EXHIBIT 10.1
CREDIT AGREEMENT

CREDIT AGREEMENT (the “Agreement”) dated as of October 11, 2007, by and among
SOVEREIGN BANK, a federal savings bank (the “Lender”) and INDUSTRIAL ENTERPRISES
OF AMERICA, INC., a Nevada corporation, having its principal office at 711 Third
Avenue, New York, New York 10017 (“Parent”), UNIFIDE INDUSTRIES, LIMITED
LIABILITY COMPANY, a New Jersey limited liability company, having its principal
office at 121 Highway 36, Suite 125, West Long Branch, NJ 07764 (“Unifide”),
PITT PENN OIL CO., LLC, an Ohio limited liability company, having its principal
office at 426 Freeport Road, P.O. Box 296, Creighton, PA 15030 (“Pitt Penn”),
EMC PACKAGING, INC., a Delaware corporation, having its principal office at 550
James Street, Lakewood, NJ 08701 (“EMC”), TODAYS WAY MANUFACTURING LLC, a New
Jersey limited liability company, having its principal office at 1081 Rosemary
Boulevard, Akron, Ohio 44306 (“Todays Way”), and PITT PENN HOLDING CO., LLC, an
Ohio limited liability company having its principal office at 426 Freeport Road,
P.O. Box 296, Creighton, Pennsylvania 15030 (“Pitt Holding”, together with
Parent, Unifide, Pitt Penn, EMC and Todays Way, each a “Borrower” and
collectively, the “Borrowers”).
 
W I T N E S S E T H:

WHEREAS, the Borrowers desire to borrow, on a joint and several basis, Revolving
Credit Loans (as defined herein) from the Lender;

WHEREAS, the Lender may make such Revolving Credit Loans to the Borrowers, on a
joint and several basis, on the terms and conditions hereinafter set forth;
 
NOW, THEREFORE, in consideration of the premises and the agreements hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:

SECTION 1. DEFINITIONS

1.1           Defined Terms. As used herein, the following terms shall have the
following meanings:

“Accounts” shall mean those accounts receivable arising out of the sale of
Inventory by the Borrowers or processing and contract manufacturing by the
Borrowers.

“Account Debtor” shall mean the person who is obligated on or under an Account.

“Affiliate” shall mean a Person (1) which directly or indirectly controls, or is
controlled by, or is under common control with a Borrower or any of its
Subsidiaries, (2) which directly or indirectly beneficially owns or holds ten
(10%) percent or more of any class of voting stock of a Borrower or any of its
Subsidiaries, or (3) ten (10%) percent or more of the voting stock of which is
directly or indirectly beneficially owned or held by a Borrower or any of its
Subsidiaries. The term “control” means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract, or
otherwise.

“Aggregate Outstandings” shall mean, on the date of determination, the sum of
(a) the Letter of Credit Exposure, and (b) the aggregate outstanding principal
amount of all Revolving Credit Loans.

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

“Borrowing Base” shall mean (i) 80% (or such lesser percentage as shall be
determined by Lender from time to time) of the Eligible Accounts plus (ii) the
lesser of (a) 50% (or such lesser percentage as shall be determined by Lender
from time to time) of the Eligible Inventory or (b) $2,000,000; provided,
however, if no Borrowing Base Certificate has been delivered as and when
required by Section 5.1 (g) hereof, the Borrowing Base shall be deemed to be
zero until the Borrowing Base Certificate has been delivered with respect to the
Borrowing Base as of the end of the immediately preceding month.

“Borrowing Base Certificate” shall mean a certificate of Parent in the form of
Exhibit A hereto setting forth the Parent’s calculation of the Borrowing Base,
subject to any reasonable modifications to such form of certificate as required
by Lender from time to time.

 
 

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

 

“Business Day” shall mean (a) subject to (b) of this definition, a day other
than a Saturday, Sunday or other day on which commercial banks in New York, New
York are authorized or required by law to close and (b) relative to the date of
(i) making a LIBOR Loan, continuing a LIBOR Loan as, or converting a Prime Rate
Loan to, a LIBOR Loan, (ii) making any payment or prepayment of principal of or
payment of interest on a LIBOR Loan, or (iii) the Borrower giving any notice (or
the number of Business Days to elapse prior to the effectiveness thereof) in
connection with any matter referred to in (b)(i) or (b)(ii), any day on which
commercial banks are open for international business (including dealings in U.S.
dollar deposits) in London, England.

 
“Capital Leases” shall mean capital leases, conditional sales contracts and
other title retention agreements, relating to the purchase or acquisition of
assets that in accordance with GAAP are required or permitted to be depreciated
or amortized on a balance sheet.

“Collateral” shall mean all existing and future assets and properties of the
Borrowers and their Subsidiaries, including without limitation, all “Collateral”
defined as such in the Security Agreement.

“Compliance Certificate” shall mean the certificate of the Chief Financial
Officer of the Parent provided pursuant to Section 5.1(a) and (b) in the form
attached hereto as Exhibit B, subject to any reasonable modifications to such
form of certificate as required by Lender from time to time.

“Consolidated Lease Expense” shall mean, for any period, lease expense
determined for Parent and its Subsidiaries (including the other Borrowers) on a
consolidated basis in accordance with GAAP.

“Contingent Obligation” shall mean, with respect to any Person, any obligations,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Funded Debt or other obligation of any other Person, or providing financial
assistance with respect to the financial condition, or the payment of the
obligations of, such other Person (including, without limitation, purchase or
repurchase agreements, reimbursement agreements with respect to letters of
credit or acceptances, indemnity arrangements, grants of security interests to
support the obligations of another Person, keepwell agreements and take-or-pay
or through-put arrangements) which has the effect of assuring or holding
harmless any third Person against loss with respect to one or more obligations
of any other Person; provided that the term “Contingent Obligation” shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business.  The amount of any Contingent Obligation of any Person shall
be deemed to be the maximum amount for which such contingently liable Person may
be liable pursuant to the terms of the instrument embodying such Contingent
Obligation.

“Contractual Obligations” shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound
(including, without limitation, any agreement, instrument or undertaking with
stock-holders of any such Person).

“Current Assets” shall mean, at any time, all Inventory, Accounts and cash
(subject to reserves and allowances for doubtful Accounts) of the Parent and its
Subsidiaries on a consolidated basis that in accordance with GAAP are properly
classified as current assets.

“Current Liabilities” shall mean, at any time, all liabilities of the Parent and
its Subsidiaries on a consolidated basis payable on demand or maturing within
one (1) year from the date as of which current liabilities are to be determined,
and such other liabilities that in accordance with GAAP are properly classified
as current liabilities.

“Default” shall mean any of the events specified in Section 8 hereof, whether or
not any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied or given, as the case may be.

“Default Rate” shall mean at any time a rate per annum equal to four (4)
percentage points per annum in excess of the Prime Rate in effect from time to
time.

“Dollars” and “$” shall mean lawful currency of the United States of America.

“Eligible Accounts” shall mean the gross outstanding balance (less all fees and
other amounts which are unearned, and less all sale, excise taxes or similar
taxes) of those Accounts of the Borrowers which are satisfactory to the Lender
and with respect to which, the Lender has a valid and perfected first priority
and only security interest, there is no violation of the negative, affirmative
or collateral covenants or other provisions of this Agreement or any other Loan
Document and which the Lender deems to be Eligible Accounts based on such
credit, collateral and other considerations as the Lender

 
 

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

 

 may deem appropriate. All returns, deductions, discounts, claims, disputes,
credits and allowances of any nature (whether issued, granted, owing, claimed or
outstanding) shall be deducted from Eligible Accounts.  Without limiting the
Lender’s discretion, as set forth above, an Account of any of the Borrowers can
only be an Eligible Account if:

(a) such Account (i) arises from the actual and bona fide sale and delivery of
finished goods Inventory or rendition of services in the ordinary course of
business which sale and delivery and services, as applicable, are completed in
accordance with the terms and provisions contained in any documents related
thereto, (ii) is not evidenced by or payable pursuant to invoices or similar
documentation issued by, or calling for payment to, any other Person and (iii)
does not arise from or in connection with any sales of Inventory or rendition of
services to any Borrower or an Affiliate or any Subsidiary or related Person of
a Borrower;

(b) such Account is not unpaid more than ninety (90) days after date of original
invoice;

(c) such Account does not arise from sales on consignment, guaranteed sale, sale
and return, sale on approval, or other terms under which payment by the Account
Debtor may be conditional or contingent;

(d) either (i) the chief executive office of the Account Debtor with respect to
such Accounts is located in the United States of America, including Puerto Rico
(the “US Requirement”), and such Account is subject to receivables or credit
insurance issued by an insurer pursuant to duly documented written insurance
policies in which the Lender is named as a loss payee and on terms and in an
amount and from an insurer acceptable to the Lender or (ii) the US Requirement
is not satisfied and such account is guaranteed or insured by EXIM Bank pursuant
to documentation acceptable to the Lender in which EXIM Bank has agreed to pay
such guarantee or insurance proceeds to Lender; provided, however, any portion
of such Account which is not so guaranteed or insured shall not be deemed an
Eligible Account, (iii) the Account is backed by a letter of credit issued by
Lender, or (iv) the Account Debtor in respect of such Account is identified on
Exhibit C;

(e) such Account does not consist of progress billings, bill and hold invoices
or retainage invoices;

(f) the Account Debtor with respect to such Account has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Account,
and is not a supplier to or creditor of the Borrower or any of its Subsidiaries;

(g) there are no facts, events or occurrences which would impair the validity,
enforceability or collectability of such Account or reduce the amount payable or
delay payment thereunder;

(h) the Account Debtor with respect to such Account is not any foreign
government, the United States of America, any State, political subdivision,
department, agency or instrumentality of any of the foregoing;

(i) the Account does not arise out of or in connection with any contract for
services or involving projects entered into by any Borrower that requires a
bond, guaranty or other similar surety as credit support;

(j) such Account is owed by any Account Debtor which is not insolvent, is not
the subject of a bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceeding and is not negotiating a compromise of its
debts or calling a meeting for such purpose and has not filed a petition or
other application for relief or had filed against it a petition or other
application for relief under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, has not failed or suspended business
operations or had or suffered a receiver or a trustee to be appointed for all or
a significant portion of its assets or affairs;

(k) such Account is owed by an Account Debtor deemed creditworthy at all times
by the Lender, as determined by the Lender;

(l) such Account is not evidenced by an instrument or chattel paper (as defined
in the UCC);

(m) the Account Debtor, any insurer with respect to such Account and EXIM Bank,
if a guarantor or insurer with respect to such Account, has been notified in
writing to send all payments on such Account and any guarantee or insurance in
respect of such Account to the Lockbox Account or such other place as instructed
by the Lender and such notice has not been revoked; and

 
 

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

 

(n) the Account is owing in Dollars.

Criteria for Eligible Accounts may be established and revised from time to time
by the Lender and the Lender reserves the right to create, from time to time,
additional categories of ineligible Accounts. Any Accounts which are not
Eligible Accounts shall nevertheless be part of the Collateral.  Lender will
endeavor to provide Parent with ten days’ notice of any material revision of the
criteria for Eligible Accounts; provided, however, the failure to provide such
notice will not prevent the revision from being effective or make Lender liable
as a result of or in respect of such revision or such failure.

“Eligible Inventory” shall mean all Inventory in which Lender has a first
priority and only perfected security interest and which is satisfactory to
Lender consisting of raw materials, finished goods and packaging material owned
by the Borrowers exclusive of (i) work in process, (ii) private label goods held
in inventory for over ninety (90) days, (iii) Inventory which can only be sold
to a Governmental Authority or (iv) Inventory which a Borrower does not have
good and marketable title to, and less reserves determined in accordance with
GAAP and less Inventory which incorporates patents, trademarks or intellectual
property of Persons other than the Borrowers provided to or used by or licensed
to a Borrower pursuant to a license or other agreement or arrangement unless
Borrowers provide Lender with a waiver and consent from each third party
licensor, or owner or Person with rights to such patents, trademarks or
intellectual property, satisfactory to Lender.  Eligible Inventory shall be
valued at the lower of book value (based on a FIFO valuation) and fair market
value.  Eligible Inventory shall be reduced by (a) all Inventory not present in
the United States of America, (b) all Inventory returned or rejected by
Borrower’s customers (other than goods that are undamaged and resalable in the
normal course of business) and Inventory to be returned to Borrower’s suppliers,
(c) Inventory which is not in good condition or fails to meet standards for sale
or use imposed by governmental agencies, departments or divisions having
regulatory authority over such Inventory, and Inventory which cannot be sold in
compliance with all Requirements of Law without a license, permit, approval or
authorization of a Governmental Authority, (d) Inventory which is not useable or
saleable at prices approximating their cost in the ordinary course of such
Borrower’s business (including without duplication the amount of any reserves
for obsolescence, unsalability or decline in value), and (e) the amount of such
other reserves against Inventory as the Lender deems necessary in the exercise
of its business judgment, including, without limitation, reserves for
discontinued, slow-moving and obsolete Inventory, market value declines, bill
and hold (deferred shipment), shrinkage and any applicable customs, freight,
duties and taxes.

Criteria for Eligible Inventory may be established and revised from time to time
by the Lender and the Lender reserves the right to create, from time to time,
additional categories of ineligible Inventory.  Any Inventory which is not
Eligible Inventory shall nevertheless be part of the Collateral.  Lender will
endeavor to provide Parent with ten (10) days’ notice of any material revision
of the criteria for Eligible Inventory; provided, however, the failure to
provide such notice will not prevent the revision from being effective or make
Lender liable as a result of or in respect of such revision or failure.

“Environmental Laws” shall mean all applicable federal, state or local statutes,
laws, ordinances, codes, rules, regulations, guidelines, requirements of any
Governmental Authority, any and all Requirements of Law and any common law
requirements, rules and basis of liability (including consent decrees and
administrative orders) relating to public health and safety, standards of
conduct concerning pollution and protection of the environment, as now or may at
any time hereafter be in effect.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated pursuant thereto, as the same may from time to
time be supplemented or amended.

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated)
which together with any of the Borrowers or their respective Subsidiaries would
be treated as a single employer under Section 4001 of ERISA.

“Event of Default” shall have the meaning specified in Section 8 hereof.

“EXIM Bank” shall mean the Export-Import Bank of the United States and any
successor thereto.

“Field Audit” shall have the meaning assigned thereto in Section 5.1 (f) hereof.

“Funded Debt” shall mean, on a consolidated basis with respect to any Person and
its Subsidiaries, without duplication, (i) all indebtedness and obligations for
borrowed money, (ii) all obligations to pay the deferred purchase price of
property or services (other than trade payables arising in the ordinary course
of business which are not overdue), (iii) all obligations as lessee under
Capital Leases, (iv) all obligations evidenced by bonds, debentures, notes or
equivalent or

 
 

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

 

 similar instruments, (v) all reimbursement and other obligations (contingent or
otherwise) in respect of letters of credit, acceptance drafts, bankers
acceptances or similar instruments, (vi) all Funded Debt of others secured by a
Lien on any property or assets of such Person, whether or not the Funded Debt is
assumed by such Person, (vii) all liabilities under interest rate cap
agreements, interest rate swap agreements, collars, foreign currency exchange
agreements and other hedging agreements or arrangements and (viii) all
Contingent Obligations of such Person.

“GAAP” shall mean generally accepted accounting principles applied in a manner
consistent with that employed in the preparation of the Parent’s certified
annual consolidated financial statements for its most recent fiscal year prior
to the date of this Agreement.

“Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.

“Guarantee” or “Guarantees” shall mean, collectively, any guarantee hereafter
delivered by any Subsidiaries of the Borrowers required to deliver a Guarantee
pursuant to Section 5.11 hereof, as the same may hereafter be amended, restated,
supplemented or otherwise modified from time to time.

“Guarantors” shall mean, collectively, each Subsidiary of any of the Borrowers
(other than the Borrowers), and each other Subsidiary of any of the Borrowers
which, from time to time hereafter, is required to execute a Guarantee in
accordance with Section 5.11 hereof.

“Hazardous Materials” shall mean any hazardous or toxic substances, materials or
wastes, defined, listed, classified or regulated as such in or under any
Environmental Laws, including, without limitation, asbestos, petroleum or
petroleum products (including gasoline, crude oil or any fraction thereof),
polychlorinated biphenyls, and urea-formaldehyde insulation.

“Intellectual Property Security Agreements” shall mean any and all assignments
and/or security agreements required by Lender in respect of any Borrower’s
existing or future intellectual property, including, without limitation, patent,
trademark and copyright assignments and security agreements, as amended,
supplemented, restated or modified from time to time.

“Intercreditor Agreement” shall mean the Intercreditor Agreement dated as of
even date herewith between the Lender and GSL of Ill, LLC, as amended, restated,
supplemented or modified from time to time.

 “Interest Period” with respect to any LIBOR Loan shall mean:

(a) initially, the period commencing on the date such LIBOR Loan is made and
ending one, two or three months thereafter as selected by the Borrowers by
irrevocable written notice from the Parent to the Lender not less than three (3)
Business Days prior to the requested LIBOR Loan; and

(b) thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such LIBOR Loan and ending one, two or three
months thereafter, as selected by the applicable Borrower by irrevocable written
notice to the Lender not less than three (3) Business Days prior to the last day
of the then current Interest Period with respect to such LIBOR Loan; provided,
however, that all of the foregoing provisions relating to Interest Periods are
subject to the following:

(i)           if any Interest Period pertaining to a LIBOR Loan would otherwise
end on a day which is not a Business Day, the Interest Period shall be extended
to the next succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which event such
Interest Period shall end on the immediately preceding Business Day;
 
(ii)           if the Borrower shall fail to give notice as provided in clause
(a) or (b) above, the Borrower shall be deemed to have requested a Prime Rate
Loan (in the case of (a)) or a conversion of the affected LIBOR Loan to a Prime
Rate Loan on the last day of the then current Interest Period with respect
thereto (in the case of (b));

 
 

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

 

(iii)           any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the applicable calendar month; and

(iv)           no Interest Period may be selected which ends later than the
Termination Date.

“Inventory”  shall mean all present and hereafter acquired inventory (as defined
in the UCC) including, without limitation, all merchandise and inventory in all
stages of production (from raw materials through work-in-process to finished
goods), and all additions, substitutions and replacements thereof, wherever
located, together with all goods and materials used or usable in manufacturing,
processing, packaging, selling, promoting or shipping of the foregoing, and all
Proceeds of any of the foregoing.

“Investment Property” shall mean all present and hereafter acquired investment
property (as defined in the UCC) together with all stock and other equity
interests in any Borrower’s subsidiaries, and all Proceeds thereof.

“Joint Venture” shall mean that certain joint venture between the Parent and
Sinochem Ningbo, Ltd. for the packaging of refrigerant gases  in China for
worldwide distribution as evidenced by a Joint Venture Agreement dated February
1, 2007, or by any other documentation, arrangement or agreement related to such
joint venture.

“Letter of Credit” or “Letters of Credit” shall mean letters of credit issued by
the Lender pursuant to the Letter of Credit Documentation for the account of the
Borrowers.

“Letter of Credit Documentation” shall mean all documentation from time to time
in effect relating to or evidencing the Letters of Credit or reimbursement
obligations with respect thereto, as amended, restated, supplemented or modified
from time to time.

“Letter of Credit Exposure” shall mean at any time the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit, and (b) unless constituting
the Revolving Credit Loans hereunder, the aggregate amount of all drawings under
Letters of Credit for which the Lender shall not have been reimbursed.

“Leverage Ratio” shall mean as at any date of determination, the ratio of (a)
Total Liabilities on such date to (b) the Tangible Net Worth on such date.

“LIBOR” shall mean as applicable to a LIBOR Loan and such Interest Period, as
determined by Lender, a rate per annum  (rounded upward, if necessary, to the
nearest 1/32 of one percent) equal to the composite LIBOR or London Interbank
Offered Rate which appears on the Sovereign Bank Treasury Group Rate Sheet as of
11:00 a.m. New York time on the day that is two (2) Business Days preceding the
first day of such Interest Period (or if not reported thereon, then as
determined by the Lender from a page, source or interbank quotation selected by
the Lender).  In the event that the Board shall impose a Reserve Percentage with
respect to LIBOR deposits of the Lender, then for any period during which such
Reserve Percentage shall apply, LIBOR shall be equal to the amount determined
above divided by an amount equal to 1 minus the Reserve Percentage.

“LIBOR Loan” shall mean any Revolving Credit Loan when and to the extent that
the interest rate therefor is determined by reference to LIBOR.

“Lien” shall mean any mortgage, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction pursuant to any of the types of security interests or other
interests referred to herein).

“Loan Documents” shall mean, collectively, this Agreement, the Revolving Credit
Note, the Letter of Credit Documentation, the Security Agreement, the
Guarantees, the Intellectual Property Security Agreements, the Lock Box
Agreement, the Perfection Certificate, the Post-Closing Letter and any other
documents executed by the Borrowers or the Guarantors or any of them or any of
their respective officers, members, managers or other representatives in
connection herewith or therewith including any and all amendments, restatements,
supplements or other modifications to any such

 
 

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

 

documents; provided, however, documents relating to the previous line of credit
in the amount of $1,000,000 previously provided to Pitt Penn shall not
constitute Loan Documents.

“Lockbox Account” shall mean the post office box or post office boxes
established under the Lockbox Agreement with respect to which payments on all
Accounts are to be made.

“Lockbox Agreement” shall mean, collectively, the agreement(s) regarding lockbox
accounts of the Borrowers and/or cash management services, by and among the
Borrowers, the Lender and/or any other parties acceptable to the Lender,
together with any other documents between the Borrowers, the Lender and any such
parties, relating to the foregoing all as amended, restated, supplemented or
modified.

“Multiemployer Plan” shall mean any Plan described in Section 4001(a)(3) of
ERISA.

“Obligations” shall have the meaning set forth in the Security Agreement.
 
“PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.

“Perfection Certificate” shall mean the Perfection Certificate or Perfection
Certificates executed by or on behalf of the Borrowers and/or the Guarantors or
any of them or any of their respective representatives as of even date herewith
or any other date, as amended, restated, supplemented or modified from time to
time.

“Permitted Acquisition” shall mean an acquisition by a Borrower or any Affiliate
or Subsidiary of a Borrower by purchase of a voting majority of the stock or
other Investment Property of another Person or the purchase of all or
substantially all of the assets of another Person (or of a division or other
operating component of another Person) (an “Acquisition”) if all of the
following conditions are met:

(i)             The total consideration for such Acquisition and all related
Acquisitions of Affiliates of such acquired Person, including, without
limitation, the cash purchase price, any Funded Debt incurred or assumed in
connection therewith, any earn-outs, debt and equity consideration, does not
exceed $4,000,000 in the aggregate (with a fair valuation of equity and debt
consideration and consideration which is contingent or tied to an earn-out or to
be paid in the future);

(ii)           The Acquisition is identified as a “Permitted Acquisition” by
such Borrower in writing to the Lender at least thirty (30) days before such
Acquisition;

(iii)           The Lender shall have received a certificate satisfactory to the
Lender signed by the chief financial officer of the Parent at least twenty (20)
days before such Acquisition to the effect that (and including calculations
indicating that) on a pro forma basis for the next four (4) quarters after
giving effect to such Acquisition: (a) all representations and warranties
contained in the Loan Documents will remain true and correct except those, if
any, made as of a specific time which shall have been true and correct when
made, (b) the Borrowers on a consolidated basis will remain in compliance with
all covenants contained in the Loan Documents, and (c) no Default or Event of
Default has occurred and is continuing or will occur after giving effect to the
consummation of such Acquisition;

(iv)           With respect to such Person which is the subject of an
Acquisition, such Acquisition has been (x) approved by the board of directors or
other appropriate governing body of such Person or (y) recommended for approval
by such board of directors or governing body to the shareholders, members,
partners, or other owners of such Person, as required under applicable law or
the certificate of incorporation and by-laws or other organizational documents
of such Person and subsequently approved by the shareholders, members, partners
or other owners if such approval is required under applicable law or by the
certificate of incorporation and by-laws or other organizational documents of
such Person or (z) otherwise agreed to by all shareholders, members, partners or
owners of such Person;

(v)           Substantially all of the revenue of the Person(s) or assets being
acquired is derived from products and services substantially similar to those
currently provided by the Borrowers;

(vi)            The Lender shall have received a first priority and only
perfected security interest in all existing and future assets and equity of such
Person(s) being acquired on terms satisfactory to the Lender;

(vii)           At least thirty days before such Acquisition, the Lender shall
have received (A) at least two (2) years of historical financial statements of
such Person (or, if such Person has been in business for less than two (2)
years,

 
 

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

 

financial statements for such lesser number of years), and (B) UCC, tax lien and
judgment searches on such Person satisfactory to the Lender;

(viii) No Event of Default has occurred and is continuing; and

(ix)             The Borrower and such other Person, if any, has complied with
the provisions of Section 5.11 hereof.

“Person” shall mean any individual, corporation, partnership (general or
limited), joint venture, limited liability company, trust, unincorporated
organization or any other juridical entity, or a government or state or any
agency or political subdivision thereof and any other entity of any kind.

“Plan” shall mean any plan of a type described in Section 4021(a) of ERISA in
respect of which the Borrower or any of its Subsidiaries or any ERISA Affiliate
is an “employer” as defined in Section 3(5) of ERISA.

“Post-Closing Letter” shall mean the Post-Closing Letter dated as of even date
herewith among Lender and Borrowers.

“Prime Rate” shall mean the rate per annum from time to time established by the
Lender as the Prime Rate and made available by the Lender at its main office or,
in the discretion of the Lender, the base, reference or other rate then
designated by the Lender for general commercial loan reference purposes, it
being understood that such rate is a reference rate, not necessarily the lowest,
established from time to time, which serves as the basis upon which effective
interest rates are calculated for loans making reference thereto.  Each change
in the Prime Rate shall be effective on the date such change is established.

“Prime Rate Loan” shall mean any Revolving Credit Loan when and to the extent
that the interest rate therefor is determined by reference to the Prime Rate.

“Proceeds” shall have the meaning given to such term in the UCC, including,
without limitation, all (a) payments or other proceeds from an insurance carrier
with respect to any loss, casualty or damage to or in respect of Collateral, and
(b) payments received on account of any condemnation or other governmental
taking of any Collateral.

“Prohibited Transaction” means any transaction set forth in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended from time to
time.

“Reportable Event” shall mean any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.

“Requirements of Law” shall mean, as to any Person, the certificate of
incorporation and by-laws and articles of organization and certificate of
formation and operating agreement and limited liability company agreement or
other organizational or governing documents of such Person, and any law, treaty,
rule or regulation, or any determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.

“Reserve Percentage” shall mean, the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves), which is
imposed on member banks of the Federal Reserve System against “Euro-currency
Liabilities” as defined in Regulation D of the Board regulations.

“Revolving Credit Line Facility” or “Revolving Credit Loan Facility” shall mean
the revolving credit line facility provided by the Lender to the Borrowers
during the Revolving Loan Period pursuant to the terms described in this
Agreement.

“Revolving Credit Loan(s)” shall mean a loan or loans, as applicable, made
pursuant to the terms of Section 2.1 hereof.

“Revolving Credit Note” shall mean the Revolving Credit Note defined in Section
2.3 hereof in the form of Exhibit D hereto.

 
 

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

 

“Revolving Loan Period” shall mean the period from and including the date hereof
to, but not including, the Termination Date or such earlier date as the
Revolving Credit Line Facility shall terminate as provided herein.

“Security Agreement” shall mean a Security Agreement dated as of even date
herewith executed by each of the Borrowers in favor of the Lender, as amended,
restated, supplemented or modified from time to time, together with any other
Security Agreement hereafter executed by any Subsidiary of a Borrower under
Section 5.11 of this Agreement, as amended, restated, supplemented or modified
from time to time.

“Subordinated Debt” shall mean indebtedness of the Borrowers subordinated in
right of payment to the obligations to the Lender under this Agreement pursuant
to subordination, documentation between the Lender and the applicable
subordinated creditor containing maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other terms in form and
substance satisfactory to the Lender.

“Subsidiary” shall mean with respect to any Person (the “parent”) at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
of which securities or other ownership interests representing more than 50% of
the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the partnership interests are, as of such date,
owned, controlled or held, directly or indirectly, by the parent.

“Tangible Net Worth” shall mean, for the Parent and its Subsidiaries (including
the other Borrowers) on a consolidated basis in accordance with GAAP subject to
this paragraph, at any date, the excess of Total Assets minus Total Liabilities,
excluding, however, from the determination of Total Assets (i) monies due from
Affiliates or Subsidiaries or officers or managers or related Persons of any
Borrowers, (ii) the value of any investment made and capital account in the
Joint Venture, (iii) the value of any restricted stock or restricted stock
grants or privately held stock or equity, (iv) any prepayments made to
consultants of any of the Borrowers or any of their Subsidiaries and (v) all
assets which would be classified as intangible assets under GAAP, including,
without limitation, goodwill, patents, trademarks, trade names, copyrights and
franchises.

“Termination Date” shall mean October 31, 2008 or, if such date is not a
Business Day, the Business Day next preceding such date.

“Total Assets” shall mean as of the date of determination, all assets of the
Parent and its Subsidiaries (including the other Borrowers), determined on a
consolidated basis in conformity with GAAP.

“Total Liabilities” shall mean as of the date of determination, all liabilities
of the Parent and its Subsidiaries (including the other Borrowers), determined
on a consolidated basis in conformity with GAAP.

“UCC” shall mean the Uniform Commercial Code as the same is in effect on this
date in the State of New York.
 
1.2           Accounting Terms. As used herein and in any certificate or other
documents made or delivered pursuant hereto, accounting terms not specifically
defined herein shall have the respective meanings given to them under GAAP.

SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT LINE FACILITY

2.1           Revolving Credit Line Facility. Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
the Lender may make Revolving Credit Loans to the Borrowers, on a joint and
several basis, at any time and from time to time from the date hereof to the
Termination Date, or until the earlier termination of this Revolving Credit Line
Facility in accordance with the terms hereof, in an aggregate principal amount
at any time outstanding not to exceed $5,000,000. Notwithstanding the foregoing,
the Aggregate Outstandings shall not at any time exceed the lesser of (a)
$5,000,000 or (b) the Borrowing Base, and Revolving Credit Loans shall not be
made that would result in Aggregate Outstandings exceeding the lesser of (a) or
(b). The Revolving Credit Line Facility shall automatically and permanently
terminate, and all Obligations shall be due and payable in full, on the earlier
of the Termination Date or the end of the Revolving Loan Period, or earlier, as
set forth elsewhere in this Agreement.

Notwithstanding anything in this Agreement, the making of any Revolving Credit
Loan to the Borrowers is within the absolute, unqualified and sole discretion of
the Lender, and Lender has the absolute, unqualified right, in its sole

 
 

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

 

discretion, to refrain from making any Revolving Credit Loan to the Borrowers
for any reason or no reason at all and without regard to any Borrowing Base
calculation.

Within the foregoing limits, the Borrowers may borrow, repay (or, subject to the
provisions of Section 2.9 hereof, prepay) and reborrow, during the Revolving
Loan Period, subject to the terms, provisions and limitations set forth in this
Agreement.

2.2           Revolving Credit Loans. (a) The Revolving Credit Loans made by a
Lender on any date shall be in a minimum aggregate amount of $100,000 or an
integral multiple thereof.

(b)           Each Revolving Credit Loan shall be either a Prime Rate Loan or a
LIBOR Loan as the Borrowers may request pursuant to Section 2.5 hereof.
Revolving Credit Loans of more than one type and Interest Period may be
outstanding at the same time.
 
2.3           Revolving Credit Note. (a) The Revolving Credit Loans made by the
Lender pursuant to Section 2.1 hereof shall be evidenced by a joint and several
promissory note of the Borrowers substantially in the form of Exhibit “D” hereto
with appropriate insertions (the “Revolving Credit Note”), payable to the order
of the Lender and evidencing the joint and several obligations of the Borrowers
to pay to the Lender on the earlier of the Termination Date or the end of the
Revolving Loan Period, or earlier, as specified in the Revolving Credit Note or
this Agreement, the lesser of (i) $5,000,000 or (ii) the aggregate unpaid
principal amount of all Revolving Credit Loans made by the Lender, with interest
thereon as hereinafter prescribed in Section 2.4 hereof.

(b)           The date and amount of each Revolving Credit Loan, the basis for
calculating interest with respect thereto, the Interest Period (if any)
applicable thereto and each payment of principal with respect thereto may be
endorsed by the Lender on the schedule annexed to and constituting a part of the
Revolving Credit Note. The aggregate unpaid amount of Revolving Credit Loans set
forth on such schedule shall be presumed to be the principal amount owing and
unpaid thereon. The failure of the Lender to make such endorsement on such
schedule shall not prejudice the Lender in any way, nor affect its rights
hereunder with respect to any Revolving Credit Loans or Borrowers’ obligations
relating thereto. The Revolving Credit Note shall be dated the date of this
Agreement and be stated to mature on the Termination Date or earlier, as
specified in the Revolving Credit Note.

2.4           Interest. Interest on each Revolving Credit Loan shall be at a per
annum rate to be elected by the Borrowers, in accordance with Section 2.5
hereof, and shall be either a fluctuating rate equal to the Prime Rate minus
0.25% or, subject to availability, the LIBOR for Interest Periods selected by
the Borrowers plus 2.00%. Interest on each Prime Rate Loan shall be payable
monthly in arrears to the Lender, on the first Business Day of each month,
commencing on the first such day to occur after the pertinent Revolving Credit
Loan is made and upon payment in full thereof.  Interest on each LIBOR Loan
shall be payable to the Lender in arrears on the last Business Day of the
Interest Period applicable to such LIBOR Loan, commencing on the first such day
to occur after the pertinent Revolving Credit Loan is made and upon payment in
full thereof. Whenever the unpaid principal balance of any Revolving Credit Loan
shall become due and payable (whether at the stated maturity thereof, by
acceleration or otherwise) or an Event of Default shall have occurred, interest
on all Revolving Credit Loans and all other obligations under this Agreement
shall thereafter accrue and be payable, on demand, to the Lender at the Default
Rate. Interest on each Revolving Credit Loan shall be calculated on the basis of
a year of 360 days for the actual number of days elapsed.

2.5           Procedure for Revolving Credit Borrowing. Subject to the terms of
this Agreement, the Borrowers may borrow under the Revolving Credit Line
Facility during the Revolving Loan Period on any Business Day by Parent giving
the Lender irrevocable notice of a request for a Revolving Credit Loan hereunder
setting forth the amount of the Revolving Credit Loan requested, the date
thereof, whether it is to be a LIBOR Loan or a Prime Rate Loan and, if it is to
be a LIBOR Loan, the duration of the Interest Period applicable thereto.
Requests for LIBOR Loans shall be received by the Lender not later than 11:00
a.m. (New York time) three (3) Business Days prior to the first day of the
Interest Period for each such Revolving Credit Loan. Requests for Prime Rate
Loans may be made up to 11:00 a.m. (New York time) on the day such Revolving
Credit Loan is to be made. Any request for a Revolving Credit Loan may be
written or oral, but if oral, it shall be confirmed in writing sent by the
Parent to the Lender by the close of business of such Business Day. Each request
for a Revolving Credit Loan shall be in a minimum aggregate amount of $100,000
or an integral multiple thereof.

2.6           Conversion and Renewals. With Lender’s prior consent, subject to
the terms of this Agreement, the Borrowers may elect from time to time to
convert all or a part of one type of Revolving Credit Loan into another type of
Revolving Credit Loan or to renew all or part of a Revolving Credit Loan by
giving the Lender notice by 11 a.m. (New

 
 

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

 

York time) on the day of the conversion into a Prime Rate Loan and at least
three (3) Business Days before the conversion into or renewal of a LIBOR Loan,
specifying: (1) the renewal or conversion date; (2) the amount of the Revolving
Credit Loan to be converted or renewed; (3) in the case of conversions, the type
of Revolving Credit Loan to be converted into; and (4) in the case of renewals
of or a conversion into LIBOR Loans, the duration of the Interest Period
applicable thereto; provided that (a) the minimum principal amount of each
Revolving Credit Loan of a Lender outstanding after a renewal or conversion to a
LIBOR Loan or to a Prime Rate Loan shall be $100,000 or an integral multiple
thereof; and (b) LIBOR Loans can be converted only on the last day of the
Interest Period of such Revolving Credit Loan. All notices given under this
Section 2.6 shall be irrevocable and shall be given not later than 11:00 a.m.
(New York time) on the day which is the day or not less than the number of
Business Days, as the case may be, specified above for such notice. Any request
for a conversion or a renewal under this Section 2.6 may be written or oral, but
if oral, it shall be confirmed in writing sent by the Parent to the Lender by
the close of business of such Business Day. If the Parent shall fail to give the
Lender the notice as specified above for the renewal or conversion of a LIBOR
Loan prior to the end of the Interest Period with respect thereto, such LIBOR
Loan shall automatically be converted into a Prime Rate Loan on the last day of
the Interest Period for such Revolving Credit Loan.

2.7           Suspension of LIBOR Loans.

(a) Increased Costs.

(i) If the adoption of, or any change in, any Requirement of Law or in the
interpretation or application thereof or compliance by the Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:

(A)           shall subject the Lender to any tax of any kind whatsoever with
respect to this Agreement, the Revolving Credit Note or any LIBOR Loan made by
it, or change the basis of taxation of payments to the Lender in respect thereof
(except for taxes covered by subsection (c) below and changes in the rate of tax
on the overall net income of the Lender);

(B)           shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of the
Lender which is not otherwise included in the determination of LIBOR hereunder,
including, without limitation, the imposition of any reserves with respect to
Eurocurrency Liabilities under Regulation D of the Board; or

(C)           shall impose on the Lender any other condition;

and the result of any of the foregoing is to increase the cost to the Lender, by
an amount which the Lender deems to be material, of making, converting into,
continuing or maintaining LIBOR Loans or to reduce any amount receivable
hereunder in respect thereof then, in any such case, the Borrowers, on a joint
and several basis, shall promptly pay the Lender, for such increased cost or
reduced amount receivable.  If the Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall notify the Parent of
the event by reason of which it has become so entitled.  A certificate as to any
additional amounts payable pursuant to this subsection submitted by the Lender
to the Parent shall be conclusive in the absence of clearly demonstrable
error.  This covenant shall survive the termination of this Agreement and the
Revolving Credit Line Facility and the payment of the Revolving Credit Note and
all other amounts payable hereunder and under the other Loan Documents and all
other Obligations.

(ii)           In the event that the Lender shall have determined that any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by the Lender or any
corporation controlling the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on the Lender’s or such corporation’s capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such change or compliance
(taking into consideration the Lender’s or such corporation’s then existing
policies with respect to capital adequacy and assuming full utilization of such
entity’s capital) by an amount deemed by the Lender to be material, then from
time to time, after submission by the Lender to the Parent of a written request
therefore accompanied by a statement in the amount and setting forth in
reasonable detail the Lender’s calculation thereof and the assumptions upon
which such calculation is based (which statement shall be deemed true and
correct absent manifest error), within ninety (90) days of Parent’s receipt of
such

 
 

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

 

request and statement, the Borrowers shall pay, on a joint and several basis, to
the Lender such additional amount or amounts as will compensate the Lender for
such reduction

(b)           Illegality. Notwithstanding any other provisions herein, if any
Requirements of Law, regulation, order or decree or any change therein or in the
interpretation or application thereof shall make it unlawful for the Lender to
make or maintain LIBOR Loans as contemplated by this Agreement, in addition to
the Lender’s right to refrain from making Revolving Credit Loans for any reason
or no reason under Section 2.1 hereof, the Lender may refrain from making
further LIBOR Loans and the Revolving Credit Loans of the Lender then
outstanding as LIBOR Loans, if any, shall, at the option of the Borrowers, be
prepaid in full together with all interest accrued and unpaid to the date of any
such prepayment together with any amounts required by Section 2.9 hereof, or
converted into a Prime Rate Loan at the end of the then current Interest Periods
with respect to such LIBOR Loans or within such earlier period as required by
law and subject to the payment obligations of the amounts required by Section
2.9 hereof.

(c)           Taxes. (i) All payments made by the Borrowers under this Agreement
and the Revolving Credit Note shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority (excluding net income taxes and franchise taxes
imposed in lieu of net income taxes imposed on the Lender as a result of a
present or former connection between the jurisdiction of the Governmental
Authority imposing such tax and the Lender (except a connection arising solely
from the Lender having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement or the Revolving Credit
Note)) (all such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called “Taxes”).  If any Taxes are
required to be withheld from any amounts payable to the Lender hereunder or
under the Revolving Credit Note, (i) the amounts so payable to the Lender shall
be increased to the extent necessary to yield to the Lender (after payment of
all Taxes on the additional amounts payable under this Section 2.7(c)) interest
or any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Revolving Credit Note, and (ii) the
Borrowers shall pay the full amount withheld to the relevant taxation authority
in accordance with applicable law.  Whenever any Taxes are payable by any of the
Borrowers, as promptly as possible thereafter such Borrower shall send to the
Lender a certified copy of an original official receipt received by such
Borrower showing payment thereof.  If a Borrower fails to pay any Taxes when due
to the appropriate taxing authority or fails to remit to the Lender the required
receipts or other required documentary evidence, the Borrowers, on a joint and
several basis, shall indemnify the Lender for any incremental taxes, interest or
penalties that may become payable by the Lender as a result of any such
failure.  The agreements in this subsection shall survive the termination of
this Agreement and the Revolving Credit Line Facility and the payment of the
Revolving Credit Note and all other amounts payable hereunder and under the
other Loan Documents and all other Obligations.

(ii)           The Borrowers, on a joint and several basis, shall indemnify the
Lender, within thirty (30) days after written demand therefor from the Lender,
for the full amount of any Taxes paid by such Person on or with respect to any
payment by or on account of any obligation of the Borrowers hereunder (including
Taxes imposed or asserted on or attributable to amounts payable under this
Section 2.7(c)), and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, including, without limitation, attorneys’
fees and expenses, whether or not such Taxes were correctly or legally imposed
or asserted by the relevant Governmental Authority.  A certificate as to the
amount of such payment or liability delivered to the Borrower by the Lender
shall be conclusive absent demonstrable error.

2.8           Upfront Fees; Other Fees.

(a)           Upfront Fees. As compensation for the execution and delivery of
this Agreement, the Borrowers agree to pay to the Lender an upfront fee equal to
$2,000 which fee shall be payable on or prior to the date of this Agreement and
has been fully earned.

(b)           Letter of Credit Fees. In connection with Letters of Credit, the
Borrowers will pay the Lender a (i) non-refundable Letter of Credit Fee equal to
0.25% per annum on the amount available to be drawn under such Letter of Credit,
which fee shall be payable to the Lender upon issuance, and (ii) fee equal to
1/8 of 1% of the amount of such Letter of Credit due at the settlement
thereof.  The Borrowers agree to pay to the Lender the customary administration,
amendment, and transfer fees charged by the Lender in connection with its
issuance and administration of Letters of Credit, as in effect and changed from
time to time, as well as all charges and fees specified in any Letter of Credit
Documentation.

(c)           Payment of All Fees. All fees payable hereunder shall be paid on
the dates due, in immediately available funds, to the Lender. All fees paid
shall not be refundable under any circumstances.  All legal fees and expenses

 
 

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

 

incurred by Lender in connection with the execution, delivery and negotiation of
this Agreement and the Loan Documents and all fees and expenses incurred by
Lender in connection with the Field Audit performed by or for Lender prior to
this date shall be paid in full on or before the date of this Agreement, and all
other legal, audit and accounting fees and expenses incurred by Lender after
this date, including, without limitation, in connection with any amendment,
modification of this Agreement and the Loan Documents, shall be paid by
Borrowers within two (2) Business Days of demand by Lender.

2.9           Indemnity. The Borrowers shall indemnify the Lender against any
loss or expense (including loss of margin) which the Lender has sustained or
incurred as a consequence of any

(i)           payment, prepayment or conversion of any part of any LIBOR Loan on
a day other than the last day of the applicable Interest Period (whether or not
such payment, prepayment or conversion is mandatory or automatic and whether or
not such payment or prepayment is then due, including pursuant to payments,
prepayments or conversions contemplated by Section 2.7 hereof),

(ii)           attempt by the Borrowers to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any notice stated herein to
be irrevocable (the Lender having in its sole discretion the options (A) to give
effect to such attempted revocation and obtain indemnity under this Section 2.9
or (B) to treat such attempted revocation as having no force or effect, as if
never made), or

(iii)           default by the Borrowers in the performance or observance of any
covenant or condition contained in this Agreement or the Revolving Credit Note
or any Loan Documents, including without limitation any failure of the Borrowers
to pay when due (by acceleration or otherwise) any principal, interest, fee or
other amount due hereunder or under the Revolving Credit Note or any Loan
Documents.

If the Lender sustains or incurs any such loss or expense it shall from time to
time notify the Person of the amount determined in good faith by the Lender
(which determination shall be conclusive) to be necessary to indemnify the
Lender for such loss or expense. Such amount shall be due and payable by the
Borrowers to the Lender ten (10) Business Days after such notice is given. All
references to “Lender” shall be deemed to include any participant in or assignee
of the Lender’s Revolving Credit Line Facility or the Revolving Credit Loans and
all other amounts payable hereunder and under the other Loan Documents.

The indemnities set forth herein shall survive the termination of this Agreement
and the Revolving Credit Line Facility and the payment in full of all Revolving
Credit Loans made pursuant to this Agreement and all other Obligations.

2.10           Prepayment. Subject to the indemnity agreement with respect to
LIBOR Loans set forth in Section 2.9 hereof, the Borrowers (a) may prepay any
Revolving Credit Loan in whole or in part without premium or penalty and (b)
shall prepay Revolving Credit Loans to the extent that the Aggregate
Outstandings exceed the Borrowing Base no later than one (1) Business Day after
the occurrence of such excess. Each prepayment shall be made together with
interest accrued on the amount prepaid to the date of prepayment. Prepayments of
Revolving Credit Loans may be reborrowed on a revolving basis as aforesaid
subject to the terms of this Agreement.

2.11           Payments.

(a)           All payments (including prepayments) to be made by the Borrowers
on account of principal, interest, charges and fees and Letters of Credit shall
be made without setoff, defense or counterclaim and shall be made to the Lender
on the date of payment at the office of the Lender pursuant to Section 10.1
hereof or at such other place as the Lender may from time to time designate in
writing on or before 11:00 a.m. (New York time). All such payments shall be made
in lawful money of the United States of America and in immediately available
funds. If any payment hereunder (other than payments on LIBOR Loans) becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on a LIBOR Loan becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month in which event such payment shall be
made on the immediately preceding Business Day and, in the event of any
extension, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
 
(b)           The Borrowers hereby authorize the Lender to automatically deduct
from any deposit account of the Borrowers or any of them held by the Lender the
amount of any loan payment or Letter of Credit unreimbursed drawing

 
 

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

 

or other amounts owed in respect of Revolving Credit Loans or Letters of Credit,
including all payments of interest, principal, fees and other sums due
(“Automatic Payment”), from time to time, under this Agreement, the Revolving
Credit Note, the Letter of Credit Documentation or the other Loan Documents; the
Lender will thereafter notify the Parent of the amount so charged.  If the funds
in the account are insufficient to cover any payment due, the Lender shall not
be obligated to advance funds to cover the payment.  The failure of the Lender
so to charge any account or to give any such notice shall not affect the
obligation of the Borrowers to pay interest, principal, fees or other sums as
provided herein, in the Revolving Credit Note, the Letter of Credit
Documentation or the other Loan Documents.  At any time and for any reason, the
Borrowers or the Lender may voluntarily terminate the Automatic
Payment.  Termination by the Borrowers of the Automatic Payment must be made by
written notice to the Lender.
 
2.12           Use of Proceeds. The proceeds of any Revolving Credit Loans shall
be used by the Borrower only for working capital purposes consistent with past
practices or to fund Permitted Acquisitions subject to the conditions with
respect thereto contained in the definition thereof.  No portion of the proceeds
of any Revolving Credit Loan shall be used by the Borrowers in any manner which
might cause the borrowing of such Revolving Credit Loan or the application of
such proceeds to violate Regulation U, Regulation T or Regulation X of the
Board.

2.13           Letters of Credit. If the Lender issues letters of credit for the
account of any Borrower (each a “Letter of Credit and collectively, the “Letters
of Credit”), without limiting this Agreement or the other Loan Documents, the
terms of such Letters of Credit and obligations relating thereto shall be
governed by the Letters of Credit Documentation.  All unpaid reimbursement
obligations in respect of Letters of Credit shall constitute Revolving Credit
Loans that accrue interest at the Default Rate with all such unpaid
reimbursement obligations and interest payable on demand from the date the
reimbursement obligation arises and are payable in accordance with this
Agreement and the other Loan Documents.

 
SECTION 3. REPRESENTATIONS AND WARRANTIES

In order to induce the Lender to enter into this Agreement and to make the
Revolving Credit Loans and to issue Letters of Credit, each of the Borrowers
hereby represents and warrants to the Lender that, on the date hereof and on the
date of each Revolving Credit Loan and Letter of Credit issuance:

3.1           Financial Condition. The consolidated balance sheet and
consolidated statements of income, retained earnings and cash flows of the
Parent and its Subsidiaries as at and for the periods ending June 30, 2005 and
June 30, 2006 respectively audited by Beckstead and Watts, LLP and the interim
consolidated balance sheet and related consolidated statements of income,
retained earnings and cash flows as of March 31, 2007 have heretofore been
furnished to the Lender, and fairly present the financial condition of the
Parent and its Subsidiaries (including the other Borrowers) as at such dates,
and the results of their operations for the fiscal years and fiscal quarters,
respectively, then ended, except to the extent of any exception specifically set
forth on Schedule 3.1 hereto. All such annual and interim financial statements
have been prepared in accordance with GAAP on a consistent basis, with the
annual financial statements, subject to year end adjustments in the case of the
interim financial statements. Neither the Borrowers nor any of their
Subsidiaries has any material contingent obligations, contingent liabilities or
liability for taxes, long-term lease or unusual forward or long-term commitment,
or other material liabilities, which are not reflected in the balance sheet
contained in the foregoing financial statements dated as of March 31, 2007 or in
the notes thereto.

3.2           No Change. Since June 30, 2006, there has been no material adverse
change in the business, operations, assets, cash flow, earnings, liabilities or
financial or other condition or prospects of the Borrowers and their
Subsidiaries taken as a whole or any individual Borrower.

3.3           Corporate Existence; Compliance with Law; Subsidiaries. Each of
the Borrowers and each of their Subsidiaries (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, (ii) has the power and authority and the legal right
to own and operate its properties, and to conduct the business in which it is
currently engaged, (iii) does not own or operate properties or conduct business
which requires qualification as a foreign corporation or limited liability
company in any jurisdiction in which it is not so qualified, and (iv) is in
compliance with all Requirements of Law.

3.4           Corporate Power; Authorization; Enforceable Obligations. Each of
the Borrowers and each of their Subsidiaries has the power and authority and the
legal right to execute, deliver and perform its obligations under the Loan
Documents and, in the case of the Borrowers, to borrow and obtain other
extensions of credit hereunder and grant the Lender a first priority perfected
security interest in the Collateral. Each of the Borrowers has taken all
necessary action to authorize the borrowings and other extensions of credit
hereunder and the above referenced security interest grant on the

 
 

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

 

terms and conditions of this Agreement and the other Loan Documents and each of
the Borrowers and each of their respective Subsidiaries has taken all necessary
action to authorize the execution, delivery and performance of the Loan
Documents and the above referenced security interest grant. No consent or
authorization of, filing with, or other act by or in respect of any other Person
(including stockholders and creditors of the Borrowers or their Subsidiaries) or
any Governmental Authority, is required in connection with the borrowings and
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents or the above
security interest grant. Each of the Loan Documents has been duly executed and
delivered on behalf of the Borrowers or their Subsidiaries, as applicable, and
each of the Loan Documents constitutes a legal, valid and binding obligation of
the Borrowers or their Subsidiaries, as applicable, enforceable against the
Borrowers or their Subsidiaries, as applicable, in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally.
 
3.5           Legal Bar. The execution, delivery and performance of each of the
Loan Documents and the borrowings and other extensions of credit hereunder and
the use of the proceeds thereof and the security interest grant referenced in
Section 3.4, and compliance with Section 7.7 and all of Section 7 and all of the
other provisions of this Agreement will not violate any of the Requirements of
Law or Contractual Obligations of the Borrowers or their Subsidiaries, and will
not result in, or require the creation or imposition of, any Lien (except in
favor of the Lender) on any of their respective properties or revenues pursuant
to any Requirements of Law or Contractual Obligations.

3.6           No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending by or against
the Borrowers or any Subsidiary or, to the knowledge of the Borrowers,
threatened against or affecting the Borrowers or any of their Subsidiaries or
any of their respective properties or revenues (a) with respect to any of the
Loan Documents or any of the transactions contemplated hereby or thereby, (b)
which if adversely determined, would have a material adverse effect on the
business, operations, property or financial or other condition or prospects of
the Borrowers and their Subsidiaries taken as a whole or any Borrower taken
individually or (c) subject to Schedule 3.6, involves a claim against any
Borrower or any Subsidiary in excess of $100,000.

3.7           No Default. Neither the Borrowers nor any of their Subsidiaries is
in default under or with respect to any Contractual Obligations in any respect
which would be materially adverse to the business, operations, property or
financial or other condition or prospects of the Borrowers and their
Subsidiaries taken as whole or which would materially and adversely affect the
ability of the Borrowers or their Subsidiaries to perform their respective
obligations under any of the Loan Documents. No Default or Event of Default has
occurred and is continuing.

3.8           No Burdensome Restrictions. No Contractual Obligations of the
Borrowers or their Subsidiaries and no Requirements of Law materially adversely
affect, or insofar as the Borrowers or their Subsidiaries may reasonably foresee
may so materially adversely affect, the business, operations, property or
financial or other condition or prospects of the Borrower and their Subsidiaries
taken as a whole.

3.9           Federal Regulations. Neither the Borrowers nor their Subsidiaries
are engaged nor will they engage, principally or as one of their 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 as now and from time to time
hereafter in effect. No part of the proceeds of any Revolving Credit Loans
hereunder, and no Letter of Credit, will be used for “purchasing” or “carrying”
“margin stock” as so defined or for any purpose which violates, or which would
be inconsistent with, the provisions of the regulations of the Board.

3.10           Environmental Matters. Except as set forth on Schedule 3.10
hereto:

(a)           The Borrowers’ and their Subsidiaries’ properties and each of them
do not contain, and have not previously contained, any Hazardous Materials in
amounts or concentrations that constitute or constituted a violation of, or
could give rise to liability under, Environmental Laws.

(b)           The Borrowers’ and their Subsidiaries’ properties and all
operations at the Borrowers’ and their Subsidiaries’ properties and each of
their properties and operations are in compliance and at all times have been in
compliance with all Environmental Laws, and there is no contamination at, under
or about the Borrowers’ or their Subsidiaries’ properties which could interfere
with the continued operation of the Borrowers’ and their Subsidiaries’
properties or impair the fair market value thereof.  The Borrowers and their
Subsidiaries and each of them have not assumed any liability of any Person under
Environmental Laws.

 
 

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

 

(c)           Neither of the Borrowers nor any of their Subsidiaries has
received or is aware of any claim or notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance with Environmental Laws with regard to the Borrowers’ or
Subsidiaries’ properties nor do the Borrowers have knowledge or reason to
believe that any such action is being contemplated, considered or threatened.

(d)           Hazardous Materials have not been transported or disposed of from
any of the Borrowers’ or their Subsidiaries’ properties in violation of, or in a
manner or to a location which could give rise to liability under, Environmental
Laws, nor have any Hazardous Materials been generated, treated, stored or
disposed of at, on or under any of the Borrowers’ or Subsidiaries’ properties in
violation of, or in a manner that could give rise to liability under, any
applicable Environmental Laws.

(e)           There are no judicial proceedings or governmental or
administrative actions pending, contemplated or threatened under any
Environmental Laws to which the any of the Borrowers or their Subsidiaries is or
will be named as a party with respect to any Borrowers’ or their Subsidiaries’
properties, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to any of the
Borrowers’ properties.

(f)           There has been no release or threat of release of Hazardous
Materials at or from any of the Borrowers’ or any of their Subsidiaries’
properties, or arising from or related to the operations of any of the Borrowers
in connection with any of the Borrowers’ or their Subsidiaries’ properties, in
violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws.

(g)           Each of the representations and warranties set forth in paragraphs
3.10(a) through 3.10(f) is true and correct with respect to each facility and
parcel of real property owned or operated by any of the Borrowers or their
Subsidiaries.

(h)           A complete list of all current permits, registrations and licenses
of any of the Borrowers relating to manufacturing, storage, handling,
transportation and disposal operations is attached on Schedule 3.10 and the
Borrowers are in full compliance with the requirements thereof.

(i)           All governmental disclosure requirements relating to
manufacturing, storage, handling, transportation and disposal operations of any
of the Borrowers are set forth on Schedule 3.10.

(j)           All legally mandated inventory control requirements of any of the
Borrowers are set forth on Schedule 3.10 and the Borrowers are in full
compliance therewith.

(k)           All other information, such as knowledge of releases or potential
liabilities with respect to disposal sites of Borrowers, which would likely be
included in public disclosures, are set forth on Schedule 3.10.

3.11           Title to Properties. Each of the Borrowers and their Subsidiaries
have valid leases of or good and marketable title to its respective properties
and assets, including the properties and assets reflected in the most recent
balance sheet described in Section 3.1 hereof. Such properties and assets are
not subject to any Lien, except as otherwise permitted by Section 7.2 hereof.

3.12           Taxes. The Borrowers and their Subsidiaries have filed all
Federal, state and other tax returns which are required to be filed and have
paid all taxes required to be paid by them or shown as due and payable on said
returns or on any assessments made against them or any of their respective
properties except such taxes, if any, as are being contested in good faith and
by proper proceedings and as to which adequate reserves have been maintained on
the financial statements referenced in Section 3.1 in conformity with GAAP for
such unpaid taxes.  Neither the Borrowers nor any of their Subsidiaries has
given or been requested to give a waiver of the statute of limitations relating
to the payment of any federal, state, local and foreign taxes or other
impositions, and no tax Lien has been filed with respect to the Borrowers of any
of their Subsidiaries.  There is no proposed tax assessment against the
Borrowers or any of their Subsidiaries and there is no basis for such
assessment.  The period within which United States federal income taxes may be
assessed against any of the Borrowers or any of their Subsidiaries has expired
for all taxable years ending on or before December 31, 2002.

3.13           ERISA. Based upon ERISA and the regulations and published
interpretations thereunder, each of the Borrowers, their Subsidiaries and each
ERISA Affiliate is in compliance in all material respects with all applicable
provisions, if any, of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with

 
 

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

 

respect to any Plan; no notice of intent to terminate a Plan has been filed nor
has any Plan been terminated; no circumstances exist which constitute grounds
under Section 4042 of ERISA entitling the PBGC to institute proceedings to
terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted such proceedings; each of the Borrowers, their Subsidiaries and each
ERISA Affiliate has met its minimum funding requirements under ERISA with
respect to all of its Plans and the present fair market value of all Plan assets
exceeds the present value of all vested benefits under each Plan, as determined
on the most recent valuation date of such Plan in accordance with the provisions
of ERISA and the regulations thereunder for calculating the potential liability
of the Borrowers, their Subsidiaries and each ERISA Affiliate to the PBGC or
such Plan under Title IV of ERISA, and neither the Borrowers, their Subsidiaries
nor an ERISA Affiliate has incurred any liability to the PBGC under ERISA.
 
3.14           Operation of Business. The Borrowers and their Subsidiaries
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
trade names, or rights thereto, necessary to conduct their respective businesses
substantially as now conducted and as presently proposed to be conducted, and
neither the Borrowers nor any Subsidiary is in material violation of any valid
rights of others with respect to any of the foregoing except where the failure
to obtain licenses or permits does not individually or in the aggregate
materially and adversely impair the ability of any of the Borrowers or any of
their Subsidiaries to operate its business or perform its obligations under a
Loan Document.  No permits, licenses, approvals or authorizations of any
Governmental Authority is required under any Requirements of Law to sell any
Inventory of any of the Borrowers.

3.15           Security Agreement. The Security Agreement executed by the
Borrowers and each of their Subsidiaries pursuant to its terms and applicable
law, constitutes a valid and continuing lien on and security interest in the
Collateral in favor of the Lender, which shall be prior to all other Liens,
claims and rights of all other Persons in such collateral.  Such security
interest constitutes a first priority perfected security interest in all such
collateral as security for all Obligations; provided, however, the existence of
Liens permitted by Section 7.2 hereof shall not constitute a violation of this
Section 3.15.

3.16           Accuracy and Completeness of Information.  All information,
reports and other papers and data with respect to the Borrowers and their
Subsidiaries, this Agreement, the other Loan Documents and any transaction
contemplated hereby or thereby furnished to the Lender by any of the Borrowers
or on behalf of any of the Borrowers, were, at the time the same were so
furnished, complete and correct in all material respects, or have been
subsequently supplemented by other information, reports or other papers or data,
to the extent necessary to give the Lender a true and accurate knowledge of the
subject matter in all material respects.  No fact is known to any of the
Borrowers which materially and adversely affect or may reasonably be expected to
materially adversely affect the business, assets, liabilities, financial or
other condition or prospects of any of the Borrowers or their Subsidiaries,
which has not been disclosed in writing to the Lender prior to the date
hereof.  No document furnished or statement made in writing to the Lender by any
of the Borrowers in connection with the negotiation, preparation or execution of
this Agreement contains any untrue statement of a material fact, or omits to
state any such material fact necessary in order to make the statements contained
therein not misleading, in either case which has not been corrected,
supplemented or remedied by subsequent documents furnished or statements made in
writing to the Lender.

3.17           Subsidiaries and Affiliates.  Other than those Subsidiaries and
Affiliates of the Borrowers expressly set forth on Schedule 3.17 hereto, Parent
has no other Subsidiaries or Affiliates.  All Subsidiaries of Parent are
Borrowers.

3.18           Funded Debt.  Schedule 3.18 sets forth a true and correct list of
all Funded Debt of Parent, each other Borrower and each of their respective
Subsidiaries, together with a list of the principal balances thereof, payment
dates with respect thereto, and a true and correct description of any Liens
securing such Funded Debt.

3.19           Solvency.  Each Borrower is, and the Borrowers on a consolidated
basis are, not Insolvent and will not be Insolvent after giving effect to the
execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated under this
Agreement and the other Loan Documents.  For purposes of this representation and
warranty, "Insolvent” as used herein means, with respect to any Borrower or the
Borrowers on a consolidated basis, on a particular date, that on such date (i)
the fair value of the property of such Borrower or the Borrowers on a
consolidated basis, is less than the total amount of liabilities (including the
reasonably estimated amount of the contingent, unliquidated, disputed and
unmatured liabilities) of such Borrower or the Borrowers on a consolidated
basis; (ii) the present fair market value of the assets of such Borrower or the
Borrowers on a consolidated basis, is less than the amount that will be required
to pay the probable liability of such Borrower or the Borrowers on a
consolidated basis, on its or their existing debts (contingent, unliquidated,
disputed, unmatured or otherwise) as they become absolute and matured; (iii)
such Borrower or the Borrowers on a consolidated basis, is/are not able to pay
its or

 
 

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

 

their, as applicable, debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business; or (iv) such
Borrower or the Borrowers on a consolidated basis, is/are engaged in a business
or transaction for which the property remaining with such Borrower or the
Borrowers on a consolidated basis, is an unreasonably small capital.

SECTION 4. CONDITIONS PRECEDENT

4.1           Conditions to Initial Revolving Credit Loan. Without limiting
Section 2 of this Agreement, the initial extension of credit to the Borrowers
hereunder is subject to the satisfaction of the following conditions precedent:

(a) Revolving Credit Note. The Lender shall have received a Revolving Credit
Note conforming to the requirements hereof and duly executed by the Borrowers.

(b) Legal Opinion. The Lender shall have received favorable opinions of counsel
to the Borrowers satisfactory in form and substance to the Lender and its
counsel and covering such matters incident to the transactions contemplated by
this Agreement as the Lender shall require.

(c) Guarantee. Intentionally omitted.

(d) Security Agreement. The Lender shall have received the Security Agreement
and all Intellectual Property Security Agreements duly executed by the
Borrowers, together with UCC-1 financing statements in favor of the Lender
(including fixture filings), Form UCC-3 termination statements or amendments (if
required), UCC, tax, judgment and litigation searches, patent, trademark and
copyright searches with the U.S. Patent and Trademark Office and all other
documents required by the Lender to provide it with a first priority perfected
security interest in all collateral subject to said security agreement.
 
(e) Lockbox Agreement. The Lender shall have received the Lockbox Agreement duly
executed by the Borrowers in favor of the Lender.

(f) Insurance. The Borrowers shall have delivered to the Lender evidence
satisfactory to the Lender that: (i) all insurance required by this Agreement or
any Loan Documents is in full force and effect and (ii) the Lender has been
named as additional insured or loss payee, as the case may be, with respect
thereto in a manner satisfactory to the Lender.

(g) Intercreditor Agreement.  The Lender shall have received the duly executed
Intercreditor Agreement in form and substance satisfactory to it.

(h) Perfection Certificate.  The Lender shall have received the Perfection
Certificate duly executed by the Borrowers.

(i) Certified Copies and Other Documents. The Lender shall have received such
certificates and other documents relating to the Borrowers with respect to the
matters herein contemplated as the Lender may request, including but not limited
to:

(i)           certificates of good standing from the Secretary of State or
applicable Governmental Authority of each jurisdiction of incorporation or
formation and from the Secretary of State or applicable Governmental Authority
of each jurisdiction in which an office is maintained and where any Borrower is
qualified to do business or is required to be qualified to do business;

(ii)            certificates of incorporation or formation or articles of
organization and all amendments thereto certified by the applicable Secretary of
State or applicable Governmental Authority; and

(iii)            certificates of an officer of each of the Borrowers dated the
date of this Agreement certifying (x) true and correct copies of the by-laws of
such Borrower or operating agreement as in effect on the date of adoption of the
resolutions referred to in (y) of this subsection (iii), (y) true and correct
copies of resolutions adopted by the board of directors, stockholders, members
or managers of such Borrower, as applicable, (1) authorizing the borrowings and
the other extensions of credit from the Lender hereunder, the execution,
delivery and performance by such Borrower of each of the Loan Documents to which
it is a party, (2) approving forms in substantially execution form of each of
the Loan

 
 

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

 

Documents to which it is a party, and (3) authorizing officers of such Borrower
to execute and deliver each of the Loan Documents to which it is a party, and
(z) the incumbency and specimen signatures of the officers of the Borrower
executing any documents delivered to the Lender by the Borrower in connection
herewith.

(i)           Fees. The Lender shall have received evidence of payment of an
upfront fee in the amount of $2,000 and all sums required to be paid on or
before this date under Section 2.8(c).

(j)           Field Audit. The Lender shall have received an updated field
examination satisfactory in all respects to the Lender.

(k)           Stock Certificates. The Lender shall have received all stock
certificates of all issued and outstanding stock of EMC and undated stock powers
for such stock executed in blank in form and substance satisfactory to Lender.

(l)           Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Lender and its counsel.

4.2           Conditions to All Revolving Credit Loans, Etc. Without limiting
Section 2 of this Agreement, any Revolving Credit Loan (including the initial
Revolving Credit Loan) to be made hereunder, and any Letter of Credit to be
issued hereunder or under the Letter of Credit Documentation is subject to the
satisfaction of the following conditions precedent:

(a)           Representations and Warranties. The representations and warranties
made by the Borrowers herein or which are contained in any other Loan Document
or any certificate, document or financial or other statement furnished at any
time under or in connection herewith, shall be correct on and as of the date of
such extension of credit as if made on and as of such date except to the extent
that such representation is stated to be made as of a date certain in which case
it shall be true and correct as of such earlier date.
 
(b) No Default or Event of Default. No Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit or after
giving effect to the extension of credit to be made on such date.

(c) Availability.  Such Revolving Credit Loan shall be agreed to be made by
Lender under Section 2 of this Agreement and after giving effect to such
extension of credit, the Aggregate Outstandings shall not exceed the lesser of
$5,000,000 or the Borrowing Base.

Each extension of credit to the Borrowers hereunder shall constitute a
representation and warranty by the Borrowers hereunder as of the date of each
such extension of credit that the conditions in clauses (a), (b) and (c) of this
Section 4.2 have been satisfied.

SECTION 5. AFFIRMATIVE COVENANTS

Each of the Borrowers hereby agrees that so long as the Revolving Credit Line
Facility remains in effect, the Revolving Credit Note, any Revolving Credit Loan
or any Letter of Credit remains issued, or outstanding and unpaid, or any
Obligations remain unpaid, the Borrowers shall and shall cause each of their
Subsidiaries to:

5.1           Information. Furnish to the Lender or cause to be furnished to the
Lender:

(a)           As soon as available, but not more than one hundred twenty (120)
days after the close of each fiscal year of the Parent (the “Annual Delivery
Date”), the Parent’s Form 10-K and the financial statements of the Parent and
its Subsidiaries including the consolidated and consolidating balance sheets of
the Parent and its Subsidiaries with related consolidated and consolidating
statements of income, retained earnings and cash flows for such fiscal year,
setting forth in each case in comparative form the figures as of the end of and
for the previous fiscal year, all prepared in accordance with GAAP consistently
applied and audited by a firm of independent certified public accountants
acceptable to the Lender and without qualification. Such financial statements
shall be accompanied by (i) copy of the management letter, if any, prepared by
such firm and (ii) a Compliance Certificate of the chief financial officer of
the Parent with computations demonstrating compliance with the financial
covenants contained in Section 6 of this Agreement and to the effect that,
having read this Agreement and the other Loan Documents and based upon an
examination which in the opinion of such officer was sufficient to enable such
officer to make an informed statement, nothing came to such officer’s attention
which

 
 

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

 

would cause such officer to believe that an Event of Default or Default had
occurred, and, if so, stating the facts with respect thereto and whether the
same has been cured prior to the date of such certificate, and, if not, what
action is proposed to be taken with respect thereto all in substantially the
form attached hereto as Exhibit B, as modified from time to time by the Lender.

(b)           As soon as possible, but not more than forty-five (45) days after
the close of the first three (3) fiscal quarters of each year (the “Quarterly
Delivery Date”), the Parent’s Form 10-Q and the financial statements of the
Parent and its Subsidiaries including consolidated and consolidating balance
sheets of the Parent and its Subsidiaries with related consolidated and
consolidating statements of income, retained earnings and cash flows as of the
last day of and for such quarter and for the period of the fiscal year ended as
of the close of the particular quarter, all such quarterly statements to be in
reasonable detail, all prepared in accordance with GAAP and on a consistent
basis with the annual financial statements, subject to year end adjustments and
certified as to fairness of presentation by the chief financial officer of the
Parent. Such financial statements shall be accompanied by a Compliance
Certificate signed by the chief financial officer of Parent to the same extent
and covering the same matters as specified in paragraph (a)(ii) above all in
substantially the form attached hereto as Exhibit B, as modified from time to
time by the Lender.
 
(c)           Prompt written notice if: (i) any obligation (other than an
obligation under this Agreement) of the Borrowers or any of their Subsidiaries
for borrowed money or for the deferred purchase price of any property or any
Funded Debt is declared or shall become due and payable prior to its stated
maturity, (ii) the holder of any note (other than a Revolving Credit Note) or
Funded Debt, or other evidence of indebtedness, certificate or security
evidencing any such obligation, has the right to declare such obligation due and
payable prior to its stated maturity, or (iii) there shall occur an Event of
Default or a Default.

(d)           Prompt written notice of: (i) any citation, summons, subpoena,
order to show cause or other order naming any of the Borrowers or any of their
Subsidiaries a party to any proceeding before any governmental body which
relates to any of the Loan Documents or which if adversely determined would have
a material adverse effect on the property, business, profits, condition
(financial or otherwise), operations or prospects of the Borrowers and their
Subsidiaries taken as a whole or any Borrower or Subsidiary, and include with
such notice a copy of such citation, summons, subpoena, order to show cause or
other order, (ii) any lapse or other termination of a license, permit or other
authorization issued to any of the Borrowers or any of their Subsidiaries by any
Governmental Authority or Person, which lapse or other termination would have a
material adverse effect on the property, business, profits, condition (financial
or otherwise), operations or prospects of the Borrowers and their Subsidiaries
taken as a whole or any Borrower or Subsidiary, (iii) any refusal by any
Governmental Authority or any other Person to renew or extend such license,
permit or other authorization, and (iv) any suit between the Borrowers or any of
their Subsidiaries and any Governmental Authority or any other Person or formal
demand made upon any of the Borrowers or any of their Subsidiaries by any
Governmental Authority or any other Person which if adversely determined would
have a material adverse effect on the property, business, profits, condition
(financial or otherwise), operations or prospects of the Borrowers and their
Subsidiaries taken as a whole or any Borrower or Subsidiary.

(e)           Within ten (10) days after the filing thereof, copies of all other
periodic reports which the Parent or any of its Subsidiaries (including the
other Borrowers) may now or hereafter be required to file with or deliver to any
securities exchange or to the Securities and Exchange Commission, or any other
Governmental Authority succeeding to the functions thereof.

(f)           At all times each of the Borrowers shall grant reasonable access
to the Lender and/or its duly authorized representatives or agents, and
cooperate fully with the Lender in any inspection of the Borrowers’ and their
Subsidiaries books and records and all collateral wherever located (“Field
Audit”) as well as a review of Accounts, Inventory, accounts payable, taxes and
insurance of the Borrowers and their Subsidiaries, provided that, Lender shall
give reasonable notice prior to any Field Audit unless during the continuance of
an Event of Default and, other than during the continuance of an Event of
Default, such Field Audits will be limited to one in each fiscal year of Parent.

(g)           Within ten (10) days after the close of each month, an accounts
receivable aging report for Accounts of the Parent and its Subsidiaries as of
the end of such immediately preceding month satisfactory to the Lender
accompanied by a Borrowing Base Certificate as of the end of such immediately
preceding month; provided however, Borrowers may also provide a Borrowing Base
Certificate as of the end of the immediately preceding week if they elect to do
so.

 
 

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

 

(h)           Promptly upon request therefor, such other information and reports
relating to the financial condition and operations of the Borrowers or any of
their Subsidiaries as the Lender at any time or from time to time may reasonably
request.

5.2           Corporate Existence; Continuance of Business. Preserve and
maintain its corporate or limited liability company existence, as applicable,
and its rights, privileges and franchises, continue to engage in substantially
the same line of business in which it was engaged on the date hereof and its
right to conduct business in all states in which the nature of its business
requires qualification to do business.
 
5.3           Payment of Obligations. Pay and discharge all taxes, assessments
and governmental charges or levies imposed upon it or upon its income and
profits, or upon any property belonging to it, prior to the date upon which
penalties attach thereto except where contested in good faith and by proper
proceedings if appropriate reserves are maintained with respect thereto in
conformity with GAAP.

5.4           Insurance. Maintain insurance, at all times throughout the term of
this Agreement, on its property with responsible insurance carriers licensed or
authorized to do business in each state in which the Borrowers or any of their
Subsidiaries conducts business against such risks, loss, damage and liability
(including liability to third parties) and in such amounts as is customarily
maintained by similar businesses.  Without regard to the immediately preceding
sentence, Borrowers shall maintain receivables or credit insurance on all
Accounts where the Account Debtor’s chief executive office is in the United
States of America except for Account Debtors identified on Exhibit C, casualty
insurance and public liability and workers’ compensation insurance, and file
with the Lender within ten (10) Business Days after request therefor
certificates of such insurance policies then in effect on Acord form or other
similar form acceptable to the Lender so that the Lender is listed as a loss
payee with respect to the receivables or credit insurance policies and casualty
insurance policies maintained by the Borrowers or any of their Subsidiaries and
as an additional insured with respect to all other insurance policies maintained
by the Borrowers and any of their Subsidiaries.

5.5           Payment of Indebtedness and Performance of Obligations. Pay and
discharge promptly all lawful claims for labor, materials and supplies or
otherwise.

5.6           Condition of Property. At all times, maintain, protect and keep in
good repair, working order and condition, normal wear and tear excepted, all
property of the Borrowers and their Subsidiaries necessary and useful in the
judgment of the Borrowers and their Subsidiaries in connection with the proper
conduct of the business of the Borrowers and their Subsidiaries.

5.7           Observance of Legal Requirements. Observe and comply in all
respects with all material laws (including but not limited to ERISA),
ordinances, orders, judgments, rules, regulations, certifications, franchises,
permits, licenses, directions and requirements of all governmental bodies which
now or at any time hereafter may be applicable to the Borrowers or any of their
Subsidiaries.

5.8           Books and Records. Keep proper and accurate books of record and
account.

5.9           Inspection. At any reasonable times and from time to time, upon
reasonable notice (with no such notice required during an Event of Default)
permit the Lender, through officers or employees or authorized representatives
to visit and inspect any of the properties of the Borrowers or any of their
Subsidiaries, and to examine the minute books, books of account, reports and
other records of the Borrowers and their Subsidiaries including records relating
to the Accounts and Inventory and, at Borrowers’ expense, make copies thereof or
extracts therefrom, and discuss the affairs, finances and accounts of the
Borrowers and their Subsidiaries with their officers or with such Borrowers’
independent accountants. Such right of inspection shall encompass, without
limitation, the conduct of a Field Audit by the Lender or its duly authorized
representatives.
 
5.10           Compliance with Environmental Laws; Indemnity.

(a)           Comply with, and ensure compliance by, all tenants and subtenants,
if any, with, all applicable Environmental Laws and obtain and comply with and
maintain, and ensure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, registrations or permits required by
applicable Environmental Laws;

 
 

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

 

(b)           Immediately notify the Lender in writing and in reasonable detail
of (i) any release or discharge by the Borrowers or any of their Subsidiaries of
any Hazardous Material required to be reported under Environmental Laws to any
Governmental Authority, (ii) any condition, circumstance, occurrence or event
that could result in the imposition of any Lien or other restriction on the
title, ownership or transferability of any of the Borrowers’ or their
Subsidiaries’ properties, and (iii) any proposed action to be taken by any of
the Borrowers or their Subsidiaries to any material additional or different
requirements or liabilities under Environmental Laws;

(c)           Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all orders and directives of all
Governmental Authorities respecting Environmental Laws; and

(d)           Indemnify, defend and hold harmless the Lender and its employees,
agents, officers, directors, successors and assigns from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature known or unknown, contingent or otherwise, arising
out of, or in any way relating to any violation of, noncompliance with or
liability under any Environmental Laws or any orders, requirements or demands of
Governmental Authorities related thereto (including, without limitation,
attorneys’ and consultants’ fees, investigation and laboratory fees, response
costs, court costs and litigation expenses), except to the extent that any of
the foregoing arise out of the gross negligence or willful misconduct of the
party seeking indemnification therefor.  Notwithstanding anything herein
contained to the contrary, the provisions of this paragraph shall survive
payment in full of the Revolving Credit Loans and the termination of this
Agreement and the payment of the Obligations.

5.11           New Subsidiaries. Give the Lender thirty days’ prior written
notice of the creation, establishment or acquisition, in any manner, of any
Subsidiary of any Borrower not existing on the date of this Agreement. Upon such
formation, the Parent shall cause any Subsidiary formed after the date of this
Agreement to become a Guarantor of all debts and obligations of the Borrowers
under this Agreement and cause (a) such Subsidiary upon formation to execute a
Guarantee and the Security Agreement together with a related perfection
certificate which shall be acceptable to the Lender in all respects, as well as
all documents required by the Lender to provide it with a first priority
perfected security interest in all existing and future assets and properties of
such Subsidiary and (b) the person owning the equity in such Subsidiary to cause
such equity to become subject to Lender’s pledge of all Subsidiary equity and
such person shall execute all documents to provide Lender with a first priority
perfected security interest in such equity. On the creation, establishment, or
acquisition of such Subsidiary, the Parent shall deliver or cause to be
delivered such proof of corporate or limited liability company action,
incumbency of officers, opinions of counsel and other documents as are
consistent with those delivered as to each Borrower pursuant to Section 4.1
hereof or as the Lender shall request, each in form and substance satisfactory
to the Lender.  

SECTION 6. FINANCIAL COVENANTS

Each of the Borrowers hereby agrees that, so long as the Revolving Credit Line
Facility remains in effect, the Revolving Credit Note, any Revolving Credit Loan
or any Letter of Credit remains issued, or outstanding and unpaid, or any
Obligations remain unpaid, each of the Borrowers shall cause compliance with the
following financial covenants, which for the avoidance of doubt shall be
calculated for the Parent and its Subsidiaries on a consolidated basis:

6.1           Leverage Ratio. A Leverage Ratio shall be maintained that is at
all times equal to or less than 2.50 to 1.00.

6.2           Current Ratio. A ratio of Current Assets to Current Liabilities
shall be maintained that is at all times equal to or more than 1.20 to 1.00.

6.3           Minimum Tangible Net Worth. A Tangible Net Worth shall be
maintained that is at all times equal to or more than $10,000,000.

Except as specifically otherwise provided, all financial covenants shall be
calculated in accordance with GAAP consistently applied.

 
 

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

 

SECTION 7. NEGATIVE COVENANTS

Each of the Borrowers hereby agrees that, so long as the Revolving Credit Line
Facility remains in effect, the Revolving Credit Note, any Revolving Credit
Loans or any Letter of Credit remains issued, or outstanding and unpaid, or any
Obligations remain unpaid, each of the Borrowers shall not, nor shall they
permit any Subsidiary to:

7.1           Indebtedness for Borrowed Money. Incur, or permit to exist, any
Funded Debt except (i) Funded Debt to Lender, (ii) existing purchase money
Funded Debt (used to finance the cost or acquisition of equipment (as defined in
the UCC)) identified on Schedule 3.18 (with no increase in Funded Debt as
compared to the outstanding Funded Debt on such items on this date) and secured
only by Liens described in Section 7.2(iii) hereof, (iii) Funded Debt, only if
previously incurred, of not more than $717,500 outstanding to GSL of Ill, LLC if
the Lien securing such Funded Debt is permitted by Section 7.2(iv), and (iv)
other unsecured Funded Debt which shall not exceed in the aggregate for the
Borrowers and all their Subsidiaries, at any time outstanding, the sum of
$3,700,000.

7.2           Liens. Create, assume or permit to exist any Lien on any of its
property or assets now owned or hereafter acquired except (i) Liens in favor of
the Lender; (ii) Liens for taxes or other governmental charges which are not
delinquent; (iii) purchase money Liens on equipment (as defined in the UCC)
granted to secure either the unpaid balance of the purchase price thereof or a
loan made to finance the purchase of such assets, all to the extent permitted
under Section 7.1(ii) hereof and identified on Schedule 7.2; and (iv) as long as
the Intercreditor Agreement is in effect, Liens in favor of GSL of Ill, LLC
securing not more than $717,500 at any time outstanding.
 
7.3           Loans and Investments. Lend or advance money, credit or property
to or invest in (by capital contribution, loan, purchase or otherwise) any firm,
corporation, or other Person except (i) investments in United States Government
obligations, certificates of deposit of any banking institution with combined
capital and surplus of at least $200,000,000 and commercial paper of the highest
credit rating given by Moody’s Investors Service, Inc. or Standard and Poor’s
Ratings Services, and (ii) investments in existing Subsidiaries or investments
in stocks, securities or assets of other Persons which qualify as a Permitted
Acquisition.

7.4           Fundamental Changes and Transfers. Wind up, liquidate, or dissolve
itself (or suffer any liquidation or dissolution), reorganize, merge or
consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise
dispose of (whether in one transaction or a series of transactions) its
property, business or assets, (whether now owned or hereafter acquired other
than sales of inventory and obsolete equipment in the ordinary course of
business) to any Person, or, except with respect to a Permitted Acquisition,
acquire all or substantially all of the property, business or assets of any
Person except that upon prior written notice to Lender a wholly owned Subsidiary
of a Borrower that is a Borrower or a Guarantor may merge into or consolidate
with any of the Borrowers, provided that in each case that immediately after
giving effect thereto, the surviving entity is obligated under this Agreement
and no event shall occur and be continuing which constitutes a Default or an
Event of Default.

7.5           Contingent Liabilities. Assume, endorse, be or become liable for
or guarantee the obligations of any Person excluding, however, (i) the
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business, (ii) guarantees given by the Borrowers for obligations of
other Borrowers and guarantees given by the Guarantors for the obligations of
the Borrowers.
 
7.6           Sales of Receivables; Sale - Leasebacks. Sell, discount or
otherwise dispose of notes, accounts receivable or other obligations owing to
the Borrowers or their Subsidiaries, with or without recourse, except for the
purpose of collection in the ordinary course of business, or sell any asset
pursuant to an arrangement to thereafter lease such asset from the purchaser
thereof.

7.7           Dividends. Declare or pay any dividends on its capital stock
(other than dividends payable solely in shares of its own common stock), or
purchase, redeem, retire or otherwise acquire any of its capital stock (or any
warrants or options to purchase its capital stock) at any time outstanding or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of any Borrower or any Subsidiary,
except for the payments of dividends or other distributions or purchases of
Parent stock upon presentation to the Lender of a certificate signed by the
chief financial officer of the Parent to the effect that (and including
calculations indicating that) on a pro forma basis after giving effect to such
payment of dividends and/or purchases of Parent stock: (a) all representations
and warranties contained in the Loan Documents will remain true and correct
except those, if any, made as of a specific time which shall have been true and
correct when made, (b) the Borrowers on a consolidated basis will remain in
compliance with all covenants contained in the Loan Documents, including,
without limitation, those contained in Section 6, and (c) no

 
 

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

 

Default or Event of Default has occurred and is continuing or will occur as a
result of the payment of such dividends and/or purchases of Parent stock.  For
the avoidance of doubt, this Section 7.7 shall not apply to dividends or other
distributions declared and paid to the Parent by any of its wholly owned
Subsidiaries or to any other Borrower by a wholly owned Subsidiary thereof.

7.8           Supply and Purchase Contracts. Enter into or be a party to any
contract for the purchase of materials, supplies or other property if such
contract requires that payment for such materials, supplies or other property be
made whether or not delivery of such materials, supplies or other property is
ever made or tendered.

7.9           Nature of Business. Materially alter the nature of the Borrowers’
or their Subsidiaries’ business, or engage in any business except for the
manufacturing, sale, packaging and marketing, as an aftermarket supplier, of
anti-freeze, auto fluids, charcoal fluids and other additives, liquid and
aerosol products, chemicals and automotive and chemical products (including
without limitation, engine oils, transmission oils, washer solvents, brake
fluids, and gasoline additives) and, packaged refrigerators for the automotive
and chemical markets.

7.10           Stock of Subsidiaries. Sell or otherwise dispose of any Borrower
or any Subsidiary of a Borrower (except in connection with a merger or
consolidation of a Subsidiary of a Borrower or a Borrower into any Borrower) or
any equity of a Borrower or any Subsidiary of a Borrower or permit a Subsidiary
of the Borrowers to issue any additional shares of its capital stock except pro
rata to its existing stockholders.
 
7.11           Transactions with Affiliates. Except for existing employment and
other agreements identified on Schedule 7.11 hereto and any stock options or
warrants of the Parent or except in the ordinary course of and pursuant to the
reasonable requirements of the Borrowers’ or any of their Subsidiaries’ business
and upon fair and reasonable terms no less favorable to the Borrowers or such
Subsidiary than would obtain in a comparable arms’ length transaction with a
Person not an Affiliate, enter into any transaction, including, without
limitation, the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate or related Person of any Borrower.

7.12           ERISA. (a) Terminate any Plan so as to result in any material
liability of a Borrower or any Subsidiary to the PBGC, (b) engage in or permit
any Person to engage in any Prohibited Transaction involving any Plan which
would subject the Borrowers or any of their Subsidiaries to any tax, penalty or
other liability, (c) incur or suffer to exist any material “accumulated funding
deficiency” (as defined in Section 202 of ERISA), whether or not waived,
involving any Plan, or (d) allow or suffer to exist any event or condition,
which presents a risk of incurring a liability of the Borrowers or any
Subsidiary to the PBGC by reason of termination of any Plan.

7.13           Amend Charter Documents.  Make any change in or amendment to
either of the Borrowers’ or the Guarantors’ charter documents unless such change
or amendment will not have any adverse effect on the Lender’s interest under the
Loan Documents or the Guarantor’s or Borrowers’ obligations under the Loan
Documents and does not involve a change of name of any such Person.

7.14           Limitation on Leases.  Permit Consolidated Lease Expense for any
fiscal year of the Parent to exceed $500,000.

7.15           Limits on Capital Expenditures.  Make or commit to make (by way
of acquisition of securities of Person or otherwise) any expenditure in respect
of the purchase or other acquisition of fixed or capital assets except for
expenditures, not exceeding in the aggregate, for the Parent and its
Subsidiaries during any fiscal year of the Parent, $500,000.

SECTION 8. EVENTS OF DEFAULT

Upon the occurrence of any of the following events (each an “Event of Default”):

(a) The Borrowers shall fail to pay on the due date thereof any interest under
or principal of the Revolving Credit Note or any other amount payable hereunder
or under any of the other Loan Documents, including, without limitation, amounts
necessary to pay to the Lender the amount of a draw under a Letter of Credit; or
 
(b) Any representation or warranty or statement or certification made or deemed
made by the Borrowers herein or which is contained in any certificate, document
or financial or other statement furnished at any time

 
 

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

 

under or in connection with this Agreement or any other Loan Documents shall
prove to have been false or misleading in any material respect on or as of the
date made or deemed made or furnished; or

(c) The Borrowers shall default in the observance or performance of any of their
covenants or agreements set forth in Sections 2.12, 5.2, 5.4, 5.10, 5.11, 6 or 7
hereof; or Sections 5(c)(ii) or (iii) of the Security Agreement, or Section 5(d)
or 5(f) of the Security Agreement; or

(d) The Borrowers shall default or breach or violate in the observance or
performance of any other covenant or agreement contained in this Agreement or
the other Loan Documents (not referenced in (a) or (c) above) and such default,
breach or violation shall continue unremedied for a period of ten (10) days
after written notice thereof is given to the Parent by the Lender; or

(e) With respect to any Funded Debt, the Borrowers or any Subsidiary of the
Borrowers shall (i) default in any payment of any such Funded Debt; or (ii)
default in the observance or performance of any other agreement or condition
relating to any such Funded Debt or contained in any instrument or agreement
evidencing, securing or relating thereto or any other event shall occur or
condition exist, in each case in this (ii) the effect of which default or other
event or condition is to entitle the holder or holders of such Funded Debt (or a
trustee or agent on behalf of such holder or holders) to cause such Funded Debt
to become due prior to its stated maturity; or

(f) (i) Any of the Borrowers or any of their Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or any of the Borrowers
or any of their Subsidiaries shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against any of the Borrowers or
any of their Subsidiaries any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of thirty (30) days; or (iii) there shall
be commenced against any of the Borrowers or any of their Subsidiaries any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall have not been vacated, discharged, or stayed or bonded pending appeal
within twenty (20) days from the entry thereof; or (iv) any of the Borrowers or
any of their Subsidiaries shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii) or (iii) of this Section 8(f); or (v) any of the Borrowers or
any of their Subsidiaries shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
 
(g) Any of the following events occur or exist with respect to any Borrower or
an ERISA Affiliate: (1) any Prohibited Transaction involving any Plan, (2) any
Reportable Event shall occur with respect to any Plan, (3) a notice of intent to
terminate any Plan shall be filed or the termination of any Plan, (4) any event
or circumstance exists which might constitute grounds entitling the PBGC to
institute proceedings for the termination of, or for the appointment of a
trustee to administer, any Plan, or the institution by the PBGC of any such
proceedings, or (5) the complete or partial withdrawal from any Multiemployer
Plan, and in each case above, such event or condition, together with all other
events or conditions listed above, if any, would reasonably be expected to
subject such Borrower or any Subsidiary of such Borrower to any tax, penalty, or
other liability to a Plan, the PBGC or otherwise (or a combination thereof)
which in the aggregate exceeds or may exceed Ten Thousand and 00/100 ($10,000)
Dollars; or

(h) The rendition by any court of a final judgment or judgments against any of
the Borrowers or any of their Subsidiaries which shall not be satisfactorily
stayed, discharged, vacated or set aside within sixty (60) days of the making
thereof; or the attachment of any property of the Borrowers or any of their
Subsidiaries which has not been released or provided for to the reasonable
satisfaction of the Lender within sixty (60) days after the making thereof,
which judgment or attachment is for an amount of Ten Thousand and 00/100
($10,000) or more; or

(i) A Loan Document or the Intercreditor Agreement shall cease, for any reason,
to be in full force and effect or shall be declared null and void, a default
shall occur thereunder or any party thereto shall assert that it has no further
obligation to the Lender thereunder (unless such party has been discharged from
such obligation under such Loan Document by the Lender in writing) or the
Security Agreement shall for any reason, except to the extent permitted by this
Agreement or any other Loan Document, cease to create, or the Lender (for any
reason other than termination or release as

 
 

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

 

permitted by this Agreement) shall cease to have, for the benefit of itself, a
valid, enforceable and perfected first priority security interest in the
Collateral or any portion thereof free of all Liens except Liens permitted by
Section 7.2, or any Guarantor shall attempt to terminate a Guarantee,

(j) John Mazzuto shall cease to serve in the position of Chairman of Parent’s
Executive Committee, or its equivalent;

(k) Any Borrower will terminate or attempt to terminate any Automatic Payment or
notify any Account Debtor, EXIM Bank or any guarantor or insurer of any Account
to make payment on any Account or guarantee thereof or insurance with respect
thereto other than to the Lender or the Lockbox Account;

(l) The failure to comply with any provision of the Post-Closing Letter; or

(m) Any material adverse change occurs or is discovered in the financial
condition or results of operations or prospects of Borrowers as compared to the
financial condition, results of operations and prospects reflected in Borrowers’
financial statements as of June 30, 2006, without taking into account for these
purposes any disclosure in Schedule 3.1 of this Agreement;

Then, in any such event in any of (a) through (m) above, any or all of the
following actions shall be taken: (i) the Lender may declare the Revolving
Credit Line Facility to be terminated forthwith, whereupon the Revolving Credit
Line Facility shall no longer be available to the Borrowers and the Lender shall
no longer make Revolving Credit Loans or issue Letters of Credit and the
Revolving Loan Period shall end; (ii) the Lender may, by notice of default to
the Parent, declare the entire amounts due under the Revolving Credit Note (with
accrued interest thereon) and all other amounts owing or outstanding under this
Agreement and the other Loan Documents and all Obligations to be immediately due
and payable; provided, however, that, subject to Section 2.1 hereof, upon the
happening of an event specified in subsection (f) of this Section 8, the Lender
shall no longer make further Revolving Credit Loans or issue Letters of Credit
and the Revolving Credit Notes and all other amounts owing under this Agreement
and all Obligations shall be immediately due and payable without declaration or
other notice to the Parent or any other Borrower; and/or (iii) the Lender may
exercise any and all rights and remedies under this Agreement, the other Loan
Documents and/or applicable law. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived. For the avoidance of doubt, no election by the Lender
in its sole, unqualified and absolute discretion pursuant to Section 2.1 hereof
to terminate the credit hereunder shall relieve the Borrowers or the Guarantors
of their respective obligations hereunder and under any other Loan Document.
 
SECTION 9. JOINT AND SEVERAL LIABILITY OF THE BORROWERS

9.1           Joint and Several Liability.  Each of the Borrowers is and shall
be jointly and severally liable for each and every obligation and Obligation of
any of the Borrowers arising or incurred under or in respect of this Agreement
or any other Loan Documents or in respect of any of the Revolving Credit Loans
made, any Letter of Credit or other instruments at any time evidencing any
thereof.  Each of the Borrowers agrees that it shall be jointly and severally
liable for all fees, as well as each of the other obligations and Obligations of
any of the Borrowers arising or incurred under or in respect of this Agreement
or any of the other Loan Documents.

9.2           Consideration.  Each of the Borrowers is accepting joint and
several liability hereunder in consideration of the financial accommodations to
be provided by the Lender under this Agreement and the other Loan Documents, for
the mutual benefit, directly or indirectly, of each of the Borrowers and in
consideration of the undertakings of each of the Borrowers to accept joint and
several liability for the obligations of each of them.

9.3           Co-Debtors.  Each of the Borrowers jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but as a
co-debtor, joint and several liability with the other Borrowers with respect to
the payment and performance of all of the obligations arising under this
Agreement and the other Loan Documents and all Obligations, it being the
intention of the parties hereto that all obligations and all Obligations shall
be the joint and several obligations of each of the Borrowers without
preferences or distinction among them.

9.4           Payment.  If and to the extent that any of the Borrowers shall
fail to make any payment with respect to any of the obligations hereunder or any
Obligations as and when due or to perform any of such obligations or any
Obligations in accordance with the terms thereof, then in each such event, the
other Borrowers will make such payment with respect to, or perform, such
obligation and all Obligations.

 
 

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

 

 
9.5           Waivers.

(a)           Except as otherwise expressly provided herein, each Borrower
hereby waives promptness, diligences, presentment, demand, protest, notice of
acceptance of its joint and several liability, notice of any and all advances of
the Revolving Credit Loans made under this Agreement and the Revolving Credit
Note, notice of occurrence of any Default or Event of Default (except to the
extent notice is expressly required to be given pursuant to the terms of this
Agreement or any of the other Loan Documents), or of any demand for any payment
under this Agreement, notice of any action at any time taken or omitted to be
taken by the Lender under or in respect of the obligations hereunder or the
Obligations, any requirement of diligence and, generally, all demands, notices
and other formalities of every kind in connection with this Agreement or the
other Loan Documents.

(b)           Each Borrower hereby waives all defenses which may be available by
virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshaling of assets of the
Borrowers and any other entity or Person primarily or secondarily liable with
respect to the Obligations, and all suretyship defenses generally and all other
defenses.

(c)           Each Borrower hereby assents to, and waives notice of, any
extension or postponement of the time for the payment, or place or manner of
payment, compromises, refinancing, consolidation or renewals of any of the
obligations hereunder or under the other Loan Documents, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
the Lender at any time or times in respect of any default by any Borrower in the
performance or satisfaction of any term, covenant, condition or provision of
this Agreement and the other Loan Documents, any and all other indulgences
whatsoever by the Lender in respect of any of the obligations hereunder or the
Obligations, and the taking, addition, substitution or release, in whole or in
part, at any time or times, of any security for any of such obligations or the
Obligations or the addition, substitution or release, in whole or in part, of
any Borrower or any other entity or Person primarily or secondarily liable for
any obligation hereunder or the Obligations.

(d)           Each Borrower further agrees that its obligations hereunder and
the Obligations shall not be released or discharged, in whole or in part, or
otherwise affected by the adequacy of any rights which the Lender may have
against any collateral security or other means of obtaining repayment of any
other obligations hereunder, the impairment of any collateral security securing
the obligations hereunder or the Obligations, including, without limitation, the
failure to protect or preserve any rights with the Lender may have in such
collateral security or the substitution, exchange, surrender, release, loss or
destruction of any such collateral security, any other act or omission which
might in any manner or to the extent vary the risk of the Borrowers, or
otherwise operate as a release or discharge of such Borrowers, all of which may
be done without notice to such Borrowers; provided, however, that the foregoing
shall in no way be deemed to create commercially unreasonable standards in
violation of the UCC.

(e)           If for any reason any of the Borrowers has no legal existence or
is under no legal obligation to discharge any of the obligations hereunder or
the Obligations, or if any of the obligations hereunder or the Obligations have
become irrecoverable from any of the other Borrowers by reason of such other
Borrower’s insolvency, bankruptcy or reorganization or by other operation of law
or for any reason, this Agreement and the other Loan Documents to which it is a
party shall nevertheless be binding on such Borrower and all other Borrowers to
the same extent as if such Borrower and all other Borrowers at all times had
been the sole obligor on such obligations and the Obligations.  Without limiting
the generality of the foregoing, each Borrower assents to any other action or
delay in acting or failure to act on the part of the Lender, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with the applicable laws or regulations thereunder
which might, but for the provisions of this Section 9.5, afford grounds for
terminating, discharging or relieving such Borrower, in whole or in part, from
any of its obligations under this Section 9.5 which shall not be discharged
except by performance and then only to the extent of such performance.  The
obligations of each Borrower under this Section 9.5 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
reconstruction or similar proceeding with respect to any Borrower or the Lender.

(f)           The joint and several liability of the Borrowers hereunder shall
continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, membership,
constitution or place of formation of any Borrower or the Lender and shall be
enforceable without any defense, setoff or counterclaim of the Borrowers, all of
which are hereby waived.

 
 

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

 

9.6           Enforcement.  The provisions of this Section 9.6 are made for the
benefit of the Lender and its successors and assigns, and may be enforced by it
from time to time against any of the Borrowers as often as occasion therefor may
arise and without requirement on the part of the Lender first to marshal any of
its claims or to exercise any of its rights against the other Borrowers or to
exhaust any remedies available to it against the other Borrowers or to resort to
any other source or means of obtaining payment of any of the obligations
hereunder or to elect any other remedy.  The provisions of this Section 9.6
shall remain in effect until all of the obligations and all Obligations
hereunder shall have been paid in full or otherwise fully satisfied and the
Revolving Credit Line Facility shall have been terminated and no Letters of
Credit are outstanding.  If at any time, any payment, or any part thereof, made
in respect of any of the Obligations, is rescinded or must otherwise be restored
or returned by the Lender upon the insolvency, bankruptcy or reorganization of
the Borrowers, or otherwise, the provisions of this Section 9.6 will forthwith
be reinstated in effect as though such payment had not been made.

9.7           Contribution.  To the extent any Borrower makes a payment
hereunder in excess of the aggregate amount of the benefit received by such
Borrower in respect of the extensions of credit under this Agreement (the
“Benefit Amount”), then such Borrower, only after the payment in full in cash of
all of the obligations under the Loan Documents and all Obligations and the
termination of the Revolving Credit Line Facility and after no Letter of Credit
is outstanding, shall be entitled to recover from each other Borrower such
excess payment, pro rata in accordance with the ratio of the Benefit Amount
received by each such other Borrower to the total Benefit Amounts received by
all Borrowers, and the right to such recovery shall be deemed to be in asset and
property of such Borrower so funding; provided that all such rights to recovery
shall be subordinate and junior in right of payment to and shall not be
exercised until the final and indefeasible repayment in full in cash of all of
the obligations under the Loan Documents and all Obligations and the termination
of the Revolving Credit Line Facility and after no Letter of Credit is
outstanding.

SECTION 10. MISCELLANEOUS

10.1           Notices. Notices, consents and other communications provided for
herein shall be in writing and shall be faxed, delivered or mailed (in the case
of facsimile communication, delivered with receipt confirmed) addressed:

(a)           if to the Lender at Sovereign Bank, 551 Fifth Avenue, 25th Floor,
New York, New York 10176,  Attn.: Silvana Burdick, Fax Number (212) 682-7450.

(b)           if to any Borrower, to the Parent only, at the addresses for the
Parent set forth on the signature pages to this Agreement (or facsimile numbers
216-514-5996 to Jim Marguiles, and to Jorge Yepes 724-226-9976), each Borrower
hereby agreeing that any notice to the Borrowers or any of them shall be
effective if sent as described in this Section 10.1 only to the Parent at two
addresses.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given (i) if
hand delivered, on the date of receipt, (ii) if by mail, three (3) Business Days
after being sent by registered or certified mail, postage prepaid, return
receipt requested, or the next Business Day after being sent by overnight mail,
or (iii) if by facsimile, upon receipt during normal business hours on any
Business Day (or otherwise the next Business Day), in each case addressed to
such party as provided in this Section 10.1 or in accordance with the latest
unrevoked direction from such party, subject to the fact that any notice to any
Borrower shall be effective if sent only to the Parent at two addresses.

10.2           Survival of Agreement. All covenants, agreements, representations
and warranties made by the Borrowers or any of their Subsidiaries herein and in
the other Loan Documents and the certificates or other instruments prepared or
delivered in connection with this Agreement or any other Loan Document shall be
considered to have been relied upon by the Lender and shall survive the making
by the Lender of the Revolving Credit Loans and issuing Letters of Credit and
the execution and delivery to the Lender of the Revolving Credit Note and the
Letter of Credit Documentation and the occurrence of any other extension of
credit and shall continue in full force and effect as long as any Obligation is
outstanding and unpaid and so long as the Lender’s Revolving Credit Line
Facility has not been terminated or there are any outstanding Letters of Credit.
 
10.3           Successors and Assigns: Participations.

(a)           Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf the

 
 

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

 

Borrowers, any Guarantor, any ERISA Affiliate, any Subsidiary of any thereof, or
the Lender, that are contained in this Agreement shall bind and inure to the
benefit of such Persons and their respective successors and assigns.  The Lender
shall have the unrestricted right at any time or from time to time and without
the Borrowers’ (or any Guarantors’) consent, to sell, assign, endorse, or
transfer all or any portion of its rights and obligations hereunder to one or
more banks or other entities (each, an “Assignee”) and, each of the Borrowers
(and each Guarantor) agrees that it shall execute, or cause to be executed such
documents, including, without limitation, amendments to this Agreement and to
any other documents, instruments and agreements executed in connection herewith
as the Lender shall deem necessary to effect the foregoing.  In addition, at the
request of the Lender and any such Assignee, each of the Borrowers shall issue
one or more new promissory notes, as applicable, to any such Assignee and, if
the Lender has retained any of its rights and obligations hereunder following
such assignment, to the Lender, which new promissory notes shall be issued in
replacement of, but not in discharge of, the liability evidenced by the note
held by the Lender prior to such assignment and shall reflect the amount of the
respective loans held by such Assignee and the Lender after giving effect to
such assignment.  Upon the execution and delivery of appropriate assignment and
documentation, amendments and other documentation required by the Lender in
connection with such assignment, and the payment by Assignee of the purchase
price agreed to by the Lender and such Assignee, such Assignee shall be a party
to this Agreement and shall have all of the rights and obligations of the Lender
hereunder (and under any and all other guaranties, documents, instruments and
agreements executed in connection herewith) to the extent that such rights and
obligations have been assigned by the Lender pursuant to the assignment
documentation between the Lender and Assignee, and the Lender shall be released
from its obligations hereunder and thereunder to a corresponding extent.  A
Borrower may not assign or transfer any of its rights or obligations hereunder
without the written consent of the Lender, and any such assignment or transfer
without such consent shall be null and void.

(b)           The Lender shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to any Borrower (or any
Guarantor), to grant to one or more institutions or other persons (each a
“Participant”) participating in the Lender’s obligations to lend hereunder
and/or any or all of the Revolving Credit Loans held by the Lender
hereunder.  In the event of any such grant by the Lender of a participating
interest to a Participant, whether or not upon notice to any of the Borrowers,
the Lender shall remain responsible for the performance of its obligations
hereunder and under the other Loan Documents and the Borrowers shall continue to
deal solely and directly with the Lender in connection with the Lender’s rights
and obligations hereunder and thereunder.

(c)            The Lender may furnish any information concerning the Borrowers,
their Subsidiaries and the Guarantors in its possession from time to time to any
prospective or actual Assignees and Participants.

10.4           Expenses; Indemnity.

The Borrowers agree, on a joint and several basis:

(a) to pay or reimburse the Lender on demand for all its out-of-pocket costs and
expenses incurred in connection with the development, preparation, negotiation
and execution of, and any amendment, supplement or modification to, this
Agreement and the Revolving Credit Note and the other Loan Documents, the
Intercreditor Agreement and any other documents prepared in connection herewith
or therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the fees and
disbursements of counsel to the Lender, and the out-of-pocket costs incurred by
the Lender in conducting periodic Field Audits;

(b) to pay or reimburse the Lender on demand for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the Revolving Credit Note, the other Loan Documents, the
Intercreditor Agreement and any other documents related to any of the foregoing,
including, without limitation, fees and disbursements of counsel to the Lender;

(c) to pay, indemnify, and hold the Lender on demand harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the Revolving Credit Note,
the other Loan Documents and any other documents related to any of the
foregoing; and

(d) to pay, indemnify, and hold the Lender on demand harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions
(whether sounding in contract, in tort or on any other ground), judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery,

 
 

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

 

enforcement, performance and administration of, or in any other way arising out
of or relating to, this Agreement, the Revolving Credit Note, the other Loan
Documents, the Intercreditor Agreement or any other documents contemplated by or
referred to herein or therein or any action taken or omitted to be taken by the
Lender with respect to any of the foregoing (all the foregoing, collectively,
the “indemnified liabilities”), provided, that the Borrowers shall have no
obligation hereunder to the Lender with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of the Lender.

The agreements in this subsection shall survive repayment of the Revolving
Credit Note and the Letters of Credit and all other amounts payable hereunder
and all other Obligations and the termination of the Revolving Credit Line
Facility and all Letters of Credit.

10.5           Applicable Law. THIS AGREEMENT AND THE REVOLVING CREDIT NOTES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.

10.6           Right of Setoff. The Borrowers hereby grant to the Lender a lien,
security interest and a right of set off as security for all liabilities and
obligations to the Lender and all Obligations, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the Lender or
any entity under the control of the Lender, or in transit to any of them.  At
any time, without demand or notice, the Lender may set off the same or any part
thereof and apply the same to any liability or obligation of the Borrowers and
any Guarantor even though unmatured and regardless of the adequacy of any other
collateral securing the Revolving Credit Loans and all Obligations.  ANY AND ALL
RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS AND REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE REVOLVING CREDIT LOANS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWERS OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY
AND IRREVOCABLY WAIVED.  The Lender shall not be required to marshal any present
or future security for, or the guarantees of, the obligations or to resort to
any such security or guarantee in any particular order and the Borrowers and any
Guarantors waive, to the fullest extent that it lawfully can, (a) any right to
they might have to require the Lender to pursue any particular remedy before
proceeding against them and (b) any right to the benefit of, or to direct the
application of the proceeds of any collateral until the obligations are paid in
full.

10.7           Payments on Business Days. Should the principal of or interest on
the Revolving Credit Note or any fee or other amount payable hereunder become
due and payable on other than a Business Day, payment in respect thereof may be
made on the next succeeding Business Day (except as otherwise specified in the
definition of “Interest Period”), and such extension of time shall in such case
be included in computing interest, if any, in connection with such payment and
fees payable hereunder.

10.8           Late Charges.  If a principal, interest, fee, Letter of Credit
drawing or other scheduled payment is not paid when due, without limiting
Borrowers’ other obligations or Lender’s other rights or remedies, the Borrowers
will be charged 5.000% of the unpaid portion of the principal, interest, fee,
Letter of Credit drawing or other scheduled payment or $10.00, whichever is
greater.  All charges under this Section 10.8 shall be payable on Lender’s
demand.
 
10.9           Waivers; Amendments.

(a)           No failure or delay of the Lender in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Lender hereunder and under the Loan Documents are cumulative and not
exclusive of any rights or remedies which they may otherwise have. No waiver of
any provision of this Agreement or the Revolving Credit Note or the Loan
Documents nor consent to any departure by the Borrowers therefrom shall in any
event be effective unless the same shall be authorized as provided in paragraph
(b) below, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
any of the Borrowers in any case shall entitle it to any other or further notice
or demand in similar or other circumstances. Each holder of any of the Revolving
Credit Notes shall be bound by any amendment, modification, waiver or consent
authorized as provided herein, whether or not such Revolving Credit Note shall
have been marked to indicate such amendment, modification, waiver or consent.

 
 

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

 

(b)           Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by all of the Borrowers and the Lender except that Lender may
reasonably modify the form of Compliance Certificate or Borrowing Base
Certificate without Borrower’s consent or agreement.

10.10           Severability. In the event any one or more of the provisions
contained in this Agreement or in the Revolving Credit Note should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall not
in any way be affected or impaired thereby. The parties shall endeavor in good
faith negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
 
10.11           Entire Agreement; Waiver of Jury Trial, Etc.   (a) This
Agreement, the Revolving Credit Note and the other Loan Documents constitute the
entire contract between the parties hereto relative to the subject matter hereof
and thereof. Any previous agreement among the parties hereto or certain of the
parties hereto with respect to the transactions contemplated hereby and thereby
(except for any Lockbox Agreement or other Loan Document previously executed by
the Borrowers or certain of them with or in favor of the Lender, all of which
shall continue in full force and effect) is superseded by this Agreement, the
Revolving Credit Note and the other Loan Documents. Except as expressly provided
in this Agreement, the Revolving Credit Note or the other Loan Documents,
nothing in this Agreement, the Revolving Credit Note or the other Loan Documents
is intended to confer upon any party, other than the parties hereto, any rights,
remedies, obligations or liabilities under or by reason of this Agreement, the
Revolving Credit Note or the other Loan Documents.  For the avoidance of doubt,
the line of credit letter relating to the $1,000,000 line of credit previously
provided by the Lender to Pitt Penn, together with any note executed by Pitt
Penn in connection therewith, and any guarantees of the obligations in respect
of such line of credit, together with any security agreements securing
obligations in connection with such line, are hereby amended, restated and
superseded in their entirety by this Agreement and the other Loan Documents.

(b)           EACH OF THE BORROWERS AND THE LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WIAVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS
WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE LENDER TO ACCEPT THIS AGREEMENT
AND MAKE ANY REVOLVING CREDIT LOAN.

(c)           Except as prohibited by law, each party hereto hereby waives any
right it may have to claim or recover in any litigation referred to in paragraph
(b) of this Section 10.10 any special, exemplary or punitive damages.

(d)           Each party hereto (i) certifies that no representative, agent or
attorney of the Lender has represented, expressly or otherwise, that the Lender
would not, in the event of litigation, seek to enforce the foregoing waivers and
(ii) acknowledges that it has been induced to enter into this Agreement, the
Revolving Credit Note or the other Loan Documents, as applicable, by, among
other things, the mutual waivers and certifications herein.

10.12            Submission to Jurisdiction.

(a)           Any legal action or proceeding with respect to this Agreement or
the Revolving Credit Note or any other Loan Document may be brought in the
courts of New York County in the State of New York or of the United States of
America for the Southern District of New York, and, by execution and delivery of
this Agreement, each of the Borrowers and each of the Guarantors hereby accepts
for themselves and in respect of their property, generally and unconditionally,
the nonexclusive jurisdiction of the aforesaid courts.

(b)           Each of the Borrowers and each of the Guarantors hereby
irrevocably waives, in connection with any such action or proceeding, any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which they may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions.

(c)           Each of the Borrowers and each of the Guarantors hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to each such person, as the case
may be, at its address set forth in Section 10.1 hereof.

 
 

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

 

(d)           Nothing herein shall affect the right of the Lender to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any Borrower or any Guarantor in any other
jurisdiction.

10.13           Interest Rate Limitation. The Borrowers shall not be obligated
to pay and the Lender shall not collect interest at a rate higher than the
maximum permitted by law or the maximum that will not subject the Lender to any
civil or criminal penalties.  If, because of the acceleration of maturity the
payment of interest in advance or any other reason, the Borrowers are required,
under the provisions of any Loan Document or otherwise, to pay interest at a
rate in excess of the maximum rate, the rate of interest under such provisions
shall immediately and automatically be reduced to such maximum rate and any
payment made in excess of such maximum rate, together with interest thereon at
the rate provided herein from the date of such payment shall be immediately and
automatically applied to the reduction of the unpaid principal balance of the
Revolving Credit Note as of the date on which such excess payment was made.  If
the amount to be so applied to reduction of the unpaid principal balance exceeds
the unpaid principal balance, the amount of such excess shall be refunded by the
Lender to the Borrowers.

10.14           Further Assurances. The Borrowers agree at any time and from
time to time at their joint and several expense, upon request of the Lender, to
promptly execute, deliver, or obtain or cause to be executed, delivered or
obtained any and all further instruments and documents and to take or cause to
be taken all such other action as the Lender may reasonably deem desirable in
obtaining the full benefits of the Loan Documents.
 
10.15           Counterparts. This Agreement each of the other Loan Documents
may be executed in counterparts of the entire document, or of signature pages to
the document, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective
when copies which, when taken together, bear the signatures of each of the
parties hereto or thereto shall be delivered to the Lender and the Borrowers.

10.16           USA PATRIOT ACT. The Lender hereby notifies the Borrowers that
pursuant to the requirements of the USA PATRIOT ACT (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the “Act”), it is or may be required to
obtain, verify and record information that identifies the Borrowers and their
Subsidiaries which information includes the name and address of the Borrowers
and their Subsidiaries and other information that will allow the Lender to
identify the Borrowers and their Subsidiaries in accordance with the Act.

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

10.18           Replacement Documentation.  Upon receipt of an affidavit of an
officer of the Lender as to the loss, theft, destruction or mutilation of the
Revolving Credit Note or any other Loan Documents and, in the case of any such
destruction or mutilation, upon surrender and cancellation of such Revolving
Credit Note or other Loan Documents, each of the Borrowers will issue, in lieu
thereof, a replacement Revolving Credit Note or other Loan Document(s) in the
same principal amount thereof and otherwise of like tenor.

10.19 Judgments.  The Borrowers and the Lender hereby agree that whenever any
decision, judgment or determination is to be made by Lender in this Agreement or
any Loan Documents, it shall be made by Lender in its sole, unqualified and
absolute discretion.

10.20 Including.  The Borrowers and Lender hereby agree that the words
“includes”, “include”, and “including”, shall not be limiting, and shall be
deemed to be followed by the words “without limitation”, without regard to
whether such words follow the words “includes”, “include”, and “including”.

 
 

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

 

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

 
Lender :
 
SOVEREIGN BANK
 
By: ____________________________
Name:
Title:
Address and Facsimile Number:
551 Fifth Avenue, New York, NY 10176

     
Notice Addresses :
 
CITIBANK, N.A.
 
Hauppauge, NY 11788
Borrowers :
 
INDUSTRIAL ENTERPRISES OF
AMERICA, INC.
 
By: ____________________________
Name:
Title:
Address and Facsimile Number:
711 Third Avenue, New York, NY 10017
Attention: John Mazzuto
With a copy of all notices to:
James W. Marguiles, Esq.
30100, Chagrin Boulevard, Suite 250
Cleveland, OH 44124

 

 
 

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

 

 
 
New York, NY 10017
UNIFIDE INDUSTRIES, LIMITED LIABILITY COMPANY
By: ____________________________
Name:
Title:
Address and Facsimile Number:
121 Highway 36, Suite 125
West Long Branch, NJ 07764

 
 
New York, NY 10017
PITT PENN OIL CO., LLC
 
By: ____________________________
Name:
Title:
Address and Facsimile Number:
426 Freeport Road, P.O. Box 296
Creighton, PA 15030

   
BANK OF AMERICA, N.A.
 
New York, NY 10036
EMC PACKAGING, INC.
 
By: ____________________________
Name:
Title:
Address and Facsimile Number:
550 James Street, Lockwood, NJ 08701
 
 
TODAYS WAY MANUFACTURING LLC
 
By: ____________________________
Name:
Title:
Address and Facsimile Number:
1081 Rosemary Boulevard, Akron, OH 44306
 
 
PITT PENN HOLDING CO., LLC
 
By: ____________________________
Name:
Title:
Address and Facsimile Number:
426 Freeport Road, P.O. Box 296
Creighton, PA 15030