**Exhibit10.2**

 

 

**LOANAGREEMENT**

 

dated as of

 

April 16, 2003

 

among

 

**ELGARELECTRONICS CORPORATION,**as Borrower

 

**ELGARHOLDINGS, INC.**

 

and

 

**CERTAINSUBSIDIARIES OF ELGAR HOLDINGS, INC.**

**FROMTIME TO TIME PARTY HERETO,**

as Guarantors,

 

**THELENDERS PARTY HERETO**

 

and

 

**U.S.BANK NATIONAL ASSOCIATION**,

as CollateralAgent

 

 

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| SECTION  1.        DEFINITIONS                                      |
|-------------------------------------------------------------------------------------------------------------|
| 1.1                                                                                                         | Certain  Defined Terms. |
| 1.2                                                                                                         | Accounting Terms. |
| 1.3                                                                                                         | Other Definitional  Provisions. |
| SECTION  2.        AMOUNT  AND TERMS OF COMMITMENT AND LOANS; NOTES |
| 2.1                                                                                                         | Loans and Notes. |
| 2.2                                                                                                         | Interest  on the Loans. |
| 2.3                                                                                                         | Fees. |
| 2.4                                                                                                         | Prepayments  and Reductions in the Commitment. |
| 2.5                                                                                                         | Use of Proceeds. |
| SECTION 3.        CONDITIONS                                        |
| 3.1                                                                                                         | Conditions  to Loans. |
| SECTION 4.        REPRESENTATIONS  AND WARRANTIES                   |
| 4.1                                                                                                         | Organization and Good  Standing. |
| 4.2                                                                                                         | Authorization  and Power. |
| 4.3                                                                                                         | No  Conflicts or Consents. |
| 4.4                                                                                                         | Enforceable  Obligations. |
| 4.5                                                                                                         | Properties; Liens. |
| 4.6                                                                                                         | Financial  Condition. |
| 4.7                                                                                                         | Full Disclosure. |
| 4.8                                                                                                         | No Default. |
| 4.9                                                                                                         | Compliance with  Contracts, Etc. |
| 4.10                                                                                                        | No Litigation. |
| 4.11                                                                                                        | Use of Proceeds;  Margin Stock, Etc. |
| 4.12                                                                                                        | Taxes. |
| 4.13                                                                                                        | ERISA. |
| 4.14                                                                                                        | Government  Regulation. |
| 4.15                                                                                                        | Capital Structure  and Subsidiaries. |
| 4.16                                                                                                        | Environmental  Matters. |
| 4.17                                                                                                        | Insurance. |
| 4.18                                                                                                        | Labor Matters. |
| 4.19                                                                                                        | Broker’s  or Finder’s Fees. |
| 4.20                                                                                                        | Operation  of Business. |
| 4.21                                                                                                        | Existing Credit  Facilities Matters. |
| 4.22                                                                                                        | Outstanding  Payables. |
| SECTION 5.        AFFIRMATIVE  COVENANTS                            |
| 5.1                                                                                                         | Financial  Statements and Other Reports. |
| 5.2                                                                                                         | Corporate  Existence, Etc. |
| 5.3                                                                                                         | Payment  of Taxes and Claims; Tax Consolidation. |
| 5.4                                                                                                         | Maintenance of  Properties; Insurance. |
| 5.5                                                                                                         | Inspection. |
| 5.6                                                                                                         | Equal Security for  Loans and Notes. |
| 5.7                                                                                                         | Compliance  with Laws, Etc. |
| 5.8                                                                                                         | Maintenance of  Accurate Records, Etc. |
| 5.9                                                                                                         | Permits. |
| 5.10                                                                                                        | Take-Out Facility. |
| 5.11                                                                                                        | ERISA Compliance. |
| 5.12                                                                                                        | Additional  Subsidiaries. |
| 5.13                                                                                                        | Controlling  Group. |

 

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| SECTION 6.        NEGATIVE  COVENANTS   |
|---------------------------------------------------------------------------------|
| 6.1                                                                             | Indebtedness. |
| 6.2                                                                             | Liens. |
| 6.3                                                                             | Restricted  Payments. |
| 6.4                                                                             | Restriction on  Fundamental Changes. |
| 6.5                                                                             | Limitation  on Dividend and Other Payment Restrictions Affecting Subsidiaries. |
| 6.6                                                                             | Transactions  with Shareholders and Affiliates; Payments. |
| 6.7                                                                             | Business  Activities. |
| 6.8                                                                             | Amendments to Charter  Documents. |
| 6.9                                                                             | Asset Sales. |
| 6.10                                                                            | Maximum Capital Expenditures. |
| 6.11                                                                            | Lease  Obligations. |
| 6.12                                                                            | Amendments to Indebtedness. |
| SECTION 7.        EVENTS  OF DEFAULT    |
| 7.1                                                                             | Failure To Make  Payments When Due. |
| 7.2                                                                             | Default in Other  Agreements. |
| 7.3                                                                             | Breach of Certain  Covenants. |
| 7.4                                                                             | Breach of  Warranty. |
| 7.5                                                                             | Other  Defaults Under This Agreement or Any Other Loan Document. |
| 7.6                                                                             | Involuntary  Bankruptcy; Appointment of Custodian, Etc. |
| 7.7                                                                             | Voluntary  Bankruptcy; Appointment of Custodian, Etc. |
| 7.8                                                                             | Judgments and Attachments. |
| 7.9                                                                             | Dissolution. |
| 7.10                                                                            | Guarantee. |
| 7.11                                                                            | Material  Contracts. |
| 7.12                                                                            | Liens. |
| 7.13                                                                            | ERISA Event. |
| 7.14                                                                            | Change of Control. |
| SECTION 8.        THE  COLLATERAL AGENT |
| 8.1                                                                             | Appointment. |
| 8.2                                                                             | Delegation  of Duties. |
| 8.3                                                                             | Exculpatory  Provisions. |
| 8.4                                                                             | Reliance by the  Collateral Agent. |
| 8.5                                                                             | Notice of Default. |
| 8.6                                                                             | Non-Reliance  on the Collateral Agent and Other Lenders. |
| 8.7                                                                             | Indemnification. |
| 8.8                                                                             | Collateral  Agent in Its Individual Capacity. |
| SECTION  9.        GUARANTEE            |
| 9.1                                                                             | Unconditional  Guarantee. |
| 9.2                                                                             | Severability. |
| 9.3                                                                             | Release  of a Guarantor. |
| 9.4                                                                             | Limitation of  Guarantor’s Liability. |
| 9.5                                                                             | Contribution. |
| 9.6                                                                             | Waiver  of Subrogation. |
| 9.7                                                                             | Waiver  of Stay, Extension, Usury and Other Laws. |
| SECTION 10.        MISCELLANEOUS        |
| 10.1                                                                            | [Intentionally  Omitted] |
| 10.2                                                                            | Participations  in and Assignments of Loans and Notes. |
| 10.3                                                                            | Expenses. |
| 10.4                                                                            | Indemnity. |

 

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| 10.5  | Setoff.                                                 |
|-------|---------------------------------------------------------|
| 10.6  | Amendments  and Waivers.                                |
| 10.7  | Independence of Covenants.                              |
| 10.8  | Entirety.                                               |
| 10.9  | Notices.                                                |
| 10.10 | Survival  of Warranties and Certain Agreements.         |
| 10.11 | Failure  or Indulgence Not Waiver; Remedies Cumulative. |
| 10.12 | Severability.                                           |
| 10.13 | Headings.                                               |
| 10.14 | Applicable  Law.                                        |
| 10.15 | Successors  and Assigns; Subsequent Holders of Notes.   |
| 10.16 | Counterparts;  Effectiveness.                           |
| 10.17 | Consent  to Jurisdiction; Venue; Waiver of Jury Trial.  |
| 10.18 | Payments  Pro Rata.                                     |
| 10.19 | Taxes.                                                  |
| 10.20 | Waiver of  Stay, Extension or Usury Laws.               |
| 10.21 | Requirements of Law.                                    |
| 10.22 | Confidentiality.                                        |

 

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**THISLOAN AGREEMENT** (this “Agreement”) is dated as of April16, 2003, and entered into by and among **ELGARELECTRONICS CORPORATION**, a California corporation (the “Borrower”),**ELGAR HOLDINGS, INC.**, a Delawarecorporation (“Holdings”), and **CERTAINSUBSIDIARIES OF HOLDINGS FROM TIME TO TIME PARTY HERETO**inaccordance with Section 5.12, as Guarantors, the Lenders named on thesignature pages hereto and any Persons that become Lenders in accordance with Section10.2(a) (the “Lenders”), and**U.S.BANK NATIONAL ASSOCIATION**, as collateral agent for the Lenders(together with its successors in such capacity, the “Collateral Agent”).

 

**RECITALS**

 

**WHEREAS,**capitalized terms used in these Recitals shall have the respective meanings setforth for such terms in Section 1.1 hereof;

 

**WHEREAS,**the Borrower desires that the Lenders extend a senior secured credit facilityto the Borrower on the terms and conditions contained herein;

 

**WHEREAS,**the Guarantors have agreed to guarantee the obligations of the Borrowerhereunder;

 

**NOW,THEREFORE,** in consideration of the premises and theagreements, provisions and covenants herein contained, the parties hereby agreeas follows:

 

**SECTION1.****                            DEFINITIONS**

 

1.1           CertainDefined Terms.

 

The following terms used in this Agreement shall havethe following meanings:

 

“Adjusted Net Assets” has the meaning provided in Section9.5.

 

“Affiliate” means, with respect to any Person, anyother Person that, directly or indirectly, controls, is controlled by or isunder common control with, such Person. For purposes of this definition, “control” means the possession, directlyor indirectly, of the power (i) to vote 5% or more of the securities havingordinary voting power for the election of directors of such Person or (ii) todirect or cause the direction of the management and policies of a Person,whether through the ownership of voting securities, by contract or otherwise;and the terms “controlling” and “controlled” have correlative meanings.

 

“Agreement” means this Loan Agreement dated as ofApril 16, 2003, as it may be amended, supplemented, restated or otherwise modifiedfrom time to time in accordance with the terms hereof.

 

“Amount of Unfunded Benefit Liabilities” means, withrespect to any Pension Plan, (a) if set forth on the most recent actuarialvaluation report with respect to such Pension Plan, the amount of unfundedbenefit liabilities (as defined in Section 4001(a)(18) of ERISA) and,otherwise, (b) the excess of (i) the greater of the current liability (asdefined in Section 412(l)(7) of the Internal Revenue Code) or the actuarialpresent value of the accrued benefits with respect to such Pension Plan over(ii) the market value of the assets of such Pension Plan.

 

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“Asset Sale” means any direct or indirect sale,issuance, conveyance, transfer, lease (other than operating leases entered intoin the ordinary course of business), assignment or other transfer for value byHoldings or any of its Subsidiaries (including any Sale and LeasebackTransaction and any merger or consolidation) to any Person other than Holdingsor a Wholly Owned Subsidiary of (a) any Capital Stock of any Subsidiary or (b)any other property or assets of Holdings or any Subsidiary other than in theordinary course of business; provided*,*however, that Asset Sales shallnot include (i) dispositions of used, surplus or worn out equipment in theordinary course of business or (ii) a disposition consisting of a RestrictedPayment or Permitted Investment permitted under Section 6.3 hereof.

 

“Assignment” has the meaning ascribed to such term Section10.2(a).

 

“Auditors” means a recognized firm of independentpublic accountants selected by Holdings and satisfactory to the Lenders.

 

“Authorized Officer” means, as applied to any Person,any individual holding the position of chairman of the board (if an officer),chief executive officer, president or vice president, and such Person’s chieffinancial officer or treasurer.

 

“Bankruptcy Law” means Title 11 of the United StatesCode entitled “Bankruptcy”, as now and hereafter in effect, or any successorstatute or any other United States federal, state or local law or the Law ofany other jurisdiction relating to bankruptcy, insolvency, winding up,liquidation, reorganization  or reliefof debtors, whether in effect on the date hereof or hereafter.

 

“Bankruptcy Order” means any court order made in aproceeding pursuant to or within the meaning of any Bankruptcy Law, containingan adjudication of bankruptcy or insolvency, or providing for liquidation,winding up, dissolution or reorganization, or appointing a custodian of adebtor or of all or any substantial part of a debtor’s property, or providingfor the staying, arrangement, adjustment or composition of indebtedness orother relief of a debtor.

 

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

 

“Board of Directors” means, as to any Person, theboard of directors of such Person or any duly authorized committee of thatBoard.

 

“Board Resolution” means, with respect to any Person,a copy of a resolution certified by the Secretary or an Assistant Secretary ofsuch Person to have been duly adopted by the Board of Directors of such Personand to be in full force and effect on the date of such certification, anddelivered to the Lenders.

 

“Borrower” has the meaning ascribed to such term inthe preamble to this Agreement.

 

“Borrower Affiliated Group”has the meaning ascribed to such term in Section 6.3(b).

 

“Business Day” means any day excluding Saturday,Sunday and any day which is a legal holiday under the laws of New York orCalifornia or is a day on which banking institutions therein located areauthorized or required by law or other governmental action to close.

 

“Capital Expenditures” means, for any period, theaggregate of all expenditures of Holdings and its Subsidiaries during suchperiod determined on a consolidated basis that, in accordance 

 

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with GAAP, are or should be included in “purchase of property andequipment” or similar items reflected in the consolidated statement of cashflows of Holdings and its Subsidiaries.

 

“Capital Stock” means (i) with respect to any Personthat is a corporation, any and all shares, interests, participations or otherequivalents (however designated and whether or not voting) of corporate stock,including each class of Common Stock and Preferred Stock of such Person andincluding any warrants, options or rights to acquire any of the foregoing andinstruments convertible into any of the foregoing, and (ii) with respect to anyPerson that is not a corporation, any and all partnership, limited liabilitycompany or other equity interests of such Person.

 

“Capitalized Lease Obligation” means, as to anyPerson, the obligations of such Person under a lease that are required to beclassified and accounted for as capital lease obligations under GAAP and, forpurposes of this definition, the amount of such obligations at any date shallbe the capitalized amount of such obligations at such date, determined inaccordance with GAAP.

 

“Cash Equivalents” means (i) marketable directobligations issued by, or unconditionally guaranteed by, the United StatesGovernment or any agency thereof and backed by the full faith and credit of theUnited States of America, in each case maturing within one year from the dateof acquisition thereof; (ii) marketable direct obligations issued by any stateof the United States of America or any political subdivision of any such stateor any public instrumentality thereof maturing within one year from the date ofacquisition thereof and, at the time of acquisition, having one of the twohighest ratings obtainable from either Standard & Poor’s Ratings Services(“S&P”) or Moody’s Investor Service, Inc. (“Moody’s”); (iii)commercial paper maturing no more than 180 days from the date of creationthereof and, at the time of acquisition, having a rating of at least A-1 fromS&P or at least P-1 from Moody’s; (iv) demand deposits, certificates ofdeposit or bankers’ acceptances maturing within 180 days from the date of acquisitionthereof issued by any bank organized under the laws of the United States ofAmerica or any state thereof or the District of Columbia or any foreign bankhaving at the date of acquisition thereof combined capital and surplus of notless than $500,000,000; (v) repurchase obligations with a term of not more thanseven days for underlying securities of the types described in clause (i) aboveentered into with any bank meeting the qualifications specified in clause (iv)above; and (vi) investments in money market funds which invest substantiallyall their assets in securities of the types described in clauses (i) through(v) above.

 

“CERCLA” means the Comprehensive EnvironmentalResponse, Compensation, and Liability Act of 1980, as amended, and any successoracts thereto.

 

“Change of Control” means the occurrence of one ormore of the following events:  (i) anysale, lease, exchange or other transfer (in one transaction or a series ofrelated transactions) of all or substantially all of the assets of the Borrowerto any Person or group of related Persons for purposes of Section 13(d) of theExchange Act (a “Group”) or to any Affiliates thereof (whether or nototherwise in compliance with the provisions of this Agreement); (ii) theapproval by the holders of Capital Stock of Holdings of any plan or proposalfor the liquidation or dissolution of Holdings (whether or not otherwise incompliance with the provisions of this Agreement); (iii) any Person or Group(other than the Permitted Holder(s)) shall become the beneficial owner (withinthe meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, ofCapital Stock representing more than 10% of the aggregate ordinary voting powerrepresented by the issued and outstanding Capital Stock of Holdings; (iv) thereplacement of a majority of the directors on the Board of Directors ofHoldings over a two-year period from the directors who constituted the Board ofDirectors of Holdings at the beginning of such period, and such replacementshall not have been approved by a vote of at least a majority of the Board ofDirectors of Holdings then still in office who either were members of suchBoard of Directors at the beginning of such period or whose election as amember of such Board of Directors was previously so approved; (v) Holdingsshall 

 

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cease to own 100% of the Capital Stock of the Borrower; (vi) thePermitted Holders shall cease to beneficially own at least 100% of theoutstanding Capital Stock having ordinary voting power in the election ofdirectors of Holdings beneficially owned by the Permitted Holders on theClosing Date; or (vii) at any time a change of control occurs under and asdefined in any documentation relating to any material Indebtedness of Holdingsor any of its Subsidiaries; provided that, in the event that theExchange Offer is successfully consummated and this Agreement is notsimultaneously terminated, any Change of Control resulting from the ExchangeOffer consummated in accordance with the Exchange Agreement shall not be deemeda Change of Control hereunder.

 

“Closing Date” means the date on or before April 17,2003 on which the Loans are made and the conditions set forth in Section 3.1are satisfied or waived in accordance with Section 10.6.

 

“Collateral” means, collectively, all of the real,personal and mixed property in which Liens are purported to be granted pursuantto the Loan Documents as security for the Obligations.

 

“Collateral Agent” has the meaning ascribed to suchterm in the preamble to this Agreement.

 

“Collateral Questionnaire” means a UCC diligencecertificate in form satisfactory to the Collateral Agent that providesinformation with respect to the personal, real or mixed property of each LoanParty.

 

“Commission” means the Securities and ExchangeCommission or any successor thereof.

 

“Commitment” means the commitment of the Lenders tomake the Loans as set forth in Section 2.1(a).

 

“Common Stock” of any Person means any and all shares,interests or other participations in, and other equivalents (however designatedand whether voting or non-voting) of, such Person’s common stock, whetheroutstanding on the Closing Date or issued after the Closing Date, and includes,without limitation, all series and classes of such common stock.

 

“Compliance Certificate” means a certificatesubstantially in the form of Exhibit III annexed hereto delivered to theLenders by the Borrower and Holdings pursuant to Section 5.1.

 

“Contested Claim” means any Tax, Indebtedness or otherclaim or liability (i) the validity or amount of which is being contested ingood faith by appropriate proceedings, timely instituted and diligentlypursued, (ii) for which adequate reserves, or other appropriate provisions, ifany, as required in conformity with GAAP shall have been made, and (iii) withrespect to which (x) no Lien has been imposed by any Tax authority and (y) anyright to execute upon or sell any assets of Holdings or of any of itsSubsidiaries has not matured or has been and continues to be effectivelyenjoined, superseded or stayed.

 

“Contingent Obligation” means, as to any Person, anyobligation of such Person guaranteeing or intended to guarantee anyIndebtedness, leases, dividends or other obligations (“primary obligations”) ofany other Person (the “primary obligor”) in any manner, whether directly orindirectly, including, without limitation, any obligation of such Person,whether or not contingent, (i) to purchase any such primary obligation or anyproperty constituting direct or indirect security therefor, (ii) to advance orsupply funds (x) for the purchase or payment of any such primary obligation or(y) to maintain working capital or equity capital of the primary obligor orotherwise to maintain the net worth or solvency of the primary obligor, (iii)to purchase property, securities or services primarily for the purpose of 

 

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assuring the owner of any such primary obligation of the ability of theprimary obligor to make payment of such primary obligation or (iv) otherwise toassure or hold harmless the holder of such primary obligation against loss inrespect thereof; provided, however, that the term ContingentObligation shall not include endorsements of instruments for deposit orcollection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amountequal to the stated or determinable amount of the primary obligation in respectof which such Contingent Obligation is made or, if not stated or determinable,the maximum reasonably anticipated liability in respect thereof (assuming suchPerson is required to perform thereunder) as determined by such Person in goodfaith.

 

“Contractual Obligation” as applied to any Person,means any provision of any Security issued by that Person or of any indenture,mortgage, deed of trust, contract, undertaking, agreement or other instrumentto which that Person is a party or by which it or any of its properties isbound or to which it or any of its properties is subject.

 

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

 

“Controlled Group” means (i) a controlled group ofcorporations as defined in Section 1563(a) of the Internal Revenue Code or (ii)a group of trades or businesses under common control, as defined in Section 414(c)of the Internal Revenue Code, of which Holdings or any of its Subsidiaries is apart or becomes a part.

 

“Controlling Group” has the meaning provided in Section5.13.

 

“Currency Agreement” means any foreign exchangecontract, currency swap agreement or other similar agreement or arrangementdesigned to protect Holdings or any of its Subsidiaries against fluctuations incurrency values.

 

“Custodian” means any receiver, interim receiver,receiver and manager, trustee, assignee, liquidator, sequestrator or similarofficial charged with maintaining possession or control over property for oneor more creditors, whether under any Bankruptcy Law or otherwise.

 

“Default” means an event or condition the occurrenceof which is, or with the lapse of time or the giving of notice or both wouldbe, an Event of Default.

 

“Disqualified Capital Stock” means that portion of anyCapital Stock which, by its terms (or by the terms of any security into whichit is convertible or for which it is exchangeable), or upon the happening ofany event, matures or is mandatorily redeemable, pursuant to a sinking fundobligation or otherwise, or is redeemable at the sole option of the holderthereof prior to the Maturity Date.

 

“Dollars” or the sign “$” means the lawful money ofthe United States of America.

 

“Eligible Assignee” means (a) any entity which is an“accredited investor” (as defined in Regulation D under the Securities Act of1933) which extends credit or buys loans as one of its businesses; and (b) anyLender and any Affiliate of any Lender.

 

“Employee Benefit Plan” means any “employee benefitplan” as defined in Section 3(3) of ERISA (i) which is, or, at any time withinthe five calendar years immediately preceding the date hereof, was at any time,maintained or contributed to by any of Holdings or its Subsidiaries or any oftheir respective ERISA Affiliates or (ii) with respect to which Holdings or anyof its Subsidiaries retains any 

 

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liability, including any potential joint and several liability as aresult of an affiliation with an ERISA Affiliate or a party that would be anERISA Affiliate except for the fact the affiliation ceased more than fivecalendar years prior to the date hereof.

 

“Environmental Claim” means any notice, claim, demand,order, direction (conditional or otherwise) or other communication by anygovernmental authority or any Person alleging liability for any response orcorrective action, any damage, including, without limitation, personal injury(including sickness, disease or death), tangible or intangible property damage,contribution, indemnity, indirect or consequential damages, damage to theenvironment, nuisance, pollution, contamination or other adverse effects on theenvironment, or for fines or penalties, in each case arising under anyEnvironmental Law, including without limitation, relating to, resulting from orin connection with Hazardous Materials and relating to Holdings, any of itsSubsidiaries or any of their respective properties or predecessors in interest,or Facilities.

 

“Environmental Laws” means federal, state, local andforeign laws, ordinances, orders, rules, regulations, judgments, writs, decreesor injunctions relating to pollution or protection of human health, safety orthe environment including, without limitation, ambient air, indoor air, soil,surface water, groundwater, wetlands and other natural resources, land orsubsurface strata, including, without limitation, those relating to the Releaseor threatened Release of Hazardous Materials or otherwise relating to thegeneration, manufacture, use, storage, transport, treatment, distribution, ordisposal of Hazardous Materials, including, without limitation, CERCLA, theHazardous Materials Transportation Act (49 U.S.C. § 1801 etseq.),the Resource Conservation and Recovery Act (42 U.S.C. § 6901 etseq.),the Federal Water Pollution Control Act (33 U.S.C. § 1251 etseq.),the Clean Air Act (42 U.S.C. § 7401 etseq.), the ToxicSubstances Control Act (15 U.S.C. § 2601 etseq.), the FederalInsecticide, Fungicide and Rodenticide Act (7 U.S.C. § 136 etseq.),the Occupational Safety and Health Act (29 U.S.C. § 651 etseq.)and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001 etseq.), each as amended or supplemented and each as in effect as of thedate of determination.

 

“ERISA” means the Employee Retirement Income SecurityAct of 1974, as amended from time to time, and any successor statute.

 

“ERISA Affiliate”, as applied to any Person, means (i)any corporation which is, or was at any time within the five calendar yearsimmediately preceding the date hereof, a member of a controlled group ofcorporations within the meaning of Section 414(b) of the Internal Revenue Codeof which that Person is, or was at any time within the five calendar yearsimmediately preceding the date hereof, a member; (ii) any trade or business(whether or not incorporated) which is, or was at any time within the fivecalendar years immediately preceding the date hereof, a member of a group oftrades or businesses under common control within the meaning of Section 414(c)of  the Internal Revenue Code of whichthat Person is, or was at any time within the five calendar years immediatelypreceding the date hereof, a member; and (iii) any member of an affiliatedservice group within the meaning of Section 414(m) or (o) of the InternalRevenue Code of which that Person, any corporation described in clause (i)above or any trade or business described in clause (ii) above is, or was at anytime within the five calendar years immediately preceding the date hereof, amember.

 

“ERISA Event” means (i) a “reportable event” withinthe meaning of Section 4043 of ERISA and the regulations issued thereunder withrespect to any Pension Plan (excluding those for which the provision for 30-daynotice to the PBGC has been waived by regulation); (ii) the failure to meet theminimum funding standard of Section 412 of the Internal Revenue Code withrespect to any Pension Plan (whether or not waived in accordance with Section412(d) of the Internal Revenue Code) or the failure to make by its due date arequired installment under Section 412(m) of the Internal Revenue Code withrespect to any Pension Plan or the failure to make any required contribution toa Multiemployer Plan; (iii) 

 

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the provision by the administrator of any Pension Plan pursuant toSection 4041(a)(2) of ERISA of a notice of intent to terminate such plan in adistress termination described in Section 4041(c) of ERISA; (iv) the withdrawalby any of Holdings or its Subsidiaries or any of their respective ERISAAffiliates from any Pension Plan with two or more contributing sponsors or thetermination of any such Pension Plan resulting in liability pursuant toSections 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedingsto terminate any Pension Plan, or the occurrence of any event or conditionwhich might reasonably be expected to constitute grounds under ERISA for thetermination of, or the appointment of a trustee to administer, any PensionPlan; (vi) the imposition of liability on any of Holdings or its Subsidiariesor any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) thewithdrawal by any of Holdings or its Subsidiaries or any of their respectiveERISA Affiliates in a complete or partial withdrawal (within the meaning ofSections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is anypotential liability therefor, or the receipt by any of Holdings or itsSubsidiaries or any of their respective ERISA Affiliates of notice from anyMultiemployer Plan that it is in reorganization or insolvency pursuant toSection 4241 or 4245 of ERISA, or that it intends to terminate or hasterminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of anact or omission which could reasonably be expected to give rise to theimposition on any of Holdings or its Subsidiaries or any of their respectiveERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43of the Internal Revenue Code or under Section 409 or 502(c), (i) or (l) or 4071of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a materialclaim (other than routine claims for benefits) against any Employee BenefitPlan other than a Multiemployer Plan or the assets thereof, or against any ofHoldings or its Subsidiaries or any of their respective ERISA Affiliates inconnection with any such Employee Benefit Plan; (x) receipt from the InternalRevenue Service of notice of the failure of any Pension Plan (or any otherEmployee Benefit Plan intended to be qualified under Section 401(a) of theInternal Revenue Code) to qualify under Section 401(a) of the Internal RevenueCode, or the failure of any trust forming part of any Pension Plan to qualifyfor exemption from taxation under Section 501(a) of the Internal Revenue Code;or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) ofthe Internal Revenue Code or pursuant to ERISA with respect to any PensionPlan.

 

“Event of Default” has the meaning ascribed to suchterm in Section 7.

 

“Exchange Act” means the Securities Exchange Act of1934, as amended, and any successor statute or statutes thereto.

 

“Exchange Agreement” means that certain Exchange Agreement, dated as ofthe Closing Date, by and among Holdings, JFL, the consenting shareholders andthe consenting noteholders party thereto, including all exhibits thereto, allin form and substance satisfactory in all respects to the Lenders.

 

“Exchange Offer” means an exchange offer by Holdings for all$90,000,000 of its 97/8% Senior Notes due 2008 in exchange for(i) $60,000,000 of 9% Senior Notes due February 1, 2008, (ii) $30,000,000in stated liquidation value of Holdings’s Series D 10.5% Senior CumulativeRedeemable Preferred Stock due February 1, 2008 and (iii) 750,000 sharesof new Class A Common Stock of Holdings, par value $0.01 per share, andincluding a cash option described in the Exchange Agreement.

 

“Existing Credit Facilities” means the creditfacilities under the Existing Financing Agreement.

 

“Existing Financing Agreement” means that certainFinancing Agreement, dated as of June 26, 2002, by and among Holdings, theBorrower, the lenders party thereto and Ableco Finance LLC, as administrativeagent and collateral agent, as amended, supplemented or modified from time totime through the Closing Date.

 

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“Facilities” means any and all real property(including, without limitation, all buildings, fixtures or other improvementslocated thereon) now, hereafter or heretofore owned, leased, operated or usedby Holdings, its Subsidiaries or any of their respective predecessors ininterest.

 

“fair market value” means, with respect to any assetor property, the price which could be negotiated in an arm’s-length, freemarket transaction, for cash, between a willing seller and a willing and ablebuyer, neither of whom is under undue pressure or compulsion to complete thetransaction.  Fair market value shall bedetermined by the Board of Directors of Holdings acting reasonably and in goodfaith and shall be evidenced by a Board Resolution of the Board of Directors ofHoldings delivered to the Lenders.

 

“Financial Statements” means the consolidated andconsolidating balance sheets, statements of operations, statements of cashflows and statements of changes in shareholder’s equity of Holdings and itsSubsidiaries for the period specified, prepared in accordance with GAAP andconsistent with prior periods (unless otherwise required by GAAP).

 

“Fiscal Year” means the fiscal year of Holdings foraccounting and tax purposes, which for all years after the Closing Date shallend on the Saturday closest to December 31.

 

“Funding Guarantor” has the meaning provided in Section9.5.

 

“GAAP” means generally accepted accounting principlesas in effect from time to time in the United States of America.

 

“Guarantees” means, collectively, the guarantees infavor of the Lenders and the Collateral Agent by the Guarantors set forth in Section9.

 

“Guarantor” means each of (i) Holdings and (ii) eachof Holdings’s Subsidiaries that in the future executes a Joinder to Guaranteein the form of Exhibit VI to this Agreement in which such Subsidiaryagrees to be bound by Section 9 and the other terms of the LoanDocuments as a Guarantor; provided that any Person constituting aGuarantor as described above shall cease to constitute a Guarantor when itsrespective Guarantee is released in accordance with the terms of the LoanDocuments.

 

“Hazardous Materials” means any pollutant,contaminant, toxic, hazardous or extremely hazardous substance, constituent orwaste, or any other constituent, waste, material, compound, chemical orsubstance including, without limitation, petroleum (including crude oil or anyfraction thereof) or any petroleum product, subject to regulation under anyEnvironmental Law.

 

“Holdings” has the meaning ascribed to such term inthe preamble to this Agreement.

 

“Incur” means, with respect to any Indebtedness orother obligation of any Person, to create, issue, incur (by conversion,exchange or otherwise), assume, guarantee or otherwise become liable in respectof such Indebtedness or other obligation or the recording, as required pursuantto GAAP or otherwise, of any such Indebtedness or other obligation on thebalance sheet of such Person (and “Incurrence,” “Incurred,” “Incurrable”and “Incurring” shall have meanings correlative to the foregoing); provided,however, that any amendment, modification or waiver of any documentpursuant to which Indebtedness was previously Incurred shall only be deemed tobe an Incurrence of Indebtedness if and to the extent such amendment,modification or waiver (i) increases the principal thereof or interest rate orpremium payable thereon or (ii) changes to an earlier date the stated maturitythereof or the date of any scheduled or required principal payment thereon orthe time or circumstances under which such Indebtedness is required to beredeemed; provided, further, that any Indebtedness of a Personexisting at 

 

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the time such Person becomes (after the Closing Date) a Subsidiary ofHoldings (whether by merger, consolidation, acquisition or otherwise) shall bedeemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary ofHoldings.

 

“Indebtedness” means with respect to any Person,without duplication, (i) all indebtedness, obligations and liabilities of suchPerson for borrowed money, (ii) all indebtedness, obligations and liabilitiesof such Person evidenced by bonds, debentures, notes or other similarinstruments, (iii) all Capitalized Lease Obligations of such Person, (iv) allobligations and liabilities of such Person issued or assumed as the deferredpurchase price of property, all conditional sale obligations and allindebtedness, obligations and liabilities under any title retention agreement(but excluding trade accounts payable and other accrued liabilities arising inthe ordinary course of business that are not overdue by 90 days or more or arebeing contested in good faith by appropriate proceedings promptly institutedand diligently conducted), (v) all indebtedness, obligations and liabilitiesfor the reimbursement of any obligor on any letter of credit, banker’sacceptance or similar credit transaction, (vi) all Contingent Obligations ofsuch Person, (vii) all indebtedness, obligations and liabilities under CurrencyAgreements and Interest Swap Obligations of such Person, (viii) allDisqualified Capital Stock issued by such Person with the amount ofIndebtedness represented by such Disqualified Capital Stock being equal to thegreater of its voluntary or involuntary liquidation preference and its maximumfixed repurchase price, but excluding accrued dividends, if any, and (ix) allindebtedness, obligations and liabilities of any other Person of the typereferred to in clauses (i) through (viii) which are secured by any Lien on anyproperty or asset of such Person, the amount of such Indebtedness being deemedto be the lesser of the fair market value of such property or asset or theamount of the Indebtedness so secured.

 

“indemnified liabilities” has the meaning ascribed tosuch term in Section 10.4.

 

“Indemnitees” has the meaning ascribed to such term inSection 10.4.

 

“Interest Swap Obligations” means the obligations ofany Person pursuant to any arrangement with any other Person, whereby, directlyor indirectly, such Person is entitled to receive from time to time periodicpayments calculated by applying either a floating or a fixed rate of intereston a stated notional amount in exchange for periodic payments made by suchother Person calculated by applying a fixed or a floating rate of interest onthe same notional amount and shall include, without limitation, interest rateswaps, caps, floors, collars and similar agreements.

 

“Internal Revenue Code” means the Internal RevenueCode of 1986, as amended from time to time, and any successor code or statute.

 

“Investment” means, with respect to any Person, anydirect or indirect loan or other extension of credit (including, withoutlimitation, a guarantee) or capital contribution to (by means of any transferof cash or other property to others or any payment for property or services forthe account or use of others), or any purchase or acquisition by such Person ofany Capital Stock, bonds, notes, debentures or other securities or evidences ofIndebtedness issued by, any other Person. For the purposes of Section 6.3 hereof, the amount of anyInvestment shall be the original cost of such Investment plus the cost of alladditional Investments by Holdings or any of its Subsidiaries, without anyadjustments for increases or decreases in value, or write-ups, write-downs orwrite-offs with respect to such Investment, reduced by the payment ofdividends, distributions, interest payments or repayments of loans or advancesin connection with such Investment or any other amounts received in respect ofsuch Investment.  If Holdings or anySubsidiary sells or otherwise disposes of any Common Stock of any direct orindirect Subsidiary such that, after giving effect to any such sale ordisposition, it ceases to be a Subsidiary of Holdings, Holdings shall be deemedto have made an Investment on the date of any such sale or 

 

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disposition equal to the fair market value of the Common Stock of suchSubsidiary not sold or disposed of.

 

“JFL” means J.F. Lehman Equity Investors I, L.P.

 

“JFL Cash Collateral Agreement” means that certainCash Collateral Agreement among JFL, U.S. Bank National Association, as AccountCustodian, and the Collateral Agent, in form and substance satisfactory to theLenders.

 

“JFL Documents” means the JFL Cash CollateralAgreement and the JFL Guaranty.

 

 “JFL Guaranty”means that certain Guaranty made by JFL, in form and substance satisfactory tothe Lenders.

 

“Laws” means all applicable statutes, laws,ordinances, regulations, rules, orders, judgments, writs, injunctions ordecrees of any state, commonwealth, nation, territory, possession, province,county, parish, town, township, village, municipality or Tribunal, and “Law”means each of the foregoing.

 

“Lenders” has the meaning ascribed to that term in thepreamble to this Agreement and shall include any assignee of any Loan, Note orCommitment to the extent of such assignment.

 

“Lien” means any lien, mortgage, deed of trust,pledge, security interest, charge or encumbrance of any kind (including anyconditional sale or other title retention agreement, any lease in the naturethereof, and any agreement to give any security interest).

 

“Litigation” means any action, suit, proceeding,claim, lawsuit, arbitration and/or investigation conducted or threatened by orbefore any Tribunal.

 

“Loan Documents” means this Agreement, the Notes, theGuarantees, the JFL Documents and the Pledge and Security Agreement and allother documents, instruments or agreements executed and delivered by theBorrower, JFL or any Guarantor for the benefit of the Collateral Agent or anyLender in connection herewith.

 

“Loan Party” means the Borrower and each Guarantor.

 

“Loans” has the meaning ascribed to such term in Section2.1(a).

 

“Margin Stock” has the meaning assigned to that termin Regulation U of the Board, as in effect from time to time.

 

“Material Adverse Effect” means (i) a material adverseeffect upon the business, operations, properties, assets, liabilities,condition (financial or otherwise) or prospects of Holdings and itsSubsidiaries, taken as a whole, (ii) a material adverse effect on the abilityof any of Holdings or its Subsidiaries to execute, deliver and perform itsobligations under the Loan Documents, on the ability of JFL to execute, deliverand perform its obligations under the JFL Documents or the other Loan Documentsto which it is a party or on the legality, validity or enforceability of thisAgreement or any other Loan Document or any Lien created thereunder, (iii) theimpairment of the ability of Holdings and its Subsidiaries to perform, or theimpairment of the ability of the Collateral Agent or the Lenders to enforce,the Obligations, or (iv) a material adverse effect on the issuance of debt orequity securities by Holdings or the Borrower.

 

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“Material Contract” means any Contractual Obligationto which the Borrower or any Guarantor is a party (other than the LoanDocuments) for which breach, nonperformance, cancellation or failure to renewcould reasonably be expected to have a Material Adverse Effect.

 

“Maturity Date” means the earliest of (i) theconsummation of the exchange contemplated by the Exchange Offer, (ii) August 1,2003 and (iii) the date that all Loans shall become due and payable in fullhereunder, whether by acceleration or otherwise.

 

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

 

“Net Cash Proceeds” means, (a) with respect to anyAsset Sale, the proceeds in the form of cash or Cash Equivalents (includingpayments in respect of deferred payment obligations when received in the formof cash or Cash Equivalents other than the portion of any such deferred paymentconstituting interest) received by Holdings or any of its Subsidiaries fromsuch Asset Sale net of (i) reasonable out-of-pocket expenses and fees relatingto such Asset Sale, (ii) the amount of Indebtedness secured by a Lien on anyasset (other than Indebtedness assumed by the purchaser of such asset) which isrequired to be and which is repaid in connection with such Asset Sale (otherthan Indebtedness arising under this Agreement) and (iii) net income taxes paidin connection with such Asset Sale, and, (b) with respect to any sale, issuanceor transfer of Capital Stock (to the extent not constituting an Asset Sale) orthe receipt by Holdings of a capital contribution, the proceeds in the form ofcash or Cash Equivalents including payments in respect of deferred paymentobligations when received in the form of cash or Cash Equivalents received byHoldings or any of its Subsidiaries from such sale, issuance or transfer orsuch capital contribution, net of (i) reasonable out-of-pocket expenses andfees relating to such sale, issuance or transfer or such capital contribution,(ii) transfer taxes paid or payable by Holdings or any of its Subsidiaries inconnection therewith and (iii) net income taxes to be paid in connectiontherewith (after taking into account any tax credits or deductions and any taxsharing arrangements); provided that amounts due under clause (a) or (b)shall further be net of any Termination Fee paid in connection with the relatedprepayment of Loans.

 

“Notes” has the meaning ascribed to such term in Section2.1(d).

 

“Notice of Borrowing” means a notice substantially inthe form of Exhibit IV annexed hereto with respect to a proposedborrowing.

 

“Obligations” means all obligations of every nature ofthe Borrower and each Guarantor from time to time owed to the Lenders and theCollateral Agent under the Loan Documents, whether for principal,reimbursements, interest (including interest which, but for the filing of apetition in bankruptcy with respect to such Loan Party, would have accrued onany Obligation, whether or not a claim is allowed against such Loan Party forsuch interest in the related bankruptcy proceeding), fees, expenses,indemnities or otherwise, and whether primary, secondary, direct, indirect,contingent, fixed or otherwise (including obligations of performance).

 

“Officer” means, with respect to any Person, theChairman of the Board, the Chief Executive Officer, the President, any VicePresident, the Chief Financial Officer, the Controller, the Treasurer, theSecretary or any Assistant Secretary of such Person.

 

“Officers’ Certificate” means, as applied to anycorporation, a certificate executed on behalf of such corporation by twoOfficers; provided, however, that the Officers’ Certificate withrespect to the compliance with the conditions precedent to the making of theLoans hereunder shall include (i) a statement that the officer or officersmaking or giving such Officers’ Certificate have read such conditions 

 

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and any definitions or other provisions contained in this Agreementrelating thereto, (ii) a statement that, in the opinion of the signers, theyhave made or have caused to be made such examination or investigation as isnecessary to enable the corporation to express an informed opinion as towhether or not such conditions have been complied with, and (iii) a statementas to whether, in the opinion of the signers, such conditions have beencomplied with.

 

“Operating Lease Obligations” means all obligationsfor the payment of rent for any real or personal property under leases oragreements to lease, other than Capitalized Lease Obligations.

 

“Other Taxes” has the meaning ascribed to such term inSection 10.19.

 

“PBGC” means the Pension Benefit Guaranty Corporation,and any successor to all or any of the Pension Benefit Guaranty Corporation’sfunctions under ERISA.

 

“Pension Plan” means an employee pension benefit planas defined in Section 3(2) of ERISA which is subject to the provisions of TitleIV of ERISA and which is maintained for employees of Holdings, any Subsidiary orany member of the Controlled Group.

 

“Permitted Holders” means J.F. Lehman Equity InvestorsI L.P., the other members of JFL-EEC LLC, a Delaware limited liability company,and each of their Affiliates.

 

“Permitted Indebtedness” has the meaning ascribed tosuch term in Section 6.1.

 

“Permitted Investments” means:

 

(i)            Investmentsby Holdings or its Subsidiaries on the Closing Date described on Schedule Ebut not any increase in the amount thereof as set forth in such Schedule or anyother modification of the terms thereof unless such increase or modificationcan be independently justified under Section 6.3;

 

(ii)           Investmentsin cash and Cash Equivalents;

 

(iii)          (A)loans and advances, and commitments to make such loans and advances, toemployees and officers of Holdings’ Subsidiaries in the ordinary course ofbusiness for bona fide business purposes described in Schedule Eattached hereto, (B) loans and advances to employees and officers of Holdings’Subsidiaries in the ordinary course of business for bona fide business purposesnot in excess of $20,000 at any one time outstanding and (C) advances toemployees and officers of Holdings’ Subsidiaries for moving, relocation andtravel expenses, drawing accounts and similar expenditures in the ordinarycourse of business not in excess of $20,000 at any one time outstanding;

 

(iv)          CurrencyAgreements entered into in the ordinary course of Holdings’s or itsSubsidiaries’ businesses and otherwise in compliance with this Agreement;

 

(v)           Investments,including without limitation debt obligations, in securities of trade creditorsor customers received pursuant to any plan of reorganization or similararrangement upon the bankruptcy or insolvency of such trade creditors orcustomers and in good faith settlement of delinquent obligations of, and otherdisputes with, customers and suppliers arising in the ordinary course ofbusiness;

 

(vi)          intercompanyloans to the extent permitted under Section 6.1(e); and

 

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(vii)         accountsreceivable owing to any of Holdings or its Subsidiaries, if created or acquiredin the ordinary course of business and payable or dischargeable in accordancewith customary trade terms of Holdings or any of its Subsidiaries, as the casemay be.

 

“Permitted Liens” has the meaning ascribed to suchterm in Section 6.2.

 

“Person” means an individual, partnership,corporation, limited liability company, unincorporated organization, trust orjoint venture, or a governmental agency or political subdivision thereof.

 

“Pledge and Security Agreement” means that certainPledge and Security Agreement among the Loan Parties and the Collateral Agent,in form and substance satisfactory to the Lenders and substantially in the formof Exhibit II annexed hereto.

 

“Preferred Stock” of any Person means any CapitalStock of such Person that has preferential rights to any other Capital Stock ofsuch Person with respect to dividends or redemptions or upon liquidation.

 

“Qualified Capital Stock” means any Capital Stock thatis not Disqualified Capital Stock or that is not Indebtedness that isconvertible or exchangeable into Capital Stock.

 

“Release” means any spill, emission, leaking, pumping,pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,emitting, leaching or migration of Hazardous Materials into the indoor oroutdoor environment (including, without limitation, the abandonment or disposalof any barrels, containers or other closed receptacles containing any HazardousMaterials), or into or out of any Facility, including without limitation themovement of any Hazardous Material through the air, soil, surface water,groundwater or property.

 

“Reportable Event” has the meaning set forth inSection 4043 of ERISA, but excluding any event for which the 30-day noticerequirement has been waived by applicable regulations of the PBGC.

 

“RequiredForms” has the meaning ascribed to such term in Section 10.19(f).

 

“Required Lenders” means Lenders holding in theaggregate more than (i) after the Loans are advanced, 80% of the outstandingprincipal amount of Loans, and (ii) prior to the Loans being advanced, 80% ofthe Commitments.

 

“Restricted Payment” has the meaning ascribed to suchterm in Section 6.3(a).

 

“Sale and Leaseback Transaction” means any direct orindirect arrangement with any Person or to which any such Person is a party,providing for the leasing to Holdings or a Subsidiary of any property, whetherowned by Holdings or any Subsidiary at the Closing Date or later acquired,which has been or is to be sold or transferred by Holdings or such Subsidiaryto any Person.

 

“Securities” means any stock, shares, partnershipinterests, voting trust certificates, certificates of interest or participationin any profit sharing agreement or arrangement, bonds, debentures, options,warrants, notes, or other evidences of indebtedness, secured or unsecured,convertible, subordinated or otherwise, or in general any instruments commonlyknown as “securities” or any certificates of interest, shares or participationsin temporary or interim certificates for the purchase or acquisition of, or anyright to subscribe to, purchase or acquire, any of the foregoing.

 

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“Securities Act” means the Securities Act of 1933, asamended, and any successor statute or statutes thereto.

 

“Solvency Certificate”****means a Solvency Certificate of the chief financial officerof the Borrower, substantially in the form of Exhibit VII.

 

“Solvent” means, with respect to the Borrower, that asof the date of determination both (i) (a) the sum of the Borrower’s debt(including contingent liabilities) does not exceed the present fair saleablevalue of the Borrower’s present assets; (b) the Borrower’s capital is notunreasonably small in relation to its business as contemplated on the ClosingDate or with respect to any transaction contemplated or undertaken after theClosing Date; and (c) the Borrower has not incurred and does not intend toincur, or believe (nor should it reasonably believe) that it will incur, debtsbeyond its ability to pay such debts as they become due (whether at maturity orotherwise); and (ii) the Borrower is “solvent” within the meaning given thatterm and similar terms under applicable laws relating to fraudulent transfersand conveyances.  For purposes of thisdefinition, the amount of any contingent liability at any time shall becomputed as the amount that, in light of all of the facts and circumstancesexisting at such time, represents the amount that can reasonably be expected tobecome an actual or matured liability (irrespective of whether such contingentliabilities meet the criteria for accrual under Statement of FinancialAccounting Standards No. 5).

 

“Subordinated Indebtedness” means Indebtedness of theBorrower or any Guarantor which is expressly subordinated in right of paymentto the Loans or the Guarantee of such Guarantor, as the case may be.

 

“Subsidiary,” means, with respect to any Person, (i)any corporation of which the outstanding Capital Stock having at least amajority of the votes entitled to be cast in the election of directors underordinary circumstances shall at the time be owned, directly or indirectly, bysuch Person, (ii) any other Person of which at least a majority of the votinginterest under ordinary circumstances is at the time, directly or indirectly,owned by such Person, and (iii) any other Person of which a majority in equityinterests (in terms of economic ownership) are owned, directly or indirectly,by such Person.  Unless otherwisespecified, all references to a “Subsidiary” shall mean a Subsidiary ofHoldings.

 

“Take-Out Facility” means a debt facility entered intoby the Borrower and/or Holdings on terms satisfactory in all respects to theLenders in their sole and absolute discretion, the proceeds of which shall beused to repay the Loans.

 

“Tax Payments” hasthe meaning ascribed to such term in Section 6.3(b).

 

“Taxes” means all taxes, assessments, fees, levies,imposts, duties, penalties, deductions, liabilities, withholdings or other chargesof any nature whatsoever, including interest, penalties and additions to tax.

 

“Termination Fee” has the meaning ascribed to suchterm in Section 2.3(b).

 

“Tribunal” means any government, any arbitrationpanel, any court or any governmental department, commission, board, bureau,agency, authority or instrumentality of the United States or any state,province, commonwealth, nation, territory, possession, county, parish, town,township, village or municipality, whether now or hereafter constituted and/orexisting.

 

“UCC” means the Uniform Commercial Code (or anysimilar or equivalent legislation) as in effect in any applicable jurisdiction.

 

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“U.S. Legal Tender” means such coin or currency of theUnited States of America as at the time of payment shall be legal tender forthe payment of public and private debts.

 

“Wholly Owned Subsidiary” of any Person means anySubsidiary of such Person of which all the outstanding Capital Stock is ownedby such Person or any Wholly Owned Subsidiary of such Person.  Unless otherwise specified, all referencesto a “Wholly Owned Subsidiary” shall mean a Wholly Owned Subsidiary ofHoldings.

 

1.2           AccountingTerms.     For the purposes of this Agreement,all accounting terms not otherwise defined herein shall have the meaningsassigned to them in conformity with GAAP.

 

1.3           OtherDefinitional Provisions.     Any of the termsdefined in Section 1.1 may, unless the context otherwise requires, beused in the singular or the plural depending on the reference.  Except as otherwise provided herein, whereany provision in this Agreement refers to a specific agreement, contract ordocument, such provision shall be construed to refer to such agreement,contract or document as it may be amended, restated, supplemented or otherwisemodified from time to time.  The use inany of the Loan Documents of the word “include” or “including”, when followingany general statement, term or matter, shall not be construed to limit suchstatement, term or matter to the specific items or matters set forthimmediately following such word or to similar items or matters, whether or notnonlimiting language (such as “without limitation” or “but not limited to” orwords of similar import) is used with reference thereto, but rather shall bedeemed to refer to all other items or matters that fall within the broadestpossible scope of such general statements, term or matter.  Except as otherwise specified, allreferences herein to Sections, Exhibits and Schedules shall refer to Sections,Exhibits and Schedules of this Agreement.

 

**SECTION2.****                            AMOUNTAND TERMS OF COMMITMENT AND LOANS; NOTES**

 

2.1           Loans and Notes.

 

(a)           Commitment.  Subject to the terms and conditions of thisAgreement and in reliance upon the representations and warranties of the LoanParties set forth herein, the Lenders hereby agree to lend to the Borrower onthe Closing Date an aggregate amount of up to $25,000,000 (the “Loans”),each such Lender committing to lend the amount set forth next to such Lender’sname on the signature pages hereto; provided that the Closing Date mustoccur no later than April 17, 2003, and the Loans shall be in an aggregateamount of not greater than the lesser of (i) $25,000,000 and (ii) the amount ofavailable Commitments (as defined below) on the Closing Date.  The Lenders’ commitments to make the Loansto the Borrower pursuant to this Section 2.1(a) are herein called,individually, the “Commitment” and collectively, the “Commitments.”

 

(b)           Noticeof Borrowing.  When the Borrowerdesires to borrow under this Section 2.1, it shall deliver to theLenders a Notice of Borrowing no later than 11:00 a.m. (New York time), atleast two (2) Business Days in advance of the date of the proposed Closing Dateor such other date as shall be agreed to by the Lenders.  The Notice of Borrowing shall specify theproposed Closing Date (which shall be a Business Day).  Each Lender’s share of the Loan shall bedetermined by reference to the quotient of such Lender’s unfunded Commitment,divided by the aggregate amount of all unfunded Commitments.  All Loans shall be funded on a *pro rata*basis by the Lenders asaforesaid.

 

(c)           Disbursementof Funds.  On the Closing Date, eachLender will make available its *pro rata*shareof the Loan requested to be made on such date in U.S. dollars, by wiretransfer, to the account designated by the Borrower.

 

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(d)           Notes.  The Borrower shall execute and deliver toeach Lender on the Closing Date a Note, dated the Closing Date and having aprincipal amount equal to the Loans advanced by such Lender, substantially inthe form of Exhibit I annexed hereto (the “Notes”).

 

(e)           ScheduledPayment of the Loans.  The Borrowershall pay in full the outstanding amount of the Loans and all other Obligationsowing hereunder, including, without limitation, the Termination Fee, no laterthan the Maturity Date; provided that if the Loans have not beenpreviously repaid in full on or prior to the consummation of the exchangecontemplated by the Exchange Offer, the Loans held by each Lender shall beexchanged on the date of the consummation of such exchange for Exchange Loanshaving the terms set forth in the summary of principal terms attached hereto asExhibit VIII.

 

(f)            Terminationof Commitment.  The Commitmentshereunder shall terminate on April 17, 2003, if the Loans are not made on orbefore such date.  All Commitments notutilized on the Closing Date shall immediately terminate.

 

(g)           ProRata Borrowings.  The Loans madeunder this Agreement shall be made by the Lenders *pro rata* on the basis of their respective Commitments.

 

2.2           Interest on the Loans.

 

(a)           Rateof Interest; Interest Payments.  TheLoans shall bear interest on the unpaid principal amount thereof from the datemade through maturity (whether by prepayment, acceleration or otherwise) at arate of ten percent (10.00%) perannum.  Interest shall be payable in arrears on the last day of eachmonth and upon any prepayment of the Loans (to the extent accrued on the amountbeing prepaid) and at maturity of the Loans; provided that if any monthwould end on a day other than a Business Day, interest shall be payable on theon the immediately preceding Business Day.

 

(b)           DefaultRate.  At any time that an Event ofDefault has occurred and is continuing, all Loans and other Obligations shallbear interest payable upon demand at a rate of 13.00% perannum.

 

(c)           Computationof Interest.  Interest on the Loansshall be computed on the basis of a 360-day year and the actual number of dayselapsed in the period during which it accrues. In computing interest on the Loans, the date of the making of the Loansshall be included, and the date of payment shall be excluded.

 

2.3           Fees.

 

(a)           FundingFee.  On the Closing Date, theBorrower agrees to pay to the Lenders (on a *prorata* basis, according to each Lender’s Commitment) a non-refundablefunding fee in an aggregate amount equal to $500,000.

 

(b)           TerminationFee.  On the date of any repaymentor prepayment of the Loans (whether by acceleration or otherwise), the Borroweragrees to pay to the Lenders (on a *pro rata*basis, according to the outstanding principal amount of the Loans of suchLender) a non-refundable termination fee in an aggregate amount equal to 2.00%of the outstanding principal amount repaid or prepaid, as applicable (the “TerminationFee”); provided that, for the avoidance of doubt, on the Maturity Date the TerminationFee payable shall equal 2.00% of the principal amount of the Loans thenoutstanding (immediately prior to any payment on such date).

 

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2.4           Prepayments and Reductions in theCommitment.

 

(a)           VoluntaryPrepayments.  The Borrower at itsoption may, upon at least one (1) day’s written notice to the Lenders, prepay allor any part of the principal amount of outstanding Loans at a redemption priceequal to 100% of the principal amount of the Loans so prepaid plus theapplicable Termination Fee, together with accrued interest through the date ofprepayment. Loans so prepaid may not be reborrowed.

 

(b)           MandatoryPrepayments.

 

(i)            Prepaymentsfrom Asset Sales.  The Borrowershall prepay Loans with the Net Cash Proceeds of any Asset Sale occurring afterthe Closing Date on a date not later than the third (3rd) BusinessDay next succeeding the date of consummation of such Asset Sale or, in the caseof that portion of the purchase price which is deferred, the date of receipt ofsuch Net Cash Proceeds, whichever is later. The amount of Loans so prepaid shall equal the amount of such Net CashProceeds.  Concurrently with theconsummation of an Asset Sale, the Borrower shall deliver to the Lenders anOfficers’ Certificate demonstrating the derivation of Net Cash Proceeds fromthe gross sales price of such Asset Sale.

 

(ii)           Prepaymentsfrom Incurrence of Indebtedness. Concurrently with the Incurrence by Holdings or any of its Subsidiariesof any Indebtedness not permitted under Section 6.1, the Borrower shallprepay the Loans in a principal amount equal to the principal amount of suchIndebtedness so Incurred (net of the Termination Fee paid in connectiontherewith and any reasonable out-of-pocket fees and expenses paid by Holdingsand its Subsidiaries in connection with such Incurrence).

 

(iii)          Notice.  The Borrower shall notify the Lenders of anyprepayment to be made pursuant to this Section 2.4(b) at least twoBusiness Days prior to such prepayment date (unless shorter notice issatisfactory to the Required Lenders).

 

(c)           Borrower’sMandatory Prepayment Obligation; Application of Prepayments.  All prepayments shall include: (i) paymentof accrued interest on the principal amount so prepaid (which shall be appliedto payment of interest before application to principal) and (ii) the applicableTermination Fee.  Loans so prepaid maynot be reborrowed.

 

(d)           Mannerand Time of Payment.  All paymentsof principal, interest and other Obligations hereunder and under the other LoanDocuments shall be made without defense, set-off or counterclaim and inimmediately available funds and delivered to each applicable Lender, unlessotherwise specified, not later than 12:00 Noon (New York time) on the date dueto such account as the applicable Lender shall have notified the Borrower;funds received by any Lender after that time shall be deemed to have been paidby the Borrower on the next succeeding Business Day.  All payments of any Obligations to be made hereunder or under anyother Loan Document by the Borrower or any other obligor with respect theretoshall be made solely in U.S. Legal Tender.

 

(e)           Paymentson Non-Business Days.  Whenever anypayment to be made hereunder or under the Notes shall be stated to be due on aday which is not a Business Day, the payment shall be made on the nextsucceeding Business Day and such extension of time shall be included in thecomputation of the payment of interest hereunder or under the Notes or of thecommitment and other fees hereunder, as the case may be.

 

(f)            Notationof Payment.  Each Lender agrees thatbefore disposing of any Note held by it, or any part thereof (other than bygranting participations therein), such Lender will make a notation 

 

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thereon of all principal payments previously made thereon and of thedate to which interest thereon has been paid and will notify the Borrower ofthe name and address of the transferee of that Note; provided, however,that the failure to make (or any error in the making of) such a notation or tonotify the Borrower of the name and address of such transferee shall not limitor otherwise affect the obligation of the Borrower hereunder or under suchNotes with respect to the Loans and payments of principal or interest on anysuch Note.

 

2.5           Use of Proceeds.

 

(a)           Loans.  The proceeds of the Loans shall be used by theBorrower: (i) to repay existing indebtedness in respect of the Existing CreditFacilities (which amounts shall not exceed $15,000,000 in the case of the termloan facility thereunder or $6,000,000 million in the case of the revolvingcredit facility thereunder, plus (in each case) accrued and unpaidinterest thereon), (ii) to pay an anniversary fee in an amount not to exceed$250,000 under the Existing Credit Facilities in satisfaction in full of allprepayment obligations or other penalties owing to the lenders under theExisting Credit Facilities, (iii) to pay the fees due on the Closing Date tothe Lenders, (iv) to pay reasonable and documented fees and expenses inconnection with the foregoing and the negotiation and execution of the LoanDocuments and the Exchange Agreement and transactions relating thereto up toand including the Closing Date, in an aggregate amount not to exceed $590,000,and (v) for general corporate purposes.

 

(b)           MarginRegulations.  No portion of theproceeds of any borrowing under this Agreement shall be used by the Borrower inany manner which might cause the borrowing or the application of such proceedsto violate the applicable requirements of Regulation T, Regulation U orRegulation X of the Board or any other regulation of the Board or to violatethe Exchange Act, in each case as in effect on the date or dates of suchborrowing and such use of proceeds.

 

**SECTION3.****                            CONDITIONS**

 

3.1           Conditionsto Loans.  The obligation of theLenders to make the Loans is subject to the prior or concurrent satisfaction ofeach of the following conditions:

 

(a)           Onor before the Closing Date, all corporate and other proceedings taken or to betaken in connection with the transactions contemplated hereby shall bereasonably satisfactory in form and substance to the Lenders, and the Lendersor their counsel shall have received on behalf of the Lenders the followingitems, each of which shall be in form and substance satisfactory to the Lendersand, unless otherwise noted, dated the Closing Date:

 

(i)            acertified copy of the each Loan Party’s charter, together with a certificate ofstatus, compliance, good standing or like certificate with respect to each LoanParty issued by the appropriate government officials of the jurisdiction of itsincorporation and of each jurisdiction in which it owns any material assets orcarries on any material business, each to be dated a recent date prior to theClosing Date;

 

(ii)           acopy of each Loan Party’s by-laws, certified as of the Closing Date by itsSecretary or one of its Assistant Secretaries;

 

(iii)          resolutionsof each Loan Party’s Board of Directors approving and authorizing theexecution, delivery and performance of each of this Agreement, each of theother Loan Documents to which it is a party and any other documents,instruments and certificates required to be executed by such Loan Party inconnection herewith and therewith and (in the case of the Borrower) 

 

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approving and authorizing the execution, delivery and payment of theNotes, each certified as of the Closing Date by one of its Officers as being infull force and effect without modification or amendment;

 

(iv)          signatureand incumbency certificates of each Loan Party’s officers executing the LoanDocuments to which it is a party;

 

(v)           executedcopies of this Agreement and the Notes substantially in the form of ExhibitI annexed hereto executed in accordance with Section 2.1(d) drawn tothe order of the Lenders and with appropriate insertions;

 

(vi)          anoriginally executed Notice of Borrowing substantially in the form of ExhibitIV annexed hereto, signed by the President or a Vice President of theBorrower on behalf of the Borrower and delivered to the Lenders;

 

(vii)         originallyexecuted copies of one or more favorable written opinions of (A) Gibson, Dunn& Crutcher LLP, counsel for the Loan Parties and JFL, substantially in theform of Exhibit V annexed hereto (or otherwise in form and substancesatisfactory to the Lenders) and addressed to the Lenders and the CollateralAgent, and (B) such other opinions of counsel and such certificates or opinionsof accountants, appraisers or other professionals as the Lenders shall haverequested;

 

(viii)        aSolvency Certificate executed by the chief financial officer of the Borrower;

 

(ix)           originallyexecuted copies of the Pledge and Security Agreement, executed and delivered byeach Loan Party, dated as of the Closing Date, substantially in the form of ExhibitII annexed hereto;

 

(x)            certificatesrepresenting the Capital Stock of each entity pledged pursuant to the Pledgeand Security Agreement (which certificates shall be accompanied by irrevocable,undated stock powers, duly endorsed in blank and otherwise satisfactory in allrespects to the Lenders);

 

(xi)           acompleted Collateral Questionnaire dated the Closing Date and executed by anOfficer of each Loan Party;

 

(xii)          (A)the results of a recent search, by a Person satisfactory to the CollateralAgent, of all effective UCC financing statements (or equivalent filings) madewith respect to any personal or mixed property of any each Loan Party in thejurisdictions specified by the Collateral Agent, together with copies of allsuch filings disclosed by such search, (B) an executed “pay-off” letter withrespect to the debt under the Existing Credit Facilities satisfactory in allrespects to the Lenders and (C) UCC termination statements (or similardocuments) for filing in all applicable jurisdictions as may be necessary toterminate any effective UCC financing statements (or equivalent filings)disclosed in such search (other than any such financing statements in respectof Permitted Liens);

 

(xiii)         evidencethat each Loan Party and JFL shall have taken or caused to be taken any otheraction, executed and delivered or caused to be executed and delivered any otheragreement, document and instrument and made or caused to be made any otherfiling and recording (other than as set forth herein) reasonably required bythe Lenders;

 

(xiv)        acertificate from the Borrower’s insurance broker or other evidence satisfactoryto it that all insurance required to be maintained pursuant to Section 5.4is in full force and 

 

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effect and that the Collateral Agent has been named as additional insuredand loss payee thereunder to the extent required under Section 5.4; and

 

(xv)         resolutionsof the Board of Directors or similar governing body of JFL and its GeneralPartner, in each case approving and authorizing the execution, delivery andperformance of each of the Loan Documents to which JFL is a party and any otherdocuments, instruments and certificates required to be executed by JFL inconnection therewith, each certified as of the Closing Date by one of itsOfficers as being in full force and effect without modification or amendment;

 

(xvi)        signatureand incumbency certificates of JFL’s officers executing the Loan Documents towhich it is a party;

 

(xvii)       originallyexecuted copies of the JFL Guaranty and the JFL Cash Collateral Agreement,executed and delivered by JFL, dated as of the Closing Date; and

 

(xviii)      allsuch counterpart originals or certified copies of such other documents,instruments, certificates and opinions as the Lenders may reasonably request.

 

(b)           TheLenders shall be satisfied that neither Holdings nor any of its Subsidiarieshas paid any amendment, waiver, consent or other fee or any administrativechanges or increased interest payments to the lenders or agents for any purposeunder the Existing Credit Facilities since December 31, 2002 except, in eachcase, as acceptable to the Lenders and disclosed to the Lenders in writingprior to the Closing Date.

 

(c)           TheLenders shall have received and be satisfied in all respects with a fullyexecuted copy of the Exchange Agreement and all opinions, documents andcertificates delivered in connection therewith.

 

(d)           TheLenders shall have completed, and be satisfied with the results of, duediligence investigations of Holdings and its Subsidiaries relating toincurrence of the Loans under the Loan Documents.

 

(e)           Thecorporate, tax, capital and ownership structure (including articles ofincorporation and by-laws), shareholders agreements and management of Holdingsand its Subsidiaries shall be satisfactory to the Lenders in all respects.

 

(f)            TheCollateral Agent, for the benefit of the Lenders, shall have been granted firstpriority perfected liens to the extent required and described in the LoanDocuments and shall have received such other reports, documents and agreementsas are customarily delivered in connection with similar secured transactions oras the Lenders shall have deemed appropriate.

 

(g)           EachLoan Party and JFL shall have received all governmental, shareholder and thirdparty consents and approvals necessary or desirable in connection with thefinancings and other transactions contemplated hereby and expiration of allapplicable waiting periods without any action being taken by any competentauthority that could restrain, prevent or impose any materially adverseconditions on the financings and other transactions contemplated hereby, and nosuch Law or regulation shall be applicable which in the reasonable judgment ofany Lender could have any such effect.

 

(h)           TheLenders shall have received (i) consolidated and consolidating *pro forma* balance sheet of Holdings andits Subsidiaries as of March 31, 2003, (ii) consolidated and consolidatingincome statements of Holdings and its Subsidiaries as of March 31, 2003, and(iii) projected financial 

 

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statements (including balance sheets and statements of operations,stockholders’ equity and cash flows of Holdings and its Subsidiaries) for thefiscal quarters ending June 30, 2003, September 30, 2003 and December 27, 2003,and such balance sheets, income statements and projections shall besatisfactory in all respects to the Lenders.

 

(i)            TheLenders shall have received consolidated financial statements of Holdings,including balance sheets and income and cash flow statements as of the end ofand for the fiscal years ending December 29, 2001 and December 28, 2002,audited by the Auditors and prepared in conformity with GAAP, together with theAuditor’s report thereon satisfactory in all respects to the Lenders, and allsuch financial statements shall be satisfactory in all respects to the Lenders(or, in the case of the Auditor’s report relating to the financial statementsfor the fiscal year ending December 28, 2002, a draft of such Auditor’s reportthereon satisfactory in all respects to the Lenders, and the Lenders shall havehad, and be satisfied in all respects with, discussions with the Auditorregarding the content and delivery thereof).

 

(j)            Noevent or occurrence shall have occurred which has resulted or could reasonablybe expected to result in a Material Adverse Effect since December 28, 2002 orin the facts and information as represented to date (other than failure byHoldings to deliver the report due under Sections 7.01(a)(ii) and 7.01(a)(xiv)of the Existing Financing Agreement and the failure by Holdings to deliver thenotices of default relating to the foregoing under Section 7.01(a)(ix) of theExisting Financing Agreement, all of which has been disclosed to the Lenders).

 

(k)           Thereshall be no action, suit, investigation, claim, litigation or proceedingpending or threatened in any court or before any arbitrator or governmentalinstrumentality that (x) purports to affect the Loans or the Notes or the otherLoan Documents or (y) that has had or could reasonably be expected to have orresult in a Material Adverse Effect.

 

(l)            Asof the Closing Date, Holdings and its Subsidiaries shall have no outstandingIndebtedness (except for Indebtedness described on Schedule B annexedhereto) and shall have terminated any commitments to lend or make otherextensions of credit under the Existing Credit Facilities.  Any and all security interests in the assetsof Holdings and its Subsidiaries granted in favor of holders of Indebtedness(other than Permitted Liens) shall have been terminated.

 

(m)          Onor before the Closing Date, the Borrower shall have paid to the Lenders and theCollateral Agent (i) all fees payable under Section 2.3(a) and (ii) thefees and expenses incurred by the Lenders and the Collateral Agent inconnection with the negotiation, preparation, execution and delivery of theLoan Documents and the transactions related thereto (including the reasonablelegal fees and out-of-pocket expenses of counsel to the Lenders and theCollateral Agent).

 

(n)           Onor before the Closing Date, each Loan Party shall have performed all agreementswhich this Agreement provides shall be performed on or before the Closing Date.

 

(o)           Onor before the Closing Date, the Borrower shall have delivered to the Lenders anOfficers’ Certificate from the Borrower in form and substance satisfactory tothe Lenders, certifying as to the matters specified in Sections 3.1(n), 3.1(p)and 3.1(q) and that the other conditions set forth in this Section3.1 are satisfied on and as of the Closing Date.

 

(p)           Therepresentations and warranties in Section 4 are true, correct andcomplete in all respects (with respect to representations and warrantiesqualified by materiality or Material Adverse Effect) and in all materialrespects (with respect to all other representations and warranties) on and asof the Closing Date to the same extent as though made on and as of that date.

 

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(q)           Noevent shall have occurred and be continuing or would result from theconsummation of the borrowing contemplated by the Notice of Borrowing whichwould constitute a Default or Event of Default.

 

(r)            Themaking of the Loans in the manner contemplated in this Agreement shall notviolate the applicable provisions of Regulation T, U or X of the Board or anyother regulation of the Board.

 

(s)           U.S.Bank National Association, in its capacity as the account custodian on behalfof the Collateral Agent under the JFL Cash Collateral Agreement, shall havereceived from JFL an amount equal to at least $4,800,000 in immediatelyavailable funds in the Account (as defined in, and in accordance with the termsof, the JFL Cash Collateral Agreement).

 

**SECTION4.****                            REPRESENTATIONSAND WARRANTIES**

 

In order to induce the Lenders to enter into thisAgreement and to make the Loans, each Loan Party represents and warrants to theLenders that, at the time of execution hereof and on the Closing Date, thefollowing statements are true, correct and complete:

 

4.1           Organizationand Good Standing.  Each ofHoldings and its Subsidiaries is duly organized and existing and in goodstanding under the Laws of its jurisdiction of organization.  Each of Holdings and its Subsidiaries hasthe requisite power and authority to own and operate its properties and tocarry on its business as now conducted and as proposed to be conducted and isduly qualified as a foreign organization and in good standing in alljurisdictions in which it is doing business, except where failure to be soqualified or in good standing, singly or in the aggregate, could not reasonablybe expected to have a Material Adverse Effect.

 

4.2           Authorizationand Power.  Each of Holdings andits Subsidiaries, to the extent a party thereto, has the requisite power andauthority, and has taken all action necessary, to execute, deliver and performits obligations under the Loan Documents and, in the case of the Borrower, toissue the Notes.

 

4.3           No Conflicts or Consents.

 

(a)           Theexecution and delivery of the Loan Documents, the consummation of each of thetransactions here contemplated hereby or thereby, the compliance with each ofthe terms and provisions hereof or thereof, and the issuance, delivery andperformance of the Notes, do not and will not (i) violate any provision of anyLaw or any governmental rule or regulation applicable to any of Holdings andits Subsidiaries, the Certificate or Articles of Incorporation or By-laws orother organizational documents of any of them or any order, judgment or decreeof any court or other agency of government binding on any of them, (ii) conflictwith, result in a breach of or constitute (with due notice or lapse of time orboth) a default under any Contractual Obligation of any of Holdings or itsSubsidiaries, except for those conflicts, breaches or defaults which would notresult in a Material Adverse Effect, (iii) result in or require the creation orimposition of any Lien upon any of the properties or assets of any of Holdingsor its Subsidiaries except for Liens created pursuant to the Loan Documents,(iv) require any approval of stockholders or any approval or consent of anyPerson under any Contractual Obligation of any of Holdings or its Subsidiariesexcept for such approvals or consents which will be obtained on or before theClosing Date and disclosed in writing to Lenders.

 

(b)           Noconsent, approval, authorization or order of any Tribunal or other Person isrequired in connection with the execution and delivery by Holdings or any ofits Subsidiaries, to the 

 

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extent a party thereto, of any of the Loan Documents or theconsummation of the transactions contemplated hereby or thereby, other than anysuch consent, approval, authorization or order which has been obtained andremains in full force and effect.

 

4.4           EnforceableObligations.    Each of the LoanDocuments and each other document or instrument to be delivered in connectiontherewith has been duly authorized; each of the Loan Documents and each otherdocument or instrument to be delivered in connection therewith to be executedand delivered on or prior to the Closing Date has been duly executed anddelivered by Holdings and each of its Subsidiaries that are a party thereto;and each of the Loan Documents and each other document or instrument to bedelivered in connection therewith to be executed and delivered on or prior tothe Closing Date is, and each of the Loan Documents to be executed anddelivered after the Closing Date will be, upon such execution and delivery, thelegal, valid and binding obligations of Holdings and each such Subsidiary (tothe extent a party thereto), enforceable in accordance with their respectiveterms, except to the extent that the enforceability thereof may be limited byapplicable bankruptcy, insolvency, reorganization or similar Laws affecting theenforcement of creditors’ rights generally or by general principles of equity(regardless of whether such enforceability is considered in a proceeding inequity or at law).

 

4.5           Properties;Liens.  Each of Holdings and itsSubsidiaries has good, sufficient and legal title to all their respectiveproperties and assets, and all properties held under lease by any of them areheld under valid, subsisting and enforceable leases, and none of Holdings orits Subsidiaries is in default under any lease, except in each case for suchdefects or defaults that, singly or in the aggregate, would not have a MaterialAdverse Effect.  Except for PermittedLiens, all such properties and assets owned or leased are so owned or leasedfree and clear of Liens.

 

4.6           Financial Condition.

 

(a)           TheFinancial Statements of Holdings and its Subsidiaries for the three-year periodended December 28, 2002, copies of which have been delivered to the Lenders,have been prepared from, and are consistent with, the books and records ofHoldings and its Subsidiaries and fairly present the consolidated financialposition of Holdings and its Subsidiaries as at the respective dates thereofand the consolidated results of operations and cash flows of Holdings and itsSubsidiaries for the periods then ended. Except as disclosed on Schedule F, neither Holdings nor any ofits Subsidiaries had at December 28, 2002, any material contingent liabilities,liabilities for Taxes or long-term leases, unusual forward or long-termcommitments or unrealized or unanticipated losses from any unfavorablecommitments which are not reflected or reserved against in the foregoingFinancial Statements or in the notes thereto. No events or developments which have had or could reasonably be expectedto have a Material Adverse Effect have occurred since December 28, 2002 (otherthan failure by Holdings to deliver the report due under Sections 7.01(a)(ii)and 7.01(a)(xiv) of the Existing Financing Agreement and the failure byHoldings to deliver the notices of default relating to the foregoing underSection 7.01(a)(ix) of the Existing Financing Agreement, all of which has beendisclosed to the Lenders).

 

(b)           The*pro forma*balance sheet ofHoldings and its Subsidiaries as of March 31, 2003, a copy of which hasheretofore been furnished to the Lenders, fairly presents the estimatedconsolidated opening balance sheet of Holdings and its Subsidiaries assumingthe Loans had been made as of March 31, 2003, and the financial condition ofHoldings on the Closing Date does not differ in any material respect from theinformation therein set forth.

 

(c)           Upongiving effect to the Loans and the restructuring contemplated by the ExchangeAgreement, the Borrower will be Solvent.

 

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4.7           FullDisclosure.    The financialprojections (including, without limitation, the *pro forma*financial statements included therewith)heretofore furnished to the Lenders by Holdings were prepared by or under thedirection of an officer of Holdings and were prepared in good faith on thebasis of information and assumptions that Holdings believed to be fair,adequate and reasonable as of the date of such information, and whichassumptions are believed to be fair and reasonable as of the date hereof (itbeing understood that projections by their nature involve approximations anduncertainties and that actual future results may differ materially from thoseprojected).  All other factualinformation heretofore or contemporaneously furnished in writing by or onbehalf of Holdings or any of its Subsidiaries to the Collateral Agent or theLenders for purposes of or in connection with this Agreement, when takentogether with Holdings’ filings with the Securities and Exchange Commission,does not contain any untrue statement of a material fact or omit to state anymaterial fact necessary to keep the statements contained herein or therein, inlight of circumstances under which they were made, from being misleading.  No fact is known, no condition exists norhas any event occurred which has not been disclosed herein or in any otherdocument, certificate or statement furnished to the Collateral Agent or theLenders for use in the transactions contemplated hereby (including Holdings’filings with the Securities and Exchange Commission) which, singly or in theaggregate, has had or could reasonably be expected to have a Material AdverseEffect.

 

4.8           No Default.    No event has occurred and is continuingwhich constitutes a Default or an Event of Default.

 

4.9           Compliancewith Contracts, Etc.    None ofHoldings or any of its Subsidiaries is in violation of (i) its certificate ofincorporation, by-laws or other organizational documents, (ii) any materialprovision of any applicable Law, ordinance, administrative or governmental ruleor regulation, or (iii) any order, decree or judgment of any Tribunal havingjurisdiction over any of them; no event of default or event that but for thegiving of notice or the lapse of time, or both, would constitute an event ofdefault exists under any material Contractual Obligation of Holdings or any ofits Subsidiaries.

 

4.10         NoLitigation.  There is noLitigation pending or, to the best knowledge of Holdings, threatened, by,against, or which may (a) affect any benefit plan of Holdings or any of itsSubsidiaries or any fiduciary or administrator thereof, (b) relate to or affectHoldings or any of its Subsidiaries which, singly or in the aggregate, wouldreasonably be expected to have a Material Adverse Effect or (c) relate to oraffect this Agreement or any of the other Loan Documents or the transactionscontemplated hereby or thereby.  Thereare no outstanding injunctions or restraining orders prohibiting consummationof any of the transactions contemplated by the Loan Documents.  There are no unsatisfied judgments againstHoldings or any of its Subsidiaries or any of their respective businesses oractivities in excess of $20,000.

 

4.11         Useof Proceeds; Margin Stock, Etc.  The proceeds of the Loans will be used solely for the purposes specifiedherein.  None of such proceeds will beused for the purpose of purchasing or carrying any Margin Stock within themeaning of the applicable provisions of Regulation T, U or X of the Board, orfor the purpose of reducing or retiring any Indebtedness which was originally incurredto purchase or carry Margin Stock or for any other purpose which might causethis transaction to constitute a “purpose credit” within the meaning of theapplicable provisions of Regulation T, U or X of the Board.  Neither Holdings nor any of its Subsidiarieshas taken or will take any action which might cause any of the Loan Documentsto violate the applicable provisions of Regulation T, U or X, or any otherregulation of the Board.

 

4.12         Taxes.  All Tax returns required to be filed byHoldings and each of its Subsidiaries have been filed and all such returns aretrue, complete, and correct in all material respects.  All Taxes that are due or claimed to be due from Holdings andeach of its Subsidiaries have been paid 

 

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other than those (i) currently payable without penaltyor interest or (ii) being contested in good faith and by appropriateproceedings and for which, in the case of both clauses (i) and (ii), adequatereserves have been established on the books and records of Holdings and itsSubsidiaries in accordance with GAAP. There are no proposed Tax assessments against Holdings or any of itsSubsidiaries.  To the best knowledge andbelief of Holdings, the accruals and reserves on the books and records ofHoldings and its Subsidiaries in respect of any Tax liability for any Taxableperiod not finally determined are adequate to meet any assessments of Tax forany such period.

 

4.13         ERISA.

 

(a)           Holdings,each Subsidiary and each of their respective ERISA Affiliates are in compliancein all material respects with all applicable provisions and requirements of theInternal Revenue Code and ERISA and the regulations and publishedinterpretations thereunder with respect to each Employee Benefit Plan, and haveperformed all their obligations under each Employee Benefit Plan.

 

(b)           NoERISA Events have occurred or are reasonably expected to occur whichindividually or in the aggregate resulted in or might reasonably be expected toresult in a liability of Holdings or any Subsidiary or any of their respectiveERISA Affiliates in excess of $20,000 during the term of this Agreement.

 

(c)           Exceptto the extent required under Section 4980B of the Internal Revenue Code, noEmployee Benefit Plan provides health or welfare benefits (through the purchaseof insurance or otherwise) for any retired or former employees of Holdings orany Subsidiary or any of their respective ERISA Affiliates.

 

(d)           Inaccordance with the most recent actuarial valuations, the Amount of UnfundedBenefit Liabilities individually or in the aggregate for all Pension Plans(excluding for purposes of such computation any Pension Plans which have anegative Amount of Unfunded Benefit Liabilities), does not exceed $20,000.

 

4.14         GovernmentRegulation.  Neither Holdingsnor any of its Subsidiaries is subject to regulation under the Public UtilityHolding Company Act of 1935, the Federal Power Act, the Investment Company Actof 1940, the Interstate Commerce Act (as any of the preceding acts have beenamended) or other Law which regulates the Incurrence by Holdings or any of itsSubsidiaries of Indebtedness, including, but not limited to, Laws relating tocommon carriers or the sale of electricity, gas, steam, water or other publicutility services.

 

4.15         Capital Structure and Subsidiaries.  Neither Holdings nor any of its Subsidiarieshas any interest in any Person other than the Subsidiaries set forth on ScheduleA and other Investments as set forth on Schedule E attached hereto,and Holdings and its Subsidiaries will own, free and clear of all Liens, claimsor restrictions on voting or transfer (other than Permitted Liens, interestsdescribed on Schedule D attached hereto or as otherwise permitted bythis Agreement), 100% of all classes of outstanding Capital Stock of each ofthe entities set forth on such Schedule A, except as specified on ScheduleA.  All of the issued andoutstanding shares of Capital Stock of Holdings and of each of its Subsidiariesare duly authorized, validly issued, fully paid and nonassessable and none ofsuch Capital Stock constitutes Margin Stock. Except as set forth on Schedule A, neither Holdings nor any ofits Subsidiaries has granted or issued, or has agreed to grant or issue, anyputs, calls or other similar rights to any Person obligating Holdings or any ofits Subsidiaries to purchase or redeem any Capital Stock or any options,warrants or similar rights to any Person to acquire any shares of, or otherSecurities convertible into, Holdings’s or any of its Subsidiaries’ CapitalStock other than stock options or phantom equity rights granted to directors,officers and employees in the ordinary course of business.

 

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4.16         Environmental Matters.   Except as set forth in Schedule Cannexed hereto:

 

(a)           theoperations of each of Holdings and its Subsidiaries (including, withoutlimitation, all operations and conditions at or in the Facilities) comply withall Environmental Laws except for any such noncompliance which would not reasonablybe expected to have a Material Adverse Effect;

 

(b)           toHoldings’s knowledge, there are no Environmental Laws, including such Lawswhich have been formally proposed for public comment, which would reasonably beexpected to result in material expenditures by Holdings or any of itsSubsidiaries, and no such Environmental Laws would reasonably be expected tointerfere in any way with current or projected operations of Holdings or any ofits Subsidiaries, in each case except for such of the foregoing which would notreasonably be expected to have a Material Adverse Effect;

 

(c)           eachof Holdings and its Subsidiaries has obtained all permits under EnvironmentalLaws necessary to their respective operations, and all such permits are in fullforce and effect, and each of Holdings and its Subsidiaries is in compliancewith the terms and conditions of such permits except for any such failure toobtain, maintain or comply which would not reasonably be expected to have aMaterial Adverse Effect;

 

(d)           noneof Holdings or its Subsidiaries has received (a) a written Environmental Claimexcept for an Environmental Claim which would not reasonably be expected tohave a Material Adverse Effect or (b) any request for information under Section104 of CERCLA or comparable foreign or state laws regarding any matter whichcould reasonably be expected to result in a Material Adverse Effect;

 

(e)           noneof Holdings or its Subsidiaries is involved in any investigation, response orcorrective action relating to or in connection with any Hazardous Materials atany Facility or at any other location except for such of the foregoing whichwould not reasonably be expected to have a Material Adverse Effect;

 

(f)            noneof Holdings or its Subsidiaries or any Facilities are subject to any judicialor administrative proceeding alleging the violation of or liability under anyEnvironmental Laws which if adversely determined could reasonably be expectedto have a Material Adverse Effect;

 

(g)           noneof Holdings or its Subsidiaries or any of their respective operations or anyFacilities are subject to any outstanding written order, decree or agreementwith any governmental authority or private party relating to (i) any actual orpotential violation of or liability under Environmental Laws or (ii) any EnvironmentalClaims except for such of the foregoing which would not reasonably be expectedto have a Material Adverse Effect;

 

(h)           noneof Holdings or its Subsidiaries has assumed by contract, law or otherwise anyobligation or liability under any Environmental Law except for such of theforegoing which would not reasonably be expected to have a Material AdverseEffect;

 

(i)            noneof Holdings or its Subsidiaries or, to the best of Holdings’s knowledge, anypredecessor of any of Holdings or its Subsidiaries has filed any notice underany Environmental Law indicating past or present treatment, storage or disposalof hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any stateequivalent except for such notices which would not reasonably be expected tohave a Material Adverse Effect;

 

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(j)            noFacilities are listed or proposed for listing on the National Priorities Listunder CERCLA or listed on the Comprehensive Environmental Response,Compensation and Liability Information System List promulgated pursuant toCERCLA, or included on any similar list maintained by any governmentalauthority except in each case for such of the foregoing which would notreasonably be expected to have a Material Adverse Effect;

 

(k)           noHazardous Materials exist on, under or about any Facility in a manner thatwould reasonably be expected to give rise to an Environmental Claim having aMaterial Adverse Effect, and none of Holdings or its Subsidiaries has filed anynotice or report of a Release of any Hazardous Materials that would reasonablybe expected to give rise to an Environmental Claim having a Material AdverseEffect;

 

(l)            noneof Holdings or its Subsidiaries or, to the best of Holdings’s knowledge, any oftheir respective predecessors has disposed of, or arranged for the disposal ortreatment of, any Hazardous Materials in a manner or at any Facility or otherlocation that would reasonably be expected to give rise to an EnvironmentalClaim having a Material Adverse Effect;

 

(m)          nounderground storage tanks, landfills or surface impoundments are on, at orunder any Facility except in each case for such of the foregoing which wouldnot reasonably be expected to have a Material Adverse Effect; and

 

(n)           noLien in favor of any Person relating to or in connection with any EnvironmentalClaim has been filed or has been attached to any Facility or other assets ofHoldings or any of its Subsidiaries except for any such Lien which would notreasonably be expected to have a Material Adverse Effect.

 

Notwithstanding anything in this Section 4.16to the contrary, there are no past or present events, conditions, circumstancesor activities, including, without limitation, any matter disclosed on ScheduleC annexed hereto, which may interfere with compliance by Holdings or itsSubsidiaries with any Environmental Law, or which may give rise to anyliability under any Environmental Law which, individually or in the aggregate,has had or would reasonably be expected to have a Material Adverse Effect.

 

4.17         Insurance.  Holdings and its Subsidiaries carry or areentitled to the benefits of insurance (including self-insurance) in suchamounts and covering such risks as is generally maintained by companies ofestablished repute engaged in the same or similar businesses, and all suchinsurance is (and will be immediately after the Loans) in full force andeffect.

 

4.18         LaborMatters.  No labor disturbanceby the employees of Holdings or any of its Subsidiaries exists or, to the bestknowledge of Holdings, is threatened, and Holdings is not aware of any existingor imminent labor disturbance by the employees of Holdings’s or itsSubsidiaries’ principal suppliers, manufacturers or customers that could,singly or in the aggregate, have a Material Adverse Effect.

 

4.19         Broker’sor Finder’s Fees.  No broker’sor finder’s fees or commissions will be payable by Holdings or any of itsSubsidiaries with respect to any transaction contemplated hereby and no similarfees or commissions will be payable by Holdings or any of its Subsidiaries forany other services rendered to Holdings or any of its Subsidiaries inconnection with the transactions contemplated hereby and thereby.  Holdings represents, warrants, covenants andagrees that the Borrower will indemnify the Lenders against, and hold each ofthem completely harmless from and against, any and all claims, 

 

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demands or liabilities for broker’s or finder’s feesor similar fees or commissions asserted to have been incurred in connectionwith any of the transactions contemplated hereby.

 

4.20         Operationof Business.  From December 28,2002, each of Holdings and its Subsidiaries shall have operated its business inthe ordinary course.

 

4.21         Existing Credit Facilities Matters.  Neither Holdings nor any of its Subsidiarieshas paid any amendment, waiver, consent or other fee or any administrativechanges or increased interest payments to the lenders or agents for any purposeunder the Existing Credit Facilities since December 31, 2002 except, in eachcase, as acceptable to the Lenders and disclosed to the Lenders in writingprior to the Closing Date.

 

4.22         OutstandingPayables.  After giving effectto payments to be made on the Closing Date as permitted hereunder, no amountsremain outstanding and payable by Holdings or the Borrower to any outsidecounsel, Joseph Stroudor other professional advisors (other than accountants).

 

**SECTION4A.****                   REPRESENTATIONSAND WARRANTIES OF THE LENDERS**

 

Each of the Lenders represents and warrants to theBorrower that, on the Closing Date, the following statements are true, correctand complete:

 

4A.1  AccreditedInvestor. Such Lender is an institutional “*accredited investor*” withinthe meaning of Regulation D of the Securities Act and the Notes to be acquiredby it pursuant to this Agreement are being acquired for its own account andwithout a view to, or for resale in connection with, any distribution thereofor any interest therein; providedthat the provisions of this Section shall not prejudice such Lender’s right atall times to sell or otherwise dispose of all or any part of the Notes soacquired pursuant to the terms of this Agreement, a registration under theSecurities Act or an exemption from such registration available under theSecurities Act.

 

4A.2  Knowledgeand Experience.  SuchLender has such knowledge and experience in financial and business matters soas to be capable of evaluating the merits and risks of its investment in theNotes, such Lender is capable of bearing the economic risks of such investmentand such Lender has had the opportunity to conduct its own due diligenceinvestigation in relation to its making of the Loans and the acquisition of theNotes hereunder.

 

4A.3  Source of Funds.  No part of the funds used by such Lender tomake the Loans hereunder constitutes assets of any “*plan*” (as defined in Section4975 of the Internal Revenue Code).

 

**SECTION5.****                            AFFIRMATIVECOVENANTS**

 

Each Loan Party covenants and agrees that, until theLoans and the Notes and all other amounts due under this Agreement have beenindefeasibly paid in full in cash and all Commitments have terminated, it shallfully and timely perform all covenants in this Section 5 required to beperformed by it.

 

5.1           Financial Statements and OtherReports.  Holdings willmaintain, and cause each of its Subsidiaries to maintain, a system ofaccounting established and administered in accordance with sound businesspractices to permit preparation of consolidated financial statements inconformity with GAAP.** **Holdingsshall timely deliver to the Lenders the information listed below in paragraphs(a) through (d) and shall timely give the Lenders the notices listed below inparagraphs (e) through (i):

 

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(a)           AnnualFinancial Statements.  As soon asavailable, but not later than 90 days after each Fiscal Year end (other thanthe Fiscal Year ended December 28, 2002): (i) the annual audited Financial Statements of Holdings and itsSubsidiaries; (ii) a comparison in reasonable detail to the prior year auditedFinancial Statements; (iii) the Auditors’ unqualified opinion in all respects(including as to going concern and scope of audit) and “Management Letter”subject to customary restrictions; (iv) a narrative discussion of theconsolidated financial condition and results of operations and the consolidatedliquidity and capital resources of Holdings and its Subsidiaries for suchFiscal Year, prepared by the chief financial officer of Holdings; and (v) aCompliance Certificate signed by the chief financial officer and anotherOfficer of Holdings and the Borrower. All such Financial Statements shall be prepared from and on a basisconsistent with the books and records of Holdings and its Subsidiaries.  All such Financial Statements shall fairlyrepresent the consolidated position of Holdings and its Subsidiaries as at therespective dates thereof and the consolidated results of operations and cashflows of Holdings and its Subsidiaries for the periods then ended.  In the event that only a draft of theAuditor’s report relating to the financial statements for the fiscal yearending December 28, 2002 was delivered on or prior to the Closing Date, as soonas available, but not later than three (3) days after the Closing Date, thesigned Auditor’s report relating to the financial statements for the fiscalyear ending December 28, 2002, satisfactory in all respects to the Lenders (itbeing agreed that an Auditor’s report delivered in the same (but signed) formas the draft thereof approved by the Lenders on or prior to the Closing Dateshall be deemed satisfactory to the Lenders).

 

(b)           QuarterlyFinancial Statements.  As soon asavailable, but not later than 45 days after the end of each of the first threefiscal quarters:  (i) FinancialStatements of Holdings and its Subsidiaries as of the fiscal quarter thenended, and for the Fiscal Year to date; (ii) a comparison in reasonable detailto the Financial Statements for the corresponding periods of the prior FiscalYear; (iii) the certification of the chief executive officer or chief financialofficer of Holdings and the Borrower that such Financial Statements have beenprepared in accordance with GAAP (subject to year-end audit adjustments and theabsence of footnotes); (iv) a narrative discussion of the consolidatedfinancial condition and results of operations and the consolidated liquidityand capital resources of Holdings and its Subsidiaries for such fiscal quarterand Fiscal Year to date, prepared by the chief financial officer of Holdingsand the Borrower; and (v) a Compliance Certificate signed by the chieffinancial officer and another Officer of Holdings and the Borrower.  All such Financial Statements shall fairlyrepresent the consolidated position of Holdings and its Subsidiaries as at therespective dates thereof and the consolidated results of operations and cashflows of Holdings and its Subsidiaries for the periods then ended (subject toyear-end adjustments and the absence of footnotes).

 

(c)           MonthlyFinancial Statements.  As soon asavailable, but not later than 30 days after the end of each month:  (i) a consolidated and consolidating balancesheet for Holdings and its Subsidiaries as at the end of such month and for theFiscal Year to date and consolidated and consolidating statements of operationsand cash flows for such month and for the Fiscal Year to date; (ii) acomparison to the balance sheet, statement of operations and statement of cashflows for the same year to date period in the prior year; and (iii) a certificationby the chief financial officer of Holdings and the Borrower that such balancesheet, statement of operations and statement of cash flows fairly represent theconsolidated position of Holdings and its Subsidiaries as at the respectivedates thereof and the consolidated results of operations and cash flows ofHoldings and its Subsidiaries for the periods then ended (subject to year-endadjustments).

 

(d)           FurtherAssurances.  When reasonablyrequested by any Lender, any further information regarding the business affairsand financial condition of Holdings or any of its Subsidiaries.

 

(e)           Noticeof Defaults.  Promptly, and in anyevent within three (3) Business Days after an Authorized Officer of Holdings orany of its Subsidiaries becoming aware of the occurrence of a 

 

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Default or Event of Default, a certificate of the chief executiveofficer or chief financial officer of the Borrower specifying the naturethereof and the Borrower’s proposed response thereto, each in reasonabledetail.

 

(f)            Proceedingsor Adverse Changes.  Promptly, andin any event within five (5) Business Days after an Authorized Officer ofHoldings or the Borrower becomes aware of (i) any proceeding being institutedby or against Holdings or any Subsidiary in any federal, state, local orforeign court or before any commission or other regulatory body (federal,state, local or foreign) seeking an injunction or any such proceeding beinginstituted or threatened which, if adversely determined, could have a MaterialAdverse Effect, (ii) any order, judgment or decree in excess of $50,000 beingentered against Holdings or any Subsidiary or any of their respectiveproperties or assets or (iii) any actual or prospective change, development orevent (other than a change in general economic conditions) which has had orcould reasonably be expected to have a Material Adverse Effect, a writtenstatement describing such proceeding, order, judgment, decree, change,development or event and any action being taken with respect thereto byHoldings or any Subsidiary.

 

(g)           ERISANotices.  (i) Promptly, and in anyevent within five (5) Business Days after an Authorized Officer of Holdings,any of its Subsidiaries or any ERISA Affiliate knows that an ERISA Event hasoccurred, a written statement of the chief financial officer of Holdingsdescribing such ERISA Event and any action that is being taken with respectthereto by Holdings, any such Subsidiary or ERISA Affiliate, and any actiontaken or threatened by the Internal Revenue Service, Department of Labor or thePBGC.  Holdings, such Subsidiary and theERISA Affiliate shall be deemed to know all facts known by the administrator ofany Employee Benefit Plan of which it is the plan sponsor; (ii) promptly, andin any event within three (3) Business Days after the filing thereof with theInternal Revenue Service, a copy of each funding waiver request filed withrespect to any Employee Benefit Plan and all communications received byHoldings, any of its Subsidiaries or any ERISA Affiliate with respect to suchrequest; and (iii) promptly, and in any event within three (3) Business Daysafter receipt by Holdings, any of its Subsidiaries or any ERISA Affiliate, ofthe PBGC’s intention to terminate an Employee Benefit Plan or to have a trusteeappointed to administer an Employee Benefit Plan, copies of each such notice.

 

(h)           Environmentaland Health and Safety Notices. Promptly, and in any event within five (5) Business Days after receiptby Holdings or any Subsidiary of any notice, complaint or order alleging actualor prospective violation in any material respect of any Environmental Law orhealth or safety Law or alleging responsibility for costs of a cleanup, which,in any such case, individually or in the aggregate, could reasonably beexpected to result in a Material Adverse Effect, together with a copy of suchnotice, complaint, or order and a written statement describing any action beingtaken with respect thereto by Holdings or any Subsidiary.

 

(i)            MaterialContracts.  Promptly, and in anyevent within five (5) Business Days after any Material Contract is terminatedor amended or any new Material Contract is entered into or issued by or toHoldings or any of its Subsidiaries or any notice is received by Holdings orany of its Subsidiaries relating to any Material Contract, a written statementdescribing such event, with copies of amendments, notices or new contracts, andan explanation of any actions being taken with respect thereto.

 

(j)            AccruedBillings and Expenses.  Promptly,and in any event within ten (10) Business Days after the end of each month, aschedule of estimated accrued billings and expenses of outside counsel andaccountants to Holdings and the Borrower as of the last day of such month,certified by the chief financial officer of the Borrower.

 

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(k)           Paymentsto Outside Counsel and JFL Relating to the Exchange Offer.  Promptly, and in any event no later thanthree (3) Business Days prior to any such payment, written notice of anypayment to outside counsel to Holdings and the Borrower or to JFL for servicesrendered in connection with the transactions contemplated by the Exchange Agreement, togetherwith reasonably detailed back-up documentation with respect thereto.

 

5.2           CorporateExistence, Etc.  Holdings willat all times preserve and keep in full force and effect and cause each of itsSubsidiaries to preserve and keep in full force and effect its corporate (orother) existence and rights and franchises to its business, except where thefailure to so preserve or keep such rights and franchises will not, singly orin the aggregate, have a Material Adverse Effect.

 

5.3           Payment of Taxes and Claims; TaxConsolidation.

 

(a)           Subjectto and consistent with Section 6.3(b), Holdings will, and will causeeach of its Subsidiaries to, pay all Taxes, assessments and other governmentalcharges imposed upon it or any of its properties or assets or in respect of anyof its franchises, business, income or property before any penalty accruesthereon, and pay all claims (including, without limitation, claims for labor,services, materials and supplies) for sums which have become due and payableand which by Law have or may become a Lien upon any of its properties or assetsprior to the time when any material penalty or fine shall be incurred withrespect thereto; provided, however, that no such charge or claimneed be paid if it is a Contested Claim.

 

(b)           Holdingswill not, nor will it permit any of its Subsidiaries to, file or consent to thefiling of any consolidated, combined or unitary income or franchise tax returnwith any Person (other than with Holdings or any of its Subsidiaries so long asthe filing of such tax return is permitted by applicable Law).

 

5.4           Maintenance of Properties;Insurance.  Holdings willmaintain or cause to be maintained in good repair, working order and condition,ordinary wear and tear excepted, all properties used or useful in the businessof Holdings and its Subsidiaries and from time to time promptly will make orcause to be made all necessary repairs, renewals and replacements thereof.  Holdings will maintain or cause to bemaintained, with financially sound and reputable insurers or with selfinsurance programs, in each case to the extent consistent with prudent businesspractices and customary in its industries, insurance with respect to itsproperties and business and the properties and businesses of its Subsidiariesagainst loss or damage of the kinds (including, in any event, businessinterruption insurance) and in the amounts customarily carried or maintainedunder similar circumstances by corporations of established reputation engagedin similar businesses and owning similar properties in the same generalrespective areas in which Holdings and its Subsidiaries operate.  Each such policy of insurance shall (i) namethe Collateral Agent as an additional insured thereunder as its interests mayappear and (ii) in the case of each casualty insurance policy, contain a losspayable clause or endorsement, satisfactory in form and substance to theLenders, that names the Collateral Agent as the loss payee thereunder andprovides that the insurer will endeavor to give at least thirty (30) days’prior written notice to the Collateral Agent of any cancellation or materialmodification of such policy.

 

5.5           Inspection.  Holdings shall permit any authorizedrepresentatives designated by the Lenders to visit and inspect any of theproperties of Holdings or its Subsidiaries, including, without limitation, itsand their financial and accounting records, and to make copies and takeextracts therefrom, and to discuss its and their affairs, finances and accountswith its and their officers and independent public accountants, all uponreasonable notice and at such reasonable times during normal business hours andas often as may be reasonably requested.

 

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5.6           Equal Security for Loans and Notes.   If Holdings or any of its Subsidiariesshall create, assume or suffer to exist any Lien upon any of their respectiveproperty or assets, whether now owned or hereafter acquired, other than Lienspermitted by the provisions of Section 6.2, Holdings shall, concurrentlywith the effectiveness of such Lien, make or cause to be made effectiveprovision whereby the Obligations under this Agreement will be secured by suchLien equally and ratably with any and all other Indebtedness thereby secured aslong as any such Indebtedness shall be secured; provided, however,that this covenant shall not be construed as or deemed to be a consent by theLenders to any violation of the provisions of Section 6.2.

 

5.7           Compliancewith Laws, Etc.   Holdings shalland shall cause each of its Subsidiaries to comply in all material respectswith the requirements of all applicable Laws of any Tribunal.

 

5.8           Maintenance of Accurate Records, Etc.  Holdings shall keep, and will cause each ofits Subsidiaries to keep, true books and records and accounts in which full andcorrect entries will be made of all its respective business transactions, andwill reflect, and cause each of its Subsidiaries to reflect, in its respectivefinancial statements adequate accruals and appropriations to reserves all inaccordance with GAAP and consistent with prior business practices.

 

5.9           Permits.  Holdings shall, and shall cause each of itsSubsidiaries to, at all times promptly obtain as required, preserve, maintain,protect, keep in full force and effect and comply with all terms, conditionsand requirements of its respective permits and other licenses, authorizations,approvals and consents necessary or material in the conduct of its operationsand all rights and interests therein or thereunder, except where the failure doso would not have a Material Adverse Effect.

 

5.10         Take-OutFacility.   Holdings shall, andshall cause each of its Subsidiaries to, take all actions necessary or deemedadvisable by the Lenders to cause the Take-Out Facility to be entered intopromptly after the Closing Date for the purpose of refinancing the Loans.

 

5.11         ERISACompliance.  Each of Holdingsand its Subsidiaries will (a) make prompt payment of all contributions which itis obligated to make under all Pension Plans and which are required to meet theminimum funding standard set forth in ERISA with respect to each of the PensionPlans, (b) within 30 days after the filing thereof, furnish to the Lenders eachSchedule B to the annual return/report (Form 5500 Series), required to be filedwith the Department of Labor and/or the Internal Revenue Service pursuant toERISA, with respect to each of the Pension Plans that is not a MultiemployerPlan for each Plan year, and (c) notify the Lenders promptly upon becomingaware of any fact, including but not limited to, any Reportable Event arisingin connection with any of the Pension Plans that is not a Multiemployer Plan,which could be reasonably expected to constitute grounds for terminationthereof by the PBGC or for the appointment by the appropriate United StatesDistrict Court of a trustee to administer such Pension Plan, together with astatement as to the action, if any, proposed to be taken with respect thereto.

 

5.12         AdditionalSubsidiaries.   Holdings willcause any Person that becomes a Subsidiary of Holdings (whether by creation, acquisitionor otherwise), to (a) promptly (and, in any event, no later than five (5) Business Daysafter such Person becomes a Subsidiary) execute and deliver to theLenders a Joinder to Guarantee, in the form of Exhibit VI annexedhereto, and otherwise in form and substance satisfactory to the Lenderspursuant to which such Subsidiary shall become a Guarantor of the Loans andthis Agreement in accordance with Section 9 with the same effect and tothe same extent as if such Person had been named herein as a Guarantor, (b)promptly (and, in anyevent, no later than five (5) Business Days after such Person becomes aSubsidiary) become a “Grantor” under the Pledge and Security Agreementby executing and delivering to the Lenders and the Collateral Agent a joinderthereto, 

 

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in all respects satisfactory to the Lenders, and (c)promptly (and,in any event, no later than five (5) Business Days after such Person becomes aSubsidiary) take all such actions and execute and deliver, or cause tobe executed and delivered, all such documents, instruments, agreements,opinions and certificates as the Lenders shall require (including, withoutlimitation, documents, instruments, agreements and certificates comparable to thosedescribed in Sections 3.1(a)(i), (ii), (iii), (iv),(x), (xi) and (xii). In the event that any Loan Party acquires Capital Stock of any Personafter the Closing Date, such Loan Party will promptly (and, in any event, no later than five (5) Business Daysafter such acquisition) notify the Collateral Agent and the Lenders ofthat fact and execute and deliver to the Collateral Agent a counterpart of thePledge and Security Agreement, in all respects satisfactory to the Lenders, andtake all such further actions and execute all such further documents andinstruments (including, without limitation, actions, documents and instrumentscomparable to those described in Section 3.1(a)(x)) as may be necessaryor, in the opinion of the Lenders, desirable to create in favor of theCollateral Agent, for the benefit of the Lenders, a valid and perfected firstpriority Lien on 100% of such Capital Stock.

 

5.13         ControllingGroup.               Each of theLenders party hereto on the Closing Date and any of their Affiliates that is anassignee Lender (collectively, the “Controlling Group”) shall beentitled:

 

(a)           todiscuss the business operations, properties, financial and other conditions,and plans and prospects of Holdings with any director, senior executive officerand/or other authorized officer of Holdings designated by the Board ofDirectors of Holdings and, upon reasonable notice to Holdings, with anydirector, senior executive officer and/or other authorized officer of anySubsidiary of Holdings;

 

(b)           tosubmit suggestions from time to time to the management of Holdings with therequirement that one or more senior executive officers of Holdings shalldiscuss such suggestions with the applicable member of the Controlling Groupwithin a reasonable period of time after such submission; and

 

(c)           tomeet with one or more senior executive officers of Holdings, at reasonabletimes and on reasonable notice, in order to discuss any suggestions made underclause (b) above or for other purposes.

 

The rights granted to each member of the ControllingGroup hereunder are not in substitution for, and shall not be deemed to be inlimitation of, any rights otherwise available to it as a Lender.  In addition, Holdings shall use itsreasonable efforts to require any successor (whether direct or indirect, bypurchase, merger, consolidation or otherwise) to all or substantially all ofthe business and/or assets of Holdings to expressly assume and agree to performthe covenants contained in this Section in the same manner and to the sameextent that Holdings would have been required to perform if no succession hadtaken place

 

**SECTION6.****                            NEGATIVECOVENANTS**

 

Each Loan Party covenants and agrees that, until theLoans and the Notes and all other amounts due under this Agreement have beenindefeasibly paid in full in cash and all Commitments have terminated, it shallfully and timely perform all covenants in this Section 6.

 

6.1           Indebtedness.  Holdings shall not, nor shall it cause orpermit any of its Subsidiaries, directly or indirectly, to Incur any Indebtedness,except for the following (“Permitted Indebtedness”):

 

(a)           Obligationsunder the Loan Documents;

 

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(b)           Indebtednessof Holdings and its Subsidiaries outstanding on the Closing Date and describedon Schedule B, reduced by the amount of any scheduled amortizationpayments or mandatory prepayments when actually paid or permanent reductionsthereon;

 

(c)           Indebtednessarising from the honoring by a bank or other financial institution of a check,draft or similar instrument inadvertently drawn against insufficient funds inthe ordinary course of business so long as such Indebtedness is extinguishedwithin two (2) Business Days of the incurrence thereof;

 

(d)           Indebtednessunder Currency Agreements; provided that in the case of CurrencyAgreements which relate to Indebtedness, such Currency Agreements do notincrease the Indebtedness of Holdings and its Subsidiaries outstanding otherthan as a result of fluctuations in foreign currency exchange rates or by reasonof fees, indemnities and compensation payable thereunder;

 

(e)           Indebtednessof Holdings to a Subsidiary and Indebtedness of a Subsidiary to Holdings or toanother Subsidiary for so long as such Indebtedness is held by Holdings or aSubsidiary, as applicable, in each case made in the ordinary course of businessand not exceeding in the aggregate at any one time outstanding $25,000; providedthat (i) any such Indebtedness is unsecured and subordinated in right ofpayment, pursuant to a written agreement satisfactory to the Required Lenders,to the Obligations under the Loan Documents; (ii) if as of any date any Personother than Holdings or a Subsidiary owns or holds any such Indebtedness or anyPerson holds a Lien in respect of such Indebtedness, such date shall be deemedthe Incurrence of Indebtedness not constituting Permitted Indebtedness; and(iii) no such intercompany Indebtedness shall be evidenced by any note or otherinstrument unless such note is in form and substance satisfactory to the Lendersand the payeethereunder shall immediately endorse and deliver the same to Collateral Agent;

 

(f)            Indebtednessof Holdings or any of its Subsidiaries in order to finance insurance premiumsand Indebtedness represented by letters of credit for the account of Holdingsor such Subsidiary, as the case may be, in order to provide security forworkers’ compensation claims, payment obligations in connection withself-insurance or similar requirements, all in the ordinary course of business;

 

(g)           obligationsin respect of performance and surety bonds and completion guarantees providedby Holdings or any Subsidiary in the ordinary course of business in accordancewith customary industry practice, in amounts and for purposes customary in theBorrower’s industry;

 

(h)           Indebtednesswith respect to Capitalized Lease Obligations entered into after the ClosingDate in an aggregate principal amount not to exceed at any time outstanding$100,000;

 

(i)            purchasemoney Indebtedness in an aggregate principal amount not to exceed at any timeoutstanding $100,000; provided, any such Indebtedness (i) shall besecured only by the asset (and any accession, addition or improvement thereto,any replacement thereof and the proceeds thereof) acquired in connection withthe incurrence of such Indebtedness, and (ii) shall not exceed 100.0% of theaggregate consideration paid with respect to such asset;

 

(j)            Indebtednessof Holdings and its Subsidiaries incurred in connection with the ExchangeOffer, as contemplated by the Exchange Agreement; and

 

(k)           guarantiesby Holdings and its Subsidiaries of each other’s Indebtedness to the extentthat such Indebtedness otherwise constitutes “Permitted Indebtedness”.

 

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6.2           Liens.   Holdings will not, and will not cause orpermit any of its Subsidiaries to, directly or indirectly, create, incur,assume or permit or suffer to exist any Liens of any kind against or upon anyproperty or assets of Holdings or any of its Subsidiaries whether owned on theClosing Date or acquired after the Closing Date, or any proceeds therefrom, orassign or otherwise convey any right to receive income or profits therefrom,except for the following (“Permitted Liens”):

 

(a)                           Liensexisting as of the Closing Date and described on Schedule D to theextent and in the manner such Liens are in effect on the Closing Date anddescribed on Schedule D;

 

(b)                           Liensin favor of the Collateral Agent granted pursuant to any Loan Document;

 

(c)                           Liensfor taxes, assessments or governmental charges or claims not delinquent;

 

(d)                           statutoryLiens of landlords or of mortgagees of landlords and Liens of carriers,warehousemen, mechanics, suppliers, materialmen, repairmen and other Liensimposed by Law incurred in the ordinary course of business for sums not yetdelinquent or constituting Contested Claims;

 

(e)                           Liensincurred or deposits made in the ordinary course of business in connection withworkers’ compensation, unemployment insurance and other types of socialsecurity, including any Lien securing letters of credit issued in the ordinarycourse of business consistent with past practice in connection therewith, or tosecure the performance of tenders, statutory obligations, surety and appealbonds, bids, leases, government contracts, performance and return-of-moneybonds and other similar obligations (exclusive of obligations for the paymentof borrowed money);

 

(f)                            judgmentLiens not giving rise to an Event of Default so long as and in respect of whichHoldings or any of its Subsidiaries shall in good faith be prosecuting anappeal or proceedings for review in respect of which there shall be secured asubsisting stay of execution pending such appeal or proceedings;

 

(g)                           easements,rights-of-way, zoning restrictions and other similar charges or encumbrances inrespect of real property not interfering in any material respect with theordinary conduct of the business of Holdings or any of its Subsidiaries;

 

(h)                           Liensencumbering deposits made to secure obligations arising from statutory,regulatory, contractual, or warranty requirements of Holdings or any of itsSubsidiaries, including rights of offset and set-off;

 

(i)                            leasesor subleases granted to others that do not materially interfere with theordinary course of business of Holdings and its Subsidiaries;

 

(j)                            Lienssecuring Indebtedness permitted pursuant to Section 6.1(h) or 6.1(i);provided, any such Lien shall encumber only the asset acquired with theproceeds of such Indebtedness and any accessions, additions, parts,replacements, fixtures, improvements and attachments thereto, and the proceedsthereof; and

 

(k)                           precautionaryUCC financing statement filings regarding operating leases or with respect toany inventory held on consignment in the ordinary course of business.

 

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6.3           Restricted Payments.

 

(a)           Holdingswill not and will not cause or permit any of its Subsidiaries to, directly orindirectly, (i) declare or pay any dividend or make any distribution (otherthan dividends or distributions payable in Qualified Capital Stock of Holdings)on or in respect of shares of Holdings’s or its Subsidiary’s Capital Stock toholders of such Capital Stock, (ii) purchase, redeem or otherwise acquire orretire for value any Capital Stock of Holdings or any of its Subsidiaries orany warrants, rights or options to purchase or acquire shares of any class ofsuch Capital Stock, (iii) make any principal payment on, purchase, defease,redeem, prepay or otherwise acquire or retire for value, prior to any scheduledfinal maturity, scheduled repayment or scheduled sinking fund payment, anySubordinated Indebtedness, (iv) make (or give any notice in respect thereof)any mandatory, voluntary or optional payment or prepayment on (whether forprincipal, interest or otherwise) or redemption or acquisition for value of, orany prepayment or redemption as a result of any asset sale, change of controlor similar event of, or purchase, defease or otherwise acquire or retire forvalue, any Indebtedness outstanding in respect of Holdings’ 97/8% Senior Notes due 2008(other than prepayments and exchanges thereof pursuant to the Exchange Offer,as contemplated by the Exchange Agreement), or (v) make any Investment (otherthan Permitted Investments) (each of the foregoing actions set forth in clauses(i), (ii), (iii), (iv) and (v) being referred to as a “Restricted Payment”).

 

(b)           Notwithstanding anything herein to thecontrary, the Borrower may make distributions or payments on behalf of Holdingsin an amount sufficient to enable Holdings to pay foreign, Federal, state orlocal tax liabilities (“Tax Payments”), not to exceed the amount of anytax liabilities that would be otherwise payable by the Borrower and itsSubsidiaries to the appropriate taxing authorities if they filed separate taxreturns to the extent that Holdings has an obligation to pay such taxliabilities relating to the operations, assets or capital of the Borrower orits Subsidiaries; provided, however, that (i) notwithstanding theforegoing, in the case of determining the amount of a Tax Payment that ispermitted to be paid by the Borrower and any of its Subsidiaries in respect oftheir income tax liability, such payment shall not exceed an amount determinedon the basis of assuming that the Borrower is the parent company of anaffiliated, combined, unitary or similar group (the “Borrower AffiliatedGroup”) filing a consolidated Federal or consolidated, combined or similarstate income tax return and that Holdings and each such Subsidiary is a memberof the Borrower Affiliated Group, and (ii) any Tax Payments shall either beused by Holdings to pay such tax liabilities within 10 days of Holdings’receipt of such payment or refunded to the Borrower; providedfurther,however, so long as a Default or Event of Default shall have occurredand be continuing or would occur as a consequence of such Tax Payment, theBorrower shall not make any Tax Payment otherwise permitted pursuant to thisparagraph without the prior written consent of the Required Lenders.  Notwithstanding any other document to thecontrary, for the avoidance of doubt and for so long as any Obligations areoutstanding, the Borrower shall be entitled to utilize any and all netoperating losses, tax credits or other tax attributes of Holdings or any othermember of the Borrower Affiliated Group without payment or compensation toHoldings or such other member for all purposes including for purposes ofdetermining the amount of the Tax Payment otherwise required to be paid by theBorrower pursuant to this paragraph.

 

6.4           Restriction on Fundamental Changes.  Except as otherwise permitted in thisAgreement, Holdings will not and will not cause or permit any of itsSubsidiaries to, directly or indirectly, in a single transaction or series ofrelated transactions, consolidate or merge with or into any Person, or sell,assign, transfer, lease, convey or otherwise dispose of all or substantiallyall of its assets, whether as an entirety or substantially as an entirety toany Person.

 

For purposes of the foregoing, the transfer (by lease,assignment, sale, merger, consolidation or otherwise, in a single transactionor series of transactions) of all or substantially all of the properties orassets of one or more Subsidiaries of Holdings, the Capital Stock of which constitutesall or substantially all of the properties and assets of Holdings or suchSubsidiary, as the case may be, shall be deemed to be 

 

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the transfer of all or substantially all of the properties and assetsof Holdings or such Subsidiary, as the case may be.

 

6.5           Limitation on Dividend and OtherPayment Restrictions Affecting Subsidiaries.    Holdings will not, andwill not cause or permit any of its Subsidiaries to, directly or indirectly,create or otherwise cause or permit to exist or become effective anyencumbrance or restriction on the ability of any Subsidiary of Holdings to (a)pay dividends or make any other distributions on or in respect of its CapitalStock owned by Holdings or any of its Subsidiaries; (b) make loans or advancesor to pay any Indebtedness or other obligation owed to Holdings or any otherSubsidiary of Holdings; or (c) transfer any of its property or assets toHoldings or any other Subsidiary, except, with respect to (a), (b) and (c)above, for such encumbrances or restrictions existing under or by reason of:(i) applicable Law; (ii) the Loan Documents; (iii) customary non-assignmentprovisions of any contract or any lease governing a leasehold interest of anySubsidiary; (iv) any agreements in effect on the Closing Date and described on ScheduleG attached hereto; (v) in the case of clause (c) above, (A) any agreementsetting forth customary restrictions on the subletting, assignment or transferof any property or asset that is leased or licensed or (B) any agreement,instrument or other document evidencing a Permitted Lien that restricts, oncustomary terms, the transfer of any property or assets subject thereto; and(vi) pursuant to the Exchange Offer, as contemplated by the Exchange Agreement.

 

6.6           Transactions with Shareholders andAffiliates; Payments.          Holdings will not, and will not permitany of its Subsidiaries to, directly or indirectly, enter into or permit toexist any transaction or series of related transactions (including, withoutlimitation, the purchase, sale, lease or exchange of any property or therendering of any service) with, or for the benefit of, any of its Affiliates,except for (i) Permitted Investments, (ii) distributions permitted under Section6.3(b), (iii) such transactions with Affiliates in existence on the ClosingDate as disclosed on Schedule H attached hereto.  Without limiting the foregoing and except aspermitted on the Closing Date or in this sentence, Holdings will not, and willnot permit any of its Subsidiaries to, directly or indirectly, make anypayments to Joseph Stroud or to attorneys, JFL or any of JFL’s Affiliates without the prior written consent ofthe Required Lenders (which consent shall not be unreasonably withheld); provided that, so long as theBorrower has provided the Lenders with prior written notice and back-updocumentation as required in Section 5.1(k), Holdings and theBorrower shall be permitted to make reasonable payments to outside counsel toHoldings and the Borrower and to JFL for services rendered in connection withthe transactions contemplated by theExchange Agreement.

 

6.7           BusinessActivities.  Holdings shall not,nor shall Holdings cause or permit any of its Subsidiaries to, directly orindirectly, materially alter the nature of the consolidated business ofHoldings and its Subsidiaries from that in existence as of the Closing Date orsimilar or related businesses.

 

6.8           Amendments to Charter Documents.  Holdings shall not, nor shall it cause orpermit any of its Subsidiaries to, amend its certificate of incorporation orby-laws or any other organizational document in any respect which could beadverse to the interests of the Lenders.

 

6.9           Asset Sales.          Holdingsshall not, nor shall it cause or permit any of its Subsidiaries to, directly orindirectly, consummate any Asset Sale unless (a) Holdings or such applicableSubsidiary has obtained the prior written consent of the Required Lendersthereto and (b) all of the Net Cash Proceeds in respect thereof are applied byHoldings or such Subsidiary in accordance with Section 2.4(b)(i).

 

6.10         MaximumCapital Expenditures.         Holdings shall not, and shall not permitits Subsidiaries to, make or incur any Capital Expenditure that would cause theaggregate amount of all 

 

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Capital Expenditures made by the Loan Parties andtheir Subsidiaries to exceed $50,000 in any calendar month.

 

6.11         LeaseObligations.               Holdings shall not, and shall notpermit its Subsidiaries to, create, incur or suffer to exist, any obligationsas lessee for the payment of rent for any real or personal property underleases or agreements to lease other than (i) Capitalized Lease Obligationspermitted under Section 6.01 and (ii) except as set forth on ScheduleI attached hereto, Operating Lease Obligations which would not cause theaggregate amount of all Operating Lease Obligations owing by all Loan Partiesand their Subsidiaries in any calendar month to exceed $5,000.

 

6.12         Amendmentsto Indebtedness.         Holdings shall not, and shall not permitits Subsidiaries to, amend or otherwise change the terms of any Indebtedness,or make any payment consistent with an amendment thereof or change thereto, ifthe effect of such amendment or change is to increase the interest rate on suchIndebtedness, change (to earlier dates) any dates upon which payments ofprincipal or interest are due thereon, change any event of default or conditionto an event of default with respect thereto (other than to eliminate any suchevent of default or increase any grace period related thereto), change theredemption, prepayment or defeasance provisions thereof, change thesubordination provisions of such Indebtedness (or of any guaranty thereof), orif the effect of such amendment or change, together with all other amendmentsor changes made, is to increase materially the obligations of the obligorthereunder or to confer any additional rights on the holders of suchIndebtedness (or a trustee or other representative on their behalf) which wouldbe adverse to any Loan Party or the Lenders.

 

**SECTION7.****                            EVENTSOF DEFAULT**

 

If any of the following conditions or events (any suchcondition or event, an “Event of Default”) shall occur and becontinuing:

 

7.1           Failure To Make Payments When Due.   Failure to pay any installment of principalof the Loans when due, whether at stated maturity, by acceleration, by noticeof prepayment or otherwise; or failure to pay any fee or any interest on theLoans or any other amount due under this Agreement within one (1) day or moreafter the date due; or

 

7.2           Defaultin Other Agreements.   Failureof Holdings or any of its Subsidiaries to pay any principal or other amountsdue on one or more issues of Indebtedness of Holdings or of any of itsSubsidiaries (other than Indebtedness referred to in Section 7.1) havingan outstanding principal amount of $100,000 or greater or breach or default byHoldings or any of its Subsidiaries with respect to any other term of any oneor more issues of Indebtedness of Holdings or of any of its Subsidiaries havingan outstanding principal amount of $100,000 or greater or any agreement orinstrument evidencing or securing such Indebtedness and such default or breachresults or, with notice or the passage of time, would result in the accelerationof that Indebtedness prior to its stated maturity (or permit the holders ofsuch Indebtedness to accelerate such maturity); or

 

7.3           Breachof Certain Covenants.   Failureof Holdings, the Borrower or any of their respective Subsidiaries to perform orcomply with any covenant, term or condition contained in Section 2.4(b),Section 5.1(e), Section 5.2, Section 5.4 or Section 6;or

 

7.4           Breachof Warranty.   Anyrepresentation, warranty or certification made or delivered by the Borrower orany Guarantor in any Loan Document or in any statement or certificate at anytime given by the Borrower or any Guarantor in writing pursuant hereto orthereto or in connection herewith or therewith shall be false or incorrect inany respect in all respects (with respect to representations, warranties andcertifications qualified by materiality or Material Adverse Effect) and in 

 

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all material respects (with respect to all otherrepresentations, warranties and certifications) on the date as of which made ordeemed made; or

 

7.5           Other Defaults Under This Agreementor Any Other Loan Document.  Any Loan Party shall default in the performance of or compliance withany covenant, term or condition contained in this Agreement or any other LoanDocument (other than those covered by Sections 7.1, 7.3, 7.4,or 7.10) and such default shall not have been remedied or waived inaccordance with this Agreement within ten (10) days after the earlier of (i) anofficer of such Loan Party becoming aware of such default or (ii) receipt bythe Borrower of notice from any Lender of such default; or

 

7.6           Involuntary Bankruptcy; Appointmentof Custodian, Etc.  A court ofcompetent jurisdiction enters a Bankruptcy Order, or an involuntary petitionshall be filed, under any Bankruptcy Law that:

 

(a)           isfor relief against Holdings or any Subsidiary in an involuntary case orproceeding, or

 

(b)           appointsa Custodian of Holdings or any Subsidiary for all or substantially all of itsproperties, or

 

(c)           ordersthe liquidation of Holdings or any Subsidiary;

 

and in each case the order or decree remains unstayed and in effect forsixty (60) days; or

 

7.7           Voluntary Bankruptcy; Appointmentof Custodian, Etc.  Holdings orany Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

 

(a)           commencesa voluntary case or proceeding, or

 

(b)           consentsto the entry of a Bankruptcy Order for relief against it in an involuntary caseor proceeding, or

 

(c)           consentsto the appointment of a Custodian of it or for all or substantially all of itsproperty, or

 

(d)           makesa general assignment for the benefit of its creditors or files a proposal orscheme of arrangement involving the rescheduling or composition of itsindebtedness, or

 

(e)           consentsto the filing of a petition in bankruptcy against it, or

 

(f)            shallgenerally not pay its debts when such debts become due or shall admit inwriting its inability to pay its debts generally; or

 

7.8           Judgmentsand Attachments.  Any moneyjudgment, writ of attachment or warrant of attachment, or similar processinvolving in any individual case or in the aggregate at any time an amount inexcess of $100,000 (to the extent not covered by third-party insurance as towhich the insurance company has acknowledged coverage) shall be entered orfiled against Holdings or any of its Subsidiaries or any of their respectiveproperties or assets and shall remain undischarged, unvacated, unbonded orunstayed for a period of thirty (30) days or in any event later than five daysprior to the date of any proposed sale thereunder; or

 

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7.9           Dissolution.  Any order, judgment or decree shall beentered against Holdings or any Subsidiary decreeing the dissolution orsplit-up of Holdings or that Subsidiary and such order shall remainundischarged or unstayed for a period in excess of 30 days; or 

 

7.10         Guarantee.  (a) Any Guarantee or any provision thereofshall cease to be in full force or effect (other than in accordance with itsexpress terms), or (b) any Guarantor or any Person acting by or on behalf ofsuch Guarantor shall deny or disaffirm such Guarantor’s obligations under itsGuarantee, or (c) any Guarantor shall default in the due performance orobservance of any term, covenant or agreement on its part to be performed orobserved, after giving effect to any applicable grace periods, pursuant to itsGuarantee; or

 

7.11         MaterialContracts.  Holdings or any ofits Subsidiaries shall breach or default under any Material Contract and suchbreach or default, if capable of remedy, is not remedied within any applicablegrace period; or

 

7.12         Liens.  Any of the Loan Documents to which theBorrower, JFL or any Guarantor is a party shall for any reason fail to resultin the Collateral Agent, for the benefit of the Lenders, having a valid, firstpriority perfected Lien on the collateral pledged under such Loan Document; or

 

7.13         ERISA Event.  An ERISA Event shall have occurred that,when taken together with all other ERISA Events that have occurred, has had orcould reasonably be expected to result in a Material Adverse Effect; or

 

7.14         Change of Control.   A Change of Control shall occur;

 

THEN (i) upon the occurrence of any Event of Default described in theforegoing Sections 7.6 or 7.7, all of the unpaid principal amountof and accrued interest on the Loans and an amount as liquidated damages forthe loss of the bargain evidenced hereby (and not as a penalty) equal to theamount that would be payable as a Termination Fee (without duplication of Section2.4(b)) by the Borrower determined as of the date of the occurrence of anyEvent of Default, and all other outstanding Obligations shall automaticallybecome immediately due and payable, without presentment, demand, protest orother requirements of any kind, all of which are hereby expressly waived by theBorrower, and the Commitments of the Lenders hereunder shall thereuponterminate, and (ii) upon the occurrence of any other Event of Default, theRequired Lenders, by written notice to the Borrower, may declare all of theunpaid principal amount of and accrued interest on the Loans and an amount asliquidated damages for the loss of the bargain evidenced hereby (and not as apenalty) equal to the amount that would be payable as a Termination Fee by theBorrower determined as of the date of the occurrence of any Event of Default,and all other outstanding Obligations to be, and the same shall forthwithbecome, due and payable, and the Commitments of the Lenders hereunder shallthereupon terminate, and the Required Lenders may cause the Collateral Agent toenforce any and all Liens and security interests created pursuant to the LoanDocuments.

 

The provisions of clause (ii) above are subject to the condition thatif the principal of and accrued interest on all or any outstanding Loans andthe Termination Fee and all other outstanding Obligations have been declaredimmediately due and payable by reason of the occurrence of any Event of Defaultother than an Event of Default described in Sections 7.6 or 7.7,the Required Lenders may, by written instrument filed with the Borrower,rescind and annul such declaration and the consequences thereof; provided**that at the time suchdeclaration is annulled and rescinded:

 

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(A)          nojudgment or decree has been entered for the payment of any monies due pursuantto the Loans or this Agreement;

 

(B)           allarrears of interest upon all the Loans and all other sums payable under theLoans and under this Agreement (except any principal, interest or TerminationFee on the Loans which has become due and payable solely by reason of suchdeclaration under clause (ii) above) shall have been duly paid; and

 

(C)           eachand every other Default and Event of Default shall have been made good, curedor waived pursuant to the terms of this Agreement;

 

and provided, further, that no suchrescission and annulment shall extend to or affect any subsequent Default orEvent of Default or impair any right consequent thereto.

 

**SECTION8.****                            THECOLLATERAL AGENT**

 

8.1           Appointment.  Each Lender hereby irrevocably designatesand appoints U.S. Bank National Association as Collateral Agent of such Lenderto act as specified herein and in the other Loan Documents, and each Lenderhereby irrevocably authorizes U.S. Bank National Association as the CollateralAgent to take such action on its behalf under the provisions of this Agreementand the other Loan Documents and to exercise such powers and perform suchduties as are expressly delegated to the Collateral Agent by the terms of thisAgreement and the other Loan Documents, together with such other powers as arereasonably incidental thereto.  TheCollateral Agent is authorized to hold all Collateral as Collateral Agent, forthe benefit of itself and the Lenders, to enter into all applicable LoanDocuments, for and on behalf of itself and the Lenders, and to take all actionsthat it is directly or indirectly authorized or permitted to take under theLoan Documents (subject to the ability of the Required Lenders to direct the CollateralAgent’s actions) with respect to the Collateral, the perfection of Liens in theCollateral, the exercise of remedies with respect to the Collateral andotherwise.  The Collateral Agent agreesto act as such upon the express conditions contained in this Section 8.  Notwithstanding any provision to thecontrary elsewhere in this Agreement or in any other Loan Document, theCollateral Agent shall have no duties or responsibilities, except thoseexpressly set forth herein or in the other Loan Documents, or any fiduciaryrelationship with any Lender, and no implied covenants, functions,responsibilities, duties, obligations or liabilities shall be read into thisAgreement or otherwise exist against the Collateral Agent.  The provisions of this Section 8 aresolely for the benefit of the Collateral Agent and the Lenders, and none ofHoldings, the Borrower nor any of their respective Subsidiaries shall have anyrights as a third party beneficiary of any of the provisions hereof.  In performing its functions and duties underthis Agreement, the Collateral Agent shall act solely as agent of the Lendersand the Collateral Agent neither assumes nor shall be deemed to have assumedany obligation or relationship of agent or trust with or for Holdings, theBorrower or any of their respective Subsidiaries.

 

8.2           Delegationof Duties.  The Collateral Agentmay execute any of its duties under this Agreement or any other Loan Documentby or through agents or attorneys-in-fact and shall be entitled to advice ofcounsel concerning all matters pertaining to such duties (including counsel tothe Borrower).  The Collateral Agentshall not be responsible for the negligence or misconduct of any agents orattorneys-in-fact selected by it with reasonable care except to the extentotherwise required by Section 8.3.

 

8.3           ExculpatoryProvisions.  Neither theCollateral Agent nor any of its officers, directors, employees, agents,attorneys-in-fact or affiliates shall be (a) liable for any action lawfullytaken or omitted to be taken by it or such Person under or in connection withthis Agreement or the other Loan Documents (except for its or such Person’s owngross negligence or willful misconduct as finally and 

 

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unappealably determined by a court of competentjurisdiction) or (b) responsible in any manner to any of the Lenders for anyrecitals, statements, representations or warranties made by the Borrower or anyGuarantor or any of their respective officers contained in this Agreement, anyother Loan Documents, or in any certificate, report, statement or otherdocument referred to or provided for in, or received by the Collateral Agentunder or in connection with, this Agreement or any other Loan Document or forany failure of the Borrower or any Guarantor or any of their respectiveSubsidiaries or any of their respective officers to perform its obligationshereunder or thereunder.  The CollateralAgent shall be under no obligation to any Lender to ascertain or to inquire asto the observance or performance of any of the agreements contained in, orconditions of, this Agreement or the other Loan Documents, or to inspect theproperties, books or records of the Borrower or any Guarantor or any of theirrespective Subsidiaries.  The CollateralAgent shall not be responsible to any Lender for the effectiveness,genuineness, validity, enforceability, collectability or sufficiency of thisAgreement or any other Loan Document or for any representations, warranties,recitals or statements made herein or therein or made in any written or oralstatement or in any financial or other statements, instruments, reports,certificates or any other documents in connection herewith or therewithfurnished or made by the Collateral Agent to the Lenders or by or on behalf ofthe Borrower or any Guarantor or any of their respective Subsidiaries to theCollateral Agent or any Lender or be required to ascertain or inquire as to theperformance or observance of any of the terms, conditions, provisions, covenantsor agreements contained herein or therein or as to the use of the proceeds ofthe Loans or of the existence or possible existence of any Default or Event ofDefault.

 

8.4           Reliance by the Collateral Agent.  The Collateral Agent shall be entitled torely, and shall be fully protected in relying, upon any note, writing,resolution, notice, consent, certificate, affidavit, letter, cablegram,telegram, facsimile or e-mail message, statement, order or other document orconversation believed by it to be genuine and correct and to have been signed,sent or made by the proper Person or Persons, and upon advice and statements oflegal counsel (including, without limitation, counsel to the Borrower or anyGuarantor), independent accountants and other experts selected by theCollateral Agent.  The Collateral Agentshall be fully justified in failing or refusing to take any action under thisAgreement or any other Loan Document unless it shall first receive such adviceor concurrence of the Required Lenders as it deems appropriate or it shallfirst be indemnified to its satisfaction by the Lenders against any and allliability and expense which may be incurred by it by reason of taking orcontinuing to take any such action.  Asbetween the Collateral Agent and the Lenders, the Collateral Agent shall in allcases be fully protected in acting, or in refraining from acting, under thisAgreement and the other Loan Documents in accordance with a request of theRequired Lenders, and such request and any action taken or failure to actpursuant thereto shall be binding upon all the Lenders.

 

8.5           Noticeof Default.  The CollateralAgent shall not be deemed to have knowledge or notice of the occurrence of anyDefault or Event of Default hereunder unless the Collateral Agent has actuallyreceived notice from a Lender or the Borrower referring to this Agreement,describing such Default or Event of Default and stating that such notice is a“notice of default.”  In the event thatthe Collateral Agent receives such a notice, the Collateral Agent shall giveprompt notice thereof to the Lenders. The Collateral Agent shall take such action with respect to such Defaultor Event of Default as shall be reasonably directed by the Required Lenders; provided,that, as between the Collateral Agent and the Lenders unless and until theCollateral Agent shall have received such directions, the Collateral Agent may(but shall not be obligated to) take such action, or refrain from taking suchaction, with respect to such Default or Event of Default as it shall deemadvisable in the best interests of the Lenders.

 

8.6           Non-Reliance on the Collateral Agentand Other Lenders.  Each Lenderexpressly acknowledges that neither the Collateral Agent nor any of itsrespective officers, directors, employees, agents, attorneys-in-fact oraffiliates have made any representations or warranties to it and that no act bythe Collateral Agent hereinafter taken, including any review of the affairs ofthe Borrower or any Guarantor shall be deemed to constitute any representationor warranty by the Collateral Agent to any 

 

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Lender.  EachLender represents to the Collateral Agent that it has, independently andwithout reliance upon the Collateral Agent or any other Lender, and based onsuch documents and information as it has deemed appropriate, made its ownappraisal of and investigation into the business, assets, operations, property,financial and other condition, prospects and creditworthiness of the Borroweror any Guarantor and made its own decision to make its Loans hereunder andenter into this Agreement.  Each Lenderalso represents that it will, independently and without reliance upon theCollateral Agent or any other Lender, and based on such documents andinformation as it shall deem appropriate at the time, continue to make its owncredit analysis, appraisals and decisions in taking or not taking action underthis Agreement, and to make such investigation as it deems necessary to informitself as to the business, assets, operations, property, financial and othercondition, prospects and creditworthiness of the Borrower or anyGuarantor.  The Collateral Agent shallhave no duty or responsibility to provide any Lender with any credit or otherinformation concerning the business, operations, assets, liabilities, property,financial and other condition or creditworthiness of the Borrower or anyGuarantor which may come into the possession of the Collateral Agent or any ofits officers, directors, employees, agents, attorneys-in-fact or affiliates.

 

8.7           Indemnification.  The Lenders agree to indemnify theCollateral Agent in its capacity as such ratably according to their respective“percentages” as used in determining the Required Lenders at such time, fromand against any and all liabilities, obligations, losses, damages, penalties,actions, judgments, suits, costs, expenses or disbursements of any kindwhatsoever which may at any time (including, without limitation, at any timefollowing the payment of the Obligations) be imposed on, incurred by orasserted against the Collateral Agent in its capacity as such in any wayrelating to or arising out of this Agreement or any other Loan Document, or anydocuments contemplated by or referred to herein or the transactions contemplatedhereby of any action taken or omitted to be taken by the Collateral Agent underor in connection with any of the foregoing, but only to the extent that any ofthe foregoing is not paid by Holdings or any of its Subsidiaries; provided,that no Lender shall be liable to the Collateral Agent for the payment of anyportion of such liabilities, obligations, losses, damages, penalties, actions,judgments, suits, costs, expenses or disbursements resulting solely from thegross negligence or willful misconduct of the Collateral Agent as finally andunappealably determined by a court of competent jurisdiction.  If any indemnity furnished to the CollateralAgent for any purpose shall, in the opinion of the Collateral Agent beinsufficient or become impaired, the Collateral Agent may call for additionalindemnity and cease, or not commence, to do the acts indemnified against untilsuch additional indemnity is furnished. The agreements in this Section 8.7 shall survive the payment ofall Obligations.

 

8.8           Collateral Agent in Its IndividualCapacity.  The Collateral Agentand its Affiliates may make loans to, accept deposits from and generally engagein any kind of business with Holdings and its Subsidiaries as though theCollateral Agent were not a Collateral Agent hereunder.  With respect to any Loans made by it and allObligations owing to it, the Collateral Agent shall have the same rights andpowers under this Agreement as any Lender and may exercise the same as thoughit were not the Collateral Agent and the terms “Lender” and “Lenders” shallinclude the Collateral Agent in its individual capacity.

 

**SECTION9.****                            GUARANTEE**

 

9.1           UnconditionalGuarantee.  Each Guarantorhereby unconditionally, jointly and severally, guarantees (such guarantee to bereferred to herein as the “Guarantee”) to each of the Lenders and to theCollateral Agent and their respective successors and assigns, that theprincipal of and interest and Termination Fee on the Loans will be promptlypaid in full when due, whether at maturity, by acceleration or otherwise andinterest on the overdue principal, if any, and interest on any interest, to theextent lawful, of the Loans and all other obligations of the Borrower to theLenders or the Collateral Agent hereunder or thereunder (including the Obligations)will be promptly paid in full or performed, all in accordance with the termshereof and thereof; subject, however, to the limitations set forth in Section 9.4.  

 

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Each Guarantor hereby agrees that its obligationshereunder shall be unconditional, irrespective of the validity, regularity orenforceability of the Loans or this Agreement or any other Loan Document, theabsence of any action to enforce the same, any waiver or consent by any of theLenders with respect to any provisions hereof or thereof, the recovery of anyjudgment against the Borrower, any action to enforce the same or any othercircumstance which might otherwise constitute a legal or equitable discharge ordefense of a Guarantor.  Each Guarantoragrees that this is a guaranty of payment and not of collection.  Each Guarantor hereby waives diligence,presentment, demand of payment, filing of claims with a court in the event ofinsolvency or bankruptcy of the Borrower, any right to require a proceedingfirst against the Borrower, protest, notice and all demands whatsoever andcovenants that this Guarantee will not be discharged except by completeperformance of the obligations (including, without limitation, payment of allObligations) contained in the Loans, this Agreement, the other Loan Documentsand in this Guarantee.  If any Lender orthe Collateral Agent is required by any court or otherwise to return to theBorrower, any Guarantor, or any custodian, trustee, liquidator or other similarofficial acting in relation to the Borrower or any Guarantor, any amount paidby the Borrower or any Guarantor to the Collateral Agent or such Lender, thisGuarantee, to the extent theretofore discharged, shall be reinstated in fullforce and effect.  Each Guarantorfurther agrees that, as between each Guarantor, on the one hand, and theLenders and the Collateral Agent, on the other hand, (x) the maturity of theobligations guaranteed hereby may be accelerated as provided in Section 7for the purposes of this Guarantee, notwithstanding any stay, injunction orother prohibition preventing such acceleration in respect of the obligationsguaranteed hereby, and (y) in the event of any acceleration of such obligationsas provided in Section 7, such obligations (whether or not due andpayable) shall forthwith become due and payable by each Guarantor for thepurpose of this Guarantee.

 

9.2           Severability.  In case any provision of this Guaranteeshall be invalid, illegal or unenforceable in any jurisdiction, the validity,legality, and enforceability of the remaining provisions in such jurisdiction,or of such provision in any other jurisdiction, shall not in any way beaffected or impaired thereby.

 

9.3           Releaseof a Guarantor.  Upon the saleor disposition (whether by merger, stock purchase, asset sale or otherwise) ofa Guarantor (or all or substantially all its assets) to an entity which is nota Subsidiary of Holdings and which sale or disposition is otherwise incompliance with the terms of this Agreement, such Guarantor shall be deemedreleased from all obligations under this Section 9 without any furtheraction required on the part of the Collateral Agent or any Lender.  The Lenders shall deliver an appropriateinstrument evidencing such release upon receipt of a request by the Borroweraccompanied by an Officers’ Certificate certifying as to the compliance withthis Section 9.3.  Any Guarantornot so released remains liable in all respects with respect to its Guarantee asprovided in this Section 9.

 

9.4           Limitation of Guarantor’s Liability.  Each Guarantor and, by its acceptance hereofeach of the Lenders, hereby confirms that it is the intention of all suchparties that the guarantee by such Guarantor pursuant to its Guarantee notconstitute a fraudulent transfer or conveyance for purposes of any BankruptcyLaw, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Actor any similar Federal or state Law.  Toeffect the foregoing intention, the Lenders and such Guarantor herebyirrevocably agree that the obligations of such Guarantor under the Guaranteeshall be limited to the maximum amount as will, after giving effect to allother contingent and fixed liabilities of such Guarantor and after givingeffect to any collections from or payments made by or on behalf of any otherGuarantor in respect of the obligations of such other Guarantor under itsGuarantee or pursuant to Section 9.5, result in the obligations of suchGuarantor under the Guarantee not constituting such fraudulent transfer or conveyance.

 

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9.5           Contribution.  In order to provide for just and equitablecontribution among the Guarantors, the Guarantors agree, interse,that in the event any payment or distribution is made by any Guarantor (a “FundingGuarantor”) under its Guarantee, such Funding Guarantor shall be entitledto a contribution from all other Guarantors in a*pro rata*amount based on the Adjusted Net Assets of eachGuarantor (including the Funding Guarantor) for all payments, damages andexpenses incurred by that Funding Guarantor in discharging the Borrower’sobligations with respect to the Obligations. “Adjusted Net Assets” of such Guarantor at any date shall meanthe lesser of (x) the amount by which the fair value of the property of suchGuarantor exceeds the total amount of liabilities, including, withoutlimitation, contingent liabilities (after giving effect to all other fixed andcontingent liabilities Incurred on such date (other than liabilities of suchGuarantor under Subordinated Indebtedness)), but excluding liabilities underthe Guarantee, of such Guarantor at such date and (y) the amount by which thepresent fair salable value of the assets of such Guarantor at such date exceedsthe amount that will be required to pay the probable liabilities of suchGuarantor on its debts, excluding debt in respect of the Guarantee of suchGuarantor, as they become absolute and matured.  The allocation among Guarantors of their obligations as set forthin this Section 9.5 shall not be construed in any way to limit theliability of any Guarantor hereunder. 

 

9.6           Waiverof Subrogation.  Until such timeas all Obligations on the Loans are paid in full, each Guarantor herebyirrevocably waives any claim or other rights which it may now or hereafteracquire against the Borrower that arise from the existence, payment,performance or enforcement of such Guarantor’s obligations under its Guaranteeand this Agreement, including, without limitation, any right of subrogation,reimbursement, exoneration, indemnification, and any right to participate inany claim or remedy of any Lender against the Borrower, whether or not suchclaim, remedy or right arises in equity, or under contract, statute or commonlaw, including, without limitation, the right to take or receive from theBorrower, directly or indirectly, in cash or other property or by set-off or inany other manner, payment or security on account of such claim or otherrights.  If any amount shall be paid toany Guarantor in violation of the preceding sentence and the Loans shall nothave been paid in full, such amount shall be deemed to have been paid to suchGuarantor for the benefit of, and held in trust for the benefit of, theLenders, and shall forthwith be paid to the Lenders to be credited and appliedupon the Loans, whether matured or unmatured, in accordance with the terms ofthis Agreement.  Each Guarantoracknowledges that it will receive direct and indirect benefits from thefinancing arrangements contemplated by this Agreement and that the waiver setforth in this Section 9.6 is knowingly made in contemplation of suchbenefits.

 

9.7           Waiver of Stay, Extension, Usury andOther Laws.   (a)   Each Guarantor covenants (to the extentthat it may lawfully do so) that it will not at any time insist upon, plead, orin any manner whatsoever claim or take the benefit or advantage of, any stay orextension law or any usury law or other Law that would prohibit or forgive suchGuarantor from performing its Guarantee as contemplated herein, whereverenacted, now or at any time hereafter in force, or which may affect thecovenants or the performance of this Agreement; and (to the extent that it maylawfully do so) each Guarantor hereby expressly waives all benefit or advantageof any such Law, and covenants that it will not hinder, delay or impede theexecution of any power herein granted to the Collateral Agent or any Lender,but will suffer and permit the execution of every such power as though no suchLaw had been enacted.

 

(b)           As used in this paragraph, anyreference to “the principal” includes the Borrower, and any reference to “thecreditor” includes the Collateral Agent and each Lender.  In accordancewith Section 2856 of the California Civil Code (i) each Guarantor waivesany and all rights and defenses available to it by reason of Sections 2787 to2855, inclusive, 2899 and 3433 of the California Civil Code, including withoutlimitation any and all rights or defenses such Guarantor may have by reason ofprotection afforded to the principal with respect to any of the guaranteedObligations, or to any other guarantor of any of the guaranteed Obligationswith respect to any of such guarantor’s obligations under 

 

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its guaranty, in either case pursuant to theantideficiency or other laws of the State of California limiting or dischargingthe principal’s indebtedness or such guarantor’s obligations, including withoutlimitation Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure;and (ii) each Guarantor waives all rights and defenses arising out of anelection of remedies by the creditor, even though that election of remedies,such as a nonjudicial foreclosure with respect to security for a guaranteedObligation, has destroyed such Guarantor’s rights of subrogation andreimbursement against the principal by the operation of Section 580d of theCode of Civil Procedure or otherwise; and even though that election of remediesby the creditor, such as nonjudicial foreclosure with respect to security foran obligation of any other guarantor of any of the guaranteed Obligations, hasdestroyed such Guarantor’s rights of contribution against such otherguarantor.  No other provision of thisGuarantee shall be construed as limiting the generality of any of the covenantsand waivers set forth in this paragraph. As provided below, this Guarantee shall be governed by, and shall beconstrued and enforced in accordance with, the laws of the State of NewYork.  This paragraph is included solelyout of an abundance of caution, and shall not be construed to mean that any ofthe above-referenced provisions of California law are in any way applicable tothis Guarantee or to any of the guaranteed Obligations.

 

**SECTION10.****                     MISCELLANEOUS**

 

10.1         [Intentionally Omitted]

 

10.2         Participations in and Assignmentsof Loans and Notes.

 

(a)           EachLender shall have the right at any time to sell, assign, transfer or negotiate(an “Assignment”) all or any portion of its Loans or Commitment to anyEligible Assignee.  In the case of anysale, transfer or negotiation of all or part of the Loans or any Commitmentauthorized under this Section 10.2(a), the assignee, transferee orrecipient shall become a party to this Agreement as a Lender by execution of anassignment and assumption agreement; provided that (i) at such time Section2.1(a) shall be deemed modified to reflect the Commitment of such newLender and of the existing Lenders, and (ii) upon surrender of the Notes, newNotes will be issued, at the Borrower’s expense, to such new Lender and to theassigning Lender, such new Notes to be in conformity with the requirements of Section2.1(d) (with appropriate modifications) to the extent needed to reflect therevised Commitment or the sale, assignment, transfer or negotiation ofLoans.  To the extent of any Assignmentpursuant to this Section 10.2(a), the assigning Lender shall be relievedof its obligations hereunder with respect to its assigned Loans or Commitment,and the assignee, transferee or recipient shall have, to the extent of suchAssignment, the same rights, benefits and obligations as it would if it were aLender with respect to such Loans or Commitment, including, without limitation,the right to approve or disapprove actions which, in accordance with the termshereof, require the approval of a Lender. At the time of each Assignment pursuant to this Section 10.2(a)to an Eligible Assignee which is not already a Lender hereunder and which isnot a United States Person (as such term is defined in Section 7701(a)(30) ofthe Internal Revenue Code) for Federal income tax purposes, the respectiveEligible Assignee, if, and to the extent, required by Section 10.19(f),shall provide to the Borrower the appropriate Internal Revenue Service Formsdescribed in Section 10.19(f).

 

(b)           EachLender may grant participations in all or any part of its Loans or itsCommitment to any Person (a “participant”); provided, however,that (i) such Lender’s obligations under this Agreement shall remain unchanged,(ii) such Lender shall remain solely responsible to the other parties heretofor the performance of such obligations and (iii) the Borrower, the CollateralAgent and the other Lenders shall continue to deal solely and directly withsuch Lender in connection with such Lender’s rights and obligations under theAgreement and such Lender shall retain the sole right to enforce theobligations of the Borrower relating to the Loans and to approve any amendment,modification or waiver of any provision of this Agreement (other than amendments,modifications or waivers with respect 

 

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to any fees payable hereunder or the amount of principal of or the rateat which interest is payable on the Loans, or the dates fixed for payments offees or principal of or interest on the Loans or termination of theCommitment).  The Borrower agrees thateach participant shall be entitled to the benefits of Section 10.19 tothe same extent as if it were a Lender and had acquired its interest byassignment pursuant to Section 10.2(a); provided, however,that a participant shall not be entitled to receive any greater payment under Section10.19 than the applicable Lender would have been entitled to receive withrespect to the participation sold to such participant, unless the sale of theparticipation to such participant is made with the Borrower’s prior writtenconsent.  To the extent permitted bylaw, each participant also shall be entitled to the benefits of Section 10.5as though it were a Lender, provided such participant agrees to be subject to Section10.18 as though it were a Lender.

 

(c)           TheBorrower shall, at its own cost and expense, provide such certificates,acknowledgments and further assurances in respect of this Agreement and theLoans as any Lender may reasonably require in connection with anyparticipation, transfer or assignment pursuant to this Section 10.2.

 

(d)           Nothingin this Agreement shall prevent or prohibit any Lender from pledging its Loanand Notes hereunder to a Federal Reserve Bank in support of borrowings made bysuch Lender from such Federal Reserve Bank.

 

10.3         Expenses.  Whether or not the transactions contemplatedhereby shall be consummated, the Borrower agrees to promptly pay (a) all thecosts and expenses incurred by the Lenders and the Collateral Agent inconnection with the transactions contemplated by the Loan Documents, including,without limitation, the reasonable fees, expenses and disbursements of counselto the Lenders (including allocated costs of internal counsel) in connectionwith the negotiation, preparation, execution and administration of the LoanDocuments and the Loans hereunder, and any amendments, modifications andwaivers hereto or thereto and consents to departures from the terms hereof andthereof; and (b) all costs and expenses (including attorneys’ fees and costs ofsettlement) incurred by the Lenders or the Collateral Agent in enforcing anyObligations of or in collecting any payments due from the Borrower or anyGuarantor hereunder or under the Notes or any other Loan Document or inconnection with any refinancing or restructuring of the credit arrangementsprovided under this Agreement in the nature of a “work-out” or in connectionwith any insolvency or bankruptcy proceedings.

 

10.4         Indemnity.  In addition to the payment of expensespursuant to Section 10.3, whether or not the transactions contemplatedhereby shall be consummated, the Borrower agrees to indemnify, pay and holdeach of the Lenders, the Collateral Agent and any holder of any of the Notes,and each of their respective officers, directors, employees, agents,representatives and affiliates (collectively called the “Indemnitees”),harmless from and against any and all liabilities, obligations, losses,damages, penalties, actions, judgments, suits, claims, costs, expenses anddisbursements of any kind or nature whatsoever (including, without limitation,the reasonable fees and disbursements of counsel for such Indemnitees inconnection with any investigative, administrative or judicial proceedingcommenced or threatened, whether or not such Indemnitee shall be designated asa party thereto), which may be suffered by, imposed on, incurred by, orasserted against that Indemnitee, in any manner resulting from, connected with,in respect of, relating to or arising out of this Agreement or any other LoanDocument, the Lenders’ agreements to make the Loans or the use or intended useof any of the proceeds of the Loans hereunder (the “indemnified liabilities”); provided,however, that the Borrower shall have no obligation to an Indemniteehereunder with respect to indemnified liabilities to the extent suchliabilities are finally and unappealably judicially determined by a court ofcompetent jurisdiction to have resulted solely from the gross negligence orwillful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmlessset forth in the preceding sentence may be unenforceable because it isviolative of any law or public policy, the Borrower shall contribute themaximum portion which it is 

 

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permitted to pay and satisfy under applicable law tothe payment and satisfaction of all indemnified liabilities incurred by theIndemnitees or any of them.

 

10.5         Setoff.   In addition to any rights now or hereaftergranted under applicable Law and not by way of limitation of any such rights,upon the occurrence and during the continuance of any Default or Event ofDefault, each Lender, the Collateral Agent and each subsequent holder of anyNote and any Affiliate thereof is hereby authorized by the Borrower and theGuarantors at any time or from time to time, without notice to the Borrower orany Guarantor, any such notice being hereby expressly waived, to set off and toappropriate and to apply any and all deposits (general or special, including,but not limited to, Indebtedness evidenced by certificates of deposit, whethermatured or unmatured) and any other Indebtedness or obligations at any timeheld or owing by the Collateral Agent, such Lender, such subsequent holder orsuch Affiliate to or for the credit or the account of the Borrower or suchGuarantor against and on account of the obligations and liabilities of theBorrower or such Guarantor to the Lenders under this Agreement, the Notes andthe other Loan Documents, including, but not limited to, all claims of anynature or description arising out of or connected with this Agreement, theNotes, the Guarantees or the other Loan Documents, irrespective of whether ornot (a) the Collateral Agent, such Lender, such subsequent holder or suchAffiliate shall have made any demand hereunder or (b) the Collateral Agent,such Lender, such subsequent holder or such Affiliate shall have declared theprincipal of or the interest on its portion of the Loans and its Notes andother amounts due hereunder to be due and payable as permitted by Section 7and although said obligations and liabilities, or any of them, may becontingent or unmatured.

 

10.6         Amendmentsand Waivers.  No amendment,modification, termination or waiver of any term or provision of this Agreement,of the Notes, any Guarantee or the Pledge and Security Agreement or consent toany departure by the Borrower or any Guarantor therefrom, shall in any event beeffective without the prior written concurrence of the Borrower or suchGuarantor, as the case may be, and the Required Lenders, and, upon the requestof any Lender, the receipt of a written opinion of counsel of the Borroweraddressed to the Lenders to the effect that such amendment, modification,termination, waiver or consent does not violate or conflict with any of theterms and provisions of any Contractual Obligation of the Borrower; provided,however, that without the prior written consent of each Lender affected,an amendment, modification, termination or waiver of this Agreement, any Notes,any Guarantee, the Pledge and Security Agreement or consent to departure from aterm or provision hereof or thereof may not: (a) reduce the principal amount of Notes whose holders must consent toany such amendment, modification, termination, waiver or consent; (b) reducethe rate of or extend the time for payment of principal or interest on anyNote; (c) reduce the principal amount of any Note; (d) make any change in thedefinition of Change of Control, in the last paragraph of Section 7 orin this Section 10.6; (e) reduce the rate or extend the time of paymentof fees or other compensation payable to the Lenders hereunder (including theTermination Fee); (f) increase the amount of the Commitment; (g) release all orsubstantially all of the collateral purported to be subject to the Liens of anyLoan Document or all or substantially all of the Guarantors from the Guarantee(in each case other than releases necessary to effectuate transactionsotherwise permitted under this Agreement); or (h) change the definition of“Required Lenders”; and provided, further, that without theconsent of the Collateral Agent, no such amendment, modification, terminationor waiver may amend, modify, terminate or waive any provision of Section 8as the same applies to the Collateral Agent or any other provision of thisAgreement or any other Loan Document as it relates to the rights or obligationsof the Collateral Agent.  Any waiver orconsent shall be effective only in the specific instance and for the specificpurpose for which it was given.  Nonotice to or demand on the Borrower in any case shall entitle the Borrower toany further notice or demand in similar or other circumstances.  Any amendment, modification, termination,waiver or consent effected in accordance with this Section 10.6 shall bebinding upon each Lender, and, if signed by the Borrower or a Guarantor, on theBorrower and such Guarantor.

 

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10.7         Independenceof Covenants.  All covenantshereunder shall be given independent effect so that if a particular action orcondition is not permitted by any of such covenants, the fact that it would bepermitted by an exception to, or be otherwise within the limitation of, anothercovenant shall not avoid the occurrence of a Default or Event of Default ifsuch action is taken or condition exists.

 

10.8         Entirety.  The Loan Documents embody the entireagreement of the parties and supersede all prior agreements and understandings,if any, relating to the subject matter hereof and thereof.

 

10.9         Notices.  Unless otherwise provided herein, any noticeor other communications herein required or permitted to be given shall be inwriting and may be personally served or delivered, telecopied, or sent by mailand shall be deemed to have been given when delivered in person, upon receiptof telecopy against receipt of answer back or four (4) Business Days afterdepositing it in the mail, registered or certified, with postage prepaid andproperly addressed; provided, however, that notices to theCollateral Agent and the Lenders shall not be effective until received.  For the purposes hereof, the addresses ofthe parties hereto (until notice of a change thereof is delivered as providedin this Section 10.9) shall be set forth under each party’s name on thesignature pages hereto.

 

10.10       Survival of Warranties and CertainAgreements.

 

(a)           Allagreements, representations and warranties made herein shall survive the executionand delivery of this Agreement, the making of the Loans hereunder and theexecution and delivery of the Notes and, notwithstanding the making of theLoans, the execution and delivery of the Notes or any investigation made by oron behalf of any party, shall continue in full force and effect.  The closing of the transactions hereincontemplated shall not prejudice any right of one party against any other partyin respect of anything done or omitted hereunder or in respect of any right todamages or other remedies.

 

(b)           Notwithstandinganything in this Agreement or implied by Law to the contrary, the agreements ofthe Borrower set forth in Sections 10.3, 10.4, 10.14, 10.15,10.17 and 10.19 shall survive the payment of the Loans and theNotes and the termination of this Agreement.

 

10.11       Failure or Indulgence Not Waiver;Remedies Cumulative.   Nofailure or delay on the part of the Collateral Agent or any Lender or anyholder of any Note in the exercise of any power, right or privilege hereunderor under any other Loan Document shall impair such power, right or privilege orbe construed to be a waiver of any default or acquiescence therein, nor shallany single or partial exercise of any such power, right or privilege precludeother or further exercise thereof or of any other right, power orprivilege.  All rights and remediesexisting under this Agreement or any other Loan Document are cumulative to andnot exclusive of any rights or remedies otherwise available.

 

10.12       Severability.  In case any provision in or obligation underthis Agreement or any other Loan Document shall be invalid, illegal orunenforceable in any jurisdiction, the validity, legality and enforceability ofthe remaining provisions or obligations in such jurisdiction, or of such provisionor obligation in any other jurisdiction, shall not in any way be affected orimpaired thereby.

 

10.13       Headings.  Section and subsection headings in thisAgreement are included herein for convenience of reference only and shall notconstitute a part of this Agreement for any other purpose or given anysubstantive effect.

 

10.14       ApplicableLaw.  **THIS AGREEMENT, EACH GUARANTEE, THE PLEDGE AND SECURITY AGREEMENT AND THENOTES SHALL BE GOVERNED BY,**

 

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**AND SHALLBE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEWYORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORKGENERAL OBLIGATIONS LAW.**

 

10.15       Successors and Assigns; SubsequentHolders of Notes.  This Agreementshall be binding upon the parties hereto and their respective successors andassigns and shall inure to the benefit of the parties hereto and the permittedsuccessors and assigns of the Lenders. The terms and provisions of this Agreement, each Guarantee, the Pledgeand Security Agreement and the other Loan Documents shall inure to the benefitof any assignee or transferee of the Loans pursuant to Section 10.2(a),and in the event of such transfer or assignment, the rights and privilegesherein conferred upon the Lenders shall automatically extend to and be vestedin such transferee or assignee, all subject to the terms and conditionshereof.  In determining whether theholders of a sufficient aggregate principal amount of the Loans shall haveconsented to any action under this Agreement, any amount of the Loans owned orheld by the Borrower, any Guarantor or any of their respective Affiliates shallbe disregarded.  The Borrower’s rightsor any interest therein hereunder and the Borrower’s or any Guarantor’sobligations under the Loan Documents (including the Obligations) may not beassigned without the prior express written consent of each of the Lenders.

 

10.16       Counterparts;Effectiveness.  This Agreementand any amendments, waivers, consents or supplements may be executed in anynumber of counterparts and by different parties hereto in separatecounterparts, each of which when so executed and delivered shall be deemed anoriginal, but all such counterparts together shall constitute but one and thesame instrument.  This Agreement shallbecome effective upon the execution of a counterpart hereof by each of theparties hereto (including the Lenders and the Collateral Agent) and deliverythereof to the Lenders.

 

10.17       Consent to Jurisdiction; Venue;Waiver of Jury Trial.

 

**(a)**           **ANYLEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY NOTE, ANYGUARANTEE, THE PLEDGE AND SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BEBROUGHT IN THE COURTS IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTIONIN THE STATE, COUNTY AND CITY OF NEW YORK, AND, BY EXECUTION AND DELIVERY OFTHIS AGREEMENT, EACH LOAN PARTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND INRESPECT OF ITS RESPECTIVE PROPERTY, GENERALLY AND UNCONDITIONALLY, THENONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.  EACH OF THE LOAN PARTIES HEREBY FURTHER IRREVOCABLY WAIVES ANYCLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER ITSELF, AND AGREES NOT TOPLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THISAGREEMENT, THE NOTES, THE GUARANTEES, THE PLEDGE AND SECURITY AGREEMENT OR ANYOTHER LOAN DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURTLACKS JURISDICTION OVER SUCH PARTY. EACH OF THE LOAN PARTIES IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESSIN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTEREDOR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH LOAN PARTY, AT ITS RESPECTIVEADDRESS FOR NOTICES PURSUANT TO SECTION 10.9.  EACH OF THE LOAN PARTIES AGREES THAT SERVICE AS PROVIDED IN THISCLAUSE (a) IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLEPARTY IN ANY SUCH PROCEEDING IN ANY OF THE AFORESAID COURTS, AND OTHERWISECONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.  TO THE EXTENT PERMITTED BY LAW, EACH OF THELOAN PARTIES HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESSAND**

 

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**FURTHER IRREVOCABLY WAIVES AND AGREESNOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDERANY NOTE, ANY GUARANTEE, THE PLEDGE AND SECURITY AGREEMENT OR ANY OTHER LOANDOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANYLENDER OR THE COLLATERAL AGENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTEDBY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTYIN ANY OTHER JURISDICTION.**

 

**(b)           EACH OF THE LOAN PARTIES HEREBYIRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THELAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OFOR IN CONNECTION WITH THIS AGREEMENT, THE NOTES, THE GUARANTEES, THE PLEDGE ANDSECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT BROUGHT IN THE COURTS REFERRED TOIN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TOPLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT INANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.**

 

**(c)           EACH OF THE PARTIES TO THIS AGREEMENTHEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THENOTES, THE GUARANTEES, THE PLEDGE AND SECURITY AGREEMENT OR ANY OTHER LOANDOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.**

 

10.18       Payments Pro Rata.

 

Each of the Lenders agrees that, if it should receive any amounthereunder (whether by voluntary payment, by realization upon security, by theexercise of the right of setoff or banker’s lien, by counterclaim or crossaction, by the enforcement of any right under the Loan Documents, or otherwise)which is applicable to the payment of the principal of, or interest on, theLoans of a sum which with respect to the related sum or sums received by otherLenders is in a greater proportion than the total of such Obligations then owedand due to such Lender bears to the total of such Obligations then owed and dueto all of the Lenders immediately prior to such receipt, then such Lenderreceiving such excess payment shall purchase for cash without recourse orwarranty from the other Lenders an interest in the Obligations of the Borrowerto such Lenders in such amount as shall result in a proportional participationby all of the Lenders in such amount; provided that, if all or anyportion of such excess amount is thereafter recovered from such Lender, suchpurchase shall be rescinded and the purchase price restored to the extent ofsuch recovery, but without interest.

 

10.19       Taxes.

 

(a)           Anyand all payments by the Borrower hereunder or under any of the other LoanDocuments shall be made free and clear of and without deduction or withholdingfor or on account of any and all present or future Taxes, unless such deductionor withholding is required by Law or the administration thereof and excludingin the case of each Lender, Taxes imposed on the net income of, and branchprofit taxes of, any Lender or the Collateral Agent (i) by the jurisdiction inwhich such Lender or the Collateral Agent is organized or any politicalsubdivision thereof or taxing authority thereof, or (ii) by any jurisdiction inwhich such Person’s principal office or relevant lending office is located orin which such Person is doing business, other than solely by reason of thisAgreement, or any political subdivision 

 

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or taxing authority of any such jurisdiction, or (iii) by reason of afailure by a Lender to which Section 10.19(f) applies to deliver theRequired Forms or to otherwise comply with the requirements of Section10.19(f) unless such failure is due to a change in law occurring after thedate on which such Lender became a Lender (all such nonexcluded Taxeshereinafter referred to as “Covered Taxes”).  If the Borrower shall be required by Law or the administrationthereof to deduct or withhold any Covered Taxes from or in respect of any sumpayable hereunder or under any other Loan Document, (i) the sum payable shallbe increased as may be necessary so that after making all required deductionsor withholdings (including deductions or withholdings applicable to additionalamounts paid under this paragraph), the Lender receives an amount equal to thesum it would have received if no such deduction or withholding had been made;(ii) the Borrower shall make such deductions or withholdings; and (iii) theBorrower forthwith shall pay the full amount deducted or withheld to therelevant authority in accordance with applicable Law.

 

(b)           TheBorrower agrees to pay forthwith any present or future stamp, duty ordocumentary taxes or any other excise or property taxes, charges or similarlevies (all such taxes, charges and levies hereinafter referred to as “OtherTaxes”) imposed by any jurisdiction (or any political subdivision or taxingauthority thereof or therein) which arise from any payment made by the Borrowerhereunder or under any other Loan Document or from the execution, delivery orregistration of, or otherwise with respect to, this Agreement or any other LoanDocument.

 

(c)           TheBorrower agrees to indemnify the Collateral Agent and each of the Lenders forthe full amount of Covered Taxes or Other Taxes not deducted or withheld andpaid by the Borrower in accordance with Section 10.19(a) and (b)to the relevant authority and any Taxes other than Covered Taxes or Other Taxesimposed by any jurisdiction on amounts payable by the Borrower under this Section10.19 paid by the Lender or the Collateral Agent and any liability(including penalties, interest, additions to tax and expenses) arisingtherefrom or with respect thereto, whether or not any such Taxes or Other Taxeswere correctly or legally asserted. Payment under this indemnification shall be made within 30 days from thedate such Lender makes written demand therefor.  A certificate as to the amount of such Taxes or Other Taxes andevidence of payment thereof submitted to the Borrower shall be prima facieevidence, absent manifest error, of the amount due from the Borrower to suchLender.

 

(d)           TheBorrower shall promptly furnish to each Lender the original or a certified copyof a receipt (or, if a receipt is not available, such other documentation asshall be reasonably satisfactory to the Lenders) evidencing any payment ofTaxes or Other Taxes made by the Borrower.

 

(e)           Theprovisions of this Section 10.19 shall survive the termination of theAgreement and repayment of all Obligations.

 

(f)                    Each Lender that is (i) an assignee ortransferee of an interest under this Agreement pursuant to Section 10.2(a)(unless the respective Lender was already a Lender hereunder immediately priorto such assignment or transfer), (ii) eligible to receive all payments ofinterest to be made to such Lender hereunder free from, or at reduced rates of,withholding of United States federal income tax, and (iii) organized in ajurisdiction other than the United States, a State thereof or the District ofColumbia hereby agrees that:

 

(i)    it shall, no later than the date upon which such Lender becomes a partyhereto, and on each date that any form required by this Section expires orbecomes obsolete, deliver to the Borrower: (A) two accurate, complete andsigned originals of U.S. Internal Revenue Service Form W-8ECI or successorform, or (B) two accurate, complete and signed originals of U.S. InternalRevenue Service Form W-8BEN or successor form, in each case, indicating thatsuch Lender is on the date of delivery thereof entitled to receive payments of 

 

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interestfor the account of its lending office under this Agreement free from, or atreduced rates of, withholding of United States federal income tax (the “RequiredForms”); and

 

(ii)   if at any time such Lender changes its lending office or offices orselects an additional lending office for purposes of this Agreement, it shall,at the same time or reasonably promptly thereafter, deliver to the Borrower andthe Agents the appropriate forms as described in clause (i) above inreplacement for, or in addition to, the forms previously delivered by ithereunder.

 

(g)           If the Borrower is required to makeany deduction or withholding as a result of the fact that a Lender is organizedoutside the United States, such Lender shall use its reasonable efforts totransfer its Loan to an affiliate in respect of which no such deduction orwithholding would be imposed if such transfer would have no adverse effect onsuch Lender or the Loan.

 

10.20       Waiverof Stay, Extension or Usury Laws. The Borrower covenants (to the extent that it may lawfully do so) thatit will not at any time insist upon, plead, or in any manner whatsoever claimor take the benefit or advantage of, any stay or extension law or any usury lawor other Law that would prohibit or forgive the Borrower from paying all or anyportion of the principal of or interest on the Loans as contemplated herein,wherever enacted, now or at any time hereafter in force, or which may affectthe covenants or the performance of this Agreement; and (to the extent that itmay lawfully do so) the Borrower hereby expressly waives all benefit oradvantage of any such Law, and covenants that it will not hinder, delay orimpede the execution of any power herein granted to the Collateral Agent or anyLender, but will suffer and permit the execution of every such power as thoughno such Law had been enacted.

 

10.21       Requirementsof Law.  In the event that anychange in Law occurring after the date that any lender becomes a Lender partyto this Agreement with respect to such Lender shall, in the opinion of suchLender, require that any Commitment of such Lender be treated as an asset orotherwise be included for purposes of calculating the appropriate amount ofcapital to be maintained by such Lender or any corporation controlling suchLender, and such change in Law shall have the effect of reducing the rate ofreturn on such Lender’s or such corporation’s capital, as the case may be, as aconsequence of such Lender’s obligations hereunder to a level below that whichsuch Lender or such corporation, as the case may be, could have achieved butfor such change in Law (taking into account such Lender’s or such corporation’spolicies, as the case may be, with respect to capital adequacy) by an amountdeemed by such Lender to be material, then from time to time following noticeby such Lender to the Borrower of such change in Law, within fifteen (15) daysafter demand by such Lender, the Borrower shall pay to such Lender suchadditional amount or amounts as will compensate such Lender or suchcorporation, as the case may be, for such reduction.

 

10.22       Confidentiality.

 

(a)           EachLender shall hold all non-public information obtained pursuant to therequirements of or in connection with this Agreement which has been identifiedas confidential by the Borrower in accordance with such Lender’s customaryprocedures for handling confidential information of this nature, it beingunderstood and agreed by the Borrower that (i) in any event a Lender may makedisclosures reasonably required by any Eligible Assignee, transferee orparticipant in connection with the contemplated assignment or transfer by suchLender of any Loans or any participation therein (provided that such EligibleAssignee, transferee or participant agrees to be bound by the terms of this Section10.22) or as required or requested by any governmental agency orrepresentative thereof or pursuant to legal process; provided thatunless specifically prohibited by applicable Law or court order, each Lendershall notify the Borrower of any request by any governmental agency orrepresentative thereof (other than 

 

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any such request in connection with any examination of the financialcondition of such Lender by such governmental agency) for disclosure of anysuch non-public information prior to disclosure of such information, (ii) aLender may share with any of its Affiliates, and such Affiliates may share withany Lender, any information related to the Borrower or the Borrower’s or theirrespective Affiliates (including information relating to creditworthiness) (itbeing understood that the Persons to whom such disclosure is made will beinformed of the confidential nature of such information and instructed to keepsuch information confidential pursuant to the terms hereof) and (iii) a Lendermay make disclosures in connection with the enforcement or exercise of rightsand remedies hereof or of any other Loan Document or any litigation relatinghereto or to any other Loan Document; and provided, further, thatin no event shall any Lender be obligated or required to return any materialsfurnished by Holdings or any of its Subsidiaries.

 

(b)           Notwithstandingthe foregoing, the parties (and each employee, representative, or other agentof the parties) may disclose to any and all Persons, without limitation of anykind, the tax treatment and tax structure of the transaction contemplated bythis Agreement; provided, however, that this clause (b) shall notpermit any party (or any employee, representative, or other agent thereof) todisclose any information, the disclosure of which would otherwise be prohibitedby this Agreement and that is not necessary to understanding the tax treatmentand tax structure of the transaction (including the identity of the parties,any information that could lead another to determine the identity of theparties, or any other information to the extent that such disclosure couldresult in a violation of any federal or state securities law).

 

*[signaturepages follow]*

 

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**INWITNESS WHEREOF**, the parties hereto have caused thisAgreement to be duly executed and delivered by their respective officersthereunto duly authorized as of the date first written above.

 
|   | **“Borrower”:**            |
|--------|--------------------------------------|
|   |                                 |
|   | **ELGAR ELECTRONICS CORPORATION**    |
|   |                                 |
|   |                                 |
|   | By:                                  | /s/ John P. Mei |   |
|   |                                 | Name:  John  P. Mei |   |
|   |                                 | Title: | Vice President, Finance, and Chief   Financial Officer |
|   |                                 |
|   |                                 |
|   | **“Guarantor”:**           |
|   |                                 |
|   | **ELGAR HOLDINGS, INC.**             |
|   |                                 |
|   |                                 |
|   | By:                                  | /s/ John P. Mei |   |
|   |                                 | Name:  John  P. Mei |   |
|   |                                 | Title: | Vice President, Finance, and Chief   Financial Officer |
|   |                                 |
|   |                                 |
|   | Notice Address for each Loan Party:  |
|   |                                 |
|   | Elgar Electronics Corporation        |
|   | 9250 Brown Deer Road                 |
|   | San Diego, California 92121          |
|   | Attn:  Chief  Financial Officer |
|   | Facsimile:  858-458-0267        |
|   |                                 |
|   | with a copy to:                      |
|   |                                 |
|   | Gibson Dunn &  Crutcher LLP |
|   | 200 Park Avenue, 47th  Floor         |
|   | New York, New York  10166       |
|   | Attn:  Conor D. Reilly          |
|   | Facsimile:  212-351-4035        |
|        |                                      |  |  |  |

 

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|   | **“Collateral  Agent”:**                               |
|--------|------------------------------------------------------------------|
|   |                                                             |
|   | **U.S.  BANK NATIONAL ASSOCIATION**,  as Collateral Agent        |
|   |                                                             |
|   |                                                             |
|   | By:                                                              | /s/ Frank P. Leslie III |   |
|   |                                                             | Name:  Frank  P. Leslie |   |
|   |                                                             | Title:  Vice  President |
|   |                                                             |
|   |                                                             |
|   | Notice Address:                                                  |
|   |                                                             |
|   | U.S. Bank National  Association                                  |
|   | 180 East Fifth Street                                            |
|   | St. Paul, Minnesota 55101                                        |
|   | Attn:       Corporate Trust Department  |
|   | Facsimile:       651-244-0711 |

 

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**“Lenders”:**

 

Commitment:  $18,750,000.00   **OCM/GFI POWER OPPORTUNITIESFUND, L.P.**

 

 
|   | By:    | GFI Energy Ventures LLC,  its General Partner |
|--------|--------|-----------------------------------------------|
|   |   |                                          |   |
|   |   |                                          |   |
|   |   | By:                                           | /s/ Larry Gilson |   |
|   |   |                                          | Name:  Larry Gilson |
|   |   |                                          | Title:  Chairman |

 

Commitment:  $6,250,000.00     **OCM PRINCIPAL OPPORTUNITIES FUND II, L.P.**

 
|   | By:                                                                                                                                                            | Oaktree Capital  Management, LLC, its General Partner |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------|
|   |                                                                                                                                                           |                                                  |   |
|   |                                                                                                                                                           |                                                  |   |
|   |                                                                                                                                                           | By:                                                   | /s/ Stephen A. Kaplan |   |
|   |                                                                                                                                                           |                                                  | Name:  Stephen A. Kaplan |
|   |                                                                                                                                                           |                                                  | Title:  Principal |
|   |                                                                                                                                                           |                                                  |   |
|   |                                                                                                                                                           |                                                  |   |
|   |                                                                                                                                                           | By:                                                   | /s/ Vincent J. Cebula |   |
|   |                                                                                                                                                           |                                                  | Name:  Vincent J. Cebula |
|   |                                                                                                                                                           |                                                  | Title:  Managing Director |
|   |                                                                                                                                                           |                                                  |   |
|   | Notice Address for the Lenders:                                                                                                                                |
|   |                                                                                                                                                           |
|   | Oaktree Capital  Management, LLC  333 South Grand Avenue  Los Angeles, California  90071  Attn:  Jordon Kruse  Facsimile:  (213) 830-6394       |
|   |                                                                                                                                                           |
|   |                                                                                                                                                           |
|   | with copies to:                                                                                                                                                |
|   |                                                                                                                                                           |
|   | Oaktree Capital  Management, LLC1301 Avenue of the Americas  34th Floor  New York, New York 10019  Attn:  Vincent Cebula  Facsimile:  (212) 284-1949 |
|   |                                                                                                                                                           |
|   | GFI Energy Ventures, LLC  11611 San Vincente Boulevard # 710  Los Angeles, California  90049  Attn:  Ian A. Schapiro  Facsimile: (310) 442-0540      |
|   |                                                                                                                                                           |
|   | and                                                                                                                                                            |

 

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|   | Skadden, Arps, Slate,  Meagher & Flom LLP   300 South Grand Avenue  Los Angeles, California  90071  Attn:  Jeffrey H. Cohen  Facsimile:  (213) 687-560 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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