ex42.htm


    

    AMENDED
      AND RESTATED LOAN
      AND SECURITY AGREEMENT 

     

    by
      and among


     

    LSB
      INDUSTRIES, INC.,


     

    as
      Guarantor,


     

    THERMACLIME,
      INC. and


    EACH
      OF ITS SUBSIDIARIES
      THAT ARE SIGNATORIES HERETO, 

     

    as
      Borrowers,


     

    THE
      LENDERS THAT ARE
      SIGNATORIES HERETO 

     

    as
      the Lenders,


     

    and


     

    WELLS
      FARGO FOOTHILL, INC.


     

    as
      the Arranger and
      Administrative Agent 

     

    Dated
      as of
[    ][    ],
      2007 

     

     

     

    

     

     

    AMENDED
      AND RESTATED LOAN
      AND SECURITY AGREEMENT 

     

    THIS
      AMENDED AND RESTATED
      LOAN AND SECURITY AGREEMENT (this “Agreement”), is entered into
      as of [    ][    ], 2007,
      between and among, on the one hand, the lenders identified on the signature
      pages hereof (such lenders, together with their respective successors and
      assigns, are referred to hereinafter each individually as a “Lender” and
      collectively as the “Lenders”), WELLS FARGO FOOTHILL,
      INC., a California corporation formerly known as Foothill Capital
      Corporation, as the arranger and administrative agent for the Lenders
      (“Agent”), and, on the other hand, LSB INDUSTRIES, INC.,
      an Delaware corporation (“Parent”), THERMACLIME, INC.,
      an Oklahoma corporation formerly known as ClimaChem, Inc.
      (“ThermaClime”), and each of the Subsidiaries of ThermaClime identified
      on the signature pages hereof (such Subsidiaries, together with ThermaClime,
      are
      referred to hereinafter each individually as a “Borrower”, and
      individually and collectively, jointly and severally, as “Borrowers”).


     

    WHEREAS,
      the
      Borrowers, the Agent and the Lenders are parties to the Loan and Security
      Agreement, dated as of April 13, 2001 (as heretofore amended or otherwise
      modified, the “Original Loan Agreement”), pursuant to which the Lenders
      extended credit to the Borrowers consisting of (i) several term loan
      facilities in an aggregate principal amount of $7,500,000 at any time
      outstanding of which no amounts are outstanding on the date hereof (the
“Original Term Loan”) and (ii) a revolving credit facility, in an
      aggregate principal amount of $50,000,000 at any time outstanding, as reduced
      in
      accordance with the terms thereof (the “Original Revolver Facility” and
      together with the Original Term Loan, the “Original Loan Facility”),
      which included a $8,500,000 sub-facility for the issuance of letters of credit;
      

     

    WHEREAS,
      pursuant
      to the Original Loan Agreement, the Borrowers granted to the Agent and the
      Lenders, a continuing security interest in all of their right, title and
      interest in all then existing and thereafter acquired or arising Collateral
      (as
      defined in the Original Loan Agreement) in order to secure the repayment of
      any
      and all of the Obligations (as defined in the Original Loan Agreement);


     

    WHEREAS,
      the
      Borrowers have notified the Agent that they intend to refinance the Orix Loans
      (as defined in the Original Loan Agreement) by entering into a new term loan
      facility arranged by Banc of America Leasing & Capital, LLC (the
“BofA Facility”) and have requested that the Lenders amend the Original
      Loan Agreement in order to make certain modifications to the Original Loan
      Facility (including, without limitation, releasing the Agent’s lien on certain
      Collateral some of which is being pledged to secure obligations under the BofA
      Facility), and in connection therewith, to amend and restate the Original Loan
      Agreement in its entirety to provide for certain other modifications as set
      forth herein; 

     

    WHEREAS,
      in
      connection with the amendment and restatement of the Original Loan Agreement,
      the Borrowers have agreed to continue, confirm and reaffirm the grant to the
      Agent, for the benefit of the Lender Group, of the security interest in the
      Collateral that is not released herein to secure the Obligations; and


     

    NOW
      THEREFORE, in
      consideration of the mutual covenants and agreements herein contained, and
      subject to the terms and conditions of this Agreement, the parties hereto agree
      to amend and restate the Original Loan Agreement as follows: 

     

    1.
      DEFINITIONS AND
      CONSTRUCTION.

     

    1.1
      Definitions. As used in this Agreement, the following terms
      shall have the following definitions: 

     

    “Account
      Debtor” means any
      Person who is or who may become obligated under, with respect to, or on account
      of, an Account, chattel paper, or a General Intangible. 

     

    “Accounts”
means
      all of
      Borrowers’ now owned or hereafter acquired right, title, and interest with
      respect to “accounts” (as that term is defined in the Code), and any and all
      supporting obligations in respect thereof. 

     

    “ACH
      Transactions” means any
      cash management or related services (including the Automated Clearing House
      processing of electronic funds transfers through the direct Federal Reserve
      Fedline system) provided by the Bank Product Provider for the account of a
      Borrower or its Subsidiaries. 

     

    “Additional
      Documents” has
      the meaning set forth in Section 4.4. 

     

    “Administrative
      Borrower” has
      the meaning set forth in Section 17.9.

     

    “Advances”
has
      the meaning
      set forth in Section 2.1. 

     

    “Affiliate”
means,
      as applied
      to any Person, any other Person who, directly or indirectly, controls, is
      controlled by, or is under common control with, such Person. For purposes of
      this definition, “control” means the possession, directly or indirectly, of the
      power to direct the management and policies of a Person, whether through the
      ownership of Stock, by contract, or otherwise; provided, however,
      that, in any event: (a) any Person which owns directly or indirectly 15% or
      more of the securities having ordinary voting power for the election of
      directors or other members of the governing body of a Person or 15% or more
      of
      the partnership or other ownership interests of a Person (other than as a
      limited partner of such Person) shall be deemed to control such Person;
      (b) each director (or comparable manager) of a Person shall be deemed to be
      an Affiliate of such Person; and (c) each partnership or joint venture in
      which a Person is a general partner or joint venturer shall be deemed to be
      an
      Affiliate of such Person. 

     

    “Agent”
means
      Foothill,
      solely in its capacity as agent for the Lenders hereunder, and any successor
      thereto. 

     

    “Agent’s
      Account” means an
      account at a bank designated by Agent from time to time as the account into
      which Borrowers shall make all payments to Agent for the benefit of the Lender
      Group and into which the Lender Group shall make all payments to Agent under
      this Agreement and the other Loan Documents; unless and until Agent notifies
      Administrative Borrower and the Lender Group to the contrary, Agent’s Account
      shall be that certain deposit account bearing account number 323-266193 and
      maintained by Agent with The Chase Manhattan Bank, 4 New York Plaza, 15th Floor,
      New York, New York 10004, ABA #021000021. 

     

     

     

    -2-


     

    “Agent
      Advances” has the
      meaning set forth in Section 2.3(e)(i). 

     

    “Agent’s
      Liens” means the
      Liens granted by Borrowers to Agent for the benefit of the Lender Group under
      this Agreement or the other Loan Documents. 

     

    “Agent-Related
      Persons” means
      Agent together with its Affiliates, officers, directors, employees, and agents.
      

     

    “Agreement”
has
      the meaning
      set forth in the preamble hereto. 

     

    “Applicable
      Prepayment
      Premium” means, as of any date of determination, an amount equal to
      (a) during the period of time from and after the Restatement Effective Date
      up to April 12, 2008, 2% times the sum of (i) the Maximum Revolver
      Amount, plus (ii) the outstanding principal balance of the Term Loan on the
      date immediately prior to the date of determination, (b) during the period
      of time from and including April 13, 2008 up to April 12, 2009, 1%
      times the sum of (i) the Maximum Revolver Amount, plus (ii) the
      outstanding principal balance of the Term Loan on the date immediately prior
      to
      the date of determination, and (c) during the period of time from and
      including April 13, 2009 up to April 12, 2010, 0.5% times the sum of
      (i) the Maximum Revolver Amount, plus (ii) the outstanding principal
      balance of the Term Loan on the date immediately prior to the date of
      determination; and (d) during the period of time from and including
      April 13, 2010 and prior to the Maturity Date, 0% times the sum of
      (i) the Maximum Revolver Amount, plus (ii) the outstanding principal
      balance of the Term Loan on the date immediately prior to the date of
      determination. 

     

    “Assignee”
has
      the meaning
      set forth in Section 14.1.

     

    “Assignment
      and Acceptance”
means an Assignment and Acceptance substantially in the form of Exhibit
      A-1.


     

    “Authorized
      Person” means any
      officer or other employee of Administrative Borrower. 

     

    “Availability”
means,
      as of
      any date of determination, if such date is a Business Day, and determined at
      the
      close of business on the immediately preceding Business Day, if such date of
      determination is not a Business Day, the amount that Borrowers are entitled
      to
      borrow as Advances under Section 2.1 (after giving effect to all
      then outstanding Obligations (other than Bank Products Obligations) and all
      sublimits and reserves applicable hereunder). 

     

    “Bank
      Product Agreements”
means those certain cash management service agreements entered into from
      time to
      time by a Borrower or its Subsidiaries in connection with any of the Bank
      Products. 

     

    “Bank
      Product Obligations”
means all obligations, liabilities, contingent reimbursement obligations,
      fees,
      and expenses owing by Borrowers or their Subsidiaries to Bank Product Provider
      pursuant to or evidenced by the Bank Product Agreements and irrespective of
      whether for the payment of money, whether direct or indirect, absolute or
      contingent, due or to 

     

     

     

    -3-


     

    become
      due, now existing or
      hereafter arising, and including all such amounts that Borrowers are obligated
      to reimburse to Agent or any member of the Lender Group as a result of Agent
      or
      such member of the Lender Group purchasing participations or executing
      indemnities or reimbursement obligations with respect to the Bank Products
      provided to Borrowers or their Subsidiaries pursuant to the Bank Product
      Agreements. 

     

    “Bank
      Product Provider” means
      Wells Fargo or any of its Affiliates. 

     

    “Bank
      Product Reserves”
means, as of any date of determination, the amount of reserves that Agent
      has
      established (based upon Bank Product Provider’s reasonable determination of the
      credit exposure in respect of then extant Bank Products) for Bank Products
      then
      provided or outstanding. 

     

    “Bank
      Products” means any
      service or facility extended to Borrowers or their Subsidiaries by Bank Product
      Provider including: (a) credit cards, (b) credit card processing
      services, (c) debit cards, (d) purchase cards, (e) ACH
      Transactions, (f) cash management, including controlled disbursement,
      accounts or services, or (g) Hedge Agreements. 

     

    “Bankruptcy
      Code” means the
      United States Bankruptcy Code, as in effect from time to time. 

     

    “Base
      LIBOR Rate” means the
      rate per annum, determined by Agent in accordance with its customary procedures,
      and utilizing such electronic or other quotation sources as it considers
      appropriate (rounded upwards, if necessary, to the next 1/16%), on the basis
      of
      the rates at which Dollar deposits are offered to major banks in the London
      interbank market on or about 11:00 a.m. (California time) 2 Business Days prior
      to the commencement of the applicable Interest Period, for a term and in amounts
      comparable to the Interest Period and amount of the LIBOR Rate Loan requested
      by
      Administrative Borrower in accordance with this Agreement, which determination
      shall be conclusive in the absence of manifest error. 

     

    “Base
      Rate” means, the rate
      of interest announced within Wells Fargo at its principal office in San
      Francisco as its “prime rate”, with the understanding that the “prime rate” is
      one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and
      serves as the basis upon which effective rates of interest are calculated for
      those loans making reference thereto and is evidenced by the recording thereof
      after its announcement in such internal publication or publications as Wells
      Fargo may designate. 

     

    “Base
      Rate Loan” means each
      portion of an Advance or the Term Loan that bears interest at a rate determined
      by reference to the Base Rate. 

     

    “Base
      Rate Margin” means 0.50
      percentage point. 

     

    “Benefit
      Plan” means a
“defined benefit plan” (as defined in Section 3(35) of ERISA) for
      which any Borrower or any Subsidiary or ERISA Affiliate of any Borrower has
      been
      an “employer” (as defined in Section 3(5) of ERISA) within the past
      six years. 

     

     

     

    -4-


     

    “Board
      of Directors” means
      the board of directors (or comparable managers) of Parent or any committee
      thereof duly authorized to act on behalf thereof. 

     

    “BofA”
means,
      collectively,
      Banc of America Leasing & Capital, LLC and each of the lenders party to
      the BofA Loan Agreement, and their respective successors and assigns (including
      any other lender or group of lenders that at any time succeeds to or refinances,
      replaces or substitutes for all or any portion of the BofA Loans at any time
      and
      from time to time). 

     

    “BofA
      Collateral” means the
“Collateral” (as such term is defined in the BofA Loan Agreement as in
      effect on the date hereof). 

     

    “BofA
      Inter-Lender Agreement”
means that certain Inter-Lender Agreement dated as of
            ,
      2007 by and between Agent and BofA (as collateral agent), as the same may be
      amended, supplemented or otherwise modified from time to time. 

     

    “BofA
      Loan Agreement” means
      that certain Term Loan Agreement dated as of
            ,
      2007, by and among ThermaClime and each of the borrowers listed therein, Parent,
      as guarantor, each of the lenders listed therein, and BofA, as administrative
      agent and collateral agent for lenders, and Bank of Utah, as payment agent,
      as
      the same may be amended, supplemented or otherwise modified from time to time.
      

     

    “BofA
      Loans” means those
      certain term loans made by BofA to ThermaClime and each of the borrowers listed
      in the BofA Loan Agreement pursuant to the terms of the BofA Loan Agreement
      in
      an aggregate principal amount of up to $50,000,000. 

     

    “Books”
means
      all of each
      Borrower’s now owned or hereafter acquired books and records (including all of
      its Records indicating, summarizing, or evidencing its assets (including the
      Collateral) or liabilities, all of its Records relating to its business
      operations or financial condition, and all of its goods or General Intangibles
      related to such information). 

     

    “Borrower”
and
      “Borrowers” have the respective meanings set forth in the preamble to
      this Agreement. 

     

    “Borrowing”
means
      a borrowing
      hereunder of Advances made on the same day by the Lenders (or Agent on behalf
      thereof), or by Swing Lender in the case of a Swing Loan, or by Agent in the
      case of an Agent Advance, or a Term Loan, as the case may be. 

     

    “Borrowing
      Base” has the
      meaning set forth in Section 2.1. 

     

    “Borrowing
      Base Certificate”
means a certificate in the form of Exhibit B-1. 

     

    “Business
      Day” means any day
      that is not a Saturday, Sunday, or other day on which national banks are
      authorized or required to close, except that, if a determination of a Business
      Day shall relate to a LIBOR Rate Loan, the term “Business Day” also shall
      exclude any day on which banks are closed for dealings in Dollar deposits in
      the
      London interbank market. 

     

     

     

    -5-


     

    “Capital
      Assets” has the
      meaning set forth in Section 2.2. 

     

    “Capital
      Lease” means a lease
      that is required to be capitalized for financial reporting purposes in
      accordance with GAAP. 

     

    “Capitalized
      Lease
      Obligation” means any Indebtedness represented by obligations under a
      Capital Lease, but excluding all Indebtedness under any operating lease that
      is
      entered into between any Borrower and any of its Subsidiaries, as lessee, and
      any “related party” (as defined in paragraph 5 of Financial Accounting Standards
      Board Statement No. 13, “Accounting for leases (FAS13)”) or Affiliate of
      such lessee, as lessor, that is required to be treated as capital lease
      obligations under GAAP, pursuant to FAS 13, as amended from time to time.


     

    “Cash
      Equivalents” means
      (a) marketable direct obligations issued or unconditionally guaranteed by
      the United States or issued by any agency thereof and backed by the full faith
      and credit of the United States, in each case maturing within 1 year from the
      date of acquisition thereof, (b) marketable direct obligations issued by
      any state of the United States or any political subdivision of any such state
      or
      any public instrumentality thereof maturing within 1 year from the date of
      acquisition thereof and, at the time of acquisition, having the highest rating
      obtainable from either S&P or Moody’s, (c) commercial paper maturing no
      more than 1 year from the date of acquisition thereof and, at the time of
      acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody’s,
      and (d) certificates of deposit or bankers’ acceptances maturing within 1
      year from the date of acquisition thereof either (i) issued by any bank
      organized under the laws of the United States or any state thereof which bank
      has a rating of A or A2, or better, from S&P or Moody’s, or
      (ii) certificates of deposit less than or equal to $100,000 in the
      aggregate issued by any other bank insured by the Federal Deposit Insurance
      Corporation. 

     

    “Cash
      Management Bank” has
      the meaning set forth in Section 2.7(a). 

     

    “Cash
      Management Account” has
      the meaning set forth in Section 2.7(a). 

     

    “Cash
      Management Agreements”
means those certain cash management service agreements, in form and substance
      satisfactory to Agent, each of which is among Administrative Borrower, Agent,
      and one of the Cash Management Banks. 

     

    “Change
      of Control” means
      (a) any “person” or “group” (within the meaning of Sections 13(d) and 14(d)
      of the Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3
      under the Exchange Act) of a greater number of shares of Parent’s Stock having
      the right to vote for the election of members of the Board of Directors than
      the
      number of shares of such Stock held by the Permitted Holders, or (b) a
      majority of the members of the Board of Directors do not constitute Continuing
      Directors, or (c) the Parent ceases to directly or indirectly own and
      control 100% of the outstanding capital Stock of ThermaClime, or
      (d) ThermaClime ceases to directly or indirectly own and control 100% of
      the outstanding capital Stock of each Borrower (other than ThermaClime), or
      (e) any Borrower ceases to directly own and control 100% of the outstanding
      capital Stock of each of its Subsidiaries extant as of the Closing Date.


     

     

     

    -6-


     

    “Chemex
      I” means Chemex I
      Corp., an Oklahoma corporation formerly known as Slurry Explosive Corporation.
      

     

    “Chemex
      II” means Chemex II
      Corp., an Oklahoma corporation formerly known as Universal Tech Corporation.
      

     

    “Cherokee”
means
      Cherokee
      Nitrogen Holdings, Inc., an Oklahoma corporation formerly known as Cherokee
      Nitrogen Company. 

     

    “ClimaCool”
means
      ClimaCool
      Corp., an Oklahoma corporation. 

     

    “ClimateCraft”
means
      ClimateCraft, Inc., an Oklahoma corporation. 

     

    “Climate
      Control Business”
means the business consisting of the manufacture and sale of hydronic fan
      coils
      and water source heat pumps as well as other products used in commercial and
      residential heating, ventilation and air conditioning systems conducted by
      TTI,
      CMI, IEC, Koax, ClimateCraft, XPA and ClimaCool. 

     

    “Climate
      Control Raw
      Inventory” means Eligible Raw Inventory that is used or consumed in the
      Climate Control Business. 

     

    “Closing
      Date” means
      April 13, 2001, the date on which the Original Loan Agreement became
      effective. 

     

    “CMI”
means
      Climate Master,
      Inc., a Delaware corporation. 

     

    “Closing
      Date Business Plan”
means the set of Projections of Borrowers for the 1 year period following
      the
      Closing Date, in form and substance (including as to scope and underlying
      assumptions) satisfactory to Agent. 

     

    “Code”
means
      the New York
      Uniform Commercial Code, as in effect from time to time. 

     

    “Collateral”
means
      all of
      each Borrower’s now owned or hereafter acquired right, title, and interest in
      and to each of the following: 

     

    (a)
      Accounts, 

     

    (b)
      Books, 

     

    (c)
      General Intangibles,


     

    (d)
      Inventory, 

     

    (e)
      Investment Property (excluding
      the Stock of (i) each Borrower and its Subsidiaries and (ii) EDN and
      DSN and their respective Subsidiaries), 

     

    (f)
      Negotiable Collateral,


     

     

     

    -7-


     

    (g)
      money or other assets of each
      such Borrower that arise from or relate to Accounts, Books, General Intangibles
      and Inventory and that now or hereafter come into the possession, custody,
      or
      control of any member of the Lender Group, and 

     

    (h)
      the proceeds and products,
      whether tangible or intangible, of any of the foregoing, including proceeds
      of
      insurance covering any or all of the foregoing, and any and all Accounts, Books,
      General Intangibles, Inventory, Investment Property, Negotiable Collateral,
      money, deposit accounts, or other tangible or intangible property resulting
      from
      the sale, exchange, collection, or other disposition of any of the foregoing,
      or
      any portion thereof or interest therein, and the proceeds thereof;
provided, however, that the Collateral shall not include any BofA
      Collateral. 

     

    “Collateral
      Access Agreement”
means a landlord waiver, bailee letter, or acknowledgement agreement of
      any
      lessor, warehouseman, processor, consignee, or other Person in possession of,
      having a Lien upon, or having rights or interests in the Inventory, in each
      case, in form and substance satisfactory to Agent. 

     

    “Collections”
means
      all cash,
      checks, notes, instruments, and other items of payment (including insurance
      proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of
      Borrowers. 

     

    “Commitment”
means,
      with
      respect to each Lender, its Revolver Commitment, its Term Loan Commitment or
      its
      Total Commitment, as the context requires, and, with respect to all Lenders,
      their Revolver Commitments, their Term Loan Commitments or their Total
      Commitments, as the context requires, in each case as such Dollar amounts are
      set forth beside such Lender’s name under the applicable heading on Schedule
      C-1 or on the signature page of the Assignment and Acceptance pursuant to
      which such Lender became a Lender hereunder in accordance with the provisions
      of
Section 14.1. 

     

    “Compliance
      Certificate”
means a certificate substantially in the form of Exhibit C-1 delivered
      by the
      chief financial officer of Parent to Agent. 

     

    “Consolidated
      Net Interest
      Expense” means, with respect to any Person for any period, gross interest
      expense of such Person and its Subsidiaries for such period determined in
      conformity with GAAP (including, without limitation, interest expense paid
      to
      Affiliates of such Person other than a Subsidiary of Parent, less the sum
      of interest income and non-cash accretion expense and non-cash amortization
      of
      debt origination cost for such period, each determined on a consolidated basis
      and in accordance with GAAP for such Person and its Subsidiaries. 

     

    “Continuing
      Director” means
      (a) any member of the Board of Directors who was a director (or comparable
      manager) of Parent on the Closing Date, and (b) any individual who becomes
      a member of the Board of Directors after the Closing Date if such individual
      was
      appointed or nominated for election to the Board of Directors by a majority
      of
      the Continuing Directors, but excluding any such individual originally proposed
      for election in opposition to the Board of Directors in office at the Closing
      Date in an actual or threatened election contest relating to the election of
      the
      directors (or comparable managers) of Parent (as such terms are used in Rule
      14a-11 under the Exchange Act) and whose initial assumption of office resulted
      from such contest or the settlement thereof. 

     

     

     

    -8-


     

    “Contribution
      Agreement”
means that certain Contribution Agreement, dated as of even date herewith,
      among
      the Borrowers and the Guarantors, in form and substance satisfactory to Agent.
      

     

    “Daily
      Balance” means, with
      respect to each day during the term of this Agreement, the amount of an
      Obligation owed at the end of such day. 

     

    “DDA”
means
      any checking or
      other demand deposit account maintained by any Borrower. 

     

    “Default”
means
      an event,
      condition, or default that, with the giving of notice, the passage of time,
      or
      both, would be an Event of Default. 

     

    “Defaulting
      Lender” means any
      Lender that fails to make any Advance (or other extension of credit) that it
      is
      required to make hereunder on the date that it is required to do so hereunder.
      

     

    “Defaulting
      Lender Rate”
means (a) the Base Rate for the first 3 days from and after the date the
      relevant payment is due, and (b) thereafter, at the interest rate then
      applicable to Advances that are Base Rate Loans (inclusive of the Base Rate
      Margin applicable thereto). 

     

    “Designated
      Account” means
      account number 400519526 of Administrative Borrower maintained with the
      Designated Account Bank or such other deposit account of Administrative Borrower
      (located within the United States) that has been designated as such, in writing,
      by Administrative Borrower to Agent. 

     

    “Designated
      Account Bank”
means BancFirst of Oklahoma, whose office is located at 4500 West Memorial,
      Oklahoma City, Oklahoma 73126, and whose ABA number is 103003632. 

     

    “Dilution”
means,
      as of any
      date of determination, a percentage, based upon the experience of the
      immediately prior 90 days, that is the result of dividing the Dollar amount
      of
      (a) bad debt write-downs, discounts, advertising allowances, credits, or
      other dilutive items with respect to the Accounts during such period, by
      (b) Borrowers’ billings during such period plus the Dollar amount of clause
      (a). 

     

    “Dilution
      Reserve” means, as
      of any date of determination, an amount sufficient to reduce the advance rate
      against Eligible Accounts by one percentage point for each percentage point
      by
      which Dilution is in excess of 5%. 

     

    “Disbursement
      Letter” means
      an instructional letter executed and delivered by Administrative Borrower to
      Agent regarding the extensions of credit to be made on the Closing Date, the
      form and substance of which is satisfactory to Agent. 

     

     

     

    -9-


     

    “Dollars”
or
“$”
means
      United States dollars. 

     

    “DSN
      Corporation” means DSN
      Corporation, an Oklahoma corporation. 

     

    “Due
      Diligence Letter” means
      the due diligence letter sent by Agent’s counsel to Administrative Borrower,
      together with Administrative Borrower’s completed responses to the inquiries set
      forth therein, the form and substance of such responses to be satisfactory
      to
      Agent. 

     

    “EBITDA”
means,
      with respect
      to any fiscal period, the result of (i) ThermaClime’s and its Subsidiaries’
consolidated net earnings (or loss), minus (ii) the aggregate amount of all
      extraordinary gains of ThermaClime and its Subsidiaries for such period, plus
      (iii) the aggregate amount of (a) all extraordinary losses, interest
      expense, income taxes, and depreciation and amortization of ThermaClime and
      its
      Subsidiaries for such period and (b) other non-operating, non-cash, one
      time charges of ThermaClime and its Subsidiaries for such period, all as
      determined in accordance with GAAP. 

     

    “EDC”
means
      El Dorado
      Chemical Company, an Oklahoma corporation. 

     

    “EDN”
means
      El Dorado
      Nitrogen Company, an Oklahoma corporation. 

     

    “Eligible
      Accounts” means
      those Accounts created by one of Borrowers in the ordinary course of its
      business, that arise out of its sale of goods or rendition of services, that
      comply with each of the representations and warranties respecting Eligible
      Accounts made by Borrowers under the Loan Documents, and that are not excluded
      as ineligible by virtue of one or more of the criteria set forth below;
provided, however, that such criteria may be fixed and revised
      from time to time by Agent in Agent’s Permitted Discretion to address the
      results of any audit performed by Agent from time to time after the Closing
      Date. In determining the amount to be included, Eligible Accounts shall be
      calculated net of customer deposits and unapplied cash remitted to Borrowers.
      Eligible Accounts shall not include the following: 

     

    (a)
      Accounts that the Account Debtor
      has failed to pay within 120 days of original invoice date or Accounts which
      are
      more than 60 days past due, 

     

    (b)
      Accounts owed by an Account
      Debtor (or its Affiliates) where 50% or more of all Accounts owed by that
      Account Debtor (or its Affiliates) are deemed ineligible under clause
      (a) above, 

     

    (c)
      Accounts with respect to which
      the Account Debtor is an employee or Affiliate of any Borrower, 

     

    (d)
      Accounts arising in a
      transaction wherein goods are placed on consignment or are sold pursuant to
      a
      guaranteed sale, a sale or return, a sale on approval, a bill and hold (except
      Accounts of the Borrowers having an aggregate invoice amount for all such
      Borrowers of up to $1,500,000 with respect to goods that are subject to a bill
      and hold letter in form and substance satisfactory to Agent), or any other
      terms
      by reason of which the payment by the Account Debtor may be conditional,


     

     

     

    -10-


     

    (e)
      Accounts that are not payable in
      Dollars, 

     

    (f)
      Accounts with respect to which
      the Account Debtor either (i) does not maintain its chief executive office
      in the United States or Canada, or (ii) is not organized under the laws of
      the United States or Canada or any state or province thereof, or (iii) is
      the government of any foreign country or sovereign state, or of any state,
      province, municipality, or other political subdivision thereof, or of any
      department, agency, public corporation, or other instrumentality thereof, unless
      (y) the Account is supported by an irrevocable letter of credit
      satisfactory to Agent in its Permitted Discretion, or (z) the Account is
      covered by credit insurance in form, substance, and amount, and by an insurer,
      satisfactory to Agent, 

     

    (g)
      Accounts with respect to which
      the Account Debtor is either (i) the United States or any department,
      agency, or instrumentality of the United States (exclusive, however, of Accounts
      with respect to which the applicable Borrower has complied, to the reasonable
      satisfaction of Agent, with the Assignment of Claims Act, 31 USC § 3727), or
      (ii) any state of the United States (exclusive, however, of
      (y) Accounts owed by any state that does not have a statutory counterpart
      to the Assignment of Claims Act or (z) Accounts owed by any state that does
      have a statutory counterpart to the Assignment of Claims Act as to which the
      applicable Borrower has complied to Agent’s satisfaction), 

     

    (h)
      Accounts with respect to which
      the Account Debtor is a creditor of any Borrower, has or has asserted a right
      of
      setoff, has disputed its liability, or has made any claim with respect to its
      obligation to pay the Account, to the extent of such claim, right of setoff,
      or
      dispute, 

     

    (i)
      Accounts with respect to an
      Account Debtor whose total obligations owing to Borrowers exceed 10% (or, in
      the
      case of Carrier Corporation and Orica USA Inc., 20%) of all Eligible Accounts,
      to the extent of the obligations owing by such Account Debtor in excess of
      such
      percentage, 

     

    (j)
      Accounts with respect to which
      the Account Debtor is subject to an Insolvency Proceeding, is not Solvent,
      has
      gone out of business, or as to which a Borrower has received notice of an
      imminent Insolvency Proceeding or a material impairment of the financial
      condition of such Account Debtor, 

     

    (k)
      Accounts with respect to which
      the Account Debtor is located in the states of New Jersey, Minnesota, or West
      Virginia (or any other state that requires a creditor to file a business
      activity report or similar document in order to bring suit or otherwise enforce
      its remedies against such Account Debtor in the courts or through any judicial
      process of such state), unless the applicable Borrower has qualified to do
      business in New Jersey, Minnesota, West Virginia, or such other states, or
      has
      filed a business activities report with the applicable division of taxation,
      the
      department of revenue, or with such other state offices, as appropriate, for
      the
      then-current year, or is exempt from such filing requirement, 

     

    (l)
      Accounts, the collection of
      which, Agent, in its Permitted Discretion, believes to be doubtful by reason
      of
      the Account Debtor’s financial condition, 

     

     

     

    -11-


     

    (m)
      Accounts that are not subject to
      a valid and perfected first priority Agent’s Lien, 

     

    (n)
      Accounts with respect to which
      (i) the goods giving rise to such Account have not been shipped and billed
      (except Accounts of the Borrowers having an aggregate invoice amount for all
      such Borrowers of up to $1,500,000 with respect to goods that are subject to
      a
      bill and hold letter in form and substance satisfactory to Agent) to the Account
      Debtor, or (ii) the services giving rise to such Account have not been
      performed and billed to the Account Debtor, or 

     

    (o)
      Accounts that represent the
      right to receive progress payments or other advance billings that are due prior
      to the completion of performance by the applicable Borrower of the subject
      contract for goods or services. 

     

    “Eligible
      Inventory” means
      Inventory of Borrowers consisting of first quality finished goods held for
      sale
      in the ordinary course of Borrowers’ business located at one of the business
      locations of Borrowers set forth on Schedule E-1 (or in-transit between any
      such
      locations), that complies with each of the representations and warranties
      respecting Eligible Inventory made by Borrowers in the Loan Documents, and that
      is not excluded as ineligible by virtue of the one or more of the criteria
      set
      forth below; provided, however, that such criteria may be fixed
      and revised from time to time by Agent in Agent’s Permitted Discretion to
      address the results of any audit or appraisal performed by Agent from time
      to
      time after the Closing Date. In determining the amount to be so included,
      Inventory shall be valued at the lower of cost or market on a basis consistent
      with Borrowers’ historical accounting practices. An item of Inventory shall not
      be included in Eligible Inventory if: 

     

    (a)
      a Borrower does not have good,
      valid, and marketable title thereto, 

     

    (b)
      it is not located at one of the
      locations in the United States set forth on Schedule E-1 or in transit
      from one such location to another such location, 

     

    (c)
      it is located on real property
      owned or leased by a Borrower or in a contract warehouse, in each case, unless
      it is subject to a Collateral Access Agreement executed by the lessor,
      warehouseman, or other third party, as the case may be, and unless it is
      segregated or otherwise separately identifiable from goods of others, if any,
      stored on the premises, 

     

    (d)
      it is not subject to a valid and
      perfected first priority security Agent’s Lien, 

     

    (e)
      it consists of goods returned or
      rejected by a Borrower’s customers, or 

     

    (f)
      it consists of goods that are
      obsolete or slow moving, restrictive or custom items, work-in-process, raw
      materials or component parts, or goods that constitute spare parts, packaging
      and shipping materials, supplies used or consumed in a Borrower’s business, bill
      and hold goods, defective goods, “seconds,” or Inventory acquired on
      consignment. 

     

     

     

    -12-


     

    “Eligible
      Raw Inventory”
means Inventory of Borrowers that would qualify as Eligible Inventory but
      for
      the fact that it consists of goods that are raw materials or component parts
      used or consumed in a Borrower’s business. 

     

    “Eligible
      Transferee” means
      (a) a commercial bank organized under the laws of the United States, or any
      state thereof, and having total assets in excess of $250,000,000, (b) a
      commercial bank organized under the laws of any other country which is a member
      of the Organization for Economic Cooperation and Development or a political
      subdivision of any such country and which has total assets in excess of
      $250,000,000, provided that such bank is acting through a branch or agency
      located in the United States, (c) a finance company, insurance company, or
      other financial institution or fund that is engaged in making, purchasing,
      or
      otherwise investing in commercial loans in the ordinary course of its business
      and having (together with its Affiliates) total assets in excess of
      $250,000,000, (d) any Affiliate (other than individuals) of a Lender that
      was party hereto as of the Closing Date, or any fund, money market account,
      investment account or other account managed by a Lender or an Affiliate of
      a
      Lender, (e) so long as no Event of Default has occurred and is continuing,
      any other Person approved by Agent and Administrative Borrower, and
      (f) during the continuation of an Event of Default, any other Person
      approved by Agent. 

     

    “Environmental
      Actions” means
      any complaint, summons, citation, notice, directive, order, claim, litigation,
      investigation, judicial or administrative proceeding, judgment, letter, or
      other
      communication from any Governmental Authority, or any third party involving
      violations of Environmental Laws or releases of Hazardous Materials from
      (a) any assets, properties, or businesses of any Borrower or any
      predecessor in interest, (b) from adjoining properties or businesses, or
      (c) from or onto any facilities which received Hazardous Materials
      generated by any Borrower or any predecessor in interest. 

     

    “Environmental
      Law” means any
      applicable federal, state, provincial, foreign or local statute, law, rule,
      regulation, ordinance, code, binding and enforceable guideline, binding and
      enforceable written policy or rule of common law now or hereafter in effect
      and
      in each case as amended, or any judicial or administrative interpretation
      thereof, including any judicial or administrative order, consent decree or
      judgment, to the extent binding on Borrowers, relating to the environment,
      employee health and safety, or Hazardous Materials, including CERCLA; RCRA;
      the
      Federal Water Pollution Control Act, 33 USC § 1251 et seq; the Toxic
      Substances Control Act, 15 USC, § 2601 et seq; the Clean Air Act, 42 USC
§ 7401 et seq.; the Safe Drinking Water Act, 42 USC. § 3803 et
      seq.; the Oil Pollution Act of 1990, 33 USC. § 2701 et seq.; the
      Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC. § 11001
et seq.; the Hazardous Material Transportation Act, 49 USC § 1801 et
      seq.; and the Occupational Safety and Health Act, 29 USC. §651 et
      seq. (to the extent it regulates occupational exposure to Hazardous
      Materials); any state and local or foreign counterparts or equivalents, in
      each
      case as amended from time to time. 

     

    “Environmental
      Liabilities and
      Costs” means all liabilities, monetary obligations, Remedial Actions,
      losses, damages, punitive damages, consequential damages, treble damages, costs
      and expenses (including all reasonable fees, disbursements and expenses of
      counsel, experts, or consultants, and costs of investigation and feasibility
      studies), fines, penalties, sanctions, and interest incurred as a result of
      any
      claim or demand by any Governmental Authority or any third party, and which
      relate to any Environmental Action. 

     

     

     

    -13-


     

    “Environmental
      Lien” means
      any Lien in favor of any Governmental Authority for Environmental Liabilities
      and Costs. 

     

    “Equipment”
means
      all of
      Borrowers’ now owned or hereafter acquired right, title, and interest with
      respect to equipment, machinery, machine tools, motors, furniture, furnishings,
      fixtures, vehicles (including motor vehicles), tools, parts, goods (other than
      consumer goods, farm products, or Inventory), wherever located, including all
      attachments, accessories, accessions, replacements, substitutions, additions,
      and improvements to any of the foregoing. 

     

    “ERISA”
means
      the Employee
      Retirement Income Security Act of 1974, as amended, and any successor statute
      thereto. 

     

    “ERISA
      Affiliate” means
      (a) any Person subject to ERISA whose employees are treated as employed by
      the same employer as the employees of a Borrower under IRC Section 414(b),
      (b) any trade or business subject to ERISA whose employees are treated as
      employed by the same employer as the employees of a Borrower under IRC
      Section 414(c), (c) solely for purposes of Section 302 of ERISA
      and Section 412 of the IRC, any organization subject to ERISA that is a
      member of an affiliated service group of which a Borrower is a member under
      IRC
      Section 414(m), or (d) solely for purposes of Section 302 of
      ERISA and Section 412 of the IRC, any Person subject to ERISA that is a
      party to an arrangement with a Borrower and whose employees are aggregated
      with
      the employees of a Borrower under IRC Section 414(o). 

     

    “Event
      of Default” has the
      meaning set forth in Section 8. 

     

    “Excess
      Availability” means
      the amount, as of the date any determination thereof is to be made, equal to
      Availability minus the aggregate amount, if any, of (i) all trade payables
      of Borrowers aged in excess of their historical levels with respect thereto,
      and
      (ii) the amount determined by Agent that is necessary to maintain
      Borrowers’ liabilities reasonably within terms, in each case as determined by
      Agent in its Permitted Discretion. 

     

    “Exchange
      Act” means the
      Securities Exchange Act of 1934, as in effect from time to time. 

     

    “Fair
      Market Value” means,
      with respect to any asset or property of a Person, the price which could be
      negotiated in an arm’s length free market transaction, for cash, between a
      willing seller and a willing and able buyer, neither of whom is under undue
      pressure or compulsion to complete the transaction. 

     

    “Family
      Member” means, with
      respect to any individual, any other individual having a relationship by blood
      (to the second degree of consanguinity), marriage, or adoption to such
      individual. 

     

     

     

    -14-


     

    “Family
      Entities” means, with
      respect to any individual, any trust, corporation, limited liability company,
      or
      partnership for which (i) all of the beneficiaries, shareholders, members,
      or partners, as the case may be, are Family Members of such individual, and
      (ii) such individual or a Family Member of such individual is the
      controlling trustee, shareholder, member, or partner of such entity.


     

    “Fee
      Letter” means that
      certain fee letter, dated as of the Closing Date, between Borrowers and Agent,
      in form and substance satisfactory to Agent, as amended, supplemented or
      otherwise modified from time to time. 

     

    “FEIN”
means
      Federal Employer
      Identification Number. 

     

    “Fixed
      Charge Coverage Ratio”
means, for any period, the ratio of (i) EBITDA for such period, to
      (ii) the sum of (A) all principal of Indebtedness of ThermaClime and
      its Subsidiaries scheduled to be paid or prepaid during such period (not
      including prepayments of Advances unless such prepayments are accompanied by
      a
      reduction of the Revolver Commitment and not including the final scheduled
      payment of the Obligations at the Maturity Date), plus
      (B) Consolidated Net Interest Expense of ThermaClime and its Subsidiaries
      for such period, plus (C) all amounts paid or payable by ThermaClime
      and its Subsidiaries on Capitalized Lease Obligations having a scheduled due
      date during such period. 

     

    “Foothill”
means
      Wells Fargo
      Foothill, Inc., a California corporation formerly known as Foothill Capital
      Corporation. 

     

    “Funding
      Date” means the date
      on which a Borrowing occurs. 

     

    “Funding
      Losses” has the
      meaning set forth in Section 2.13(b)(ii). 

     

    “GAAP”
means
      generally
      accepted accounting principles as in effect from time to time in the United
      States, consistently applied. 

     

    “General
      Intangibles” means
      all of Borrowers’ now owned or hereafter acquired right, title, and interest
      with respect to “general intangibles” as that term is defined in the Code
      (including payment intangibles, contract rights, rights to payment, proprietary
      rights, rights arising under common law, statutes, or regulations, choses or
      things in action, goodwill, patents, trade names, trademarks, servicemarks,
      copyrights, blueprints, drawings, purchase orders, customer lists, monies due
      or
      recoverable from pension funds, route lists, rights to payment and other rights
      under any royalty or licensing agreements, infringement claims, computer
      programs, information contained on computer disks or tapes, software,
      literature, reports, catalogs, money, deposit accounts, insurance premium
      rebates, tax refunds, and tax refund claims), and any and all supporting
      obligations in respect thereof. 

     

    “Governing
      Documents” means,
      with respect to any Person, the certificate or articles of incorporation,
      by-laws, or other organizational documents of such Person. 

     

    “Governmental
      Authority”
means any federal, state, local, or other governmental or administrative
      body,
      instrumentality, department, or agency or any court, tribunal, administrative
      hearing body, arbitration panel, commission, or other similar dispute-resolving
      panel or body. 

     

     

     

    -15-


     

    “Guaranties”
means,
      collectively, (i) the guaranty made by Parent contained in Section 18
      hereof and (ii) those certain general continuing guaranties executed and
      delivered by Guarantors (other than Parent) in favor of Agent, for the benefit
      of the Lender Group, in form and substance satisfactory to Agent. 

     

    “Guarantor
      Security
      Agreement” means a security agreement made by Guarantors in favor of Agent
      for the benefit of Lenders, the form and substance of which is satisfactory
      to
      Agent. 

     

    “Guarantors”
means
      (i) the Parent, (ii) each of ThermaClime’s Subsidiaries extant as of
      the Closing Date (other than EDN, DSN, and their respective Subsidiaries) that
      are not Borrowers, and (iii) Cherokee. 

     

    “Hard
      Cost” means, with
      respect to each Capital Asset acquired by a Borrower, the cash purchase price
      paid by a Borrower for such Capital Asset less the aggregate amount of all
      soft
      costs (including, without limitation, all taxes, delivery and storage charges,
      installation charges and other charges added to such purchase price) included
      in
      the purchase price for such Capital Asset. 

     

    “Hazardous
      Materials” means
      (a) substances that are defined or listed in, or otherwise classified
      pursuant to, any applicable laws or regulations as “hazardous substances,”
“hazardous materials,” “hazardous wastes,” “toxic substances,” or any other
      formulation intended to define, list, or classify substances by reason of
      deleterious properties such as ignitability, corrosivity, reactivity,
      carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil,
      petroleum, or petroleum derived substances, natural gas, natural gas liquids,
      synthetic gas, drilling fluids, produced waters, and other wastes associated
      with the exploration, development, or production of crude oil, natural gas,
      or
      geothermal resources, (c) any flammable substances or explosives or any
      radioactive materials, and (d) asbestos in any form or electrical equipment
      that contains any oil or dielectric fluid containing levels of polychlorinated
      biphenyls in excess of 50 parts per million. 

     

    “Hedge
      Agreement” means any
      and all transactions, agreements, or documents now existing or hereafter entered
      into between Borrower or its Subsidiaries and Bank Product Provider, which
      provide for an interest rate, credit, commodity or equity swap, cap, floor,
      collar, forward foreign exchange transaction, currency swap, cross currency
      rate
      swap, currency option, or any combination of, or option with respect to, these
      or similar transactions, for the purpose of hedging Borrower’s or its
      Subsidiaries’ exposure to fluctuations in interest or exchange rates, loan,
      credit exchange, security or currency valuations or commodity prices.


     

    “IEC”
means
      International
      Environmental Corporation, an Oklahoma corporation. 

     

    “Indebtedness”
means
      (a) all obligations of a Borrower for borrowed money, (b) all
      obligations of a Borrower evidenced by bonds, debentures, notes, or other
      similar instruments and all reimbursement or other obligations of a Borrower
      in


     

     

     

    -16-


     

    respect
      of letters of credit,
      bankers acceptances, interest rate swaps, or other financial products,
      (c) all Capitalized Lease Obligations, (d) all obligations or
      liabilities of others secured by a Lien on any asset of a Borrower, irrespective
      of whether such obligation or liability is assumed, (e) all obligations of
      a Borrower for the deferred purchase price of assets (other than trade debt
      incurred in the ordinary course of a Borrower’s business and repayable in
      accordance with customary trade practices), and (f) any obligation of a
      Borrower guaranteeing or intended to guarantee (whether directly or indirectly
      guaranteed, endorsed, co-made, discounted, or sold with recourse to a Borrower)
      any obligation of any other Person. 

     

    “Indemnified
      Liabilities” has
      the meaning set forth in Section 11.3. 

     

    “Indemnified
      Person” has the
      meaning set forth in Section 11.3. 

     

    “Insolvency
      Proceeding” means
      any proceeding commenced by or against any Person under any provision of the
      Bankruptcy Code or under any other state or federal bankruptcy or insolvency
      law, assignments for the benefit of creditors, formal or informal moratoria,
      compositions, extensions generally with creditors, or proceedings seeking
      reorganization, arrangement, or other similar relief. 

     

    “Intangible
      Assets” means,
      with respect to any Person, that portion of the book value of all of such
      Person’s assets that would be treated as intangibles under GAAP. 

     

    “Interest
      Period” means, with
      respect to each LIBOR Rate Loan, a period commencing on the date of the making
      of such LIBOR Rate Loan and ending 1, 2, or 3 months thereafter;
provided, however, that (a) if any Interest Period would end
      on a day that is not a Business Day, such Interest Period shall be extended
      (subject to clauses (c)-(e) below) to the next succeeding Business Day,
      (b) interest shall accrue at the applicable rate based upon the LIBOR Rate
      from and including the first day of each Interest Period to, but excluding,
      the
      day on which any Interest Period expires, (c) any Interest Period that
      would end on a day that is not a Business Day shall be extended to the next
      succeeding Business Day unless such Business Day falls in another calendar
      month, in which case such Interest Period shall end on the next preceding
      Business Day, (d) with respect to an Interest Period that begins on the
      last Business Day of a calendar month (or on a day for which there is no
      numerically corresponding day in the calendar month at the end of such Interest
      Period), the Interest Period shall end on the last Business Day of the calendar
      month that is 1, 2, or 3 months after the date on which the Interest Period
      began, as applicable, and (e) Borrowers (or Administrative Borrower on
      behalf thereof) may not elect an Interest Period which will end after the
      Maturity Date. 

     

    “In-Transit
      Inventory“ means
      Eligible Inventory that is in-transit (via rail car or truck) between any of
      the
      locations set forth on Schedule E-1 with respect to which Agent has received
      reports in form and substance satisfactory to Agent. 

     

    “Inventory”
means
      all
      Borrowers’ now owned or hereafter acquired right, title, and interest with
      respect to inventory, including goods held for sale or lease or to be furnished
      under a contract of service, goods that are leased by a Borrower as lessor,
      goods that are furnished by a Borrower under a contract of service, and raw
      materials, work in process, or materials used or consumed in a Borrower’s
      business. 

     

     

     

    -17-


     

    “Investment”
means,
      with
      respect to any Person, any investment by such Person in any other Person
      (including Affiliates) in the form of loans, guarantees, advances, or capital
      contributions (excluding (a) commission, travel, and similar advances to
      officers and employees of such Person made in the ordinary course of business,
      and (b) bona fide Accounts arising from the sale of goods or rendition of
      services in the ordinary course of business consistent with past practice),
      purchases or other acquisitions for consideration of Indebtedness or Stock,
      and
      any other items that are or would be classified as investments on a balance
      sheet prepared in accordance with GAAP. 

     

    “Investment
      Property” means
      all of Borrowers’ now owned or hereafter acquired right, title, and interest
      with respect to “investment property” as that term is defined in the Code (but
      excluding the Stock of (i) each Borrower and its Subsidiaries and
      (ii) EDN and DSN and their respective Subsidiaries), and any and all
      supporting obligations in respect thereof. 

     

    “IRC”
means
      the Internal
      Revenue Code of 1986, as in effect from time to time. 

     

    “Issuing
      Lender” means
      Foothill or any other Lender that, at the request of Administrative Borrower
      and
      with the consent of Agent agrees, in such Lender’s sole discretion, to become an
      Issuing Lender for the purpose of issuing L/Cs or L/C Undertakings pursuant
      to
Section 2.12. 

     

    “Koax”
means
      Koax Corp., an
      Oklahoma corporation. 

     

    “L/C”
has
      the meaning set
      forth in Section 2.12(a). 

     

    “L/C
      Disbursement” means a
      payment made by the Issuing Lender pursuant to a Letter of Credit. 

     

    “L/C
      Undertaking” has the
      meaning set forth in Section 2.12(a). 

     

    “Lender”
and
“Lenders”
      have the respective meanings set forth in the preamble to this Agreement, and
      shall include any other Person made a party to this Agreement in accordance
      with
      the provisions of Section 14.1. 

     

    “Lender
      Group” means,
      individually and collectively, each of the Lenders (including the Issuing
      Lender), the Bank Product Provider and Agent. 

     

    “Lender
      Group Expenses” means
      all (a) out-of-pocket costs or expenses (including taxes, and insurance
      premiums) required to be paid by a Borrower under any of the Loan Documents
      that
      are paid or incurred by any one or more members of the Lender Group,
      (b) fees or charges paid or incurred by any one or more members of Lender
      Group in connection with any one or more members of the Lender Group’s
      transactions with Borrowers under the Loan Documents, including, fees or charges
      for photocopying, notarization, couriers and messengers, telecommunication,
      public record searches (including tax lien, judgment, and UCC searches and
      including searches with the patent and trademark office, the copyright office),
      filing, recording, (including, without limitation, mortgage recordation taxes
      and other similar fees or taxes in connection with the recordation or filing
      or
      any mortgage from time to time together with any penalties, interest or costs
      arising therefrom or related thereto) publication, appraisal (including periodic
      

     

     

     

    -18-


     

    Collateral
      appraisals or business
      valuations to the extent of the fees and charges (and up to the amount of any
      limitation) contained in this Agreement), and environmental audits,
      (c) costs and expenses incurred by any one or more members of Lender Group
      in the disbursement of funds to or for the account of Borrowers (by wire
      transfer or otherwise), (d) charges paid or incurred by any one or more
      members of Lender Group resulting from the dishonor of checks,
      (e) reasonable costs and expenses paid or incurred by any one or more
      members of the Lender Group to correct any default or enforce any provision
      of
      the Loan Documents, or in gaining possession of, maintaining, handling,
      preserving, storing, shipping, selling, preparing for sale, or advertising
      to
      sell the Collateral, or any portion thereof, irrespective of whether a sale
      is
      consummated, (f) audit fees and expenses of any one or more members of
      Lender Group related to audit examinations of the Books to the extent of the
      fees and charges (and up to the amount of any limitation) contained in this
      Agreement, (g) reasonable costs and expenses of third party claims or any
      other suit paid or incurred by any one or more members of the Lender Group
      in
      enforcing or defending the Loan Documents or in connection with the transactions
      contemplated by the Loan Documents, (h) any one or more members of Lender
      Group’s reasonable fees and expenses (including attorneys fees) incurred in
      advising, structuring, drafting, reviewing, administering, or amending the
      Loan
      Documents, and (i) any one or more members of Lender Group’s reasonable
      fees and expenses (including attorneys fees) incurred in terminating, enforcing
      (including attorneys fees and expenses incurred in connection with a “workout,”
a “restructuring,” or an Insolvency Proceeding concerning any Borrower or in
      exercising rights or remedies under the Loan Documents), or defending the Loan
      Documents, irrespective of whether suit is brought, or in taking any Remedial
      Action concerning the Collateral. 

     

    “Lender-Related
      Person”
means, with respect to any Lender, such Lender, together with such Lender’s
      Affiliates, and the officers, directors, employees, and agents of such Lender.
      

     

    “Letter
      of Credit” means an
      L/C or an L/C Undertaking, as the context requires. 

     

    “Letter
      of Credit Usage”
means, as of any date of determination, the aggregate undrawn amount of
      all
      outstanding Letters of Credit plus 100% of the amount of outstanding time drafts
      accepted by an Underlying Issuer as a result of drawings under Underlying
      Letters of Credit. 

     

    “LIBOR
      Deadline” has the
      meaning set forth in Section 2.13(b)(i). 

     

    “LIBOR
      Notice” means a
      written notice in the form of Exhibit L-1. 

     

    “LIBOR
      Rate” means, for each
      Interest Period for each LIBOR Rate Loan, the rate per annum determined by
      Agent
      (rounded upwards, if necessary, to the next 1/16%) by dividing (a) the Base
      LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve
      Percentage. The LIBOR Rate shall be adjusted on and as of the effective day
      of
      any change in the Reserve Percentage. 

     

     

     

    -19-


     

    “LIBOR
      Rate Loan” means each
      portion of an Advance that bears interest at a rate determined by reference
      to
      the LIBOR Rate. 

     

    “LIBOR
      Rate Margin” means
      1.75 percentage points. 

     

    “Lien”
means
      any interest in
      an asset securing an obligation owed to, or a claim by, any Person other than
      the owner of the asset, whether such interest shall be based on the common
      law,
      statute, or contract, whether such interest shall be recorded or perfected,
      and
      whether such interest shall be contingent upon the occurrence of some future
      event or events or the existence of some future circumstance or circumstances,
      including the lien or security interest arising from a mortgage, deed of trust,
      encumbrance, pledge, hypothecation, assignment, deposit arrangement, security
      agreement, conditional sale or trust receipt, or from a lease, consignment,
      or
      bailment for security purposes and also including reservations, exceptions,
      encroachments, easements, rights-of-way, covenants, conditions, restrictions,
      leases, and other title exceptions and encumbrances affecting Real Property.
      

     

    “Loan
      Account” has the
      meaning set forth in Section 2.10. 

     

    “Loan
      Documents” means this
      Agreement, the Bank Product Agreements, the Cash Management Agreements, the
      Contribution Agreement, the Disbursement Letter, the Due Diligence Letter,
      the
      Fee Letter, the Guaranties, Guarantor Security Agreement, the Letters of Credit,
      the Officers’ Certificate, the Patent Security Agreement, the Trademark Security
      Agreement, any note or notes executed by a Borrower in connection with this
      Agreement and payable to a member of the Lender Group, and any other agreement
      entered into, now or in the future, by any Borrower and the Lender Group in
      connection with this Agreement. 

     

    “LSB
      Chemical” means LSB
      Chemical Corp., an Oklahoma corporation. 

     

    “Management
      Agreement” means
      the Management Agreement dated November 21, 1997 between the Parent and
      ThermaClime (as amended, renewed or extended), in the form delivered to Agent
      on
      the Closing Date. 

     

    “Material
      Adverse Change”
means (a) a material adverse change in the business, prospects, operations,
      results of operations, assets, liabilities or condition (financial or otherwise)
      of Borrowers taken as a whole, (b) a material impairment of the ability of
      Borrowers, taken as a whole, to perform their obligations under the Loan
      Documents or of the Lender Group’s ability to enforce the Obligations or realize
      upon the Collateral, or (c) a material impairment of the enforceability or
      priority of the Agent’s Liens with respect to the Collateral as a result of an
      action or failure to act on the part of a Borrower. 

     

    “Maturity
      Date” has the
      meaning set forth in Section 3.4. 

     

    “Maximum
      Revolver Amount”
means $50,000,000 minus the aggregate principal amount of the Term Loan
      then
      outstanding. 

     

    “Negotiable
      Collateral” means
      all of Borrowers’ now owned and hereafter acquired right, title, and interest
      with respect to letters of credit, letter of credit rights, instruments,
      promissory notes, drafts, documents, and chattel paper (including electronic
      chattel paper and tangible chattel paper), and any and all supporting
      obligations in respect thereof. 

     

     

     

    -20-


     

    “Net
      Orderly Liquidation
      Value” means, with respect to an item of Eligible Inventory and Eligible Raw
      Inventory, as of any date of determination, the orderly liquidation value
      thereof as determined by Agent in its Permitted Discretion, which determination
      may be made by Agent in reliance on periodic appraisals. 

     

    “Obligations”
means
      (a) all loans, Advances, debts, principal, interest (including any interest
      that, but for the provisions of the Bankruptcy Code, would have accrued),
      contingent reimbursement obligations with respect to outstanding Letters of
      Credit, premiums, liabilities (including all amounts charged to Borrowers’ Loan
      Account pursuant hereto), obligations, fees (including the fees provided for
      in
      the Fee Letter), charges, costs, Lender Group Expenses (including any fees
      or
      expenses that, but for the provisions of the Bankruptcy Code, would have
      accrued), guaranties, covenants, and duties of any kind and description owing
      by
      Borrowers to the Lender Group pursuant to or evidenced by the Loan Documents
      and
      irrespective of whether for the payment of money, whether direct or indirect,
      absolute or contingent, due or to become due, now existing or hereafter arising,
      and including all interest not paid when due and all Lender Group Expenses
      that
      Borrowers are required to pay or reimburse by the Loan Documents, by law, or
      otherwise, and (b) all Bank Product Obligations. Any reference in this
      Agreement or in the Loan Documents to the Obligations shall include all
      amendments, changes, extensions, modifications, renewals, replacements,
      substitutions, and supplements, thereto and thereof, as applicable, both prior
      and subsequent to any Insolvency Proceeding. 

     

    “Officers’
Certificate”
means
      the representations and warranties of officers form submitted by Agent to
      Administrative Borrower, together with Borrowers’ completed responses to the
      inquiries set forth therein, the form and substance of such responses to be
      satisfactory to Agent. 

     

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

     

    “Original
      Loan Agreement” has
      the meaning set forth in the recitals to this Agreement. 

     

    “Original
      Revolver Facility”
has the meaning set forth in the recitals to this Agreement. 

     

    “Original
      Revolver
      Indebtedness” has the meaning set forth in Section 2.1(h).


     

    “Original
      Term Loan” has the
      meaning set forth in the recitals to this Agreement. 

     

    “Original
      Term Loan
      Indebtedness” has the meaning set forth in Section 2.2(b).


     

     

     

    -21-


     

    “Originating
      Lender” has the
      meaning set forth in Section 14.1(e). 

     

    “Overadvance”
has
      the meaning
      set forth in Section 2.5. 

     

    “Parent”
has
      the meaning set
      forth in the preamble to this Agreement. 

     

    “Participant”
has
      the meaning
      set forth in Section 14.1(e). 

     

    “Patent
      Security Agreement”
means a patent security agreement executed and delivered by Borrowers and
      Agent,
      the form and substance of which is satisfactory to Agent. 

     

    “Permitted
      Discretion” means
      a determination made in good faith and in the exercise of reasonable (from
      the
      perspective of a secured asset-based lender) business judgment. 

     

    “Permitted
      Dispositions”
means (a) sales or other dispositions by Borrowers of Equipment that is
      substantially worn, damaged, or obsolete in the ordinary course of the
      applicable Borrower’s business, (b) sales by Borrowers of Inventory to
      buyers in the ordinary course of business, (c) the use or transfer of money
      or Cash Equivalents by Borrowers in a manner that is not prohibited by the
      terms
      of this Agreement or the other Loan Documents, (d) the licensing by
      Borrowers, on a non-exclusive basis, of patents, trademarks, copyrights, and
      other intellectual property rights in the ordinary course of the applicable
      Borrower’s business, (e) sales, transfers leases or other dispositions of
      assets by any Borrower or any of its Subsidiaries to any other Borrower or
      Guarantor (other than Parent), and (f) sales or other dispositions by
      Borrowers of Accounts which are not Eligible Accounts, provided that
      (i) the consideration payable in connection with the sale or disposition of
      such non-Eligible Accounts shall be in cash and shall equal no less than 100%
      of
      the aggregate original invoice amount of such Accounts and (ii) the
      proceeds from such sales or dispositions shall be deposited in a Cash Management
      Account and applied to the Obligations. 

     

    “Permitted
      Holders” means
      Jack E. Golsen, Barry H. Golsen, David Goss, David Shear, Tony Shelby, Robert
      Brown, their respective Family Members, and their respective Family Entities.
      

     

    “Permitted
      Investments” means
      (a) Investments in Cash Equivalents, (b) Investments in negotiable
      instruments for collection, (c) advances made in connection with purchases
      of goods or services in the ordinary course of business, (d) Investments by
      any Borrower or Guarantor in any other Borrower or any Guarantor (other than
      Parent), (e) guarantees by a Borrower or Guarantor of Indebtedness
      permitted under Section 7.1(e), (f) guarantees permitted under
Section 7.6, (g) other Investments set forth on Schedule 7.13
      hereto, (h) Investments made by any Borrower or Guarantor (other than the
      Parent) in the Parent, provided the aggregate amount of such Investments do
      not
      exceed $2,000,000 at any time outstanding and (i) Investments in any newly
      created Subsidiary by means of purchase or other acquisition of the equity
      interests of such Subsidiary including by way of merger, provided there
      is no investment of Collateral. 

     

    “Permitted
      Liens” means
      (a) Liens held by Agent for the benefit of Agent and the Lenders,
      (b) Liens for unpaid taxes that either (i) are not yet delinquent, or
      (ii) do not constitute an Event of Default hereunder and are the subject of
      Permitted 

     

     

     

    -22-


     

    Protests,
      (c) Liens set forth
      on Schedule P-1, (d) the interests of lessors under operating
      leases, (e) purchase money Liens or the interests of lessors under Capital
      Leases to the extent that such Liens or interests secure Permitted Purchase
      Money Indebtedness and so long as such Lien attaches only to the asset purchased
      or acquired and the proceeds thereof, (f) Liens arising by operation of law
      in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers,
      or suppliers, incurred in the ordinary course of Borrowers’ business and not in
      connection with the borrowing of money, and which Liens either (i) are for
      sums not yet delinquent, or (ii) are the subject of Permitted Protests,
      (g) Liens arising from deposits made in connection with obtaining worker’s
      compensation or other unemployment insurance, social security and other similar
      laws (h) Liens or deposits to secure performance of bids, tenders, or
      leases incurred in the ordinary course of Borrowers’ business and not in
      connection with the borrowing of money, (i) Liens granted as security for
      surety, payment, performance or appeal bonds in connection with obtaining such
      bonds in the ordinary course of Borrowers’ business, (j) Liens resulting
      from any judgment or award that is not an Event of Default hereunder,
      (k) with respect to any Real Property, easements, exceptions, reservations,
      encroachments, restrictions, rights of way, zoning restrictions and other
      similar title policy exceptions or encumbrances that do not materially interfere
      with or impair the use or operation thereof by Borrowers; and (l) Liens on
      the BofA Collateral in favor of BofA (as collateral agent) on the Restatement
      Effective Date securing the repayment of the BofA Loans and all other
      obligations under the BofA Loan Agreement. 

     

    “Permitted
      Protest” means the
      right of the applicable Borrower to protest any Lien (other than any such Lien
      that secures the Obligations), taxes (other than payroll taxes or taxes that
      are
      the subject of a United States federal tax lien), or rental payment, provided
      that (a) a reserve with respect to such obligation is established on the
      Books in such amount as is required under GAAP, (b) any such protest is
      instituted promptly and prosecuted diligently by the applicable Borrower in
      good
      faith, and (c) Agent is satisfied in its Permitted Discretion that, while
      any such protest is pending, there will be no impairment of the enforceability,
      validity, or priority of any of the Agent’s Liens. 

     

    “Permitted
      Purchase Money
      Indebtedness” means, as of any date of determination, Purchase Money
      Indebtedness incurred after the Closing Date in an aggregate amount outstanding
      at any one time not in excess of $7,500,000. 

     

    “Person”
means
      natural
      persons, corporations, limited liability companies, limited partnerships,
      general partnerships, limited liability partnerships, joint ventures, trusts,
      land trusts, business trusts, or other organizations, irrespective of whether
      they are legal entities, and governments and agencies and political subdivisions
      thereof. 

     

    “Projections”
means
      Parent’s
      forecasted (a) balance sheets, (b) profit and loss statements, and
      (c) cash flow statements, all prepared on a consistent basis with Parent’s
      historical financial statements, together with appropriate supporting details
      and a statement of underlying assumptions. 

     

     

     

    -23-


     

    “Pro
      Rata Share” means:


     

    (a)
      with respect to a Lender’s
      obligation to make Advances and receive payments of principal, interest, fees,
      costs, and expenses with respect thereto, the percentage obtained by dividing
      (i) such Lender’s Revolver Commitment, by (ii) the aggregate Revolver
      Commitments of all Lenders, 

     

    (b)
      with respect to a Lender’s
      obligation to participate in Letters of Credit, to reimburse the Issuing Lender,
      and to receive payments of fees with respect thereto, the percentage obtained
      by
      dividing (i) such Lender’s Revolver Commitment, by (ii) the aggregate
      Revolver Commitments of all Lenders, 

     

    (c)
      with respect to a Lender’s
      obligation to make the Term Loan and receive payments of interest, fees, and
      principal with respect thereto, the percentage obtained by dividing
      (i) such Lender’s Term Loan Commitment, by (ii) the aggregate amount
      of all Lenders’ Term Loan Commitments, and 

     

    (d)
      with respect to all other
      matters (including the indemnification obligations arising under
      Section 16.7), the percentage obtained by dividing (i) such Lender’s
      Total Commitment, by (ii) the aggregate amount of Total Commitments of all
      Lenders; provided, however, that, in each case, in the event all
      Commitments have been terminated, Pro Rata Share shall be determined according
      to the Commitments in effect immediately prior to such termination.


     

    “Purchase
      Money Indebtedness”
means Indebtedness (other than the Obligations, but including Capitalized
      Lease
      Obligations), incurred at the time of, or within 60 days after, the acquisition
      of any fixed assets for the purpose of financing all or any part of the
      acquisition cost thereof. 

     

    “Real
      Property” means any
      estates or interests in real property now owned or hereafter acquired by any
      Borrower and the improvements thereto. 

     

    “Record”
means
      information
      that is inscribed on a tangible medium or which is stored in an electronic
      or
      other medium and is retrievable in perceivable form. 

     

    “Remedial
      Action” means all
      actions taken to (a) clean up, remove, remediate, contain, treat, monitor,
      assess, evaluate, or in any way address Hazardous Materials in the indoor or
      outdoor environment, (b) prevent or minimize a release or threatened
      release of Hazardous Materials so they do not migrate or endanger or threaten
      to
      endanger public health or welfare or the indoor or outdoor environment,
      (c) perform any pre-remedial studies, investigations, or post-remedial
      operation and maintenance activities, or (d) conduct any other actions
      authorized by 42 USC § 9601. 

     

    “Report”
has
      the meaning set
      forth in Section 16.17. 

     

    “Required
      Lenders” means, at
      any time, Lenders whose Pro Rata Shares aggregate 66-2/3 % of the Total
      Commitments, or if the Commitments have been terminated irrevocably, 66-2/3%
      of
      the Obligations (other than Bank Product Obligations) then outstanding.


     

     

     

    -24-


     

    “Reserve
      Percentage” means,
      on any day, for any Lender, the maximum percentage prescribed by the Board
      of
      Governors of the Federal Reserve System (or any successor Governmental
      Authority) for determining the reserve requirements (including any basic,
      supplemental, marginal, or emergency reserves) that are in effect on such date
      with respect to eurocurrency funding (currently referred to as “eurocurrency
      liabilities”) of that Lender, but so long as such Lender is not required or
      directed under applicable regulations to maintain such reserves, the Reserve
      Percentage shall be zero. 

     

    “Restatement
      Effective Date”
has the meaning set forth in Section 3.2. 

     

    “Revolver
      Commitment” means,
      with respect to each Lender, its Revolver Commitment, and, with respect to
      all
      Lenders, their Revolver Commitments, in each case as such Dollar amounts are
      set
      forth beside such Lender’s name under the applicable heading on Schedule C-1 or
      on the signature page of the Assignment and Acceptance pursuant to which such
      Lender became a Lender hereunder in accordance with the provisions of
Section 14.1. 

     

    “Revolver
      Usage” means, as of
      any date of determination, the sum of (a) the then extant amount of
      outstanding Advances, plus (b) the then extant amount of the Letter of
      Credit Usage. 

     

    “Risk
      Participation
      Liability” means, as to each Letter of Credit, all reimbursement obligations
      of Borrowers to the Issuing Lender with respect to an L/C Undertaking,
      consisting of (a) the amount available to be drawn or which may become
      available to be drawn, (b) all amounts that have been paid by the Issuing
      Lender to the Underlying Issuer to the extent not reimbursed by Borrowers,
      whether by the making of an Advance or otherwise, and (c) all accrued and
      unpaid interest, fees, and expenses payable with respect thereto. 

     

    “SEC”
means
      the United States
      Securities and Exchange Commission and any successor thereto. 

     

    “Securities
      Account” means a
“securities account” as that term is defined in the Code. 

     

    “Senior
      Leverage Coverage
      Ratio” means, as of any date, the ratio of (a) the sum of (i) the
      aggregate outstanding principal amount of the Advances, the Term Loan and the
      BofA Loans plus the Letter of Credit Usage as of such date to (b) EBITDA
      for the twelve (12) month period ending as of the last day of the month
      immediately preceding such date. 

     

    “Services
      Agreement” means
      the Services Agreement dated November 21, 1997 between the Parent and
      ThermaClime (as amended, renewed or extended), in the form delivered to Agent
      on
      the Closing Date. 

     

    “Settlement”
has
      the meaning
      set forth in Section 2.3(f)(i). 

     

    “Settlement
      Date” has the
      meaning set forth in Section 2.3(f)(i). 

     

     

     

    -25-


     

    “Solvent”
means,
      with respect
      to any Person on a particular date, that such Person is not insolvent (as such
      term is defined in the Uniform Fraudulent Transfer Act). 

     

    “Special
      Term Advance” has
      the meaning set forth in Section 2.01(h). 

     

    “Stock”
means
      all shares,
      options, warrants, interests, participations, or other equivalents (regardless
      of how designated) of or in a Person, whether voting or nonvoting, including
      common stock, preferred stock, or any other “equity security” (as such term is
      defined in Rule 3a11-1 of the General Rules and Regulations promulgated by
      the
      SEC under the Exchange Act). 

     

    “Subsidiary”
of
      a Person
      means a corporation, partnership, limited liability company, or other entity
      in
      which that Person directly or indirectly owns or controls the shares of Stock
      having ordinary voting power to elect a majority of the board of directors
      (or
      appoint other comparable managers) of such corporation, partnership, limited
      liability company, or other entity, other than EDN, DSN and each of their
      respective Subsidiaries. 

     

    “Swing
      Lender” means Foothill
      or any other Lender that, at the request of Administrative Borrower and with
      the
      consent of Agent agrees, in such Lender’s sole discretion, to become the Swing
      Lender hereunder. 

     

    “Swing
      Loan” has the meaning
      set forth in Section 2.3(d)(i). 

     

    “Tangible
      Net Worth” means,
      with respect to any Person, as of any date of determination, the result of
      (a) the total stockholder’s equity of such Person and its Subsidiaries,
      minus (b) the sum of (i) all Intangible Assets of such Person and its
      Subsidiaries, (ii) all of such Person’s prepaid expenses, and
      (iii) all amounts due to such Person and its Subsidiaries from Affiliates.


     

    “Taxes”
has
      the meaning set
      forth in Section 2.2. 

     

    “Term
      Loan” has the meaning
      set forth in Section 2.2(a). 

     

    “Term
      Loan Amount” means
      $7,500,000. 

     

    “Term
      Loan Commitment” means,
      with respect to each Lender, its Term Loan Commitment, and, with respect to
      all
      Lenders, their Term Loan Commitments, in each case as such Dollar amounts are
      set forth beside such Lender’s name under the applicable heading on Schedule
      C-1. 

     

    “Term
      Loan Priority
      Collateral” means all Capital Assets acquired by a Borrower with proceeds of
      the Term Loan. 

     

    “ThermaClime”
means
      ThermaClime, Inc., an Oklahoma corporation formerly known as ClimaChem, Inc.
      

     

    “ThermaClime
      Fifth Supplemental
      Indenture” means that certain Fifth Supplemental Indenture dated as of
      May 24, 2002, among ThermaClime, as issuer, the guarantors named therein,
      and Bank One, N.A., as trustee, supplementing and amending the ThermaClime
      Indenture. 

     

     

     

    -26-


     

    “ThermaClime
      Indenture” means
      the Indenture dated as of November 26, 1997 among ThermaClime, as issuer,
      the guarantors named therein, and Bank One, N.A., as trustee, with respect
      to
      ThermaClime’s 10 3/4%
      Senior Notes due 2007. 

     

    “ThermaClime
      Notes” means the
      Securities (as such term is defined in the ThermaClime Indenture) issued by
      ThermaClime under and pursuant to the ThermaClime Indenture. 

     

    “Total
      Commitment” means,
      with respect to each Lender, its Total Commitment, and, with respect to all
      Lenders, their Total Commitments, in each case as such Dollar amounts are set
      forth beside such Lender’s name under the applicable heading on Schedule
      C-1 attached hereto or on the signature page of the Assignment and
      Acceptance pursuant to which such Lender became a Lender hereunder in accordance
      with the provisions of Section 14.1. 

     

    “Trademark
      Security
      Agreement” means a trademark security agreement executed and delivered by
      certain Borrowers and Agent, the form and substance of which is satisfactory
      to
      Agent. 

     

    “Trison”
means
      Trison
      Construction, Inc., an Oklahoma corporation. 

     

    “TTI”
means
      ThermaClime
      Technologies, Inc., an Oklahoma corporation. 

     

    “Underlying
      Issuer” means a
      third Person which is the beneficiary of an L/C Undertaking and which has issued
      a letter of credit at the request of the Issuing Lender for the benefit of
      Borrowers. 

     

    “Underlying
      Letter of Credit”
means a letter of credit that has been issued by an Underlying Issuer.
      

     

    “Voidable
      Transfer” has the
      meaning set forth in Section 17.7. 

     

    “Wells
      Fargo” means Wells
      Fargo Bank, National Association, a national banking association. 

     

    “XPA”
means
      XpediAir, Inc.,
      an Oklahoma corporation formerly known as The Environmental Group, Inc.


     

    1.2
Accounting
      Terms. All accounting terms not specifically defined herein shall
      be construed in accordance with GAAP. When used herein, the term “financial
      statements” shall include the notes and schedules thereto. Whenever the term
“Borrowers” or the term “Parent” is used in respect of a financial covenant or a
      related definition, it shall be understood to mean Parent and its Subsidiaries
      on a consolidated basis unless the context clearly requires otherwise.


     

     

     

    -27-


     

    1.3
Code.
      Any terms used in this Agreement that are defined in the Code shall be construed
      and defined as set forth in the Code unless otherwise defined herein.


     

    1.4
      Construction. Unless the context of this Agreement or any other
      Loan Document clearly requires otherwise, references to the plural include
      the
      singular, references to the singular include the plural, the term “including” is
      not limiting, and the term “or” has, except where otherwise indicated, the
      inclusive meaning represented by the phrase “and/or.” The words “hereof,”
“herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any
      other Loan Document refer to this Agreement or such other Loan Document, as
      the
      case may be, as a whole and not to any particular provision of this Agreement
      or
      such other Loan Document, as the case may be. Section, subsection, clause,
      schedule, and exhibit references herein are to this Agreement unless otherwise
      specified. Any reference in this Agreement or in the other Loan Documents to
      any
      agreement, instrument, or document shall include all alterations, amendments,
      changes, extensions, modifications, renewals, replacements, substitutions,
      joinders, and supplements, thereto and thereof, as applicable (subject to any
      restrictions on such alterations, amendments, changes, extensions,
      modifications, renewals, replacements, substitutions, joinders, and supplements
      set forth herein). Any reference herein to any Person shall be construed to
      include such Person’s successors and assigns. Any requirement of a writing
      contained herein or in the other Loan Documents shall be satisfied by the
      transmission of a Record and any Record transmitted shall constitute a
      representation and warranty as to the accuracy and completeness of the
      information contained therein. 

     

    1.5
Schedules
      and
      Exhibits. All of the schedules and exhibits attached to this
      Agreement shall be deemed incorporated herein by reference. 

     

    2.
      LOAN AND TERMS OF
      PAYMENT. 

     

    2.1
      Advances. 

     

    (a)
      Subject to the terms and
      conditions of this Agreement, and during the term of this Agreement, each Lender
      with a Revolver Commitment agrees (severally, not jointly or jointly and
      severally) to make advances (“Advances”) to Borrowers in an amount at any
      one time outstanding not to exceed such Lender’s Pro Rata Share of an amount
      equal to the lesser of (i) the Maximum Revolver Amount less the Letter of
      Credit Usage or (ii) the Borrowing Base less the Letter of Credit Usage.
      For purposes of this Agreement, “Borrowing Base,” as of any date of
      determination, shall mean the result of the following for all Borrowers:


     

    (A)
      the lesser of 

     

    (1)
      85% of the amount of Eligible
      Accounts of such Borrowers, less the amount, if any, of the sum of the Dilution
      Reserve, and 

     

    (2)
      an amount equal to such
      Borrowers’ Collections with respect to Accounts for the immediately preceding 75
      day period, plus 

     

     

     

    -28-


     

    (B)
      the lowest of 

     

    (1)
      $25,000,000, and 

     

    (2)
      the sum of 

     

    (x)
      the lesser of (i) 70% of
      the value of such Borrowers’ Eligible Inventory, and (ii) 80% of the Net
      Orderly Liquidation Value of such Borrowers’ Eligible Inventory, plus


     

    (y)
      the lesser of (i) 60% (or,
      in the case of Climate Control Raw Inventory, 65%) of the value of such
      Borrowers’ Eligible Raw Inventory, and (ii) 80% of the Net Orderly
      Liquidation Value of such Borrowers’ Eligible Raw Inventory, minus 

     

    (C)(z)
      the sum of (1) the Bank
      Products Reserve, and (2) the aggregate amount of reserves, if any,
      established by Agent under Section 2.1(b). 

     

    (b)
      Anything to the contrary in this
Section 2.1 notwithstanding, Agent shall have the right to establish
      reserves in such amounts, and with respect to such matters, as Agent in its
      Permitted Discretion shall deem necessary or appropriate, against the Borrowing
      Base, including reserves with respect to (i) sums that Borrowers are
      required to pay (such as taxes, assessments, insurance premiums, or, in the
      case
      of leased assets, rents or other amounts payable under such leases) and has
      failed to pay under any Section of this Agreement or any other Loan Document,
      and (ii) amounts owing by Borrowers to any Person to the extent secured by
      a Lien on, or trust over, any of the Collateral (other than any existing
      Permitted Lien set forth on Schedule P-1 which is specifically identified
      thereon as entitled to have priority over the Agent’s Liens), which Lien or
      trust, in the Permitted Discretion of Agent likely would have a priority
      superior to the Agent’s Liens (such as Liens or trusts in favor of landlords,
      warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or
      Liens
      or trusts for ad valorem, excise, sales, or other taxes where given priority
      under applicable law) in and to such item of the Collateral. In addition to
      the
      foregoing, Agent shall have the right to have the Inventory reappraised by
      a
      qualified appraisal company selected by Agent from time to time after the
      Closing Date for the purpose of redetermining the Net Orderly Liquidation Value
      of the Eligible Inventory and/or the Eligible Raw Inventory, which appraisals,
      so long as no Default or Event of Default shall have occurred and be continuing,
      shall be conducted at Borrowers’ expense no more frequently than once during any
      twelve month period, and, after the occurrence and during the continuance of
      a
      Default or an Event of Default, at Borrowers’ expense as frequently as Agent
      shall determine. Based upon the results of any such redetermination, and any
      other information received from the collateral reporting required under
Section 6.2, Agent may, in its Permitted Discretion, redetermine the
      Borrowing Base. 

     

    (c)
      Intentionally deleted.


     

     

     

    -29-


     

    (d)
      Notwithstanding the foregoing,
      the aggregate principal amount of Advances made by the Lenders based upon the
      aggregate value of Borrowers’ Eligible Inventory included in the Borrowing Base
      shall not exceed the aggregate principal amount of Advances made by the Lenders
      based upon the aggregate amount of Borrowers’ Eligible Accounts included in the
      Borrowing Base. 

     

    (e)
      Notwithstanding the foregoing,
      the aggregate principal amount of Advances made by the Lenders based upon the
      aggregate value of Borrowers’ In-Transit Inventory shall not exceed $2,000,000.
      In addition, all amounts payable to common carriers in respect of Borrowers’
In-Transit Inventory shall be deducted by Agent from the proceeds of Advances
      made by Lenders in respect of such In-Transit Inventory. 

     

    (f)
      The Lenders with Revolver
      Commitments shall have no obligation to make additional Advances hereunder
      to
      the extent such additional Advances would cause the Revolver Usage to exceed
      (i) the Maximum Revolver Amount or (ii) the maximum amount of
      indebtedness permitted to be incurred pursuant to clause (b) of the
      definition of “Permitted Indebtedness” under the ThermaClime Indenture.


     

    (g)
      Amounts borrowed pursuant to
      this Section may be repaid and, subject to the terms and conditions of this
      Agreement, reborrowed at any time during the term of this Agreement.


     

    (h)
      Notwithstanding anything to the
      contrary contained in this Section 2.1, the Borrowers hereby
      acknowledge, confirm and agree that (i) immediately prior to the
      Restatement Effective Date, the existing outstanding principal amount of the
      Advances under and as defined in the Original Loan Facility is equal to $[0.00]
      (such Indebtedness being hereinafter referred to as the “Original Revolver
      Indebtedness”), (ii) such Original Revolver Indebtedness shall not be
      repaid on the Closing Date, but rather shall be reevidenced by this Agreement
      as
      a portion of the Advances outstanding hereunder, and (iii) for all purposes
      of this Agreement and the other Loan Documents, the sum of the Original Revolver
      Indebtedness on the Restatement Effective Date and the Advances made on the
      Restatement Effective Date (if any) shall constitute the Advances outstanding
      on
      the Restatement Effective Date. 

     

    2.2
CapEx
      Loans. 

     

    (a)
      Subject to the terms and
      conditions of this Agreement, and during the term of this Agreement, each Lender
      with a Term Loan Commitment may, in its sole discretion, make term loans
      (collectively, the “Term Loan”) to Borrowers, in an aggregate principal
      amount at any one time outstanding not to exceed such Lender’s Pro Rata Share of
      the Term Loan Amount. The proceeds of each Term Loan shall be used by a Borrower
      solely to fund a portion of the purchase price of assets (“Capital
      Assets”) acquired by such Borrower that, in accordance with GAAP, are or
      should be included in “property, plant and equipment” or in a similar fixed
      asset account on such Borrower’s balance sheet. The maximum principal amount of
      each Term Loan shall not exceed 70% of the Hard Cost of the Capital Assets
      to be
      acquired by the Borrowers with a portion of the proceeds of such Term Loan.
      Each
      Term Loan shall be made in a minimum amount of $50,000. The outstanding unpaid
      principal balance and all accrued and unpaid interest under 

     

     

     

    -30-


     

    the
      Term Loan shall be due and
      payable on the date of termination of this Agreement, whether by its terms,
      by
      prepayment, or by acceleration. All amounts outstanding under the Term Loan
      shall constitute Obligations. Any principal amount of the Term Loan which is
      repaid or prepaid by Borrowers may be reborrowed pursuant to the terms hereof.
      Borrowers may, at any time, prepay all or a portion of the Term Loan without
      penalty or premium. 

     

    (b)
      Notwithstanding anything to the
      contrary contained in this Section 2.2, the Borrowers hereby
      acknowledge, confirm and agree that (i) immediately prior to the
      Restatement Effective Date, the outstanding principal amount of the Term Loan
      under and as defined in the Original Loan Facility is equal to $[0.00] (such
      Indebtedness being hereinafter referred to as the “Original Term Loan
      Indebtedness”), (ii) such Original Term Loan Indebtedness shall not be
      repaid on the Restatement Effective Date, but rather shall be reevidenced by
      this Agreement as a portion of the Term Loan outstanding hereunder,
      (iii) for all purposes of this Agreement and the other Loan Documents, the
      Original Term Loan Indebtedness on the Restatement Effective Date shall
      constitute the Term Loan outstanding on the Restatement Effective Date.


     

    2.3
Borrowing
      Procedures
      and Settlements. 

     

    (a)
Procedure
      for
      Borrowing. Each Borrowing shall be made by an irrevocable written
      request by an Authorized Person delivered to Agent, which notice must be
      received by Agent no later than 10:00 a.m. (California time) on the Business
      Day
      prior to the date that is the requested Funding Date in the case of a request
      for an Advance specifying (i) the amount of such Borrowing, (ii) the
      requested Funding Date, which shall be a Business Day; provided, however, that
      in the case of a request for Swing Loan in an amount of $6,000,000, or less,
      such notice will be timely received if it is received by Agent no later than
      10:00 a.m. (California time) on the Business Day that is the requested Funding
      Date, and (iii) in the case of a Borrowing consisting of a Term Loan, the
      Capital Assets proposed to be financed with the proceeds of such Term Loan
      together with the Hard Cost of such Capital Assets, the invoices pertaining
      to
      such Capital Assets and any other information or documents reasonably requested
      by Agent that pertain to such Capital Assets. At Agent’s election, in lieu of
      delivering the above-described written request, any Authorized Person may give
      Agent telephonic notice of such request by the required time, with such
      telephonic notice to be confirmed in writing within 24 hours of the giving
      of
      such notice. 

     

    (b)
Agent’s
      Election. Promptly after receipt of a request for a Borrowing pursuant
      to Section 2.3(a), Agent shall elect, in its discretion, (i) to
      have the terms of Section 2.3(c) apply to such requested Borrowing,
      or (ii) if the Borrowing is for an Advance, to request Swing Lender to make
      a Swing Loan pursuant to the terms of Section 2.3(d) in the amount
      of the requested Borrowing; provided, however, that if Swing
      Lender declines in its sole discretion to make a Swing Loan pursuant to
Section 2.3(d), Agent shall elect to have the terms of
Section 2.3(c) apply to such requested Borrowing. 

     

     

     

    -31-


     

    (c)
Making
      of
      Advances. 

     

    (i)
      In the event that Agent shall
      elect to have the terms of this Section 2.3(c) apply to a requested
      Borrowing as described in Section 2.3(b), then promptly after
      receipt of a request for a Borrowing pursuant to Section 2.3(a),
      Agent shall notify the Lenders, not later than 1:00 p.m. (California time)
      on
      the Business Day immediately preceding the Funding Date applicable thereto,
      by
      telecopy, telephone, or other similar form of transmission, of the requested
      Borrowing. Each Lender shall make the amount of such Lender’s Pro Rata Share of
      the requested Borrowing available to Agent in immediately available funds,
      to
      Agent’s Account, not later than 10:00 a.m. (California time) on the Funding Date
      applicable thereto. After Agent’s receipt of the proceeds of such Advances, upon
      satisfaction of the applicable conditions precedent set forth in
Section 3 hereof, Agent shall make the proceeds thereof available to
      Administrative Borrower on the applicable Funding Date by transferring
      immediately available funds equal to such proceeds received by Agent to
      Administrative Borrower’s Designated Account; provided, however,
      that, subject to the provisions of Section 2.3(i), Agent shall not
      request any Lender to make, and no Lender shall have the obligation to make,
      any
      Advance if Agent shall have actual knowledge that (1) one or more of the
      applicable conditions precedent set forth in Section 3 will not be
      satisfied on the requested Funding Date for the applicable Borrowing unless
      such
      condition has been waived, or (2) the requested Borrowing would exceed the
      Availability on such Funding Date. 

     

    (ii)
      Unless Agent receives notice
      from a Lender on or prior to the Closing Date or, with respect to any Borrowing
      after the Closing Date, at least 1 Business Day prior to the date of such
      Borrowing, that such Lender will not make available as and when required
      hereunder to Agent for the account of Borrowers the amount of that Lender’s Pro
      Rata Share of the Borrowing, Agent may assume that each Lender has made or
      will
      make such amount available to Agent in immediately available funds on the
      Funding Date and Agent may (but shall not be so required), in reliance upon
      such
      assumption, make available to Borrowers on such date a corresponding amount.
      If
      and to the extent any Lender shall not have made its full amount available
      to
      Agent in immediately available funds and Agent in such circumstances has made
      available to Borrowers such amount, that Lender shall on the Business Day
      following such Funding Date make such amount available to Agent, together with
      interest at the Defaulting Lender Rate for each day during such period. A notice
      submitted by Agent to any Lender with respect to amounts owing under this
      subsection shall be conclusive, absent manifest error. If such amount is so
      made
      available, such payment to Agent shall constitute such Lender’s Advance on the
      date of Borrowing for all purposes of this Agreement. If such amount is not
      made
      available to Agent on the Business Day following the Funding Date, Agent will
      notify Administrative Borrower of such failure to fund and, upon demand by
      Agent, Borrowers shall pay such amount to Agent for Agent’s account, together
      with interest thereon for each day elapsed since the date of such Borrowing,
      at
      a rate per annum equal to the interest rate applicable at the time to the
      Advances composing such Borrowing. The 

     

     

     

    -32-


     

    failure
      of any Lender to make any
      Advance on any Funding Date shall not relieve any other Lender of any obligation
      hereunder to make an Advance on such Funding Date, but no Lender shall be
      responsible for the failure of any other Lender to make the Advance to be made
      by such other Lender on any Funding Date. 

     

    (iii)
      Agent shall not be obligated
      to transfer to a Defaulting Lender any payments made by Borrowers to Agent
      for
      the Defaulting Lender’s benefit, and, in the absence of such transfer to the
      Defaulting Lender, Agent shall transfer any such payments to each other
      non-Defaulting Lender member of the Lender Group ratably in accordance with
      their Commitments (but only to the extent that such Defaulting Lender’s Advance
      was funded by the other members of the Lender Group) or, if so directed by
      Administrative Borrower and if no Default or Event of Default had occurred
      and
      is continuing (and to the extent such Defaulting Lender’s Advance was not funded
      by the Lender Group), retain same to be re-advanced to Borrowers as if such
      Defaulting Lender had made Advances to Borrowers. Subject to the foregoing,
      Agent may hold and, in its Permitted Discretion, re-lend to Borrowers for the
      account of such Defaulting Lender the amount of all such payments received
      and
      retained by it for the account of such Defaulting Lender. Solely for the
      purposes of voting or consenting to matters with respect to the Loan Documents,
      such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s
      Commitment shall be deemed to be zero. This Section shall remain effective
      with
      respect to such Lender until (x) the Obligations under this Agreement shall
      have been declared or shall have become immediately due and payable,
      (y) the non-Defaulting Lenders, Agent, and Borrowers shall have waived such
      Defaulting Lender’s default in writing, or (z) the Defaulting Lender makes
      its Pro Rata Share of the applicable Advance and pays to Agent all amounts
      owing
      by Defaulting Lender in respect thereof. The operation of this Section shall
      not
      be construed to increase or otherwise affect the Commitment of any Lender,
      to
      relieve or excuse the performance by such Defaulting Lender or any other Lender
      of its duties and obligations hereunder, or to relieve or excuse the performance
      by Borrower of its duties and obligations hereunder to Agent or to the Lenders
      other than such Defaulting Lender. Any such failure to fund by any Defaulting
      Lender shall constitute a material breach by such Defaulting Lender of this
      Agreement and shall entitle Administrative Borrower at its option, upon written
      notice to Agent, to arrange for a substitute Lender to assume the Commitment
      of
      such Defaulting Lender, such substitute Lender to be acceptable to Agent. In
      connection with the arrangement of such a substitute Lender, the Defaulting
      Lender shall have no right to refuse to be replaced hereunder, and agrees to
      execute and deliver a completed form of Assignment and Acceptance Agreement
      in
      favor of the substitute Lender (and agrees that it shall be deemed to have
      executed and delivered such document if it fails to do so) subject only to
      being
      repaid its share of the outstanding Obligations (other than Bank Product
      Obligations) (including an assumption of its Pro Rata Share of the Risk
      Participation Liability) without any premium or penalty of any kind whatsoever;
      provided further, however, that any such assumption of the
      Commitment of such Defaulting Lender shall not be deemed to constitute a waiver
      of any of the Lender Groups’ or Borrowers’ rights or remedies against any such
      Defaulting Lender arising out of or in relation to such failure to fund.


     

     

     

    -33-


     

    (d)
Making
      of Swing
      Loans. 

     

    (i)
      In the event Agent shall elect,
      with the consent of Swing Lender, as a Lender, to have the terms of this
Section 2.3(d) apply to a requested Borrowing as described in
Section 2.3(b), Swing Lender as a Lender shall make such Advance in
      the amount of such Borrowing (any such Advance made solely by Swing Lender
      as a
      Lender pursuant to this Section 2.3(d) being referred to as a “Swing
      Loan” and such Advances being referred to collectively as “Swing Loans”)
      available to Borrowers on the Funding Date applicable thereto by transferring
      immediately available funds to Administrative Borrower’s Designated Account.
      Each Swing Loan is an Advance hereunder and shall be subject to all the terms
      and conditions applicable to other Advances, except that no such Swing Loan
      shall be eligible for the LIBOR Option and all payments on any Swing Loan shall
      be payable to Swing Lender as a Lender solely for its own account (and for
      the
      account of the holder of any participation interest with respect to such Swing
      Loan). Subject to the provisions of Section 2.3(i), Agent shall not
      request Swing Lender as a Lender to make, and Swing Lender as a Lender shall
      not
      make, any Swing Loan if Agent has actual knowledge that (i) one or more of
      the applicable conditions precedent set forth in Section 3 will not
      be satisfied on the requested Funding Date for the applicable Borrowing unless
      such condition has been waived, or (ii) the requested Borrowing would
      exceed the Availability on such Funding Date. Swing Lender as a Lender shall
      not
      otherwise be required to determine whether the applicable conditions precedent
      set forth in Section 3 have been satisfied on the Funding Date
      applicable thereto prior to making, in its sole discretion, any Swing Loan.
      

     

    (ii)
      The Swing Loans shall be
      secured by the Agent’s Liens, shall constitute Advances and Obligations
      hereunder, and shall bear interest at the rate applicable from time to time
      to
      Advances that are Base Rate Loans. 

     

    (e)
Agent
      Advances.


     

    (i)
      Agent hereby is authorized by
      Borrowers and the Lenders, from time to time in Agent’s sole discretion,
      (1) after the occurrence and during the continuance of a Default or an
      Event of Default, or (2) at any time that any of the other applicable
      conditions precedent set forth in Section 3 have not been satisfied, to
      make Advances to Borrowers on behalf of the Lenders that Agent, in its Permitted
      Discretion deems necessary or desirable (A) to preserve or protect the
      Collateral, or any portion thereof, (B) to enhance the likelihood of
      repayment of the Obligations (other than the Bank Product Obligations), or
      (C) to pay any other amount chargeable to Borrowers pursuant to the terms
      of this Agreement, including Lender Group Expenses and the costs, fees, and
      expenses described in Section 10 (any of the Advances described in this
      Section 2.3(e) shall be referred to as “Agent Advances”). Each Agent
      Advance is an Advance hereunder and shall be subject to all the terms and
      conditions 

     

     

     

    -34-


     

    applicable
      to other Advances, except
      that no such Agent Advance shall be eligible for the LIBOR Option and all
      payments thereon shall be payable to Agent solely for its own account (and
      for
      the account of the holder of any participation interest with respect to such
      Agent Advance). 

     

    (ii)
      The Agent Advances shall be
      repayable on demand and secured by the Agent’s Liens granted to Agent under the
      Loan Documents, shall constitute Advances and Obligations hereunder, and shall
      bear interest at the rate applicable from time to time to Advances that are
      Base
      Rate Loans. 

     

    (f)
Settlement.
      It
      is agreed that each Lender’s funded portion of the Advances is intended by the
      Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding
      Advances. Such agreement notwithstanding, Agent, Swing Lender, and the other
      Lenders agree (which agreement shall not be for the benefit of or enforceable
      by
      Borrowers) that in order to facilitate the administration of this Agreement
      and
      the other Loan Documents, settlement among them as to the Advances, the Swing
      Loans, and the Agent Advances shall take place on a periodic basis in accordance
      with the following provisions: 

     

    (i)
      Agent shall request settlement
      (“Settlement”) with the Lenders on a weekly basis, or on a more frequent
      basis if so determined by Agent, (1) on behalf of Swing Lender, with
      respect to each outstanding Swing Loan, (2) for itself, with respect to
      each Agent Advance, and (3) with respect to Collections received, as to
      each by notifying the Lenders by telecopy, telephone, or other similar form
      of
      transmission, of such requested Settlement, no later than 2:00 p.m. (California
      time) on the Business Day immediately prior to the date of such requested
      Settlement (the date of such requested Settlement being the “Settlement
      Date”). Such notice of a Settlement Date shall include a summary statement
      of the amount of outstanding Advances, Swing Loans, and Agent Advances for
      the
      period since the prior Settlement Date. Subject to the terms and conditions
      contained herein (including Section 2.3(c)(iii)): (y) if a
      Lender’s balance of the Advances, Swing Loans, and Agent Advances exceeds such
      Lender’s Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a
      Settlement Date, then Agent shall, by no later than 12:00 p.m. (California
      time)
      on the Settlement Date, transfer in immediately available funds to the account
      of such Lender as such Lender may designate, an amount such that each such
      Lender shall, upon receipt of such amount, have as of the Settlement Date,
      its
      Pro Rata Share of the Advances, Swing Loans, and Agent Advances, and (z) if
      a Lender’s balance of the Advances, Swing Loans, and Agent Advances is less than
      such Lender’s Pro Rata Share of the Advances, Swing Loans, and Agent Advances as
      of a Settlement Date, such Lender shall no later than 12:00 p.m. (California
      time) on the Settlement Date transfer in immediately available funds to the
      Agent’s Account, an amount such that each such Lender shall, upon transfer of
      such amount, have as of the Settlement Date, its Pro Rata Share of the Advances,
      Swing Loans, and Agent Advances. Such amounts made available to Agent under
      clause (z) of the immediately preceding sentence shall be applied against
      the amounts of the applicable Swing Loan or Agent Advance and, together with
      the
      portion of such Swing Loan or Agent Advance 

     

     

     

    -35-


     

    representing
      Swing Lender’s Pro Rata
      Share thereof, shall constitute Advances of such Lenders. If any such amount
      is
      not made available to Agent by any Lender on the Settlement Date applicable
      thereto to the extent required by the terms hereof, Agent shall be entitled
      to
      recover for its account such amount on demand from such Lender together with
      interest thereon at the Defaulting Lender Rate. 

     

    (ii)
      In determining whether a
      Lender’s balance of the Advances, Swing Loans, and Agent Advances is less than,
      equal to, or greater than such Lender’s Pro Rata Share of the Advances, Swing
      Loans, and Agent Advances as of a Settlement Date, Agent shall, as part of
      the
      relevant Settlement, apply to such balance the portion of payments actually
      received in good funds by Agent with respect to principal, interest, fees
      payable by Borrowers and allocable to the Lenders hereunder, and proceeds of
      Collateral. To the extent that a net amount is owed to any such Lender after
      such application, such net amount shall be distributed by Agent to that Lender
      as part of such next Settlement. 

     

    (iii)
      Between Settlement Dates,
      Agent, to the extent no Agent Advances or Swing Loans are outstanding, may
      pay
      over to Swing Lender any payments received by Agent, that in accordance with
      the
      terms of this Agreement would be applied to the reduction of the Advances,
      for
      application to Swing Lender’s Pro Rata Share of the Advances. If, as of any
      Settlement Date, Collections received since the then immediately preceding
      Settlement Date have been applied to Swing Lender’s Pro Rata Share of the
      Advances other than to Swing Loans, as provided for in the previous sentence,
      Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent
      shall
      pay to the Lenders, to be applied to the outstanding Advances of such Lenders,
      an amount such that each Lender shall, upon receipt of such amount, have, as
      of
      such Settlement Date, its Pro Rata Share of the Advances. During the period
      between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with
      respect to Agent Advances, and each Lender (subject to the effect of letter
      agreements between Agent and individual Lenders) with respect to the Advances
      other than Swing Loans and Agent Advances, shall be entitled to interest at
      the
      applicable rate or rates payable under this Agreement on the daily amount of
      funds employed by Swing Lender, Agent, or the Lenders, as applicable.


     

    (g)
Notation.
      Agent
      shall record on its books the principal amount of the Advances owing to each
      Lender, including the Swing Loans owing to Swing Lender, and Agent Advances
      owing to Agent, and the interests therein of each Lender, from time to time.
      In
      addition, each Lender is authorized, at such Lender’s option, to note the date
      and amount of each payment or prepayment of principal of such Lender’s Advances
      in its books and records, including computer records, such books and records
      constituting conclusive evidence, absent manifest error, of the accuracy of
      the
      information contained therein. 

     

    (h)
Lenders’
Failure
      to
      Perform. All Advances (other than Swing Loans and Agent Advances) shall
      be made by the Lenders contemporaneously and in accordance with their Pro Rata
      Shares. It is understood that (i) no Lender 

     

     

     

    -36-


     

    shall
      be responsible for any failure
      by any other Lender to perform its obligation to make any Advance (or other
      extension of credit) hereunder, nor shall any Commitment of any Lender be
      increased or decreased as a result of any failure by any other Lender to perform
      its obligations hereunder, and (ii) no failure by any Lender to perform its
      obligations hereunder shall excuse any other Lender from its obligations
      hereunder. 

     

    (i)
Optional
      Overadvances. Any contrary provision of this Agreement notwithstanding,
      the Lenders hereby authorize Agent or Swing Lender, as applicable, and Agent
      or
      Swing Lender, as applicable, may, but is not obligated to, knowingly and
      intentionally, continue to make Advances (including Swing Loans) to Borrowers
      notwithstanding that an Overadvance exists or thereby would be created, so
      long
      as (i) after giving effect to such Advances (including a Swing Loan), the
      Revolver Usage with respect to the Borrowers does not exceed the Borrowing
      Base
      by more than $5,000,000, (ii) after giving effect to such Advances
      (including a Swing Loan) the outstanding Revolver Usage (except for and
      excluding amounts charged to the Loan Account for interest, fees, or Lender
      Group Expenses) does not exceed the Maximum Revolver Amount, and (iii) at
      the time of the making of any such Advance (including a Swing Loan), Agent
      does
      not believe, in good faith, that the Overadvance created by such Advance will
      be
      outstanding for more than 90 days. The foregoing provisions are for the
      exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended
      to benefit Borrowers in any way. The Advances and Swing Loans, as applicable,
      that are made pursuant to this Section 2.3(i) shall be subject to the same
      terms and conditions as any other Advance or Swing Loan, as applicable, except
      that they shall not be eligible for the LIBOR Option and the rate of interest
      applicable thereto shall be the rate applicable to Advances that are Base Rate
      Loans under Section 2.6(c) hereof without regard to the presence or absence
      of a Default or Event of Default. 

     

    (i)
      In the event Agent obtains
      actual knowledge that the Revolver Usage exceeds the amounts permitted by the
      preceding paragraph, regardless of the amount of, or reason for, such excess,
      Agent shall notify Lenders as soon as practicable (and prior to making any
      (or
      any additional) intentional Overadvances (except for and excluding amounts
      charged to the Loan Account for interest, fees, or Lender Group Expenses) unless
      Agent determines that prior notice would result in imminent harm to the
      Collateral or its value), and the Lenders with Revolver Commitments thereupon
      shall, together with Agent, jointly determine the terms of arrangements that
      shall be implemented with Borrowers and intended to reduce, within a reasonable
      time, the outstanding principal amount of the Advances to Borrowers to an amount
      permitted by the preceding paragraph. In the event Agent or any Lender disagrees
      over the terms of reduction or repayment of any Overadvance, the terms of
      reduction or repayment thereof shall be implemented according to the
      determination of the Required Lenders. 

     

     

     

    -37-


     

    (ii)
      Each Lender with a Revolver
      Commitment shall be obligated to settle with Agent as provided in
      Section 2.3(f) for the amount of such Lender’s Pro Rata Share of any
      unintentional Overadvances by Agent reported to such Lender, any intentional
      Overadvances made as permitted under this Section 2.3(i), and any
      Overadvances resulting from the charging to the Loan Account of interest, fees,
      or Lender Group Expenses. 

     

    2.4
      Payments. 

     

    (a)
Payments
      by
      Borrowers. 

     

    (i)
      Except as otherwise expressly
      provided herein, all payments by Borrowers shall be made to Agent’s Account for
      the account of the Lender Group and shall be made in immediately available
      funds, no later than 11:00 a.m. (California time) on the date specified herein.
      Any payment received by Agent later than 11:00 a.m. (California time), shall
      be
      deemed to have been received on the following Business Day and any applicable
      interest or fee shall continue to accrue until such following Business Day.
      

     

    (ii)
      Unless Agent receives notice
      from Administrative Borrower prior to the date on which any payment is due
      to
      the Lenders that Borrowers will not make such payment in full as and when
      required, Agent may assume that Borrowers have made (or will make) such payment
      in full to Agent on such date in immediately available funds and Agent may
      (but
      shall not be so required), in reliance upon such assumption, distribute to
      each
      Lender on such due date an amount equal to the amount then due such Lender.
      If
      and to the extent Borrowers do not make such payment in full to Agent on the
      date when due, each Lender severally shall repay to Agent on demand such amount
      distributed to such Lender, together with interest thereon at the Defaulting
      Lender Rate for each day from the date such amount is distributed to such Lender
      until the date repaid. 

     

    (iii)
      In the event the aggregate
      principal amount of the Advances outstanding on any day exceeds the maximum
      amount of indebtedness permitted to be incurred pursuant to clause (b) of
      the definition of “Permitted Indebtedness” under the ThermaClime Indenture,
      Borrowers will immediately prepay the outstanding principal amount of the
      Advances, to the full extent of any such excess. 

     

    (iv)
      Upon receipt of any
      disbursements or dividends described in Section 6.16, the Borrowers
      shall immediately prepay the outstanding principal amount of the Advances in
      the
      amount of such distribution or dividend. 

     

    (b)
Apportionment
      and
      Application of Payments. 

     

    (i)
      Except as otherwise provided
      with respect to Defaulting Lenders and except as otherwise provided in the
      Loan
      Documents (including letter agreements between Agent and individual Lenders),
      aggregate principal and interest payments shall be apportioned ratably among
      the
      Lenders (according to the unpaid principal balance of the 

     

     

     

    -38-


     

    Obligations
      to which such payments
      relate held by each Lender) and payments of fees and expenses (other than fees
      or expenses that are for Agent’s separate account, after giving effect to any
      letter agreements between Agent and individual Lenders) shall be apportioned
      ratably among the Lenders having a Pro Rata Share of the type of Commitment
      or
      Obligation to which a particular fee relates. All payments shall be remitted
      to
      Agent and all such payments (other than payments received while no Default
      or
      Event of Default has occurred and is continuing and which relate to the payment
      of principal or interest of specific Obligations or which relate to the payment
      of specific fees), and all proceeds of Accounts or other Collateral received
      by
      Agent, shall be applied as follows: 

     

    A.
first,
      to pay any Lender
      Group Expenses then due to Agent under the Loan Documents, until paid in full,
      

     

    B.
second,
      to pay any Lender
      Group Expenses then due to the Lenders under the Loan Documents, on a ratable
      basis, until paid in full, 

     

    C.
third,
      to pay any fees
      then due to Agent (for its separate accounts, after giving effect to any letter
      agreements between Agent and the individual Lenders) under the Loan Documents
      until paid in full, 

     

    D.
fourth,
      to pay any fees
      then due to any or all of the Lenders (after giving effect to any letter
      agreements between Agent and individual Lenders) under the Loan Documents,
      on a
      ratable basis, until paid in full, 

     

    E.
fifth,
      to pay interest due
      in respect of all Agent Advances, until paid in full, 

     

    F.
sixth,
      ratably to pay
      interest due in respect of the Advances (other than Agent Advances), the Swing
      Loans, and the Term Loan until paid in full, 

     

    G.
seventh,
      to pay the
      principal of all Agent Advances until paid in full, 

     

    H.
eighth,
      to pay the
      principal amounts then due and payable (other than as a result of an
      acceleration thereof) with respect to the Term Loan until paid in full,


     

    I.
ninth,
      to pay the
      principal of all Swing Loans until paid in full, 

     

    J.
tenth,
      so long as no Event
      of Default has occurred and is continuing, and at Agent’s election (which
      election Agent agrees will not be made if an Overadvance would be created
      thereby), to pay amounts then due and owing by any Borrower or its Subsidiaries
      in respect of Bank Products, until paid in full, 

     

     

     

    -39-


     

    K.
eleventh,
      so long as no
      Event of Default has occurred and is continuing, to pay the principal of all
      Advances until paid in full, 

     

    L.
twelfth,
      if an Event of
      Default has occurred and is continuing, ratably (i) to pay the principal of
      all Advances until paid in full, and (ii) to Agent, to be held by Agent,
      for the benefit of Wells Fargo or its Affiliates, as applicable, as cash
      collateral in an amount up to the amount of the Bank Products Reserve
      established prior to the occurrence of, and not in contemplation of, the subject
      Event of Default until Borrowers’ and their Subsidiaries’ obligations in respect
      of the then extant Bank Products have been paid in full or the cash collateral
      amount has been exhausted, 

     

    M.
thirteenth,
      if an Event of
      Default has occurred and is continuing, to pay the outstanding principal balance
      of the Term Loan (in inverse order of the maturity of the installments due
      thereunder) until the Term Loan is paid in full, 

     

    N.
fourteenth,
      if an Event of
      Default has occurred and is continuing, to Agent, to be held by Agent, for
      the
      ratable benefit of Issuing Lender and those Lenders having a Revolver
      Commitment, as cash collateral in an amount up to 105% of the then extant Letter
      of Credit Usage until paid in full, 

     

    O.
fifteenth,
      to pay any
      other Obligations (including Bank Product Obligations) until paid in full,
      and


     

    P.
sixteenth,
      to Borrowers
      (to be wired to the Designated Account) or such other Person entitled thereto
      under applicable law. 

     

    (ii)
      Agent promptly shall distribute
      to each Lender, pursuant to the applicable wire instructions received from
      each
      Lender in writing, such funds as it may be entitled to receive, subject to
      a
      Settlement delay as provided in Section 2.3(h). 

     

    (iii)
      In each instance, so long as
      no Default or Event of Default has occurred and is continuing,
Section 2.4(b) shall not be deemed to apply to any payment by
      Borrowers specified by Borrowers to be for the payment of specific Obligations
      then due and payable (or prepayable) under any provision of this Agreement.
      

     

    (iv)
      For purposes of the foregoing,
“paid in full” means payment of all amounts owing under the Loan Documents
      according to the terms thereof, including loan fees, service fees, professional
      fees, interest (and specifically including interest accrued after the
      commencement of any Insolvency Proceeding), default interest, interest on
      interest, and expense reimbursements, whether or not the same would be or is
      allowed or disallowed in whole or in part in any Insolvency Proceeding.


     

     

     

    -40-


     

    (v)
      In the event of a direct
      conflict between the priority provisions of this Section 2.4 and
      other provisions contained in any other Loan Document, it is the intention
      of
      the parties hereto that such priority provisions in such documents shall be
      read
      together and construed, to the fullest extent possible, to be in concert with
      each other. In the event of any actual, irreconcilable conflict that cannot
      be
      resolved as aforesaid, the terms and provisions of this Section 2.4
      shall control and govern. 

     

    (vi)
      Notwithstanding anything to the
      contrary contained in this Agreement or any other Loan Document, all proceeds
      received by Agent from the sale or other disposition of, or in connection with
      any casualty or loss of, any Term Loan Priority Collateral shall be applied,
      first, to the Obligations in respect of the Term Loan then outstanding and
      the
      remainder of such proceeds shall be applied in accordance with
Section 2.4(b)(i). 

     

    2.5
      Overadvances. If, at any time or for any reason, the amount of
      Obligations (other than Bank Product Obligations) owed by Borrowers to the
      Lender Group pursuant to Sections 2.1 and 2.12 is greater than either the
      Dollar or percentage limitations set forth in Sections 2.1 or 2.12, (an
“Overadvance”), Borrowers immediately shall pay to Agent, in cash, the
      amount of such excess, which amount shall be used by Agent to reduce such
      Overadvances in accordance with the priorities set forth in
Section 2.4(b). In addition, Borrowers hereby promise to pay the
      Obligations (including principal, interest, fees, costs, and expenses) in
      Dollars in full to the Lender Group as and when due and payable under the terms
      of this Agreement and the other Loan Documents. 

     

    2.6
Interest
      Rates and
      Letter of Credit Fee: Rates, Payments, and Calculations.


     

    (a)
Interest
      Rates.
      Except as provided in clause (c) below, all Obligations (except for undrawn
      Letters of Credit and except for Bank Product Obligations) that have been
      charged to the Loan Account pursuant to the terms hereof shall bear interest
      on
      the Daily Balance thereof as follows (i) if the relevant Obligation is an
      Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate
      plus the LIBOR Rate Margin, (ii) otherwise, at a per annum rate equal to
      the Base Rate plus the Base Rate Margin. 

     

    The
      foregoing notwithstanding, at no
      time shall any portion of the Obligations (other than Bank Product Obligations)
      in respect of the Term Loan bear interest on the Daily Balance thereof at a
      per
      annum rate less than 6.25%. To the extent that interest accrued hereunder at
      the
      rate set forth herein would be less than the foregoing minimum daily rate,
      the
      interest rate chargeable hereunder for such day automatically shall be deemed
      increased to the minimum rate. 

     

    (b)
Letter
      of Credit
      Fee. Borrowers shall pay Agent (for the ratable benefit of the Lenders
      with a Revolver Commitment, subject to any letter agreement between Agent and
      individual Lenders), a Letter of Credit fee (in addition to the charges,
      commissions, fees, and costs set forth in Section 2.12(e)) which
      shall accrue at a rate equal to 1.00% per annum times the Daily Balance of
      the undrawn amount of all outstanding Letters of Credit. 

     

     

     

    -41-


     

    (c)
Default
      Rate.
      Upon the occurrence and during the continuation of an Event of Default (and
      at
      the election of Agent or the Required Lenders), 

     

    (i)
      all Obligations (except for
      undrawn Letters of Credit and except for Bank Product Obligations) that have
      been charged to the Loan Account pursuant to the terms hereof shall bear
      interest on the Daily Balance thereof at a per annum rate equal to 2 percentage
      points above the per annum rate otherwise applicable hereunder, and


     

    (ii)
      the Letter of Credit fee
      provided for above shall be increased to 2 percentage points above the per
      annum
      rate otherwise applicable hereunder. 

     

    (d)
Payment.
      Interest, Letter of Credit fees, and all other fees payable hereunder shall
      be
      due and payable, in arrears, on the first day of each month at any time that
      Obligations or Commitments are outstanding. Borrowers hereby authorize Agent,
      from time to time, without prior notice to Borrowers, to charge such interest
      and fees, all Lender Group Expenses (as and when incurred), the charges,
      commissions, fees, and costs provided for in Section 2.12(e) (as and
      when accrued or incurred), the fees and costs provided for in
Section 2.11 (as and when accrued or incurred), and all other
      payments as and when due and payable under any Loan Document (including any
      amounts due and payable to Wells Fargo or its Affiliates in respect of Bank
      Products up to the amount of the then extant Bank Products Reserve) to
      Borrowers’ Loan Account, which amounts thereafter constitute Advances hereunder
      and shall accrue interest at the rate then applicable to Advances hereunder.
      Any
      interest not paid when due shall be compounded by being charged to Borrowers’
Loan Account and shall thereafter constitute Advances hereunder and shall accrue
      interest at the rate then applicable to Advances that are Base Rate Loans
      hereunder. 

     

    (e)
Computation.
      All interest and fees chargeable under the Loan Documents shall be computed
      on
      the basis of a 360 day year for the actual number of days elapsed. In the event
      the Base Rate is changed from time to time hereafter, the rates of interest
      hereunder based upon the Base Rate automatically and immediately shall be
      increased or decreased by an amount equal to such change in the Base Rate.
      

     

    (f)
Intent
      to Limit Charges
      to Maximum Lawful Rate. In no event shall the interest rate or rates
      payable under this Agreement, plus any other amounts paid in connection
      herewith, exceed the highest rate permissible under any law that a court of
      competent jurisdiction shall, in a final determination, deem applicable.
      Borrowers and the Lender Group, in executing and delivering this Agreement,
      intend legally to agree upon the rate or rates of interest and manner of payment
      stated within it; provided, however, that, anything contained
      herein to the contrary notwithstanding, if said rate or rates of interest or
      manner of payment exceeds the maximum allowable under applicable law, then,
      ipso facto, as of the date of this Agreement, Borrowers are and shall be
      liable only for the payment of such maximum as allowed by law, and payment
      received from Borrowers in excess of such legal maximum, whenever received,
      shall be applied to reduce the principal balance of the Obligations to the
      extent of such excess. 

     

     

     

    -42-


     

    2.7
Cash
      Management. 

     

    (a)
      Borrowers shall
      (i) establish and maintain cash management services of a type and on terms
      satisfactory to Agent at one or more of the banks set forth on Schedule
      2.7(a) (each a “Cash Management Bank”), and shall request in writing
      and otherwise take such reasonable steps to ensure that all of its Account
      Debtors forward payment of the amounts owed by them directly to such Cash
      Management Bank, and (ii) deposit or cause to be deposited promptly, and in
      any event no later than the first Business Day after the date of receipt
      thereof, all Collections (including those sent directly by Account Debtors
      to a
      Cash Management Bank) into a bank account in Agent’s name (a “Cash Management
      Account”) at one of the Cash Management Banks. 

     

    (b)
      On the Closing Date, each Cash
      Management Bank shall establish and maintain Cash Management Agreements with
      Agent and Borrowers in form and substance acceptable to Agent, provided that
      such Cash Management Agreements may not be implemented until 30 days after
      the
      Closing Date. Each such Cash Management Agreement shall provide, among other
      things, that (i) all items of payment deposited in such Cash Management
      Account and proceeds thereof are held by such Cash Management Bank as agent
      or
      bailee-in-possession for Agent, (ii) the Cash Management Bank has no rights
      of setoff or recoupment or any other claim against the applicable Cash
      Management Account, other than for payment of its service fees and other charges
      directly related to the administration of such Cash Management Account and
      for
      returned checks or other items of payment, and (iii) it immediately will
      forward by daily sweep all amounts in the applicable Cash Management Account
      to
      the Agent’s Account. 

     

    (c)
      So long as no Default or Event
      of Default has occurred and is continuing, Administrative Borrower may amend
      Schedule 2.7(a) or (b) to add or replace a Cash Management Account Bank or
      Cash Management Account; provided, however, that (i) such
      prospective Cash Management Bank shall be satisfactory to Agent and Agent shall
      have consented in writing in advance to the opening of such Cash Management
      Account with the prospective Cash Management Bank, and (ii) prior to the
      time of the opening of such Cash Management Account, Borrowers and such
      prospective Cash Management Bank shall have executed and delivered to Agent
      a
      Cash Management Agreement. Borrowers shall close any of their Cash Management
      Accounts (and establish replacement cash management accounts in accordance
      with
      the foregoing sentence) promptly and in any event within 30 days of notice
      from
      Agent that the creditworthiness of any Cash Management Bank is no longer
      acceptable in Agent’s reasonable judgment, or as promptly as practicable and in
      any event within 60 days of notice from Agent that the operating performance,
      funds transfer, or availability procedures or performance of the Cash Management
      Bank with respect to Cash Management Accounts or Agent’s liability under any
      Cash Management Agreement with such Cash Management Bank is no longer acceptable
      in Agent’s reasonable judgment. 

     

    (d)
      The Cash Management Accounts
      shall be cash collateral accounts, with all cash, checks and similar items
      of
      payment in such accounts securing payment of the Obligations, and in which
      Borrowers are hereby deemed to have granted a Lien to Agent. 

     

    2.8
Crediting
      Payments. The receipt of any payment item by Agent (whether from
      transfers to Agent by the Cash Management Banks pursuant to the Cash Management
      Agreements or otherwise) shall not be considered a payment on account unless
      

     

     

     

    -43-


     

    such
      payment item is a wire transfer
      of immediately available federal funds made to the Agent’s Account or unless and
      until such payment item is honored when presented for payment. Should any
      payment item not be honored when presented for payment, then Borrowers shall
      be
      deemed not to have made such payment and interest shall be calculated
      accordingly. Anything to the contrary contained herein notwithstanding, any
      payment item shall be deemed received by Agent only if it is received into
      the
      Agent’s Account on a Business Day on or before 11:00 a.m. (California time). If
      any payment item is received into the Agent’s Account on a non-Business Day or
      after 11:00 a.m. (California time) on a Business Day, it shall be deemed to
      have
      been received by Agent as of the opening of business on the immediately
      following Business Day. 

     

    2.9
Designated
      Account. Agent is authorized to make the Advances, and Issuing
      Lender is authorized to issue the Letters of Credit, under this Agreement based
      upon telephonic or other instructions received from anyone purporting to be
      an
      Authorized Person, or without instructions if pursuant to Section 2.6(d).
      Administrative Borrower agrees to establish and maintain a Designated Account
      for Borrowers with the Designated Account Bank for the purpose of receiving
      the
      proceeds of the Advances requested by Borrowers and made by Agent or the Lenders
      hereunder. Unless otherwise agreed by Agent and Administrative Borrower, any
      Advance, Agent Advance or Swing Loan requested by Borrowers and made by Agent
      or
      the Lenders hereunder shall be made to the Designated Account. 

     

    2.10
Maintenance
      of Loan
      Account; Statements of Obligations. Agent shall maintain an account
      on its books in the name of Borrowers and (the “Loan Account”) on which
      Borrowers will be charged with the Term Loan, all Advances (including Agent
      Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to
      Borrowers or for Borrowers’ account, the Letters of Credit issued by Issuing
      Lender for Borrowers’ account, and with all other payment Obligations hereunder
      or under the other Loan Documents (except for Bank Product Obligations),
      including, accrued interest, fees and expenses, and Lender Group Expenses.
      In
      accordance with Section 2.8, the Loan Account will be credited with all
      payments received by Agent from Borrowers or for Borrowers’ account, including
      all amounts received in the Agent’s Account from any Cash Management Bank. Agent
      shall render statements regarding the Loan Account to Administrative Borrower,
      including principal, interest, fees, and including an itemization of all charges
      and expenses constituting Lender Group Expenses owing, and such statements
      shall
      be conclusively presumed to be correct and accurate and constitute an account
      stated between Borrowers and the Lender Group unless, within 45 days after
      receipt thereof by Administrative Borrower, Administrative Borrower shall
      deliver to Agent written objection thereto describing the error or errors
      contained in any such statements. 

     

    2.11
Fees.
      Borrowers shall pay to Agent the following fees and charges, which fees and
      charges shall be non-refundable when paid (irrespective of whether this
      Agreement is terminated thereafter) and shall be apportioned among the Lenders
      in accordance with the terms of letter agreements between Agent and individual
      Lenders: 

     

    (a)
      Unused Line Fee. On the first
      day of each month during the term of this Agreement, an unused line fee in
      the
      amount equal to 0.375% per annum times the result of (a) the Maximum
      Revolver Amount, less (b) the sum of (i) the average Daily Balance of
      Advances that were outstanding during the immediately preceding month, plus
      (ii) the average Daily Balance of the Letter of Credit Usage during the
      immediately preceding month, 

     

     

     

    -44-


     

    (b)
      Fee Letter Fees. As and when due
      and payable under the terms of the Fee Letter, Borrowers shall pay to Agent
      the
      fees set forth in the Fee Letter, and 

     

    (c)
      For the separate account of each
      member of the Lender Group, audit, appraisal, and valuation fees and charges
      as
      follows, (i) a fee of $1,000 per day, per auditor, plus out-of-pocket
      expenses for each financial audit of a Borrower performed by personnel employed
      by Agent and each Lender that accompanies Agent’s personnel in connection with
      such financial audit conducted by Agent, (ii) if implemented, for the sole
      account of the Agent, a one time charge of $3,000 plus out-of-pocket expenses
      for expenses for the establishment of electronic collateral reporting systems,
      (iii) a fee of $1,500 per day per appraiser, plus out-of-pocket expenses,
      for each appraisal of the Collateral consisting of Inventory and Capital Assets
      performed by personnel employed by Agent, provided, that, in the absence of
      a
      continuing Event of Default, the Borrowers shall not be obligated to pay for
      more than one (1) appraisal in any 12 month period, and (iv) the
      actual charges paid or incurred by the Agent (and, subject to clause
      (i) above, each Lender) if it elects to employ the services of one or more
      third Persons to perform financial audits of Borrowers, to appraise the
      Collateral, or any portion thereof, or to assess a Borrower’s business
      valuation. 

     

    2.12
Letters
      of
      Credit. 

     

    (a)
      Subject to the terms and
      conditions of this Agreement, the Issuing Lender agrees to issue letters of
      credit (each, an “L/C”) for the account of Borrowers or to purchase
      participations or execute indemnities or reimbursement obligations (each such
      undertaking, an “L/C Undertaking”) with respect to letters of credit
      issued by an Underlying Issuer (as of the Closing Date, the prospective
      Underlying Issuer is to be Wells Fargo) for the account of Borrowers. To request
      the issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or
      extension of an outstanding L/C or L/C Undertaking), Administrative Borrower
      shall hand deliver or telecopy (or transmit by electronic communication, if
      arrangements for doing so have been approved by the Issuing Lender) to the
      Issuing Lender and Agent (reasonably in advance of the requested date of
      issuance, amendment, renewal, or extension) a notice requesting the issuance
      of
      an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be
      amended, renewed, or extended, the date of issuance, amendment, renewal, or
      extension, the date on which such L/C or L/C Undertaking is to expire, the
      amount of such L/C or L/C Undertaking, the name and address of the beneficiary
      thereof (or of the Underlying Letter of Credit, as applicable), and such other
      information as shall be necessary to prepare, amend, renew, or extend such
      L/C
      or L/C Undertaking. If requested by the Issuing Lender, Borrowers also shall
      be
      an applicant under the application with respect to any Underlying Letter of
      Credit that is to be the subject of an L/C Undertaking. The Issuing Lender
      shall
      have no obligation to issue a Letter of Credit if any of the following would
      result after giving effect to the requested Letter of Credit: 

     

    (i)
      the Letter of Credit Usage would
      exceed the Borrowing Base less the amount of outstanding Advances, or


     

     

     

    -45-


     

    (ii)
      the Letter of Credit Usage
      would exceed $15,000,000, or 

     

    (iii)
      the Letter of Credit Usage
      would exceed the lesser of (A) Maximum Revolver Amount and (B) the
      maximum amount of indebtedness permitted to be incurred pursuant to clause
      (b) of the definition of “Permitted Indebtedness” under the ThermaClime
      Indenture less (C) the then extant amount of outstanding Advances.


     

    Borrowers
      and the Lender Group
      acknowledge and agree that certain Underlying Letters of Credit may be issued
      to
      support letters of credit that already are outstanding as of the Closing Date.
      Each Letter of Credit (and corresponding Underlying Letter of Credit) shall
      have
      an expiry date no later than 30 days prior to the Maturity Date and all such
      Letters of Credit (and corresponding Underlying Letter of Credit) shall be
      in
      form and substance acceptable to the Issuing Lender (in the exercise of its
      Permitted Discretion), including the requirement that the amounts payable
      thereunder must be payable in Dollars. If Issuing Lender is obligated to advance
      funds under a Letter of Credit, Borrowers immediately shall reimburse such
      L/C
      Disbursement to Issuing Lender by paying to Agent an amount equal to such L/C
      Disbursement not later than 11:00 a.m., California time, on the date that such
      L/C Disbursement is made, if Administrative Borrower shall have received written
      or telephonic notice of such L/C Disbursement prior to 10:00 a.m., California
      time, on such date, or, if such notice has not been received by Administrative
      Borrower prior to such time on such date, then not later than 11:00 a.m.,
      California time, on (i) the Business Day that Administrative Borrower
      receives such notice, if such notice is received prior to 10:00 a.m., California
      time, on the date of receipt, and, in the absence of such reimbursement, the
      L/C
      Disbursement immediately and automatically shall be deemed to be an Advance
      hereunder and, thereafter, shall bear interest at the rate then applicable
      to
      Advances that are Base Rate Loans under Section 2.6. To the extent
      an L/C Disbursement is deemed to be an Advance hereunder Borrowers’ obligation
      to reimburse such L/C Disbursement shall be discharged and replaced by the
      resulting Advance. Promptly following receipt by Agent of any payment from
      Borrowers pursuant to this paragraph, Agent shall distribute such payment to
      the
      Issuing Lender or, to the extent that Lenders have made payments pursuant to
      Section 2.12(c) to reimburse the Issuing Lender, then to such
      Lenders and the Issuing Lender as their interest may appear. 

     

    (b)
      Promptly following receipt of a
      notice of L/C Disbursement pursuant to Section 2.12(a), each Lender
      with a Revolver Commitment agrees to fund its Pro Rata Share of any Advance
      deemed made pursuant to the foregoing subsection on the same terms and
      conditions as if Borrowers had requested such Advance and Agent shall promptly
      pay to Issuing Lender the amounts so received by it from the Lenders. By the
      issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing
      the amount thereof) and without any further action on the part of the Issuing
      Lender or the Lenders with Revolver Commitment, the Issuing Lender shall be
      deemed to have granted to each Lender with a Revolver Commitment, and each
      Lender with a Revolver Commitment shall be deemed to have purchased, a
      participation in each Letter of Credit, in an amount equal to its Pro Rata
      Share
      of the Risk Participation Liability of such Letter of Credit, and each such
      Lender agrees to pay to Agent, for the account of the Issuing Lender, such
      Lender’s Pro Rata Share of any payments made by the Issuing Lender under such
      Letter of Credit. In consideration and in furtherance of the foregoing, each
      Lender with a Revolver Commitment hereby absolutely and unconditionally agrees
      to pay to 

     

     

     

    -46-


     

    Agent,
      for the account of the
      Issuing Lender, such Lender’s Pro Rata Share of each L/C Disbursement made by
      the Issuing Lender and not reimbursed by Borrowers on the date due as provided
      in clause (a) of this Section, or of any reimbursement payment required to
      be refunded to Borrowers for any reason. Each Lender with a Revolver Commitment
      acknowledges and agrees that its obligation to deliver to Agent, for the account
      of the Issuing Lender, an amount equal to its respective Pro Rata Share pursuant
      to this Section 2.12(b) shall be absolute and unconditional and such
      remittance shall be made notwithstanding the occurrence or continuation of
      an
      Event of Default or Default or the failure to satisfy any condition set forth
      in
Section 3 hereof. If any such Lender fails to make available to
      Agent the amount of such Lender’s Pro Rata Share of any payments made by the
      Issuing Lender in respect of such Letter of Credit as provided in this Section,
      Agent (for the account of the Issuing Lender) shall be entitled to recover
      such
      amount on demand from such Lender together with interest thereon at the
      Defaulting Lender Rate until paid in full. 

     

    (c)
      Each Borrower hereby agrees to
      indemnify, save, defend, and hold the Lender Group harmless from any loss,
      cost,
      expense, or liability, and reasonable attorneys fees incurred by the Lender
      Group arising out of or in connection with any Letter of Credit;
provided, however, that no Borrower shall be obligated hereunder
      to indemnify for any loss, cost, expense, or liability that is caused by the
      gross negligence or willful misconduct of the Issuing Lender or any other member
      of the Lender Group. Each Borrower agrees to be bound by the Underlying Issuer’s
      regulations and interpretations of any Underlying Letter of Credit or by Issuing
      Lender’s interpretations of any L/C issued by Issuing Lender to or for such
      Borrower’s account, even though this interpretation may be different from such
      Borrower’s own, and each Borrower understands and agrees that the Lender Group
      shall not be liable for any error, negligence, or mistake, whether of omission
      or commission, in following Borrowers’ instructions or those contained in the
      Letter of Credit or any modifications, amendments, or supplements thereto.
      Each
      Borrower understands that the L/C Undertakings may require Issuing Lender to
      indemnify the Underlying Issuer for certain costs or liabilities arising out
      of
      claims by Borrowers against such Underlying Issuer. Each Borrower hereby agrees
      to indemnify, save, defend, and hold the Lender Group harmless with respect
      to
      any loss, cost, expense (including reasonable attorneys fees), or liability
      incurred by the Lender Group under any L/C Undertaking as a result of the Lender
      Group’s indemnification of any Underlying Issuer; provided,
however, that no Borrower shall be obligated hereunder to indemnify
      for
      any loss, cost, expense, or liability that is caused by the gross negligence
      or
      willful misconduct of the Issuing Lender or any other member of the Lender
      Group. 

     

    (d)
      Each Borrower hereby authorizes
      and directs any Underlying Issuer to deliver to the Issuing Lender all
      instruments, documents, and other writings and property received by such
      Underlying Issuer pursuant to such Underlying Letter of Credit and to accept
      and
      rely upon the Issuing Lender’s instructions with respect to all matters arising
      in connection with such Underlying Letter of Credit and the related application.
      

     

    (e)
      Any and all charges,
      commissions, fees, and costs incurred by the Issuing Lender relating to
      Underlying Letters of Credit shall be Lender Group Expenses for purposes of
      this
      Agreement and immediately shall be reimbursable by Borrowers to Agent for the
      account of the Issuing Lender; it being acknowledged and agreed by each Borrower
      that, as of the Closing Date, the issuance charge imposed by the prospective
      Underlying Issuer is .825% per annum times the face amount of each Underlying
      Letter of Credit, that such issuance charge may be changed from time to time,
      and that the Underlying Issuer also imposes a schedule of charges for
      amendments, extensions, drawings, and renewals. 

     

     

     

    -47-


     

    (f)
      If by reason of (i) any
      change in any applicable law, treaty, rule, or regulation or any change in
      the
      interpretation or application thereof by any Governmental Authority, or
      (ii) compliance by the Underlying Issuer or the Lender Group with any
      direction, request, or requirement (irrespective of whether having the force
      of
      law) of any Governmental Authority or monetary authority including, Regulation
      D
      of the Federal Reserve Board as from time to time in effect (and any successor
      thereto): 

     

    (i)
      any reserve, deposit, or similar
      requirement is or shall be imposed or modified in respect of any Letter of
      Credit issued hereunder, or 

     

    (ii)
      there shall be imposed on the
      Underlying Issuer or the Lender Group any other condition regarding any
      Underlying Letter of Credit or any Letter of Credit issued pursuant hereto;
      

     

    and
      the result of the foregoing is
      to increase, directly or indirectly, the cost to the Lender Group of issuing,
      making, guaranteeing, or maintaining any Letter of Credit or to reduce the
      amount receivable in respect thereof by the Lender Group, then, and in any
      such
      case, Agent may, at any time within a reasonable period after the additional
      cost is incurred or the amount received is reduced, notify Administrative
      Borrower, and Borrowers shall pay on demand such amounts as Agent may specify
      to
      be necessary to compensate the Lender Group for such additional cost or reduced
      receipt, together with interest on such amount from the date of such demand
      until payment in full thereof at the rate then applicable to Base Rate Loans
      hereunder. The determination by Agent of any amount due pursuant to this
      Section, as set forth in a certificate setting forth the calculation thereof
      in
      reasonable detail, shall, in the absence of manifest or demonstrable error,
      be
      final and conclusive and binding on all of the parties hereto. 

     

    2.13
LIBOR
      Option. 

     

    (a)
Interest
      and Interest
      Payment Dates. In lieu of having interest charged at the rate based
      upon the Base Rate, Borrowers shall have the option (the “LIBOR Option”)
      to have interest on all or a portion of the Advances be charged at the LIBOR
      Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of
      (i) the last day of the Interest Period applicable thereto, (ii) the
      occurrence of an Event of Default in consequence of which the Required Lenders
      or Agent on behalf thereof elect to accelerate the maturity of the Obligations,
      or (iii) termination of this Agreement pursuant to the terms hereof. On the
      last day of each applicable Interest Period, unless Administrative Borrower
      properly has exercised the LIBOR Option with respect thereto, the interest
      rate
      applicable to such LIBOR Rate Loan automatically shall convert to the rate
      of
      interest then applicable to Base Rate Loans of the same type hereunder. At
      any
      time that an Event of Default has occurred and is continuing, Borrowers no
      longer shall have the option to request that Advances bear interest at the
      LIBOR
      Rate and Agent shall have the right to convert the interest rate on all
      outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans
      hereunder. 

     

     

     

    -48-


     

    (b)
      LIBOR Election. 

     

    (i)
      Administrative Borrower may, at
      any time and from time to time, so long as no Event of Default has occurred
      and
      is continuing, elect to exercise the LIBOR Option by notifying Agent prior
      to
      11:00 a.m. (California time) at least 3 Business Days prior to the commencement
      of the proposed Interest Period (the “LIBOR Deadline”). Notice of
      Administrative Borrower’s election of the LIBOR Option for a permitted portion
      of the Advances and an Interest Period pursuant to this Section shall be made
      by
      delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline,
      or by telephonic notice received by Agent before the LIBOR Deadline (to be
      confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to
      5:00
      p.m. (California time) on the same day. Promptly upon its receipt of each such
      LIBOR Notice, Agent shall provide a copy thereof to each of the Lenders having
      a
      Revolver Commitment. 

     

    (ii)
      Each LIBOR Notice shall be
      irrevocable and binding on Borrowers. In connection with each LIBOR Rate Loan,
      each Borrower shall indemnify, defend, and hold Agent and the Lenders harmless
      against any loss, cost, or expense incurred by Agent or any Lender as a result
      of (a) the payment of any principal of any LIBOR Rate Loan other than on
      the last day of an Interest Period applicable thereto (including as a result
      of
      an Event of Default), (b) the conversion of any LIBOR Rate Loan other than
      on the last day of the Interest Period applicable thereto, or (c) the
      failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date
      specified in any LIBOR Notice delivered pursuant hereto (such losses, costs,
      and
      expenses, collectively, “Funding Losses”). Funding Losses shall, with
      respect to Agent or any Lender, be deemed to equal the amount determined by
      Agent or such Lender to be the excess, if any, of (i) the amount of
      interest that would have accrued on the principal amount of such LIBOR Rate
      Loan
      had such event not occurred, at the LIBOR Rate that would have been applicable
      thereto, for the period from the date of such event to the last day of the
      then
      current Interest Period therefor (or, in the case of a failure to borrow,
      convert or continue, for the period that would have been the Interest Period
      therefor), minus (ii) the amount of interest that would accrue on
      such principal amount for such period at the interest rate which Agent or such
      Lender would be offered were it to be offered, at the commencement of such
      period, Dollar deposits of a comparable amount and period in the London
      interbank market. A certificate of Agent or a Lender delivered to Administrative
      Borrower setting forth any amount or amounts that Agent or such Lender is
      entitled to receive pursuant to this Section shall be conclusive absent manifest
      error. 

     

    (iii)
      Borrowers shall have not more
      than 5 LIBOR Rate Loans in effect at any given time. Borrowers only may exercise
      the LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral
      multiples of $500,000 in excess thereof. 

     

     

     

    -49-


     

    (c)
Prepayments.
      Borrowers may prepay LIBOR Rate Loans at any time; provided,
however, that in the event that LIBOR Rate Loans are prepaid on any
      date
      that is not the last day of the Interest Period applicable thereto, including
      as
      a result of any automatic prepayment through the required application by Agent
      of proceeds of Collections in accordance with Section 2.4(b) or for any
      other reason, including early termination of the term of this Agreement or
      acceleration of the Obligations pursuant to the terms hereof, each Borrower
      shall indemnify, defend, and hold Agent and the Lenders and their Participants
      harmless against any and all Funding Losses in accordance with clause
      (b) above. 

     

    (d)
Special
      Provisions
      Applicable to LIBOR Rate. 

     

    (i)
      The LIBOR Rate may be adjusted
      by Agent with respect to any Lender on a prospective basis to take into account
      any additional or increased costs to such Lender of maintaining or obtaining
      any
      eurodollar deposits or increased costs due to changes in applicable law
      occurring subsequent to the commencement of the then applicable Interest Period,
      including changes in tax laws (except changes of general applicability in
      corporate income tax laws) and changes in the reserve requirements imposed
      by
      the Board of Governors of the Federal Reserve System (or any successor),
      excluding the Reserve Percentage, which additional or increased costs would
      increase the cost of funding loans bearing interest at the LIBOR Rate. In any
      such event, the affected Lender shall give Administrative Borrower and Agent
      notice of such a determination and adjustment and Agent promptly shall transmit
      the notice to each other Lender and, upon its receipt of the notice from the
      affected Lender, Administrative Borrower may, by notice to such affected Lender
      (y) require such Lender to furnish to Administrative Borrower a statement
      setting forth the basis for adjusting such LIBOR Rate and the method for
      determining the amount of such adjustment, or (z) repay the LIBOR Rate
      Loans with respect to which such adjustment is made (together with any amounts
      due under clause (b)(ii) above). 

     

    (ii)
      In the event that any change in
      market conditions or any law, regulation, treaty, or directive, or any change
      therein or in the interpretation of application thereof, shall at any time
      after
      the date hereof, in the reasonable opinion of any Lender, make it unlawful
      or
      impractical for such Lender to fund or maintain LIBOR Advances or to continue
      such funding or maintaining, or to determine or charge interest rates at the
      LIBOR Rate, such Lender shall give notice of such changed circumstances to
      Agent
      and Administrative Borrower and Agent promptly shall transmit the notice to
      each
      other Lender and (y) in the case of any LIBOR Rate Loans of such Lender
      that are outstanding, the date specified in such Lender’s notice shall be deemed
      to be the last day of the Interest Period of such LIBOR Rate Loans, and interest
      upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at
      the
      rate then applicable to Base Rate Loans, and (z) Borrowers shall not be
      entitled to elect the LIBOR Option until such Lender determines that it would
      no
      longer be unlawful or impractical to do so. 

     

    (e)
No
      Requirement of
      Matched Funding. Anything to the contrary contained herein
      notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
      is required actually to acquire eurodollar deposits to fund or otherwise match
      

     

     

     

    -50-


     

    fund
      any Obligation as to which
      interest accrues at the LIBOR Rate. The provisions of this Section shall apply
      as if each Lender or its Participants had match funded any Obligation as to
      which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits
      for each Interest Period in the amount of the LIBOR Rate Loans. 

     

    2.14
Capital
      Requirements. If, after the date hereof, any Lender determines that
      (i) the adoption of or change in any law, rule, regulation or guideline
      regarding capital requirements for banks or bank holding companies, or any
      change in the interpretation or application thereof by any Governmental
      Authority charged with the administration thereof, or (ii) compliance by
      such Lender or its parent bank holding company with any guideline, request
      or
      directive of any such entity regarding capital adequacy (whether or not having
      the force of law), the effect of reducing the return on such Lender’s or such
      holding company’s capital as a consequence of such Lender’s Commitments
      hereunder to a level below that which such Lender or such holding company could
      have achieved but for such adoption, change, or compliance (taking into
      consideration such Lender’s or such holding company’s then existing policies
      with respect to capital adequacy and assuming the full utilization of such
      entity’s capital) by any amount deemed by such Lender to be material in the
      exercise of its Permitted Discretion, then such Lender may notify Administrative
      Borrower and Agent thereof. Following receipt of such notice, Borrowers agree
      to
      pay such Lender on demand the amount of such reduction of return of capital
      as
      and when such reduction is determined, payable within 90 days after presentation
      by such Lender of a statement in the amount and setting forth in reasonable
      detail such Lender’s calculation thereof and the assumptions upon which such
      calculation was based (which statement shall be deemed true and correct absent
      manifest error). In determining such amount, such Lender may use any reasonable
      averaging and attribution methods. 

     

    2.15
Joint
      and Several
      Liability of Borrowers. 

     

    (a)
      Each of Borrowers is accepting
      joint and several liability hereunder and under the other Loan Documents in
      consideration of the financial accommodations to be provided by the Agent and
      the Lenders under this Agreement, for the mutual benefit, directly and
      indirectly, of each of Borrowers and in consideration of the undertakings of
      the
      other Borrowers to accept joint and several liability for the Obligations.
      

     

    (b)
      Each of Borrowers, jointly and
      severally, hereby irrevocably and unconditionally accepts, not merely as a
      surety but also as a co-debtor, joint and several liability with the other
      Borrowers, with respect to the payment and performance of all of the Obligations
      (including, without limitation, any Obligations arising under this
Section 2.15), it being the intention of the parties hereto that all
      the Obligations shall be the joint and several obligations of each Person
      composing Borrowers without preferences or distinction among them. 

     

    (c)
      If and to the extent that any of
      Borrowers shall fail to make any payment with respect to any of the Obligations
      as and when due or to perform any of the Obligations in accordance with the
      terms thereof, then in each such event the other Persons composing Borrowers
      will make such payment with respect to, or perform, such Obligation.


     

     

     

    -51-


     

    (d)
      The Obligations of each Person
      composing Borrowers under the provisions of this Section 2.15
      constitute the absolute and unconditional, full recourse Obligations of each
      Person composing Borrowers enforceable against each such Borrower, irrespective
      of the validity, regularity or enforceability of this Agreement or any other
      circumstances whatsoever. 

     

    (e)
      Except as otherwise expressly
      provided in this Agreement, each Person composing Borrowers hereby waives notice
      of acceptance of its joint and several liability, notice of any Advances or
      Letters of Credit issued under or pursuant to this Agreement, notice of the
      occurrence of any Default, Event of Default, or of any demand for any payment
      under this Agreement, notice of any action at any time taken or omitted by
      Agent
      or Lenders under or in respect of any of the Obligations, any requirement of
      diligence or to mitigate damages and, generally, to the extent permitted by
      applicable law, all demands, notices and other formalities of every kind in
      connection with this Agreement (except as otherwise provided in this Agreement).
      Each Person composing Borrowers hereby assents to, and waives notice of, any
      extension or postponement of the time for the payment of any of the Obligations,
      the acceptance of any payment of any of the Obligations, the acceptance of
      any
      partial payment thereon, any waiver, consent or other action or acquiescence
      by
      Agent or Lenders at any time or times in respect of any default by any Person
      composing Borrowers in the performance or satisfaction of any term, covenant,
      condition or provision of this Agreement, any and all other indulgences
      whatsoever by Agent or Lenders in respect of any of the Obligations, and the
      taking, addition, substitution or release, in whole or in part, at any time
      or
      times, of any security for any of the Obligations or the addition, substitution
      or release, in whole or in part, of any Person composing Borrowers. Without
      limiting the generality of the foregoing, each of Borrowers assents to any
      other
      action or delay in acting or failure to act on the part of any Agent or Lender
      with respect to the failure by any Person composing Borrowers to comply with
      any
      of its respective Obligations, including, without limitation, any failure
      strictly or diligently to assert any right or to pursue any remedy or to comply
      fully with applicable laws or regulations thereunder, which might, but for
      the
      provisions of this Section 2.15 afford grounds for terminating,
      discharging or relieving any Person composing Borrowers, in whole or in part,
      from any of its Obligations under this Section 2.15, it being the
      intention of each Person composing Borrowers that, so long as any of the
      Obligations hereunder remain unsatisfied, the Obligations of such Person
      composing Borrowers under this Section 2.15 shall not be discharged
      except by performance and then only to the extent of such performance. The
      Obligations of each Person composing Borrowers under this
Section 2.15 shall not be diminished or rendered unenforceable by
      any winding up, reorganization, arrangement, liquidation, reconstruction or
      similar proceeding with respect to any Person composing Borrowers or any Agent
      or Lender. The joint and several liability of the Persons composing Borrowers
      hereunder shall continue in full force and effect notwithstanding any
      absorption, merger, amalgamation or any other change whatsoever in the name,
      constitution or place of formation of any of the Persons composing Borrowers
      or
      any Agent or Lender. 

     

    (f)
      Each Person composing Borrowers
      represents and warrants to Agent and Lenders that such Borrower is currently
      informed of the financial condition of Borrowers and of all other circumstances
      which a diligent inquiry would reveal and which bear upon the risk of nonpayment
      of the Obligations. Each Person composing Borrowers further represents and
      warrants to Agent and Lenders that such Borrower has read and understands the
      terms and conditions of the Loan Documents. Each Person composing Borrowers
      hereby covenants that such Borrower will continue to keep informed of Borrowers’
financial condition, the financial condition of other guarantors, if any, and
      of
      all other circumstances which bear upon the risk of nonpayment or nonperformance
      of the Obligations. 

     

     

     

    -52-


     

    (g)
      The provisions of this
Section 2.15 are made for the benefit of the Agent, the Lenders and
      their respective successors and assigns, and may be enforced by it or them
      from
      time to time against any or all of the Persons composing Borrowers as often
      as
      occasion therefor may arise and without requirement on the part of any such
      Agent, Lender, successor or assign first to marshal any of its or their claims
      or to exercise any of its or their rights against any of the other Persons
      composing Borrowers or to exhaust any remedies available to it or them against
      any of the other Persons composing Borrowers or to resort to any other source
      or
      means of obtaining payment of any of the Obligations hereunder or to elect
      any
      other remedy. The provisions of this Section 2.15 shall remain in
      effect until all of the Obligations shall have been paid in full or otherwise
      fully satisfied. If at any time, any payment, or any part thereof, made in
      respect of any of the Obligations, is rescinded or must otherwise be restored
      or
      returned by any Agent or Lender upon the insolvency, bankruptcy or
      reorganization of any of the Persons composing Borrowers, or otherwise, the
      provisions of this Section 2.15 will forthwith be reinstated in
      effect, as though such payment had not been made. 

     

    3.
      CONDITIONS; TERM OF
      AGREEMENT. 

     

    3.1
Conditions
      Precedent
      to the Initial Extension of Credit. The obligation of the Lender
      Group (or any member thereof) to make the initial Advance (or otherwise to
      extend any credit provided for hereunder) on the Closing Date, is subject to
      the
      fulfillment, to the satisfaction of Agent, of each of the conditions precedent
      set forth below: 

     

    (a)
      the Closing Date shall occur on
      or before April 16, 2001; 

     

    (b)
      Agent shall have received all
      financing statements required by Agent, duly executed by the applicable
      Borrowers, and Agent shall have received searches reflecting the filing of
      all
      such financing statements; 

     

    (c)
      Agent shall have received each
      of the following documents, in form and substance satisfactory to Agent, duly
      executed, and each such document shall be in full force and effect:


     

    (i)
      [Intentionally Omitted]


     

    (ii)
      the Disbursement Letter,


     

    (iii)
      the Due Diligence Letter,


     

    (iv)
      the Fee Letter, 

     

    (v)
      the Guaranties, 

     

    (vi)
      the Cash Management Agreements,


     

     

     

    -53-


     

    (vii)
      the Contribution Agreement,


     

    (vii)
      the Officers’ Certificate,


     

    (ix)
      the Patent Security Agreement,


     

    (x)
      the Trademark Security
      Agreement, 

     

    (xii)
      [Intentionally Omitted],


     

    (xiii)
      the Guarantor Security
      Agreement, 

     

    (xiv)
      [Intentionally Omitted];


     

    (d)
      Agent shall have received a
      certificate from the Secretary of each Borrower attesting to the resolutions
      of
      such Borrower’s Board of Directors authorizing its execution, delivery, and
      performance of this Agreement and the other Loan Documents to which such
      Borrower is a party and authorizing specific officers of such Borrower to
      execute the same; 

     

    (e)
      Agent shall have received copies
      of each Borrower’s Governing Documents, as amended, modified, or supplemented to
      the Closing Date, certified by the Secretary of such Borrower; 

     

    (f)
      Agent shall have received a
      certificate of status with respect to each Borrower, dated within 10 days of
      the
      Closing Date, such certificate to be issued by the appropriate officer of the
      jurisdiction of organization of such Borrower, which certificate shall indicate
      that such Borrower is in good standing in such jurisdiction; 

     

    (g)
      Agent shall have received
      certificates of status with respect to each Borrower, each dated within 30
      days
      of the Closing Date, such certificates to be issued by the appropriate officer
      of the jurisdictions (other than the jurisdiction of organization of such
      Borrower) in which its failure to be duly qualified or licensed would constitute
      a Material Adverse Change, which certificates shall indicate that such Borrower
      is in good standing in such jurisdictions; 

     

    (h)
      Agent shall have received a
      certificate from the Secretary of each Guarantor attesting to the resolutions
      of
      such Guarantor’s Board of Directors authorizing its execution, delivery, and
      performance of the Loan Documents to which such Guarantor is a party and
      authorizing specific officers of such Guarantor to execute the same;


     

    (i)
      Agent shall have received copies
      of each Guarantor’s Governing Documents, as amended, modified, or supplemented
      to the Closing Date, certified by the Secretary of such Guarantor; 

     

    (j)
      Agent shall have received a
      certificate of status with respect to each Guarantor, dated within 10 days
      of
      the Closing Date, such certificate to be issued by the appropriate officer
      of
      the jurisdiction of organization of such Guarantor, which certificate shall
      indicate that such Guarantor is in good standing in such jurisdiction;


     

     

     

    -54-


     

    (k)
      Agent shall have received
      certificates of status with respect to each Guarantor, each dated within 30
      days
      of the Closing Date, such certificates to be issued by the appropriate officer
      of the jurisdictions (other than the jurisdiction of organization of such
      Guarantor) in which its failure to be duly qualified or licensed would
      constitute a Material Adverse Change, which certificates shall indicate that
      such Guarantor is in good standing in such jurisdictions; 

     

    (l)
      Agent shall have received a
      certificate of insurance, together with the endorsements thereto, as are
      required by Section 6.8, the form and substance of which shall be
      satisfactory to Agent; 

     

    (m)
      Agent shall have received
      Collateral Access Agreements with respect to the locations set forth on Schedule
      3.1(m) hereto; 

     

    (n)
      Agent shall have received
      opinions of Borrowers’ counsel in form and substance satisfactory to Agent;


     

    (o)
      Agent shall have received
      satisfactory evidence (including a certificate of the chief financial officer
      of
      Parent) that all tax returns required to be filed by Borrowers have been timely
      filed and all taxes upon Borrowers or their properties, assets, income, and
      franchises (including Real Property taxes and payroll taxes) have been paid
      prior to delinquency, except such taxes that are the subject of a Permitted
      Protest; 

     

    (p)
      Intentionally deleted;


     

    (q)
      Agent shall have completed its
      business, legal, and collateral due diligence, including (i) a collateral
      audit and review of Borrowers’ books and records and verification of Borrowers’
representations and warranties to the Lender Group, the results of which shall
      be satisfactory to Agent, (ii) an inspection of each of the locations where
      Inventory is located, the results of which shall be satisfactory to Agent,
      and
      (iii) receipt of an updated environmental review of Borrowers’ Real
      Property indicating no change from the initial environmental review provided
      to
      Agent on or about May, 2000; 

     

    (r)
      Agent shall have received
      completed reference checks with respect to Borrowers’ senior management, the
      results of which are satisfactory to Agent in its sole discretion; 

     

    (s)
      Agent shall have received an
      appraisal from Continental Plant of the Net Orderly Liquidation Value of
      Borrowers’ Inventory, the results of which shall be satisfactory to Agent;


     

    (t)
      Agent shall have received
      (i) Borrowers’ Closing Date Business Plan, and (ii) a draft of the
      Parent’s consolidated audited income statement for the fiscal year ended
      December 31, 2000, the results of which shall be materially consistent with
      the draft annual financial statements provided to Agent prior to the Closing
      Date; 

     

    (u)
      Agent shall have received a
      schedule from Parent listing all of the Parent’s significant real property
      indicating the estimated Fair Market Value of each item. 

     

     

     

    -55-


     

    (v)
      Borrowers shall pay all Lender
      Group Expenses incurred in connection with the transactions evidenced by this
      Agreement; 

     

    (w)
      Agent shall have received copies
      of each of Management Agreement and the Services Agreement together with a
      certificate of the Secretary of the applicable Borrower certifying each such
      document as being a true, correct, and complete copy thereof; 

     

    (x)
      Borrowers shall have received
      all licenses, approvals or evidence of other actions required by any
      Governmental Authority in connection with the execution and delivery by
      Borrowers of this Agreement or any other Loan Document or with the consummation
      of the transactions contemplated hereby and thereby; and 

     

    (y)
      all other documents and legal
      matters in connection with the transactions contemplated by this Agreement
      shall
      have been delivered, executed, or recorded and shall be in form and substance
      satisfactory to Agent. 

     

    3.2
Conditions
      Precedent
      to Restatement Effective Date. The effectiveness of this Agreement
      is subject to the fulfillment, in a manner satisfactory to the Agent, of each
      of
      the following conditions precedent (the first date upon which all such
      conditions shall have been satisfied being herein called the “Restatement
      Effective Date”): 

     

    (a)
      Representations and Warranties;
      No Event of Default. The representations and warranties contained in
      Section 5 herein and in each other Loan Document and certificate or other
      writing delivered to the Agent or any Lender pursuant hereto on or prior to
      the
      Restatement Effective Date shall be correct in all material respects on and
      as
      of the Restatement Effective Date as though made on and as of such date, except
      to the extent that such representations and warranties (or any schedules related
      thereto) expressly relate solely to an earlier date (in which case such
      representations and warranties shall be true and correct in all material
      respects on and as of such date); and no Default or Event of Default shall
      have
      occurred and be continuing on the Restatement Effective Date or would result
      from this Amendment becoming effective in accordance with its terms.


     

    (b)
      Delivery of Documents. The Agent
      shall have received on or before the Restatement Effective Date the following,
      each in form and substance satisfactory to the Agent and, unless indicated
      otherwise, dated the Restatement Effective Date: 

     

    (i)
      counterparts of this Agreement
      duly executed by the Borrowers, the Agent and the Lenders; 

     

    (ii)
      fully executed copies of the
      BofA Loan Agreement and the BofA Inter-Lender Agreement; 

     

    (iii)
      such other agreements,
      instruments, approvals, opinions and other documents as the Agent may reasonably
      request from the Borrowers. 

     

    (c)
      Amendment Fee. The Borrowers
      shall have paid to the Agent, for the benefit of the Lenders, in immediately
      available funds, a fully earned and nonrefundable amendment fee equal to $50,000
      the payment of which shall be effected by Agent charging such fee to Borrowers’
Loan Account. 

     

     

     

    -56-


     

    (d)
      Proceedings. All proceedings in
      connection with the transactions contemplated by this Agreement, and all
      documents incidental thereto, shall be satisfactory to the Agent and its special
      counsel, and the Agent and such special counsel shall have received from the
      Borrowers all such information and such counterpart originals or certified
      copies of documents, and such other agreements, instruments, approvals, opinions
      and other documents, as the Agent or such special counsel may reasonably
      request. 

     

    3.3
Conditions
      Precedent
      to all Extensions of Credit. The obligation of the Lender Group (or
      any member thereof) to make all Advances (or to extend any other credit
      hereunder) shall be subject to the following conditions precedent: 

     

    (a)
      the representations and
      warranties contained in this Agreement and the other Loan Documents shall be
      true and correct in all material respects on and as of the date of such
      extension of credit, as though made on and as of such date (except to the extent
      that such representations and warranties relate solely to an earlier date);
      

     

    (b)
      no Default or Event of Default
      shall have occurred and be continuing on the date of such extension of credit,
      nor shall either result from the making thereof; and 

     

    (c)
      no injunction, writ, restraining
      order, or other order of any nature prohibiting, directly or indirectly, the
      extending of such credit shall have been issued and remain in force by any
      Governmental Authority against any Borrower, Agent, any Lender, or any of their
      Affiliates. 

     

    3.4
Term.
      This Agreement shall become effective upon the execution and delivery hereof
      by
      Borrowers, Agent, and the Lenders and shall continue in full force and effect
      for a term ending on April 13, 2012 (the “Maturity Date”). The
      foregoing notwithstanding, the Lender Group, upon the election of the Required
      Lenders, shall have the right to terminate its obligations under this Agreement
      immediately and without notice upon the occurrence and during the continuation
      of an Event of Default. 

     

    3.5
Effect
      of
      Termination. On the date of termination of this Agreement, all
      Obligations (including contingent reimbursement obligations of Borrowers with
      respect to any outstanding Letters of Credit and including all Bank Products
      Obligations) immediately shall become due and payable without notice or demand
      (including providing cash collateral to be held by Agent for the benefit of
      Wells Fargo or its Affiliates with respect to the then extant Bank Products
      Obligations). No termination of this Agreement, however, shall relieve or
      discharge Borrowers of their duties, Obligations, or covenants hereunder and
      the
      Agent’s Liens in the Collateral shall remain in effect until all Obligations
      have been fully and finally discharged and the Lender Group’s obligations to
      provide additional credit hereunder have been terminated. When this Agreement
      has been terminated and all of the Obligations have been fully and finally
      discharged and the Lender Group’s obligations to provide additional credit under
      the Loan Documents have been terminated irrevocably, Agent will, at Borrowers’
sole expense, execute and deliver any UCC termination 

     

     

     

    -57-


     

    statements,
      lien releases, mortgage
      releases, re-assignments of trademarks, discharges of security interests, and
      other similar discharge or release documents (and, if applicable, in recordable
      form) as are reasonably necessary to release, as of record, the Agent’s Liens
      and all notices of security interests and liens previously filed by Agent with
      respect to the Obligations. 

     

    3.6
Early
      Termination by
      Borrowers. Borrowers have the option, at any time upon 90 days
      prior written notice by Administrative Borrower to Agent, to terminate this
      Agreement by paying to Agent, for the benefit of the Lender Group, in cash,
      the
      Obligations (including (a) either (i) providing cash collateral to be
      held by Agent for the benefit of those Lenders with a Revolver Commitment in
      an
      amount equal to 105% of the then extant Letter of Credit Usage, or
      (ii) causing the original Letters of Credit to be returned to the Issuing
      Lender, and (b) providing cash collateral to be held by Agent for the
      benefit of Wells Fargo or its Affiliates with respect to the then extant Bank
      Products Obligations), in full, together with the Applicable Prepayment Premium
      (to be allocated based upon letter agreements between Agent and individual
      Lenders). If Administrative Borrower has sent a notice of termination pursuant
      to the provisions of this Section, then the Commitments shall terminate and
      Borrowers shall be obligated to repay the Obligations (including (a) either
      (i) providing cash collateral to be held by Agent for the benefit of those
      Lenders with a Revolver Commitment in an amount equal to 105% of the then extant
      Letter of Credit Usage, or (ii) causing the original Letters of Credit to
      be returned to the Issuing Lender, and (b) providing cash collateral to be
      held by Agent for the benefit of Wells Fargo or its Affiliates with respect
      to
      the then extant Bank Products Obligations), in full, together with the
      Applicable Prepayment Premium, on the date set forth as the date of termination
      of this Agreement in such notice. In the event of the termination of this
      Agreement and repayment of the Obligations at any time prior to the Maturity
      Date, for any other reason, including (a) termination upon the election of
      the Required Lenders to terminate after the occurrence and during the
      continuation of an Event of Default, (b) foreclosure and sale of
      Collateral, (c) sale of the Collateral in any Insolvency Proceeding, or
      (iv) restructure, reorganization or compromise of the Obligations by the
      confirmation of a plan of reorganization, or any other plan of compromise,
      restructure, or arrangement in any Insolvency Proceeding, then, in view of
      the
      impracticability and extreme difficulty of ascertaining the actual amount of
      damages to the Lender Group or profits lost by the Lender Group as a result
      of
      such early termination, and by mutual agreement of the parties as to a
      reasonable estimation and calculation of the lost profits or damages of the
      Lender Group, Borrowers shall pay the Applicable Prepayment Premium to Agent
      (to
      be allocated based upon letter agreements between Agent and individual Lenders),
      measured as of the date of such termination. 

     

    4.
      CREATION OF SECURITY
      INTEREST. 

     

    4.1
Grant
      of Security
      Interest.

     

    (a)
      Each Borrower hereby grants to
      Agent, for the benefit of the Lender Group, a continuing security interest
      in
      all of its right, title, and interest in all currently existing and hereafter
      acquired or arising Collateral in order to secure prompt repayment of any and
      all of the Obligations in accordance with the terms and conditions of the Loan
      Documents and in order to secure prompt performance by Borrowers of each of
      their covenants and duties under the Loan Documents. The Agent’s Liens in and to
      the Collateral shall attach to all Collateral without further act on the part
      of
      Agent or Borrowers. Anything contained in this Agreement or 

     

     

     

    -58-


     

    any
      other Loan Document to the
      contrary notwithstanding, except for Permitted Dispositions and as otherwise
      permitted in Sections 7.3 and 7.4 of this Agreement, Borrowers
      have no authority, express or implied, to dispose of any item or portion of
      the
      Collateral. 

     

    (b)
      Each of the Borrowers hereby
      confirm, ratify and reaffirm that the Liens granted to the Agent pursuant to
      the
      Original Loan Agreement (as amended hereby), in all of its right, title, and
      interest in all then existing and thereafter acquired or arising Collateral
      in
      order to secure prompt repayment of any and all of the Obligations in accordance
      with the terms and conditions of the Loan Documents and in order to secure
      prompt performance by the Borrowers of each of their covenants and duties under
      the Loan Documents are continuing and are and shall remain unimpaired and
      continue to constitute fully perfected, first priority Liens in favor of Agent
      (subject only to Permitted Liens which have priority as a matter of law), for
      the benefit of the Lender Group, with the same force, effect and priority in
      effect both immediately prior to and after entering into this Agreement and
      the
      other Loan Documents entered into on or as of the Closing Date. Each of the
      Borrowers hereby confirm and agree that such Liens attach to all currently
      existing and hereafter acquired or arising Collateral in order to secure the
      prompt repayment of any and all of the Obligations in accordance with the terms
      and conditions of the Loan Documents (as defined herein) and in order to secure
      the prompt performance by the Borrowers of each of their covenants and duties
      under the Loan Documents. The Agent’s Liens in and to the Collateral have
      attached and continue to attach to all such Collateral without further act
      on
      the part of Agent or the Borrowers. Anything contained in this Agreement or
      any
      other Loan Document to the contrary notwithstanding, except for Permitted
      Dispositions or as otherwise permitted in Sections 7.5 and 7.4 of this
      Agreement, the Borrowers have no authority, express or implied, to dispose
      of
      any item or portion of the Collateral. 

     

    4.2
Negotiable
      Collateral. In the event that any Collateral, including proceeds,
      is evidenced by or consists of Negotiable Collateral, and if and to the extent
      that perfection or priority of Agent’s security interest is dependent on or
      enhanced by possession, the applicable Borrower, immediately upon the request
      of
      Agent, shall endorse and deliver physical possession of such Negotiable
      Collateral to Agent. 

     

    4.3
Collection
      of
      Accounts, General Intangibles, and Negotiable Collateral. At any
      time after the occurrence and during the continuation of an Event of Default,
      Agent or Agent’s designee may (a) notify Account Debtors of Borrowers that
      the Accounts, chattel paper, or General Intangibles have been assigned to Agent
      or that Agent has a security interest therein, or (b) collect the Accounts,
      chattel paper, or General Intangibles directly and charge the collection costs
      and expenses to the Loan Account. Each Borrower agrees that it will hold in
      trust for the Lender Group, as the Lender Group’s trustee, any Collections that
      it receives and immediately will deliver said Collections to Agent or a Cash
      Management Bank in their original form as received by the applicable Borrower.
      

     

     

     

    -59-


     

    4.4
Filing
      of Financing
      Statements; Commercial Tort Claims; Delivery of Additional Documentation
      Required.

     

    (a)
      Each Borrower authorizes Agent
      to file any financing statement required hereunder, and any continuation
      statement or amendment with respect thereto, in any appropriate filing office
      without the signature of such Borrower where permitted by applicable law. Each
      Borrower hereby ratifies the filing of any financing statement, and any
      continuation statement or amendment with respect thereto, filed without the
      signature of such Borrower prior to the date hereof. Agent shall endeavor to
      promptly deliver to Administrative Borrower a copy of each such financing
      statement so filed by Agent. 

     

    (b)
      If any Borrower acquires any
      commercial tort claims after the date hereof, such Borrower shall immediately
      deliver to Agent a written description of such commercial tort claim and shall
      deliver a written agreement, in form and substance satisfactory to Agent,
      pursuant to which such Borrower shall pledge and collaterally assign all of
      its
      right, title and interest in and to such commercial tort claim to Agent, for
      the
      benefit of the Lender Group, as security for the Obligations (a “Commercial
      Tort Claim Assignment”). 

     

    (c)
      At any time upon the request of
      Agent, Borrowers shall execute and deliver to Agent, and cause its Subsidiaries
      that are Guarantors to execute and deliver to Agent, any and all financing
      statements, original financing statements in lieu of continuation statements,
      amendments to financing statements, fixture filings, security agreements,
      pledges, assignments, Commercial Tort Claim Assignments, endorsements of
      certificates of title, and all other documents (collectively, the “Additional
      Documents”) that Agent may request in its Permitted Discretion, in form and
      substance satisfactory to Agent, to create and perfect and continue perfected
      or
      better perfect the Agent’s Liens in the Collateral (whether now owned or
      hereafter arising or acquired, tangible or intangible, real or personal), and
      in
      order to fully consummate all of the transactions contemplated hereby and under
      the other Loan Documents. To the maximum extent permitted by applicable law,
      each Borrower authorizes Agent to execute any such Additional Documents in
      the
      applicable Borrower’s name and authorize Agent to file such executed Additional
      Documents in any appropriate filing office. To the maximum extent permitted
      by
      applicable law, each Borrower authorizes the filing of any such Additional
      Documents without the signature of such Borrower in any appropriate filing
      office. In addition, on such periodic basis as Agent shall require, Borrowers
      shall (i) provide Agent with a report of all new patentable, copyrightable,
      or trademarkable materials acquired or generated by Borrowers during the prior
      period, (ii) cause all patents, copyrights, and trademarks acquired or
      generated by Borrowers that are not already the subject of a registration with
      the appropriate filing office (or an application therefor diligently prosecuted)
      to be registered with such appropriate filing office in a manner sufficient
      to
      impart constructive notice of Borrowers’ ownership thereof, and (iii) cause
      to be prepared, executed, and delivered to Agent supplemental schedules to
      the
      applicable Loan Documents to identify such patents, copyrights, and trademarks
      as being subject to the security interests created thereunder. 

     

     

     

    -60-


     

    4.5
Power
      of
      Attorney. Each Borrower hereby irrevocably makes, constitutes, and
      appoints Agent (and any of Agent’s officers, employees, or agents designated by
      Agent) as such Borrower’s true and lawful attorney, with power to (a) if
      such Borrower refuses to, or fails timely to execute and deliver any of the
      documents described in Section 4.4, sign the name of such Borrower
      on any of the documents described in Section 4.4, (b) at any
      time that an Event of Default has occurred and is continuing, sign such
      Borrower’s name on any invoice or bill of lading relating to the Collateral,
      drafts against Account Debtors, or notices to Account Debtors, (c) send
      requests for verification of Accounts, (d) endorse such Borrower’s name on
      any Collection item that may come into the Lender Group’s possession,
      (e) at any time that an Event of Default has occurred and is continuing,
      make, settle, and adjust all claims under such Borrower’s policies of property
      insurance and make all determinations and decisions with respect to such
      policies of insurance, and (f) at any time that an Event of Default has
      occurred and is continuing, settle and adjust disputes and claims respecting
      the
      Accounts, chattel paper, or General Intangibles directly with Account Debtors,
      for amounts and upon terms that Agent determines to be reasonable, and Agent
      may
      cause to be executed and delivered any documents and releases that Agent
      determines to be necessary. The appointment of Agent as each Borrower’s
      attorney, and each and every one of its rights and powers, being coupled with
      an
      interest, is irrevocable until all of the Obligations have been fully and
      finally repaid and performed and the Lender Group’s obligations to extend credit
      hereunder are terminated. 

     

    4.6
Right
      to
      Inspect. Agent and each Lender (through any of their respective
      officers, employees, or agents) shall have the right, from time to time
      hereafter to inspect the Books and to check, test, and appraise the Collateral
      in order to verify Borrowers’ financial condition or the amount, quality, value,
      condition of, or any other matter relating to, the Collateral. 

     

    4.7
Control
      Agreements. Each Borrower agrees that it will not transfer any
      Collateral or any other assets out of any Securities Accounts or deposit
      accounts and, if to another securities intermediary or depository, unless each
      of the applicable Borrower, Agent, and the substitute securities intermediary
      or
      depository have entered into a Control Agreement. Upon the occurrence and during
      the continuance of a Event of Default, Agent may notify any securities
      intermediary or depository to liquidate the applicable Securities Account or
      depository account or any related Investment Property maintained or held thereby
      and remit the proceeds thereof to the Agent’s Account for application to the
      Obligations in accordance with the terms of the Loan Documents. Each Borrower
      hereby agrees to take any or all action that Agent requests in order for Agent
      to obtain control in accordance with Sections 9-104, 9-105, 9-106 and 9-107
      of
      the Code with respect to any Collateral constituting Securities Accounts,
      deposit accounts, electronic chattel paper, Investment Property and
      letter-of-credit rights. No arrangement contemplated hereby or by a Control
      Agreement in respect of any Securities Accounts or other Investment Property,
      or
      deposit accounts, electronic paper or letter-of-credit rights, shall be modified
      by any Borrower without the prior written consent of Agent. 

     

     

     

    -61-


     

    5.
      REPRESENTATIONS AND
      WARRANTIES. 

     

    In
      order to induce the Lender Group
      to enter into this Agreement, each Borrower makes the following representations
      and warranties to the Lender Group which shall be true, correct, and complete,
      in all material respects, as of the date hereof, and shall be true, correct,
      and
      complete, in all material respects, as of the Restatement Effective Date, and
      at
      and as of the date of the making of each Advance (or other extension of credit)
      made thereafter, as though made on and as of the date of such Advance (or other
      extension of credit) (except to the extent that such representations and
      warranties relate solely to an earlier date) and such representations and
      warranties shall survive the execution and delivery of this Agreement:


     

    5.1
No
      Encumbrances. Each Borrower has good and indefeasible title to its
      Collateral free and clear of Liens except for Permitted Liens. 

     

    5.2
Eligible
      Accounts. The Eligible Accounts are bona fide existing payment
      obligations of Account Debtors created by the sale and delivery of Inventory
      or
      the rendition of services to such Account Debtors in the ordinary course of
      Borrowers’ business, owed to Borrowers without defenses, disputes, offsets,
      counterclaims, or rights of return or cancellation. As to each Eligible Account,
      such Account is not: 

     

    (a)
      owed by an employee, Affiliate,
      or agent of a Borrower, 

     

    (b)
      on account of a transaction
      wherein goods were placed on consignment or were sold pursuant to a guaranteed
      sale, a sale or return, a sale on approval, a bill and hold, or on any other
      terms by reason of which the payment by the Account Debtor may be conditional,
      

     

    (c)
      payable in a currency other than
      Dollars, 

     

    (d)
      owed by an Account Debtor that
      has or has asserted a right of setoff, has disputed its liability, or has made
      any claim with respect to its obligation to pay the Account, 

     

    (e)
      owed by an Account Debtor that
      is subject to any Insolvency Proceeding or is not Solvent or as to which a
      Borrower has received notice of an imminent Insolvency Proceeding or a material
      impairment of the financial condition of such Account Debtor, 

     

    (f)
      on account of a transaction as
      to which the goods giving rise to such Account have not been shipped and billed
      to the Account Debtor or the services giving rise to such Account have not
      been
      performed and accepted by the Account Debtor, 

     

    (g)
      a right to receive progress
      payments or other advance billings that are due prior to the completion of
      performance by the applicable Borrower of the subject contract for goods or
      services, and 

     

    (h)
      an Account that has not been
      billed to the customer. 

     

     

     

    -62-


     

    5.3
Eligible
      Inventory
      and Eligible Raw Inventory. All Eligible Inventory is of good and
      merchantable quality, free from defects. As to each item of Eligible Inventory
      and Eligible Raw Inventory, such Inventory is 

     

    (a)
      owned by a Borrower free and
      clear of all Liens other than Liens in favor of Agent, 

     

    (b)
      either located at one of the
      locations set forth on Schedule E-1 or in transit from one such location to
      another such location, 

     

    (c)
      not located on real property
      leased by a Borrower or in a contract warehouse, in each case, unless subject
      to
      a Collateral Access Agreement executed by the lessor, the warehouseman, or
      other
      third party, as the case may be, and unless segregated or otherwise separately
      identifiable from goods of others, if any, stored on the premises, 

     

    (d)
      not goods that have been
      returned or rejected by Borrowers’ customers, and 

     

    (e)
      not goods that are obsolete or
      slow moving, restrictive or custom items, work-in-process, or that constitute
      spare parts, packaging and shipping materials, supplies used or consumed in
      Borrowers’ business, bill and hold goods, defective goods, “seconds,” or
      Inventory acquired on consignment, except for Eligible Raw Inventory.


     

    5.4
      Equipment. All of the material Equipment is used or held for use
      in Borrowers’ business or is useful in Borrowers’ business. 

     

    5.5
Location
      of
      Inventory. The Inventory are not stored with a bailee,
      warehouseman, or similar party and are located only at the locations identified
      on Schedule 5.5. 

     

    5.6
Inventory
      Records. Each Borrower keeps correct and accurate records itemizing
      and describing the type, quality, and quantity of its Inventory and the book
      value thereof. 

     

    5.7
Location
      of Chief
      Executive Office; FEIN. The chief executive office of each Borrower
      is located at the address indicated in Schedule 5.7 and each Borrower’s FEIN is
      identified in Schedule 5.7. 

     

    5.8
Due
      Organization and
      Qualification; Subsidiaries. 

     

    (a)
      Each Borrower is duly organized
      and existing and in good standing under the laws of the jurisdiction of its
      organization and qualified to do business in any state where the failure to
      be
      so qualified reasonably could be expected to have a Material Adverse Change.
      

     

    (b)
      Set forth on Schedule 5.8(b), is
      a complete and accurate description of the authorized capital Stock of each
      Borrower, by class, and, as of the Closing Date, a description of the number
      of
      shares of each such class that are issued and outstanding. Other than as
      described on Schedule 5.8(b), there are no subscriptions, options, warrants,
      or
      calls relating to any shares 

     

     

     

    -63-


     

    of
      each Borrower’s capital Stock,
      including any right of conversion or exchange under any outstanding security
      or
      other instrument. No Borrower is subject to any obligation (contingent or
      otherwise) to repurchase or otherwise acquire or retire any shares of its
      capital Stock or any security convertible into or exchangeable for any of its
      capital Stock. 

     

    (c)
      Set forth on Schedule 5.8(c), is
      a complete and accurate list of each Borrower’s direct and indirect
      Subsidiaries, showing: (i) the jurisdiction of their organization;
      (ii) the number of shares of each class of common and preferred Stock
      authorized for each of such Subsidiaries; and (iii) the number and the
      percentage of the outstanding shares of each such class owned directly or
      indirectly by the applicable Borrower. All of the outstanding capital Stock
      of
      each such Subsidiary has been validly issued and is fully paid and
      non-assessable. 

     

    (d)
      Except as set forth on Schedule
      5.8(c), there are no subscriptions, options, warrants, or calls relating to
      any
      shares of any Borrower’s Subsidiaries’ capital Stock, including any right of
      conversion or exchange under any outstanding security or other instrument.
      No
      Borrower or any of its respective Subsidiaries is subject to any obligation
      (contingent or otherwise) to repurchase or otherwise acquire or retire any
      shares of any Borrower’s Subsidiaries’ capital Stock or any security convertible
      into or exchangeable for any such capital Stock. 

     

    5.9
Due
      Authorization; No
      Conflict. 

     

    (a)
      As to each Borrower, the
      execution, delivery, and performance by such Borrower of this Agreement and
      the
      Loan Documents to which it is a party have been duly authorized by all necessary
      action on the part of such Borrower. 

     

    (b)
      As to each Borrower, the
      execution, delivery, and performance by such Borrower of this Agreement and
      the
      Loan Documents to which it is a party do not and will not (i) violate any
      provision of federal, state, or local law or regulation applicable to any
      Borrower, the Governing Documents of any Borrower, or any order, judgment,
      or
      decree of any court or other Governmental Authority binding on any Borrower,
      (ii) conflict with, result in a breach of, or constitute (with due notice
      or lapse of time or both) a default under any material contractual obligation
      of
      any Borrower, (iii) result in or require the creation or imposition of any
      Lien of any nature whatsoever upon any properties or assets of Borrower, other
      than Permitted Liens, or (iv) require any approval of any Borrower’s
      interestholders or any approval or consent of any Person under any material
      contractual obligation of any Borrower. 

     

    (c)
      Other than the filing of
      financing statements, the execution, delivery, and performance by each Borrower
      of this Agreement and the Loan Documents to which such Borrower is a party
      do
      not and will not require any registration with, consent, or approval of, or
      notice to, or other action with or by, any Governmental Authority or other
      Person. 

     

    (d)
      As to each Borrower, this
      Agreement and the other Loan Documents to which such Borrower is a party, and
      all other documents contemplated hereby and thereby, when executed and delivered
      by such Borrower will be the legally valid and binding obligations of such
      Borrower, enforceable against such Borrower in accordance with their respective
      terms, except as enforcement may be limited by equitable principles or by
      bankruptcy, insolvency, reorganization, moratorium, or similar laws relating
      to
      or limiting creditors’ rights generally. 

     

     

     

    -64-


     

    (e)
      The Agent’s Liens are validly
      created, perfected, and first priority Liens, subject only to Permitted Liens
      and the filing of financing statements and other recordations with the United
      States Patent and Trademark Office. 

     

    (f)
      The execution, delivery, and
      performance by each Guarantor of the Loan Documents to which it is a party
      have
      been duly authorized by all necessary action on the part of such Guarantor.
      

     

    (g)
      The execution, delivery, and
      performance by each Guarantor of the Loan Documents to which it is a party
      do
      not and will not (i) violate any provision of federal, state, or local law
      or regulation applicable to such Guarantor, the Governing Documents of such
      Guarantor, or any order, judgment, or decree of any court or other Governmental
      Authority binding on such Guarantor, (ii) conflict with, result in a breach
      of, or constitute (with due notice or lapse of time or both) a default under
      any
      material contractual obligation of such Guarantor, (iii) result in or
      require the creation or imposition of any Lien of any nature whatsoever upon
      any
      properties or assets of such Guarantor, other than Permitted Liens, or
      (iv) require any approval of such Guarantor’s interestholders or any
      approval or consent of any Person under any material contractual obligation
      of
      Guarantor. 

     

    (h)
      The execution, delivery, and
      performance by each Guarantor of the Loan Documents to which such Guarantor
      is a
      party do not and will not require any registration with, consent, or approval
      of, or notice to, or other action with or by, any Governmental Authority or
      other Person. 

     

    (i)
      The Loan Documents to which each
      Guarantor is a party, and all other documents contemplated hereby and thereby,
      when executed and delivered by such Guarantor will be legally valid and binding
      obligations of such Guarantor, enforceable against such Guarantor in accordance
      with their respective terms, except as enforcement may be limited by equitable
      principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
      laws relating to or limiting creditors’ rights generally. 

     

    5.10
      Litigation. Other than those matters disclosed on Schedule 5.10,
      there are no actions, suits, or proceedings pending or, to the best knowledge
      of
      Borrowers, threatened against Borrowers, or any of their Subsidiaries, as
      applicable, except for (a) matters that are fully covered by insurance
      (subject to customary deductibles), and (b) matters arising after the
      Closing Date that, if decided adversely to Borrowers, or any of their
      Subsidiaries, as applicable, reasonably could not be expected to result in
      a
      Material Adverse Change. 

     

    5.11
No
      Material Adverse
      Change. All financial statements relating to Borrowers that have
      been delivered by Borrowers to the Lender Group have been prepared in accordance
      with GAAP (except, in the case of unaudited financial statements, for the lack
      of footnotes and being subject to year-end audit adjustments) and present fairly
      in all material respects, Borrowers’ financial condition as of the date thereof
      and results of operations for the period then ended. 

     

     

     

    -65-


     

    5.12
Fraudulent
      Transfer. 

     

    (a)
      Each Borrower is Solvent.


     

    (b)
      No transfer of property is being
      made by any Borrower and no obligation is being incurred by any Borrower in
      connection with the transactions contemplated by this Agreement or the other
      Loan Documents with the intent to hinder, delay, or defraud either present
      or
      future creditors of Borrowers. 

     

    5.13
Employee
      Benefits. None of Borrowers, any of their Subsidiaries, or any of
      their ERISA Affiliates maintains or contributes to any Benefit Plan.


     

    5.14
Environmental
      Condition. Except as set forth on Schedule 5.14, (a) to
      Borrowers’ knowledge, none of Borrowers’ properties or assets has ever been used
      by Borrowers or by previous owners or operators in the disposal of, or to
      produce, store, handle, treat, release, or transport, any Hazardous Materials,
      where such production, storage, handling, treatment, release or transport was
      in
      violation, in any material respect, of applicable Environmental Law, (b) to
      Borrowers’ knowledge, none of Borrowers’ properties or assets has ever been
      designated or identified in any manner pursuant to any environmental protection
      statute as a Hazardous Materials disposal site, (c) none of Borrowers have
      received notice that a Lien arising under any Environmental Law has attached
      to
      any revenues or to any Real Property owned or operated by Borrowers, and
      (d) none of Borrowers have received a summons, citation, notice, or
      directive from the Environmental Protection Agency or any other federal or
      state
      governmental agency concerning any action or omission by any Borrower resulting
      in the releasing or disposing of Hazardous Materials into the environment.
      

     

    5.15
      [Intentionally
      Omitted].

     

    5.16
Intellectual
      Property. Each Borrower owns, or holds licenses in, all trademarks,
      trade names, copyrights, patents, patent rights, and licenses that are necessary
      to the conduct of its business as currently conducted. Attached hereto as
      Schedule 5.16 is a true, correct, and complete listing of all material patents,
      patent applications, trademarks, trademark applications, copyrights, and
      copyright registrations as to which each Borrower is the owner or is an
      exclusive licensee. 

     

    5.17
Leases.
      Borrowers enjoy peaceful and undisturbed possession under all leases material
      to
      the business of Borrowers and to which Borrowers are a party or under which
      Borrowers are operating. All of such leases are valid and subsisting and no
      material default by Borrowers exists under any of them. 

     

    5.18
DDAs.
      Set forth on Schedule 5.18 are all of the DDAs of each Borrower, including,
      with
      respect to each depository (i) the name and address of that depository, and
      (ii) the account numbers of the accounts maintained with such depository.


     

     

     

    -66-


     

    5.19
Complete
      Disclosure. All factual information (taken as a whole) furnished by
      or on behalf of Borrowers in writing to Agent or any Lender (including all
      information contained in the Schedules hereto or in the other Loan Documents)
      for purposes of or in connection with this Agreement, the other Loan Documents
      or any transaction contemplated herein or therein is, and all other such factual
      information (taken as a whole) hereafter furnished by or on behalf of Borrowers
      in writing to the Agent or any Lender will be, true and accurate in all material
      respects on the date as of which such information is dated or certified and
      not
      incomplete by omitting to state any fact necessary to make such information
      (taken as a whole) not misleading in any material respect at such time in light
      of the circumstances under which such information was provided. On the Closing
      Date, the Closing Date Projections represent, and as of the date on which any
      other Projections are delivered to Agent, such additional Projections represent
      Borrowers’ good faith best estimate of its future performance for the periods
      covered thereby. 

     

    5.20
      Indebtedness. Set forth on Schedule 5.20 is a true and complete
      list of all Indebtedness of each Borrower outstanding immediately prior to
      the
      Closing Date that is to remain outstanding after the Closing Date, other than
      Indebtedness owing by a Borrower to another Borrower, and such Schedule
      accurately reflects the aggregate principal amount of such Indebtedness, the
      amortization schedule (if any) in respect of such Indebtedness and the maturity
      date of such Indebtedness. 

     

    6.
      AFFIRMATIVE
      COVENANTS. 

     

    Each
      Borrower covenants and agrees
      that, so long as any credit hereunder shall be available and until full and
      final payment of the Obligations, Borrowers shall and shall cause each of their
      respective Subsidiaries to do all of the following: 

     

    6.1
Accounting
      System. Maintain a system of accounting that enables Borrowers to
      produce financial statements in accordance with GAAP and maintain records
      pertaining to the Collateral that contain information as from time to time
      reasonably may be requested by Agent. Borrowers also shall keep an inventory
      reporting system that shows all additions, sales, claims, returns, and
      allowances with respect to the Inventory. 

     

    6.2
Collateral
      Reporting. Provide Agent (and if so requested by a Lender, with
      copies for such Lender) with the following documents at the following times
      in
      form satisfactory to Agent: 

     

     

     

    
      	 	 	 
	Daily	  	
              (a)
                a sales journal,
                collection journal, and credit register since the last such schedule
                and a
                calculation of the Borrowing Base of Borrowers on an individual and
                a
                combined basis, and

               

              (b)
                notice of all returns,
                disputes, or claims. 

               

            
	
            	
            
	Weekly	  	(c)
              Inventory reports specifying each Borrower’s cost and the wholesale market
              value of its Inventory, with additional detail showing additions to
              and
              deletions from the Inventory.


    

     

     

    -67-


     

    
      	 	 	 
	Monthly (not
              later than the 15th day of each month)	  	
              (d)
                a detailed calculation of
                the Borrowing Base of Borrowers, on an individual and a combined
                basis,
                (including, in each case, detail regarding those Accounts that are
                not
                Eligible Accounts),

               

              (e)
                a detailed aging, by
                total, of the Accounts, together with a reconciliation to the detailed
                calculation of the Borrowing Base previously provided to
                Agent,

               

              (f)
                a summary aging, by
                vendor, of Borrowers’ accounts payable and any book overdraft,
                and

               

              (g)
                a calculation of Dilution
                for the prior month.

               

            
	
            	
            
	Quarterly	  	
              (h)
                a detailed list of each
                Borrower’s customers with outstanding account balances,

               

              (i)
                a report regarding each
                Borrower’s accrued, but unpaid, ad valorem taxes,

               

            
	
            	
            
	Upon
              request by Agent	  	
              (j)
                copies of invoices in
                connection with the Accounts, credit memos, remittance advices, deposit
                slips, shipping and delivery documents in connection with the Accounts
                and, for Inventory and Equipment acquired by Borrowers, purchase
                orders
                and invoices, and 

               

              (k)
                such other reports as to
                the Collateral, or the financial condition of Borrowers as Agent
                may
                request.

               

            


    

    In
      addition, each Borrower agrees to
      cooperate fully with Agent to facilitate and implement a system of electronic
      collateral reporting in order to provide electronic reporting of each of the
      items set forth above. 

     

    6.3
Financial
      Statements,
      Reports, Certificates. Deliver to Agent, with copies to each
      Lender: 

     

    (a)
      as soon as available, but in any
      event within 30 days (45 days (or, if such Person has filed a filing extension
      with the SEC, 50 days) in the case of a month that is the end of one of the
      first 3 fiscal quarters in a fiscal year) after the end of each month during
      each of Parent’s and ThermaClime’s fiscal years, 

     

    (i)
      a company prepared consolidated
      and consolidating balance sheet, income statement, and statement of cash flow
      covering Parent’s and its Subsidiaries’ and ThermaClime’s and its Subsidiaries’
operations during such period, 

     

    (ii)
      a certificate signed by the
      chief financial officer or vice president/controller of Parent and of
      ThermaClime to the effect that: 

     

    A.
      the financial statements
      delivered hereunder have been prepared in accordance with GAAP (except for
      the
      lack of footnotes and being subject to year-end audit adjustments) and fairly
      present in all material respects the financial condition of Parent and its
      Subsidiaries and ThermaClime and its Subsidiaries, as the case may be,


     

     

     

    -68-


     

    B.
      the representations and
      warranties of Borrowers contained in this Agreement and the other Loan Documents
      are true and correct in all material respects on and as of the date of such
      certificate, as though made on and as of such date (except to the extent that
      such representations and warranties relate solely to an earlier date), and
      

     

    C.
      there does not exist any
      condition or event that constitutes a Default or Event of Default (or, to the
      extent of any non-compliance, describing such non-compliance as to which he
      or
      she may have knowledge and what action Borrowers have taken, are taking, or
      propose to take with respect thereto), and 

     

    (iii)
      for each month that is the
      date on which a financial covenant in Section 7.20 is to be tested,
      a Compliance Certificate demonstrating, in reasonable detail, compliance at
      the
      end of such period with the applicable financial covenants contained in
Section 7.20, and 

     

    (b)
      as soon as available, but in any
      event within 90 days (or, if such Person has filed a filing extension with
      the
      SEC, 105 days) after the end of each of Parent’s and ThermaClime’s fiscal years,


     

    (i)
      financial statements of Parent
      and its Subsidiaries and of ThermaClime and its Subsidiaries for each such
      fiscal year, prepared on a consolidated and consolidating basis, audited (in
      the
      case of the consolidated financial statements) by independent certified public
      accountants reasonably acceptable to Agent and certified, without any
      qualifications, by such accountants to have been prepared in accordance with
      GAAP (such audited financial statements to include a balance sheet, income
      statement, and statement of cash flow and, if prepared, such accountants’ letter
      to management), 

     

    (ii)
      a certificate of such
      accountants addressed to Agent and the Lenders stating that such accountants
      do
      not have knowledge of the existence of any continuing Default or Event of
      Default under Section 7.20, 

     

    (c)
      as soon as available, but in any
      event at least 1 day prior to the start of each of Parent’s and ThermaClime’s
      fiscal years, 

     

    (i)
      copies of Borrowers’
Projections, in form and substance (including as to scope and underlying
      assumptions) satisfactory to Agent, in its sole discretion, for the forthcoming
      year, month by month, certified by the chief financial officer or vice
      president/controller of Parent and of ThermaClime as being such officer’s good
      faith best estimate of the financial performance of Parent and its Subsidiaries
      and of ThermaClime and its Subsidiaries, as the case may be, during the period
      covered thereby, 

     

     

     

    -69-


     

    (d)
      if and when filed by any
      Borrower or by Parent or ThermaClime, 

     

    (i)
      10-Q quarterly reports, Form
      10-K annual reports, and Form 8-K current reports, 

     

    (ii)
      any other filings made by any
      Borrower, Parent or ThermaClime with the SEC, 

     

    (iii)
      copies of Borrowers’, Parent’s
      and ThermaClime’s federal income tax returns (if requested by Agent), and any
      amendments thereto, filed with the Internal Revenue Service, and 

     

    (iv)
      any other information that is
      provided by Parent to its shareholders generally, 

     

    (e)
      if and when filed by any
      Borrower and as requested by Agent, satisfactory evidence of payment of
      applicable excise taxes in each jurisdictions in which (i) any Borrower
      conducts business or is required to pay any such excise tax, (ii) where any
      Borrower’s failure to pay any such applicable excise tax would result in a Lien
      on the properties or assets of any Borrower, or (iii) where any Borrower’s
      failure to pay any such applicable excise tax reasonably could be expected
      to
      result in a Material Adverse Change, 

     

    (f)
      as soon as a Borrower has
      knowledge of any event or condition that constitutes a Default or an Event
      of
      Default, notice thereof and a statement of the curative action that Borrowers
      propose to take with respect thereto, 

     

    (g)
      as soon as available, but no
      later than Wednesday of each week, a report listing (i) all cash
      distributions and advances made by EDN to any Borrower and Guarantor (other
      than
      Parent and Cherokee) during the preceding week and (ii) all cash
      distributions and advances made by any Borrower and Guarantor (other than Parent
      and Cherokee) to EDN during the preceding week, and 

     

    (h)
      upon the request of Agent, any
      other report reasonably requested relating to the financial condition of
      Borrowers. 

     

    In
      addition to the financial
      statements referred to above, Borrowers agree to deliver financial statements
      prepared on both a consolidated and consolidating basis and that no Borrower,
      or
      any Subsidiary of a Borrower, will have a fiscal year different from that of
      ThermaClime. Parent, ThermaClime and Borrowers agree that their independent
      certified public accountants are authorized to communicate with Agent and to
      release to Agent whatever financial information concerning Parent, ThermaClime
      or Borrowers that Agent reasonably may request. Parent, ThermaClime and each
      Borrower waives the right to assert a confidential relationship, if any, it
      may
      have with any accounting firm or service bureau in connection with any
      information requested by Agent pursuant to or in accordance with this Agreement,
      and agree that Agent may contact directly any such accounting firm or service
      bureau in order to obtain such information. Notwithstanding the foregoing,
      the
      Agent will use reasonable good faith efforts to permit a representative of
      Borrowers to be present or participate in any communication with such
      accountants. 

     

     

     

    -70-


     

    6.4
      [Intentionally
      Omitted]. 

     

    6.5
Return.
      Cause returns and allowances as between Borrowers and their Account Debtors,
      to
      be on the same basis and in accordance with the usual customary practices of
      the
      applicable Borrower, as they exist at the time of the execution and delivery
      of
      this Agreement. If, at a time when no Event of Default has occurred and is
      continuing, any Account Debtor returns any Inventory to any Borrower, the
      applicable Borrower promptly shall determine the reason for such return and,
      if
      the applicable Borrower accepts such return, issue a credit memorandum (with
      a
      copy to be sent to Agent) in the appropriate amount to such Account Debtor.
      If,
      at a time when an Event of Default has occurred and is continuing, any Account
      Debtor returns any Inventory to any Borrower, the applicable Borrower promptly
      shall determine the reason for such return and, if Agent consents (which consent
      shall not be unreasonably withheld), issue a credit memorandum (with a copy
      to
      be sent to Agent) in the appropriate amount to such Account Debtor.


     

    6.6
Maintenance
      of
      Properties. Maintain and preserve all of its properties which are
      necessary or useful in the proper conduct to its business in good working order
      and condition, ordinary wear and tear excepted, and comply at all times with
      the
      provisions of all leases to which it is a party as lessee, so as to prevent
      any
      loss or forfeiture thereof or thereunder. 

     

    6.7
Taxes.
      Cause all assessments and taxes, whether real, personal, or otherwise, due
      or
      payable by, or imposed, levied, or assessed against Borrowers or any of their
      assets to be paid in full, before delinquency or before the expiration of any
      extension period, except to the extent that the validity of such assessment
      or
      tax shall be the subject of a Permitted Protest. Borrowers will make timely
      payment or deposit of all tax payments and withholding taxes required of it
      by
      applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
      disability, and local, state, and federal income taxes, and will, upon request,
      furnish Agent with proof satisfactory to Agent indicating that the applicable
      Borrower has made such payments or deposits. Borrowers shall deliver
      satisfactory evidence of payment of applicable excise taxes in each
      jurisdictions in which any Borrower is required to pay any such excise tax.
      

     

    6.8
      Insurance. 

     

    (a)
      At Borrowers’ expense, maintain
      insurance respecting its property and assets wherever located, covering loss
      or
      damage by fire, theft, explosion, and all other hazards and risks as ordinarily
      are insured against by other Persons engaged in the same or similar businesses.
      Borrowers also shall maintain business interruption, public liability, and
      product liability insurance, as well as insurance against larceny, embezzlement,
      and criminal misappropriation. All such policies of insurance shall be in such
      amounts and with such insurance companies as are reasonably satisfactory to
      Agent. Borrowers shall deliver copies of all such policies to Agent with a
      satisfactory lender’s loss payable endorsement naming Agent as sole loss payee
      (with respect to the policies covering any Collateral) or additional insured,
      as
      appropriate. Each policy of insurance or endorsement shall contain a clause
      requiring the insurer to give not less than 30 days prior written notice to
      Agent in the event of cancellation of the policy for any reason whatsoever.
      

     

     

     

    -71-


     

    (b)
      Administrative Borrower shall
      give Agent prompt notice of any loss covered by such insurance. Agent may elect
      to adjust, in its sole discretion, any losses (so long as no Default or Event
      of
      Default shall occur and be continuing, in excess of $250,000 or in any amount
      if
      a Default or Event of Default shall have occurred and be continuing) payable
      under any such insurance policies covering any Collateral, without any liability
      to Borrowers whatsoever in respect of such adjustments. Except as provided
      in
      the immediately succeeding sentence, any monies received as payment for any
      loss
      under any insurance policy mentioned above (other than liability insurance
      policies) or as payment of any award or compensation for condemnation or taking
      by eminent domain, shall be paid over to Agent to be applied at the option
      of
      the Required Lenders either to the prepayment of the Obligations or shall be
      disbursed to Administrative Borrower under staged payment terms reasonably
      satisfactory to the Required Lenders for application to the cost of repairs,
      replacements, or restorations. Any monies received as payment for any loss
      under
      any insurance policy in respect of assets or properties of a Borrower that
      do
      not constitute Collateral shall be applied, within 60 days of the receipt of
      such monies, at the option of such Borrower either to the prepayment of the
      Advances or to the cost of repairs, replacements, or restorations. Any such
      repairs, replacements, or restorations shall be effected with reasonable
      promptness and shall be of a value at least equal to the value of the items
      or
      property destroyed prior to such damage or destruction. 

     

    (c)
      Borrowers shall not take out
      separate insurance concurrent in form or contributing in the event of loss
      with
      that required to be maintained under this Section 6.8, unless Agent
      is included thereon as named insured with the loss payable to Agent under a
      lender’s loss payable endorsement or its equivalent. Administrative Borrower
      immediately shall notify Agent whenever such separate insurance is taken out,
      specifying the insurer thereunder and full particulars as to the policies
      evidencing the same, and copies of such policies promptly shall be provided
      to
      Agent. 

     

    6.9
Location
      of
      Inventory. Keep the Inventory only at the locations identified on
      Schedule 5.5; provided, however, that Administrative Borrower may
      amend Schedule 5.5 so long as such amendment occurs by written notice to Agent
      not less than 30 days prior to the date on which the Inventory is moved to
      such
      new location, so long as such new location is within the continental United
      States, and so long as, at the time of such written notification, the applicable
      Borrower provides any financing statements necessary to perfect and continue
      perfected the Agent’s Liens on such assets and also provides to Agent a
      Collateral Access Agreement. 

     

    6.10
Compliance
      with
      Laws. Comply with the requirements of all applicable laws, rules,
      regulations, and orders of any Governmental Authority, including the Fair Labor
      Standards Act and the Americans With Disabilities Act, other than laws, rules,
      regulations, and orders the non-compliance with which, individually or in the
      aggregate, would not result in and reasonably could not be expected to result
      in
      a Material Adverse Change. 

     

    6.11
Leases.
      Pay when due all rents and other amounts payable under any leases to which
      any
      Borrower is a party or by which any Borrower’s properties and assets are bound,
      unless such payments are the subject of a Permitted Protest. 

     

     

     

    -72-


     

    6.12
Brokerage
      Commissions. Pay any and all brokerage commission or finders fees
      incurred in connection with or as a result of Borrowers’ obtaining financing
      from the Lender Group under this Agreement. Borrowers agree and acknowledge
      that
      payment of all such brokerage commissions or finders fees shall be the sole
      responsibility of Borrowers, and each Borrower agrees to indemnify, defend,
      and
      hold Agent and the Lender Group harmless from and against any claim of any
      broker or finder arising out of Borrowers’ obtaining financing from the Lender
      Group under this Agreement. 

     

    6.13
      Existence. At all times preserve and keep in full force and
      effect each Borrower’s valid existence and good standing and any rights and
      franchises material to Borrowers’ businesses. 

     

    6.14
      Environmental. 

     

    (a)
      Keep any property either owned
      or operated by any Borrower free of any Environmental Liens or post bonds or
      other financial assurances sufficient to satisfy the obligations or liability
      evidenced by such Environmental Liens, (b) comply, in all material
      respects, with Environmental Laws and provide to Agent documentation of such
      compliance which Agent reasonably requests, (c) promptly notify Agent of
      any release of a Hazardous Material of any reportable quantity from or onto
      property owned or operated by any Borrower and take any Remedial Actions
      required to abate said release or otherwise to come into compliance with
      applicable Environmental Law, and (d) promptly provide Agent with written
      notice within 10 days of the receipt of any of the following: (i) notice
      that an Environmental Lien has been filed against any of the real or personal
      property of any Borrower, (ii) commencement of any Environmental Action or
      notice that an Environmental Action will be filed against any Borrower, and
      (iii) notice of a violation, citation, or other administrative order which
      reasonably could be expected to result in a Material Adverse Change.


     

    6.15
Disclosure
      Updates. Promptly and in no event later than 5 Business Days after
      obtaining knowledge thereof, (a) notify Agent if any written information,
      exhibit, or report furnished to the Lender Group contained any untrue statement
      of a material fact or omitted to state any material fact necessary to make
      the
      statements contained therein not misleading in light of the circumstances in
      which made, and (b) correct any defect or error that may be discovered
      therein or in any Loan Document or in the execution, acknowledgement, filing,
      or
      recordation thereof. 

     

    7.
      NEGATIVE
      COVENANTS.Each Borrower covenants and agrees that, so long as any
      credit hereunder shall be available and until full and final payment of the
      Obligations, Borrowers will not and will not permit any of their respective
      Subsidiaries to do any of the following: 

     

    7.1
      Indebtedness. Create, incur, assume, permit, guarantee, or
      otherwise become or remain, directly or indirectly, liable with respect to
      any
      Indebtedness, except: 

     

     

     

    -73-


     

    (a)
      Indebtedness evidenced by this
      Agreement and the other Loan Documents, together with Indebtedness owed to
      Underlying Issuers with respect to Underlying Letters of Credit; 

     

    (b)
      Indebtedness set forth on
      Schedule 5.20; 

     

    (c)
      Permitted Purchase Money
      Indebtedness; 

     

    (d)
      refinancings, renewals,
      replacements or extensions of Indebtedness permitted under clauses (b) and
      (c) of this Section 7.1 (and continuance or renewal of any
      Permitted Liens associated therewith) so long as: (i) the terms and
      conditions of such refinancings, renewals, or extensions do not, in Agent’s
      judgment, materially impair the prospects of repayment of the Obligations by
      Borrowers or materially impair Borrowers’ creditworthiness, (ii) such
      refinancings, renewals, or extensions do not result in an increase in the
      principal amount of, or interest rate with respect to, the Indebtedness so
      refinanced, renewed, or extended, except for increases in the principal amount
      of such Indebtedness not exceeding the principal amount of such Indebtedness
      outstanding on the Closing Date, (iii) such refinancings, renewals, or
      extensions do not result in a shortening of the average weighted maturity of
      the
      Indebtedness so refinanced, renewed, or extended, nor are they on terms or
      conditions, that, taken as a whole, are materially more burdensome or
      restrictive to the applicable Borrower, and (iv) if the Indebtedness that
      is refinanced, renewed, or extended was subordinated in right of payment to
      the
      Obligations, then the terms and conditions of the refinancing, renewal, or
      extension Indebtedness must be include subordination terms and conditions that
      are at least as favorable to the Lender Group as those that were applicable
      to
      the refinanced, renewed, or extended Indebtedness; 

     

    (e)
      Indebtedness outstanding under
      the ThermaClime Notes in an aggregate principal amount not to exceed $7,000,000
      at any one time outstanding; 

     

    (f)
      Indebtedness owing by
      (i) any Borrower to any Guarantor or any other Borrower and (ii) any
      Guarantor to any other Guarantor other than the Parent or any Borrower;


     

    (g)
      subordinated Indebtedness the
      terms and conditions of which, including provisions subordinating such
      Indebtedness to the Obligations, are satisfactory to the Lenders; 

     

    (h)
      Indebtedness owing by any
      Borrower to any Subsidiary of Parent that is not also a Subsidiary of
      ThermaClime, provided that the aggregate principal amount of such Indebtedness
      shall not exceed $500,000 at any time; 

     

    (i)
      other unsecured Indebtedness in
      an aggregate amount not to exceed $500,000 at any time; 

     

    (j)
      Indebtedness composing Permitted
      Investments; 

     

    (k)
      Indebtedness outstanding under
      the BofA Loan Agreement, provided that (i) the aggregate principal
      amount of BofA Loans shall not exceed $50,000,000 (plus any paid-in-kind
      interest added to the principal balance thereof) at any time, (ii) any


     

     

     

    -74-


     

    prepayments
      or repayments of the
      principal amount of such Indebtedness shall reduce the amount of Indebtedness
      permitted under this Section 7.1(k) on a dollar-for-dollar basis and
      such prepaid or repaid amounts shall not be reborrowed by any Borrower without
      the prior written consent of the Lenders, (iii) Borrowers shall not make
      any payments in respect of such Indebtedness if an Event of Default has occurred
      and is continuing or would occur as a result of the making of such payment,
      except to the extent such payments are made solely from the proceeds of any
      BofA
      Collateral, and (iv) BofA and the Agent have entered into the BofA
      Inter-Lender Agreement; and 

     

    (l)
      Indebtedness owing to EDN or any
      of its Subsidiaries resulting from loans from EDN or its Subsidiaries to any
      Borrower or Guarantor permitted under Section 7.11(f). 

     

    7.2
Liens.
      Create, incur, assume, or permit to exist, directly or indirectly, any Lien
      on
      or with respect to any of its assets, of any kind, whether now owned or
      hereafter acquired, or any income or profits therefrom, except for Permitted
      Liens (including Liens that are replacements of Permitted Liens to the extent
      that the original Indebtedness is refinanced, renewed, replaced or extended
      under Section 7.1(d) and so long as the replacement Liens only encumber
      those assets that secured the refinanced, renewed, or extended Indebtedness).
      

     

    7.3
Restrictions
      on
      Fundamental Changes. 

     

    (a)
      Enter into any merger,
      consolidation, reorganization, or recapitalization, or reclassify its Stock.
      

     

    (b)
      Liquidate, wind up, or dissolve
      itself (or suffer any liquidation or dissolution). 

     

    (c)
      Convey, sell, lease, license,
      assign, transfer, or otherwise dispose of, in one transaction or a series of
      transactions, all or any substantial part of its assets. 

     

    Clauses
      (a), (b) and
      (c) of this Section 7.3 shall not apply to (i) the merger
      or consolidation of a Borrower with and into another Borrower other than
      ThermaClime, or (ii) the sale, transfer, lease or other disposal of assets
      of any Borrower or any of its Subsidiaries to any other Borrower or Guarantor
      (other than Parent). 

     

    7.4
Disposal
      of
      Assets. Other than Permitted Dispositions and as provided in
Section 7.3, convey, sell, lease, license, assign, transfer, or
      otherwise dispose of any of the assets of any Borrower, except that, so long
      as
      no Default or Event of Default has occurred and is continuing or would result
      therefrom: 

     

    (a)
      a Borrower may sell or otherwise
      dispose of any of its other assets, provided that (i) the proceeds from
      such sale or disposition are either applied to prepay the Obligations in
      accordance with Section 2.4(b) or distributed to ThermaClime and are
      used by ThermaClime solely to repurchase the ThermaClime Notes, (ii) after
      giving effect to the repurchase of the ThermaClime Notes in accordance with
      clause (i) above, Excess Availability is not less than $15,000,000,
      (iii) such assets are sold for Fair Market Value and (iv) the
      aggregate Fair Market Value of all such assets sold during each fiscal year
      pursuant to this Section 7.4(a) shall not exceed $4,000,000; and


     

     

     

    -75-


     

    (b)
      notwithstanding anything to the
      contrary contained herein, any Borrower and any of its respective Subsidiaries
      and Cherokee may sell, transfer or otherwise dispose of any BofA Collateral
      owned by such Person so long as (i) such disposition is permitted under the
      BofA Loan Agreement or if BofA otherwise consents to such sale or disposition
      and (ii) the proceeds from such sale are applied in accordance with
Section 2.4(b) or, if the BofA Loan Agreement is then in effect, in
      accordance with the terms of the BofA Loan Agreement. 

     

    7.5
Change
      Name. Change any Borrower’s name, FEIN, corporate structure or
      identity, or add any new fictitious name; provided, however, that
      a Borrower may change its name or add any new fictitious name upon at least
      30
      days prior written notice by Administrative Borrower to Agent of such change
      and
      so long as, at the time of such written notification, such Borrower provides
      any
      financing statements or fixture filings necessary to perfect and continue
      perfected Agent’s Liens. 

     

    7.6
      Guarantee. Guarantee or otherwise become in any way liable with
      respect to the obligations of any third Person except (i) by endorsement of
      instruments or items of payment for deposit to the account of Borrowers or
      which
      are transmitted or turned over to Agent, (ii) for guarantees of
      Indebtedness permitted under Section 7.1 and guarantees set forth on
      Schedule 5.20 and (iii) for guarantees of performance, surety or appeal
      bonds of any Borrower or Guarantor (other than the Parent). 

     

    7.7
Nature
      of
      Business. Make any change in the principal nature of Borrowers’
business. 

     

    7.8
Prepayments
      and
      Amendments. 

     

    (a)
      Except in connection with a
      refinancing permitted by Section 7.1(d), prepay, redeem, defease,
      purchase, or otherwise acquire any Indebtedness of any Borrower or any
      Guarantor, other than the Obligations in accordance with this Agreement and
      as
      otherwise permitted in Section 7.8(b) and
Section 7.4(b), 

     

    (b)
      ThermaClime shall not repurchase
      any ThermaClime Notes; provided, that ThermaClime may repurchase its
      ThermaClime Notes (i) to the extent permitted in Section 7.4,
      or (ii) with proceeds from a cash contribution made by Parent to
      ThermaClime so long as (A) no Default or Event of Default has occurred and
      is continuing or would result therefrom, (B) EBITDA for the fiscal quarter
      immediately preceding the date of such repurchase is not less than $5,000,000
      and (C) after giving effect to such repurchase, Excess Availability is not
      less than $15,000,000, and 

     

    (c)
      Except in connection with a
      refinancing permitted by Section 7.1(d) and except in connection
      with the ThermaClime Fifth Supplemental Indenture, directly or indirectly,
      (i) amend, modify, alter, increase, or change any of the terms or
      conditions of any agreement, instrument, document, indenture, or other writing
      evidencing or concerning Indebtedness permitted under Sections 7.1(b), (c),
      (e) or (g) or (ii) amend, modify or otherwise change (or
      permit the amendment, modification or other 

     

     

     

    -76-


     

    change
      in any manner of) any of the
      provisions of Indebtedness permitted under Section 7.1(k) or of any
      instrument or agreement (including, without limitation, the BofA Loan Agreement)
      relating to any such Indebtedness if such amendment, modification or change
      would shorten the final maturity or average life to maturity of, or require
      any
      payment to be made earlier than the date originally scheduled on, such
      Indebtedness, would increase the principal amount of or the interest rate
      applicable to such Indebtedness, would change the lien subordination provisions
      of such Indebtedness, or would otherwise be materially adverse to any Borrower,
      the Agent or the Lenders in any respect. 

     

    7.9
Change
      of
      Control. Cause, permit, or suffer, directly or indirectly, any
      Change of Control. 

     

    7.10
      Consignments. Consign any Inventory or sell any Inventory on
      bill and hold, sale or return, sale on approval, or other conditional terms
      of
      sale. 

     

    7.11
      Distributions. Other than distributions or the declaration and
      payment of dividends by a Borrower to another Borrower, make any distribution
      or
      declare or pay any dividends (in cash or other property, other than common
      Stock) on, or purchase, acquire, redeem, or retire any of any Borrower’s Stock,
      of any class, whether now or hereafter outstanding or pay any management or
      similar fees; provided, that: 

     

    (a)
      ThermaClime may make
      distributions and pay dividends to Parent in repayment of the costs and expenses
      incurred by Parent that are directly allocable to the Borrowers for Parent’s
      provision of the Services (as defined in the Services Agreement) on behalf
      of
      the Borrowers pursuant to the Services Agreement; 

     

    (b)
      each Borrower may make
      distributions and pay dividends to any Guarantor (other than Parent and
      Cherokee), and each Guarantor may make distributions and pay dividends to any
      Borrower or Guarantor (other than Parent and Cherokee); 

     

    (c)
      so long as no Default or Event
      of Default has occurred and is continuing or would result therefrom,
      (i) ThermaClime may make distributions and pay dividends to Parent in
      respect of the management fees payable by ThermaClime to Parent in accordance
      with the Management Agreement, provided that the aggregate amount of all such
      payments made by Borrowers pursuant to this clause (c)(i) shall not exceed
      $2,500,000 during any fiscal year of ThermaClime or the maximum management
      fees
      payable to Parent each calendar quarter under the Management Agreement, and
      (ii) ThermaClime may make distributions and pay dividends to Parent in an
      aggregate amount not to exceed, during each fiscal year, the sum of (A) 50%
      of the actual consolidated net income of the Borrowers for such fiscal year
      determined in accordance with GAAP, plus (B) the amounts paid to Parent
      during such fiscal year in accordance with Section 7.11(d);


     

    (d)
      so long as Agent has not
      exercised any of its rights or remedies following an Event of Default,
      ThermaClime may make distributions and pay dividends to Parent in an aggregate
      amount not to exceed, during each fiscal year, the consolidated income tax
      liability of the Borrowers for such fiscal year calculated as if each the
      Borrower was a separate consolidated taxpayer; 

     

     

     

    -77-


     

    (e)
      each Borrower may make
      distributions and pay dividends to any Subsidiary of Parent that is not also
      a
      Subsidiary of ThermaClime, provided that the aggregate amount of such
      distributions and dividends shall not exceed $100,000 during each fiscal year;
      and 

     

    (f)
      each Borrower and Guarantor may
      make advances, distributions and pay dividends to EDN and its Subsidiaries,
      provided that (i) no Default or Event of Default has occurred and is
      continuing or would result from the making of such distributions or dividends,
      (ii) the aggregate amount of such advances, distributions and dividends
      does not exceed $5,000,000 during any week, (iii) the aggregate amount of
      such advances, distributions and dividends paid to EDN and its Subsidiaries
      by
      the Borrowers and Guarantors (other than the Parent and Cherokee) shall not
      exceed the aggregate amount of advances, distributions and dividends paid by
      EDN
      and its Subsidiaries to the Borrowers and Guarantors (other than the Parent
      and
      Cherokee), and (iv) as of the end of any fiscal year, the aggregate amount
      of such advances, distributions and dividends paid to EDN and its Subsidiaries
      by the Borrowers and Guarantors (other than the Parent and Cherokee) during
      such
      year minus the aggregate amount of advances, distributions and dividends
      paid by EDN and its Subsidiaries to the Borrowers and Guarantors (other than
      the
      Parent and Cherokee) during such year shall not exceed $10,000,000.


     

    7.12
Accounting
      Methods. Modify or change its method of accounting (other than as
      may be required to conform to GAAP) or enter into, modify, or terminate any
      agreement currently existing, or at any time hereafter entered into with any
      third party accounting firm or service bureau for the preparation or storage
      of
      Borrowers’ accounting records without said accounting firm or service bureau
      agreeing to provide Agent information regarding the Collateral or Borrowers’
financial condition. 

     

    7.13
      Investments. Except for Permitted Investments, directly or
      indirectly, make or acquire any Investment, or incur any liabilities (including
      contingent obligations) for or in connection with any Investment;
provided, however, that Borrowers are also permitted to make or
      acquire other Investments (other than in the Cash Management Accounts) not
      exceeding $1,000,000 in the aggregate outstanding at any one time. 

     

    7.14
Transactions
      with
      Affiliates. Except for agreements set forth on Schedule 7.14 or
      transactions among the Borrowers and Guarantors, directly or indirectly enter
      into or permit to exist any transaction with any Affiliate of any Borrower
      except for transactions that are in the ordinary course of Borrowers’ business,
      upon fair and reasonable terms, that are fully disclosed to Agent, and that
      are
      no less favorable to Borrowers than would be obtained in an arm’s length
      transaction with a non-Affiliate. 

     

    7.15
      Suspension. Suspend or go out of a substantial portion of its
      business. 

     

    7.16
      Compensation. Pay or accrue total cash compensation, during any
      year, to its officers and senior management employees in an aggregate amount
      in
      excess of the amount established by the compensation committee of Parent.


     

     

     

    -78-


     

    7.17
Use
      of
      Proceeds. Use the proceeds of the Advances and the Term Loan for
      any purpose other than (a) on the Closing Date, to pay transactional fees,
      costs, and expenses incurred in connection with this Agreement, the other Loan
      Documents, and the transactions contemplated hereby and thereby, and
      (b) thereafter, consistent with the terms and conditions hereof, for its
      lawful and permitted purposes. 

     

    7.18
Change
      in Location
      of Chief Executive Office; Inventory and Equipment with Bailees.
      Relocate its chief executive office to a new location without Administrative
      Borrower providing 30 days prior written notification thereof to Agent and
      so
      long as, at the time of such written notification, the applicable Borrower
      provides any financing statements or fixture filings necessary to perfect and
      continue perfected the Agent’s Liens and also provides to Agent a Collateral
      Access Agreement with respect to such new location. The Inventory and Equipment
      shall not at any time now or hereafter be stored with a bailee, warehouseman,
      or
      similar party without Agent’s prior written consent. 

     

    7.19
Securities
      Accounts. Maintain assets in any Securities Account at any time
      that Advances are outstanding. 

     

    7.20
Financial
      Covenants. 

     

    (a)
      Fail to maintain: 

     

    (i)
Minimum
      EBITDA.
      EBITDA for the 12 month period ending each fiscal quarter after
      September 30, 2007 of greater than $25,000,000; 

     

    (ii)
      Intentionally deleted.


     

    (iii)
Fixed
      Charge Coverage
      Ratio. A Fixed Charge Coverage Ratio, measured on a fiscal year-end
      basis commencing with the fiscal year ending December 31, 2001, of not less
      than 1.10:1.00. 

     

    (iv)
Senior
      Leverage
      Coverage Ratio. A Senior Leverage Coverage Ratio, measured on a
      quarterly basis commencing with the fiscal quarter ending December 31,
      2007, of not greater than 4.50:1.00. 

     

    (b)
      Intentionally deleted.


     

    8.
      EVENTS OF DEFAULT.


     

    Any
      one or more of the following
      events shall constitute an event of default (each, an “Event of Default”) under
      this Agreement: 

     

    8.1
If
      Borrowers
      fail to pay when due and payable or when declared due and payable, all or any
      portion of the Obligations (whether of principal, interest (including any
      interest which, but for the provisions of the Bankruptcy Code, would have
      accrued on such amounts), fees and charges due the Lender Group, reimbursement
      of Lender Group Expenses, or other amounts constituting Obligations);


     

     

     

    -79-


     

    8.2
If
      Borrowers
      fail to perform, keep, or observe any term, provision, condition, covenant,
      or
      agreement contained in Sections 6.1, 6.2 (but only up to three
      times during any 12-month period, and only in relation to Defaults caused by
      the
      failure of third Persons to provide required information or reporting, and
      not
      in relation to Defaults caused by a Borrower), 6.3, 6.6,
6.9, 6.10, 6.11 and 6.15 of this Agreement, or
      comparable provisions of the other Loan Documents, within 10 days of the date
      when required (or within 5 days of the date when required in the case of
Section 6.2 or Section 6.3), or if a Borrower or
      Guarantor otherwise fails to perform, keep, or observe any other term,
      provision, condition, covenant, or agreement contained in this Agreement or
      in
      any of the other Loan Documents; 

     

    8.3
If
      any material
      portion of any Borrower’s or any of its Subsidiaries’ assets is attached,
      seized, subjected to a writ or distress warrant, levied upon, or comes into
      the
      possession of any third Person; 

     

    8.4
If
      an
      Insolvency Proceeding is commenced by any Borrower, any Guarantor or any of
      their Subsidiaries; 

     

    8.5
If
      an
      Insolvency Proceeding is commenced against any Borrower, any Guarantor or any
      of
      their Subsidiaries, and any of the following events occur: (a) the
      applicable Borrower, Guarantor or the Subsidiary consents to the institution
      of
      the Insolvency Proceeding against it, (b) the petition commencing the
      Insolvency Proceeding is not timely controverted, (c) the petition
      commencing the Insolvency Proceeding is not dismissed within 60 calendar days
      of
      the date of the filing thereof; provided, however, that, during
      the pendency of such period, Agent (including any successor agent) and each
      other member of the Lender Group shall be relieved of their obligation to extend
      credit hereunder, (d) an interim trustee is appointed to take possession of
      all or any substantial portion of the properties or assets of, or to operate
      all
      or any substantial portion of the business of, any Borrower, any Guarantor
      or
      any of their Subsidiaries, or (e) an order for relief shall have been
      entered therein; 

     

    8.6
If
      any
      Borrower, any Guarantor or any of their Subsidiaries is enjoined, restrained,
      or
      in any way prevented by court order from continuing to conduct all or any
      material part of its business affairs; 

     

    8.7
If
      a notice of
      Lien (other than (a) a Permitted Lien, (b) Liens on any property or
      assets of the Parent and (c) Liens on any property or assets of Cherokee
      that are subordinate to the Agent’s Liens), levy, or assessment securing or
      otherwise with respect to Indebtedness or an obligation for the payment of
      money
      in an aggregate amount in excess of $100,000 is filed of record with respect
      to
      any Borrower’s, any Guarantor’s or any of its Subsidiaries’ assets by the United
      States, or any department, agency, or instrumentality thereof, or by any state,
      county, municipal, or governmental agency, or if any taxes or debts owing at
      any
      time hereafter to any one or more of such entities becomes a Lien (other than
      (a) a Permitted Lien, (b) Liens on any property or assets of the
      Parent and (c) Liens on any property or assets of Cherokee that are
      subordinate to the Agent’s Liens), whether choate or otherwise, upon any
      Borrower’s, any Guarantor’s or any of its Subsidiaries’ assets and the same is
      not paid on the payment date thereof; 

     

     

     

    -80-


     

    8.8
If
      a judgment
      or other claim for an amount in excess of $100,000 becomes a Lien (other than
      (a) Liens on any property or assets of the Parent and (b) Liens on any
      property or assets of Cherokee that are subordinate to the Agent’s Liens) or
      encumbrance upon any material portion of any Borrower’s, any Guarantor’s or any
      of its Subsidiaries’ properties or assets; 

     

    8.9
If
      there is a
      default in any material agreement to which any Borrower, any Guarantor (other
      than the Parent and Cherokee) or any of its Subsidiaries is a party and such
      default (a)(i) occurs at the final maturity of the obligations thereunder,
      or
      (ii) results in a right by the other party thereto, irrespective of whether
      exercised, to accelerate the maturity of the applicable Borrower’s, Guarantor’s
      or its Subsidiaries’ obligations thereunder, to terminate such agreement, or to
      refuse to renew such agreement pursuant to an automatic renewal right therein,
      and (b) involves Indebtedness or an obligation for the payment of money in
      an aggregate amount in excess of $100,000; 

     

    8.10
If
      any
      Borrower, any Guarantor (other than the Parent and Cherokee) or any of its
      Subsidiaries makes any payment on account of Indebtedness that has been
      contractually subordinated in right of payment to the payment of the
      Obligations, except to the extent such payment is permitted by the terms of
      the
      subordination provisions applicable to such Indebtedness; 

     

    8.11
If
      any
      material misstatement or misrepresentation exists now or hereafter in any
      warranty, representation, statement, or Record made to the Lender Group by
      any
      Borrower, any Guarantor, their Subsidiaries, or any officer, employee, agent,
      or
      director of any Borrower, any Guarantor or any of their Subsidiaries;


     

    8.12
If
      the
      obligation of any Guarantor under its Guaranty is limited or terminated by
      operation of law or by such Guarantor thereunder; 

     

    8.13
If
      this
      Agreement or any other Loan Document that purports to create a Lien, shall,
      for
      any reason not as a result of any act or omission of the Agent, fail or cease
      to
      create a valid and perfected and, except to the extent permitted by the terms
      hereof or thereof, first priority Lien on or security interest in the Collateral
      covered hereby or thereby; or 

     

    8.14
Any
      provision
      of any Loan Document shall at any time for any reason be declared to be null
      and
      void, or the validity or enforceability thereof shall be contested by any
      Borrower or Guarantor, or a proceeding shall be commenced by any Borrower or
      Guarantor, or by any Governmental Authority having jurisdiction over any
      Borrower or Guarantor, seeking to establish the invalidity or unenforceability
      thereof, or any Borrower or Guarantor shall deny that any Borrower or Guarantor
      has any liability or obligation purported to be created under any Loan Document.
      

     

     

     

    -81-


     

    9.
      THE LENDER GROUP’S RIGHTS
      AND REMEDIES. 

     

    9.1
Rights
      and
      Remedies. Upon the occurrence, and during the continuation, of an
      Event of Default, the Required Lenders (at their election but without notice
      of
      their election and without demand) may authorize and instruct Agent to do any
      one or more of the following on behalf of the Lender Group (and Agent, acting
      upon the instructions of the Required Lenders, shall do the same on behalf
      of
      the Lender Group), all of which are authorized by Borrowers: 

     

    (a)
      Declare all Obligations, whether
      evidenced by this Agreement, by any of the other Loan Documents, or otherwise,
      immediately due and payable; 

     

    (b)
      Cease advancing money or
      extending credit to or for the benefit of Borrowers under this Agreement, under
      any of the Loan Documents, or under any other agreement between Borrowers and
      the Lender Group; 

     

    (c)
      Terminate this Agreement and any
      of the other Loan Documents as to any future liability or obligation of the
      Lender Group, but without affecting any of the Agent’s Liens in the Collateral
      and without affecting the Obligations; 

     

    (d)
      Settle or adjust disputes and
      claims directly with Account Debtors for amounts and upon terms which Agent
      considers advisable, and in such cases, Agent will credit the Loan Account
      with
      only the net amounts received by Agent in payment of such disputed Accounts
      after deducting all Lender Group Expenses incurred or expended in connection
      therewith; 

     

    (e)
      Cause Borrowers to hold all
      returned Inventory in trust for the Lender Group, segregate all returned
      Inventory from all other assets of Borrowers or in Borrowers’ possession and
      conspicuously label said returned Inventory as the property of the Lender Group;
      

     

    (f)
      Without notice to or demand upon
      any Borrower or Guarantor, make such payments and do such acts as Agent
      considers necessary or reasonable to protect its security interests in the
      Collateral. Each Borrower agrees to assemble the Collateral if Agent so
      requires, and to make the Collateral available to Agent at a place that Agent
      may designate which is reasonably convenient to both parties. Each Borrower
      authorizes Agent to enter the premises where the Collateral is located, to
      take
      and maintain possession of the Collateral, or any part of it, and to pay,
      purchase, contest, or compromise any Lien that in Agent’s determination appears
      to conflict with the Agent’s Liens and to pay all expenses incurred in
      connection therewith and to charge Borrowers’ Loan Account therefor. With
      respect to any of Borrowers’ owned or leased premises, each Borrower hereby
      grants Agent a license to enter into possession of such premises and to occupy
      the same, without charge, in order to exercise any of the Lender Group’s rights
      or remedies provided herein, at law, in equity, or otherwise; 

     

    (g)
      Without notice to any Borrower
      (such notice being expressly waived), and without constituting a retention
      of
      any collateral in satisfaction of an obligation (within the meaning of the
      Code), set off and apply to the Obligations any and all (i) balances and
      deposits of any Borrower held by the Lender Group (including any amounts
      received in the Cash Management Accounts), or (ii) Indebtedness at any time
      owing to or for the credit or the account of any Borrower held by the Lender
      Group; 

     

     

     

    -82-


     

    (h)
      Hold, as cash collateral, any
      and all balances and deposits of any Borrower held by the Lender Group, and
      any
      amounts received in the Cash Management Accounts, to secure the full and final
      repayment of all of the Obligations; 

     

    (i)
      Ship, reclaim, recover, store,
      finish, maintain, repair, prepare for sale, advertise for sale, and sell (in
      the
      manner provided for herein) the Collateral. Agent is hereby granted a license
      or
      other right to use, without charge, for the benefit of the Lender Group, such
      Borrower’s labels, patents, copyrights, trade secrets, trade names, trademarks,
      service marks, and advertising matter, or any property of a similar nature,
      as
      it pertains to the Collateral, in completing production of, advertising for
      sale, and selling any Collateral and such Borrower’s rights under all licenses
      and all franchise agreements shall inure to the Lender Group’s benefit;


     

    (j)
      Sell the Collateral at either a
      public or private sale, or both, by way of one or more contracts or
      transactions, for cash or on terms, in such manner and at such places (including
      Borrowers’ premises) as Agent determines is commercially reasonable. It is not
      necessary that the Collateral be present at any such sale; 

     

    (k)
      Agent shall give notice of the
      disposition of the Collateral as follows: 

     

    (i)
      Agent shall give Administrative
      Borrower (for the benefit of the applicable Borrower) a notice in writing of
      the
      time and place of public sale, or, if the sale is a private sale or some other
      disposition other than a public sale is to be made of the Collateral, the time
      on or after which the private sale or other disposition is to be made; and
      

     

    (ii)
      The notice shall be personally
      delivered or mailed, postage prepaid, to Administrative Borrower as provided
      in
      Section 12, at least 10 days before the earliest time of disposition set
      forth in the notice; no notice needs to be given prior to the disposition of
      any
      portion of the Collateral that is perishable or threatens to decline speedily
      in
      value or that is of a type customarily sold on a recognized market;


     

    (l)
      Agent, on behalf of the Lender
      Group may credit bid and purchase at any public sale; 

     

    (m)
      Agent may seek the appointment
      of a receiver or keeper to take possession of all or any portion of the
      Collateral or to operate same and, to the maximum extent permitted by law,
      may
      seek the appointment of such a receiver without the requirement of prior notice
      or a hearing; 

     

    (n)
      The Lender Group shall have all
      other rights and remedies available to it at law or in equity pursuant to any
      other Loan Documents; and 

     

     

     

    -83-


     

    (o)
      Any deficiency that exists after
      disposition of the Collateral as provided above will be paid immediately by
      Borrowers. Any excess will be returned, without interest and subject to the
      rights of third Persons, by Agent to Administrative Borrower (for the benefit
      of
      the applicable Borrower). 

     

    9.2
Remedies
      Cumulative. The rights and remedies of the Lender Group under this
      Agreement, the other Loan Documents, and all other agreements shall be
      cumulative. The Lender Group shall have all other rights and remedies not
      inconsistent herewith as provided under the Code, by law, or in equity. No
      exercise by the Lender Group of one right or remedy shall be deemed an election,
      and no waiver by the Lender Group of any Event of Default shall be deemed a
      continuing waiver. No delay by the Lender Group shall constitute a waiver,
      election, or acquiescence by it. 

     

    10.
      TAXES AND
      EXPENSES. 

     

    If
      any Borrower fails to pay any
      monies (whether taxes, assessments, insurance premiums, or, in the case of
      leased properties or assets, rents or other amounts payable under such leases)
      due to third Persons, or fails to make any deposits or furnish any required
      proof of payment or deposit, all as required under the terms of this Agreement,
      then, Agent, in its sole discretion and without prior notice to any Borrower,
      may do any or all of the following: (a) make payment of the same or any
      part thereof, (b) set up such reserves in Borrowers’ Loan Account as Agent
      deems necessary to protect the Lender Group from the exposure created by such
      failure, or (c) in the case of the failure to comply with
Section 6.8 hereof, obtain and maintain insurance policies of the
      type described in Section 6.8 and take any action consistent with
      the terms of this Agreement. Any such amounts paid by Agent shall constitute
      Lender Group Expenses and any such payments shall not constitute an agreement
      by
      the Lender Group to make similar payments in the future or a waiver by the
      Lender Group of any Event of Default under this Agreement. Agent need not
      inquire as to, or contest the validity of, any such expense, tax, or Lien and
      the receipt of the usual official notice for the payment thereof shall be
      conclusive evidence that the same was validly due and owing. 

     

    11.
      WAIVERS;
      INDEMNIFICATION. 

     

    11.1
Demand;
      Protest;
      etc. Each Borrower waives demand, protest, notice of protest,
      notice of default or dishonor, notice of payment and nonpayment, nonpayment
      at
      maturity, release, compromise, settlement, extension, or renewal of documents,
      instruments, chattel paper, and guarantees at any time held by the Lender Group
      on which each such Borrower may in any way be liable. 

     

    11.2
The
      Lender Group’s
      Liability for Collateral. Each Borrower hereby agrees that:
      (a) so long as the Lender Group complies with its obligations, if any,
      under the Code, Agent shall not in any way or manner be liable or responsible
      for: (i) the safekeeping of the Collateral, (ii) any loss or damage
      thereto occurring or arising in any manner or fashion from any cause,
      (iii) any diminution in the value thereof, or (iv) any act or default
      of any carrier, warehouseman, bailee, forwarding agency, or other Person, and
      (b) all risk of loss, damage, or destruction of the Collateral shall be
      borne by Borrowers. 

     

     

     

    -84-


     

    11.3
      Indemnification. Each Borrower shall pay, indemnify, defend, and
      hold the Agent-Related Persons, the Lender-Related Persons with respect to
      each
      Lender, each Participant, and each of their respective officers, directors,
      employees, agents, and attorneys-in-fact (each, an “Indemnified Person”)
      harmless (to the fullest extent permitted by law) from and against any and
      all
      claims, demands, suits, actions, investigations, proceedings, and damages,
      and
      all reasonable attorneys fees and disbursements and other out-of-pocket costs
      and expenses actually incurred in connection therewith (as and when they are
      incurred and irrespective of whether suit is brought), at any time asserted
      against, imposed upon, or incurred by any of them (a) in connection with or
      as a result of or related to the execution, delivery, enforcement, performance,
      or administration of this Agreement, any of the other Loan Documents, or the
      transactions contemplated hereby or thereby, and (b) with respect to any
      investigation, litigation, or proceeding related to this Agreement, any other
      Loan Document, or the use of the proceeds of the credit provided hereunder
      (irrespective of whether any Indemnified Person is a party thereto), or any
      act,
      omission, event, or circumstance in any manner related thereto (all the
      foregoing, collectively, the “Indemnified Liabilities”). The foregoing to the
      contrary notwithstanding, Borrowers shall have no obligation to any Indemnified
      Person under this Section 11.3 with respect to any Indemnified
      Liability that a court of competent jurisdiction finally determines to have
      resulted from the gross negligence or willful misconduct of such Indemnified
      Person. This provision shall survive the termination of this Agreement and
      the
      repayment of the Obligations. If any Indemnified Person makes any payment to
      any
      other Indemnified Person with respect to an Indemnified Liability as to which
      Borrowers were required to indemnify the Indemnified Person receiving such
      payment, the Indemnified Person making such payment is entitled to be
      indemnified and reimbursed by Borrowers with respect thereto. WITHOUT
      LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON
      WITH
      RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE
      OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER
      PERSON.

     

    12.
      NOTICES.


     

    Unless
      otherwise provided in this
      Agreement, all notices or demands by Borrowers or Agent to the other relating
      to
      this Agreement or any other Loan Document shall be in writing and (except for
      financial statements and other informational documents which may be sent by
      first-class mail, postage prepaid) shall be personally delivered or sent by
      registered or certified mail (postage prepaid, return receipt requested),
      overnight courier, electronic mail (at such email addresses as the
      Administrative Borrower or Agent, as applicable, may designate to each other
      in
      accordance herewith), or telefacsimile to Borrowers in care of Administrative
      Borrower or to Agent, as the case may be, at its address set forth below:


     

     

     

    
      	 	 	 	 	 	 	 
	 	 	If
              to
              Administrative Borrower:	  	THERMACLIME,
              INC.	 	 
	 	 	 	  	
              16
                South Pennsylvania
                Avenue

              Oklahoma
                City, Oklahoma
                73107

            	 	 
	 	 	 	  	Attn:
              Tony M. Shelby	 	 
	 	 	 	  	Fax
              No. (405) 236-1209	 	 


    

     

     

    -85-


     

    
      	 	 	 	 	 	 	 
	 	 	with
              copies to:	  	THERMACLIME,
              INC.	 	 
	 	 	 	  	
              16
                South Pennsylvania
                Avenue

              Oklahoma
                City, Oklahoma
                73107

            	 	 
	 	 	 	  	Attn:
              David M. Shear, Esq.	 	 
	 	 	 	  	Fax
              No. (405) 236-1209	 	 
	
            	
            	
            	
            
	 	 	If
              to
              Agent:	  	WELLS
              FARGO FOOTHILL, INC.	 	 
	 	 	 	  	
              2450
                Colorado
                Avenue

              Suite
                3000 West

              Santa
                Monica, California
                90404

            	 	 
	 	 	 	  	Attn:
              Business Finance Division Manager	 	 
	 	 	 	  	Fax
              No. (310) 478-9788	 	 
	
            	
            	
            	
            
	 	 	with
              copies to:	  	SCHULTE
              ROTH & ZABEL LLP	 	 
	 	 	 	  	
              919
                Third Avenue

              New
                York, New York
                10022

            	 	 
	 	 	 	  	Attn:
              Eliot L. Relles, Esq.	 	 
	 	 	 	  	Fax
              No. (212) 593-5955	 	 


    

    Agent
      and Borrowers may change the
      address at which they are to receive notices hereunder, by notice in writing
      in
      the foregoing manner given to the other party. All notices or demands sent
      in
      accordance with this Section 12, other than notices by Agent in connection
      with enforcement rights against the Collateral under the provisions of the
      Code,
      shall be deemed received on the earlier of the date of actual receipt or 3
      Business Days after the deposit thereof in the mail. Each Borrower acknowledges
      and agrees that notices sent by the Lender Group in connection with the exercise
      of enforcement rights against Collateral under the provisions of the Code shall
      be deemed sent when deposited in the mail or personally delivered, or, where
      permitted by law, transmitted by telefacsimile or any other method set forth
      above. 

     

    13.
      CHOICE OF LAW AND VENUE;
      JURY TRIAL WAIVER.

     

    (a)
      THE VALIDITY OF THIS
      AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE
      CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT),
      THE
      CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
      OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
      OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
      BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.


     

    (b)
      THE PARTIES AGREE THAT
      ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE
      OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
      COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK,


     

     

     

    -86-


     

    PROVIDED,
      HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
      OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY
      JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL
      OR
      OTHER PROPERTY MAY BE FOUND. BORROWERS AND THE LENDER GROUP WAIVE, TO THE EXTENT
      PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
      OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING
      IS
      BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b). 

     

    BORROWERS
      AND THE LENDER
      GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
      CAUSE
      OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
      THE
      TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
      BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWERS
      AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
      KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
      WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY
      BE
      FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 

     

    14.
      ASSIGNMENTS AND
      PARTICIPATIONS; SUCCESSORS. 

     

    14.1
Assignments
      and
      Participations.

     

    (a)
      Any Lender may, with the written
      consent of Agent (provided that no written consent of Agent shall be required
      in
      connection with any assignment and delegation by a Lender to an Eligible
      Transferee and no notice to Agent shall be required in connection with any
      assignment and delegation by a Lender to an Affiliate of a Lender or a fund
      or
      account managed by a Lender), assign and delegate to one or more assignees
      (each
      an “Assignee”) all, or any ratable part of all, of the Obligations, the
      Commitments and the other rights and obligations of such Lender hereunder and
      under the other Loan Documents, in a minimum amount of $5,000,000 (except such
      minimum amount shall not apply to any Affiliate of a Lender or to a fund or
      account managed by a Lender); provided, however, that Borrowers
      and Agent may continue to deal solely and directly with such Lender in
      connection with the interest so assigned to an Assignee until (i) written
      notice of such assignment, together with payment instructions, addresses, and
      related information with respect to the Assignee, have been given to
      Administrative Borrower and Agent by such Lender and the Assignee,
      (ii) such Lender and its Assignee have delivered to Administrative Borrower
      and Agent an Assignment and Acceptance substantially in the form of Exhibit
      A-1, and (iii) the assignor Lender or Assignee has paid to Agent for
      Agent’s separate account a processing fee in the amount of $5,000. Anything
      contained herein to the contrary notwithstanding, the consent of Agent shall
      not
      be required (and payment of any fees shall not be required) if such assignment
      is in connection with any merger, consolidation, sale, transfer, or other
      disposition of all or any substantial portion of the business or loan portfolio
      of such Lender or the assignee is an Affiliate (other than individuals) of,
      or a
      fund, money market account, investment account or other account managed by
      a
      Lender or an Affiliate of a Lender. 

     

     

     

    -87-


     

    (b)
      From and after the date that
      Agent notifies the assignor Lender (with a copy to Administrative Borrower,
      if
      applicable) that it has received an executed Assignment and Acceptance and
      payment (if applicable) of the above-referenced processing fee, (i) the
      Assignee thereunder shall be a party hereto and, to the extent that rights
      and
      obligations hereunder have been assigned to it pursuant to such Assignment
      and
      Acceptance, shall have the rights and obligations of a Lender under the Loan
      Documents, and (ii) the assignor Lender shall, to the extent that rights
      and obligations hereunder and under the other Loan Documents have been assigned
      by it pursuant to such Assignment and Acceptance, relinquish its rights (except
      with respect to Section 11.3 hereof) and be released from its
      obligations under this Agreement (and in the case of an Assignment and
      Acceptance covering all or the remaining portion of an assigning Lender’s rights
      and obligations under this Agreement and the other Loan Documents, such Lender
      shall cease to be a party hereto and thereto), and such assignment shall affect
      a novation between Borrowers and the Assignee. 

     

    (c)
      By executing and delivering an
      Assignment and Acceptance, the assigning Lender thereunder and the Assignee
      thereunder confirm to and agree with each other and the other parties hereto
      as
      follows: (1) other than as provided in such Assignment and Acceptance, such
      assigning Lender makes no representation or warranty and assumes no
      responsibility with respect to any statements, warranties or representations
      made in or in connection with this Agreement or the execution, legality,
      validity, enforceability, genuineness, sufficiency or value of this Agreement
      or
      any other Loan Document furnished pursuant hereto, (2) such assigning
      Lender makes no representation or warranty and assumes no responsibility with
      respect to the financial condition of Borrowers or the performance or observance
      by Borrowers of any of their obligations under this Agreement or any other
      Loan
      Document furnished pursuant hereto, (3) such Assignee confirms that it has
      received a copy of this Agreement, together with such other documents and
      information as it has deemed appropriate to make its own credit analysis and
      decision to enter into such Assignment and Acceptance, (4) such Assignee
      will, independently and without reliance upon Agent, such assigning Lender
      or
      any other Lender, and based on such documents and information as it shall deem
      appropriate at the time, continue to make its own credit decisions in taking
      or
      not taking action under this Agreement, (5) such Assignee appoints and
      authorizes Agent to take such actions and to exercise such powers under this
      Agreement as are delegated to Agent, by the terms hereof, together with such
      powers as are reasonably incidental thereto, and (6) such Assignee agrees
      that it will perform all of the obligations which by the terms of this Agreement
      are required to be performed by it as a Lender. 

     

    (d)
      Immediately upon each Assignee’s
      making its processing fee payment (if applicable) under the Assignment and
      Acceptance and receipt and acknowledgment by Agent of such fully executed
      Assignment and Acceptance, this Agreement shall be deemed to be amended to
      the
      extent, but only to the extent, necessary to reflect the addition of the
      Assignee and the resulting adjustment of the Commitments arising therefrom.
      The
      Commitment allocated to each Assignee shall reduce such Commitments of the
      assigning Lender pro tanto. 

     

     

     

    -88-


     

    (e)
      Any Lender may at any time sell
      to one or more commercial banks, financial institutions, or other Persons not
      Affiliates of such Lender (a “Participant”) participating interests in
      its Obligations, the Commitment, and the other rights and interests of that
      Lender (the “Originating Lender”) hereunder and under the other Loan
      Documents; provided, however, that (i) the Originating Lender
      shall remain a “Lender” for all purposes of this Agreement and the other Loan
      Documents and the Participant receiving the participating interest in the
      Obligations, the Commitments, and the other rights and interests of the
      Originating Lender hereunder shall not constitute a “Lender” hereunder or under
      the other Loan Documents and the Originating Lender’s obligations under this
      Agreement shall remain unchanged, (ii) the Originating Lender shall remain
      solely responsible for the performance of such obligations,
      (iii) Borrowers, Agent, and the Lenders shall continue to deal solely and
      directly with the Originating Lender in connection with the Originating Lender’s
      rights and obligations under this Agreement and the other Loan Documents,
      (iv) no Lender shall transfer or grant any participating interest under
      which the Participant has the right to approve any amendment to, or any consent
      or waiver with respect to, this Agreement or any other Loan Document, except
      to
      the extent such amendment to, or consent or waiver with respect to this
      Agreement or of any other Loan Document would (A) extend the final maturity
      date of the Obligations hereunder in which such Participant is participating,
      (B) reduce the interest rate applicable to the Obligations hereunder in
      which such Participant is participating, (C) release all or a material
      portion of the Collateral or guaranties (except to the extent expressly provided
      herein or in any of the Loan Documents) supporting the Obligations hereunder
      in
      which such Participant is participating, (D) postpone the payment of, or
      reduce the amount of, the interest or fees payable to such Participant through
      such Lender, or (E) change the amount or due dates of scheduled principal
      repayments or prepayments or premiums; and (v) all amounts payable by
      Borrowers hereunder shall be determined as if such Lender had not sold such
      participation; except that, if amounts outstanding under this Agreement are
      due
      and unpaid, or shall have been declared or shall have become due and payable
      upon the occurrence of an Event of Default, each Participant shall be deemed
      to
      have the right of set-off in respect of its participating interest in amounts
      owing under this Agreement to the same extent as if the amount of its
      participating interest were owing directly to it as a Lender under this
      Agreement. The rights of any Participant only shall be derivative through the
      Originating Lender with whom such Participant participates and no Participant
      shall have any rights under this Agreement or the other Loan Documents or any
      direct rights as to the other Lenders, Agent, Borrowers, the Collections, the
      Collateral, or otherwise in respect of the Obligations. No Participant shall
      have the right to participate directly in the making of decisions by the Lenders
      among themselves. 

     

    (f)
      In connection with any such
      assignment or participation or proposed assignment or participation, a Lender
      may disclose all documents and information which it now or hereafter may have
      relating to Borrowers or Borrowers’ business. 

     

    (g)
      Any other provision in this
      Agreement notwithstanding, any Lender may at any time create a security interest
      in, or pledge, all or any portion of its rights under and interest in this
      Agreement in favor of any Federal Reserve Bank in accordance with Regulation
      A
      of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR §203.14, and such
      Federal Reserve Bank may enforce such pledge or security interest in any manner
      permitted under applicable law. 

     

     

     

    -89-


     

    14.2
      Successors. This Agreement shall bind and inure to the benefit
      of the respective successors and assigns of each of the parties;
provided, however, that Borrowers may not assign this Agreement or
      any rights or duties hereunder without the Lenders’ prior written consent and
      any prohibited assignment shall be absolutely void ab initio. No consent to
      assignment by the Lenders shall release any Borrower from its Obligations.
      A
      Lender may assign this Agreement and the other Loan Documents and its rights
      and
      duties hereunder and thereunder pursuant to Section 14.1 hereof and,
      except as expressly required pursuant to Section 14.1 hereof, no
      consent or approval by any Borrower is required in connection with any such
      assignment. 

     

    15.
      AMENDMENTS;
      WAIVERS. 

     

    15.1
Amendments
      and
      Waivers. No amendment or waiver of any provision of this Agreement
      or any other Loan Document, and no consent with respect to any departure by
      Borrowers therefrom, shall be effective unless the same shall be in writing
      and
      signed by the Required Lenders (or by Agent at the written request of the
      Required Lenders) and Administrative Borrower (on behalf of all Borrowers)
      and
      then any such waiver or consent shall be effective only in the specific instance
      and for the specific purpose for which given; provided, however,
      that no such waiver, amendment, or consent shall, unless in writing and signed
      by all of the Lenders affected thereby and Administrative Borrower (on behalf
      of
      all Borrowers) and acknowledged by Agent, do any of the following: 

     

    (a)
      increase or extend any
      Commitment of any Lender, 

     

    (b)
      postpone or delay any date fixed
      by this Agreement or any other Loan Document for any payment of principal,
      interest, fees, or other amounts due hereunder or under any other Loan Document,
      

     

    (c)
      reduce the principal of, or the
      rate of interest on, any loan or other extension of credit hereunder, or reduce
      any fees or other amounts payable hereunder or under any other Loan Document,
      

     

    (d)
      change the percentage of the
      Commitments that is required to take any action hereunder, 

     

    (e)
      amend this Section or any
      provision of the Agreement providing for consent or other action by all Lenders,
      

     

    (f)
      release Collateral other than as
      permitted by Section 16.12, 

     

    (g)
      change the definition of
“Required Lenders”, 

     

    (h)
      contractually subordinate any of
      the Agent’s Liens, 

     

    (i)
      release any Borrower or
      Guarantor from any obligation for the payment of money, or 

     

     

     

    -90-


     

    (j)
      change the definition of
      Borrowing Base or the definitions of Eligible Accounts, Eligible Inventory,
      Eligible Raw Inventory, Eligible Inventory, Maximum Revolver Amount, Term Loan
      Amount, or change Section 2.1(b); or 

     

    (k)
      amend any of the provisions of
Section 16. 

     

    and,
provided
      further,
however, that no amendment, waiver or consent shall, unless in writing
      and signed by Agent, Issuing Lender, or Swing Lender, affect the rights or
      duties of Agent, Issuing Lender, or Swing Lender, as applicable, under this
      Agreement or any other Loan Document. The foregoing notwithstanding, any
      amendment, modification, waiver, consent, termination, or release of, or with
      respect to, any provision of this Agreement or any other Loan Document that
      relates only to the relationship of the Lender Group among themselves, and
      that
      does not affect the rights or obligations of Borrowers, shall not require
      consent by or the agreement of Borrowers. 

     

    15.2
Replacement
      of
      Holdout Lender. If any action to be taken by the Lender Group or
      Agent hereunder requires the unanimous consent, authorization, or agreement
      of
      all Lenders, and a Lender (“Holdout Lender”) fails to give its consent,
      authorization, or agreement, then Agent, upon at least 5 Business Days prior
      irrevocable notice to the Holdout Lender, may permanently replace the Holdout
      Lender with one or more substitute Lenders (each, a “Replacement
      Lender”), and the Holdout Lender shall have not right to refuse to be
      replaced hereunder. Such notice to replace the Holdout Lender shall specify
      an
      effective date for such replacement, which date shall not be later than 15
      Business Days after the date such notice is given. 

     

    Prior
      to the effective date of such
      replacement, the Holdout Lender and each Replacement Lender shall execute and
      deliver an Assignment and Acceptance Agreement, subject only to the Holdout
      Lender being repaid its share of the outstanding Obligations (including an
      assumption of its Pro Rata Share of the Risk Participation Liability) without
      any premium or penalty of any kind whatsoever. If the Holdout Lender shall
      refuse or fail to execute and deliver any such Assignment and Acceptance
      Agreement prior to the effective date of such replacement, the Holdout Lender
      shall be deemed to have executed and delivered such Assignment and Acceptance
      Agreement. The replacement of any Holdout Lender shall be made in accordance
      with the terms of Section 14.1. Until such time as the Replacement
      Lenders shall have acquired all of the Obligations, the Commitments, and the
      other rights and obligations of the Holdout Lender hereunder and under the
      other
      Loan Documents, the Holdout Lender shall remain obligated to make the Holdout
      Lender’s Pro Rata Share of Advances and to purchase a participation in each
      Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
      Participation Liability of such Letter of Credit. 

     

    15.3
No
      Waivers;
      Cumulative Remedies. No failure by Agent or any Lender to exercise
      any right, remedy, or option under this Agreement or, any other Loan Document,
      or delay by Agent or any Lender in exercising the same, will operate as a waiver
      thereof. No waiver by Agent or any Lender will be effective unless it is in
      writing, and then only to the extent specifically stated. No waiver by Agent
      or
      any Lender on any occasion shall affect or diminish Agent’s and each Lender’s
      rights thereafter to require strict performance by Borrowers of any provision
      of
      this Agreement. Agent’s and each Lender’s rights under this Agreement and the
      other Loan Documents will be cumulative and not exclusive of any other right
      or
      remedy that Agent or any Lender may have. 

     

     

     

    -91-


     

    16.
      AGENT; THE LENDER
      GROUP. 

     

    16.1
Appointment
      and
      Authorization of Agent. Each Lender hereby designates and appoints
      Foothill as its representative under this Agreement and the other Loan Documents
      and each Lender hereby irrevocably authorizes Agent to take such action on
      its
      behalf under the provisions of this Agreement and each other Loan Document
      and
      to exercise such powers and perform such duties as are expressly delegated
      to
      Agent by the terms of this Agreement or any other Loan Document, together with
      such powers as are reasonably incidental thereto. Agent agrees to act as such
      on
      the express conditions contained in this Section 16. The provisions
      of this Section 16 are solely for the benefit of Agent, and the
      Lenders, and Borrowers shall have no rights as a third party beneficiary of
      any
      of the provisions contained herein. Any provision to the contrary contained
      elsewhere in this Agreement or in any other Loan Document notwithstanding,
      Agent
      shall not have any duties or responsibilities, except those expressly set forth
      herein, nor shall Agent have or be deemed to have any fiduciary relationship
      with any Lender, and no implied covenants, functions, responsibilities, duties,
      obligations or liabilities shall be read into this Agreement or any other Loan
      Document or otherwise exist against Agent; it being expressly understood and
      agreed that the use of the word “Agent” is for convenience only, that Foothill
      is merely the representative of the Lenders, and only has the contractual duties
      set forth herein. Except as expressly otherwise provided in this Agreement,
      Agent shall have and may use its sole discretion with respect to exercising
      or
      refraining from exercising any discretionary rights or taking or refraining
      from
      taking any actions that Agent expressly is entitled to take or assert under
      or
      pursuant to this Agreement and the other Loan Documents. Without limiting the
      generality of the foregoing, or of any other provision of the Loan Documents
      that provides rights or powers to Agent, Lenders agree that Agent shall have
      the
      right to exercise the following powers as long as this Agreement remains in
      effect: (a) maintain, in accordance with its customary business practices,
      ledgers and records reflecting the status of the Obligations, the Collateral,
      the Collections, and related matters, (b) execute or file any and all
      financing or similar statements or notices, amendments, renewals, supplements,
      documents, instruments, proofs of claim, notices and other written agreements
      with respect to the Loan Documents, (c) make Advances, for itself or on
      behalf of Lenders as provided in the Loan Documents, (d) exclusively
      receive, apply, and distribute the Collections as provided in the Loan
      Documents, (e) open and maintain such bank accounts and cash management
      accounts as Agent deems necessary and appropriate in accordance with the Loan
      Documents for the foregoing purposes with respect to the Collateral and the
      Collections, (f) perform, exercise, and enforce any and all other rights
      and remedies of the Lender Group with respect to Borrowers, the Obligations,
      the
      Collateral, the Collections, or otherwise related to any of same as provided
      in
      the Loan Documents, and (g) incur and pay such Lender Group Expenses as
      Agent may deem necessary or appropriate for the performance and fulfillment
      of
      its functions and powers pursuant to the Loan Documents. 

     

    16.2
Delegation
      of
      Duties. Agent may execute any of its duties under this Agreement or
      any other Loan Document by or through agents, employees or attorneys-in-fact
      and
      shall be entitled to advice of counsel concerning all matters pertaining to
      such
      duties. Agent shall not be responsible for the negligence or misconduct of
      any
      agent or attorney-in-fact that it selects as long as such selection was made
      without gross negligence or willful misconduct. 

     

     

     

    -92-


     

    16.3
Liability
      of
      Agent. None of the Agent-Related Persons shall (i) be liable
      for any action taken or omitted to be taken by any of them under or in
      connection with this Agreement or any other Loan Document or the transactions
      contemplated hereby (except for its own gross negligence or willful misconduct),
      or (ii) be responsible in any manner to any of the Lenders for any recital,
      statement, representation or warranty made by any Borrower or any Subsidiary
      or
      Affiliate of any Borrower, or any officer or director thereof, contained in
      this
      Agreement or in any other Loan Document, or in any certificate, report,
      statement or other document referred to or provided for in, or received by
      Agent
      under or in connection with, this Agreement or any other Loan Document, or
      the
      validity, effectiveness, genuineness, enforceability or sufficiency of this
      Agreement or any other Loan Document, or for any failure of any Borrower or
      any
      other party to any Loan Document to perform its obligations hereunder or
      thereunder. No Agent-Related Person shall be under any obligation to any Lender
      to ascertain or to inquire as to the observance or performance of any of the
      agreements contained in, or conditions of, this Agreement or any other Loan
      Document, or to inspect the Books or properties of Borrowers or the books or
      records or properties of any of Borrowers’ Subsidiaries or Affiliates.


     

    16.4
Reliance
      by
      Agent. Agent shall be entitled to rely, and shall be fully
      protected in relying, upon any writing, resolution, notice, consent,
      certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
      statement or other document or conversation believed by it to be genuine and
      correct and to have been signed, sent, or made by the proper Person or Persons,
      and upon advice and statements of legal counsel (including counsel to Borrowers
      or counsel to any Lender), independent accountants and other experts selected
      by
      Agent. Agent shall be fully justified in failing or refusing to take any action
      under this Agreement or any other Loan Document unless Agent shall first receive
      such advice or concurrence of the Lenders as it deems appropriate and until
      such
      instructions are received, Agent shall act, or refrain from acting, as it deems
      advisable. If Agent so requests, it shall first be indemnified to its reasonable
      satisfaction by Lenders against any and all liability and expense that may
      be
      incurred by it by reason of taking or continuing to take any such action. Agent
      shall in all cases be fully protected in acting, or in refraining from acting,
      under this Agreement or any other Loan Document in accordance with a request
      or
      consent of the Lenders and such request and any action taken or failure to
      act
      pursuant thereto shall be binding upon all of the Lenders. 

     

    16.5
Notice
      of Default or
      Event of Default. Agent shall not be deemed to have knowledge or
      notice of the occurrence of any Default or Event of Default, except with respect
      to defaults in the payment of principal, interest, fees, and expenses required
      to be paid to Agent for the account of the Lenders, except with respect to
      Events of Default of which Agent has actual knowledge, unless Agent shall have
      received written notice from a Lender or Administrative Borrower referring
      to
      this Agreement, describing such Default or Event of Default, and stating that
      such notice is a “notice of default.” Agent promptly will notify the Lenders of
      its receipt of any such notice or of any Event of Default of which Agent has
      actual knowledge. If any Lender obtains actual knowledge of any Event of
      Default, such Lender promptly shall notify the other Lenders and Agent of such
      Event of Default. Each Lender shall be solely responsible for giving any notices
      to its Participants, if any. Subject to Section 16.4, Agent shall
      take such action with respect to such Default or Event of Default as may be
      requested by the Required Lenders in accordance with Section 9;


     

     

     

    -93-


     

    provided,
however,
      that unless and until Agent has received any such request, Agent may (but shall
      not be obligated to) take such action, or refrain from taking such action,
      with
      respect to such Default or Event of Default as it shall deem advisable.


     

    16.6
Credit
      Decision. Each Lender acknowledges that none of the Agent-Related
      Persons has made any representation or warranty to it, and that no act by Agent
      hereinafter taken, including any review of the affairs of Borrowers and their
      Subsidiaries or Affiliates, shall be deemed to constitute any representation
      or
      warranty by any Agent-Related Person to any Lender. Each Lender represents
      to
      Agent that it has, independently and without reliance upon any Agent-Related
      Person and based on such documents and information as it has deemed appropriate,
      made its own appraisal of and investigation into the business, prospects,
      operations, property, financial and other condition and creditworthiness of
      Borrowers and any other Person (other than the Lender Group) party to a Loan
      Document, and all applicable bank regulatory laws relating to the transactions
      contemplated hereby, and made its own decision to enter into this Agreement
      and
      to extend credit to Borrowers. Each Lender also represents that it will,
      independently and without reliance upon any Agent-Related Person and based
      on
      such documents and information as it shall deem appropriate at the time,
      continue to make its own credit analysis, appraisals and decisions in taking
      or
      not taking action under this Agreement and the other Loan Documents, and to
      make
      such investigations as it deems necessary to inform itself as to the business,
      prospects, operations, property, financial and other condition and
      creditworthiness of Borrowers and any other Person (other than the Lender Group)
      party to a Loan Document. Except for notices, reports, and other documents
      expressly herein required to be furnished to the Lenders by Agent, Agent shall
      not have any duty or responsibility to provide any Lender with any credit or
      other information concerning the business, prospects, operations, property,
      financial and other condition or creditworthiness of Borrowers and any other
      Person party to a Loan Document that may come into the possession of any of
      the
      Agent-Related Persons. 

     

    16.7
Costs
      and Expenses;
      Indemnification. Agent may incur and pay Lender Group Expenses to
      the extent Agent reasonably deems necessary or appropriate for the performance
      and fulfillment of its functions, powers, and obligations pursuant to the Loan
      Documents, including court costs, reasonable attorneys fees and expenses, costs
      of collection by outside collection agencies and auctioneer fees and costs
      of
      security guards or insurance premiums paid to maintain the Collateral, whether
      or not Borrowers are obligated to reimburse Agent or Lenders for such expenses
      pursuant to the Loan Agreement or otherwise. Agent is authorized and directed
      to
      deduct and retain sufficient amounts from Collections received by Agent to
      reimburse Agent for such out-of-pocket costs and expenses prior to the
      distribution of any amounts to Lenders. In the event Agent is not reimbursed
      for
      such costs and expenses from Collections received by Agent, each Lender hereby
      agrees that it is and shall be obligated to pay to or reimburse Agent for the
      amount of such Lender’s Pro Rata Share thereof. Whether or not the transactions
      contemplated hereby are consummated, the Lenders shall indemnify upon demand
      the
      Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrowers
      and without limiting the obligation of Borrowers to do so), according to their
      Pro Rata Shares, from and against any and all Indemnified Liabilities;
provided, however, that no Lender shall be liable for the payment
      to any Agent-Related Person of any portion of such Indemnified Liabilities
      resulting solely from such Person’s gross negligence or willful misconduct nor
      shall any Lender be liable for 

     

     

     

    -94-


     

    the
      obligations of any Defaulting
      Lender in failing to make an Advance or other extension of credit hereunder.
      Without limitation of the foregoing, each Lender shall reimburse Agent upon
      demand for such Lender’s ratable share of any costs or out-of-pocket expenses
      (including attorneys fees and expenses) incurred by Agent in connection with
      the
      preparation, execution, delivery, administration, modification, amendment,
      or
      enforcement (whether through negotiations, legal proceedings or otherwise)
      of,
      or legal advice in respect of rights or responsibilities under, this Agreement,
      any other Loan Document, or any document contemplated by or referred to herein,
      to the extent that Agent is not reimbursed for such expenses by or on behalf
      of
      Borrowers. The undertaking in this Section shall survive the payment of all
      Obligations hereunder and the resignation or replacement of Agent. 

     

    16.8
Agent
      in Individual
      Capacity. Agent and its Affiliates may make loans to, issue letters
      of credit for the account of, accept deposits from, acquire equity interests
      in,
      and generally engage in any kind of banking, trust, financial advisory,
      underwriting, or other business with Borrowers and their Subsidiaries and
      Affiliates and any other Person (other than the Lender Group) party to any
      Loan
      Documents as though Agent were not Agent hereunder, and, in each case, without
      notice to or consent of the other members of the Lender Group. The other members
      of the Lender Group acknowledge that, pursuant to such activities, Agent or
      its
      Affiliates may receive information regarding Borrowers or their Affiliates
      and
      any other Person (other than the Lender Group) party to any Loan Documents
      that
      is subject to confidentiality obligations in favor of Borrowers or such other
      Person and that prohibit the disclosure of such information to the Lenders,
      and
      the Lenders acknowledge that, in such circumstances (and in the absence of
      a
      waiver of such confidentiality obligations, which waiver Agent will use its
      reasonable best efforts to obtain), Agent shall not be under any obligation
      to
      provide such information to them. The terms “Lender” and “Lenders” include Agent
      in its individual capacity. 

     

    16.9
Successor
      Agent. Agent may resign as Agent upon 45 days notice to the
      Lenders. If Agent resigns under this Agreement, the Required Lenders shall
      appoint a successor Agent for the Lenders. If no successor Agent is appointed
      prior to the effective date of the resignation of Agent, Agent may appoint,
      after consulting with the Lenders, a successor Agent. If Agent has materially
      breached or failed to perform any material provision of this Agreement or of
      applicable law, the Required Lenders may agree in writing to remove and replace
      Agent with a successor Agent from among the Lenders. In any such event, upon
      the
      acceptance of its appointment as successor Agent hereunder, such successor
      Agent
      shall succeed to all the rights, powers, and duties of the retiring Agent and
      the term “Agent” shall mean such successor Agent and the retiring Agent’s
      appointment, powers, and duties as Agent shall be terminated. After any retiring
      Agent’s resignation hereunder as Agent, the provisions of this
Section 16 shall inure to its benefit as to any actions taken or
      omitted to be taken by it while it was Agent under this Agreement. If no
      successor Agent has accepted appointment as Agent by the date which is 45 days
      following a retiring Agent’s notice of resignation, the retiring Agent’s
      resignation shall nevertheless thereupon become effective and the Lenders shall
      perform all of the duties of Agent hereunder until such time, if any, as the
      Lenders appoint a successor Agent as provided for above. 

     

    16.10
Lender
      in
      Individual Capacity. Any Lender and its respective Affiliates may
      make loans to, issue letters of credit for the account of, accept deposits
      from,
      acquire equity interests in and generally engage in any kind of banking, trust,
      financial 

     

     

     

    -95-


     

    advisory,
      underwriting or other
      business with Borrowers and their Subsidiaries and Affiliates and any other
      Person (other than the Lender Group) party to any Loan Documents as though
      such
      Lender were not a Lender hereunder without notice to or consent of the other
      members of the Lender Group. The other members of the Lender Group acknowledge
      that, pursuant to such activities, such Lender and its respective Affiliates
      may
      receive information regarding Borrowers or their Affiliates and any other Person
      (other than the Lender Group) party to any Loan Documents that is subject to
      confidentiality obligations in favor of Borrowers or such other Person and
      that
      prohibit the disclosure of such information to the Lenders, and the Lenders
      acknowledge that, in such circumstances (and in the absence of a waiver of
      such
      confidentiality obligations, which waiver such Lender will use its reasonable
      best efforts to obtain), such Lender not shall be under any obligation to
      provide such information to them. With respect to the Swing Loans and Agent
      Advances, Swing Lender shall have the same rights and powers under this
      Agreement as any other Lender and may exercise the same as though it were not
      the sub-agent of the Agent. 

     

    16.11
Withholding
      Taxes. 

     

    (a)
      If any Lender is a “foreign
      corporation, partnership or trust” within the meaning of the IRC and such Lender
      claims exemption from, or a reduction of, U.S. withholding tax under Sections
      1441 or 1442 of the IRC, such Lender agrees with and in favor of Agent and
      Borrowers, to deliver to Agent and Administrative Borrower: 

     

    (i)
      if such Lender claims an
      exemption from withholding tax pursuant to its portfolio interest exception,
      (a) a statement of the Lender, signed under penalty of perjury, that it is
      not a (I) a “bank” as described in Section 881(c)(3)(A) of the IRC,
      (II) a 10% shareholder (within the meaning of Section 881(c)(3)(B) of the
      IRC), or (III) a controlled foreign corporation described in
      Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form
      W-8BEN, before the first payment of any interest under this Agreement and at
      any
      other time reasonably requested by Agent or Administrative Borrower;


     

    (ii)
      if such Lender claims an
      exemption from, or a reduction of, withholding tax under a United States tax
      treaty, properly completed IRS Form W-8BEN before the first payment of any
      interest under this Agreement and at any other time reasonably requested by
      Agent or Administrative Borrower; 

     

    (iii)
      if such Lender claims that
      interest paid under this Agreement is exempt from United States withholding
      tax
      because it is effectively connected with a United States trade or business
      of
      such Lender, two properly completed and executed copies of IRS Form W-8ECI
      before the first payment of any interest is due under this Agreement and at
      any
      other time reasonably requested by Agent or Administrative Borrower;


     

    (iv)
      such other form or forms as may
      be required under the IRC or other laws of the United States as a condition
      to
      exemption from, or reduction of, United States withholding tax. 

     

     

     

    -96-


     

    Such
      Lender agrees promptly to
      notify Agent and Administrative Borrower of any change in circumstances which
      would modify or render invalid any claimed exemption or reduction. 

     

    (b)
      If any Lender claims exemption
      from, or reduction of, withholding tax under a United States tax treaty by
      providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation
      in, or otherwise transfers all or part of the Obligations of Borrowers to such
      Lender, such Lender agrees to notify Agent of the percentage amount in which
      it
      is no longer the beneficial owner of Obligations of Borrowers to such Lender.
      To
      the extent of such percentage amount, Agent will treat such Lender’s IRS Form
      W-8BEN as no longer valid. 

     

    (c)
      If any Lender is entitled to a
      reduction in the applicable withholding tax, Agent may withhold from any
      interest payment to such Lender an amount equivalent to the applicable
      withholding tax after taking into account such reduction. If the forms or other
      documentation required by subsection (a) of this Section are not delivered
      to Agent, then Agent may withhold from any interest payment to such Lender
      not
      providing such forms or other documentation an amount equivalent to the
      applicable withholding tax. 

     

    (d)
      If the IRS or any other
      Governmental Authority of the United States or other jurisdiction asserts a
      claim that Agent did not properly withhold tax from amounts paid to or for
      the
      account of any Lender (because the appropriate form was not delivered, was
      not
      properly executed, or because such Lender failed to notify Agent of a change
      in
      circumstances which rendered the exemption from, or reduction of, withholding
      tax ineffective, or for any other reason) such Lender shall indemnify and hold
      Agent harmless for all amounts paid, directly or indirectly, by Agent as tax
      or
      otherwise, including penalties and interest, and including any taxes imposed
      by
      any jurisdiction on the amounts payable to Agent under this Section, together
      with all costs and expenses (including attorneys fees and expenses). The
      obligation of the Lenders under this subsection shall survive the payment of
      all
      Obligations and the resignation or replacement of Agent. 

     

    (e)
      All payments made by Borrowers
      hereunder or under any note or other Loan Document will be made without setoff,
      counterclaim, or other defense, except as required by applicable law other
      than
      for Taxes (as defined below). All such payments will be made free and clear
      of,
      and without deduction or withholding for, any present or future taxes, levies,
      imposts, duties, fees, assessments or other charges of whatever nature now
      or
      hereafter imposed by any jurisdiction (other than the United States) or by
      any
      political subdivision or taxing authority thereof or therein (other than of
      the
      United States) with respect to such payments (but excluding, any tax imposed
      by
      any jurisdiction or by any political subdivision or taxing authority thereof
      or
      therein (i) measured by or based on the net income or net profits of a
      Lender, or (ii) to the extent that such tax results from a change in the
      circumstances of the Lender, including a change in the residence, place of
      organization, or principal place of business of the Lender, or a change in
      the
      branch or lending office of the Lender participating in the transactions set
      forth herein) and all interest, penalties or similar liabilities 

     

     

     

    -97-


     

    with
      respect thereto (all such
      non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
      being referred to collectively as “Taxes”). If any Taxes are so levied or
      imposed, each Borrower agrees to pay the full amount of such Taxes, and such
      additional amounts as may be necessary so that every payment of all amounts
      due
      under this Agreement or under any note, including any amount paid pursuant
      to
      this Section 16.11(e) after withholding or deduction for or on
      account of any Taxes, will not be less than the amount provided for herein;
      provided, however, that Borrowers shall not be required to
      increase any such amounts payable to Agent or any Lender (i) that is not
      organized under the laws of the United States, if such Person fails to comply
      with the other requirements of this Section 16.11, or (ii) if
      the increase in such amount payable results from Agent’s or such Lender’s own
      willful misconduct or gross negligence. Borrowers will furnish to Agent as
      promptly as possible after the date the payment of any Taxes is due pursuant
      to
      applicable law certified copies of tax receipts evidencing such payment by
      Borrowers. 

     

    16.12
Collateral
      Matters. 

     

    (a)
      The Lenders hereby irrevocably
      authorize Agent, at its option and in its sole discretion, to release any Lien
      on any Collateral (i) upon the termination of the Commitments and payment
      and satisfaction in full by Borrowers of all Obligations, (ii) constituting
      property being sold or disposed of if a release is required or desirable in
      connection therewith and if Administrative Borrower certifies to Agent that
      the
      sale or disposition is permitted under Section 7.4 of this Agreement
      or the other Loan Documents (and Agent may rely conclusively on any such
      certificate, without further inquiry), (iii) constituting property in which
      no Borrower owned any interest at the time the security interest was granted
      or
      at any time thereafter, or (iv) constituting property leased to a Borrower
      under a lease that has expired or is terminated in a transaction permitted
      under
      this Agreement. Except as provided above, Agent will not execute and deliver
      a
      release of any Lien on any Collateral without the prior written authorization
      of
      (y) if the release is of all or any substantial portion of the Collateral,
      all of the Lenders, or (z) otherwise, the Required Lenders. Upon request by
      Agent or Administrative Borrower at any time, the Lenders will confirm in
      writing Agent’s authority to release any such Liens on particular types or items
      of Collateral pursuant to this Section 16.12; provided,
however, that (1) Agent shall not be required to execute any
      document necessary to evidence such release on terms that, in Agent’s opinion,
      would expose Agent to liability or create any obligation or entail any
      consequence other than the release of such Lien without recourse,
      representation, or warranty, and (2) such release shall not in any manner
      discharge, affect, or impair the Obligations or any Liens (other than those
      expressly being released) upon (or obligations of Borrowers in respect of)
      all
      interests retained by Borrowers, including, the proceeds of any sale, all of
      which shall continue to constitute part of the Collateral. 

     

    (b)
      Agent shall have no obligation
      whatsoever to any of the Lenders to assure that the Collateral exists or is
      owned by Borrowers or is cared for, protected, or insured or has been
      encumbered, or that the Agent’s Liens have been properly or sufficiently or
      lawfully created, perfected, protected, or enforced or are entitled to any
      particular priority, or to exercise at all or in any particular manner or under
      any duty of care, disclosure or fidelity, or to continue exercising, any of
      the
      rights, authorities and powers 

     

     

     

    -98-


     

    granted
      or available to Agent
      pursuant to any of the Loan Documents, it being understood and agreed that
      in
      respect of the Collateral, or any act, omission, or event related thereto,
      subject to the terms and conditions contained herein, Agent may act in any
      manner it may deem appropriate, in its sole discretion given Agent’s own
      interest in the Collateral in its capacity as one of the Lenders and that Agent
      shall have no other duty or liability whatsoever to any Lender as to any of
      the
      foregoing, except as otherwise provided herein. 

     

    16.13
Restrictions
      on
      Actions by Lenders; Sharing of Payments. 

     

    (a)
      Each of the Lenders agrees that
      it shall not, without the express consent of Agent, and that it shall, to the
      extent it is lawfully entitled to do so, upon the request of Agent, set off
      against the Obligations, any amounts owing by such Lender to Borrowers or any
      deposit accounts of Borrowers now or hereafter maintained with such Lender.
      Each
      of the Lenders further agrees that it shall not, unless specifically requested
      to do so by Agent, take or cause to be taken any action, including, the
      commencement of any legal or equitable proceedings, to foreclose any Lien on,
      or
      otherwise enforce any security interest in, any of the Collateral the purpose
      of
      which is, or could be, to give such Lender any preference or priority against
      the other Lenders with respect to the Collateral. 

     

    (b)
      If, at any time or times any
      Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any
      proceeds of Collateral or any payments with respect to the Obligations arising
      under, or relating to, this Agreement or the other Loan Documents, except for
      any such proceeds or payments received by such Lender from Agent pursuant to
      the
      terms of this Agreement, or (ii) payments from Agent in excess of such
      Lender’s ratable portion of all such distributions by Agent, such Lender
      promptly shall (1) turn the same over to Agent, in kind, and with such
      endorsements as may be required to negotiate the same to Agent, or in
      immediately available funds, as applicable, for the account of all of the
      Lenders and for application to the Obligations in accordance with the applicable
      provisions of this Agreement, or (2) purchase, without recourse or
      warranty, an undivided interest and participation in the Obligations owed to
      the
      other Lenders so that such excess payment received shall be applied ratably
      as
      among the Lenders in accordance with their Pro Rata Shares; provided,
however, that if all or part of such excess payment received by the
      purchasing party is thereafter recovered from it, those purchases of
      participations shall be rescinded in whole or in part, as applicable, and the
      applicable portion of the purchase price paid therefor shall be returned to
      such
      purchasing party, but without interest except to the extent that such purchasing
      party is required to pay interest in connection with the recovery of the excess
      payment. 

     

    16.14
Agency
      for
      Perfection.Agent hereby appoints each other Lender as its agent
      (and each Lender hereby accepts such appointment) for the purpose of perfecting
      the Agent’s Liens in assets which, in accordance with Article 9 of the UCC can
      be perfected only by possession. Should any Lender obtain possession of any
      such
      Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s
      request therefor shall deliver such Collateral to Agent or in accordance with
      Agent’s instructions. 

     

    16.15
Payments
      by Agent
      to the Lenders. All payments to be made by Agent to the Lenders
      shall be made by bank wire transfer or internal transfer of immediately
      available funds pursuant to such wire transfer instructions as each party may
      

     

     

     

    -99-


     

    designate
      for itself by written
      notice to Agent. Concurrently with each such payment, Agent shall identify
      whether such payment (or any portion thereof) represents principal, premium,
      or
      interest of the Obligations. 

     

    16.16
Concerning
      the
      Collateral and Related Loan Documents. Each member of the Lender
      Group authorizes and directs Agent to enter into this Agreement and the other
      Loan Documents relating to the Collateral, for the benefit of the Lender Group.
      Each member of the Lender Group agrees that any action taken by Agent in
      accordance with the terms of this Agreement or the other Loan Documents relating
      to the Collateral and the exercise by Agent of its powers set forth therein
      or
      herein, together with such other powers that are reasonably incidental thereto,
      shall be binding upon all of the Lenders. 

     

    16.17
Field
      Audits and
      Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports
      and
      Information. By becoming a party to this Agreement, each Lender:


     

    (a)
      is deemed to have requested that
      Agent furnish such Lender, promptly after it becomes available, a copy of each
      field audit or examination report (each a “Report” and collectively, “Reports”)
      prepared by Agent, and Agent shall so furnish each Lender with such Reports,
      

     

    (b)
      expressly agrees and
      acknowledges that Agent does not (i) make any representation or warranty as
      to the accuracy of any Report, and (ii) shall not be liable for any
      information contained in any Report, 

     

    (c)
      expressly agrees and
      acknowledges that the Reports are not comprehensive audits or examinations,
      that
      Agent or other party performing any audit or examination will inspect only
      specific information regarding Borrowers and will rely significantly upon the
      Books, as well as on representations of Borrowers’ personnel, 

     

    (d)
      agrees to keep all Reports and
      other material, non-public information regarding Borrowers and their
      Subsidiaries and their operations, assets, and existing and contemplated
      business plans in a confidential manner; it being understood and agreed by
      Borrowers that in any event such Lender may make disclosures (a) to counsel
      for and other advisors, accountants, and auditors to such Lender,
      (b) reasonably required by any bona fide potential or actual Assignee or
      Participant in connection with any contemplated or actual assignment or transfer
      by such Lender of an interest herein or any participation interest in such
      Lender’s rights hereunder, (c) of information that has become public by
      disclosures made by Persons other than such Lender, its Affiliates, assignees,
      transferees, or Participants, or (d) as required or requested by any court,
      governmental or administrative agency, pursuant to any subpoena or other legal
      process, or by any law, statute, regulation, or court order; provided,
however, that, unless prohibited by applicable law, statute, regulation,
      or court order, such Lender shall notify Administrative Borrower of any request
      by any court, governmental or administrative agency, or pursuant to any subpoena
      or other legal process for disclosure of any such non-public material
      information concurrent with, or where practicable, prior to the disclosure
      thereof, and 

     

     

     

    -100-


     

    (e)
      without limiting the generality
      of any other indemnification provision contained in this Agreement, agrees:
      (i) to hold Agent and any such other Lender preparing a Report harmless
      from any action the indemnifying Lender may take or conclusion the indemnifying
      Lender may reach or draw from any Report in connection with any loans or other
      credit accommodations that the indemnifying Lender has made or may make to
      Borrowers, or the indemnifying Lender’s participation in, or the indemnifying
      Lender’s purchase of, a loan or loans of Borrowers; and (ii) to pay and
      protect, and indemnify, defend and hold Agent, and any such other Lender
      preparing a Report harmless from and against, the claims, actions, proceedings,
      damages, costs, expenses, and other amounts (including, attorneys fees and
      costs) incurred by Agent and any such other Lender preparing a Report as the
      direct or indirect result of any third parties who might obtain all or part
      of
      any Report through the indemnifying Lender. 

     

    In
      addition to the foregoing:
      (x) any Lender may from time to time request of Agent in writing that Agent
      provide to such Lender a copy of any report or document provided by Borrowers
      to
      Agent that has not been contemporaneously provided by Borrowers to such Lender,
      and, upon receipt of such request, Agent shall provide a copy of same to such
      Lender, (y) to the extent that Agent is entitled, under any provision of
      the Loan Documents, to request additional reports or information from Borrowers,
      any Lender may, from time to time, reasonably request Agent to exercise such
      right as specified in such Lender’s notice to Agent, whereupon Agent promptly
      shall request of Administrative Borrower the additional reports or information
      reasonably specified by such Lender, and, upon receipt thereof from
      Administrative Borrower, Agent promptly shall provide a copy of same to such
      Lender, and (z) any time that Agent renders to Administrative Borrower a
      statement regarding the Loan Account, Agent shall send a copy of such statement
      to each Lender. 

     

    16.18
Several
      Obligations; No Liability. Notwithstanding that certain of the Loan
      Documents now or hereafter may have been or will be executed only by or in
      favor
      of Agent in its capacity as such, and not by or in favor of the Lenders, any
      and
      all obligations on the part of Agent (if any) to make any credit available
      hereunder shall constitute the several (and not joint) obligations of the
      respective Lenders on a ratable basis, according to their respective
      Commitments, to make an amount of such credit not to exceed, in principal
      amount, at any one time outstanding, the amount of their respective Commitments.
      Nothing contained herein shall confer upon any Lender any interest in, or
      subject any Lender to any liability for, or in respect of, the business, assets,
      profits, losses, or liabilities of any other Lender. Each Lender shall be solely
      responsible for notifying its Participants of any matters relating to the Loan
      Documents to the extent any such notice may be required, and no Lender shall
      have any obligation, duty, or liability to any Participant of any other Lender.
      Except as provided in Section 16.7, no member of the Lender Group shall
      have any liability for the acts or any other member of the Lender Group. No
      Lender shall be responsible to any Borrower or any other Person for any failure
      by any other Lender to fulfill its obligations to make credit available
      hereunder, nor to advance for it or on its behalf in connection with its
      Commitment, nor to take any other action on its behalf hereunder or in
      connection with the financing contemplated herein. 

     

     

     

    -101-


     

    17.
      GENERAL
      PROVISIONS. 

     

    17.1
      Effectiveness. This Agreement shall be binding and deemed
      effective when executed by Borrowers, Agent, and each Lender whose signature
      is
      provided for on the signature pages hereof. 

     

    17.2
Section
      Headings. Headings and numbers have been set forth herein for
      convenience only. Unless the contrary is compelled by the context, everything
      contained in each Section applies equally to this entire Agreement.


     

    17.3
      Interpretation. Neither this Agreement nor any uncertainty or
      ambiguity herein shall be construed or resolved against the Lender Group or
      Borrowers, whether under any rule of construction or otherwise. On the contrary,
      this Agreement has been reviewed by all parties and shall be construed and
      interpreted according to the ordinary meaning of the words used so as to
      accomplish fairly the purposes and intentions of all parties hereto.


     

    17.4
Severability
      of
      Provisions. Each provision of this Agreement shall be severable
      from every other provision of this Agreement for the purpose of determining
      the
      legal enforceability of any specific provision. 

     

    17.5
Amendments
      in
      Writing.This Agreement only can be amended by a writing in
      accordance with Section 15.1. 

     

    17.6
Counterparts;
      Telefacsimile Execution. This Agreement may be executed in any
      number of counterparts and by different parties on separate counterparts, each
      of which, when executed and delivered, shall be deemed to be an original, and
      all of which, when taken together, shall constitute but one and the same
      Agreement. Delivery of an executed counterpart of this Agreement by
      telefacsimile shall be equally as effective as delivery of an original executed
      counterpart of this Agreement. Any party delivering an executed counterpart
      of
      this Agreement by telefacsimile also shall deliver an original executed
      counterpart of this Agreement but the failure to deliver an original executed
      counterpart shall not affect the validity, enforceability, and binding effect
      of
      this Agreement. The foregoing shall apply to each other Loan Document mutatis
      mutandis. 

     

    17.7
Revival
      and
      Reinstatement of Obligations. If the incurrence or payment of the
      Obligations by any Borrower or Guarantor or the transfer to the Lender Group
      of
      any property should for any reason subsequently be declared to be void or
      voidable under any state or federal law relating to creditors’ rights, including
      provisions of the Bankruptcy Code relating to fraudulent conveyances,
      preferences, or other voidable or recoverable payments of money or transfers
      of
      property (collectively, a “Voidable Transfer”), and if the Lender Group
      is required to repay or restore, in whole or in part, any such Voidable
      Transfer, or elects to do so upon the reasonable advice of its counsel, then,
      as
      to any such Voidable Transfer, or the amount thereof that the Lender Group
      is
      required or elects to repay or restore, and as to all reasonable costs,
      expenses, and attorneys fees of the Lender Group related thereto, the liability
      of Borrowers or Guarantor automatically shall be revived, reinstated, and
      restored and shall exist as though such Voidable Transfer had never been made.
      

     

     

     

    -102-


     

    17.8
      Integration. This Agreement, together with the other Loan
      Documents, reflects the entire understanding of the parties with respect to
      the
      transactions contemplated hereby and shall not be contradicted or qualified
      by
      any other agreement, oral or written, before the date hereof. 

     

    17.9
ThermaClime
      as Agent
      for Borrowers. Each Borrower hereby irrevocably appoints
      ThermaClime as the borrowing agent and attorney-in-fact for all Borrowers (the
      “Administrative Borrower”), which appointment shall remain in full force and
      effect unless and until Agent shall have received prior written notice signed
      by
      each Borrower that such appointment has been revoked and that another Borrower
      has been appointed Administrative Borrower. Each Borrower hereby irrevocably
      appoints and authorizes the Administrative Borrower (i) to provide Agent
      with all notices with respect to Advances and Letters of Credit obtained for
      the
      benefit of any Borrower and all other notices and instructions under this
      Agreement and (ii) except as provided in the clause (i) above, to take
      such action as the Administrative Borrower deems appropriate on its behalf
      to
      obtain Advances and Letters of Credit and to exercise such other powers as
      are
      reasonably incidental thereto to carry out the purposes of this Agreement.
      It is
      understood that the handling of the Loan Account and Collateral of Borrowers
      in
      a combined fashion, as more fully set forth herein, is done solely as an
      accommodation to Borrowers in order to utilize the collective borrowing powers
      of Borrowers in the most efficient and economical manner and at their request,
      and that Lender Group shall not incur liability to any Borrower as a result
      hereof. Each Borrower expects to derive benefit, directly or indirectly, from
      the handling of the Loan Account and the Collateral in a combined fashion since
      the successful operation of each Borrower is dependent on the continued
      successful performance of the integrated group. To induce the Lender Group
      to do
      so, and in consideration thereof, each Borrower hereby jointly and severally
      agrees to indemnify each member of the Lender Group and hold each member of
      the
      Lender Group harmless against any and all liability, expense, loss or claim
      of
      damage or injury, made against the Lender Group by any Borrower or by any third
      party whosoever, arising from or incurred by reason of (a) the handling of
      the Loan Account and Collateral of Borrowers as herein provided, (b) the
      Lender Group’s relying on any instructions of the Administrative Borrower, or
      (c) any other action taken by the Lender Group hereunder or under the other
      Loan Documents, except that Borrowers will have no liability to the relevant
      Agent-Related Person or Lender-Related Person under this
Section 17.9 with respect to any liability that has been finally
      determined by a court of competent jurisdiction to have resulted solely from
      the
      gross negligence or willful misconduct of such Agent-Related Person or
      Lender-Related Person, as the case may be. 

     

    17.10
No
      Novation. This Agreement constitutes an amendment and restatement of and
      supersedes the Original Loan Agreement and does not extinguish the obligations
      for the payment of money outstanding under the Original Loan Agreement or
      discharge or release the Obligations (including the Obligations of any
      predecessor corporations) under, and as defined in, the Original Loan Agreement
      except as provided herein or the Lien or priority of any mortgage, pledge,
      security agreement or any other security therefor except as provided herein.
      Nothing herein contained shall be construed as a substitution or novation of
      the
      Obligations outstanding under, and as defined in, the Original Loan Agreement
      or
      instruments securing the same, which shall remain in full force and effect,
      except as modified hereby or by instruments or documents executed concurrently
      herewith. Nothing expressed or implied in this Agreement shall be construed
      as a
      release or other discharge of any Borrower or Guarantor under the Original
      Loan
      Agreement 

     

     

     

    -103-


     

    from
      any of its obligations and
      liabilities as a “Borrower” or “Guarantor” thereunder except as provided herein.
      Each Borrower and Guarantor hereby (i) confirms and agrees that each Loan
      Document to which it is a party is, and shall continue to be, in full force
      and
      effect, as modified by this Agreement and instruments or documents executed
      concurrently herewith, and is hereby ratified and confirmed in all respects
      except that on and after the Restatement Effective Date all references in any
      such Loan Document to “the Loan Agreement,” “thereto,” “thereof,” “thereunder”
or words of like import referring to the Original Loan Agreement shall mean
      the
      Original Loan Agreement as amended and restated and superseded by this Agreement
      and (ii) confirms and agrees that to the extent that any such Loan Document
      purports to assign or pledge to the Agent a security interest in or Lien on,
      any
      collateral as security for the obligations of the Borrowers or the Guarantors
      from time to time existing in respect of the Original Loan Agreement and the
      Loan Documents, such pledge, assignment and/or grant of the security interest
      or
      lien is hereby ratified and confirmed in all respects, as amended hereby or
      thereby. 

     

    18.
      GUARANTY


     

    18.1
Guaranty;
      Limitation
      of Liability. The Parent hereby, unconditionally and irrevocably,
      guarantees the punctual payment when due, whether at stated maturity, by
      acceleration or otherwise, of all Obligations of the Borrowers now or hereafter
      existing under any Loan Document, whether for principal, interest (including,
      without limitation, all interest that accrues after the commencement of any
      case, proceeding or other action relating to bankruptcy, insolvency or
      reorganization of any Borrower), fees, expenses or otherwise (such obligations,
      to the extent not paid by the Borrowers, being the “Guaranteed Obligations”),
      and agrees to pay any and all expenses (including reasonable counsel fees and
      expenses) incurred by the Agents and the Lenders in enforcing any rights under
      the guaranty set forth in this Section 18. Without limiting the
      generality of the foregoing, the Parent’s liability shall extend to all amounts
      that constitute part of the Guaranteed Obligations and would be owed by the
      Borrowers to the Agents and the Lenders under any Loan Document but for the
      fact
      that they are unenforceable or not allowable due to the existence of a
      bankruptcy, reorganization or similar proceeding involving any Borrower.


     

    18.2
Guaranty
      Absolute. The Parent guarantees that the Guaranteed Obligations
      will be paid strictly in accordance with the terms of the Loan Documents,
      regardless of any law, regulation or order now or hereafter in effect in any
      jurisdiction affecting any of such terms or the rights of the Agents or the
      Lenders with respect thereto. The obligations of the Parent under this
Section 18 are independent of the Guaranteed Obligations, and a
      separate action or actions may be brought and prosecuted against Parent to
      enforce such obligations, irrespective of whether any action is brought against
      the Borrowers or whether the Borrowers are joined in any such action or actions.
      The liability of the Parent under this Section 18 shall be
      irrevocable, absolute and unconditional irrespective of, and Parent hereby
      irrevocably waives any defenses it may now or hereafter have in any way relating
      to, any or all of the following: 

     

    (a)
      any lack of validity or
      enforceability of any Loan Document or any agreement or instrument relating
      thereto; 

     

    (b)
      any change in the time, manner
      or place of payment of, or in any other term of, all or any of the Guaranteed
      Obligations, or any other amendment or waiver of or any consent to departure
      from any Loan Document, including, without limitation, any increase in the
      Guaranteed Obligations resulting from the extension of additional credit to
      the
      Borrowers or otherwise; 

     

     

     

    -104-


     

    (c)
      any taking, exchange, release or
      non-perfection of any Collateral, or any taking, release or amendment or waiver
      of or consent to departure from any other guaranty, for all or any of the
      Guaranteed Obligations; 

     

    (d)
      any change, restructuring or
      termination of the corporate, limited liability company or partnership structure
      or existence of any Borrower; or 

     

    (e)
      any other circumstance
      (including, without limitation, any statute of limitations) or any existence
      of
      or reliance on any representation by the Agents or the Lenders that might
      otherwise constitute a defense available to, or a discharge of, Parent, any
      Borrower or any other guarantor or surety. 

     

    This
Section 18
      shall
      continue to be effective or be reinstated, as the case may be, if at any time
      any payment of any of the Guaranteed Obligations is rescinded or must otherwise
      be returned by a Lender or any other Person upon the insolvency, bankruptcy
      or
      reorganization of any Borrower or otherwise, all as though such payment had
      not
      been made. 

     

    18.3.
      Waiver. Parent hereby waives promptness, diligence, notice of
      acceptance and any other notice with respect to any of the Guaranteed
      Obligations and this Section 18 and any requirement that the Agents
      or the Lenders exhaust any right or take any action against the Borrowers or
      any
      other Person or any collateral. Parent acknowledges that it will receive direct
      and indirect benefits from the financing arrangements contemplated herein and
      that the waiver set forth in this Section 18.3 is knowingly made in
      contemplation of such benefits. Parent hereby waives any right to revoke this
      Section 18, and acknowledges that this Section 18 is
      continuing in nature and applies to all Guaranteed Obligations, whether existing
      now or in the future. 

     

    18.4.
Continuing
      Guaranty; Assignments. This Section 18 is a continuing
      guaranty and shall (a) remain in full force and effect until the later of
      (i) the cash payment in full of the Guaranteed Obligations (other than
      indemnification obligations as to which no claim has been made) and all other
      amounts payable under this Section 18 and (ii) the Maturity
      Date, (b) be binding upon Parent, its successors and assigns and
      (c) inure to the benefit of and be enforceable by the Agents and the
      Lenders and their successors, pledgees, transferees and assigns. Without
      limiting the generality of the foregoing clause (c), any Lender may pledge,
      assign or otherwise transfer all or any portion of its rights and obligations
      under this Agreement (including, without limitation, all or any portion of
      its
      Commitments and the Advances owing to it) to any other Person, and such other
      Person shall thereupon become vested with all the benefits in respect thereof
      granted such Lender herein or otherwise, in each case as provided in
Section 14.1. 

     

    18.5.
      Subrogation. Parent will not exercise any rights that it may now
      or hereafter acquire against any Borrower or any other insider guarantor that
      arise from the existence, payment, performance or enforcement of Parent’s
      obligations under this Section 18, including, without limitation,
      any right of subrogation, reimbursement, exoneration, contribution or
      indemnification and 

     

     

     

    -105-


     

    any
      right to participate in any
      claim or remedy of the Agents and the Lenders against any Borrower or any other
      insider guarantor or any collateral, whether or not such claim, remedy or right
      arises in equity or under contract, statute or common law, including, without
      limitation, the right to take or receive from any Borrower or any other insider
      guarantor, directly or indirectly, in cash or other property or by set-off
      or in
      any other manner, payment or security solely on account of such claim, remedy
      or
      right, unless and until all of the Guaranteed Obligations and all other amounts
      payable under this Section 18 shall have been paid in full in cash
      and the Maturity Date shall have occurred. If any amount shall be paid to Parent
      in violation of the immediately preceding sentence at any time prior to the
      later of the payment in full in cash of the Guaranteed Obligations and all
      other
      amounts payable under this Section 18 and the Maturity Date, such
      amount shall be held in trust for the benefit of the Agents and the Lenders
      and
      shall forthwith be paid to the Agents and the Lenders to be credited and applied
      to the Guaranteed Obligations and all other amounts payable under this
Section 18, whether matured or unmatured, in accordance with the
      terms of this Agreement, or to be held as collateral for any Guaranteed
      Obligations or other amounts payable under this Section 18
      thereafter arising. If (i) Parent shall make payment to the Agents and the
      Lenders of all or any part of the Guaranteed Obligations, (ii) all of the
      Guaranteed Obligations and all other amounts payable under this
Section 18 shall be paid in full in cash and (iii) the Maturity
      Date shall have occurred, the Agents and the Lenders will, at Parent’s request
      and expense, execute and deliver to Parent appropriate documents, without
      recourse and without representation or warranty, necessary to evidence the
      transfer by subrogation to Parent of an interest in the Guaranteed Obligations
      resulting from such payment by Parent. 

     

    [Signature
      page to follow.]


     

     

     

    -106-


     

    IN
      WITNESS WHEREOF,
      the parties hereto have caused this Agreement to be executed and delivered
      as of
      the date first above written. 

     

     

     

    
      	 	 	 
	Parent:
	
            
	
              LSB
                INDUSTRIES,
                INC.,

              an
                Delaware
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	Borrowers:
	
            
	
              THERMACLIME,
                INC.,

              an
                Oklahoma
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              CHEROKEE
                NITROGEN
                COMPANY,

              an
                Oklahoma
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              CLIMATE
                MASTER,
                INC.,

              a
                Delaware
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              CLIMATECRAFT,
                INC.,

              an
                Oklahoma
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 


    

    
      	 	 	 
	
              CLIMACOOL,
                CORP.,

              an
                Oklahoma
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              INTERNATIONAL
                ENVIRONMENTAL

              CORPORATION,
                an Oklahoma corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              THERMACLIME
                TECHNOLOGIES, INC.,

              an
                Oklahoma
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	KOAX
              CORP., an Oklahoma corporation
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              LSB
                CHEMICAL
                CORP., an Oklahoma

              corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              XPEDIAIR,
                INC., an Oklahoma corporation.

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 


    

    
      	 	 	 
	
              EL
                DORADO CHEMICAL
                COMPANY,

              an
                Oklahoma
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              CHEMEX
                I
                CORP., an Oklahoma

              corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              TRISON
                CONSTRUCTION,
                INC.,

              an
                Oklahoma
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 
	
            
	
              CHEMEX
                II
                CORP.,

            
	
              an
                Oklahoma
                corporation

            
	
            	
            
	By:	 	
               

               

            
	Title:	 	 


    

    
      	 	 	 
	
              Agent
                and
                Lenders:

               

            
	
            
	
              WELLS
                FARGO FOOTHILL,
                INC., a

              California
                corporation, as
                Agent and as a

              Lender

            
	
            	
            
	
              By:

               

            	 	
               

               

            
	
              Title:

               

            	 	 
	
            
	
              Lender:

               

            
	
            
	
              WACHOVIA
                BANK,
                NATIONAL

              ASSOCIATION
                (as successor in interest to

              Congress
                Financial
                Corporation

              (Southwest))

            
	
            	
            
	
              By:

               

            	 	
               

               

            
	
              Title:

               

            	 	 


    

    TABLE
      OF CONTENTS


     

     

     

    
      	 	 	 
	 	  	Page
	
              1.
                DEFINITIONS AND
                CONSTRUCTION

            	  	2
	
              1.1
                Definitions

            	  	2
	
              1.2
                Accounting
                Terms

            	  	27
	
              1.3
                Code

            	  	28
	
              1.4
                Construction

            	  	28
	
              1.5
                Schedules and
                Exhibits

            	  	28
	
              2.
                LOAN AND TERMS OF
                PAYMENT

            	  	28
	
              2.1
                Advances

            	  	28
	
              2.2
                CapEx
                Loans

            	  	30
	
              2.3
                Borrowing Procedures and
                Settlements

            	  	31
	
              2.4
                Payments.

            	  	38
	
              2.5
                Overadvances

            	  	41
	
              2.6
                Interest Rates and Letter
                of Credit Fee: Rates, Payments, and Calculations.

            	  	41
	
              2.7
                Cash
                Management

            	  	43
	
              2.8
                Crediting
                Payments

            	  	44
	
              2.9
                Designated
                Account

            	  	44
	
              2.10
                Maintenance of Loan
                Account; Statements of Obligations

            	  	44
	
              2.11
                Fees

            	  	45
	
              2.12
                Letters of
                Credit

            	  	45
	
              2.13
                LIBOR
                Option.

            	  	48
	
              2.14
                Capital
                Requirements

            	  	51
	
              2.15
                Joint and Several
                Liability of Borrowers

            	  	51
	
              3.
                CONDITIONS; TERM OF
                AGREEMENT

            	  	53
	
              3.1
                Conditions Precedent to
                the Initial Extension of Credit

            	  	53
	
              3.2
                Intentionally
                Omitted

            	  	56
	
              3.3
                Conditions Precedent to
                all Extensions of Credit

            	  	57
	
              3.4
                Term

            	  	57
	
              3.5
                Effect of
                Termination

            	  	58
	
              3.6
                Early Termination by
                Borrowers

            	  	58
	
              4.
                CREATION OF SECURITY
                INTEREST

            	  	59
	
              5.
                REPRESENTATIONS AND
                WARRANTIES.

            	  	62
	
              5.1
                No
                Encumbrances

            	  	62
	
              5.2
                Eligible
                Accounts

            	  	62
	
              5.3
                Eligible
                Inventory

            	  	63
	
              5.4
                Equipment

            	  	63
	
              5.5
                Location of
                Inventory

            	  	63
	
              5.6
                Inventory
                Records

            	  	63
	
              5.7
                Location of Chief
                Executive Office; FEIN

            	  	63
	
              5.8
                Due Organization and
                Qualification; Subsidiaries

            	  	63
	
              5.9
                Due Authorization; No
                Conflict.

            	  	64
	
              5.10
                Litigation

            	  	65
	
              5.11
                No Material Adverse
                Change

            	  	65


    

    
      	 	 	 
	 	  	Page
	
              5.12
                Fraudulent
                Transfer

            	  	66
	
              5.13
                Employee
                Benefits

            	  	66
	
              5.14
                Environmental
                Condition

            	  	66
	
              5.15
                [Intentionally
                Omitted]

            	  	66
	
              5.16
                Intellectual
                Property

            	  	66
	
              5.17
                Leases

            	  	66
	
              5.18
                DDAs.

            	  	67
	
              5.19
                Complete
                Disclosure

            	  	67
	
              5.20
                Indebtedness

            	  	67
	
              6.
                AFFIRMATIVE
                COVENANTS

            	  	67
	
              6.1
                Accounting
                System

            	  	67
	
              6.2
                Collateral
                Reporting

            	  	67
	
              6.3
                Financial Statements,
                Reports, Certificates

            	  	68
	
              6.5
                Return

            	  	71
	
              6.6
                Maintenance of
                Properties

            	  	71
	
              6.7
                Taxes

            	  	71
	
              6.8
                Insurance.

            	  	72
	
              6.9
                Location of
                Inventory

            	  	72
	
              6.10
                Compliance with
                Laws

            	  	73
	
              6.11
                Leases

            	  	73
	
              6.12
                Brokerage
                Commissions

            	  	73
	
              6.13
                Existence

            	  	73
	
              6.14
                Environmental

            	  	73
	
              6.15
                Disclosure
                Updates

            	  	73
	
              7.
                NEGATIVE
                COVENANTS.

            	  	74
	
              7.1
                Indebtedness

            	  	74
	
              7.2
                Liens

            	  	75
	
              7.3
                Restrictions on
                Fundamental Changes

            	  	75
	
              7.4
                Disposal of
                Assets

            	  	76
	
              7.5
                Change
                Name

            	  	76
	
              7.6
                Guarantee

            	  	76
	
              7.7
                Nature of
                Business

            	  	76
	
              7.8
                Prepayments and
                Amendments

            	  	77
	
              7.9
                Change of
                Control

            	  	77
	
              7.10
                Consignments

            	  	77
	
              7.11
                Distributions

            	  	77
	
              7.12
                Accounting
                Methods

            	  	78
	
              7.13
                Investments

            	  	78
	
              7.14
                Transactions with
                Affiliates

            	  	78
	
              7.15
                Suspension

            	  	79
	
              7.16
                Compensation

            	  	79
	
              7.17
                Use of
                Proceeds.

            	  	79
	
              7.18
                Change in Location of
                Chief Executive Office; Inventory and Equipment with
                Bailees

            	  	79
	
              7.19
                Securities
                Accounts

            	  	79
	
              7.20
                Financial
                Covenants

            	  	79
	
              7.21
                Minimum
                Availability

            	  	—


    

     

     

    -ii-


     

    
      	 	 	 
	 	  	Page
	
              7.22
                Inactive
                Subsidiaries

            	  	—
	
              8.
                EVENTS OF
                DEFAULT

            	  	79
	
              9.
                THE LENDER GROUP’S RIGHTS
                AND REMEDIES

            	  	82
	
              9.1
                Rights and
                Remedies

            	  	82
	
              9.2
                Remedies
                Cumulative

            	  	84
	
              10.
                TAXES AND
                EXPENSES

            	  	84
	
              11.
                WAIVERS;
                INDEMNIFICATION

            	  	85
	
              11.1
                Demand; Protest;
                etc.

            	  	85
	
              11.2
                The Lender Group’s
                Liability for Collateral

            	  	85
	
              11.3
                Indemnification

            	  	85
	
              12.
                NOTICES

            	  	86
	
              13.
                CHOICE OF LAW AND VENUE;
                JURY TRIAL WAIVER

            	  	87
	
              14.
                ASSIGNMENTS AND
                PARTICIPATIONS; SUCCESSORS

            	  	88
	
              14.1
                Assignments and
                Participations

            	  	88
	
              14.2
                Successors

            	  	90
	
              15.
                AMENDMENTS;
                WAIVERS

            	  	90
	
              15.1
                Amendments and
                Waivers

            	  	90
	
              15.2
                Replacement of Holdout
                Lender

            	  	91
	
              15.3
                No Waivers; Cumulative
                Remedies.

            	  	92
	
              16.
                AGENT; THE LENDER
                GROUP

            	  	92
	
              16.1
                Appointment and
                Authorization of Agent

            	  	92
	
              16.2
                Delegation of
                Duties

            	  	93
	
              16.3
                Liability of
                Agent

            	  	93
	
              16.4
                Reliance by
                Agent

            	  	94
	
              16.5
                Notice of Default or
                Event of Default

            	  	94
	
              16.6
                Credit
                Decision

            	  	94
	
              16.7
                Costs and Expenses;
                Indemnification.

            	  	95
	
              16.8
                Agent in Individual
                Capacity

            	  	95
	
              16.9
                Successor
                Agent.

            	  	96
	
              16.10
                Lender in Individual
                Capacity

            	  	96
	
              16.11
                Withholding
                Taxes

            	  	96
	
              16.12
                Collateral
                Matters

            	  	99
	
              16.13
                Restrictions on Actions
                by Lenders; Sharing of Payments.

            	  	99
	
              16.14
                Agency for
                Perfection

            	  	99
	
              16.15
                Payments by Agent to the
                Lenders

            	  	99
	
              16.16
                Concerning the
                Collateral and Related Loan Documents

            	  	100
	
              16.17
                Field Audits and
                Examination Reports; Confidentiality; Disclaimers by Lenders; Other
                Reports and Information

            	  	100
	
              16.18
                Several Obligations; No
                Liability

            	  	101
	
              17.
                GENERAL
                PROVISIONS

            	  	102
	
              17.1
                Effectiveness

            	  	102
	
              17.2
                Section
                Headings

            	  	102
	
              17.3
                Interpretation

            	  	102
	
              17.4
                Severability of
                Provisions

            	  	102
	
              17.5
                Amendments in
                Writing

            	  	102
	
              17.6
                Counterparts;
                Telefacsimile Execution

            	  	102


    

     

     

    -iii-


     

    
      	 	 	 
	 	  	Page
	
              17.7
                Revival and Reinstatement
                of Obligations

            	  	102
	
              17.8
                Integration

            	  	103
	
              17.9
                ThermaClime as Agent for
                Borrowers

            	  	103
	
              17.10
                No
                Novation

            	  	103
	
              18.
                GUARANTY

            	  	104
	
              18.1.
                Guaranty; Limitation of
                Liability

            	  	104
	
              18.2.
                Guaranty
                Absolute

            	  	104
	
              18.3.
                Waiver

            	  	105
	
              18.4.
                Continuing Guaranty;
                Assignments

            	  	105
	
              18.5.
                Subrogation

            	  	105


    

     

     

    -iv-


     

    EXHIBITS
      AND SCHEDULES


     

     

     

    
      	 	 	 	 	 
	Exhibit
              A-1	  	Form
              of Assignment and Acceptance	  	 
	Exhibit
              B-1	  	Form
              of Borrowing Base Certificate	  	 
	Exhibit
              C-1	  	Form
              of Compliance Certificate	  	 
	Exhibit
              L-1	  	Form
              of LIBOR Notice	  	 
	
            	
            	
            
	Schedule
              C-1	  	Commitments	  	 
	Schedule
              E-1	  	Eligible
              Inventory Locations	  	 
	Schedule
              P-1	  	Permitted
              Liens	  	 
	Schedule
              2.8(a)	  	Cash
              Management Banks	  	 
	Schedule
              3.1(m)	  	Collateral
              Access Locations	  	 
	Schedule
              5.5	  	Locations
              of Inventory and Equipment	  	 
	Schedule
              5.7	  	Chief
              Executive Office; FEIN	  	 
	Schedule
              5.8(b)	  	Capitalization
              of Borrowers	  	 
	Schedule
              5.8(c)	  	Capitalization
              of Borrowers’ Subsidiaries	  	 
	Schedule
              5.10	  	Litigation	  	 
	Schedule
              5.14	  	Environmental
              Matters	  	 
	Schedule
              5.16	  	Intellectual
              Property	  	 
	Schedule
              5.18	  	Demand
              Deposit Accounts	  	 
	Schedule
              5.20	  	Permitted
              Indebtedness	  	 
	Schedule
              7.4(b)	  	Permitted
              LSB Indebtedness	  	 
	Schedule
              7.13	  	Other
              Permitted Investments	  	 
	Schedule
              7.14	  	Transactions
              with Affiliates	  	 


    

    Schedule
      C-1


     

    Commitments
      

     

     

     

    
      	 	 	 	 	 	 	 	 	 	 
	
              Lender

               

            	  	Revolver
Commitment	  	Term
              Loan
Sub-facility
Commitment*	  	Total Commitment
	
              Wells
                Fargo Foothill,
                Inc.

            	  	$	30,000,000	  	$	4,500,000	  	$	30,000,000
	 	  	 	 	  	 	 	  	 	 
	
              Congress
                Financial Corporation
                (Southwest)

            	  	$	20,000,000	  	$	3,000,000	  	$	20,000,000
	 	  	 	 	  	 	 	  	 	 
	
              All
                Lenders

            	  	$	50,000,000	  	$	7,500,000	  	$	50,000,000
	 	  	 	 	  	 	 	  	 	 


    

    

    
      	*	The
              Term Loan Commitment is a sub-facility of the Revolver
              Commitment. 


    

    EXHIBIT
      A-1


     

    FORM
      OF ASSIGNMENT AND
      ACCEPTANCE AGREEMENT 

     

    This
ASSIGNMENT
      AND
      ACCEPTANCE AGREEMENT (“Assignment Agreement”) is entered into as of
                    
      between
                    
      (“Assignor”) and
                    
      (“Assignee”). Reference is made to the Agreement described in Item 2
      of Annex I annexed hereto (the “Loan Agreement”). Capitalized terms used
      herein and not otherwise defined shall have the meanings ascribed to them in
      the
      Loan Agreement. 

     

    In
      accordance with the terms and
      conditions of Section 14 of the Loan Agreement, the Assignor hereby sells
      and assigns to the Assignee, and the Assignee hereby purchases and assumes
      from
      the Assignor, that interest in and to the Assignor’s rights and obligations
      under the Loan Documents as of the date hereof with respect to the Obligations
      owing to the Assignor, and Assignor’s portion of the Total Commitments and the
      Revolver Commitments, all as specified in Item 4.b and
Item 4.c of Annex I. After giving effect to such sale and
      assignments, the Assignee’s portion of the Total Commitments and Revolver
      Commitments will be as set forth in Item 4.b of Annex I. After
      giving effect to such sale and assignment the Assignor’s amount and portion of
      the Total Commitments and Revolver Commitments will be as set forth in
Item 4.d and Item 4.e of Annex I. 

     

    The
      Assignor (a) represents and
      warrants that it is the legal and beneficial owner of the interest being
      assigned by it hereunder and that such interest is free and clear of any adverse
      claim; (b) makes no representation or warranty and assumes no
      responsibility with respect to any statements, warranties or representations
      made in or in connection with the Loan Documents or the execution, legality,
      validity, enforceability, genuineness, sufficiency or value of the Loan
      Documents or any other instrument or document furnished pursuant thereto; and
      (c) makes no representation or warranty and assumes no responsibility with
      respect to the financial condition of any Borrower or any of its Subsidiaries
      or
      the performance or observance by any Borrower or any of its Subsidiaries of
      any
      of their respective obligations under the Loan Documents or any other instrument
      or document furnished pursuant thereto. 

     

    The
      Assignee (a) confirms that
      it has received copies of the Loan Agreement and the other Loan Documents,
      together with copies of the financial statements referred to therein and such
      other documents and information as it has deemed appropriate to make its own
      credit analysis and decision to enter into this Assignment Agreement;
      (b) agrees that it will, independently and without reliance, as it shall
      deem appropriate at the time, continue to make its own credit decisions in
      taking or not taking action under the Loan Documents; (c) confirms that it
      is eligible as an assignee under the terms of the Loan Agreement;
      (d) appoints and authorizes the Agent to take such action as agent on its
      behalf and to exercise such powers under the Loan Documents as are delegated
      to
      Agent by the terms thereof, together with such powers as are reasonably
      incidental thereto; (e) agrees that it will perform in accordance with
      their terms all of the obligations which by the terms of the Loan Documents
      are
      required to be performed by it as a Lender [and 

     

    (f) attaches
      the forms
      prescribed by the Internal Revenue Service of the United States certifying
      as to
      the Assignee’s status for purposes of determining exemption from United States
      withholding taxes with respect to all payments to be made to the Assignee under
      the Loan Agreement or such other documents as are necessary to indicate that
      all
      such payments are subject to such rates at a rate reduced by an applicable
      tax
      treaty.] 

     

    Following
      the execution of this
      Assignment Agreement by the Assignor and Assignee, it will be delivered by
      the
      Assignor to the Agent for recording by the Agent. The effective date of this
      Assignment (the “Settlement Date”) shall be the later of (a) the date of
      the execution hereof by the Assignor and the Assignee, the payment by Assignor
      or Assignee to Agent for Agent’s sole and separate account a processing fee in
      the amount of $5,000, and the receipt of any required consent of the Agent,
      and
      (b) the date specified in item 5 of Annex I. 

     

    Upon
      recording by the Agent, as of
      the Settlement Date (a) the Assignee shall be a party to the Loan Agreement
      and, to the extent of the interest assigned pursuant to this Assignment
      Agreement, have the rights and obligations of a Lender thereunder and under
      the
      other Loan Documents, and (b) the Assignor shall, to the extent of the
      interest assigned pursuant to this Assignment Agreement, relinquish its rights
      and be released from its obligations under the Loan Agreement and the other
      Loan
      Documents. 

     

    Upon
      recording by the Agent, from
      and after the Settlement Date, the Agent shall make all payments under the
      Loan
      Agreement and the other Loan Documents in respect of the interest assigned
      hereby (including, without limitation, all payments or principal, interest
      and
      commitment fees (if applicable) with respect thereto) to the Assignee. Upon
      the
      Settlement Date, the Assignee shall pay to the Assignor the Assigned Share
      (as
      set forth in Item 4.b of Annex I) of the principal amount of any
      outstanding loans under the Loan Agreement and the other Loan Documents. The
      Assignor and Assignee shall make all appropriate adjustments in payments under
      the Loan Agreement and the other Loan Documents for periods prior to the
      Settlement Date directly between themselves on the Settlement Date.


     

    THIS
      ASSIGNMENT AGREEMENT SHALL BE
      GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
      STATE OF NEW YORK. 

     

    [Remainder
      of page left
      intentionally blank.] 

     

    IN
      WITNESS WHEREOF, the parties
      hereto have caused this Assignment Agreement and Annex I hereto to be
      executed by their respective officers thereunto duly authorized, as of the
      first
      date above written. 

     

     

     

    
      	 	 	 
	
              [NAME
                OF
                ASSIGNOR]

            
	as
              Assignor
	
            	
            
	
              By

               

            	 	
               

               

            
	
              Title:

               

            	 	
               

               

            


    

     

     

    
      	 	 	 
	
              [NAME
                OF
                ASSIGNEE]

              as
                Assignee

            
	
            	
            
	
              By:

               

            	 	
               

               

            
	
              Title:

               

            	 	
               

               

            


    

     

     

    
      	 
	ACCEPTED
              THIS      DAY OF
                          


    

     

    
      	 	 	 
	
              WELLS
                FARGO FOOTHILL,
                INC.,

              AS
                AGENT

            
	
            	
            
	
              By:

               

            	 	
               

               

            
	
              Title:

               

            	 	
               

               

            


    

    ANNEX
      FOR ASSIGNMENT AND ACCEPTANCE


     

    ANNEX
      I 

     

     

     

    
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              1.

            	 	Borrowers:
              ThermaClime, Inc., an Oklahoma corporation
              (“ThermaClime”), and each of the subsidiaries of ThermaClime and party to
              the below referenced Loan Agreement. 	  
	
            	
            
	
              2.

               

            	  	Name
              and Date of Loan Agreement: Amended and Restated Loan and
              Security Agreement, dated as of October [__], 2007, among LSB Industries,
              Inc., an Delaware corporation, as guarantor, the Borrowers, the lenders
              signatory thereto as the Lenders, and Wells Fargo Foothill, Inc., a
              California corporation, as the arranger and administrative agent for
              the
              Lenders.	   
	
            	
            	
            
	
              3.

            	 	Date
              of Assignment Agreement:	  	 	 	 
	
            	
            	
            
	
              4.

            	 	Amounts:	  	 	 	 
	
            	
            	
            	
            
	
            	 	a.	 	
              Assignor’s
                Total
                Commitment

            	  	$	                    	 
	
            	
            	
            	
            	
            
	 	  	 	  	i.	  	Assignor’s
              Revolver Commitment	  	$	                    	 
	
            	
            	
            	
            
	 	  	b.	  	Assigned
              Share of Total Commitment	  	 	                    	%
	
            	
            	
            	
            	
            
	 	  	 	  	i.	  	Assigned
              Share of Revolver Commitment	  	 	                    	%
	
            	
            	
            	
            
	 	  	c.	  	Assigned
              Amount of Total Commitment	  	$	                    	 
	
            	
            	
            	
            	
            
	 	  	 	  	i.	  	Assigned
              Amount of Revolver Credit	  	 	 	 
	
            	
            	
            	
            	
            
	 	  	 	  	 	  	Commitment	  	$	                    	 
	
            	
            	
            	
            
	 	  	d.	  	Resulting
              Amount of Assignor’s Total Commitment after giving effect
              to the sale and Assignment to Assignee	  	$	                    	 
	
            	
            	
            	
            	
            
	 	  	 	  	i.	  	Resulting
              Amount of Assignor’s Revolver Commitment
              $                    	  	 	 	 
	
            	
            	
            	
            
	 	  	e.	  	Assignor’s
              Resulting Share of Total Commitment after giving effect
              to the Assignment to Assignee	  	 	                    	%
	
            	
            	
            	
            	
            
	 	  	 	  	i.	  	Assignor’s
              Resulting Share of Revolving Credit	  	 	 	 
	
            	
            	
            	
            	
            
	 	  	 	  	 	  	Commitment	  	 	                    	%


    

    
      	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              5.

            	  	Settlement
              Date:	  	    
                              
	
            	
            	
            
	
              6.

            	  	Notice
              and Payment Instructions, etc.	  	 


    

     

     

    
      	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	  	Assignee:	  	Assignor:	  	 
	
            	
            	
            	
            	
            	
            	
            
	 	  	By:	  	
               

               

            	  	By:	  	
               

               

            	  	 	  	 
	 	  	Title:	  	
               

               

            	  	Title:	  	
               

               

            	  	 	  	 
	
            	
            	
            	
            	
            	
            
	7.	  	Agreed
              and Accepted:	  	 	  	 	  	 	  	 
	
            	
            	
            	
            	
            
	 	  	[ASSIGNOR]	  	[ASSIGNEE]	  	 	  	 
	
            	
            	
            	
            	
            	
            	
            
	 	  	By:	  	
               

               

            	  	By:	  	
               

               

            	  	 	  	 
	 	  	Title:	  	
               

               

            	  	Title:	  	
               

               

            	  	 	  	 


    

     

     

    
      	 	 	 
	Accepted:
	WELLS
              FARGO FOOTHILL, INC., as Agent
	
            	
            
	By:	 	
               

               

            
	Title:	 	
               

               

            


    

    EXHIBIT
      C-1 

     

    (Form
      of Compliance Certificate)


     

    [on
      Borrowers’ letterhead]


     

     

     

    
      	 	 	 
	
              To:

               

            	  	
              Wells
                Fargo Foothill, Inc., as
                Agent

              under
                the below-referenced
                Loan Agreement

              2450
                Colorado Avenue, Suite
                3000 West

              Santa
                Monica, California
                90404

              Attn:
                Business Finance
                Division Manager

            


    

     

     

    
      	 	 	 
	Re:	  	Compliance
              Certificate dated
                                  


    

    Ladies
      and Gentlemen: 

     

    Reference
      is made to that certain
      Amended and Restated Loan and Security Agreement, dated as of October [__],
      2007
      (the “Loan Agreement”) among LSB Industries, Inc., an Delaware corporation
      (“Parent”), ThermaClime, Inc., an Oklahoma corporation (“ThermaClime”), certain
      of ThermaClime’s subsidiaries identified on the signature pages thereof (such
      subsidiaries, together with ThermaClime, are collectively, jointly and
      severally, the “Borrowers”), the lenders signatory thereto (the “Lenders”), and
      Wells Fargo Foothill, Inc., a California corporation, as the arranger and
      administrative agent for the Lenders (“Agent”). Capitalized terms used in this
      Compliance Certificate have the meanings set forth in the Loan Agreement unless
      specifically defined herein. 

     

    Pursuant
      to Section 6.3
      of the Loan Agreement, the undersigned officer of ThermaClime hereby certifies
      that: 

     

    1.
      The financial information of
      Parent and its Subsidiaries and of ThermaClime and its Subsidiaries, as the
      case
      may be, furnished in Schedule 1 attached hereto, has been prepared in
      accordance with GAAP (except for year-end adjustments and the lack of footnotes,
      in the case of financial statements delivered under Section 6.3(a)
      of the Loan Agreement) and fairly presents the financial condition of Parent
      and
      its Subsidiaries and of ThermaClime and its Subsidiaries, as the case may be.
      

     

    2.
      Such officer has reviewed the
      terms of the Loan Agreement and has made, or caused to be made under his/her
      supervision, a review in reasonable detail of the transactions and condition
      of
      the Borrowers during the accounting period covered by the financial statements
      delivered pursuant to Section 6.3 of the Loan Agreement.


     

    3.
      Such review has not disclosed the
      existence on and as of the date hereof, and the undersigned does not have
      knowledge of the existence as of the date hereof, of any event or condition
      that
      constitutes a Default or Event of Default, except for such conditions or events
      listed on Schedule 2 attached hereto, specifying the nature and period of
      existence thereof and what action Borrowers have taken, are taking, or propose
      to take with respect thereto. 

     

    4.
      Borrowers are in timely
      compliance with all representations, warranties, and covenants set forth in
      the
      Loan Agreement and the other Loan Documents, except as set forth on Schedule
      2 attached hereto. Without limiting the generality of the foregoing,
      Borrowers are in compliance with the covenants contained in
Section 7.20 of the Loan Agreement as demonstrated on Schedule
      3 hereof. 

     

    IN
      WITNESS WHEREOF, this Compliance
      Certificate is executed by the undersigned this     
      day of
                    ,
        . 

     

     

     

    
      	 	 	 
	
              THERMACLIME,
                INC.,

              an
                Oklahoma corporation,
                

              as
                Administrative
                Borrower

            
	
            	
            
	By:	 	
               

               

            
	Name:	 	 
	Title:	 	 


    

    SCHEDULE
      3


     

     

     

    
      	1.	Minimum
              EBITDA.


    

    (a)
      ThermaClime’s and its
      Subsidiaries’ EBITDA for the
                    
      ending
                    ,
            
      is
      $            ,
      which amount [is/is not] greater than or equal to the amount
      set forth in Section 7.20(a)(i) of the Loan Agreement for the
      corresponding period. 

     

     

     

    
      	2.	Fixed
              Charge Coverage Ratio. [If
              Applicable] 


    

    (a)
      The Fixed Charge Coverage Ratio
      of ThermaClime and its Subsidiaries, for the fiscal year ending
                    ,
      is calculated as follows 

     

     

     

    
      	 	 	 	 	 	 
	
              (i)

            	  	EBITDA
              of ThermaClime and its Subsidiaries for the 12 month period
              then ended:	  	$	                    
	
            	
            	
            
	
              (ii)

            	  	Principal
              Indebtedness of ThermaClime and its Subsidiaries
              scheduled to be paid or prepaid during such period:	  	$	                    
	
            	
            	
            
	
              (iii)

            	  	Gross
              interest expense of ThermaClime and its Subsidiaries for such
              period:	  	$	                    
	
            	
            	
            
	
              (iv)

            	  	Interest
              income of ThermaClime and its Subsidiaries for such
              period:	  	$	                    
	
            	
            	
            
	
              (v)

            	  	Non-cash
              accretion expense of ThermaClime and its Subsidiaries for
              such period:	  	$	                    
	
            	
            	
            
	
              (vi)

            	  	
              Non-cash
                amortization of debt
                origination cost of ThermaClime and its Subsidiaries

              for
                such
                period:

            	  	$	                    
	
            	
            	
            
	
              (vii)

            	  	Capitalized
              Lease Obligations of ThermaClime and its Subsidiaries
              having a scheduled due date during such period:	  	$	                    


    

     

     

    
      	 	 	 
	
              Item
                (i) divided by the
                sum of

              Item
                (ii) plus Item
                (vii) plus the result of Item (iii) minus

              the
                sum of Item (iv) plus
                Item (v) plus Item

              (vi) (=
                Fixed Charge
                Coverage Ratio)

            	  	        
              :
                                              


    

    (b)
      The Fixed Charge Coverage Ratio
      set forth above [is/is not] greater than or equal to the amount
      set forth in Section 7.20(a)(iii) of the Loan Agreement for the
      corresponding period. 

     

    EXHIBIT
      L-1


     

    FORM
      OF LIBOR NOTICE


     

    Wells
      Fargo Foothill, Inc., as Agent


    under
      the below referenced Loan
      Agreement 

    2450
      Colorado Place 

    Suite
      3000 West 

    Santa
      Monica, California 90404


     

    Attention:
                                              
        

     

    Ladies
      and Gentlemen: 

     

    Reference
      hereby is made to that
      certain Amended and Restated Loan and Security Agreement, dated as of October
      [    ], 2007 (the “Loan Agreement”), among LSB
      Industries, Inc., an Delaware corporation (“Parent”), ThermaClime, Inc.,
      an Oklahoma corporation (“Administrative Borrower”), certain of
      Administrative Borrower’s subsidiaries signatory thereto (such subsidiaries,
      together with Administrative Borrower, each a “Borrower” and
      collectively, the “Borrowers”), the lenders signatory thereto (the
“Lenders”), and Wells Fargo Foothill, Inc., a California corporation,
      as
      the arranger and administrative agent for the Lenders (“Agent”).
      Capitalized terms used herein and not otherwise defined herein shall have the
      meanings ascribed to them in the Loan Agreement. 

     

    This
      LIBOR Notice represents the
      Borrowers’ request to elect the LIBOR Option with respect to outstanding
      Advances in the amount of
      $            
      (the “LIBOR Rate Component”)[, and is a written confirmation of the
      telephonic notice of such election given to Agent]. 

     

    Such
      LIBOR Rate Component will have
      an Interest Period of [1, 2, or 3] month(s) commencing on
                    .


     

    This
      LIBOR Notice further confirms
      the Borrowers’ acceptance, for purposes of determining the rate of interest
      based on the LIBOR Rate under the Loan Agreement, of the LIBOR Rate as
      determined pursuant to the Loan Agreement. 

     

    Administrative
      Borrower, on behalf
      of itself and the other Borrowers, represents and warrants that (i) as of
      the date hereof, each representation or warranty contained in or pursuant to
      any
      Loan Document, any agreement, instrument, certificate, document or other writing
      furnished at any time under or in connection with any Loan Document, and as
      of
      the effective date of any advance, continuation or conversion requested above
      is
      true and correct in all material respects (except to the extent any
      representation or warranty expressly related to an earlier date), (ii) each
      of the covenants and agreements contained in any Loan Document have been
      performed (to the extent required to be performed on or before the date hereof
      or each such effective date), and (iii) no Default or Event of Default has
      occurred and is continuing on the date hereof, nor will any thereof occur after
      giving effect to the request above. 

     

     

     

    
      	 	 	 
	
              Dated:

            	 	
               

               

            
	
            
	
              THERMACLIME,
                INC., an
                Oklahoma

              corporation,
                as Administrative
                Borrower

            
	
            	
            
	
              By

            	 	
               

               

            
	
              Name:

               

            	 	
               

               

            
	
              Title:

               

            	 	
               

               

            


    

     

     

    
      	 	 	 
	
              Acknowledged
                by:

            
	
            
	WELLS
              FARGO FOOTHILL, INC.,
	
            
	
              as
                Agent

               

            
	
            	
            
	
              By:

               

            	 	
               

               

            
	
              Name:

               

            	 	
               

               

            
	
              Title: