Exhibit 10.5

 

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LOGO [g20928img_exapg1.jpg]

dated as of

April 30, 2007

among

ESMARK INCORPORATED,

SUN STEEL COMPANY LLC,

ELECTRIC COATING TECHNOLOGIES LLC,

GREAT WESTERN STEEL COMPANY LLC,

CENTURY STEEL COMPANY LLC,

ELECTRIC COATING TECHNOLOGIES BRIDGEVIEW LLC,

U.S. METALS & SUPPLY LLC,

MIAMI VALLEY STEEL SERVICE, INC.,

NORTH AMERICAN STEEL LLC,

PREMIER RESOURCE GROUP LLC, and

INDEPENDENT STEEL COMPANY LLC,

as Borrowers

The Other Loan Parties Party Hereto

The Lenders Party Hereto

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and Co-Collateral Agent

J.P. MORGAN SECURITIES INC.,

as Sole Bookrunner and Co-Lead Arranger

GE CAPITAL MARKETS, INC.,

as Co-Lead Arranger

and

GENERAL ELECTRIC CAPITAL CORPORATION,

as Co-Collateral Agent

 

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CHASE BUSINESS CREDIT

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TABLE OF CONTENTS

 

              Page

Article I              Definitions

   1   Section 1.01.    Defined Terms    1   Section 1.02.    Classification of
Loans and Borrowings    23   Section 1.03.    Terms Generally    23   Section
1.04.    Accounting Terms; GAAP    24   Section 1.05.    Co-Collateral Agent
Determinations    24

Article II            The Credits

   24   Section 2.01.    Commitments    24   Section 2.02.    Loans and
Borrowings    24   Section 2.03.    Requests for Revolving Borrowings    25  
Section 2.04.    Protective Advances    25   Section 2.05.    Swingline Loans
and Overadvances    26   Section 2.06.    Letters of Credit    27   Section
2.07.    Funding of Borrowings    31   Section 2.08.    Interest Elections    31
  Section 2.09.    Termination and Reduction of Commitments    32   Section
2.10.    Repayment and Amortization of Loans; Evidence of Debt    33   Section
2.11.    Prepayment of Loans    34   Section 2.12.    Fees    35   Section 2.13.
   Interest    36   Section 2.14.    Alternate Rate of Interest    37   Section
2.15.    Increased Costs    37   Section 2.16.    Break Funding Payments    38  
Section 2.17.    Taxes    38   Section 2.18.    Payments Generally; Allocation
of Proceeds; Sharing of Set-offs    40   Section 2.19.    Mitigation
Obligations; Replacement of Lenders    42   Section 2.20.    Returned Payments
   42

Article III          Representations and Warranties

   43   Section 3.01.    Organization; Powers    43   Section 3.02.   
Authorization; Enforceability    43   Section 3.03.    Governmental Approvals;
No Conflicts    43   Section 3.04.    Financial Condition; No Material Adverse
Change    43

 

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TABLE OF CONTENTS

(continued)

 

              Page   Section 3.05.    Properties    43   Section 3.06.   
Litigation and Environmental Matters    44   Section 3.07.    Compliance with
Laws and Agreements    44   Section 3.08.    Investment Company Status    44  
Section 3.09.    Taxes    44   Section 3.10.    ERISA    44   Section 3.11.   
Disclosure    45   Section 3.12.    Material Agreements    45   Section 3.13.   
Solvency    45   Section 3.14.    Insurance    45   Section 3.15.   
Capitalization and Subsidiaries    45   Section 3.16.    Security Interest in
Collateral    46   Section 3.17.    Employment Matters    46   Section 3.18.   
Affiliate Transactions    46   Section 3.19.    Common Enterprise    46

Article IV            Conditions

   47   Section 4.01.    Effective Date    47   Section 4.02.    Each Credit
Event    49

Article V              Affirmative Covenants

   50   Section 5.01.    Financial Statements; Borrowing Base and Other
Information    50   Section 5.02.    Notices of Material Events    53   Section
5.03.    Existence; Conduct of Business    54   Section 5.04.    Payment of
Obligations    54   Section 5.05.    Maintenance of Properties    54   Section
5.06.    Books and Records; Inspection Rights    54   Section 5.07.   
Compliance with Laws    54   Section 5.08.    Use of Proceeds    54   Section
5.09.    Insurance    55   Section 5.10.    Casualty and Condemnation    55  
Section 5.11.    Appraisals; Field Examinations    55   Section 5.12.   
Depository Banks    55   Section 5.13.    Additional Collateral; Further
Assurances    55

 

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TABLE OF CONTENTS

(continued)

 

              Page   Section 5.14.    Post-Closing Covenants    56

Article VI            Negative Covenants

   57   Section 6.01.    Indebtedness    57   Section 6.02.    Liens    58  
Section 6.03.    Fundamental Changes    59   Section 6.04.    Investments,
Loans, Advances, Guarantees and Acquisitions    60   Section 6.05.    Asset
Sales    62   Section 6.06.    Sale and Leaseback Transactions    63   Section
6.07.    Swap Agreements    63   Section 6.08.    Restricted Payments; Certain
Payments of Indebtedness    63   Section 6.09.    Transactions with Affiliates
   64   Section 6.10.    Restrictive Agreements    64   Section 6.11.   
Amendment of Material Documents    65   Section 6.12.    Fixed Charge Coverage
Ratio    65

Article VII          Events of Default

   65

Article VIII        The Administrative Agent and Co-Collateral Agents

   68

Article IX           Miscellaneous

   70   Section 9.01.    Notices    70   Section 9.02.    Waivers; Amendments   
71   Section 9.03.    Expenses; Indemnity; Damage Waiver    73   Section 9.04.
   Successors and Assigns    75   Section 9.05.    Survival    77   Section
9.06.    Counterparts; Integration; Effectiveness    78   Section 9.07.   
Severability    78   Section 9.08.    Right of Setoff    78   Section 9.09.   
Governing Law; Jurisdiction; Consent to Service of Process    78   Section 9.10.
   WAIVER OF JURY TRIAL    79   Section 9.11.    Headings    79   Section 9.12.
   Confidentiality    79   Section 9.13.    Several Obligations; Nonreliance;
Violation of Law    80   Section 9.14.    USA PATRIOT Act    80   Section 9.15.
   Disclosure    80

 

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TABLE OF CONTENTS

(continued)

 

              Page   Section 9.16.    Appointment for Perfection    80   Section
9.17.    Interest Rate Limitation    80

Article X              Loan Guaranty

   81   Section 10.01.    Guaranty    81   Section 10.02.    Guaranty of Payment
   81   Section 10.03.    No Discharge or Diminishment of Loan Guaranty    81  
Section 10.04.    Defenses Waived    82   Section 10.05.    Rights of
Subrogation    82   Section 10.06.    Reinstatement; Stay of Acceleration    82
  Section 10.07.    Information    82   Section 10.08.    Termination    83  
Section 10.09.    Taxes    83   Section 10.10.    Maximum Liability    83  
Section 10.11.    Liability Cumulative    83

Article XI            The Borrower Representative

   83   Section 11.01.    Appointment; Nature of Relationship    83   Section
11.02.    Powers    84   Section 11.03.    Employment of Agents    84   Section
11.04.    Notices    84   Section 11.05.    Successor Borrower Representative   
84   Section 11.06.    Execution of Loan Documents; Borrowing Base Certificate
   84   Section 11.07.    Reporting    85

Article XII          Subordination of Intercompany Obligations

   85   Section 12.01.    Subordination Generally    85   Section 12.02.   
Specific Performance; Waiver of Defenses    85   Section 12.03.    Distributions
   85   Section 12.04.    Loan Parties Failure to Act    86

Article XIII        Concerning Joint and Several Liability of the Borrowers

   86   Section 13.01.    Joint and Several Liability    86   Section 13.02.   
Obligation to Act    86   Section 13.03.    Full Recourse; Enforceability    86
  Section 13.04.    Waiver of Defenses    86

 

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TABLE OF CONTENTS

(continued)

 

              Page   Section 13.05.    Termination; Use of Remedies    87

Article XIV          Contribution Obligations

   87   Section 14.01.    Contributions    87   Section 14.02.    Subordination
of Claims    88   Section 14.03.    Limit on Obligations    88   Section 14.04.
   Termination; Use of Remedies    88

 

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SCHEDULES:

Commitment Schedule

Schedule 3.05 – Properties

Schedule 3.06 – Disclosed Matters

Schedule 3.12 – Material Agreements

Schedule 3.14 – Insurance

Schedule 3.15 – Capitalization and Subsidiaries

Schedule 3.18 – Affiliate Transactions

Schedule 6.01 – Existing Indebtedness

Schedule 6.02 – Existing Liens

Schedule 6.04 – Existing Investments

Schedule 6.09 – Success Fee/Affiliate Transaction

Schedule 6.10 – Existing Restrictions

EXHIBITS:

Exhibit A – Form of Assignment and Assumption

Exhibit B-1 – Opinion of Patzik, Frank & Samotny Ltd.

Exhibit B-2 – Opinion of Ohio Counsel to Miami Valley

Exhibit C-1 – Form of Borrowing Base Certificate

Exhibit C-2 – Form of Aggregate Borrowing Base Certificate

Exhibit D – Form of Compliance Certificate

Exhibit E – Joinder Agreement

 

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This CREDIT AGREEMENT, dated as of April 30, 2007 (as it may be amended or
modified from time to time, this “Agreement”), is entered into by and among
ESMARK INCORPORATED, a Delaware corporation (herein, together with its
successors and assigns, the “Company”), SUN STEEL COMPANY LLC, an Illinois
limited liability company (“Sun Steel”), ELECTRIC COATING TECHNOLOGIES LLC, a
Delaware limited liability company (“Electric Coating”), GREAT WESTERN STEEL
COMPANY LLC, an Illinois limited liability company (“Great Western”), CENTURY
STEEL COMPANY LLC, an Illinois limited liability company (“Century Steel”),
ELECTRIC COATING TECHNOLOGIES BRIDGEVIEW LLC, an Illinois limited liability
company (“ECT Bridgeview”), U.S. METALS & SUPPLY LLC, an Illinois limited
liability company (“U.S. Metals”), MIAMI VALLEY STEEL SERVICE, INC., an Ohio
corporation (“Miami Valley”), NORTH AMERICAN STEEL LLC, an Illinois limited
liability company (“North American”), PREMIER RESOURCE GROUP LLC, an Illinois
limited liability company (“Premier”), and INDEPENDENT STEEL COMPANY LLC, an
Illinois limited liability company (“Independent” and, together with the
Company, Sun Steel, Electric Coating, Great Western, Century Steel, ECT
Bridgeview, U.S. Metals, Miami Valley, North American, and Premier, and their
respective successors and assigns, collectively, the “Borrowers” and,
individually, “Borrower”), the other Loan Parties party hereto, the Lenders
party hereto, JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders
(herein, together with its successors and assigns, the “Administrative Agent”)
and Co-Collateral Agent, J.P. MORGAN SECURITIES INC., as Sole Bookrunner and
Co-Lead Arranger, GE CAPITAL MARKETS, INC., as Co-Lead Arranger, and GENERAL
ELECTRIC CAPITAL CORPORATION, as Co-Collateral Agent.

The parties hereto agree as follows:

Article I

Definitions

Section 1.01. Defined Terms. As used in this Agreement, the following terms have
the 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.

“Account” has the meaning assigned to such term in the Security Agreement.

“Account Debtor” means any Person obligated on an Account.

“Acquisition” means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (i) the acquisition of all
or substantially all of the assets of any Person, or any business or division of
any Person, (ii) the acquisition or ownership of in excess of 50% of the Equity
Interest of any Person, or (iii) the acquisition of another Person by a merger,
consolidation, amalgamation or any other combination with such Person.

“Acquisition Target” shall mean any Person engaged in the steel business or
primarily involved in the steel industry which Borrowers desire to acquire in
accordance with Section 6.04(o) hereof.

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“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period,
multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” has the meaning assigned to such term in the opening
paragraph of this Agreement.

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

“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.

“Aggregate Availability” means, with respect to all the Borrowers, at any time,
an amount equal to (a) the lesser of the Total Commitment and the Aggregate
Borrowing Base, minus (b) the Revolving Exposure of all Lenders, minus
(c) reserves established by the Co-Collateral Agents in their Permitted
Discretion.

“Aggregate Borrowing Base” means the aggregate of the Borrowing Bases of all of
the Borrowers.

“Aggregate Borrowing Base Certificate” means a certificate, signed and certified
as accurate and complete by a Financial Officer of the Borrower Representative,
in substantially the form of Exhibit C-2 or another form which is acceptable to
the Administrative Agent in its Permitted Discretion.

“Aggregate Credit Exposure” means, at any time, the aggregate Credit Exposure of
all the Lenders.

“Agreement” has the meaning assigned to such term in the opening paragraph of
this Agreement.

“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 0.50%. 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 Percentage” means, with respect to any Lender, (a) with respect to
Revolving Loans, LC Exposure, Swingline Loans or Overadvances, a percentage
equal to a fraction the numerator of which is such Lender’s Commitment and the
denominator of which is the aggregate Commitment of all Lenders (if the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon such Lender’s share of the aggregate Revolving Exposures
at that time), and (b) with respect to Protective Advances or with respect to
the Aggregate Credit Exposure, a percentage based upon its share of the
Aggregate Credit Exposure and the unused Commitments.

“Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar
Revolving Loan, or with respect to the commitment fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under the caption
“ABR Spread”, “Eurodollar Spread” or “Commitment Fee Rate”, as the case may be,
based upon the Borrowers’ Aggregate Availability as of the most recent
determination date, provided that the “Applicable Rate” shall be the rate per
annum set forth below as Pricing Level III for the period from the Effective
Date through and including [October     ], 2007.

 

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Pricing Level

  

Aggregate Availability

  

ABR Spread

  

Eurodollar Spread

I

   If Aggregate Availability is greater than $120,000,000    0.00%    1.00%

II

  

If Aggregate Availability is greater than $100,000,000, but less than

or equal to $120,000,000

   0.25%    1.25%

III

   If Aggregate Availability is greater than $80,000,000, but less than or equal
to $100,000,000    0.50%    1.50%

IV

   If Aggregate Availability is less than or equal to $80,000,000    1.00%   
1.75%

For purposes of the foregoing, (a) the Applicable Rate shall be determined by
the Co-Collateral Agents as of the end of each fiscal quarter of the Company
based upon the average daily Aggregate Availability during such fiscal quarter
and (b) each change in the Applicable Rate resulting from a change in Aggregate
Availability shall be effective during the period commencing on the first
Business Day immediately after the end of such fiscal quarter; provided,
however, that notwithstanding the foregoing, the applicable rate per annum for
Pricing Level IV shall apply at any time that an Event of Default has occurred
and is continuing.

“Approved Fund” has the meaning assigned to such term in Section 9.04.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Maturity Date and the date of termination of
the Commitments.

“Available Commitment” means, at any time, the Total Commitment then in effect,
minus the Revolving Exposure of all Lenders at such time.

“Banking Services” means each and any of the following bank services provided to
any Loan Party by the Co-Collateral Agents or any of their respective
Affiliates: (a) commercial credit cards, (b) stored value cards and (c) treasury
management services (including, without limitation, controlled disbursement,
automated clearinghouse transactions, return items, overdrafts and interstate
depository network services).

“Banking Services Obligations” of the Loan Parties means any and all obligations
of the Loan Parties, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) in connection with Banking
Services.

 

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“Banking Services Reserves” means all Reserves which the Co-Collateral Agents
from time to time establish in their Permitted Discretion for Banking Services
then provided or outstanding.

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

“Borrower” or “Borrowers” has the meaning assigned to such term in the opening
paragraph of this Agreement.

“Borrower Representative” means the Company, in its capacity as contractual
representative of the Borrowers pursuant to Article XI.

“Borrowing” means (a) Revolving Loans of the same Type, 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, (b) a Swingline Loan, (c) a Protective
Advance and (d) an Overadvance.

“Borrowing Base” means, at any time, with respect to each Borrower, the sum of
(a) 85% of such Borrower’s Eligible Accounts at such time, plus (b) the lesser
of (i) 70% of such Borrower’s Eligible Inventory, valued at the lower of cost or
market value, determined on a first-in-first-out basis, at such time and
(ii) 85% of the Net Orderly Liquidation Value of such Borrower’s Eligible
Inventory identified in the most recent inventory appraisal ordered by the
Administrative Agent minus (c) Reserves established by the Co-Collateral Agents
in their Permitted Discretion. The Co-Collateral Agents may, in their Permitted
Discretion, reduce the advance rates set forth above and/or reduce one or more
of the other elements used in computing the Borrowing Base, in each case, after
the occurrence of a Default and/or adjust Reserves at any time and from time to
time.

“Borrowing Base Certificate” means a certificate, signed and certified as
accurate and complete by a Financial Officer of the Borrower Representative, in
substantially the form of Exhibit C-1 or another form which is acceptable to the
Administrative Agent in its sole discretion.

“Borrowing Request” means a request by the Borrower Representative for a
Revolving Borrowing in accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Chicago 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.

“Capital Expenditures” means, without duplication, any expenditure or commitment
to expend money for any purchase or other acquisition of any asset which would
be classified as a fixed or capital asset on a consolidated balance sheet of the
Company and its Subsidiaries prepared in accordance with GAAP (but excluding
Acquisitions).

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.

“Change in Control” means (a) Franklin Mutual shall cease to own at least 50.01%
of the outstanding voting Equity Interests of the Company on a fully diluted
basis; (b) occupation of a majority

 

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of the seats (other than vacant seats) on the board of directors of the Company
by Persons who were neither (i) nominated by the board of directors of the
Company nor (ii) appointed by directors so nominated; (c) either James P.
Bouchard or Craig T. Bouchard (or both) shall cease to be on the board of
directors of the Company; (d) the Company shall cease to own, free and clear of
all Liens or other encumbrances (other than the Liens granted under the
Collateral Documents), at least 100% (or, with respect to Great Western, 50.01%)
of the outstanding voting Equity Interests of the other Borrowers on a fully
diluted basis; or (e) any change in the senior management of the Company (other
than with respect to Thomas Modrowski) from that set forth in Section 3.4 of
that certain Stockholders Agreement dated November 8, 2004, by and among the
Company, Bouchard Group, L.L.C., Franklin Mutual Advisers, LLC and certain other
shareholders, without reference to any modifications or restatements to such
Stockholders Agreement after its original date of execution.

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement (exclusive of any change in Tax rates), (b) any change in
any law, rule or regulation or in the interpretation or application thereof by
any Governmental Authority after the date of this Agreement or (c) compliance by
any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any
lending office of such Lender or by such Lender’s or the Issuing Bank’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 date of
this Agreement.

“Chase” means JPMorgan Chase Bank, N.A., a national banking association, in its
individual capacity, and its successors.

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

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means any and all property owned, leased or operated by a Person
covered by the Collateral Documents and any and all other property of any Loan
Party, now existing or hereafter acquired, that may at any time be or become
subject to a security interest or Lien in favor of the Administrative Agent, on
behalf of itself and the Lenders, to secure the Secured Obligations.

“Collateral Access Agreement” has the meaning assigned to such term in the
Security Agreement.

“Collateral Documents” means, collectively, the Security Agreement and any other
documents granting a Lien upon the Collateral as security for payment of the
Secured Obligations.

“Collection Account” has the meaning assigned to such term in the Security
Agreement.

“Commitment” means, with respect to each Lender, the commitment, if any, of such
Lender to make Revolving Loans and to acquire participations in Letters of
Credit, Overadvances, Protective Advance and Swingline Loans hereunder,
expressed as an amount representing the maximum possible aggregate amount of
such Lender’s Revolving Exposure hereunder, as such commitment may be reduced
from time to time pursuant to Section 2.09, and reduced or increased from time
to time pursuant to assignments by or to such Lender pursuant to Section 9.04.
The initial amount of each Lender’s Commitment is set forth on the Commitment
Schedule, or in the Assignment and Assumption pursuant to which such Lender
shall have assumed its Commitment, as applicable.

 

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“Commitment Schedule” means the Schedule attached hereto identified as such.

“Company” has the meaning assigned to such term in the opening paragraph of this
Agreement.

“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.

“Co-Collateral Agents” means the Administrative Agent and, if it is a Lender,
GE.

“Credit Exposure” means, as to any Lender at any time, the sum of (a) such
Lender’s Revolving Exposure at such time, plus (b) an amount equal to its
Applicable Percentage, if any, of the aggregate principal amount of Protective
Advances outstanding at such time.

“Default” means any event 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 Schedule 3.06.

“Document” has the meaning assigned to such term in the Security Agreement.

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

“Domestic Subsidiary” means any Subsidiary organized under the laws of the
United States of America, any State thereof, or the District of Columbia.

“EBITDA” means, for any period, Net Income for such period, plus (a) without
duplication and to the extent deducted in determining Net Income for such
period, the sum of (i) Interest Expense for such period, (ii) income tax expense
for such period net of tax refunds, (iii) all amounts attributable to
depreciation and amortization expense for such period, (iv) non-cash charges
related to the impairment of intangibles, (v) non-cash expenses associated with
stock grants (excluding any such non-cash expense to the extent it represents an
accrual or reserve for potential cash expense in any future period or
amortization of a prepaid cash expense that was paid in a prior period) minus
(b) without duplication and to the extent included in Net Income, (i) any
extraordinary gains and any non-cash items of income for such period, and
(ii) interest income, all calculated for the Company and its Subsidiaries on a
consolidated basis in accordance with GAAP.

“Effective Date” means the date on which the conditions specified in Section
4.01 are satisfied (or waived in accordance with Section 9.02).

“Eligible Accounts” means, at any time, the Accounts of a Borrower which the
Co-Collateral Agents determine in their Permitted Discretion are eligible as the
basis for the extension of Revolving Loans, Swingline Loans and the issuance of
Letters of Credit hereunder. Without limiting the discretion of the
Co-Collateral Agents provided herein, Eligible Accounts shall not include any
Account:

(a) which is not owned by such Borrower or not subject to a first priority
perfected security interest in favor of the Co-Collateral Agents for the benefit
of the Secured Creditors;

 

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(b) which is subject to any Lien other than (i) a Lien in favor of the
Administrative Agent and (ii) a Permitted Encumbrance which does not have
priority over the Lien in favor of the Co-Collateral Agents for the benefit of
the Secured Creditors;

(c) (i) with respect to a Borrower that ages its Accounts based on the date of
the original invoice with respect thereto, which is unpaid more than 90 days
after the date of the original invoice therefor, (ii) with respect to a Borrower
that ages its Accounts based on the scheduled due date of such Account, which is
unpaid more than the earlier of (x) 60 days after the original scheduled due
date therefor and (y) 120 days after the date of the original invoice therefor,
or (iii) with respect to any Borrower, which has a scheduled due date that is
more than 60 days after the original invoice date, has been written off the
books of such Borrower or has otherwise been designated as uncollectible;

(d) which is owing by an Account Debtor for which more than 25% of the Accounts
owing from such Account Debtor and its Affiliates are ineligible hereunder;

(e) which is owing by an Account Debtor to the extent (but only to the extent)
the aggregate amount of Accounts owing from such Account Debtor and its
Affiliates to (i) such Borrower exceeds 50% of the aggregate amount of Eligible
Accounts of such Borrower or (ii) all Borrowers exceeds 15% of the aggregate
amount of Eligible Accounts of all Borrowers (but such Account to the extent not
in excess of such limitation shall be deemed eligible if it is not otherwise
deemed ineligible pursuant to the other criteria set forth in this definition);

(f) with respect to which any covenant, representation, or warranty contained in
this Agreement or in the Security Agreement has been breached or is not true;

(g) which (i) does not arise from the sale of goods or performance of services
in the ordinary course of business, (ii) is not evidenced by an invoice or other
documentation satisfactory to the Administrative Agent in its Permitted
Discretion which has been sent to the Account Debtor, (iii) represents a
progress billing, (iv) is contingent upon the Borrower’s completion of any
further performance, (v) represents a sale on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment, cash-on-delivery or any other
repurchase or return basis or (vi) relates to payments of interest;

(h) for which the goods giving rise to such Account have not been shipped to the
Account Debtor or for which the services giving rise to such Account have not
been performed by such Borrower or if such Account was invoiced more than once;

(i) with respect to which any check or other instrument of payment has been
returned uncollected for any reason;

(j) which is owed by an Account Debtor which has (i) applied for, suffered, or
consented to the appointment of any receiver, custodian, trustee, or liquidator
of its assets, (ii) has had possession of all or a material part of its property
taken by any receiver, custodian, trustee or liquidator, (iii) filed, or had
filed against it, any request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or
voluntary or involuntary case under any state or federal bankruptcy laws (other
than post-petition accounts payable of an Account Debtor that is a
debtor-in-possession under the Bankruptcy Code and reasonably acceptable to the
Administrative Agent), (iv) has admitted in writing its inability, or is
generally unable to, pay its debts as they become due, (v) become insolvent, or
(vi) ceased operation of its business;

 

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(k) which is owed by any Account Debtor which has sold all or a substantially
all of its assets;

(l) which is owed by an Account Debtor which (i) does not maintain its chief
executive office in the U.S. or Canada or (ii) is not organized under applicable
law of the U.S., any state of the U.S., Canada, or any province of Canada
unless, in either case, such Account is backed by a Letter of Credit acceptable
to the Administrative Agent which is in the possession of, has been assigned to
and is directly drawable by the Administrative Agent;

(m) which is owed in any currency other than U.S. dollars;

(n) which is owed by (i) the government (or any department, agency, public
corporation, or instrumentality thereof) of any country other than the U.S.
unless such Account is backed by a Letter of Credit acceptable to the
Administrative Agent which is in the possession of the Administrative Agent, or
(ii) the government of the U.S., or any department, agency, public corporation,
or instrumentality thereof, unless the Federal Assignment of Claims Act of 1940,
as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other
steps necessary to perfect the Lien of the Administrative Agent in such Account
have been complied with to the Administrative Agent’s satisfaction;

(o) which is owed by any Affiliate, employee, officer, director, agent or
stockholder of any Loan Party;

(p) which, for any Account Debtor, exceeds a credit limit determined by the
Co-Collateral Agents in their Permitted Discretion, to the extent of such
excess;

(q) which is owed by an Account Debtor or any Affiliate of such Account Debtor
to which any Loan Party is indebted, but only to the extent of such indebtedness
or is subject to any security, deposit, progress payment, retainage or other
similar advance made by or for the benefit of an Account Debtor, in each case to
the extent thereof;

(r) which is subject to any counterclaim, deduction, defense, setoff or dispute
but only to the extent of any such counterclaim, deduction, defense, setoff or
dispute;

(s) which is evidenced by any promissory note, chattel paper, or instrument;

(t) which is owed by an Account Debtor located in any jurisdiction which
requires filing of a “Notice of Business Activities Report” or other similar
report in order to permit such Borrower to seek judicial enforcement in such
jurisdiction of payment of such Account, unless such Borrower has filed such
report or qualified to do business in such jurisdiction;

(u) with respect to which such Borrower has made any agreement with the Account
Debtor for any reduction thereof, other than discounts and adjustments given in
the ordinary course of business, or any Account which was partially paid and
such Borrower created a new receivable for the unpaid portion of such Account;

(v) which does not comply in all material respects with the requirements of all
applicable laws and regulations, whether Federal, state or local, including
without limitation the Federal Consumer Credit Protection Act, the Federal Truth
in Lending Act and Regulation Z of the Board;

 

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(w) which is for goods that have been sold under a purchase order or pursuant to
the terms of a contract or other agreement or understanding (written or oral)
that indicates or purports that any Person other than such Borrower has or has
had an ownership interest in such goods, or which indicates any party other than
such Borrower as payee or remittance party;

(x) which was created on cash on delivery terms; or

(y) which the Co-Collateral Agents determine in their Permitted Discretion may
not be paid by reason of the Account Debtor’s inability to pay or which the
Co-Collateral Agents otherwise determine in their Permitted Discretion is
unacceptable.

In the event that an Account which was previously an Eligible Account ceases to
be an Eligible Account hereunder, such Borrower or the Borrower Representative
shall notify the Administrative Agent thereof on and at the time of submission
to the Administrative Agent of the next Aggregate Borrowing Base Certificate and
the Borrowing Base Certificate of any Borrower. In determining the amount of an
Eligible Account, the face amount of an Account may, in the Co-Collateral
Agents’ Permitted Discretion, be reduced by, without duplication, to the extent
not reflected in such face amount, (i) the amount of all accrued and actual
discounts, claims, credits or credits pending, promotional program allowances,
price adjustments, finance charges or other allowances (including any amount
that such Borrower may be obligated to rebate to an Account Debtor pursuant to
the terms of any agreement or understanding (written or oral)) and (ii) the
aggregate amount of all cash received in respect of such Account but not yet
applied by such Borrower to reduce the amount of such Account.

“Eligible Inventory” means, at any time, the Inventory of a Borrower which the
Co-Collateral Agents determine in their Permitted Discretion is eligible as the
basis for the extension of Revolving Loans, Swingline Loans and the issuance of
Letters of Credit hereunder. Without limiting the discretion of the
Co-Collateral Agents provided herein, Eligible Inventory shall not include any
Inventory:

(a) which is not owned by such Borrower or not subject to a first priority
perfected Lien in favor of the Co-Collateral Agents for the benefit of the
Secured Creditors;

(b) which is subject to any Lien other than (i) a Lien in favor of the
Administrative Agent and (ii) a Permitted Encumbrance which does not have
priority over the Lien in favor of the Co-Collateral Agents for the benefit of
the Secured Creditors;

(c) which is, in the Co-Collateral Agents’ Permitted Discretion, slow moving,
obsolete, unmerchantable, defective, damaged, shopworn, used, unfit for sale,
not salable at prices approximating at least the cost of such Inventory in the
ordinary course of business or unacceptable due to age, type, category and/or
quantity;

(d) with respect to which any covenant, representation, or warranty contained in
this Agreement or the Security Agreement has been breached or is not true and
which does not conform to all standards imposed by any Governmental Authority;

(e) in which any Person other than such Borrower shall (i) have any direct or
indirect ownership, interest or title to such Inventory or (ii) be indicated on
any purchase order or invoice with respect to such Inventory as having or
purporting to have an interest therein;

(f) which is not finished goods, work-in-process or raw materials, or which
constitutes spare or replacement parts, subassemblies, packaging and shipping
material, manufacturing supplies, samples, prototypes, displays or display
items, bill-and-hold goods,

 

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goods that are returned or marked for return, repossessed goods, defective or
damaged goods, goods held on consignment, or goods which are not of a type held
for sale in the ordinary course of business;

(g) which is not located in the U.S. or is in transit with a common carrier from
vendors and suppliers;

(h) which is located in any location leased by such Borrower unless (i) such
Inventory, when aggregated with all other Inventory of such Borrower located at
such location, has a fair market value in excess of $500,000, and (ii) either
(x) the lessor has delivered to the Administrative Agent a Collateral Access
Agreement or (y) a three month Reserve for rent, charges, and other amounts due
or to become due with respect to such facility has been established by the
Co-Collateral Agents in their Permitted Discretion;

(i) which is located in any third party warehouse or is in the possession of a
bailee (other than a third party processor) and is not evidenced by a Document
(other than bills of lading to the extent permitted pursuant to clause
(g) above), unless (i) such Inventory, when aggregated with all other Inventory
of such Borrower located at such location, has a fair market value in excess of
$500,000, and (ii) either (x) such warehouseman or bailee has delivered to the
Administrative Agent a Collateral Access Agreement and such other documentation
as the Administrative Agent may require or (y) an appropriate Reserve has been
established by the Co-Collateral Agents in their Permitted Discretion;

(j) which is being processed offsite at a third party location or outside
processor (other than such Inventory of Premier and North American which is
processed at processors disclosed to the Co-Collateral Agents prior to the
Effective Date and such Inventory of Great Western which is processed with Metal
Processing Corporation at its location in Gary, Indiana, provided, in each case,
an appropriate Reserve has been established by the Co-Collateral Agents in their
Permitted Discretion and the aggregate amount of all such Inventory located at
all such processors that may be included as “Eligible Inventory” shall not
exceed $35,000,000), or is in-transit to or from said third party location or
outside processor;

(k) which is a discontinued product or component thereof;

(l) which is the subject of a consignment by such Borrower as consignor (unless
(i) such Inventory, when aggregated with all other Inventory of such Borrower in
the possession of the counterparty (the “consignee”) to such consignment, has a
fair market value in excess of $500,000, (ii) such Borrower has (A) perfected
its security interest in such consigned Inventory by filing a financing
statement pursuant to Section 9-505 of the UCC, naming such Borrower, as
consignor, and the consignee, as consignee and (B) notified the Administrative
Agent of the exact legal name of the consignee and such consignee’s correct
address and contact person for notice purposes, (ii) the Administrative Agent
has sent a notice that complies with the requirements set forth in
Section 9-324(b) of the UCC to such consignee to the extent such Borrower has
not perfected its security interest as described in the foregoing clause (i)(A)
prior to the time that the consignee receives possession of such Inventory, and
(iii) such consignee has delivered to the Administrative Agent a Collateral
Access Agreement and such other documentation as the Administrative Agent may
require; provided, however, that the aggregate amount of all Inventory which is
the subject of a consignment by one or more Borrowers as consignors that may be
included as “Eligible Inventory” shall not exceed $10,000,000);

(m) which is perishable;

 

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(n) which contains or bears any intellectual property rights licensed to such
Borrower unless the Administrative Agent is satisfied in its Permitted
Discretion that it may sell or otherwise dispose of such Inventory without
(i) infringing the rights of such licensor, (ii) violating any contract with
such licensor, or (iii) incurring any liability with respect to payment of
royalties other than royalties incurred pursuant to sale of such Inventory under
the current licensing agreement;

(o) which is not reflected in a current perpetual inventory report of such
Borrower (unless such Inventory is reflected in a report to the Administrative
Agent as “in transit” Inventory);

(p) for which reclamation rights have been asserted by the seller;

(q) which the Co-Collateral Agents otherwise determine is unacceptable in their
Permitted Discretion;

(r) which is not covered by casualty insurance as required by the Loan
Documents; or

(s) which consists of Hazardous Materials or goods that can be transported or
sold only with licenses not readily available.

In the event that Inventory which was previously Eligible Inventory ceases to be
Eligible Inventory hereunder, such Borrower or the Borrower Representative shall
notify the Administrative Agent thereof on and at the time of submission to the
Administrative Agent of the next Aggregate Borrowing Base Certificate and the
Borrowing Base Certificate of any Borrower.

“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 any 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.

“Equipment” has the meaning assigned to such term in the Security Agreement.

“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, as amended
from time to time.

 

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“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with a Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, 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 any 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 any 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 any
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 any Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from any 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 Adjusted 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,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of any 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 or income taxes imposed by the United States of America or any similar
tax imposed by any other jurisdiction in which any Borrower is located and
(c) in the case of a Foreign Lender (other than an assignee pursuant to a
request by a 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 Borrowers with respect to such withholding
tax pursuant to Section 2.17(a).

“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.

 

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“Financial Officer” means the chief financial officer, principal accounting
officer, vice president of finance, treasurer or controller of a Borrower.

“Fixed Charges” means, with reference to any period, without duplication, cash
Interest Expense, plus prepayments and scheduled principal payments on
Indebtedness made during such period, plus expense for income taxes paid in
cash, plus dividends or distributions paid in cash (other than the dividends
paid by the Company in April 2007 in an aggregate amount not in excess of
$4,613,000), plus Capital Lease Obligation payments, plus cash contributions to
any Plan, all calculated for the Company and its Subsidiaries on a consolidated
basis.

“Fixed Charge Coverage Ratio” means the ratio of (a) EBITDA, minus the
unfinanced portion of Capital Expenditures to (b) Fixed Charges, determined as
of the end of each fiscal quarter of the Company for (i) the Company’s fiscal
quarter ending June 30, 2007, (ii) the Company’s two consecutive fiscal quarters
ending September 30, 2007, (iii) the Company’s three consecutive fiscal quarters
ending December 31, 2007, and (iv) the then most recently ending four fiscal
quarters, beginning March 31, 2008, and thereafter, and calculated for the
Company and its Subsidiaries on a consolidated basis in accordance with GAAP.

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

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Franklin Documents” means (a) the Franklin Stock Purchase Agreements, and
(b) the other agreements, documents and instruments executed and delivered in
connection therewith.

“Franklin Mutual” means Franklin Mutual Advisers, LLC, a Delaware limited
liability company.

“Franklin Stock Purchase Agreements” means that certain (i) Preferred Stock
Purchase Agreement dated as of November 8, 2004, by and among the Company,
Esmark LLC, Bouchard Group, L.L.C. and Franklin Mutual and (ii) Preferred Stock
Purchase Agreement dated as of April 28, 2005, by and among the Company and
Franklin Mutual Advisers, LLC.

“Funding Accounts” has the meaning assigned to such term in Section 4.01(h).

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

“GE” means General Electric Capital Corporation, in its individual capacity, and
its successors.

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

“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

 

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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.

“Guaranteed Obligations” has the meaning assigned to such term in Section 10.01.

“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.

“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 (excluding accounts payable in the ordinary course
of business), (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, (j) all
obligations, contingent or otherwise, of such Person in respect of bankers’
acceptances, (k) obligations under any liquidated earn-out and (l) all other
Off-Balance Sheet Liabilities. 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.

“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money
of the Borrowers that is not guaranteed by any other Person or subject to any
other credit enhancement.

“Interest Election Request” means a request by the Borrower Representative to
convert or continue a Revolving Borrowing in accordance with Section 2.08.

“Interest Expense” means, with reference to any period, total interest expense
(including that attributable to Capital Lease Obligations but excluding interest
income) of the Company and its Subsidiaries for such period with respect to all
outstanding Indebtedness of the Company and its Subsidiaries (including all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers’ acceptance financing and net costs under Swap Agreements
in respect of interest rates to the extent such net costs are allocable to such
period in accordance with GAAP), calculated on a consolidated basis for the
Company and its Subsidiaries for such period in accordance with GAAP.

 

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“Interest Payment Date” means (a) with respect to any ABR Loan (other than a
Swingline Loan), the first day of each calendar month and the Maturity Date, and
(b) 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 the Maturity Date.

“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 Representative 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
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.

“Inventory” has the meaning assigned to such term in the Security Agreement.

“Issuing Bank” means Chase, in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.06(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.

“Joinder Agreement” has the meaning assigned to such term in Section 5.13.

“LC Collateral Account” has the meaning assigned to such term in Section
2.06(j).

“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
Borrowers at such time. The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.

“Lenders” means the Persons listed on the Commitment Schedule 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 Swingline Lender.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable

 

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to those currently provided on such page of such Service, as determined by the
Administrative Agent in its Permitted Discretion from time to time for purposes
of providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable 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 (rounded upwards, if necessary, to the next 1/16 of 1%) 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 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, any promissory notes issued pursuant to
the Agreement, any Letter of Credit applications, the Collateral Documents, the
Loan Guaranty and all other agreements, instruments, documents and certificates
identified in Section 4.01 executed and delivered to, or in favor of, the
Administrative Agent or any Lenders and all other perfection certificates,
pledges, powers of attorney, consents, assignments, contracts, notices, letter
of credit agreements and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Loan Party, or any employee of any
Loan Party, and delivered to the Administrative Agent or any Lender in
connection with the Agreement or the transactions contemplated thereby. Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to the
Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.

“Loan Guarantor” means each Loan Party (other than the Borrowers).

“Loan Guaranty” means Article X of this Agreement and each separate Guarantee,
in form and substance satisfactory to the Administrative Agent, delivered by
each Loan Guarantor that is a Foreign Subsidiary (which Guarantee shall be
governed by the laws of the country in which such Foreign Subsidiary is
located), as it may be amended or modified and in effect from time to time.

“Loan Parties” means the Borrowers, the Borrowers’ Domestic Subsidiaries and any
other Person who becomes a party to this Agreement pursuant to a Joinder
Agreement and their successors and assigns.

“Loans” means the loans and advances made by the Lenders pursuant to this
Agreement, including Swingline Loans, Overadvances and Protective Advances.

“Long-Term Debt” means any Indebtedness that, in accordance with GAAP,
constitutes (or, when incurred, constituted) a long-term liability.

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, prospects or condition, financial or otherwise, of the
Company and its Subsidiaries taken as a

 

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whole, (b) the ability of any Loan Party to perform any of its obligations under
the Loan Documents to which it is a party, (c) the Collateral, or the
Administrative Agent’s Liens (on behalf of itself and the Secured Creditors) on
the Collateral or the priority of such Liens, or (d) the rights of or benefits
available to the Administrative Agent, the Co-Collateral Agents, the Issuing
Bank or the Lenders thereunder.

“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 Company and its Subsidiaries in an aggregate principal amount
exceeding $2,000,000. For purposes of determining Material Indebtedness, the
“obligations” of any 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 such Borrower or such Subsidiary would be required to pay if
such Swap Agreement were terminated at such time.

“Maturity Date” means April 30, 2012 or any earlier date on which the
Commitments are reduced to zero or otherwise terminated pursuant to the terms
hereof.

“Maximum Liability” has the meaning assigned to such term in Section 10.10.

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

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

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

“Net Orderly Liquidation Value” means, with respect to Inventory of any Person,
the orderly liquidation value thereof as determined in a manner acceptable to
the Administrative Agent by an appraiser acceptable to the Administrative Agent,
net of all costs of liquidation thereof.

“Net Proceeds” means, with respect to any event, (a) the cash proceeds received
in respect of such event including (i) any cash received in respect of any
non-cash proceeds (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or purchase
price adjustment receivable or otherwise, but excluding any interest payments),
but only as and when received, (ii) in the case of a casualty, insurance
proceeds and (iii) in the case of a condemnation or similar event, condemnation
awards and similar payments, net of (b) the sum of (i) all reasonable fees and
out-of-pocket expenses paid to third parties (other than Affiliates) in
connection with such event, (ii) in the case of a sale, transfer or other
disposition of an asset (including pursuant to a sale and leaseback transaction
or a casualty or a condemnation or similar proceeding), the amount of all
payments required to be made as a result of such event to repay Indebtedness
(other than Loans) secured by such asset or otherwise subject to mandatory
prepayment as a result of such event and (iii) the amount of all taxes paid (or
reasonably estimated to be payable) and the amount of any reserves established
to fund contingent liabilities reasonably estimated to be payable, in each case
during the year that such event occurred or the next succeeding year and that
are directly attributable to such event (as determined reasonably and in good
faith by a Financial Officer).

 

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“Non-Consenting Lender” has the meaning assigned to such term in Section
9.02(d).

“Non-Paying Guarantor” has the meaning assigned to such term in Error! Reference
source not found.

“Obligated Party” has the meaning assigned to such term in Section 10.02.

“Obligations” means all unpaid principal of and accrued and unpaid interest on
the Loans, all LC Exposure, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Loan Parties to the
Lenders or to any Lender, the Administrative Agent, the Co-Collateral Agents,
the Issuing Bank or any indemnified party arising under the Loan Documents.

“Off-Balance Sheet Liabilities” of a Person means (a) any repurchase obligation
or liability of such Person with respect to accounts or notes receivable sold by
such Person, (b) any indebtedness, liability or obligation under any so-called
“synthetic lease” transaction entered into by such Person, or (c) any
indebtedness, liability or obligation arising with respect to any other
transaction which is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the balance sheets of
such Person (other than operating leases).

“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.

“Overadvance” has the meaning assigned to such term in Section 2.05(b).

“Participant” has the meaning set forth in Section 9.04(c).

“Paying Guarantor” has the meaning assigned to such term in Error! Reference
source not found.

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

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

“Permitted Encumbrances” means:

(a) Liens imposed by law for taxes that are not yet due or are being contested
in compliance with Section 5.04;

(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 5.04;

(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;

 

18

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

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

(f) 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 any Borrower or any Subsidiary; and

(g) statutory landlord’s Liens under leases under which the Company or any of
its Subsidiaries is a tenant or other Liens on leased property reserved in
leases thereof for rent.

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 $250,000,000;

(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 Securities
and Exchange Commission 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 any 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.

 

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“Prepayment Event” means:

(a) any sale, transfer or other disposition (including pursuant to a sale and
leaseback transaction) of any property or asset of any Loan Party, other than
dispositions described in Section 6.05(a); or

(b) any casualty or other insured damage to, or any taking under power of
eminent domain or by condemnation or similar proceeding of, any property or
asset of any Loan Party with a fair value immediately prior to such event equal
to or greater than $250,000; or

(c) the issuance by the Company of any Equity Interests, or the receipt by the
Company of any capital contribution; or

(d) the incurrence by any Loan Party of any Indebtedness, other than
Indebtedness permitted under Section 6.01 or permitted by the Required Lenders
pursuant to Section 9.02.

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

“Projections” has the meaning assigned to such term in Section 5.01(e).

“Protective Advance” has the meaning assigned to such term in Section 2.04.

“Register” has the meaning set forth in Section 9.04.

“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.

“Rentals” means, with reference to any period, the aggregate fixed amounts
payable by the Company and its Subsidiaries under any operating leases,
calculated on a consolidated basis for the Company and its Subsidiaries for such
period in accordance with GAAP.

“Report” means reports prepared by the Administrative Agent or another Person
showing the results of appraisals, field examinations or audits pertaining to
the Borrowers’ assets from information furnished by or on behalf of the
Borrowers, after the Administrative Agent has exercised its rights of inspection
pursuant to this Agreement, which Reports may be distributed to the Lenders by
the Administrative Agent.

“Required Lenders” means, at any time, Lenders having Credit Exposure and unused
Commitments representing more than 50% of the sum of the total Credit Exposure
and unused Commitments at such time; provided that, as long as there are only
two Lenders, Required Lenders shall mean both Lenders.

“Requirement of Law” means, as to any Person, the Certificate of Incorporation
and By-Laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

 

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“Reserves” means any and all reserves which the Co-Collateral Agents deem
necessary, in their Permitted Discretion, to maintain (including, without
limitation, an availability reserve, reserves for accrued and unpaid interest on
the Secured Obligations, Banking Services Reserves, reserves for rent at
locations leased by any Loan Party and for consignee’s, warehousemen’s and
bailee’s charges, reserves for dilution of Accounts to the extent such dilution
exceeds 5%, reserves for Inventory shrinkage, reserves for customs charges and
shipping charges related to any Inventory in transit, reserves for Swap
Obligations, reserves for contingent liabilities of any Loan Party, reserves for
uninsured losses of any Loan Party, reserves for uninsured, underinsured,
un-indemnified or under-indemnified liabilities or potential liabilities with
respect to any litigation and reserves for taxes, fees, assessments, and other
governmental charges) with respect to the Collateral or any Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the
Company 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 in the Company or any option, warrant or other right
to acquire any such Equity Interests in the Company.

“Revolving Exposure” means, with respect to any Lender at any time, the sum of
the outstanding principal amount of such Lender’s Revolving Loans and its LC
Exposure and an amount equal to its Applicable Percentage of the aggregate
principal amount of Swingline Loans outstanding at such time, plus an amount
equal to its Applicable Percentage of the aggregate principal amount of
Overadvances outstanding at such time.

“Revolving Loan” means a Loan made pursuant to Section 2.01.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill
Companies, Inc.

“Secured Creditors” means the Administrative Agent, the Co-Collateral Agents,
the Issuing Bank, all Lenders and their respective Affiliates to which Secured
Obligations are owed by any of the Loan Parties or their Subsidiaries.

“Secured Obligations” means all Obligations, together with all (i) Swap
Obligations owing to one or more Lenders or their respective Affiliates and
(ii) Banking Services Obligations; provided that at or prior to the time that
any transaction relating to such Swap Obligation is executed, the Lender party
thereto (other than Chase) shall have delivered written notice to the
Administrative Agent that such a transaction has been entered into and that it
constitutes a Secured Obligation entitled to the benefits of the Collateral
Documents.

“Security Agreement” means that certain Pledge and Security Agreement, dated as
of the date hereof, between the Loan Parties and the Administrative Agent, for
the benefit of the Administrative Agent and the Secured Creditors, and any other
pledge or security agreement entered into, after the date of this Agreement by
any other Loan Party (as required by this Agreement or any other Loan Document),
as the same may be amended, restated or otherwise modified from time to time.

“Settlement” has the meaning assigned to such term in Section 2.05(d).

“Settlement Date” has the meaning assigned to such term in Section 2.05(d).

 

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“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one, minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

“Subordinated Indebtedness” of a Person means any Indebtedness of such Person
the payment of which is subordinated to payment of the Obligations to the
written satisfaction of the Administrative Agent in its Permitted Discretion.

“Subordination Agreement” means the Subordination Agreement, dated as of the
date hereof, by and between the Administrative Agent, on behalf of the Lenders,
and Franklin Mutual.

“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 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
(a) 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, or (b) that is, as of such date, otherwise
Controlled, 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 direct or indirect subsidiary of the Company or a Loan
Party, as applicable.

“Supermajority Revolving Lenders” means, at any time, Lenders having Credit
Exposure and unused Commitments representing more than 75% of the sum of the
total Credit Exposure and unused Commitments at such time.

“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 Borrowers or the
Subsidiaries shall be a Swap Agreement.

“Swap Obligations” of a Person means any and all obligations of such Person,
whether absolute or contingent and howsoever and whensoever created, arising,
evidenced or acquired (including all renewals, extensions and modifications
thereof and substitutions therefor), under, without duplication, (a) any and all
Swap Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Swap Agreement transaction.

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

 

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“Swingline Loan” has the meaning assigned to such term in Section 2.05(a).

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

“Total Commitment” means the sum of the Commitments of the Lenders, as the same
may be decreased pursuant to Section 2.09. As of the Effective Date, the amount
of the Total Commitment is $150,000,000.

“Transactions” means the execution, delivery and performance by the Borrowers of
this Agreement, the borrowing of Loans and other credit extensions, 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 Adjusted LIBO Rate, the Alternate Base Rate.

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of Illinois or any other state the laws of which are required to be
applied in connection with the issue of perfection of security interests.

“Unliquidated Obligations” means, at any time, any Secured Obligations (or
portion thereof) that are contingent in nature or unliquidated at such time,
including any Secured Obligation that is: (i) an obligation to reimburse a bank
for drawings not yet made under a letter of credit issued by it; (ii) any other
obligation (including any guarantee) that is contingent in nature at such time;
or (iii) an obligation to provide collateral to secure any of the foregoing
types of obligations.

“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.

“Working Capital” means, at any date, the excess of current assets of the
Company and its Subsidiaries on such date over current liabilities of the
Company and its Subsidiaries on such date, all determined on a consolidated
basis in accordance with GAAP.

Section 1.02. 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”).

Section 1.03. 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 to the extent permitted hereunder, (c) the words “herein”, “hereof” and

 

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“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 and (e) 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 1.04. 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 Representative notifies the Administrative Agent that the Borrowers
request 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 Representative 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.

Section 1.05. Co-Collateral Agent Determinations. If a Co-Collateral Agent
proposes an adjustment or revision to Borrowing Base advance rates, eligibility
standards or Reserves, the other Co-Collateral Agent shall respond to such
proposal in three Business Days. If the Co-Collateral Agents cannot agree on
Borrowing Base advance rates, eligibility standards, Reserves or any other
action or determination, the determination shall be made by the individual
Co-Collateral Agent either asserting the more conservative credit judgment or
declining to permit the requested action for which consent is being sought by
the Borrowers, as applicable.

Article II

The Credits

Section 2.01. Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Revolving Loans to the Borrowers from time to time
during the Availability Period in an aggregate principal amount that will not
result in (i) such Lender’s Revolving Exposure exceeding such Lender’s
Commitment or (ii) the total Revolving Exposures exceeding the lesser of (A) the
Total Commitment and (B) the Aggregate Borrowing Base, subject to the
Administrative Agent’s authority, in its sole discretion, to make Protective
Advances and Overadvances pursuant to the terms of Section 2.04 and Section
2.05. Within the foregoing limits and subject to the terms and conditions set
forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans.

Section 2.02. Loans and Borrowings. (a) Each Loan (other than a Swingline Loan)
shall be made as part of a Borrowing consisting of Loans of the same Class and
Type made by the Lenders ratably in accordance with their respective Commitments
of the applicable Class. Any Protective Advance, any Overadvance and any
Swingline Loan shall be made in accordance with the procedures set forth in
Section 2.04 and Section 2.05.

(b) Subject to Section 2.14, each Revolving Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower Representative may
request in accordance herewith, provided that all Borrowings made on the
Effective Date must be made as ABR Borrowings but may be converted into
Eurodollar Borrowings in accordance with Section 2.08. 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; provided that any exercise of such option shall not affect the obligation
of the Borrowers to repay such Loan in accordance with the terms of this
Agreement.

 

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(c) At the commencement of each Interest Period for any Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$500,000 and not less than $1,000,000. ABR Revolving Borrowings may be in any
amount. 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 a total of six
Eurodollar Borrowings outstanding.

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

Section 2.03. Requests for Revolving Borrowings. To request a Revolving
Borrowing, the Borrower Representative shall notify the Administrative Agent of
such request either in writing (delivered by hand or facsimile) in a form
approved by the Administrative Agent and signed by the Borrower Representative
or by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00
a.m., Chicago time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than noon, Chicago
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 2.06(e) may be given not later than 9:00 a.m., Chicago
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
facsimile to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower Representative.
Each such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.01:

(i) the name of the applicable Borrower;

(ii) the aggregate amount of the requested Borrowing and a breakdown of the
separate wires comprising such Borrowing;

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

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

(v) 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.”

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 Revolving Borrowing, then
the applicable Borrower(s) 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 2.04. Protective Advances. (a) Subject to the limitations set forth
below, the Administrative Agent is authorized by the Borrowers and the Lenders,
from time to time in the Co-Collateral Agents’ Permitted Discretion (but shall
have absolutely no obligation to), to make Loans to the Borrowers, on behalf of
all Lenders, which the Co-Collateral Agents, in their Permitted Discretion, deem

 

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necessary or desirable (i) to preserve or protect the Collateral, or any portion
thereof, (ii) to enhance the likelihood of, or maximize the amount of, repayment
of the Loans and other Obligations, or (iii) to pay any other amount chargeable
to or required to be paid by the Borrowers pursuant to the terms of this
Agreement, including payments of reimbursable expenses (including costs, fees,
and expenses as described in Section 9.03) and other sums payable under the Loan
Documents (any of such Loans are herein referred to as “Protective Advances”);
provided that the aggregate amount of outstanding Protective Advances, plus the
aggregate Revolving Exposure shall not exceed the aggregate unused Commitments.
Protective Advances may be made even if the conditions precedent set forth in
Section 4.02 have not been satisfied. The Protective Advances shall be secured
by the Liens in favor of the Administrative Agent in and to the Collateral and
shall constitute Obligations hereunder. All Protective Advances shall be ABR
Borrowings. The Administrative Agent’s authorization to make Protective Advances
may be revoked at any time by either Co-Collateral Agent and the Required
Lenders. Any such revocation must be in writing and shall become effective
prospectively upon the Administrative Agent’s receipt thereof. At any time that
there is sufficient Aggregate Availability and the conditions precedent set
forth in Section 4.02 have been satisfied, the Administrative Agent may request
the Lenders to make a Revolving Loan to repay a Protective Advance. At any other
time the Administrative Agent may require the Lenders to fund their risk
participations described in Section 2.04(b).

(b) Upon the making of a Protective Advance by the Administrative Agent (whether
before or after the occurrence of a Default), each Lender shall be deemed,
without further action by any party hereto, to have unconditionally and
irrevocably purchased from the Administrative Agent without recourse or
warranty, an undivided interest and participation in such Protective Advance in
proportion to its Applicable Percentage. From and after the date, if any, on
which any Lender is required to fund its participation in any Protective Advance
purchased hereunder, the Administrative Agent shall promptly distribute to such
Lender, such Lender’s Applicable Percentage of all payments of principal and
interest and all proceeds of Collateral received by the Administrative Agent in
respect of such Protective Advance.

Section 2.05. Swingline Loans and Overadvances. (a) The Administrative Agent,
the Swingline Lender and the Lenders agree that to facilitate the administration
of this Agreement and the other Loan Documents, promptly after the Borrower
Representative requests an ABR Borrowing, the Swingline Lender may elect to have
the terms of this Section 2.05(a) apply to such Borrowing Request by advancing,
on behalf of the Lenders and in the amount requested, same day funds to the
Borrowers, on the applicable Borrowing date to the Funding Account(s) (each such
Loan made solely by the Swingline Lender pursuant to this Section 2.05(a) is
referred to in this Agreement as a “Swingline Loan”), with settlement among them
as to the Swingline Loans to take place on a periodic basis as set forth in
Section 2.05(d). Each Swingline Loan shall be subject to all the terms and
conditions applicable to other ABR Loans funded by the Lenders, except that all
payments thereon shall be payable to the Swingline Lender solely for its own
account. The aggregate amount of Swingline Loans outstanding at any time shall
not exceed $25,000,000. The Swingline Lender shall not make any Swingline Loan
if the requested Swingline Loan exceeds the Aggregate Availability. All
Swingline Loans shall be ABR Borrowings.

(b) Any provision of this Agreement to the contrary notwithstanding, at the
request of the Borrower Representative, the Administrative Agent may in the sole
discretion of the Co-Collateral Agents (but with absolutely no obligation), make
Revolving Loans to the Borrowers, on behalf of the Lenders, in amounts that
exceed the Aggregate Availability (any such excess Revolving Loans are herein
referred to collectively as “Overadvances”); provided that, no Overadvance shall
result in a Default due to Borrowers’ failure to comply with Section 2.01 for so
long as such Overadvance remains outstanding in accordance with the terms of
this paragraph, but solely with respect to the amount of such Overadvance. In
addition, Overadvances may be made even if the condition precedent set forth in
Section 4.02(c) has not been satisfied. All Overadvances shall constitute ABR
Borrowings.

 

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The authority of the Administrative Agent to make Overadvances is limited to an
aggregate amount not to exceed $5,000,000 at any time, no Overadvance may remain
outstanding for more than 30 days and no Overadvance shall cause any Lender’s
Revolving Exposure to exceed its Commitment; provided that, either Co-Collateral
Agent or the Required Lenders may at any time in their Permitted Discretion
revoke the Administrative Agent’s authorization to make Overadvances. Any such
revocation must be in writing and shall become effective prospectively upon the
Administrative Agent’s receipt thereof.

(c) Upon the making of a Swingline Loan or an Overadvance (whether before or
after the occurrence of a Default and regardless of whether a Settlement has
been requested with respect to such Swingline Loan or Overadvance), each Lender
shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from the Swingline Lender or the
Administrative Agent, as the case may be, without recourse or warranty, an
undivided interest and participation in such Swingline Loan or Overadvance in
proportion to its Applicable Percentage of the Total Commitment. The Swingline
Lender or the Administrative Agent may, at any time, require the Lenders to fund
their participations. From and after the date, if any, on which any Lender is
required to fund its participation in any Swingline Loan or Overadvance
purchased hereunder, the Administrative Agent shall promptly distribute to such
Lender, such Lender’s Applicable Percentage of all payments of principal and
interest and all proceeds of Collateral received by the Administrative Agent in
respect of such Loan.

(d) The Administrative Agent, on behalf of the Swingline Lender, shall request
settlement (a “Settlement”) with the Lenders on at least a weekly basis or on
any date that the Administrative Agent elects, by notifying the Lenders of such
requested Settlement by facsimile, telephone, or e-mail no later than 12:00 noon
Chicago time on the date of such requested Settlement (the “Settlement Date”).
Each Lender (other than the Swingline Lender, in the case of the Swingline
Loans) shall transfer the amount of such Lender’s Applicable Percentage of the
outstanding principal amount of the applicable Loan with respect to which
Settlement is requested to the Administrative Agent, to such account of the
Administrative Agent as the Administrative Agent may designate, not later than
2:00 p.m., Chicago time, on such Settlement Date. Settlements may occur during
the existence of a Default and whether or not the applicable conditions
precedent set forth in Section 4.02 have then been satisfied. Such amounts
transferred to the Administrative Agent shall be applied against the amounts of
the Swingline Lender’s Swingline Loans and, together with Swingline Lender’s
Applicable Percentage of such Swingline Loan, shall constitute Revolving Loans
of such Lenders, respectively. If any such amount is not transferred to the
Administrative Agent by any Lender on such Settlement Date, the Swingline Lender
shall be entitled to recover such amount on demand from such Lender together
with interest thereon as specified in Section 2.07.

Section 2.06. Letters of Credit. (a) General. Subject to the terms and
conditions set forth herein, the Borrower Representative may request the
issuance of Letters of Credit for its own account or for the account of another
Borrower, in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from time to time during the Availability Period.
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 Borrowers to, or entered into by
the Borrowers 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 Representative shall
hand deliver or facsimile (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 (prior to 9:00 am, Chicago time, at least
three Business Days prior to

 

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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 paragraph (c)
of this Section), 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 applicable 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 Borrowers 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 $25,000,000, and (ii) the total Revolving Exposures
shall not exceed the lesser of (A) the Total Commitment and (B) the Aggregate
Borrowing Base.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close
of business on the earlier of (i) the date 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 Maturity Date.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants
to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
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 Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrowers on the
date due as provided in paragraph (e) of this Section, or of any reimbursement
payment required to be refunded to the Borrowers for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph 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. If the Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the Borrowers shall reimburse such LC Disbursement by
paying to the Administrative Agent an amount equal to such LC Disbursement not
later than 11:00 a.m., Chicago time, on the date that such LC Disbursement is
made, if the Borrowers Representative shall have received notice of such LC
Disbursement prior to 9:00 a.m., Chicago time, on such date, or, if such notice
has not been received by the Borrower Representative prior to such time on such
date, then not later than 11:00 a.m., Chicago time, on (i) the Business Day that
the Borrower Representative receives such notice, if such notice is received
prior to 9:00 a.m., Chicago time, on the day of receipt, or (ii) the Business
Day immediately following the day that the Borrower Representative receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that the Borrowers may, subject to the conditions to borrowing set
forth herein, request in accordance with Section 2.03 or Section 2.05 that such
payment be financed with an ABR Revolving Borrowing or Swingline Loan in an
equivalent amount and, to the extent so financed, the Borrowers’ obligation to
make such payment shall be discharged and replaced by the resulting ABR
Revolving Borrowing or Swingline Loan. If the Borrowers fail to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the Borrowers in respect
thereof and such

 

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Lender’s Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrowers, in the same manner as
provided in Section 2.07 with respect to Loans made by such Lender (and Section
2.07 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
and the Administrative Agent shall promptly pay to the Issuing Bank the amounts
so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrowers pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing
Bank as their interests may appear. Any payment made by a Lender pursuant to
this paragraph 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 Borrowers of their
obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. The Borrowers’ joint and several obligation to
reimburse LC Disbursements as provided in paragraph (e) of this Section 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) 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 Borrowers’ 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 Borrowers to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrowers to the extent permitted by applicable law) suffered by
any 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 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 applicable Borrower by telephone (confirmed by
facsimile) 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 Borrowers of their obligation
to reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.

 

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(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then,
unless the Borrowers 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 Borrowers reimburse such LC Disbursement, at the
rate per annum then applicable to ABR Revolving Loans; provided that, if the
Borrowers fail to reimburse such LC Disbursement when due pursuant to
paragraph (e) of this Section, then Section 2.13(d) shall apply. Interest
accrued pursuant to this paragraph 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 paragraph (e) of this Section 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 Representative, 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
Borrowers shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.12(b). 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 Representative 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 paragraph, the Borrowers shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders (the “LC Collateral Account”), an amount in cash equal to
105% of the LC Exposure as of such date, plus 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 any Borrower described in clause (h) or (i) of
Article VII. Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the Secured Obligations. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account and the Borrowers hereby grant
the Administrative Agent a security interest in the LC Collateral 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 Borrowers’ 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 Borrowers 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 Secured Obligations. If the Borrowers
are required to provide an amount of cash

 

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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
Borrowers within three Business Days after all such Defaults have been cured or
waived.

Section 2.07. 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 1:00 p.m., Chicago time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders in an amount equal to such Lender’s Applicable Percentage;
provided that Swingline Loans shall be made as provided in Section 2.05. The
Administrative Agent will make such Loans available to the Borrower
Representative by promptly crediting the amounts so received, in like funds, to
the Funding Account(s); provided that ABR Revolving Loans made to finance the
reimbursement of (i) an LC Disbursement as provided in Section 2.06(e) shall be
remitted by the Administrative Agent to the Issuing Bank and (ii) a Protective
Advance or an Overadvance shall be retained by the Administrative Agent.

(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 paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the applicable 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 Borrowers 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
applicable 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
Borrowers, the interest rate applicable to ABR 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 2.08. Interest Elections. (a) Each Revolving Borrowing initially shall
be of the Type specified in the applicable Borrowing Request and, in the case of
a Eurodollar Revolving Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. Thereafter, the Borrower Representative may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower
Representative 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, Overadvances or Protective
Advances, which may not be converted or continued.

(b) To make an election pursuant to this Section, the Borrower Representative
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.03 if the Borrowers
were requesting a Revolving 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 facsimile to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower Representative.

 

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(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:

(i) the Borrower and the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated 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 Borrowers 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 Representative 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 Representative,
then, so long as an Event of Default is continuing (i) no outstanding Revolving
Borrowing may be converted to or continued as a Eurodollar Borrowing and
(ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted to an
ABR Borrowing at the end of the Interest Period applicable thereto.

Section 2.09. Termination and Reduction of Commitments. (a) Unless previously
terminated, all Commitments shall terminate on the Maturity Date.

(b) The Borrowers may at any time terminate the Commitments upon (i) the payment
in full of all outstanding Loans, together with accrued and unpaid interest
thereon and on any Letters of Credit, (ii) the cancellation and return of all
outstanding Letters of Credit (or alternatively, with respect to each such
Letter of Credit, the furnishing to the Administrative Agent of a cash deposit
(or at the discretion of the Administrative Agent a back up standby letter of
credit satisfactory to the Administrative Agent) equal to 105% of the LC
Exposure as of such date), (iii) the payment in full of the accrued and unpaid
fees, and (iv) the payment in full of all reimbursable expenses and other
Obligations together with accrued and unpaid interest thereon.

(c) The Borrowers may from time to time reduce the Commitments; provided that
(i) each reduction of the Commitments shall be in an amount that is an integral
multiple of $500,000 and not less than $1,000,000 and (ii) the Borrowers shall
not reduce the Commitments if, after giving effect to any concurrent prepayment
of the Revolving Loans in accordance with Section 2.11, (A) the

 

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sum of the Revolving Exposures would exceed the lesser of (x) the Total
Commitment and (y) the Aggregate Borrowing Base or (B) the total Revolving
Loans, Swingline Loans and LC Exposure of any Borrower would exceed its
Borrowing Base.

(d) The Borrower Representative shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) or (c) of
this Section at least three Business Days 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 Representative pursuant to this Section shall be irrevocable; provided
that a notice of termination of the Commitments delivered by the Borrower
Representative 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 Representative (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 Commitments shall be permanent. Each reduction
of the Commitments shall be made ratably among the Lenders in accordance with
their respective Commitments.

Section 2.10. Repayment and Amortization of Loans; Evidence of Debt. (a) The
Borrowers hereby unconditionally promise to pay (i) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each
Revolving Loan on the Maturity Date, (ii) to the Administrative Agent the then
unpaid amount of each Protective Advance on the earlier of the Maturity Date and
demand by the Administrative Agent, and (iii) to the Administrative Agent the
then unpaid principal amount of each Overadvance on the earlier of the Maturity
Date and the 30th day after such Overadvance is made.

(b) At all times that full cash dominion is in effect pursuant to Section 7.3 of
the Security Agreement, on each Business Day, the Administrative Agent shall
apply all funds credited to the Collection Account the previous Business Day
(whether or not immediately available) first to prepay any Protective Advances
and Overadvances that may be outstanding, pro rata, and second to prepay the
Revolving Loans (including Swing Line Loans) and to cash collateralize
outstanding LC Exposure.

(c) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of the Borrowers 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.

(d) 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 Borrowers 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.

(e) The entries made in the accounts maintained pursuant to paragraph (c) or
(d) of this Section 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 any error therein shall
not in any manner affect the obligation of the Borrowers to repay the Loans in
accordance with the terms of this Agreement.

(f) Any Lender may request that Loans made by it be evidenced by a promissory
note. In such event, the Borrowers shall prepare, execute and deliver to such
Lender a

 

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promissory note payable to the order of such Lender (or, if requested by such
Lender, to such Lender and its registered assigns) and in a form approved by the
Administrative Agent. Thereafter, the Loans evidenced by such promissory note
and interest thereon shall at all times (including after assignment pursuant to
Section 9.04) 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 2.11. Prepayment of Loans. (a) The Borrowers shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with paragraph (e) of this Section. Each partial
prepayment of a Eurodollar Loan shall be in an aggregate principal amount of at
least $1,000,000 (or, if less, the full amount of such Borrowing), or an
integral multiple of $500,000 in excess thereof. Any prepayment made pursuant to
this Section 2.11 shall be accompanied by any amounts payable in respect thereof
under Section 2.16.

(b) Except for Overadvances permitted under Section 2.05, in the event and on
such occasion that the total Revolving Exposure exceeds the lesser of (i) the
Total Commitment and (ii) the Aggregate Borrowing Base, the Borrowers shall
prepay the Revolving Loans, LC Exposure and/or Swingline Loans in an aggregate
amount equal to such excess.

(c) In the event and on each occasion that any Net Proceeds are received by or
on behalf of any Loan Party in respect of any Prepayment Event, the Borrowers
shall, immediately after such Net Proceeds are received by any Loan Party,
prepay the Obligations as set forth in Section 2.11(d) below in an aggregate
amount equal to 100% of such Net Proceeds, provided that, in the case of any
event described in clause (a) or (b) of the definition of the term “Prepayment
Event”, if the Borrower Representative shall deliver to the Administrative Agent
a certificate of a Financial Officer to the effect that the Loan Parties intend
to apply the Net Proceeds from such event (or a portion thereof specified in
such certificate), within 90 days after receipt of such Net Proceeds, to acquire
(or replace or rebuild) real property, equipment or other tangible assets
(excluding inventory) to be used in the business of the Loan Parties, and
certifying that no Default has occurred and is continuing, then either (i) so
long as full cash dominion is not in effect, no prepayment shall be required
pursuant to this paragraph in respect of the Net Proceeds specified in such
certificate or (ii) if full cash dominion is in effect, if the Net Proceeds
specified in such certificate are to be applied by (A) the Borrowers, then such
Net Proceeds shall be applied by the Administrative Agent to reduce the
outstanding principal balance of the Revolving Loans (without a permanent
reduction of the Commitment) and upon such application, the Co-Collateral Agents
shall establish a Reserve against the Aggregate Borrowing Base and the Borrowing
Base of each applicable Borrower in an amount equal to the amount of such
proceeds so applied and (B) any Loan Party that is not a Borrower, then such Net
Proceeds shall be deposited in a cash collateral account and in either case,
thereafter, such funds shall be made available to the applicable Loan Party as
follows:

(1) the Borrower Representative shall request a Revolving Loan (specifying that
the request is to use Net Proceeds pursuant to this Section) or the applicable
Loan Party shall request a release from the cash collateral account be made in
the amount needed;

(2) so long as the conditions set forth in Section 4.02 have been met, the
Lenders shall make such Revolving Loan or the Administrative Agent shall release
funds from the cash collateral account; and

(3) in the case of Net Proceeds applied against the Revolving Loan, the Reserve
established with respect to such insurance proceeds shall be reduced by the
amount of such Revolving Loan;

 

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provided that to the extent of any such Net Proceeds therefrom that have not
been so applied by the end of such 90-day period, at which time a prepayment
shall be required in an amount equal to such Net Proceeds that have not been so
applied; provided, further that the Borrowers shall not be permitted to make
elections to use Net Proceeds to acquire (or replace or rebuild) real property,
equipment or other tangible assets (excluding inventory) with respect to Net
Proceeds in any fiscal year in an aggregate amount in excess of $500,000.

(d) All such amounts pursuant to Section 2.11(c) shall be applied, first to
prepay any Protective Advances and Overadvances that may be outstanding, pro
rata, and second to prepay the Revolving Loans (including Swing Line Loans)
without a corresponding reduction in the Commitment and to cash collateralize
outstanding LC Exposure. If the precise amount of insurance or condemnation
proceeds allocable to Inventory as compared to Equipment, Fixtures and real
property is not otherwise determined, the allocation and application of those
proceeds shall be determined by the Co-Collateral Agents, in their Permitted
Discretion.

(e) The Borrower Representative shall notify the Administrative Agent by
telephone (confirmed by facsimile) of any prepayment hereunder (i) in the case
of prepayment of a Eurodollar Revolving Borrowing, not later than 10:00 a.m.,
Chicago time, three Business Days before the date of prepayment, or (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later than 10:00 a.m.,
Chicago time, on 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 2.09, then such notice of prepayment may be revoked
if such notice of termination is revoked in accordance with Section 2.09.
Promptly following receipt of any such notice relating to a Revolving Borrowing,
the Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Revolving Borrowing shall be in an amount that would
be permitted in the case of an advance of a Revolving Borrowing of the same Type
as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be
applied ratably to the Revolving Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.13.

Section 2.12. Fees. (a) The Borrowers agree to pay to the Administrative Agent
for the account of each Lender a commitment fee, which shall accrue at a per
annum rate equal to (i) 0.375% at any time that the Aggregate Credit Exposure is
equal to or less than 50% of the aggregate amount of the Commitments of the
Lenders and (ii) 0.25% at any time that the Aggregate Credit Exposure is greater
than 50% of the aggregate amount of the Commitments of the Lenders, in each
case, on the average daily amount of the Available Commitment of such Lender
during the period from and including the Effective Date to but excluding the
date on which the Lenders’ Commitments terminate. Accrued commitment fees shall
be payable in arrears on the first Business Day of each calendar month and on
the date on which the Commitments terminate, commencing on the first such date
to occur after the date hereof. All 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.

(b) The Borrowers agree to pay (i) to the Administrative Agent for the account
of each Lender a participation fee with respect to its participations in Letters
of Credit, which shall accrue at the same Applicable Rate used to determine the
interest rate applicable to Eurodollar Revolving Loans on the average daily
amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the
rate of 0.125% per annum on the average daily amount of the LC Exposure

 

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(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date of termination of the Commitments and the date on which there
ceases to be any LC Exposure, as well as the Issuing Bank’s standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of Credit
or processing of drawings thereunder. Participation fees and fronting fees
accrued through and including the last day of each calendar month shall be
payable on the first Business Day of each calendar month following such last
day, commencing on the first such date to occur after the Effective Date;
provided that all such fees shall be payable on the date on which the
Commitments terminate and any such fees accruing after the date on which the
Commitments terminate shall be payable on demand. Any other fees payable to the
Issuing Bank pursuant to this paragraph shall be payable within 10 days after
demand. All 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.

(c) The Borrowers agree to pay to the Administrative Agent and the Co-Collateral
Agents each for their own accounts, fees payable in the amounts and at the times
separately agreed upon between the Borrowers and/or Borrower Representative, on
the one hand, and the Administrative Agent and/or either or both Co-Collateral
Agents, on the other hand.

(d) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent (or to the Issuing Bank, in the
case of fees payable to it) for distribution, in the case of commitment fees and
participation fees, to the Lenders. Fees paid shall not be refundable under any
circumstances.

Section 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including
each Swingline Loan) shall bear interest at the Alternate Base Rate, plus the
Applicable Rate.

(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing, plus
the Applicable Rate.

(c) Each Protective Advance and each Overadvance shall bear interest at the
Alternate Base Rate, plus the Applicable Rate for Revolving Loans, plus 2%.

(d) Notwithstanding the foregoing, during the occurrence and continuance of an
Event of Default, the Administrative Agent or the Required Lenders may, at their
option, by notice to the Borrower Representative (which notice may be revoked at
the option of the Required Lenders notwithstanding any provision of Section 9.02
requiring the consent of “each Lender affected thereby” for reductions in
interest rates), declare that (i) all Loans shall bear interest at 2%, plus the
rate otherwise applicable to such Loans as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount outstanding hereunder,
such amount shall accrue at 2%, plus the rate applicable to such fee or other
obligation as provided hereunder.

(e) Accrued interest on each Loan (for ABR Loans, accrued through the last day
of the prior calendar month) shall be payable in arrears on each Interest
Payment Date for such Loan and upon termination of the Commitments; provided
that (i) interest accrued pursuant to paragraph (d) of this Section 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
Availability Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii) in the
event of any conversion of any Eurodollar 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.

 

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(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. The applicable Alternate
Base Rate, Adjusted LIBO 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 Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period; or

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

then the Administrative Agent shall give notice thereof to the Borrower
Representative and the Lenders by telephone or facsimile as promptly as
practicable thereafter and, until the Administrative Agent notifies the Borrower
Representative 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 reflected in the
Adjusted LIBO Rate) or the Issuing Bank; or

(ii) impose on any Lender or the Issuing Bank 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 or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or the Issuing Bank 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 or the Issuing Bank’s capital or on the capital of
such Lender’s or the Issuing Bank’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

 

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which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s
holding company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the Issuing Bank’s policies and the policies of
such Lender’s or the Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or the Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or the Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower Representative and shall be
conclusive absent manifest error. The Borrowers shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.

(d) Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the Issuing Bank’s right to demand such compensation; provided that
the Borrowers shall not be required to compensate a Lender or the Issuing Bank
pursuant to this Section for any increased costs or reductions incurred more
than 270 days prior to the date that such Lender or the Issuing Bank, as the
case may be, notifies the Borrower Representative of the Change in Law giving
rise to such increased costs or reductions and of such Lender’s or the Issuing
Bank’s intention to claim compensation therefor; provided further that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the 270-day period referred to above shall be extended to include the
period of retroactive effect thereof.

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
2.09(d) 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 Representative pursuant to
Section 2.19, then, in any such event, the Borrowers 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 Adjusted 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. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section shall be delivered
to the Borrower Representative and shall be conclusive absent manifest error.
The Borrowers shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.

Section 2.17. Taxes. (a) Any and all payments by or on account of any obligation
of the Borrowers hereunder shall be made free and clear of and without deduction
for any Indemnified Taxes or Other Taxes; provided that if the Borrowers shall
be required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after making

 

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all required deductions (including deductions applicable to additional sums
payable under this Section) the Administrative Agent, Lender or Issuing Bank (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrowers shall make such deductions and
(iii) the Borrowers shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

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

(c) The Borrowers shall jointly and severally indemnify the Administrative
Agent, each Lender and the Issuing Bank, within 10 days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent, such Lender or the Issuing Bank, as the case may be,
on or with respect to any payment by or on account of any obligation of the
Borrowers hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) 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. A
certificate as to the amount of such payment or liability delivered to the
Borrower Representative by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrowers to a Governmental Authority, the Borrower Representative 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 any 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 Representative (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 Representative as will
permit such payments to be made without withholding or at a reduced rate.

(f) If the Administrative Agent or a Lender determines, in its Permitted
Discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrowers or with respect to which the
Borrowers have paid additional amounts pursuant to this Section 2.17, it shall
pay over such refund to the Borrowers (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrowers under this Section
2.17 with respect to the 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 Borrowers, upon the
request of the Administrative Agent or such Lender, agree to repay the amount
paid over to the Borrowers, (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 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 Borrowers or any other Person.

 

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Section 2.18. Payments Generally; Allocation of Proceeds; Sharing of Set-offs.
(a) The Borrowers shall make each payment required to be made by them hereunder
(whether of principal, interest, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 2.15, Section 2.16 or Section 2.17, or
otherwise) prior to 2:00 p.m., Chicago time, on the date when due, in
immediately available funds, without set-off 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 120 South LaSalle
Street, Chicago, Illinois, except payments to be made directly to the Issuing
Bank or Swingline Lender as expressly provided herein and except that payments
pursuant to Section 2.15, Section 2.16 or Section 2.17 and Section 9.03 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 United States dollars.
At all times that full cash dominion is in effect pursuant to Section 7.3 of the
Security Agreement, solely for purposes of determining the amount of Loans
available for borrowing purposes, checks (in addition to immediately available
funds applied pursuant to Section 2.10(b)) from collections of items of payment
and proceeds of any Collateral shall be applied in whole or in part against the
Obligations, on the Business Day after receipt, subject to actual collection.

(b) Any proceeds of Collateral received by the Administrative Agent (i) not
constituting either (A) a specific payment of principal, interest, fees or other
sum payable under the Loan Documents (which shall be applied as specified by the
Borrowers), (B) a mandatory prepayment (which shall be applied in accordance
with Section 2.11) or (C) amounts to be applied from the Collection Account when
full cash dominion is in effect (which shall be applied in accordance with
Section 2.10(b)) or (ii) after an Event of Default has occurred and is
continuing and the Administrative Agent so elects or the Required Lenders so
direct, such funds shall be applied ratably first, to pay any fees, indemnities,
or expense reimbursements including amounts then due to the Administrative
Agent, the Co-Collateral Agents and the Issuing Bank from the Borrowers (other
than in connection with Banking Services or Swap Obligations), second, to pay
any fees or expense reimbursements then due to the Lenders from the Borrowers
(other than in connection with Banking Services or Swap Obligations), third, to
pay interest due in respect of the Overadvances and Protective Advances, fourth,
to pay the principal of the Overadvances and Protective Advances, fifth, to pay
interest then due and payable on the Loans (other than the Overadvances and
Protective Advances) ratably, sixth, to prepay principal on the Loans (other
than the Overadvances and Protective Advances) and unreimbursed LC Disbursements
ratably, seventh, to pay an amount to the Administrative Agent equal to 105% of
the aggregate undrawn face amount of all outstanding Letters of Credit and the
aggregate amount of any unpaid LC Disbursements, to be held as cash collateral
for such Obligations, eight, to payment of any amounts owing with respect to
Banking Services and Swap Obligations, and ninth, to the payment of any other
Secured Obligation due to the Administrative Agent or any Lender by the
Borrowers. Notwithstanding anything to the contrary contained in this Agreement,
unless so directed by the Borrower Representative, or unless a Default is in
existence, neither the Administrative Agent nor any Lender shall apply any
payment which it receives to any Eurodollar Loan of a Class, except (a) on the
expiration date of the Interest Period applicable to any such Eurodollar Loan or
(b) in the event, and only to the extent, that there are no outstanding ABR
Loans of the same Class and, in any such event, the Borrowers shall pay the
break funding payment required in accordance with Section 2.16. The
Administrative Agent and the Lenders shall have the continuing and exclusive
right to apply and reverse and reapply any and all such proceeds and payments to
any portion of the Secured Obligations.

 

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(c) At the election of the Administrative Agent, all payments of principal,
interest, LC Disbursements, fees, premiums, reimbursable expenses (including,
without limitation, all reimbursement for fees and expenses pursuant to Section
9.03), and other sums payable under the Loan Documents, may be paid from the
proceeds of Borrowings made hereunder whether made following a request by the
Borrower Representative pursuant to Section 2.03 or a deemed request as provided
in this Section or may be deducted from any deposit account of any Borrower
maintained with the Administrative Agent. Each Borrower hereby irrevocably
authorizes (i) the Administrative Agent to make a Borrowing for the purpose of
paying each payment of principal, interest and fees as it becomes due hereunder
or any other amount due under the Loan Documents and agrees that all such
amounts charged shall constitute Loans (including Swingline Loans and
Overadvances, but such a Borrowing may only constitute a Protective Advance if
it is to reimburse costs, fees and expenses as described in Section 9.03) and
that all such Borrowings shall be deemed to have been requested pursuant to
Section 2.03, Section 2.04 or Section 2.05, as applicable and (ii) the
Administrative Agent to charge any deposit account of any Borrower maintained
with the Administrative Agent for each payment of principal, interest and fees
as it becomes due hereunder or any other amount due under the Loan Documents.

(d) 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 Loans or participations in LC Disbursements resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loans
and participations in LC Disbursements 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 Loans
and participations in LC Disbursements 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 Loans and participations in LC Disbursements; 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 paragraph shall not be construed to
apply to any payment made by the Borrowers 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 Borrowers or any Subsidiary or Affiliate thereof (as to which
the provisions of this paragraph shall apply). Each Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against such Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of such Borrower in the amount of such participation.

(e) Unless the Administrative Agent shall have received notice from the Borrower
Representative 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 Borrowers will not make such payment, the Administrative
Agent may assume that the Borrowers have 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 Borrowers have 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.

 

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(f) If any Lender shall fail to make any payment required to be made by it
hereunder, 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 hereunder until all such unsatisfied obligations are fully paid.

Section 2.19. Mitigation Obligations; Replacement of Lenders. If any Lender
requests compensation under Section 2.15, or if the Borrowers are 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:

(a) 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 Section 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 Lender (and
the Borrowers hereby agree to pay all reasonable costs and expenses incurred by
any Lender in connection with any such designation or assignment);

(b) the Borrowers may, at their sole expense and effort, require such Lender or
any Lender that defaults in its obligation to fund Loans hereunder (herein, a
“Departing Lender”), upon notice to the Departing Lender and the Administrative
Agent, to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in Section 9.04), 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 Borrowers shall have received the prior
written consent of the Administrative Agent (and if a Commitment is being
assigned, the Issuing Bank), which consent shall not unreasonably be withheld,
(ii) the Departing Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements and
Swingline Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrowers (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 Departing 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 Borrowers to require
such assignment and delegation cease to apply.

Section 2.20. Returned Payments. If after receipt of any payment which is
applied to the payment of all or any part of the Obligations, the Administrative
Agent or any Lender is for any reason compelled to surrender such payment or
proceeds to any Person because such payment or application of proceeds is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not been received by the Administrative Agent
or such Lender. The provisions of this Section 2.20 shall be and remain
effective notwithstanding any contrary action which may have been taken by the
Administrative Agent or any Lender in reliance upon such payment or application
of proceeds. The provisions of this Section 2.20 shall survive the termination
of this Agreement.

 

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Article III

Representations and Warranties

Each Loan Party represents and warrants to the Lenders that:

Section 3.01. Organization; Powers. Each of the Loan Parties and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.

Section 3.02. Authorization; Enforceability. The Transactions are within each
Loan Party’s organizational powers and have been duly authorized by all
necessary organizational actions and, if required, actions by equity holders.
The Loan Documents to which each Loan Party is a party have been duly executed
and delivered by such Loan Party and constitute a legal, valid and binding
obligation of such Loan Party, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.

Section 3.03. 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 and except for filings necessary to perfect
Liens created pursuant to the Loan Documents, (b) will not violate any material
Requirement of Law applicable to any Loan Party or any of its Subsidiaries,
(c) will not violate or result in a material default under any material
indenture, agreement or other instrument binding upon any Loan Party or any of
its Subsidiaries or its assets, or give rise to a right thereunder to require
any payment to be made by any Loan Party or any of its Subsidiaries, and
(d) will not result in the creation or imposition of any Lien on any asset of
any Loan Party or any of its Subsidiaries, except Liens created pursuant to the
Loan Documents.

Section 3.04. Financial Condition; No Material Adverse Change. (a) The Company
has heretofore furnished to the Lenders its consolidated balance sheet and
statements of income, stockholders equity and cash flows (i) as of and for the
fiscal year ended December 31, 2006, reported on by Grant Thornton LLP,
independent public accountants, and (ii) as of and for the fiscal month and the
portion of the fiscal year ended January 31, 2007, certified by its chief
financial officer. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Company 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) No event, change or condition has occurred that has had, or could reasonably
be expected to have, a Material Adverse Effect, since December 31, 2006.

Section 3.05. Properties. (a) As of the date of this Agreement, Schedule 3.05
sets forth the address of each parcel of real property that is owned or leased
by each Loan Party. Each of such leases and subleases is valid and enforceable
in accordance with its terms and is in full force and effect, and no material
default by any party to any such lease or sublease exists. Each of the Loan
Parties and its Subsidiaries has good and indefeasible title to, or valid
leasehold interests in, all its real and personal property, free of all Liens
other than those permitted by Section 6.02.

 

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(b) Each Loan Party and its Subsidiaries owns, or is licensed to use, all
trademarks, trade names, copyrights, patents and other intellectual property
necessary to its business as currently conducted, a correct and complete list of
which, as of the date of this Agreement, is set forth on Schedule 3.05, and the
use thereof by the Loan Parties and its Subsidiaries does not infringe in any
material respect upon the rights of any other Person.

Section 3.06. Litigation and Environmental Matters. (a) There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority
pending against or, to the knowledge of any Loan Party, threatened against or
affecting the Loan Parties or any of their Subsidiaries (i) as to which there is
a reasonable possibility of an adverse determination and that, if adversely
determined, 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) (i) No Loan Party nor any of its Subsidiaries has received notice of any
claim with respect to any Environmental Liability or knows of any basis for any
Environmental Liability except for the Disclosed Matters and (ii) 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, no Loan Party
nor any of its Subsidiaries (1) 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 or (2) has become subject to any
Environmental Liability.

(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 could reasonably be expected to result in, a Material Adverse Effect.

Section 3.07. Compliance with Laws and Agreements. Each Loan Party and its
Subsidiaries is in compliance with all Requirements of Law 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 3.08. Investment Company Status. No Loan Party nor any of its
Subsidiaries is an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940.

Section 3.09. Taxes. Each Loan Party and its Subsidiaries 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 such Loan Party 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 be expected to result in a Material Adverse Effect. No tax liens have been
filed and no claims are being asserted with respect to any such taxes.

Section 3.10. 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. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than the fair market value of the assets of such Plan, and the present value of
all accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the

 

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date of the most recent financial statements reflecting such amounts, exceed by
more than the fair market value of the assets of all such underfunded Plans.
Nothing in this Section 3.10 shall prohibit Borrowers from assuming unfunded or
underfunded obligations for a sum certain amount of one or more Acquisition
Targets, provided that, without the Administrative Agent’s prior written
consent, the total amount of such assumed obligations shall not exceed
$2,500,000 in the aggregate.

Section 3.11. Disclosure. Each Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
Subsidiary is subject, and all other matters known to it, that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect. None of the reports, financial statements, certificates or other
information furnished by or on behalf of the any Loan Party to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or any other Loan Document (as modified or supplemented by other
information so furnished) 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 Borrowers represent only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time delivered and, if such projected financial
information was delivered prior to the Effective Date, as of the Effective Date.

Section 3.12. Material Agreements. All material agreements and contracts to
which any Loan Party is a party or is bound as of the date of this Agreement are
listed on Schedule 3.12. No Loan Party is in material default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (i) any material agreement to which it is a party or
(ii) any agreement or instrument evidencing or governing Indebtedness in excess
of $1,000,000.

Section 3.13. Solvency. (a) Immediately after the consummation of the
Transactions to occur on the Effective Date, (i) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (ii) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (iii) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted after
the Effective Date.

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

Section 3.14. Insurance. Schedule 3.14 sets forth a description of all insurance
maintained by or on behalf of the Loan Parties and the Subsidiaries as of the
Effective Date. As of the Effective Date, all premiums in respect of such
insurance have been paid. The Borrowers believe that the insurance maintained by
or on behalf of the Company and its Subsidiaries is adequate.

Section 3.15. Capitalization and Subsidiaries. Schedule 3.15 sets forth (a) a
correct and complete list of the name and relationship to the Company of each
and all of the Company’s Subsidiaries, (b) a true and complete listing of each
class of each of the Borrowers’ authorized Equity Interests, of which all of
such issued shares are validly issued, outstanding, fully paid and
non-assessable, and owned

 

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beneficially and of record by the Persons identified on Schedule 3.15, and
(c) the type of entity of the Company and each of its Subsidiaries. All of the
issued and outstanding Equity Interests owned by any Loan Party has been (to the
extent such concepts are relevant with respect to such ownership interests) duly
authorized and issued and is fully paid and non-assessable.

Section 3.16. Security Interest in Collateral. With respect to Collateral the
granting and perfection of a Lien on which is governed by the UCC, the
provisions of this Agreement and the other Loan Documents create legal and valid
Liens on all the Collateral in favor of the Administrative Agent, for the
benefit of the Administrative Agent and the Secured Creditors, and such Liens
constitute perfected and continuing Liens on the Collateral, securing the
Secured Obligations, enforceable against the applicable Loan Party and all third
parties, and having priority over all other Liens on the Collateral except in
the case of (a) Permitted Encumbrances, to the extent any such Permitted
Encumbrances would have priority over the Liens in favor of the Administrative
Agent pursuant to any applicable law or agreement and (b) Liens perfected only
by possession or compliance with applicable certificate of title laws to the
extent the Administrative Agent has not obtained or does not maintain possession
of such Collateral or has not had its Lien noted on Collateral subject to any
such certificate of title laws.

Section 3.17. Employment Matters. As of the Effective Date, there are no
strikes, lockouts or slowdowns against any Loan Party or any Subsidiary pending
or, to the knowledge of the Borrowers, threatened. The hours worked by and
payments made to employees of the Loan Parties and the Subsidiaries have not
been in material violation of the Fair Labor Standards Act or any other
applicable Federal, state, local or foreign law dealing with such matters. All
payments due from any Loan Party or any Subsidiary, or for which any claim may
be made against any Loan Party or any Subsidiary, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of the Loan Party or such Subsidiary.

Section 3.18. Affiliate Transactions. Except as set forth on Schedule 3.18, as
of the date of this Agreement, there are no existing or proposed agreements,
arrangements, understandings, or transactions between any Loan Party and any of
the officers, members, managers, directors, stockholders, parents, other
interest holders, employees, or Affiliates (other than Subsidiaries) of any Loan
Party or any members of their respective immediate families, and none of the
foregoing Persons are directly or indirectly indebted to or have any direct or
indirect ownership, partnership, or voting interest in any Affiliate of any Loan
Party or any Person with which any Loan Party has a business relationship or
which competes with any Loan Party.

Section 3.19. Common Enterprise. The successful operation and condition of each
of the Loan Parties is dependent on the continued successful performance of the
functions of the group of the Loan Parties as a whole and the successful
operation of each of the Loan Parties is dependent on the successful performance
and operation of each other Loan Party. Each Loan Party expects to derive
benefit (and its board of directors or other governing body has determined that
it may reasonably be expected to derive benefit), directly and indirectly, from
(i) successful operations of each of the other Loan Parties and (ii) the credit
extended by the Lenders to the Borrowers hereunder, both in their separate
capacities and as members of the group of companies. Each Loan Party has
determined that execution, delivery, and performance of this Agreement and any
other Loan Documents to be executed by such Loan Party is within its purpose,
will be of direct and indirect benefit to such Loan Party, and is in its best
interest.

 

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Article IV

Conditions

Section 4.01. Effective Date. The obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 9.02):

(a) Credit Agreement and Loan Documents. The Administrative Agent (or its
counsel) shall have received (i) from each party hereto either (A) a counterpart
of this Agreement signed on behalf of such party or (B) written evidence
satisfactory to the Administrative Agent (which may include facsimile
transmission of a signed signature page of this Agreement) that such party has
signed a counterpart of this Agreement and (ii) duly executed copies of the Loan
Documents and such other certificates, documents, instruments and agreements as
the Administrative Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including any promissory notes requested by a Lender pursuant to Section 2.10
payable to the order of each such requesting Lender and a written opinion of the
Loan Parties’ counsel, addressed to the Administrative Agent, the Issuing Bank
and the Lenders in substantially the form of Exhibit B-1 and Exhibit B-2.

(b) Financial Statements and Projections. The Lenders shall have received
(i) audited consolidated and consolidating financial statements of the Company
for the 2004 and 2005 fiscal years, (ii) unaudited consolidated and
consolidating financial statements of the Company for each fiscal month in 2007
(through February), and such financial statements shall not, in the reasonable
judgment of the Administrative Agent, reflect any material adverse change in the
consolidated financial condition of the Company, as reflected in the financial
statements, (iii) all other financial statements for completed or pending
acquisitions that are required under Regulation S-X of the Securities Act of
1933, as amended, and (iv) satisfactory annual projections through December 31,
2011, including monthly projections for the 12 months ending December 31, 2007.

(c) Closing Certificates; Certified Certificate of Incorporation; Good Standing
Certificates. The Administrative Agent shall have received (i) a certificate of
each Loan Party, dated the Effective Date and executed by its Secretary or
Assistant Secretary, which shall (A) certify the resolutions of its Board of
Directors, members or other body authorizing the execution, delivery and
performance of the Loan Documents to which it is a party, (B) identify by name
and title and bear the signatures of the Financial Officers and any other
officers of such Loan Party authorized to sign the Loan Documents to which it is
a party, and (C) contain appropriate attachments, including the certificate or
articles of incorporation or organization of each Loan Party certified by the
relevant authority of the jurisdiction of organization of such Loan Party and a
true and correct copy of its by-laws or operating, management or partnership
agreement, and (ii) a long form good standing certificate for each Loan Party
from its jurisdiction of organization.

(d) No Default Certificate. The Administrative Agent shall have received a
certificate, signed by the chief financial officer of each Borrower, on the
initial Borrowing date (i) stating that no Default has occurred and is
continuing, (ii) stating that the representations and warranties contained in
Article III are true and correct in all material respects as of such date, and
(iii) certifying any other factual matters as may be reasonably requested by the
Administrative Agent.

(e) Fees. The Lenders, the Co-Lead Arrangers and the Administrative Agent shall
have received all fees required to be paid, and all expenses for which invoices
have been presented (including the reasonable fees and expenses of legal
counsel), on or before the Effective Date. All such

 

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amounts will be paid with proceeds of Loans made on the Effective Date and will
be reflected in the funding instructions given by the Borrower Representative to
the Administrative Agent on or before the Effective Date.

(f) Lien Searches. The Administrative Agent shall have received the results of a
recent lien search in each of the jurisdictions where assets of the Loan Parties
are located, and such search shall reveal no liens on any of the assets of the
Loan Parties except for liens permitted by Section 6.02 or discharged on or
prior to the Effective Date pursuant to a pay-off letter or other documentation
satisfactory to the Administrative Agent.

(g) Pay-Off Letter. The Administrative Agent shall have received satisfactory
pay-off letters for all existing Indebtedness to be repaid from the proceeds the
initial Borrowing, confirming that all Liens upon any of the property of the
Loan Parties constituting Collateral will be terminated concurrently with such
payment and all letters of credit issued or guaranteed as part of such
Indebtedness shall have been cash collateralized or supported by a Letter of
Credit.

(h) Funding Accounts. The Administrative Agent shall have received a notice
setting forth the deposit account(s) of the Borrowers (the “Funding Accounts”)
to which the Lender is authorized by the Borrowers to transfer the proceeds of
any Borrowings requested or authorized pursuant to this Agreement.

(i) Customer List. The Administrative Agent shall have received a true and
complete list of customers of each of the Borrowers.

(j) Collateral Access and Control Agreements. The Administrative Agent shall
have received each (i) Collateral Access Agreement required to be provided
pursuant to Section 4.13 of the Security Agreement and (ii) Deposit Account
Control Agreement required to be provided pursuant to Section 4.14 of the
Security Agreement.

(k) Borrowing Base Certificate. The Co-Collateral Agents shall have received an
Aggregate Borrowing Base Certificate in form and substance satisfactory to the
Co-Collateral Agents which calculates the Aggregate Borrowing Base and a
Borrowing Base Certificate in form and substance satisfactory to the
Co-Collateral Agents from each Borrower which calculates the Borrowing Base of
such Borrower.

(l) Closing Aggregate Availability. After giving effect to all Borrowings to be
made on the Effective Date and the issuance of any Letters of Credit on the
Effective Date and payment of all fees and expenses due hereunder, and with all
of the Loan Parties’ indebtedness, liabilities, and obligations current, the
Borrowers’ Aggregate Availability shall not be less than $70,000,000.

(m) Pledged Equity Interests; Transfer Powers; Pledged Notes. The Administrative
Agent shall have received (i) the certificates representing Equity Interests
pledged pursuant to the Security Agreement, together with an undated transfer
power for each such certificate executed in blank by a duly authorized officer
of the pledgor thereof and (ii) each promissory note (if any) pledged to the
Administrative Agent pursuant to the Security Agreement endorsed (without
recourse) in blank (or accompanied by an executed transfer form in blank) by the
pledgor thereof.

(n) Filings, Registrations and Recordings. Each document (including any Uniform
Commercial Code financing statement) required by the Collateral 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 in right to any other Person (other than with
respect to Liens expressly permitted by Section 6.02), shall be in proper form
for filing, registration or recordation.

 

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(o) Environmental Reports. The Administrative Agent shall have received
environmental review reports with respect to the real properties of the
Borrowers and their Subsidiaries specified by the Administrative Agent from
firm(s) satisfactory to the Co-Collateral Agents, which review reports shall be
acceptable to the Co-Collateral Agents.

(p) Insurance. The Administrative Agent shall have received evidence of
insurance coverage in form, scope, and substance reasonably satisfactory to the
Administrative Agent and otherwise in compliance with the terms of Section 5.09
and Section 4.12 of the Security Agreement.

(q) Approvals. The Co-Collateral Agents shall have received evidence that all
necessary consents, permits, licenses and approvals (governmental or otherwise)
required for the execution, delivery and performance by each Loan Party of the
Loan Documents have been duly obtained and are in full force and effect.

(r) Franklin Documents & Subordination Agreement. The Administrative Agent shall
have received copies of the Franklin Documents certified by the Secretary or
Assistant Secretary of the Company as true, correct and complete copies of such
documents. In addition, the Administrative Agent shall have received the
Subordination Agreement, duly executed by Franklin Mutual.

(s) Other Documents. The Administrative Agent shall have received such other
documents as the Administrative Agent, the Issuing Bank, any Lender or their
respective counsel may have reasonably requested.

The Administrative Agent shall notify the Borrowers 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 9.02) at
or prior to 4:00 p.m., Chicago time, on April 30, 2007 (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at
such time).

Section 4.02. 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 Borrowers 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.

(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.

(c) After giving effect to any Borrowing or the issuance of any Letter of
Credit, Aggregate Availability is not less than zero.

 

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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
Borrowers on the date thereof as to the matters specified in paragraphs (a),
(b) and (c) 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 shall have expired or terminated and all LC
Disbursements shall have been reimbursed, each Loan Party executing this
Agreement covenants and agrees, jointly and severally with all of the Loan
Parties, with the Lenders that:

Section 5.01. Financial Statements; Borrowing Base and Other Information. The
Borrowers will furnish to the Administrative Agent and each Lender:

(a) within 120 days after the end of each fiscal year of the Company, its
audited consolidated and consolidating 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 Grant Thornton LLP or such 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
and consolidating financial statements present fairly in all material respects
the financial condition and results of operations of the Company and its
Subsidiaries on a consolidated and consolidating basis in accordance with GAAP
consistently applied, accompanied by any management letter prepared by said
accountants;

(b) subject to Section 5.14(b), within 30 days after the end of each fiscal
month of the Company, its consolidated and consolidating balance sheet and
related statements of operations and cash flows as of the end of and for such
fiscal month 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 Company and its Subsidiaries on a consolidated and consolidating basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;

(c) concurrently with any delivery of financial statements under clause (a) or
(b) above, a certificate of a Financial Officer of the Borrower Representative
in substantially the form of Exhibit D (i) certifying, in the case of the
financial statements delivered under clause (b), as presenting fairly in all
material respects the financial condition and results of operations of the
Company 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, (ii) 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, (iii) setting forth the
Fixed Charge Coverage Ratio (and reasonably detailed calculations thereof
regardless of whether such financial covenant is applicable during such period)
as of the then applicable fiscal quarter-end, including a month-by-month
calculation of the Fixed Charge Coverage Ratio for each of the 12 months ending
as of the then applicable fiscal quarter-end, and, if applicable, demonstrating
compliance with Section 6.12, and (iv) stating whether any change in GAAP or in

 

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the application thereof has occurred since the date of the audited financial
statements referred to in Section 3.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate;

(d) [Reserved]

(e) as soon as available, but in any event not more than 30 days prior to the
end of each fiscal year of the Company, a copy of the plan and forecast
(including a projected consolidated and consolidating balance sheet, income
statement and funds flow statement) of the Company and its Subsidiaries for each
month of the upcoming fiscal year (the “Projections”) in form reasonably
satisfactory to the Co-Collateral Agents;

(f) as soon as available but in any event within 20 days of the end of each
calendar month, and at such other times as may be requested by the Co-Collateral
Agents if Aggregate Availability at such time is less than $35,000,000, as of
the period then ended, an Aggregate Borrowing Base Certificate, together with a
Borrowing Base Certificate for each Borrower which calculates such Borrower’s
Borrowing Base, and supporting information in connection therewith, together
with any additional reports with respect to the Borrowing Base, as the
Co-Collateral Agents may reasonably request;

(g) as soon as available but in any event within 20 days of the end of each
calendar month and at such other times as may be requested by the Co-Collateral
Agents if Aggregate Availability at such time is less than $35,000,000, as of
the period then ended, all delivered electronically in a text formatted file
acceptable to the Co-Collateral Agents:

 

  (i) a detailed aging of the Borrowers’ Accounts (1) including all invoices
aged by invoice date and due date and (2) reconciled to the Aggregate Borrowing
Base Certificate and the Borrowing Base Certificate of each Borrower delivered
as of such date prepared in a manner reasonably acceptable to the Co-Collateral
Agents, together with a summary specifying the name, address, and balance due
for each Account Debtor;

 

  (ii) a schedule detailing the Borrowers’ Inventory, in form reasonably
acceptable to the Administrative Agent, (1) by location (showing Inventory in
transit, any Inventory located with a third party under any consignment, bailee
arrangement, or warehouse agreement), by class (raw material, work-in-process
and finished goods), by product type, and by volume on hand, which Inventory
shall be valued at the lower of cost (determined on a first-in, first-out basis)
or market and adjusted for Reserves as the Co-Collateral Agents have previously
indicated to the Borrower Representative are deemed by the Co-Collateral Agents
to be appropriate in their Permitted Discretion, (2) including a report of any
variances or other results of Inventory counts performed by the Borrowers since
the last Inventory schedule (including information regarding sales or other
reductions, additions, returns, credits issued by Borrowers and complaints and
claims made against the Borrowers), and (3) reconciled to the Aggregate
Borrowing Base Certificate and the Borrowing Base Certificate of each Borrower
delivered as of such date;

 

  (iii) a worksheet of calculations prepared by the Borrowers to determine
Eligible Accounts and Eligible Inventory, such worksheets detailing the Accounts
and Inventory excluded from Eligible Accounts and Eligible Inventory and the
reason for such exclusion;

 

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  (iv) a reconciliation of the Borrowers’ Accounts and Inventory between the
amounts shown in the Borrowers’ general ledger and financial statements and the
reports delivered pursuant to clauses (i) and (ii) above; and

 

  (v) a reconciliation of the loan balance per the Borrowers’ general ledger to
the loan balance under this Agreement;

(h) as soon as available but in any event within 20 days of the end of each
calendar month and at such other times as may be requested by the Co-Collateral
Agents, as of the month then ended, a schedule and aging of the Borrowers’
accounts payable, delivered electronically in a text formatted file acceptable
to the Co-Collateral Agents;

(i) as soon as available but in any event within 20 days of the end of each
calendar quarter, as of the quarter then ended, and at such other times as may
be requested by the Co-Collateral Agents, a list of all customer addresses,
delivered electronically in a text formatted file acceptable to the
Co-Collateral Agents;

(j) promptly upon either Co-Collateral Agent’s request:

 

  (i) copies of invoices in connection with the invoices issued by the Borrowers
in connection with any Accounts, credit memos, shipping and delivery documents,
and other information related thereto;

 

  (ii) copies of purchase orders, invoices, and shipping and delivery documents
in connection with any Inventory or Equipment purchased by any Loan Party; and

 

  (iii) a schedule detailing the balance of all intercompany accounts of the
Loan Parties;

(k) as soon as available but in any event within 20 days of the end of each
calendar week and at such other times as may be reasonably requested by the
Co-Collateral Agents, as of the period then ended, the Borrowers’ sales journal,
cash receipts journal (identifying trade and non-trade cash receipts) and debit
memo/credit memo journal;

(l) as soon as possible and in any event within 10 days of filing thereof,
copies of all tax returns filed by any Loan Party with the U.S. Internal Revenue
Service;

(m) within 10 days of each March 31 and September 30, an updated customer list
for each Borrower and its Subsidiaries, which list shall state the customer’s
name, mailing address and phone number and shall be certified as true and
correct by a Financial Officer of the Borrower Representative;

(n) as soon as possible and in any event within ten days after the end of each
calendar month, a detailed listing of all advances of proceeds of Loans
requested by the Borrower Representative for each Borrower during the
immediately preceding calendar month and a detailed listing of all intercompany
loans made by the Borrowers during such calendar month;

(o) [Reserved]

 

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(p) promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by any Borrower or
any Subsidiary with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any or all of the functions of said Commission, or with
any national securities exchange, or distributed by any Borrower to its
shareholders generally, as the case may be;

(q) if applicable, promptly after Moody’s or S&P shall have announced a change
in the rating established or deemed to have been established for the Index Debt,
written notice of such rating change; and

(r) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of any Borrower or any
Subsidiary, or compliance with the terms of this Agreement, as the
Administrative Agent, either Co-Collateral Agent or any Lender may reasonably
request.

Section 5.02. Notices of Material Events. The Borrowers will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) receipt of any notice of any governmental investigation or any litigation or
proceeding commenced or threatened against any Loan Party that (i) seeks damages
in excess of $100,000, (ii) seeks injunctive relief, (iii) is asserted or
instituted against any Plan, its fiduciaries or its assets, (iv) alleges
criminal misconduct by any Loan Party, (v) alleges the material violation of any
law regarding, or seeks remedies in connection with, any Environmental Laws,
(vi) contests any tax, fee, assessment, or other governmental charge in excess
of $100,000, or (vii) involves any product recall;

(c) any Lien (other than Permitted Encumbrances) or claim made or asserted
against any of the Collateral;

(d) any loss, damage, or destruction to the Collateral in the amount of $100,000
or more, whether or not covered by insurance;

(e) any and all default notices received under or with respect to any leased
location or public warehouse where Collateral is located (which shall be
delivered within two Business Days after receipt thereof);

(f) all material amendments to any real estate lease or other material
agreements, together with a copy of each such amendment;

(g) the fact that a Loan Party has entered into a Swap Agreement or an amendment
to a Swap Agreement, together with copies of all agreements evidencing such Swap
Agreement or amendments thereto (which shall be delivered within two Business
Days);

(h) 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 Borrowers and their Subsidiaries in an aggregate amount
exceeding $100,000; and

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

 

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Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower Representative
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 5.03. Existence; Conduct of Business. Each Loan Party will, and will
cause each Subsidiary to, (a) do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, qualifications, licenses, permits, franchises, governmental
authorizations, intellectual property rights, licenses and permits material to
the conduct of its business, and maintain all requisite authority to conduct its
business in each jurisdiction in which its business is conducted; provided that
the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 6.03 and (b) carry on and conduct its
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted.

Section 5.04. Payment of Obligations. Each Loan Party will, and will cause each
Subsidiary to, pay or discharge all Material Indebtedness and all other material
liabilities and obligations, including Taxes, before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) such Loan Party or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect.

Section 5.05. Maintenance of Properties. Each Loan Party will, and will cause
each Subsidiary to, keep and maintain all property material to the conduct of
its business in good working order and condition, ordinary wear and tear
excepted.

Section 5.06. Books and Records; Inspection Rights. Each Loan Party will, and
will cause each Subsidiary to, (i) 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 (ii) permit any representatives
designated by the Administrative Agent or any Lender (including employees of the
Administrative Agent, any Lender or any consultants, accountants, lawyers and
appraisers retained by the Administrative Agent), upon reasonable prior notice,
to visit and inspect its properties, to examine and make extracts from its books
and records, including environmental assessment reports and Phase I or Phase II
studies, to conduct field examinations of Accounts and Inventory and appraisals
of Inventory pursuant to Section 5.11, 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. The Loan Parties acknowledge that
the Administrative Agent, after exercising its rights of inspection, may prepare
and distribute to the Lenders certain Reports pertaining to the Loan Parties’
assets for internal use by the Administrative Agent and the Lenders.

Section 5.07. Compliance with Laws. Each Loan Party will, and will cause each
Subsidiary to, comply with all Requirements of Law 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 5.08. Use of Proceeds. The proceeds of the Loans will be used only to
finance the working capital needs of the Borrowers and their respective
Subsidiaries in the ordinary course of business, to refinance existing
indebtedness of the Company, and to pay fees and expenses incurred in connection
therewith and for other general corporate purposes. No part of the proceeds of
any Loan and no Letter of Credit will be used, whether directly or indirectly,
for any purpose that entails a violation of any of the Regulations of the Board,
including Regulations T, U and X.

 

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Section 5.09. Insurance. Each Loan Party will, and will cause each Subsidiary
to, maintain with financially sound and reputable carriers having a financial
strength rating of at least A+ by A.M. Best Company (a) insurance in such
amounts (with no greater risk retention) and against such risks (including loss
or damage by fire and loss in transit; theft, burglary, pilferage, larceny,
embezzlement, and other criminal activities; business interruption; and general
liability) and such other hazards, as is customarily maintained by companies of
established repute engaged in the same or similar businesses operating in the
same or similar locations and (b) all insurance required pursuant to the
Collateral Documents. The Borrowers will furnish to the Lenders, upon request of
the Administrative Agent, information in reasonable detail as to the insurance
so maintained.

Section 5.10. Casualty and Condemnation. The Borrowers (a) will furnish to the
Administrative Agent and the Lenders prompt written notice of any casualty or
other insured damage to any material portion of the Collateral or the
commencement of any action or proceeding for the taking of any material portion
of the Collateral or interest therein under power of eminent domain or by
condemnation or similar proceeding and (b) will ensure that the Net Proceeds of
any such event (whether in the form of insurance proceeds, condemnation awards
or otherwise) are collected and applied in accordance with the applicable
provisions of this Agreement and the Collateral Documents.

Section 5.11. Appraisals; Field Examinations. (a) If no Default has occurred and
is continuing and Aggregate Availability is $35,000,000 or greater, the Loan
Parties shall, at their sole expense, (i) (A) once during any Fiscal Year, at
the request of the Co-Collateral Agents, provide the Co-Collateral Agents with
appraisals or updates of their Inventory from an appraiser selected and engaged
by the Co-Collateral Agents and reasonably acceptable to the Borrower
Representative, and prepared on a basis satisfactory to the Co-Collateral
Agents, such appraisals and updates to include, without limitation, information
required by applicable law, rules and regulations and by the internal policies
of the Co-Collateral Agents and (B) during any Fiscal Year, at the request of
the Required Lenders and/or either Co-Collateral Agent, provide the
Co-Collateral Agents with a second such appraisal or update of their Inventory
and (ii) up to and including two times during any Fiscal Year, at the request of
the Co-Collateral Agents, permit the Co-Collateral Agents or their authorized
representatives to conduct field examinations and audits of the Loan Parties.

(b) If a Default has occurred and is continuing and/or Aggregate Availability is
less than $35,000,000, the Loan Parties shall, at their sole expense,
(i) provide the Co-Collateral Agents with appraisals or updates of their
Inventory from an appraiser selected and engaged by the Co-Collateral Agents,
and prepared on a basis satisfactory to the Co-Collateral Agents, such
appraisals and updates to include, without limitation, information required by
applicable law and regulations and by the internal policies of the Co-Collateral
Agents as the Co-Collateral Agents deem necessary, without limitation on the
number or frequency of such additional appraisals or updates and (ii) at the
request of the Co-Collateral Agents, permit the Co-Collateral Agents or their
authorized representatives to conduct field examinations and audits of the Loan
Parties, without limitation on the number or frequency of such field
examinations or audits.

Section 5.12. Depository Banks. The Borrowers and their Subsidiaries will
maintain the Administrative Agent as its principal depository bank, including
for the maintenance of operating, administrative, cash management, collection
activity, and other deposit accounts for the conduct of its business.

Section 5.13. Additional Collateral; Further Assurances. (a) Subject to
applicable law, each Borrower and each Subsidiary that is a Loan Party shall
cause each of its Domestic Subsidiaries formed or acquired after the date of
this Agreement in accordance with the terms of this Agreement to become a Loan
Party by executing the Joinder Agreement set forth as Exhibit E hereto (the
“Joinder

 

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Agreement”). Upon execution and delivery thereof, each such Person (i) shall
automatically become a Loan Guarantor hereunder and thereupon shall have all of
the rights, benefits, duties, and obligations in such capacity under the Loan
Documents and (ii) will grant Liens to the Administrative Agent, for the benefit
of the Administrative Agent and the Lenders, in any property of such Loan Party
which constitutes Collateral, excluding any parcel of real property owned by any
Loan Party and improvements thereto or any interest therein.

(b) Each Borrower and each Subsidiary that is a Loan Party will cause (i) 100%
of the issued and outstanding Equity Interests of each of its Domestic
Subsidiaries and (ii) 65% (or such greater percentage that, due to a change in
applicable law after the date hereof, (1) could not reasonably be expected to
cause the undistributed earnings of such Foreign Subsidiary as determined for
U.S. federal income tax purposes to be treated as a deemed dividend to such
Foreign Subsidiary’s U.S. parent and (2) could not reasonably be expected to
cause any material adverse tax consequences) of the issued and outstanding
Equity Interests entitled to vote (within the meaning of Treas. Reg.
Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests
not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
in each Foreign Subsidiary directly owned by any Borrower or any of its Domestic
Subsidiaries to be subject at all times to a first priority, perfected Lien in
favor of the Administrative Agent pursuant to the terms and conditions of the
Loan Documents or other security documents as the Administrative Agent shall
reasonably request.

(c) Without limiting the foregoing, each Loan Party will, and will cause each
Subsidiary to, execute and deliver, or cause to be executed and delivered, to
the Administrative Agent such documents, agreements and instruments, and will
take or cause to be taken such further actions (including the filing and
recording of financing statements, fixture filings, mortgages, deeds of trust
and other documents and such other actions or deliveries of the type required by
Section 4.01, as applicable), which may be required by law or which the
Administrative Agent may, from time to time, reasonably request to carry out the
terms and conditions of this Agreement and the other Loan Documents and to
ensure perfection and priority of the Liens created or intended to be created by
the Collateral Documents, all at the expense of the Loan Parties.

(d) If any material assets (excluding any real property or improvements thereto
or any interest therein) are acquired by any Borrower or any Subsidiary that is
a Loan Party after the Effective Date (other than assets constituting Collateral
under the Security Agreement that become subject to the Lien in favor of the
Security Agreement upon acquisition thereof), the Borrower Representative will
notify the Administrative Agent and the Lenders thereof, and, if requested by
the Administrative Agent or the Required Lenders, the Borrowers will cause such
assets to be subjected to a Lien securing the Secured Obligations and will take,
and cause the Subsidiary Loan Parties to take, such actions as shall be
necessary or reasonably requested by the Administrative Agent to grant and
perfect such Liens, including actions described in paragraph (c) of this
Section, all at the expense of the Loan Parties.

Section 5.14. Post-Closing Covenants.

(a) Deposit Accounts. The Loan Guarantors shall have delivered to the
Administrative Agent the Deposit Account Control Agreements required pursuant to
Section 4.14 of the Security Agreement.

(b) March 2007 Financial Statements. The Company shall have delivered to the
Administrative Agent on or before June 30, 2007, its consolidated and
consolidating balance sheet and related statements of operations and cash flows
as of the end of and for the fiscal month ended March 31, 2007, and the then
elapsed portion of the fiscal year, setting forth in each case in comparative

 

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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 Company and its
Subsidiaries on a consolidated and consolidating basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes.

(c) 2006 Audited Financials. The Company shall have delivered to the Lenders its
audited consolidated and consolidating financial statements for its fiscal year
ended December 31, 2006, on or before May 14, 2007.

Article VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees, expenses and other amounts payable under any
Loan Document have been paid in full and all Letters of Credit have expired or
terminated and all LC Disbursements shall have been reimbursed, the Loan Parties
covenant and agree, jointly and severally, with the Lenders that:

Section 6.01. Indebtedness. No Loan Party will, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

(a) the Secured Obligations;

(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and
extensions, renewals and replacements of any such Indebtedness in accordance
with clause (f) hereof;

(c) Indebtedness of any Borrower to any Subsidiary and of any Subsidiary to any
Borrower or any other Subsidiary, provided that (i) Indebtedness of any
Subsidiary that is not a Loan Party to any Borrower or any Subsidiary that is a
Loan Party shall be subject to Section 6.04 and (ii) Indebtedness of any
Borrower to any Subsidiary and Indebtedness of any Subsidiary that is a Loan
Party to any Subsidiary that is not a Loan Party shall be subordinated to the
Secured Obligations on terms reasonably satisfactory to the Administrative
Agent;

(d) Guarantees by any Borrower of Indebtedness of any Subsidiary and by any
Subsidiary of Indebtedness of any Borrower or any other Subsidiary, provided
that (i) the Indebtedness so Guaranteed is permitted by this Section 6.01,
(ii) Guarantees by any Borrower or any Subsidiary that is a Loan Party of
Indebtedness of any Subsidiary that is not a Loan Party shall be subject to
Section 6.04(a)Section 6.04 and (iii) Guarantees permitted under this clause (d)
shall be subordinated to the Secured Obligations of the applicable Subsidiary on
the same terms as the Indebtedness so Guaranteed is subordinated to the Secured
Obligations;

(e) Indebtedness of any Borrower or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets (whether
or not constituting purchase money Indebtedness), 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 in
accordance with clause (f) hereof; 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 $2,500,000 at any
time outstanding;

 

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(f) Indebtedness which represents an extension, refinancing, or renewal of any
of the Indebtedness described in clauses (b), (e), (i) and (j) hereof; provided
that, (i) the principal amount or interest rate of such Indebtedness is not
increased, (ii) any Liens securing such Indebtedness are not extended to any
additional property of any Loan Party, (iii) no Loan Party that is not
originally obligated with respect to repayment of such Indebtedness is required
to become obligated with respect thereto, (iv) such extension, refinancing or
renewal does not result in a shortening of the average weighted maturity of the
Indebtedness so extended, refinanced or renewed, (v) the terms of any such
extension, refinancing, or renewal are not less favorable to the obligor
thereunder than the original terms of such Indebtedness and (iv) if the
Indebtedness that is refinanced, renewed, or extended was subordinated in right
of payment to the Secured Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must include subordination terms
and conditions that are at least as favorable to the Administrative Agent and
the Lenders as those that were applicable to the refinanced, renewed, or
extended Indebtedness;

(g) Indebtedness owed to any person providing workers’ compensation, health,
disability or other employee benefits or property, casualty or liability
insurance, pursuant to reimbursement or indemnification obligations to such
person, in each case incurred in the ordinary course of business;

(h) Indebtedness of any Borrower or any Subsidiary in respect of performance
bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each
case provided in the ordinary course of business;

(i) 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 (i) shall not exceed $1,000,000 at any
time outstanding;

(j) Indebtedness owing to Franklin Mutual pursuant to the Franklin Documents;

(k) Indebtedness of any Borrower or any Subsidiary under Swap Agreements
permitted under Section 6.07; and

(l) other unsecured Indebtedness in an aggregate principal amount not exceeding
$1,000,000 at any time outstanding.

Section 6.02. Liens. No Loan Party will, nor will it 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) Liens created pursuant to any Loan Document;

(b) Permitted Encumbrances;

 

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(c) any Lien on any property or asset of any Borrower or any Subsidiary existing
on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien
shall not apply to any other property or asset of such Borrower or 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;

(d) Liens on fixed or capital assets acquired, constructed or improved by any
Borrower or any Subsidiary; provided that (i) such security interests secure
Indebtedness permitted by clause (e) of Section 6.01, (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 or
improvement, (iii) the Indebtedness secured thereby does not exceed 80% of the
cost of acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or assets of
such Borrower or Subsidiary or any other Borrower or Subsidiary;

(e) any Lien existing on any property or asset (other than Accounts and
Inventory) prior to the acquisition thereof by any Borrower or any Subsidiary or
existing on any property or asset (other than Accounts and Inventory) of any
Person that becomes a Loan Party after the date hereof prior to the time such
Person becomes a Loan Party; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming
a Loan Party, as the case may be, (ii) such Lien shall not apply to any other
property or assets of the Loan Party 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 Loan Party, as the case may be and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;

(f) Liens of a collecting bank arising in the ordinary course of business under
Section 4-208 of the Uniform Commercial Code in effect in the relevant
jurisdiction covering only the items being collected upon;

(g) Liens arising out of sale and leaseback transactions permitted by Section
6.06;

(h) Liens granted by a Subsidiary that is not a Loan Party in favor of any
Borrower or another Loan Party in respect of Indebtedness owed by such
Subsidiary; and

(i) a Lien in favor of Franklin Mutual on the assets of the Borrowers provided
such Lien is subordinated to the Lien in favor of the Administrative Agent for
the benefit of the Lenders pursuant to a written subordination agreement in form
and substance reasonably satisfactory to the Administrative Agent.

Notwithstanding the foregoing, none of the Liens permitted pursuant to this
Section 6.02 may at any time attach to any Loan Party’s (1) Accounts, other than
those permitted under clause (a) of the definition of Permitted Encumbrance and
clause (a) above and (2) Inventory, other than those permitted under clauses
(a) and (b) of the definition of Permitted Encumbrance and clause (a) above.

Section 6.03. Fundamental Changes. (a) No Loan Party will, nor will it 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 liquidate or dissolve,
except that, if at the time thereof and immediately after giving effect thereto
no Event of Default shall have occurred and be continuing (i) any Subsidiary of
any Borrower may merge into a Borrower in a transaction in which the Borrower is
the surviving corporation, (ii) any Loan Party (other than a Borrower) may merge
into any Loan Party in a transaction in which the

 

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surviving entity is a Loan Party and (iii) any Subsidiary that is not a Loan
Party may liquidate or dissolve if the Borrower which owns such Subsidiary
determines in good faith that such liquidation or dissolution is in the best
interests of such Borrower and is not materially disadvantageous to the Lenders;
provided that any such 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 6.04.

(b) No Loan Party will, nor will it permit any of its Subsidiaries to, engage to
any material extent in any business other than businesses of the type conducted
by the Borrowers and their Subsidiaries on the date of execution of this
Agreement and businesses reasonably related thereto.

(c) No Loan Party will, nor will it permit any of its Subsidiaries to, change
its fiscal year end (which as of the Effective Date is December 31 of each
calendar year).

Section 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. No Loan
Party will, nor will it permit any Subsidiary to, purchase, hold or acquire
(including pursuant to any merger with any Person that was not a Loan Party and
a wholly owned Subsidiary prior to such merger) any equity interest, 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 (whether through purchase of assets, merger
or otherwise), except:

(a) Permitted Investments, subject to control agreements in favor of the
Administrative Agent for the benefit of the Lenders or otherwise subject to a
perfected security interest in favor of the Administrative Agent for the benefit
of the Lenders;

(b) investments and Guaranties in existence on the date of this Agreement and
described in Schedule 6.041;

(c) investments by the Borrowers and the Subsidiaries in Equity Interests in
their respective Subsidiaries, provided that (A) any such Equity Interests held
by a Loan Party shall be pledged pursuant to the Security Agreement (subject to
the limitations applicable to common stock of a Foreign Subsidiary referred to
in Section 5.13) and (B) the aggregate amount of investments by Loan Parties in
Subsidiaries that are not Loan Parties (together with outstanding intercompany
loans permitted under clause (B) to the proviso to Section 6.04(d) and
outstanding Guarantees permitted under the proviso to Section 6.04(e)) shall not
exceed $1,000,000 at any time outstanding (in each case determined without
regard to any write-downs or write-offs);

(d) loans or advances made by any Borrower to any Subsidiary and made by any
Subsidiary to any other Borrower or any other Subsidiary, provided that (A) any
such loans and advances made by a Loan Party shall be evidenced by a promissory
note pledged pursuant to the Security Agreement and (B) the amount of such loans
and advances made by Loan Parties to Subsidiaries that are not Loan Parties
(together with outstanding investments permitted under clause (B) to the proviso
to Section 6.04(c) and outstanding Guarantees permitted under the proviso to
Section 6.04(e)) shall not exceed $1,000,000 at any time outstanding (in each
case determined without regard to any write-downs or write-offs);

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1

List the Metal Management guaranty on this schedule.

 

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(e) Guarantees constituting Indebtedness permitted by Section 6.01, provided
that the aggregate principal amount of Indebtedness of Subsidiaries that are not
Loan Parties that is Guaranteed by any Loan Party shall (together with
outstanding investments permitted under clause (B) to the proviso to Section
6.04(c) and outstanding intercompany loans permitted under clause (B) to the
proviso to Section 6.04(d)) shall not exceed $1,000,000 at any time outstanding
(in each case determined without regard to any write-downs or write-offs);

(f) loans or advances made by a Loan Party to its employees on an arms-length
basis in the ordinary course of business consistent with past practices for
travel and entertainment expenses, relocation costs and similar purposes up to a
maximum of $25,000 to any employee and up to a maximum of $100,000 in the
aggregate at any one time outstanding;

(g) subject to Sections 4.2(a) and 4.4 of the Security Agreement, notes payable,
or stock or other securities issued by Account Debtors to a Loan Party pursuant
to negotiated agreements with respect to settlement of such Account Debtor’s
Accounts in the ordinary course of business, consistent with past practices;

(h) investments in the form of Swap Agreements permitted by Section 6.07;

(i) investments of any Person existing at the time such Person becomes a
Subsidiary of a Borrower or consolidates or merges with a Borrower or any of the
Subsidiaries (including in connection with a permitted acquisition) so long as
such investments were not made in contemplation of such Person becoming a
Subsidiary or of such merger;

(j) investments received in connection with the dispositions of assets permitted
by Section 6.05;

(k) investments constituting deposits described in clauses (c) and (d) of the
definition of the term “Permitted Encumbrances”;

(l) Investments of any Borrower or any Subsidiary in Swap Agreements permitted
under Section 6.07;

(m) the Company’s existing equity investment in Metalmax, L.L.C. in the original
amount of $110,000;

(n) the non-recourse pledge to Guaranty Bank of a certificate of deposit in the
amount of $50,000 to secure the obligations of Metalmax, L.L.C., to Guaranty
Bank; and

(o) Equity investments by the Company in the Equity Interests of any Acquisition
Target or of a new entity established to purchase substantially all of the
assets of or equity in any Acquisition Target sufficient to give the Company
Control of such Acquisition Target or new entity, provided prior to each such
investment, Borrowers fully comply with the following:

(i) Borrowers shall deliver to the Administrative Agent a certificate, in form
and substance satisfactory to the Administrative Agent, stating that Borrowers
will be in compliance on a pro-forma basis the each financial covenant set forth
in Section 6.12 below as of the testing period immediately following the
proposed acquisition and providing supporting calculations therefor;

 

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(ii) Borrowers shall deliver to the Administrative Agent each of the following
with respect to the Acquisition Target, each in form and substance satisfactory
to Administrative Agent: (i) financial statements, including, without
limitation, balance sheets, statements of income and retained earnings and cash
flow statements, for the previous three fiscal years and for the most recent
interim year-to-date period available, unless such statements do not exist;
(ii) a current accounts receivable aging report, and (iii) a current inventory
report;

(iii) Borrowers shall deliver to the Administrative Agent pro-forma combined
statements of income and retained earnings for Borrowers and the proposed
Acquisition Target for the three (3) year period after the proposed date of
acquisition, together with a combined balance sheet for Borrowers and the
Acquisition Target as of the date of closing the proposed acquisition, each in
form and substance satisfactory to the Administrative Agent; and

(iv) the applicable Acquisition Target shall have executed a Joinder Agreement
and such other agreements, documents and instructions as the Administrative
Agent may request in connection therewith; and

(v) unsecured Guaranties by a Borrower in the ordinary course of business of the
trade payables of any of its Subsidiaries;

provided, however, that with respect to each Acquisition Target, other than any
Acquisition Target for which the purchase price (which shall include all
transaction costs and all indebtedness, liabilities and contingent obligations
incurred or assumed in connection therewith or otherwise reflected on a
consolidated balance sheet of the Borrowers and the Acquisition Target) is less
than $10,000,000, the Required Lenders may approve or deny such acquisition in
their sole reasonable discretion based upon their review of the information
described in subsections (i) through (iii) of this Section 6.04(o) and such
approval or denial shall be provided by the Required Lenders to Borrowers within
10 Business Days after the Lenders receive the information described in
subsections (i) through (iii) above; provided, further, that with respect to any
Acquisition Target for which the purchase price (which shall include all
transaction costs and all indebtedness, liabilities and contingent obligations
incurred or assumed in connection therewith or otherwise reflected on a
consolidated balance sheet of Borrowers and Target) is less than $10,000,000,
the Required Lenders shall consent to such acquisitions provided Borrowers fully
satisfy all of the conditions precedent set forth in subsections (i) through
(iv) of this Section 6.04(o). Notwithstanding the foregoing, no Acquisition
Target’s Eligible Accounts or Eligible Inventory will be included in the
Borrowing Base unless and until such time as (i) the Co-Collateral Agents have
completed a full audit and review of such Acquisition Target and the results of
such audit and review are satisfactory to the Co-Collateral Agents in their sole
discretion, and (ii) the Co-Collateral Agents have received a copy of a current
due diligence report prepared by external certified public accountants at the
request of Borrowers on such Acquisition Target and the results of such due
diligence report are satisfactory to the Co-Collateral Agents, in their sole
reasonable discretion.

Section 6.05. Asset Sales. No Loan Party will, nor will it permit any Subsidiary
to, sell, transfer, lease or otherwise dispose of any asset, including any
Equity Interest owned by it, nor will any Borrower permit any Subsidiary to
issue any additional Equity Interest in such Subsidiary (other than to another
Borrower or another Subsidiary in compliance with Section 6.04), except:

(a) sales, transfers and dispositions of (i) inventory in the ordinary course of
business and (ii) used, obsolete, worn out or surplus equipment or property in
the ordinary course of business;

 

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(b) sales, transfers and dispositions to any Borrower or any Subsidiary,
provided that any such sales, transfers or dispositions involving a Subsidiary
that is not a Loan Party shall be made in compliance with Section 6.09;

(c) sales, transfers and dispositions of accounts receivable in connection with
the compromise, settlement or collection thereof;

(d) sales, transfers and dispositions of investments permitted by clauses (i)
and (k) of Section 6.04;

(e) sale and leaseback transactions permitted by Section 6.06;

(f) dispositions resulting from any casualty or other insured damage to, or any
taking under power of eminent domain or by condemnation or similar proceeding
of, any property or asset of any Borrower or any Subsidiary; and

(g) sales, transfers and other dispositions of assets (other than Equity
Interests in a Subsidiary unless all Equity Interests in such Subsidiary are
sold) that are not permitted by any other paragraph of this Section, provided
that the aggregate fair market value of all assets sold, transferred or
otherwise disposed of in reliance upon this paragraph (g) shall not exceed
$100,000 during any fiscal year of the Borrowers;

provided that all sales, transfers, leases and other dispositions permitted
hereby (other than those permitted by paragraphs (b) and (f) above) shall be
made for fair value and for at least 80% cash consideration.

Section 6.06. Sale and Leaseback Transactions. No Loan Party will, nor will it
permit any Subsidiary to, enter into any arrangement, directly or indirectly,
whereby it shall sell or transfer any property, real or personal, used or useful
in its business, whether now owned or hereafter acquired, and thereafter rent or
lease such property or other property that it intends to use for substantially
the same purpose or purposes as the property sold or transferred, except for any
such sale of any fixed or capital assets by any Borrower or any Subsidiary that
is made for cash consideration in an amount not less than the fair value of such
fixed or capital asset and is consummated within 90 days after such Borrower or
such Subsidiary acquires or completes the construction of such fixed or capital
asset.

Section 6.07. Swap Agreements. No Loan Party will, nor will it permit any
Subsidiary to, enter into any Swap Agreement, except (a) Swap Agreements entered
into to hedge or mitigate risks to which any Borrower or any Subsidiary has
actual exposure (other than those in respect of Equity Interests of any Borrower
or any of its Subsidiaries), and (b) Swap 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 any Borrower or any
Subsidiary.

Section 6.08. Restricted Payments; Certain Payments of Indebtedness. (a) No Loan
Party will, nor will it permit any Subsidiary to, declare or make, or agree to
pay or make, directly or indirectly, any Restricted Payment, or incur any
obligation (contingent or otherwise) to do so, except (i) each Borrower may
declare and pay dividends with respect to its Equity Interests payable solely in
additional shares of its common stock; (ii) Subsidiaries of the Company may
declare and pay dividends ratably with respect to their Equity Interests;
(iii) provided no Default then exists, or would be created thereby, the
Borrowers may make Restricted Payments, not exceeding $250,000, in the
aggregate, during any fiscal year, pursuant to and in accordance with profit
sharing plans for management or employees of

 

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the Borrowers and their Subsidiaries; and (iv) cash dividends in respect of the
Company’s Equity Interests, provided that on the date on which any such
dividends are made under the foregoing clause (iv) are made (A) no Default shall
have occurred and be continuing or would result therefrom, and (B) Aggregate
Availability shall be $35,000,000 or greater prior to and immediately after such
dividend is made by the Company.

(b) No Loan Party will, nor will it permit any Subsidiary to, make or agree to
pay or make, directly or indirectly, any payment or other distribution (whether
in cash, securities or other property) of or in respect of principal of or
interest on any Indebtedness, or any payment or other distribution (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 Indebtedness, except:

(i) payment of Indebtedness created under the Loan Documents;

(ii) payment of regularly scheduled interest and regularly scheduled principal
payments as and when due in respect of any Indebtedness, other than payments in
respect of the Subordinated Indebtedness prohibited by the subordination
provisions thereof;

(iii) refinancings of Indebtedness to the extent permitted by Section 6.01; and

(iv) payment of secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such Indebtedness.

Section 6.09. Transactions with Affiliates. No Loan Party will, nor will it
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) transactions that (i) are in the ordinary course of business and
(ii) are at prices and on terms and conditions not less favorable to such
Borrower or such Subsidiary than could be obtained on an arm’s-length basis from
unrelated third parties, (b) transactions between or among any Borrower and any
Subsidiary that is a Loan Party not involving any other Affiliate, (c) any
investment permitted by Section 6.04(c) or Section 6.04(d), (d) any Indebtedness
permitted under Section 6.01(c), (e) any Restricted Payment permitted by Section
6.08, (f) loans or advances to employees permitted under Section 6.04, (g) the
payment of reasonable fees to directors of any Borrower or any Subsidiary who
are not employees of such Borrower or Subsidiary, and compensation and employee
benefit arrangements paid to, and indemnities provided for the benefit of,
directors, officers or employees of the Borrowers or their Subsidiaries in the
ordinary course of business, (h) any issuances of securities or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment agreements, stock options and stock ownership plans approved by a
Borrower’s board of directors and (i) the transactions described on Schedule
6.09 regarding the success fee that may become payable to Craig T. Bouchard and
James P. Bouchard.

Section 6.10. Restrictive Agreements. No Loan Party will, nor will it permit any
Subsidiary to, directly or indirectly, enter into, incur or permit to exist any
agreement or other arrangement that prohibits, restricts or imposes any
condition upon (a) the ability of such Loan Party or any of its Subsidiaries to
create, incur or permit to exist any Lien upon any of its property or assets, or
(b) the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its equity interest or to make or repay loans or
advances to any Borrower or any other Subsidiary or to Guarantee Indebtedness of
any Borrower or any other Subsidiary; provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by any Loan Document,
(ii) the foregoing shall not apply to restrictions and conditions existing on
the date hereof identified on Schedule 6.10 (but shall apply to any

 

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amendment or modification expanding the scope of, any such restriction or
condition), (iii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause
(a) of the foregoing shall not apply to restrictions or conditions imposed by
any agreement relating to secured Indebtedness permitted by this Agreement if
such restrictions or conditions apply only to the property or assets securing
such Indebtedness and (v) clause (a) of the foregoing shall not apply to
customary provisions in leases restricting the assignment thereof.

Section 6.11. Amendment of Material Documents. No Loan Party will, nor will it
permit any Subsidiary to, amend, modify or waive any of its rights under (a) any
agreement relating to any Subordinated Indebtedness, (b) its certificate of
incorporation, by-laws, operating, management or partnership agreement or other
organizational documents, or (c) any other material agreement, in the case of
clauses (a), (b) and (c), to the extent any such amendment, modification or
waiver would be adverse to the Lenders.

Section 6.12. Fixed Charge Coverage Ratio. If, during any fiscal quarter of the
Company, Aggregate Availability falls below $35,000,000, then the Borrowers will
not permit the Fixed Charge Coverage Ratio to be less than 1.10 to 1.00.

Article VII

Events of Default

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

(a) the Borrowers shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;

(b) the Borrowers shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in clause (a) of this Article)
payable under this Agreement, when and as the same shall become due and payable,
and such failure shall continue unremedied for a period of three Business Days;

(c) any representation or warranty made or deemed made by or on behalf of any
Loan Party or any Subsidiary in or in connection with this Agreement or any Loan
Document or any amendment or modification thereof or waiver thereunder, or in
any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
materially incorrect when made or deemed made;

(d) any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.01, Section 5.02(a), Section 5.03 (with respect
to a Loan Party’s existence), Section 5.08, Section 5.11 or Section 5.14 or in
Article VI;

(e) any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement (other than those which constitute a
default under another Section of this Article), and such failure shall continue
unremedied for a period of (i) 10 days after the earlier of any Loan Party’s
knowledge of such breach or notice thereof from the Administrative Agent (which
notice will be given at the request of any Lender) if such breach

 

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relates to terms or provisions of Section 5.02 (other than Section 5.02(a)),
Section 5.03 through Section 5.07, Section 5.09, Section 5.10 or Section 5.12 of
this Agreement or (ii) 30 days after the earlier of any Loan Party’s knowledge
of such breach or notice thereof from the Administrative Agent (which notice
will be given at the request of any Lender) if such breach relates to terms or
provisions of any other Section of this Agreement;

(f) any Loan Party 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 after giving
effect to any applicable notice and cure periods with respect thereto (and
excluding payments which are being contested in good faith by the applicable
Loan Party, provided such Loan Party provides to the Administrative Agent a
written detailed explanation of the basis for contesting such payments promptly
after such Loan Party fails to make any such payments);

(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 a Loan Party or any Subsidiary of any Loan Party 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 any Loan Party or any Subsidiary of any Loan
Party 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) any Loan Party or any Subsidiary of any Loan Party 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) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for such Loan Party or Subsidiary of any Loan
Party 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;

(j) any Loan Party or any Subsidiary of any Loan Party 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 $100,000 shall be rendered against any Loan Party, any Subsidiary of
any Loan Party or any combination thereof and the same shall remain undischarged
for a period of 30 consecutive days during which execution shall not be
effectively stayed, vacated, bonded or insured (and the insurer has assumed
responsibility in writing) or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of any Loan Party or any Subsidiary
of any Loan Party

 

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to enforce any such judgment or any Loan Party or any Subsidiary of any Loan
Party shall fail within 30 days to discharge one or more non-monetary judgments
or orders which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect, which judgments or orders, in any such case,
are not stayed on appeal or otherwise being appropriately contested in good
faith by proper proceedings diligently pursued;

(l) (i) an ERISA Event shall have occurred 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, or (ii) a
Lien shall be imposed against the assets of any Loan Party or ERISA Affiliate
under section 412 of the Code or under ERISA;

(m) a Change in Control shall occur;

(n) the occurrence of any “default”, as defined in any Loan Document (other than
this Agreement) or the breach of any of the terms or provisions of any Loan
Document (other than this Agreement), which default or breach continues beyond
any period of grace therein provided;

(o) the Loan Guaranty shall fail to remain in full force or effect or any action
shall be taken by the Company or any of its Subsidiaries or Affiliates to
discontinue or to assert the invalidity or unenforceability of the Loan
Guaranty, or any Loan Guarantor shall fail to comply with any of the terms or
provisions of the Loan Guaranty to which it is a party, or any Loan Guarantor
shall deny that it has any further liability under the Loan Guaranty to which it
is a party, or shall give notice to such effect;

(p) any Collateral Document shall for any reason fail to create a valid and
perfected first priority security interest in any Collateral purported to be
covered thereby, except as permitted by the terms of any Collateral Document, or
any Collateral Document shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Collateral Document, or any Loan Party shall fail to
comply with any of the terms or provisions of any Collateral Document; or

(q) any material provision of any Loan Document for any reason ceases to be
valid, binding and enforceable in accordance with its terms (or any Loan Party
shall challenge the enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such assertion, that
any provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms);

then, and in every such event (other than an event with respect to the Borrowers
described in clause (h) or (i) of this Article), 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 Representative,
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 Borrowers 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 Borrowers; and in case of any event with respect to the Borrowers described
in clause (h) or (i) of this Article, 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 Borrowers accrued
hereunder, shall automatically

 

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become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrowers. Upon the occurrence
and the continuance of an Event of Default, the Administrative Agent may, and at
the request of the Required Lenders shall, exercise any rights and remedies
provided to the Administrative Agent under the Loan Documents or at law or
equity, including all remedies provided under the UCC.

Article VIII

The Administrative Agent and Co-Collateral Agents

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the
Administrative Agent as its administrative agent and each of the Co-Collateral
Agents as its collateral agent, authorizes the Administrative Agent to take such
actions on its behalf, including execution of the other Loan Documents, and
authorizes the Administrative Agent and the Co-Collateral Agents to exercise
such powers as are delegated to the Administrative Agent and the Co-Collateral
Agents, respectively, by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto.

Each Person serving as the Administrative Agent and/or a Co-Collateral 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 or a Co-Collateral Agent, and such Person and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Loan Parties or any Subsidiary of a Loan Party or
other Affiliate thereof as if it were not the Administrative Agent or a
Co-Collateral Agent hereunder.

Neither the Administrative Agent nor the Co-Collateral Agents shall have any
duties or obligations except those expressly set forth in the Loan Documents.
Without limiting the generality of the foregoing, (a) neither the Administrative
Agent nor the Co-Collateral Agents shall be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) neither the Administrative Agent nor the Co-Collateral Agents shall have any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated by the Loan
Documents that the Administrative Agent or the Co-Collateral Agents are 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 9.02), and (c) except as expressly set forth in the Loan
Documents, neither the Administrative Agent nor the Co-Collateral Agents shall
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to any Loan Party or any of its Subsidiaries that is
communicated to or obtained by the Person serving as Administrative Agent or
Co-Collateral Agent or any of its Affiliates in any capacity. Neither the
Administrative Agent nor the Co-Collateral Agents shall 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 9.02) or in the absence of its
own gross negligence or willful misconduct. Neither the Administrative Agent nor
the Co-Collateral Agents shall be deemed to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent or the
Co-Collateral Agents by the Borrower Representative or a Lender, and the
Administrative Agent or the Co-Collateral Agents 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 any Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or in
connection with any Loan Document, (iii) the performance or observance of any of
the covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document, (v) the creation,
perfection or priority of Liens on the Collateral or the existence of the
Collateral, or (vi) the satisfaction of any condition set forth in Article IV or
elsewhere in any Loan Document, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent or the Co-Collateral
Agents.

 

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The Administrative Agent and the Co-Collateral Agents 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 and the Co-Collateral Agents 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 and the Co-Collateral Agents may consult with legal counsel
(who may be counsel for the Borrowers), 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 and the Co-Collateral Agents may perform any and all of
their duties and exercise their rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent and/or the Co-Collateral
Agents. The Administrative Agent and the Co-Collateral Agents and any such
sub-agent may perform any and all its duties and exercise its rights and powers
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 the Co-Collateral Agents 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 and the Co-Collateral Agents.

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent and the Co-Collateral
Agents may resign at any time by notifying the Lenders, the Issuing Bank and the
Borrower Representative. Upon any such resignation of the Administrative Agent,
the Required Lenders shall have the right, in consultation with the Borrowers,
to appoint a successor Administrative Agent. If no successor Administrative
Agent 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 and the Issuing Bank, appoint a successor Administrative
Agent which shall be a commercial bank or an Affiliate of any such commercial
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 Co-Collateral Agents, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrowers to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrowers and such
successor. After the resignation of the Administrative Agent or either
Co-Collateral Agent (or both) hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent or Co-Collateral Agent, their 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 or
Co-Collateral Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or either Co-Collateral 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 either Co-Collateral 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 other Loan Document or related agreement
or any document furnished hereunder or thereunder.

 

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Each Lender hereby agrees that (a) it has requested a copy of each Report
prepared by or on behalf of the Administrative Agent and/or the Co-Collateral
Agents; (b) none of the Co-Collateral Agents or the Administrative Agent
(i) makes any representation or warranty, express or implied, as to the
completeness or accuracy of any Report or any of the information contained
therein or any inaccuracy or omission contained in or relating to a Report and
(ii) shall be liable for any information contained in any Report; (c) the
Reports are not comprehensive audits or examinations, and that any Person
performing any field examination will inspect only specific information
regarding the Loan Parties and will rely significantly upon the Loan Parties’
books and records, as well as on representations of the Loan Parties’ personnel
and that none of the Co-Collateral Agents or the Administrative Agent undertakes
any obligation to update, correct or supplement the Reports; (d) it will keep
all Reports confidential and strictly for its internal use, not share the Report
with any Loan Party or any other Person except as otherwise permitted pursuant
to this Agreement; and (e) without limiting the generality of any other
indemnification provision contained in this Agreement, it will pay and protect,
and indemnify, defend, and hold the Administrative Agent, the Co-Collateral
Agents and any such other Person preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses, and other amounts
(including reasonable attorney fees) incurred by as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender.

Any Lender identified herein as a Syndication Agent, Documentation Agent,
Managing Agent, Manager, Lead Arranger, Arranger or any other corresponding
title, other than “Administrative Agent” and “Co-Collateral Agent,” shall have
no right, power, obligation, liability, responsibility or duty under this
Agreement or any other Loan Document except those applicable to all Lenders as
such; provided, however, that the foregoing shall not be construed to diminish
the obligations, if any, of the Administrative Agent and/or the Co-Collateral
Agents to the Loan Parties expressly set forth in any of the Loan Documents.
Each Lender acknowledges that it has not relied, and will not rely, on any
Lender so identified in deciding to enter into this Agreement or in taking or
not taking any action hereunder.

Article IX

Miscellaneous

Section 9.01. Notices. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (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 facsimile, as follows:

(i) if to any Loan Party, to the Borrower Representative at:

 

 

Esmark Incorporated

       

2500 Euclid Avenue

       

Chicago Heights, Illinois

       

60411

       

Attention: John Krupinski

       

Telecopy: 708-756-0099

       

Telephone: 708-756-0400

     

(ii) if to JPMorgan Chase Bank, N.A. in its capacities as the Administrative
Agent, the Issuing Bank, the Swingline Lender, a Co-Collateral Agent or a
Lender, to it at:

 

 

120 South LaSalle Street, Floor 8

      Chicago, Illinois 60603      

 

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  Attention: David Lehner         Telecopy: 312-661-6929         Telephone:
312-661-5021      

(iii) if to General Electric Capital Corporation, in its capacity as a
Co-Collateral Agent or a Lender, to it at:

 

 

500 West Monroe Street, 12th Floor

     

Chicago, IL 60661

       

Attention: Esmark Incorporated, Account Manager

     

Telecopy: 312-463-3840

       

Telephone: 312-463-2300

     

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

All such notices and other communications (i) sent by hand or overnight courier
service, or mailed by certified or registered mail, shall be deemed to have been
given when received or (ii) sent by facsimile shall be deemed to have been given
when sent, provided that if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the
next Business Day for the recipient.

(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications (including e-mail and internet or
intranet websites) pursuant to procedures approved by the Administrative Agent;
provided that the foregoing shall not apply to notices pursuant to Article II
unless otherwise agreed by the Administrative Agent and the applicable Lender.
The Administrative Agent or the Borrower Representative (on behalf of the Loan
Parties) 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. All such notices and other
communications (i) sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if not given during the normal business
hours of the recipient, such notice or communication shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient, and (ii) posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail address
as described in the foregoing clause (b)(i) of notification that such notice or
communication is available and identifying the website address therefor.

(c) Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto.

Section 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative
Agent, the Co-Collateral Agents, the Issuing Bank or any Lender in exercising
any right or power hereunder or under any other Loan Document 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, the
Issuing Bank and the Lenders hereunder and under any other Loan Document are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or consent to
any departure by any Loan Party therefrom shall in any event be effective unless
the same shall be permitted

 

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by paragraph (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, any Lender or the
Issuing Bank may have had notice or knowledge of such Default at the time.

(b) Neither this Agreement nor any other Loan Document nor any provision hereof
or thereof may be waived, amended or modified except (i) in the case of this
Agreement, pursuant to an agreement or agreements in writing entered into by the
Borrowers and the Required Lenders or, (ii) in the case of any other Loan
Document, pursuant to an agreement or agreements in writing entered into by the
Administrative Agent and the Loan Party or Loan Parties that are parties
thereto, 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 (provided that the Administrative Agent may make
Protective Advances as set forth in Section 2.04), (ii) reduce or forgive the
principal amount of any Loan or LC Disbursement or reduce the rate of interest
thereon, or reduce or forgive any interest or fees payable hereunder, without
the written consent of each Lender directly affected thereby, (iii) postpone any
scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any date for the payment of any interest, fees or other
Obligations payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment, without
the written consent of each Lender directly affected thereby, (iv) change
Section 2.18(b) or Section 2.18(d) in a manner that would alter the manner in
which payments are shared, without the written consent of each Lender,
(v) increase the advance rates set forth in the definition of the Borrowing Base
or add new categories of eligible assets, without the written consent of the
Supermajority Revolving Lenders and the Co-Collateral Agents, (vi) change any of
the provisions of this Section or the definition of “Required Lenders” or any
other provision of any Loan Document specifying the number or percentage of
Lenders (or Lenders of any Class) required to waive, amend or modify any rights
thereunder or make any determination or grant any consent thereunder, without
the written consent of each Lender, (vii) release any Loan Guarantor from its
obligation under its Loan Guaranty (except as otherwise permitted herein or in
the other Loan Documents), without the written consent of each Lender, or
(viii) except as provided in clauses (c) and (d) of this Section or in any
Collateral Document, release all or substantially all of the Collateral, without
the written consent of each Lender; 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. The Administrative Agent may also amend
the Commitment Schedule to reflect assignments entered into pursuant to Section
9.04.

(c) The Lenders hereby irrevocably authorize the Administrative Agent, at its
option and in its sole discretion, to release any Liens granted to the
Administrative Agent by the Loan Parties on any Collateral (i) upon the
termination of the all Commitments, payment and satisfaction in full in cash of
all Secured Obligations (other than Unliquidated Obligations), and the cash
collateralization of all Unliquidated Obligations in a manner satisfactory to
each affected Lender, (ii) constituting property being sold or disposed of if
the Loan Party disposing of such property certifies to the Administrative Agent
that the sale or disposition is made in compliance with the terms of this
Agreement (and the Administrative Agent may rely conclusively on any such
certificate, without further inquiry), (iii) constituting property leased to a
Loan Party under a lease which has expired or been terminated in a transaction
permitted under this Agreement, or (iv) as required to effect any sale or other
disposition of such Collateral in connection with any exercise of remedies of
the Administrative Agent and the Lenders pursuant to Article VII. Except as
provided in the preceding sentence, the Administrative Agent will not release
any Liens on Collateral without the prior written authorization of the Required
Lenders; provided that, the Administrative Agent may in its discretion, release
its Liens on

 

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Collateral valued in the aggregate not in excess of $100,000 during any calendar
year without the prior written authorization of the Required Lenders. Any such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
the Loan Parties in respect of) all interests retained by the Loan Parties,
including the proceeds of any sale, all of which shall continue to constitute
part of the Collateral.

(d) If, in connection with any proposed amendment, waiver or consent requiring
the consent of “each Lender” or “each Lender affected thereby,” the consent of
the Required Lenders is obtained, but the consent of other necessary Lenders is
not obtained (any such Lender whose consent is necessary but not obtained being
referred to herein as a “Non-Consenting Lender”), then the Borrowers may elect
to replace a Non-Consenting Lender as a Lender party to this Agreement, provided
that, concurrently with such replacement, (i) another bank or other entity which
is reasonably satisfactory to the Borrowers and the Administrative Agent shall
agree, as of such date, to purchase for cash the Loans and other Obligations due
to the Non-Consenting Lender pursuant to an Assignment and Assumption and to
become a Lender for all purposes under this Agreement and to assume all
obligations of the Non-Consenting Lender to be terminated as of such date and to
comply with the requirements of clause (b) of Section 9.04, and (ii) the
Borrowers shall pay to such Non-Consenting Lender in same day funds on the day
of such replacement (1) all interest, fees and other amounts then accrued but
unpaid to such Non-Consenting Lender by the Borrowers hereunder to and including
the date of termination, including without limitation payments due to such
Non-Consenting Lender under Section 2.15 and Section 2.17, and (2) an amount, if
any, equal to the payment which would have been due to such Lender on the day of
such replacement under Section 2.16 had the Loans of such Non-Consenting Lender
been prepaid on such date rather than sold to the replacement Lender.

Section 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrowers shall pay
(i) all reasonable out-of-pocket expenses incurred by the Administrative Agent,
the Co-Lead Arrangers and each of their Affiliates, including the reasonable
fees, charges and disbursements of counsel for the Administrative Agent, in
connection with the syndication and distribution (including, without limitation,
via the internet or through a service such as Intralinks) of the credit
facilities provided for herein, the preparation and administration of the Loan
Documents or any amendments, modifications or waivers of the provisions of the
Loan Documents (whether or not the transactions contemplated hereby or thereby
shall be consummated), (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, the
Co-Collateral Agents, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent, the
Co-Collateral Agents, the Issuing Bank or any Lender, in connection with the
enforcement, collection or protection of its rights in connection with the Loan
Documents, including its rights under this Section, or in connection with the
Loans made 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. Expenses being
reimbursed by the Borrowers under this Section include, without limiting the
generality of the foregoing, costs and expenses incurred in connection with:

(i) appraisals and insurance reviews;

(ii) field examinations and the preparation of Reports based on the fees charged
by a third party retained by the Administrative Agent or the Co-Collateral
Agents or the internally allocated fees for each Person employed by the
Administrative Agent or the Co-Collateral Agents with respect to each field
examination;

 

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(iii) background checks regarding senior management and/or key investors, as
deemed necessary or appropriate in the Permitted Discretion of the
Administrative Agent;

(iv) taxes, fees and other charges for (A) lien and title searches and title
insurance and (B) filing financing statements and continuations, and other
actions to perfect, protect, and continue the Administrative Agent’s Liens;

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

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

All of the foregoing costs and expenses may be charged to the Borrowers as
Revolving Loans or to another deposit account, all as described in Section
2.18(c).

(b) The Borrowers shall, jointly and severally, indemnify the Administrative
Agent, the Co-Collateral Agents, the Issuing Bank 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, penalties, 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 the Loan Documents or any agreement
or instrument contemplated thereby, the performance by the parties hereto of
their respective obligations thereunder 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 any Borrower or
any of their Subsidiaries, or any Environmental Liability related in any way to
any Borrower or any of their Subsidiaries, 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,
penalties, 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 Borrowers fail to pay any amount required to be paid
by it to the Administrative Agent, the Co-Collateral Agents, the Issuing Bank or
the Swingline Lender under paragraph (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 Applicable 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, penalty, 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, no Loan Party shall assert, and
each 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.

 

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

Section 9.04. 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
Borrowers 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 Borrowers without such consent shall be null and
void) and (ii) no Lender may assign or otherwise transfer its rights or
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 paragraph (c) of this
Section) 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 paragraph (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 Representative, provided that no consent of the Borrower
Representative 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; and

(C) the Issuing Bank.

(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 Approved Fund 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 Representative and the Administrative
Agent otherwise consent, provided that no such consent of the Borrower
Representative 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;

(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

 

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(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire in which the assignee
designates one or more Credit Contacts to whom all syndicate-level information
(which may contain material non-public information about the Company, the Loan
Parties and their Related Parties or their respective securities) will be made
available and who may receive such information in accordance with the assignee’s
compliance procedures and applicable laws, including Federal and state
securities laws.

For the purposes of this Section 9.04(b), the term “Approved Fund” has the
following meaning:

“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 paragraph (b)(iv)
of this Section, 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 Section
2.15, Section 2.16, Section 2.17 and Section 9.03). Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this Section 9.04 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 paragraph (c) of this Section.

(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrowers, 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 Borrowers, the Administrative Agent, the Issuing Bank 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 Borrowers, the Issuing Bank 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 paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, 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 Section 2.05, Section
2.06(d) or Section 2.06(e)Section 2.06(e) , Section 2.07(b), Section 2.18(d) or
Section 9.03(c), the Administrative Agent shall have no obligation to accept
such Assignment and Assumption and record the information therein in the
Register unless and

 

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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
paragraph.

(c) (i) Any Lender may, without the consent of the Borrowers, 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 Borrowers, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
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 9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of
this Section, the Borrowers agree that each Participant shall be entitled to the
benefits of Section 2.15, Section 2.16 and Section 2.17 to the same extent as if
it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 9.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 2.18(c) and
Section 2.18(d) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under
Section 2.15 or Section 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
Representative’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 Representative is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrowers, 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 9.05. Survival. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, the Issuing
Bank 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
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Section 2.17 and Section 9.03 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 9.06. 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, the other
Loan Documents 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 in Section 4.01, 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 facsimile or electronic mail as an
Adobe “.pdf” file shall be effective as delivery of a manually executed
counterpart of this Agreement.

Section 9.07. Severability. Any provision of any Loan Document 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 thereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

Section 9.08. Right of Setoff. If an Event of Default 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 Borrowers or such
Loan Guarantor against any of and all the Secured Obligations held by such
Lender, irrespective of whether or not such Lender shall have made any demand
under the Loan Documents and although such obligations may be unmatured. The
applicable Lender shall notify the Borrower Representative and the
Administrative Agent of such set-off or application, provided that any failure
to give or any delay in giving such notice shall not affect the validity of any
such set-off or application under this Section. 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 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) The Loan Documents (other than those containing a contrary express choice of
law provision) shall be governed by and construed in accordance with the
internal laws (including, without limitation, 735 ILCS Section 105/5-1 et seq,
but otherwise without regard to the conflict of laws provisions) of the State of
Illinois, but giving effect to federal laws applicable to national banks.

(b) Each Loan Party hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any U.S. Federal or
Illinois State court sitting in Chicago, Illinois in any action or proceeding
arising out of or relating to any Loan Documents, 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
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be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement or any other Loan Document
shall affect any right that the Administrative Agent, the Issuing Bank or any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement or any other Loan Document against any Loan Party or its properties in
the courts of any jurisdiction.

(c) Each Loan Party 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 or any other Loan Document in any
court referred to in paragraph (b) of this Section. 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 9.01. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.

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, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY (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, the
Co-Collateral Agents, the Issuing Bank and the 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 Requirement of Laws or by any subpoena
or similar legal process, provided that to the extent practicable and permitted
by applicable law, the Person requested to disclose such information will
provide prompt written notice of such request to the Company and allow the
Company a reasonable opportunity to seek protective measures prior to
disclosure, (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 any other Loan Document or the enforcement of rights hereunder
or thereunder, (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 Loan Parties and
their obligations,

 

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(g) with the consent of the Borrower Representative 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, the Issuing
Bank or any Lender on a non-confidential basis from a source other than the
Borrowers. For the purposes of this Section, “Information” means all information
received from the Borrowers relating to the Borrowers or their business, other
than any such information that is available to the Administrative Agent, the
Co-Collateral Agents, the Issuing Bank or any Lender on a non-confidential basis
prior to disclosure by the Borrowers. 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. Several Obligations; Nonreliance; Violation of Law. The respective
obligations of the Lenders hereunder are several and not joint and the failure
of any Lender to make any Loan or perform any of its obligations hereunder shall
not relieve any other Lender from any of its obligations hereunder. Each Lender
hereby represents that it is not relying on or looking to any margin stock for
the repayment of the Borrowings provided for herein. Anything contained in this
Agreement to the contrary notwithstanding, neither the Issuing Bank nor any
Lender shall be obligated to extend credit to the Borrowers in violation of any
Requirement of Law.

Section 9.14. 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 Borrowers that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies the Borrowers, which information includes the names and
addresses of the Borrowers and other information that will allow such Lender to
identify the Borrowers in accordance with the Act.

Section 9.15. Disclosure. Each Loan Party and each Lender hereby acknowledges
and agrees that the Administrative Agent and/or its Affiliates from time to time
may hold investments in, make other loans to or have other relationships with
any of the Loan Parties and their respective Affiliates.

Section 9.16. Appointment for Perfection. Each Lender hereby appoints each other
Lender as its agent for the purpose of perfecting Liens, for the benefit of the
Administrative Agent and the Lenders, in assets which, in accordance with
Article 9 of the UCC or any other applicable law can be perfected only by
possession. Should any Lender (other than the Administrative Agent) obtain
possession of any such Collateral, such Lender shall notify the Administrative
Agent thereof, and, promptly upon the Administrative Agent’s request therefor
shall deliver such Collateral to the Administrative Agent or otherwise deal with
such Collateral in accordance with the Administrative Agent’s instructions.

Section 9.17. 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 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.

 

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Article X

Loan Guaranty

Section 10.01. Guaranty. Each Loan Guarantor (other than those that have
delivered a separate Guaranty) hereby agrees that it is jointly and severally
liable for, and, as primary obligor and not merely as surety, absolutely and
unconditionally guarantees to the Lenders the prompt payment when due, whether
at stated maturity, upon acceleration or otherwise, and at all times thereafter,
of the Secured Obligations and all costs and expenses including, without
limitation, all court costs and attorneys’ and paralegals’ fees (including
allocated costs of in-house counsel and paralegals) and expenses paid or
incurred by the Administrative Agent, the Co-Collateral Agents, the Issuing Bank
and the Lenders in endeavoring to collect all or any part of the Secured
Obligations from, or in prosecuting any action against, any Borrower, any Loan
Guarantor or any other guarantor of all or any part of the Secured Obligations
(such costs and expenses, together with the Secured Obligations, collectively
the “Guaranteed Obligations”). Each Loan Guarantor further agrees that the
Guaranteed Obligations may be extended or renewed in whole or in part without
notice to or further assent from it, and that it remains bound upon its
guarantee notwithstanding any such extension or renewal. All terms of this Loan
Guaranty apply to and may be enforced by or on behalf of any domestic or foreign
branch or Affiliate of any Lender that extended any portion of the Guaranteed
Obligations.

Section 10.02. Guaranty of Payment. This Loan Guaranty is a guaranty of payment
and not of collection. Each Loan Guarantor waives any right to require the
Administrative Agent, the Issuing Bank or any Lender to sue any Borrower, any
Loan Guarantor, any other guarantor, or any other person obligated for all or
any part of the Guaranteed Obligations (each, an “Obligated Party”), or
otherwise to enforce its payment against any collateral securing all or any part
of the Guaranteed Obligations.

Section 10.03. No Discharge or Diminishment of Loan Guaranty. (a) Except as
otherwise provided for herein, the obligations of each Loan Guarantor hereunder
are unconditional and absolute and not subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Guaranteed Obligations), including: (i) any claim of waiver,
release, extension, renewal, settlement, surrender, alteration, or compromise of
any of the Guaranteed Obligations, by operation of law or otherwise; (ii) any
change in the corporate existence, structure or ownership of any Borrower or any
other guarantor of or other person liable for any of the Guaranteed Obligations;
(iii) any insolvency, bankruptcy, reorganization or other similar proceeding
affecting any Obligated Party, or their assets or any resulting release or
discharge of any obligation of any Obligated Party; or (iv) the existence of any
claim, setoff or other rights which any Loan Guarantor may have at any time
against any Obligated Party, the Administrative Agent, the Issuing Bank, any
Lender, or any other person, whether in connection herewith or in any unrelated
transactions.

(b) The obligations of each Loan Guarantor hereunder are not subject to any
defense or setoff, counterclaim, recoupment, or termination whatsoever by reason
of the invalidity, illegality, or unenforceability of any of the Guaranteed
Obligations or otherwise, or any provision of applicable law or regulation
purporting to prohibit payment by any Obligated Party, of the Guaranteed
Obligations or any part thereof.

(c) Further, the obligations of any Loan Guarantor hereunder are not discharged
or impaired or otherwise affected by: (i) the failure of the Administrative
Agent, the Issuing Bank or any Lender to assert any claim or demand or to
enforce any remedy with respect to all or any part of the Guaranteed
Obligations; (ii) any waiver or modification of or supplement to any provision
of any agreement relating to the Guaranteed Obligations; (iii) any release,
non-perfection, or invalidity of any indirect or direct security for the
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Obligations or any obligations of any other guarantor of or other person liable
for any of the Guaranteed Obligations; (iv) any action or failure to act by the
Administrative Agent, the Issuing Bank or any Lender with respect to any
collateral securing any part of the Guaranteed Obligations; or (v) any default,
failure or delay, willful or otherwise, in the payment or performance of any of
the Guaranteed Obligations, or any other circumstance, act, omission or delay
that might in any manner or to any extent vary the risk of such Loan Guarantor
or that would otherwise operate as a discharge of any Loan Guarantor as a matter
of law or equity (other than the indefeasible payment in full in cash of the
Guaranteed Obligations).

Section 10.04. Defenses Waived. To the fullest extent permitted by applicable
law, each Loan Guarantor hereby waives any defense based on or arising out of
any defense of any Borrower or any Loan Guarantor or the unenforceability of all
or any part of the Guaranteed Obligations from any cause, or the cessation from
any cause of the liability of any Borrower or any Loan Guarantor, other than the
indefeasible payment in full in cash of the Guaranteed Obligations. Without
limiting the generality of the foregoing, each Loan Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by law, any notice not provided for herein, as well as any requirement
that at any time any action be taken by any person against any Obligated Party,
or any other person. The Administrative Agent may, at its election, foreclose on
any Collateral held by it by one or more judicial or nonjudicial sales, accept
an assignment of any such Collateral in lieu of foreclosure or otherwise act or
fail to act with respect to any collateral securing all or a part of the
Guaranteed Obligations, compromise or adjust any part of the Guaranteed
Obligations, make any other accommodation with any Obligated Party or exercise
any other right or remedy available to it against any Obligated Party, without
affecting or impairing in any way the liability of such Loan Guarantor under
this Loan Guaranty except to the extent the Guaranteed Obligations have been
fully and indefeasibly paid in cash. To the fullest extent permitted by
applicable law, each Loan Guarantor waives any defense arising out of any such
election even though that election may operate, pursuant to applicable law, to
impair or extinguish any right of reimbursement or subrogation or other right or
remedy of any Loan Guarantor against any Obligated Party or any security.

Section 10.05. Rights of Subrogation. No Loan Guarantor will assert any right,
claim or cause of action, including, without limitation, a claim of subrogation,
contribution or indemnification that it has against any Obligated Party, or any
collateral, until the Loan Parties and the Loan Guarantors have fully performed
all their obligations to the Administrative Agent, the Issuing Bank and the
Lenders.

Section 10.06. Reinstatement; Stay of Acceleration. If at any time any payment
of any portion of the Guaranteed Obligations is rescinded or must otherwise be
restored or returned upon the insolvency, bankruptcy, or reorganization of any
Borrower or otherwise, each Loan Guarantor’s obligations under this Loan
Guaranty with respect to that payment shall be reinstated at such time as though
the payment had not been made and whether or not the Administrative Agent, the
Issuing Bank and the Lenders are in possession of this Loan Guaranty. If
acceleration of the time for payment of any of the Guaranteed Obligations is
stayed upon the insolvency, bankruptcy or reorganization of any Borrower, all
such amounts otherwise subject to acceleration under the terms of any agreement
relating to the Guaranteed Obligations shall nonetheless be payable by the Loan
Guarantors forthwith on demand by the Lender.

Section 10.07. Information. Each Loan Guarantor assumes all responsibility for
being and keeping itself informed of the Borrowers’ financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks that
each Loan Guarantor assumes and incurs under this Loan Guaranty, and agrees that
neither the Administrative Agent, the Issuing Bank nor any Lender shall have any
duty to advise any Loan Guarantor of information known to it regarding those
circumstances or risks.

 

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Section 10.08. Termination. The Lenders may continue to make loans or extend
credit to the Borrowers based on this Loan Guaranty until five days after it
receives written notice of termination from any Loan Guarantor. Notwithstanding
receipt of any such notice, each Loan Guarantor will continue to be liable to
the Lenders for any Guaranteed Obligations created, assumed or committed to
prior to the fifth day after receipt of the notice, and all subsequent renewals,
extensions, modifications and amendments with respect to, or substitutions for,
all or any part of that Guaranteed Obligations.

Section 10.09. Taxes. All payments of the Guaranteed Obligations will be made by
each Loan Guarantor free and clear of and without deduction for any Indemnified
Taxes or Other Taxes; provided that if any Loan Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent, Lender or Issuing Bank (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Loan Guarantor shall make such deductions and
(iii) such Loan Guarantor shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

Section 10.10. Maximum Liability. The provisions of this Loan Guaranty are
severable, and in any action or proceeding involving any state corporate law, or
any state, federal or foreign bankruptcy, insolvency, reorganization or other
law affecting the rights of creditors generally, if the obligations of any Loan
Guarantor under this Loan Guaranty would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of such Loan
Guarantor’s liability under this Loan Guaranty, then, notwithstanding any other
provision of this Loan Guaranty to the contrary, the amount of such liability
shall, without any further action by the Loan Guarantors or the Lenders, be
automatically limited and reduced to the highest amount that is valid and
enforceable as determined in such action or proceeding (such highest amount
determined hereunder being the relevant Loan Guarantor’s “Maximum Liability”.
This Section with respect to the Maximum Liability of each Loan Guarantor is
intended solely to preserve the rights of the Lenders to the maximum extent not
subject to avoidance under applicable law, and no Loan Guarantor nor any other
person or entity shall have any right or claim under this Section with respect
to such Maximum Liability, except to the extent necessary so that the
obligations of any Loan Guarantor hereunder shall not be rendered voidable under
applicable law. Each Loan Guarantor agrees that the Guaranteed Obligations may
at any time and from time to time exceed the Maximum Liability of each Loan
Guarantor without impairing this Loan Guaranty or affecting the rights and
remedies of the Lenders hereunder, provided that, nothing in this sentence shall
be construed to increase any Loan Guarantor’s obligations hereunder beyond its
Maximum Liability.

Section 10.11. Liability Cumulative. The liability of each Loan Party as a Loan
Guarantor under this Article X is in addition to and shall be cumulative with
all liabilities of each Loan Party to the Administrative Agent, the Issuing Bank
and the Lenders under this Agreement and the other Loan Documents to which such
Loan Party is a party or in respect of any obligations or liabilities of the
other Loan Parties, without any limitation as to amount, unless the instrument
or agreement evidencing or creating such other liability specifically provides
to the contrary.

Article XI

The Borrower Representative

Section 11.01. Appointment; Nature of Relationship. The Company is hereby
appointed by each of the Borrowers as its contractual representative (herein
referred to as the “Borrower Representative”) hereunder and under each other
Loan Document, and each of the Borrowers irrevocably authorizes the Borrower
Representative to act as the contractual representative of such Borrower with
the

 

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rights and duties expressly set forth herein and in the other Loan Documents.
The Borrower Representative agrees to act as such contractual representative
upon the express conditions contained in this Article XI. Additionally, the
Borrowers hereby appoint the Borrower Representative as their agent to receive
all of the proceeds of the Loans in the Funding Account(s), at which time the
Borrower Representative shall promptly disburse such Loans to the appropriate
Borrower. The Administrative Agent and the Lenders, and their respective
officers, directors, agents or employees, shall not be liable to the Borrower
Representative or any Borrower for any action taken or omitted to be taken by
the Borrower Representative or the Borrowers pursuant to this Section 11.01.

Section 11.02. Powers. The Borrower Representative shall have and may exercise
such powers under the Loan Documents as are specifically delegated to the
Borrower Representative by the terms of each thereof, together with such powers
as are reasonably incidental thereto. The Borrower Representative shall have no
implied duties to the Borrowers, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Loan Documents
to be taken by the Borrower Representative.

Section 11.03. Employment of Agents. The Borrower Representative may execute any
of its duties as the Borrower Representative hereunder and under any other Loan
Document by or through authorized officers.

Section 11.04. Notices. Each Borrower shall immediately notify the Borrower
Representative of the occurrence of any Default or Unmatured Default hereunder
referring to this Agreement describing such Default or Unmatured Default and
stating that such notice is a “notice of default.” In the event that the
Borrower Representative receives such a notice, the Borrower Representative
shall give prompt notice thereof to the Administrative Agent and the Lenders.
Any notice provided to the Borrower Representative hereunder shall constitute
notice to each Borrower on the date received by the Borrower Representative.

Section 11.05. Successor Borrower Representative. Upon the prior written consent
of the Administrative Agent, the Borrower Representative may resign at any time,
such resignation to be effective upon the appointment of a successor Borrower
Representative. The Administrative Agent shall give prompt written notice of
such resignation to the Lenders.

Section 11.06. Execution of Loan Documents; Borrowing Base Certificate. The
Borrowers hereby empower and authorize the Borrower Representative, on behalf of
the Borrowers, to execute and deliver to the Administrative Agent and the
Lenders the Loan Documents and all related agreements, certificates, documents,
or instruments as shall be necessary or appropriate to effect the purposes of
the Loan Documents, including without limitation, the Aggregate Borrowing Base
Certificate and the Borrowing Base Certificate of each Borrower and the
Compliance Certificates. Each Borrower agrees that any action taken by the
Borrower Representative or the Borrowers in accordance with the terms of this
Agreement or the other Loan Documents, and the exercise by the Borrower
Representative of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Borrowers.

 

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Section 11.07. Reporting. Each Borrower hereby agrees that such Borrower shall
furnish promptly after each fiscal month to the Borrower Representative a copy
of its Borrowing Base Certificate and any other certificate or report required
hereunder or requested by the Borrower Representative on which the Borrower
Representative shall rely to prepare the Aggregate Borrowing Base Certificate
and the Borrowing Base Certificate of each Borrower and Compliance Certificates
required pursuant to the provisions of this Agreement.

Article XII

Subordination of Intercompany Obligations

Section 12.01. Subordination Generally. Each Loan Party covenants and agrees
that the payment of all indebtedness, principal, interest (including interest
which accrues after the commencement of any case or proceeding in bankruptcy, or
for the reorganization of any Loan Party), fees, charges, expenses, attorneys’
fees and any other sum, obligation or liability owing by any other Loan Party to
such Loan Party, including any intercompany trade payables or royalty or
licensing fees (collectively, the “Intercompany Obligations”), is subordinated,
to the extent and in the manner provided in this Article XII, to the prior
payment in full in cash of all Obligations and that the subordination is for the
benefit of the Secured Creditors, and the Administrative Agent, on behalf of the
Secured Creditors, may enforce such provisions directly.

Section 12.02. Specific Performance; Waiver of Defenses. Each Loan Party
executing this Agreement hereby (i) authorizes the Administrative Agent, on
behalf of the Secured Creditors, to demand specific performance of the terms of
this Article XII irrespective of whether any other Loan Party shall have
complied with any of the provisions hereof applicable to it, at any time when
such Loan Party shall have failed to comply with any provisions of this Article
XII that are applicable to it and (ii) to the extent not prohibited by
applicable law irrevocably waives any defense based on the adequacy of a remedy
at law, which might be asserted as a bar to such remedy of specific performance.

Section 12.03. Distributions. Except to the extent otherwise permitted herein,
upon any distribution of assets of any Loan Party in any dissolution,
winding-up, liquidation or reorganization (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise):

(a) the Secured Creditors shall first be entitled to receive payment in full of
the Obligations in cash before any Loan Party is entitled to receive any payment
on account of the Intercompany Obligations;

(b) any payment or distribution of assets of any Loan Party of any kind or
character, whether in cash, property or securities, to which any other Loan
Party would be entitled, except for the provisions of this Section 12.03, shall
be paid by the liquidating trustee or agent or other Person making such payment
or distribution directly to the Administrative Agent, to the extent necessary to
make payment in full of the Obligations in cash, after giving effect to any
concurrent payment or distribution or provision therefor to any Secured
Creditor; and

(c) if any payment or distribution of assets of any Loan Party of any kind or
character, whether in cash, property or securities, shall be received by any
other Loan Party on account of the Intercompany Obligations before payment in
full of the Obligations in cash, such payment or distribution shall be received
and held for and shall be paid over to the Administrative Agent for application
to the payment of the Obligations until payment in full of the Obligations in
cash, after giving effect to any concurrent payment or distribution or provision
therefor to the any Secured Creditor.

 

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Section 12.04. Loan Parties Failure to Act. No right of any Secured Creditor or
any other present or future holders of any of the Obligations to enforce the
subordination provisions herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of any Loan Party or by any
act or failure to act, in good faith, by any such holder, or by any
noncompliance by any Loan Party with the terms hereof, regardless of any
knowledge thereof which any such holder may have or be otherwise charged with.

Article XIII

Concerning Joint and Several Liability of the Borrowers

Section 13.01. Joint and Several Liability. (a) Each of the Borrowers is
accepting joint and several liability hereunder in consideration of all Loans,
Letters of Credit and all other extensions of credit made to or for the account
of any of the Borrowers under this Agreement, for the mutual benefit, directly
and indirectly, of each of the Borrowers and in consideration of the
undertakings of each of the Borrowers to accept joint and several liability for
the obligations of each of them.

(b) Each of the Borrowers jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers with respect to the payment and
performance of all of the Obligations, it being the intention of the parties
hereto that all the Obligations shall be the joint and several obligations of
each of the Borrowers without preferences or distinction among them.

Section 13.02. Obligation to Act. If and to the extent that any of the Borrowers
shall fail to make any payment with respect to any of the Obligations as and
when due or to perform any of the Obligations in accordance with the terms
thereof, then in each such event, the other Borrowers will make such payment
with respect to, or perform, such Obligation.

Section 13.03. Full Recourse; Enforceability. The obligations of each Borrower
under the provisions of this Article XIII constitute full recourse obligations
of such Borrower, enforceable against it to the full extent of its properties
and assets (subject to applicable bankruptcy, insolvency, moratorium, fraudulent
transfer and other laws affecting creditors’ rights generally, and subject to
general principles of equity, regardless of whether considered in a proceeding
at law or in equity), irrespective of the validity, regularity or enforceability
of this Agreement or any other circumstances whatsoever.

Section 13.04. Waiver of Defenses. Except as otherwise expressly provided
herein, each Borrower hereby waives, to the extent not prohibited by applicable
law, notice of acceptance of its joint and several liability, notice of any Loan
made under this Agreement, notice of occurrence of any Default, or of any demand
for any payment under this Agreement, notice of any action at any time taken or
omitted by any Lender under or in respect of any of the Obligations, any
requirement of diligence and, generally, all demands, notices and other
formalities of every kind in connection with this Agreement. Each Borrower
hereby assents to, and waives, to the extent not prohibited by applicable law,
notice of, any extension or postponement of the time for the payment of any of
the Obligations, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by any Lender at any time or times in
respect of any default by any Borrower in the performance or satisfaction of any
term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by any Lender in respect of any of the Obligations, and
the taking, addition, substitution or release, in whole or in part, at any time
or times, of any security for any of the Obligations or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Borrower. Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of any Lender, including, without
limitation, any failure strictly

 

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or diligently to assert any right or to pursue any remedy or to comply fully
with the applicable laws or regulations thereunder which might, but for the
provisions of this Article XIII, afford grounds for terminating, discharging or
relieving such Borrower, in whole or in part, from any of its obligations under
this Article XIII, it being the intention of each Borrower that, so long as any
of the Obligations remain unsatisfied, the obligations of such Borrower under
this Article XIII shall not be discharged except by performance and then only to
the extent of such performance. The Obligations of each Borrower under this
Article XIII shall not be diminished or rendered unenforceable by any winding
up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Borrower or any Lender. The joint and several
liability of the Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of any
Borrower or any Lender; provided, however that this sentence shall not apply to
any Borrower which is released in accordance with the terms hereof with respect
to any obligations arising after the dissolution, consolidation or merger of
such Borrower or after the sale of all of the Equity Interests of such Borrower.

Section 13.05. Termination; Use of Remedies. The provisions of this Article XIII
are made for the benefit of the Lenders and their respective successors and
permitted assigns, and may be enforced by any such Person from time to time
against any of the Borrowers as often as occasion therefor may arise and without
requirement on the part of any Lender first to marshal any of its claims or to
exercise any of its rights against any of the other Borrowers or to exhaust any
remedies available to it against any of the other Borrowers or to resort to any
other source or means of obtaining payment of any of the Obligations or to elect
any other remedy. The provisions of this Article XIII shall remain in effect
until payment in full of the Obligations in cash and termination of all
Commitments. If at any time, any payment, or any part thereof, made in respect
of any of the Obligations, is rescinded or must otherwise be restored or
returned by any Lender upon the insolvency, bankruptcy or reorganization of any
of the Borrowers, or otherwise, the provisions of this Article XIII will
forthwith be reinstated in effect, as though such payment had not been made.

Article XIV

Contribution Obligations

Section 14.01. Contributions. If, as of any date, the aggregate amount of
payments made by a Loan Party on account of the Obligations and proceeds of such
Loan Party’s Collateral that are applied to the Obligations exceeds the
aggregate amount of Loan proceeds actually used by such Loan Party in its
business (such excess amount being referred to as an “Accommodation Payment”),
then each of the other Loan Parties (each such Loan Party being referred to as a
“Contributing Loan Party”) shall be obligated to make contribution to such Loan
Party (the “Paying Loan Party”) in an amount equal to (i) the product derived by
multiplying the sum of each Accommodation Payment of each Loan Party by the
Allocable Percentage (as defined below) of the Loan Party from whom contribution
is sought less (ii) the amount, if any, of the then outstanding Accommodation
Payment of such Contributing Loan Party (such last mentioned amount which is to
be subtracted from the aforesaid product to be increased by any amounts
theretofore paid by such Contributing Loan Party by way of contribution
hereunder, and to be decreased by any amounts theretofore received by such
Contributing Loan Party by way of contribution hereunder); provided, however,
that a Paying Loan Party’s recovery of contribution hereunder from the other
Loan Parties shall be limited to that amount paid by the Paying Loan Party in
excess of its Allocable Percentage of all Accommodation Payments then
outstanding of all Loan Parties. As used herein, the term “Allocable Percentage”
shall mean, on any date of determination thereof, a fraction the denominator of
which shall be equal to the number of Loan Parties who are parties to this
Agreement on such date and the numerator of which shall be one; provided,
however, that such percentages shall be modified in the event that contribution
from a Loan Party is not possible by reason of insolvency, bankruptcy or

 

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otherwise by reducing such Loan Party’s Allocable Percentage equitably and by
adjusting the Allocable Percentage of the other Loan Parties proportionately so
that the Allocable Percentages of all Loan Parties at all times equals 100%.

Section 14.02. Subordination of Claims. Each Loan Party hereby subordinates any
claims, including any right of payment, subrogation, contribution (including
rights of contribution pursuant to Section 14.01(a) and indemnity, that it may
have from or against any other Loan Party, and any successor or assign of any
other Loan Party, including any trustee, receiver or debtor-in-possession,
howsoever arising, due or owing or whether heretofore, now or hereafter
existing, to the prior payment in full of all of the Obligations in cash and
termination of all Commitments; provided, unless an Event of Default shall then
exist, the foregoing shall not prevent or prohibit the repayment of intercompany
accounts and loans among the Loan Parties in the ordinary course of business.

Section 14.03. Limit on Obligations. Notwithstanding any provision to the
contrary contained herein or in any of the other Loan Documents, to the extent
the joint obligations of any Loan Party shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or transfers)
then the obligations of each Loan Party hereunder shall be limited to the
maximum amount that is permissible under applicable law, after taking into
account, among other things, such Loan Party’s right of contribution and
indemnification from each other Loan Party under this Agreement or applicable
law.

Section 14.04. Termination; Use of Remedies. The provisions of this Article XIV
are made for the benefit of the Lenders and their respective successors and
permitted assigns, and may be enforced by any such Person from time to time
against any of the Loan Parties as often as occasion therefor may arise and
without requirement on the part of any Lender first to marshal any of its claims
or to exercise any of its rights against any of the other Loan Parties or to
exhaust any remedies available to it against any of the other Loan Parties or to
resort to any other source or means of obtaining payment of any of the
Obligations or to elect any other remedy. The provisions of this Article XIV
shall remain in effect until payment in full of the Obligations in cash and
termination of all Commitments. If at any time, any payment, or any part
thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by any Lender upon the insolvency, bankruptcy
or reorganization of any of the Loan Parties, or otherwise, the provisions of
this Article XIV will forthwith be reinstated in effect, as though such payment
had not been made.

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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.

 

BORROWERS: ESMARK INCORPORATED By  

 

Name:   Title:   SUN STEEL COMPANY LLC By  

 

Name:   Title:   ELECTRIC COATING TECHNOLOGIES LLC By  

 

Name:   Title:   GREAT WESTERN STEEL COMPANY LLC By  

 

Name:   Title:   CENTURY STEEL COMPANY LLC By  

 

Name:   Title:   ELECTRIC COATING TECHNOLOGIES BRIDGEVIEW LLC By  

 

Name:   Title:  

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U.S. METALS & SUPPLY LLC By  

 

Name:   Title:   MIAMI VALLEY STEEL SERVICE, INC. By  

 

Name:   Title:   NORTH AMERICAN STEEL LLC By  

 

Name:   Title:   PREMIER RESOURCE GROUP LLC By  

 

Name:   Title:   INDEPENDENT STEEL COMPANY LLC By  

 

Name:   Title:   LOAN GUARANTORS: ESMARK REALTY LLC By  

 

Name:   Title:   SUN STEEL REALTY LLC By  

 

Name:   Title:  

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

CENTURY STEEL REALTY LLC

By

 

 

Name:

 

Title:

  GREAT WESTERN REALTY LLC By  

 

Name:   Title:   U.S. METALS REALTY LLC By  

 

Name:   Title:   MIAMI VALLEY REALTY LLC By  

 

Name:   Title:   ISCO REALTY LLC By  

 

Name:   Title:  

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

JPMORGAN CHASE BANK, N.A., as Administrative

Agent, Co-Collateral Agent, Issuing Bank, Swingline

Lender, and a Lender

By  

 

Name:   Title:  

GENERAL ELECTRIC CAPITAL CORPORATION,

as Co-Collateral Agent and a Lender

By  

 

Name:   Title: