**Exhibit 10.51**

 

EXECUTION VERSION

 

 

 

**AMENDED AND RESTATED**

 

**CREDIT AND SECURITY AGREEMENT**

 

dated as of

 

January 27, 2009

 

among

 

UFP TECHNOLOGIES, INC.,

 

MOULDED FIBRE TECHNOLOGY, INC.,

 

SIMCO INDUSTRIES, INC.,

 

SIMCO AUTOMOTIVE TRIM, INC.,

 

STEPHENSON & LAWYER, INC.

 

and

 

PATTERSON PROPERTIES CORPORATION

 

as joint and several borrowers,

 

the GUARANTORS from time to time party hereto,

 

and

 

BANK OF AMERICA, N.A.,

 

as Lender

 

 

 

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**TABLE OF CONTENTS**

 
| ** ** | ** **                                                           | **Page**   |
|------------|----------------------------------------------------------------------|------------|
| ** ** | ** **                                                           | ** ** |
| ARTICLE  1 | DEFINITIONS                                                          | 1          |
| 1.1        | Defined Terms                                                        | 1          |
| 1.2        | Terms Generally                                                      | 21         |
| 1.3        | Accounting Terms; GAAP                                               | 22         |
| 1.4        | Joint and Several  Obligations; Designated Financial Officers        | 22         |
| ARTICLE  2 | THE  CREDITS                                                         | 22         |
| 2.1        | Revolving Loans                                                      | 22         |
| 2.2        | Term Loans                                                           | 24         |
| 2.3        | LIBOR Borrowings                                                     | 26         |
| 2.4        | Letters of Credit and  Acceptances                                   | 27         |
| 2.5        | Expiration, Termination or  Reduction of Revolving Credit Commitment | 30         |
| 2.6        | Payments                                                             | 30         |
| 2.7        | Prepayment of Loans                                                  | 31         |
| 2.8        | Fees                                                                 | 33         |
| 2.9        | Increased Costs                                                      | 34         |
| 2.10       | Taxes                                                                | 35         |
| ARTICLE  3 | GUARANTEE  BY GUARANTORS                                             | 36         |
| 3.1        | The Guarantee                                                        | 36         |
| 3.2        | Obligations Unconditional                                            | 36         |
| 3.3        | Reinstatement                                                        | 37         |
| 3.4        | Subrogation                                                          | 37         |
| 3.5        | Remedies                                                             | 37         |
| 3.6        | Instrument for the Payment  of Money                                 | 37         |
| 3.7        | Continuing Guarantee                                                 | 37         |
| 3.8        | General Limitation on  Amount of Obligations Guaranteed              | 37         |
| ARTICLE  4 | THE  COLLATERAL                                                      | 38         |
| 4.1        | Grant of Security Interest                                           | 38         |
| 4.2        | Special Warranties and  Covenants of the Credit Parties              | 39         |
| 4.3        | Collection of Proceeds of  Accounts Receivable                       | 42         |
| 4.4        | Fixtures, etc.                                                       | 43         |
| 4.5        | Right of Lender to Dispose  of Collateral, etc.                      | 43         |
| 4.6        | Right of Lender to Use and  Operate Collateral, etc.                 | 44         |

 

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**TABLE OF CONTENTS**

(continued)

 
| ** ** | ** **                                       | **Page**   |
|------------|--------------------------------------------------|------------|
| ** ** | ** **                                       | ** ** |
| 4.7        | Proceeds of Collateral                           | 44         |
| ARTICLE  5 | REPRESENTATIONS  AND WARRANTIES                  | 44         |
| 5.1        | Organization; Powers                             | 44         |
| 5.2        | Authorization;  Enforceability                   | 45         |
| 5.3        | Governmental Approvals; No  Conflicts            | 45         |
| 5.4        | Financial Condition; No  Material Adverse Change | 45         |
| 5.5        | Properties                                       | 46         |
| 5.6        | Litigation and  Environmental Matters            | 47         |
| 5.7        | Compliance with Laws and  Agreements             | 47         |
| 5.8        | Investment and Holding  Company Status           | 47         |
| 5.9        | Taxes                                            | 47         |
| 5.10       | ERISA                                            | 47         |
| 5.11       | Disclosure                                       | 48         |
| 5.12       | Capitalization                                   | 48         |
| 5.13       | Subsidiaries                                     | 48         |
| 5.14       | Material Indebtedness,  Liens and Agreements     | 49         |
| 5.15       | Federal Reserve  Regulations                     | 49         |
| 5.16       | Solvency                                         | 49         |
| 5.17       | Force Majeure                                    | 50         |
| 5.18       | Accounts Receivable                              | 50         |
| 5.19       | Labor and Employment  Matters                    | 51         |
| 5.20       | Bank Accounts                                    | 51         |
| 5.21       | Certain Obligations  Respecting Subsidiaries     | 51         |
| ARTICLE  6 | CONDITIONS                                       | 52         |
| 6.1        | Effective Time                                   | 52         |
| 6.2        | Each Extension of Credit                         | 55         |
| 6.3        | Michigan Real Estate Term  Loan Effective Time   | 55         |
| ARTICLE  7 | AFFIRMATIVE  COVENANTS                           | 56         |
| 7.1        | Financial Statements and  Other Information      | 56         |
| 7.2        | Notices of Material Events                       | 58         |
| 7.3        | Existence; Conduct of  Business                  | 59         |
| 7.4        | Payment of Obligations                           | 59         |

 

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**TABLE OF CONTENTS**

(continued)

 
|        |                                                     | **Page** |
|-------------|----------------------------------------------------------|----------|
|        |                                                     |     |
| 7.5         | Maintenance of Properties;  Insurance                    | 59       |
| 7.6         | Books and Records;  Inspection Rights                    | 59       |
| 7.7         | Fiscal Year                                              | 60       |
| 7.8         | Compliance with Laws                                     | 60       |
| 7.9         | Use of Proceeds                                          | 60       |
| 7.10        | Certain Obligations  Respecting Subsidiaries             | 60       |
| 7.11        | ERISA                                                    | 60       |
| 7.12        | Environmental Matters;  Reporting                        | 61       |
| 7.13        | Matters Relating to  Additional Real Property Collateral | 61       |
| 7.14        | Cash Deposits/Bank  Accounts                             | 61       |
| ARTICLE  8  | NEGATIVE  COVENANTS                                      | 62       |
| 8.1         | Indebtedness                                             | 62       |
| 8.2         | Liens                                                    | 62       |
| 8.3         | Contingent Liabilities                                   | 63       |
| 8.4         | Fundamental Changes; Asset  Sales                        | 63       |
| 8.5         | Investments; Hedging  Agreements                         | 66       |
| 8.6         | Restricted Junior Payments                               | 66       |
| 8.7         | Transactions with  Affiliates                            | 66       |
| 8.8         | Restrictive Agreements                                   | 67       |
| 8.9         | Sale-Leaseback  Transactions                             | 67       |
| 8.10        | Fixed Charge Coverage  Ratio                             | 67       |
| 8.11        | Lines of Business                                        | 67       |
| 8.12        | Other Indebtedness                                       | 67       |
| 8.13        | Modifications of Certain  Documents                      | 67       |
| ARTICLE  9  | EVENTS  OF DEFAULT                                       | 68       |
| 9.1         | Events of Default                                        | 68       |
| 9.2         | Receivership                                             | 70       |
| ARTICLE  10 | MISCELLANEOUS                                            | 71       |
| 10.1        | Notices                                                  | 71       |
| 10.2        | Waivers; Amendments                                      | 71       |
| 10.3        | Expenses; Indemnity;  Damage Waiver                      | 72       |
| 10.4        | Successors and Assigns                                   | 73       |

 

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**TABLE OF CONTENTS**

(continued)

 
|   |                                                               | **Page** |
|--------|--------------------------------------------------------------------|----------|
|   |                                                               |     |
| 10.5   | Survival                                                           | 74       |
| 10.6   | Counterparts; Integration;  References to Agreement; Effectiveness | 74       |
| 10.7   | Severability                                                       | 74       |
| 10.8   | Right of Setoff                                                    | 74       |
| 10.9   | Subordination by Credit  Parties                                   | 75       |
| 10.10  | Governing Law;  Jurisdiction; Consent to Service of Process        | 75       |
| 10.11  | WAIVER OF JURY TRIAL                                               | 76       |
| 10.12  | Arbitration                                                        | 76       |
| 10.13  | Headings                                                           | 77       |
| 10.14  | Confidentiality                                                    | 77       |

 

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**AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT**

 

THISAMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT dated as of January 27,2009 (this “Agreement”) is by and among UFP Technologies, Inc., aDelaware corporation, Moulded Fibre Technology, Inc., a Maine corporation,Simco Industries, Inc., a Michigan corporation, Simco Automotive Trim, Inc.,a Michigan corporation, Stephenson & Lawyer, Inc., a Michigancorporation, and Patterson Properties Corporation, a Michigan corporation, asjoint and several borrowers, the guarantors from time to time party hereto, andBANK OF AMERICA, N.A., as Lender.

 

ThisAgreement amends, restates and supersedes the Credit and Security Agreementdated as of February 28, 2003 (as amended, the “Prior Credit Agreement”)by and among UFP Technologies, Inc., Moulded Fibre Technology, Inc.,Simco Industries, Inc. and Simco Automotive Trim, Inc., as joint andseveral borrowers, the guarantors from time to time party thereto, and Bank ofAmerica, N.A. (as assignee of Banc of America Leasing & Capital LLC,successor to Fleet Capital Corporation), as Lender.

 

Theparties hereto agree as follows:

 

**ARTICLE 1**

** **

**Definitions**

** **

1.1           **DefinedTerms**.  As used in thisAgreement, the following terms have the meanings specified below:

 

“AcceptanceAgreement” means the Lender’s standard form of agreement for Acceptances,substantially in the form of Exhibit F, as the same may be modifiedor replaced by the Lender from time to time.

 

“Acceptances”means acceptance transactions not involving a letter of credit in support oftrade obligations of the Credit Parties pursuant to this Agreement.

 

“AdditionalMortgage” has the meaning assigned to such term in Section 7.13(a).

 

“AdditionalMortgaged Property” means any Real Property Asset that is now owned orleased, or hereinafter acquired, by the Credit Parties, which the Lenderdetermines to acquire a Mortgage on following the Closing Date.

 

“AdvanceRequest” means a written request signed by a Designated Financial Officerfor a Borrowing in accordance with subsection 2.1(b), in substantially theform of Exhibit B-4 annexed hereto.

 

“Affiliate”means, with respect to a specified Person, another Person that Controls or isControlled by or is under common Control with the Person specified.

 

“Applicable Margin” and “Applicable UnusedFee Rate” means, for any Type of Loans (a) for the Initial PaymentPeriod (as defined below) the following percentages per annum:

 
| **Applicable Margin (% per annum) ** | ** ** | **Applicable Unused Fee Rate** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------|------------|
| **Base Rate Loans**                                 | ** ** | **LIBOR Loans**                          | ** ** | ** (% per annum)** | ** ** |
| ** **                                                    | ** ** | ** **                                    | ** ** | ** ** | ** ** |
| -0.25                                                         | %          | 1.00                                          | %          | 0.15 | % |

 

and(b) for anyPayment Period (as defined below) other than the Initial Payment Period, therespective rates indicated below for Loans of such Type opposite the applicableFixed Charge Coverage Ratio indicated below (or as provided in the finalparagraph of this definition, for part of a Payment Period):

 

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| ** **                                            | ** ** | **Applicable Margin (% per annum)** | ** ** | ** **                                          | ** ** |
|-------------------------------------------------------|------------|---------------------------------------------------------|------------|-----------------------------------------------------|------------|
| **Fixed Charge Coverage   Ratio**      | ** ** | **Base Rate Loans**                           | ** ** | **LIBOR Loans,  Acceptances,  LC Margin** | ** ** | **Applicable Unused Fee  Rate (% per annum)** | ** ** |
| Greater than or  equal to 1.75 to 1.00                |       | -0.25                                                   | %          | 1.00                                                | %          | 0.15 | % |
|                                                  |       |                                                    |       |                                                |       |   |   |
| Greater than  1.50 to 1.00 but less than 1.75 to 1.00 |       | -0.25                                                   | %          | 1.25                                                | %          | 0.20 | % |
|                                                  |       |                                                    |       |                                                |       |   |   |
| Less than 1.50  to 1.00                               |       | 0.00                                                    | %          | 1.50                                                | %          | 0.20 | % |

 

Forpurposes hereof, a “Payment Period” means (i) initially, the periodcommencing on the Closing Date to and including the fifth Business Day afterthe date of delivery of the financial statements required by subsection 7.1(b) andthe Compliance Certificate required by subsection 7.1(c) for the fiscalperiod of the Credit Parties ended December 31, 2008 (the “InitialPayment Period”), and (ii) thereafter, the period commencing on theday immediately succeeding the last day of the prior Payment Period to but notincluding the fifth Business Day after the earlier of (x) the due date ofthe next Compliance Certificate required to be delivered by the Borrowers tothe Lender pursuant to subsection 7.1(c) concurrently with the deliveryby the Borrowers of the financial statements required by subsection 7.1(b) tobe delivered to the Lender for the periods ended March 31st, June 30th, September 30th and December 31st of each year, or (y) the date of theactual receipt by the Lender of such Compliance Certificate.  Subject to and in accordance with the finalparagraph of this definition, the Applicable Margin and Applicable Unused FeeRate shall be effective for each Payment Period (or in the circumstancesdescribed in the final paragraph of this definition, such portion of a PaymentPeriod).

 

TheApplicable Margin and Applicable Unused Fee Rate for any Payment Period exceptthe Initial Payment Period shall be determined on the basis of the ComplianceCertificates required to be delivered to the Lender pursuant tosubsection 7.1(c) concurrently with the delivery by the Borrowers ofthe corresponding financial statements required by subsection 7.1(b) to bedelivered to the Lender for the periods ended March 31st, June 30th, September 30th and December 31st of each year, setting forth, among otherthings, a calculation of the Fixed Charge Coverage Ratio as at the last day ofthe fiscal quarter immediately preceding such Payment Period.

 

Anythingin this Agreement to the contrary notwithstanding, the Applicable Margin andApplicable Unused Fee Rate shall be the rates applicable when the Fixed ChargeCoverage Ratio is less than 1.50 to 1.00 if the Compliance Certificate requiredto be delivered by subsection 7.1(c) and the financial statements requiredby subsection 7.1(b), respectively, shall not be delivered within five BusinessDays after the same shall be due (but only with respect to the portion of suchPayment Period prior to the delivery of such certificate).

 

“BaseRate” means, for any day, a per annum rate equal to the greater of (a) thePrime Rate for such day; or (b) the Federal Funds Rate for such day, plus0.50%.   Any change in the Base Rate dueto a change in the Prime Rate or the Federal Funds Rate shall be effective fromand including the effective date of such change in the Prime Rate or theFederal Funds Rate, respectively.

 

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

 

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“Borrower”means (a) UFP Technologies, Inc., Moulded Fibre Technology, Inc.,Simco Industries, Inc., Simco Automotive Trim, Inc., Stephenson &Lawyer, Inc., and Patterson Properties Corporation, individually, and (b) allof UFP Technologies, Inc., Moulded Fibre Technology, Inc., SimcoIndustries, Inc., Simco Automotive Trim, Inc., Stephenson &Lawyer, Inc., and Patterson Properties Corporation, collectively, as jointand several borrowers.

 

“Borrowing”means Loans of a particular Class of the same Type, made, converted orcontinued on the same date and, in the case of LIBOR Loans, as to which asingle LIBOR Interest Period is in effect.

 

“BorrowingBase” means, at the relevant time of reference thereto, an amountdetermined by the Lender by reference to the most recent Borrowing BaseCertificate/Collateral Update Certificate delivered to the Lender pursuant to Section 2.1(b) whichis equal to the sum of:

 
| (a)    |   | 85%  of Eligible Accounts, provided that at no time shall more than $500,000 in  the aggregate of all outstanding Eligible Accounts arise from the sale of  tooling to account debtors, plus                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                       |
| (b)    |   |                                                                                                                                                                                                                                       | the  lesser of: |
|   |   |                                                                                                                                                                                                                                       |   |
|   |   | (i)                                                                                                                                                                                                                                        | the  sum of: |
|   |   |                                                                                                                                                                                                                                       |   |
|   |   |                                                                                                                                                                                                                                       | (A) | 50%  of Eligible Raw Material Inventory, |
|   |   |                                                                                                                                                                                                                                       |   |   |
|   |   |                                                                                                                                                                                                                                       | plus |   |
|   |   |                                                                                                                                                                                                                                       |   |   |
|   |   |                                                                                                                                                                                                                                       | (B) | 50%  of Eligible Finished Goods Inventory, |
|   |   |                                                                                                                                                                                                                                       |   |
|   |   | and                                                                                                                                                                                                                                        |   |
|   |   |                                                                                                                                                                                                                                       |   |
|   |   | (ii)                                                                                                                                                                                                                                       | $7,000,000,  minus |
|   |   |                                                                                                                                                                                                                                       |   |
| (c)    |   | reserves  for foreign exchange, interest rate derivative exposure, letter of credit  exposure, acceptances exposure and such other reserves as the Lender in its  reasonable credit judgment****shall deem  appropriate from time to time; |

 

Indetermining the Borrowing Base from time to time, the Lender may, but shall notbe required to, rely upon reports or analyses generated by the Credit Parties(including, without limitation, Borrowing Base Certificates/Collateral UpdateCertificates) and reports or analyses generated by or on behalf of theLender.  Notwithstanding anything to thecontrary set forth herein, the Lender may in its reasonable credit judgment atany time and from time to time, adjust the percentages of Eligible Accounts,Eligible Raw Materials Inventory, Eligible Finished Goods Inventory and undrawnamount of Documentary LCs included within the Borrowing Base.  In addition, upon receipt by the Lender of aninventory appraisal in form and substance satisfactory to the Lender from athird party appraiser acceptable to the Lender, the Lender shall consider, inthe Lender’s sole discretion, increasing the Eligible Inventory advance rate tothe lesser of 65% of cost of Eligible Inventory or 85% of the net orderlyliquidation value of Eligible Inventory.

 

“BorrowingBase Certificate” means a certificate signed by a Designated FinancialOfficer certifying the amount of the Borrowing Base as of the date set forththerein, in substantially the form of Exhibit B-1 annexed hereto.

 

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“BusinessDay” means any day that is not a Saturday, Sunday or other day on whichcommercial banks in Boston, Massachusetts are authorized or required by law toremain closed; *provided* that, when used inconnection with a LIBOR Loan, the term “Business Day” shall also excludeany day on which banks are not open for dealings in U.S. dollar deposits in theLondon interbank market.

 

“CapitalExpenditures” means, for any period, the sum for the Credit Parties(determined on a consolidated basis without duplication in accordance withGAAP) of the aggregate amount of expenditures made or liabilities incurredduring such period (including the aggregate amount of Capital Lease Obligationsincurred during such period) to acquire or construct fixed assets, plant andequipment (including renewals, improvements and replacements, but excludingrepairs) computed in accordance with GAAP; *provided* thatsuch term shall not include any such expenditures in connection with anyreplacement or repair of Property affected by a Casualty Event.

 

“CapitalLease Obligations” of any Person means the obligations of such Person topay rent or other amounts under any lease of (or other arrangement conveyingthe right to use) real or personal property, or a combination thereof, whichobligations are required to be classified and accounted for as capital leaseson a balance sheet of such Person under GAAP, and the amount of suchobligations shall be the capitalized amount thereof determined in accordancewith GAAP.

 

“CashManagement Bank” means Bank of America, N.A., in its capacity as theprovider of cash management services to the Credit Parties.

 

“CasualtyEvent” means, with respect to any Property of any Person, any loss of ordamage to, or any condemnation or other taking of, such Property for which suchPerson or any of its Subsidiaries receives insurance proceeds, or proceeds of acondemnation award or other compensation.

 

“Changein Law” means (a) the adoption of any law, rule or regulationafter the Closing Date, (b) any change after the Closing Date in any law, rule orregulation or in the interpretation or application thereof by any GovernmentalAuthority or (c) compliance by the Lender or the Issuing Lender (or, forpurposes of subsection 2.9(b), by any lending office of the Lender or bythe Lender’s or the Issuing Lender’s holding company, if any) with any request,guideline or directive (whether or not having the force of law), other than arequest or directive to comply with any law, rule or regulation in effecton the Closing Date, of any Governmental Authority made or issued after theClosing Date.

 

“Changeof Control” means (a) any event, transaction or occurrence as a resultof which a majority of the seats (other than vacant seats) on the board ofdirectors of any Credit Party shall be occupied by Persons who were neither (i) nominatedby the board of directors of UFP nor (ii) appointed by directors sonominated; or (b) the failure of UFP to own, directly or indirectlythrough one or more Subsidiaries, 100% of the outstanding capital stock of eachof the other Credit Parties; or (c) the sale of all or substantially allof the business or assets of any Credit Party; or (d) R. Jeffrey Baillyand/or Ronald J. Lataille shall for any reason cease to serve in their presentcapacities as officers of the Borrowers and the Borrowers shall fail within six(6) months of the date that R. Jeffrey Bailly and/or Ronald J. Lataillecease to serve in such capacities, to retain replacements for R. Jeffrey Baillyand/or Ronald J. Lataille who have comparable industry experience and arereasonably acceptable to the Lender.

 

“Class”when used in reference to any Loan or Borrowing, refers to whether such Loan,the Loans comprising such Borrowing or the Loans that the Lender is obligatedto make, are Revolving Loans, or a Term Loan.

 

“ClosingDate” means the date during which the Effective Time shall occur.

 

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

 

“Collateral”means, collectively, all of the Property in which Liens are purported to begranted hereunder and under the other Loan Documents as security for theObligations of the Credit Parties hereunder.

 

“CollateralUpdate Certificate” means a certificate signed by a Designated FinancialOfficer, in substantially the form of Exhibit B-2 annexed hereto.

 

“ComplianceCertificate” means a certificate signed by a Designated Financial Officer,in substantially the form of Exhibit D annexed hereto, (a) certifyingas to whether a Default has occurred and, if a Default has occurred, specifyingthe details thereof and any action taken or proposed to be taken with respectthereto, (b) setting forth reasonably detailed calculations demonstratingcompliance with Section 8.10, and****(c) statingwhether any change in GAAP or in the application thereof has occurred since thedate of the audited financial statements referred to in Section 5.4 and,if any such change has occurred, specifying the effect of such change on thefinancial statements accompanying such certificate.

 

“Control”means the possession, directly or indirectly, of the power to direct or causethe direction of the management or policies of a Person, whether through theability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled”have meanings correlative thereto.  APerson who owns or holds capital stock, beneficial interests or othersecurities representing five percent (5%) or more of the Total Voting Power ofanother Person shall be deemed, for purposes of this Agreement, to “control”such other Person.

 

“ControlAgreement” means with respect to any Controlled Account, an agreement inaccordance with Section 4.3(b), in form and substance satisfactory to theLender, executed and delivered by the Credit Parties, the depositoryinstitution at which such Controlled Account is maintained and the Lender inaccordance with Sections 4.3 and 7.14, as such agreement may be amended,supplemented or otherwise modified from time to time.

 

“ControlledAccount “ has the meaning assigned to such term in Section 4.3(a).

 

“Copyrights”means all copyrights, whether statutory or common law, owned by or assigned tothe Credit Parties, and all exclusive and nonexclusive licenses to the CreditParties from third parties or rights to use copyrights owned by such thirdparties, including, without limitation, the registrations, applications andlicenses listed on Schedule 5.5 hereto, along with any and all (a) renewalsand extensions thereof, (b) income, royalties, damages, claims andpayments now and hereafter due and/or payable with respect thereto, including,without limitation, damages and payments for past, present or futureinfringements thereof, (c) rights to sue for past, present and futureinfringements thereof, and (d) foreign copyrights and any other rightscorresponding thereto throughout the world.

 

“CreditParties” (i) until such time as any acquired or newly createdSubsidiary of the Borrowers shall become a Subsidiary Guarantor of theObligations of the Borrowers hereunder, the Borrowers; and (ii) from andafter such time as any acquired or newly created Subsidiary of the Borrowersshall become a Subsidiary Guarantor of the Obligations of the Borrowershereunder, the Borrowers and all Subsidiary Guarantors.

 

“Default”means any event or condition which constitutes an Event of Default or whichupon notice, lapse of time or both would, unless cured or waived, become anEvent of Default.

 

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“DesignatedFinancial Officer” means an individual holding one or more of the followingoffices with each of the Credit Parties or otherwise having executiveresponsibilities for financial matters and listed in Schedule 1.4hereto:  chief financial officer,principal accounting officer, treasurer, assistant treasurer or controller.

 

“DisclosedMatters” means the actions, suits and proceedings and the environmentalmatters disclosed in Schedule 5.6.

 

“DiscountRate for Acceptances” means a per annum rate equal to the Applicable Marginin effect for LIBOR Loans minus .25%.

 

“Disposition”means any sale, assignment, transfer or other disposition of any property(whether now owned or hereafter acquired) by any Credit Party to anyPerson  other than to another CreditParty excluding (a) the granting of Liens permitted hereunder and (b) anysale, assignment, transfer or other disposition of (i) any property soldor disposed of in the ordinary course of business and on ordinary businessterms, (ii) any property no longer used or useful in the business of theCredit Parties and (iii) any Collateral pursuant to an exercise ofremedies by the Lender hereunder or under any other Loan Document.

 

“EffectiveTime” means the time specified in a written notice from the Lender when theconditions specified in Section 6.1 are satisfied (or waived in accordancewith Section 10.2).

 

“EligibleAccounts” means (a) the aggregate face amount of the accountsreceivable outstanding and owed to the Credit Parties as determined in accordancewith GAAP consistently applied and as entered on the books and records of theCredit Parties in the ordinary course of the business operations of the Credit Parties which satisfy each of therequirements set forth below, minus (b) without duplication, theaggregate amount of any returns, discounts (which may, at the Lender’s option,be calculated on the shortest term), claims, credits, chargebacks, contraaccounts, aged credit balances, allowances or excise taxes of any nature(whether issued, owing, granted or outstanding):

 

(i)                                     the subject goods have been sold and/orservices have been rendered on an absolute sale basis and on an open accountbasis to an account debtor which is not (A) the United States governmentor any agency thereof or other Person such that the Assignment of Claims Actwould apply to the pledge of receivables of such account debtor, unless theAssignment of Claims Act has been complied with to the satisfaction of theLender or (B) an Affiliate of any Credit Party;

 

(ii)                                  an invoice (in form and substance acceptableto the Lender) has been sent to the applicable account debtor and bears aninvoice date contemporaneous with or later than the date of sale of such goodsor rendering of such service;

 

(iii)                               the account receivable does not arise from asale to the account debtor on a bill-and-hold, guaranteed sale, progressbilling, sale-or-return, sale-on-assignment, sale-on-appraisal, consignment orany other repurchase or return basis;

 

(iv)                              the account is not evidenced by chattel paperor an instrument of any kind, and has not been reduced to judgment;

 

(v)                                 the account debtor is not insolvent or thesubject of any bankruptcy or insolvency proceedings of any kind;

 

6

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(vi)                              the account debtor is credit worthy and notexperiencing financial difficulties that could reasonably be expected to affectthe collectability of the account;

 

(vii)                           the account debtor is an entity organized under the laws of one of theUnited States, whose main office is also located within the United States(including Puerto Rico as within the United States), or, if the account debtoris not such an entity organized and located within the United States, theaccount is insured by a letter of credit issued or confirmed by a bankacceptable to the Lender or by other credit enhancements, in each case in formand substance satisfactory to the Lender;

 

(viii)                        the account receivable is a valid and legally enforceable obligation ofthe account debtor thereunder, it is not subject to recoupment, offset (otherthan discount for prompt payment) or other defense on the part of such accountdebtor or to any claim on the part of such account debtor denying liabilitythereunder;

 

(ix)                                the account receivable is not subject to any Lien of any kind exceptfor the Lien of the Lender securing the obligations of the Credit Parties underthis Agreement;

 

(x)                                   the account receivable has not remainedoutstanding in whole or in part for more than (A) ninety (90) days afterthe invoice date or (B) sixty (60) days after the due date;

 

(xi)                                the account receivable does not arise out of a transaction (direct orindirect) with an employee, officer, agent, director or stockholder of anyCredit Party;

 

(xii)                             the account receivable is not owing from (i) anaccount debtor from whom twenty-five percent (25%)****ormore of the dollar amount of all accounts receivable are deemed ineligibleunder clause (x) above, provided that this clause (xii) shall not apply toany accounts receivable arising from the sale of tooling to account debtors;

 

(xiii)                          the total unpaid accounts receivable owingfrom such account debtor do not exceed thirty percent (30%)****ofall Eligible Accounts;

 

(xiv)                         the account receivable constitutes Collateral in which the Lender has aFirst Priority Lien securing the Obligations of the Credit Parties under thisAgreement;

 

(xv)                            the Credit Parties have not made an agreementwith the account debtor to extend the time of payment of the subject accountreceivable;

 

(xvi)                         the account debtor isnot located in Minnesota (or any other jurisdiction which adopts a statute orother requirement with respect to which any Person that obtains business fromwithin such jurisdiction or is otherwise subject to such jurisdiction’s tax lawmust file a “Business Activity Report” (or other applicable report) or make anyother required filings in a timely manner in order to enforce its claims insuch jurisdiction’s courts or arising under such jurisdiction’s laws);provided, that accounts receivable which would be Eligible Accounts but for theterms of this clause (xvi) shall nonetheless be deemed to be Eligible Accountsif the Credit Parties have filed a “Business Activity Report” (or otherapplicable report) with the applicable state office or are qualified to dobusiness in such jurisdiction and, at the time the account receivable wascreated, was qualified to do business in such jurisdiction or had on file withthe applicable state office a current “Business Activity Report” (or otherapplicable report); and

 

(xvii)                      the account receivable is denominated in U.S.Dollars; and

 

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(xviii)                   with respect to any account receivablearising from the sale of tooling to account debtors, such account receivablehas not been rejected by the Lender.

 

*provided,however*, that (A) theLender may in its reasonable credit judgment exclude particular accounts fromthe definition of Eligible Accounts and may impose additional and/or morerestrictive eligibility or valuation criteria than those set forth above aspreconditions for any account to be deemed to be an Eligible Account hereunder,and (B) an account deemed to be an Eligible Account at any one point intime may be excluded by the Lender in its reasonable credit judgment at afuture point in time.

 

“EligibleInventory” means inventory of the Credit Parties recorded on the books andrecords of the Credit Parties in the ordinary course of the business operationsof the Credit Parties valued on a first in first out basis at the lower of (a) thefair market value of such inventory, or (b) the cost charged by supplierswhich are not Affiliates of the Credit Parties, which inventory satisfies eachof the following requirements:

 

(i)                                     is in good and merchantable condition and isnot work in process;

 

(ii)                                  meets all standards imposed by any governmentagency having regulatory authority over such goods and/or their use,manufacture and/or sale;

 

(iii)                               has been physically received in thecontinental United States by the Credit Parties and is located at a facilityowned or leased by the Credit Parties; provided that no inventory located at aleased facility shall be deemed to be “Eligible Inventory” hereunder unless thelandlord of such facility shall have entered into an agreement satisfactory inform and substance to the Lender acknowledging the Liens of the Lender andgranting the Lender unrestricted access to such inventory;

 

(iv)                              is currently useable or currently salable inthe normal course of the business operations, or, as respects raw materials, isincorporated or is being held to be incorporated in customer products beingproduced or provided by the Credit Parties;

 

(v)                                 does not constitute excess, obsolete,unsaleable, shopworn, seconds, damaged or unfit inventory;

 

(vi)                              has not remained in the possession of theCredit Parties for more than 180-days****or has nototherwise been determined by the Lender in its reasonable credit judgment toconstitute slow-moving inventory;

 

(vii)                           does not arise from a sale to an accountdebtor on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,consignment or any other repurchase or return basis;

 

(viii)                        is not subject to any Lien of any kind exceptfor the Lien of the Lender securing Obligations under this Agreement;

 

(ix)                                has not been sold to any Person;

 

(x)                                   does not constitute raw materialsspecifically printed for a customer with the Customer’s name or Customer’strademarks;

 

(xi)                                does not constitute customer labels; and

 

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(xii)                             constitutes Collateral in which the Lenderhas a First Priority Lien securing the obligations of the Credit Parties underthis Agreement;

 

*provided,however*, that (A) theaggregate amount of Eligible Inventory shall be computed net of such reservesfor slow moving and other ineligible inventory as the Lender shall deemappropriate, (B) the Lender may in its reasonable credit judgment excludeparticular items of inventory from the definition of Eligible Inventory and mayimpose additional and/or more restrictive eligibility or valuation criteriathan those set forth above as preconditions for any item of inventory to bedeemed to be Eligible Inventory hereunder, and (C) inventory deemed to beEligible Inventory at any one point in time may be excluded by the Lender inits reasonable credit judgment at a future point in time.

 

“EligibleFinished Goods Inventory” means that portion of Eligible Inventoryconsisting of finished goods.

 

“EligibleRaw Materials Inventory” means that portion of Eligible Inventoryconsisting of raw materials.

 

“EnvironmentalLaws” means all applicable laws, rules, regulations, codes, ordinances,orders, decrees, judgments, injunctions, notices or binding agreements issued,promulgated or entered into by any Governmental Authority, relating in any wayto the environment, preservation or reclamation of natural resources, themanagement, release or threatened release of any Hazardous Material or tohealth and safety matters.

 

“EnvironmentalLiability” means any liability, contingent or otherwise (including any liabilityfor damages, costs of environmental remediation, fines, penalties orindemnities), of any Credit Party directly or indirectly resulting from orbased upon (a) violation of any Environmental Law, (b) thegeneration, use, handling, transportation, storage, treatment or disposal ofany Hazardous Materials, (c) exposure to any Hazardous Materials, (d) therelease or threatened release of any Hazardous Materials into the environmentor (e) any contract, agreement or other consensual arrangement pursuant towhich liability is assumed or imposed with respect to any of the foregoing.

 

“EquityRights” means, with respect to any Person, any subscriptions, options,warrants, commitments, preemptive rights or agreements of any kind (includingany stockholders’ or voting trust agreements) for the issuance or sale of, orsecurities convertible into, any additional shares of capital stock of anyclass, or partnership or other ownership interests of any type in, such Person.

 

“ERISA”means the Employee Retirement Income Security Act of 1974, as amended from timeto time.

 

“ERISAAffiliate” means any trade or business (whether or not incorporated) that,together with the Credit Parties, is treated as a single employer within themeaning of Section 414(b), (c), (m) or (o) of the Code.  Notwithstanding the foregoing, for purposesof any liability related to a Multiemployer Plan under Title IV of ERISA, theterm “ERISA Affiliate” means any trade or business that, together with theCredit Parties, is treated as a single employer within the meaning of Section 4001(b) ofERISA.

 

“ERISAEvent” means (a) a “reportable event”, as defined in Section 4043of ERISA or the regulations issued thereunder for which the notice requirementhas not been waived with respect to any Pension Plan, (b) the existencewith respect to any Pension Plan of an “accumulated funding deficiency” (asdefined in Section 412 of the Code or Section 302 of ERISA), whetheror not waived, (c) the filing pursuant to Section 412(d) of the Codeor Section 303(d) of ERISA of an application for a waiver of theminimum funding standard with respect to any Pension Plan, (d) theincurrence by any Credit Party or 

 

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anyERISA Affiliate of any liability under Title IV of ERISA with respect to thetermination of any Pension Plan, (e) the receipt by any Credit Party orany ERISA Affiliate from the PBGC or plan administrator of any notice relating to an intention to terminateany Pension Plan or Pension Plans or to appoint a trustee to administer anyPension Plan, or (f) the receipt by any Credit Party or any ERISAAffiliate of any notice, or the receipt by any Multiemployer Plan from anyCredit Party or any ERISA Affiliate of any notice of Withdrawal Liability or adetermination that a Multiemployer Plan is, or is expected to be, insolvent orin reorganization, within the meaning of Title IV of ERISA.

 

“Eventof Default” has the meaning assigned to such term in Section 9.1.

 

“ExcessAvailability” means, as of any date of determination thereof, thedifference between (a) the lesser of (i) the Revolving CreditCommitment at such time and (ii) the Borrowing Base at such time, and (b) theRevolving Credit Exposure at such time.

 

“ExcludedTaxes” means, with respect to the Lender, the Issuing Lender or any otherrecipient of any payment to be made by or on account of any Obligationhereunder, (a) income, net worth or franchise taxes imposed on (ormeasured by) its net income or net worth by the United States of America, or bythe jurisdiction under the laws of which such recipient is organized or inwhich its principal office is located or, in the case of the Lender, in whichits lending office is located or in which it is taxable solely on account ofsome connection other than the execution, delivery or performance of thisAgreement or the receipt of income hereunder, and (b) any branch profitstaxes imposed by the United States of America or any similar tax imposed by anyother jurisdiction in which any Borrower is located.

 

“ExistingDebt” means (i) Indebtedness of the Credit Parties existing as of theEffective Time which is being repaid in full with the proceeds of the Loansmade by the Lender at the Effective Time and (ii) Indebtedness of theCredit Parties existing as of the Effective Time which is permitted to remainoutstanding after the Effective Time under Section 8.1 and is listed on Schedule8.1 hereto.

 

“ExistingEquipment Term Loan” means the Existing Equipment Term Loan made by theLender to the Borrowers under the Prior Loan Agreement in the amount of$2,018,523.90, as more fully described in Section 2.2(a)(i).

 

“ExistingEquipment Term Loan Maturity Date” means January 27, 2016, or suchearlier date as provided in Section 2.7 or Section 9.1.

 

“ExistingEquipment Term Note” means the Second Amended and Restated Equipment TermNote, in the form of Exhibit A-2 annexed hereto, issued by theBorrowers in favor of the Lender and evidencing the Existing Equipment TermLoan.

 

“ExistingLetters of Credit” means those certain letters of credit issued by theIssuing Lender under the Prior Credit Agreement outstanding as of the ClosingDate and listed on Schedule 8.1 hereto.

 

“FederalFunds Rate” means (a) the weighted average of interest rates onovernight federal funds transactions with members of the Federal Reserve Systemarranged by federal funds brokers on the applicable Business Day (or on thepreceding Business Day, if the applicable day is not a Business Day), aspublished by the Federal Reserve Bank of New York on the next Business Day; or (b) ifno such rate is published on the next Business Day, the average rate (roundedup, if necessary, to the nearest 1/8 of 1%) charged to Lender on the applicableday on such transactions, as determined by Lender.

 

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“FirstPriority” means, with respect to any Lien purported to be created in anyCollateral pursuant to any Collateral Document, that such Lien is the mostsenior Lien (other than Permitted Liens) to which such Collateral is subject.

 

“Fixed Charge Coverage Ratio” means, for anyperiod, the ratio of:

 

(a)                                  Operating Cash Flow ofthe Credit Parties for theperiod of four consecutive fiscal quarters ending on or most recently endedprior to the date of measurement, to

 

(b)                                 the sum for the CreditParties (determined on a consolidated basis without duplication in accordancewith GAAP), of

 

(i) the aggregate amount of Interest Expense forsuch period, plus

 

(ii) the aggregate amount of regularly scheduledpayments of principal in respect of Indebtedness for borrowed money (includingthe principal component of any payments in respect of Capital LeaseObligations) paid or required to be paid during such period.

 

For purposes of calculating Fixed Charge Coverage Ratioat any time, the Credit Parties shall be permitted to offset (withoutduplication) the income taxes described in subsection (b)(i) of thedefinition of “Operating Cash Flow” below with state or federal income taxrefunds received by the Credit Parties during such period, but only in anamount less than or equal to the amount described in subsection (b)(i) ofthe definition of “Operating Cash Flow” for such period.

 

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

 

“GovernmentalAuthority” means the government of the United States of America, any othernation or any political subdivision thereof, whether state or local, and anyagency, authority, instrumentality, regulatory body, court, central bank orother entity exercising executive, legislative, judicial, taxing, regulatory oradministrative powers or functions of or pertaining to government.

 

“Guarantee”means a guarantee, an endorsement, a contingent agreement to purchase or tofurnish funds for the payment or maintenance of, or otherwise to be or becomecontingently liable under or with respect to, the Indebtedness, otherobligations, net worth, working capital or earnings of any Person, or aguarantee of the payment of dividends or other distributions upon the stock orequity interests of any Person, or an agreement to purchase, sell or lease (aslessee or lessor) property, products, materials, supplies or services primarilyfor the purpose of enabling a debtor to make payment of such debtor’sobligations or an agreement to assure a creditor against loss, and including,without limitation, causing a bank or other financial institution to issue aletter of credit or other similar instrument for the benefit of another Person,but excluding endorsements for collection or deposit in the ordinary course ofbusiness.  The terms “Guarantee”and “Guaranteed” used as a verb shall have a correlative meaning.  The amount of any Guarantee shall be deemedto be an amount equal to the stated or determinable amount of the primaryobligations in respect of which such Guarantee is made or, if not stated ordeterminable, the maximum reasonably anticipated liability in respect thereof(assuming such Person is required to perform thereunder).

 

“Guarantor”means any Person, including, without limitation, the Subsidiary Guarantors,which is a guarantor hereunder as of the Effective Time or which becomes aguarantor hereunder after the Effective Time.

 

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“HazardousMaterials” means all explosive or radioactive substances or wastes and allhazardous or toxic substances, wastes or other pollutants, including petroleumor petroleum distillates, asbestos or asbestos containing materials,polychlorinated biphenyls, radon gas, infectious or medical wastes and allother substances or wastes of any nature, in each case regulated or subject toregulation pursuant to any Environmental Law.

 

“HazardousMaterials Indemnity Agreement” means the Hazardous Materials IndemnityAgreement dated as of February 28, 2003 by and among the Credit Partiesand the Lender, as such agreement may be amended, supplemented or otherwisemodified from time to time.

 

“HedgingAgreement”  means any interest rateprotection agreement, foreign currency exchange agreement, commodity priceprotection agreement or other interest or currency exchange rate or commodityprice hedging arrangement.

 

“Indebtedness”means, for any Person, without duplication: (a) obligations created,issued or incurred by such Person for borrowed money (whether by loan, advance,the issuance and sale of debt securities or the sale of Property to anotherPerson subject to an understanding or agreement, contingent or otherwise, torepurchase such Property from such Person); (b) obligations of such Personto pay the deferred purchase or acquisition price of Property or services,other than trade accounts payable (other than for borrowed money) arising, andaccrued expenses and deferred taxes incurred and paid, in the ordinary courseof business; (c) Capital Lease Obligations of such Person; (d) obligationsof such Person in respect of Hedging Agreements; and (e) obligations ofsuch Person in respect of letters of credit or similar instruments issued oraccepted by banks and other financial institutions for the account of suchPerson.  The Indebtedness of any Personshall include the Indebtedness of any other entity (including any partnershipin which such Person is a general partner) to the extent such Person is liabletherefor as a result of such Person’s ownership interest in or other relationshipwith such entity, except to the extent the terms of such Indebtedness providethat such Person is not liable therefor.

 

“IndemnifiedTaxes” means all Taxes other than (a) Excluded Taxes and Other Taxesand (b) amounts constituting penalties or interest imposed with respect toExcluded Taxes or Other Taxes.

 

“IntercompanyIndebtedness” has the meaning assigned to such term in Section 10.9.

 

“InterestExpense” means, for any period, the sum, without duplication, for theCredit Parties (determined on a consolidated basis without duplication inaccordance with GAAP), of the following: (a) all interest in respect ofIndebtedness during such period, but excluding capitalized debt acquisitioncosts (including fees and expenses related to this Agreement) plus (b) thenet amounts payable (or minus the net amounts receivable) in respect ofHedging Agreements accrued during such period (whether or not actually paid orreceived during such period) excluding reimbursement of legal fees and othersimilar transaction costs and excluding payments required by reason of theearly termination of Hedging Agreements in effect on the date hereof plus(c) all fees, including letter of credit and Acceptances fees andexpenses, (but excluding reimbursement of legal fees) incurred in respect ofIndebtedness during such period.

 

“Investment”means, for any Person: (a) the acquisition (whether for cash, Property,services or securities or otherwise) of capital stock, bonds, notes,debentures, partnership, limited liability company or other ownership interestsor other securities of any other Person or any agreement to make any suchacquisition (including, without limitation, any “short sale” or any sale of anysecurities at a time when such securities are not owned by the Person enteringinto such short sale); (b) the making of any deposit with, or advance,loan or other extension of credit to, any other Person (including the purchaseof Property from another Person subject to an understanding or agreement,contingent or otherwise, to resell 

 

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suchProperty to such Person, but excluding any such advance, loan or extension ofcredit representing the purchase price of inventory or supplies sold by suchPerson in the ordinary course of business provided that in no event shall theterm of any such inventory or supply advance, loan or extension of creditexceed 180 days); or (c) the entering into of any Guarantee of, or othercontingent obligation with respect to, Indebtedness or other liability of anyother Person and (without duplication) any amount committed to be advanced,lent or extended to such Person. Notwithstanding the foregoing, Capital Expenditures shall not be deemed “Investments”for purposes hereof.

 

“IPCollateral” means, collectively, the Collateral relating to intellectualproperty rights of the Credit Parties hereunder or under any other LoanDocument.

 

“IssuingLender” means Bank of America, N.A., in its capacity as an issuer ofLetters of Credit and Acceptances hereunder.

 

“LandlordWaiver and Consent” means, with respect to any Leasehold Property, aletter, certificate or other instrument in writing from the lessor under therelated lease, in form approved by the Lender in its sole discretion.

 

“LC/AcceptanceDisbursement” means a payment made by the Issuing Lender pursuant to aLetter of Credit or an Acceptance Agreement.

 

“LCand Acceptances Sublimit” means a sublimit of the Revolving CreditCommitment available for the issuance of Letters of Credit and Acceptances forthe account of the Borrowers in an aggregate maximum amount available to bedrawn equal to $5,000,000.

 

“LeaseholdProperty” means any leasehold interest of any Credit Party as lessee underany lease of real property, other than any such leasehold interest designatedfrom time to time by the Lender in its sole discretion as not being required tobe included in the Collateral and not being of material importance to thebusiness or operations of the Credit Parties.

 

“Lender”means Bank of America, N.A. or any other party which becomes a lenderhereunder.

 

“Letterof Credit” means any letter of credit issued on a standby basis or insupport of trade obligations of the Credit Parties pursuant to this Agreement.

 

“LIBOR”means, for any Interest Period with respect to a LIBOR Loan, the per annum rateof interest (rounded up, if necessary, to the nearest 1/8th of 1%), determinedby Lender at approximately 11:00 a.m. (London time) two Business Daysprior to commencement of such Interest Period, for a term comparable to suchInterest Period, equal to (a) the British Bankers Association LIBOR Rate (“BBALIBOR”), as published by Reuters (or other commercially available sourcedesignated by Lender); or (b) if BBA LIBOR is not available for anyreason, the interest rate at which Dollar deposits in the approximate amount ofthe LIBOR Loan would be offered by Lender’s London branch to major banks in theLondon interbank Eurodollar market.  Ifthe Board imposes a Reserve Percentage with respect to LIBOR deposits, then LIBORshall be the foregoing rate, divided by 1 minus the Reserve Percentage.

 

“LIBORDaily Floating Rate” means a fluctuating rate of interest per annum equalto BBA LIBOR, as published by Reuters (or other commercially available sourceproviding quotations of BBA LIBOR as selected by Lender from time to time), asdetermined for each Business Day at approximately 11:00 a.m. London timetwo (2) London Banking Days prior to the date in question, for U.S. Dollardeposits (for delivery on the first day of such interest period) with a onemonth term, as adjusted from time to time in Lender’s sole discretion forreserve requirements, deposit insurance assessment rates and 

 

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otherregulatory costs.  If the BBA LIBOR DailyFloating Rate is not available for any reason, then such rate will bedetermined by such alternate method as reasonably selected by Lender.

 

“LIBORInterest Period” means with respect to any LIBOR Borrowing, the periodcommencing on the date of such Borrowing and ending on the numericallycorresponding day in the calendar month that is one, two, three or six monthsthereafter, as the Borrowers may elect; *provided*, that (i) ifany LIBOR Interest Period would end on a day other than a Business Day, suchLIBOR Interest Period shall be extended to the next succeeding Business Dayunless such next succeeding Business Day would fall in the next calendar month,in which case such LIBOR Interest Period shall end on the next precedingBusiness Day and (ii) any LIBOR Interest Period that commences on the lastBusiness Day of a calendar month (or on a day for which there is no numericallycorresponding day in the last calendar month of such LIBOR Interest Period)shall end on the last Business Day of the last calendar month of such LIBORInterest Period.  For purposes hereof,the date of a Borrowing initially shall be the date on which such Borrowing ismade and thereafter shall be the effective date of the most recent conversionor continuation of such Borrowing. Notwithstanding the foregoing, if any LIBOR Interest Period for anyRevolving Credit Borrowing would otherwise end after the Revolving CreditMaturity Date, such LIBOR Interest Period shall end on the Revolving CreditMaturity Date.

 

“LIBORRequest” means a written request signed by a Designated Financial Officerfor the conversion of Base Rate Loans or LIBOR Daily Floating Rate Loans intoLIBOR Loans or for the continuation of an existing LIBOR Loan for an additionalLIBOR Interest Period in accordance with Section 2.3, in substantially theform of Exhibit B-3 annexed hereto.

 

“Lien”means, with respect to any asset, (a) any mortgage, deed of trust, lien,pledge, hypothecation, encumbrance, charge or security interest in, on or ofsuch asset, (b) the interest of a vendor or a lessor under any conditionalsale agreement, capital lease or title retention agreement (or any financinglease having substantially the same economic effect as any of the foregoing),other than an operating lease, relating to such asset and (c) in the caseof securities, any purchase option, call or similar right of a third party withrespect to such securities.

 

“LoanDocuments” means this Agreement, the Revolving Credit Note, the ExistingEquipment Term Note, the Massachusetts Real Estate Term Note, the Michigan RealEstate Term Note, the Control Agreements, the Mortgages, the Stock PledgeAgreement, the Hazardous Materials Indemnity Agreement, each Letter of Credit,each Acceptance, agreements between the Borrowers and the Lender (or any of itsaffiliates) relating to Letters of Credit and Acceptances, and any otherinstruments or documents executed and delivered or to be delivered to theLender from time to time pursuant to this Agreement, as the same may besupplemented and amended from time to time in accordance with their respectiveterms.

 

“Loans”means the Revolving Loans, the Existing Equipment Term Loan, the MassachusettsReal Estate Term Loan and the Michigan Real Estate Term Loan.

 

“LockBox” has the meaning assigned to such term in Section 4.3(a).

 

“LockboxAgreement” means with respect to any Lock Box****ofthe Credit Parties, an agreement in accordance with Section 4.3(b), inform and substance satisfactory to the Lender, executed and delivered by theCredit Parties, the depository institution at which such Lock Box is maintainedand the Lender at the Effective Time, as such agreement may be amended,supplemented or otherwise modified from time to time.

 

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“MassachusettsReal Estate Term Loan” means the Massachusetts Real Estate Term Loan madeby the Lender to the Borrowers pursuant to the Prior Loan Agreement in theamount of $1,846,000 as more fully described in Section 2.2(a)(ii).

 

“MassachusettsReal Estate Term Loan Maturity Date” means January 27, 2016, or suchearlier date as provided in Section 2.7 or Section 9.1.

 

“MassachusettsReal Estate Term Note” means the Second Amended and Restated MassachusettsReal Estate Term Note, substantially in the form of Exhibit A-4 annexedhereto, issued by the Borrowers in favor of the Lender and evidencing theMassachusetts Real Estate Term Loan.

 

“MassachusettsReal Property” means the Borrowers’ owned real property located inGeorgetown, Massachusetts.

 

“MaterialAdverse Effect” means, any event, circumstance, happening or condition,which, in the Lender’s reasonable discretion, has resulted or could result in amaterial adverse effect on (a) the business, assets, financial conditionor prospects of the Credit Parties taken as a whole, (b) the ability ofany Credit Party to pay or perform any of its obligations under this Agreementor the other Loan Documents or (c) any of the rights of or benefitsavailable to the Lender under this Agreement and the other Loan Documents.

 

“MaterialIndebtedness” means Indebtedness (other than the Loans, Letters of Creditor Acceptances), including, without limitation, obligations in respect of oneor more Hedging Agreements, in an aggregate principal amount exceeding****$50,000.  Forpurposes of determining Material Indebtedness, the “principal amount” of theobligations of any Person in respect of a Hedging Agreement at any time shallbe the maximum aggregate amount (giving effect to any netting agreements) thatsuch Person would be required to pay if such Hedging Agreement were terminatedat such time.

 

“MaterialLeasehold Property” means a Leasehold Property reasonably determined by theLender to be of material value as Collateral or of material importance to theoperations of the Credit Parties.

 

“MaterialOwned Property” means any real property owned by any Credit Party that isreasonably determined by the Lender to be of material value as Collateral or ofmaterial importance to the operations of the Credit Parties following theClosing Date.

 

“MaterialRental Obligations” means obligations of the Credit Parties to pay rentunder any one or more operating leases with respect to any real or personalproperty that is material to the business of the Credit Parties.

 

“MichiganReal Estate Term Loan” means the Michigan Real Estate Term Loan to be madeby the Lender to the Borrowers in accordance with Section 2.2(b)(ii), inthe amount of the lesser of (i) $4,000,000 and (ii) 80% of theappraised value of the Michigan Property, based upon the results of an appraisalobtained by the Lender with respect to the such property.

 

“MichiganReal Estate Term Loan****Closing Date”means the date during which the Michigan Real Estate Term Loan****Effective Time shall occur.

 

“MichiganReal Estate Term Loan****Effective Time”means the time specified in a written notice from the Lender when theconditions specified in Section 6.3 are satisfied (or waived in accordancewith Section 10.2).

 

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“MichiganReal Estate Term Loan Maturity Date” means January 27, 2016, or suchearlier date as provided in Section 2.7 or Section 9.1.

 

“MichiganReal Estate Term Note” means the Michigan Real Estate Term Note,substantially in the form of Exhibit A-5 annexed hereto, issued bythe Borrowers in favor of the Lender and evidencing the Michigan Real EstateTerm Loan.

 

“MichiganReal Property” means the Borrowers’ owned real property located inKentwood, Michigan.

 

“MultiemployerPlan” means a multiemployer plan as defined in Section 4001(a)(3) ofERISA.

 

“Mortgage”means a security instrument (whether designated as a deed of trust or amortgage, leasehold mortgage, assignment of leases and rents or by any similartitle) executed and delivered by any Credit Party in such form as may beapproved by the Lender in its sole and reasonable discretion, in each case withsuch changes thereto as may be recommended by the Lender’s local counsel basedon local laws or customary local practices, and (b) at the Lender’s option,in the case of an Additional Mortgaged Property, an amendment to an existingMortgage, in form satisfactory to the Lender, adding such Additional MortgagedProperty to the Real Property Assets encumbered by such existing Mortgage, ineither cases as such security instrument or amendment may be amended,supplemented or otherwise modified from time to time.

 

“MortgagedProperty” means the Massachusetts Real Property, the Michigan RealProperty, and each Additional Mortgaged Property.

 

“Net Cash Payments” means,

 

(a)                                  with respect to any Casualty Event, theaggregate amount of cash proceeds of insurance, condemnation awards and othercompensation received by the Credit Parties in respect of such Casualty Eventnet of (i) reasonable expenses incurred by the Credit Parties inconnection therewith and (ii) contractually required repayments ofIndebtedness to the extent secured by a Lien on such property and (iii) anyincome and transfer taxes payable by the Credit Parties in respect of suchCasualty Event;

 

(b)                                 with respect to any Disposition, theaggregate amount of all cash payments received by the Credit Parties directlyor indirectly in connection with such Disposition, whether at the time of suchDisposition or after such Disposition under deferred payment arrangements orInvestments entered into or received in connection with such Disposition, netof (i) the amount of any legal, title, transfer and recording taxexpenses, commissions and other fees and expenses payable by the Credit Partiesin connection therewith, (ii) any Federal, state and local income or otherTaxes estimated to be payable by the Credit Parties as a result thereof, (iii) anyrepayments by the Credit Parties of Indebtedness to the extent that suchIndebtedness is secured by a Lien on the property that is the subject of suchDisposition and the transferee of (or holder of a Lien on) such propertyrequires that such Indebtedness be repaid as a condition to the purchase ofsuch property, and (iv) any repayments by the Credit Parties to minoritystockholders if and to the extent permitted hereby; and

 

(c)                                  with respect to any incurrence ofIndebtedness or offering of equity securities, the aggregate amount of all cashproceeds received by the Credit Parties therefrom less all legal, underwriting andsimilar fees and expenses incurred in connection therewith.

 

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“Non-FinancedCapital Expenditures” means CapitalExpenditures paid in cash and not financed with Indebtedness for borrowedmoney; *provided that*Capital Expendituresfinanced with the proceeds of Revolving Loans shall be deemed to constitute “Non-FinancedCapital Expenditures” for purposes of this Agreement.

 

“Obligations”means (a) the aggregate outstanding principal balance of and all intereston the Loans made by the Lender to the Borrowers (including any interestaccruing after the commencement of any proceeding by or against any Borrowerunder the federal bankruptcy laws, as now or hereafter constituted, or anyother applicable federal or state bankruptcy, insolvency or other similar law,and any other interest that would have accrued but for the commencement of suchproceeding, whether or not any such interest is allowed as a claim enforceableagainst any Borrower in any such proceeding), and (b) all LC/ AcceptanceDisbursements, overdraft obligations, fees, costs, charges, expenses and otherobligations from time to time owing to the Lender, the Issuing Lender, the CashManagement Bank, or any other Affiliate of the Lender by the Credit Partieshereunder or under any other Loan Document or in respect of any HedgingAgreement, cash management agreement, operating or deposit account, commercialcredit card and merchant card services, automated clearinghouse services,leases or other banking product or service from time to time made available tothe Credit Parties by the Lender, the Issuing Lender, the Cash Management Bankor any other Affiliate of the Lender.

 

“OperatingCash Flow” means, for any period, (a) the net income of the Credit Parties(determined on a consolidated basis without duplication in accordance withGAAP) for such period, plus (b) to the extent deducted incalculating net income (withoutduplication) (i) income taxes accrued during such period, (ii) extraordinaryor unusual losses (including losses from discontinued operations) during suchperiod, (iii) depreciation, amortization and other non-cash chargesaccrued for such period, and (iv) interest and fees in respect ofIndebtedness (including amounts accrued or paid in respect of HedgingAgreements) during such period (whether or not actually paid in cash duringsuch period), minus (c) to the extent such items were added incalculating net income (withoutduplication) (i) extraordinary or unusual gains (including gains fromdiscontinued operations) during such period, (ii) the aggregate amount of all Non-Financed Capital Expenditures during suchperiod, (iii) the aggregate amount of dividends and distributionspermitted to be paid under Section 8.6 and actually paid in cash duringsuch period, and (iv) proceeds received during such period inrespect of Casualty Events and Dispositions.

 

“OtherTaxes” means any and all present or future stamp or documentary taxes orany other excise or property taxes, charges or similar levies arising from anypayment made hereunder or from the execution, delivery or enforcement of, orotherwise with respect to, this Agreement and the other Loan Documents, *provided* that there shall be excluded from “Other Taxes” allExcluded Taxes.

 

“Patents”means all patents issued or assigned to and all patent applications made by theCredit Parties and, to the extent that the grant of a security interest doesnot cause a breach or termination thereof, all exclusive and nonexclusivelicenses to the Credit Parties from third parties or rights to use patentsowned by such third parties, including, without limitation, the patents, patentapplications and licenses listed on Schedule 5.5 hereto, along with anyand all (a) inventions and improvements described and claimed therein, (b) reissues,divisions, continuations, extensions and continuations-in-part thereof, (c) income,royalties, damages, claims and payments now and hereafter due and/or payableunder and with respect thereto, including, without limitation, damages andpayments for past or future infringements thereof, (d) rights to sue forpast, present and future infringements thereof, and (e) any other rightscorresponding thereto throughout the world.

 

“PensionPlan” means any Plan that is a defined benefit pension plan subject to theprovisions of Title IV of ERISA or Section 412 of the Code or Section 302of ERISA, and in respect of which any 

 

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CreditParty or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069of ERISA be deemed to be) an “employer” as defined in Section 3(5) ofERISA.

 

“PermittedAcquisitions” has the meaning assigned to such term in subsection8.4(c)(iii).

 

“PermittedInvestments” means:

 

(a)                                  direct obligations of, or obligations theprincipal of and interest on which are unconditionally guaranteed by, theUnited States of America (or by any agency thereof to the extent suchobligations are backed by the full faith and credit of the United States of America),in each case maturing within one year from the date of acquisition thereof;

 

(b)                                 investments in commercial paper maturing within270 days from the date of acquisition thereof and having, at such date ofacquisition, the highest credit rating obtainable from Standard and Poor’sRatings Service or from Moody’s Investors Service, Inc.;

 

(c)                                  investments in certificates of deposit,banker’s acceptances and time deposits maturing within 180 days from the dateof acquisitionthereof issued or guaranteed by or placed with, and money market depositaccounts issued or offered by, any domestic office of any commercial bankorganized under the laws of the United States of America or any State thereofwhich has a combined capital and surplus and undivided profits of not less than$250,000,000;

 

(d)                                 fully collateralized repurchase agreementswith a term of not more than 30 days for securities described in clause (a) aboveand entered intowith a financial institution satisfying the criteria described in clause (c) above;

 

(e)                                  advances, loans and extensions of credit toany director, officer or employee of the Credit Parties, if the aggregateoutstanding amount of all such advances, loans and extensions of credit(excluding travel advances in the ordinary course of business) does not at anytime exceed $25,000;

 

(f)                                    capital contributions by any Credit Party toany other Credit Party and Intercompany Indebtedness; and

 

(g)                                 investments in money market mutual funds thatare rated AAA by Standard &Poor’s Rating Service.

 

“PermittedLiens” has the meaning set forth in Section 8.2.

 

“Person”means any natural person, corporation, limited liability company, trust, jointventure, association, company, partnership, Governmental Authority or otherentity.

 

“Plan”means any employee benefit plan within the meaning of Section 3(3) ofERISA in which any Credit Party or any ERISA Affiliate is an “employer” asdefined in Section 3(5) of ERISA, including, but not limited to, anyPension Plan or Multiemployer Plan.

 

“Post-DefaultRate” means a rate per annum equal to the Base Rate plus theApplicable Margin plus two percent (2%).

 

“PrimeRate” means the rate of interest announced by Lender from time to time asits prime rate.  Such rate is set byLender on the basis of various factors, including its costs and desired return,general economic conditions and other factors, and is used as a reference pointfor pricing some loans, which may 

 

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bepriced at, above or below such rate.  Anychange in such rate announced by Lender shall take effect at the opening ofbusiness on the day specified in the public announcement of such change.

 

“Property”means any interest of any kind in property or assets, whether real, personal ormixed, and whether tangible or intangible.

 

“ProprietaryRights” has the meaning assigned to such term in Section 5.5(b).

 

“PTO”means the United States Patent and Trademark Office or any successor orsubstitute office in which filings are necessary or, in the opinion of the Lender,desirable in order to create or perfect Liens on any IP Collateral.

 

“RealProperty Asset” means, at any time of determination, any and all realproperty owned or leased by the Credit Parties.

 

“RegisteredProprietary Rights” has the meaning assigned to such term in Section 5.5(c).

 

“ReimbursementObligation” has the meaning assigned to such term in Section 2.4(d).

 

“RelatedParties” means, with respect to any specified Person, such Person’sAffiliates and the respective directors, officers, employees, agents andadvisors of such Person and such Person’s Affiliates.

 

“ReservePercentage” means the reserve percentage (expressed as a decimal, roundedup to the nearest 1/8th of 1%) applicable to member banks under regulationsissued from time to time by the Board for determining the maximum reserverequirement (including any emergency, supplemental or other marginal reserverequirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrencyliabilities”).

 

“RestrictedJunior Payment” means (i) any dividend or other distribution, director indirect, on account of any shares of any class of stock of, or other equityinterest in, any Credit Party now or hereafter outstanding, except a dividendpayable solely in shares of stock or other equity interests, (ii) anyredemption, retirement, sinking fund or similar payment, purchase or otheracquisition for value, direct or indirect, of any shares of any class of stockof, or other equity interest in, any Credit Party now or hereafter outstanding,(iii) any payment made to retire, or to obtain the surrender of, anyoutstanding warrants, options or other rights to acquire shares of any class ofstock of, or other equity interest in, any Credit Party, (iv) any paymentor prepayment of principal of, premium, if any, or interest on, or redemptionpurchase, retirement, defeasance (including economic or legal defeasance),sinking fund or similar payment with respect to, any Subordinated Indebtedness,and (v) any payment made to any Affiliates of any Credit Party in respectof management, consulting or other similar services provided to any CreditParty.

 

“RestrictiveAgreements” has the meaning assigned to such term in Section 5.13(b).

 

“RevolvingCredit Availability Period” means the period from and including theEffective Time to but excluding the earlier of (a) the Revolving CreditMaturity Date and (b) the date of termination of the Revolving CreditCommitment, as terminated by the Borrowers pursuant to Section 2.7 or bythe Lender pursuant to Section 9.1.

 

“RevolvingCredit Commitment” means the commitment of the Lender to make RevolvingLoans as such commitment may be reduced from time to time pursuant to Section 2.5.  The original maximum amount of the RevolvingCredit Commitment is equal to $17,000,000.

 

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“RevolvingCredit Exposure” means at any time the sum of (a) the outstandingprincipal amount of Revolving Loans at such time, (b) the Total LC andAcceptances Exposure at such time.

 

“RevolvingCredit Maturity Date” November 30, 2013.

 

“RevolvingCredit Note” means the Second Amended and Restated Revolving Credit Note,substantially in the form of Exhibit A-1 annexed hereto, issued bythe Borrowers in favor of the Lender.

 

“RevolvingLoan” means a Loan made pursuant to Section 2.1(a) that utilizesthe Revolving Credit Commitment.

 

“SolvencyCertificate” means a certificate in substantially the form of Exhibit Eannexed hereto executed by the Chief Financial Officer of the Borrowers anddelivered to the Lender on the Closing Date.

 

“SpecialCounsel” means Edwards Angell Palmer & Dodge LLP, in its capacityas special counsel to Bank of America, N.A., as Lender of the credit facilitiescontemplated hereby.

 

“StockPledge Agreement” means the Stock Pledge Agreement dated as of February 28,2003 by and between UFP and the Lender with respect to the capital stock ofeach of the Credit Parties owned by UFP or its Subsidiaries, as the same may bemodified or amended from time to time with the consent of the Lender.

 

“SubordinatedIndebtedness” means any Indebtedness of the Credit Parties incurred afterthe Closing Date with the consent of the Lender that by its terms (or by theterms of the instrument under which it is outstanding and to which appropriatereference is made in the instrument evidencing such Subordinated Indebtedness)is made subordinate and junior in right of payment to the Loans and to theother Obligations of the Credit Parties by provisions in form and substancereasonably satisfactory to the Lender and Special Counsel.

 

“Subsidiary”means, with respect to any Person (the “parent”) at any date, anycorporation, limited liability company, partnership, association or otherentity the accounts of which would be consolidated with those of the parent inthe parent’s consolidated financial statements if such financial statementswere prepared in accordance with GAAP as of such date, as well as any othercorporation, limited liability company, partnership, association or otherentity (a) of which securities or other ownership interests representingmore than 50% of the ordinary voting power or, in the case of a partnership,more than 50% of the general partnership interests are, as of such date, owned,controlled or held, or (b) that is, as of such date, otherwise Controlled,by the parent and/or one or more subsidiaries of the parent.  References herein to “Subsidiaries”shall, unless the context requires otherwise, be deemed to be references toSubsidiaries of the Borrowers.

 

“SubsidiaryGuarantor” means, collectively, any Subsidiary of the Borrowers whichbecomes a Guarantor hereunder after the Effective Time.

 

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

 

“TermLoans” means, collectively, the Existing Equipment Term Loan, theMassachusetts Real Estate Term Loan and the Michigan Real Estate Term Loan.

 

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“TermNotes” means, collectively, the Existing Equipment Term Note, theMassachusetts Real Estate Term Note and the Michigan Real Estate Term Note.

 

“TotalLC and Acceptances Exposure” means, at any time, the sum of (a) 100%of the aggregate undrawn amount of all outstanding standby and documentaryLetters of Credit at such time plus (b) the aggregate amount of allLC/Acceptance Disbursements that have not yet been reimbursed by or on behalfof the Borrowers at such time, plus (c) all amounts of outstandingAcceptances issued by the Lender for the account of the Borrowers at such time,including any Acceptances which have not been paid at the maturity thereof andwhich have not been added to the principal of the Revolving Loans.

 

“TotalVoting Power” means, with respect to any Person, the total number of voteswhich holders of securities having the ordinary power to vote, in the absenceof contingencies, are entitled to cast in the election of directors of suchPerson.

 

“Trademarks”means all trademarks (including service marks), federal and state trademarkregistrations and applications made by the Credit Parties, common lawtrademarks and trade names owned by or assigned to the Credit Parties, allregistrations and applications for the foregoing and all exclusive andnonexclusive licenses from third parties of the right to use trademarks of suchthird parties, including, without limitation, the registrations, applications,unregistered trademarks, service marks and licenses listed on Schedule 5.5hereto, along with any and all (a) renewals thereof, (b) income,royalties, damages and payments now and hereafter due and/or payable withrespect thereto, including, without limitation, damages, claims and paymentsfor past or future infringements thereof, (c) rights to sue for past,present and future infringements thereof, and (d) foreign trademarks,trademark registrations, and trade name applications for any thereof and anyother rights corresponding thereto throughout the world.

 

“Type”when used in reference to any Loan or Borrowing, refers to whether the rate ofinterest on such Loan, or on the Loans comprising such Borrowing, is determinedby reference to the LIBOR Rate, the Base Rate or the LIBOR Daily Floating Rate.

 

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

 

“UFP”means UFP Technologies, Inc., a Delaware corporation.

 

“U.S.Dollars” or “$” refers to lawful money of the United States ofAmerica.

 

“WhollyOwned Subsidiary” means, with respect to any Person at any date, anycorporation, limited liability company, partnership, association or otherentity of which securities or other ownership interests representing 100% ofthe equity or ordinary voting power (other than directors’ qualifying shares)or, in the case of a partnership, 100% of the general partnership interestsare, as of such date, directly or indirectly owned, controlled or held by suchPerson or one or more Wholly Owned Subsidiaries of such Person or by suchPerson and one or more Wholly Owned Subsidiaries of such Person.

 

“WithdrawalLiability” means liability to a Multiemployer Plan as a result of acomplete or partial withdrawal from such Multiemployer Plan, as such terms aredefined in Part I of Subtitle E of Title IV of ERISA.

 

1.2                                 **Terms Generally**.  Thedefinitions of terms herein shall apply equally to the singular and pluralforms of the terms defined.  Whenever thecontext may require, any pronoun shall include the corresponding masculine,feminine and neuter forms.  The words “include”,“includes” and “including” 

 

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shallbe deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to havethe same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) anydefinition of or reference to any agreement, instrument or other documentherein shall be construed as referring to such agreement, instrument or otherdocument as from time to time amended, supplemented or otherwise modified(subject to any restrictions on such amendments, supplements or modificationsset forth herein), (b) any reference herein to any Person shall beconstrued to include such Person’s successors and assigns, (c) the words “herein”,“hereof” and “hereunder”, and words of similar import, shall be construed torefer to this Agreement in its entirety and not to any particular provisionhereof, (d) all references herein to Articles, Sections, Exhibits andSchedules shall be construed to refer to Articles and Sections of, and Exhibitsand Schedules to, this Agreement and (e) the words “asset” and “property”shall be construed to have the same meaning and effect and to refer to any andall tangible and intangible assets and properties, including cash, securities,accounts and contract rights.

 

1.3                                 **Accounting Terms; GAAP**. Except as otherwise expressly provided herein, all terms of anaccounting or financial nature shall be construed in accordance with GAAP, asin effect from time to time; *provided* that,if the Borrowers notify the Lender that the Borrowers request an amendment toany provision hereof to eliminate the effect of any change occurring after thedate hereof in GAAP or in the application thereof on the operation of suchprovision (or if the Lender notifies the Borrowers that the Lender requests anamendment to any provision hereof for such purpose), regardless of whether anysuch notice is given before or after such change in GAAP or in the applicationthereof, then such provision shall be interpreted on the basis of GAAP as ineffect and applied immediately before such change shall have become effectiveuntil such notice shall have been withdrawn or such provision shall have beenamended in accordance herewith.

 

1.4                                 **Joint and Several Obligations;Designated Financial Officers**.

 

(a)          All Obligations of theCredit Parties hereunder shall be joint and several.  Any notice, request, waiver, consent or otheraction made, given or taken by any Credit Party shall bind all Credit Parties.

 

(b)         Each Credit Party herebyauthorizes each of the Designated Financial Officers listed in Schedule 1.4hereto to act as agent for each Credit Party and to execute and deliver onbehalf of each Credit Party such notices, requests, waivers, consents,certificates and other documents, and to take any and all actions required orpermitted to be delivered or taken by any Credit Party hereunder.  The Borrowers may replace any of theDesignated Financial Officers listed in Schedule 1.4 hereto or add anyadditional Designated Financial Officers by delivering written notice to theLender specifying the names of each new Designated Financial Officer and theoffices held by each such Person.  EachCredit Party hereby agrees that any such notices, requests, waivers, consents,certificates and other documents executed, delivered or sent by any DesignatedFinancial Officer and any such actions taken by any Designated FinancialOfficer shall bind each Credit Party.

 

**ARTICLE 2**

** **

**The Credits**

** **

2.1                                 **Revolving Loans**.

 

(a)          Revolving Credit Commitment.  Subject to the terms and conditions set forthherein, the Lender agrees to make Revolving Loans to the Borrowers from time totime during the Revolving Credit Availability Period in an aggregate principalamount that will not result in the Revolving Credit Exposure exceeding thelesser of (i) the Revolving Credit Commitment at such time 

 

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and (ii) the BorrowingBase at such time.  Within the foregoinglimits and subject to the terms and conditions set forth herein, the Borrowersmay borrow, prepay and reborrow Revolving Loans.

 

(b)         Funding of Revolving Loans.  The Borrowers shall deliver to the Lender oneach Business Day not later than 1:00 p.m., Boston, Massachusetts time, byfacsimile or electronic mail transmission, a Borrowing Base Certificate insubstantially the form of Exhibit B-1 hereto, setting forth theBorrowing Base as of the close of business on the immediately precedingBusiness Day.  So long as no Default orEvent of Default shall have occurred and be continuing or shall resulttherefrom, on each Business Day not later than 3:30 p.m. Boston,Massachusetts time, the Lender shall make a Revolving Loan to the Borrowers inan amount equal to the amount requested by the Borrowers in the Borrowing BaseCertificate delivered to the Lender that Business Day, by crediting such amountto one or more accounts of the Borrowers maintained with the Lender; *provided* that Revolving Loans made to finance thereimbursement of an LC/Acceptance Disbursement under any Letter of Credit orAcceptance as provided in Section 2.4(e) shall be remitted by theLender to the Issuing Lender.

 

(c)          Interest on Revolving Loans.  Subject to Section 2.3 hereof, eachRevolving Loan made to the Borrowers by Lender hereunder shall bear interest ata rate per annum equal to the LIBOR Daily Floating Rate plus the ApplicableMargin, or, if the Borrowers shall notify the Lender in writing that theBorrowers shall so desire, the Base Rate plus the Applicable Margin.  Notwithstanding the foregoing, (i) all RevolvingLoans which are not paid when due shall automatically bear interest until paidin full at the Post-Default Rate, (ii) during the period when any Event ofDefault of the type described in clauses (g), (h) or (i) of Section 9.1shall have occurred and be continuing, the principal of all Revolving Loanshereunder shall automatically bear interest, after as well as before judgment,at the Post-Default Rate, (iii) if there shall occur and be continuing anyEvent of Default (other than an Event of Default of the type described inclauses (g), (h) or (i) of Section 9.1), following writtennotice delivered to the Borrowers from the Lender, the principal of allRevolving Loans hereunder shall bear interest, after as well as beforejudgment, at the Post-Default Rate during the period beginning on the date suchEvent of Default first occurred, and ending on the date such Event of Defaultis cured or waived.  Accrued interest oneach Revolving Loan shall be payable in arrears on the first day of each month;*provided* that interest accrued at thePost-Default Rate shall be payable on demand, and all accrued interest onRevolving Loans shall be payable upon expiration of the Revolving CreditAvailability Period.  All interest hereundershall be computed on the basis of a year of 360 days, and in each case shall bepayable for the actual number of days elapsed (including the first day butexcluding the last day).

 

(d)         Repayment of Revolving Loans.  The Borrowers unconditionally promise to payto the Lender the then unpaid principal amount of the Revolving Loans on theRevolving Credit Maturity Date.  Inaddition, if following any reduction in the Revolving Credit Commitment or atany other time the Revolving Credit Exposure shall exceed the lesser of (i) theRevolving Credit Commitment at such time, or (ii) the Borrowing Base atsuch time, the Borrowers shall first, repay Revolving Loans in an aggregateamount equal to such excess, and second, provide cash collateral for Total LCand Acceptances Exposure as specified in Section 2.4(g) in anaggregate amount equal to such excess.

 

(e)          Loan Account.  The Lender shall maintain in accordance withits usual practice an account evidencing the indebtedness of the Borrowers tothe Lender resulting from each Revolving Loan made by the Lender, including theamounts of principal and interest payable and paid to the Lender from time totime hereunder.  The entries made in theaccount maintained pursuant to this subsection 2.1(e) shall be prima facieevidence of the existence and amounts of the obligations recorded therein; *provided* that the failure of the Lender to maintain suchaccount or any error therein 

 

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shall not in any manneraffect the obligation of the Borrowers to repay the Revolving Loans inaccordance with the terms of this Agreement.

 

(f)            Revolving Credit Note.  Prior to the Closing Date, the Borrowersshall prepare, execute and deliver to the Lender a Revolving Credit Note in theprincipal amount of the Revolving Credit Commitment.

 

(g)         Treatment of Revolving LoansOutstanding under Prior Credit Agreement.  In the event that any Revolving Loans under(and as defined in) the Prior Credit Agreement shall remain outstanding on theClosing Date, then such loans shall be continued as Revolving Loans hereunder.

 

2.2                                 **Term Loans**.

 

(a)          Existing Equipment Term Loanand Massachusetts Real Estate Term Loan.

 

(i)                                     The ExistingEquipment Term Loan is comprised of the aggregate amount of principal andinterest outstanding on the Equipment Term Loan under (and as defined in) thePrior Credit Agreement.  Such loans shallremain outstanding on the Closing Date, and shall be continued as the ExistingEquipment Term Loan hereunder.

 

(ii)                                  TheMassachusetts Real Estate Term Loan is comprised of the aggregate amount ofprincipal and interest outstanding on the Real Estate Term Loan under (and asdefined in) the Prior Credit Agreement. Such loan shall remain outstanding on the Closing Date, and shall becontinued as the Massachusetts Real Estate Term Loan hereunder.

 

(b)         Funding of the Michigan RealEstate Term Loan. Subject to the terms and conditions set forthherein, the Lender agrees to fund the MichiganReal Estate Term Loan onthe Michigan Real Estate Term Loan Closing Date.  Principal amounts of the Michigan Real EstateTerm Loan that have been repaid or prepaid may not be reborrowed.

 

(c)          Interest on the Term Loans.  Subject to Section 2.3 hereof, theoutstanding principal amount of the Term Loans shall bear interest at a rateper annum equal to the LIBOR Daily Floating Rate plus the Applicable Margin,or, if the Borrowers shall notify the Lender in writing that the Borrowersshall so desire, the Base Rate plus the Applicable Margin.  Notwithstanding the foregoing, (i) anyportion of the Term Loans which is not paid when due shall automatically bearinterest until paid in full at the Post-Default Rate, (ii) during theperiod when any Event of Default of the type described in clauses (g), (h) or(i) of Section 9.1 shall have occurred and be continuing, theoutstanding principal balance of the Term Loans shall automatically bearinterest, after as well as before judgment, at the Post-Default Rate, (iii) ifthere shall occur and be continuing any Event of Default (other than an Eventof Default of the type described in clauses (g), (h) or (i) of Section 9.1),following written notice delivered to the Borrowers from the Lender, theoutstanding principal balance of the Term Loans shall bear interest, after aswell as before judgment, at the Post-Default Rate during the period beginningon the date such Event of Default first occurred, and ending on the date suchEvent of Default is cured or waived. Accrued interest on the outstanding principal balance of the Term Loansshall be payable in arrears on the first day of each month; *provided* that interest accrued at the Post-Default Rateshall be payable on demand, and all accrued interest on the (x) ExistingEquipment Term Loan shall be payable on each date that any portion of theprincipal of the Existing Equipment Term Loan shall be payable hereunder and onthe Existing Equipment Term Loan Maturity Date, (y) Massachusetts RealEstate Term Loan shall be payable on each date that any portion of theprincipal of the Massachusetts Real Estate Term Loan shall be payable hereunderand on the Massachusetts Real Estate Term Loan Maturity Date, and (z) MichiganReal Estate Term Loan 

 

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shall be payable on eachdate that any portion of the principal of the Michigan Real Estate Term Loanshall be payable hereunder and on the Michigan Real Estate Term Loan MaturityDate.  All interest hereunder shall becomputed on the basis of a year of 360 days, and in each case shall be payablefor the actual number of days elapsed (including the first day but excludingthe last day).  Notwithstanding this Section 2.2(c),subject to Section 8.5(b), the Borrowers may elect to fix the rate ofinterest on one or more of the Term Loans pursuant to a Hedging Agreement.

 

(d)         Repayment of Term Loans.

 

(i)                                     Repayment ofExisting Equipment Term Loan.  The Borrowers hereby unconditionally promiseto pay to the Lender monthly principal installments in respect of the ExistingEquipment Term Loan on the first day of each month commencing February 1,2009 in equal monthly installments calculated based on the full principalamount of the Existing Equipment Term Loan, amortizing on a seven-year directreduction amortization schedule.  To theextent not previously paid, the Existing Equipment Term Loan shall be due andpayable in full on the Existing Equipment Term Loan Maturity Date.

 

(ii)                                  Repayment ofMassachusetts Real Estate Term Loan and Michigan Real Estate Term Loan.

 

(A)                              The Borrowershereby unconditionally promise to pay to the Lender monthly principalinstallments in respect of the Massachusetts Real Estate Term Loan on the firstday of each month commencing February 1, 2009 in equal monthlyinstallments calculated based on the full principal amount of the MassachusettsReal Estate Term Loan, amortizing on a twenty-year direct reductionamortization schedule.  To the extent notpreviously paid, the Massachusetts Real Estate Term Loan shall be due andpayable in full on the Massachusetts Real Estate Term Loan Maturity Date.

 

(B)                                The Borrowershereby unconditionally promise to pay to the Lender monthly principalinstallments in respect of the Michigan Real Estate Term Loan on the first dayof each month commencing March 1, 2009 in equal monthly installmentscalculated based on the full principal amount of the Michigan Real Estate TermLoan, amortizing on a twenty-year direct reduction amortization schedule.  To the extent not previously paid, theMichigan Real Estate Term Loan shall be due and payable in full on the MichiganReal Estate Term Loan Maturity Date.

 

Notwithstanding any of the foregoing, following the expiration ortermination of the Revolving Credit Commitment for any reason, if the Borrowersshall obtain a revolving credit facility with a third party lender to replacein whole or in part the Revolving Loan contemplated herein, the Borrower shallsimultaneously prepay the entire Term Loans (unless sooner repaid hereunder).

 

(e)          Loan Account.  The Lender shall maintain in accordance withits usual practice an account evidencing the indebtedness of the Borrowers tothe Lender in respect of the Term Loans, including the amounts of principal andinterest payable and paid to the Lender from time to time hereunder.  The entries made in the account maintainedpursuant to this subsection  2.2(e) shall be prima facie evidence ofthe existence and amounts of the obligations recorded therein; provided thatthe failure of the Lender to maintain such account or any error therein shallnot in any manner affect the obligation of the Borrowers to repay the TermLoans in accordance with the terms of this Agreement.

 

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(f)            Term Notes.  Prior to the Closing Date or the MichiganReal Estate Term Loan Closing Date, as applicable, the Borrowers shall prepare,execute and deliver to the Lender the Term Notes evidencing the Borrowers’obligations in respect of the applicable Term Loans.

 

2.3                                 **LIBOR Borrowings**.

 

(a)          General.  The entire principal balance of the TermLoans and each Revolving Loan initially shall be a LIBOR Daily Floating RateLoan, or, if the Borrowers shall notify the Lender in writing that theBorrowers shall so desire, a Base Rate Loan. Thereafter, the Borrowers may elect to convert all or any portion of theTerm Loans or any portion of the outstanding Revolving Loans to a LIBORBorrowing.  The Borrowers may electdifferent options for continuations and conversions with respect to differentportions of the affected Borrowing, in which case the Loans comprising eachsuch portion shall be considered a separate Borrowing.  The Borrowers shall not be permitted toselect any LIBOR Interest Period for any LIBOR Borrowing that ends after theRevolving Credit Maturity Date, the Existing Equipment Term Loan Maturity Date,the Massachusetts Real Estate Term Loan Maturity Date or the Michigan RealEstate Term Loan Maturity Date.

 

(b)         Interest on LIBOR Borrowings.  Each LIBOR Borrowing shall bear interestduring the applicable LIBOR Interest Period at a rate per annum equal to theLIBOR Rate plus the Applicable Margin. Notwithstanding the foregoing, (i) all LIBOR Borrowings which arenot paid when due shall automatically be converted into Base Rate Borrowingsand shall bear interest until paid in full at the Post-Default Rate, (ii) duringthe period when any Event of Default of the type described in clauses (g),(h) or (i) of Section 9.1 shall have occurred and be continuing,all LIBOR Borrowings shall automatically be converted into Base Rate Borrowingsand shall bear interest, after as well as before judgment, at the Post-DefaultRate, (iii) if there shall occur and be continuing any Event of Default(other than an Event of Default of the type described in clauses (g), (h) or(i) of Section 9.1), following written notice delivered to theBorrowers from the Lender, all LIBOR Borrowings shall automatically beconverted into Base Rate Borrowings and shall bear interest, after as well asbefore judgment, at the Post-Default Rate during the period beginning on thedate such Event of Default first occurred, and ending on the date such Event ofDefault is cured or waived.  Accruedinterest on each LIBOR Borrowing shall be payable in arrears on the first dayof each month and on the last Business Day of the LIBOR Interest Periodapplicable to such LIBOR Borrowing; *provided* thatinterest accrued at the Post-Default Rate shall be payable on demand.  All interest hereunder shall be computed onthe basis of a year of 360 days, and in each case shall be payable for theactual number of days elapsed (including the first day but excluding the lastday).

 

(c)          Procedure for RequestingLIBOR Borrowings.  To requestthat any portion of the Term Loan or the outstanding Revolving Loans beconverted into a LIBOR Borrowing, or, to request that any LIBOR Borrowingcontinue as a LIBOR Borrowing for an additional LIBOR Interest Period, theBorrowers shall submit to the Lender a LIBOR Request, in substantially the formof Exhibit B-3 hereto and setting forth all of the informationrequired to be set forth therein, by electronic mail or facsimile transmission,not later than 1:00 p.m., Boston, Massachusetts time, three Business Daysbefore the date of the proposed conversion or continuation of suchBorrowing.  Each such LIBOR Request madeby the Borrowers shall be irrevocable. Subject to the provisions of subsection 2.3(f) and provided that noDefault or Event of Default shall have occurred and be continuing, upon receiptof a LIBOR Request, the Lender shall on the requested date of conversion orcontinuation (i) convert the Base Rate Loan or LIBOR Daily Floating RateLoan, as applicable, requested to be converted into a LIBOR Loan for the LIBORInterest Period set forth in such LIBOR Request and/or (ii) continue theLIBOR Loan requested to be continued as a LIBOR Loan for the additional LIBORInterest Period set forth in such LIBOR Request.

 

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(d)         Incomplete LIBOR Requests.  If any LIBOR Request is incomplete in anyrespect, then such LIBOR Request shall be void and the Borrowing which was thesubject matter of such LIBOR Request shall continue as a Base Rate Borrowing orLIBOR Daily Floating Rate Loan, as applicable. If, with respect to any existing LIBOR Borrowing, the Borrowers fail todeliver a LIBOR Request to continue such LIBOR Borrowing at least threeBusiness Days prior to the expiration of the LIBOR Interest Period for suchexisting LIBOR Borrowing, such LIBOR Borrowing shall automatically convert to aLIBOR Daily Floating Rate Loan at the expiration of such LIBOR Interest Period.

 

(e)          Limit on LIBOR Borrowings.  At the commencement of each LIBOR InterestPeriod for a LIBOR Borrowing, such Borrowing shall be in an aggregate amount atleast equal to $250,000 or any greater multiple of $100,000.  Borrowings of more than one Type and Class maybe outstanding at the same time; *provided* thatthere shall not at any time be more than a total of five (5) LIBORBorrowings outstanding.

 

(f)            Alternate Rate of Interest.  If prior to the commencement of any LIBORInterest Period for a LIBOR Borrowing, the Lender determines that (i) adequateand reasonable means do not exist for ascertaining the LIBOR Rate for suchLIBOR Interest Period, (ii) the LIBOR Rate for such LIBOR Interest Periodwill not adequately and fairly reflect the cost to the Lender of making ormaintaining LIBOR Borrowings, or (iii) as a result of any Change in Law itis unlawful or impossible for the Lender to make or maintain any LIBORBorrowing; then in each case the Lender shall give notice thereof to theBorrowers as promptly as practicable thereafter and, until the Lender notifiesthe Borrowers that the circumstances giving rise to such notice no longerexist, any LIBOR Request submitted by the Borrowers shall be ineffective; *provided* that if as a result of a Change in Law the Lenderis prohibited from maintaining any outstanding LIBOR Borrowing, upon noticefrom the Lender, the Borrowers shall immediately (A) convert such LIBORBorrowing to a Base Rate Loan, or (B) repay such LIBOR Borrowing in full,together with all interest accrued thereon and all fees and other amountspayable to the Lender hereunder (in either case, subject to the provisions ofsubsection 2.3(g) of this Agreement with respect to redeploymentcosts).  This section shall also beapplicable, *mutatis mutandis,* to Loans bearinginterest at the LIBOR Daily Floating Rate.

 

(g)         Break Funding Payments.  In the event of (i) the payment of anyprincipal of any LIBOR Loan other than on the last day of the LIBOR InterestPeriod applicable thereto (including as a result of an Event of Default), (ii) theconversion of any LIBOR Loan other than on the last day of the LIBOR InterestPeriod applicable thereto, or (iii) the failure to borrow, convert,continue or prepay any LIBOR Loan on the date specified in any notice deliveredpursuant hereto (regardless of whether such notice is permitted to be revocableand is revoked in accordance herewith), then, in any such event, the Borrowersshall compensate the Lender for the loss, cost and expense attributable to suchevent, as determined by the Lender in a manner consistent with its customs andpractices.  In the event that the Lenderis entitled to receive compensation pursuant to this subsection 2.3(g), theLender shall deliver a certificate to the Borrowers setting forth the amount oramounts that the Lender is entitled to receive, and the Borrowers shall paysuch amount or amounts within three (3) days after receipt of suchcertificate.

 

2.4                                 **Letters of Credit and Acceptances**.

 

(a)          General.  Subject to the terms and conditions set forthherein, in addition to the Revolving Loans provided for in Section 2.1,any Borrower may request the issuance of Letters of Credit and Acceptances forits own account by the Issuing Lender, in a form reasonably acceptable to theIssuing Lender (which, in the case of Acceptance, shall include submission ofan Acceptance Agreement and such other agreements and documents as may berequired by the Lender in its sole 

 

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discretion), at any time andfrom time to time during the Revolving Credit Availability Period.  Letters of Credit and Acceptances issuedhereunder shall constitute utilization of the Revolving Credit Commitment.  In the event of any inconsistency between theterms and conditions of this Agreement and the terms and conditions of any formof letter of credit application, Acceptance Agreement or other agreementsubmitted by any Borrower to, or entered into by any Borrower with, the IssuingLender relating to any Letter of Credit or Acceptance, the terms and conditionsof this Agreement shall control.  EachAcceptance shall be in an amount not less than $1,000,000.

 

(b)         Notice of Issuance,Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of an Letter ofCredit (or the amendment, renewal or extension of an outstanding Letter ofCredit) or an Acceptance, the Borrowers shall deliver to the Issuing Lender andthe Lender by electronic or facsimile transmission (reasonably in advance ofthe requested date of issuance, amendment, renewal or extension) a letter ofcredit application or Acceptance Agreement (as applicable) in the form requiredby the Issuing Lender.  A Letter ofCredit shall be issued, amended, renewed or extended, and an Acceptance shallbe issued, only if (and upon issuance, amendment, renewal or extension of eachLetter of Credit or upon issuance of an Acceptance, the Borrowers shall bedeemed to represent and warrant that), after giving effect to such issuance,amendment, renewal or extension (i) the Total LC and Acceptances Exposureat such time shall not exceed the LC and Acceptances Sublimit, and (ii) theRevolving Credit Exposure at such time shall not exceed the lesser of (A) theRevolving Credit Commitment at such time, and (B) the Borrowing Base atsuch time.

 

(c)          Expiration Date.  Each Letter of Credit shall expire (withoutgiving effect to any extension thereof by reason of an interruption ofbusiness) at or prior to the close of business on the earlier of (i) thedate 365 days, in the case of standby Letters of Credit, or 180 days, in thecase of documentary Letters of Credit, after the date of the issuance of suchLetter of Credit (or, in the case of any renewal or extension thereof, 365 daysor 180 days, as applicable, after such renewal or extension) *provided* that any such standby Letter of Credit may providefor automatic extensions thereof to a date not later than 365 days beyond itscurrent expiration date, and (ii) the date that is thirty Business Daysprior to the Revolving Credit Maturity Date. Each Acceptance shall expire at or prior to the close of business on theearlier of (i) the date 180 days after the date of the issuance of suchAcceptance and (ii) the date that is thirty Business Days prior to theRevolving Credit Maturity Date.  NoLetter of Credit or Acceptance may be extended beyond the date that is thirtyBusiness Days prior to the Revolving Credit Maturity Date.

 

(d)         Reimbursement.  If the Issuing Lender shall make anyLC/Acceptance Disbursement in respect of a Letter of Credit or an Acceptance,the Borrowers shall reimburse (each, a “Reimbursement Obligation”) theIssuing Lender in respect of such LC/Acceptance Disbursement by paying to theLender for the account of the Issuing Bank an amount equal to suchLC/Acceptance Disbursement not later than 1:00 p.m., Boston, Massachusettstime, on (i) the Business Day that the Borrowers receive notice of thesame, if such notice is received prior to 11:00 a.m., Boston,Massachusetts time, or (ii) the Business Day immediately following the daythat the Borrowers receive such notice, if such notice is not received prior tosuch time, *provided* that, subject to the conditionsto borrowing set forth herein, payment of each such Reimbursement Obligationshall be made through the automatic funding of a Base Rate Borrowing in anamount equal to the amount of such Reimbursement Obligation, and the Borrowershereby irrevocably authorize and direct the Lender to take such actions as maynecessary to effectuate such automatic funding of such Base RateBorrowings.  To the extent that any suchReimbursement Obligation is paid through the automatic funding of a Base RateBorrowing, the Borrowers’ obligation to make such payment shall be dischargedand replaced by the resulting Base Rate Borrowing.  If the Borrowers cannot satisfy theconditions to borrowing set forth herein such that the payment of any ReimbursementObligation cannot be made through the automatic funding of a Base RateBorrowing and the Borrowers shall fail 

 

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to make such payment whendue, the Lender shall promptly pay to the Issuing Lender the unreimbursed portionof such LC/Acceptance Disbursement. Promptly following receipt by the Lender of any payment from theBorrowers pursuant to this paragraph, the Lender shall distribute such paymentto the Issuing Lender.

 

(e)          Obligations Absolute.  The Borrowers’ obligation to reimburseLC/Acceptance Disbursements as provided in subsection 2.4(d) shall beabsolute, unconditional and irrevocable, and shall be performed strictly inaccordance with the terms of this Agreement under any and all circumstanceswhatsoever and irrespective of (i) any lack of validity or enforceabilityof any Letter of Credit or Acceptance agreement, or any term or provisiontherein, (ii) any draft or other document presented under a Letter ofCredit or Acceptance proving to be forged, fraudulent or invalid in any respector any statement therein being untrue or inaccurate in any respect, (iii) paymentby the Issuing Lender to the beneficiary under a Letter of Credit or Acceptanceagainst presentation of a draft or other document that does not comply strictlywith the terms of such Letter of Credit or Acceptance and (iv) any otherevent or circumstance whatsoever (other than gross negligence or willfulmisconduct of the Issuing Lender), whether or not similar to any of theforegoing, that might, but for the provisions of this Section 2.4,constitute a legal or equitable discharge of the Borrowers’ obligationshereunder.

 

(f)            Interim Interest.  If the Issuing Lender shall make anyLC/Acceptance Disbursement in respect of any Letter of Credit or Acceptance,and if the Borrowers cannot satisfy the conditions to borrowing set forthherein such that payment of the Reimbursement Obligation resulting from suchLC/Acceptance Disbursement cannot be made through the automatic funding of aBase Rate Borrowing, then, unless the Borrowers shall reimburse suchLC/Acceptance Disbursement in full on the date such LC/Acceptance Disbursementis made, the unpaid amount thereof shall bear interest, for each day from andincluding the date such LC/Acceptance Disbursement is made to but excluding thedate that the Borrowers reimburse such LC/Acceptance Disbursement, at the rateper annum then applicable to Base Rate Loans; *provided*that, if the Borrowers fail to reimburse such LC/Acceptance Disbursement whendue pursuant to subsection 2.4(d), then interest calculated at the Post-DefaultRate shall accrue on the unpaid amount thereof. Interest accrued pursuant to this paragraph shall be for the account ofthe Issuing Lender, except that interest accrued on and after the date ofpayment by the Lender pursuant to subsection 2.4(d) shall be for theaccount of the Lender to the extent of the payment.

 

(g)         Cash Collateralization.  If either (i) an Event of Default shalloccur and be continuing and the Borrowers receive notice from the Lenderdemanding the deposit of cash collateral pursuant to this paragraph, or (ii) theBorrowers shall be required to provide cash collateral for Total LC andAcceptances Exposure pursuant to subsections  2.1(d) or 2.7(b), theBorrowers shall immediately deposit with the Lender an amount in cash equal to,in the case of an Event of Default, the Total LC and Acceptances Exposure as ofsuch date plus any accrued and unpaid interest thereon and, in the case of anycash collateral required to be provided pursuant to subsections 2.1(d) or2.7(b), the amount required under subsections 2.1(d) or 2.7(b), asthe case may be; *provided* that the obligation todeposit such cash collateral shall become effective immediately, and suchdeposit shall become immediately due and payable, without demand or othernotice of any kind, upon the occurrence of any Event of Default described inclause (g) or (h) of Section 9.1.  Such deposit shall be held by the Lender ascollateral in the first instance for the Total LC and Acceptances Exposureunder this Agreement and thereafter for the payment of any other obligations ofthe Credit Parties hereunder.

 

(h)         Existing Letters of Credit.  All Existing Letters of Credit issued underthe Prior Credit Agreement which are outstanding on the Closing Date shallremain outstanding after the 

 

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Closing Date in accordancewith their terms and shall be treated for all purposes as if they were issuedby Issuing Lender pursuant to the terms of this Agreement.

 

2.5                                 **Expiration, Termination orReduction of Revolving Credit Commitment**.

 

(a)          Expiration of RevolvingCredit Commitment.  Unlesspreviously terminated, the Revolving Credit Commitment shall expire at theclose of business on the Revolving Credit Maturity Date.

 

(b)         Reduction of RevolvingCredit Commitment.  TheBorrowers may at any time and from time to time reduce the Revolving CreditCommitment; *provided* that (i) each reduction ofthe Revolving Credit Commitment shall be in an amount that is at least equal to$500,000 or any greater multiple of $100,000, and (ii) the Borrowers shallnot reduce the Revolving Credit Commitment if, after giving effect to anyconcurrent repayment, the total Revolving Credit Exposure would exceed thetotal Revolving Credit Commitment.  TheBorrowers shall notify the Lender of any election to reduce the RevolvingCredit Commitment at least three Business Days prior to the effective date ofsuch reduction, specifying the effective date thereof.  Each notice of reduction of the RevolvingCredit Commitment shall be irrevocable. Each reduction of the Revolving Credit Commitment shall be permanent.

 

(c)          Optional Termination ofRevolving Credit Commitment.  The Borrowers shall have the right at anytime to terminate the Revolving Credit Commitment without prepayment penalty orpremium.  The Borrowers shall notify theLender of any election to terminate the Revolving Credit Commitment under thissubsection 2.5(c) in writing at least ninety (90) days prior to the effectivedate of such termination, specifying the effective date thereof.  Each notice of termination of the RevolvingCredit Commitment shall be irrevocable. Any termination of the Revolving Credit Commitment shall be permanent.

 

2.6                                 **Payments**.

 

(a)          Payments Generally.  The Borrowers shall be obligated to make eachpayment required to be made by the Borrowers hereunder (whether of principal,interest, fees or reimbursement of LC/Acceptance Disbursements, or otherwise)to Lender at its offices in Boston, Massachusetts, prior to 3:00 p.m.,Boston, Massachusetts time, on the date when due (except that if any paymentshall be due on a day that is not a Business Day, the date for payment shall beextended to the next succeeding Business Day, and, in the case of any paymentaccruing interest, interest thereon shall be payable for the period of suchextension).  All payments shall be madein immediately available funds, in U.S. dollars without set-off orcounterclaim.  Any amounts received aftersuch time on any date may, in the discretion of the Lender, be deemed to havebeen received on the next succeeding Business Day for purposes of calculatinginterest thereon.  Notwithstandinganything to the contrary set forth herein, subject to the conditions to thefunding of Revolving Loans set forth herein, all payments of interest, fees andany other amounts due to be paid by the Borrowers hereunder shall be madethrough the automatic funding of Base Rate Revolving Loans in amounts equal tothe amounts of such interest, fees or other amounts due to be paid by theBorrowers hereunder, and the Borrowers hereby irrevocably authorize and directthe Lender to take such actions as may be necessary to effectuate suchautomatic funding of Base Rate Revolving Loans, and, upon funding of any suchBase Rate Revolving Loan, the Borrowers’ obligation to make such payment shallbe discharged and replaced by the resulting Base Rate Revolving Loan.  The Borrowers expressly acknowledge and agreethat (i) the Lender may, in its sole discretion, effectuate the automaticfunding of a Revolving Loan pursuant to this subsection 2.6(a) even thoughat the time of, or after giving effect to, the funding of such Revolving Loansthe Revolving Credit Exposure exceeds 

 

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the lesser of (x) theRevolving Credit Commitment and (y) the Borrowing Base, and (ii) ifany one or more of the conditions to the funding of Revolving Loans cannot besatisfied and the Lender, in its sole discretion, refuses to fund a Base RateRevolving Loan in an amount sufficient to satisfy the amount of any interest,fees or other amounts due hereunder, the Borrowers shall remain obligated topay the full amount of such interest, fees or other amounts as and when thesame shall become due.

 

(b)         Application of Payments.  If at any time insufficient funds arereceived by and available to the Lender to pay fully all amounts of principal,unreimbursed LC/Acceptance Disbursements, interest and fees then due hereunderunder any circumstances, including, without limitation during, or as a resultof the exercise by the Lender of remedies hereunder or under any other LoanDocument and applicable law, such funds shall be applied (i) first, to payinterest, fees, costs and expenses then due hereunder, (ii) second, to payprincipal and unreimbursed LC/Acceptance Disbursements then due hereunder, and (iii) third,to any other Obligations then due from the Credit Parties to the Lender, theIssuing Lender, the Cash Management Bank or any other Affiliate of the Lender.

 

(c)          Collection.  Any check, instrument or other item ofpayment in favor of any Borrower remitted to the Cash Management Bank forprocessing shall be subject to a collection charge equal to two days intereston the amount thereof at the Base Rate plus the Applicable Margin, whichcollection charges shall be payable by the Borrowers monthly in arrears on thefirst Business Day of each month.

 

2.7                                 **Prepayment of Loans**.

 

(a)          Optional Prepayments ofLoans.  The Borrowers shall have theright at any time and from time to time to prepay the Revolving Loans in wholeor in part, subject to the payment of any amounts due under subsection2.3(g).  The Borrowers shall have theright at any time and from time to time to prepay the Term Loans in whole or inpart, subject to prior notice in accordance with subsection 2.7(d),subject to the payment of any amounts due under subsection 2.3(g), and *provided that*each such prepayment of the Term Loans shallbe in an amount that is at least equal to $250,000 or any greater multiple of$100,000.

 

(b)         Mandatory Prepayments.  The Borrowers shall be obligated to, andshall, make prepayments of the Loans hereunder (and reduce the Revolving CreditCommitment hereunder) as follows:

 

(i)                                     Incurrence ofDebt.  Without limiting theobligation of the Borrowers to obtain the consent of the Lender to anyincurrence of Indebtedness not otherwise permitted hereunder, the Borrowersagree, on the closing of any incurrence of Indebtedness by any Credit Party(other than Indebtedness permitted pursuant to Section 8.1) to prepay theLoans hereunder (and provide cash collateral for Total LC and AcceptancesExposure as specified in subsection 2.4(g)), and the Revolving CreditCommitment hereunder shall be subject to automatic reduction, upon the date ofsuch incurrence of Indebtedness, in an aggregate amount equal to 100% of theamount of the Net Cash Payments from such incurrence of Indebtedness receivedby any Credit Party, such prepayment and reduction to be effected in each casein the manner and to the extent specified in subsection 2.7(c) below.

 

(ii)                                  Sale orOffering of Securities.  TheBorrowers agree on the closing of any offering or sale of equity securities byany Credit Party, to prepay the Loans hereunder (and provide cash collateralfor Total LC and Acceptances Exposure as specified in subsection 2.4(g)), uponthe date of such sale or offering of securities, in an aggregate amount equalto 100% of the 

 

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amount of Net Cash Paymentsfrom such offering of securities received by any such Credit Party (excludingNet Cash Payments received in connection with Equity Rights issued or grantedto members of the Credit Parties’ boards of directors or employees that areregistered on Form S-8), such prepayment to be effected in each case inthe manner and to the extent specified in subsection 2.7(c) below.

 

(iii)                               Sale of Assets.  Without limiting the obligation of theBorrowers to obtain the consent of the Lender to any Disposition not otherwisepermitted hereunder, the Borrowers agree, on the date of any Disposition by anyCredit Party, to prepay the Loans hereunder (and provide cash collateral forTotal LC and Acceptances Exposure as specified in subsection 2.4(g)), andthe Revolving Credit Commitment hereunder shall be subject to automaticreduction, upon the date of such Disposition, in an aggregate amount equal to100% of the amount of such Net Cash Payments from such Disposition received byany Credit Party on the date of such Disposition, such payment and reduction tobe effected in each case and in the manner and to the extent specified insubsection 2.7(c) below. Notwithstanding the forgoing, the Borrowers shall not be required tomake any prepayment of the Loans under this subsection 2.7(b)(iii) withrespect to the first $100,000 of aggregate Net Cash Payments received by theCredit Parties from Dispositions after the Effective Time to the extent 100% ofsuch Net Cash Payments are utilized to replace the assets disposed of by theCredit Parties in the Disposition within 90 days of each such Disposition.

 

(iv)                              Proceeds ofCasualty Events.  Upon thereceipt by the Lender or the Credit Parties of the proceeds of insurance,condemnation award or other compensation in respect of any Casualty Eventaffecting any property of the Credit Parties, the Borrowers shall prepay theLoans (and provide cash collateral for Total LC and Acceptances Exposure asspecified in subsection 2.4(g)), and the Revolving Credit Commitment shallbe subject to automatic reduction, in an aggregate amount equal to 100% of theNet Cash Payments from such Casualty Event, such prepayment and reduction to beeffected in each case in the manner and to the extent specified in subsection2.7(c) below; *provided* thatif there shall occur a Casualty Event and the aggregate market value of allproperty affected by such Casualty Event shall be less than or equal to$200,000, and if, at the time proceeds of insurance in respect of such CasualtyEvent are received, no Event of Default shall have occurred and be continuing,the Borrowers shall be entitled to utilize such insurance proceeds (in anamount not in excess of $200,000) to repair or replace the property affected bysuch Casualty Event within 90 days (it being understood that if proceeds ofinsurance intended to be applied to repair or replace property are not in factapplied within 90 days after receipt thereof, then such proceeds shall beapplied to the prepayment of Loans, cover for Total LC and Acceptances Exposureand reduction of the Revolving Credit Commitment as provided in this clause (iv) atthe expiration of such 90 day period). For any Casualty Events in which the aggregate market value of allproperty affected by such Casualty Event is greater than $200,000, with the Lender’sprior written consent, which may be withheld in the Lender’s reasonable creditjudgment, the Borrowers shall be permitted to utilize such insurance proceedsto repair or replace the property affected by such Casualty Event subject toany restrictions or conditions as are provided in the Lender’s consent.

 

(c)          Application.  In the event of any mandatory prepayment ofLoans pursuant to subsections (b)(i), (b)(ii), (b)(iii) and (b)(iv) ofthis Section 2.7, the proceeds shall be applied as follows:

 

(i)                                     first, to theextent that Revolving Credit Exposure shall at such time exceed the lesser of (A) theRevolving Credit Commitment at such time or (B) the Borrowing Base at suchtime, such prepayment shall be applied to the repayment of Revolving Loans;

 

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(ii)                                  second, if suchprepayment is made at a time when any part of the Term Loan remainsoutstanding, such prepayment shall be applied to the repayment of the unpaidprincipal balance of the Term Loan in inverse order of maturity; and

 

(iii)                               third, afterthe Term Loan has been repaid in full, the amount of any mandatory prepaymentshall be applied to repay Revolving Loans, and, second, to provide cashcollateral for Total LC and Acceptances Exposure as specified in Section 2.4(g),with a corresponding permanent reduction in the Revolving Credit Commitment(except that no such corresponding permanent reduction in the total RevolvingCredit Commitment shall be required in connection with any prepayment pursuantto subsection 2.7(b)(ii) above).

 

(d)         Notification of CertainPrepayments.  TheBorrowers shall notify the Lender by telephone (confirmed by telecopy) of anyvoluntary prepayment of any LIBOR Loan not later than 1:00 p.m., Boston,Massachusetts time, three Business Days before the date of suchprepayment.  The Borrowers shall notifythe Lender of any mandatory prepayment of the Loans pursuant to subsection 2.7(b) hereunderas soon as practicable.  Each such noticeshall be irrevocable and shall specify the prepayment date and the principalamount of each Borrowing or portion thereof to be prepaid.

 

(e)          Prepayments Accompanied byInterest.  Allprepayments of the Term Loans shall be accompanied by accrued interest throughthe date of prepayment.

 

2.8                                 **Fees**.

 

(a)          Unused Fee.  The Borrowers shall pay to the Lender unusedfees in respect of the Revolving Credit Commitment, in an aggregate amountequal to the product of (x) the Applicable Unused Fee Rate, multiplied by (y) thedaily average unused amounts of the Revolving Credit Commitment during theperiod from and including the date on which the Effective Time shall occur tobut excluding the date on which the Revolving Credit Commitmentterminates.  Accrued unused fees shall bepayable monthly in arrears on the first day of each month and on the date onwhich the Revolving Credit Commitment terminates.  All unused fees shall be computed on thebasis of a year of 360 days and shall be payable for the actual number of dayselapsed (including the first day but excluding the last day).

 

(b)         Letter of Credit Fees.  The Borrowers shall pay with respect toLetters of Credit issued hereunder the following fees:

 

(i)                                     with respect toeach documentary or standby Letter of Credit issued hereunder, a fee to theLender which shall accrue at a rate per annum equal to (x) the ApplicableMargin for LIBOR Rate Revolving Loans multiplied by (y) the averagedaily amount of outstanding Letters of Credit during the period from andincluding the Closing Date to but excluding the date on which there shall nolonger be any Letters of Credit outstanding hereunder, and

 

(ii)                                  with respect toeach documentary or standby Letter of Credit issued hereunder, the IssuingLender’s standard fees with respect to the issuance, amendment, renewal or extensionof any Letter of Credit or processing of drawings thereunder.

 

Accruedfees for Letters of Credit shall be computed on the basis of a year of 360 daysand shall be payable for the actual number of days elapsed (including the firstday but excluding the last day), and shall be payable monthly in arrears on thefirst day of each month and on the date the Revolving Credit Commitmentterminates, commencing on the first such date to occur after the date hereof, *provided* that 

 

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anysuch fees accruing after the date on which the Revolving Credit Commitmentterminates shall be payable on demand.

 

(c)          Acceptances Fees.  The Borrowers shall pay with respect toAcceptances issued hereunder the following fees:

 

(i)                                     with respect toeach Acceptance issued hereunder, a fee to the Lender which shall accrue at arate per annum equal to (x) (A) the Applicable Margin for LIBOR RateRevolving Loans minus (B) the Discount Rate for Acceptances, multipliedby (y) the average daily amount of outstanding Acceptances during theperiod from and including the Closing Date to but excluding the date on whichthere shall no longer be any Acceptances outstanding hereunder, and

 

(ii)                                  with respect toeach Acceptance issued hereunder, the Issuing Lender’s standard fees withrespect to the issuance, amendment, renewal or extension of any Acceptances orprocessing of drafts thereunder.

 

Accruedfees for Acceptances shall be computed on the basis of a year of 360 days andshall be payable for the actual number of days elapsed (including the first daybut excluding the last day), and shall be payable monthly in arrears on thefirst day of each month and on the date the Revolving Credit Commitmentterminates, commencing on the first such date to occur after the date hereof, *provided* that any such fees accruing after the date on whichthe Revolving Credit Commitment terminates shall be payable on demand.

 

2.9                                 **Increased Costs**.

 

(a)          If any Change in Law shall:

 

(i)                                     impose, modifyor deem applicable any reserve, special deposit or similar requirement againstassets of, deposits with or for the account of, or credit extended by, theLender or the Issuing Lender; or

 

(ii)                                  impose on theLender or the Issuing Lender or the London interbank market any other conditionaffecting this Agreement or LIBOR Loans made by the Lender or any Letter ofCredit;

 

andthe result of any of the foregoing shall be to increase the cost to the Lenderof making or maintaining any LIBOR Loan (or of maintaining its obligation tomake any such Loan) or to increase the cost to the Issuing Lender of issuing ormaintaining any Letter of Credit or to reduce the amount of any sum received orreceivable by the Lender or the Issuing Lender hereunder (whether of principal,interest or otherwise), then the Borrowers will pay to the Lender or theIssuing Lender, as the case may be, such additional amount or amounts as willcompensate the Lender or the Issuing Lender, as the case may be, for suchadditional costs incurred or reduction suffered.

 

(b)         If the Lender or the IssuingLender reasonably determines that any Change in Law regarding capitalrequirements has or would have the effect of reducing the rate of return on theLender’s or the Issuing Lender’s capital or on the capital of the Lender’s orthe Issuing Lender’s holding company, if any, as a consequence of thisAgreement or the Loans made by the Lender, or the Letters of Credit issued bythe Issuing Lender, to a level below that which the Lender or the IssuingLender or the Lender’s or the Issuing Lender’s holding company could haveachieved but for such Change in Law (taking into consideration the Lender’s orthe Issuing Lender’s policies and the 

 

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policies of the Lender’s orthe Issuing Lender’s holding company with respect to capital adequacy), thenfrom time to time the Borrowers will pay to the Lender or the Issuing Lender,as the case may be, such additional amount or amounts as will compensate theLender or the Issuing Lender, or the Lender’s or the Issuing Lender’s holdingcompany, for any such reduction suffered.

 

(c)          A certificate of the Lenderor the Issuing Lender setting forth the amount or amounts necessary tocompensate the Lender or the Issuing Lender or its holding company, as the casemay be, as specified in subsections 2.9(a) or 2.9(b) above shall bedelivered to the Borrowers and shall be conclusive so long as it reflects areasonable basis for the calculation of the amounts set forth therein and doesnot contain any manifest error.  TheBorrowers shall pay the Lender or the Issuing Lender the amount shown as due onany such certificate within 10 days after receipt thereof.

 

(d)         Failure or delay on the partof the Lender or the Issuing Lender to demand compensation pursuant to this Section 2.9shall not constitute a waiver of the Lender’s or the Issuing Lender’s right todemand such compensation; *provided* thatthe Borrowers shall not be required to compensate the Lender or the IssuingLender pursuant to this Section 2.9 for any increased costs or reductionsincurred more than six months prior to the date that Lender or the IssuingLender, as the case may be, notifies the Borrowers of the Change in Law givingrise to such increased costs or reductions and of Lender’s or the IssuingLender’s intention to claim compensation therefor; *provided**further* that, if the Change in Lawgiving rise to such increased costs or reductions is (i) retroactive and (ii) occurredwithin such six-month period, then the six-month period referred to above maybe extended to include the period of retroactive effect thereof, but in noevent any period prior to the Closing Date.

 

2.10                           **Taxes**.

 

(a)          Any and all payments by oron account of any Obligations of the Borrowers hereunder shall be made free andclear of and without deduction for any Indemnified Taxes or Other Taxes; *provided* that if the Borrowers shall be required to deductany Indemnified Taxes or Other Taxes from such payments, then (i) the sumpayable shall be increased as necessary so that after making all requireddeductions (including deductions applicable to additional sums payable underthis Section 2.10) the Lender or the Issuing Lender (as the case may be)receives an amount equal to the sum it would have received had no such deductionsbeen made, (ii) the Borrowers shall make such deductions and (iii) theBorrowers shall pay the full amount deducted to the relevant GovernmentalAuthority in accordance with applicable law.

 

(b)         In addition, the Borrowersshall pay all Other Taxes to the relevant Governmental Authority in accordancewith applicable law.

 

(c)          The Borrowers shallindemnify the Lender and the Issuing Lender, within 10 days after writtendemand therefor, for the full amount of any Indemnified Taxes or Other Taxes(including Indemnified Taxes or Other Taxes imposed or asserted on orattributable to amounts payable under this Section 2.10) paid by theLender or the Issuing Lender, as the case may be (and any penalties, interestand reasonable expenses arising therefrom or with respect thereto during theperiod prior to the Borrowers making the payment demanded under this paragraph(c)), whether or not such Indemnified Taxes or Other Taxes were correctly orlegally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of suchpayment or liability delivered to the Borrowers by the Lender or the IssuingLender, shall be conclusive absent manifest error.

 

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(d)   As soon as practicable after any payment ofIndemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority,the Borrowers shall deliver to the Lender the original or a certified copy of areceipt issued by such Governmental Authority evidencing such payment, a copyof the return reporting such payment or other evidence of such paymentreasonably satisfactory to the Lender.

 

**ARTICLE 3**

** **

**Guarantee by Guarantors**

** **

3.1           **TheGuarantee**.  The Guarantorshereby guarantee to the Lender and the Issuing Lender and their respectivesuccessors and assigns the prompt payment in full when due (whether at statedmaturity, by acceleration or otherwise) of the Obligations.  The Guarantors hereby further agree that ifthe Borrowers shall fail to pay in full when due (whether at stated maturity,by acceleration or otherwise) any of the Obligations, the Guarantors willpromptly pay the same, without any demand or notice whatsoever, and that in thecase of any extension of time of payment or renewal of any of the Obligations,the same will be promptly paid in full when due (whether at extended maturity,by acceleration or otherwise) in accordance with the terms of such extension orrenewal.

 

3.2           **ObligationsUnconditional**.  Theobligations of the Guarantors under Section 3.1 are absolute andunconditional irrespective of the value, genuineness, validity, regularity orenforceability of this Agreement, the other Loan Documents or any otheragreement or instrument referred to herein or therein, or any substitution, releaseor exchange of any other guarantee of or security for any of the Obligations,and, to the fullest extent permitted by applicable law, irrespective of anyother circumstance whatsoever that might otherwise constitute a legal orequitable discharge or defense of a surety or guarantor, it being the intent ofthis Section 3.2 that the obligations of the Guarantors hereunder shall beabsolute and unconditional under any and all circumstances.  Without limiting the generality of theforegoing, it is agreed that the occurrence of any one or more of the followingshall not alter or impair the liability of the Guarantors hereunder which shallremain absolute and unconditional as described above:

 

(i)            at any time or from time to time,without notice to such Guarantors, the time for any performance of orcompliance with any of the Obligations shall be extended, or such performanceor compliance shall be waived;

 

(ii)           any of the acts mentioned in any ofthe provisions hereof or of the other Loan Documents or any other agreement orinstrument referred to herein or therein shall be done or omitted;

 

(iii)          the maturity of any of the Obligationsshall be accelerated, or any of the Obligations shall be modified, supplementedor amended in any respect, or any right hereunder or under the other LoanDocuments or any other agreement or instrument referred to herein or thereinshall be waived or any other guarantee of any of the Obligations or anysecurity therefor shall be released or exchanged in whole or in part or otherwisedealt with; or

 

(iv)          any lien or security interest grantedto, or in favor of, the Lender or the Issuing Lender as security for any of theObligations shall fail to be perfected.

 

TheGuarantors hereby expressly waive diligence, presentment, demand of payment,protest and all notices whatsoever, and any requirement that the Lender or theIssuing Lender exhaust any right, power or remedy or proceed against theBorrowers hereunder or under the other Loan Documents or any other

 

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agreementor instrument referred to herein or therein, or against any other Person underany other guarantee of, or security for, any of the Obligations.

 

3.3           **Reinstatement**.  The obligations of the Guarantors under this Article 3shall be automatically reinstated if and to the extent that for any reason anypayment by or on behalf of the Borrowers in respect of the Obligations isrescinded or must be otherwise restored by any holder of any of theObligations, whether as a result of any proceedings in bankruptcy orreorganization or otherwise, and each Guarantor agrees that it will indemnifythe Lender and the Issuing Lender on demand for all reasonable costs andexpenses (including fees and expenses of counsel) incurred by the Lender or theIssuing Lender in connection with such rescission or restoration, including anysuch costs and expenses incurred in defending against any claim alleging thatsuch payment constituted a preference, fraudulent transfer or similar paymentunder any bankruptcy, insolvency or similar law.

 

3.4           **Subrogation**.  Until such time as the Obligations shall havebeen indefensibly paid in full, each of the Guarantors hereby waives all rightsof subrogation or contribution, whether arising by contract or operation of law(including, without limitation, any such right arising under the FederalBankruptcy Code of 1978, as amended) or otherwise by reason of any payment byit pursuant to the provisions of this Article 3 and further agrees withthe Borrowers for the benefit of each creditor of the Borrowers (including,without limitation, the Lender and the Issuing Lender) that any such payment byit shall constitute a contribution of capital by such Guarantor to theBorrowers.

 

3.5           **Remedies**.  The Guarantors agree that, as between theGuarantors and the Lender, the Obligations of the Borrowers hereunder may bedeclared to be forthwith due and payable as provided in Section 9.1 (andshall be deemed to have become automatically due and payable in thecircumstances provided in Section 9.1) for purposes of Section 3.1notwithstanding any stay, injunction or other prohibition preventing suchdeclaration (or such Obligations from becoming automatically due and payable)as against the Borrowers and that, in the event of such declaration (or suchObligations being deemed to have become automatically due and payable), suchObligations (whether or not due and payable by the Borrowers) shall forthwithbecome due and payable by the Guarantors for purposes of Section 3.1.

 

3.6           **Instrumentfor the Payment of Money**. Each of the Guarantors hereby acknowledges that the guarantee in this Article 3constitutes an instrument for the payment of money, and consents and agreesthat the Lender or the Issuing Lender, at its sole option, in the event of adispute by such Guarantor in the payment of any moneys due hereunder, shallhave the right to summary judgment or such other expedited procedure as may beavailable for a suit on a note or other instrument for the payment of money.

 

3.7           **ContinuingGuarantee**.  The guarantee inthis Article 3 is a continuing guarantee, and shall apply to allObligations whenever arising.

 

3.8           **GeneralLimitation on Amount of Obligations Guaranteed**.  In any action or proceeding involving anystate or non-U.S. corporate law, or any state or Federal or non-U.S.bankruptcy, insolvency, reorganization or other law affecting the rights ofcreditors generally, if the obligations of the Guarantors under Section 3.1would otherwise be held or determined to be void, invalid or unenforceable, orsubordinated to the claims of any other creditors, on account of the amount ofits liability under Section 3.1, then, notwithstanding any other provisionhereof to the contrary, the amount of such liability shall, without any furtheraction by the Guarantors, Lender, or other Person, be automatically limited andreduced to the highest amount that is valid and enforceable and notsubordinated to the claims of other creditors as determined in such action orproceeding.

 

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** **

**ARTICLE 4**

** **

**The Collateral**

** **

4.1           **Grant ofSecurity Interest. **Assecurity for due and punctual payment and performance of the Obligations, eachCredit Party hereby grants to the Lender (for the ratable benefit of theLender, the Issuing Lender and the Cash Management Bank) a continuing securityinterest in and lien on all tangible and intangible property and assets of suchCredit Party, whether now owned or existing or hereafter acquired or arising,together with any and all additions thereto and replacements therefor andproceeds and products thereof (collectively referred to for purposes of this Article 4as “Collateral”), including without limitation the property describedbelow:

 

(a)   all tangible personal property, includingwithout limitation all present and future goods, inventory (including, withoutlimitation, all merchandise, raw materials, work in process, finished goods andsupplies), machinery, equipment, motor vehicles, rolling stock, tools,furniture, fixtures, office supplies, computers, computer software andassociated equipment, whether now owned or hereafter acquired, including,without limitation, all tangible personal property used in the operation of thebusiness of such Credit Party;

 

(b)   all rights under all present and futureauthorizations, permits, licenses and franchises issued, granted or licensed tosuch Credit Party for the operation of its business;

 

(c)   all Patents of such Credit Party;

 

(d)   all Trademarks of such Credit Party;

 

(e)   all Copyrights of such Credit Party;

 

(f)    the entire goodwill of business of suchCredit Party and all other general intangibles (including know-how, tradesecrets, customer lists, proprietary information, inventions, domain names,methods, procedures and formulae) connected with the use of and symbolized byany Patents, Trademarks or Copyrights of such Credit Party;

 

(g)   all rights under all present and futurevendor or customer contracts and all franchise, distribution, design,consulting, construction, engineering, management and advertising and relatedagreements;

 

(h)   all rights under all present and futureleases of real and personal property; and

 

all other personal property, including, withoutlimitation, all present and future accounts, accounts receivable, cash, cash equivalents,deposits, deposit accounts, loss carry back, tax refunds, insurance proceeds,premiums, rebates and refunds, choses in action, investment property,securities, partnership interests, limited liability company interests,contracts, contract rights, general intangibles (including without limitation,all customer and advertiser mailing lists, intellectual property, patents,copyrights, trademarks, trade secrets, trade names, domain names, goodwill,customer lists, advertiser lists, catalogs and other printed materials,publications, indexes, lists, data and other documents and papers relatingthereto, blueprints, designs, charts, and research and development, whether onpaper, recorded electronically or otherwise), all websites (including without limitation,all content, HTML documents, audiovisual material, software, data, hardware,access lines, connections, copyrights, trademarks, patents and trade secretsrelating to such websites) and domain names, any information stored on anymedium, including electronic medium, related to any of the personal property ofsuch Credit Party, all financial 

 

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books and records and other books and recordsrelating, in any manner, to the business of such Credit Party, all proposalsand cost estimates and rights to performance, all instruments and promissorynotes, documents and chattel paper, and all debts, obligations and liabilitiesin whatever form owing to such Credit Party from any person, firm orcorporation or any other legal entity, whether now existing or hereafterarising, now or hereafter received by or belonging or owing to such CreditParty; and all guaranties and security therefor, and all letters of credit andother supporting obligations in respect of such debts, obligations andliabilities.

 

Any of the foregoing terms which are defined in theUniform Commercial Code shall have the meaning provided in the UniformCommercial Code, as amended and in effect from time to time, as supplementedand expanded by the foregoing.

 

4.2           **SpecialWarranties and Covenants of the Credit Parties**.  Each Credit Party hereby warrants andcovenants to the Lender that:

 

(a)   Such Credit Party has delivered to the Lendera Perfection Certificate in substantially the form of Exhibit Chereto.  All information set forth insuch Perfection Certificate is true and correct in all material respects andthe facts contained in such Perfection Certificate are accurate in all materialrespects as of the date of this Agreement. Each Credit Party agrees to supplement its Perfection Certificatepromptly after obtaining information which would require a correction oraddition to such Perfection Certificate.

 

(b)   No Credit Party will change its jurisdictionof organization, principal or any other place of business, or the location ofany Collateral from the locations set forth in the Perfection Certificatedelivered by such Credit Party, or make any change in its name or conduct itsbusiness operations under any fictitious business name or trade name, without,in any such case, at least thirty (30) days’ prior written notice to theLender; provided that the inventory of such Credit Party may be in thepossession of manufacturers or processors in any jurisdiction in which allnecessary UCC financing statements have been filed by the Lender and withrespect to which the Lender has received waiver letters from all landlords,warehousemen and processors in form and substance acceptable to Lender.

 

(c)   Except for Collateral that is obsolete or nolonger used in their business, the Credit Parties will keep the Collateral ingood order and repair (normal wear excepted) and adequately insured at alltimes in accordance with the provisions of Section 7.5.  The Credit Parties will pay promptly when dueall taxes and assessments on the Collateral or for its use or operation, exceptfor taxes and assessments permitted to be contested as provided in Section 7.4.  Following the occurrence and during thecontinuance of an Event of Default, the Lender may at its option discharge anytaxes or Liens to which any Collateral is at any time subject (other thanPermitted Liens), and may, upon the failure of the Credit Parties to do so inaccordance with this Agreement, purchase insurance on any Collateral and payfor the repair, maintenance or preservation thereof, and each Credit Partyagrees to reimburse the Lender on demand for any payments or expenses incurredby the Lender pursuant to the foregoing authorization and any unreimbursedamounts shall constitute Obligations for all purposes hereof.

 

(d)   The Lender may from time to time request andeach Credit Party shall deliver copies of all customer lists and vendor lists.

 

(e)   To the extent, if any, that such Credit Party’ssignature is required therefor, each Credit Party will promptly execute anddeliver to the Lender such financing statements and amendments thereto,certificates and other documents or instruments as may be necessary to enablethe Lender to perfect or from time to time renew the security interest grantedhereby, including,

 

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withoutlimitation, such financing statements and amendments thereto, certificates andother documents as may be necessary to perfect a security interest in anyadditional Collateral hereafter acquired by such Credit Party or in anyreplacements or proceeds thereof.  EachCredit Party authorizes and appoints the Lender, in case of need, to executesuch financing statements, certificates and other documents pertaining to theLender’s security interest in the Collateral in its stead if such Credit Party’ssignature is required therefor and such Credit Party fails to so execute suchdocuments, with full power of substitution, as such Debtor’s attorney in fact.

 

(f)    Each Credit Party hereby irrevocablyauthorizes the Lender, at any time and from time to time, to file in anyjurisdiction financing statements and amendments thereto that (i) indicatethe Collateral (x) as all assets of such Credit Party or words of similareffect, regardless of whether any particular asset falls within the scope of Article 9of the Uniform Commercial Code of the Commonwealth of Massachusetts or suchjurisdiction or (y) as being of an equal or lesser scope or with greaterdetail and (ii) which contain any other information required by Article 9of the Uniform Commercial Code (including Part 5 thereof) for thesufficiency or filing office acceptance of any financing statement oramendment, including whether (A) any Credit Party is an organization, thetype of organization and any organization identification number issued to suchCredit Party and (B) in the case of a financing statement filed as afixture filing or indicating Collateral as as-extracted collateral or timber tobe cut, a sufficient description of the real property to which the Collateralrelates.  The Credit Parties agree tofurnish any such information to the Lender promptly upon request.  Each Credit Party also ratifies its authorizationfor the Lender to have filed in any Uniform Commercial Code jurisdiction anylike initial financing statements or amendments thereto if filed prior to thedate hereof.

 

(g)   Each Credit Party agrees that it will joinwith the Lender in executing and, at its own expense, will file and refile, orpermit the Lender to file and refile such other documents (including, withoutlimitation, this Agreement and licenses to use software and other propertyprotected by copyright), in such offices (including, without limitation, thePTO, the United States Copyright Office, and appropriate state patent,trademark and copyright offices), as the Lender may reasonably deem necessaryor appropriate, wherever required or permitted by law in order to perfect andpreserve the rights and interests granted to the Lender in Patents, Trademarksand Copyrights hereunder.  Each CreditParty will give the Lender notice of each office at which records of suchCredit Party pertaining to all intangible items of Collateral are kept.  Except as may be provided in such notice, therecords concerning all intangible Collateral are and will be kept at theaddress shown in the respective Perfection Certificate for such Credit Party asthe principal place of business of such Credit Party.

 

(h)   The Credit Parties are the sole and exclusiveowners of the websites and domain names listed on Schedule 4.2 heretoand have registered such domain names with the applicable authority forregistration of the same which provides for the exclusive use by the CreditParties of such domain names.  Thewebsites do not contain any material, the publication of which may result in (a) theviolation of rights of any person or (b) a right of any person against thepublisher or distributor of such material.

 

(i)    The Credit Parties shall, annually by theend of the first calendar quarter following the previous calendar year, providewritten notice to the Lender of all applications for registration of Patents,Trademarks or Copyrights, to the extent such applications exist, made duringthe preceding calendar year.  The CreditParties shall file and prosecute diligently all applications for registrationof Patents, Trademarks or Copyrights now or hereafter pending that would benecessary to the business of the Credit Parties to which any such applicationspertain, and to do all acts, in any such instance, necessary to preserve andmaintain all rights in such registered Patents, Trademarks or

 

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Copyrights unlesssuch Patents, Trademarks or Copyrights are not material to the business of theCredit Parties, as reasonably determined by the Credit Parties consistent withprudent and commercially reasonable business practices.  Any and all costs and expenses incurred inconnection with any such actions shall be borne by the Credit Parties.  Except in accordance with prudent andcommercially reasonable business practices, the Credit Parties shall notabandon any right to file a Patent, Trademark or Copyright application or anypending Patent, Trademark or Copyright application or any registered Patent,Trademark or Copyright, in each case material to its business, without theconsent of the Lender.

 

(j)    The domain name servers used in connectionwith the domain names of the Credit Parties and all other relevant informationpertaining to such domain names, and the administrative contacts used inconnection with the registration of such domain names are identified on Schedule4.2 hereof.  No Credit Party willchange such domain name servers without 10 days’ prior notice to theLender.  No Credit Party will cause achange in the identity of any domain name administrative contact without 10days’ prior notice to the Lender.

 

(k)   If any Credit Party is, now or at any timehereafter, a beneficiary under a letter of credit now or hereafter, such CreditParty will promptly notify the Lender thereof and, at the request and option ofthe Lender, such Credit Party shall, pursuant to an agreement in form andsubstance satisfactory to the Lender, either (i) arrange for the issuerand any confirmer or other nominated person of such letter of credit to consentto an assignment to the Lender of the proceeds of the letter of credit or (ii) arrangefor the Lender to become the transferee beneficiary of the letter of credit,with the Lender agreeing, in each case, that the proceeds of the letter ofcredit are to be applied by the Lender against the Obligations as provided inthis Agreement.

 

(l)            To the extent any Credit Partyshall, now or at any time hereafter, hold or acquire any promissory note orother instrument or tangible chattel paper, such Credit Party will promptlynotify the Lender thereof and, at the request and option of the Lender, suchDebtor will deliver such promissory note or other instrument or tangiblechattel paper to the Lender to be held as Collateral hereunder, together withan endorsement thereof reasonably satisfactory in form and substance to theLender.

 

(m)          If,now or at any time hereafter, any Credit Party shall obtain or hold anyinvestment property or electronic chattel paper, such Credit Party will promptly notify the Lenderthereof and, at the request and option of the Lender, such Credit Party willtake or cause to be taken such steps as the Lender may reasonably request forthe Lender to obtain “control” (as provided in Sections 9-105 and 9-106 of theUniform Commercial Code of the Commonwealth of Massachusetts, as amended and ineffect from time to time) of such Collateral.

 

(n)           NoCredit Party holds any commercial tort claims, as defined in Article 9 ofthe Uniform Commercial Code, except as indicated in the Perfection Certificateattached hereto as Exhibit C. If any of the Credit Parties shall at any time acquire a commercial tortclaim, such Credit Party shall immediately notify the Lender in a writingsigned by such Credit Party of the brief details thereof and grant to theLender in such writing a security interest therein and in the proceeds thereof,all upon the terms of this Agreement, with such writing to be in form andsubstance reasonably satisfactory to the Lender.

 

(o)           Ifany Credit Party has accounts receivable in respect of which the account debtoris located in Minnesota, the Credit Parties represent and warrant that theapplicable Credit Party has filed and shall file all legally-required Notice ofBusiness Activities Reports and comparable reports with the appropriategovernment authorities.

 

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4.3           **Collectionof Proceeds of Accounts Receivable**.

 

(a)   Upon the request of the Lender (which requestmay be made in its sole discretion), the Credit Parties shall (i) directall of their account debtors to make all payments on accounts receivable of theCredit Parties directly to post office boxes (each a “Lock Box” andcollectively the “Lock Boxes”) under the control of the Cash ManagementBank, (ii) establish accounts (each a “Controlled Account” andcollectively the “Controlled Accounts”) in the Lender’s name for thebenefit of the Borrowers with the Cash Management Bank, into which all paymentsreceived in the Lock Boxes shall be deposited, and into which the CreditParties will immediately deposit all payments made for inventory or servicessold or rendered by the Credit Parties and received by the Credit Parties inthe identical form in which such payments were made, whether by cash or check,and (iii) cause each Subsidiary and Affiliate, and any other Person actingfor or in concert with the Credit Parties that receives any monies, checks,notes, drafts or other payments relating to or as proceeds of accountsreceivable or other Collateral, to receive and hold such items in trust for,and as the sole and exclusive property of, the Lender and, immediately uponreceipt thereof, shall remit the same (or cause the same to be remitted) inhand to the Controlled Accounts; *provided* that,for purposes of administrative convenience, the Lender may in its reasonablediscretion, permit the Credit Parties from time to time to maintain one or moreaccounts with one or more financial institutions other than the Cash ManagementBank and with such maximum cash balances as the Lender deems appropriate, andfor which the Credit Parties may, at the discretion of the Lender, be permittedto have direct access.

 

(b)   Each Credit Party acknowledges that the CashManagement Bank is an Affiliate of the Lender and that the Cash Management Bankand the Lender are parties to cash management agreements that confirm that theLender has dominion and control over all accounts of the Credit Parties or theLender maintained by the Cash Management Bank, and all funds from time to timeheld in such accounts.  The Borrowers,the Lender and the Cash Management Bank hereby agree that the Cash ManagementBank shall comply with any instructions originated by the Lender directingdisposition of funds in such accounts without further consent of theBorrowers.  Upon the request of theLender (which request may be made in its sole discretion), (i) each CreditParty agrees to enter into such Lockbox Agreements and Control Agreements withthe Cash Management Bank and the Lender as the Lender may reasonably requestand (ii) each Credit Party agrees to cause each financial institutionother than the Cash Management Bank with which a Lock Box and/or ControlledAccount has been established to, enter into a Lockbox Agreement and/or ControlAgreement, as applicable, confirming that the amounts on deposit in such LockBox and/or Controlled Account, as applicable, are the property of and are underthe control of the Lender, that such financial institution has no right tosetoff against such Lock Box or Controlled Account or against any other accountmaintained by such financial institution into which the contents of suchControlled Account are transferred, and that upon written notice from theLender, such financial institution shall wire, or otherwise transfer inimmediately available funds in a manner satisfactory to the Lender, fundsdeposited in the Controlled Account on a daily basis as such funds arecollected.

 

(c)   The Credit Parties agree to pay allreasonable fees, costs and expenses which the Credit Parties incur inconnection with opening and maintaining a Lock Box and Controlled Account.  All of such fees, costs and expenses whichremain unpaid pursuant to any Lock Box or Control Agreement with the CreditParties, to the extent same shall have been paid by the Lender hereunder, shallconstitute Loans hereunder, shall be payable to the Lender by the CreditParties upon demand, and, until paid, shall bear interest at the highest ratethen applicable to Loans hereunder.  Allchecks, drafts, instruments and other items of payment or proceeds ofCollateral delivered to the Lender or the Cash Management Bank in kind shall beendorsed by the Credit Parties, to the Lender, and, if that endorsement of anysuch item shall not be made for any reason, the Lender and the Cash 

 

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Management Bankare each hereby irrevocably authorized to endorse the same on behalf of theCredit Parties.  For the purpose of thissubsection 4.3(c), each Credit Party irrevocably hereby makes, constitutes andappoints the Lender (and all Persons designated by the Lender for that purpose,including, without limitation, the Cash Management Bank) as such Credit Party’strue and lawful attorney and agent-in-fact (i) to endorse the name of thesuch Credit Party upon said items of payment and/or proceeds of Collateral ofthe Credit Parties and upon any chattel paper, document, instrument, invoice orsimilar document or agreement relating to any account receivable of the CreditParties or goods pertaining thereto; (ii) to take control in any manner ofany item of payment or proceeds thereof; (iii) to have access to any LockBox or postal box into which any mail of the Credit Parties is deposited; and (iv) openand process all mail addressed to the Credit Parties and deposited therein.

 

(d)   The Lender (and all Persons designated by theLender for such purpose, including, without limitation, the Cash ManagementBank) may, at any time and from time to time after the occurrence and during thecontinuance of an Event of Default, whether before or after notification to anyaccount debtor and whether before or after the maturity of any of theObligations, (i) enforce collection of any accounts receivable or contractrights of the Credit Parties by suit or otherwise; (ii) exercise all ofthe rights and remedies of the Credit Parties with respect to proceedingsbrought to collect any accounts receivable; (iii) surrender, release orexchange all or any part of any accounts receivable of the Credit Parties, orcompromise or extend or renew for any period (whether or not longer than theoriginal period) any indebtedness thereunder; (iv) sell or assign anyaccount receivable of the Credit Parties upon such terms, for such amount andat such time or times as the Lender deems advisable; (v) prepare, file andsign the names of the Credit Parties on any proof of claim in bankruptcy orother similar document against any account debtor indebted on an accountreceivable of the Credit Parties; and (vi) do all other acts and thingswhich are necessary, in the Lender’s sole discretion, to fulfill theObligations of the Credit Parties under this Agreement and to allow the Lenderto collect the accounts receivable.  Inaddition to any other provision hereof or in any of the other Loan Documents,the Lender may at any time on or after the occurrence of an Event of Default,at the sole expense of the Credit Parties, notify any parties obligated on anyof the accounts receivable of the Credit Parties to make payment directly tothe Lender of any amounts due or to become due thereunder.

 

4.4           **Fixtures,etc.**  It is the intention ofthe parties hereto that (except for Collateral located on any MortgagedProperty) none of the Collateral shall become fixtures and each Credit Partywill take all such reasonable action or actions as may be necessary to preventany of the Collateral from becoming fixtures. Without limiting the generality of the foregoing, each Credit Partywill, if requested by the Lender, use commercially reasonable efforts to obtainwaivers of Liens, in form satisfactory to the Lender, from each lessor of realproperty on which any of the Collateral is or is to be located to the extentrequested by the Lender.

 

4.5           **Right ofLender to Dispose of Collateral, etc.**  Upon the occurrence of any Event of Default,such Event of Default not having previously been waived, remedied or cured, butsubject to the provisions of the Uniform Commercial Code or other applicablelaw, in addition to all other rights under applicable law and under the LoanDocuments, the Lender shall have the right to take possession of the Collateraland, in addition thereto, the right to enter upon any premises on which theCollateral or any part thereof may be situated and remove the same therefrom.  The Lender may require the Credit Parties tomake the Collateral (to the extent the same is moveable) available to theLender at a place to be designated by the Lender or transfer any informationrelated to the Collateral to the Lender by electronic medium.  Unless the Collateral is perishable orthreatens to decline speedily in value or is of a type customarily sold on arecognized market, the Lender will give the Credit Parties at least seven (7) days’prior written notice of the time and place of any public sale thereof or of thetime after which any private sale or any other intended disposition thereof isto be made.  Any such notice shall bedeemed to meet any

 

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requirement hereunder or under any applicable law (including theUniform Commercial Code) that reasonable notification be given of the time andplace of such sale or other disposition.

 

4.6           **Right ofLender to Use and Operate Collateral, etc.**  Upon the occurrence and during thecontinuance of any Event of Default, subject to the provisions of the UniformCommercial Code or other applicable law, the Lender shall have the right andpower (a) to take possession of all or any part of the Collateral, and toexclude the Credit Parties and all persons claiming under the Credit Partieswholly or partly therefrom, and thereafter to hold, store, and/or use, operate,manage and control the same, and (b) to grant a license to use, or causeto be granted a license to use, any or all of the Patents, Trademarks andCopyrights (in the case of Trademarks, along with the goodwill associatedtherewith), but subject to the terms of any licenses.  Upon any such taking of possession, theLender may, from time to time, at the expense of the Credit Parties, make allsuch repairs, replacements, alterations, additions and improvements to and ofthe Collateral as the Lender may deem proper. In any such case the Lender shall have the right to manage and controlthe Collateral and to carry on the business and to exercise all rights andpowers of the Credit Parties in respect thereto as the Lender shall deem best,including the right to enter into any and all such agreements with respect tothe operation of the Collateral or any part thereof as the Lender may see fit;and the Lender shall be entitled to collect and receive all rents, issues,profits, fees, revenues and other income of the same and every partthereof.  Such rents, issues, profits,fees, revenues and other income shall be applied to pay the expenses of holdingand operating the Collateral and of conducting the business thereof, and of allmaintenance, repairs, replacements, alterations, additions and improvements,and to make all payments which the Lender may be required or may elect to make,if any, for taxes, assessments, insurance and other charges upon the Collateralor any part thereof, and all other payments which the Lender may be required orauthorized to make under any provision of this Agreement (including legal costsand reasonable attorneys’ fees).  TheLender shall apply the remainder of such rents, issues, profits, fees, revenuesand other income as provided in****Section 4.7.

 

4.7           **Proceeds ofCollateral**.  After deductingall reasonable costs and expenses of collection, storage, custody, sale orother disposition and delivery (including reasonable legal costs and attorneys’fees) and all other charges against the Collateral, the Lender shall apply theresidue of the proceeds of any such sale or disposition to the Obligations inaccordance with the terms hereof****and anysurplus shall be returned to the Credit Parties or to any Person or partylawfully entitled thereto.  In the eventthe proceeds of any sale, lease or other disposition of the Collateral areinsufficient to pay all of the Obligations in full, the Credit Parties will beliable for the deficiency, together with interest thereon at the Post-DefaultRate, and the cost and expenses of collection of such deficiency, including (tothe extent permitted by law), without limitation, reasonable attorneys’ fees,expenses and disbursements.

 

**ARTICLE 5**

** **

**Representations and Warranties**

** **

EachCredit Party represents and warrants to the Lender and the Issuing Lender as toitself and each other Credit Party, that:

 

5.1           **Organization;Powers**.  Each Credit Party hasbeen duly formed or organized and is validly existing and in good standingunder the laws of its jurisdiction of organization.  Each Credit Party has all requisite power andauthority to carry on its business as now conducted and is qualified to dobusiness in, and is in good standing in, every jurisdiction where suchqualification is required, except where the failure to have such power orauthority or to be so qualified or in good standing, individually or in theaggregate, could not reasonably be expected to result in a Material AdverseEffect.

 

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5.2           **Authorization;Enforceability**.  The borrowingof the Loans and the grant of security interests pursuant to the Loan Documentsare within the power and authority of the Credit Parties and have been dulyauthorized by all necessary action on the part of the Credit Parties.  This Agreement and the other Loan Documentshave been duly authorized, executed and delivered by the Credit Parties andconstitute legal, valid and binding obligations of the Credit Parties,enforceable in accordance with their respective terms, subject to applicablebankruptcy, insolvency, reorganization, moratorium or other laws affectingcreditors’ rights generally and subject to general principles of equity,regardless of whether considered in a proceeding in equity or at law.

 

5.3           **GovernmentalApprovals; No Conflicts**.  Theborrowing of the Loans and the grant of the security interests pursuant to theLoan Documents (a) do not require any consent or approval of, registrationor filing with, or any other action by, any Governmental Authority which hasnot been obtained, except as disclosed on Schedule 5.3, (b) willnot violate any applicable law, policy or regulation or the organizational documentsof the Credit Parties or any order of any Governmental Authority, (c) willnot violate or result in a default under any indenture, agreement or otherinstrument binding upon the Credit Parties, or any assets, or give rise to aright thereunder to require any payment to be made by the Credit Parties, andsuch violation or default or right to payment would have a Material AdverseEffect, and (d) except for the Liens created by the Loan Documents, willnot result in the creation or imposition of any Lien on any asset of the CreditParties.

 

5.4           **FinancialCondition; No Material Adverse Change**.

 

(a)   The Credit Parties have heretofore deliveredto the Lender the following financial statements:

 

(i)            the consolidated balance sheets andstatements of operations, shareholders’ equity and cash flows of the CreditParties, as of and for the fiscal years ended December 31, 2007, auditedand accompanied by an opinion of the Credit Parties’ independent publicaccountants;

 

(ii)           the draft audited consolidatedbalance sheet and statements of operations, shareholder’s equity and cash flowsof the Credit Parties, as of and for the nine month period ended on September 30,2008, certified by a Designated Financial Officer that such financialstatements fairly present the financial condition of the Credit Parties as atsuch date and the results of the operations of the Credit Parties for theperiod ended on such date and that all such financial statements, including therelated schedules and notes thereto have been prepared in all material respectsin accordance with GAAP applied consistently throughout the periods involved,except as disclosed on Schedule 5.4; and

 

(iii)          the projected consolidated balancesheets, statements of operations and cash flows for the Credit Parties on aquarterly basis for fiscal year 2009.

 

Exceptas disclosed on Schedule 5.4, such financial statements (except forthe projections) present fairly, in all material respects, the respectiveconsolidated financial position and results of operations and cash flows of therespective entities as of such respective dates and for such periods inaccordance with GAAP, subject to year-end audit adjustments and the absence offootnotes in the case of such unaudited or *pro forma*statements.  The projections were preparedby the Credit Parties in good faith and were based on assumptions that werereasonable when made.

 

(b)   Except as disclosed on Schedule 5.4,since December 31, 2007, there has been no material adverse change in thebusiness, assets, operations or condition, financial or otherwise, of the

 

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Credit Partiesfrom that set forth in the December 31, 2007 financial statements referredto in clause (i) of paragraph (a) above.

 

(c)   None of the Credit Parties has on the datehereof any contingent liabilities, liabilities for taxes, unusual forward orlong-term commitments or unrealized or anticipated losses from any unfavorablecommitments in each case that are material, except as referred to or reflectedor provided for in the balance sheets as at the end of their respective fiscalyears ended December 31, 2007, referred to above, as provided for in Schedule 5.4annexed hereto, or as otherwise permitted pursuant to this Agreement, or asreferred to or reflected or provided for in the financial statements describedin this Section 5.4.

 

5.5           **Properties**.

 

(a)   Each Credit Party has good and marketabletitle to, or valid, subsisting and enforceable leasehold interests in, all itsProperty material to its business.  Allmachinery and equipment of the Credit Parties is in good operating conditionand repair (ordinary wear and tear excepted), and all necessary replacements ofand repairs thereto have be made so as to preserve and maintain the value andoperating efficiency of such machinery and equipment.  As of the date hereof, Schedule 5.5annexed hereto contains a true, accurate and complete list of (i) allowned equipment and all leased equipment, and (ii) all equipment leases(together with all amendments, modifications, supplements, renewals orextensions of any thereof).  Except asspecified in Schedule 5.5, each agreement listed in clause (ii) ofthe immediately preceding sentence is in full force and effect and theBorrowers have no knowledge of any default that has occurred and is continuingthereunder, and each such agreement constitutes the legal, valid and bindingobligation of each applicable Credit Party, enforceable against such CreditParty in accordance with its terms, except as enforcement may be limited bybankruptcy, insolvency, reorganization, moratorium or similar laws relating toor limiting creditors’ rights generally or by equitable principles.

 

(b)   Set forth on Schedule 5.5 hereto is acomplete list of all Patents, Trademarks and Copyrights.  Each Credit Party owns, or is licensed touse, all Patents, Trademarks and Copyrights and other intellectual propertymaterial to its business (“Proprietary Rights”), and to the knowledge ofthe Borrowers, the use thereof by the Credit Parties does not infringe upon therights of any other Person, except for any such infringements that,individually or in the aggregate, could not reasonably be expected to result ina Material Adverse Effect.

 

(c)   Schedule 5.5 clearly identifies allPatents, Trademarks and Copyrights that have been duly registered in, filed inor issued by the PTO or the United States Register of Copyrights (collectively,the “Registered Proprietary Rights”). The Registered Proprietary Rights have been properly maintained andrenewed in accordance with all applicable provisions of law and administrativeregulations in the United States, as applicable.  The Credit Parties have taken commerciallyreasonable steps to protect their Registered Proprietary Rights and to maintainthe confidentiality of all Proprietary Rights that are not generally in thepublic domain.

 

(d)   As of the date hereof, Schedule 5.5annexed hereto contains a true, accurate and complete list of (i) all RealProperty Assets, whether owned or leased, and (ii) all leases, subleases orassignments of leases (together with all amendments, modifications,supplements, renewals or extensions of any thereof) affecting each LeaseholdProperty, regardless of whether such Credit Party is the landlord or tenant(whether directly or as an assignee or successor in interest) under such lease,sublease or assignment.  Except asspecified in Schedule 5.5, each agreement listed in clause (ii) ofthe immediately preceding sentence is in full force and effect and theBorrowers have no knowledge of any default that has occurred and is continuingthereunder, and each such agreement constitutes the

 

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legal, valid andbinding obligation of each applicable Credit Party, enforceable against suchCredit Party in accordance with its terms, except as enforcement may be limitedby bankruptcy, insolvency, reorganization, moratorium or similar laws relatingto or limiting creditors’ rights generally or by equitable principles.

 

5.6           **Litigationand Environmental Matters**.

 

(a)   There are no actions, suits or proceedings byor before any arbitrator or Governmental Authority pending against or, to theknowledge of the Credit Parties, threatened against or affecting any CreditParty as to which there is a reasonable possibility of an adverse determinationand that, if adversely determined, could reasonably be expected, individuallyor in the aggregate, to result in a Material Adverse Effect (other than theDisclosed Matters set forth in part (a) of Schedule 5.6).

 

(b)   Except for the Disclosed Matters set forth inSchedule 5.6 and except with respect to any other matters that,individually or in the aggregate, could not reasonably be expected to result ina Material Adverse Effect, the Credit Parties (i) have not failed to complywith any Environmental Law or to obtain, maintain or comply with any permit,license or other approval required in connection with the operation of theCredit Parties’ business to be in compliance with all applicable EnvironmentalLaws, (ii) have not become subject to any Environmental Liability; (iii) havenot received notice of any claim with respect to any Environmental Liability orany inquiry, allegation, notice or other communication from any GovernmentalAuthority which is currently outstanding or pending concerning its compliancewith any Environmental Law or (iv) do not know of any basis for anyEnvironmental Liability.

 

(c)   Since the date of this Agreement, there hasbeen no change in the status of the Disclosed Matters that, individually or in theaggregate, has resulted in, or materially increased the likelihood of, aMaterial Adverse Effect.

 

5.7           **Compliancewith Laws and Agreements**. Except as set forth on Schedule 5.7, each Credit Party is incompliance with all laws, regulations, policies and orders of any GovernmentalAuthority applicable to it or its property and all indentures, agreements andother instruments binding upon it or its property, except where the failure todo so, individually or in the aggregate, could not reasonably be expected toresult in a Material Adverse Effect.

 

5.8           **Investmentand Holding Company Status**. No Credit Party is (a) an “investment company” as defined in, orsubject to regulation under, the Investment Company Act of 1940, as amended or (b) a“bank holding company” as defined in, or subject to regulation under, the BankHolding Company Act of 1956, as amended.

 

5.9           **Taxes**.  Except as set forth on Schedule 5.9,each Credit Party has timely filed or caused to be filed all Tax returns andreports required to have been filed and has paid or caused to be paid all Taxesrequired to have been paid by it, except (a) Taxes that are beingcontested in good faith by appropriate proceedings and for which such CreditParty has set aside on its books adequate reserves with respect thereto inaccordance with GAAP, which reserves shall be acceptable to Lender, or (b) tothe extent that the failure to do so could not reasonably be expected to resultin a Material Adverse Effect.

 

5.10         **ERISA**.  Except as set forth on Schedule 5.10, noCredit Party has any Pension Plans.  NoERISA Event has occurred or is reasonably expected to occur that, when takentogether with all other such ERISA Events for which liability is reasonablyexpected to occur, could reasonably be expected to result in a Material AdverseEffect.  No Credit Party has a presentintention to terminate any Pension Plan

 

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with respect to which any Credit Party would incur a cost of more than$100,000 to terminate such Plan, including amounts required to be contributedto fund such Plan on Plan termination and all costs and expenses associatedtherewith, including without limitation attorneys’ and actuaries’ fees andexpenses in connection with such termination and a reasonable estimate ofexpenses and settlement or judgment costs and attorneys’ fees and expenses inconnection with litigation related to such termination.

 

5.11         **Disclosure**.  As of the Effective Time, the Credit Partieshave disclosed to the Lender all material agreements, instruments and corporateor other restrictions to which any Credit Party is subject after the EffectiveTime, and all other matters known to the Credit Parties, that, individually orin the aggregate, could reasonably be expected to result in a Material AdverseEffect.  The organizational structure ofthe Credit Parties is as set forth on Schedule 5.12 annexed hereto.  The information, reports, financialstatements, exhibits and schedules furnished at or prior to the Effective Timein writing by or on behalf of the Credit Parties to the Lender in connectionwith the negotiation, preparation or delivery of this Agreement and the otherLoan Documents or included herein or therein or delivered pursuant hereto orthereto, at the Effective Time, when taken as a whole do not contain any untruestatement of material fact or omit to state any material fact necessary to makethe statements herein or therein, in light of the circumstances under whichthey were made, not materially misleading. All written information furnished after the Effective Time by the CreditParties to the Lender in connection with this Agreement and the other LoanDocuments and the transactions contemplated hereby and thereby will be true,complete and accurate in every material respect, or (in the case of pro-formainformation and projections) prepared in good faith based on reasonableassumptions, on the date as of which such information is stated orcertified.  There is no fact known to theCredit Parties that could reasonably be expected to have a Material AdverseEffect that has not been disclosed herein, in the other Loan Documents or in areport, financial statement, exhibit, schedule, disclosure letter or otherwriting furnished to the Lender for use in connection with the transactionscontemplated hereby or thereby.

 

5.12         **Capitalization**.  As of the Effective Time, the capitalstructure and ownership of the Credit Parties are correctly described on Schedule 5.12.  As of the Effective Time, the authorized,issued and outstanding capital stock of the Credit Parties consists of thecapital stock described on Schedule 5.12, all of which is duly andvalidly issued and outstanding, fully paid and nonassessable.  Except as set forth on Schedule 5.12,as of the date hereof, (x) there are no outstanding Equity Rights withrespect to any Credit Party and, (y) there are no outstanding obligationsof any Credit Party to repurchase, redeem, or otherwise acquire any shares ofcapital stock of or other interest in any Credit Party, nor are there anyoutstanding obligations of any Credit Party to make payments to any Person,such as “phantom stock” payments, where the amount thereof is calculated withreference to the fair market value or equity value of any Credit Party.

 

5.13         **Subsidiaries**.

 

(a)   Set forth on Schedule 5.13 is acomplete and correct list of all Subsidiaries of the Credit Parties as of thedate hereof, together with, for each such Subsidiary, (i) the jurisdictionof organization of such Subsidiary, (ii) each Person holding ownership interestsin such Subsidiary and (iii) the nature of the ownership interests held byeach such Person and the percentage of ownership of such Subsidiary representedby such ownership interests.  Except asdisclosed in Schedule 5.13, (x) each Credit Party and itsrespective Subsidiaries owns, free and clear of Liens (other than Lienspermitted hereunder), and has the unencumbered right to vote, all outstandingownership interests in each Person shown to be held by it in Schedule 5.13,(y) all of the issued and outstanding capital stock of each such Personorganized as a corporation is validly issued, fully paid and nonassessable and (z) thereare no outstanding Equity Rights with respect to such Person.

 

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(b)   Except as set forth on Schedule 8.8,as of the date of this Agreement none of the Credit Parties is subject to anyindenture, agreement, instrument or other arrangement containing any provisionof the type described in Section 8.8 (“Restrictive Agreements”),other than any such provision the effect of which has been unconditionally,irrevocably and permanently waived.

 

5.14         **MaterialIndebtedness, Liens and Agreements**.

 

(a)   Schedule 5.14 hereto contains acomplete and correct list, as of the date of this Agreement, of all MaterialIndebtedness or any extension of credit (or commitment for any extension ofcredit) to, or guarantee by, any Credit Party the aggregate principal or faceamount of which equals or exceeds (or may equal or exceed) $50,000 and theaggregate principal or face amount outstanding or that may become outstandingwith respect thereto is correctly described on Schedule 5.14.

 

(b)   Schedule 5.14 hereto is acomplete and correct list, as of the date of this Agreement, of each Lien(other than the Liens in favor of the Lender) securing Indebtedness of anyPerson and covering any property of the Credit Parties, and the aggregateIndebtedness secured (or which may be secured) by each such Lien and theProperty covered by each such Lien is correctly described in the appropriatepart of Schedule 5.14.

 

(c)   Schedule 5.14 hereto is acomplete and correct list, as of the date of this Agreement, of each contractand arrangement to which any Credit Party is a party for which breach,nonperformance, cancellation or failure to renew would have a Material AdverseEffect other than purchase orders made in the ordinary course of business andsubject to customary terms.

 

(d)   To the extent requested by Lender, true andcomplete copies of each agreement listed on the appropriate part of Schedule 5.14have been delivered to the Lender, together with all amendments, waivers andother modifications thereto.  All suchagreements are valid, subsisting, in full force and effect, are currentlybinding and will continue to be binding upon each Credit Party that is a partythereto and, to the best knowledge of the Credit Parties, binding upon theother parties thereto in accordance with their terms.  The Credit Parties are not in default underany such agreements, which default could have a Material Adverse Effect.

 

5.15         **FederalReserve Regulations**.  NoCredit Party is engaged principally or as one of its important activities inthe business of extending credit for the purpose of purchasing or carryingmargin stock (as defined in Regulation U of the Board).  The making of the Loans hereunder, the use ofthe proceeds thereof (including Letters of Credit and Acceptances) ascontemplated hereby, and the security arrangements contemplated by the LoanDocuments, will not violate or be inconsistent with any of the provisions ofRegulations T, U, or X of the Board of the Federal Reserve System.

 

5.16         **Solvency**.  As of the Effective Time and after givingeffect to the initial Loans hereunder and the other transactions contemplatedhereby:

 

(a)   the aggregate value of all properties of theCredit Parties at their present fair saleable value on a going concern basis (*i.e.*, the amount that may be realized within a reasonabletime, considered to be six months to one year, either through collection orsale at the regular market value, conceiving the latter as the amount thatcould be obtained for such properties within such period by a capable anddiligent businessperson from an interested buyer who is willing to purchaseunder ordinary selling conditions), exceed the amount of all the debts andliabilities (including contingent, subordinated, unmatured and unliquidatedliabilities) of the Credit Parties;

 

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(b)   the Credit Parties will not, on aconsolidated basis, have an unreasonably small capital with which to conducttheir business operations as heretofore conducted; and

 

(c)   the Credit Parties will have, on aconsolidated basis, sufficient cash flow to enable them to pay their debts asthey mature.

 

5.17         **ForceMajeure**.  Since December 31,2007, the business, properties and other assets of the Credit Parties have notbeen materially and adversely affected in any way as the result of any fire orother casualty, strike, lockout or other labor trouble, embargo, sabotage,confiscation, contamination, riot, civil disturbance, activity of armed forcesor act of God.

 

5.18         **AccountsReceivable**.  The Lender mayrely, in determining which accounts receivable are Eligible Accounts, on allstatements and representations made by the Credit Parties with respect to suchaccounts receivable.  Unless otherwiseindicated to the Lender in writing:

 

(a)   Each account receivable is genuine and in allrespects what it purports to be, and it is not evidenced by a judgment;

 

(b)   Each account receivable arises out of acompleted, bona fide sale and delivery of goods or rendition of services by aCredit Party in the ordinary course of its business and in accordance with theterms and conditions of all purchase orders, contracts or other documentsrelating thereto and forming a part of the contract between such Credit Partyand the account debtor, and, in the case of goods, title to the goods haspassed from the Credit Party to the account debtor;

 

(c)   Each account receivable is for a liquidatedamount maturing as stated in the duplicate invoice covering such sale orrendition of services, a copy of which has been furnished or is available tothe Lender;

 

(d)   Each account receivable, and the Lender’ssecurity interest therein, is not, and will not (by voluntary act or omissionof the Credit Parties) be in the future, subject to any offset, Lien,deduction, defense, dispute, counterclaim or any other adverse condition exceptfor disputes resulting in returned goods where the amount in controversy isdeemed by the Lender to be immaterial, and each such account receivable isabsolutely owing to one of the Credit Parties and is not contingent in anyrespect or for any reason;

 

(e)   No Credit Party has made any agreement with anyaccount debtor for any extension, compromise, settlement or modification of anyaccount receivable or any deduction therefrom, except discounts or allowanceswhich are granted by the Credit Parties in the ordinary course of theirbusinesses for prompt payment and which are reflected in the calculation of thenet amount of each respective invoice related thereto and are reflected in theBorrowing Base Certificates and Collateral Update Certificates furnished to theLender hereunder;

 

(f)    To the best knowledge of the Credit Parties,the account debtor under each account receivable had the capacity to contractat the time any contract or other document giving rise to an account receivablewas executed and such account debtor is not insolvent; and

 

(g)   To the best knowledge of the Credit Parties,there are no proceedings or actions which are threatened or pending against anyaccount debtor which might result in any material adverse change in suchaccount debtor’s financial condition or the collectability of any accountreceivable.

 

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5.19         **Labor andEmployment Matters**.

 

(a)   Except as set forth on Schedule 5.19as of the Effective Time, and thereafter with respect to which such would havea Material Adverse Effect, (A) no employee of the Credit Parties isrepresented by a labor union, no labor union has been certified or recognizedas a representative of any such employee, and the Credit Parties do not haveany obligation under any collective bargaining agreement or other agreementwith any labor union or any obligation to recognize or deal with any laborunion, and there are no such contracts or other agreements pertaining to orwhich determine the terms or conditions of employment of any employee of theCredit Parties; (B) there are no pending or threatened representationcampaigns, elections or proceedings; (C) the Credit Parties do not haveknowledge of any strikes, slowdowns or work stoppages of any kind, orthreats thereof, and no such activities occurred during the 24-month periodpreceding the date hereof; (D) no Credit Party has engaged in, admittedcommitting or been held to have committed any unfair labor practice; and (E) thereare no controversies or grievances between any Credit Party and any of its employeesor representatives thereof.

 

(b)   Except as set forth on Schedule 5.19,the Credit Parties have at all times complied in all material respects, and arein material compliance with, all applicable laws, rules and regulationsrespecting employment, wages, hours, compensation, benefits, and payment andwithholding of taxes in connection with employment.

 

(c)   Except as set forth on Schedule 5.19,except as could not reasonably be expected to have, individually or in theaggregate, a Material Adverse Effect, the Credit Parties have at all timescomplied with, and are in compliance with, all applicable laws, rules andregulations respecting occupational health and safety, whether now existing orsubsequently amended or enacted, including, without limitation, theOccupational Safety & Health Act of 1970, 29 U.S.C. Section 651et seq. and the state analogies thereto, all as amended or superseded from timeto time, and any common law doctrine relating to worker health and safety.

 

5.20         **BankAccounts**.  Schedule 5.20lists all banks and other financial institutions at which any Credit Partymaintains deposits and/or other accounts as of the Closing Date, and suchSchedule correctly identifies the name and address of each depository, the namein which the account is held, a description of the purpose of the account, andthe complete account number.

 

5.21         **CertainObligations Respecting Subsidiaries**.

 

(a)   Each Borrower shall, and shall cause each ofits Subsidiaries to, take such action from time to time as shall be necessaryto ensure that the percentage of the issued and outstanding shares of capitalstock of any class or character owned by it in any Subsidiary on the datehereof is not at any time decreased, other than by reason of transfers to theBorrowers.

 

(b)   While the Borrowers and the Subsidiaries arenot permitted to form or acquire any Subsidiary without the prior writtenconsent of the Lender pursuant to subsection 8.4(a), in the event that theLender consents to any formation or acquisition of any Subsidiary and suchSubsidiary is formed or acquired, this subsection 5.21(b) shall beapplicable and the Borrower forming or acquiring such Subsidiary will (or ifsuch Subsidiary is formed or acquired by a Credit Party which is not aBorrower, the Borrowers will cause such Credit Party to) take or cause to betaken the following actions:  as soon aspossible but in any case not later than 10 days after the date on which suchSubsidiary is created (or, in the case of a Subsidiary formed or acquired inconnection with a Permitted Acquisition, concurrently with the consummation ofsuch Permitted Acquisition) (x) cause

 

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such Subsidiary to (A) executeand deliver to the Lender, a counterpart to this Agreement and thereby become aparty thereto as an additional “Credit Party” and “Subsidiary Guarantor”thereunder and grant to the Lender a First Priority Lien on all “Collateral” ofsuch Subsidiary Guarantor thereunder, (B) take such other action as shallbe necessary to create and perfect valid and enforceable First Priority Liensin favor of the Lender on all or substantially all of the assets of suchSubsidiary consistent with the provisions of this Agreement and the applicableother Loan Documents and (C) deliver proof of corporate action, incumbencyof officers and other documents and opinions as is consistent with thosedelivered by each Borrower pursuant to Section 6.1 as of the EffectiveTime and (y) execute and deliver to the Lender such pledge agreements orsuch addenda or amendments to this Agreement and take such other actions(including delivering the certificates representing such shares of stock orother equity interests to the Lender) as shall be necessary to create andperfect valid and enforceable First Priority Liens in favor of the Lender onall of the issued and outstanding stock or other equity interests of suchSubsidiary, all of the foregoing to be in form and substance reasonablysatisfactory to the Lender.

 

**ARTICLE 6**

** **

**Conditions**

** **

6.1           **EffectiveTime**.  The obligations of theLender to make Revolving Loans and Term Loans (other than the MichiganReal Estate Term Loan), and of the Issuing Lender to issue Letters of Credithereunder shall not become effective until the date on which each of thefollowing conditions is satisfied (or waived in accordance with Section 10.2):

 

(a)   Counterparts of Agreement.  The Lender shall have received from eachparty hereto either (i) a counterpart of this Agreement signed on behalfof such party or (ii) written evidence satisfactory to the Lender (whichmay include telecopy transmission of a signed signature page of thisAgreement) that such party has signed a counterpart of this Agreement.

 

(b)   Notes. The Lender shall have received a duly completed and executed (i) RevolvingCredit Note, (ii) Existing Equipment Term Note, and (iii) MassachusettsReal Estate Term Note.

 

(c)   Organizational Structure.  The corporate organizational structure,capitalization and ownership of the Credit Parties, shall be as set forth on Schedules5.12 and 5.13 annexed hereto. The Lender shall have had the opportunity to review, and shall besatisfied with, the Credit Parties’ state and federal tax assumptions, and theownership, capital, organization and structure of the Credit Parties.

 

(d)   Existence and Good Standing.  The Lender shall have received such documentsand certificates as the Lender or Special Counsel may reasonably requestrelating to the organization, existence and good standing of each Credit Party,the authorization of the transactions contemplated hereby and any other legalmatters relating to the Credit Parties, this Agreement or the other LoanDocuments, all in form and substance reasonably satisfactory to the Lender andSpecial Counsel.

 

(e)   Security Interests in Personal and MixedProperty.  The Lender shall havereceived evidence satisfactory to it that the Credit Parties shall have takenor caused to be taken all such actions, executed and delivered or caused to beexecuted and delivered all such agreements, documents and instruments and madeor caused to be made all such filings and recordings (other than filings orrecordings to be made by the Lender on or after the Closing Date) that may benecessary or, in the opinion of the Lender, desirable in order to create infavor of the Lender, valid and (upon such

 

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filing and recording)perfected First Priority security interests in the entire personal and mixedproperty Collateral.

 

(f)    Mortgage Amendment; Etc.  The Lender shall have received from theCredit Parties a fully executed and notarized amendment to the Mortgage on theMassachusetts Real Property, in form and substance satisfactory to the Lender,in proper form for recording in all appropriate places in all applicable jurisdictions,encumbering the Massachusetts Real Property, together with mortgagee titleinsurance policies or commitments therefor, and copies of all surveys, deeds,title exception documents, flood hazard certificates and other documents as theLender may reasonably require.

 

(g)   Leases; Landlord Waivers and Consents.  In the case of each Material LeaseholdProperty existing as of the Closing Date, copies of the lease, and allamendments thereto, between the Credit Party and the landlord or tenant partythereto, together with a Landlord Waiver and Consent with respect thereto andwhere required by the terms of any lease, the consent of the mortgagee, groundlessor or other party.

 

(h)   Hazardous Materials EnvironmentalIndemnity.  A joinder and amendmentto the Hazardous Materials Indemnity Agreement executed and delivered by theCredit Parties, making Stephenson & Lawyer, Inc. and PattersonProperties Corporation parties to the Hazardous Materials Indemnity Agreementand amending the terms thereof.

 

(i)    Environmental Reports.  The Lender shall have received reports andother information, in form, scope and substance satisfactory to the Lender,regarding environmental matters relating to such Real Property Assets as theLender shall require (other than the Michigan Real Property), which reportsshall include Phase I and/or Phase II environmental assessments asspecified by the Lender for each such Real Property Asset, which conform to theASTM Standard Practice for Environmental Site Assessments, and the Lender shallbe satisfied with the results of such reports and other information.  Such reports shall be conducted by one ormore environmental consulting firms reasonably satisfactory to the Lender.  The Credit Parties shall deliver a similarsatisfactory environmental assessment prior to the acquisition of any futureReal Property Asset.

 

(j)    Evidence of Insurance.  The Lender shall have received certificatesfrom the Credit Parties’ insurance brokers that all insurance required to bemaintained pursuant to Section 7.5 is in full force and effect and thatthe Lender has been named as additional insured or loss payee thereunder to theextent required under Section 7.5, in form and substance satisfactory tothe Lender.

 

(k)   Necessary Governmental Permits, Licenses andAuthorizations and Consents; Etc. The Credit Parties shall have obtained all other permits, licenses,authorizations and consents from all other Governmental Authorities and allconsents of other Persons with respect to Material Indebtedness, Liens andmaterial agreements listed on Schedule 5.14 (and so identifiedthereon) annexed hereto, in each case that are necessary or advisable inconnection with the transactions contemplated by the Loan Documents, and eachof the foregoing shall be in full force and effect, in each case other thanthose the failure to obtain or maintain which, either individually or in theaggregate, would not reasonably be expected to have a Material AdverseEffect.  No action, request for stay,petition for review or rehearing, reconsideration or appeal with respect to anyof the foregoing shall be pending, and the time for any applicable GovernmentalAuthority to take action to set aside its consent on its own motion shall haveexpired.

 

(l)    Existing Debt; Liens.  The Lender shall have received evidence thatall principal, interest, and other amounts owing in respect of all ExistingDebt of the Credit Parties (other than

 

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Indebtedness permitted toremain outstanding in accordance with Section 8.1 hereof) will be repaidin full as of the Effective Time, and that with respect to all Indebtednesspermitted to remain outstanding in accordance with Section 8.1 hereof, anydefaults or events of default existing as of the Closing Date with respect tosuch Indebtedness will be cured or waived immediately following the funding ofthe initial Loans.  The Lender shall havereceived evidence that as of the Effective Time, the Property of the CreditParties is not subject to any Liens (other than Liens permitted to remainoutstanding in accordance with Section 8.2 hereof).

 

(m)  Financial Statements; Projections.  The Lender shall have received the certifiedfinancial statements and projections referred to in Section 5.4 hereof andthe same shall not be inconsistent with the information previously provided tothe Lender.

 

(n)   Financial Officer Certificate.  The Lender shall have received a certificate,dated the Closing Date and signed by a Designated Financial Officer, confirmingcompliance with the conditions set forth in paragraphs (a) and (b) ofSection 6.2 at the Effective Time.

 

(o)   Solvency Certificate.  The Lender shall have received the SolvencyCertificate, dated the Closing Date and signed by the Chief Financial Officerof the Borrowers, confirming the truth and accuracy of the representations andwarranties made by the Borrowers in Section 5.16.

 

(p)   No Material Adverse Change.  There shall have occurred no material adversechange since September 30, 2008 (in the reasonable opinion of the Lender)in the businesses, assets, liabilities (actual or contingent), operations,condition (financial or otherwise), or prospects of the Credit Parties.

 

(q)   Opinion of Counsel to Credit Parties.  The Lender shall have received favorablewritten opinions (addressed to the Lender and dated the Closing Date) of Lynch,Brewer, Hoffman & Fink, LLP, special counsel to the Credit Parties,substantially in the form of Exhibit I annexed hereto and coveringsuch matters relating to the Credit Parties, this Agreement, the other LoanDocuments or the transactions contemplated hereby as the Lender shallreasonably request.

 

(r)    Borrowing Base and Collateral UpdateCertificates.  A Designated FinancialOfficer shall have executed and delivered to the Lender a Borrowing BaseCertificate substantially in the form of Exhibit B-1 annexedhereto, which Borrowing Base Certificate shall show Excess Availability underthe Revolving Credit Commitment of not less than $1 (after giving effect to thepayment of all sums and expenses, the issuance of all Letters of Credit and thefunding of all Loans to be paid, issued or funded at the Effective Time), and aCollateral Update Certificate substantially in the form of Exhibit B-2annexed hereto.

 

(s)   Inspection, Audit and Appraisal.  The Lender shall have (i) discussed thebusiness and operations of the Credit Parties with the senior management of theCredit Parties, (ii) inspected the facilities of the Credit Parties, (iii) conductedan audit of the books and records of the Credit Parties and (iv) receivedappraisal reports and other information regarding the assets of the CreditParties (including, without limitation, the equipment to be financed pursuantto the Existing Equipment Term Loan) as the Lender may require conducted by auditorssatisfactory to the Lender, and the results of such meeting, inspection, auditand appraisals shall be in form, scope and substance satisfactory to the Lenderin its sole discretion.

 

(t)    Fees and Expenses.  The Lender and the Issuing Lender shall havereceived all fees and other amounts due and payable to such Person and SpecialCounsel at or prior to the

 

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Effective Time, including,to the extent invoiced, reimbursement or payment of all out-of-pocket expensesrequired to be reimbursed or paid by the Borrowers hereunder.

 

(u)   Other Documents.  The Lender shall have received all materialcontracts, instruments, opinions, certificates, assurances and other documentsas the Lender or Special Counsel shall have reasonably requested (including,without limitation, the Lender’s standard for direct debit agreement executedby the Borrowers) and the same shall be reasonably satisfactory to each ofthem.

 

6.2           **EachExtension of Credit**.  Theobligation of the Lender to make a Loan on the occasion of any Borrowing, andof the Issuing Lender to issue, amend, renew or extend any Letter of Credit, issubject to the satisfaction of the following conditions:

 

(a)   Representations and Warranties.  The representations and warranties of eachCredit Party set forth in this Agreement and the other Loan Documents shall betrue and correct in all material respects on and as of the date of suchBorrowing, or (as applicable) the date of issuance, amendment, renewal orextension of such Letter of Credit, both before and after giving effect theretoand to the use of the proceeds thereof (or, if any such representation orwarranty is expressly stated to have been made as of a specific date, suchrepresentation or warranty shall be or have been true and correct as of suchspecific date and provided that, to the extent any change in circumstancesexpressly permitted by this Agreement causes any representation and warrantyset forth herein to no longer be true, such representation and warranty shallbe deemed modified to reflect such change in circumstances).

 

(b)   No Defaults.  At the time of, and immediately after givingeffect to, such Borrowing, or (as applicable) the date of issuance, amendment,renewal or extension of such Letter of Credit, no Default shall have occurredand be continuing.

 

(c)   Borrowing Base Certificate.  A Designated Financial Officer shall haveexecuted and delivered to the Lender a Borrowing Base Certificate substantiallyin the form of Exhibit B-1 annexed hereto, which Borrowing BaseCertificate shall show Excess Availability as of the close of business on theimmediately preceding Business Day of not less than $1 (after giving effect tothe funding of such requested Loan or the issuance of such requested Letter ofCredit).

 

6.3           **MichiganReal Estate Term Loan Effective Time**.  The obligations of the Lender to make theMichigan Real Estate Term Loan hereunder shall not become effective until thedate on which each of the following conditions is satisfied (or waived inaccordance with Section 10.2):

 

(a)   Note. The Lender shall have received a duly completed and executed MichiganReal Estate Term Note.

 

(b)   Mortgage; Etc.  The Lender shall have received from theCredit Parties (i) a fully executed and notarized Mortgage on the MichiganReal Property, in form and substance satisfactory to the Lender, in proper formfor recording in all appropriate places in all applicable jurisdictions,encumbering the Michigan Real Property, together with mortgagee title insurancepolicies or commitments therefor, and copies of all surveys, deeds, titleexception documents, flood hazard certificates and other documents as theLender may reasonably require.

 

(c)   Environmental Reports.  The Lender shall have received reports andother information, in form, scope and substance satisfactory to the Lender,regarding environmental matters relating to the Michigan Real Property as theLender shall require, which reports shall include Phase I and/or Phase IIenvironmental assessments as specified by the Lender for the Michigan Real Property,

 

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which conform to the ASTMStandard Practice for Environmental Site Assessments, and the Lender shall besatisfied with the results of such reports and other information.  Such reports shall be conducted by one ormore environmental consulting firms reasonably satisfactory to the Lender.

 

(d)   Appraisal. The Lender shall havereceived an appraisal report regarding the Michigan Real Property satisfactoryto the Lender, and the results of such appraisal shall be in form, scope andsubstance satisfactory to the Lender in its sole discretion.

 

(e)   Financial Officer Certificate.  The Lender shall have received a certificate,dated the Michigan Real Estate Term Loan Closing Date and signed by aDesignated Financial Officer, confirming compliance with the conditions setforth in paragraphs (a) and (b) of Section 6.2 at the EffectiveTime.

 

(f)    No Material Adverse Change.  There shall have occurred no material adversechange (in the reasonable opinion of the Lender) in the businesses, assets,liabilities (actual or contingent), operations, condition (financial orotherwise), or prospects of the Credit Parties.

 

(g)   Opinion of Local Michigan Counsel toCredit Parties.  The Lender shallhave received favorable written opinions (addressed to the Lender and dated theMichigan Real Estate Term Loan****Closing Date)of local Michigan counsel reasonably acceptable to the Lender covering suchmatters relating to the Credit Parties and the Mortgage on the Michigan RealProperty and the transactions contemplated thereby as the Lender shallreasonably request.

 

(h)   Solvency Certificate.  The Lender shall have received the SolvencyCertificate, dated the Michigan Real Estate Term Loan****ClosingDate and signed by the Chief Financial Officer of the Borrowers, confirming thetruth and accuracy of the representations and warranties made by the Borrowersin Section 5.16.

 

(i)    Fees and Expenses.  The Lender and the Issuing Lender shall havereceived all fees and other amounts due and payable to such Person and SpecialCounsel at or prior to the Michigan Real Estate Term Loan****EffectiveTime, including, to the extent invoiced, reimbursement or payment of allout-of-pocket expenses required to be reimbursed or paid by the Borrowershereunder.

 

(j)    Other Documents.  The Lender shall have received all such otherinstruments, certificates, assurances and documents as the Lender or SpecialCounsel shall have reasonably requested and the same shall be reasonablysatisfactory to each of them.

 

**ARTICLE 7**

** **

**Affirmative Covenants**

** **

Untilthe Revolving Credit Commitment has expired or been terminated and theprincipal of and interest on each Loan and all fees payable hereunder shallhave been paid in full and all Letters of Credit shall have expired orterminated and all LC/Acceptance Disbursements shall have been reimbursed, eachCredit Party covenants and agrees with the Lender that:

 

7.1           **FinancialStatements and Other Information**. The Credit Parties will furnish to the Lender:

 

(a)   as soon as available and in any event within120 days after the end of each fiscal year of the Credit Parties:

 

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(i)            consolidated statements ofoperations, shareholders’ equity and cash flows of the Credit Parties for suchfiscal year and the related consolidated balance sheets of the Credit Partiesas at the end of such fiscal year, setting forth in each case in comparativeform the corresponding consolidated figures for the preceding fiscal year, and

 

(ii)           an opinion of independent certifiedpublic accountants of recognized national standing (without a “going concern”or like qualification or exception and without any qualification or exceptionas to the scope of such audit) stating that the financial statements referredto in the preceding clause (i) fairly present in all material respects theconsolidated financial condition and results of operations of the CreditParties as at the end of, and for, such fiscal year in accordance with GAAP.

 

(b)   as soon as available and in any event within45 days after each December 31st, March 31st, June 30th and September 30th:

 

(i)            consolidated statements ofoperations, shareholders’ equity and cash flows of the Credit Parties for suchquarter and for the period from the beginning of the respective fiscal year tothe end of such quarter, and the related consolidated balance sheets of theCredit Parties as at the end of such period, setting forth in each case incomparative form the corresponding consolidated figures for the correspondingperiod in the preceding fiscal year, and the corresponding figures for theforecasts most recently delivered to the Lender for such period, and

 

(ii)           a certificate of a DesignatedFinancial Officer, which certificate shall state that said financial statementsreferred to in the preceding clause (i) fairly present in all materialrespects the consolidated financial condition and results of operations of theCredit Parties, in each case in accordance with GAAP, consistently applied, asat the end of, and for, such period (subject to normal year-end auditadjustments and the omission of footnotes);

 

(c)   as soon as available and in any event (i) simultaneouslywith the delivery of the quarterly financial statements delivered pursuant tosubsection 7.1(b) above, a Compliance Certificate duly executed by aDesignated Financial Officer with respect to such quarterly financialstatements, and (ii) within 120 days after the end of each fiscal year, aCompliance Certificate duly executed by a Designated Financial Officer withrespect to the annual financial statements delivered pursuant to subsection 7.1(a) above;

 

(d)   promptly following the request of the Lender,a management summary of operations of theCredit Parties for such quarter, certifiedby a Designated Financial Officer that such summary of operations fairlypresents the financial condition of the Credit Parties for the fiscal quarterof the Credit Parties most recently ended;

 

(e)   within five days after the same are sent orfiled, copies of all financial statements and reports which the Credit Partiessend to the holders of any public equity securities and all periodic financialstatements, final registration statements (excluding exhibits) and reportswhich the Borrower may make to, or file with, the Securities and ExchangeCommission;

 

(f)    as soon as available and in any event withintwenty (20) days after the end of each month with respect to such month (or, ifthe Borrowing Base falls below $4,000,000, no later than 1:00 p.m. (Bostontime) of each Business Day), a Borrowing Base Certificate in the form attachedhereto as Exhibit B-1, with respect to the Collateral of theBorrowers as of the close of 

 

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business on the lastBusiness Day of such month, together with such other information relating tothe Collateral as the Lender shall reasonably request, and accompanied by suchsupporting detail and documentation as the Lender shall reasonably request(which may include, at the discretion of the Lender, accounts receivable andaccounts payable aging reports, and inventory reports);

 

(g)   as soon as available and in any event withintwenty (20) days after the end of each month with respect to such month, (i) aCollateral Update Certificate in the form attached hereto as Exhibit B-2,(ii) a summary of inventory by type and location, (iii) an accountsreceivable aging report, and (iv) such other information relating to theCollateral as the Lender shall reasonably request, in each case, accompanied bysuch supporting detail and documentation as the Lender shall reasonablyrequest;

 

(h)   as soon as available and in any event withinsixty (60) days after the end of each fiscal year of the Credit Parties,statements of forecasted consolidated income and cash flows for the CreditParties for each fiscal quarter in the immediately succeeding fiscal year and aforecasted consolidated balance sheet of the Credit Parties as of the last dayof each fiscal quarter in such succeeding fiscal year, and a comparison of theprojected Excess Availability as of the last day of each fiscal quarter in suchsucceeding fiscal year with the Excess Availability as of the last day of eachfiscal quarter in the current fiscal year, together with supporting assumptionswhich were reasonable when made, all prepared in good faith in reasonabledetail and consistent with the Credit Parties’ past practices in preparingprojections and otherwise reasonably satisfactory in scope to the Lender;

 

(i)    as soon as available and in any event nolater than 1:00 p.m. (Boston time) on each day that the Borrowers make anyrequest for any Borrowing hereunder, an Advance Request in the form attachedhereto as Exhibit B-4.

 

(j)    promptly upon receipt thereof, copies of allmanagement letters and accountants’ letters received by the Credit Parties; and

 

(k)   promptly following any request therefor, suchother information regarding the operations, business affairs and financialcondition of the Credit Parties, or compliance with the terms of thisAgreement, as the Lender may reasonably request.

 

7.2           **Notices ofMaterial Events**.  The CreditParties will furnish to the Lender prompt written notice of the following:

 

(a)   the occurrence of any Default;

 

(b)   the filing or commencement of any action,suit or proceeding by or before any arbitrator or Governmental Authorityagainst or affecting any Credit Party or Affiliate that could reasonably beexpected to result in a Material Adverse Effect;

 

(c)   the occurrence of any ERISA Event related tothe Plan of any Credit Party or knowledge after due inquiry of any ERISA Eventrelated to a Plan of any other ERISA Affiliate that, alone or together with anyother ERISA Events that have occurred, could reasonably be expected to resultin liability of the Credit Parties; and

 

(d)   any other development that results in, orcould reasonably be expected to result in, a Material Adverse Effect.

 

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Eachnotice delivered under this Section 7.2 shall be accompanied by astatement of a Designated Financial Officer setting forth the details of theevent or development requiring such notice and any action taken or proposed tobe taken with respect thereto.

 

7.3                                 **Existence; Conduct of Business**.  EachCredit Party shall do or cause to be done all things necessary to preserve,renew and keep in full force and effect its legal existence and the rights,licenses, permits, privileges and franchises material to the conduct of itsbusiness; *provided* that the foregoing shall notprohibit any merger, consolidation, liquidation, dissolution or anydiscontinuance or sale of such business permitted under Section 8.4.

 

7.4                                 **Payment of Obligations**.  EachCredit Party shall pay its obligations, including Tax liabilities, that, if notpaid, could result in a Material Adverse Effect before the same shall becomedelinquent or in default, except where (a) the validity or amount thereofis being contested in good faith by appropriate proceedings, (b) suchCredit Party has set aside on its books adequate reserves with respect theretoin accordance with GAAP, which reserves shall be acceptable to Lender, and (c) thefailure to make payment pending such contest could not reasonably be expectedto result in a Material Adverse Effect.

 

7.5                                 **Maintenance of Properties;Insurance**.  Each Credit Party shall (a) keep andmaintain all property material to the conduct of its business in good workingorder and condition, ordinary wear and tear excepted, and (b) maintaininsurance, with financially sound and reputable insurance companies, as may berequired by law and such other insurance in such amounts and against such risksas are customarily maintained by companies engaged in the same or similarbusinesses operating in the same or similar locations, including, withoutlimitation, business interruption and product liability insurance.  Without limiting the generality of theforegoing, the Credit Parties will maintain or cause to be maintained replacementvalue casualty insurance on the Collateral under such policies of insurance, ineach case with such insurance companies, in such amounts, with suchdeductibles, and covering such terms and risks as are at all times satisfactoryto the Lender in its commercially reasonable judgment.  All general liability and other liabilitypolicies with respect to the Credit Parties shall name the Lender as anadditional insured thereunder as its interests may appear, and all businessinterruption and casualty insurance policy shall contain a loss payable clauseor endorsement, satisfactory in form and substance to the Lender that names theLender as the loss payee thereunder.  Allpolicies of insurance shall provide for at least 30 days prior written noticeto the Lender of any modifications or cancellation of such policy.

 

7.6                                 **Books and Records; InspectionRights**.

 

(a)          Each Credit Party shall keepproper books of record and account in which entries are made of all dealingsand transactions in relation to its business and activities which fairly recordsuch transactions and activities.  EachCredit Party shall permit any representatives designated by the Lender to visitand inspect its properties, to examine and make extracts from its books andrecords, and to discuss its affairs, finances and condition with its officersand independent accountants as frequently as the Lender deems appropriate *provided* that, so long as no Default has occurred and iscontinuing, all such visits shall be on reasonable prior notice, at reasonabletimes during regular business hours of such Credit Party, and *provided further* that after the occurrence and during thecontinuance of any Default, the Lender may visit at any reasonable times.  The Borrowers shall reimburse the Lender forall examination and inspections costs, internal costs as reasonably determinedby the Lender from time to time (currently, at the rate of $850****per man-day), plus all out-of-pocket expenses incurred inconnection with such inspections.  TheCredit Parties will permit independent appraisers and environmental consultantsselected by the Lender to visit the properties of the Credit Parties andperform appraisals and examinations of the inventory, equipment and RealProperty Assets of the Credit Parties at such times and with such frequenciesas the Lender shall 

 

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reasonably request. TheBorrowers shall reimburse the Lender for all fees, costs and expenses chargedby such independent appraisers and environmental consultants for each suchappraisal and examination.

 

(b)         In addition to and not inlimitation of any other inspection rights set forth in this Section 7.6,each Borrower shall, and shall cause each Subsidiary to, permit the Lender orany representatives designated by the Lender (including any third partyconsultants, accountants, lawyers and appraisers) to conduct, at the Borrowers’sole cost and expense, so long as the Fixed Charge Coverage Ration is greaterthan 1.50 to 1.00, one commercial field examination of the business, operationsand assets of the Borrowers, including without limitation, the assets includedin the Borrowing Base, in each twelve month period following the Closing Date, *provided*, *however*, thatthe Lender may conduct, at the Borrowers’ sole cost and expense, fieldexaminations with greater frequency and at such additional time or times as theLender, in its sole discretion, may determine in the event the Fixed ChargeCoverage Ration is equal to or less than 1.50 to 1.00.

 

7.7                                 **Fiscal Year**.  Toenable the ready and consistent determination of compliance with the covenantsset forth in Section 8.10 hereof, the Credit Parties shall not changetheir current fiscal year or current method of determining the last day of thefirst three fiscal quarters in each fiscal year without the prior writtenconsent of the Lender.

 

7.8                                 **Compliance with Laws**.  EachCredit Party shall comply with (i) all permits, licenses andauthorizations, including, without limitation, environmental permits, licensesand authorizations, issued by a Governmental Authority, (ii) all laws,rules, regulations and orders including, without limitation, EnvironmentalLaws, of any Governmental Authority and (iii) all contractual obligations,in each case applicable to it or its property, except where the failure to doso, individually or in the aggregate, could not reasonably be expected toresult in a Material Adverse Effect.

 

7.9                                 **Use of Proceeds**.  Theproceeds of the Loans will be used only for (i) the refinancing ofexisting indebtedness, (ii) fees and expenses incurred in connection withthe transactions contemplated by this Agreement, (iii) for generalcorporate and working capital purposes (including the issuance of letters ofcredit, banker’s acceptances, and financing Capital Expenditures) of the CreditParties, and (iv) financing Permitted Acquisitions.  No part of the proceeds of any Loan will beused, whether directly or indirectly, for any purpose that entails a violationof any of the Regulations of the Board, including Regulations T, U and X.

 

7.10                           **Certain Obligations RespectingSubsidiaries**.  Each Credit Party will, and will cause eachof its Subsidiaries to, take such action from time to time as shall benecessary to ensure that the percentage of the issued and outstanding shares ofcapital stock of any class or character owned by it in any Subsidiary on thedate hereof is not at any time decreased, other than by reason of transfers toanother Credit Party.

 

7.11                           **ERISA**. Except where a failure to comply with any of the following, individuallyor in the aggregate, would not or could not reasonably be expected to result ina Material Adverse Effect, (i) the Credit Parties will maintain, and causeeach ERISA Affiliate to maintain, each Plan in compliance with all applicablerequirements of ERISA and of the Code and with all applicable rulings andregulations issued under the provisions of ERISA and of the Code and (ii) theCredit Parties will not and, to the extent authorized, will not permit any ofthe ERISA Affiliates to (a) engage in any transaction with respect to anyPlan which would subject any Credit Party to either a civil penalty assessedpursuant to Section 502(i) of ERISA or a tax imposed by Section 4975of the Code, (b) fail to make full payment when due of all amounts which,under the provisions of any Plan, any Credit Party or any ERISA Affiliate isrequired to pay as contributions thereto, or permit to exist any accumulatedfunding deficiency 

 

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(assuch term is defined in Section 302 of ERISA and Section 412 of theCode), whether or not waived, with respect to any Pension Plan or (c) failto make any payments to any Multiemployer Plan that any Credit Party or any ofthe ERISA Affiliates may be required to make under any agreement relating tosuch Multiemployer Plan or any law pertaining thereto.

 

7.12                           **Environmental Matters; Reporting**.  TheCredit Parties will observe and comply with, and cause each Subsidiary toobserve and comply with all Environmental Laws to the extent non-compliancecould reasonably be expected to have a Material Adverse Effect.  The Credit Parties will give the Lenderprompt written notice of any violation as to any Environmental Law by anyCredit Party and of the commencement of any judicial or administrativeproceeding relating to Environmental Laws (a) in which an adverse resultwould have a material adverse effect on any operating permits, air emissionpermits, water discharge permits, hazardous waste permits or otherenvironmental permits held by any Credit Party, or (b) which will, or islikely to, have a Material Adverse Effect on such Credit Party or which willrequire a material expenditure by such Credit Party to cure any alleged problemor violation.

 

7.13                           **Matters Relating to AdditionalReal Property Collateral**.

 

(a)          From and after the EffectiveTime, in the event that any Credit Party acquires any Material Owned Propertythat the Lender determines is an Additional Mortgaged Property or in the eventthat the Lender determines that any Real Property Asset has become anAdditional Mortgaged Property, the Borrowers shall deliver, to the Lender, assoon as practicable after the Lender has notified the Borrowers that a RealProperty Asset is an Additional Mortgaged Property, fully executed andnotarized Mortgages (“Additional Mortgages”), in proper form forrecording in all appropriate places in all applicable jurisdictions,encumbering the interest of the applicable Credit Party in such AdditionalMortgaged Property, together with mortgagee title insurance policies orcommitments therefor, and copies of all surveys, deeds, title exceptiondocuments, flood hazard certificates and other documents as the Lender mayreasonably require copies of all deeds with respect to such AdditionalMortgaged Property.

 

(b)         From and after the EffectiveTime, in the event that any Credit Party enters into any lease with respect toany Material Leasehold Property, the Borrowers shall deliver to the Lendercopies of the lease, and all amendments thereto, between the Credit Party andthe landlord or tenant, together with a Landlord Waiver and Consent withrespect thereto and where required by the terms of any lease, the consent ofthe mortgagee, ground lessor or other party.

 

(c)          If requested by the Lender,the Credit Parties shall permit an independent real estate appraisersatisfactory to the Lender, upon reasonable notice, to visit and inspect anyAdditional Mortgaged Property for the purpose of preparing an appraisal of suchAdditional Mortgaged Property satisfying the requirements of all applicablelaws and regulations (in each case to the extent required under such laws andregulations as determined by the Lender in its sole discretion).

 

7.14                           **Cash Deposits/Bank Accounts**.  Atthe Lender’s request following the exercise of its rights pursuant to Section 4.3,the Credit Parties shall take all actions necessary to maintain, preserve andprotect the rights and interests of the Lender with respect to all cashdeposits of the Credit Parties and all other proceeds of Collateral and shallnot, without the Lender’s prior written consent, open any deposit or other bankaccount, or instruct any account debtor to make payment to any account otherthan to an established dominion account, Lock Box Account or other ControlledAccount under the Lender’s control; *provided* thatso long as no Default or Event of Default shall have occurred and becontinuing, the Credit Parties shall be permitted to maintain payroll andaccounts not subject to the Lender’s control so long as the aggregate amount offunds on deposit in all such payroll accounts does not materially exceedestimated payroll for the next payroll period.

 

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**ARTICLE 8**

**Negative Covenants**

** **

Untilthe Revolving Credit Commitment has expired or terminated and the principal ofand interest on each Loan and all fees payable hereunder have been paid in fulland all Letters of Credit shall have expired or terminated and allLC/Acceptance Disbursements shall have been reimbursed, each Credit Partycovenants and agrees with the Lender that:

 

8.1                                 **Indebtedness**.  TheCredit Parties will not, and will not permit any Subsidiary to, create, incur,assume or permit to exist any Indebtedness, except:

 

(a)          Indebtedness createdhereunder;

 

(b)         Existing Debt on the ClosingDate which is set forth in Schedule 8.1 and has been designated onsuch schedule as Indebtedness that will remain outstanding following thefunding of the initial Loans, and any extension, renewal, refunding orreplacement of any such Indebtedness that does not increase the principalamount thereof;

 

(c)          Intercompany loans among theCredit Parties;

 

(d)         other Indebtedness incurredafter the Closing Date (determined on a consolidated basis without duplicationin accordance with GAAP) consisting of Capital Lease Obligations and/or securedby Liens permitted under Section 8.2(h), in an aggregate principal amountat any time outstanding not in excess of (i) $5,000,000, or, (ii) ifthe Credit Parties finance a new molded fiber machine, $8,000,000; and

 

(e)          Guarantees permitted under Section 8.3.

 

8.2                                 **Liens**.  TheCredit Parties will not, and will not permit any Subsidiary to, create, incur,assume or permit to exist any Lien on any Property or asset now owned orhereafter acquired by it, or assign or sell any income or revenues (includingaccounts receivable) or rights in respect of any thereof, except (the followingbeing called “Permitted Liens”):

 

(a)          Liens created hereunder orunder the other Loan Documents;

 

(b)         any Lien on any property orasset of any Credit Party existing on the date hereof and set forth in Schedule 8.1(excluding, however, following the making of the initial Loans hereunder, theLiens in favor of any Person other than the Lender securing Indebtedness notdesignated on said schedule as Indebtedness to remain outstanding following thefunding of the initial Loans), *provided* that (i) suchLien shall not apply to any other property or asset of any Credit Party and (ii) suchLien shall secure only those obligations which it secures on the date hereofand extensions, renewals and replacements thereof that do not increase theoutstanding principal amount thereof;

 

(c)          Liens imposed by anyGovernmental Authority for taxes, assessments or charges not yet delinquent or(in the case of property taxes and assessments not exceeding $250,000 in theaggregate more than 90 days overdue) which are being contested in good faithand by appropriate proceedings if adequate reserves with respect thereto aremaintained on the books of the applicable Credit Party in accordance with GAAPand which reserves shall be acceptable to the Lender;

 

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(d)         landlords’, carriers’,warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens, andvendors’ Liens imposed by statute or common law not securing the repayment ofIndebtedness, arising in the ordinary course of business which are not overduefor a period of more than 60 days or which are being contested in good faithand by appropriate proceedings and Liens securing judgments (including, withoutlimitation, pre-judgment attachments) but only to the extent for an amount andfor a period not resulting in an Event of Default under Section 9.1(j) hereof;

 

(e)          pledges or deposits underworker’s compensation, unemployment insurance and other social securitylegislation and pledges or deposits to secure the performance of bids, tenders,trade contracts (other than for borrowed money), leases (other than capitalleases), utility purchase obligations, statutory obligations, surety and appealbonds, performance bonds and other obligations of a like nature incurred in theordinary course of business;

 

(f)            easements, rights-of-way,restrictions and other similar encumbrances incurred in the ordinary course ofbusiness and encumbrances consisting of zoning restrictions, easements,licenses, restrictions on the use of Property or minor imperfections in titlethereto which, in the aggregate, are not material in amount, and which do not,in the aggregate, materially detract from the value of the Property of anyCredit Party or materially interfere with the ordinary conduct of the businessof any Credit Party;

 

(g)         Liens consisting of bankers’liens and rights of setoff, in each case, arising by operation of law, andLiens on documents presented in letter of credit drawings; and

 

(h)         Liens on fixed or capitalassets, including real or personal property, acquired, constructed or improvedby any Credit Party, *provided* that (A) suchLiens secure Indebtedness (including Capital Lease Obligations) permitted by Section 8.1(d),(B) such Liens and the Indebtedness secured thereby are incurred prior toor within 90 days after such acquisition or the completion of such constructionor improvement or were in effect at the time the Credit Parties acquired theassets or stock, (C) the Indebtedness secured thereby does not exceed thecost of acquiring, constructing or improving such fixed or capital assets, and (D) suchsecurity interests shall not apply to any other property or assets of theCredit Parties.

 

8.3                                 **Contingent Liabilities**.  TheCredit Parties will not Guarantee the Indebtedness or other obligations of anyPerson, or Guarantee the payment of dividends or other distributions upon thestock of, or the earnings of, any Person, except:

 

(a)          endorsements of negotiableinstruments for deposit or collection or similar transactions in the ordinarycourse of business;

 

(b)         Guarantees and letters ofcredit in effect on the date hereof which are disclosed in Schedule 8.1,and any replacements thereof in amounts not exceeding such Guarantees;

 

(c)          obligations in respect ofLetters of Credit.

 

8.4                                 **Fundamental Changes; Asset Sales**.

 

(a)          The Credit Parties will notenter into any transaction of merger or consolidation or amalgamation, orliquidate, wind up or dissolve itself (or suffer any liquidation ordissolution) without the prior written consent of the Lender.  The Credit Parties will not acquire anybusiness or property from, or capital stock of, or other equity interests in, orbe a party to any acquisition of, any 

 

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Person without the priorwritten consent of the Lender, except for purchases of property to be used inthe ordinary course of business, Investments permitted under Section 8.5and Capital Expenditures.  The CreditParties will not form or acquire any Subsidiary without the prior writtenconsent of the Lender; provided that a Credit Party may form or acquire aSubsidiary to effect a Permitted Acquisition permitted by subsection 8.4(c)(iii) solong as the Credit Parties comply with the requirements of Section 5.21with respect to such Subsidiary.  TheCredit Parties will not issue or sell any of their capital stock or otherequity interests without the prior consent of the Lender (other than inconnection with Equity Rights issued or granted to members of the CreditParties’ boards of directors or employees consistent with the Credit Parties’past business practices).

 

(b)         The Credit Parties will notconvey, sell, lease, transfer or otherwise dispose (including any Disposition)of, in one transaction or a series of transactions, any part of their businessor property, whether now owned or hereafter acquired (including, withoutlimitation, receivables and leasehold interests, but excluding (x) obsoleteor worn-out property (including leasehold interests), or tools, equipment orother property no longer used or useful in their business and (y) anyinventory or other property sold or disposed of in the ordinary course of businessand on ordinary business terms) without the prior written consent of theLender, *provided* that the Credit Parties maysublease real property to the extent such sublease would not interfere with theoperation of the business of the Credit Parties.

 

(c)          Notwithstanding theforegoing provisions of this Section 8.4:

 

(i)                                     any CreditParty may be merged or combined with or into any other Credit Party (providedthat if such merger involves any Borrower, (x) such Borrower shall be thesurviving entity and (y) no Change of Control shall occur); and

 

(ii)                                  any CreditParty may sell, lease, transfer or otherwise dispose of any or all of itsproperty (upon voluntary liquidation or otherwise) to any other Credit Party.

 

(iii)                               subject toSections 8.1, 8.2 and 8.5 and the proviso in Section 8.4(a), any of theCredit Parties may acquire all or substantially all of the business and assetsof any corporation, partnership, limited liability company, or other entitylocated in and organized under the laws of the United States or any statethereof (“Permitted Acquisitions”), subject to satisfaction of thefollowing conditions:

 

(A)                              the aggregateconsideration paid by the Credit Parties (I) for any single acquisitionshall not exceed $8,000,000, and (II) for all acquisitions shall notexceed $16,000,000 in the aggregate;

 

(B)                                the Lender mustbe given at least thirty (30) days’ advance notice of each such PermittedAcquisition;

 

(C)                                the business orassets so acquired shall be located in the United States and in the same or a substantiallysimilar line of business as that of the Credit Parties;

 

(D)                               if suchacquisition is structured as a stock or other equity acquisition, then theentity whose equity interests are being acquired shall be organized under thelaws of the United States and either (i) the Person so acquired shallbecome (x) a direct Subsidiary of a Credit Party and (y) a SubsidiaryGuarantor or (ii) such Person shall be merged with and into a Credit Party(*provided* that such Credit Party shall bethe 

 

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surviving corporation of such merger and noChange of Control shall occur) and, in any event, all of the assets of suchPerson shall become Collateral and all of the requirements of Section 5.21shall be satisfied concurrently with the consummation of such acquisition;

 

(E)                                 after givingeffect to the Permitted Acquisition and the financing thereof, the CreditParties must be in pro forma compliance with all financial covenants;

 

(F)                                 the assets soacquired shall be transferred free and clear of any Liens (other than Lienspermitted by Section 8.2) and no debt or liabilities shall be incurred,guaranteed, assumed or combined except to the extent otherwise permitted by Section 8.1;

 

(G)                                the Lendershall have received Lien searches reasonably satisfactory to the Lender withrespect to the assets being acquired;

 

(H)                               the Lendershall have received perfected First Priority Liens (subject only to Lienspermitted by Section 8.2) on substantially all of the assets beingacquired in such Permitted Acquisition;

 

(I)                                    to the extentrequested by the Lender, the Lender shall have received an opinion of counselin each applicable jurisdiction reasonably satisfactory to it to the effectthat the Liens granted pursuant to this Agreement are perfected securityinterests in such assets and as to such other matters as the Lender mayreasonably require;

 

(J)                                   in connectionwith such Permitted Acquisition, the Borrowers shall deliver to the Lender (I) acopy of the purchase agreement pursuant to which such Permitted Acquisitionwill be consummated; (II) a copy of each existing material agreementrelating to the assets to be acquired in such Permitted Acquisition and whichis to be in effect after the consummation of such Permitted Acquisition; (III) aCompliance Certificate calculating compliance (as of the last day of the thenmost recently ended fiscal quarter) with the covenants set forth in Section 8.10on a *pro forma* basis, assuming such PermittedAcquisition had occurred prior to the first day of the earliest fiscal quarterincluded in the applicable test period for calculating such compliance; (IV) suchother information or reports as the Lender may reasonably request with respectto such Permitted Acquisition; (V) to the extent available to the CreditParties, historical financial statements for the prior three fiscal years (*provided* that if such statements are not available for theprior three fiscal years, historical financial statements for not less than theprior four fiscal quarters) of the entity whose assets are being acquired; and (VI) ifthe Credit Parties are acquiring any interest in real property, and if requiredby the Lender, reports and other information in form, scope and substancereasonably satisfactory to the Lender and prepared by environmental consultantsreasonably satisfactory to the Lender, concerning any environmental hazards orliabilities to which any Credit Party is likely to be subject with respect tosuch acquired real property;

 

(K)                               the acquisitionshall have been approved by the boards of directors of the target Person andthe applicable Credit Party;

 

(L)                                 immediatelyprior to such Permitted Acquisition no Default shall have occurred and becontinuing and after giving effect to such Permitted Acquisition, no Defaultshall have occurred and be continuing and, in the reasonable judgment of the 

 

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Lender, no Material Adverse Effect couldreasonably be expected to result from such Permitted Acquisition;

 

(M)                            the Lender shallhave completed (i) its business, legal and collateral due diligence,including a collateral audit and review of the target Person’s books andrecords and (ii) its field examination of the accounts receivable,inventory and related matters of the target Person, which results shall besatisfactory to the Lender; and

 

(N)                               the Lendershall have received a certificate, dated the closing date of such PermittedAcquisition and signed by a Designated Financial Officer, certifying thatExcess Availability under the Revolving Credit Commitment shall not be lessthan $4,000,000 both before and at any time during the period of 60 days aftergiving effect to such Permitted Acquisition.

 

8.5                                 **Investments; Hedging Agreements**.

 

(a)          The Credit Parties will notmake or permit to remain outstanding any Investment, except:

 

(i)                                     Investmentsconsisting of Guarantees permitted by Section 8.3(c) and Indebtednesspermitted by Section 8.1; Intercompany Indebtedness; and capitalcontributions by any Credit Party to any other Credit Party;

 

(ii)                                  PermittedInvestments; and

 

(iii)                               Checking anddeposit accounts with banks used in the ordinary course of business.

 

(b)         The Credit Parties will notenter into any Hedging Agreement without the prior written consent of theLender.

 

8.6                                 **Restricted Junior Payments**.  TheCredit Parties will not declare or make any Restricted Junior Payment at anytime; *provided*, *however*,that any Credit Party that is a Subsidiary of another Credit Party may paydividends to such Credit Party.

 

8.7                                 **Transactions with Affiliates**. Except as expressly permitted by this Agreement, the Credit Parties willnot directly or indirectly (a) make any Investment in an Affiliate; (b) transfer,sell, lease, assign or otherwise dispose of any property to an Affiliate; (c) mergeinto or consolidate with an Affiliate, or purchase or acquire property from anAffiliate; or (d) enter into any other transaction directly or indirectlywith or for the benefit of an Affiliate (including, without limitation,guarantees and assumptions of obligations of an Affiliate); *provided* that:

 

(i)                                     any Affiliatewho is an individual may serve as a director, officer, employee or consultantof any Credit Party, receive reasonable compensation for his or her services insuch capacity and benefit from Permitted Investments to the extent specified inclause (e) of the definition thereof;

 

(ii)                                  the CreditParties may engage in and continue the transactions with or for the benefit ofAffiliates which are described in Schedule 8.7 or are referred toin Section 8.6 (but only to the extent specified in such section); and

 

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(iii)                               the CreditParties may engage in transactions with Affiliates in the ordinary course ofbusiness on terms which are no less favorable to the Credit Parties than thoselikely to be obtained in an arms’ length transaction between a Credit Party anda non-affiliated third party.

 

8.8                                 **Restrictive Agreements**.  TheCredit Parties will not directly or indirectly, enter into, incur or permit toexist any agreement or other arrangement (other than this Agreement) thatprohibits, restricts or imposes any condition upon (a) the ability of anyCredit Party to create, incur or permit to exist any Lien upon any of itsproperty or assets, or (b) the ability of any Credit Party that is aSubsidiary of another Credit Party to pay dividends or other distributions withrespect to any shares of its capital stock or other equity interests or to makeor repay loans or advances to any other Credit Party or to GuaranteeIndebtedness of any other Credit Party; *provided* that (i) theforegoing shall not apply to restrictions and conditions imposed by law or bythis Agreement, (ii) the foregoing shall not apply to restrictions andconditions existing on the date hereof identified on Schedule 8.8(but shall apply to any extension or renewal of, or any amendment ormodification expanding the scope of, any such restriction or condition), (iii) theforegoing shall not apply to customary restrictions and conditions contained inagreements relating to the sale of stock or assets of a Subsidiary of a CreditParty pending such sale, *provided* suchrestrictions and conditions apply only to the Subsidiary that is to be sold andsuch sale is permitted hereunder, (iv) clause (a) of the foregoingshall not apply to restrictions or conditions imposed by any agreement relatingto secured Indebtedness permitted by this Agreement if such restrictions orconditions apply only to the property or assets securing such Indebtedness, and(v) clause (a) of the foregoing shall not apply to customaryprovisions in leases and other contracts (excluding license agreements)restricting the assignment thereof.

 

8.9                                 **Sale-Leaseback Transactions**.  NoCredit Party will directly or indirectly, enter into any arrangements with anyPerson whereby such Credit Party shall sell or transfer (or request anotherPerson to purchase) any property, real, personal or mixed, used or useful inits business, whether now owned or hereafter acquired, and thereafter rent orlease such property from any Person.

 

8.10                           **Fixed Charge Coverage Ratio**.  TheCredit Parties shall not permit the Fixed Charge Coverage Ratio to be less than1.25 to 1.00 at any time.

 

8.11                           **Lines of Business**.  TheCredit Parties will not engage to any substantial extent in any line or linesof business activity other than (i) the types of businesses engaged in bythe Credit Parties as of the Effective Time and businesses substantiallyrelated thereto, and (ii) such other lines of business as may be consentedto by the Lender.

 

8.12                           **Other Indebtedness**.  TheCredit Parties will not purchase, redeem, retire or otherwise acquire forvalue, or set apart any money for a sinking, defeasance or other analogous fundfor the purchase, redemption, retirement or other acquisition of, or make anyvoluntary payment or prepayment of the principal of or interest on, or anyother amount owing in respect of any Subordinated Indebtedness, except as maybe consented to by the Lender.

 

8.13                           **Modifications of CertainDocuments**.  The Credit Parties will not consent to anymodification, supplement or waiver of any of the provisions of any documents oragreements evidencing or governing any Existing Debt.

 

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**ARTICLE 9**

 

**Events of Default**

 

9.1                                 **Events of Default**.  Theoccurrence of any of the following events shall be deemed to constitute an “Eventof Default” hereunder:

 

(a)          the Credit Parties shallfail to pay to the Lender, the Issuing Lender, the Cash Management Bank or anyother Affiliate of the Lender, any principal of or interest on any Loan or anyReimbursement Obligation in respect of any LC/Acceptance Disbursement or anyother Obligation of the Credit Parties to the Lender, the Issuing Lender, theCash Management Bank or any other Affiliate of the Lender when the same shallbecome due and payable, whether at the due date thereof or at a date fixed forprepayment thereof, by acceleration of such due or prepayment date, orotherwise;

 

(b)         (i) any representationor warranty made or deemed made by or on behalf of any Credit Party or anySubsidiary in or in connection with this Agreement, any of the other LoanDocuments or any amendment or modification hereof or thereof, or in any report,certificate, financial statement or other document furnished pursuant to or inconnection with this Agreement, any of the other Loan Documents or anyamendment or modification hereof or thereof, shall prove to have been incorrectin any material respect when made or deemed made, or (ii) the occurrenceof an “Event of Default” under the Mortgage on the Massachusetts Real Propertyor Michigan Real Property;

 

(c)          the Credit Parties (i) shallfail to observe or perform any covenant, condition or agreement contained inSections 7.1, 7.2, 7.5, 7.6, 7.9, 7.10, 7.12, 7.14 or in Article 8(it being expressly acknowledged and agreed that any Event of Default resultingfrom the failure of the Credit Parties at any measurement date to satisfy anyfinancial covenant set forth in Section 8.10 shall not be deemed to be “cured”or remedied by the Credit Parties’ satisfaction of such financial covenant atany subsequent measurement date) or (ii) shall fail to observe or performany other covenant, condition or agreement contained in Sections 7.3, 7.4, 7.7,7.8, 7.11, or 7.13 and such failure described in this clause (ii) shallcontinue unremedied for a period of 30 days after the earlier of (x) actualknowledge by an officer of any Credit Party or (y) notice thereof from theLender to the Credit Parties;

 

(d)         the Credit Parties shallfail to observe or perform any covenant, condition or agreement contained inthis Agreement (other than those specified in clauses (a), (b) or (c) ofthis Section 9.1) or any other Loan Document (other than the Mortgages onthe Massachusetts Real Property and Michigan Real Property), and such failureshall continue unremedied for a period of 30 days after notice thereof from theLender to the Credit Parties;

 

(e)          the Credit Parties shallfail to make any payment (whether of principal, interest or otherwise andregardless of amount) in respect of (x) any Material Indebtedness when andas the same shall become due and payable, after giving effect to any graceperiod with respect thereto, or (y) any Material Rental Obligation whenand as the same shall become due and payable, after giving effect to any graceperiod with respect thereto, except with respect to Material Rental Obligationswhere (i) the payment thereof is being contested in good faith byappropriate proceedings, (ii) such Credit Party has set aside on its booksadequate reserves with respect thereto in accordance with GAAP, which reservesshall be acceptable to Lender, and (iii) the failure to make paymentpending such contest could not reasonably be expected to result in a MaterialAdverse Effect;

 

(f)            any event or conditionoccurs that results in (i) any Material Indebtedness of any Credit Partybecoming due prior to its scheduled maturity or that enables or permits (withor without the giving of notice, the lapse of time or both) the holder orholders of any Material Indebtedness or any trustee or agent on its or theirbehalf to cause such Material Indebtedness to become due, or to require theprepayment, repurchase, redemption or defeasance thereof, prior to itsscheduled maturity, or (ii) the lease with respect to any Material RentalObligation of any Credit Party being terminated 

 

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prior to its scheduledexpiration date or that enables or permits (with or without the giving ofnotice, the lapse of time or both) the counterparty to such lease to cause suchlease to be terminated prior to its scheduled expiration date;

 

(g)         an involuntary proceedingshall be commenced or an involuntary petition shall be filed seeking (i) liquidation,reorganization or other relief in respect of any Credit Party or its debts, orof a substantial part of its assets, under any Federal, state or foreignbankruptcy, insolvency, receivership or similar law now or hereafter in effector (ii) the appointment of a receiver, trustee, custodian, sequestrator,conservator or similar official for any Credit Party or for a substantial partof its assets, and, in any such case, such proceeding or petition shallcontinue undismissed for 60 days or an order or decree approving or orderingany of the foregoing shall be entered;

 

(h)         any Credit Party shall (i) voluntarilycommence any proceeding or file any petition seeking liquidation,reorganization or other relief under any Federal, state or foreign bankruptcy,insolvency, receivership or similar law now or hereafter in effect, (ii) consentto the institution of, or fail to contest in a timely and appropriate manner,any proceeding or petition described in clause (g) of this Article, (iii) applyfor or consent to the appointment of a receiver, trustee, custodian,sequestrator, conservator or similar official for any Credit Party or for asubstantial part of its assets, (iv) file an answer admitting the materialallegations of a petition filed against it in any such proceeding, (v) makea general assignment for the benefit of creditors or (vi) take any actionfor the purpose of effecting any of the foregoing;

 

(i)             any Credit Party shallbecome unable, admit in writing or fail generally to pay its debts as theybecome due;

 

(j)             a final judgment orjudgments for the payment of money (x) in excess of $100,000 in theaggregate (exclusive of judgment amounts fully covered by insurance where theinsurer has admitted liability in respect of such judgment) or (y) inexcess of $250,000 in the aggregate (regardless of insurance coverage), shallbe rendered by one or more courts, administrative tribunals or other bodieshaving jurisdiction against any Credit Party and the same shall not bedischarged (or provision shall not be made for such discharge), bonded, or astay of execution thereof shall not be procured, within 60 days from the dateof entry thereof and the relevant Credit Party shall not, within said period of60 days, or such longer period during which execution of the same shall havebeen stayed, appeal therefrom and cause the execution thereof to be stayedduring such appeal;

 

(k)          an ERISA Event shall haveoccurred that, in the reasonable opinion of the Lender, when taken togetherwith all other ERISA Events that have occurred, could reasonably be expected toresult in a Material Adverse Effect;

 

(l)             there shall occur any Changeof Control;

 

(m)       any of the following shalloccur: (i) the Liens created hereunder or under the other Loan Documentsshall at any time (other than by reason of the Lender relinquishing such Lien)cease in any material respect to constitute valid and perfected Liens on theCollateral intended to be covered thereby; (ii) except for expiration inaccordance with its respective terms, any Loan Document shall for whateverreason be terminated, or shall cease to be in full force and effect; or (iii) theenforceability of any Loan Document shall be contested by any Credit Party;

 

(n)         there shall occur anymaterial loss theft, damage or destruction of any Collateral not fully covered(subject to such reasonable deductibles as the Lender shall have approved) byinsurance;

 

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(o)         any Guarantor shall assertthat its obligations under any Loan Document shall be invalid or unenforceable;or

 

(p)         there shall occur anymaterial adverse change (in the opinion of the Lender) on the businesses,operations, properties, conditions (financial or otherwise), assets,liabilities, income or prospects of the Credit Parties;

 

then,and in every such event (other than an event described in clause (g) or (h) ofthis Section 9.1), and at any time thereafter during the continuance ofsuch event, the Lender may, by notice to the Borrowers, take any or all of thefollowing actions, at the same or different times: (i) terminate theRevolving Credit Commitment, and thereupon the Revolving Credit Commitmentshall terminate immediately, (ii) notify the Borrowers that theoutstanding principal of the Loans shall bear interest at the Post-DefaultRate, and thereupon the outstanding principal of the Loans shall bear interestat the Post-Default Rate, (iii) declare the Loans then outstanding to bedue and payable in whole (or in part, in which case any principal not so declaredto be due and payable may thereafter be declared to be due and payable), andthereupon the principal of the Loans so declared to be due and payable,together with accrued interest thereon and all fees and other Obligations,shall become due and payable immediately, without presentment, demand, protestor other notice of any kind, all of which are hereby waived by the CreditParties, and (iv) the Lender, the Issuing Lender, the Cash Management Bankand any other Affiliate of the Lender may exercise all of the rights as securedparty and mortgagee hereunder or under the other Loan Documents; and in case ofany event with respect to the Credit Parties or any Subsidiary described inclause (g) or (h) of this Section 9.1, the Revolving CreditCommitment shall automatically terminate, the principal of the Loans thenoutstanding shall automatically bear interest at the Post-Default Rate, theprincipal of the Loans then outstanding, together with accrued interest thereonand all fees and other Obligations shall automatically become due and payable,and the Borrowers shall provide cash collateral in accordance with Section 2.4(g) withoutpresentment, demand, protest or other notice of any kind, all of which arehereby waived by the Credit Parties, and the Lender, the Issuing Lender, theCash Management Bank and all other Affiliates of the Lender shall be permittedto exercise such rights as secured party and mortgagee hereunder or under theother Loan Documents to the extent permitted by applicable law.

 

9.2                                 **Receivership**. Without limiting the generality of the foregoing or limiting in any waythe rights of the Lender hereunder or under the other Loan Documents orotherwise under applicable law, at any time after (i) the entire principalbalance of any Loan shall have become due and payable (whether at maturity, byacceleration or otherwise) and (ii) the Lender shall have provided to theBorrowers not less than ten (10) days’ prior written notice of itsintention to apply for a receiver, the Lender shall be entitled to apply forand have a receiver appointed under state or federal law by a court ofcompetent jurisdiction in any action taken by the Lender to enforce its rightsand remedies hereunder and under the other Loan Documents in order to manage,protect, preserve, sell and otherwise dispose of all or any portion of theCollateral and continue the operation of the business of the Credit Parties,and to collect all revenues and profits thereof and apply the same to thepayment of all expenses and other charges of such receivership, including thecompensation of the receiver, and to the payment of the Loans and other feesand expenses due hereunder and under the Loan Documents as aforesaid until asale or other disposition of such Collateral shall be finally made andconsummated.  TO THE EXTENT PERMITTED BYAPPLICABLE LAW, EACH CREDIT PARTY HEREBY IRREVOCABLY CONSENTS TO AND WAIVES ANYRIGHT TO OBJECT TO OR OTHERWISE CONTEST THE APPOINTMENT OF A RECEIVER ASPROVIDED ABOVE.  EACH CREDIT PARTY (I) GRANTSSUCH WAIVER AND CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE IMPLICATIONSTHEREOF WITH COUNSEL, (II) ACKNOWLEDGES THAT (A) THE UNCONTESTEDRIGHT TO HAVE A RECEIVER APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDEREDESSENTIAL BY THE LENDER IN CONNECTION WITH THE ENFORCEMENT OF ITS RIGHTS ANDREMEDIES HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS, AND (B) THEAVAILABILITY OF SUCH 

 

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APPOINTMENTAS A REMEDY UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCINGTHE LENDER TO MAKE THE LOANS TO THE BORROWERS; AND (III) AGREES TO ENTERINTO ANY AND ALL STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHERINSTRUMENTS IN CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THELENDER IN CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THERECEIVER OVER ALL OR ANY PORTION OF THE COLLATERAL.  THE LENDER ACKNOWLEDGES AND AGREES THATNOTHING IN THIS SECTION 9.2 SHALL BE DEEMED TO CONSTITUTE A WAIVER OF THERIGHT OF CREDIT PARTIES TO FILE FOR PROTECTION UNDER TITLE 11 OF THE UNITEDSTATES CODE AT ANY TIME.

 

**ARTICLE 10**

**Miscellaneous**

** **

10.1                           **Notices**. Except in the case of notices and other communications expresslypermitted to be given by telephone, all notices and other communicationsprovided for herein shall be in writing and shall be delivered by hand orovernight courier service, mailed by certified or registered mail or sent bytelephonic facsimile (fax), as follows:

 

(a)          if to any Credit Party, toUFP Technologies, Inc., 172 East Main Street, Georgetown, MA  01833, Attention: Ronald J. Lataille, ChiefFinancial Officer (Fax no. (978) 352-5616) with a copy to Lynch, Brewer,Hoffman & Fink, LLP, 101 Federal Street, Boston, MA  02110, Attention Patrick J. Kinney, Jr.(Fax no. (617) 951-0811); and

 

(b)         if to the Lender, to Bank ofAmerica, N.A., 100 Federal Street, Mail Stop MA5-100-08-08, Boston, MA  02110, Attention:  Peter G. McCarthy, Senior Vice President (Faxno. (617) 434-1226), with a copy to Edwards Angell Palmer & Dodge LLP,111 Huntington Avenue, Boston, MA 02199-7613, Attention:  David L. Ruediger (Fax no. (617) 227-4420).

 

Anyparty hereto may change its address or fax number for notices and othercommunications hereunder by notice to the other parties hereto.  All notices and other communications given toany party hereto in accordance with the provisions of this Agreement shall bedeemed to have been given on the date of receipt.

 

10.2                           **Waivers; Amendments**.

 

(a)          No failure or delay by theLender, the Issuing Lender, the Cash Management Bank or any Affiliate of theLender in exercising any right or power hereunder shall operate as a waiverthereof, nor shall any single or partial exercise of any such right or power,or any abandonment or discontinuance of steps to enforce such a right or power,preclude any other or further exercise thereof or the exercise of any otherright or power.  The rights and remediesof the Lender, the Issuing Lender, the Cash Management Bank and all Affiliatesof the Lender hereunder and under the other Loan Documents are cumulative andare not exclusive of any rights or remedies that they would otherwisehave.  No waiver of any provision of thisAgreement or consent to any departure by any Credit Party or Subsidiarytherefrom shall in any event be effective unless the same shall be permitted byparagraph (b) of this Section 10.2, and then such waiver or consentshall be effective only in the specific instance and for the purpose for whichgiven.  Without limiting the generalityof the foregoing, the making of a Loan or issuance of a Letter of Credit shallnot be construed as a waiver of any Default, regardless of whether the Lenderor the Issuing Lender may have had notice or knowledge of such Default at thetime.

 

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(b)         Neither this Agreement norany other Loan Document nor any provision hereof or thereof may be waived,amended or modified except pursuant to an agreement or agreements in writingentered into by the Borrowers and the Lender.

 

10.3                           **Expenses; Indemnity; DamageWaiver**.

 

(a)          The Credit Parties jointlyand severally agree to pay, or reimburse the Lender for paying, (i) allreasonable out-of-pocket expenses incurred by the Lender and its Affiliates,including the reasonable fees, charges and disbursements of Special Counsel, inconnection with the preparation of this Agreement and the other Loan Documentsor any amendments, modifications or waivers of the provisions hereof or thereof(whether or not the transactions contemplated hereby or thereby shall beconsummated), (ii) all reasonable out-of-pocket expenses incurred by theIssuing Lender in connection with the issuance, amendment, renewal or extensionof any Letter of Credit or any demand for payment thereunder, (iii) allout-of-pocket expenses incurred by the Lender, the Issuing Lender, the CashManagement Bank or any Affiliate of the Lender, including the fees, charges anddisbursements of any counsel for the Lender, the Issuing Lender, the CashManagement Bank or any Affiliate of the Lender, in connection with theenforcement or protection of their rights in connection with this Agreement andthe other Loan Documents, including their rights under this Section 10.3,or in connection with the Loans made or Letters of Credit issued hereunder,including in connection with any workout, restructuring or negotiations inrespect thereof, and (iv) all Other Taxes levied by any GovernmentalAuthority in respect of this Agreement or any of the other Loan Documents orany other document referred to herein or therein and all costs, expenses,taxes, assessments and other charges incurred in connection with any filing,registration, recording or perfection of any security interest contemplated byany Loan Document or any other document referred to therein.

 

(b)         The Credit Parties jointlyand severally agree to indemnify the Lender, the Issuing Lender, the CashManagement Bank, each Affiliate of the Lender and each Related Party of any ofthe foregoing Persons (each such Person being called an “Indemnitee”)against, and hold each Indemnitee harmless from, any and all losses, claims,damages, liabilities and related expenses, including the fees, charges anddisbursements of any counsel for any Indemnitee and settlement costs, incurredby or asserted against any Indemnitee arising out of, in connection with, or asa result of (i) the execution or delivery of this Agreement, the otherLoan Documents or any agreement or instrument contemplated hereby, theperformance by the parties hereto and thereto of their respective obligationshereunder or thereunder or the consummation of the transactions contemplatedhereby or any other transactions contemplated hereby or thereby, (ii) anyLoan or Letter of Credit or the use of the proceeds therefrom (including anyrefusal by the Issuing Lender to honor a demand for payment under a Letter ofCredit if the documents presented in connection with such demand do notstrictly comply with the terms of such Letter of Credit), (iii) any actualor alleged presence or release of Hazardous Materials on or from any propertyowned, leased or operated by any Credit Party or any Subsidiary, or anyEnvironmental Liability related in any way to any Credit Party or anySubsidiary, or (iv) any actual or prospective claim, litigation,investigation or proceeding relating to any of the foregoing, whether based oncontract, tort or any other theory and regardless of whether any Indemnitee isa party thereto; *provided* that such indemnityshall not, as to any Indemnitee, be available to the extent that such losses,claims, damages, liabilities or related expenses are determined by a court ofcompetent jurisdiction by final and nonappealable judgment to have resultedfrom the gross negligence or willful misconduct of such Indemnitee.

 

(c)          To the extent permitted byapplicable law, none of the Credit Parties shall assert, and each Credit Partyhereby waives, any claim against any Indemnitee, on any theory of liability,for special, indirect, consequential or punitive damages (as opposed to director actual damages) arising out of, in connection with, or as a result of, thisAgreement, the other Loan Documents or any 

 

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agreement or instrumentcontemplated hereby or thereby, the transactions contemplated hereby, any Loanor Letter of Credit or the use of the proceeds thereof.

 

(d)         All amounts due under this Section 10.3shall be payable promptly after written demand therefor.

 

10.4                           **Successors and Assigns**.

 

(a)          The provisions of thisAgreement shall be binding upon and inure to the benefit of the parties heretoand their respective successors and assigns permitted hereby, except that noCredit Party may assign or otherwise transfer any of its rights or obligationshereunder without the prior written consent of the Lender (and any attemptedassignment or transfer without such consent shall be null and void).  Nothing in this Agreement, expressed orimplied, shall be construed to confer upon any Person (other than the partieshereto, their respective successors and assigns permitted hereby and, to theextent expressly contemplated hereby, the Related Parties of the Lender, theIssuing Lender and the Cash Management Bank) any legal or equitable right,remedy or claim under or by reason of this Agreement.

 

(b)         The Lender may at any time andfrom time to time assign to one or more assignees all or a portion of itsrights and obligations under this Agreement (including all or a portion of theRevolving Credit Commitment and the Loans at the time owing to it).

 

(c)          The Lender may at any time andfrom time to time, sell participations to one or more banks or other entities(a “Participant”) in all or a portion of the Lender’s rights andobligations under this Agreement (including all or a portion of the RevolvingCredit Commitment and the Loans owing to it); *provided*that (i) the Lender’s obligations under this Agreement shall remainunchanged, (ii) the Lender shall remain solely responsible to the otherparties hereto for the performance of such obligations and (iii) theBorrowers shall continue to deal solely and directly with the Lender inconnection with the Lender’s rights and obligations under this Agreement.  The Borrowers agree that each Participantshall be entitled to the benefits of this Agreement to the same extent as if itwere a Lender and had acquired its interest by assignment pursuant to paragraph(b) of this Section 10.4; *provided* that aParticipant shall not be entitled to receive any greater payment under thisAgreement than the Lender would have been entitled to receive with respect tothe participation sold to such Participant, unless the sale of theparticipation to such Participant is made with the Borrowers’ prior writtenconsent.

 

(d)         The Lender may at any timepledge or assign a security interest in all or any portion of its rights underthis Agreement to secure obligations of the Lender, including any such pledgeor assignment to a Federal Reserve Bank, and this Section shall not applyto any such pledge or assignment of a security interest; *provided*that no such pledge or assignment of a security interest shall release theLender from any of its obligations hereunder or substitute any such assigneefor the Lender as a party hereto.

 

(e)          The Lender may furnish anyinformation concerning any Credit Party, any Subsidiary in the possession ofthe Lender from time to time to assignees and participants (includingprospective assignees and participants) subject, however, to and so long as therecipient agrees in writing to be bound by, the provisions of Section 10.14.  In addition, the Lender may furnish anyinformation concerning any Credit Party, any Subsidiary, any Affiliate in theLender’s possession to any Affiliate of the Lender, subject, however, to theprovisions of Section 10.14.  TheCredit Parties shall assist the Lender in effectuating any assignment orparticipation pursuant to this Section 10.4 in 

 

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whatever manner the Lenderreasonably deems necessary, including participation in meetings withprospective transferees.

 

10.5                           **Survival**.  Allcovenants, agreements, representations and warranties made by the CreditParties and Subsidiaries herein and in the other Loan Documents, and in thecertificates or other instruments delivered in connection with or pursuant tothis Agreement and the other Loan Documents, shall be considered to have beenrelied upon by the other parties hereto and shall survive the execution anddelivery of this Agreement and the other Loan Documents and the making of anyLoans and issuance of any Letters of Credit, regardless of any investigationmade by any such other party or on its behalf and notwithstanding that theLender or the Issuing Lender may have had notice or knowledge of any Default orincorrect representation or warranty at the time any credit is extendedhereunder, and shall continue in full force and effect so long as the principalof or any accrued interest on any Loan or any fee or any other Obligationpayable under this Agreement or the other Loan Documents is outstanding andunpaid or any Letter of Credit is outstanding and so long as the RevolvingCredit Commitment has not expired or terminated.  The provisions of Sections 2.9, 2.10 and 10.3shall survive and remain in full force and effect regardless of theconsummation of the transactions contemplated hereby, the repayment of theLoans, the expiration or termination of the Letters of Credit and the RevolvingCredit Commitment or the termination of this Agreement or any other LoanDocument or any provision hereof or thereof.

 

10.6                           **Counterparts; Integration;References to Agreement; Effectiveness**.  This Agreement may be executedin counterparts (and by different parties hereto on different counterparts),each of which shall constitute an original, but all of which when takentogether shall constitute a single contract. This Agreement and any separate letter agreements with respect to feespayable to the Lender or its counsel constitute the entire contract among theparties relating to the subject matter hereof and supersede any and allprevious agreements and understandings, oral or written, relating to thesubject matter hereof.  Whenever there isa reference in any Loan Document or UCC Financing Statement to the “CreditAgreement” to which the Lender and the Credit Parties are parties, suchreference shall be deemed to be made to this Agreement among the partieshereto.  Except as provided in Section 6.1,this Agreement shall become effective when it shall have been executed by theLender and when the Lender shall have received counterparts hereof which, whentaken together, bear the signatures of each of the other parties hereto, andthereafter shall be binding upon and inure to the benefit of the parties heretoand their respective successors and assigns. Delivery of an executed counterpart of a signature page of thisAgreement by telecopy shall be effective as delivery of a manually executedcounterpart of this Agreement.

 

10.7                           **Severability**.  Anyprovision of this Agreement held to be invalid, illegal or unenforceable in anyjurisdiction shall, as to such jurisdiction, be ineffective to the extent ofsuch invalidity, illegality or unenforceability without affecting the validity,legality and enforceability of the remaining provisions hereof; and theinvalidity of a particular provision in a particular jurisdiction shall notinvalidate such provision in any other jurisdiction.

 

10.8                           **Right of Setoff**.  EachCredit Party hereby grants to the Lender, the Cash Management Bank and eachAffiliate of the Lender that from time to time maintains any deposit accounts,holds any funds or otherwise becomes indebted to the Credit Parties a securityinterest in all deposits (general or special, time or demand, provisional orfinal) and funds at any time held and other indebtedness at any time owing by theLender, the Cash Management Bank or any such Affiliate of the Lender to or forthe credit or the account of any Credit Party as security for the Obligations,and the Credit Parties hereby agree that if an Event of Default shall haveoccurred and be continuing, the Lender, the Cash Management Bank and eachAffiliate of the Lender are hereby authorized at any time and from time totime, to the fullest extent permitted by law, to set off and apply any and alldeposits (general or special, time or demand, provisional or final) or otherfunds at any time held and other indebtedness at any time 

 

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owingby the Lender, the Cash Management Bank or any Affiliate of the Lender to orfor the credit or the account of any Credit Party against any and all of theObligations, irrespective of whether or not the Lender shall have made anydemand under this Agreement and although any of the Obligations may beunmatured.  The rights of the Lender, theCash Management Bank and each Affiliate of the Lender under this Section 10.8are in addition to any other rights and remedies (including other rights ofsetoff) which the Lender, the Cash Management Bank or any Affiliate of theLender may have.

 

10.9                           **Subordination by Credit Parties**.  TheCredit Parties hereby agree that all present and future Indebtedness of anyCredit Party to another Credit Party (“Intercompany Indebtedness”) shallbe subordinate and junior in right of payment and priority to the Obligations,and each Credit Party agrees not to make, demand, accept or receive any paymentin respect of any present or future Intercompany Indebtedness, including,without limitation, any payment received through the exercise of any right ofsetoff, counterclaim or cross claim, or any collateral therefor, unless anduntil such time as the Obligations shall have been indefeasibly paid in full; *provided* that, so long as no Default shall have occurred andbe continuing and no Default shall be caused thereby, the Credit Parties maymake and receive such payments as shall be customary in the ordinary course ofthe Credit Parties’ business.  Without inany way limiting the foregoing, in the event of any insolvency or bankruptcyproceedings, or any receivership, liquidation, reorganization, dissolution orother similar proceedings relative to any Credit Party or to its businesses,properties or assets, the Lender shall be entitled to receive payment in fullof all of the Obligations before any Credit Party shall be entitled to receiveany payment in respect of any present or future Intercompany Indebtedness.

 

10.10                     **Governing Law; Jurisdiction;Consent to Service of Process**.

 

(a)          This Agreement shall beconstrued in accordance with and governed by the law of The Commonwealth ofMassachusetts.

 

(b)         Each party hereto herebyirrevocably and unconditionally submits, for itself and its property, to thenonexclusive jurisdiction of the courts of The Commonwealth of Massachusettsand of the United States District Court for the District of Massachusetts, andany appellate court from any thereof, in any action or proceeding arising outof or relating to this Agreement or the other Loan Documents, or forrecognition or enforcement of any judgment, and each of the parties heretohereby irrevocably and unconditionally agrees that all claims in respect of anysuch action or proceeding may be heard and determined in such Massachusettscourt (or, to the extent permitted by law, in such Federal court).  Each of the parties hereto agrees that afinal judgment in any such action or proceeding shall be conclusive and may beenforced in other jurisdictions by suit on the judgment or in any other mannerprovided by law.  Nothing in thisAgreement shall affect any right that the Lender, the Issuing Lender or theCash Management Bank may otherwise have to bring any action or proceedingrelating to this Agreement against any Credit Party, any Subsidiary or itsproperties in the courts of any jurisdiction.

 

(c)          Each party hereto herebyirrevocably and unconditionally waives, to the fullest extent it may legallyand effectively do so, any objection which it may now or hereafter have to thelaying of venue of any suit, action or proceeding arising out of or relating tothis Agreement or the other Loan Documents in any court referred to inparagraph (b) of this Section 10.10. Each of the parties hereto hereby irrevocably waives, to the fullestextent permitted by law, the defense of an inconvenient forum to themaintenance of such action or proceeding in any such court.

 

(d)         Each party to this Agreementirrevocably consents to service of process in the manner provided for noticesin Section 10.1.  Nothing in thisAgreement will affect the right of any party to this Agreement to serve processin any other manner permitted by law.

 

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10.11                     **WAIVER OF JURY TRIAL**.  EACHPARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLYOR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONSCONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NOREPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLYOR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEKTO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHERPARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHERTHINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.

 

10.12                     **Arbitration**. Notwithstanding any other provision of this Agreement to the contrary,any controversy or claim among the parties relating in any way to anyObligations or Loan Documents, including any alleged tort, shall at the requestof any party hereto be determined by binding arbitration conducted inaccordance with the United States Arbitration Act (Title 9 U.S. Code).  Arbitration proceedings will be determined inaccordance with the Act, the then-current rules and procedures for thearbitration of financial services disputes of the American ArbitrationAssociation (“AAA”), and the terms of this Section.  In the event of any inconsistency, the termsof this Section shall control.  IfAAA is unwilling or unable to serve as the provider of arbitration or toenforce any provision of this Section, the Lender may designate anotherarbitration organization with similar procedures to serve as the provider ofarbitration.  The arbitration proceedingsshall be conducted in Boston, Massachusetts. The arbitration hearing shall commence within 90 days of the arbitrationdemand and close within 90 days thereafter. The arbitration award must be issued within 30 days after close of thehearing (subject to extension by the arbitrator for up to 60 days upon ashowing of good cause), and shall include a concise written statement ofreasons for the award.  The arbitratorshall give effect to applicable statutes of limitation in determining anycontroversy or claim, and for these purposes, service on AAA under applicableAAA rules of a notice of claim is the equivalent of the filing of alawsuit.  Any dispute concerning this Section orwhether a controversy or claim is arbitrable shall be determined by thearbitrator.  The arbitrator shall havethe power to award legal fees to the extent provided by this Agreement.  Judgment upon an arbitration award may beentered in any court having jurisdiction. The arbitrator shall not have the power to commit errors of law or legalreasoning, and any award may be reviewed and vacated or corrected on appeal toa court of competent jurisdiction for any such error.  The institution and maintenance of an actionfor judicial relief or pursuant to a provisional or ancillary remedy shall notconstitute a waiver of the right of any party, including the plaintiff, tosubmit the controversy or claim to arbitration if any other party contests suchaction for judicial relief.  Nocontroversy or claim shall be submitted to arbitration without the consent ofall parties if, at the time of the proposed submission, such controversy orclaim relates to an obligation secured by Real Property Asset, but if allparties do not consent to submission of such a controversy or claim toarbitration, it shall be determined as provided in the next sentence.  At the request of any party, a controversy orclaim that is not submitted to arbitration as provided above shall bedetermined by judicial reference; and if such an election is made, the partiesshall designate to the court a referee or referees selected under the auspicesof the AAA in the same manner as arbitrators are selected in AAA sponsoredproceedings and the presiding referee of the panel (or the referee if there isa single referee) shall be an active attorney or retired judge; and judgmentupon the award rendered by such referee or referees shall be entered in thecourt in which proceeding was commenced. None of the foregoing provisions of this Section shall limit theright of the Lender to exercise self-help remedies, such as setoff, foreclosureor sale of any Collateral or to obtain provisional or ancillary remedies from acourt of competent jurisdiction before, after or during any arbitrationproceeding.  The exercise of a remedydoes not waive the right of any party to resort to arbitration orreference.  At the Lender’s option,foreclosure under a Mortgage may be accomplished either by exercise of power ofsale thereunder or by judicial foreclosure.]

 

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10.13                     **Headings**.  Article andSection headings and the Table of Contents used herein are for convenienceof reference only, are not part of this Agreement and shall not affect theconstruction of, or be taken into consideration in interpreting, thisAgreement.

 

10.14                     **Confidentiality**.  TheLender agrees to keep confidential information obtained by it pursuant heretoand the other Loan Documents confidential in accordance with the Lender’scustomary practices and agrees that it will only use such information inconnection with the transactions contemplated by this Agreement and notdisclose any of such information other than (a) to the Lender’s employees,representatives, directors, attorneys, auditors, agents, professional advisors,trustees or Affiliates who are advised of the confidential nature of suchinformation or to any direct or indirect contractual counterparty in swapagreements or such contractual counterparty’s professional advisor (so long assuch contractual counterparty or professional advisor to such contractualcounterparty agrees to be bound by the provisions of this Section 10.14), (b) tothe extent such information presently is or hereafter becomes available to theLender on a non-confidential basis from any source of such information that isin the public domain at the time of disclosure, (c) to the extentdisclosure is required by law (including applicable securities law),regulation, subpoena or judicial order or process (*provided*that notice of such requirement or order shall be promptly furnished to theBorrowers unless such notice is legally prohibited) or requested or required bybank, securities, insurance or investment company regulators or auditors or anyadministrative body or commission to whose jurisdiction the Lender may besubject, (d) to any rating agency to the extent required in connectionwith any rating to be assigned to the Lender, (e) to assignees orparticipants or prospective assignees or participants who agree to be bound bythe provisions of this Section 10.14, (f) to the extent required inconnection with any litigation between any Credit Party and the Lender withrespect to the Loans or this Agreement and the other Loan Documents or (g) withthe Borrowers’ prior written consent.

 

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IN WITNESS WHEREOF, theparties hereto have caused this Amended and Restated Credit and SecurityAgreement to be duly executed by their respective authorized officers as of theday and year first above written.

 
|   | BORROWERS                           |
|--------|-------------------------------------|
|   |                                |
|   | UFP  TECHNOLOGIES, INC.             |
|   |                                |
|   |                                |
|   | By:                                 | *      /s/  Ronald J. Lataille* |
|   | Name:  Ronald J. Lataille           |
|   | Title:  Treasurer                   |
|   |                                |   |
|   |                                |   |
|   | MOULDED  FIBRE TECHNOLOGY, INC.     |
|   |                                |
|   |                                |
|   | By:                                 | *      /s/  Ronald J. Lataille* |
|   | Name:  Ronald J. Lataille           |
|   | Title:  Treasurer                   |
|   |                                |
|   |                                |
|   | SIMCO  INDUSTRIES, INC.             |
|   |                                |
|   |                                |
|   | By:                                 | *      /s/  Ronald J. Lataille* |
|   | Name:  Ronald J. Lataille           |
|   | Title:  Treasurer                   |
|   |                                |   |
|   |                                |   |
|   | SIMCO  AUTOMOTIVE TRIM, INC.        |
|   |                                |   |
|   |                                |
|   | By:                                 | *      /s/  Ronald J. Lataille* |
|   | Name:  Ronald J. Lataille           |
|   | Title:  Treasurer                   |
|   |                                |   |
|   |                                |   |
|   | STEPHENSON &  LAWYER, INC. |
|   |                                |   |
|   |                                |   |
|   | By:                                 | *      /s/  Ronald J. Lataille* |
|   | Name:  Ronald J. Lataille           |
|   | Title:  Treasurer                   |
|   |                                |   |
|   |                                |   |
|   | PATTERSON  PROPERTIES CORPORATION   |
|   |                                |
|   |                                |
|   | By:                                 | *      /s/  Ronald J. Lataille* |
|   | Name:  Ronald J. Lataille           |
|   | Title:  Treasurer                   |
|        |                                     |  |  |

 

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|   | LENDER                                              |
|--------|-----------------------------------------------------|
|   |                                                |
|   | BANK  OF AMERICA, N.A. (assignee of                 |
|   | Banc  of America Leasing & Capital LLC,    |
|   | successor  to Fleet Capital Corporation), as Lender |
|   |                                                |   |
|   |                                                |   |
|   | By:                                                 | *      /s/  Peter G. McCarthy* |
|   | Name:  Peter G. McCarthy                            |
|   | Title:  Senior Vice President                       |
|   |                                                |   |
|   | ISSUING  LENDER                                     |
|   |                                                |   |
|   | BANK  OF AMERICA, N.A., as Issuing Lender           |
|   |                                                |   |
|   |                                                |
|   | By:                                                 | *      /s/  Peter G. McCarthy* |
|   | Name:  Peter G. McCarthy                            |
|   | Title:  Senior Vice President                       |
|   |                                                |   |
|   | CASH  MANAGEMENT BANK                               |
|   |                                                |   |
|   | BANK  OF AMERICA, N.A., as Cash Management Bank     |
|   |                                                |   |
|   |                                                |
|   | By:                                                 | *      /s/  Peter G. McCarthy* |
|   | Name:  Peter G. McCarthy                            |
|   | Title:  Senior Vice President                       |
|        |                                                     |  |  |

 

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SCHEDULES & EXHIBITS

 
| Schedule  1.1      | Material  Owned Properties                                                    |
|--------------------|-------------------------------------------------------------------------------|
| Schedule 1.4  | Designated  Financial Officers                                                |
| Schedule  4.2      | Websites  and Domain Names                                                    |
| Schedule 5.3  | Governmental  Approvals; No Conflicts                                         |
| Schedule 5.4  | Financial  Condition; No Material Adverse Changes                             |
| Schedule 5.5  | Properties;  Proprietary Rights; Real Property Assets                         |
| Schedule 5.6  | Litigation  and Environmental Matters                                         |
| Schedule 5.7  | Compliance  with Laws and Agreements                                          |
| Schedule 5.9  | Taxes                                                                         |
| Schedule 5.10 | Pension  Plans                                                                |
| Schedule 5.12 | Organizational  Structure; Capitalization                                     |
| Schedule 5.13 | Subsidiaries                                                                  |
| Schedule 5.14 | Material  Indebtedness, Liens and Agreements                                  |
| Schedule 5.19 | Labor  and Employment Matters                                                 |
| Schedule 5.20 | Bank  Accounts                                                                |
| Schedule 8.1  | Existing  Indebtedness                                                        |
| Schedule 8.7  | Transactions  with Affiliates                                                 |
| Schedule 8.8  | Restrictive  Agreements                                                       |
|               |                                                                          |
| Exhibit A-1   | Form of  Second Amended and Restated Revolving Credit Note               |
| Exhibit A-2   | Form of  Second Amended and Restated Existing Equipment Term Note        |
| Exhibit A-3   | Form of  Second Amended and Restated Massachusetts Real Estate Term Note |
| Exhibit A-4   | Form of  Michigan Real Estate Term Note                                  |
| Exhibit B-1   | Form of  Borrowing Base Certificate                                      |
| Exhibit B-2   | Form of  Collateral Update Certificate                                   |
| Exhibit B-3   | Form of  LIBOR Request                                                   |
| Exhibit B-4   | Form of  Advance Request                                                 |
| Exhibit C     | Form of  Perfection Certificate                                          |
| Exhibit D     | Form of  Compliance Certificate                                          |
| Exhibit E     | Form of  Solvency Certificate                                            |
| Exhibit F     | Form of  Acceptance Agreement                                            |

 

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