Exhibit 10.1

REVOLVING CREDIT

AND

SECURITY AGREEMENT

PNC BANK, NATIONAL ASSOCIATION

(AS LENDER AND AS AGENT)

WITH

HUTCHINSON TECHNOLOGY INCORPORATED

AND

THE OTHER BORROWERS SIGNATORY HERETO

(BORROWERS)

September 16, 2011

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TABLE OF CONTENTS

 

I.

  

DEFINITIONS

     1       1.1.    Accounting Terms      1       1.2.    General Terms      1
      1.3.    Uniform Commercial Code Terms      26       1.4.    Certain
Matters of Construction      26       1.5.    Changes in GAAP      27   

II.

  

ADVANCES, PAYMENTS

     28       2.1.    Revolving Advances      28       2.2.    Procedure for
Revolving Advances Borrowing      29       2.3.    Disbursement of Advance
Proceeds      31       2.4.    Maximum Advances      31       2.5.    Repayment
of Advances      31       2.6.    Repayment of Excess Advances      32      
2.7.    Statement of Account      32       2.8.    Letters of Credit      33   
   2.9.    Issuance of Letters of Credit      33       2.10.    Requirements For
Issuance of Letters of Credit      34       2.11.    Disbursements,
Reimbursement      34       2.12.    Repayment of Participation Advances      35
      2.13.    Documentation      36       2.14.    Determination to Honor
Drawing Request      36       2.15.    Nature of Participation and Reimbursement
Obligations      36       2.16.    Indemnity      38       2.17.    Liability
for Acts and Omissions      38       2.18.    Additional Payments      39      
2.19.    Manner of Borrowing and Payment      39       2.20.    Use of Proceeds
     41       2.21.    Defaulting Lender      41   

III.

  

INTEREST AND FEES

     42       3.1.    Interest      42       3.2.    Letter of Credit Fees     
42       3.3.    Closing Fee and Facility Fee      43       3.4.    Collateral
Management Fee and Collateral Examination Fee      44       3.5.    Computation
of Interest and Fees      44       3.6.    Maximum Charges      44       3.7.   
Increased Costs      44       3.8.    Basis For Determining Interest Rate
Inadequate or Unfair      45       3.9.    Capital Adequacy      46       3.10.
   Taxes      46   

IV.

  

COLLATERAL: GENERAL TERMS

     50       4.1.    Security Interest in the Collateral      50       4.2.   
Perfection of Security Interest      50       4.3.    Disposition of Collateral
     51   

 

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   4.4.    Preservation of Collateral      52       4.5.    Ownership of
Collateral      52       4.6.    Defense of Agent’s and Lenders’ Interests     
53       4.7.    Books and Records      53       4.8.    Financial Disclosure   
  53       4.9.    Compliance with Laws      54       4.10.    Inspection of
Premises      54       4.11.    Insurance      54       4.12.    Failure to Pay
Insurance      55       4.13.    Payment of Taxes      55       4.14.    Payment
of Leasehold Obligations      56       4.15.    Receivables      56       4.16.
   Inventory      59       4.17.    Maintenance of Equipment      59       4.18.
   Exculpation of Liability      59       4.19.    Environmental Matters      59
  

V.

  

REPRESENTATIONS AND WARRANTIES

     61       5.1.    Authority      61       5.2.    Formation and
Qualification      62       5.3.    Survival of Representations and Warranties
     62       5.4.    Tax Returns      62       5.5.    Financial Statements   
  63       5.6.    Entity Names      63       5.7.    O.S.H.A. and Environmental
Compliance      64       5.8.    Solvency; No Litigation, Violation,
Indebtedness or Default      64       5.9.    Patents, Trademarks, Copyrights
and Licenses      65       5.10.    Licenses and Permits      66       5.11.   
Default of Indebtedness      66       5.12.    No Default      66       5.13.   
No Burdensome Restrictions      66       5.14.    No Labor Disputes      66   
   5.15.    Margin Regulations      66       5.16.    Investment Company Act   
  67       5.17.    Disclosure      67       5.18.    Delivery of Indenture
Documentation      67       5.19.    Swaps      67       5.20.    [Reserved]   
  67       5.21.    Application of Certain Laws and Regulations      67      
5.22.    Business and Property of Borrowers      67       5.23.    Section 20
Subsidiaries      67       5.24.    Anti-Terrorism Laws      68       5.25.   
Trading with the Enemy      68       5.26.    Inactive Subsidiaries      68   

VI.

  

AFFIRMATIVE COVENANTS

     69       6.1.    Payment of Fees      69       6.2.    Conduct of Business
and Maintenance of Existence and Assets      69   

 

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6.3.

   Violations      69     

6.4.

   Government Receivables      69     

6.5.

   Financial Covenants      70     

6.6.

   Execution of Supplemental Instruments      70     

6.7.

   Payment of Indebtedness      70     

6.8.

   Standards of Financial Statements      71     

6.9.

   [Reserved.]      71     

6.10.

   Appraisal      71     

6.11.

   Maintenance of Deposit Account      71   

VII.

  NEGATIVE COVENANTS      71     

7.1.

   Merger, Consolidation, Acquisition and Sale of Assets      71     

7.2.

   Creation of Liens      72     

7.3.

   Guarantees      72     

7.4.

   Investments      72     

7.5.

   Loans      72     

7.6.

   Capital Expenditures      73     

7.7.

   Dividends      73     

7.8.

   Indebtedness      73     

7.9.

   Nature of Business      73     

7.10.

   Transactions with Affiliates      74     

7.11.

   Leases      74     

7.12.

   Subsidiaries      74     

7.13.

   Fiscal Year and Accounting Changes      74     

7.14.

   Pledge of Credit      74     

7.15.

   Amendment of Articles of Incorporation, By-Laws      74     

7.16.

   Compliance with ERISA      75     

7.17.

   Prepayment of Indebtedness      75     

7.18.

   Anti-Terrorism Laws      75     

7.19.

   Membership/Partnership Interests      76     

7.20.

   Trading with the Enemy Act      76     

7.21.

   Other Agreements      76     

7.22.

   Inactive Subsidiaries      76   

VIII.

  CONDITIONS PRECEDENT      76     

8.1.

   Conditions to Initial Advances      76     

8.2.

   Conditions to Each Advance      80   

IX.

  INFORMATION AS TO BORROWERS      80     

9.1.

   Disclosure of Material Matters      80     

9.2.

   Schedules      80     

9.3.

   Environmental Reports      81     

9.4.

   Litigation      81     

9.5.

   Material Occurrences      81     

9.6.

   Government Receivables      82     

9.7.

   Annual Financial Statements      82     

9.8.

   Quarterly Financial Statements      82     

9.9.

   Monthly Financial Statements      82   

 

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9.10.

   Other Reports      83     

9.11.

   Additional Information      83     

9.12.

   Projected Operating Budget      83     

9.13.

   Variances From Operating Budget      83     

9.14.

   Notice of Suits, Adverse Events      83     

9.15.

   ERISA Notices and Requests      84     

9.16.

   Additional Documents      84     

9.17.

   Thai Assignment      84   

X.

  EVENTS OF DEFAULT      84     

10.1.

   Nonpayment      84     

10.2.

   Breach of Representation      85     

10.3.

   Financial Information      85     

10.4.

   Judicial Actions      85     

10.5.

   Noncompliance      85     

10.6.

   Judgments      85     

10.7.

   Bankruptcy      85     

10.8.

   Inability to Pay      86     

10.9.

   Subsidiary Bankruptcy      86     

10.10.

   [Reserved];      86     

10.11.

   Lien Priority      86     

10.12.

   Indenture Default      86     

10.13.

   Cross Default      86     

10.14.

   Termination of Guaranty      86     

10.15.

   Change of Control      87     

10.16.

   Invalidity      87     

10.17.

   Licenses      87     

10.18.

   Seizures      87     

10.19.

   Operations      87     

10.20.

   Pension Plans      88   

XI.

  LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT      88     

11.1.

   Rights and Remedies      88     

11.2.

   Agent’s Discretion      89     

11.3.

   Setoff      89     

11.4.

   Rights and Remedies not Exclusive      90     

11.5.

   Allocation of Payments After Event of Default      90   

XII.

  WAIVERS AND JUDICIAL PROCEEDINGS      91     

12.1.

   Waiver of Notice      91     

12.2.

   Delay      91     

12.3.

   Jury Waiver      91   

XIII.

  EFFECTIVE DATE AND TERMINATION      91     

13.1.

   Term      91     

13.2.

   Termination      92   

XIV.

  REGARDING AGENT      92     

14.1.

   Appointment      92   

 

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14.2.

   Nature of Duties      93     

14.3.

   Lack of Reliance on Agent and Resignation      93     

14.4.

   Certain Rights of Agent      94     

14.5.

   Reliance      94     

14.6.

   Notice of Default      94     

14.7.

   Indemnification      94     

14.8.

   Agent in its Individual Capacity      94     

14.9.

   Delivery of Documents      95     

14.10.

   Borrowers’ Undertaking to Agent      95     

14.11.

   No Reliance on Agent’s Customer Identification Program      95     

14.12.

   Other Agreements      95   

XV.

  BORROWING AGENCY      96     

15.1.

   Borrowing Agency Provisions      96     

15.2.

   Waiver of Subrogation      96   

XVI.

  MISCELLANEOUS      96     

16.1.

   Governing Law      96     

16.2.

   Entire Understanding      97     

16.3.

   Successors and Assigns; Participations; New Lenders      99     

16.4.

   Application of Payments      101     

16.5.

   Indemnity      102     

16.6.

   Notice      102     

16.7.

   Survival      104     

16.8.

   Severability      104     

16.9.

   Expenses      104     

16.10.

   Injunctive Relief      104     

16.11.

   Consequential Damages      105     

16.12.

   Captions      105     

16.13.

   Counterparts; Facsimile Signatures      105     

16.14.

   Construction      105     

16.15.

   Confidentiality; Sharing Information      105     

16.16.

   Publicity      106     

16.17.

   Certifications From Banks and Participants; US PATRIOT Act      106   

 

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LIST OF EXHIBITS AND SCHEDULES

 

Exhibits    Exhibit 1.2    Borrowing Base Certificate Exhibit 2.1(a)   
Revolving Credit Note Exhibit 5.5(b)    Financial Projections Exhibit 8.1(k)   
Financial Condition Certificate Exhibit 16.3    Commitment Transfer Supplement
Schedules    Schedule 1.2    Permitted Encumbrances Schedule 4.5    Equipment
and Inventory Locations Schedule 4.15(h)    Deposit and Investment Accounts
Schedule 4.19    Real Property Schedule 5.1    Consents Schedule 5.2(a)   
States of Qualification and Good Standing Schedule 5.2(b)    Subsidiaries
Schedule 5.4    Federal Tax Identification Number Schedule 5.6    Prior Names
Schedule 5.8(b)    Litigation Schedule 5.8(d)    Plans Schedule 5.9   
Intellectual Property Schedule 5.10    Licenses and Permits Schedule 5.14   
Labor Disputes Schedule 5.22    Business and Property of Borrower Schedule 7.3
   Guarantees Schedule 7.8    Indebtedness

 

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REVOLVING CREDIT

AND

SECURITY AGREEMENT

Revolving Credit and Security Agreement dated as of September 16, 2011 among
HUTCHINSON TECHNOLOGY INCORPORATED, a corporation organized under the laws of
the State of Minnesota (“HTI”) (HTI and each other Person who becomes a Borrower
hereunder, each a “Borrower”, and collectively “Borrowers”), the financial
institutions which are now or which hereafter become a party hereto
(collectively, the “Lenders” and individually a “Lender”) and PNC BANK, NATIONAL
ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).

IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:

 

I. DEFINITIONS.

1.1. Accounting Terms. As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended
September 26, 2010.

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

“3.25% Convertible Subordinated Note Documents” shall mean the 3.25% Convertible
Subordinated Notes, the 3.25% Convertible Subordinated Note Indenture and all
other documents executed and delivered with respect to the 3.25% Convertible
Subordinated Notes and the 3.25% Convertible Subordinated Note Indenture.

“3.25% Convertible Subordinated Note Indenture” shall mean the Indenture, dated
as of January 25, 2006, among HTI, as issuer and LaSalle Bank National
Association, as Trustee, and Instrument of Resignation, Appointment and
Acceptance dated as of October 29, 2008 by and among HTI, LaSalle Bank National
Association, as prior trustee, and Wells Fargo Bank, National Association, as
successor trustee, each as amended, restated, supplemented or otherwise modified
in compliance with the terms of this Agreement.

“3.25% Convertible Subordinated Notes” shall mean HTI’s 3.25% Convertible
Subordinated Notes due January 15, 2026, issued under the 3.25% Convertible
Subordinated Note Indenture in an aggregate original principal amount of
$225,000,000, as amended, restated, supplemented or otherwise modified in
compliance with the terms of this Agreement.

“8.50% Convertible Senior Note Documents” shall mean the 8.50% Convertible
Senior Notes, the 8.50% Convertible Senior Note Indenture and all other
documents executed and delivered with respect to the 8.50% Convertible Senior
Notes and the 8.50% Convertible Senior Note Indenture.

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“8.50% Convertible Senior Note Indenture” shall mean the Indenture, dated as of
February 11, 2011, among HTI, as issuer and Wells Fargo Bank, National
Association, as Trustee, as amended by the First Supplemental Indenture, dated
as of June 17, 2011, among HTI, as issuer and Wells Fargo Bank, National
Association, as Trustee and as further amended, restated, supplemented or
otherwise modified in compliance with the terms of this Agreement.

“8.50% Convertible Senior Notes” shall mean HTI’s 8.50% Convertible Senior Notes
due January 15, 2026, issued under the 8.50% Convertible Senior Note Indenture
in an aggregate original principal amount of $85,170,000, as amended, restated,
supplemented or otherwise modified in compliance with the terms of this
Agreement.

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

“Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(iii)
hereof.

“Advances” shall mean and include the Revolving Advances and Letters of Credit.

“Affiliate” of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, managing member, general
partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (x) to
vote 10% or more of the Equity Interests having ordinary voting power for the
election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise; provided that, solely for the purpose of Section 5.24(b)
hereof, control of a Person shall mean the power, direct or indirect, (x) to
vote 15% or more of the Equity Interests having ordinary voting power for the
election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise.

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

“Agent Advances” shall have the meaning set forth in Section 16.2(b) hereof.

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

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open
Rate in effect on such day plus 1/2 of 1% and (iii) the Daily LIBOR Rate plus
1%. For purposes of this definition, “Daily LIBOR Rate” shall mean, for any day,
the rate per annum determined by Agent by dividing (x) the Published Rate by
(y) a number equal to 1.00 minus the Reserve Percentage. For the

 

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

“Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or
money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the
Applicable Laws comprising or implementing the Bank Secrecy Act, and the
Applicable Laws administered by the United States Treasury Department’s Office
of Foreign Asset Control (as any of the foregoing Applicable Laws may from time
to time be amended, renewed, extended, or replaced).

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

“Application Date” shall have the meaning set forth in Section 2.5(b).

“Authority” shall have the meaning set forth in Section 4.19(d).

“Availability Blockage Period” shall mean the period commencing on the Closing
Date and continuing until the earlier to occur of (i) the end of the Term or
(ii) a Compliance Event.

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

“benefited Lender” shall have the meaning set forth in Section 2.19(d).

“Blocked Accounts” shall have the meaning set forth in Section 4.15(h).

“Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).

“Blocked Person” shall have the meaning set forth in Section 5.24(b) hereof.

“Board of Directors” shall mean, with respect to any Person, the board of
directors or comparable governing body of such Person.

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

“Borrowers on a Consolidated Basis” shall mean the consolidation in accordance
with GAAP of the accounts or other items of the Borrowers and their respective
Subsidiaries.

 

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“Borrowers’ Account” shall have the meaning set forth in Section 2.7.

“Borrowing Agent” shall mean HTI.

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

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

“Capital Expenditures” shall mean expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements, substitutions
or additions thereto which have a useful life of more than one year, including
the total principal portion of Capitalized Lease Obligations, which, in
accordance with GAAP, would be classified as capital expenditures (but excluding
expenditures made in connection with the repair, replacement or restoration of
assets to the extent funded from insurance proceeds paid on account of the loss
of or damage to, or from awards or compensation arising from the taking by
eminent domain or condemnation of, the assets being repaired, replaced or
restored).

“Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.

“Cash Collateralized Letters of Credit” shall mean outstanding Letters of Credit
the obligations in respect of which have been cash collateralized in accordance
with, or in a manner consistent with, Section 3.2 hereof.

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

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

 

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“Change of Control” shall mean (a) any “person” or “group” of persons (within
the meaning of Section 13(d) and 14(d) of the Exchange Act) shall obtain,
directly or indirectly, “beneficial ownership” (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) of shares representing more than 35% of the
aggregate voting power of the total issued and outstanding shares of Equity
Interests of HTI having the right to vote for the election of directors of HTI
under ordinary circumstances, or (b) a majority of the seats on the Board of
Directors of HTI shall be occupied by persons other than (i) directors on the
Closing Date, (ii) directors whose election or nomination was approved by
individuals referred to in clause (i) constituting at the time of such election
or nomination at least a majority of the Board of Directors or (iii) directors
whose election or nomination was approved by individuals referred to in clauses
(i) and/or (ii) above constituting at the time of such election or nomination at
least a majority of the Board of Directors.

“CIP Regulations” shall have the meaning set forth in Section 14.11.

“Closing Date” shall mean September 16, 2011 or such other date as may be agreed
to by the parties hereto.

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

“Collateral” shall mean and include (except to the extent the same constitute
Excluded Assets):

(a) all Receivables;

(b) all Equipment;

(c) all General Intangibles;

(d) all Inventory;

(e) all Investment Property;

(f) all Subsidiary Stock;

(g) all of each Borrower’s right, title and interest in and to, whether now
owned or hereafter acquired and wherever located, (i) its respective goods and
other personal property including, but not limited to, all merchandise returned
or rejected by Customers, relating to or securing any of the Receivables;
(ii) all of each Borrower’s rights as a consignor, a consignee, an unpaid
vendor, mechanic, artisan, or other lienor, including stoppage in transit,
setoff, detinue, replevin, reclamation and repurchase; (iii) all additional
amounts due to any Borrower from any Customer relating to the Receivables;
(iv) other personal property, including warranty claims, relating to any goods
securing the Secured Obligations; (v) all of each

 

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Borrower’s contract rights, rights of payment which have been earned under a
contract right, instruments (including promissory notes), documents, chattel
paper (including electronic chattel paper), warehouse receipts, deposit
accounts, letters of credit and money; (vi) all commercial tort claims (whether
now existing or hereafter arising); (vii) if and when obtained by any Borrower,
all real and personal property of third parties in which such Borrower has been
granted a lien or security interest as security for the payment or enforcement
of Receivables; (viii) all letter of credit rights (whether or not the
respective letter of credit is evidenced by a writing); (ix) all supporting
obligations; and (x) any other goods or personal property now owned or hereafter
acquired in which any Borrower has expressly granted a security interest or may
in the future grant a security interest to Agent hereunder, or in any amendment
or supplement hereto or thereto, or under any other agreement between Agent and
any Borrower;

(h) all of each Borrower’s ledger sheets, ledger cards, files, correspondence,
records, books of account, business papers, computers, computer software (owned
by any Borrower or in which it has an interest), computer programs, tapes, disks
and documents relating to (a), (b), (c), (d), (e), (f) or (g) of this Paragraph;
and

(i) all proceeds and products of (a), (b), (c), (d), (e), (f), (g) and (h) in
whatever form, including, but not limited to: cash, deposit accounts (whether or
not comprised solely of proceeds), certificates of deposit, insurance proceeds
(including hazard, flood and credit insurance), negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements,
documents, eminent domain proceeds, condemnation proceeds and tort claim
proceeds.

“Commitment Percentage” of any Lender shall mean the percentage set forth below
such Lender’s name on the signature page hereof as same may be adjusted upon any
assignment by a Lender pursuant to Section 16.3(c) or (d) hereof.

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

“Compliance Certificate” shall mean a compliance certificate to be signed by the
Chief Financial Officer or Treasurer of Borrowing Agent, on behalf of Borrowing
Agent, which shall state that, based on an examination sufficient to permit such
officer to make an informed statement, no Default or Event of Default exists, or
if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such default and, such certificate shall have appended
thereto calculations which set forth Borrowers’ compliance with the requirements
or restrictions imposed by Sections 6.5, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8 and
7.11.

“Compliance Event” shall mean the receipt by Agent of a Compliance Certificate
certifying that no Default or Event of Default exists as of March 25,
2012, June 24, 2012, September 30, 2012 or December 30, 2012; provided that
Agent and Lenders reserve their right to exercise all remedies under this
Agreement and the Other Documents following the occurrence and during the
continuation of an Event of Default if a Compliance Event does not occur for any
of the foregoing periods.

 

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“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies,
domestic or foreign, and other third parties under any material agreements or
undertakings to which any Borrower is a party or by which any Borrower is bound,
necessary to carry on any Borrower’s business or necessary (including to avoid a
conflict or breach under any agreement, instrument, other document, license,
permit or other authorization) for the execution, delivery or performance of
this Agreement, the Other Documents, including any Consents required under all
applicable federal, state or other Applicable Law (but excluding filings
necessary to perfect the Liens created by this Agreement and the Other
Documents).

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

“Contingent Obligations” shall mean (i) contingent indemnification obligations
under this Agreement and the Other Documents and (ii) obligations under Sections
3.7 and 3.9 hereof, in each case to the extent no claim giving rise thereto has
been asserted.

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

“Credit Insurance” shall have the meaning provided in the definition of “Insured
Receivables”.

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

“Customs” shall have the meaning set forth in Section 2.10(b) hereof.

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

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

“Defaulting Lender” shall have the meaning set forth in Section 2.21(a) hereof.

“Depository Accounts” shall have the meaning set forth in Section 4.15(h)
hereof.

“Designated Lender” shall have the meaning set forth in Section 16.2(b) hereof.

 

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“Documents” shall have the meaning set forth in Section 8.1(c) hereof.

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

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

“Drawing Date” shall have the meaning set forth in Section 2.11(b) hereof.

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

“Earnings Before Interest and Taxes” shall mean for any period the sum of
(i) net income (or loss) of Borrowers on a Consolidated Basis for such period
(excluding gains and losses that arise from changes in currency exchange rates
and extraordinary gains and losses), plus (ii) all interest expense of Borrowers
on a Consolidated Basis for such period, plus (iii) all charges against income
of Borrowers on a Consolidated Basis for such period for federal, state and
local taxes, plus (iv) all non-cash charges, including, without limitation,
stock-based compensation expense and asset impairment charges, of Borrowers on a
Consolidated Basis for such period.

“EBITDA” shall mean for any period the sum of (i) Earnings Before Interest and
Taxes for such period plus (ii) depreciation expenses of Borrowers on a
Consolidated Basis for such period, plus (iii) amortization expenses of
Borrowers on a Consolidated Basis for such period.

“Eligible Inventory” shall mean and include Inventory, excluding work in
process, of each Borrower which is not, in Agent’s opinion arrived at in the
exercise of its Permitted Discretion, obsolete, slow moving or unmerchantable
and which is subject to a perfected, first priority security interest in favor
of Agent and no other Lien (other than a Permitted Encumbrance). In addition,
Inventory shall not be Eligible Inventory if it (i) does not conform to all
standards imposed by any Governmental Body which has regulatory authority over
such goods or the use or sale thereof, (ii) is in transit, (iii) is located
outside the continental United States or at a location that is not otherwise in
compliance with this Agreement, (iv) constitutes Consigned Inventory, (v) is the
subject of an Intellectual Property Claim; (vi) is subject to a License
Agreement or other agreement that limits, conditions or restricts any Borrower’s
or Agent’s right to sell or otherwise dispose of such Inventory, unless Agent is
a party to a Licensor/Agent Agreement with the Licensor under such License
Agreement; (vii) or is situated at a location not owned by a Borrower unless the
owner or occupier of such location has executed in favor of Agent a Lien Waiver
Agreement; or (viii) is otherwise determined by Agent in the exercise of its
Permitted Discretion to be ineligible Inventory.

“Eligible Receivables” shall mean and include with respect to each Borrower,
each Receivable of such Borrower arising in the Ordinary Course of Business
which is subject to Agent’s first priority perfected security interest and no
other Lien (other than Permitted Encumbrances), and is evidenced by an invoice
or other documentary evidence satisfactory to Agent in the exercise of its
Permitted Discretion. In addition, no Receivable shall be an Eligible Receivable
(including, without limitation, Thai Receivables) if:

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

 

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(b) it is due or unpaid more than sixty (60) days after the original due date or
more than ninety (90) days after the original invoice date;

(c) fifty percent (50%) or more of the Receivables from such Customer are due or
unpaid more than sixty (60) days after the original due date;

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

(e) the Customer shall (i) apply for, suffer, or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or call a meeting of its
creditors, (ii) admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;

(f) except in the case of Insured Receivables, the sale is to a Customer outside
the continental United States of America, unless the sale is on letter of
credit, guaranty or acceptance terms, in each case acceptable to Agent in its
Permitted Discretion;

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

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

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

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

(k) the Receivables of the Customer exceed a credit limit determined by Agent,
in its Permitted Discretion, to the extent such Receivable exceeds such limit;

(l) the Receivable is subject to any offset, deduction, defense, dispute, or
counterclaim or the Receivable is contingent in any respect or for any reason
(provided, that, the

 

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portion of the Receivable not subject to offset, deduction, defense, dispute,
counterclaim or contingency will be considered an Eligible Receivable if it
meets all other requirements therefor) or the Customer is also a creditor or
supplier of a Borrower (provided, that, the portion of the Receivables of such
Customer in excess of the trade (or other) debt owed by such Borrower to such
Customer will be considered Eligible Receivables if such Receivables meet all
other requirements therefor);

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

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

(o) such Receivable is not payable to a Borrower (including, in the case of a
Thai Receivable, pursuant to the Thai Assignment); or

(p) if such Receivable is a Thai Receivable, such Receivable does not meet the
definition of Eligible Thai Receivables;

(q) if such Receivable is a Thai Receivable, the contract governing such
Receivable prohibits its assignment pursuant to the Thai Assignment, unless the
consent of such Customer to such assignment has been obtained;

(r) if such Receivable is a Thai Receivable, the Receivables of the Customer
exceed the approved limit for such Customer under the Credit Insurance, to the
extent such Receivable exceeds such limit; or

(s) such Receivable is not otherwise satisfactory to Agent as determined by
Agent in the exercise of its Permitted Discretion.

“Eligible Thai Receivables” shall mean Eligible Receivables consisting of Thai
Receivables that are payable in Dollars or Thai Baht, which have been assigned
to HTI pursuant to the Thai Assignment and which are Insured Receivables. For
the purpose of determining the Formula Amount, on any date of determination the
value of Eligible Thai Receivables payable in Thai Baht shall be converted to
the Equivalent Amount of Dollars on the last day of the immediately prior month.

“e-mail” shall have the meaning set forth in Section 16.6 hereof.

“Environmental Complaint” shall have the meaning set forth in Section 4.19(d)
hereof.

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

 

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“Equipment” shall mean and include as to each Borrower all of such Borrower’s
goods (other than Inventory) whether now owned or hereafter acquired and
wherever located including all equipment, machinery, apparatus, motor vehicles,
fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.

“Equivalent Amount” shall mean, on any date of determination, with respect to
valuations denominated in Thai Baht, the amount of Dollars which would result
from Agent converting Thai Baht into Dollars at approximately 12:00 noon (New
York time) on such day in accordance with Agent’s customary practice for
commercial loans it administers.

“Equity Interests” of any Person shall mean any and all shares, rights to
purchase, options, warrants, general, limited or limited liability partnership
interests, member interests, participation or other equivalents of or interest
in (regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities or
any other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

“Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto the interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined by Agent by dividing
(i) the rate which appears on the Bloomberg Page BBAM1 (or on such other
substitute Bloomberg page that displays rates at which US dollar deposits are
offered by leading banks in the London interbank deposit market), or the rate
which is quoted by another source selected by Agent which has been approved by
the British Bankers’ Association as an authorized information vendor for the
purpose of displaying rates at which US dollar deposits are offered by leading
banks in the London interbank deposit market (an “Alternative Source”), at
approximately 11:00 a.m., London time two (2) Business Days prior to the first
day of such Interest Period (or if there shall at any time, for any reason, no
longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternative
Source, a comparable replacement rate determined by the Agent at such time
(which determination shall be conclusive absent manifest error)) for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage.

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

“Eurodollar Rate Loan” shall mean an Advance at any time that bears interest
based on the Eurodollar Rate.

 

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

“Exchange Act” shall have the mean the Securities Exchange Act of 1934, as
amended.

“Excluded Assets” shall mean, with respect to a Borrower or Guarantor,
(a) intent-to-use trademarks until such time as such Borrower or Guarantor
begins to use such trademarks in the applicable jurisdiction, (b) any property
of such Borrower or Guarantor that is subject to a Lien of the type referred to
in clause (h) or (j) of the definition of “Permitted Encumbrances”, but only if
any agreement granting or relating to such Lien prohibits the granting of a Lien
in favor of Agent on such property, (c) any item of General Intangibles of such
Borrower or Guarantor, but only to the extent that such item of General
Intangibles (or any agreement evidencing such item of General Intangibles)
contains a term or is subject to any law that restricts, prohibits or requires a
consent (that has not been obtained) of another Person to the creation,
attachment or perfection of a Lien thereon, which restriction, prohibition
and/or requirement of consent is not rendered ineffective by Applicable Law,
(d) the Equity Interests in any Foreign Subsidiary of a Borrower or a Guarantor
other than HTI Thailand, and that portion of the Equity Interests in HTI
Thailand that does not constitute Subsidiary Stock, and (e) any item of
Intellectual Property of such Borrower or Guarantor that arises under or is
governed by the laws of a country or political subdivision thereof other than
the United States or a political subdivision thereof (“Foreign Intellectual
Property”), if the creation, attachment or perfection of a Lien thereon would
violate Applicable Law, require the Consent of any Governmental Body of such
country or a political subdivision thereof, or impair in any material respect
the value of such item of Foreign Intellectual Property.

“Excluded Taxes” means, with respect to the Agent, any Lender or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower hereunder, (a) Taxes imposed on or measured by its overall net income
(however denominated), and franchise taxes imposed on it (in lieu of net income
Taxes), by the jurisdiction (or any political subdivision thereof) under the
Laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits Taxes imposed by the United States or any
similar tax imposed by any other jurisdiction in which the Borrower is located,
(c) any backup withholding Tax that is required by the Code to be withheld from
amounts payable to a Lender that has failed to comply with clause (A) of
Section 3.10(e)(ii), and (d) in the case of a Foreign Lender, any United States
withholding Tax that (i) is required to be imposed on amounts payable to such
Foreign Lender pursuant to the Laws in force at the time such Foreign Lender
becomes a party hereto (or designates a new lending office), (ii) is
attributable to such Foreign Lender’s failure or inability (other than as a
result of a Change in Law) to comply with clause (B) of Section 3.10(e)(ii),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 3.10(a)(ii) or (c), or (iii) is attributable to such
Foreign Lender’s failure to satisfy the applicable requirements as in effect
after December 31, 2012 of FATCA to establish that such payment is exempt from
withholding under FATCA.

“Executive Officer” means the any president, vice president, treasurer or
controller of Borrowing Agent.

 

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“Executive Order No. 13224” shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.

“FATCA” means Section 1471 through 1474 of the Code, including any regulations
promulgated thereunder or official interpretations thereof.

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

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

“Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal
period, the ratio of (a) EBITDA minus Unfinanced Capital Expenditures made
during such period to (b) all Senior Debt Payments plus cash taxes paid by a
Borrower or a Subsidiary of a Borrower during such period plus cash dividends
and distributions paid by a Borrower or a Subsidiary of a Borrower (other than
to a Borrower or a Subsidiary of a Borrower) during such period.

“Foreign Intellectual Property” shall have the meaning provided in the
definition of “Excluded Assets”.

“Foreign Lender” means any Lender that is organized under the Laws of a
jurisdiction other than that in which the Borrower is resident for tax purposes.
For purposes of this definition, the United States, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

 

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“Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person
that is not organized or incorporated in the United States or any State or
territory thereof.

“Formula Amount” shall have the meaning set forth in Section 2.1(a).

“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect, except as this Agreement refers to GAAP as in effect on a
specific date, from time to time.

“General Intangibles” shall mean and include as to each Borrower all of such
Borrower’s general intangibles, whether now owned or hereafter acquired,
including all payment intangibles, all choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, trademark applications, service marks, trade secrets,
goodwill, copyrights, design rights, software, computer information, source
codes, codes, records and updates, registrations, licenses, franchises, customer
lists, tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to such
Borrower to secure payment of any of the Receivables by a Customer (other than
to the extent covered by Receivables) all rights of indemnification and all
other intangible property of every kind and nature (other than Receivables).

“Governmental Acts” shall have the meaning set forth in Section 2.16.

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

“Guarantor” shall mean any Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations and “Guarantors” means
collectively all such Persons.

“Guarantor Security Agreement” shall mean any Security Agreement executed by any
Guarantor in favor of Agent securing the Guaranty of such Guarantor, in form and
substance reasonably satisfactory to the Agent.

“Guaranty” shall mean any guaranty of the obligations of Borrowers executed by a
Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders, in form and substance reasonably satisfactory to the Agent.

“Hazardous Discharge” shall have the meaning set forth in Section 4.19(d)
hereof.

“Hazardous Substance” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous

 

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or Toxic Substances or related materials as defined in CERCLA, the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.),
RCRA, Articles 15 and 27 of the New York State Environmental Conservation Law or
any other applicable Environmental Law and in the regulations adopted pursuant
thereto.

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

“Hedge Liabilities” shall have the meaning provided in the definition of
“Lender-Provided Interest Rate Hedge”.

“HTI Thailand” shall mean Hutchinson Technology Operations (Thailand) Co. Ltd.,
a company organized under the laws of Thailand.

“Inactive Subsidiary” shall mean each of Hutchinson Technology Asia, Inc. and
Hutchinson Technology Business Services Incorporated.

“Indebtedness” of any Person shall mean, without duplication: (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by notes, bonds, debentures or similar instruments, (c) all
obligations of such Person for the deferred purchase price of property or
services (other than trade payables and accrued expense), (d) the maximum amount
available to be drawn under all letters of credit, bankers’ acceptances and
similar obligations issued for the account of such Person and all unpaid
drawings in respect of such letters of credit, bankers’ acceptances and similar
obligations, (e) all Capitalized Lease Obligations of such Person, and (f) all
obligations referred to in clauses (a) through (e) above secured by any Lien on
any property of such Person, even though such Person has not assumed or become
liable for the payment of such obligations. For purposes of this definition, the
amount of any Indebtedness described in clause (f) above shall be the lower of
the amount of the obligation and the fair value of the property securing the
obligation.

“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

“Indenture Documentation” shall mean, collectively, the 3.25% Convertible
Subordinated Note Documents and the 8.50% Convertible Senior Note Documents.

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

“Insured Receivables” shall mean Receivables, including Thai Receivables, that
are supported by credit insurance acceptable to Agent in the exercise of its
Permitted Discretion which has been assigned to Agent for the benefit of itself
and the Lenders, including a loss payable endorsement (“Credit Insurance”).

“Intellectual Property” shall mean property constituting under any Applicable
Law a patent, patent application, copyright, trademark, service mark, trade
name, mask work, trade secret or license or other right to use any of the
foregoing.

 

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“Intellectual Property Claim” shall mean the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise) that
any Borrower’s ownership, use, marketing, sale or distribution of any Inventory,
Equipment, Intellectual Property or other property or asset is violative of any
ownership of or right to use any Intellectual Property of such Person.

“Interest Period” shall mean the period provided for any Eurodollar Rate Loan
pursuant to Section 2.2(b).

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

“Inventory” shall mean and include as to each Borrower all of such Borrower’s
now owned or hereafter acquired goods, merchandise and other personal property,
wherever located, to be furnished under any consignment arrangement, contract of
service or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in such Borrower’s business or used in selling or
furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.

“Inventory Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(iii) hereof.

“Investment Property” shall mean and include as to each Borrower, all of such
Borrower’s now owned or hereafter acquired securities (whether certificated or
uncertificated), securities entitlements, securities accounts, commodities
contracts and commodities accounts.

“Investments” shall have the meaning set forth in Section 7.4.

“ISP98 Rules” shall have the meaning set forth in Section 2.9(b).

“Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a
draft pursuant to the terms hereof.

“Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.

“Lender Default” shall have the meaning set forth in Section 2.21(a).

“Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which the Agent confirms meets the
following requirements: such Interest Rate Hedge (i) is documented in a standard
International Swap Dealer Association Agreement, (ii) provides for the method of
calculating the reimbursable amount of the provider’s credit exposure in a
reasonable and customary manner, and (iii) is

 

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entered into for hedging (rather than speculative) purposes. The liabilities of
any Borrower to the provider of any Lender-Provided Interest Rate Hedge (the
“Hedge Liabilities”) shall be “Secured Obligations” hereunder, guaranteed
obligations under the Guaranty and secured obligations under the Guarantor
Security Agreement and otherwise treated as Secured Obligations for purposes of
each of the Other Documents. The Liens securing the Hedge Liabilities shall be
pari passu with the Liens securing all other Secured Obligations under this
Agreement and the Other Documents.

“Letter of Credit Application” shall have the meaning set forth in
Section 2.09(a).

“Letter of Credit Borrowing” shall have the meaning set forth in
Section 2.11(d).

“Letter of Credit Fees” shall have the meaning set forth in Section 3.2.

“Letter of Credit Sublimit” shall mean $5,000,000.

“Letters of Credit” shall have the meaning set forth in Section 2.8.

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

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

“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,
in form and content reasonably satisfactory to Agent, by which Agent is given
the unqualified right, vis-a-vis such Licensor, to enforce Agent’s Liens with
respect to and to dispose of any Borrower’s Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of such Borrower’s
default under any License Agreement with such Licensor.

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, or any lease having substantially the same economic effect as any of
the foregoing.

“Lien Waiver Agreement” shall mean an agreement which is executed in favor of
Agent by a Person who owns or occupies premises leased by a Borrower at which
any Collateral may be located from time to time and by which such Person shall
waive, or subordinate to the Lien of Agent under this Agreement and any Other
Documents, any Lien that such Person may ever have with respect to any of the
Collateral and shall authorize Agent from time to time to enter upon the
premises to inspect or remove the Collateral from such premises or to use such
premises to store or dispose of such Inventory.

 

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“Liquidity” shall mean the sum of Borrowers’ consolidated unrestricted cash,
cash equivalents, short term investments and Undrawn Availability.

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

“Maximum Face Amount” shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.

“Maximum Revolving Advance Amount” shall mean $35,000,000.

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

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

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections
3(37) and 4001(a)(3) of ERISA.

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

“NOLV Inventory Advance Rate” has the meaning set forth in
Section 2.1(a)(g)(iii) hereof.

“Note” shall mean the Revolving Credit Note.

“Obligations” shall mean any and all loans, advances, debts, liabilities,
obligations, covenants and duties owing by any Borrower to Lenders or Agent of
any kind or nature, present or future (including any interest or other amounts
accruing thereon after maturity, or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to any Borrower, whether or not a claim for post-filing or
post-petition interest or other amounts is allowed in such proceeding), under
this Agreement or any of the Other Documents whether or not evidenced by any
note, guaranty or other instrument, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening of a letter of
credit, loan, or in any other manner, whether direct or indirect (including
those acquired by assignment or participation), absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising, contractual or
tortious, liquidated or unliquidated,

 

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and including all reasonable costs and expenses of Agent and any Lender incurred
in the documentation, negotiation, modification, enforcement, collection or
otherwise in connection with any of the foregoing, including but not limited to
reasonable attorneys’ fees and expenses.

“Ordinary Course of Business” shall mean with respect to any Borrower, the
ordinary course of such Borrower’s (or, for the purpose of the definition of
“Eligible Receivables”, HTI Thailand’s) business consistent with past practice.

“Other Documents” shall mean the Note, any Guaranty, any Guarantor Security
Agreement, and any and all other agreements, instruments and documents,
including guaranties, pledges, powers of attorney, consents, or other similar
agreements and all other writings heretofore, now or hereafter executed by any
Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of
the transactions contemplated by this Agreement (other than the Questionnaire
and any Lender Provided Interest Rate Hedges).

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

“Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(b).

“Parent” of any Person shall mean a corporation or other entity owning, directly
or indirectly at least 50% of the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the directors of the Person,
or other Persons performing similar functions for any such Person.

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

“Participation Advance” shall have the meaning set forth in Section 2.11(d).

“Participation Commitment” shall mean each Lender’s obligation to buy a
participation of the Letters of Credit issued hereunder.

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

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

“Pension Benefit Plan” shall mean at any time any employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained by any member of the
Controlled Group for employees of any member of the Controlled Group; or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the Controlled Group for employees of
any entity which was at such time a member of the Controlled Group.

 

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“Permitted Discretion” means a determination made by the Agent in good faith in
the exercise of its reasonable (from the perspective of a secured lender)
business judgment.

“Permitted Encumbrances” shall mean:

(a) Liens in favor of Agent for the benefit of Agent, Lenders and any other
holders of Secured Obligations;

(b) Liens for Taxes, assessments or other governmental charges not delinquent or
being Properly Contested;

(c) Liens disclosed in the financial statements referred to in Section 5.5, the
existence of which Agent has consented to in writing;

(d) deposits or pledges to secure obligations under worker’s compensation,
social security or similar laws, or under unemployment insurance;

(e) deposits or pledges to secure bids, tenders, contracts (other than contracts
for the payment of money), leases, statutory obligations, surety and appeal
bonds and other obligations of like nature arising in the Ordinary Course of
Business;

(f) Liens arising by virtue of the rendition, entry or issuance against any
Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary,
of any judgment, writ, order, or decree for so long as each such Lien is at all
times junior in priority to any Liens in favor of Agent and such judgment, writ,
order or decree does not constitute an Event of Default under Section 10.6;

(g) mechanics’, workers’, materialmen’s, warehousemen’s, statutory landlord’s or
other like Liens arising in the Ordinary Course of Business with respect to
obligations which are not due or which are being Properly Contested;

(h) Liens (including without limitation the interests of lessors under
capitalized leases) placed upon fixed assets hereafter acquired (and on any
additions, accessions or improvements thereto and proceeds of such fixed assets,
additions, accessions and improvements) to secure a portion of the acquisition
cost thereof, provided that (x) any such Liens shall not encumber any other
property of any Borrower and (y) the aggregate amount of Indebtedness secured by
such Liens incurred as a result of such acquisition during any fiscal year shall
not exceed the amount provided for in Section 7.6;

(i) Liens disclosed on Schedule 1.2; provided that such Liens shall secure only
those obligations which they secure on the Closing Date (and any extension or
refinancing thereof which does not increase the principal amount of such
obligations as of the date of such extension or refinancing) and shall not
subsequently apply to any other property or assets of any Borrower;

 

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(j) with respect to Real Property, easements, servitudes, restrictive covenants,
rights of way, and zoning restrictions that do not materially interfere with or
impair the use or operation thereof;

(k) licenses or sublicenses of Intellectual Property in the Ordinary Course of
Business or in settlement of any litigation or claims in respect of Intellectual
Property and leases or subleases of Real Property or Equipment in the Ordinary
Course of Business;

(l) rights of setoff or bankers’ liens upon deposits of cash in favor of banks
or other depository institutions to the extent incurred in connection with the
maintenance of such deposits in the Ordinary Course of Business;

(m) Liens in favor of custom and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods;

(n) Liens on Real Property (and on any additions, accessions or improvements
thereto and proceeds of such Real Property, additions, accessions and
improvements) securing Indebtedness or other obligations of any of the Borrowers
or their Subsidiaries; and

(o) Liens on Collateral securing Indebtedness or other obligations of any of the
Borrowers permitted under clause (vi) of Section 7.8, provided that such Liens
are subordinated to the Liens in favor of Agent granted under this Agreement or
any Other Documents pursuant to a subordination agreement in form and substance
reasonably satisfactory to the Agent.

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

“Plan” shall mean any employee benefit plan within the meaning of Section 3(3)
of ERISA (including a Pension Benefit Plan), maintained for employees of any
Borrower or any member of the Controlled Group or any such Plan to which any
Borrower or any member of the Controlled Group is required to contribute on
behalf of any of its employees.

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

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

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

“Properly Contested” shall mean, in the case of any Indebtedness or Lien, as
applicable, of any Person (including any Taxes) that is not paid as and when due
or payable by reason of such Person’s bona fide dispute concerning its liability
to pay same or concerning the amount thereof, (i) such Indebtedness or Lien, as
applicable, is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (ii) such Person has

 

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established appropriate reserves as shall be required in conformity with GAAP;
(iii) the non-payment of such Indebtedness will not have a Material Adverse
Effect and will not result in the forfeiture of any assets of such Person;
(iv) no Lien is imposed upon any of such Person’s assets with respect to such
Indebtedness unless such Lien is at all times junior and subordinate in priority
to the Liens in favor of the Agent (except only with respect to property taxes
that have priority as a matter of applicable state law) and enforcement of such
Lien is stayed during the period prior to the final resolution or disposition of
such dispute; (v) if such Indebtedness or Lien, as applicable, results from, or
is determined by the entry, rendition or issuance against a Person or any of its
assets of a judgment, writ, order or decree, enforcement of such judgment, writ,
order or decree is stayed pending a timely appeal or other judicial review; and
(vi) if such contest is abandoned, settled or determined adversely (in whole or
in part) to such Person, such Person forthwith pays such Indebtedness and all
penalties, interest and other amounts due in connection therewith.

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

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

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

“Questionnaire” shall mean the Documentation Information Questionnaire and the
responses thereto provided by Borrowing Agent and delivered to Agent.

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

“Real Property” shall mean all of each Borrower’s right, title and interest in
and to the owned and leased premises identified on Schedule 4.19 hereto or which
is hereafter owned or leased by any Borrower.

“Receivables” shall mean and include, as to each Borrower, all of such
Borrower’s accounts, contract rights, instruments (including those evidencing
indebtedness owed to such Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
drafts and acceptances, credit card receivables and all other forms of
obligations owing to such Borrower arising out of or in connection with the sale
or lease of Inventory or the rendition of services, and all supporting
obligations, guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder. With respect HTI, “Receivables” shall
include Thai Receivables which have been assigned to HTI pursuant to the Thai
Assignment.

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

“Register” shall have the meaning set forth in Section 16.3(e).

 

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“Registered IP” shall mean patents, patent applications, registered trademarks,
trademark applications, registered service marks, service mark applications,
registered copyrights and copyright applications.

“Regulations” shall have the meaning set forth in Section 3.11(a).

“Reimbursement Date” shall have the meaning set forth in Section 2.11(b).

“Reimbursement Obligation” shall have the meaning set forth in
Section 2.11(b)hereof.

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

“Reportable Event” shall mean a reportable event described in Section 4043(c) of
ERISA or the regulations promulgated thereunder, unless the 30-day notice
requirement with respect thereto has been waived by the PBGC or would have been
waived under regulations issued under Section 4043 of ERISA by the PBGC in
effect on the date of this Agreement.

“Required Lenders” shall mean Lenders holding at least sixty six and two thirds
percent (66-2/3%) of the Advances and, if no Advances are outstanding, shall
mean Lenders holding sixty six and two thirds percent (66-2/3%) of the
Commitment Percentages; provided, however, if there are fewer than three
(3) Lenders, Required Lenders shall mean all Lenders.

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

“Revolving Advances” shall mean Advances made other than Letters of Credit.

“Revolving Credit Note” shall have the meaning set forth in Section 2.1(a)
hereof.

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Alternate Base Rate plus 2.00% with respect to Domestic Rate Loans
and (b) the sum of the Eurodollar Rate plus 4.50% with respect to Eurodollar
Rate Loans; provided that upon the occurrence of a Compliance Event, “Revolving
Interest Rate” shall mean an interest rate per annum equal to (a) the sum of the
Alternate Base Rate plus 1.00% with respect to Domestic Rate Loans and (b) the
sum of the Eurodollar Rate plus 3.50% with respect to Eurodollar Rate Loans.
Notwithstanding the foregoing, the Revolving Interest Rate for Eurodollar Rate
Loans outstanding on the date of a Compliance Event shall not be adjusted from
the Revolving Interest Rate then applicable to such Eurodollar Rate Loan until
the first day after the end of the Interest Period then in effect for such
Eurodollar Loans.

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

“Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company
controlling PNC, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.

 

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“Secured Obligations” shall mean all Obligations, all Hedge Liabilities and
obligations of any Borrower to Lenders or Agent arising by reason of any
equipment lease or guarantee, or under any interest or currency swap, future,
option or other similar agreement or out of overdrafts or deposit or other
accounts or electronic funds transfers (whether through automated clearing
houses or otherwise) or out of the Agent’s or any Lenders non-receipt of or
inability to collect funds or otherwise not being made whole in connection with
depository transfer check or other similar arrangements.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Senior Debt Payments” shall mean and include all cash actually expended by any
Borrower to make (a) interest payments on any Advances hereunder, plus
(b) payments of all fees set forth herein and with respect to any Advances
(other than the fee payable under Section 3.3(a) hereof), plus (c) capitalized
lease payments, plus (d) payments of principal of or interest on any other
Indebtedness for borrowed money.

“Settlement Date” shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.

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

“Subsidiary Stock” shall mean all of the issued and outstanding Equity Interests
of any Subsidiary owned by any Borrower (not to exceed 66% of the Equity
Interests of any Foreign Subsidiary).

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Body, including any interest, additions to tax or
penalties applicable thereto; provided, however, that Taxes shall not include
Other Taxes.

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

“Termination Event” shall mean (i) a Reportable Event with respect to any Plan
or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of the
Controlled Group from a Plan during a plan year in which such entity was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the
providing of notice of intent to terminate a Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Plan or Multiemployer Plan; (v) any event or
condition (a) which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (b) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any
Borrower or any member of the Controlled Group from a Multiemployer Plan.

 

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“Thai Assignment” shall mean that certain Assignment Agreement, dated as of the
Closing Date between HTI Thailand and HTI, as amended, restated, supplemented or
otherwise modified from time to time with the consent of Agent.

“Thai Receivables” shall mean and include accounts, contract rights, instruments
(including those evidencing indebtedness owed to HTI Thailand by its
Affiliates), documents, chattel paper (including electronic chattel paper),
general intangibles relating to accounts, drafts and acceptances, credit card
receivables and all other forms of obligations originally owing to HTI Thailand
arising out of or in connection with the sale or lease of Inventory or the
rendition of services to Customers, and all supporting obligations, guarantees
and other security therefor, whether secured or unsecured, now existing or
hereafter created, and whether or not specifically sold or assigned to Agent
hereunder.

“Thai Receivables Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(ii).

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

“Trading with the Enemy Act” shall mean the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) and any enabling legislation or executive order relating thereto.

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

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

“UCP” shall have the meaning set forth in Section 2.9(b).

“Undrawn Availability” at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount, minus (b) the sum of (i) the outstanding amount of Advances plus
(ii) all amounts due and owing to any Borrower’s trade creditors which are sixty
(60) days or more past due, plus (iii) fees and expenses for which Borrowers are
liable under this Agreement or any Other Documents but which have not been paid
or charged to Borrowers’ Account.

“Unfinanced Capital Expenditures” shall mean all Capital Expenditures of
Borrowers other than those made utilizing financing provided by the applicable
seller or third party lenders. For the avoidance of doubt, Capital Expenditures
made by a Borrower utilizing Revolving Advances shall be deemed Unfinanced
Capital Expenditures.

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

 

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

“Website Posting” shall have the meaning set forth in Section 6.16.

“Week” shall mean the time period commencing with the opening of business on a
Wednesday and ending on the end of business the following Tuesday.

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

1.4. Certain Matters of Construction. The terms “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Agent is a
party, including references to any of the Other Documents, shall include any and
all modifications or amendments thereto and any and all extensions or renewals
thereof. All references herein to the time of day shall mean the time in New
York, New York. Unless otherwise provided, all financial calculations shall be
performed with Inventory valued at the lower of cost, determined on a first-in,
first-out basis, or market. Whenever the words “including” or “include” shall be
used, such words shall be understood to mean “including, without limitation” or
“include, without limitation”. A Default or Event of Default shall be deemed to
exist at all times during the period commencing on the date that such Default or
Event of Default occurs to the date on which such Default or Event of Default is
waived in writing by the Required Lenders or in the case of a Default, is cured
within any applicable cure period; and a Default or an Event of Default shall
“continue” or be “continuing” until such Default or Event of Default has been
waived in writing by the Required Lenders or, in the case of a Default, is
cured. Any Lien referred to in this Agreement or any of the Other Documents as
having been created in favor of Agent, any agreement entered into by Agent
pursuant to this Agreement or any of the Other Documents, any payment made by or
to or funds received by Agent pursuant to or as contemplated by this Agreement
or any of the Other Documents, or any act taken or omitted to be taken by Agent,
shall, unless otherwise expressly provided, be created,

 

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entered into, made or received, or taken or omitted, for the benefit or account
of Agent and Lenders. Wherever the phrase “to the best of Borrowers’ knowledge”
or words of similar import relating to the knowledge or the awareness of any
Borrower are used in this Agreement or Other Documents, such phrase shall mean
and refer to (i) the actual knowledge of an Executive Officer of Borrowing Agent
or (ii) the knowledge that an Executive Officer would have obtained if he had
engaged in good faith and diligent performance of his duties, including the
making of such reasonably specific inquiries as may be necessary of the
employees or agents of the Borrowers and a good faith attempt to ascertain the
existence or accuracy of the matter to which such phrase relates. All covenants
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or otherwise within the limitations of, another
covenant shall not avoid the occurrence of a default if such action is taken or
condition exists. In addition, all representations and warranties hereunder
shall be given independent effect so that if a particular representation or
warranty proves to be incorrect or is breached, the fact that another
representation or warranty concerning the same or similar subject matter is
correct or is not breached will not affect the incorrectness of a breach of a
representation or warranty hereunder. Obligations shall be deemed paid in full
for all purposes of this Agreement and any Other Documents once all Obligations
other than Contingent Obligations and Obligations in respect of Cash
Collateralized Letters of Credit have been fully paid in cash. Secured
Obligations shall be deemed paid in full for all purposes of this Agreement and
any Other Documents once (i) all Obligations other than Contingent Obligations,
Obligations in respect of Cash Collateralized Letters of Credit and Hedge
Liabilities and other obligations described in clause (iii) below not then due
and owing are fully paid in cash, (ii) each Borrower has furnished to the Lender
counterparty to any Hedge Liabilities not then due and owing an indemnification
reasonably satisfactory to such Lender with respect thereto, (iii) each Borrower
has furnished to Agent an indemnification reasonably satisfactory to Agent with
respect to all obligations constituting Secured Obligations which arise by
reason of any equipment lease or guarantee, or under any interest or currency
swap, future, option or other similar agreement, or out of overdrafts or deposit
or other accounts or electronic funds transfers (whether through automated
clearing houses or otherwise) or out of the Agent’s or any Lenders non-receipt
of or inability to collect funds or otherwise not being made whole in connection
with depository transfer check or other similar arrangements, and (iv) this
Agreement shall have been terminated.

1.5. Changes in GAAP. All accounting terms used and not otherwise defined herein
shall have the meanings assigned thereto under GAAP as in effect on the date
hereof. If any change in GAAP from and after the Closing Date results in a
change in the calculation of any financial covenant or the interpretation of
related provisions of this Agreement, then the Borrowers, the Agent and the
Lenders agree to amend this Agreement so as to equitably reflect such changes in
GAAP with the desired result that the criteria for evaluating the Borrowers’
financial condition shall be the same after such change in GAAP as if such
change had not been made, provided that, notwithstanding any other provision of
this Agreement, the Required Lenders’ agreement to any such amendment shall be
sufficient to bind all Lenders, and further provided that, until such time as
such amendment has been entered into, financial covenants and related provisions
shall be calculated and interpreted in accordance with GAAP as in effect
immediately prior to such change.

 

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II. ADVANCES, PAYMENTS.

2.1. Revolving Advances.

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

(i) 85%, subject to the provisions of Section 2.1(b) hereof (“Receivables
Advance Rate”), of Eligible Receivables (other than Eligible Thai Receivables),
plus

(ii) the lesser of (x) 85%, subject to the provisions of Section 2.1(b) hereof
(“Thai Receivables Advance Rate”), of Eligible Thai Receivables, (y) the policy
limit of liability of the Credit Insurance (for the applicable Customers and for
all Customers in the aggregate) and (z) $5,000,000, plus

(iii) (A) Until delivery of the first Inventory appraisal required by
Section 6.10, 40%, subject to the provisions of Section 2.1(b) hereof
(“Inventory Advance Rate”), of the value of the Eligible Inventory, and
(B) thereafter, the lesser of (1) a percentage of the value of the Eligible
Inventory equal to the Inventory Advance Rate, and (2) 65%, subject to the
provisions of Section 2.1(b) hereof (“NOLV Inventory Advance Rate” and together
with the Receivables Advance Rate, the Thai Receivables Advance Rate and the
Inventory Advance Rate, the “Advance Rates”) of the appraised net orderly
liquidation value of Eligible Inventory (as determined in a manner consistent
with the methodology established in the most recent Inventory appraisal
delivered to Agent pursuant to Section 6.10) and (C) $10,000,000, minus

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

(v) at all times during the Availability Blockage Period, $5,000,000, minus

(vi) subject to the provisions of Section 2.1(b) hereof, such reserves as Agent
may in its Permitted Discretion deem proper and necessary from time to time.

The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and
(iii) minus (y) Section 2.1(a)(y)(v) and (vi) at any time and from time to time
shall be referred to as the “Formula Amount”. The Revolving Advances shall be
evidenced by one or more secured promissory notes (collectively, the “Revolving
Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).

(b) Discretionary Rights. The Advance Rates may be increased by Agent and the
Agent, upon at least five (5) Business Days advance notice to Borrowing Agent,
may impose or increase reserves pursuant to clause (vi) of Section 2.1(a)
hereof, in each case, from time to time in the exercise of its Permitted
Discretion. The Advance Rates may be decreased by Agent at any time and from
time to time in the exercise of its Permitted Discretion if one or more of the

 

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following events occur or conditions exist: (i) an Event of Default has occurred
and is continuing; (ii) a material increase in dilution (i.e., reductions in the
amount of Receivables due to bad debt experience, returns, discounts, price
adjustments, credits and similar offsets) of Receivables; or (iii) a material
change in the product mix of Inventory (other than changes from one type of
suspension assembly and raw materials used in that type of suspension assembly
to other types of suspension assemblies and raw materials used in those other
types of suspension assemblies); provided, however, that in no event shall Agent
decrease any Advance Rates from that which, in any case, is expressly stated in
clauses (i), (ii) or (iii) of Section 2.1(a) hereof, unless Agent has given
Borrowing Agent five (5) Business Days advance notice (or, if an Event of
Default then exists, contemporaneous notice) of such change. Each Borrower
consents to any such increases or decreases or the imposition or increase of any
such reserves and acknowledges that decreasing the Advance Rates or increasing
or imposing reserves may limit or restrict Advances requested by Borrowing
Agent. The rights of Agent under this subsection are subject to the provisions
of Section 16.2(b).

2.2. Procedure for Revolving Advances Borrowing.

(a) Borrowing Agent on behalf of any Borrower may notify Agent prior to 10:00
a.m. on a Business Day of a Borrower’s request to incur, on that day, a
Revolving Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any Other
Documents, or with respect to any other Obligation, become due, same shall be
deemed a request for a Revolving Advance maintained as a Domestic Rate Loan as
of the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any Other Documents,
and such request shall be irrevocable.

(b) Notwithstanding the provisions of subsection (a) above, in the event any
Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall give
Agent written notice by no later than 10:00 a.m. on the day which is three
(3) Business Days prior to the date such Eurodollar Rate Loan is to be borrowed,
specifying (i) the date of the proposed borrowing (which shall be a Business
Day), (ii) the type of borrowing and the amount on the date of such Advance to
be borrowed, which amount shall be in an aggregate principal amount that is not
less than $150,000 and integral multiples of $50,000 in excess thereof, and
(iii) the duration of the first Interest Period therefor. Interest Periods for
Eurodollar Rate Loans shall be for one, two, three or six months; provided, if
an Interest Period would end on a day that is not a Business Day, it shall end
on the next succeeding Business Day unless such day falls in the next succeeding
calendar month in which case the Interest Period shall end on the next preceding
Business Day. No Eurodollar Rate Loan shall be made available to any Borrower
during the continuance of a Default or an Event of Default. After giving effect
to each requested Eurodollar Rate Loan, including those which are converted from
a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more
than five (5) Eurodollar Rate Loans, in the aggregate.

(c) Each Interest Period of a Eurodollar Rate Loan shall commence on the date
such Eurodollar Rate Loan is made or on the date of conversion of a Domestic
Rate Loan into such Eurodollar Rate Loan, as the case may be (or, in the case of
any succeeding Interest Period, on the day following the last date of the
current Interest Period applicable to such Eurodollar Rate Loan) and shall end
on such date as Borrowing Agent may elect as set forth in

 

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subsection (b)(iii) above, subsection (d) below or this subsection (c) (as the
case may be), provided that the exact length of each Interest Period shall be
determined in accordance with the practice of the interbank market for offshore
Dollar deposits and no Interest Period shall end after the last day of the Term.

Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to
Section 2.2(d), as the case may be. Borrowing Agent shall elect the duration of
each succeeding Interest Period by giving irrevocable written notice to Agent of
such duration not later than 10:00 a.m. on the day which is three (3) Business
Days prior to the last day of the then current Interest Period applicable to
such Eurodollar Rate Loan. If Agent does not receive timely notice of the
Interest Period elected by Borrowing Agent, Borrowing Agent shall be deemed to
have elected to convert to a Domestic Rate Loan subject to Section 2.2(d)
hereinbelow.

(d) Borrowing Agent may, on the last Business Day of the then current Interest
Period applicable to any outstanding Eurodollar Rate Loan, or, provided that no
Event of Default shall have occurred and be continuing, on any Business Day with
respect to Domestic Rate Loans, convert any such loan into a loan of another
type in the same aggregate principal amount provided that any conversion of a
Eurodollar Rate Loan shall be made only on the last Business Day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Borrowing
Agent desires to convert a loan, Borrowing Agent shall give Agent written notice
by no later than 10:00 a.m. (i) on the day which is three (3) Business Days’
prior to the date on which such conversion is to occur with respect to a
conversion from a Domestic Rate Loan to a Eurodollar Rate Loan, or (ii) on the
day which is one (1) Business Day prior to the date on which such conversion is
to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic
Rate Loan, specifying, in each case, the date of such conversion, the loans to
be converted and if the conversion is from a Domestic Rate Loan to any other
type of loan, the duration of the first Interest Period therefor.

(e) At its option and upon written notice given prior to 10:00 a.m. (New York
time) at least three (3) Business Days’ prior to the date of such prepayment,
any Borrower may prepay Eurodollar Rate Loans in whole at any time or in part
from time to time with accrued interest on the principal being prepaid to the
date of such repayment. Such Borrower shall specify the date of prepayment of
Advances which are Eurodollar Rate Loans and the amount of such prepayment. In
the event that any prepayment of a Eurodollar Rate Loan is required or permitted
on a date other than the last Business Day of the then current Interest Period
with respect thereto, such Borrower shall indemnify Agent and Lenders therefor
in accordance with Section 2.2(f) hereof. Any Borrower may prepay Domestic Rate
Loans in whole at any time or in part from time to time.

(f) Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any
default by any Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including, but not limited to, any interest payable

 

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by Agent or Lenders to lenders of funds obtained by it in order to make or
maintain its Eurodollar Rate Loans hereunder. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Agent or any
Lender to Borrowing Agent shall be conclusive absent manifest error.

(g) Notwithstanding any other provision hereof, if any Change in Law shall make
it unlawful for any Lender (for purposes of this subsection (g), the term
“Lender” shall include any Lender and the office or branch where any Lender or
any corporation or bank controlling such Lender makes or maintains any
Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the
obligation of Lenders to make Eurodollar Rate Loans hereunder shall forthwith be
cancelled and Borrowers shall, if any affected Eurodollar Rate Loans are then
outstanding, promptly upon request from Agent, either pay all such affected
Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans
of another type. If any such payment or conversion of any Eurodollar Rate Loan
is made on a day that is not the last day of the Interest Period applicable to
such Eurodollar Rate Loan, Borrowers shall pay Agent, upon Agent’s request, such
amount or amounts as may be necessary to compensate Lenders for any loss or
expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan
as a result of such payment or conversion, including (but not limited to) any
interest or other amounts payable by Lenders to lenders of funds obtained by
Lenders in order to make or maintain such Eurodollar Rate Loan. A certificate as
to any additional amounts payable pursuant to the foregoing sentence submitted
by Lenders to Borrowing Agent shall be conclusive absent manifest error.

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

2.4. Maximum Advances. The aggregate balance of Revolving Advances outstanding
at any time shall not exceed the lesser of (a) the Maximum Revolving Advance
Amount or (b) the Formula Amount less, in each case, the aggregate Maximum
Undrawn Amount of all issued and outstanding Letters of Credit.

2.5. Repayment of Advances.

(a) The Revolving Advances shall be due and payable in full on the last day of
the Term subject to earlier prepayment as herein provided.

 

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

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

(d) Subject to Section 3.10, Borrowers shall pay principal, interest, and all
other amounts payable hereunder, or under any related agreement, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.

2.6. Repayment of Excess Advances. The aggregate balance of Advances outstanding
at any time in excess of the maximum amount of Advances permitted hereunder
shall be immediately due and payable without the necessity of any demand, at the
Payment Office, whether or not a Default or Event of Default has occurred.

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

 

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2.8. Letters of Credit. Subject to the terms and conditions hereof, Agent shall
issue or cause the issuance of letters of credit (“Letters of Credit”) for the
account of any Borrower; provided, however, that Agent will not be required to
issue or cause to be issued any Letters of Credit to the extent that the
issuance thereof would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) the Maximum Undrawn Amount of all outstanding Letters of
Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or
(y) the Formula Amount. The Maximum Undrawn Amount of outstanding Letters of
Credit shall not exceed in the aggregate at any time the Letter of Credit
Sublimit. All disbursements or payments related to Letters of Credit shall be
deemed to be Domestic Rate Loans consisting of Revolving Advances and shall bear
interest at the Revolving Interest Rate for Domestic Rate Loans; Letters of
Credit that have not been drawn upon shall not bear interest.

2.9. Issuance of Letters of Credit.

(a) Borrowing Agent, on behalf of Borrowers, may request Agent to issue or cause
the issuance of a Letter of Credit by delivering to Agent at the Payment Office,
prior to 10:00 a.m. (New York time), at least five (5) Business Days’ prior to
the proposed date of issuance, Agent’s form of Letter of Credit Application (the
“Letter of Credit Application”) completed to the reasonable satisfaction of
Agent; and, such other certificates, documents and other papers and information
as Agent may reasonably request. Borrowing Agent, on behalf of Borrowers, also
has the right to give instructions and make agreements with respect to any
application, any applicable letter of credit and security agreement, any
applicable letter of credit reimbursement agreement and/or any other applicable
agreement, any letter of credit and the disposition of documents, disposition of
any unutilized funds, and to agree with Agent upon any amendment, extension or
renewal of any Letter of Credit.

(b) Each Letter of Credit shall, among other things, (i) provide for the payment
of sight drafts, other written demands for payment, or acceptances of usance
drafts when presented for honor thereunder in accordance with the terms thereof
and when accompanied by the documents described therein and (ii) have an expiry
date not later than twenty-four (24) months after such Letter of Credit’s date
of issuance and in no event later than the last day of the Term. Each standby
Letter of Credit shall be subject either to the Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce at the time a Letter of Credit is issued (the “UCP”) or the
International Standby Practices (ISP98 International Chamber of Commerce
Publication Number 590) (the “ISP98 Rules”)), and any subsequent revision
thereof at the time a standby Letter of Credit is issued, as determined by
Agent, and each trade Letter of Credit shall be subject to the UCP.

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

 

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2.10. Requirements For Issuance of Letters of Credit.

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

(b) In connection with all Letters of Credit issued or caused to be issued by
Agent under this Agreement, each Borrower hereby appoints Agent, or its
designee, as its attorney, with full power and authority if an Event of Default
shall have occurred and is continuing, (i) to sign and/or endorse such
Borrower’s name upon any warehouse or other receipts, letter of credit
applications and acceptances, (ii) to sign such Borrower’s name on bills of
lading; (iii) to clear Inventory through the United States of America Customs
Department (“Customs”) in the name of such Borrower or Agent or Agent’s
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose; and (iv) to complete in such Borrower’s
name or Agent’s, or in the name of Agent’s designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof. Neither Agent nor its attorneys will be liable for any
acts or omissions under this Section 2.10(b) nor for any error of judgment or
mistakes of fact or law in connection therewith, except for Agent’s or its
attorney’s gross negligence or willful misconduct. This power, being coupled
with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.

2.11. Disbursements, Reimbursement.

(a) Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
Agent a participation in such Letter of Credit and each drawing thereunder in an
amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount
of such Letter of Credit and the amount of such drawing, respectively.

(b) In the event of any request for a drawing under a Letter of Credit by the
beneficiary or transferee thereof, Agent will promptly notify Borrowing Agent.
Provided that Borrowing Agent shall have received such notice, the Borrowers
shall reimburse (such obligation to reimburse Agent shall sometimes be referred
to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon, New York time on
each date that an amount is paid by Agent under any Letter of Credit (each such
date, a “Drawing Date”) in an amount equal to the amount so paid by Agent. In
the event Borrowers fail to reimburse Agent for the full amount of any drawing
under any Letter of Credit by 12:00 Noon, New York time, on the Drawing Date,
Agent will promptly notify each Lender thereof, and Borrowers shall be deemed to
have requested that a Revolving Advance maintained as a Domestic Rate Loan be
made by the Lenders to be disbursed on the Drawing Date under such Letter of
Credit, subject to the amount of the unutilized portion of the lesser of Maximum
Revolving Advance Amount or the Formula Amount and subject to Section 8.2
hereof. Any notice given by Agent pursuant to this Section 2.11(b) may be oral
if immediately confirmed in writing; provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of such
notice.

 

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(c) Each Lender shall upon any notice pursuant to Section 2.11(b) make available
to Agent an amount in immediately available funds equal to its Commitment
Percentage of the amount of the drawing, whereupon the participating Lenders
shall (subject to Section 2.11(d)) each be deemed to have made a Revolving
Advance maintained as a Domestic Rate Loan to Borrowers in that amount. If any
Lender so notified fails to make available to Agent the amount of such Lender’s
Commitment Percentage of such amount by no later than 2:00 p.m., New York time
on the Drawing Date, then interest shall accrue on such Lender’s obligation to
make such payment, from the Drawing Date to the date on which such Lender makes
such payment (i) at a rate per annum equal to the Federal Funds Effective Rate
during the first three days following the Drawing Date and (ii) at a rate per
annum equal to the rate applicable to Revolving Advances maintained as a
Domestic Rate Loans on and after the fourth day following the Drawing Date.
Agent will promptly give notice of the occurrence of the Drawing Date, but
failure of Agent to give any such notice on the Drawing Date or in sufficient
time to enable any Lender to effect such payment on such date shall not relieve
such Lender from its obligation under this Section 2.11(c), provided that such
Lender shall not be obligated to pay interest as provided in Section 2.11(c)
(i) and (ii) until and commencing from the date of receipt of notice from Agent
of a drawing.

(d) With respect to any unreimbursed drawing that is not converted into a
Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or in
part as contemplated by Section 2.11(b), because of Borrowers’ failure to
satisfy the conditions set forth in Section 8.2 (other than any notice
requirements) or for any other reason, Borrowers shall be deemed to have
incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the
amount of such drawing. Such Letter of Credit Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the rate per annum
applicable to a Revolving Advance maintained as a Domestic Rate Loan. Each
Lender’s payment to Agent pursuant to Section 2.11(c) shall be deemed to be a
payment in respect of its participation in such Letter of Credit Borrowing and
shall constitute a “Participation Advance” from such Lender in satisfaction of
its Participation Commitment under this Section 2.11.

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

2.12. Repayment of Participation Advances.

(a) Upon (and only upon) receipt by Agent for its account of immediately
available funds from Borrowers (i) in reimbursement of any payment made by the
Agent under the Letter of Credit with respect to which any Lender has made a
Participation Advance to Agent, or (ii) in payment of interest on such a payment
made by Agent under such a Letter of Credit, Agent will pay to each Lender, in
the same funds as those received by Agent, the amount of such Lender’s
Commitment Percentage of such funds, except Agent shall retain the amount of the
Commitment Percentage of such funds of any Lender that did not make a
Participation Advance in respect of such payment by Agent.

 

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(b) If Agent is required at any time to return to any Borrower, or to a trustee,
receiver, liquidator, custodian, or any official in any insolvency proceeding,
any portion of the payments made by Borrowers to Agent pursuant to
Section 2.12(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.

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

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

2.15. Nature of Participation and Reimbursement Obligations. Each Lender’s
obligation in accordance with this Agreement to make the Revolving Advances or
Participation Advances as a result of a drawing under a Letter of Credit, and
the obligations of Borrowers to reimburse Agent upon a draw under a Letter of
Credit, shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Section 2.15 under all
circumstances, including the following circumstances:

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

(ii) the failure of any Borrower or any other Person to comply, in connection
with a Letter of Credit Borrowing, with the conditions set forth in this
Agreement for the making of a Revolving Advance, it being acknowledged that such
conditions are not required for the making of a Letter of Credit Borrowing and
the obligation of the Lenders to make Participation Advances under Section 2.11;

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

(iv) any claim of breach of warranty that might be made by any Borrower or any
Lender against the beneficiary of a Letter of Credit, or the existence of any

 

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

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

(vi) payment by Agent under any Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit;

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

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

(ix) any Material Adverse Effect on any Borrower or any Guarantor;

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

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

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

(xiii) the fact that the Term shall have expired or this Agreement or the
Obligations hereunder shall have been terminated; and

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

 

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2.16. Indemnity. In addition to amounts payable as provided in Section 16.5,
each Borrower hereby agrees to protect, indemnify, pay and save harmless Agent
and any of Agent’s Affiliates that have issued a Letter of Credit from and
against any and all claims, demands, liabilities, damages, penalties, interest,
judgments, losses, costs, charges and expenses (including reasonable fees,
expenses and disbursements of counsel and allocated costs of internal counsel,
but excluding taxes) which the Agent or any of Agent’s Affiliates may incur or
be subject to as a consequence, direct or indirect, of the issuance of any
Letter of Credit, other than as a result of (A) the gross negligence or willful
misconduct of the Agent as determined by a final and non-appealable judgment of
a court of competent jurisdiction or (b) the wrongful dishonor by the Agent or
any of Agent’s Affiliates of a proper demand for payment made under any Letter
of Credit, except if such dishonor resulted from any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto Governmental
Body (all such acts or omissions herein called “Governmental Acts”).

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

Without limiting the generality of the foregoing, Agent and each of its
Affiliates (i) may rely on any oral or other communication believed in good
faith by Agent or such

 

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Affiliate to have been authorized or given by or on behalf of the applicant for
a Letter of Credit, (ii) may honor any presentation if the documents presented
appear on their face substantially to comply with the terms and conditions of
the relevant Letter of Credit; (iii) may honor a previously dishonored
presentation under a Letter of Credit, whether such dishonor was pursuant to a
court order, to settle or compromise any claim of wrongful dishonor, or
otherwise, and shall be entitled to reimbursement to the same extent as if such
presentation had initially been honored, together with any interest paid by
Agent or its Affiliates; (iv) may honor any drawing that is payable upon
presentation of a statement advising negotiation or payment, upon receipt of
such statement (even if such statement indicates that a draft or other document
is being delivered separately), and shall not be liable for any failure of any
such draft or other document to arrive, or to conform in any way with the
relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming
that it rightfully honored under the laws or practices of the place where such
bank is located; and (vi) may settle or adjust any claim or demand made on Agent
or its Affiliate in any way related to any order issued at the applicant’s
request to an air carrier, a letter of guarantee or of indemnity issued to a
carrier or any similar document (each an “Order”) and honor any drawing in
connection with any Letter of Credit that is the subject of such Order,
notwithstanding that any drafts or other documents presented in connection with
such Letter of Credit fail to conform in any way with such Letter of Credit.

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

2.18. Additional Payments. Any sums expended by Agent or any Lender due to any
Borrower’s failure to perform or comply with its obligations under this
Agreement or any Other Document including any Borrower’s obligations under
Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrowers’
Account as a Revolving Advance and added to the Obligations.

2.19. Manner of Borrowing and Payment.

(a) Each borrowing of Revolving Advances shall be advanced according to the
applicable Commitment Percentages of Lenders.

(b) Each payment (including each prepayment) by any Borrower on account of the
principal of and interest on the Revolving Advances, shall be applied to the
Revolving Advances pro rata according to the applicable Commitment Percentages
of Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by any Borrower on account of principal, interest and
fees shall be made without set off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.

(c) (i) Notwithstanding anything to the contrary contained in Sections 2.19(a)
and (b) hereof, commencing with the first Business Day following the Closing
Date, each

 

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borrowing of Revolving Advances shall be advanced by Agent and each payment by
any Borrower on account of Revolving Advances shall be applied first to those
Revolving Advances advanced by Agent. On or before 1:00 P.M., New York time, on
each Settlement Date commencing with the first Settlement Date following the
Closing Date, Agent and Lenders shall make certain payments as follows: (I) if
the aggregate amount of new Revolving Advances made by Agent during the
preceding Week (if any) exceeds the aggregate amount of repayments applied to
outstanding Revolving Advances during such preceding Week, then each Lender
shall provide Agent with funds in an amount equal to its applicable Commitment
Percentage of the difference between (w) such Revolving Advances and (x) such
repayments and (II) if the aggregate amount of repayments applied to outstanding
Revolving Advances during such Week exceeds the aggregate amount of new
Revolving Advances made during such Week, then Agent shall provide each Lender
with funds in an amount equal to its applicable Commitment Percentage of the
difference between (y) such repayments and (z) such Revolving Advances.

(ii) Each Lender shall be entitled to earn interest at the applicable Revolving
Interest Rate on outstanding Advances which it has funded.

(iii) Promptly following each Settlement Date, Agent shall submit to each Lender
a certificate with respect to payments received and Advances made during the
Week immediately preceding such Settlement Date. Such certificate of Agent shall
be conclusive in the absence of manifest error.

(d) If any Lender or Participant (a “benefited Lender”) shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender’s
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender’s Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender’s Advances may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.

(e) Unless Agent shall have been notified by telephone, confirmed in writing, by
any Lender that such Lender will not make the amount which would constitute its
applicable Commitment Percentage of the Advances available to Agent, Agent may
(but shall not be obligated to) assume that such Lender shall make such amount
available to Agent on the next Settlement Date and, in reliance upon such
assumption, make available to Borrowers a corresponding amount. Agent will
promptly notify Borrowing Agent of its receipt of any such notice from a Lender.
If such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Effective Rate (computed on the basis of a
year of 360 days)

 

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during such period as quoted by Agent, times (ii) such amount, times (iii) the
number of days from and including such Settlement Date to the date on which such
amount becomes immediately available to Agent. A certificate of Agent submitted
to any Lender with respect to any amounts owing under this paragraph (e) shall
be conclusive, in the absence of manifest error. If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrowers; provided, however, that Agent’s
right to such recovery shall not prejudice or otherwise adversely affect
Borrowers’ rights (if any) against such Lender.

2.20. Use of Proceeds.

(a) Borrowers shall apply the proceeds of Advances (i) to (A) pay fees and
expenses relating to this transaction, (B) fund Capital Expenditures and
(C) provide for its working capital needs and reimburse drawings under Letters
of Credit, and (ii) for other general corporate purposes.

(b) Without limiting the generality of Section 2.20(a) above, neither the
Borrowers, the Guarantors nor any other Person which may in the future become
party to this Agreement or the Other Documents as a Borrower or Guarantor,
intends to use nor shall they use any portion of the proceeds of the Advances,
directly or indirectly, for any purpose in violation of the Trading with the
Enemy Act.

2.21. Defaulting Lender.

(a) Notwithstanding anything to the contrary contained herein, in the event any
Lender (x) has refused (which refusal constitutes a breach by such Lender of its
obligations under this Agreement) to make available its portion of any Advance
or (y) notifies either Agent or Borrowing Agent that it does not intend to make
available its portion of any Advance (if the actual refusal would constitute a
breach by such Lender of its obligations under this Agreement) (each, a “Lender
Default”), all rights and obligations hereunder of such Lender (a “Defaulting
Lender”) as to which a Lender Default is in effect and of the other parties
hereto shall be modified to the extent of the express provisions of this
Section 2.21 while such Lender Default remains in effect.

(b) Advances shall be incurred pro rata from Lenders (the “Non-Defaulting
Lenders”) which are not Defaulting Lenders based on their respective Commitment
Percentages, and no Commitment Percentage of any Lender or any pro rata share of
any Advances required to be advanced by any Lender shall be increased as a
result of such Lender Default. Amounts received in respect of principal of any
type of Advances shall be applied to reduce the applicable Advances of each
Lender (other than any Defaulting Lender) pro rata based on the aggregate of the
outstanding Advances of that type of all Lenders at the time of such
application; provided, that, Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender’s
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder (including any principal, interest or fees). Amounts payable
to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, re-lend to a Borrower the amount of such payments
received or retained by it for the account of such Defaulting Lender.

 

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(c) A Defaulting Lender shall not be entitled to give instructions to Agent or
to approve, disapprove, consent to or vote on any matters relating to this
Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have
either Advances outstanding or a Commitment Percentage.

(d) Other than as expressly set forth in this Section 2.21, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this
Section 2.21 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

(e) In the event a Defaulting Lender retroactively cures to the satisfaction of
Agent the breach which caused a Lender to become a Defaulting Lender, such
Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as
a Lender under this Agreement.

 

III. INTEREST AND FEES.

3.1. Interest. Interest on Advances shall be payable in arrears on the first day
of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months from the commencement of such Interest Period or (b) the
end of the Interest Period. Interest charges shall be computed on the actual
principal amount of Advances outstanding during the month at a rate per annum
equal to the applicable Revolving Interest Rate. Whenever, subsequent to the
date of this Agreement, the Alternate Base Rate is increased or decreased, the
Revolving Interest Rate for Domestic Rate Loans shall be similarly changed
without notice or demand of any kind by an amount equal to the amount of such
change in the Alternate Base Rate during the time such change or changes remain
in effect. The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate
Loans without notice or demand of any kind on the effective date of any change
in the Reserve Percentage as of such effective date. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, at the
option of Agent or at the direction of Required Lenders, (i) the Obligations
other than Eurodollar Rate Loans shall bear interest at the Revolving Interest
Rate for Domestic Rate Loans plus two (2%) percent per annum and (ii) each
Eurodollar Rate Loan shall bear interest at the Revolving Interest Rate for such
Eurodollar Rate Loan plus two (2%) percent per annum (as applicable, the
“Default Rate”).

3.2. Letter of Credit Fees.

(a) Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees
for each Letter of Credit for the period from and excluding the date of issuance
of same to and

 

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including the date of expiration or termination, equal to the average daily face
amount of each outstanding Letter of Credit multiplied by four and one-half of
one percent (4.5%) per annum (provided that following a Compliance Event, such
fee shall be equal to the average daily face amount of each outstanding Letter
of Credit multiplied by three and one-half of one percent (3.5%) per annum),
such fees to be calculated on the basis of a 360-day year for the actual number
of days elapsed and to be payable quarterly in arrears on the first day of each
quarter and on the last day of the Term, and (y) to the Issuer, a fronting fee
of one quarter of one percent (0.25%) per annum, together with any and all
administrative, issuance, amendment, payment and negotiation charges with
respect to Letters of Credit and all fees and expenses as agreed upon by the
Issuer and the Borrowing Agent in connection with any Letter of Credit,
including in connection with the opening, amendment or renewal of any such
Letter of Credit and any acceptances created thereunder and shall reimburse
Agent for any and all fees and expenses as agreed upon by the Issuer and
Borrowing Agent, if any, paid by Agent to the Issuer (all of the foregoing fees,
the “Letter of Credit Fees”). Any such charge in effect at the time of a
particular transaction shall be the charge for that transaction, notwithstanding
any subsequent change in the Issuer’s prevailing charges for that type of
transaction. All Letter of Credit Fees payable hereunder shall be deemed earned
in full on the date when the same are due and payable hereunder and shall not be
subject to rebate or pro-ration upon the termination of this Agreement for any
reason. Upon and after the occurrence of an Event of Default, and during the
continuation thereof, at the option of Agent or at the direction of Required
Lenders, the Letter of Credit Fees described in clause (x) of this
Section 3.2(a) shall be increased by an additional two percent (2%) per annum.

(b) On demand following the occurrence and during the continuance of an Event of
Default, Borrowers will cause cash to be deposited and maintained in an account
with Agent, as cash collateral, in an amount equal to one hundred and five
percent (105%) of the Maximum Undrawn Amount of all outstanding Letters of
Credit, and each Borrower hereby irrevocably authorizes Agent, in its
discretion, on such Borrower’s behalf and in such Borrower’s name, to open such
an account and to make and maintain deposits therein, or in an account opened by
such Borrower, in the amounts required to be made by such Borrower, out of the
proceeds of Receivables or other Collateral or out of any other funds of such
Borrower coming into any Lender’s possession at any time. Agent will invest such
cash collateral (less reasonable reserves) in such short-term money-market items
as to which Agent and such Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral. No Borrower may withdraw amounts credited to any such account except
upon the occurrence of all of the following: (x) payment in full of all Secured
Obligations, (y) expiration of all Letters of Credit and (z) termination of this
Agreement.

3.3. Closing Fee and Facility Fee.

(a) Closing Fee. On the Closing Date, Borrowers shall pay to Agent for the
ratable benefit of Lenders a closing fee of $350,000 less that portion of the
commitment fee of $100,000 and deposit of $60,000 heretofore paid by Borrowers
to Agent remaining after application of such commitment fee or deposit to out of
pocket expenses due under Section 16.9.

(b) Facility Fee. If, for any calendar quarter during the Term, the average
daily unpaid balance of the Revolving Advances and undrawn amount of any
outstanding Letters

 

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of Credit for each day of such calendar quarter does not equal the Maximum
Revolving Advance Amount, then Borrowers shall pay to Agent for the ratable
benefit of Lenders a fee at a rate equal to three quarters of one percent
(0.75%) per annum on the amount by which the Maximum Revolving Advance Amount
exceeds such average daily unpaid balance. Such fee shall be payable to Agent in
arrears on the first day of each calendar quarter with respect to the previous
calendar quarter.

3.4. Collateral Management Fee and Collateral Examination Fee.

(a) Collateral Management Fee. Borrowers shall pay Agent a collateral management
fee equal to $2,000 per month commencing on the first day of the month following
the Closing Date and on the first day of each month thereafter during the Term.
The collateral management fee shall be deemed earned in full on the date when
same is due and payable hereunder and shall not be subject to rebate or
proration upon termination of this Agreement for any reason.

(b) Collateral Examination Fee. Borrowers shall pay to Agent on the first day of
each month following any month in which Agent performs any field examination of
Collateral, the need for which is to be determined by Agent in the exercise of
its Permitted Discretion and which examination is undertaken by Agent or for
Agent’s benefit - a collateral examination fee at the then current rate, which
as of the Closing Date is in an amount equal to $850 per day, for each person
employed to perform such examination, plus all reasonable costs and
disbursements incurred by Agent in the performance of such examination.
Notwithstanding anything to the contrary stated above or elsewhere in this
Agreement, unless a Default or Event of Default has occurred and is continuing,
Borrowers will be obligated to pay Agent’s fees and expenses for no more than
four (4) field examinations of Collateral per fiscal year.

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

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

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

(a) impose, modify or hold applicable any reserve, special deposit, assessment
or similar requirement against assets held by, or deposits in or for the account
of, advances or loans by, or other credit extended by, any office of Agent or
any Lender, including pursuant to Regulation D of the Board of Governors of the
Federal Reserve System; or

 

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(b) impose on Agent or any Lender or the London interbank Eurodollar market any
other condition with respect to this Agreement or any Other Document;

and the result of any of the foregoing is to increase the cost to Agent or any
Lender of (i) making, renewing or maintaining its Advances hereunder or (ii) in
the case of Eurodollar Rate Loans, making, renewing, converting to, continuing
or maintaining Eurodollar Rate Loans, in each case, by an amount that Agent or
such Lender reasonably deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender reasonably deems to be material,
then, in any case Borrowers shall pay Agent or such Lender, within thirty
(30) days following its demand (accompanied by documentation setting forth in
reasonable detail the calculation thereof and the assumptions on which such
calculation was based), such additional amount as will compensate Agent or such
Lender for such additional cost or such reduction, as the case may be; provided
that the foregoing shall not apply to increased costs which are reflected in the
Eurodollar Rate or to increased costs or reductions that are incurred more than
180 days prior to the date of such demand, as the case may be; provided further,
that if the circumstances giving rise to such claim have a retroactive effect,
then such 180 day period shall be extended to include such period of retroactive
effect. Agent or such Lender shall certify the amount of such additional cost or
reduced amount to Borrowing Agent, and such certification shall be conclusive
absent manifest error.

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

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

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

then Agent shall give Borrowing Agent prompt written or telephonic of such
determination. If such notice is given, (i) any such requested Eurodollar Rate
Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify
Agent no later than 10:00 a.m. (New York City time) two (2) Business Days prior
to the date of such proposed borrowing, that its request for such borrowing
shall be cancelled or made as an unaffected type of Eurodollar Rate Loan,
(ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been
converted to an affected type of Eurodollar Rate Loan shall be continued as or
converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent,
no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be

 

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converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent,
no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
last Business Day of the then current Interest Period applicable to such
affected Eurodollar Rate Loan, shall be converted into an unaffected type of
Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and
no Borrower shall have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.

3.9. Capital Adequacy.

(a) In the event that Agent or any Lender shall have determined that any Change
in Law regarding capital adequacy or compliance by Agent or any Lender (for
purposes of this Section 3.9, the term “Lender” shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender) and the
office or branch where Agent or any Lender (as so defined) makes or maintains
any Eurodollar Rate Loans with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Governmental Body,
central bank or comparable agency charged with the interpretation or
administration thereof constituting a Change in Law, has or would have the
effect of reducing the rate of return on Agent or any Lender’s capital as a
consequence of its obligations hereunder to a level below that which Agent or
such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent’s and each Lender’s policies with respect to
capital adequacy) by an amount reasonably deemed by Agent or any Lender to be
material, then, from time to time, Borrowers shall pay, within thirty (30) days
following demand (accompanied by documentation setting forth in reasonable
detail the calculation thereof and the assumptions on which such calculation was
based), to Agent or such Lender such additional amount or amounts as will
compensate Agent or such Lender for such reduction; provided that the foregoing
shall not apply to reductions which are incurred more than 180 days prior to the
date of such demand; provided further, that if the circumstances giving rise to
such claim have a retroactive effect, then such 180 day period shall be extended
to include such period of retroactive effect. In determining such amount or
amounts, Agent or such Lender may use any reasonable averaging or attribution
methods. The protection of this Section 3.9 shall be available to Agent and each
Lender regardless of any possible contention of invalidity or inapplicability
with respect to the Change in Law.

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

3.10. Taxes.

(a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of
Taxes. Any and all payments by or on account of any obligation of the Borrowers
under this Agreement shall to the extent permitted by Applicable Law be made
free and clear of and without reduction or withholding for any Taxes. If,
however, Applicable Law requires the Borrowers or the Agent to withhold or
deduct any Tax, such Tax shall be withheld or deducted in

 

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accordance with such Applicable Law as determined by the Borrowing Agent or the
Agent, as the case may be, upon the basis of the information and documentation
to be delivered pursuant to subsection (e) below.

(i) If the Borrowers or the Agent shall be required by the Code to withhold or
deduct any Taxes from any payment, then (A) the Agent shall withhold or make
such deductions as are determined by the Agent to be required based upon the
information and documentation it has received pursuant to subsection (e) below,
(B) the Agent shall timely pay the full amount withheld or deducted to the
relevant Governmental Body in accordance with the Code, and (C) to the extent
that the withholding or deduction is made on account of Indemnified Taxes or
Other Taxes, the sum payable by the Borrowers shall be increased as necessary so
that after any required withholding or the making of all required deductions
(including deductions applicable to additional sums payable under this Section)
the Agent or Lender, as the case may be, receives an amount equal to the sum it
would have received had no such withholding or deduction been made.

(ii) If the Borrowers or the Agent shall be required by any Applicable Law other
than the Code to withhold or deduct any Taxes from any payment, then (A) the
Borrowers or the Agent, as required by such Applicable Law, shall withhold or
make such deductions as are determined by them or it to be required based upon
the information and documentation they or it has received pursuant to subsection
(e) below, (B) the Borrowers or the Agent, to the extent required by such
Applicable Law, shall timely pay the full amount so withheld or deducted by it
to the relevant Governmental Body in accordance with such Applicable Laws, and
(C) to the extent that the withholding or deduction is made on account of
Indemnified Taxes or Other Taxes, the sum payable by the Borrowers shall be
increased as necessary so that after any required withholding or the making of
all required deductions (including deductions applicable to additional sums
payable under this Section) the Agent or Lender, as the case may be, receives an
amount equal to the sum it would have received had no such withholding or
deduction been made.

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

(c) Tax Indemnifications. (i) Without limiting the provisions of subsection
(a) or (b) above, subject to Section 3.10(f) the Borrowers shall, and do hereby,
indemnify the Agent, and Lenders, and shall make payment in respect thereof
within 10 days after demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) withheld or
deducted by the Borrowers or the Agent or paid by the Agent or such Lender, as
the case may be, and any penalties, interest with respect thereto. The Borrowers
shall also, and do hereby, indemnify the Agent, and shall make payment in
respect thereof within 10 days after demand therefor, for any amount which a
Lender for any reason fails to pay indefeasibly to the Agent as required by
clause (ii) of this subsection. A certificate as to the amount of any such
payment or liability delivered to the Borrowers by a Lender (with a copy to the
Agent), or by the Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

 

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(ii) Without limiting the provisions of subsection (a) or (b) above, each Lender
shall, and does hereby, indemnify the Borrowers and the Agent, and shall make
payment in respect thereof within 10 days after demand therefor, against any and
all Taxes and any and all related losses, claims, liabilities, penalties,
interest and expenses (including the fees, charges and disbursements of any
counsel for the Borrower or the Agent) incurred by or asserted against the
Borrowers or the Agent by any Governmental Body as a result of the failure by
such Lender, as the case may be, to deliver, or as a result of the inaccuracy,
inadequacy or deficiency of, any documentation required to be delivered by such
Lender or Participant, as the case may be, to the Borrowers or the Agent
pursuant to subsection (e). Each Lender hereby authorizes the Agent to set off
and apply any and all amounts at any time owing to such Lender as the case may
be, under this Agreement against any amount due to the Agent under this clause
(ii). The agreements in this clause (ii) shall survive the resignation and/or
replacement of the Agent, any assignment of rights by, or the replacement of, a
Lender, and the repayment, satisfaction or discharge of all Obligations and
termination of this Agreement.

(d) Evidence of Payments. Upon request by the Borrowing Agent or the Agent, as
the case may be, after any payment of Taxes by the Borrowers or by the Agent to
a Governmental Body as provided in this Section 3.10, the Borrowing Agent shall
deliver to the Agent or the Agent shall deliver to the Borrowing Agent, as the
case may be, the original or a certified copy of a receipt issued by such
Governmental Body evidencing such payment, a copy of any return required by
Applicable Laws to report such payment or other evidence of such payment
reasonably satisfactory to the Borrowing Agent or the Agent, as the case may be.

(e) Status of Lenders; Tax Documentation. (i) Each Lender shall deliver to the
Borrowing Agent and to the Agent, at the time or times prescribed by Applicable
Law or when reasonably requested by the Borrowing Agent or the Agent, such
properly completed and executed documentation prescribed by Applicable Law or by
the taxing authorities of any jurisdiction and such other reasonably requested
information as will permit the Borrowing Agent or the Agent, as the case may be,
to determine (A) whether or not payments made hereunder are subject to Taxes,
(B) if applicable, the required rate of withholding or deduction, and (C) such
Lender’s entitlement to any available exemption from, or reduction of,
applicable Taxes in respect of all payments to be made to such Lender by the
Borrowers pursuant to this Agreement or otherwise to establish such Lender’s
status for withholding tax purposes in the applicable jurisdiction.

(ii) Without limiting the generality of the foregoing, if any Borrower is
resident for tax purposes in the United States,

(A) any Lender that is a “United States person” within the meaning of
Section 7701(a)(30) of the Code shall deliver to the Borrowing Agent and the
Agent executed originals of Internal Revenue Service Form W-9 or such other
documentation or information prescribed by Applicable Law or reasonably
requested by the Borrowing Agent or the Agent as will enable the Borrowing Agent
or the Agent, as the case may be, to determine whether or not such Lender is
subject to backup withholding or information reporting requirements; and

 

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(B) each Foreign Lender that is entitled under the Code or any applicable treaty
to an exemption from or reduction of withholding tax with respect to payments
hereunder or shall deliver to the Borrowing Agent and the Agent (in such number
of copies as shall be requested by the recipient) on or prior to the date on
which such Foreign Lender becomes a Lender under this Agreement (and from time
to time thereafter upon the request of the Borrowing Agent or the Agent, but
only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:

(I) executed originals of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is a
party,

(II) executed originals of Internal Revenue Service Form W-8ECI,

(III) executed originals of Internal Revenue Service Form W-8IMY and all
required supporting documentation,

(IV) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of such
Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the Code
and (y) executed originals of Internal Revenue Service Form W-8BEN, or

(V) executed originals of any other form prescribed by Applicable Law as a basis
for claiming exemption from or a reduction in United States Federal withholding
tax together with such supplementary documentation as may be prescribed by
applicable Laws to permit the Borrowing Agent or the Agent to determine the
withholding or deduction required to be made.

(iii) If a payment made to a Lender under this Agreement would be subject to
U.S. Federal withholding tax imposed by FATCA if such Lender fails to comply
with the applicable reporting requirements of FATCA (including those contained
in Section 1471(b) or 1472(b) of the Code, as applicable) or any regulations or
official interpretations thereof, such Foreign Lender shall deliver to the
Borrowing Agent or the Agent, at the time or times prescribed law and at such
time or times reasonably requested by the Borrowing Agent or the Agent, such
documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Borrowing Agent or the Agent to comply with its
obligations under FATCA or to determine the amount to deduct and withhold from
any such payments. For purposes of this Section 3.10(e)(iii), FATCA shall
include any regulations or official interpretations of FATCA.

 

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(iv) Each Lender shall promptly (A) notify the Borrowing Agent and the Agent of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction, and (B) take such steps as shall not be materially
disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the re-designation of its lending office) to
avoid any requirement of Applicable Law of any jurisdiction that the Borrowers
or the Agent make any withholding or deduction for Taxes from amounts payable to
such Lender.

(f) Treatment of Certain Refunds. Unless required by Applicable Law, at no time
shall the Agent have any obligation to file for or otherwise pursue on behalf of
a Lender, or have any obligation to pay to any Lender, any refund of Taxes
withheld or deducted from funds paid for the account of such Lender, as the case
may be. If the Agent, any Lender determines, in its reasonable discretion, that
it has received a refund of any Indemnified Taxes or Other Taxes or with respect
to which the Borrowers have paid additional amounts pursuant to this Section, it
shall pay to the Borrowers an amount equal to such refund (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrowers
under this Section with respect to the Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket expenses incurred by the Agent, such Lender,
as the case may be, and without interest (other than any interest paid by the
relevant Governmental Body with respect to such refund), provided that the
Borrowers, upon the request of the Agent or such Lender, agree to repay the
amount paid over to the Borrowers (plus any penalties, interest or other charges
imposed by the relevant Governmental Body) to the Agent or such Lender in the
event the Agent or such Lender is required to repay such refund to such
Governmental Body. This subsection shall not be construed to require the Agent,
any Lender to make available its Tax returns (or any other information relating
to its Taxes that it deems confidential) to the Borrowers or any other Person.

 

IV. COLLATERAL: GENERAL TERMS

4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Secured Obligations, each Borrower
hereby assigns, pledges and grants to Agent for its benefit and for the ratable
benefit of each Lender a continuing security interest in and to and Lien on all
of its Collateral, whether now owned or existing or hereafter acquired or
arising and wheresoever located. Each Borrower shall mark its books and records
as may be necessary or appropriate to evidence, protect and perfect Agent’s
security interest and shall cause its financial statements to reflect such
security interest. Each Borrower shall promptly, after an Executive Officer
becomes aware thereof, provide Agent with written notice of all commercial tort
claims held by such Borrower which are reasonably likely to result in recovery
by such Borrower of damages in excess of $500,000, such notice to contain the
case title together with the applicable court and a brief description of the
claim(s). Upon delivery of each such notice, such Borrower shall be deemed to
hereby grant to Agent a security interest and lien in and to such commercial
tort claims and all proceeds thereof.

4.2. Perfection of Security Interest. Each Borrower shall take all action that
may be necessary or desirable, or that Agent may request in its Permitted
Discretion, so as at all times to

 

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maintain the validity, perfection, enforceability and priority of Agent’s
security interest in and Lien on the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining Lien Waiver Agreements (other than with respect to
premises at which Collateral with a fair value of $500,000 or less is located),
(iii) delivering to Agent, endorsed or accompanied by such instruments of
assignment as Agent may reasonably specify, and stamping or marking, in such
manner as Agent may specify, any and all chattel paper, instruments, letters of
credits and advices thereof (other than those with a fair value of $500,000 or
less) and documents evidencing or forming a part of the Collateral (other than
Collateral with a fair value of $500,000 or less), (iv) entering into
warehousing, lockbox and other custodial arrangements reasonably satisfactory to
Agent, and (v) executing and delivering financing statements, control
agreements, instruments of pledge, notices and assignments, in each case in form
and substance reasonably satisfactory to Agent, relating to the creation,
validity, perfection, maintenance or continuation of Agent’s security interest
and Lien under the Uniform Commercial Code or other Applicable Law, provided,
however, that (1) Liens on payroll, payroll tax, 401(k), employee spending,
other employee benefit and workers’ compensation deposit accounts need not be
perfected, (2) Liens on disbursement and money market accounts need not be
perfected, (3) Liens on deposit accounts securing Indebtedness described on
Schedule 7.8 need not be perfected, (4) Liens on deposit accounts into which the
proceeds of Receivables received by electronic payments other than from hard
disk drive Customers and SiPi Metals (and no other funds) are deposited need not
be perfected, (5) Liens on vehicles which are subject to a certificate of title
law need not be perfected, provided that the aggregate fair value of such
vehicles does not exceed $500,000 at any given time, (6) Liens on commercial
tort claims need not be valid, perfected or enforceable unless and until a
notice thereof is required to have been delivered to Agent under Section 4.1
hereof and (7) Liens on Intellectual Property need not be perfected to the
extent that any action other than the filing of a Uniform Commercial Code
financing statement would be required to perfect such Liens. By its signature
hereto, each Borrower hereby authorizes Agent to file against such Borrower, one
or more financing, continuation or amendment statements pursuant to the Uniform
Commercial Code in form and substance satisfactory to Agent (which statements
may have a description of collateral which is broader than that set forth
herein). All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrowers’
Account as a Revolving Advance of a Domestic Rate Loan and added to the Secured
Obligations, or, at Agent’s option, shall be paid to Agent for its benefit and
for the ratable benefit of Lenders promptly following demand.

4.3. Disposition of Collateral. Each Borrower will safeguard and protect all
Collateral for Agent’s general account and make no disposition thereof whether
by sale, lease or otherwise except as permitted by Section 7.1 hereof.
Notwithstanding anything to the contrary in this Agreement or any Other
Documents, upon any sale, lease or other disposition of any item of Collateral
in accordance with Section 7.1 hereof to any Person other than a Borrower or
Guarantor, such item of Collateral shall, automatically and without any action
on the part of Agent or any Lender, be released from the Liens granted to Agent
or any Lender under this Agreement or any Other Documents. Upon any release of
Liens on any item of Collateral pursuant to this Section 4.3, Agent shall
(i) execute and deliver to Borrowing Agent, at Borrowing Agent’s expense, all
documents that Borrowing Agent may reasonably request to evidence such release
which are in form and substance reasonably satisfactory to Agent, and (ii) if
such item of Collateral has theretofore been delivered to Agent, return such
item of Collateral to Borrowing Agent.

 

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

4.5. Ownership of Collateral.

(a) With respect to the Collateral, at the time the Collateral becomes subject
to Agent’s security interest: (i) each Borrower shall be the sole owner of and
fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest in each and every item of the its respective
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens and encumbrances whatsoever; (ii) each document
and agreement relating to the Collateral executed by each Borrower and delivered
to Agent or any Lender in connection with this Agreement shall be true and
correct in all material respects; (iii) all signatures and endorsements of each
Borrower that appear on such documents and agreements shall be genuine and each
Borrower shall have full capacity to execute same; and (iv) each Borrower’s
Equipment and Inventory shall be located as set forth on Schedule 4.5 and shall
not be removed from such location(s) without the prior written consent of Agent
(which shall not be unreasonably withheld or delayed) except with respect to the
sale of Inventory in the Ordinary Course of Business and Equipment to the extent
permitted in Section 7.1 hereof.

(b) (i) As of the Closing Date, there is no location at which any Borrower has
any Inventory (except for Inventory in transit) other than those locations
listed on Schedule 4.5; (ii) Schedule 4.5 hereto contains a correct and complete
list, as of the Closing Date, of the addresses of each warehouse at which
Inventory of any Borrower is stored and the legal name of the owner thereof, and
none of the receipts received by any Borrower from any warehouse states that the
goods covered thereby are to be delivered to bearer or to the order of a named
Person or to a named Person and such named Person’s assigns; (iii) Schedule 4.5
hereto sets forth a correct and complete list as of the Closing Date of (A) each
place of business of each Borrower and (B) the chief executive office of each
Borrower; and (iv) Schedule 4.5 hereto sets forth a correct and complete list as
of the Closing Date of the location, by state and street address, of all Real
Property owned or leased by each Borrower, together with the names and addresses
of any landlords.

 

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4.6. Defense of Agent’s and Lenders’ Interests. Subject to the provisions of
Section 4.3 hereof, until (a) payment in full of all of the Secured Obligations,
and (b) termination of this Agreement, Agent’s interests in the Collateral shall
continue in full force and effect. During such period no Borrower shall, without
Agent’s prior written consent, pledge, sell, assign, transfer, create or suffer
to exist a Lien upon or encumber or allow or suffer to be encumbered in any way
any part of the Collateral, except for Permitted Encumbrances and sales,
assignments or transfers permitted by Section 7.1 hereof. Each Borrower shall
defend Agent’s interests in the Collateral against any and all Persons
whatsoever other than the holders of Permitted Encumbrances. At any time
following the occurrence and during the continuance of an Event of Default,
Agent shall have the right to take possession of the indicia of the Collateral
and the Collateral in whatever physical form contained, including: labels,
stationery, documents, instruments and advertising materials. If Agent exercises
this right to take possession of the Collateral, Borrowers shall, upon demand,
assemble it in the best manner possible and make it available to Agent at a
place reasonably convenient to Agent. In addition, with respect to all
Collateral, Agent and Lenders shall be entitled to all of the rights and
remedies set forth herein and further provided by the Uniform Commercial Code or
other Applicable Law. Each Borrower shall at the request of Agent, and Agent
may, at its option, at any time after the occurrence and during the continuance
of an Event of Default, instruct all suppliers, carriers, forwarders,
warehousers or others receiving or holding cash, checks, Inventory, documents or
instruments in which Agent holds a security interest to deliver the same to
Agent and/or subject to Agent’s order and if they shall come into any Borrower’s
possession, they, and each of them, shall be held by such Borrower in trust as
Agent’s trustee, and such Borrower will immediately deliver them to Agent in
their original form together with any necessary endorsement.

4.7. Books and Records. Each Borrower shall (a) keep proper books of record and
account in which full, true and correct entries will be made of all dealings or
transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP
applied in a manner consistent with any material audit adjustments proposed by
such independent public accountant as shall then be regularly engaged by
Borrowers.

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

 

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4.9. Compliance with Laws. Each Borrower shall comply with all Applicable Laws
with respect to the Collateral or any part thereof or to the operation of such
Borrower’s business the non-compliance with which could reasonably be expected
to have a Material Adverse Effect. The Collateral at all times shall be
maintained in accordance with the requirements of all insurance carriers which
provide insurance with respect to the Collateral so that such insurance shall
remain in full force and effect.

4.10. Inspection of Premises. At all reasonable times and, absent the existence
of a Default or an Event of Default, upon reasonable notice, Agent and each
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower’s books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower’s business. Agent, any Lender and their agents may, upon reasonable
notice (absent the existence of a Default or an Event of Default), enter upon
any premises of any Borrower at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower’s business.

4.11. Insurance. The assets and properties of each Borrower at all times shall
be maintained in accordance with the requirements of all insurance carriers
which provide insurance with respect to the assets and properties of such
Borrower so that such insurance shall remain in full force and effect. Each
Borrower shall bear the full risk of any loss of any nature whatsoever with
respect to the Collateral. At each Borrower’s own cost and expense in amounts
and with carriers acceptable to Agent in its Permitted Discretion, each Borrower
shall (a) keep all its insurable properties and properties in which such
Borrower has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower’s including business interruption
insurance; (b) maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to such Borrower insuring against
larceny, embezzlement or other criminal misappropriation of insured’s officers
and employees who may either singly or jointly with others at any time have
access to the assets or funds of such Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker’s compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which such Borrower is engaged in business;
(e) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof, and (ii) appropriate loss
payable endorsements in form and substance satisfactory to Agent in its
Permitted Discretion, naming Agent as an additional insured or lender loss payee
as its interests may appear with respect to all insurance coverage referred to
in clauses (a), (b) and (c) above, and providing (A) that, in the case of
insurance coverage referred to in clauses (a) and (b) above on Collateral, and
clause (c) above as to claims by Agent, all proceeds thereunder shall be payable
to Agent, (B) no such insurance shall be affected by any act or neglect of the
insured or owner of the property described in such policy, and (C) (1) that such
policy and loss payable clauses may not be cancelled or terminated unless at
least thirty (30)

 

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days’ prior written notice (or, in the case of cancellation as a result of
Borrower’s failure to pay premiums due thereunder, at least ten (10) days’ prior
written notice) is given to Agent and (2) that such policy and loss payable
clauses may not be amended unless prompt written notice is given to Agent. In
the event of any loss in respect of Collateral thereunder, the carriers named in
any insurance coverage referred to in clauses (a) and (b) above hereby are
directed by Agent and the applicable Borrower to make payment for such loss to
Agent and not to such Borrower and Agent jointly. If any such insurance losses
are paid by check, draft or other instrument payable to any Borrower and Agent
jointly, Agent may endorse such Borrower’s name thereon and do such other things
as Agent may deem advisable to reduce the same to cash. Agent is hereby
authorized to adjust and compromise claims in excess of $500,000 under insurance
coverage referred to in clauses (a) and (b) above on Collateral. Except as
provided below, all loss recoveries received by Agent upon any such insurance
may be applied to the Secured Obligations, in such order as Agent in its sole
discretion shall determine. Any surplus shall be paid by Agent to Borrowers or
applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrowers to Agent, on demand. Anything hereinabove to the contrary
notwithstanding, and subject to the fulfillment of the conditions set forth
below, Agent shall remit to Borrowing Agent all insurance proceeds received by
Agent during any calendar year under insurance policies procured and maintained
by Borrowers which insure the Collateral, provided that, in the event the amount
of insurance proceeds received by Agent for any occurrence exceeds $100,000,
then Agent shall not be obligated to remit the insurance proceeds to Borrowing
Agent unless Borrowing Agent shall provide Agent with evidence reasonably
satisfactory to Agent that the insurance proceeds will be used by Borrowers to
repair, replace or restore the insured property which was the subject of the
insurable loss. The agreement of Agent to remit insurance proceeds in the manner
above provided shall be subject in each instance to satisfaction of each of the
following conditions: (x) no Event of Default or Default shall then have
occurred and be continuing, and (y) Borrowers shall use such insurance proceeds
to repair, replace or restore the insurable property which was the subject of
the insurable loss and for no other purpose.

4.12. Failure to Pay Insurance. If any Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and pay the premium therefor on behalf of such
Borrower, and charge Borrowers’ Account therefor as a Revolving Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Secured
Obligations.

4.13. Payment of Taxes. Each Borrower will pay, when due, all Taxes lawfully
levied or assessed upon such Borrower or any of the Collateral including real
and personal property taxes, assessments and charges and all franchise, income,
employment, social security benefits, withholding, and sales taxes; provided
that the failure to pay Taxes in an aggregate amount not exceeding $10,000 shall
not be a breach of this Section 4.13. If any Taxes in an aggregate amount
exceeding $10,000 lawfully levied or assessed upon any Borrower or any of the
Collateral remain unpaid after the date fixed for their payment, or if any claim
shall be made which, in Agent’s or any Lender’s opinion arrived at in the
exercise of its Permitted Discretion, could reasonably be expected to create a
valid Lien on the Collateral, Agent may without notice to Borrowers pay the
Taxes and each Borrower hereby indemnifies and holds Agent and each Lender
harmless in respect thereof. Notwithstanding the foregoing, no Borrower will be
required to pay, and Agent will not pay, any Taxes to the extent that any
applicable Borrower has

 

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Properly Contested those Taxes. The amount of any payment by Agent under this
Section 4.13 shall be charged to Borrowers’ Account as a Revolving Advance
maintained as a Domestic Rate Loan and added to the Secured Obligations and,
until Borrowers shall furnish Agent with an indemnity therefor (or supply Agent
with evidence satisfactory to Agent in the exercise of its Permitted Discretion
that due provision for the payment thereof has been made), Agent may hold
without interest any balance standing to Borrowers’ credit and Agent shall
retain its security interest in and Lien on any and all Collateral held by
Agent.

4.14. Payment of Leasehold Obligations. Each Borrower shall at all times pay,
when and as due, its rental obligations under all leases of Real Property under
which it is a tenant, and shall otherwise comply, in all material respects, with
all other terms of such leases (except where failure to make such payments or
comply with such terms is not reasonably likely to have a Material Adverse
Effect) and, at Agent’s request will provide evidence of having done so.

4.15. Receivables.

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

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

(c) Location of Borrowers. Each Borrower’s chief executive office as of the
Closing Date is located at 40 West Highland Park Drive NE, Hutchinson,
Minnesota. Until written notice is given to Agent by Borrowing Agent of any
other office at which any Borrower keeps its records pertaining to Receivables,
all such records shall be kept at such executive office.

(d) Collection of Receivables. Until any Borrower’s authority to do so is
terminated by notice given by Agent (which notice Agent may give at any time
following the occurrence and during the continuance of an Event of Default) each
Borrower will, at such Borrower’s sole cost and expense, but on Agent’s behalf
and for Agent’s account, collect as Agent’s property and in trust for Agent all
amounts received on Receivables, and, to the extent the same are required to be
deposited in the Blocked Account or Depository Accounts, shall not commingle
such collections with any Borrower’s funds or use the same except to pay Secured
Obligations. To the extent required by Section 4.15(h), each Borrower shall
deposit in the

 

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Blocked Account or Depository Accounts or, upon request by Agent, deliver to
Agent, in original form and on the date of receipt thereof, all checks, drafts,
notes, money orders, acceptances, cash and other evidences of Indebtedness
collected in respect of the Collateral. The value of any payments made in Thai
Baht which are received by Agent pursuant this Agreement shall be deemed to be
the Equivalent Amount of such payments determined on the Application Date.

(e) Notification of Assignment of Receivables. At any time following the
occurrence and during the continuance of an Event of Default, Agent shall have
the right to send notice of the assignment of, and Agent’s security interest in
and Lien on, the Receivables to any and all Customers or any third party holding
or otherwise concerned with any of the Collateral. Thereafter, Agent shall have
the sole right to collect the Receivables, take possession of the Collateral, or
both. Agent’s actual collection expenses, including, but not limited to,
stationery and postage, telephone and telegraph, secretarial and clerical
expenses and the salaries of any collection personnel used for collection, may
be charged to Borrowers’ Account and added to the Secured Obligations.

(f) Power of Agent to Act on Borrowers’ Behalf. Agent shall have the right to
receive, endorse, assign and/or deliver in the name of Agent or any Borrower any
and all checks, drafts and other instruments for the payment of money relating
to the Receivables, and each Borrower hereby waives notice of presentment,
protest and non-payment of any instrument so endorsed. Each Borrower hereby
constitutes Agent or Agent’s designee as such Borrower’s attorney with power
(i) to endorse such Borrower’s name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment or Collateral; (ii) to sign such
Borrower’s name on any invoice or bill of lading relating to any of the
Receivables, drafts against Customers, assignments and verifications of
Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to
sign such Borrower’s name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Agent to preserve, protect, or
perfect Agent’s interest in the Collateral and to file same; (v) to demand
payment of the Receivables; (vi) to enforce payment of the Receivables by legal
proceedings or otherwise; (vii) to exercise all of such Borrower’s rights and
remedies with respect to the collection of the Receivables and any other
Collateral; (viii) to settle, adjust, compromise, extend or renew the
Receivables; (ix) to settle, adjust or compromise any legal proceedings brought
to collect Receivables; (x) to prepare, file and sign such Borrower’s name on a
proof of claim in bankruptcy or similar document against any Customer; (xi) to
prepare, file and sign such Borrower’s name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(xii) to do all other acts and things necessary to carry out this Agreement;
provided that, except with respect to the foregoing sub-clause (iv), Agent may
only exercise such power of attorney following the occurrence and during the
continuance of an Event of Default. All such acts of said attorney or designee
are hereby ratified and approved, and said attorney or designee shall not be
liable for any acts of omission or commission nor for any error of judgment or
mistake of fact or of law, unless done willfully or with gross (not mere)
negligence (as determined by a court of competent jurisdiction in a final
non-appealable judgment) or beyond the scope of the authority granted hereby;
this power being coupled with an interest is irrevocable until the Secured
Obligations are paid in full. Agent shall have the right at any time following
the occurrence and during the continuance of an Event of Default or Default, to
change the address for delivery of mail addressed to any Borrower to such
address as Agent may designate and to receive, open and dispose of all mail
addressed to any Borrower.

 

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(g) No Liability. Neither Agent nor any Lender shall, under any circumstances or
in any event whatsoever, have any liability for any error or omission or delay
of any kind occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof, or for any damage
resulting therefrom, except to the extent arising from such Agent’s or Lender’s
failure to act in a commercially reasonable manner if it has exercised secured
lender remedies against such Receivables. Following the occurrence and during
the continuance of an Event of Default, Agent may, without notice or consent
from any Borrower, sue upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto and/or
release any obligor thereof. Agent is authorized and empowered to accept
following the occurrence and during the continuance of an Event of Default the
return of the goods represented by any of the Receivables, without notice to or
consent by any Borrower, all without discharging or in any way affecting any
Borrower’s liability hereunder.

(h) Establishment of a Lockbox Account, Dominion Account. All proceeds of
Collateral (i) received by electronic payments from hard disk drive Customers or
SiPi Metals Corp. (other than in respect of Thai Receivables) shall be deposited
by Borrowers into either (a) a lockbox account, dominion account or such other
“blocked account” (“Blocked Accounts”) established at a bank or banks (each such
bank, a “Blocked Account Bank”) pursuant to an arrangement with such Blocked
Account Bank as may be selected by Borrowing Agent and be acceptable to Agent or
(b) depository accounts (“Depository Accounts”) established at the Agent for the
deposit of such proceeds, (ii) received by electronic payments in respect of
Thai Receivables shall be paid by the applicable Customer into the deposit
account set forth in Annex I of the Thai Assignment for further credit to a
Blocked Account or Depository Account or (iii) received by check shall be
deposited by Borrowers no less often than weekly into accounts at Citizens Bank,
the funds in which accounts shall be forwarded to a Blocked Account or
Depository Account no later than the first Business Day following the date on
which said checks are deposited. Each applicable Borrower, Agent and each
Blocked Account Bank shall enter into a deposit account control agreement in
form and substance reasonably satisfactory to Agent directing such Blocked
Account Bank to transfer such funds so deposited to Agent, either to any account
maintained by Agent at said Blocked Account Bank or by wire transfer to
appropriate account(s) of Agent. All funds deposited in such Blocked Accounts
shall immediately become the property of Agent and Borrowing Agent shall obtain
the agreement by such Blocked Account Bank to waive any offset rights against
the funds so deposited (subject to customary exceptions). Neither Agent nor any
Lender assumes any responsibility for such blocked account arrangement,
including any claim of accord and satisfaction or release with respect to
deposits accepted by any Blocked Account Bank thereunder. All deposit accounts
and investment accounts of each Borrower and its Subsidiaries as of the Closing
Date are set forth on Schedule 4.15(h) and no additional such accounts (other
than those on which the Liens of the Agent need not be perfected as provided in
Section 4.2) shall be opened by any Borrower except if subject to a control
agreement reasonably satisfactory to Agent.

 

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

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

4.17. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved,
except where the failure to so maintain and preserve the value and operating
efficiency of such Equipment could not reasonably be expected to have a Material
Adverse Effect. No Borrower shall use or operate the Equipment in violation of
any law, statute, ordinance, code, rule or regulation, except where such
violation could not reasonably be expected to have a Material Adverse Effect.
Each Borrower shall have the right to sell or dispose of Equipment to the extent
set forth in Section 7.1 hereof.

4.18. Exculpation of Liability. Nothing herein contained shall be construed to
constitute Agent or any Lender as any Borrower’s agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof (except to
the extent caused by such Agent’s or Lender’s gross negligence or willful
misconduct). Neither Agent nor any Lender, whether by anything herein or in any
assignment or otherwise, assume any of any Borrower’s obligations under any
contract or agreement assigned to Agent or such Lender, and neither Agent nor
any Lender shall be responsible in any way for the performance by any Borrower
of any of the terms and conditions thereof.

4.19. Environmental Matters.

(a) Except for events, conditions or occurrences that could not reasonably be
expected to have a Material Adverse Effect:

(i) Borrowers shall ensure that the Real Property and all operations and
businesses conducted thereon remains in compliance with all Environmental Laws
and they shall not place or permit to be placed any Hazardous Substances on any
Real Property except as permitted by Applicable Law or appropriate governmental
authorities.

(ii) Borrowers shall establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.

(iii) Borrowers shall (i) employ in connection with the use of the Real Property
appropriate technology necessary to maintain compliance with any applicable
Environmental Laws and (ii) dispose of any and all Hazardous Waste generated at
the Real

 

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Property only at facilities and with carriers that maintain valid permits under
RCRA and any other applicable Environmental Laws. Borrowers shall use their best
efforts to obtain certificates of disposal, such as hazardous waste manifest
receipts, from all treatment, transport, storage or disposal facilities or
operators employed by Borrowers in connection with the transport or disposal of
any Hazardous Waste generated at the Real Property.

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

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

(b) Borrowers shall respond promptly to any Hazardous Discharge or Environmental
Complaint and take all necessary action in order to safeguard the health of any
Person (unless failure to do so could not reasonably be expected to have a
Material Adverse Effect) and to avoid subjecting the Collateral or Real Property
to any Lien under any Environmental Laws. If any Borrower shall fail to respond
promptly to any Hazardous Discharge or Environmental Complaint or any Borrower
shall fail to comply with any of the requirements of any Environmental Laws and
any such failure could reasonably be expected to have a Material Adverse Effect,
Agent on behalf of Lenders may, but without the obligation to do so, for the
sole purpose of protecting Agent’s interest in the Collateral: (A) give such
notices or (B) enter onto the Real Property (or authorize third parties to enter
onto the Real Property) and take such actions as Agent (or such third parties as
directed by Agent) deem reasonably necessary or advisable, to clean up, remove,
mitigate or otherwise deal with any such Hazardous Discharge or Environmental
Complaint. All reasonable costs and expenses incurred by Agent

 

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and Lenders (or such third parties) in the exercise of any such rights,
including any sums paid in connection with any judicial or administrative
investigation or proceedings, fines and penalties, together with interest
thereon from the date expended at the Default Rate for Domestic Rate Loans
constituting Revolving Advances shall be paid promptly following demand by
Borrowers, and until paid shall be added to and become a part of the Secured
Obligations.

(c) Following the occurrence and during the continuance of an Event of Default,
and in the event the Agent reasonably believes that an environmental condition
affecting the Real Property could have a Material Adverse Effect, then promptly
upon the written request of Agent from time to time, Borrowers shall provide
Agent, at Borrowers’ expense, with an environmental site assessment or
environmental audit report prepared by an environmental engineering firm
acceptable in the reasonable opinion of Agent, to assess with a reasonable
degree of certainty the existence of a Hazardous Discharge and the potential
costs in connection with abatement, cleanup and removal of any Hazardous
Substances found on, under, at or within the Real Property. Any report or
investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean-up of such Hazardous
Discharge shall be acceptable to Agent. If such estimates, individually or in
the aggregate, exceed $500,000, Agent shall have the right to require Borrowers
to post a bond, letter of credit or other security reasonably satisfactory to
Agent to secure payment of these costs and expenses.

(d) Borrowers shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including reasonable attorney’s fees, suffered or incurred by
Agent or Lenders under or on account of any Environmental Laws, including the
assertion of any Lien thereunder, with respect to any Hazardous Discharge or the
presence of any Hazardous Substances affecting the Real Property, whether or not
the same originates or emerges from the Real Property or any contiguous real
estate, except to the extent such loss, liability, damage, expense, claim, cost,
fine or penalty is attributable to any Hazardous Discharge resulting from
actions on the part of Agent or any Lender. Borrowers’ obligations under this
Section 4.19 shall arise upon the discovery of the presence of any Hazardous
Substances at the Real Property, whether or not any federal, state, or local
environmental agency has taken or threatened any action in connection with the
presence of any Hazardous Substances. Borrowers’ obligation and the
indemnifications hereunder shall survive the termination of this Agreement.

(e) For purposes of Section 4.19 and 5.7, all references to Real Property shall
be deemed to include all of each Borrower’s right, title and interest in and to
its owned and leased premises.

 

V. REPRESENTATIONS AND WARRANTIES.

Each Borrower represents and warrants as follows:

5.1. Authority. This Agreement and the Other Documents to which it is a party
have been duly executed and delivered by each Borrower, and this Agreement and
the Other Documents to which it is a party constitute the legal, valid and
binding obligation of such Borrower enforceable in accordance with their terms,
except as such enforceability may be

 

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limited by any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors’ rights generally or general principles of equity. The
execution, delivery and performance of this Agreement and of the Other Documents
to which it is a party (a) are within such Borrower’s corporate powers, have
been duly authorized by all necessary corporate action, are not in contravention
of law or the terms of such Borrower’s by-laws, certificate of incorporation or
other applicable documents relating to such Borrower’s formation or of any
material agreement or undertaking to which such Borrower is a party or by which
such Borrower is bound or which affects the Collateral, (b) will not conflict
with or violate any law or regulation, or any judgment, order or decree of any
Governmental Body, (c) will not require the Consent of any Governmental Body or
any other Person, except those Consents set forth on Schedule 5.1 hereto, all of
which will have been duly obtained, made or compiled prior to the Closing Date
and which are in full force and effect and (d) will not result in the creation
of any Lien except Permitted Encumbrances upon any asset of such Borrower under
the provisions of any agreement, charter document, instrument, by-law, mortgage,
indenture, contract or other instrument to which such Borrower is a party or by
which it or its property is a party or by which it may be bound, including under
the provisions of the Indenture Documentation.

5.2. Formation and Qualification.

(a) Each Borrower (unless merged into another Borrower after the Closing Date in
accordance with Section 7.1 hereof) is duly incorporated and in good standing
under the laws of the state listed on Schedule 5.2(a) and is qualified to do
business and is in good standing in all states in which qualification and good
standing are necessary for such Borrower to conduct its business and own its
property and where the failure to so qualify could reasonably be expected to
have a Material Adverse Effect. All states in which a Borrower is qualified to
do business and is in good standing as of the date hereof are listed on Schedule
5.2(a). Each Borrower has delivered to Agent true and complete copies of its
certificate of incorporation and by-laws and will promptly notify Agent of any
amendment or changes thereto.

(b) The only Subsidiaries of each Borrower as of the date hereof are listed on
Schedule 5.2(b).

5.3. Survival of Representations and Warranties. All representations and
warranties of such Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower’s execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.

5.4. Tax Returns. Each Borrower’s federal tax identification number is set forth
on Schedule 5.4. Each Borrower has filed all federal, state and local Tax
returns and other reports each is required by law to file and has paid all Taxes
that are due and payable other than those that are being Properly Contested;
provided that the failure to pay Taxes in an aggregate amount not exceeding
$10,000 shall not be a breach of this Section 5.4. Federal, state and local
income tax returns of each Borrower have been examined and reported upon by the
appropriate taxing authority or closed by applicable statute as set forth on
Schedule 5.4. The provision for Taxes on the books of each Borrower is adequate
in all material respects for all years not closed by applicable statutes, and
for its current fiscal year, and no Borrower has any knowledge of any deficiency
or additional assessment in connection therewith not provided for on its books.

 

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5.5. Financial Statements.

(a) The pro forma balance sheet of Borrowers on a Consolidated Basis (the “Pro
Forma Balance Sheet”) furnished to Agent on the Closing Date reflects the
consummation of the transactions contemplated under this Agreement to be
effected on the Closing Date (collectively, the “Transactions”) and, in all
material respects, is accurate, complete and correct and fairly reflects the
financial condition of Borrowers on a Consolidated Basis as of August 21, 2011
after giving effect on a proforma basis on such date to the Transactions, and
has been prepared in accordance with GAAP, consistently applied (but for the
absence of footnote disclosures and subject to normal year-end audit
adjustments). The Pro Forma Balance Sheet has been certified as accurate,
complete and correct in all material respects by the President and Chief
Financial Officer of Borrowing Agent on Borrowing Agent’s behalf.

(b) The twelve-month cash flow projections of Borrowers on a Consolidated Basis
and their projected balance sheets as of the Closing Date, copies of which are
annexed hereto as Exhibit 5.5(b) (the “Projections”), were prepared by or under
the direction of the Chief Financial Officer of HTI, are based on underlying
assumptions which, as of the date of this Agreement, provide a reasonable basis
for the projections contained therein and, as of the date of this Agreement,
reflect Borrowers’ judgment based on present circumstances of the most likely
set of conditions and course of action for the projected period. The cash flow
Projections together with the Pro Forma Balance Sheet, are referred to as the
“Pro Forma Financial Statements”.

(c) The consolidated balance sheet of Borrowers, their Subsidiaries and such
other Persons described therein (including the accounts of all Subsidiaries for
the respective periods during which a subsidiary relationship existed) as of
August 21, 2011, and the related statements of income and cash flow for the
period ended on such date, copies of which have been delivered to Agent, have
been prepared in accordance with GAAP, consistently applied (except for the
absence of footnote disclosures and subject to year-end audit adjustments) and
present fairly in all material respects the consolidated financial position of
Borrowers and their Subsidiaries at such date and the consolidated results of
their operations for such period (except for the absence of footnote disclosures
and subject to normal year-end audit adjustments). Since August 21, 2011 there
has been no material adverse change in the condition, financial or otherwise, of
Borrowers and their Subsidiaries (taken as a whole) as shown on the consolidated
balance sheet as of such date. From August 21, 2011 to the date hereof, there
has been no change in the aggregate value of machinery, equipment and Real
Property owned by Borrowers and their respective Subsidiaries, except changes in
the Ordinary Course of Business, none of which individually or in the aggregate
has been materially adverse.

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

 

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5.7. O.S.H.A. and Environmental Compliance.

(a) Except for non-compliance (and citations, notices or orders of
non-compliance) that could not reasonably be expected to have a Material Adverse
Effect, each Borrower has duly complied with, and its facilities, business,
assets, property, leaseholds, Real Property and Equipment are in compliance in
all material respects with, the provisions of the Federal Occupational Safety
and Health Act, the Environmental Protection Act, RCRA and all other
Environmental Laws; there have been no outstanding citations, notices or orders
of non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.

(b) Except for matters that could not reasonably be expected to have a Material
Adverse Effect, each Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.

(c) Except for Releases or other matters that could not reasonably be expected
to have a Material Adverse Effect: (i) there are no visible signs of releases,
spills, discharges, leaks or disposal (collectively referred to as “Releases”)
of Hazardous Substances at, upon, under or within any Real Property or any
premises leased by any Borrower; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property or any premises leased by any
Borrower; (iii) neither the Real Property nor any premises leased by any
Borrower has ever been used as a treatment, storage or disposal facility of
Hazardous Waste; and (iv) no Hazardous Substances are present on the Real
Property or any premises leased by any Borrower, excepting such quantities as
are handled in accordance with all applicable manufacturer’s instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of any Borrower or of its tenants.

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

(a) At the Closing Date, after giving effect to the Transactions and all rights
of contribution arising therefrom, each Borrower will be solvent, able to pay
its debts as they mature, and have capital sufficient to carry on its business
and all businesses in which it is about to engage, and the fair present saleable
value of its assets, calculated on a going concern basis will be in excess of
the amount of its liabilities.

(b) Except as disclosed in Schedule 5.8(b), no Borrower has (i) any litigation,
arbitration, actions or proceedings pending or, to the best of Borrowers’
knowledge, threatened against it which could reasonably be expected to have a
Material Adverse Effect, and (ii) any indebtedness for borrowed money other than
the Obligations and other Indebtedness permitted by Section 7.8 hereof.

(c) No Borrower is in violation of any applicable statute, law, rule, regulation
or ordinance in any respect which could reasonably be expected to have a
Material Adverse Effect, nor is any Borrower in violation of any order of any
court, Governmental Body or arbitration board or tribunal in any respect which
could reasonably be expected to have a Material Adverse Effect.

 

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(d) No Borrower nor any member of the Controlled Group maintains or contributes
to any Plan other than (i) as of the Closing Date, those listed on Schedule
5.8(d) hereto and (ii) thereafter, as permitted under this Agreement. (i) No
determination has been made that a Plan is in “at risk” status (within the
meaning of Section 303 of ERISA and Section 430 of the Code); (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code; (iii) neither
any Borrower nor any member of the Controlled Group has incurred any liability
to the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid; (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan; (v) as of the date of this Agreement, the current
value of the assets of each Pension Benefit Plan exceeds the present value of
the accrued benefits and other liabilities of such Plan and neither any Borrower
nor any member of the Controlled Group knows of any facts or circumstances which
would materially change the value of such assets and accrued benefits and other
liabilities; (vi) neither any Borrower nor any member of the Controlled Group
has breached any of the responsibilities, obligations or duties imposed on it by
ERISA with respect to any Plan; (vii) neither any Borrower nor any member of a
Controlled Group has incurred any material liability for any excise tax arising
under Section 4972 or 4980B of the Code, and no fact exists which could give
rise to any such liability; (viii) neither any Borrower nor any member of the
Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged
in a non-exempt “prohibited transaction” described in Section 406 of the ERISA
or Section 4975 of the Code nor taken any action which would constitute or
result in a Termination Event with respect to any such Plan which is subject to
ERISA; (ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan; (x) there exists no
Reportable Event; (xi) neither any Borrower nor any member of the Controlled
Group has any fiduciary responsibility for investments with respect to any plan
existing for the benefit of persons other than employees or former employees of
any Borrower and any member of the Controlled Group; (xii) neither any Borrower
nor any member of the Controlled Group maintains or contributes to any Plan
which provides health, accident or life insurance benefits to former employees,
their spouses or dependents, other than in accordance with Section 4980B of the
Code, except to the extent maintenance of, or contribution to, such Plan could
not reasonably be expected to have a Material Adverse Effect; (xiii) neither any
Borrower nor any member of the Controlled Group has withdrawn, completely or
partially, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980 and there exists no fact which
would reasonably be expected to result in any such liability, except to the
extent such liability could not reasonably be expected to have a Material
Adverse Effect; and (xiv) no Plan fiduciary (as defined in Section 3(21) of
ERISA) has any liability for breach of fiduciary duty or for any failure in
connection with the administration or investment of the assets of a Plan.

5.9. Patents, Trademarks, Copyrights and Licenses. As of the date of this
Agreement, all items of Registered IP owned by any Borrower are set forth on
Schedule 5.9, are valid and, to the extent same are material, have been duly
registered or filed with all appropriate Governmental Bodies, and there is no
objection to or pending challenge to the validity of any such Registered IP and
no Borrower is aware of any grounds for any challenge, except in any such case
(i) as set forth in Schedule 5.9 hereto or (ii) where such objection or
challenge could

 

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not reasonably be expected to have a Material Adverse Effect. Each item of
Registered IP owned by any Borrower and all trade secrets used by any Borrower
consist of original material or property developed by such Borrower or was
lawfully acquired by such Borrower from the proper and lawful owner thereof.
Each of such items has been maintained so as to preserve the value thereof from
the date of creation or acquisition thereof except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.

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

5.11. Default of Indebtedness. As of the date hereof, no Borrower is in default
in the payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder for the
payment of the principal of or interest on any Indebtedness.

5.12. No Default. No Borrower is in default in the payment or performance of any
of its contractual obligations (other than contractual obligations for the
payment of the principal of or interest on any Indebtedness), exceeding
$1,000,000 in the aggregate, beyond any period of grace provided with respect
thereto, and no Default has occurred and is continuing.

5.13. No Burdensome Restrictions. No Borrower is party to any contract or
agreement the performance of which could reasonably be expected to have a
Material Adverse Effect. No Borrower has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.

5.14. No Labor Disputes. No Borrower is involved in any labor dispute and there
are no strikes or walkouts of any Borrower’s employees in existence or, to the
best of the Borrowers’ knowledge, threatened in each case except to the extent
such disputes, strikes or walkouts could not reasonably be expected to have a
Material Adverse Effect, and no union contract existing on the Closing Date is
scheduled to expire during the Term other than as set forth on Schedule 5.14
hereto.

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

 

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

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

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

5.19. Swaps. No Borrower is, as of the date of this Agreement, a party to any
swap agreement whereby such Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited “two-way basis”
without regard to fault on the part of either party.

5.20. [Reserved].

5.21. Application of Certain Laws and Regulations. Neither any Borrower nor any
Subsidiary of any Borrower is subject to any law, statute, rule or regulation
which regulates the incurrence of any Indebtedness, including laws, statutes,
rules or regulations relative to common or interstate carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public utility
services.

5.22. Business and Property of Borrowers. At the Closing Date, except as
described in Schedule 5.22, Borrowers do not propose to engage in any business
other than the manufacture and distribution of disk drive components and
biotechnology measurement devices and activities necessary to conduct the
foregoing. On the Closing Date, to the best of Borrower’s knowledge, each
Borrower will own, lease or license all the property and possess all of the
rights and Consents necessary for the conduct of the business of such Borrower
(except where failure to do so could not reasonably be expected to have a
Material Adverse Effect).

5.23. Section 20 Subsidiaries. Borrowers do not intend to use and shall not use
any portion of the proceeds of the Advances, directly or indirectly, to purchase
during the underwriting period, or for 30 days thereafter, Ineligible Securities
being underwritten by a Section 20 Subsidiary.

 

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5.24. Anti-Terrorism Laws.

(a) General. Neither any Borrower nor any Affiliate of any Borrower (other than
a Person who is (i) an Affiliate of a Borrower solely because it has the power,
direct or indirect, to vote 10% or more of the Equity Interests having ordinary
voting power for the election of directors of such Borrower or other Persons
performing similar functions for such Borrower and (ii) not a direct or indirect
parent of such Borrower) is in violation of any Anti-Terrorism Law or engages in
or conspires to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law.

(b) Executive Order No. 13224. Neither any Borrower nor any Affiliate of any
Borrower or their respective agents acting or benefiting in any capacity in
connection with the Advances or other transactions hereunder, is any of the
following (each a “Blocked Person”):

(i) a Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;

(ii) a Person owned or controlled by, or acting for or on behalf of, any Person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order No. 13224;

(iii) a Person or entity with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law;

(iv) a Person or entity that commits, threatens or conspires to commit or
supports “terrorism” as defined in the Executive Order No. 13224;

(v) a Person or entity that is named as a “specially designated national” on the
most current list published by the U.S. Treasury Department Office of Foreign
Asset Control at its official website or any replacement website or other
replacement official publication of such list, or

(vi) a Person or entity who is affiliated or associated with a Person or entity
listed above.

Neither any Borrower nor to the knowledge of any Borrower, any of its agents
acting in any capacity in connection with the Advances or other transactions
hereunder (i) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (ii) deals in, or otherwise engages in any transaction relating to,
any property or interests in property blocked pursuant to the Executive Order
No. 13224.

5.25. Trading with the Enemy. No Borrower has engaged, nor does it intend to
engage, in any business or activity prohibited by the Trading with the Enemy
Act.

5.26. Inactive Subsidiaries. No Inactive Subsidiary (i) engages in any business
or conducts any operations other than the provision of customer support and
service and operations incidental thereto and to the ownership of Equity
Interests in its Subsidiaries, (ii) owns assets, other than Equity Interests in
its Subsidiaries, having a fair market value of more than $1,500,000 in the
aggregate or (iii) has any outstanding obligations or liabilities in respect of
any Indebtedness for borrowed money.

 

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VI. AFFIRMATIVE COVENANTS.

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

6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees and
expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrowers’ Account for all such fees and expenses.

6.2. Conduct of Business and Maintenance of Existence and Assets. (a) Conduct
continuously and operate actively its business according to good business
practices and maintain all of its material tangible properties useful or
necessary in its business in good working order and condition (reasonable wear
and tear excepted and except as may be disposed of in accordance with the terms
of this Agreement), and take all actions necessary to enforce and protect the
validity of any intellectual property right or other right included in the
Collateral (except where failure to take such action could not reasonably be
expected to have a Material Adverse Effect); (b) except as a result of mergers
permitted by Section 7.1 hereof, keep in full force and effect its existence and
comply in all material respects with the laws and regulations governing the
conduct of its business where the failure to do so could reasonably be expected
to have a Material Adverse Effect; and (c) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any political
subdivision thereof (except where failure to take such action could not
reasonably be expected to have a Material Adverse Effect).

6.3. Violations. Promptly notify Agent in writing of any violation of any law,
statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Borrower which could reasonably be expected to have a
Material Adverse Effect.

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

 

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6.5. Financial Covenants.

(a) Fixed Charge Coverage Ratio. Cause to be maintained a Fixed Charge Coverage
Ratio as of the end of each period set forth below of not less than the
corresponding Fixed Charge Coverage Ratio for such period set forth below:

 

Period

   Fixed
Charge
Coverage
Ratio  

For the fiscal quarter ending on December 25, 2011

     1.05: 1.00   

For the two fiscal quarters ending March 25, 2012

     1.05: 1.00   

For the three fiscal quarters ending June 24, 2012

     1.05: 1.00   

For the four fiscal quarters ending September 30, 2012, and for each four fiscal
quarter period ending on the last day of each fiscal quarter thereafter

     1.05: 1.00   

(b) Minimum EBITDA. Cause EBITDA to be not less than the amount set forth below
for the corresponding period set forth below:

 

Period

   EBITDA  

For the period commencing on the first day of the fiscal month in which the
Closing Date occurs and ending September 25, 2011

   $ (12,000,000 ) 

For the period commencing on the first day of the fiscal month in which the
Closing Date occurs and ending December 25, 2011

   $ (10,000,000 ) 

(c) Minimum Liquidity. At all times, measured monthly, prior to a Compliance
Event cause Liquidity to be not less than $20,000,000.

6.6. Execution of Supplemental Instruments. Execute and deliver to Agent from
time to time, upon demand, such supplemental agreements, statements, assignments
and transfers, or instructions or documents relating to the Collateral, and such
other instruments as Agent may reasonably request, in order that the full intent
of this Agreement may be carried into effect.

6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or before
maturity (subject, where applicable, to specified grace periods and, in the case
of the trade payables, to normal payment practices) all its obligations and
liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.

 

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6.8. Standards of Financial Statements. Cause all financial statements referred
to in Sections 9.7, 9.8, 9.9, 9.10 and 9.11 as to which GAAP is applicable to be
complete and correct in all material respects and to be prepared in reasonable
detail and in accordance with GAAP applied on a basis consistent with prior
practices, except as concurred in by such reporting accountants or officer, as
the case may be, and disclosed therein (provided that (a) interim financial
statements need not contain footnote disclosures and may be subject to normal
year-end or quarter-end adjustments, and (b) financial statements for the first
fiscal month of each fiscal quarter need not reflect all accrued expenses).

6.9. [Reserved.]

6.10. Appraisal. (a) Deliver to Agent within sixty (60) days following the
Closing Date and in six (6) month intervals thereafter, at Borrowers’ sole
expense, an appraisal of the net orderly liquidation value of Borrowers’
Inventory, in form satisfactory to Agent in its Permitted Discretion, performed
by an appraiser satisfactory to Agent in Agent’s Permitted Discretion.

6.11. Maintenance of Deposit Account. Maintain at all times following the
Closing Date a Depository Account with Agent with a cash balance not less than
$15,000,000 (which, for the avoidance of doubt, shall not constitute restricted
cash).

 

VII. NEGATIVE COVENANTS.

No Borrower shall, until payment in full of the Obligations and termination of
this Agreement:

7.1. Merger, Consolidation, Acquisition and Sale of Assets.

(a) Enter into any merger, consolidation or other reorganization with or into
any other Person or acquire all or a substantial portion of the assets or Equity
Interests of any Person or permit any other Person to consolidate with or merge
with it.

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

(c) Notwithstanding anything to the contrary stated in Section 7.1(a) or (b),
(i) any Borrower may merge with or into or be consolidated with any other
Borrower or any Subsidiary of a Borrower (as long as the entity surviving such
merger or consolidation is a Borrower), (ii) any Borrower may sell, lease,
transfer or otherwise dispose of all or any part of its properties or assets to
any other Borrower or acquire all or any part of the properties or assets of any
other Borrower or any Subsidiary of a Borrower, (iii) any Borrower may make
Investments permitted by Section 7.4 hereof, (iv) any Borrower may sell
Inventory in the Ordinary Course of Business, (v) any Borrower may transfer or
otherwise dispose of obsolete or worn-out Equipment in the Ordinary Course of
Business, (vi) any Borrower may sell Investments described in clauses
(a) through (d) of Section 7.4 hereof, (vii) any Borrower may license or
sublicense to other Persons the right to use Intellectual Property in the
Ordinary Course of Business or in the settlement of any litigation or claims in
respect of Intellectual Property, (viii) any Borrower may sell, lease, transfer
or otherwise dispose of Real Property, (ix) any Borrower may sell Equipment for
fair value (as determined by transfer pricing studies completed from time to
time at the direction of HTI) to the Thai Subsidiary, and (x) any Borrower may
sell, lease,

 

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transfer or otherwise dispose of other property or assets provided that the
aggregate fair value of all property and assets sold, leased, transferred or
otherwise disposed of pursuant to this clause (x) does not exceed $1,500,000 per
fiscal year.

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

7.3. Guarantees. Become liable upon the obligations or liabilities of any other
Person by assumption, endorsement or guaranty thereof or otherwise (other than
to Agent or Lenders) except (a) the endorsement of checks in the Ordinary Course
of Business, (b) the assumption or guaranty of obligations or liabilities of any
other Borrower, (c) assumptions, endorsements and guaranties described in
Schedule 7.3, and (d) guaranties of obligations or liabilities of any Subsidiary
of a Borrower that is not a Borrower, provided that the sum (without
duplication) of the maximum aggregate outstanding principal amount of the
obligations and liabilities so guaranteed plus the aggregate amount (net of
returns thereon) of all Investments made pursuant to clause (g) of Section 7.4
hereof plus the aggregate outstanding principal amount of all loans made
pursuant to clause (c) of Section 7.5 hereof shall not exceed $25,000,000 in the
aggregate for all such Subsidiaries at any given time.

7.4. Investments. Purchase or acquire Indebtedness or Equity Interests of, or
any other ownership interest in, any Person (“Investments”), except
(a) obligations issued or guaranteed by the United States of America or any
agency thereof, (b) commercial paper with maturities of not more than 180 days
and a published rating of not less than A-1 or P-1 (or the equivalent rating),
(c) certificates of time deposit and bankers’ acceptances having maturities of
not more than 180 days and repurchase agreements backed by United States
government securities of a commercial bank if (i) such bank has a combined
capital and surplus of at least $500,000,000, or (ii) its debt obligations, or
those of a holding company of which it is a Subsidiary, are rated not less than
A (or the equivalent rating) by a nationally recognized investment rating
agency, (d) U.S. money market funds that invest solely in obligations of the
nature described in clauses (a) through (c) above, (e) other Investments
permitted by HTI’s Investment Policy as in effect on the date hereof, a true and
correct copy of which has been provided to Agent, (f) Investments by a Borrower
in any other Borrower, (g) Investments by a Borrower in any Subsidiary of a
Borrower that is not a Borrower, provided that the sum (without duplication) of
the aggregate outstanding principal amount of such Investments (net of returns
thereon) plus the maximum aggregate amount of all obligations and liabilities
guaranteed pursuant to clause (d) of Section 7.3 hereof plus the aggregate
outstanding principal amount of all loans made pursuant to clause (c) of
Section 7.5 hereof shall not exceed $25,000,000 in the aggregate for all such
Subsidiaries at any given time, and (h) other Investments, provided that the
aggregate amount thereof (net of any returns thereon) shall not exceed $500,000
at any time.

7.5. Loans. Make advances, loans or extensions of credit to any Person,
including any Parent, Subsidiary or Affiliate except (a) with respect to the
extension of commercial trade credit in connection with the sale of Inventory in
the Ordinary Course of Business, (b) advances, loans or extensions of credit
from any Borrower to any other Borrower, (c) advances, loans or extensions of
credit to any Subsidiary of a Borrower that is not a Borrower, provided that the
sum (without duplication) of the aggregate outstanding principal amount of such
advances, loans or extensions of credit plus the aggregate amount (net of
returns thereon) of all Investments

 

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made pursuant to clause (g) of Section 7.4 hereof plus the maximum aggregate
outstanding principal amount of all obligations and liabilities guaranteed
pursuant to clause (d) of Section 7.3 hereof shall not exceed $25,000,000 in the
aggregate for all such Subsidiaries at any given time, and (d) advances to
directors and employees of travel and other business expenses.

7.6. Capital Expenditures. Contract for, purchase or make any expenditure or
commitments for Capital Expenditures in any fiscal year in an aggregate amount
for all Borrowers in excess of $35,000,000.

7.7. Dividends. Declare, pay or make any dividend or distribution on any shares
of the common stock or preferred stock of any Borrower (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock or dividends or distributions payable by any Borrower to any other
Borrower) or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any common or preferred stock, or of any
options to purchase or acquire any such shares of common or preferred stock of
any Borrower, except that, provided that no Default or Event of Default has
occurred and is continuing and Liquidity is not less than $20,000,000 after
giving effect to any such repurchase, HTI may repurchase its capital stock from
time to time in the open market or otherwise as long as the aggregate
consideration for such repurchases does not exceed $20,000,000 over the Term.

7.8. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
(exclusive of trade debt) except in respect of (i) Indebtedness to Lenders;
(ii) Indebtedness incurred for Capital Expenditures permitted under Section 7.6
hereof; (iii) Indebtedness due under the Indenture Documentation (and any
extension or refinancing thereof that does not increase the principal amount of
such Indebtedness as of the date of such extension or refinancing),
(iv) Indebtedness of a Borrower to any other Borrower, (v) Indebtedness secured
only by Liens permitted by clause (n) of the definition of Permitted
Encumbrances, (vi) unsecured Indebtedness and Indebtedness secured only by Liens
permitted by clause (o) of the definition of Permitted Encumbrances, provided
that the aggregate outstanding principal amount of such Indebtedness shall not
exceed $75,000,000 at any given time and, except in the case of unsecured
Indebtedness the proceeds of which are used to repurchase or repay Indebtedness
under the Indenture Documentation, the terms and conditions of such Indebtedness
shall be satisfactory to PNC in its reasonable discretion, (vii) service fees
payable to Subsidiaries in the Ordinary Course of Business, and
(viii) Indebtedness described on Schedule 7.8 (and any extension or refinancing
thereof that does not increase the principal amount of such Indebtedness as of
the date of such extension or refinancing).

7.9. Nature of Business. Substantially change the nature of the business in
which it is presently engaged (except that the Borrowers may after the date
hereof engage in businesses reasonably related to any business in which they are
presently engaged, including (i) the manufacture and sale of other products with
the same Equipment as is used in the business in which Borrowers are presently
engaged and (ii) the sale of products currently manufactured by the Borrowers
to, or the performance of services currently offered by the Borrowers for,
Customers in other markets), nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the Ordinary Course of Business or assets or property which are useful in,
necessary for and are to be used in its business as conducted in accordance with
this Section 7.9.

 

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7.10. Transactions with Affiliates. Directly or indirectly, purchase, acquire or
lease any property from, or sell, transfer or lease any property to, or
otherwise enter into any transaction or deal with, any Affiliate of any
Borrower, except (a) transactions which are in the Ordinary Course of Business,
on terms and conditions no less favorable than terms and conditions which would
have been obtainable from a Person other than an Affiliate, (b) payment of
directors’ fees (including fees paid in the form of stock incentives),
(c) employment, severance and change of control arrangements with officers and
payment of officer’s compensation and benefits, (d) advances to directors and
officers permitted by Section 7.5 hereof, (e) reimbursement of directors and
officers for travel and other business expenses, (f) customary indemnification
agreements with directors and officers, and indemnification of directors and
officers in accordance therewith or in accordance with Applicable Law or the
respective organizational documents of the Borrowers, (g) transactions between
any Borrower and any other Borrower, (h) transactions between any Borrower and
any Subsidiary of a Borrower that is not a Borrower otherwise expressly
permitted by this Agreement, and (i) transactions effected pursuant to the Thai
Assignment.

7.11. Leases. Enter as lessee into any lease arrangement for real or personal
property (unless capitalized and permitted under Section 7.6 hereof) if after
giving effect thereto, aggregate annual rental payments for all leased property
would exceed $15,000,000 in any one fiscal year in the aggregate for all
Borrowers.

7.12. Subsidiaries.

(a) Form any Subsidiary unless (i) (A) such Subsidiary expressly joins in this
Agreement as a borrower and becomes jointly and severally liable for the
obligations of Borrowers hereunder, under the Note and under any Other Document
and (B) Agent shall have received all documents, including legal opinions, it
may reasonably require to establish compliance with each of the foregoing
conditions or (ii) subject to Section 7.4(g), such Subsidiary is a Foreign
Subsidiary.

(b) Enter into any partnership, joint venture or similar arrangement without the
consent of Agent (which shall not be unreasonably withheld or delayed).

7.13. Fiscal Year and Accounting Changes. Change its fiscal year from one ending
on the last Sunday of each September or make any change (i) in accounting
treatment and reporting practices except as required by GAAP or (ii) in tax
reporting treatment except as required by law.

7.14. Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s credit
on any purchases or for any purpose whatsoever or use any portion of any Advance
in or for any business other than such Borrower’s business as conducted in
compliance with Section 7.9 hereof.

7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify or waive
any term or provision of its Articles of Incorporation or By-Laws in a manner
that would be materially adverse to the interests of Agent or Lenders under this
Agreement or any Other Document unless required by law.

 

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7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d) or any other Plan for
which Agent has provided its prior written consent, (ii) engage, or permit any
member of the Controlled Group to engage, in any non-exempt “prohibited
transaction”, as that term is defined in section 406 of ERISA and Section 4975
of the Code, (iii) maintain, or permit any member of the Controlled Group to
maintain, a Plan that is or is likely to be in “at risk” status (within the
meaning of Section 303 of ERISA and Section 430 of the Code), (iv) terminate, or
permit any member of the Controlled Group to terminate, any Plan where such
event could result in any liability of any Borrower or any member of the
Controlled Group or the imposition of a lien on the property of any Borrower or
any member of the Controlled Group pursuant to Section 4068 of ERISA,
(v) assume, or permit any member of the Controlled Group to assume, any
obligation to contribute to any Multiemployer Plan not disclosed on Schedule
5.8(d), (vi) incur, or permit any member of the Controlled Group to incur, any
withdrawal liability to any Multiemployer Plan; (vii) fail promptly to notify
Agent of the occurrence of any Termination Event, (viii) fail to comply, or
permit a member of the Controlled Group to fail to comply, with the requirements
of ERISA or the Code or other Applicable Laws in respect of any Plan, (ix) fail
to meet, or permit any member of the Controlled Group to fail to meet, all
minimum funding requirements under ERISA or the Code or postpone or delay or
allow any member of the Controlled Group to postpone or delay any funding
requirement with respect of any Plan.

7.17. Prepayment of Indebtedness. At any time, directly or indirectly, prepay
any Indebtedness (other than to Lenders), or repurchase, redeem, retire or
otherwise acquire any Indebtedness of any Borrower; provided that Borrowers
shall be permitted to repurchase the 3.25% Convertible Subordinated Notes in
whole or in part so long as, after giving effect to any such repurchase, no
Default or Event of Default has occurred and is continuing and Liquidity is not
less than $50,000,000.

7.18. Anti-Terrorism Laws. No Borrower shall, until payment in full of the
Obligations and termination of this Agreement, nor shall it permit any Affiliate
(other than a Person who is (i) an Affiliate of a Borrower solely because it has
the power, direct or indirect, to vote 10% or more of the Equity Interests
having ordinary voting power for the election of directors of such Borrower or
other Persons performing similar functions for such Borrower and (ii) not a
direct or indirect parent of such Borrower) or agent acting in any capacity in
connection with the Advances or other transactions hereunder to:

(a) Conduct any business or engage in any transaction or dealing with any
Blocked Person, including the making or receiving any contribution of funds,
goods or services to or for the benefit of any Blocked Person.

(b) Deal in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order No. 13224.

(c) Engage in or conspire to engage in any transaction that evades or avoids, or
has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT Act or
any other Anti-Terrorism Law.

 

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Each Borrower shall deliver to Lenders any certification or other evidence
requested from time to time by any Lender in its sole discretion, confirming
such Borrower’s compliance with this Section.

7.19. Membership/Partnership Interests. Elect, or permit any of its Subsidiaries
to elect, (x) to treat its limited liability company membership interests or
partnership interests, as the case may be, as securities as contemplated by the
definition of “security” in Section 8-102(15) and by Section 8-103 of Article 8
of Uniform Commercial Code or (y) to certificate its limited liability company
membership interests or partnership interests, as the case may be.

7.20. Trading with the Enemy Act. Engage in any business or activity in
violation of the Trading with the Enemy Act.

7.21. Other Agreements. Enter into any material amendment, waiver or
modification of the Indenture Documentation or any related agreements which is
materially adverse to the interests of Agent or Lenders under this Agreement or
any Other Document.

7.22. Inactive Subsidiaries. Permit any Inactive Subsidiary to (i) engage in any
business or conduct any operations other than the provision of customer support
and service and operations incidental thereto and to the ownership of Equity
Interests in its Subsidiaries, (ii) own assets, other than Equity Interests in
its Subsidiaries having a fair market value of more than $1,500,000 in the
aggregate or (iii) incur any obligations or liabilities in respect of any
Indebtedness for borrowed money.

 

VIII. CONDITIONS PRECEDENT.

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

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

(b) Filings, Registrations and Recordings. Except as otherwise contemplated by
Section 4.2 hereof, each document (including any Uniform Commercial Code
financing statement) required by this Agreement, any related agreement or under
law or reasonably requested by the Agent to be filed, registered or recorded in
order to create, in favor of Agent, a perfected security interest in or lien
upon the Collateral shall have been properly filed, registered or recorded in
each jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;

(c) Corporate Proceedings of Borrowers. Agent shall have received a copy of the
resolutions in form and substance reasonably satisfactory to Agent, of the Board
of Directors of each Borrower authorizing (i) the execution, delivery and
performance of this Agreement, the Notes, and any Other Documents to which it is
a party and (ii) the granting by such Borrower of

 

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the security interests in and liens upon the Collateral in each case certified
by the Secretary or an Assistant Secretary of such Borrower as of the Closing
Date; and, such certificate shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded as of the date of such
certificate;

(d) Incumbency Certificates of Borrowers. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of such
Borrower executing this Agreement, the Other Documents or any certificate or
other documents to be delivered by it pursuant hereto, together with evidence of
the incumbency of such Secretary or Assistant Secretary;

(e) Corporate Proceedings of each Guarantor. Agent shall have received a copy of
the resolutions in form and substance reasonably satisfactory to Agent, of the
Board of Directors of each Guarantor authorizing the execution, delivery and
performance of the Guaranty and each Other Document to which it is a party
certified by the Secretary or an Assistant Secretary of such Guarantor as of the
Closing Date; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate;

(f) Incumbency Certificates of each Guarantor. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Guarantor, dated
the Closing Date, as to the incumbency and signature of the officers of such
Guarantor executing this Agreement or any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;

(g) Certificates. Agent shall have received a copy of the Articles or
Certificate of Incorporation of each Borrower and each Guarantor, and all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation, together with copies of the
By-Laws of each Borrower and each Guarantor certified as accurate and complete
by the Secretary of such Borrower and such Guarantor;

(h) Good Standing Certificates. Agent shall have received good standing
certificates for each Borrower and each Guarantor dated not more than thirty
(30) days prior to the Closing Date, issued by the Secretary of State or other
appropriate official of Borrower’s or such Guarantor’s jurisdiction of
incorporation and each jurisdiction where the conduct of such Borrower’s or such
Guarantor’s business activities or the ownership of its properties necessitates
qualifications (except where failure to be so qualified and in good standing
could not reasonably be expected to have a Material Adverse Effect);

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

 

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

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

(l) Collateral Examination. Agent shall have completed Collateral examinations,
the results of which shall be reasonably satisfactory in form and substance to
Lenders, of the Receivables and Inventory of each Borrower and all books and
records in connection therewith;

(m) Fees. Agent shall have received all fees payable to Agent and Lenders on or
prior to the Closing Date pursuant to Article III hereof;

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

(o) Insurance. Agent shall have received in form and substance reasonably
satisfactory to Agent, certified copies of Borrowers’ casualty insurance
policies, together with loss payable endorsements on Agent’s standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers’ liability insurance policies, together with endorsements naming Agent
as a co-insured;

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

(q) Blocked Accounts. Agent shall have received duly executed agreements
establishing the Blocked Accounts or Depository Accounts with financial
institutions reasonably acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;

(r) Consents. Agent shall have received any and all Consents necessary to permit
the effectuation of the transactions contemplated by this Agreement and the
Other Documents;

(s) No Adverse Material Change. Since July 27, 2011, there shall not have
occurred any event, condition or state of facts which could reasonably be
expected to have a Material Adverse Effect;

 

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(t) Leasehold Agreements. Agent shall have received landlord, mortgagee or
warehouseman agreements reasonably satisfactory to Agent with respect to all
premises leased by Borrowers (other than the Brooklyn Park, Minnesota warehouse)
at which Inventory with an aggregate fair value in excess of $500,000 and books
and records are located;

(u) Guarantees and Other Documents. Agent shall have received (i) the executed
Guarantees, (ii) the executed Guarantor Security Agreement, and (iii) the
executed Other Documents, all in form and substance reasonably satisfactory to
Agent;

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

(w) Closing Certificate. Agent shall have received a closing certificate signed
by the Chief Financial Officer of each Borrower on behalf of such Borrower dated
the Closing Date, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct in all material
respects on and as of such date (except to the extent that such representations
and warranties relate solely to an earlier date), (ii) Borrowers are on such
date in compliance with all the terms and provisions set forth in this Agreement
and the Other Documents and (iii) on such date no Default or Event of Default
has occurred and is continuing;

(x) Borrowing Base. Agent shall have received evidence from Borrowers that the
aggregate amount of Eligible Receivables and Eligible Inventory is sufficient in
value and amount to support Advances in the amount requested by Borrowers on the
Closing Date;

(y) Undrawn Availability. After giving effect to the initial Advances hereunder,
Borrowers shall have Undrawn Availability of at least $5,000,000;

(z) Compliance with Laws. Agent shall be reasonably satisfied that each Borrower
is in compliance with all pertinent federal, state, local or territorial
regulations, including those with respect to the Federal Occupational Safety and
Health Act, the Environmental Protection Act, ERISA and the Trading with the
Enemy Act, except where failure to be in such compliance could not reasonably be
expected to have a Material Adverse Effect;

(aa) Deposit Account with Agent. Borrowers shall have opened a Depository
Account with a cash balance not less than $15,000,000 after giving effect to the
initial Advances;

(bb) Liquidity. Liquidity shall be not less than $65,000,000;

(cc) Credit Insurance. Borrowers shall have obtained credit insurance for
Receivables owing from hard disk drive Customers of the Borrowers and HTI
Thailand, which credit insurance shall have been assigned to Agent for the
benefit of itself and Lenders, including a loss payable endorsement, in form
reasonably satisfactory to Agent; and

 

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

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

(a) Representations and Warranties. Each of the representations and warranties
made by any Borrower in or pursuant to this Agreement and the Other Documents to
which it is a party, and each of the representations and warranties contained in
any certificate, document or financial or other statement furnished at any time
under this Agreement or the Other Documents shall be true and correct in all
material respects on and as of such date as if made on and as of such date
(except to the extent that such representations and warranties relate solely to
an earlier date);

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

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

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

 

IX. INFORMATION AS TO BORROWERS.

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

9.1. Disclosure of Material Matters. Promptly after an Executive Officer of
Borrowing Agent learns thereof, report to Agent all matters materially and
adversely affecting the value, enforceability or collectability of any material
portion of the Collateral, including any Borrower’s reclamation or repossession
of, or the return to any Borrower of, a material amount of goods or claims or
disputes asserted by any Customer or other obligor.

9.2. Schedules. Deliver to Agent (i) on or before the fifteenth (15th) day of
each fiscal month a Borrowing Base Certificate in form satisfactory to Agent in
its Permitted Discretion (which shall be calculated as of the last day of the
prior fiscal month and which shall not be binding upon Agent or restrictive of
Agent’s rights under this Agreement) and (ii) on or before the fifteenth
(15th) day of each fiscal month as and for the prior fiscal month (a) accounts
receivable ageings inclusive of reconciliations to the general ledger,
(b) accounts payable

 

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schedules inclusive of reconciliations to the general ledger and (c) Inventory
reports. Borrowing Agent shall have the right, at Borrowing Agent’s option, to
deliver roll forwards of Receivables to Agent from time to time. In addition,
each Borrower will deliver to Agent at such intervals as Agent may reasonably
require: (i) confirmatory assignment schedules, (ii) copies of Customer’s
invoices, (iii) evidence of shipment or delivery of Inventory, and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may reasonably require including trial balances and test verifications.
Agent shall have the right to confirm and verify all Receivables by any manner
and through any medium it considers advisable and do whatever it may deem
reasonably necessary to protect its interests hereunder; provided that Agent
shall in no event contact Customers of any Borrower without the prior consent of
Borrowing Agent unless an Event of Default has occurred and is continuing. In
connection with any field examination of Collateral performed by Agent,
Borrowers shall promptly cooperate with Agent in confirming and verifying any
Receivables. The items to be provided under this Section are to be in form
reasonably satisfactory to Agent and executed by each Borrower and delivered to
Agent from time to time solely for Agent’s convenience in maintaining records of
the Collateral, and any Borrower’s failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent’s Lien with respect
to the Collateral.

9.3. Environmental Reports. Furnish Agent, concurrently with the delivery of the
financial statements referred to in Sections 9.7 and 9.8, with a Compliance
Certificate signed by the Chief Financial Officer or Treasurer of Borrowing
Agent on behalf of Borrowing Agent stating, to the best of his knowledge,
whether or not each Borrower is in compliance with all federal, state and local
Environmental Laws (except where failure to be in such compliance could not
reasonably be expected to have a Material Adverse Effect). To the extent any
Borrower is not in compliance with the foregoing laws, the certificate shall set
forth with specificity all areas of non-compliance and the proposed action such
Borrower will implement in order to achieve full compliance.

9.4. Litigation. Promptly after an Executive Officer of Borrowing Agent becomes
aware thereof, notify Agent in writing of any claim, litigation, suit or
administrative proceeding pending or threatened against any Borrower or any
Guarantor, whether or not the claim is covered by insurance, which in any such
case adversely affects Collateral with a fair value in excess of $500,000 or
which could reasonably be expected to have a Material Adverse Effect.

9.5. Material Occurrences. Promptly after an Executive Officer of Borrowing
Agent becomes aware thereof, notify Agent in writing of the occurrence of
(a) any Event of Default or Default; (b) any event of default under the
Indenture Documentation; (c) any event which with the giving of notice or lapse
of time, or both, would constitute an event of default under the Indenture
Documentation; (d) any event, development or circumstance whereby any financial
statements or other reports furnished to Agent fail in any material respect to
present fairly, in accordance with GAAP (in the case of interim financial
statements, except for the absence of footnote disclosures and subject to normal
year-end audit adjustments), the consolidated financial condition or operating
results of Borrowers and their Subsidiaries as of the date of such statements;
(e) any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject any Borrower to a tax imposed by Section 4971 of the
Code; (f) each and every default by any Borrower which might result in the
acceleration of the maturity of any

 

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Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; (g) any other development in the business or affairs of any
Borrower, or any Guarantor, which could reasonably be expected to have a
Material Adverse Effect; in each case describing the nature thereof and the
action Borrowers propose to take with respect thereto; and (h) the termination
or modification of the Credit Insurance.

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

9.7. Annual Financial Statements. Furnish Agent within ninety (90) days after
the end of each fiscal year of Borrowers, financial statements of Borrowers on a
Consolidated Basis including, but not limited to, statements of income and
stockholders’ equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and reported upon without
qualification by Deloitte & Touche LLP or another independent certified public
accounting firm selected by Borrowers and reasonably satisfactory to Agent (the
“Accountants”). The report of the Accountants shall be accompanied by a
statement of the Accountants certifying that (i) they have caused this Agreement
to be reviewed, (ii) in making the examination upon which such report was based
either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any related
agreement or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth Borrowers’ compliance with the requirements or restrictions
imposed by Sections 6.5, 7.2, 7.3, 7.4, 7.5,7.6, 7.7, 7.8 and 7.11 hereof. In
addition, the reports shall be accompanied by a Compliance Certificate.

9.8. Quarterly Financial Statements. Furnish Agent within forty five (45) days
after the end of each fiscal quarter, an unaudited balance sheet of Borrowers on
a Consolidated Basis and unaudited statements of income and cash flow of
Borrowers on a Consolidated Basis reflecting results of operations from the
beginning of the fiscal year to the end of such quarter and for such quarter,
prepared on a basis consistent with prior practices and complete and correct in
all material respects, except for the absence of footnote disclosures and
subject to normal and recurring year-end adjustments that individually and in
the aggregate are not material to the consolidated business of Borrowers and
their Subsidiaries. The reports shall be accompanied by a Compliance
Certificate.

9.9. Monthly Financial Statements. Furnish Agent within thirty (30) days after
the end of each fiscal month, an unaudited balance sheet of Borrowers on a
Consolidated Basis and unaudited statements of income and cash flow of Borrowers
on a Consolidated Basis reflecting results of operations from the beginning of
the fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, except for the absence of footnote disclosures and subject to normal
and recurring year-end or quarter-end adjustments that individually and in the
aggregate are not

 

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material to the consolidated business of Borrowers and their Subsidiaries. The
financial statements furnished to Agent pursuant to this Section 9.9 shall
indicate, in a footnote or supplemental disclosure, the aggregate outstanding
amount of Indebtedness owing by HTI Thailand to HTI.

9.10. Other Reports. Furnish Agent as soon as available, but in any event within
ten (10) days after the issuance thereof, copies of all notices, reports,
financial statements and other materials sent pursuant to the Indenture
Documentation.

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

9.12. Projected Operating Budget. Furnish Agent, no later than thirty (30) days
following the beginning of each Borrower’s fiscal years commencing with fiscal
year 2012, a month by month projected operating budget and cash flow of
Borrowers on a Consolidated Basis for such fiscal year (including an income
statement for each month and a balance sheet as at the end of the last month in
each fiscal quarter), such projections to be accompanied by a certificate signed
by the President or Chief Financial Officer of Borrowing Agent on behalf of
Borrowing Agent to the effect that such projections have been prepared on the
basis of sound financial planning practice consistent with past budgets and
financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared.

9.13. Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.9, a written
report summarizing all material variances from budgets submitted by Borrowers
pursuant to Section 9.12.

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

 

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9.15. ERISA Notices and Requests. Furnish Agent with prompt written notice in
the event that (i) any Borrower or any member of the Controlled Group knows or
has reason to know that a Termination Event has occurred, together with a
written statement describing such Termination Event and the action, if any,
which such Borrower or any member of the Controlled Group has taken, is taking,
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a non-exempt prohibited transaction (as defined in
Sections 406 of ERISA and 4975 of the Code) has occurred together with a written
statement describing such transaction and the action which such Borrower or any
member of the Controlled Group has taken, is taking or proposes to take with
respect thereto, (iii) a funding waiver request has been filed with respect to
any Plan together with all communications received by any Borrower or any member
of the Controlled Group with respect to such request, (iv) any material increase
in the benefits of any existing Plan or the establishment of any new Plan or the
commencement of contributions to any Plan to which any Borrower or any member of
the Controlled Group was not previously contributing shall occur, (v) any
Borrower or any member of the Controlled Group shall receive from the PBGC a
notice of intention to terminate a Plan or to have a trustee appointed to
administer a Plan, together with copies of each such notice, (vi) any Borrower
or any member of the Controlled Group shall receive any unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (vii) any Borrower or any member of the Controlled Group
shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (viii) any Borrower or any member of
the Controlled Group shall fail to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for
such installment or payment; or (ix) any Borrower or any member of the
Controlled Group knows that (a) a Multiemployer Plan has been terminated,
(b) the administrator or plan sponsor of a Multiemployer Plan intends to
terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.

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

9.17. Thai Assignment. Promptly notify Agent of any termination of the Thai
Assignment.

 

X. EVENTS OF DEFAULT.

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

10.1. Nonpayment. Failure by any Borrower to pay any principal or interest on
the Obligations within three (3) Business Days following the date when due,
whether at maturity or by reason of acceleration pursuant to the terms of this
Agreement or by notice of intention to prepay, or by required prepayment, or
failure to pay any other liabilities, fees, or charges, or make any other
payment provided for herein or in any Other Document within three (3) Business
Days following the date when due;

 

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

10.3. Financial Information. Failure by any Borrower to (i) furnish financial
information (x) within fifteen (15) days following the date when due, or (y) if
due promptly following request, within fifteen (15) days of after such request,
or (ii) permit the inspection of its books or records in accordance with this
Agreement;

10.4. Judicial Actions. Issuance of a notice of Lien, levy, assessment,
injunction or attachment (other than a Permitted Encumbrance) against any
Borrower’s Inventory or Receivables or against a material portion of any other
Collateral;

10.5. Noncompliance. Except as otherwise provided for in Sections 10.1 and 10.3,
(i) failure or neglect of any Borrower or any Guarantor to perform, keep or
observe any term, provision, condition or covenant contained in Sections 4.6,
4.15(i), 4.17, 6.5, 6.11 or Article VII of this Agreement, or (ii) failure or
neglect of any Borrower or Guarantor to perform, keep or observe any other term,
provision, condition or covenant contained herein or in any Other Document which
is not cured within twenty (20) days after the earlier of (x) the date on which
written notice thereof is given to Borrowing Agent by Agent or (y) the date on
which such failure or neglect first becomes known to an Executive Officer;
provided that, Borrowers shall have a period of twenty (20) days following the
first (and only the first) occurrence of a breach of Section 6.11 within which
to cure such breach;

10.6. Judgments. Any judgment or judgments (except to the extent covered by
insurance, as applicable, in accordance with Section 4.11 and for which the
insurer has acknowledged coverage) are rendered against any Borrower or any
Guarantor for an aggregate amount in excess of $2,000,000 or against all
Borrowers or Guarantors for an aggregate amount in excess of $2,000,000 and
(i) enforcement proceedings shall have been commenced by a creditor upon such
judgment, or (ii) there shall be any period of forty (40) consecutive days
during which such judgment is not released or discharged or a stay of
enforcement of such judgment, by reason of a pending appeal or otherwise, shall
not be in effect, or (iii) any such judgment results in the creation of a Lien
upon any of the Collateral (other than a Permitted Encumbrance);

10.7. Bankruptcy. Any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors,
(iii) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent,
(v) file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vi) acquiesce to, or fail to have dismissed, within
forty-five (45) days, any petition filed against it in any involuntary case
under such bankruptcy laws, or (vii) take any action for the purpose of
effecting any of the foregoing;

 

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10.8. Inability to Pay. Any Borrower or any Guarantor shall admit in writing its
inability, or be generally unable, to pay its debts as they become due or cease
(other than in connection with a merger permitted by Section 7.1) operations of
its present business;

10.9. Subsidiary Bankruptcy. Any Subsidiary of any Borrower, or any Guarantor,
shall (i) apply for, consent to or suffer the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar fiduciary
of itself or of all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under any state,
federal or foreign bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, within forty-five (45) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;

10.10. [Reserved];

10.11. Lien Priority. Any Lien on Collateral (other than Collateral with a fair
value of less than $10,000) created hereunder or provided for hereby or under
any Other Document for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest (subject to Permitted Encumbrances) other
than as a result of any sale, lease, assignment, transfer or other disposition
thereof permitted by this Agreement and other than as contemplated by
Section 4.2 hereof; provided that, so long as each Borrower complies with all
obligations with respect to the Collateral set forth herein and provides timely
and accurate information to Agent regarding any change in circumstances which
would affect the continued validity or effectiveness of the UCC-1 financing
statement filed by Agent against such Borrower to perfect Agent’s Lien, the
foregoing shall not constitute a Default or Event of Default if caused solely by
the action or inaction of Agent.

10.12. Indenture Default. An event of default has occurred under the Indenture
Documentation, which event of default shall not have been cured within any
applicable grace period or waived;

10.13. Cross Default. A default of the obligations of any Borrower under any
other agreement to which it is a party evidencing Indebtedness of such Borrower
shall occur which materially and adversely affects the condition or affairs
(financial or otherwise) of the Borrowers and their Subsidiaries (taken as a
whole), which default is not cured within any applicable grace period or waived;

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

 

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

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

10.17. Licenses. (i) Any Governmental Body shall (A) revoke, terminate, suspend
or adversely modify any license, permit, patent, trademark or tradename of any
Borrower or any Guarantor, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, tradename or
patent and such proceedings shall not be dismissed or discharged within sixty
(60) days, or (C) schedule or conduct a hearing on the renewal of any license,
permit, trademark, tradename or patent necessary for the continuation of any
Borrower’s or any Guarantor’s business and the staff of such Governmental Body
issues a report recommending the termination, revocation, suspension or adverse
modification of such license, permit, trademark, tradename or patent, unless, in
any such case, such revocation, termination, suspension or modification could
not reasonably be expected to have a Material Adverse Effect; or (ii) any
agreement which is necessary or material to the operation of any Borrower’s or
any Guarantor’s business shall be revoked or terminated and not replaced by a
substitute reasonably acceptable to Agent within thirty (30) days after the date
of such revocation or termination, and such revocation or termination and
non-replacement would reasonably be expected to have a Material Adverse Effect;

10.18. Seizures. Any portion of the Collateral (other than Inventory located
outside the United States) shall be seized or taken by a Governmental Body, or
any Borrower or any Guarantor or the title and rights of any Borrower or any
Guarantor which is the owner of any material portion of the Collateral shall
have become the subject matter of claim, litigation, suit or other proceeding
which could reasonably be expected, in the opinion of Agent arrived at in the
exercise of its Permitted Discretion, upon final determination, to result in
impairment or loss of the security in any material portion of the Collateral
provided by this Agreement or the Other Documents;

10.19. Operations. The operations of any Borrower’s or HTI Thailand’s
manufacturing facility are interrupted at any time for more than five
(5) consecutive days (or, in the case of shutdowns authorized by an Executive
Officer to cut costs, fifteen (15) consecutive days), unless (except in the case
of shutdowns authorized by an Executive Officer to cut costs) such Borrower or
Subsidiary shall (i) be entitled to receive for such period of interruption,
proceeds of business interruption insurance sufficient to assure that its per
diem cash needs during such period is at least equal to its average per diem
cash needs for the consecutive three month period immediately preceding the
initial date of interruption and (ii) receive such proceeds in the amount
described in clause (i) preceding not later than thirty (30) days following the
initial date of any such interruption; provided, however, that notwithstanding
the provisions of clauses (i) and (ii) of this section, an Event of Default
shall be deemed to have occurred if such Borrower or Guarantor shall be
receiving the proceeds of business interruption insurance for a period of thirty
(30) consecutive days; or

 

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

 

XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

11.1. Rights and Remedies.

(a) Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all
Obligations shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed terminated; and (ii) any
of the other Events of Default and at any time thereafter (such default not
having previously been cured or waived), at the option of Required Lenders all
Obligations shall be immediately due and payable and Lenders shall have the
right to terminate this Agreement and to terminate the obligation of Lenders to
make Advances. Upon the occurrence and during the continuance of any Event of
Default, Agent shall have the right to exercise any and all rights and remedies
provided for herein, under the Other Documents, under the Uniform Commercial
Code and at law or equity generally, including the right to foreclose the
security interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any or all of
the Collateral with or without judicial process. Agent may enter any of any
Borrower’s premises or other premises without legal process and without
incurring liability to any Borrower therefor, and Agent may thereupon, or at any
time thereafter, in its discretion without notice or demand, take the Collateral
and remove the same to such place as Agent may deem advisable and Agent may
require Borrowers to make the Collateral available to Agent at a convenient
place. With or without having the Collateral at the time or place of sale, Agent
may sell the Collateral, or any part thereof, at public or private sale, at any
time or place, in one or more sales, at such price or prices, and upon such
terms, either for cash, credit or future delivery, as Agent may elect. Except as
to that part of the Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, Agent
shall give Borrowers reasonable notification of such sale or sales, it being
agreed that in all events written notice mailed to Borrowing Agent at least ten
(10) days prior to such sale or sales is reasonable notification. At any public
sale Agent or any Lender may bid for and become the purchaser, and Agent, any
Lender or any other purchaser at any such sale thereafter shall hold the
Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and all such claims, rights and equities are
hereby expressly waived and released by each Borrower. In connection with the
exercise of the foregoing remedies, including the sale of Inventory, Agent is
granted a perpetual nonrevocable, royalty free, nonexclusive license and Agent
is granted permission to use all of each Borrower’s (a) trademarks, trade
styles, trade names, patents, patent applications, copyrights, service marks,
licenses, franchises and other proprietary rights which are used or useful in
connection with Inventory for the purpose of marketing, advertising for sale and
selling or otherwise disposing of such Inventory and (b) Equipment for the
purpose of completing the manufacture of unfinished goods. The cash proceeds
realized from the sale of any Collateral shall be applied to the Obligations in
the order set forth in Section 11.5 hereof. Noncash proceeds will only be
applied to the Obligations as they are converted into cash. If any deficiency
shall arise, Borrowers shall remain liable to Agent and Lenders therefor.

 

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(b) To the extent that Applicable Law imposes duties on the Agent to exercise
remedies in a commercially reasonable manner, each Borrower acknowledges and
agrees that it is not commercially unreasonable for the Agent (i) to fail to
incur expenses reasonably deemed significant by the Agent to prepare Collateral
for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected
or disposed of, (iii) to fail to exercise collection remedies against Customers
or other Persons obligated on Collateral or to remove Liens on or any adverse
claims against Collateral, (iv) to exercise collection remedies against
Customers and other Persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as any Borrower, for expressions of
interest in acquiring all or any portion of such Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure the Agent against risks of loss, collection or
disposition of Collateral or to provide to the Agent a guaranteed return from
the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Agent in the
collection or disposition of any of the Collateral. Each Borrower acknowledges
that the purpose of this Section 11.1(b) is to provide non-exhaustive
indications of what actions or omissions by the Agent would not be commercially
unreasonable in the Agent’s exercise of remedies against the Collateral and that
other actions or omissions by the Agent shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section 11.1(b).
Without limitation upon the foregoing, nothing contained in this Section11.1(b)
shall be construed to grant any rights to any Borrower or to impose any duties
on Agent that would not have been granted or imposed by this Agreement or by
Applicable Law in the absence of this Section 11.1(b).

11.2. Agent’s Discretion. Agent shall have the right in its sole discretion to
determine which rights, Liens, security interests or remedies Agent may at any
time pursue, relinquish, subordinate, or modify or to take any other action with
respect thereto and such determination will not in any way modify or affect any
of Agent’s or Lenders’ rights hereunder.

11.3. Setoff. Subject to Section 14.12, in addition to any other rights which
Agent or any Lender may have under Applicable Law, upon the occurrence and
during the continuance of an Event of Default hereunder, Agent and such Lender
shall have a right, immediately and without notice of any kind, to apply any
Borrower’s property held by Agent and such Lender to reduce the Secured
Obligations.

 

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

11.5. Allocation of Payments After Event of Default. Notwithstanding any other
provisions of this Agreement to the contrary, after the occurrence and during
the continuance of an Event of Default, all amounts collected or received by the
Agent on account of the Secured Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent’s
discretion, be paid over or delivered as follows:

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

SECOND, to payment of any fees owed to the Agent;

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

FOURTH, to the payment of all of the Secured Obligations consisting of accrued
fees not repaid pursuant to clause “SECOND” above and interest;

FIFTH, to the payment of the outstanding principal amount of the Secured
Obligations (including the payment or cash collateralization of any outstanding
Letters of Credit in accordance with Section 3.2 hereof);

SIXTH, to all other Secured Obligations not repaid pursuant to clauses “FIRST”
through “FIFTH” above; and

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

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any
amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Agent in a cash collateral account and applied
(A) first, to reimburse the Issuer from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses “FIFTH” and
“SIXTH” above in the manner provided in this Section 11.5.

 

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XII. WAIVERS AND JUDICIAL PROCEEDINGS.

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

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

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

 

XIII. EFFECTIVE DATE AND TERMINATION.

13.1. Term. This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of each Borrower,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until October 1, 2012; provided that, if
(i) on October 1, 2012 the aggregate outstanding principal amount of 3.25%
Convertible Subordinated Notes is $50,000,000 or less and (ii) Liquidity on
October 1, 2012 (after giving effect to the repurchase of the 3.25% Convertible
Subordinated Notes on such date, if any) is not less than $50,000,000, then this
Agreement shall continue in full force and effect until October 1, 2014 (the
“Term”), in either case unless sooner terminated as herein provided. Borrowers
may terminate this Agreement at any time upon ten (10) days’ prior written
notice upon payment in full of the Secured Obligations. In the event this
Agreement is terminated prior to the last day of the Term (the date of such
termination hereinafter referred to as the “Early Termination Date”), Borrowers
shall pay to Agent for the benefit of Lenders an early termination fee in an
amount equal to (x) $175,000 if the Early Termination Date occurs on or after
the Closing Date but on or before October 1, 2012, (y) $87,500 if the Early
Termination Date occurs after October 1, 2012 but on or before October 1, 2013,
and (z) $0 if the Early

 

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Termination Date occurs on or after October 1, 2013; provided, that following
the occurrence of an Event of Default arising under the proviso of
Section 10.19, which Event of Default has not been waived by Agent, Borrowers
shall be permitted to terminate this Agreement and pay off all of the Secured
Obligations in full and shall not be required to pay such early termination fee.

13.2. Termination. The termination of the Agreement shall not affect any
Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all Secured
Obligations have been paid in full. The security interests, Liens and rights
granted to Agent and Lenders hereunder and under any Other Documents and the
financing statements filed hereunder and thereunder shall continue in full force
and effect, notwithstanding the termination of this Agreement or the fact that
Borrowers’ Account may from time to time be temporarily in a zero or credit
position, until all of the Secured Obligations of each Borrower have been paid
in full after the termination of this Agreement. Accordingly, each Borrower
waives any rights which it may have under the Uniform Commercial Code to demand
the filing of termination statements with respect to the Collateral, and Agent
shall not be required to send such termination statements to each Borrower, or
to file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Secured Obligations have
been paid in full. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all Secured
Obligations are paid in full. Upon the termination pursuant to this Section 13.2
of the security interests and Liens granted to Agent and Lenders hereunder and
under any Other Documents, Agent shall (i) execute and deliver to Borrowing
Agent, at Borrowing Agent’s expense, all documents that Borrowing Agent may
reasonably request to evidence such termination, and (ii) return to Borrowing
Agent all items with Collateral that have theretofore been delivered to Agent.

 

XIV. REGARDING AGENT.

14.1. Appointment. Each Lender hereby designates PNC to act as Agent for such
Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in
Section 3.4), charges and collections (without giving effect to any collection
days) received pursuant to this Agreement, for the ratable benefit of Lenders.
Agent may perform any of its duties hereunder by or through its agents or
employees. As to any matters not expressly provided for by this Agreement
(including collection of the Note) Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding; provided, however, that Agent shall not be required to take any action
which exposes Agent to liability or which is contrary to this Agreement or the
Other Documents or Applicable Law unless Agent is furnished with an
indemnification reasonably satisfactory to Agent with respect thereto.

 

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

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

Agent may resign on sixty (60) days’ written notice to each of Lenders and
Borrowing Agent and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.

Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s rights, powers and duties as Agent (other
than its obligations under Section 16.15 hereof) shall be terminated, without
any other or further act or deed on the part of such former

 

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Agent. After any Agent’s resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.

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

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

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

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

14.8. Agent in its Individual Capacity. With respect to the obligation of Agent
to lend under this Agreement, the Advances made by it shall have the same rights
and powers hereunder as any other Lender and as if it were not performing the
duties as Agent specified herein; and the

 

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term “Lender” or any similar term shall, unless the context clearly otherwise
indicates, include Agent in its individual capacity as a Lender. Agent may
engage in business with any Borrower as if it were not performing the duties
specified herein, and may accept fees and other consideration from any Borrower
for services in connection with this Agreement or otherwise without having to
account for the same to Lenders.

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

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

14.11. No Reliance on Agent’s Customer Identification Program. Each Lender
acknowledges and agrees that neither such Lender, nor any of its Affiliates,
participants or assignees, may rely on the Agent to carry out such Lender’s,
Affiliate’s, participant’s or assignee’s customer identification program, or
other obligations required or imposed under or pursuant to the USA PATRIOT Act
or the regulations thereunder, including the regulations contained in 31 CFR
103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other
Anti-Terrorism Law, including any programs involving any of the following items
relating to or in connection with any Borrower, its Affiliates or its agents,
this Agreement, the Other Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.

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

 

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XV. BORROWING AGENCY.

15.1. Borrowing Agency Provisions.

(a) Each Borrower hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to borrow, sign and endorse notes, and
execute and deliver all instruments, documents, writings and further assurances
now or hereafter required hereunder, on behalf of such Borrower or Borrowers,
and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in
accordance with the request of Borrowing Agent.

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

(c) All Obligations shall be joint and several, and each Borrower shall make
payment upon the maturity of the Obligations by acceleration or otherwise, and
such obligation and liability on the part of each Borrower shall in no way be
affected by any extensions, renewals and forbearance granted to Agent or any
Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to
pursue or preserve its rights against any Borrower, or the release by Agent or
any Lender of any Collateral now or thereafter acquired from any Borrower, and
such agreement by each Borrower to pay upon any notice issued pursuant thereto
is unconditional and unaffected by prior recourse by Agent or any Lender to the
other Borrowers or any Collateral for such Borrower’s Obligations or the lack
thereof. Each Borrower waives all suretyship defenses.

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

 

XVI. MISCELLANEOUS

16.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against any Borrower with

 

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

16.2. Entire Understanding.

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

(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrowers may, subject to the provisions of this Section 16.2 (b),
from time to time enter into written supplemental agreements to this Agreement
or the Other Documents executed by Borrowers, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any manner
the rights of Lenders, Agent or Borrowers thereunder or the conditions,
provisions or terms thereof or waiving any Event of Default thereunder, but only
to the extent specified in such written agreements; provided, however, that no
such supplemental agreement shall, without the consent of all Lenders:

(i) increase the Commitment Percentage, or the maximum dollar commitment of any
Lender or the Maximum Revolving Advance Amount.

 

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(ii) extend the maturity of any Note or the due date for any amount payable
hereunder, or decrease the rate of interest (other than as a result of waiver of
the Default Rate) or reduce any fee payable by Borrowers to Lenders pursuant to
this Agreement.

(iii) alter the definition of the term Required Lenders or alter, amend or
modify this Section 16.2(b).

(iv) release any Collateral during any calendar year (other than in accordance
with the provisions of this Agreement) having an aggregate value in excess of
$500,000.

(v) change the rights and duties of Agent.

(vi) permit any Revolving Advance to be made if after giving effect thereto the
total of Revolving Advances outstanding hereunder would exceed the Formula
Amount for more than sixty (60) consecutive Business Days or exceed one hundred
and ten percent (110%) of the Formula Amount.

(vii) increase the Advance Rates above the Advance Rates in effect on the
Closing Date.

(viii) release any Guarantor.

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

In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such consent is denied, then PNC may, at its option, require
such Lender to assign its interest in the Advances to PNC or to another Lender
or to any other Person designated by the Agent (the “Designated Lender”), for a
price equal to (i) the then outstanding principal amount thereof plus
(ii) accrued and unpaid interest and fees due such Lender, which interest and
fees shall be paid when collected from Borrowers. In the event PNC elects to
require any Lender to assign its interest to PNC or to the Designated Lender,
PNC will so notify such Lender in writing within forty five (45) days following
such Lender’s denial, and such Lender will assign its interest to PNC or the
Designated Lender no later than five (5) days following receipt of such notice
pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the
Designated Lender, as appropriate, and Agent.

Notwithstanding (a) the existence of a Default or an Event of Default, (b) that
any of the other applicable conditions precedent set forth in Section 8.2 hereof
have not been

 

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satisfied or (c) any other provision of this Agreement, Agent may at its
discretion and without the consent of the Required Lenders, voluntarily permit
the sum of the outstanding Revolving Advances and the Maximum Undrawn Amount at
any time to exceed the Formula Amount by up to ten percent (10%) of the Formula
Amount for up to sixty (60) consecutive Business Days (the “Out-of-Formula
Loans”); provided, that, such outstanding Advances do not exceed the Maximum
Revolving Advance Amount. If Agent is willing in its sole and absolute
discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans shall be
payable on demand and shall bear interest at the Default Rate for Revolving
Advances consisting of Domestic Rate Loans; provided that, if Lenders do make
Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have
changed the limits of Section 2.1(a). For purposes of this paragraph, the
discretion granted to Agent hereunder shall not preclude involuntary
overadvances that may result from time to time due to the fact that the Formula
Amount was unintentionally exceeded for any reason, including, but not limited
to, Collateral previously deemed to be either “Eligible Receivables” or
“Eligible Inventory”, as applicable, becomes ineligible, collections of
Receivables applied to reduce outstanding Revolving Advances are thereafter
returned for insufficient funds or overadvances are made to protect or preserve
the Collateral. In the event Agent involuntarily permits the outstanding
Revolving Advances to exceed the Formula Amount by more than ten percent (10%),
Agent shall use its efforts to have Borrowers decrease such excess in as
expeditious a manner as is practicable under the circumstances and not
inconsistent with the reason for such excess. Revolving Advances made after
Agent has determined the existence of involuntary overadvances shall be deemed
to be involuntary overadvances and shall be decreased in accordance with the
preceding sentence.

In addition to (and not in substitution of) the discretionary Revolving Advances
permitted above in this Section 16.2, the Agent is hereby authorized by
Borrowers and the Lenders, from time to time in the Agent’s sole discretion,
(A) after the occurrence and during the continuation of a Default or an Event of
Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make
Revolving Advances to Borrowers on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (a) to preserve or
protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other Secured
Obligations, or (c) to pay any other amount chargeable to Borrowers pursuant to
the terms of this Agreement; provided, that at any time after giving effect to
any such Revolving Advances the outstanding Revolving Advances do not exceed one
hundred and ten percent (110%) of the Formula Amount.

16.3. Successors and Assigns; Participations; New Lenders.

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

(b) Each Borrower acknowledges that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a “Participant”). Each
Participant may exercise all rights of payment

 

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(including rights of set-off) with respect to the portion of such Advances held
by it or other Obligations payable hereunder as fully as if such Participant
were the direct holder thereof provided that Borrowers shall not be required to
pay to any Participant more than the amount which it would have been required to
pay to Lender which granted an interest in its Advances or other Obligations
payable hereunder to such Participant had such Lender retained such interest in
the Advances hereunder or other Obligations payable hereunder and in no event
shall Borrowers be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Participant. Each Borrower hereby grants
to any Participant a continuing security interest in any deposits, moneys or
other property actually or constructively held by such Participant as security
for the Participant’s interest in the Advances.

(c) Any Lender, with the consent of Agent which shall not be unreasonably
withheld or delayed, and, provided that no Event of Default has occurred and is
continuing, with the consent of Borrowing Agent which shall not be unreasonably
withheld or delayed, may sell, assign or transfer all or any part of its rights
and obligations under or relating to Revolving Advances under this Agreement and
the Other Documents to one or more additional banks or financial institutions
and one or more additional banks or financial institutions may commit to make
Advances hereunder (each a “Purchasing Lender”), in minimum amounts of not less
than $5,000,000, pursuant to a Commitment Transfer Supplement, executed by a
Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for
recording. Upon such execution, delivery, acceptance and recording, from and
after the transfer effective date determined pursuant to such Commitment
Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto
and, to the extent provided in such Commitment Transfer Supplement, have the
rights and obligations of a Lender thereunder with a Commitment Percentage as
set forth therein, and (ii) the transferor Lender thereunder shall, to the
extent provided in such Commitment Transfer Supplement, be released from its
obligations under this Agreement (other than its obligations under Section 16.15
hereof), the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Each Borrower hereby consents to the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender
following the occurrence and during the continuance of an Event of Default of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Borrowers shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.

(d) Any Lender, with the consent of Agent which shall not be unreasonably
withheld or delayed, may directly or indirectly sell, assign or transfer all or
any portion of its rights and obligations under or relating to Revolving
Advances under this Agreement and the Other Documents to an entity, whether a
corporation, partnership, trust, limited liability company or other entity that
(i) is engaged in making, purchasing, holding or otherwise investing in bank
loans and similar extensions of credit in the ordinary course of its business
and (ii) is administered, serviced or managed by the assigning Lender or an
Affiliate of such Lender (a

 

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“Purchasing CLO” and together with each Participant and Purchasing Lender, each
a “Transferee” and collectively the “Transferees”), pursuant to a Commitment
Transfer Supplement modified as appropriate to reflect the interest being
assigned (“Modified Commitment Transfer Supplement”), executed by any
intermediate purchaser, the Purchasing CLO, the transferor Lender, and Agent as
appropriate and delivered to Agent for recording. Upon such execution and
delivery, from and after the transfer effective date determined pursuant to such
Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder shall be
a party hereto and, to the extent provided in such Modified Commitment Transfer
Supplement, have the rights and obligations of a Lender thereunder and (ii) the
transferor Lender thereunder shall, to the extent provided in such Modified
Commitment Transfer Supplement, be released from its obligations under this
Agreement (other than its obligations under Section 16.15 hereof), the Modified
Commitment Transfer Supplement creating a novation for that purpose. Such
Modified Commitment Transfer Supplement shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition of such
Purchasing CLO. Each Borrower hereby consents to the addition of such Purchasing
CLO. Borrowers shall execute and deliver such further documents and do such
further acts and things in order to effectuate the foregoing.

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

(f) Subject to the provisions of Section 16.15 hereof, each Borrower authorizes
each Lender to disclose to any Transferee and any prospective Transferee any and
all financial information in such Lender’s possession concerning such Borrower
which has been delivered to such Lender by or on behalf of such Borrower
pursuant to this Agreement or in connection with such Lender’s credit evaluation
of such Borrower.

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

 

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16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and each of
their respective officers, directors, Affiliates, attorneys, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, and costs, expenses and disbursements of
any kind or nature whatsoever (including reasonable fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against Agent or any
Lender in any claim, litigation, proceeding or investigation instituted or
conducted by any Governmental Body or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the gross negligence or willful misconduct of the party
being indemnified (as determined by a court of competent jurisdiction in a final
and non-appealable judgment). Without limiting the generality of the foregoing,
this indemnity shall extend to any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including fees and disbursements of counsel) asserted
against or incurred by any of the indemnitees described above in this
Section 16.5 with respect to any Real Property by any Person under any
Environmental Laws or similar laws by reason of any Borrower’s or any other
Person’s failure to comply with laws applicable to solid or hazardous waste
materials, including Hazardous Substances and Hazardous Waste, or other Toxic
Substances.

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

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

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

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

 

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

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

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

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

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

(A) If to Agent or PNC at:

PNC Bank, National Association

340 Madison Avenue

New York, New York 10173

Attention:      Glenn D. Kreutzer Telephone:      212-752-6093 Facsimile:     
212-303-0060

with a copy to:

Hahn & Hessen LLP

488 Madison Avenue

New York, New York 10022

Attention:      Steven J. Seif, Esq. Telephone:      212-478-7200 Facsimile:
     212-478-7400

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

(C) If to Borrowing Agent or any Borrower:

Hutchinson Technologies Incorporated

40 West Highland Park Drive NE

Hutchinson, Minnesota 55350

Attention:      Chief Financial Officer Telephone:      320-587-1864 Facsimile:
     320-587-1810

and

 

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Attention:      Treasurer Telephone:      320-587-3797 Facsimile:     
320-587-1810

with a copy to:

Faegre & Benson LLP

2200 Wells Fargo Center

90 South 7th Street

Minneapolis, MN 55402-3901

Attention:      Jennifer Mewaldt, Esq.

Telephone:

     612-766-7203

Facsimile:

     612-766-1600

16.7. Survival. The obligations of Borrowers under Sections 2.2(f), 2.16, 3.7,
3.9, 4.19(h), and 16.5 and the obligations of Lenders under Sections 14.7 and
16.15, shall survive termination of this Agreement and the Other Documents and
payment in full of the Secured Obligations.

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

16.9. Expenses. All reasonable costs and expenses including reasonable
attorneys’ fees (including the allocated costs of in house counsel) and
disbursements incurred by Agent on its behalf or on behalf of Lenders (a) in all
efforts made to enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder or thereunder and all related agreements, documents and
instruments, or (c) in instituting, maintaining, preserving, enforcing and
foreclosing on Agent’s security interest in or Lien on any of the Collateral, or
maintaining, preserving or enforcing any of Agent’s or any Lender’s rights
hereunder and under all related agreements, documents and instruments, whether
through judicial proceedings or otherwise, or (d) in defending or prosecuting
any actions or proceedings arising out of or relating to the transactions
contemplated hereby or (e) in connection with any advice given to Agent or any
Lender with respect to its rights and obligations under this Agreement and all
related agreements, documents and instruments, may be charged to Borrowers’
Account and shall be part of the Obligations.

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

 

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

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

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

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

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

 

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Subsidiary or Affiliate of any Lender receiving such information shall be bound
by the provisions of this Section 16.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement.

16.16. Publicity. Subject to the provisions of Section 16.15 hereof, each
Borrower and each Lender hereby authorizes Agent to make appropriate
announcements of the financial arrangement entered into among Borrowers, Agent
and Lenders, including announcements which are commonly known as tombstones, in
such publications and to such selected parties as Agent shall in its sole and
absolute discretion deem appropriate (provided that Agent shall provide
Borrowing Agent with a reasonable opportunity to review and comment on any such
announcement prior to the making or publication thereof by Agent).

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

 

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

 

HUTCHINSON TECHNOLOGY INCORPORATED By:  

/s/ David P. Radloff

Name:   David P. Radloff Title:   Chief Financial Officer

PNC BANK, NATIONAL ASSOCIATION,

as Lender and as Agent

By:  

/s/ Brian Conway

Name:   Brian Conway Title:   Vice President Commitment Percentage: 100%