

dated as of

May 18, 2007

among

PATRICK INDUSTRIES, INC.,

The Lenders Party Hereto,

FIFTH THIRD BANK,
as Syndication Agent,

LASALLE BANK, NATIONAL ASSOCIATION,
KEY BANK, NATIONAL ASSOCIATION
and
CHARTER ONE BANK,
as Co-Documentation Agents,

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

 

______________________

J.P. MORGAN SECURITIES INC.,

Sole Bookrunner and Sole Lead Arranger

 

 

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TABLE OF CONTENTS

 

Page

 

 

ARTICLE I

Definitions

1

 

SECTION 1.1

Defined Terms

1

 

SECTION 1.2

Classification of Loans and Borrowings

16

 

SECTION 1.3

Terms Generally

16

 

SECTION 1.4

Accounting Terms; GAAP

17

ARTICLE II

The Credits

17

 

SECTION 2.1

Commitments

17

 

SECTION 2.2

Loans and Borrowings

17

 

SECTION 2.3

Requests for Borrowings

18

 

SECTION 2.4

Swingline Loans

18

 

SECTION 2.5

Letters of Credit

20

 

SECTION 2.6

Funding of Borrowings

24

 

SECTION 2.7

Interest Elections

24

 

SECTION 2.8

Termination and Reduction of Revolving Commitments

25

 

SECTION 2.9

Repayment of Loans; Evidence of Debt

26

 

SECTION 2.10

Amortization of Term Loans

27

 

SECTION 2.11

Optional and Mandatory Prepayment of Loans

27

 

SECTION 2.12

Fees

28

 

SECTION 2.13

Interest

29

 

SECTION 2.14

Alternate Rate of Interest

30

 

SECTION 2.15

Increased Costs

30

 

SECTION 2.16

Break Funding Payments

31

 

SECTION 2.17

Taxes

31

 

SECTION 2.18

Payments Generally; Pro Rata Treatment; Sharing of
Set-offs                                          
                                          
                                                             32

 

SECTION 2.19

Mitigation Obligations, etc.; Replacement of Lenders

34

 

SECTION 2.20

Increase in Revolving Commitments

35

ARTICLE III

Representations and Warranties

36

 

SECTION 3.1

Organization; Powers

36

 

SECTION 3.2

Authorization; Enforceability

36

 

SECTION 3.3

Governmental Approvals; No Conflicts

36

 

SECTION 3.4

Financial Condition; No Material Adverse Change

36

 

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TABLE OF CONTENTS

(continued)

Page

 

 

 

SECTION 3.5

Properties

37

 

SECTION 3.6

Litigation and Environmental Matters

37

 

SECTION 3.7

Compliance with Laws and Agreements

37

 

SECTION 3.8

Investment Company Status

37

 

SECTION 3.9

Taxes

38

 

SECTION 3.10

Use of Proceeds

38

 

SECTION 3.11

ERISA

38

 

SECTION 3.12

Disclosure

38

 

SECTION 3.13

Subsidiaries

38

 

SECTION 3.14

Regulation U

38

 

SECTION 3.15

Insurance

38

 

SECTION 3.16

Solvency, etc

39

 

SECTION 3.17

Intellectual Property

39

 

SECTION 3.18

Burdensome Obligations

39

 

SECTION 3.19

Labor Matters

39

 

SECTION 3.20

Adorn Acquisition

39

ARTICLE IV

Conditions

40

 

SECTION 4.1

Effective Date

40

 

SECTION 4.2

Each Credit Event

43

ARTICLE V

Affirmative Covenants

43

 

SECTION 5.1

Financial Statements; Ratings Change and Other Information

43

 

SECTION 5.2

Notices of Material Events

44

 

SECTION 5.3

Existence; Conduct of Business

45

 

SECTION 5.4

Payment of Obligations

45

 

SECTION 5.5

Maintenance of Properties; Insurance

45

 

SECTION 5.6

Books and Records; Inspection Rights

45

 

SECTION 5.7

Compliance with Laws

45

 

SECTION 5.8

Use of Proceeds and Letters of Credit

45

 

SECTION 5.9

Further Assurances

45

ARTICLE VI

Negative Covenants

46

 

SECTION 6.1

Indebtedness

46

 

SECTION 6.2

Liens

47

 

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TABLE OF CONTENTS

(continued)

Page

 

 

 

SECTION 6.3

Fundamental Changes

48

 

SECTION 6.4

Investments, Loans, Advances, Guarantees and Acquisitions

48

 

SECTION 6.5

Hedge Agreements

49

 

SECTION 6.6

Restricted Payments

49

 

SECTION 6.7

Transactions with Affiliates

49

 

SECTION 6.8

Financial Covenants

49

 

SECTION 6.9

Asset Sales

50

 

SECTION 6.10

Optional Payments and Modifications of Certain Debt Instruments

50

 

SECTION 6.11

Negative Pledge Clauses

51

 

SECTION 6.12

Restrictions on Subsidiary Distributions, etc

51

 

SECTION 6.13

Lines of Business

51

 

SECTION 6.14

Changes in Fiscal Periods

51

ARTICLE VII

Events of Default

51

ARTICLE VIII

The Administrative Agent

54

ARTICLE IX

Miscellaneous

56

 

SECTION 9.1

Notices

56

 

SECTION 9.2

Waivers; Amendments

57

 

SECTION 9.3

Expenses; Indemnity; Damage Waiver

58

 

SECTION 9.4

Successors and Assigns

59

 

SECTION 9.5

Survival

62

 

SECTION 9.6

Counterparts; Integration; Effectiveness

62

 

SECTION 9.7

Severability

63

 

SECTION 9.8

Right of Setoff

63

 

SECTION 9.9

Governing Law; Jurisdiction; Consent to Service of
Process                                          
                                          
                                                      63

 

SECTION 9.10

WAIVER OF JURY TRIAL

64

 

SECTION 9.11

Headings

64

 

SECTION 9.12

Confidentiality

64

 

SECTION 9.13

Other Agents

64

 

SECTION 9.14

Interest Rate Limitation

64

 

SECTION 9.15

USA PATRIOT Act

65

 

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SCHEDULES:

 

Schedule 1.1

--

Pricing Schedule

Schedule 2.1

--

Commitments

Schedule 2.5

--

Existing Letters of Credit

Schedule 2.10

--

Amortization of Term Loans

Schedule 3.6

--

Disclosed Matters

Schedule 3.13

--

Subsidiaries

Schedule 3.15

--

Insurance

Schedule 5.10

--

Post-Closing Actions

Schedule 6.1

--

Existing Indebtedness

Schedule 6.2

--

Existing Liens

Schedule 6.4

--

Existing Investments

 

EXHIBITS:

Exhibit A

--

Form of Assignment and Assumption

Exhibit B-1

--

Form of Opinion of McDermott Will & Emery LLP

Exhibit B-2

--

Form of Opinion of Warrick & Boyn, LLP

Exhibit C

--

Form of Borrowing Request

Exhibit D

--

Form of Interest Election Request

Exhibit E

--

Form of Note

Exhibit F

--

Form of Subsidiary Guaranty

Exhibit G

--

Form of Security Agreement

Exhibit H

--

Form of Pledge Agreement

Exhibit I

Form of Intercreditor Agreement

 

 

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CREDIT AGREEMENT dated as of May 18, 2007 among PATRICK INDUSTRIES, INC., an
Indiana corporation, the LENDERS party hereto and JPMORGAN CHASE BANK, N.A., as
Administrative Agent.

The parties hereto agree as follows:

ARTICLE I

 

DEFINITIONS

SECTION 1.1 Defined Terms. As used in this Agreement, the following terms have
the respective meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

“Administrative Agent” means JPMorgan in its capacity as administrative agent
for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Adorn Acquisition” means the acquisition of the Target pursuant to the Adorn
Acquisition Agreement.

“Adorn Acquisition Agreement” means the Securities Purchase Agreement among the
Borrower, FNL Management Corp., the Target and the stockholders, warrant holders
and option holders of the Target.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1%. Any change in the Alternate Base Rate
due to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively.

“Applicable Margin” - see Schedule 1.1.

“Approved Fund” has the meaning assigned to such term in Section 9.4.

“Asset Disposition” means (a) any conveyance, sale, lease, sublease, assignment,
transfer or other disposition (including by way of merger or consolidation) of
any property of the Borrower or any Subsidiary (including the loss, destruction
or damage of, or any Condemnation Proceeding with respect to, any property),
excluding (i) sales of inventory and dispositions of cash equivalents, in each
case in the ordinary course of business, and (ii) the sale of the North Carolina
Property; and (b) any issuance or sale of any Equity Interests of any Subsidiary
to any Person other than the Borrower or a Subsidiary Guarantor.

 

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“Asset Sale” means any Asset Disposition other than an involuntary disposition
through loss, destruction or damage of, or a Condemnation Proceeding with
respect to, any property.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by Section 9.4), and accepted by the Administrative Agent,
substantially in the form of Exhibit A or any other form approved by the
Administrative Agent.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

Bond Purchase Agreement means the Bond Purchase and Loan Agreement dated as of
April 12, 2007 among the Borrower, the City of Mishawaka, Indiana, and JPMorgan,
as initial purchaser, relating to a $4,500,000 aggregate principal amount
Economic Development Revenue Bond, Series 2007 (Patrick Industries, Inc.
Project).

“Borrower” means Patrick Industries, Inc., an Indiana corporation.

“Borrowing” means (a) Revolving Loans or Term Loans of the same Class and Type
that are made, converted or continued on the same date and, in the case of
Eurodollar Loans, as to which a single Interest Period is in effect; or (b) a
Swingline Loan.

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.3 and substantially in the form of Exhibit C.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.

“California Property” means each of (a) the property located at 13414 Slover
Avenue, Fontana, California and (b) the property located at 13050 Santa Ana,
Fontana, California.

“Capital Expenditure” means all amounts accrued by the Borrower and its
Subsidiaries in respect of any purchase or other acquisition for value of fixed
or capital assets (including Capital Lease Obligations), but excluding
expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored, (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced or (iii)
with the proceeds of sale of the assets being replaced.

“Capital Lease” of any Person means a lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, that is
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP.

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any Capital Lease, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the

 

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rules of the SEC thereunder as in effect on the date hereof), other than Tontine
Capital, of Equity Interests that represent more than the Designated Percentage
(as defined below) of the aggregate ordinary voting power represented by the
issued and outstanding Equity Interests of the Borrower; (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated; or (c) the
acquisition of direct or indirect Control of the Borrower by any Person or group
(other than Tontine Capital). For purposes of the foregoing, “Designated
Percentage” means the greater of (A) 35% and (B) the percentage (but not more
than 40%) of such Equity Interests owned by Tontine Capital.

“Change in Law” means (a) the adoption of any law, rule or regulation after the
Effective Date, (b) any change in any law, treaty, order, rule or regulation or
in the interpretation or application thereof by any Governmental Authority after
the Effective Date, or (c) compliance by any Lender (or, for purposes of Section
2.15(b), by any lending office of such Lender or by such Lender’s holding
company, if any) with any request, guideline or directive (whether or not having
the force of law) of any Governmental Authority made or issued after the
Effective Date.

“Class”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans or
Swingline Loans.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means all property on which a Lien is granted to the Administrative
Agent pursuant to the Security Documents.

“Commitment” means a Revolving Commitment or a Term Commitment, as the context
requires.

“Commitment Fee Rate” - see Schedule 1.1.

“Computation Period” means a period of four consecutive fiscal quarters ending
on the last day of a fiscal quarter.

“Condemnation Proceeding” means any condemnation, confiscation, seizure or
eminent domain proceeding, or similar taking, of property of the Borrower or any
Subsidiary.

“Consolidated EBITDA” means, for any period, the sum of (a) Consolidated Net
Income for such period plus (b) to the extent deducted in determining such
Consolidated Net Income, Interest Expense, income tax expense, depreciation,
amortization and Restructuring Charges plus (c) for the Computation Periods
ending June 30, 2007, September 30, 2007 and December 31, 2007, adjustments to
account for the acquisition of American Hardwood, Inc. in amounts equal to
$729,000, $471,000 and $104,000, respectively.

“Consolidated Net Income” means, with respect to the Borrower and its
Subsidiaries for any period, the net income (or loss) of the Borrower and its
Subsidiaries for such period, excluding any extraordinary gains.

“Consolidated Net Worth” means, as of any date of determination, consolidated
shareholders’ equity of the Borrower and its Subsidiaries as of such date
determined in accordance with GAAP.

 

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“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

“Credit Extension” shall mean, as the context may require, (i) the making of a
Loan by a Lender or (ii) the issuance of any Letter of Credit, or the amendment,
extension or renewal of any existing Letter of Credit, by the Issuing Bank.

“Default” means any event, occurrence or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.

“Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in the Borrower’s Form 10-K for the fiscal year
ended December 31, 2006 or on Schedule 3.6.

“Dollars” or “$” refers to lawful money of the United States of America.

“Effective Date” means the date on which the conditions specified in Section 4.1
are satisfied (or waived in accordance with Section 9.2).

“Eligible Assignee” shall mean (a) a Lender, (b) an Affiliate of a Lender,
(c) an Approved Fund, and (d) any other person (other than a natural person)
approved by (i) the Administrative Agent, (ii) in the case of any assignment of
a Revolving Commitment, the Issuing Bank and the Swingline Lender, and
(iii) unless a Default has occurred and is continuing and except during the
primary syndication of the Commitments and Loans by the Arranger, the Borrower
(each such approval not to be unreasonably withheld or delayed); provided that
notwithstanding the foregoing, “Eligible Assignee” shall not include Borrower or
any of Borrower’s Affiliates or Subsidiaries.

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Equity Interests “ means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any person, trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or,

 

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solely for purposes of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or
any other recipient of any payment to be made by or on account of any obligation
of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America, or by the jurisdiction under
the laws of which such recipient is organized or in which its principal office
is located or, in the case of any Lender, in which its applicable lending office
is located, (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction in which the Borrower is
located and (c) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrower under Section 2.19(b)), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office) or
is attributable to such Foreign Lender’s failure to comply with Section 2.17(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 2.17(a).

“Existing Letter of Credit” means each letter of credit listed on Schedule 2.5.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

“Fee Letter” means the fee letter dated April 10, 2007 among the Borrower, the
Administrative Agent and the Arranger.

 

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“Financial Officer” of any Person means the chief financial officer, principal
accounting officer, treasurer or controller of such Person.

“fiscal quarter” means any fiscal quarter of a fiscal year.

“fiscal year” means a fiscal year of the Borrower.

“Fixed Charge Coverage Ratio” means, for any period, the ratio of (a) the result
of (i) Consolidated EBITDA for such period minus (ii) income tax expense of the
Borrower and its Subsidiaries for such period minus (iii) dividends paid by the
Borrower and its Subsidiaries during such period to (b) the sum of (i) Interest
Expense for such period (excluding interest expense with respect to the Tontine
Subordinated Debt that is (x) paid through the issuance of additional Tontine
Subordinated Debt during the first twelve months after the Effective Date or (y)
paid with the proceeds of the issuance of common stock of the Borrower) and (ii)
the aggregate amount of principal payments on Indebtedness required to be made
by the Borrower and its Subsidiaries during such period (excluding principal
payments on Tontine Subordinated Debt made with the proceeds of the issuance of
common stock of the Borrower).

“Foreign Lender” means any Lender that is not, for United States Federal income
tax purposes, (i) a citizen or resident of the United States, (ii) a corporation
or entity treated as a corporation created or organized in or under the laws of
the United States, or any political subdivision thereof, (iii) an estate whose
income is subject to U.S. Federal income taxation regardless of its source or
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
persons have the authority to control all substantial decisions of such trust.

“Foreign Subsidiary” means each Subsidiary organized under the laws of any
jurisdiction other than the United States or any state thereof.

“GAAP” means generally accepted accounting principles in the United States of
America.

“Governmental Authority” means any Federal, state, local or foreign court,
central bank or governmental agency, authority, instrumentality or regulatory
body or any subdivision thereof.

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

 

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“Hedging Agreement” means any interest rate, currency or commodity swap
agreement, cap agreement, collar agreement or other agreement or arrangement
designed to protect a Person against fluctuations in interest rates, currency
exchange rates or commodity prices.

“Hedging Obligation” means, with respect to any Person, any liability of such
Person under any Hedging Agreement.

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect of
letters of credit and letters of guaranty (other than the Letters of Credit) and
(j) all obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person’s ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Information Memorandum” means the Confidential Information Memorandum dated
April 2007 relating to the Borrower and the Transactions.

“Interest Election Request” means a request by the Borrower to convert or
continue a Revolving Borrowing or Term Borrowing in accordance with
Section 2.7(b), substantially in the form of Exhibit D.

“Interest Expense” means for any period the consolidated interest expense of the
Borrower and its Subsidiaries for such period (including all imputed interest on
Capital Leases).

“Interest Payment Date” means (a) with respect to any ABR Term Loan, the last
day of each March, June, September and December, (b) with respect to any ABR
Revolving Loan (other than a Swingline Loan), the last day of each month, (c)
with respect to any Eurodollar Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months’ duration after the first day of such Interest Period
and (d) with respect to any Swingline Loan, the last day of each March, June,
September and December and any other day agreed between the Borrower and the
Swingline Lender.

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the

 

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next preceding Business Day and (ii) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and,
in the case of a Revolving Borrowing, thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.

“Issuing Bank” means JPMorgan in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.5(i).
The Issuing Bank may, in its discretion, arrange for one or more Letters of
Credit to be issued by Affiliates of the Issuing Bank, in which case the term
“Issuing Bank” shall include any such Affiliate with respect to Letters of
Credit issued by such Affiliate.

“JPMorgan” means JPMorgan Chase Bank, N.A.

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time. The LC Exposure of any Lender at any time shall be its
Revolving Percentage of the total LC Exposure at such time.

“LC Fee Rate” - see Schedule 1.1.

“LC Sublimit” – see Section 2.5(b).

“Lenders” means the Persons listed on Schedule 2.1 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption. Unless the context otherwise requires, the term “Lenders”
includes the Issuing Bank and the Swingline Lender.

“Letter of Credit” means (a) any Existing Letter of Credit and (b) any letter of
credit issued pursuant to this Agreement.

“Leverage Ratio” means, for any period, the ratio of (a) the aggregate
outstanding amount of Indebtedness of the Borrower and its Subsidiaries as of
the last day of such period to (b) Consolidated EBITDA for such period; provided
that the Leverage Ratio shall be calculated without giving effect to (i) any
principal of the Tontine Subordinated Debt outstanding before the date that is
12 months following the Effective Date and (ii) Interest Expense with respect to
the Tontine Subordinated Debt accruing before the end of such 12-month period.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate per annum equal to the British Bankers Association LIBOR Rate
(“BBA LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as designated by the Administrative Agent from
time to time) at approximately 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period, for deposits in Dollars (for
delivery on the first day of such Interest Period) with a term equivalent to
such Interest Period. In the event that such rate is not available at such time
for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing
for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the

 

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Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

“Loan Documents” means this Agreement, the Subsidiary Guaranty, the Letters of
Credit and the applications and/or reimbursement agreements related thereto, the
Notes (if any), the Security Documents, each Hedging Agreement relating to the
Loans entered into with any counterparty that was a Lender or an Affiliate of a
Lender at the time such Hedging Obligation was entered into and, solely for
purposes of clause (e) of Article VII, the Fee Letter.

“Loan Parties” means the Borrower and the Subsidiary Guarantors.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

“Margin Stock” means any “margin stock” as defined in Regulation U of the Board.

“Material Adverse Effect” means:

(a) prior to the consummation of the Adorn Acquisition, any material adverse
condition or material adverse change in or affecting the business, condition
(financial or otherwise), assets, liabilities or results of operations of the
Borrower and its subsidiaries (the “Borrower Group”) or the Target and its
subsidiaries (the “Target Group”), in each case taken as a whole, since December
31, 2006, provided that the following shall be excluded from a determination of
whether there has been a Material Adverse Effect: (i) so long as neither the
Borrower Group nor the Target Group is, or would be, disproportionately affected
thereby, changes in business or economic conditions affecting the economy or the
Borrower Group’s industries generally or the Target Group’s industries
generally; (ii) changes in stock markets or credit markets; (iii) any event as
to which the Administrative Agent has provided written consent; or (iv) the
execution, delivery or performance of the commitment letter for this Agreement
or the Adorn Acquisition Agreement (including any announcement relating to such
commitment letter or the Adorn Acquisition Agreement or the fact that the
Borrower is acquiring the stock of the Target); and

(b) thereafter, (i) a material adverse effect on the business, assets,
operations or financial condition of the Borrower and its Subsidiaries taken as
a whole (ii) the actual or prospective ability of the Borrower to perform any of
its obligations under this Agreement or (c) the rights of or benefits available
to the Lenders under this Agreement.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or
more of the Borrower and its Subsidiaries in an aggregate principal amount
exceeding $5,000,000. For purposes of determining Material Indebtedness, the
“principal amount” of the obligations of the Borrower or any Subsidiary in
respect of any Swap Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that the Borrower or such Subsidiary
would be required to pay if such Swap Agreement were terminated at such time.

“Moody’s” means Moody’s Investors Service, Inc.

 

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“Mortgage” means a mortgage, leasehold mortgage, deed of trust or similar
document granting a Lien on real property (or any interest therein) of the
Borrower or any other Loan Party in appropriate form for filing or recording in
the applicable jurisdiction and otherwise reasonably satisfactory to the
Administrative Agent.

“Mortgaged Property” means real property of the Borrower or any Subsidiary on
which a Lien has been granted to the Administrative Agent pursuant to a
Mortgage.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

“Net Cash Proceeds” means:

(a)           with respect to any Asset Disposition, the aggregate cash proceeds
(including cash proceeds received by way of deferred payment of principal
pursuant to a note, installment receivable or otherwise, but only as and when
received) received by the Borrower or any Subsidiary pursuant to such Asset
Disposition net of (i) the direct costs relating to such Asset Disposition
(including sales commissions and legal, accounting and investment banking fees);
(ii) taxes paid as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements); (iii) amounts required
to be applied to the repayment of any Indebtedness secured by a Lien on the
asset subject to such Asset Disposition (other than the Loans); and (iv) so long
as no Default exists, any amount that a Financial Officer of the Borrower
certifies, prior to the fifth Business Day after such Asset Disposition, is
expected to be reinvested in fixed assets within 150 days (or, in the case of a
Condemnation Proceeding or the total destruction of a building, 365 days)
following the receipt of such proceeds by the Borrower or the applicable
Subsidiary (it being understood that any portion of such amount not so invested
within such 150 day period shall constitute Net Cash Proceeds on 150th day),
provided that the Administrative Agent may, in its sole discretion, (A) extend
the 150 or 365 day period specified in this clause (iv) if the Borrower or the
applicable Subsidiary has committed to make such reinvestment prior to the end
of such period and is diligently pursuing the purchase or construction of the
applicable fixed assets and/or (B) require the Borrower or the applicable
Subsidiary to deposit any amount to be reinvested pursuant to this clause (iv)
into a special deposit account with the Administrative Agent or make other
arrangements to assure that such amount will only be used to invest in the
relevant fixed assets;

(b)           with respect to any issuance of Equity Interests, the aggregate
cash proceeds received by the Borrower or any Subsidiary pursuant to such
issuance, net of the direct costs relating to such issuance (including sales and
underwriter’s commissions); and

(c)           with respect to any issuance of Indebtedness, the aggregate cash
proceeds received by the Borrower or any Subsidiary pursuant to such issuance,
net of the direct costs of such issuance (including up-front fees and placement
fees).

“North Carolina Property” means the property located at 44040 US Highway 52, New
London, North Carolina.

“Note” - see Section 2.9(e).

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement.

 

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“Participant” has the meaning set forth in Section 9.4.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

“Percentage” means a Revolving Percentage or a Term Percentage, as the context
requires.

“Permitted Acquisition” means a transaction (or series of related transactions),
including any merger or consolidation, (a) pursuant to which the Borrower or a
Subsidiary, directly or indirectly, acquires all or substantially all of the
assets of a Person, or of a business or division of a Person, or acquires in
excess of 50% of the Equity Interests of a Person (in each case other than the
Borrower or a Subsidiary) and (b) that meets all of the following requirements:

(i)            the Person to be acquired is, or the assets to be acquired are
for use in, in the same or a similar line of business as the Borrower;

(ii)          in the case of the acquisition of a Person, such acquisition has
been approved by the board of directors or similar governing body of such
Person;

 

(iii)

no Default shall exist at the time of, or shall result from, such transaction;

(iv)         at the time of such transaction (and after giving effect thereto),
the Borrower will be in pro forma compliance with each of the financial
covenants contained in Section 6.8;

(v)           after giving effect to such transaction, the aggregate
consideration (other than consideration to be paid in common stock of the
Borrower) paid by the Borrower and its Subsidiaries for such transaction and all
other Permitted Acquisitions after the Effective Date will not exceed
$20,000,000;

(vi)         if the consideration (including stock of the Borrower) to be paid
in connection with such transaction exceeds $1,000,000, the Borrower shall have
given the Administrative Agent not less than 10 Business Days’ prior notice of
such transaction; and

(vii)        concurrently with such transaction, the Borrower and/or any
applicable Subsidiary shall comply with its obligations under Section 5.9.

“Permitted Encumbrances” means:

(a)           Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.4;

(b)           carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s
and other like Liens imposed by law, arising in the ordinary course of business
and securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.4;

(c)           pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;

(d)           deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety, customs and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the ordinary
course of business;

 

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(e)           landlord’s liens arising in the ordinary course of business
(provided that neither the Borrower nor any Subsidiary shall enter any lease of
real property after the date hereof unless the applicable landlord shall have
entered into an agreement subordinating any such lien on Collateral to the
security interest of the Administrative Agent);

(f)           judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Article VII;

(g)           easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Borrower or any Subsidiary;

(h)          leases, licenses, subleases or sublicenses granted to others in the
ordinary course of business that do not interfere in any material respect with
the business of the Borrower or any Subsidiary;

(i)            Liens of a collection bank arising under Section 4-210 of the
Uniform Commercial Code on items in the course of collection,

(j)           Liens arising solely by virtue of any statutory or common law
provision relating to bankers’ liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the depositor in excess of those set forth by regulations promulgated
by the Board and (ii) such deposit account is not intended by the Borrower or
any Subsidiary to provide collateral to the depository institution; and

(k) Liens arising out of conditional sale, title retention, consignment or
similar arrangements for sale of goods entered into by the Borrower or any
Subsidiary in the ordinary course of business;

provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness.

“Permitted Investments” means:

(a)           direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;

(b)          investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from S&P or from Moody’s;

(c)           investments in certificates of deposit, banker’s acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;

 

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(d)           fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into with
a financial institution satisfying the criteria described in clause (c) above;
and

(e)           money market funds that (i) comply with the criteria set forth in
SEC Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by
S&P and Aaa by Moody’s and (iii) have portfolio assets of at least
$5,000,000,000.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledge Agreement” means the Pledge Agreement executed by the Borrower and any
other Person which owns stock of any Subsidiary in the form attached hereto as
Exhibit H.

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan as its prime rate in effect at its office located at 270
Park Avenue, New York, New York; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

“Project Documents” means the Bond Purchase Agreement, the Project Note and all
other documents and instruments executed and delivered in connection with the
Bond Purchase Agreement.

 

“Project Note” means the “Project Note” under and as defined in the Bond
Purchase Agreement.

 

“Register” has the meaning set forth in Section 9.4.

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

“Required Lenders” means, at any time, Lenders having Total Percentages of more
than 50%.

“Requirement of Law” means, as to any Person, any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the
Borrower or any Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any such Equity Interests or any option, warrant or other right to acquire any
such Equity Interests.

“Restructuring Charges” means one-time charges taken in connection with the
Adorn Acquisition that are approved in writing by the Administrative Agent
(which approval shall not be unreasonably withheld).

 

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“Revolving Availability Period” means the period from and including the
Effective Date to but excluding the Revolving Termination Date.

“Revolving Commitment” means, with respect to each Lender, the commitment, if
any, of such Lender to make Revolving Loans hereunder up to the amount set forth
as such Lender’s “Revolving Commitment” on Schedule 2.1, or in the Assignment
and Assumption pursuant to which such Lender assumed its Revolving Commitment,
as applicable, as the same may be (a) reduced from time to time pursuant to
Section 2.8, (b) increased from time to time pursuant to Section 2.20 and
(c) reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.4. The aggregate amount of the Revolving
Commitments of all Lenders on the Effective Date is $35,000,000.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
aggregate principal amount at such time of all outstanding Revolving Loans of
such Lender, plus the aggregate amount at such time of such Lender’s LC
Exposure, plus the aggregate amount at such time of such Lender’s Swingline
Exposure.

“Revolving Lender” means a Lender that has a Revolving Commitment (or, if the
Revolving Commitments have terminated, that has Revolving Credit Exposure).

“Revolving Loan” has the meaning set forth in Section 2.1(b).

“Revolving Termination Date” means the earlier of (a) May 17, 2012 (five years
after the closing date) and (b) the date on which the Revolving Commitments
terminate pursuant to Section 2.8 or Article VII.

“Revolving Percentage” means, with respect to any Revolving Lender, the
percentage that such Revolving Lender’s Revolving Commitment is of the total
Revolving Commitments (or, if the Revolving Commitments have terminated, the
percentage that the Revolving Credit Exposure of such Lender is of the total
Revolving Credit Exposures of all Revolving Lenders).

“S&P” means Standard & Poor’s.

“SEC” means the United States Securities and Exchange Commission or any
Governmental Authority succeeding to any or all of its functions.

“Securities Act” means the Securities Act of 1933.

“Security Agreement” means the Security Agreement, in substantially the form of
Exhibit G, to be executed by the Borrower and each Subsidiary Guarantor.

“Security Documents” means the Security Agreement, the Pledge Agreement, each
Mortgage and any other pledge agreement, security agreement or similar document
which is executed to grant security to the Administrative Agent for the
obligations of the Borrower or any other Loan Party hereunder or in connection
herewith.

“Subordinated Debt” means (a) the Tontine Subordinated Debt and (b) any other
unsecured Indebtedness of the Borrower that has payment schedules, subordination
terms, covenants, pricing and other terms that have been approved in writing by
the Administrative Agent.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be

 

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consolidated with those of the parent in the parent’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP as
of such date, as well as any other corporation, limited liability company,
partnership, association or other entity of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Borrower.

“Subsidiary Guarantor” means each Subsidiary that has executed the Subsidiary
Guaranty.

“Subsidiary Guaranty” means the Guaranty issued by various Subsidiaries in the
form attached hereto as Exhibit F.

“Supported Letter of Credit” means a Letter of Credit for which the Borrower has
provided (a) cash collateral pursuant to documentation satisfactory to the
Issuing Bank and/or (b) a backup letter of credit from a financial institution
and in a form satisfactory to the Issuing Bank in an aggregate amount at least
equal to the sum of (i) 105% of the aggregate undrawn amount of such Letter of
Credit and (ii) all fees that will be payable with respect to such Letter of
Credit assuming such Letter of Credit is drawn in full on the scheduled
expiration date therefor.

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or any
Subsidiary shall be a Swap Agreement.

“Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. The Swingline Exposure of any Lender
at any time shall be its Revolving Percentage of the total Swingline Exposure at
such time.

“Swingline Lender” means JPMorgan, in its capacity as lender of Swingline Loans
hereunder.

“Swingline Loan” means a Loan made pursuant to Section 2.4.

“Target” means Adorn, Inc.

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

“Term Commitment” means, with respect to each Lender, the commitment, if any, of
such Lender to make a Term Loan hereunder in the amount set forth as such
Lender’s “Term Commitment” on Schedule 2.1.

“Term Lender” means a Lender that has a Term Commitment or, after the Effective
Date, an outstanding Term Loan.

“Term Loan” has the meaning set forth in Section 2.1(a).

 

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“Term Maturity Date” means the earlier of (a) May 17, 2012 (five years after the
closing date) and (b) the date on which the Term Loans are declared due and
payable pursuant to Article VII.

“Term Percentage” means, with respect to any Term Lender, the percentage of the
total Term Commitments represented by such Lender’s Term Commitment (or, after
the Effective Date, the percentage of the outstanding principal amount of the
Term Loans represented by such Lender’s outstanding Term Loan).

“Tontine Capital” means Tontine Capital Partners, L.P., Tontine Overseas Master
Fund, L.P. and their respective Affiliates.

“Tontine Subordinated Debt” means Subordinated Debt issued by the Borrower to
Tontine Capital on the Effective Date evidenced by one or more promissory notes
in a form approved by the Administrative Agent.

“Tontine Subordination Agreement” means the subordination agreement dated as of
the Effective Date between Tontine Capital and the Administrative Agent.

“Total Percentage” means, as to any Lender, the percentage which (a) the
Revolving Commitments of such Lender plus the unpaid principal amount of the
Term Loans of such Lender (plus, after the termination of the Revolving
Commitments, the Revolving Credit Exposure of such Lender) is of (b) the sum of
the Revolving Commitments of all Lenders plus the unpaid principal amount of all
Term Loans (plus, after the termination of the Revolving Commitments, the
Revolving Credit Exposures of all Lenders).

“Transactions” means the execution, delivery and performance by the Borrower of
this Agreement, the Adorn Acquisition, the borrowing of Loans, the use of the
proceeds thereof and the issuance of Letters of Credit hereunder.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the LIBO Rate or the Alternate Base Rate.

“Voting Stock” means capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.

“Wholly-Owned Subsidiary” means, as to any Person, another Person all of the
shares of capital stock or other ownership interests of which (except directors’
qualifying shares) are at the time directly or indirectly owned by such Person
and/or another Wholly-Owned Subsidiary of such Person.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.2 Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving
Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a
“Eurodollar Revolving Loan”). Borrowings also may be classified and referred to
by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar
Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

 

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SECTION 1.3 Terms Generally. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words “include”, “includes” and “including” shall be deemed to
be followed by the phrase “without limitation”. The word “will” shall be
construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement, (e) references to
any statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting such statute or regulation and (f) 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.

SECTION 1.4 Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Administrative Agent that the Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

ARTICLE II

 

THE CREDITS

SECTION 2.1 Commitments. Subject to the terms and conditions hereof:

(a)           Each Term Lender severally agrees to make a single loan in Dollars
to the Borrower (each such loan, a “Term Loan”) on the Effective Date in the
amount of such Lender’s Term Percentage of $75,000,000. Amounts borrowed under
this Section 2.1 that are repaid or prepaid by the Borrower may not be
reborrowed.

(b)           Each Revolving Lender agrees to make loans (each such loan, a
“Revolving Loan”) to the Borrower from time to time during the Revolving
Availability Period in an aggregate principal amount that will not result in (a)
such Lender’s Revolving Credit Exposure exceeding such Lender’s Revolving
Commitment or (b) the total Revolving Credit Exposures exceeding the total
Revolving Commitments. Within the foregoing limits, the Borrower may borrow,
prepay and reborrow Revolving Loans.

SECTION 2.2 Loans and Borrowings. (a)  Each Loan shall be made as part of a
Borrowing consisting of Loans of the same Class made by the applicable Lenders
ratably in accordance with their respective Revolving Percentages or Term
Percentages, as the case may be. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder;

 

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provided that the Commitments are several and no Lender shall be responsible for
any other Lender’s failure to make any Loan.

(b)           Subject to Section 2.14, (i) each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith; provided that each Swingline Loan shall be an ABR Loan.
Each Lender at its option may make any Eurodollar Loan by causing any domestic
or foreign branch or Affiliate of such Lender to make such Loan; (it being
understood that any exercise of such option shall not affect the obligation of
the Borrower to repay such Loan in accordance with the terms of this Agreement).

(c)           At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in the amount of $1,000,000 or a higher
integral multiple of $100,000. At the time that each ABR Borrowing is made, such
Borrowing shall be in the amount of $500,000 or a higher integral multiple of
$50,000; provided that an ABR Revolving Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Revolving Commitments or
that is required to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.5(e). Each Swingline Loan shall be in such amount as
may be agreed by the Borrower and the Swingline Lender. Borrowings of more than
one Type and Class may be outstanding at the same time; provided that there
shall not at any time be more than eight Eurodollar Borrowings outstanding.

(d)           Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
(i) any Borrowing of Revolving Loans if the Interest Period requested with
respect thereto would end after the Revolving Termination Date or (ii) any
Borrowing of Term Loans if the Interest Period requested with respect thereto
would end after the Term Maturity Date.

SECTION 2.3 Requests for Borrowings. To request a Revolving Borrowing or the
Term Borrowing, the Borrower shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before the date of the
proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00
a.m., New York City time, on the date of the proposed Borrowing; provided that
any such notice of an ABR Revolving Borrowing to finance the reimbursement of an
LC Disbursement as contemplated by Section 2.5(e) may be given not later than
10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent and signed by
the Borrower. Each such telephonic and written Borrowing Request shall specify
the following information in compliance with Section 2.2:

 

(i)

the aggregate amount of the requested Borrowing;

 

(ii)

the date of such Borrowing, which shall be a Business Day;

(iii)         whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

(iv)         in the case of a Eurodollar Borrowing, the initial Interest Period
to be applicable thereto, which shall be a period contemplated by the definition
of the term “Interest Period”; and

(v)           the location and number of the Borrower’s account to which funds
are to be disbursed, which shall comply with the requirements of Section 2.6.

 

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If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Borrowing, then the
Borrower shall be deemed to have selected an Interest Period of one month’s
duration. Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

SECTION 2.4 Swingline Loans.

(a)           Subject to the terms and conditions set forth herein, the
Swingline Lender agrees to make Swingline Loans to the Borrower from time to
time during the Revolving Availability Period, in an aggregate principal amount
at any time outstanding that will not result in (i) the aggregate principal
amount of outstanding Swingline Loans exceeding $5,000,000 or (ii) the sum of
the total Revolving Credit Exposures exceeding the total Revolving Commitments.

(b)           Swingline Loans will be borrowed and repaid on a daily basis in
accordance with procedures agreed to by the Borrower and the Swingline Lender.
The Swingline Lender shall make each Swingline Loan available to the Borrower by
means of a credit to the general deposit account of the Borrower with the
Swingline Lender (or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.5(e), by remittance
to the Issuing Bank).

(c)           Notwithstanding any other provision of this Agreement, the
Swingline Lender may make Swingline Loans without regard to the conditions
precedent set forth in Section 4.2 so long as (i) the Commitments remain in
effect, (ii) the Swingline Lender has not received written notice from the
Required Lenders instructing the Swingline Lender to cease making Swingline
Loans and (iii) such Swingline Loans are made in accordance with the procedures
established by the Borrower and the Swingline Lender pursuant to clause (b)
above.

(d)           The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Lenders to acquire participations on such Business Day
in all or a portion of the Swingline Loans outstanding. Such notice shall
specify the aggregate amount of Swingline Loans in which Lenders will
participate. Promptly upon receipt of such notice, the Administrative Agent will
give notice thereof to each Lender, specifying in such notice such Lender’s
Revolving Percentage of such Swingline Loan or Loans. Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Lender’s Revolving Percentage of such Swingline Loan or Loans. Each Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this clause is absolute and unconditional and shall
not be affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Lender shall comply with its obligation under this
clause (d) by wire transfer of immediately available funds, in the same manner
as provided in Section 2.6 with respect to Loans made by such Lender (and
Section 2.6 shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to the Swingline
Lender the amounts so received by it from the Lenders. The Administrative Agent
shall notify the Borrower of any participations in any Swingline Loan acquired
pursuant to this clause (d), and thereafter payments in respect of such
Swingline Loan shall be made to the Administrative Agent and not to the
Swingline Lender. Any amounts received by the Swingline Lender from the Borrower
(or other party on behalf of the Borrower) in

 

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respect of a Swingline Loan after receipt by the Swingline Lender of the
proceeds of a sale of participations therein shall be promptly remitted to the
Administrative Agent; any such amounts received by the Administrative Agent
shall be promptly remitted by the Administrative Agent to the Lenders that shall
have made their payments pursuant to this clause (d) and to the Swingline
Lender, as their interests may appear; provided that any such payment so
remitted shall be repaid to the Swingline Lender or to the Administrative Agent,
as applicable, if and to the extent such payment is required to be refunded to
the Borrower for any reason. The purchase of participations in a Swingline Loan
pursuant to this clause (d) shall not relieve the Borrower of any default in the
payment thereof.

SECTION 2.5 Letters of Credit.

(a)           General. On the Effective Date, each Existing Letter of Credit
shall be deemed to have been issued hereunder and shall be a “Letter of Credit”
for all purposes hereof. In addition, the Borrower may, from time to time during
the Revolving Availability Period, request the issuance of Letters of Credit for
its own account (or jointly for the joint and several accounts of the Borrower
and any Subsidiary), in each case in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank. The Issuing Bank shall have no
obligation to issue, and the Borrower shall not request the issuance of, any
Letter of Credit at any time if after giving effect to such issuance, the LC
Exposure would exceed the LC Sublimit or the total Revolving Exposure would
exceed the total Revolving Commitments. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.

(b)           Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance
of a Letter of Credit, or identifying the Letter of Credit to be amended,
renewed or extended, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such Letter of
Credit is to expire (which shall comply with Section 2.5(c)), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank’s standard form in connection
with any request for a Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $15,000,000 (the “LC Sublimit”)
and (ii) the sum of the total Revolving Credit Exposures shall not exceed the
total Revolving Commitments.

(c)           Expiration Date. Each Letter of Credit shall expire at or prior to
the close of business on the earlier of (i) the date that is one year after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the scheduled Revolving Termination Date
(unless the Borrower has confirmed in writing to the Issuing Bank that such
Letter of Credit will be a Supported Letter of Credit not later than 45 days
prior to the scheduled

 

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Revolving Termination Date, in which case such expiration date shall not be
later than one year after the Revolving Termination Date). Notwithstanding
clause (i) of the preceding sentence, a Letter of Credit may have automatic
renewal provisions so long as such Letter of Credit permits the Issuing Bank to
prevent any such renewal at least once in each twelve-month period (commencing
with the date of issuance of such Letter of Credit) by giving notice to the
beneficiary thereof not later than a day (the “Nonrenewal Notice Date”) agreed
upon at the time such Letter of Credit is issued. Unless otherwise directed by
the Issuing Bank, the Borrower shall not be required to make a specific request
to the Issuing Bank for any such automatic renewal (and, once such a Letter of
Credit has been issued, the Lenders shall be deemed to have authorized (but may
not require) the Issuing Bank to permit the renewal of such Letter of Credit
from time to time (subject to the first sentence of this clause (c)); provided
that (A) the Issuing Bank shall have no obligation to permit such renewal if (A)
the Issuing Bank has determined that it would have no obligation at such time to
issue such Letter of Credit in its renewed form under the terms hereof and (B)
the Issuing Bank shall not permit such renewal if it has received notice from
the Borrower, the Administrative Agent or any Lender at lease five Business Days
prior to the Nonrenewal Notice Date that any applicable condition specified in
Section 4.2 is not then satisfied.

(d)           Participations. Concurrently with the issuance or increase in the
amount of a Letter of Credit (or, in the case of an Existing Letter of Credit,
on the Effective Date), and without any further action on the part of the
Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving
Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Revolving Lender’s
Revolving Percentage of the aggregate amount available to be drawn under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to the Administrative
Agent, for the account of the Issuing Bank, such Lender’s Revolving Percentage
of each LC Disbursement made by the Issuing Bank and not reimbursed by the
Borrower on the date due as provided in Section 2.5(e), or of any reimbursement
payment required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this clause (d) in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.

 

(e)

Reimbursement.

(1) If the Issuing Bank shall make any LC Disbursement in respect of a Letter of
Credit, the Borrower shall reimburse such LC Disbursement by paying to the
Administrative Agent an amount equal to such LC Disbursement not later than
12:00 noon, New York City time, on the date that such LC Disbursement is made,
if the Borrower shall have received notice of such LC Disbursement prior to
10:00 a.m., New York City time, on such date, or, if such notice has not been
received by the Borrower prior to such time on such date, then not later than
12:00 noon, New York City time, on (i) the Business Day that the Borrower
receives such notice, if such notice is received prior to 10:00 a.m., New York
City time, on the day of receipt, or (ii) the Business Day immediately following
the day that the Borrower receives such notice, if such notice is not received
prior to such time on the day of receipt; provided that the Borrower may,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.3 or 2.4 that such payment be financed with an ABR Revolving
Borrowing or

 

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Swingline Loan in an equivalent amount and, to the extent so financed, the
Borrower’s obligation to make such payment shall be discharged and replaced by
the resulting ABR Revolving Borrowing or Swingline Loan.

(2)          If the Borrower fails to make such payment when due, the
Administrative Agent shall notify each Revolving Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Revolving Lender’s Revolving Percentage thereof. Promptly following receipt of
such notice, each Revolving Lender shall pay to the Administrative Agent its
Revolving Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.6 with respect to Loans made by such Revolving
Lender (and Section 2.6 shall apply, mutatis mutandis, to the payment
obligations of the Revolving Lenders), and the Administrative Agent shall
promptly pay to the Issuing Bank the amounts so received by it from the
Revolving Lenders. Promptly following receipt by the Administrative Agent of any
payment from the Borrower pursuant to this clause (e), the Administrative Agent
shall distribute such payment to the Issuing Bank or, to the extent that
Revolving Lenders have made payments pursuant to this clause (e) to reimburse
the Issuing Bank, then to such Revolving Lenders and the Issuing Bank as their
interests may appear. Any payment made by a Revolving Lender pursuant to this
clause (e) to reimburse the Issuing Bank for any LC Disbursement (other than the
funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall
not constitute a Loan and shall not relieve the Borrower of its obligation to
reimburse such LC Disbursement.

(f)           Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in clause (e) shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit or this
Agreement, or any term or provision therein, (ii) any draft or other document
presented under a Letter of Credit proving to be forged, fraudulent or invalid
in any respect or any statement therein being untrue or inaccurate in any
respect, (iii) any payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the terms of
such Letter of Credit, or (iv) any other event or circumstance whatsoever,
whether or not similar to any of the foregoing, that might, but for the
provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower’s obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or 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 (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to

 

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documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or 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.

(g)           Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.

(h)           Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to Section 2.5(e), then Section 2.13(c) shall apply. Interest accrued
pursuant to this clause (h) shall be for the account of the Issuing Bank, except
that interest accrued on and after the date of payment by any Lender pursuant to
Section 2.5(e) to reimburse the Issuing Bank shall be for the account of such
Lender to the extent of such payment.

(i)            Replacement of the Issuing Bank. The Issuing Bank may be replaced
at any time by written agreement among the Borrower, the Administrative Agent,
the replaced Issuing Bank and the successor Issuing Bank. The Administrative
Agent shall notify the Lenders of any such replacement of the Issuing Bank. At
the time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.12(c). From and after the effective date of any such replacement, (i)
the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.

(j)            Cash Collateralization. If any Event of Default shall occur and
be continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
clause (j), the Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders, an amount in cash equal to the LC Exposure (excluding any LC Exposure
with respect to any Supported Letter of Credit) as of such date plus any accrued
and unpaid interest thereon; provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower described in
clause (h)

 

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or (i) of Article VII. Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. Other
than any interest earned on the investment of such deposits, which investments
shall be made at the option and sole discretion of the Administrative Agent and
at the Borrower’s risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall be applied by the Administrative Agent to
reimburse the Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrower for the LC Exposure at such
time or, if the maturity of the Loans has been accelerated (but subject to the
consent of Lenders with LC Exposure representing greater than 50% of the total
LC Exposure), be applied to satisfy other obligations of the Borrower under this
Agreement. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three Business Days after all Events of Default have been cured or waived.

SECTION 2.6 Funding of Borrowings.

(a)           Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds by 12:00
noon, New York City time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders; provided
that Swingline Loans shall be made pursuant to the procedures established
pursuant to Section 2.4(b). The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to an account of the Borrower maintained with the Administrative Agent in
New York City and designated by the Borrower in the applicable Borrowing
Request; provided that ABR Revolving Loans made to finance the reimbursement of
an LC Disbursement as provided in Section 2.5(e) shall be remitted by the
Administrative Agent to the Issuing Bank.

(b)           Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender’s share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with clause (a) above and may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Revolving Loans. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender’s Loan
included in such Borrowing.

SECTION 2.7 Interest Elections.

(a)           Each Revolving Borrowing and Term Borrowing initially shall be of
the Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower

 

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may elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods
therefor, all as provided in this Section. The Borrower may elect different
options with respect to different portions of the affected Borrowing, in which
case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing. This Section shall not apply to
Swingline Borrowings, which may not be converted or continued.

(b)           To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.3 if the Borrower were
requesting a Revolving Borrowing or a Term Borrowing of the Type resulting from
such election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Interest Election Request signed by the Borrower.

(c)           Each Interest Election Request shall specify the following
information in compliance with Section 2.2:

(i)            the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different portions
thereof, or if outstanding Borrowings are being combined, allocation to each
resulting Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii)          the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;

(iii)         whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and

(iv)         if the resulting Borrowing is a Eurodollar Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

(d)           Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.

(e)           If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Revolving Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing and the Administrative Agent,
at the request of the Required Lenders, so notifies the Borrower, then, so long
as an Event of Default is continuing (i) no outstanding Borrowing may be
converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.

 

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SECTION 2.8 Termination and Reduction of Revolving Commitments.

(a)           Unless previously terminated, the Revolving Commitments shall
automatically terminate on the Revolving Termination Date.

(b)           The Borrower may at any time terminate, or from time to time
permanently reduce, the Revolving Commitments to an amount that is not less than
the total Revolving Credit Exposures; provided that (i) each reduction of the
Revolving Commitments shall be in the amount of $1,000,000 or a higher integral
multiple of $500,000.

(c)           The Borrower shall notify the Administrative Agent in writing of
any election to terminate or reduce the Revolving Commitments under clause (b)
above at least one Business Day prior to the effective date of such termination
or reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable; provided that a notice of termination of
the Revolving Commitments delivered by the Borrower may state that such notice
is conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Revolving Commitments shall be
permanent. Each reduction of the Revolving Commitments shall be made ratably
among the Revolving Lenders in accordance with their respective Revolving
Percentages.

(d)           After the payment in full of the Term Loans, the Revolving
Commitments shall be permanently reduced in an amount equal to the Net Cash
Proceeds of any prepayment of the Revolving Loans described in Sections 2.11(c),
(d) or (e).

SECTION 2.9 Repayment of Loans; Evidence of Debt.

(a)           The Borrower hereby unconditionally promises to pay to the
Administrative Agent, for the account of each applicable Lender, the then unpaid
principal amount of all Revolving Loans and Swingline Loans on the Revolving
Termination Date and (ii) to the Administrative Agent for the account of each
Lender the then unpaid principal amount of each Term Loan on the Term Loan
Maturity Date.

(b)           Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.

(c)           The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d)           The entries made in the accounts maintained pursuant to Section
2.9(b) or (c) shall be prima facie evidence of the existence and amounts of the
obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or

 

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any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.

(e)           Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and
substantially in the form of Exhibit E (each a “Note”). Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.4) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).

SECTION 2.10 Amortization of Term Loans. The Borrower shall repay the Term Loans
on the dates and in the amounts specified on Schedule 2.10.

SECTION 2.11 Optional and Mandatory Prepayment of Loans.

(a)           The Borrower shall have the right at any time and from time to
time to prepay any Borrowing in whole or in part, including accrued and unpaid
interest, subject to prior notice in accordance with clause (b) below; provided
that each partial prepayment shall be in the amount of $500,000 or a higher
integral multiple of $50,000 (or, if less, the outstanding principal amount of
such Borrowing) together with accrued and unpaid interest thereon.

(b)           In the event of the termination of all the Revolving Commitments,
the Borrower shall, on the date of such termination, repay or prepay all
outstanding Revolving Loans and all outstanding Swingline Loans and either
replace or cash collateralize (in accordance with the procedures set forth in
Section 2.5(j)) each outstanding Letter of Credit (other than a Supported Letter
of Credit).

(c)           Not later than five Business Days following the receipt of any Net
Cash Proceeds of any Asset Disposition by the Borrower or any Subsidiary, the
Borrower shall prepay the Term Loans (and, after the Term Loans have been paid
in full, prepay Revolving Loans) in an amount (rounded down, if necessary, to an
integral multiple of $500,000) equal to the excess of (x) all Net Cash Proceeds
of Asset Dispositions (excluding, so long as no Default exists at the time of
such sale, the sale of the North Carolina Property) received on or after the
date of this Agreement over (y) the amount of Net Cash Proceeds of Asset
Dispositions previously applied to prepay Loans pursuant to this clause (c).

(d)           Not later than five Business Days following the receipt of any Net
Cash Proceeds of any issuance of Indebtedness by the Borrower or any Subsidiary
(other than Indebtedness permitted by Section 6.1(h)), the Borrower shall prepay
the Term Loans (and, after the Term Loans have been paid in full, prepay
Revolving Loans) in an amount (rounded down, if necessary, to an integral
multiple of $500,000) equal to the excess of (i) all such Net Cash Proceeds
received on or after the date of this Agreement over (i) the amount of such Net
Cash Proceeds previously applied to prepay Loans pursuant to this clause (d).

(e)           Not later than five Business Days following the receipt of any Net
Cash Proceeds from the issuance of any Equity Interests by the Borrower or any
Subsidiary (excluding any Net Cash Proceeds from the issuance of common stock of
the Borrower that are applied to repay Tontine Subordinated Debt in accordance
with Section 6.11), the Borrower shall prepay the Term Loans (and, after the
Term Loans have been paid in full, prepay Revolving Loans) in an amount

 

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(rounded down, if necessary, to an integral multiple of $500,000) equal to the
excess of (i) all such Net Cash Proceeds received on or after the date of this
Agreement over (i) the amount of such Net Cash Proceeds previously applied to
prepay Loans pursuant to this clause (e).

(f)           The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (other than prepayments of
Swingline Loans, which shall be made in accordance with the procedures
established pursuant Section 2.4(b)) (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of prepayment, or (ii) in the case of prepayment
of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business
Day before the date of prepayment. Each such notice shall be irrevocable and
shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid; provided that, if a notice of prepayment is given
in connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.8(c), then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.8(c).
Promptly following receipt of any such notice relating to a Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided
in Section 2.2. Each prepayment of a Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing. Prepayments shall be accompanied by
accrued interest to the extent required by Section 2.13.

(g)           All prepayments of Term Loans shall be applied pro rata to the
remaining installments thereof.

SECTION 2.12 Fees.

(a)           Commitment Fee. The Borrower agrees to pay to the Administrative
Agent for the account of each Revolving Lender a commitment fee (a “Commitment
Fee”) equal to the Commitment Fee Rate per annum on the average daily unused
amount of the unused Revolving Commitment of such Revolving Lender during the
period from and including the Effective Date to but excluding the date on which
the Revolving Commitments terminate. Accrued Commitment Fees shall be payable in
arrears (A) on the last Business Day of March, June, September and December of
each year, commencing on the first such date to occur after the Effective Date
and (B) on the date on which the Revolving Commitments terminate. Commitment
Fees shall be computed on the basis of a year of 360 days and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day). For purposes of computing Commitment Fees, a Revolving Commitment of
a Lender shall be deemed to be used to the extent of the outstanding Revolving
Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender
shall be disregarded for such purpose).

(b)           Administrative Agent Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, the administrative fees set forth in
the Fee Letter or such other fees payable in the amounts and at the times
separately agreed upon between the Borrower and the Administrative Agent (the
“Administrative Agent Fees”).

(c)           LC and Fronting Fees. The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Revolving Lender a participation
fee (“LC Participation Fee”) with respect to its participations in Letters of
Credit, which shall accrue at a rate equal to the LC Fee Rate from time to time
used to determine the interest rate on Eurodollar Revolving Loans pursuant to
Section 2.13 on the average daily amount of such Lender’s LC Exposure (excluding

 

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any portion thereof attributable to Reimbursement Obligations) during the period
from and including the Effective Date to but excluding the later of the date on
which such Lender’s Revolving Commitment terminates and the date on which such
Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting
fee (“Fronting Fee”) of 0.125% on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to Reimbursement Obligations) during
the period from and including the Effective Date to but excluding the later of
the date of termination of the Revolving Commitments and the date on which there
ceases to be any LC Exposure, as well as the Issuing Bank’s customary fees with
respect to the issuance, amendment, renewal or extension of any Letter of Credit
or processing of drawings thereunder. Accrued LC Participation Fees and Fronting
Fees shall be payable in arrears (i) on the last Business Day of March, June,
September and December of each year, commencing on the first such date to occur
after the Effective Date, and (ii) on the date on which the Revolving
Commitments terminate. Any such fees accruing after the date on which the
Revolving Commitments terminate shall be payable on demand. Any other fees
payable to the Issuing Bank pursuant to this clause (c) shall be payable within
10 days after demand therefor. All LC Participation Fees and Fronting Fees shall
be computed on the basis of a year of 360 days and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).

(d)           All Fees. All fees hereunder shall be paid on the dates due, in
immediately available funds in Dollars, to the Administrative Agent for
distribution, if and as appropriate, among the Lenders, except that the Borrower
shall pay the Fronting Fees directly to the Issuing Bank. Once paid, none of the
fees shall be refundable under any circumstances.

SECTION 2.13 Interest.

(a)           Subject to the provisions of Section 2.13(c), the Loans comprising
each ABR Borrowing, including each Swingline Loan, shall bear interest at a rate
per annum equal to the Alternate Base Rate.

(b)           Subject to the provisions of Section 2.13(c) and (e), the Loans
comprising each Eurodollar Borrowing shall bear interest at a rate per annum
equal to the LIBO Rate for the Interest Period in effect for such Borrowing plus
the Applicable Margin in effect from time to time.

(c)           Notwithstanding the foregoing, (i) if any principal of, or
interest on, any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (x) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
clause (a) or (b) above or (y) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in Section 2.13(a), and (ii) at the written
request of the Required Lenders made to the Administrative Agent, the interest
rate applicable to each Loan and the LC Fee Rate shall each be increased by 2%
per annum during the existence of an Event of Default.

(d)           Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Revolving Commitments; provided that (i) interest accrued
pursuant to Section 2.13(c) shall be payable on demand, (ii) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving
Loan prior to the end of the Revolving Availability Period), accrued interest on
the principal amount repaid or prepaid shall be payable on the date of such

 

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repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.

(e)           The Borrower agrees that, for any period during which any Lender
is required to maintain reserves with respect to liabilities or assets
consisting of or including eurodollar funds or deposits (currently known as
“Eurocurrency liabilities”), the Borrower will pay such Lender additional
interest on the unpaid principal amount of each Eurodollar Loan of such Lender
in an amount equal to the actual cost of such reserves allocated to such Loan by
such Lender (as determined by such Lender in good faith, which determination
shall be conclusive). Such additional interest shall be due and payable on each
Interest Payment Date for such Loan, provided that the Borrower shall have
received at least 15 days’ prior notice (with a copy to the Administrative
Agent) of such additional interest from such Lender. If a Lender fails to give
notice at least 15 days prior to the relevant Interest Payment Date, such
additional interest shall be due and payable 15 days after receipt of such
notice

(f)           All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate or
LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

SECTION 2.14 Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

(a)           the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the LIBO Rate for such Interest Period; or

(b)           the Administrative Agent is advised by the Required Lenders that
the LIBO Rate for such Interest Period will not adequately and fairly reflect
the cost to such Lenders of making or maintaining their Loans included in such
Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be
ineffective and (ii) if any Borrowing Request requests a Eurodollar Revolving
Borrowing, such Borrowing shall be made as an ABR Borrowing.

 

SECTION 2.15 Increased Costs.   

 

(a)

If any Change in Law shall:

(i)          impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement referred to
in Section 2.13(e)); or

 

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(ii)         impose on any Lender or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender or
any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender of
participating in, issuing or maintaining any Letter of Credit or to reduce the
amount of any sum received or receivable by such Lender hereunder (whether of
principal, interest or otherwise), then the Borrower will pay to such Lender
such additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered.

(b)           If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as
a consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by the
Issuing Bank, to a level below that which such Lender or such Lender’s holding
company could have achieved but for such Change in Law (taking into
consideration the policies of such Lender or, if applicable, its holding company
with respect to capital adequacy), then from time to time the Borrower will pay
to such Lender such additional amount or amounts as will compensate such Lender
its holding company for any such reduction suffered.

SECTION 2.16 Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.8(c) and is revoked in accordance therewith) or (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.19, then,
in any such event, the Borrower shall compensate each Lender for the loss, cost
and expense attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the LIBO Rate that would have been applicable to such
Loan, for the period from the date of such event to the last day of the then
current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the Eurodollar market.

SECTION 2.17 Taxes.

(a)           All payments by or on account of any obligation of the Borrower
hereunder or under any other Loan Document shall be made without setoff,
counterclaim or other defense and free and clear of and without deduction or
withholding for any and all Indemnified Taxes; provided that if the Borrower
shall be required by law to deduct any Indemnified Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions or withholdings applicable to
additional sums payable under this Section 2.17) the Administrative Agent or the
applicable Lender, as the case may be, receives an amount equal to the sum it
would have received had no such deductions or withholdings been made, (ii) the
Borrower shall make such deductions or withholdings and

 

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(iii) the Borrower shall pay the full amount deducted or withheld to the
relevant Governmental Authority in accordance with applicable law.

(b)           In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

(c)           The Borrower shall indemnify the Administrative Agent and each
Lender, within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender, as the case may be, on or with respect to any payment by or on account
of any obligation of the Borrower hereunder (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section 2.17) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.

(d)           As soon as practicable after any payment of Indemnified Taxes or
Other Taxes, and in any event within 30 days of any payment being due, by the
Borrower to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

(e)           Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate. Each Foreign Lender shall
(i) furnish either (a) two accurate and complete originally executed U.S.
Internal Revenue Service Form W-8BEN (or successor form) or (b) an accurate and
complete U.S. Internal Revenue Service Form W-8ECI (or successor form),
certifying, in either case, to such Foreign Lender’s legal entitlement to an
exemption or reduction from U.S. Federal withholding tax with respect to all
interest payments hereunder, and (ii) to the extent it may lawfully do so at
such times, upon reasonable request by the Borrower or the Administrative Agent,
provide a new Form W-8BEN (or successor form) or Form W-8ECI (or successor form)
upon the expiration or obsolescence of any previously delivered form to
reconfirm any complete exemption from, or any entitlement to a reduction in,
U.S. Federal withholding tax with respect to any interest payment hereunder.

(f)           If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to this Section 2.17, it shall
(within 30 days after making such determination) pay over such refund to the
Borrower (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrower under this Section 2.17 with respect to the
Indemnified Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided that the Borrower, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in
the event the Administrative Agent or such Lender is required to repay such

 

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refund to such Governmental Authority. This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax returns
(or any other information relating to its taxes which it deems confidential) to
the Borrower or any other Person.

SECTION 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a)           The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or
otherwise) prior to 2:00 p.m., New York City time, on the date when due, in
immediately available funds, without set-off, deduction or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York, except payments to be made directly to the Issuing Bank or the
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.15, 2.16, 2.17 and 9.3 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in Dollars.

(b)           If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.

(c)           If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements or
Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans, Term Loans and
participations in LC Disbursements and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans and participations in LC Disbursements and
Swingline Loans; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this clause (c)
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC Disbursements to any
assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this clause (c) shall apply).
The Borrower consents to the foregoing and agrees, to

 

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the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.

(d)           Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.

(e)           If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.4(c), 2.5(d) or (e), 2.6(b), 2.18(d) or 9.3(c), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.19 Mitigation Obligations, etc.; Replacement of Lenders.

(a)           Any Lender making a claim for compensation pursuant to Section
2.15, 2.16 or 2.17 shall deliver to the Borrower (with a copy to the
Administrative Agent) a certificate setting forth in reasonable detail the basis
for such claim and the amount necessary to compensate such Lender (or, if
applicable, its holding company) pursuant to such Section, which certificate
shall be conclusive absent manifest error. The Borrower shall pay such Lender
the amount shown as due on any such certificate within 10 days after receipt
thereof.

(b)           Failure or delay on the part of the Administrative Agent or any
Lender to make a claim for compensation pursuant to Section 2.15, 2.16 or 2.17
shall not constitute a waiver of the Administrative Agent’s or such Lender’s
right to such compensation; provided that the Borrower shall not be required to
pay any compensation pursuant to any such Section for any amount incurred by the
Administrative Agent or any Lender more than 270 days prior to the date that the
Administrative Agent or such Lender, as the case may be, delivers the
certificate required by Section 2.19(a) with respect to the applicable claim;
and provided, further, that if such claim arises out of a Change in Law that is
retroactive, then the 270-day period referred to above shall be extended to
include the period of retroactive effect thereof.

(c)           If any Lender requests compensation under Section 2.15, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such

 

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Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.
The Borrower hereby agrees to pay all reasonable costs and expenses incurred by
any Lender in connection with any such designation or assignment (and a
certificate setting forth such costs and expenses in reasonable detail submitted
by such Lender to the Borrower and the Administrative Agent shall be conclusive
absent manifest error).

(d)           If any Lender requests compensation under Section 2.15 or 2.17, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
or if the Borrower is entitled to replace any Lender pursuant to Section 9.2(c),
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.4), all its interests, rights and obligations under this Agreement) to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Commitment is being assigned, the Issuing Bank and the Swingline
Lender), which consents shall not unreasonably be withheld, (ii) such Lender
shall have received payment of an amount equal to the outstanding principal of
its Loans (and, to the extent funded, its participations in LC Disbursements and
Swingline Loans), accrued interest thereon, accrued fees and all other amounts
payable to it hereunder (assuming for this purpose that the Loans of such Lender
were being prepaid) from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.

SECTION 2.20 Increase in Revolving Commitments.

(a)           So long as no Default exists, upon notice to the Administrative
Agent (which shall promptly notify the Lenders), the Borrower may from time to
time, request an increase in the aggregate amount of the Revolving Commitments
by an amount (for all such requests) not exceeding $25,000,000; provided that
each such increase shall be in an aggregate amount of at least $5,000,000. At
the time of sending such notice, the Borrower (in consultation with the
Administrative Agent) shall specify the time period within which each Lender is
requested to respond (which shall in no event be less than ten Business Days
from the date of delivery of such notice to the Lenders). Each Lender shall
notify the Administrative Agent within such time period whether or not it agrees
to increase its Revolving Commitment and, if so, whether by an amount equal to,
greater than, or less than its Revolving Percentage of such requested increase.
Any Lender not responding within such time period shall be deemed to have
declined to increase its Revolving Commitment. The Administrative Agent shall
notify the Borrower and each Lender of the Lenders’ responses to each request
made hereunder. To achieve the full amount of a requested increase, the Borrower
may also invite additional Eligible Assignees to become Lenders pursuant to a
joinder agreement in form and substance satisfactory to the Administrative Agent
and its counsel.

(b)           If the aggregate Revolving Commitments are increased in accordance
with this Section, the Administrative Agent and the Borrower shall determine the
effective date (the

 

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“Increase Effective Date”) and the final allocation of such increase. The
Administrative Agent shall promptly notify the Borrower and the Lenders of the
final allocation of such increase and the Increase Effective Date. As a
condition precedent to such increase, the Borrower shall deliver to the
Administrative Agent a certificate of each Loan Party dated as of the Increase
Effective Date (in sufficient copies for each Lender) signed by a Financial
Officer of such Loan Party (i) certifying and attaching the resolutions adopted
by such Loan Party approving or consenting to such increase and (ii) in the case
of the Borrower, certifying that, before and after giving effect to such
increase, (A) the representations and warranties contained in Article III and
the other Loan Documents are true and correct on and as of the Increase
Effective Date, and (B) no Default exists. The Borrower shall prepay any
Revolving Loans outstanding on the Increase Effective Date (and pay any
additional amounts required pursuant to Section 2.16) to the extent necessary to
keep the outstanding Revolving Loans ratable with any revised Revolving
Percentages arising from any nonratable increase in the Revolving Commitments
under this Section.

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Administrative Agent and each Lender
that:

SECTION 3.1 Organization; Powers. Each of the Borrower and each Subsidiary
(a) is duly organized and validly existing and in good standing under the laws
of the jurisdiction of its organization, (b) has all requisite power and
authority to carry on its business as conducted on the Effective Date and to own
and lease its property and (c) is qualified and in good standing (to the extent
such concept is applicable in the applicable jurisdiction) to do business in
every jurisdiction where such qualification is required, except in such
jurisdictions where the failure to so qualify or be in good standing,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

SECTION 3.2 Authorization; Enforceability. The Transactions are within the
organizational powers of each Loan Party and have been duly authorized by all
necessary organizational action on the part of each Loan Party. This Agreement
has been duly executed and delivered by the Borrower and constitutes a legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms, and each other Loan Document has been duly executed and delivered by each
Loan Party that is a party thereto, enforceable in accordance with its terms,
subject, in each case, to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

SECTION 3.3 Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except such as have been obtained or made
and are in full force and effect, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of the
Borrower or any Subsidiary or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or other
instrument binding upon the Borrower or any Subsidiary or of their respective
assets, or give rise to a right thereunder to require any payment to be made by
the Borrower or any Subsidiary, and (d) will not result in the creation or
imposition of any Lien on any asset of the Borrower or any Subsidiary (except
for Liens granted under the Loan Documents).

SECTION 3.4 Financial Condition; No Material Adverse Change.

(a)           The Borrower has heretofore furnished to the Lenders consolidated
balance sheet and statements of income, stockholders equity and cash flows (i)
as of and for the fiscal years

 

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ended December 31, 2005 and 2006, reported on by McGladrey & Pullen, independent
public accountants, and (ii) as of and for the fiscal quarter and the portion of
the fiscal year ended March 31, 2007. Such financial statements present fairly,
in all material respects, the financial position and results of operations and
cash flows of the Borrower and its consolidated Subsidiaries as of such dates
and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements referred
to in clause (ii) above.

(b)           The Borrower has heretofore furnished to the Lenders consolidated
balance sheet and statements of income, stockholders’ equity and cash flows for
the Target (i) as of and for the fiscal years ended December 31, 2005 and 2006,
reported on by Deloitte & Touche LLP, independent public accountants, and (ii)
as of and for the fiscal quarter and the portion of the fiscal year ended March
31, 2007, certified by the Target’s chief financial officer. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Target and its consolidated
subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year-end audit adjustments and the absence of footnotes in the case
of the statements referred to in clause (ii) above.

(c)           Since December 31, 2006, there has been no event or circumstance
that, individually or in the aggregate with all other events and circumstances,
has had or would reasonably be expected to have a Material Adverse Effect.

SECTION 3.5 Properties.

(a)           Each of the Borrower and each Subsidiary has good title to, or
valid leasehold interests in, all its real and personal property material to its
business, subject to no Liens other than Liens permitted by Section 6.2.

(b)           Each of the Borrower and each Subsidiary owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

SECTION 3.6 Litigation and Environmental Matters.

(a)           Except the Disclosed Matters, there are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Subsidiary (i) that could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or
(ii) that involve this Agreement or the Transactions.

(b)           Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Borrower nor any
Subsidiary (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.

 

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(c)           Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.

SECTION 3.7 Compliance with Laws and Agreements. Each of the Borrower and each
Subsidiary is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.

SECTION 3.8 Investment Company Status. Neither the Borrower nor any Subsidiary
is an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940.

SECTION 3.9 Taxes. Each of the Borrower and each Subsidiary has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate proceedings and
for which the Borrower or such Subsidiary, as applicable, has set aside on its
books adequate reserves or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.

SECTION 3.10 Use of Proceeds. The Borrower will use the proceeds of (a) the Term
Loans to finance the Adorn Acquisition and pay related fees and expenses and
(b) the Revolving Loans on the Effective Date in an aggregate amount not to
exceed $35,000,000 (including Letters of Credit) to finance the Adorn
Acquisition and pay related fees and expenses and will use the proceeds of
Revolving Loans and Swingline Loans after the Effective Date for general
corporate purposes.

SECTION 3.11 ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. Without limiting the foregoing, during the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement or the making of any Credit Extension, (i) no steps have been
taken to terminate any Plan other than a “standard termination” in accordance
with Section 4041(b) of ERISA and (ii) no contribution failure has occurred with
respect to any Plan sufficient to give rise to a lien under Section 302(f) of
ERISA.

SECTION 3.12 Disclosure. As of the Effective Date, neither the Information
Memorandum nor any of the other reports, financial statements, certificates or
other information furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished on or prior to the Effective Date) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.

SECTION 3.13 Subsidiaries. Set forth on Schedule 3.13 is a complete and accurate
list, as of the Effective Date, of the name and jurisdiction of organization of
each Subsidiary, the number of outstanding shares of stock or other equity units
of each Subsidiary, and the percentage ownership interest of the Borrower and
its other Subsidiaries in each Subsidiary.

 

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SECTION 3.14 Regulation U. Neither the Borrower nor any Subsidiary is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no proceeds
of any Loan will be used for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock or maintaining or extending
credit to others for such purpose.

SECTION 3.15 Insurance. Set forth on Schedule 3.15 is a complete and accurate
summary of the property and casualty insurance program of the Borrower and its
Subsidiaries as of the Effective Date (including the names of all insurers,
policy numbers, expiration dates, amounts and types of coverage, exclusions,
deductibles, self-insured retention, and a description in reasonable detail of
any self-insurance program, retrospective rating plan, fronting arrangement or
other risk assumption arrangement involving the Borrower or any Subsidiary).

SECTION 3.16 Solvency, etc. On the Effective Date, and immediately prior to and
after giving effect to each Credit Extension hereunder and the use of the
proceeds thereof, (a) the assets of the Loan Parties, taken as a whole, will
exceed their liabilities and (b) the Loan Parties, taken as a whole, will be
solvent, will be able to pay their debts as they mature, will own assets with
present fair saleable value greater than the amount required to pay their
probable liability on their existing debts as they mature and will have capital
sufficient to carry on their business as then constituted.

SECTION 3.17 Intellectual Property. Each of the Borrower and each Subsidiary
owns and possesses or has a license or other right to use all such patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, service mark rights and copyrights as are necessary for the
conduct of the business of the Borrower and its Subsidiaries, without any
infringement upon rights of others that could reasonably be expected to have a
Material Adverse Effect.

SECTION 3.18 Burdensome Obligations. Neither the Borrower nor any Subsidiary is
subject to any charter or corporate restriction that could reasonably be
expected to have a Material Adverse Effect.

SECTION 3.19 Labor Matters. Except as, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect: (a) there are no strikes or other
labor disputes against the Borrower or any Subsidiary pending or, to the
knowledge of the Borrower, threatened; (b) hours worked by and payment made to
employees of the Borrower and each Subsidiary have not been in violation of the
Fair Labor Standards Act or any other applicable Requirement of Law dealing with
such matters; and (c) all payments due from the Borrower or any Subsidiary on
account of employee health and welfare insurance have been paid or accrued as a
liability on the books of the Borrower or the relevant Subsidiary.

SECTION 3.20 Adorn Acquisition.

(a)           The Adorn Acquisition complies in all material respects with all
applicable legal requirements, and all necessary governmental, regulatory,
shareholder and other consents and approvals required for the consummation of
the Adorn Acquisition have been, or prior to the consummation thereof will be,
(i) duly waived or (ii) duly obtained and in full force and effect. All
applicable waiting periods with respect to the Adorn Acquisition have expired
without any action being taken by any competent Governmental Authority which
restrains, prevents or imposes material adverse conditions upon the consummation
of such transaction. At the time of consummation thereof, there shall not exist
any judgment, order or injunction prohibiting or imposing material adverse
conditions on the Adorn Acquisition or any transaction contemplated hereby. On
the Effective Date the Adorn Acquisition will have been consummated in
accordance with the terms of the Adorn Acquisition Agreement, without waiver of
any of the conditions thereof.

 

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(b)           The consummation by the Borrower of the Adorn Acquisition will not
violate any statute or regulation of the United States or any other applicable
jurisdiction, or any order, judgment or decree of any court or other
Governmental Authority, or result in a breach of, or constitute a default under,
any agreement or indenture, or any order or decree, binding on any Loan Party.

(c)           The representations and warranties in the Adorn Acquisition
Agreement are true and correct in all material respects on the date of this
Agreement, and there have been no amendments to or waivers under the Adorn
Acquisition Agreement (other than amendments and waivers approved in writing by
the Administrative Agent.) The Adorn Acquisition Agreement does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.

ARTICLE IV

 

CONDITIONS

SECTION 4.1 Effective Date. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit shall not become effective until the
date on which each of the following conditions is satisfied (or waived in
accordance with Section 9.2):

(a)           Credit Agreement. The Administrative Agent (or its counsel) shall
have received from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.

(b)           Notes. The Administrative Agent shall have received, for each
Lender requesting the same, a Note.

(c)           Security Agreement. The Administrative Agent shall have received
the Security Agreement, executed by each Loan Party (after giving effect to the
Adorn Acquisition).

(d)           Pledge Agreement. The Administrative Agent shall have received the
Pledge Agreement, executed by the Borrower and each Subsidiary that (after
giving effect to the Adorn Acquisition) owns an equity interest in another
Subsidiary.

(e)           Subsidiary Guaranty. The Administrative Agent shall have received
the Subsidiary Guaranty, executed by each Subsidiary (after giving effect to the
Adorn Acquisition), other than a Foreign Subsidiary.

(f)           Real Estate Documents. With respect to each parcel of real
property (other than the North Carolina Property) owned by any Loan Party (after
giving effect to the Adorn Acquisition), or leased by any Loan Party (after
giving effect to the Adorn Acquisition), the Administrative Agent shall have
received a duly executed Mortgage providing for a fully perfected Lien, in favor
of the Administrative Agent, in all right, title and interest of such Loan Party
in such real property.

 

(g)

Corporate Documents. The Administrative Agent shall have received:

 

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(i)           a certificate of the secretary or assistant secretary of each Loan
Party dated the Effective Date, certifying (A) that attached thereto is a true
and complete copy of the copy of the certificate or articles of incorporation or
similar formation document of such Loan Party, certified (to the extent
applicable) as of a recent date by the Secretary of State of the state of its
organization, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of such Loan Party
authorizing the Transactions and the execution delivery and performance of the
Loan Documents to which such person is a party and, in the case of the Borrower,
the borrowings hereunder, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect and (C) as to the
incumbency and specimen signature of each officer executing any Loan Document as
of the Effective Date or any other document delivered in connection herewith on
behalf of such Loan Party (together with a certificate of another officer as to
the incumbency and specimen signature of the secretary or assistant secretary
executing the certificate in this clause (i));

(ii)a certificate as to the good standing of the Borrower and applicable
Subsidiaries (in so-called “long-form” if available) as of a recent date, from
such Secretary of State; and

(iii)such other documents as the Lenders or the Administrative Agent may
reasonably request.

(h)           Officers’ Certificate. The Administrative Agent shall have
received a certificate, dated the Effective Date and signed by a responsible
officer of the Borrower, confirming compliance with the conditions precedent set
forth in this Section 4.1 and Section 4.2.

(i)            Opinions of Counsel. The Administrative Agent shall have received
favorable written opinions of McDermott Will & Emery LLP, special counsel for
the Borrower, and Warrick & Boyn, LLP, special Indiana counsel for the Borrower,
substantially in the forms of Exhibits B-1 and B-2, respectively, in each case
dated the Effective Date, addressed to the Administrative Agent and the Lenders
and covering such other matters relating to the Borrower, this Agreement or the
Transactions as the Administrative Agent shall reasonably request.

(j)            Requirements of Law. The Lenders shall be satisfied that the
Borrower, its Subsidiaries and the Transactions shall be in full compliance with
all material Requirements of Law.

(k)           Consents. The Lenders shall be satisfied that all requisite
Governmental Authorities and third parties shall have approved or consented to
the Transactions, and there shall be no governmental or judicial action, actual
or threatened, that has or would have, singly or in the aggregate, a reasonable
likelihood of restraining, preventing or imposing burdensome conditions on the
Transactions or the other transactions contemplated hereby.

(l)            Litigation. There shall be no litigation, public or private, or
administrative proceedings, governmental investigation or other legal or
regulatory developments, actual or threatened, that, singly or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect, or could
materially and adversely affect the ability of the Borrower and its Subsidiaries
to fully and timely perform their respective obligations under the Loan
Documents, or the ability of the parties to consummate the financings
contemplated hereby.

(m)         Sources and Uses. The sources and uses of the Term Loans shall be as
set forth in Section 3.10.

 

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(n)           Fees. The Arranger and Administrative Agent shall have received
all Fees and other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder or under
any other Loan Document.

(o)           Adorn Acquisition. The closing of the Adorn Acquisition shall take
place concurrently with the initial Credit Extension in accordance with
applicable Requirements of Law pursuant to documentation reasonably acceptable
to the Administrative Agent and for a purchase price not in excess of
$75,000,000 (excluding adjustment to working capital).

(p)           Equity and Tontine Subordinated Debt Issuance. The Borrower shall
have received (i) cash proceeds of not less than $10,000,000 from equity
contributions and (ii) cash proceeds from the issuance of the Tontine
Subordinated Debt in an amount not less than $25,000,000 minus the amount of
cash proceeds from equity contributions referred to in clause (i) above.

(q)           Personal Property Requirements. The Administrative Agent shall
have received certified copies of UCC, tax and judgment lien searches or
equivalent reports or searches, each of a recent date that list all effective
financing statements, lien notices or comparable documents that name the
Borrower and applicable Subsidiaries as debtor and that are filed in those state
jurisdictions in which the Borrower and applicable Subsidiaries are organized
and such other searches that the Administrative Agent deems necessary or
appropriate, none of which encumber the Collateral covered or intended to be
covered by the Security Documents (other than Permitted Encumbrances).

(r)           Filings, Registrations and Recordings. The Administrative Agent
shall have received each document (including Uniform Commercial Code financing
statements) required by the Security Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or recorded in
order to create in favor of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the collateral described therein, prior and
superior to any other Person (subject to Liens permitted by Section 6.2), in
proper form for filing, registration or recording.

(s)           Insurance. Evidence satisfactory to the Administrative Agent of
the existence of insurance required to be maintained pursuant to Section 5.4,
together with evidence that the Administrative Agent has been named as a
lender’s loss payee and that the Administrative Agent and the Lenders have been
named as additional insureds on all related insurance policies.

(t)            Title Commitment. The Administrative Agent shall have received
the following with respect to each parcel of real property subjected to a
Mortgage on the Effective Date:

(i)           an ALTA Loan Title Insurance Policy (or a commitment therefor),
issued by an insurer acceptable to the Administrative Agent, insuring (or
committing to insure) the Administrative Agent’s Lien on such real property and
containing such endorsements as the Administrative Agent may reasonably require
(it being understood that the amount of coverage, exceptions to coverage and
status of title set forth in such policy shall be acceptable to the
Administrative Agent);

(ii)         copies of all documents of record concerning such real property as
shown on the commitment for the ALTA Loan Title Insurance Policy referred to
above; and

 

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(iii)        a flood insurance policy concerning such real property, reasonably
satisfactory to the Administrative Agent, if required by the Flood Disaster
Protection Act of 1973.

(u)           Intercreditor Agreement. An Intercreditor Agreement, substantially
in the form of Exhibit I, with the holder of the Project Note.

(v)           Bond Purchase Agreement Amendment. A First Amendment to the Bond
Purchase Agreement signed by the Borrower and JPMorgan, as the holder of the
Project Note, together with an agreement confirming that such parties shall
consider such First Amendment effective as between themselves notwithstanding
that the City of Mishwaka has not yet executed and delivered such First
Amendment.

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.2) at
or prior to 3:00 p.m., New York City time, on June 1, 2007 (and, if such
conditions are not so satisfied or waived, the Commitments shall terminate at
such time).

SECTION 4.2 Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or
extend any Letter of Credit, is subject to the satisfaction of the following
conditions:

(a)           The representations and warranties of the Borrower set forth in
this Agreement shall be true and correct in all material respects on and as of
the date of such Borrowing or the date of issuance, amendment, renewal or
extension of such Letter of Credit, as applicable (except to the extent
expressly made as of another date, in which case such representations and
warranties shall be true and correct in all material respects as of such other
date).

(b)           At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in clauses (a) and (b)
of this Section.

ARTICLE V

 

AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit (other than any Supported Letter of Credit) shall
have expired or terminated and all LC Disbursements shall have been reimbursed,
the Borrower covenants and agrees with the Lenders that the Borrower will:

SECTION 5.1 Financial Statements; Ratings Change and Other Information. Furnish
to the Administrative Agent and each Lender:

 

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(a)           as soon as available, but not later than the earlier of (i) five
Business Days after the filing thereof with the SEC and (ii) 100 days after the
end of each fiscal year, copies of the Borrower’s audited consolidated balance
sheet and related statements of operations, stockholders' equity and cash flows
as of the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by Ernst & Young
LLP or other independent public accountants of recognized national standing
(without a "going concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied (it being understood that the foregoing can be satisfied by
delivery of the Borrower’s relevant Form 10-K);

(b)           as soon as available, but not later than the earlier of (i) five
Business Days after the filing thereof with the SEC and (ii) 45 days after the
end of each of the first three fiscal quarters of each fiscal year, copies the
Borrower’s consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the Borrower and
its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes (it being understood that the foregoing can be satisfied by
delivery of the Borrower’s relevant Form 10-Q);

(c)           concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the Borrower
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 6.8 and (iii) stating whether any change
in GAAP or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 3.4 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate;

(d)           as soon as available, and in any event no later than 30 days
following the end of each fiscal year, a detailed consolidated budget for the
next fiscal year (including a projected consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such next fiscal year, the
related consolidated statements of projected cash flows, projected changes in
financial position and projected income and a description of the underlying
assumptions applicable thereto), and, as soon as available, significant
revisions, if any, of such budget and projections with respect to such fiscal
year (collectively, the “Projections”), which Projections shall in each case be
accompanied by a certificate of the chief financial officer or treasurer of the
Borrower stating that such Projections are based on reasonable and good faith
estimates, information and assumptions;

(e)           promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Borrower or any Subsidiary with the SEC, or with any national securities
exchange, or distributed by the Borrower to its shareholders generally, as the
case may be; and

(f)           promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or

 

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compliance with the terms of this Agreement, as the Administrative Agent or any
Lender may reasonably request.

SECTION 5.2 Notices of Material Events. Furnish to the Administrative Agent and
each Lender prompt written notice of the following:

 

(a)

the occurrence of any Default;

(b)           the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;

(c)           the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$500,000; and

(d)           any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

 

SECTION 5.3 Existence; Conduct of Business. Maintain its legal existence and
good standing in the jurisdiction of its organization; cause each Subsidiary to
maintain its legal existence and good standing in the jurisdiction of its
organization (except in connection with transactions permitted by Section 6.3);
and do or cause to be done, and cause each Subsidiary to do or cause to be done,
all things necessary to preserve, renew and keep in full force and effect all
rights, licenses, permits, privileges and franchises material to the conduct of
its business, except to the extent failure to do so would not have a Material
Adverse Effect.

SECTION 5.4 Payment of Obligations. Pay, and cause each Subsidiary to pay, prior
to delinquency, (a) all of its federal income taxes and other material Tax
liabilities and (b) all other liabilities that, if not paid, could reasonably be
expected to result in a Material Adverse Effect, except where (i) the validity
or amount thereof is being contested in good faith by appropriate proceedings,
(ii) the Borrower or such Subsidiary has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (iii) the failure to
make payment pending such contest could not reasonably be expected to result in
a Material Adverse Effect.

SECTION 5.5 Maintenance of Properties; Insurance.

(a)           Maintain, and cause each Subsidiary to maintain, (a) all property
material to the conduct of the business of the Borrower and its Subsidiaries,
taken as a whole, in good working order and condition, ordinary wear and tear
excepted, except where failure to do so could not reasonably be expected to
result in a Material Adverse Effect; and (b) insurance, with financially sound
and reputable insurance companies, in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.

(b)           Without limiting clause (a) above, maintain, and cause each
Subsidiary to maintain, (i) all-risk casualty insurance policies for not less
than 90% of the replacement value of

 

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the buildings and personal property included in the Collateral (subject to
customary deductibles), which policies shall name the Administrative Agent as an
additional insured and as a loss payee (with a customary endorsement in favor of
a mortgagee and secured party reasonably satisfactory to the Administrative
Agent); (ii) liability insurance policies in amounts consistent with past
practice, which policies shall name the Administrative Agent as an additional
insured; and (iii) such other insurance with respect to the Collateral as the
Administrative Agent may reasonably request.

SECTION 5.6 Books and Records; Inspection Rights. Keep, and cause each
Subsidiary to keep, proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
business and activities; and permit, and cause each Subsidiary to permit, any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested; provided that (i) so long
as no Default exists, no Lender shall have the right to make more than two such
visits or inspections in any year; and (ii) each Lender shall coordinate its
activities pursuant to this Section 5.6 with the Administrative Agent so as to
minimize the number of visits by Lenders and avoid disruption to the businesses
of the Borrower and its Subsidiaries.

SECTION 5.7 Compliance with Laws. Comply, and cause each Subsidiary to comply,
with all laws, rules, regulations and orders of any Governmental Authority
applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

SECTION 5.8 Use of Proceeds and Letters of Credit. Use the proceeds of the Loans
only for the purposes specified in Section 3.10; and not use the proceeds of any
Loan, directly or indirectly, for any purpose that entails a violation of any of
the Regulations of the Board, including Regulations T, U and X.

SECTION 5.9 Further Assurances.

(a)           Take, and cause each Subsidiary to take, such actions as are
necessary (including the execution and delivery of such security agreements,
mortgages, deeds of trust, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, certificates, assurances and other instruments as the Administrative
Agent or the Required Lenders may reasonably request from time to time) in order
(i) to ensure that (x) the obligations of the Borrower hereunder and under the
other Loan Documents are secured by substantially all assets of the Borrower
(subject to such exceptions as are expressly set forth in the Loan Documents or
agreed to by the Administrative Agent) and guaranteed, pursuant to the
Subsidiary Guaranty, by all Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary created or acquired after the
date hereof) and (y) the obligations of each Subsidiary Guarantor under the
Subsidiary Guaranty are secured by substantially all of the assets of such
Subsidiary Guarantor (subject to such exceptions as are expressly set forth in
the Loan Documents or agreed to by the Administrative Agent), (ii) to perfect
and maintain the validity, perfection and priority of the Liens intended to be
created by the Security Documents and (iii) to better assure, convey, grant,
assign, transfer, preserve, protect and confirm to the Administrative Agent and
the Lenders the rights granted or now or hereafter intended to be granted to the
Administrative Agent and the Lenders under any Loan Document or under any other
document executed in connection therewith. Notwithstanding the foregoing, (A) no
Foreign Subsidiary shall be required to issue any guaranty or grant any
collateral and neither the Borrower nor any Subsidiary Guarantor shall be
required to pledge more than 65% of the stock of any Foreign Subsidiary if, in
either such case, such action would result in material and adverse tax

 

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consequences to the Borrower or such Subsidiary Guarantor; and (B) no domestic
Subsidiary shall be required to issue any guaranty or grant any collateral if
such Subsidiary conducts no business and has no material assets

(b)           Without limiting Section 5.9(a), maintain, and cause each
Subsidiary to maintain, control agreements in favor of the Administrative Agent
with respect to each deposit account and securities account of the Borrower or a
Subsidiary (other than payroll and insurance accounts and accounts as to which
the Administrative Agent, in its discretion, may agree need not be subject to a
control agreement) a control agreement in form reasonably satisfactory to the
Administrative Agent: provided that the Borrower and its Subsidiaries may
maintain petty cash and similar deposit accounts that are not subject to such
control agreements so long as the aggregate amount on deposit in such accounts
does not at any time exceed $500,000 for more than three consecutive Business
Days.

(c)           If the North Carolina Property has not been sold (or if a binding
purchase agreement providing for the sale of such property has not been
executed) on or prior to May 19, 2008 (the “NC Sale Deadline”), cause to be
delivered to the Administrative Agent with respect to such property an
originally executed Mortgage and a title policy meeting the requirements of
Section 4.1(t) not later than (i) the NC Sale Deadline or (ii) if such property
is subject to such a purchase agreement on the NC Sale Deadline, on the earlier
of (x) the date on which such purchase agreement is terminated and (y) 60 days
after the NC Sale Deadline if such property has not been sold by 60th day.

SECTION 5.10 Certain Post-Closing Matters. Take each action specified on
Schedule 5.10 within the applicable time period (if any) specified on such
Schedule.

ARTICLE VI

 

NEGATIVE COVENANTS

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit (other than any Supported Letter of Credit) have expired
or terminated and all LC Disbursements shall have been reimbursed, the Borrower
covenants and agrees with the Lenders that the Borrower will:

 

SECTION 6.1 Indebtedness. Not, and not permit any Subsidiary to, create, incur,
assume or permit to exist any Indebtedness, except:

 

(a)

Indebtedness created hereunder;

(b)           Indebtedness existing on the date hereof and set forth in
Schedule 6.1 and extensions, renewals and replacements of any such Indebtedness
that do not increase the outstanding principal amount thereof; provided that all
Indebtedness designated as being paid at closing on Schedule 6.1 shall be repaid
on the Effective Date;

(c)           Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;

(d)          Guarantees by the Borrower of Indebtedness of any Subsidiary and by
any Subsidiary of Indebtedness of the Borrower or any other Subsidiary;

 

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(e)           Indebtedness of the Borrower or any Subsidiary incurred to finance
the acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof; provided that (i) such Indebtedness is incurred prior to or within 90
days after such acquisition or the completion of such construction or
improvement and (ii) the aggregate principal amount of Indebtedness permitted by
this clause (e) shall not exceed $7,000,000 at any time outstanding;

(f)           Indebtedness of any Person that becomes a Subsidiary after the
date hereof; provided that (i) such Indebtedness exists at the time such Person
becomes a Subsidiary and is not created in contemplation of or in connection
with such Person becoming a Subsidiary and (ii) the aggregate principal amount
of Indebtedness permitted by this clause (f) shall not exceed $1,000,000 at any
time outstanding;

(g)           other unsecured Indebtedness in an aggregate principal amount not
exceeding $5,000,000 at any time outstanding; provided that the aggregate
principal amount of Indebtedness of the Borrower's Subsidiaries permitted by
this clause (g) shall not exceed $1,000,000 at any time outstanding;

 

(h)

the Tontine Subordinated Debt; and

 

(i)

Indebtedness under the Project Documents.

SECTION 6.2 Liens. Not, and not permit any Subsidiary to, create, incur, assume
or permit to exist any Lien on any property or asset now owned or hereafter
acquired by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except:

 

(a)

Permitted Encumbrances;

(b)           any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.2; provided
that (i) such Lien shall not apply to any other property or asset of the
Borrower or any Subsidiary and (ii) such Lien shall secure only those
obligations which it secures on the date hereof and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;

(c)           any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a Subsidiary; provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition or
such Person becoming a Subsidiary , as the case may be, (ii) such Lien shall not
apply to any other property or assets of the Borrower or any Subsidiary and
(iii) such Lien shall secure only those obligations which it secures on the date
of such acquisition or the date such Person becomes a Subsidiary, as the case
may be and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof;

(d)           Liens on fixed or capital assets acquired, constructed or improved
by the Borrower or any Subsidiary; provided that (i) such security interests
secure Indebtedness permitted by Section 6.1(e), (ii) such security interests
and the Indebtedness secured thereby are incurred prior to or within 90 days
after such acquisition or the completion of such construction

 

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or improvement, and (iii) such security interests shall not apply to any other
property or assets of the Borrower or any Subsidiary; and

 

(e)

Liens arising under the Project Documents.

SECTION 6.3 Fundamental Changes. (a) Not, and not permit any Subsidiary to,
merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or any substantial
part of its assets, or all or substantially all of the stock of any Subsidiary
(in each case, whether now owned or hereafter acquired), or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) any Person
may merge into the Borrower in a transaction in which the Borrower is the
surviving corporation, (ii) any Person may merge into any other Loan Party in a
transaction in which the surviving entity is a Loan Party, (iii) any Subsidiary
may sell, transfer, lease or otherwise dispose of its assets to the Borrower or
to another Subsidiary and (iv) any Subsidiary may liquidate or dissolve if the
Borrower determines in good faith that such liquidation or dissolution is in the
best interests of the Borrower and is not materially disadvantageous to the
Lenders; provided that any merger involving a Person that is not a wholly owned
Subsidiary immediately prior to such merger shall not be permitted unless also
permitted by Section 6.4.

(b)           Not, and not permit any Subsidiary to, engage to any material
extent in any business other than businesses of the type conducted by the
Borrower and its Subsidiaries on the date of execution of this Agreement and
businesses reasonably related thereto.

SECTION 6.4 Investments, Loans, Advances, Guarantees and Acquisitions. Not, and
not permit any Subsidiary to, purchase, hold or acquire (including pursuant to
any merger with any Person that was not a wholly owned Subsidiary prior to such
merger) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, Guarantee any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person, or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person constituting a business unit,
except:

 

(a)

Permitted Investments;

 

(b)

Investments described in Schedule 6.4;

 

(c)

the Adorn Acquisition;

(d)          investments in accounts receivable and in lease, utility and
similar deposits, in each case the ordinary course of business;

(e)           investments in securities of any customer in the ordinary course
of business and consistent with past practices that are received in settlement
of bona fide disputes or pursuant to any plan of reorganization or liquidation
or similar arrangement upon the bankruptcy or insolvency of such customer;

(f)           non-cash consideration received in connection with any permitted
Asset Disposition;

(g)          investments by the Borrower in any Subsidiary or by any Subsidiary
in the Borrower or any other Subsidiary; provided that (i) any investment in the
form of a loan or advance shall be evidenced by a subordinated promissory note
in form and substance satisfactory

 

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to the Administrative Agent, and if issued in favor of the Borrower or any
Subsidiary Guarantor, shall be pledged to the Administrative Agent pursuant to
the Security Agreement; (ii) the aggregate amount of all investments in Foreign
Subsidiaries after the Effective Date shall not exceed $5,000,000;

 

(h)

Guarantees constituting Indebtedness permitted by Section 6.1;

 

(i)

Permitted Acquisitions; and

(j)           other investments not at any time exceeding in the aggregate
$1,000,000 (valued without giving effect to an write-off or write-down of any
such investment).

SECTION 6.5 Hedge Agreements. Not, and not permit any Subsidiary to, enter into
any Hedge Agreement, except (a) Swap Agreements entered into to hedge or
mitigate risks to which the Borrower or any Subsidiary has actual exposure
(other than those in respect of Equity Interests of the Borrower or any
Subsidiary), and (b) Hedge Agreements entered into in order to effectively cap,
collar or exchange interest rates (from fixed to floating rates, from one
floating rate to another floating rate or otherwise) with respect to any
interest-bearing liability or investment of the Borrower or any Subsidiary.

SECTION 6.6 Restricted Payments. Not, and not permit any Subsidiary to, declare
or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except (a) the Borrower may declare and pay dividends with respect to
its Equity Interests payable solely in additional shares of its common stock,
(b) any Subsidiary may declare and pay dividends to the Borrower or any other
Subsidiary and (c) the Borrower may make Restricted Payments pursuant to and in
accordance with stock option plans or other benefit plans for management or
employees of the Borrower and its Subsidiaries in amounts that are consistent
with past practice.

SECTION 6.7 Transactions with Affiliates. Not, and not permit any Subsidiary to,
sell, lease or otherwise transfer any property or assets to, or purchase, lease
or otherwise acquire any property or assets from, or otherwise engage in any
other transactions with, any of its Affiliates, except (a) in the ordinary
course of business at prices and on terms and conditions not less favorable to
the Borrower or such Subsidiary than could be obtained on an arm's-length basis
from unrelated third parties, (b) transactions between or among the Borrower and
the Subsidiary Guarantors not involving any other Affiliate, (c) the incurrence
of the Tontine Subordinated Debt and repayment thereof with proceeds from the
issuance of common stock of the Borrower and (d) any Restricted Payment
permitted by Section 6.6.

SECTION 6.8 Financial Covenants. Not permit:

(a)           Maximum Leverage Ratio. The Leverage Ratio for any Computation
Period to exceed the ratio set forth below:

 

Computation Period Ending

Maximum Leverage Ratio

September 30, 2007       - March 30, 2008

4.00 to 1.0

March 31, 2008               - December 30, 2008

3.75 to 1.0

December 31, 2008        - December 30, 2009

3.50 to 1.0

December 31, 2009 and thereafter

3.00 to 1.0

 

 

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(b)           Minimum Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio for any Computation Period to be less than the ratio set forth below:

Computation Period Ending

Minimum Fixed Charge
Coverage Ratio

September 30, 2007       - June 30, 2009

1.10 to 1.0

September 30, 2009 and thereafter

1.25 to 1.0

 

(c)           Consolidated Net Worth. Consolidated Net Worth to be less than the
total of (a) $70,000,000 plus (b) 50% of Consolidated Net Income for each fiscal
quarter ending after the Effective Date (excluding any fiscal quarter in which
there is a loss) plus (c) 100% of the Net Cash Proceeds from the issuance by the
Borrower and its Subsidiaries of Equity Interests in excess of $15,000,000 after
the Effective Date minus (d) Restructuring Charges.

(d)           Capital Expenditures. Capital Expenditures in any fiscal year to
exceed $8,000,000 (or, if the Leverage Ratio as of the end of such fiscal year
is less than 3.00 to 1.0, $10,000,000).

SECTION 6.9 Asset Sales. Not, and not permit any Subsidiary to, effect any Asset
Sale, or agree to effect any Asset Sale, except for the following:

(a)           disposition of used, worn out, obsolete or surplus property by any
Loan Party in the ordinary course of business and the abandonment or other
disposition of intellectual property that is, in the reasonable judgment of the
Borrower, no longer economically practicable to maintain or useful in the
conduct of the business of the Borrower and its Subsidiaries taken as a whole;

(b)          leases of real or personal property in the ordinary course of
business and in accordance with the applicable Security Documents;

 

(c)

the sale or other disposition of either California Property;

(d)           sales of luan during the period from the Effective Date through
December 31, 2007 in an aggregate amount not exceeding $12,000,000; and

(e)           other Asset Sales; provided that (i) Asset Sales made pursuant to
this clause (e) shall (x) be made for not less than fair market value (as
determined in good faith by the Board of Directors of the Borrower) and (y) be
for at least 85% cash consideration; and (ii) the aggregate consideration for
all Assets Sale pursuant to this clause (e) shall not exceed $5,000,000 in any
fiscal year or $20,000,000 during the term of this Agreement.

SECTION 6.10 Optional Payments and Modifications of Certain Debt Instruments.
Not (a) make or offer to make any optional or voluntary payment, prepayment
(including mandatory prepayment), repurchase or redemption of or otherwise
optionally or voluntarily defease or segregate funds with respect to any
Subordinated Debt or (b) amend, modify, waive or otherwise change, or consent or
agree to any amendment, modification, waiver or other change to, any of the
terms of any indenture, agreement, note or other document that evidences or
governs the terms of any Subordinated Debt. Notwithstanding the foregoing, the
Borrower may repay the Tontine Subordinated Debt with the proceeds of the
issuance of common stock of the Borrower.

 

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SECTION 6.11 Negative Pledge Clauses. Not, and not permit any Subsidiary to,
enter into or suffer to exist or become effective any agreement that prohibits,
limits or imposes any condition upon the ability of the Borrower or any
Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its
property or revenues, whether now owned or hereafter acquired, to secure its
obligations under the Loan Documents or any refinancing thereof other than (a)
this Agreement and the other Loan Documents, (b) any agreement governing any
purchase money Lien or Capital Lease Obligation otherwise permitted hereby (in
which case, any prohibition or limitation shall only be effective against the
assets financed thereby), (c) the Project Documents and (d) any agreement
governing Indebtedness of a Foreign Subsidiary otherwise permitted hereunder.

SECTION 6.12 Restrictions on Subsidiary Distributions, etc. Not, and not permit
any Subsidiary to, enter into or suffer to exist or become effective any
consensual restriction or limitation on the ability of any Subsidiary to
(a) make Restricted Payments to, or pay any Indebtedness owed to, the Borrower
or any other Subsidiary, (b) make loans or advances to, or other investments in,
the Borrower or any other Subsidiary, (c) in the case of any Subsidiary,
guarantee the obligations of the Borrower hereunder or (d) transfer any of its
assets to the Borrower or any other Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) restrictions existing under the
Loan Documents and (ii) restrictions with respect to a Subsidiary imposed
pursuant to an agreement that has been entered into in connection with the
disposition of all or substantially all of the Equity Interests in or assets of
such Subsidiary, (iii) customary non-assignment provisions of any contracts and
licenses and restrictions in leases restricting subletting, (iv) customary net
worth provisions contained in leases and other agreements entered into by the
Borrower or a Subsidiary in the ordinary course of business, (v) customary
non-assignment provisions in contracts and licenses entered into in the ordinary
course of business, (vi) purchase money obligations and Capital Lease
Obligations that impose restrictions on the property purchased or leased, (vii)
provisions limiting the disposition or distribution of assets or property in
asset sale agreements and other similar agreements entered into in the ordinary
course of business, which limitation is applicable only to the assets that are
the subject of such agreements, (viii) restrictions and limitations in the
Project Documents that are substantially the same as the relevant provisions
hereof and (ix) restrictions and limitations in agreements governing
Indebtedness of Foreign Subsidiaries that is otherwise permitted hereunder,
provided that such restrictions and limitations apply only to the applicable
Foreign Subsidiary (and any of its subsidiaries) .

SECTION 6.13 Lines of Business. Not, and not permit any Subsidiary to, enter
into any business, either directly or through any Subsidiary, except for those
businesses in which the Borrower and its Subsidiaries are engaged on the date of
this Agreement or that are reasonably related thereto.

SECTION 6.14 Changes in Fiscal Periods. Not permit the fiscal year of the
Borrower to end on a day other than December 31 or change the Borrower’s method
of determining fiscal quarters.

ARTICLE VII

 

EVENTS OF DEFAULT

If any of the following events (“Events of Default”) shall occur:

(a)           the Borrower shall fail (i) to pay when due any principal of any
Loan or any reimbursement obligation in respect of any LC Disbursement or (ii)
to cause any Letter of Credit to become a Supported Letter of Credit on the date
required pursuant to Section 2.5(c).

(b)           the Borrower shall fail to pay when due (i) any interest on any
Loan or any fee payable pursuant to Section 2.12 and such failure shall continue
unremedied for three Business

 

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Days or (ii) any other amount payable hereunder and such failure shall continue
unremedied for ten days after the Borrower receives notice thereof from the
Administrative Agent or any Lender;

(c)           any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with this Agreement or any
amendment or modification hereof or waiver hereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof or waiver
hereunder, shall prove to have been incorrect in any material respect when made
or deemed made;

(d)           the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.2(a), 5.3 (with respect to the
Borrower’s existence) or 5.8 or in Article VI;

(e)           the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clause (a), (b) or (d) above) or in any other Loan Document, and such failure
shall continue unremedied for a period of 30 days;

(f)           the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable;

(g)           any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;

(h)           an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any Subsidiary or its debts, or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the foregoing shall
be entered;

(i)            the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (h) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;

 

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(j)            the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due;

(k)           one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against the Borrower, any
Subsidiary or any combination thereof and the same shall remain unpaid and
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Subsidiary to
enforce any such judgment;

(l)            (i) an ERISA Event shall occur that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse Effect,
(ii) the Borrower or any other Person takes any step to terminate a Plan if as a
result of such termination the Borrower could be required to make a contribution
to such Plan, or could incur a liability or obligation to such Plan, in excess
of $5,000,000, or (iii) a contribution failure occurs with respect to any Plan
sufficient to give rise to a Lien under section 302(f) of ERISA;

(m)         any Loan Document shall cease to be in full force and effect; or the
Borrower or any other Loan Party shall contest in any manner the validity,
binding nature or enforceability of any Loan Document;

(n)           any subordination provision in any document or instrument
governing Subordinated Debt, or any subordination provision in any guaranty by
any Subsidiary of any Subordinated Debt shall cease to be in full force and
effect, or the Borrower or any other Loan Party shall contest in any manner the
validity, binding nature or enforceability of any such provision; or

 

(o)

a Change in Control shall occur;

then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times:  (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h) or (i)
above, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.

 

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ARTICLE VIII

 

THE ADMINISTRATIVE AGENT

Each Lender irrevocably appoints the Administrative Agent as its agent and
authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
hereof, together with such actions and powers as are reasonably incidental
thereto.

The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein. Without limiting the generality of the foregoing,
(a) the Administrative Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) the Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby that the Administrative Agent is required
to exercise in writing as directed by the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.2), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any Subsidiary that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.2) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers

 

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through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders and the Borrower. Upon any such resignation, the Required
Lenders shall have the right, in consultation with the Borrower, to appoint a
successor. If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a bank with an office in Chicago, Illinois,
or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent’s resignation hereunder, the
provisions of this Article and Section 9.3 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.

The Administrative Agent shall, and the Lenders and the Issuers irrevocably
authorize the Administrative Agent to, at the sole cost and expense of the
Borrower,:

(a)           release any Lien on any property granted to or held by the
Administrative Agent under any Loan Document (i) upon termination of the
Commitments, payment in full in cash of all principal of and interest on the
Loans, all LC Disbursements and all fees payable hereunder and the expiration or
termination of all Letters of Credit (other than any Supported Letter of
Credit), (ii) that is sold or otherwise disposed of as part of or in connection
with a transaction permitted hereunder or (iii) subject to Section 9.2, if
approved, authorized or ratified in writing by the Required Lenders;

(b)           subordinate any Lien on any property granted to or held by the
Administrative Agent under any Loan Document to the holder of any Lien on such
property that is permitted by Section 6.2(d); and

(c)           release any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty if such Person ceases to be a Subsidiary as a result of a
transaction permitted hereunder.

Upon request by the Administrative Agent at any time, the Required Lenders will
confirm in writing the Administrative Agent’s authority to release or
subordinate its interest in particular types or items of

 

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property, or to release any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty pursuant to this paragraph.

ARTICLE IX

 

MISCELLANEOUS

SECTION 9.1 Notices. (a) Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to clause (b) below),
all notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

(i)           if to the Borrower, to it at 107 W Franklin Street, Elkhart,
Indiana 46516, Attention of Andy L. Nemeth, Chief Financial Officer (Telecopy
No. (574) 294-7511), with a copy to McDermott Will & Emery LLP, 227 West Monroe,
Chicago, Illinois 60606, Attention of Robert A. Schreck, Jr. (Telecopy No. (312)
984-7700);

(ii)          if to the Administrative Agent, to JPMorgan Chase Bank, N.A., Loan
and Agency Services Group, 10 South Dearborn Street, 7th Floor, Chicago,
Illinois 60603, Attention of Susan Moy (Telecopy No. (312) 732-4864), with a
copy to JPMorgan Chase Bank, N.A., 270 Park Avenue, New York 10017;

(iii)         if to the Issuing Bank, 10 South Dearborn Street, 7th Floor,
Chicago, Illinois 60603, Attention of Susan Moy (Telecopy No. (312) 732-4864);

(iv)         if to the Swingline Lender, to it at 10 South Dearborn Street, 7th
Floor, Chicago, Illinois 60603, Attention of Susan Moy (Telecopy No. (312)
732-4864); and

(v)          if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.

(b)           Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II unless otherwise agreed by the
Administrative Agent and the applicable Lender. The Administrative Agent or the
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

(c)           Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.

(d)           Notwithstanding any other provision hereof, documents required to
be delivered pursuant to Section 5.1 or 5.2 may be delivered electronically and,
if so delivered, shall be deemed to have been delivered on the date on which (i)
the Borrower posts such documents, or provides a link thereto, on the Borrower’s
website on the Internet at http://www.patrickind.com or (ii) such documents are
posted on the Borrower’s behalf on an Internet or intranet website, if any, to
which the Administrative Agent and the Lenders have access; provided that (i)
the Borrower shall notify (which may be by facsimile or electronic mail) the
Administrative Agent (which shall

 

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notify each Lender) of the posting of any such document and, promptly upon
request by the Administrative Agent, provide to the Administrative Agent by
electronic mail an electronic version (i.e., a soft copy) of any such document
specifically requested by the Administrative Agent; and (ii) the Borrower shall
deliver to the Administrative Agent a paper copy of each compliance certificate
delivered pursuant to Section 5.1(c). Except for compliance certificates
referred to in the preceding sentence, the Administrative Agent shall have no
obligation (x) to request the delivery or to maintain copies of any document
delivered pursuant to Section 5.1 or (y) to monitor compliance by the Borrower
with the delivery of any documents (and each Lender shall be solely responsible
for requesting delivery to it or maintaining its copies of such documents).

(e)           The Borrower acknowledges that (i) the Administrative Agent or an
Affiliate thereof may make available materials and/or information provided by or
on behalf of the Borrower hereunder (collectively, “Borrower Materials”) to
Lenders and/or potential Lenders by posting the Borrower Materials on IntraLinks
or another similar electronic system (the “Platform”) and (ii) certain Lenders
and/or potential Lenders may not desire to receive material non-public
information with respect to the Borrower or its securities (each such Lender, a
“Public Lender”). The Borrower agrees that it will use commercially reasonable
efforts to identify that portion of the Borrower Materials that may be
distributed to the Public Lenders and that (w) all Borrower Materials that are
made available to Public Lenders shall be clearly and conspicuously marked
“PUBLIC,” which, at a minimum, shall mean that the word “PUBLIC” shall appear
prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC,” the Borrower shall be deemed to have authorized the Administrative
Agent, the Lenders, the proposed Lenders and their respective Affiliates to
treat such Borrower Materials as not containing any material non-public
information with respect to the Borrower or its securities for purposes of
United States Federal and state securities laws; (y) all Borrower Materials
marked “PUBLIC” are permitted to be made available through a portion of the
Platform designated “Public Investor;” and (z) the Administrative Agent and its
Affiliates shall treat any Borrower Materials that are not marked “PUBLIC” as
being suitable only for posting on, and shall only post such Borrower Materials
on, the portion of the Platform not designated “Public Investor.”
Notwithstanding the foregoing, the Borrower shall be under no obligation to mark
any Borrower Materials “PUBLIC”.

SECTION 9.2 Waivers; Amendments.

(a)           No failure or delay by the Administrative Agent or any Lender in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent and the
Lenders hereunder are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by Section 9.2(b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent or any Lender may have had notice or knowledge of such Default at the
time.

(b)           Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower

 

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and the Required Lenders or by the Borrower and the Administrative Agent with
the consent of the Required Lenders; provided that no such agreement shall (i)
increase the Commitment of any Lender without the written consent of such
Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or
reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Lender affected thereby, (iii) postpone the
scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the scheduled date
of expiration of any Commitment, without the written consent of each Lender
affected thereby, (iv) change Section 2.18(b) or (c) in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (v) release all or substantially all of the Collateral,
(vi) release all or substantially all of the Subsidiary Guarantors from their
obligations under the Subsidiary Guaranty or (vii) change any of the provisions
of this Section or the definition of “Required Lenders” or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend
or modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; and provided, further,
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent, the Issuing Bank or the Swingline Lender
hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank or the Swingline Lender, as the case may be.

(c)           If, in connection with any proposed waiver, amendment or other
modification of any provision of this Agreement contemplated by clauses (ii)
through (vi), inclusive, of the first proviso to Section 9.2(b), the consent of
the Required Lenders is obtained but the consent of one or more other Lenders
whose consent is required is not obtained, then Borrower may (at any time during
the 90 days following the originally requested deadline for approving such
waiver, amendment or other modification) replace all, but not less than all, of
such non-consenting Lenders in accordance with the terms of Section 2.19(d) so
long as after giving effect to such replacement the proposed waiver, amendment
or other modification will be consented to by all applicable Lenders.
Notwithstanding the foregoing, the Borrower shall not have the right to replace
a Lender that is acting as the Administrative Agent, the Swingline Lender or the
Issuing Bank as a result of such Lender’s refusal to consent to any waiver,
amendment or other modification that would affect its rights or duties in such
capacity.

SECTION 9.3 Expenses; Indemnity; Damage Waiver.

(a)           The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (iii) all out-of-pocket expenses incurred
by the Administrative Agent or any Lender, including the fees, charges and
disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with
the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

 

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(b)           The Borrower shall indemnify the Administrative Agent and each
Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an “Indemnitee”) against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses, including
the fees, charges and disbursements of any counsel for any Indemnitee, incurred
by or asserted against any Indemnitee arising out of, in connection with, or as
a result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the
use of the proceeds therefrom (including any refusal by the Issuing Bank to
honor a demand for payment under a Letter of Credit if the documents presented
in connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any
Subsidiary, or any Environmental Liability related in any way to the Borrower or
any Subsidiary, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee.

(c)           To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline
Lender under Section 9.3(a) or (b) of this Section, each Lender severally agrees
to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as
the case may be, such Lender’s Total Percentage (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent, the Issuing Bank or the Swingline
Lender in its capacity as such.

(d)           To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
Without limiting the foregoing, the Borrower agrees that no Indemnitee shall be
liable for any damages arising from the use by third parties of any information
or other materials obtained through IntraLinks or other similar information
transmission systems in connection with this Agreement or the other Loan
Documents or the transactions contemplated hereby or thereby

(e)           All amounts due under this Section shall be payable promptly after
written demand therefor.

SECTION 9.4 Successors and Assigns.

(a)           The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or

 

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obligations hereunder except in accordance with this Section. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), Participants (to the extent provided in Section 9.4(c)) and,
to the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

(b)           (i) Subject to the conditions set forth in clause (b)(ii) below,
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:

(A)          the Borrower, provided that no consent of the Borrower shall be
required for an assignment to a Lender, an Affiliate of a Lender, an Approved
Fund or, if an Event of Default has occurred and is continuing, any other
assignee;

(B)          the Administrative Agent, provided that no consent of the
Administrative Agent shall be required for an assignment of (x) any Revolving
Commitment to an assignee that has a Revolving Commitment immediately prior to
giving effect to such assignment and (y) all or any portion of a Term Loan to a
Lender, an Affiliate of a Lender or an Approved Fund; and

(C)          in the case of the assignment of a Revolving Commitment, the
Issuing Bank and the Swingline Lender; provided that no such consent shall be
required for an assignment to an assignee that has a Revolving Commitment
immediately prior to giving effect to such assignment.

 

(ii)

Assignments shall be subject to the following additional conditions:

(A)          except in the case of an assignment to a Lender or an Affiliate of
a Lender or an assignment of the entire remaining amount of the assigning
Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans
of the assigning Lender subject to each such assignment (determined as of the
date the Assignment and Assumption with respect to such assignment is delivered
to the Administrative Agent) shall not be less than $5,000,000 unless each of
the Borrower and the Administrative Agent otherwise consent, provided that no
such consent of the Borrower shall be required if an Event of Default has
occurred and is continuing;

(B)          each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations under
this Agreement, provided that this clause shall not be construed to prohibit the
assignment of a proportionate part of all the assigning Lender’s rights and
obligations in respect of one Class of Commitments or Loans;

(C)          the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

(D)          the assignee, if it is not a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

 

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For the purposes of this Section 9.4(b), the term “Approved Fund” means any
Person (other than a natural person) that is engaged in making, purchasing,
holding or investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.

 

(iii)        Subject to acceptance and recording thereof pursuant to Section
9.4 (b)(iv), from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.15,
2.16, 2.17 and 9.3). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 9.4
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section 9.4(c).

 

(iv)        The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof
from time to time (the "Register"). The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary. The Register shall be available for inspection by the Borrower
and any Lender at any reasonable time and from time to time upon reasonable
prior notice.

 

(v)         Upon its receipt of a duly completed Assignment and Assumption
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in clause (b)(ii)(C)
above and any written consent to such assignment required by clause (b)(i)
above, the Administrative Agent shall accept such Assignment and Assumption and
record the information contained therein in the Register; provided that if
either the assigning Lender or the assignee shall have failed to make any
payment required to be made by it pursuant to Section 2.4(c), 2.5(d) or (e),
2.6(b), 2.18(d) or 9.3(c), the Administrative Agent shall have no obligation to
accept such Assignment and Assumption and record the information therein in the
Register unless and until such payment shall have been made in full, together
with all accrued interest thereon. No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this clause (v).

 

(c)           (i)          Any Lender may, without the consent of the Borrower,
the Administrative Agent, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks or other entities (a "Participant") in all
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided that (A) such Lender's obligations under this Agreement shall remain
unchanged, (B) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (C) the Borrower, the
Administrative Agent and the Lenders shall continue to deal solely and directly
with such

 

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Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 9.2(b) that affects such Participant. Subject to clause (c) below, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 9.4(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 9.8 as though it were a Lender, provided such Participant agrees to be
subject to Section 2.18(c) as though it were a Lender.

(ii)         A Participant shall not be entitled to receive any greater payment
under Section 2.15 or 2.17 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as
though it were a Lender.

 

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

SECTION 9.5 Survival. All covenants, agreements, representations and warranties
made by the Borrower herein and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement 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 the Administrative
Agent or any Lender may have had notice or knowledge of any 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 the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of
Sections 2.15, 2.16, 2.17 and 9.3 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any provision hereof.

SECTION 9.6 Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Except as provided

 

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in Section 4.1, this Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

SECTION 9.7 Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.8 Right of Setoff. If an Event of Default under Section 7(a) shall
have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other obligations at
any time owing by such Lender or Affiliate to or for the credit or the account
of the Borrower against any of and all the obligations of the Borrower now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.

SECTION 9.9 Governing Law; Jurisdiction; Consent to Service of Process.

(a)           This Agreement shall be construed in accordance with and governed
by the law of the State of Illinois.

(b)           The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the courts of the
State of Illinois sitting in Chicago and of the United States District Court of
the Northern District of Illinois, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such Illinois State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement against the Borrower or its
properties in the courts of any jurisdiction.

(c)           The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in Section
9.9(b). Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.

(d)           Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

 

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SECTION 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 9.12 Confidentiality. Each of the Administrative Agent and each Lenders
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (g) with the consent of the Borrower or (h) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Borrower. For the purposes of this Section, “Information” means
all information received from the Borrower relating to the Borrower or its
business, other than any such information that is available to the
Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by the Borrower; provided that, in the case of information received
from the Borrower after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

SECTION 9.13 Other Agents. No Person listed on the cover page hereof or
elsewhere herein as the Arranger, the Sole Bookrunner, the Sole Lead Arranger,
the Syndication Agent or a Co-Documentation Agent shall have any power, duty or
responsibility under this Agreement or any other Loan Document, except in its
capacity (if applicable) as a Lender hereunder.

SECTION 9.14 Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to

 

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the Maximum Rate and, to the extent lawful, the interest and Charges that would
have been payable in respect of such Loan but were not payable as a result of
the operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

SECTION 9.15 USA PATRIOT Act. Each Lender that is subject to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”) hereby notifies the Borrower that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies the Borrower, which information includes the name and address of
the Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Act.

SECTION 9.16 Authorization to Enter Into Intercreditor Agreement. The Lenders
authorize the Administrative Agent to enter into the Intercreditor Agreement
referred to in Section 4.1(u).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

 

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

PATRICK INDUSTRIES, INC.

By: /s/ Paul E. Hassler_______________

 

Name: Paul E. Hassler

 

Title:

President

 

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JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent,

By:__/s/ Chad Douglass_______________

 

Name: Chad Douglass

 

Title:

Vice President

 

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FIFTH THIRD BANK, as a Syndication Agent and as a Lender

 

By:

/s/ Craig Ellis__________________

 

Name:

Craig Ellis

 

Title:

Vice President

 

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LASALLE BANK, NATIONAL ASSOCIATION, as a Co-Documentation Agent and as a Lender

 

By:

/s/ Andrew J. Crask __________________

 

Name: Andrew J. Crask

 

Title:

Vice President

 

 

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KEY BANK, NATIONAL ASSOCIATION, as a Co-Documentation Agent and as a Lender

By: /s/ Geoffrey R. Henry_____________

 

Name: Geoffrey R. Henry

 

Title:

Vice President

 

 

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CHARTER ONE BANK, as a Co-Documentation Agent and as a Lender

By: /s/ Kyle Rosburg____________________

 

Name: Kyle Rosburg

 

Title:

Assistant Vice President

 

 

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ASSOCIATED BANK, as a Lender

By: Viktor Gottlieb________________

 

Name: Viktor Gottlieb

 

Title: Assistant Vice President

 

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NATIONAL CITY BANK, as a Lender

By Chris D. Thornton________________

 

Name: Chris D. Thornton

 

Title:

Vice President

 

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1ST SOURCE BANK, as a Lender

 

By

William B. Burton________________

 

Name: William B. Burton

 

Title: Vice President

 

 

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SCHEDULE 1.1

PRICING SCHEDULE

 

The Applicable Margin, the Commitment Fee Rate and the LC Fee Rate,
respectively, shall be determined in accordance with the table below and the
other provisions of this Schedule 1.1.

 

Level I

Level II

Level III

Level IV

Level V

Applicable Margin

1.500%

1.750%

2.000%

2.250%

2.500%

Commitment Fee Rate

0.250%

0.250%

0.250%

0.375%

0.500%

LC Fee Rate

1.500%

1.750%

2.000%

2.250%

2.500%

 

Level means Level I, Level II, Level III, Level IV or Level V, as applicable.

Level I applies when the Leverage Ratio is less than 2.00 to 1.0.

Level II applies when the Leverage Ratio is equal to or greater than 2.00 to 1.0
but less or equal to 2.50 to 1.0.

Level III applies when the Leverage Ratio is greater than 2.50 to 1.0 but less
than or equal to 3.00 to 1.0.

Level IV applies when the Leverage Ratio is greater than 3.00 to 1.0 but less
than or equal to 3.50 to 1.0.

Level V applies when the Leverage Ratio is greater than 3.50 to 1.0.

Initially, pricing shall be based on Level V. The applicable Level shall be
adjusted, to the extent applicable, 50 days (or, in the case of the last fiscal
quarter of any fiscal year, 95 days) after the end of each fiscal quarter
(commencing with the fiscal quarter ending September 30, 2007) based on the
Leverage Ratio as of the last day of such fiscal quarter; provided that, unless
the Required Lenders otherwise agree, if the Borrower fails to deliver the
financial statements required by Section 5.1(a) or (b), as applicable, and the
related certificate required by Section 5.1(c) by the 45th day (or, if
applicable, the 90th day) after any fiscal quarter, Level V shall apply until
such financial statements are delivered.

If, as a result of any restatement of or other adjustment to the financial
statements of the Borrower or for any other reason, the Banks determine that (a)
the Leverage Ratio as calculated by the Borrower as of any applicable date was
inaccurate and (b) a proper calculation of the Leverage Ratio would have
resulted in different pricing for any period, then (i) if the proper calculation
of the Leverage Ratio would have resulted in higher pricing for such period,
then the Borrower shall automatically and retroactively be obligated to pay to
the Administrative Agent for the benefit of the Banks, promptly following demand
by the Administrative Agent (accompanied by supporting materials (which may be
in the form of financial statements prepared by the Borrower or the Borrower’s
independent auditors)), an amount equal to the excess of the amount of interest
and fees that should have been paid for such period over the amount of interest
and fees actually paid for such period; (ii) if the Borrower provides materials
to the Administrative Agent (which materials shall be reasonably satisfactory to
the Administrative Agent) demonstrating that the proper calculation of the
Leverage Ratio would have resulted in lower pricing for such period, then so
long as such inaccurate calculation was made in good faith and no Default
exists, the Borrower shall receive a credit against future payments of interest
and fees hereunder in an amount equal

 

Schedule 1.1-1-

 

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

to the amount of interest and fees actually paid for such period over the amount
of interest and fees that should have been paid for such period (and such credit
shall be applied to pay each subsequent payment of interest and fees hereunder
until applied in full); and (iii) if as a result of any restatement or other
event a proper calculation of the Leverage Ratio would have resulted in higher
pricing for one or more periods and lower pricing for one or more other periods
(due to the shifting of income or expenses from one period to another period or
any similar reason), then the amount to be paid by the Borrower pursuant to
clause (i) above and the amount to be credited to the Borrower pursuant to
clause (ii) above shall be netted and only the difference between the amount of
interest and fees that should have been paid for all applicable periods and the
amount of interest and fees actually paid for all such periods shall be paid by
the Borrower or credited to the Borrower, as applicable.

 

Schedule 1.1-2-

 

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SCHEDULE 2.1

COMMITMENTS

 

 

Revolver

Term Loan

Total

Bank

Commitment

Commitment

Commitment

 

JPMorgan Chase Bank, N.A

$6,363,636.36

$13,636,363.64

$20,000,000.00

Fifth Third Bank

$5,727,272.73

$12,272,727.27

$18,000,000.00

LaSalle Bank, National Association $5,170,454.55

$11,079,545.45

$16,250,000.00

Key Bank, National Association

$5,170,454.55

$11,079,545.45

$16,250,000.00

Charter One Bank

$5,170,454.55

$11,079,545.45

$16,250,000.00

Associated Bank

$4,215,909.09

$ 9,034,090.91

$13,250,000.00

National City Bank

$1,590,909.09

$ 3,409,090.91

$ 5,000,000.00

1st Source Bank

$1,590,909.09

$ 3,409,090.91

$ 5,000,000.00

 

Total

$35,000,000.00

$75,000,000.00

$110,000,000.00

 

Schedule 2.1-1-

 

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SCHEDULE 2.10

AMORTIZATION OF TERM LOANS

 

DATE

PRINCIPAL PAYMENT

September 30, 2007

$1,875,000

December 31, 2007

$1,875,000

March 31, 2008

$1,875,000

June 30, 2008

$1,875,000

September 30, 2008

$2,375,000

December 31, 2008

$2,375,000

March 31, 2009

$2,375,000

June 30, 2009

$2,375,000

September 30, 2009

$2,375,000

December 31, 2009

$2,375,000

March 31, 2010

$2,375,000

June 30, 2010

$2,375,000

September 30, 2010

$2,875,000

December 31, 2010

$2,875,000

March 31, 2011

$2,875,000

June 30, 2011

$2,875,000

September 30, 2011

$3,375,000

December 31, 2011

$3,375,000

March 31, 2012

$3,375,000

Term Maturity Date

$26,875,000 (or, if less, remaining principal balance)

 

 

 

Schedule 2.10