Exhibit 10.1

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

This Amended and Restated Loan and Security Agreement (this “Agreement”) dated
as of August 2, 2010, is between Bank of America, N.A. (the “Bank”) and Kewaunee
Scientific Corporation, a Delaware corporation (the “Borrower”). All capitalized
terms used but not defined herein have the meanings specified in Annex I
attached hereto.

R E C I T A L S

A. The Borrower and the Bank entered into that certain Loan and Security
Agreement dated as of December 10, 2007 (the “Existing Agreement”), pursuant to
which the Bank agreed to provide a line of credit in the amount of $14,000,000
to the Borrower to refinance certain existing indebtedness and for working
capital and other general corporate purposes.

B. The Borrower has requested that the Bank make an additional $4,000,000 term
loan (the “Term Loan”) to the Borrower, and that the Existing Agreement be
amended and restated in order to, among other things, provide for the Term Loan
and make certain other amendments to the Existing Agreement.

C. The Bank is willing to make the Term Loan to the Borrower, and the parties
hereto are willing to amend and restate the Existing Agreement to make the Term
Loan available to the Borrower and continue to make the Line of Credit available
to Borrower, in each case upon the terms and conditions set forth herein.

NOW, THEREFORE, the Borrower and the Bank agree as follows:

 

1. AMENDMENT AND RESTATEMENT

 

1.1 Amended and Restated Agreement.

The Borrower and the Bank hereby agree that upon the effectiveness of this
Agreement, all of the terms, conditions and provisions of the Existing Agreement
shall be and hereby are amended and restated in their entirety by the terms,
conditions and provisions of this Agreement, and the terms, conditions and
provisions of the Existing Agreement, except as otherwise expressly provided
herein, shall be superseded by this Agreement.

 

1.2 Continuation of Obligations.

Notwithstanding this amendment and restatement of the Existing Agreement,
including anything in this Section 1, (i) all of the indebtedness, liabilities
and obligations owing by Borrower under the Existing Agreement and the other
“Loan Documents” as defined in the Existing Agreement (the “Prior Loan
Documents”) shall continue as indebtedness, liabilities and obligations
hereunder, as amended, supplemented or otherwise modified by the terms of this
Agreement; (ii) this Agreement is given as a substitution for or supplement of
the Existing Agreement, and not as a payment of the indebtedness, liabilities
and obligations of Borrower and any guarantors under the Existing Agreement or
any Prior Loan Document, and is not intended to constitute a novation of the
Existing Agreement, any of the other Prior Loan Documents or the indebtedness,
liabilities and obligations of Borrower and any guarantors thereunder; and
(iii) the other Prior Loan Documents will remain in full force and effect as
“Loan Documents” hereunder, as set forth in this Agreement. Upon the
effectiveness of this Agreement, all advances under the Line of Credit owing by
Borrower and outstanding under the Existing Agreement shall continue as Line of
Credit advances hereunder subject to the terms hereof, and all Letters of Credit
(including the drawn and unreimbursed amounts of the Letters of Credit) issued
and outstanding under the Existing Agreement shall continue as Letters of Credit
hereunder subject to the terms hereof.

 

1

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

2. LINE OF CREDIT AMOUNT AND TERMS

 

2.1 Line of Credit Commitment and Availability.

 

(a) During the availability period described below, the Bank will provide a line
of credit (the “Line of Credit”) to the Borrower. The amount of the Line of
Credit is Fourteen Million Dollars ($14,000,000) (as adjusted from time to time
pursuant to clause (c) below, the “Line of Credit Commitment”).

 

(b) For purposes of determining the amount available under the Line of Credit
Commitment, the principal amount outstanding under the Line of Credit shall be
deemed to include (i) the aggregate principal amount outstanding under all lines
of credit, or other credit facilities, provided by the Bank, or any affiliate of
the Bank, to any of the Borrower’s Direct Foreign Subsidiaries (collectively,
the “Foreign Subsidiary Credit Lines”) and (ii) the amount of any Letters of
Credit outstanding, including amounts drawn on any Letters of Credit and not yet
reimbursed.

 

(c) In the event the Borrower fails to comply with Section 9.5 (and such event
does not constitute an event of default under Section 10.2(a)), the Bank shall
temporarily reduce the Line of Credit Commitment to an amount that would have
resulted in the Borrower’s compliance with such Section for such reporting
period (and the Borrower shall make any prepayments required pursuant to
Section 2.3(c)) until such time as the Borrower demonstrates compliance with
Section 9.5 without giving effect to such reduction in the Line of Credit
Commitment.

 

(d) This is a revolving Line of Credit. During the availability period, the
Borrower may repay principal amounts and reborrow them.

 

2.2 Availability Period.

The Line of Credit is available between the date of this Agreement and July 31,
2012, or such earlier date as the availability may terminate as provided in this
Agreement (the “Line of Credit Expiration Date”).

 

2.3 Repayment Terms; Prepayments.

 

(a) The Borrower will pay interest on the first business day of each month,
commencing September 1, 2010, until payment in full of any principal outstanding
under the Line of Credit.

 

2

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

(b) The Borrower will repay in full any principal, interest or other charges
outstanding under the Line of Credit no later than the Line of Credit Expiration
Date.

 

(c) If at any time the aggregate outstanding principal amount of loans, together
with any other amounts included pursuant to Section 2.1(b), under the Line of
Credit exceeds the Line of Credit Commitment, the Borrower will prepay the loans
under the Line of Credit in the amount of such excess.

 

(d) In addition, the Borrower may prepay any outstanding loans under the Line of
Credit in full or in part at any time without penalty.

 

(e) Each prepayment, whether voluntary, by reason of acceleration or otherwise,
will be accompanied by the amount of accrued interest on the amount prepaid.

 

(f) Any repayment made hereunder is in addition to any repayments made in
accordance with any AutoBorrow Services Agreement.

 

2.4 Line of Credit Interest Rate.

 

(a) The interest rate applicable to loans under the Line of Credit is a rate per
annum equal to the Wall Street Journal LIBOR Daily Floating Rate plus the
Applicable Margin as defined below.

 

(b) The Wall Street Journal LIBOR Daily Floating Rate for any day is a
fluctuating rate of interest equal to the one month London interbank offered
rate as published in the “Money Rates” section of The Wall Street Journal on the
immediately preceding banking day (or, if such source is not available, such
alternate source as determined by the Bank), as adjusted from time to time in
the Bank’s sole discretion for reserve requirements, deposit insurance
assessment rates and other regulatory costs.

 

2.5 Applicable Margin.

The Applicable Margin shall be the following amounts per annum, based upon the
Basic Fixed Charge Coverage Ratio (as defined in Section 9.4, the “Financial
Test”), as set forth in the most recent compliance certificate received by the
Bank as required in Section 9.2(c); provided, that until the Bank receives the
first compliance certificate, Pricing Level 1 shall apply.

 

Pricing Level

  

Basic Fixed

Charge Coverage

Ratio

  

Applicable Margin

(in percentage

points per annum)

1

   ³ 2.00 to 1.00    1.575%

2

  

< 2.00 to 1.00, but

³ 1.65 to 1.00

   1.875%

3

  

< 1.65 to 1.00, but

³ 1.30 to 1.00

   2.175%

 

3

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

The Applicable Margin shall be in effect from the date the most recent
compliance certificate is received by the Bank until the first banking day of
the month following the month in which the next compliance certificate is
received; provided, that if the Borrower fails to timely deliver the next
compliance certificate, Pricing Level 3 shall apply from the date such
compliance certificate was due until the date such compliance certificate is
received by the Bank.

If, as a result of any restatement of or other adjustment to the financial
statements of the Borrower or for any other reason, the Borrower or the Bank
determines that (i) the Financial Test as calculated by the Borrower as of any
applicable date was inaccurate and (ii) a proper calculation of the Financial
Test would have resulted in higher pricing for such period, the Borrower shall
immediately and retroactively be obligated to pay to the Bank an amount equal to
the excess of the amount of interest and fees that should have been paid for
such period over the amount of interest and fees actually paid for such period.
The Bank’s acceptance of payment of such amounts will not constitute a waiver of
any default under this Agreement. The Borrower’s obligations under this
paragraph shall survive the termination of this Agreement and the repayment of
all other obligations.

 

2.6 Letters of Credit.

 

(a) During the availability period, at the request of the Borrower, the Bank
will issue:

 

  (i) commercial letters of credit with a maximum maturity of 365 days but not
to extend more than 365 days beyond the Line of Credit Expiration Date. Each
commercial letter of credit will require drafts payable at sight.

 

  (ii) standby letters of credit (together with the commercial letters of
credit, collectively, the “Letters of Credit”) during the availability period at
the request of the Borrower, with a maximum maturity of 365 days but not to
extend more than 365 days beyond the Line of Credit Expiration Date. The standby
letters of credit may include a provision providing that the maturity date will
be automatically extended each year for an additional year unless the Bank gives
written notice to the contrary.

 

(b) The amount of the Letters of Credit outstanding at any one time (including
the drawn and unreimbursed amounts of the Letters of Credit) may not exceed One
Million Dollars ($1,000,000) (the “Letter of Credit Sublimit”). The Letter of
Credit Sublimit is part of, and not in addition to, the Line of Credit
Commitment.

 

(c) The Borrower agrees:

 

  (i) Any sum drawn under a Letter of Credit that is not reimbursed on the date
of drawing may, at the option of the Bank, be added to the principal amount
outstanding under this Agreement. In addition, the Bank may make advances under
the Line of Credit to cash collateralize Letters of Credit to the extent the
Borrower has failed to provide cash collateral on the date required hereunder
pursuant to clause (ii) or (vi) below. In either such case, the drawn amount or
amount advanced to cash collateralize Letters of Credit, as applicable, shall be
deemed to be a loan under the Line of Credit and will bear interest and be due
as described elsewhere in this Agreement.

 

4

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

  (ii) If there is a default under this Agreement, to immediately cash
collateralize any outstanding Letters of Credit in an amount equal to the
maximum amount available to be drawn thereunder.

 

  (iii) The issuance of any Letter of Credit and any amendment to a Letter of
Credit is subject to the Bank’s written approval and must be in form and content
reasonably satisfactory to the Bank and in favor of a beneficiary reasonably
acceptable to the Bank, and is subject to the receipt of a duly executed
Application and Agreement for Standby Letter of Credit on the Bank’s form then
in effect.

 

  (iv) To pay any issuance and/or other fees that the Bank notifies the Borrower
will be charged for issuing and processing Letters of Credit for the Borrower.

 

  (v) To allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.

 

  (vi) To pay the Bank a non-refundable fee equal to 1.00% per annum of the
outstanding undrawn amount of each Letter of Credit, payable on the date of
issue of each Letter of Credit and thereafter annually on the anniversary of
such issuance, in each case, in advance, calculated on the basis of the face
amount outstanding on the day the fee is calculated.

 

  (vii) To cash collateralize all outstanding Letters of Credit (in an amount
equal to the maximum amount available to be drawn thereunder) on the date that
is 10 banking days prior to the Line of Credit Expiration Date.

 

3. TERM LOAN AMOUNT AND TERMS

 

3.1 Term Loan Commitment and Availability.

The Bank will provide a term loan (the “Term Loan”) to the Borrower in the
amount of Four Million Dollars ($4,000,000). The Term Loan will be fully
disbursed to the Borrower in a single draw on the Effective Date. Term Loan
proceeds may not be reborrowed once repaid.

 

3.2 Repayment Terms; Prepayments.

 

(a) The Borrower will pay interest on the first business day of each month,
commencing September 1, 2010, until payment in full of any principal outstanding
under the Term Loan.

 

(b) The Borrower will repay the outstanding principal balance of the Term Loan
in consecutive equal monthly principal payments in the amount of $16,666.66
each, commencing on September 1, 2010 and continuing on the first business day
of each month thereafter until August 1, 2017 (the “Term Loan Maturity Date”).
All outstanding principal, accrued unpaid interest and other charges outstanding
under the Term Loan shall be due and payable in full on the Term Loan Maturity
Date.

 

5

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

(c) In addition, the Borrower may prepay the outstanding principal of the Term
Loan in full or in part at any time without penalty.

 

(d) Each prepayment, whether voluntary, by reason of acceleration or otherwise,
will be accompanied by the amount of accrued interest on the amount prepaid.

 

3.3 Term Loan Interest Rate.

 

(a) The interest rate applicable to the Term Loan is a rate per annum equal to
the Wall Street Journal LIBOR Daily Floating Rate plus 1.575%.

 

(b) The Wall Street Journal LIBOR Daily Floating Rate for any day is a
fluctuating rate of interest equal to the one month London interbank offered
rate as published in the “Money Rates” section of The Wall Street Journal on the
immediately preceding banking day (or, if such source is not available, such
alternate source as determined by the Bank), as adjusted from time to time in
the Bank’s sole discretion for reserve requirements, deposit insurance
assessment rates and other regulatory costs.

 

4. FEES AND EXPENSES

 

4.1 Fees.

 

(a) Term Loan Upfront Fee. The Borrower will pay to the Bank an upfront fee in
the amount of $20,000 with respect to the Term Loan on or before the date of
this Agreement.

 

(b) Waiver Fee. If the Bank, at its discretion, agrees to waive or amend any
terms of this Agreement, the Borrower will, at the Bank’s option, pay the Bank a
fee for each waiver or amendment in an amount advised by the Bank at the time
the Borrower requests the waiver or amendment. Nothing in this Section 4.1(b)
shall imply that the Bank is obligated to agree to any waiver or amendment
requested by the Borrower. The Bank may impose additional requirements as a
condition to any waiver or amendment.

 

(c) Late Fee. To the extent permitted by law, the Borrower agrees to pay a late
fee in an amount not to exceed two percent (2%) of any payment that is more than
fifteen (15) days late. The imposition and payment of a late fee shall not
constitute a waiver of the Bank’s rights with respect to the default.

 

4.2 Expenses.

The Borrower agrees to immediately repay the Bank for expenses that include, but
are not limited to, filing, recording and search fees, and documentation fees.

 

6

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

4.3 Reimbursement Costs.

The Borrower agrees to reimburse the Bank for any expenses it incurs in the
preparation of this Agreement and any agreement or instrument required by this
Agreement. Expenses include, but are not limited to, reasonable attorneys’ fees.

 

5. GUARANTY AND COLLATERAL

 

5.1 Guaranty.

 

(a) The Borrower unconditionally and irrevocably guarantees to the Bank the
punctual payment of all sums now owing or which may in the future be owing by
any Direct Foreign Subsidiary under the Foreign Subsidiary Credit Lines, when
the same are due and payable, whether on demand, at stated maturity, by
acceleration or otherwise, and whether for principal, interest, fees, expenses,
indemnification or otherwise (all of the foregoing sums being the “Guaranteed
Liabilities”). The Guaranteed Liabilities include, without limitation, interest
accruing after the commencement of a proceeding under bankruptcy, insolvency or
similar laws of any jurisdiction at the rate or rates provided in the documents
executed in connection with the Foreign Subsidiary Credit Lines (the “Foreign
Credit Documents”). This is a guaranty of payment and not of collection. The
Bank shall not be required to exhaust any right or remedy or take any action
against any Direct Foreign Subsidiary or any other person or entity or any
collateral. The Borrower agrees that, as between the Borrower and the Bank, the
Guaranteed Liabilities may be declared to be due and payable for the purposes of
this guaranty notwithstanding any stay, injunction or other prohibition which
may prevent, delay or vitiate any declaration as regards any Direct Foreign
Subsidiary and that in the event of a declaration or attempted declaration, the
Guaranteed Liabilities shall immediately become due and payable by the Borrower
for the purposes of this guaranty.

 

(b) The Borrower guarantees that the Guaranteed Liabilities shall be paid
strictly in accordance with the terms of the Foreign Subsidiary Credit Lines.
The liability of the Borrower under this Section 5.1 is absolute and
unconditional irrespective of: (a) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Foreign Credit Documents
or Guaranteed Liabilities, or any other amendment or waiver of or any consent to
departure from any of the terms of any Foreign Credit Document or Guaranteed
Liability, including any increase or decrease in the rate of interest thereon;
(b) any release or amendment or waiver of, or consent to departure from, any
other guaranty or support document, or any exchange, release or non-perfection
of any collateral, for all or any of the Foreign Credit Documents or Guaranteed
Liabilities; (c) any present or future law, regulation or order of any
jurisdiction (whether of right or in fact) or of any agency thereof purporting
to reduce, amend, restructure or otherwise affect any term of any Foreign Credit
Document or Guaranteed Liability; (d) without being limited by the foregoing,
any lack of validity or enforceability of any Foreign Credit Documents or
Guaranteed Liabilities; and (e) any other setoff, defense or counterclaim
whatsoever (in any case, whether based on contract, tort or any other theory)
with respect to the Foreign Credit Documents or the transactions contemplated
thereby which might constitute a legal or equitable defense available to, or
discharge of, any Direct Foreign Subsidiary or a guarantor.

 

7

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

(c) The guaranty under this Section 5.1 is a continuing guaranty of the payment
of all Guaranteed Liabilities now or hereafter existing under the Foreign
Subsidiary Credit Lines and shall remain in full force and effect until payment
in full of all Guaranteed Liabilities and until the Foreign Subsidiary Credit
Lines are no longer in effect.

 

(d) The guaranty under this Section 5.1 shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Liabilities is rescinded or must otherwise be returned by the Bank on
the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all
as though the payment had not been made.

 

(e) All payments by the Borrower shall be made in the manner, at the place and
in the currency (the “Payment Currency”) required by the Foreign Credit
Documents; provided, however, that (if the Payment Currency is other than U.S.
dollars) the Borrower may, at its option (or, if for any reason whatsoever the
Borrower is unable to effect payments in the foregoing manner, the Borrower
shall be obligated to) pay to the Bank at its principal office the equivalent
amount in U.S. dollars computed at the selling rate of the Bank or a selling
rate chosen by the Bank, most recently in effect on or prior to the date the
Guaranteed Liability becomes due, for cable transfers of the Payment Currency to
the place where the Guaranteed Liability is payable. In any case in which the
Borrower makes or is obligated to make payment in U.S. Dollars, the Borrower
shall hold the Bank harmless from any loss incurred by the Bank arising from any
change in the value of U.S. Dollars in relation to the Payment Currency between
the date the Guaranteed Liability becomes due and the date the Bank is actually
able, following the conversion of the U.S. Dollars paid by the Borrower into the
Payment Currency and remittance of such Payment Currency to the place where such
Guaranteed Liability is payable, to apply such Payment Currency to such
Guaranteed Liability.

 

(f) The Borrower further agrees that all payments to be made under this
Section 5.1 shall be made without setoff or counterclaim and free and clear of,
and without deduction for, any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings or restrictions or conditions of any nature whatsoever
now or hereafter imposed, levied, collected, withheld or assessed by any country
or by any political subdivision or taxing authority thereof or therein
(“Taxes”). If any Taxes are required to be withheld from any amounts payable to
the Bank hereunder, the amounts so payable to the Bank shall be increased to the
extent necessary to yield to the Bank (after payment of all Taxes) the amounts
payable hereunder in the full amounts so to be paid. Whenever any Tax is paid by
the Borrower, as promptly as possible thereafter, the Borrower shall send the
Bank an official receipt showing payment thereof, together with such additional
documentary evidence as may be required from time to time by the Bank.

 

5.2 Pledge of Pledged Interests as Security for Line of Credit. The Borrower
hereby grants to the Bank, as collateral security for the payment, performance
and satisfaction of all of the Borrower’s obligations to the Bank hereunder with
respect to the Line of Credit (including, without limitation, all Letters of
Credit and the Borrower’s obligations set forth in Section 5.1) and all of the
Borrower’s obligations to the Bank under any Swap Contract related to the Line
of Credit, a first priority security interest in all of the following items of
property now owned or hereafter owned by the Borrower (collectively, the “Line
of Credit Collateral”):

 

(a) all Equity Interests in all of its Direct Foreign Subsidiaries (limited, in
each case to Equity Interests that, when taken with all other Equity Interests
pledged hereunder, constitute no more than (i) 65% of the Voting Equity
Interests of each Direct Foreign Subsidiary and (ii) 100% of the other Equity
Interests of the Borrower in each Direct Foreign Subsidiary), in each case,
whether now existing or hereafter created or acquired (collectively, the
“Pledged Interests”), including without limitation the Pledged Interests more
particularly described on Schedule 5.2, as it may be updated from time to time
(such Direct Foreign Subsidiaries, are referred to collectively as the “Pledged
Subsidiaries”);

 

8

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

(b) all money, securities, security entitlements and other investment property,
dividends, rights, general intangibles and other property at any time and from
time to time (i) declared or distributed in respect of or in exchange for or on
conversion of any Pledged Interest, or (ii) by its or their terms exchangeable
or exercisable for or convertible into any Pledged Interest;

 

(c) all other personal property of whatever character or description, including
money, securities, security entitlements and other investment property, and
general intangibles hereafter delivered to the Bank in substitution for or as an
addition to any of the foregoing;

 

(d) all securities accounts to which may at any time be credited any or all of
the foregoing or any proceeds thereof and all certificates and instruments
representing or evidencing any of the foregoing or any proceeds thereof; and

 

(e) all proceeds of any of the foregoing.

 

5.3 Term Loan Collateral.

 

(a) The payment, performance and satisfaction of all of the Borrower’s
obligations to the Bank hereunder with respect to the Term Loan and all Swap
Contracts related to the Term Loan shall be secured by that certain Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Deed of
Trust”) of even date herewith executed by the Borrower in favor of the Bank. The
Deed of Trust shall grant to the Bank a first priority security interest in the
real property of the Borrower commonly known as 2700 West Front Street,
Statesville, Iredell County, North Carolina 28677 and certain personal property
related thereto (collectively, the “Mortgaged Property”).

 

(b) The Borrower hereby additionally grants to the Bank, as collateral security
for the payment, performance and satisfaction of all of the Borrower’s
obligations to the Bank hereunder with respect to the Term Loan and all Swap
Contracts related to the Term Loan, a first priority security interest in all
Equipment now owned or hereafter owned by the Borrower, wherever located.
“Equipment” as used herein means all goods (excluding inventory, farm products
or consumer goods), all machinery, machine tools, equipment, office equipment,
furniture, furnishings, motors, motor vehicles, tools, dies, parts, jigs, and
all attachments, accessories, accessions, replacements, substitutions, additions
and improvements thereto, all supplies used or useful in connection therewith,
and all other “Equipment” as same is now or hereafter defined in Article 9 of
the Uniform Commercial Code in effect in the State of North Carolina, together
with all rents, issues, profits, products and proceeds of any of the foregoing.

 

9

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

(c) The Bank agrees to release its lien on Equipment at such time as the
LTV Ratio is less than or equal to 80%. “LTV Ratio” as used herein means the
ratio of the then-outstanding principal balance of the Term Loan to the
appraised value of the Mortgaged Property, based on the most recent appraisal of
the Mortgaged Property. The Bank shall have the right to obtain a new appraisal
of the Mortgaged Property for the purpose of calculating the LTV Ratio, and the
costs of any such appraisal shall be paid by the Borrower. The Bank agrees to
execute such agreements, make such filings (including appropriate UCC-3
termination or amendment statements deleting the Equipment from the collateral
described in any filed UCC financing statement) and take such steps as are
reasonably requested by the Borrower in order to release its lien on Equipment
under the foregoing circumstances, all at Borrower’s expense.

 

5.4 Preservation and Protection of Collateral.

 

(a) The Line of Credit Collateral and the Equipment are collectively referred to
herein as the “Collateral”.

 

(b) The Bank shall be under no duty or liability with respect to the collection,
protection or preservation of the Collateral or the Mortgaged Property, or
otherwise, beyond the use of reasonable care in the custody and preservation
thereof while in its possession.

 

(c) The Borrower agrees to pay when due all taxes, charges, liens and
assessments against the Collateral and the Mortgaged Property, unless being
contested in good faith by appropriate proceedings diligently conducted and
against which adequate reserves have been established in accordance with
generally accepted accounting principles, consistently applied and evidenced to
the satisfaction of Bank and provided that all enforcement proceedings in the
nature of levy or foreclosure are effectively stayed. Upon the Borrower’s
failure to (i) so pay or contest such taxes, charges, liens or assessments or
(ii) pay any amount pursuant to Section 5.11, the Bank at its option may pay or
contest any of them (the Bank having the sole right to determine the legality or
validity and the amount necessary to discharge such taxes, charges, liens or
assessments) but shall not have any obligation to make any such payment or
contest. All sums so disbursed by the Bank, including attorneys’ fees, court
costs, expenses and other charges related thereto, shall be payable on demand by
the Borrower to the Bank and shall be additional obligations secured by the
Collateral or the Mortgaged Property, as the case may be, and any amounts not so
paid on demand (in addition to other rights and remedies resulting from such
nonpayment) shall bear interest from the date of demand until paid in full at
the default rate set forth in Section 6.6.

 

(d) The Borrower hereby irrevocably authorizes Bank to file (with, or to the
extent permitted by applicable law, without the signature of the Borrower
appearing thereon) financing statements (including amendments thereto and
continuations and copies thereof) showing the Borrower as “debtor” at such time
or times and in all filing offices as the Bank may from time to time determine
to be necessary or advisable to perfect or protect its lien and security
interest in the Collateral and the Mortgaged Property. Any such financing
statement covering the Collateral shall describe the Collateral as described in
Sections 5.2 and 5.3 above, and any such financing statement covering the
Mortgaged Property shall describe the Mortgaged Property as described in the
Deed of Trust.

 

10

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

5.5 Default.

If any event of default occurs (after giving effect to any applicable notice
requirements and grace or cure periods provided for in Section 10 below), the
Bank is given full power and authority, then or at any time thereafter, to sell,
assign, deliver or collect the whole or any part of the Collateral, or any
substitute therefor or any addition thereto, in one or more sales, with or
without any previous demands or demand of performance or, to the extent
permitted by law, notice or advertisement, in such order as the Bank may elect;
and any such sale may be made either at public or private sale at the Bank’s
place of business or elsewhere, either for cash or upon credit or for future
delivery, at such price or prices as the Bank may reasonably deem fair; and the
Bank may be the purchaser of any or all Collateral so sold and hold the same
thereafter in its own right free from any claim of the Borrower or right of
redemption. Demands of performance, advertisements and presence of property and
sale and notice of sale are hereby waived to the extent permissible by law. Any
sale hereunder may be conducted by an auctioneer or any officer or agent of the
Bank. The Borrower recognizes that the Bank may be unable to effect a public
sale of the Line of Credit Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the “Securities Act”), and
applicable state law, and may be otherwise delayed or adversely affected in
effecting any sale by reason of present or future restrictions thereon imposed
by governmental authorities, and that as a consequence of such prohibitions and
restrictions the Bank may be compelled (i) to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Line of Credit Collateral for their own account,
for investment and not with a view to the distribution or resale thereof, or
(ii) to seek regulatory approval of any proposed sale or sales, or (iii) to
limit the amount of such Line of Credit Collateral sold to any Person or group.
The Borrower agrees and acknowledges that private sales so made may be at prices
and upon terms less favorable to the Borrower than if such Line of Credit
Collateral was sold either at public sales or at private sales not subject to
other regulatory restrictions, and that the Bank has no obligation to delay the
sale of any of such Line of Credit Collateral for the period of time necessary
to permit the Pledged Subsidiary to register or otherwise qualify such Line of
Credit Collateral, even if such Pledged Subsidiary would agree to register or
otherwise qualify such Line of Credit Collateral for public sale under the
Securities Act or applicable state law. The Borrower further agrees, to the
extent permitted by applicable law, that the use of private sales made under the
foregoing circumstances to dispose of such Line of Credit Collateral shall be
deemed to be dispositions in a commercially reasonable manner. The Borrower
hereby acknowledges that a ready market may not exist for the Pledged Interests
if they are not traded on a national securities exchange or quoted on an
automated quotation system and agrees and acknowledges that in such event the
Pledged Interests may be sold for an amount less than a pro rata share of the
fair market value of the Pledged Subsidiary’s assets minus its liabilities. In
addition to the foregoing, the Bank may exercise such other rights and remedies
as may be available under the Loan Documents, at law (including without
limitation the UCC) or in equity. The sale of the Mortgaged Property upon the
occurrence of an event of default shall be governed by the terms of the Deed of
Trust.

 

11

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

5.6 Proceeds of Sale.

The net cash proceeds resulting from the collection, liquidation, sale, or other
disposition of the Line of Credit Collateral shall be applied first to the
expenses (including attorney’s fees) of retaking, holding, storing, processing
and preparing for sale, selling, collecting, liquidating and the like, and then
to the satisfaction of all obligations hereunder with respect to the Line of
Credit (including, without limitation, all Letters of Credit and the Borrower’s
obligations set forth in Section 5.1) and under any Swap Contract related to the
Line of Credit. The net cash proceeds resulting from the collection,
liquidation, sale, or other disposition of the Equipment shall be applied first
to the expenses (including attorney’s fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting, liquidating and the
like, and then to the satisfaction of all obligations hereunder with respect to
the Term Loan and under any Swap Contract related to the Term Loan. The Borrower
shall be liable to the Bank for, and shall pay to the Bank on demand, any
deficiency or deficiencies which may remain after such sale, disposition,
collection or liquidation any of the Collateral.

 

5.7 Presentments, Demands and Notices.

The Bank shall not be under any duty or obligation whatsoever to make or give
any presentments, demands for performances, notices of nonperformance, protests,
notice of protest or notice of dishonor in connection with any obligations or
evidences of indebtedness held thereby as collateral, or in connection with any
obligations or evidences of indebtedness which constitute in whole or in part
the obligations secured hereby.

 

5.8 Voting Rights.

 

(a) So long as no event of default has occurred, the registration of the Line of
Credit Collateral in the name of the Borrower as record and beneficial owner
shall not be changed and the Borrower shall be entitled to exercise all voting
and other rights and powers pertaining to such Line of Credit Collateral for all
purposes not inconsistent with the terms hereof.

 

(b) If any event of default occurs, at the option of the Bank, all rights and
powers of the Borrower described in clause (a) above shall cease and the Bank
may thereupon (but shall not be obligated to), at its request, cause such Line
of Credit Collateral to be registered in the name of the Bank or its nominee
and/or exercise such rights and powers as appertain to ownership of such Line of
Credit Collateral, and to that end the Borrower hereby appoints the Bank as its
proxy, with full power of substitution, to vote and exercise all other rights as
a shareholder with respect to such Pledged Interests, which proxy is coupled
with an interest and is irrevocable, and the Borrower hereby agrees to provide
such further proxies as the Bank may request; provided, that the Bank in its
discretion may from time to time refrain from exercising, and shall not be
obligated to exercise, any such rights or powers or such proxy.

 

12

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

5.9 Attorney-in-Fact.

The Borrower hereby appoints the Bank as the Borrower’s attorney-in-fact for the
purposes of carrying out the provisions of this Article 5 and taking any action
and executing any instrument which the Bank may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest; provided, that the Bank shall have and may exercise rights
under this power of attorney only if any event of default occurs. Without
limiting the generality of the foregoing, if any event of default occurs, the
Bank shall have the right and power to receive, endorse and collect all checks
and other orders for the payment of money made payable to the Borrower
representing any dividend, interest payment, principal payment or other
distribution payable or distributable in respect to the Collateral or any part
thereof and to give full discharge for the same.

 

5.10 Reinstatement.

This Article 5 shall continue to be effective or be reinstated, as the case may
be, if at any time any payment received by the Bank in respect of any obligation
secured hereby is rescinded or must otherwise be returned by the Bank or is
repaid by the Bank in whole or in part in good faith settlement of a pending or
threatened avoidance claim. The provisions of this Section 5.10 shall survive
the repayment in full of all of the obligations hereunder and the termination of
the Line of Credit Commitment.

 

5.11 Further Assurances.

At the request of the Bank, the Borrower will from time to time (i) execute and
deliver, at its expense, all share certificates, documents, instruments,
agreements, financing statements (and amendments thereto and continuations
thereof), assignments, control agreements, or other writings to carry out the
terms of this Article 5 or to protect or enforce the Bank’s liens and security
interests in the Collateral and the Mortgaged Property, and (ii) do, at its
expense, all things determined by the Bank to be necessary or advisable to
perfect and keep in full force and effect the Bank’s liens and security
interests in the Collateral and the Mortgaged Property, including the prompt
payment of all out-of-pocket fees and expenses incurred in connection with any
filings made to perfect or continue the Bank’s liens and security interests in
the Collateral and the Mortgaged Property. The Borrower will additionally, at
the request of the Bank at any time and at the Borrower’s expense, cause the
Equity Interests in its Direct Foreign Subsidiaries to be re-certificated such
that there exist separate share certificates representing the Pledged Interests,
on the one hand, and the other such Equity Interests that do not constitute
Pledged Interests, on the other hand. Upon any such re-certification the Bank
shall be permitted to update the information on Schedule 5.2 and amend any
financing statements accordingly.

 

5.12 Miscellaneous.

 

(a) The Borrower agrees to register the interest of the Bank in the Line of
Credit Collateral on its own books and records and the registration books of
each of the Pledged Subsidiaries.

 

13

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

(b) Any forbearance, failure or delay by the Bank in exercising any right, power
or remedy hereunder shall not be deemed to be a waiver of such right, power or
remedy.

 

(c) Subject to the provisions of Section 5.10, upon satisfaction in full of all
the Borrower’s obligations hereunder and the termination of the Line of Credit
Commitment, the Bank shall, at the Borrower’s sole expense, promptly deliver to
the Borrower the certificates evidencing its shares of Pledged Interests (and
any other property received as a dividend or distribution or otherwise in
respect of such Pledged Interests to the extent then held by the Bank as
additional Line of Credit Collateral hereunder), together with any cash then
constituting the Line of Credit Collateral not then sold or otherwise disposed
of in accordance with the provisions hereof, and take such further actions at
the request of the Borrower as may be necessary to effect the same.

 

6. DISBURSEMENTS, PAYMENTS AND COSTS

 

6.1 Disbursements and Payments.

 

(a) Each payment by the Borrower will be made in U.S. Dollars and immediately
available funds by direct debit to a deposit account as specified below or, for
payments not required to be made by direct debit, by mail to the address shown
on the Borrower’s statement or at one of the Bank’s banking centers in the
United States.

 

(b) In addition to any advances made pursuant to the terms of the automatic
borrowing feature described in any AutoBorrow Services Agreement, the Bank may
honor instructions for advances or repayments given by any one of the
individuals authorized to sign loan agreements on behalf of the Borrower, or any
other individual designated by any one of such authorized signers (each an
“Authorized Individual”).

 

(c) For any payment under this Agreement made by direct debit to a deposit
account, the Borrower will maintain sufficient immediately available funds in
the deposit account to cover such direct debit. If there are insufficient
immediately available funds in the deposit account on the date the Bank enters
any such direct debit authorized by this Agreement, the Bank may reverse the
debit.

 

(d) Each disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.

 

(e) Prior to the date each payment of principal and interest and any fees from
the Borrower becomes due (the “Due Date”), the Bank will mail to the Borrower a
statement of the amounts that will be due on such Due Date (the “Billed
Amount”). The calculations in the bill will be made on the assumption that no
new extensions of credit or payments will be made between the date of the
billing statement and the Due Date, and that there will be no changes in the
applicable interest rates. If the Billed Amount differs from the actual amount
due on such Due Date (the “Accrued Amount”), the discrepancy will be treated as
follows:

 

  (i) If the Billed Amount is less than the Accrued Amount, the Billed Amount
for the following Due Date will be increased by the amount of the discrepancy.
The Borrower will not be in default by reason of any such discrepancy.

 

14

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

  (ii) If the Billed Amount is more than the Accrued Amount, the Billed Amount
for the following Due Date will be decreased by the amount of the discrepancy.

Regardless of any such discrepancy, interest will continue to accrue based on
the actual amount of principal outstanding without compounding. The Bank will
not pay the Borrower interest on any overpayment.

 

6.2 Telephone and Telefax Authorization.

 

(a) In addition to any advances made pursuant to the terms of the automatic
borrowing feature described in any AutoBorrow Services Agreement, the Bank may
honor telephone or telefax instructions for advances or repayments and telefax
requests for the issuance of Letters of Credit given, or purported to be given,
by any one of the Authorized Individuals.

 

(b) Advances will be deposited in and repayments will be withdrawn from account
number 002373427907 owned by the Borrower, or such other of the Borrower’s
accounts with the Bank as designated in writing by the Borrower (the “Designated
Account”).

 

(c) The Borrower will indemnify and hold the Bank harmless from all liability,
loss, and costs in connection with any act resulting from telephone or telefax
instructions the Bank reasonably believes are made by any Authorized Individual.
This Section 6.2(c) will survive this Agreement’s termination, and will benefit
the Bank and its officers, employees, and agents.

 

6.3 Direct Debit.

The Borrower agrees that on each Due Date the Bank will debit the Billed Amount
from the Designated Account.

 

6.4 Banking Days.

Unless otherwise provided in this Agreement, a banking day is a day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close,
or are in fact closed, in the state where the Bank’s lending office is located,
and, if such day relates to amounts bearing interest at an offshore rate (if
any), means any such day on which dealings in dollar deposits are conducted
among banks in the offshore dollar interbank market. All payments and
disbursements which would be due on a day which is not a banking day will be due
on the next banking day. All payments received on a day which is not a banking
day will be applied to the credit on the next banking day.

 

15

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

6.5 Interest Calculation.

Except as otherwise stated in this Agreement, all interest and fees, if any,
will be computed on the basis of a 360-day year and the actual number of days
elapsed. This results in more interest or a higher fee than if a 365-day year is
used. Installments of principal which are not paid when due under this Agreement
shall continue to bear interest until paid.

 

6.6 Default Rate.

Upon the occurrence of any default or after maturity or after judgment has been
rendered on any obligation under this Agreement, all amounts outstanding under
this Agreement, including any interest, fees, or costs which are not paid when
due, will at the option of the Bank bear interest at a rate which is 4.0
percentage points higher than the rate of interest otherwise provided under this
Agreement. This may result in compounding of interest. This will not constitute
a waiver of any default.

 

7. CONDITIONS

Before the Bank is required to continue to make loans under the Line of Credit
and to fund the Term Loan to the Borrower under this Agreement, it must receive
any documents and other items it may reasonably require, in form and content
acceptable to the Bank, including any items specifically listed below.

 

7.1 Authorizations.

Evidence that the execution, delivery and performance by the Borrower of the
Loan Documents have been duly authorized by the Borrower.

 

7.2 Governing Documents.

A current copy of the Borrower’s organizational documents, certified by an
officer of the Borrower acceptable to the Bank as true, correct and complete.

 

7.3 Loan Documents.

The Loan Documents shall have been executed and delivered to the Bank and shall
be in full force and effect.

 

7.4 Perfection and Evidence of Priority.

Evidence that the security interests and liens in favor of the Bank are valid,
enforceable, properly perfected in a manner acceptable to the Bank and prior to
all others’ rights and interests.

 

7.5 Deed of Trust.

Evidence that the Deed of Trust has been properly recorded in the office of the
Register of Deeds of Iredell County, North Carolina.

 

16

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

7.6 Title Insurance.

An acceptable commitment for an ALTA title insurance policy, issued by a title
insurance company acceptable to the Bank in the maximum amount of the Term Loan
plus any other amount secured by the Deed of Trust, insuring that the Deed of
Trust constitutes a valid first-priority lien covering the Mortgaged Property
and providing such other insurance coverage and endorsements as the Bank
requires in its sole discretion, subject only to those exceptions and
encumbrances (regardless of rank or priority) the Bank approves in its sole
discretion. Such commitment shall be “marked up” in a manner acceptable to the
Bank in its sole discretion prior to or substantially concurrently with the
execution of this Agreement. All title insurance costs shall be paid by the
Borrower.

 

7.7 Appraisal.

An as-completed appraisal of the Mortgaged Property, taking into account the
expansion and modernization of the Mortgaged Property to be financed with the
proceeds of the Term Loan, prepared by an appraiser selected by Bank. The
appraisal shall conform to all requirements and guidelines of the Bank and any
governmental authorities that regulate Bank concerning appraisals, and the cost
thereof will be borne by the Borrower.

 

7.8 Flood Certification.

Satisfactory evidence that none of the improvements constituting Mortgaged
Property are located in whole or in part in a flood hazard zone.

 

7.9 Survey.

[Reserved.]

 

7.10 Access and Laws.

The Bank shall have received and approved (i) satisfactory evidence that the
Mortgaged Property abuts and has fully adequate direct and free access to one or
more public streets, dedicated to public use, fully installed and accepted by
the appropriate governmental authorities, that all fees, costs and expenses of
the installation and acceptance thereof have been paid in full, and that there
are no restrictions on the use and enjoyment of such streets which would
adversely affect the Mortgaged Property; (ii) satisfactory evidence that all
applicable zoning ordinances, restrictive covenants and governmental
requirements affecting the Mortgaged Property permit the use for which the
Mortgaged Property is intended and have been or will be complied with without
the existence of any variance, non-complying use, nonconforming use or other
special exception; (iii) evidence satisfactory to the Bank that the Mortgaged
Property complies and will comply with all laws and governmental requirements
regarding subdivision and platting; and (iv) evidence satisfactory to the Bank
of compliance by the Borrower and the Mortgaged Property, and the use and
occupancy of the Mortgaged Property, with such applicable laws and governmental
requirements as the Bank may request

 

17

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

7.11 Environmental Compliance.

A fully completed, executed environmental questionnaire with respect to the
Mortgaged Property, on the Bank’s current form and executed by an officer of the
Borrower acceptable to the Bank, certifying that there is no evidence that any
Hazardous Substance has been generated, treated, stored, released or disposed of
in the Mortgaged Property, or any evidence that the Mortgaged Property and any
use or activity thereon violates or is or could be subject to any response,
remediation, clean-up or other obligation under any environmental law, and, if
requested by the Bank, the Borrower shall have delivered to the Bank a copy of
the existing Phase I environmental assessment for the Mortgaged Property
prepared for the Borrower.

 

7.12 Payment of Fees.

Payment of all fees and other amounts due and owing to the Bank, including
without limitation (i) the $20,000 upfront fee referenced in Section 4.1(a), and
(ii) payment of all appraisal costs, all costs of title insurance, and all other
accrued and unpaid costs and expenses incurred by the Bank as required by
Sections 4.2 and 4.3.

 

7.13 Good Standing.

Certificates of good standing for the Borrower from its state of formation and
from any other state in which the Borrower is required to qualify to conduct its
business, issued as of a recent date by the applicable Secretary of State(s).

 

7.14 Legal Opinion.

[Reserved.]

 

7.15 Insurance.

Evidence of insurance coverage, as required by the Deed of Trust and in
Section 9.18.

 

7.16 No Material Adverse Change.

There shall not have occurred a material adverse change since April 30, 2010 in
the business, assets, liabilities (actual or contingent), operations, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries or in
the facts and information regarding the Borrower and its Subsidiaries as
represented to date.

 

8. REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and so long as the Line of Credit
Commitment shall be in effect or any credit extension or other obligation
hereunder shall remain unpaid or unsatisfied, the Borrower makes the following
representations and warranties. Each request for an extension of credit
(including any request made pursuant to any AutoBorrow Services Agreement)
constitutes a renewal of these representations and warranties as of the date of
the request:

 

8.1 Formation.

The Borrower is duly formed and existing under the laws of the state or other
jurisdiction where organized.

 

18

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

8.2 Authorization.

The execution, delivery and performance of each Loan Document has been duly
authorized and executed by the Borrower, is within the Borrower’s organizational
powers, and does not conflict with any of the Borrower’s organizational papers.

 

8.3 Governmental Authorization.

No approval, consent, exemption, authorization, or other action by, or notice
to, or filing with, any governmental authority is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, the Borrower with respect to any Loan Document, other than the
recording of the Deed of Trust in the officer of the Register of Deeds for
Iredell County, North Carolina and the filing of financing statements in the
office of the Delaware Secretary of State.

 

8.4 Enforceable Agreement.

Each of this Agreement and the other Loan Documents is a legal, valid and
binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, except as may be limited by any bankruptcy,
reorganization, liquidation, insolvency, moratorium, or similar laws affecting
the enforcement of creditors’ rights generally, and any instrument or agreement
required hereunder, when executed and delivered, will be similarly legal, valid,
binding and enforceable.

 

8.5 Good Standing.

In each state in which the Borrower does business, it is properly licensed, in
good standing, and, where required, in compliance with fictitious name statutes.

 

8.6 Compliance with Laws.

The Borrower is in compliance with all applicable laws, regulations, and orders
of any government authority (including environmental laws, regulations and
orders), except where the failure to so comply would not have a material adverse
effect in its business condition (financial or otherwise), operations,
properties or prospects.

 

8.7 No Conflicts.

The execution, delivery and performance of the Loan Documents does not conflict
with any law, agreement, or obligation by which the Borrower is bound.

 

19

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

8.8 Financial Information.

All financial and other information that has been or will be supplied to the
Bank is sufficiently complete to give the Bank accurate knowledge of the
Borrower’s financial condition, including all material contingent liabilities.
Since April 30, 2010, there has been no material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of the
Borrower.

 

8.9 Lawsuits.

There is no lawsuit, tax claim or other dispute pending or threatened against
the Borrower or against any of its properties or revenues that (a) purport to
affect or pertain to this Agreement or any other Loan Document, or any of the
transactions contemplated hereby or thereby, or (b) either individually or in
the aggregate, if determined adversely, could reasonably be expected to have a
material adverse effect on the business condition (financial or otherwise),
operations, properties or prospects of the Borrower or impair the Borrower’s
financial ability to perform its obligations under this Agreement or any other
Loan Document.

 

8.10 Liens.

The property of Borrower is subject to no Liens, except those permitted by
Section 9.9.

 

8.11 Collateral.

 

(a) All of the Pledged Interests are validly issued and outstanding, fully paid
and non-assessable and constitute 65% of the issued and outstanding Voting
Equity Interests (or if the Borrower owns less than 65% of such Voting Equity
Interests, then 100% of the Voting Equity Interests owned by the Borrower) and
100% of the other issued and outstanding Equity Interests of each Pledged
Subsidiary, and are accurately described on Schedule 5.2.

 

(b) All Collateral is owned by the Borrower free of any liens, charges,
equities, options, hypothecations, encumbrances and restrictions on pledge or
transfer, including transfer of voting rights, other than Liens permitted by
Section 9.9. Without limiting the foregoing, the Pledged Interests are not and
will not be subject to any voting trust, shareholders agreement, right of first
refusal, voting proxy, power of attorney or other similar arrangement.

 

(c) Except for Liens permitted by Section 9.9, the Borrower is indefeasibly
seized of marketable, unencumbered title to the Mortgaged Property in fee simple
absolute and has full power and lawful right to convey and encumber the same.
There are no covenants, restrictions, conditions, liens or charges upon the
title to the Mortgaged Property which would prevent the use of the Mortgaged
Property for its intended purpose.

 

20

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

8.12 Permits, Franchises.

The Borrower possesses all permits, memberships, franchises, contracts and
licenses required and all trademark rights, trade name rights, patent rights,
copyrights, and fictitious name rights necessary to enable it to conduct the
business in which it is now engaged.

 

8.13 Other Obligations.

The Borrower is not in default on any obligation for borrowed money, any
purchase money obligation or any other material lease, commitment, contract,
instrument or obligation.

 

8.14 Tax Matters.

The Borrower has no knowledge of any pending assessments or adjustments of its
income tax for any year and all taxes due have been paid (other than those being
contested in good faith by appropriate proceedings diligently conducted and for
which adequate reserves have been provided in accordance with GAAP).

 

8.15 No Event of Default.

There is no event which is, or with notice or lapse of time or both would be, an
event of default under this Agreement or any other Loan Document.

 

8.16 Insurance.

The Borrower has obtained, and maintained in effect, the insurance coverage
required by the Deed of Trust and by Section 9.18.

 

8.17 Access.

The Mortgaged Property has adequate rights of access to public ways, as shown in
the survey(s) furnished to the Bank.

 

8.18 Zoning.

The current and anticipated use of the Mortgaged Property complies with all
applicable zoning ordinances, regulations and restrictive covenants affecting
the Mortgaged Property without the existence of any variance, non-complying use,
nonconforming use or other special exception, all use restrictions of any
governmental authorities having jurisdiction have been satisfied, and no
violation of any law or regulation exists with respect thereto.

 

9. COVENANTS

So long as the Line of Credit Commitment shall be in effect or any credit
extension or other obligation hereunder shall remain unpaid or unsatisfied, the
Borrower agrees:

 

9.1 Use of Proceeds.

 

(a) To use the proceeds of the Line of Credit only to for working capital and
for other general corporate purposes.

 

21

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

(b) To use the proceeds of the Term Loan only to finance the expansion and
modernization of the Mortgaged Property, or to reimburse the Borrower for
amounts previously financed with respect thereto.

 

(c) Not to use the proceeds of the credit extended under this Agreement directly
or indirectly to purchase or carry any “margin stock” as that term is defined in
Regulation U of the Board of Governors of the Federal Reserve System, or extend
credit to or invest in other parties for the purpose of purchasing or carrying
any such “margin stock,” or to reduce or retire any indebtedness incurred for
such purpose.

 

9.2 Financial Information.

To provide the following financial information and statements in form and
content acceptable to the Bank, and such additional information as requested by
the Bank from time to time.

 

(a) Within 120 days after the end of each fiscal year, the annual consolidated
financial statements of the Borrower and its Subsidiaries for such fiscal year,
certified and dated by an authorized financial officer. These financial
statements must be audited (with an opinion satisfactory to the Bank) by a
Certified Public Accountant reasonably acceptable to the Bank. The statements
shall be prepared on a consolidated basis.

 

(b) Within 45 days after the end of each of the first three fiscal quarters of
each fiscal year, quarterly consolidated financial statements of the Borrower
and its Subsidiaries for such fiscal quarter, certified and dated by an
authorized financial officer. These financial statements may be
company-prepared. The statements shall be prepared on a consolidated basis.

 

(c) Within the periods referenced in Sections 9.2(a) and (b) above, a compliance
certificate, signed by an authorized financial officer of the Borrower and
setting forth (i) the information and computations (in sufficient detail) to
establish that the Borrower is in compliance with all financial covenants at the
end of the period covered by the financial statements then being furnished and
(ii) whether there existed as of the date of such financial statements and
whether there exists as of the date of the certificate, any default under this
Agreement and, if any such default exists, specifying the nature thereof and the
action the Borrower is taking and proposes to take with respect thereto.

 

9.3 Debt to Worth Ratio.

To maintain at all times, on a consolidated basis, a ratio of Total Liabilities
to Tangible Net Worth not exceeding 1.10 to 1.00.

“Total Liabilities” means the sum of current liabilities plus long term
liabilities of the Borrower and its Subsidiaries, determined in accordance with
GAAP, consistently applied.

 

22

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

“Tangible Net Worth” means, with respect to the Borrower and its Subsidiaries,
the book value of total assets (including leaseholds and leasehold improvements
and reserves against assets but excluding goodwill, patents, trademarks, trade
names, organization expense, unamortized debt discount and expense, capitalized
or deferred research and development costs, deferred marketing expenses, and
other like intangibles, and monies due from affiliates, officers, directors,
employees, shareholders, members or managers) less total liabilities, including
but not limited to accrued and deferred income taxes.

This ratio will be calculated at the end of each reporting period for which the
Bank requires financial statements, using the results of the twelve-month period
ending with that reporting period.

 

9.4 Basic Fixed Charge Coverage Ratio.

To maintain at all times, on a consolidated basis, a Basic Fixed Charge Coverage
Ratio of at least 1.30 to 1.00.

“Basic Fixed Charge Coverage Ratio” means for the Borrower and its Subsidiaries,
as of the last day of any fiscal quarter, the ratio of (a) the sum of EBITDA for
the four fiscal quarter period ended on such date plus lease expense and rent
expense for such period, minus income taxes paid, and dividends, withdrawals,
and other distributions made, in such period, to (b) the sum of interest
expense, lease expense, rent expense for such period, plus the current portion
of long term debt and the current portion of capitalized lease obligations
required to have been made during such period (whether or not such payments are
actually made).

“EBITDA” means consolidated net income determined in accordance with GAAP,
consistently applied, less income or plus loss from discontinued operations and
extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion, and amortization, all to the extent included in the
determination of consolidated net income.

This ratio will be calculated at the end of each reporting period for which the
Bank requires financial statements, using the results of the twelve-month period
ending with that reporting period. The current portion of long-term liabilities
will be measured as of the date twelve (12) months prior to the current
financial statement.

 

9.5 Asset Coverage Ratio.

To maintain at all times, on a consolidated basis, an Asset Coverage Ratio of at
least 1.00 to 1.00, but only for so long as (1) the Line of Credit Commitment is
in effect or there is any amount outstanding under or owing with respect to the
Line of Credit; or (2) any commitment with respect to any Foreign Subsidiary
Credit Line is in effect or there is any amount outstanding under or owing with
respect to any Foreign Subsidiary Credit Line; or (3) any Letter of Credit is
outstanding, or any amount drawn on a Letter of Credit remains unreimbursed, or
any other amount is outstanding under or owing with respect to any Letter of
Credit.

“Asset Coverage Ratio” means the ratio of (a) the sum of 60% of the balance due
on accounts receivable plus 35% of the value of the inventory, to (b) the
principal amount outstanding under the Line of Credit (including the aggregate
principal amount outstanding under the Foreign Subsidiary Credit Lines, the
amount of all outstanding Letters of Credit, and all amounts drawn on Letters of
Credit and not yet reimbursed).

 

23

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

This ratio will be calculated at the end of each reporting period for which the
Bank requires financial statements, using the results of the twelve-month period
ending with that reporting period.

 

9.6 Dividends and Distributions.

Not to declare or pay any dividends (except dividends paid in capital stock),
redemptions of stock or membership interests, distributions and withdrawals (as
applicable) to its owners, except for, so long as no event of default or event
which, with notice or the passage of time, will constitute an event of default
has occurred and is continuing or will result therefrom (giving effect thereto
on a pro forma basis as if such payment were made on the first day of the last
applicable measurement period described in Section 9.4), cash dividends and
distributions from the Borrower to its owners.

 

9.7 Bank as Principal Depository.

To maintain the Bank as its principal depository bank, including for the
maintenance of business, cash management, operating and administrative deposit
accounts, but only for so long as (1) the Line of Credit Commitment is in effect
or there is any amount outstanding under or owing with respect to the Line of
Credit; or (2) any commitment with respect to any Foreign Subsidiary Credit Line
is in effect or there is any amount outstanding under or owing with respect to
any Foreign Subsidiary Credit Line; or (3) any Letter of Credit is outstanding,
or any amount drawn on a Letter of Credit remains unreimbursed, or any other
amount is outstanding under or owing with respect to any Letter of Credit.

 

9.8 Other Debts.

Not to have outstanding or incur any direct or contingent liabilities or lease
obligations (other than those to the Bank), or become liable for the liabilities
of others, without the Bank’s written consent. This does not prohibit:

 

(a) Acquiring goods, supplies, or merchandise on normal trade credit.

 

(b) Endorsing negotiable instruments received in the usual course of business.

 

(c) Obtaining surety bonds in the usual course of business.

 

(d) Liabilities, lines of credit and leases in existence on the date of this
Agreement disclosed in the footnotes to the consolidated financial statements of
the Borrower and its Subsidiaries for the fiscal year ended April 30, 2010 or in
Schedule 9.8.

 

(e) Additional debts and equipment lease obligations for business purposes which
do not exceed an individual principal amount of One Million Dollars
($1,000,000), or an aggregate principal amount of Two Million Dollars
($2,000,000) outstanding in any fiscal year of the Borrower.

 

24

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

(f) Additional operating lease obligations for warehouses and facilities
necessary to meet current or expected business requirements which do not exceed
an individual principal amount of One Million Dollars ($1,000,000), or an
aggregate principal amount of Two Million Dollars ($2,000,000) outstanding in
any fiscal year of the Borrower.

 

9.9 Other Liens.

Not to create, assume, or allow any security interest or lien (including
judicial liens) on property the Borrower now or later owns, except:

 

(a) Liens and security interests in favor of the Bank.

 

(b) Liens for taxes not yet due.

 

(c) Liens outstanding on the date of this Agreement disclosed in Schedule 9.9.

 

(d) Additional purchase money security interests in assets acquired after the
date of this Agreement, if the total principal amount of debts secured by such
liens does not exceed One Million Dollars ($1,000,000) at any one time.

 

(e) Liens incidental to the conduct of business or the ownership of properties
and assets (including Liens in connection with worker’s compensation,
unemployment insurance and other like laws (excluding Liens imposed by ERISA or
the substantial equivalent under foreign law (including any statutory liens for
profit sharing plans imposed by foreign law)), warehousemen’s mechanic’s
materialmen’s and attorneys’ liens, and statutory or common law landlords’ liens
(or the substantial equivalent under foreign law)) and Liens and pledges or
deposits to secure the performance of bids, tenders or trade contracts, or to
secure statutory obligations, surety or appeal bonds or other Liens of like
general nature incurred in the ordinary course of business and not in connection
with the borrowing of money, provided, in each case, the obligation secured is
not more than 30 days overdue or, if so overdue, is being contested in good
faith by appropriate actions or proceedings and adequate reserves have been
established in accordance with GAAP;

 

(f) Liens of or resulting from any judgment or award not constituting an event
of default under Section 10.10;

 

(g) Minor survey exceptions or minor encumbrances, easements or reservations, or
rights of others for rights-of-way, utilities and other similar purposes, or
zoning or other restrictions as to the use of real properties, which are
necessary for the conduct of the activities of the Borrower and its Subsidiaries
or which customarily exist on properties of companies engaged in similar
activities and similarly situated and which do not in any event materially
impair their use in the operation of the business of the Borrower and its
Subsidiaries;

 

25

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

(h) Liens or set-off rights arising by contract in the ordinary course of
business or by law and in connection with cash management and banking
arrangements entered into in the ordinary course of business; or

 

(i) Liens securing obligations under interest rate hedge agreements.

 

9.10 Maintenance of Assets.

 

(a) Not to sell, assign, lease, transfer or otherwise dispose of any part of the
Borrower’s business or the Borrower’s assets except in the ordinary course of
the Borrower’s business.

 

(b) Not to sell, assign, lease, transfer or otherwise dispose of any assets for
less than fair market value, or enter into any agreement to do so.

 

(c) Not to enter into any sale and leaseback agreement covering any of its fixed
assets.

 

(d) To maintain and preserve all rights, privileges, and franchises the Borrower
needs to operate its business as presently conducted.

 

(e) To make any repairs, renewals, or replacements to keep the Borrower’s
properties in good working condition.

 

9.11 Investments.

Not to have any existing, or make any new, investments in any individual or
entity, or make any capital contributions or other transfers of assets to any
individual or entity, except for:

 

(a) Existing investments disclosed in Schedule 9.11;

 

(b) Investments made after the date hereof in the Borrower’s Subsidiaries in an
aggregate amount not to exceed One Million Dollars ($1,000,000) outstanding at
any time, unless such Subsidiaries guaranty the Borrower’s obligations hereunder
on terms and conditions satisfactory to the Bank;

 

(c) Investments in U.S. treasury bills and other obligations of the federal
government or any agency thereof;

 

(d) Repurchase obligations with a term of not more than ninety (90) days for
underlying investments of the types described in clause (c) above;

 

(e) Other investments approved in writing by the Bank in its sole discretion;
and

 

(f) Investments permitted by Section 9.12.

 

9.12 Loans.

Not to make any loans, advances or other extensions of credit to any individual
or entity, except for:

 

(a) Existing extensions of credit disclosed in Schedule 9.12;

 

26

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

(b) Extensions of credit made after the date hereof to the Borrower’s
Subsidiaries in an aggregate amount not to exceed One Million Dollars
($1,000,000) outstanding at any time, unless such Subsidiaries guaranty the
Borrower’s obligations hereunder on terms and conditions satisfactory to the
Bank;

 

(c) Extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business to non-affiliated entities; and

 

(d) Other extensions of credit not exceeding One Hundred Thousand Dollars
($100,000) in the aggregate in any fiscal year of the Borrower.

 

9.13 Change of Management.

Not to make any substantial change in the present executive or management
personnel of the Borrower without providing the Bank written notice within ten
(10) days of such change.

 

9.14 Change of Ownership.

Not to cause, permit, or suffer any change in capital ownership such that there
is a change of more than fifty percent (50%) in the direct or indirect capital
ownership of the Borrower.

 

9.15 Collateral.

 

(a) Not to permit any Pledged Interests (i) to be held or maintained in the form
of a security entitlement or credited to any securities account and (ii) which
constitute a “security” (or as to which the related Pledged Subsidiary has
elected to have treated as a “security”) under Article 8 of the UCC (including,
for the purposes of this Section 9.15(a), the Uniform Commercial Code of any
other applicable jurisdiction) to be maintained in the form of uncertificated
securities.

 

(b) To cause the Pledged Interests that constitute “securities” (or as to which
the issuer elects to have treated as “securities”) under the UCC to be
represented by the certificates now and hereafter delivered to Bank and that it
shall cause each of the Pledged Subsidiaries not to issue any Equity Interests,
or securities convertible into, or exchangeable or exercisable for, Equity
Interests, at any time during the term of this Agreement.

 

9.16 Additional Negative Covenants.

Not to, without the Bank’s written consent:

 

(a) enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a limited
liability company;

 

27

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

(b) acquire or purchase a business or its assets for a purchase price (including
all cash, notes, or any other property given as consideration for such
acquisition or purchase) exceeding One Million Dollars ($1,000,000) in the
aggregate;

 

(c) engage in any business activities substantially different from the
Borrower’s present business;

 

(d) liquidate or dissolve or fail to preserve, renew and maintain in full force
and effect its legal existence and good standing under the laws of the
jurisdiction of its organization;

 

(e) voluntarily suspend its business; or

 

(f) make any significant change in accounting treatment or reporting practices,
except as required by generally accepted accounting principles, or change the
fiscal year.

 

9.17 Notices to Bank.

To promptly notify the Bank in writing of:

 

(a) any lawsuit over Two Hundred Fifty Thousand Dollars ($250,000) against the
Borrower;

 

(b) any substantial dispute between any governmental authority and the Borrower;

 

(c) any event of default under this Agreement or any other Loan Document, or any
event which, with notice or lapse of time or both, would constitute an event of
default under this Agreement or any other Loan Document;

 

(d) any material adverse change in the Borrower’s business condition (financial
or otherwise), operations, properties or prospects, or ability to repay the
credit;

 

(e) any change in the Borrower’s name, legal structure, place of business, or
chief executive office (if the Borrower has more than one place of business);
and

 

(f) any actual contingent liabilities over Two Hundred Fifty Thousand Dollars
($250,000) of the Borrower, and any such contingent liabilities which are
reasonably foreseeable.

 

9.18 Insurance.

 

(a) General Business Insurance. To maintain insurance satisfactory to the Bank
as to amount, nature and carrier covering property damage (including loss of use
and occupancy) to any of the Borrower’s properties (including without limitation
the Equipment), business interruption insurance, public liability insurance
including coverage for contractual liability, product liability and workers’
compensation, and any other insurance which is usual for the Borrower’s
business, including the insurance required by the Deed of Trust. The policy
covering damage to Equipment shall be endorsed, in a manner satisfactory to the
Bank, to name the Bank as loss payee thereunder with respect to Equipment. Each
policy shall provide for at least thirty (30) days prior notice to the Bank of
any cancellation thereof.

 

28

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

(b) Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank
a copy of each insurance policy, or, if permitted by the Bank, a certificate of
insurance listing all insurance in force.

 

9.19 Compliance with Laws.

To comply with the laws (including any fictitious or trade name statute),
regulations, and orders of any government body with authority over the
Borrower’s business, except where the failure to so comply would not have a
material adverse effect in its business condition (financial or otherwise),
operations, properties or prospects. The Bank shall have no obligation to make
any advance to the Borrower except in compliance with all applicable laws and
regulations and the Borrower shall fully cooperate with the Bank in complying
with all such applicable laws and regulations.

 

9.20 ERISA Plans.

Promptly during each year, to pay and cause its Subsidiaries to pay
contributions adequate to meet at least the minimum funding standards under
ERISA with respect to each and every Plan; file each annual report required to
be filed pursuant to ERISA in connection with each Plan for each year; and
notify the Bank within ten (10) days of the occurrence of any Reportable Event
that might constitute grounds for termination of any capital Plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any Plan. “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time.
Capitalized terms in this paragraph shall have the meanings defined within
ERISA.

 

9.21 Books and Records.

To maintain adequate books and records.

 

9.22 Audits.

To allow the Bank and its agents to inspect the Borrower’s properties and
examine, audit, and make copies of books and records at any reasonable time. If
any of the Borrower’s properties, books or records are in the possession of a
third party, the Borrower authorizes that third party to permit the Bank or its
agents to have access to perform inspections or audits and to respond to the
Bank’s requests for information concerning such properties, books and records.

 

9.23 Perfection of Liens.

To help the Bank perfect and protect its security interests and liens, and
reimburse it for related costs it incurs to protect its security interests and
liens.

 

9.24 Final Title Policy.

To deliver to the Bank, within thirty (30) days of the date of this Agreement,
the final title policy insuring the Deed of Trust.

 

29

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

9.25 Survey.

To deliver to the Bank, within ninety (90) days of the date of this Agreement, a
survey of the Mortgaged Property in compliance with Bank’s survey requirements.
The survey shall specify the flood zone classification of the Mortgaged Property
and the surveyor shall certify that no improvements are located in whole or in
part in a flood hazard zone. Upon delivery of the survey, and to the extent
requested by the Bank, (i) the Deed of Trust shall be amended to replace the
legal description of the Mortgaged Property attached thereto with the legal
description of the Mortgaged Property determined in accordance with the survey,
and (ii) the lender’s title insurance policy shall be endorsed to insure the
Deed of Trust as amended by the aforementioned amendment, together with such
other endorsements (including without limitation access and same-as-survey
endorsements) as are requested by the Bank in connection with the delivery of
the survey. The foregoing Deed of Trust amendment and title insurance
endorsements shall be in form and content reasonably acceptable to the Bank and
the costs thereof (including, without limitation, reasonable attorneys’ fees
incurred by the Bank in connection therewith) will be paid by the Borrower.

 

9.26 Hazardous Substances.

 

(a) Indemnity. The Borrower agrees to indemnify and hold the Bank harmless from
and against all liabilities, claims, actions, foreseeable and unforeseeable
consequential damages, costs and expenses (including sums paid in settlement of
claims and all consultant, expert and legal fees and expenses of the Bank’s
counsel) or loss directly or indirectly arising out of or resulting from any of
the following:

(i) Any Hazardous Substance being present at any time, whether before, during or
after any construction, in or around any part of the Mortgaged Property, or in
the soil, groundwater or soil vapor on or under the Mortgaged Property,
including those incurred in connection with any investigation of site conditions
or any clean-up, remedial, removal or restoration work, or any resulting damages
or injuries to the person or property of any third parties or to any natural
resources.

(ii) Any use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a Hazardous Substance. This
indemnity will apply whether the Hazardous Substance is on, under or about any
of the Borrower’s property or operations or property leased to the Borrower,
whether or not the property has been taken by the Bank as collateral.

Upon demand by the Bank, the Borrower will defend any investigation, action or
proceeding alleging the presence of any Hazardous Substance in any such
location, which affects the Mortgaged Property or which is brought or commenced
against the Bank, whether alone or together with the Borrower or any other
person, all at the Borrower’s own cost and by counsel to be approved by the Bank
in the exercise of its reasonable judgment. In the alternative, the Bank may
elect to conduct its own defense at the expense of the Borrower. The Borrower’s
obligations to the Bank under this Section 9.26, except the obligation to give
notices to the Bank appearing in Section 9.26(d), shall survive termination of
this Agreement, repayment of the Borrower’s obligations to the Bank under this
Agreement, and foreclosure of the Deed of Trust, the taking of a deed-in-lieu of
foreclosure, or any similar proceedings.

 

30

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

(b) Representation and Warranty. Before signing this Agreement, the Borrower
researched and inquired into the previous uses and ownership of the Mortgaged
Property. Based on that due diligence, the Borrower represents and warrants that
to the best of its knowledge, no Hazardous Substance has been disposed of or
released or otherwise exists in, on, under or onto the Mortgaged Property,
except as the Borrower has disclosed to the Bank in writing.

 

(c) Compliance With Environmental Laws. The Borrower has complied, and will
comply and cause all occupants of the Mortgaged Property to comply, with all
current and future laws, regulations and ordinances or other requirements of any
governmental authority relating to or imposing liability or standards of conduct
concerning protection of health or the environment or Hazardous Substances
(“Environmental Laws”). The Borrower shall promptly, at the Borrower’s sole cost
and expense, take all reasonable actions with respect to any Hazardous
Substances or other environmental condition at, on, or under the Mortgaged
Property necessary to (i) comply with all applicable Environmental Laws;
(ii) allow continued use, occupation or operation of the Mortgaged Property; or
(iii) maintain the fair market value of the Mortgaged Property. The Borrower
acknowledges that Hazardous Substances may permanently and materially impair the
value and use of the Mortgaged Property.

 

(d) Notices Regarding Hazardous Substances. Until the Line of Credit Commitment
shall be terminated and all credit extensions or other obligations hereunder
have been fully and finally paid and satisfied, the Borrower will promptly
notify the Bank in writing if it knows, suspects or believes there may be any
Hazardous Substance in or around the Mortgaged Property, or in the soil,
groundwater or soil vapor on or under the Mortgaged Property, or that the
Borrower or the Mortgaged Property may be subject to any threatened or pending
investigation by any governmental agency under any current or future law,
regulation or ordinance pertaining to any Hazardous Substance.

 

(e) Site Visits, Observations and Testing. The Bank and its agents and
representatives will have the right at any reasonable time, after giving
reasonable notice to the Borrower, to enter and visit the Mortgaged Property and
any other locations where any personal property collateral securing this
Agreement is located, for the purposes of observing the Mortgaged Property and
the personal property collateral, taking and removing environmental samples, and
conducting tests on any part of the Mortgaged Property. The Borrower shall
reimburse the Bank on demand for the costs of any such environmental
investigation and testing. The Bank will make reasonable efforts during any site
visit, observation or testing conducted pursuant this paragraph to avoid
interfering with the Borrower’s use of the Mortgaged Property and the personal
property collateral. The Bank is under no duty, however, to visit or observe the
Mortgaged Property or the personal property collateral or to conduct tests, and
any such acts by the Bank will be solely for the purposes of protecting the
Bank’s security and preserving the Bank’s rights under this Agreement. No site
visit, observation or testing or any report or findings made as a result thereof
(“Environmental Report”) (i) will result in a waiver of any default of the
Borrower; (ii) impose any liability on the Bank; or (iii) be a representation or
warranty of any kind regarding the Mortgaged Property or the personal property
collateral (including its condition or value or compliance with any laws) or the
Environmental Report (including its accuracy or completeness). In the event the
Bank has a duty or obligation under applicable laws, regulations or other
requirements to disclose an Environmental Report to the Borrower or any other
party, the Borrower authorizes the Bank to make such a disclosure. The Bank may
also disclose an Environmental Report to any regulatory authority, and to any
other parties as necessary or appropriate in the Bank’s judgment. The Borrower
further understands and agrees that any Environmental Report or other
information regarding a site visit, observation or testing that is disclosed to
the Borrower by the Bank or its agents and representatives is to be evaluated
(including any reporting or other disclosure obligations of the Borrower) by the
Borrower without advice or assistance from the Bank

 

31

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

9.27 Cooperation.

To take any action reasonably requested by the Bank to carry out the intent of
this Agreement.

 

10. DEFAULT AND REMEDIES

If any of the following events of default occurs, the Bank may do one or more of
the following: (a) declare the Borrower in default; (b) stop making any
additional credit available to the Borrower; (c) declare the Line of Credit
Commitment to be terminated, whereupon the Line of Credit Commitment shall be
terminated; (d) declare the unpaid principal amount of all outstanding credit
extensions, all interest accrued and unpaid thereon, and all other amounts owing
or payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Borrower; and (e) exercise all
rights, powers and remedies available to it under the Loan Documents (including
those set forth in Article 5) or applicable law. If an event which, with notice
or the passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional
credit under this Agreement. If an event of default occurs under Section 10.7,
then the Line of Credit Commitment shall automatically terminate, the unpaid
principal amount of all outstanding credit extensions and all interest and other
amounts as aforesaid shall automatically become due and payable, in each case
without further act of the Bank.

 

10.1 Failure to Pay.

The Borrower fails to make any payment under this Agreement when due (including,
without limitation, any failure to prepay pursuant to Section 2.3(c)), and such
failure continues for five (5) days past the date when such payment is due.

 

10.2 Specific Covenants.

 

(a) The Borrower fails to comply with Section 9.5 for (i) two consecutive fiscal
quarters or (ii) any four fiscal quarters during the term of this Agreement. For
the avoidance of doubt, any cure by the Borrower made pursuant to Section 2.1(c)
shall not be deemed compliance with Section 9.5 for purposes of this Section.

 

32

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

(b) The Borrower fails to perform or observe any term, covenant or agreement
contained in Article 9 of this Agreement (other than Section 9.5).

 

10.3 Other Defaults.

The Borrower fails to perform or observe any other covenant or agreement (not
specified in Section 10.1 or 10.2 above) contained in this Agreement or any Loan
Document on its part to be performed or observed and such failure continues for
30 days after the earliest to occur of (1) an officer of the Borrower becomes
aware of such failure, or (2) the Bank notifies the Borrower of such failure.

 

10.4 Other Bank Agreements.

Any default occurs under any other agreement the Borrower or any of its
Subsidiaries has with the Bank or any affiliate of the Bank and such default
continues for 5 days after the Borrower receives notice thereof.

 

10.5 Cross-default.

Any default occurs under any agreement in connection with any credit, in an
aggregate amount of One Million Dollars ($1,000,000) or more, the Borrower or
any of the Borrower’s Subsidiaries has obtained from any other Person or which
the Borrower or any of the Borrower’s Subsidiaries has guaranteed.

 

10.6 False Information.

The Borrower has given the Bank materially false or materially misleading
information or representations.

 

10.7 Bankruptcy.

The Borrower files a bankruptcy petition, a bankruptcy petition is filed against
the Borrower which is not dismissed within 60 days after the filing hereof, or
the Borrower makes a general assignment for the benefit of creditors. The
default will be deemed cured if any bankruptcy petition filed against the
Borrower is dismissed within a period of sixty (60) days after such filing;
provided, however, that such cure opportunity will be terminated upon the entry
of an order for relief in any bankruptcy case arising from such a petition.

 

10.8 Receivers.

A receiver or similar official is appointed for a substantial portion of the
Borrower’s business, or the business is terminated, liquidated or dissolved.

 

10.9 Lien Priority.

The Bank fails to have an enforceable first lien on or security interest in any
property given as security for this Agreement, subject to Liens permitted by
Section 9.9.

 

33

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

10.10 Judgments.

Any judgments or arbitration awards are entered against the Borrower, or the
Borrower enters into any settlement agreements with respect to any litigation or
arbitration, in an aggregate amount of Five Hundred Thousand Dollars ($500,000)
or more in excess of any insurance coverage.

 

10.11 Invalidity of this Agreement.

Any provision of this Agreement or any Loan Document, at any time after its
execution and delivery and for any reason other than as expressly permitted
hereunder or thereunder or satisfaction in full of all the Borrower’s
obligations hereunder or thereunder, ceases to be in full force and effect in
any material respect; or the Borrower or any other Person contests in any manner
the validity or enforceability of any provision of this Agreement or any Loan
Document; or the Borrower denies that it has any or further liability or
obligation under this Agreement or any Loan Document (provided, however, that if
Borrower claims that such obligations have been paid, such claim shall not be
considered a denial of liability), or purports to revoke, terminate or rescind
any provision of this Agreement or any Loan Document.

 

10.12 Government Action.

Any government authority takes action that the Bank believes materially
adversely affects the Borrower’s financial condition or ability to repay.

 

10.13 Casualty or Condemnation.

A material portion of the Mortgaged Property or the Equipment is so demolished,
destroyed or damaged that, in the reasonable opinion of the Bank, the Mortgaged
Property and/or the Equipment cannot be restored, rebuilt or replaced with
available funds within a reasonable period of time and in any event, prior to
the maturity of the Term Loan, or there is commenced any proceeding to condemn
or otherwise take pursuant to the power of eminent domain, or a contract for
sale or a conveyance in lieu of such a taking is executed which provides for the
transfer of, a material portion of the Mortgaged Property .

 

11. ENFORCING THIS AGREEMENT; MISCELLANEOUS

 

11.1 GAAP.

Except as otherwise stated in this Agreement, all financial information provided
to the Bank and all financial covenants will be made under GAAP, consistently
applied.

 

11.2 Governing Law.

This Agreement shall be governed by and construed in accordance with the laws of
North Carolina. To the extent that the Bank has greater rights or remedies under
federal law, whether as a national bank or otherwise, this Section shall not be
deemed to deprive the Bank of such rights and remedies as may be available under
federal law.

 

34

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

11.3 Successors and Assigns.

This Agreement is binding on the Borrower’s and the Bank’s successors and
assignees. The Borrower agrees that it may not assign this Agreement without the
Bank’s prior consent. The Bank may sell participations in or assign this loan,
and may exchange information about the Borrower with actual or potential
participants or assignees. If a participation is sold or the loan is assigned,
the purchaser will have the right of set-off against the Borrower.

 

11.4 Dispute Resolution Provision.

This Section, including the subsections below, is referred to as the “Dispute
Resolution Provision.” This Dispute Resolution Provision is a material
inducement for the parties entering into this Agreement.

 

(a) This Dispute Resolution Provision concerns the resolution of any
controversies or claims between the parties, whether arising in contract, tort
or by statute, including but not limited to controversies or claims that arise
out of or relate to: (i) this Agreement (including any renewals, extensions or
modifications); or (ii) any document related to this Agreement (collectively a
“Claim”). For the purposes of this Dispute Resolution Provision only, the term
“parties” shall include any parent corporation, Subsidiary or affiliate of the
Bank involved in the servicing, management or administration of any obligation
described or evidenced by this Agreement.

 

(b) At the request of any party to this Agreement, any Claim shall be resolved
by binding arbitration in accordance with the Federal Arbitration Act (Title 9,
U.S. Code) (the “Act”). The Act will apply even though this Agreement provides
that it is governed by the law of a specified state.

 

(c) Arbitration proceedings will be determined in accordance with the Act, the
then-current rules and procedures for the arbitration of financial services
disputes of the American Arbitration Association or any successor thereof
(“AAA”), and the terms of this Dispute Resolution Provision. In the event of any
inconsistency, the terms of this Dispute Resolution Provision shall control. If
AAA is unwilling or unable to (i) serve as the provider of arbitration or
(ii) enforce any provision of this arbitration clause, the Bank may designate
another arbitration organization with similar procedures to serve as the
provider of arbitration.

 

(d) The arbitration shall be administered by AAA and conducted, unless otherwise
required by law, in any U.S. state where real or tangible personal property
collateral for this credit is located or if there is no such collateral, in the
state specified in Section 11.2. All Claims shall be determined by one
arbitrator; however, if Claims exceed Five Million Dollars ($5,000,000), upon
the request of any party, the Claims shall be decided by three arbitrators. All
arbitration hearings shall commence within ninety (90) days of the demand for
arbitration and close within ninety (90) days of commencement and the award of
the arbitrator(s) shall be issued within thirty (30) days of the close of the
hearing. However, the arbitrator(s), upon a showing of good cause, may extend
the commencement of the hearing for up to an additional sixty (60) days. The
arbitrator(s) shall provide a concise written statement of reasons for the
award. The arbitration award may be submitted to any court having jurisdiction
to be confirmed and have judgment entered and enforced.

 

35

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

(e) The arbitrator(s) will give effect to statutes of limitation in determining
any Claim and may dismiss the arbitration on the basis that the Claim is barred.
For purposes of the application of any statutes of limitation, the service on
AAA under applicable AAA rules of a notice of Claim is the equivalent of the
filing of a lawsuit. Any dispute concerning this Dispute Resolution Provision or
whether a Claim is arbitrable shall be determined by the arbitrator(s), except
as set forth at subsection (h) of this Dispute Resolution Provision. The
arbitrator(s) shall have the power to award legal fees pursuant to the terms of
this Agreement.

 

(f) This Dispute Resolution Provision does not limit the right of any party to:
(i) exercise self-help remedies, such as but not limited to, setoff;
(ii) initiate judicial or non-judicial foreclosure against any real or personal
property collateral; (iii) exercise any judicial or power of sale rights, or
(iv) act in a court of law to obtain an interim remedy, such as but not limited
to, injunctive relief, writ of possession or appointment of a receiver, or
additional or supplementary remedies.

 

(g) The filing of a court action is not intended to constitute a waiver of the
right of any party, including the suing party, thereafter to require submittal
of the Claim to arbitration.

 

(h) Any arbitration or trial by a judge of any Claim will take place on an
individual basis without resort to any form of class or representative action
(the “Class Action Waiver”). Regardless of anything else in this Dispute
Resolution Provision, the validity and effect of the Class Action Waiver may be
determined only by a court and not by an arbitrator. The parties to this
Agreement acknowledge that the Class Action Waiver is material and essential to
the arbitration of any disputes between the parties and is nonseverable from the
agreement to arbitrate Claims. If the Class Action Waiver is limited, voided or
found unenforceable, then the parties’ agreement to arbitrate shall be null and
void with respect to such proceeding, subject to the right to appeal the
limitation or invalidation of the Class Action Waiver. The Parties acknowledge
and agree that under no circumstances will a class action be arbitrated.

 

(i) By agreeing to binding arbitration, the parties irrevocably and voluntarily
waive any right they may have to a trial by jury in respect of any Claim.
Furthermore, without intending in any way to limit this agreement to arbitrate,
to the extent any Claim is not arbitrated, the parties irrevocably and
voluntarily waive any right they may have to a trial by jury in respect of such
Claim. This waiver of jury trial shall remain in effect even if the Class Action
Waiver is limited, voided or found unenforceable. WHETHER THE CLAIM IS DECIDED
BY ARBITRATION OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE
EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY
TO THE EXTENT PERMITTED BY LAW.

 

36

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

11.5 Severability; Waivers.

If any part of this Agreement is not enforceable, the rest of the Agreement may
be enforced. The Bank retains all rights, even if it makes a loan after default.
If the Bank waives a default, it may enforce a later default. Any consent or
waiver under this Agreement must be in writing.

 

11.6 Attorneys’ Fees.

The Borrower shall reimburse the Bank for any reasonable costs and attorneys’
fees incurred by the Bank in connection with the enforcement or preservation of
any rights or remedies under this Agreement and any other documents executed in
connection with this Agreement, and in connection with any amendment, waiver,
“workout” or restructuring under this Agreement. In the event of a lawsuit or
arbitration proceeding, the prevailing party is entitled to recover costs and
reasonable attorneys’ fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator. In the event
that any case is commenced by or against the Borrower under the Bankruptcy Code
(Title 11, United States Code) or any similar or successor statute, the Bank is
entitled to recover costs and reasonable attorneys’ fees incurred by the Bank
related to the preservation, protection, or enforcement of any rights of the
Bank in such a case. As used in this Section, “attorneys’ fees” includes the
allocated costs of the Bank’s in-house counsel.

 

11.7 One Agreement.

This Agreement and any related security or other agreements required by this
Agreement, collectively:

 

(a) represent the sum of the understandings and agreements between the Bank and
the Borrower concerning this credit;

 

(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and

 

(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail. Any reference in any
related document to a “promissory note” or a “note” executed by the Borrower and
dated as of the date of this Agreement shall be deemed to refer to this
Agreement, as now in effect or as hereafter amended, renewed, or restated.

 

11.8 Indemnification.

The Borrower will indemnify and hold the Bank harmless from any loss, liability,
damages, judgments, and costs of any kind relating to or arising directly or
indirectly out of (a) this Agreement, any Loan Document or any other document
required hereunder, (b) any credit extended or committed by the Bank to the
Borrower hereunder, and (c) any litigation or proceeding related to or arising
out of this Agreement, any such document, or any such credit; provided that such
indemnity shall not be available to the Bank to the extent that such losses,
liabilities, damages, judgments or costs are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of the Bank. This indemnity includes but is not
limited to attorneys’ fees. This indemnity extends to the Bank, its parent,
Subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys, and assigns. This indemnity will survive repayment of the
Borrower’s obligations to the Bank. All sums due to the Bank hereunder shall be
obligations of the Borrower, due and payable immediately without demand.

 

37

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

11.9 Notices.

Unless otherwise provided in this Agreement or in any other Loan Document, all
notices required under this Agreement shall be personally delivered or sent by
first class mail, postage prepaid, or by overnight courier, to the addresses on
the signature page of this Agreement, or sent by facsimile to the fax numbers
listed on the signature page, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing. Notices and other
communications shall be effective (i) if mailed, upon the earlier of receipt or
five (5) days after deposit in the U.S. mail, first class, postage prepaid,
(ii) if telecopied, when transmitted, or (iii) if hand-delivered, by courier or
otherwise (including telegram, lettergram or mailgram), when delivered.

 

11.10 Headings.

Article and Section headings are for reference only and shall not affect the
interpretation or meaning of any provisions of this Agreement.

 

11.11 Counterparts.

This Agreement may be executed in as many counterparts as necessary or
convenient, and by the different parties on separate counterparts each of which,
when so executed, shall be deemed an original but all such counterparts shall
constitute but one and the same agreement.

 

11.12 Borrower Information; Reporting to Credit Bureaus.

The Borrower authorizes the Bank at any time to verify or check any information
given by the Borrower to the Bank, check the Borrower’s credit references,
verify employment, and obtain credit reports. The Borrower agrees that the Bank
shall have the right at all times to disclose and report to credit reporting
agencies and credit rating agencies such information pertaining to the Borrower
and/or all guarantors as is consistent with the Bank’s policies and practices
from time to time in effect.

[SIGNATURE PAGE FOLLOWS]

 

38

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

This Agreement is executed as of the date stated at the top of the first page.

 

Bank of America, N.A.     Kewaunee Scientific Corporation   By  

/s/ Michael W. Mason

    By  

/s/ D. Michael Parker

  (Seal) Name:   Michael W. Mason     Name:   D. Michael Parker   Title:  
Senior Vice President     Title:   Senior Vice President, Finance and Chief
Financial Officer  

Address where notices to

the Bank are to be sent:

 

Bank of America, N.A.

101 S. Tryon Street

NC1-002-03-10

Charlotte, NC 28255

Telephone: (980) 683-1839

Facsimile: (980) 233-7196

   

Address where notices to

the Borrower are to be sent:

 

Kewaunee Scientific Corporation

P.O. Box 1842

Statesville, NC 28687

Telephone: (704) 871-3290

Facsimile: (704) 873-1275

 

USA Patriot Act Notice. Federal law requires all financial institutions to
obtain, verify and record information that identifies each person who opens an
account or obtains a loan. The Bank will ask for the Borrower’s legal name,
address, tax ID number or social security number and other identifying
information. The Bank may also ask for additional information or documentation
or take other actions reasonably necessary to verify the identity of the
Borrower, guarantors or other related persons.

 

39

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

Annex I

“AutoBorrow Services Agreement” means any AutoBorrow Services Agreement entered
into between the Borrower and the Bank on or after the date hereof.

“Direct Foreign Subsidiary” means any Foreign Subsidiary if Equity Interests
representing more than 50% of either the aggregate ordinary voting power or the
aggregate equity value represented by the issued and outstanding Equity
Interests of such Person are owned by the Borrower, a Domestic Subsidiary or any
combination thereof.

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
any political subdivision of the United States.

“Effective Date” means the date that all of the conditions set forth in
Section 7 have been satisfied or have been waived in writing by the Bank.

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

“Foreign Subsidiary” means a Subsidiary other than a Domestic Subsidiary.

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

“Hazardous Substance” means any substance, material or waste that is or becomes
designated or regulated as “toxic,” “hazardous,” “pollutant,” or “contaminant”
or a similar designation or regulation under any current or future federal,
state or local law (whether under common law, statute, regulation or otherwise)
or judicial or administrative interpretation of such, including without
limitation petroleum or natural gas.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement in the nature of
a security interest of any kind or nature whatsoever (including any conditional
sale or other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).

“Loan Documents” means this Agreement, any promissory note issued hereunder, the
Notice of Negative Pledge, any AutoBorrow Services Agreement, each request for
credit extension, and all other instruments and documents heretofore or
hereafter executed or delivered to or in favor of the Bank in connection with
the extensions of credit made and transactions contemplated by this Agreement.

 

A-1

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

“Notice of Negative Pledge” means, individually or collectively as the context
may indicate, notices of the agreement of the Borrower not to permit any Lien on
its fee or leasehold interest in real property, in each case delivered on or
after the date hereof to the Bank and in form and substance satisfactory to the
Bank.

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

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person.

“Swap Contract” means any agreement, whether or not in writing, relating to any
Swap Transaction, including, unless the context otherwise clearly requires, any
form of master agreement (the “Master Agreement”) published by the International
Swaps and Derivatives Association, Inc., or any other master agreement, entered
into between Swap Counterparty and the Borrower (or its affiliate) in connection
with the Line of Credit or the Term Loan, together with any related schedule and
confirmation, as amended, supplemented, superseded or replaced from time to
time, relating to or governing any Swap Transaction.

“Swap Counterparty” means the Bank or an affiliate of the Bank, in its capacity
as counterparty under any Swap Contract.

“Swap Transaction” means any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap or option, bond, note or bill option, interest rate option, forward
foreign exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swap option, currency option or any other similar
transaction (including any option to enter into the foregoing) or any
combination of the foregoing, entered into between any Swap Counterparty and the
Borrower (or its affiliate).

“Voting Equity Interests” means, with respect to any Person, the Equity
Interests entitled to vote for members of the board of directors or equivalent
governing body of such Person.

 

A-2