exv10w1



 







Exhibit 10.1




Execution
Copy




REVOLVING CREDIT




AND




SECURITY AGREEMENT




PNC BANK, NATIONAL ASSOCIATION




(AS LENDER AND AS AGENT)




WITH




KITTY HAWK, INC.,




KITTY HAWK CARGO, INC.,




KITTY HAWK AIRCARGO, INC.,




AND




KITTY HAWK GROUND, INC.




(BORROWERS)




July 19, 2006




 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	I	 	DEFINITIONS	 	 	1	 
	 
	 	1.1.	 	Accounting Terms	 	 	1	 
	 
	 	1.2.	 	General Terms	 	 	1	 
	 
	 	1.3.	 	Uniform Commercial Code Terms	 	 	21	 
	 
	 	1.4.	 	Certain Matters of Construction	 	 	21	 
	 
	 	 	 	 	 	 	 	 
	II	 	ADVANCES, PAYMENTS	 	 	22	 
	 
	 	2.1.	 	Revolving Advances	 	 	22	 
	 
	 	2.2.	 	Procedure for Revolving Advances Borrowing	 	 	23	 
	 
	 	2.3.	 	Disbursement of Advance Proceeds	 	 	25	 
	 
	 	2.4.	 	Reserved	 	 	25	 
	 
	 	2.5.	 	Maximum Advances	 	 	25	 
	 
	 	2.6.	 	Repayment of Advances	 	 	26	 
	 
	 	2.7.	 	Repayment of Excess Advances	 	 	26	 
	 
	 	2.8.	 	Statement of Account	 	 	26	 
	 
	 	2.9.	 	Letters of Credit	 	 	27	 
	 
	 	2.10.	 	Issuance of Letters of Credit	 	 	27	 
	 
	 	2.11.	 	Requirements For Issuance of Letters of Credit	 	 	27	 
	 
	 	2.12.	 	Disbursements, Reimbursement	 	 	28	 
	 
	 	2.13.	 	Repayment of Participation Advances	 	 	29	 
	 
	 	2.14.	 	Documentation	 	 	30	 
	 
	 	2.15.	 	Determination to Honor Drawing Request	 	 	30	 
	 
	 	2.16.	 	Nature of Participation and Reimbursement Obligations	 	 	30	 
	 
	 	2.17.	 	Indemnity	 	 	31	 
	 
	 	2.18.	 	Liability for Acts and Omissions	 	 	32	 
	 
	 	2.19.	 	Additional Payments	 	 	33	 
	 
	 	2.20.	 	Manner of Borrowing and Payment	 	 	33	 
	 
	 	2.21.	 	Mandatory Prepayments	 	 	35	 
	 
	 	2.22.	 	Use of Proceeds	 	 	35	 
	 
	 	2.23.	 	Defaulting Lender	 	 	35	 
	 
	 	 	 	 	 	 	 	 
	III	 	INTEREST AND FEES	 	 	36	 
	 
	 	3.1.	 	Interest	 	 	36	 
	 
	 	3.2.	 	Letter of Credit Fees	 	 	37	 
	 
	 	3.3.	 	Closing Fee and Facility Fee	 	 	37	 
	 
	 	3.4.	 	Collateral Evaluation Fee and Collateral Monitoring Fee	 	 	38	 
	 
	 	3.5.	 	Computation of Interest and Fees	 	 	38	 
	 
	 	3.6.	 	Maximum Charges	 	 	38	 
	 
	 	3.7.	 	Increased Costs	 	 	38	 
	 
	 	3.8.	 	Basis For Determining Interest Rate Inadequate or Unfair	 	 	39	 
	 
	 	3.9.	 	Capital Adequacy	 	 	40	 
	 
	 	3.10.	 	Gross Up for Taxes	 	 	40	 
	 
	 	3.11.	 	Withholding Tax Exemption	 	 	41	 
	 
	 	3.12.	 	Lending Offices	 	 	41	 






i









 






	 	 	 	 	 	 	 	 	 
	IV	 	COLLATERAL	 	 	42	 
	 
	 	4.1.	 	Security Interest in the Collateral	 	 	42	 
	 
	 	4.2.	 	Perfection of Security Interest	 	 	42	 
	 
	 	4.3.	 	Disposition of Collateral	 	 	43	 
	 
	 	4.4.	 	Preservation of Collateral	 	 	43	 
	 
	 	4.5.	 	Ownership of Collateral	 	 	43	 
	 
	 	4.6.	 	Defense of Agent’s and Lenders’ Interests	 	 	44	 
	 
	 	4.7.	 	Books and Records	 	 	44	 
	 
	 	4.8.	 	Financial Disclosure	 	 	45	 
	 
	 	4.9.	 	Compliance with Laws	 	 	45	 
	 
	 	4.10.	 	Inspection of Premises	 	 	45	 
	 
	 	4.11.	 	Insurance	 	 	45	 
	 
	 	4.12.	 	Failure to Pay Insurance	 	 	46	 
	 
	 	4.13.	 	Payment of Taxes	 	 	46	 
	 
	 	4.14.	 	Payment of Leasehold Obligations	 	 	47	 
	 
	 	4.15.	 	Receivables	 	 	47	 
	 
	 	4.16.	 	Reserved	 	 	50	 
	 
	 	4.17.	 	Maintenance of Equipment	 	 	50	 
	 
	 	4.18.	 	Exculpation of Liability	 	 	50	 
	 
	 	4.19.	 	Environmental Matters	 	 	50	 
	 
	 	4.20.	 	Financing Statements	 	 	52	 
	 
	 	 	 	 	 	 	 	 
	V	 	REPRESENTATIONS AND WARRANTIES	 	 	52	 
	 
	 	5.1.	 	Authority	 	 	52	 
	 
	 	5.2.	 	Formation and Qualification	 	 	53	 
	 
	 	5.3.	 	Survival of Representations and Warranties	 	 	53	 
	 
	 	5.4.	 	Tax Returns	 	 	53	 
	 
	 	5.5.	 	Financial Statements	 	 	53	 
	 
	 	5.6.	 	Entity Names	 	 	54	 
	 
	 	5.7.	 	O.S.H.A. and Environmental Compliance	 	 	54	 
	 
	 	5.8.	 	Solvency; No Litigation, Violation, Indebtedness or Default	 	 	55	 
	 
	 	5.9.	 	Patents, Trademarks, Copyrights and Licenses	 	 	56	 
	 
	 	5.10.	 	Licenses and Permits	 	 	57	 
	 
	 	5.11.	 	Reserved	 	 	57	 
	 
	 	5.12.	 	No Default	 	 	57	 
	 
	 	5.13.	 	No Burdensome Restrictions	 	 	57	 
	 
	 	5.14.	 	No Labor Disputes	 	 	57	 
	 
	 	5.15.	 	Margin Regulations	 	 	57	 
	 
	 	5.16.	 	Investment Company Act	 	 	57	 
	 
	 	5.17.	 	Disclosure	 	 	57	 
	 
	 	5.18.	 	Delivery of Asset Purchase Agreement	 	 	58	 
	 
	 	5.19.	 	Swaps	 	 	58	 
	 
	 	5.20.	 	Conflicting Agreements	 	 	58	 
	 
	 	5.21.	 	Application of Certain Laws and Regulations	 	 	58	 
	 
	 	5.22.	 	Business and Property of Borrowers	 	 	58	 
	 
	 	5.23.	 	Section 20 Subsidiaries	 	 	58	 
	 
	 	5.24.	 	Anti-Terrorism Laws	 	 	58	 






ii









 






	 	 	 	 	 	 	 	 	 
	 
	 	5.25.	 	Trading with the Enemy	 	 	59	 
	 
	 	5.26.	 	Federal Securities Laws	 	 	59	 
	 
	 	5.27.	 	Internal Controls and Procedures	 	 	59	 
	 
	 	 	 	 	 	 	 	 
	VI	 	AFFIRMATIVE COVENANTS	 	 	60	 
	 
	 	6.1.	 	Payment of Fees	 	 	60	 
	 
	 	6.2.	 	Conduct of Business and Maintenance of Existence and Assets	 	 	60	 
	 
	 	6.3.	 	Violations	 	 	60	 
	 
	 	6.4.	 	Government Receivables	 	 	60	 
	 
	 	6.5.	 	Financial Covenants	 	 	60	 
	 
	 	6.6.	 	Execution of Supplemental Instruments	 	 	61	 
	 
	 	6.7.	 	Payment of Indebtedness	 	 	61	 
	 
	 	6.8.	 	Standards of Financial Statements	 	 	61	 
	 
	 	6.9.	 	Exercise of Rights	 	 	61	 
	 
	 	 	 	 	 	 	 	 
	VII	 	NEGATIVE COVENANTS	 	 	62	 
	 
	 	7.1.	 	Merger, Consolidation, Acquisition and Sale of Assets	 	 	62	 
	 
	 	7.2.	 	Creation of Liens	 	 	62	 
	 
	 	7.3.	 	Guarantees	 	 	62	 
	 
	 	7.4.	 	Investments	 	 	62	 
	 
	 	7.5.	 	Loans	 	 	62	 
	 
	 	7.6.	 	Purchase Money Indebtedness;
Capitalized Leases.  Shall not incur purchase money Indebtedness and
Capitalized Lease Obligations in an aggregate amount not to exceed at
any time $4,000,000.00	 	 	62	 
	 
	 	7.7.	 	Dividends	 	 	63	 
	 
	 	7.8.	 	Indebtedness	 	 	63	 
	 
	 	7.9.	 	Nature of Business	 	 	63	 
	 
	 	7.10.	 	Transactions with Affiliates	 	 	63	 
	 
	 	7.11.	 	Subsidiaries	 	 	63	 
	 
	 	7.12.	 	Fiscal Year and Accounting Changes	 	 	64	 
	 
	 	7.13.	 	Pledge of Credit	 	 	64	 
	 
	 	7.14.	 	Amendment of Articles of Incorporation, By-Laws	 	 	64	 
	 
	 	7.15.	 	Compliance with ERISA	 	 	64	 
	 
	 	7.16.	 	Prepayment of Indebtedness	 	 	64	 
	 
	 	7.17.	 	Anti-Terrorism Laws	 	 	64	 
	 
	 	7.18.	 	Membership/Partnership Interests	 	 	65	 
	 
	 	7.19.	 	Trading with the Enemy Act	 	 	65	 
	 
	 	7.20.	 	Other Agreements	 	 	65	 
	 
	 	 	 	 	 	 	 	 
	VIII	 	CONDITIONS PRECEDENT	 	 	65	 
	 
	 	8.1.	 	Conditions to Initial Advances	 	 	65	 
	 
	 	8.2.	 	Conditions to Each Advance	 	 	69	 
	 
	 	 	 	 	 	 	 	 
	IX	 	INFORMATION AS TO BORROWERS	 	 	69	 
	 
	 	9.1.	 	Disclosure of Material Matters	 	 	69	 
	 
	 	9.2.	 	Schedules	 	 	69	 
	 
	 	9.3.	 	Environmental Reports	 	 	70	 
	 
	 	9.4.	 	Litigation	 	 	70	 
	 
	 	9.5.	 	Material Occurrences	 	 	70	 






iii









 






	 	 	 	 	 	 	 	 	 
	 
	 	9.6.	 	Government Receivables	 	 	70	 
	 
	 	9.7.	 	Annual Financial Statements	 	 	70	 
	 
	 	9.8.	 	Quarterly Financial Statements	 	 	71	 
	 
	 	9.9.	 	Monthly Financial Statements	 	 	71	 
	 
	 	9.10.	 	Other Reports	 	 	71	 
	 
	 	9.11.	 	Additional Information	 	 	71	 
	 
	 	9.12.	 	Projected Operating Budget	 	 	72	 
	 
	 	9.13.	 	Variances From Operating Budget	 	 	72	 
	 
	 	9.14.	 	Notice of Suits, Adverse Events	 	 	72	 
	 
	 	9.15.	 	ERISA Notices and Requests	 	 	72	 
	 
	 	9.16.	 	Additional Documents	 	 	73	 
	 
	 	9.17.	 	SEC Information	 	 	73	 
	 
	 	 	 	 	 	 	 	 
	X	 	EVENTS OF DEFAULT	 	 	73	 
	 
	 	10.1.	 	Nonpayment	 	 	73	 
	 
	 	10.2.	 	Breach of Representation	 	 	73	 
	 
	 	10.3.	 	Financial Information	 	 	73	 
	 
	 	10.4.	 	Judicial Actions	 	 	73	 
	 
	 	10.5.	 	Noncompliance	 	 	74	 
	 
	 	10.6.	 	Judgments	 	 	74	 
	 
	 	10.7.	 	Bankruptcy	 	 	74	 
	 
	 	10.8.	 	Inability to Pay	 	 	74	 
	 
	 	10.9.	 	Affiliate Bankruptcy	 	 	74	 
	 
	 	10.10.	 	Material Adverse Effect	 	 	74	 
	 
	 	10.11.	 	Lien Priority	 	 	75	 
	 
	 	10.12.	 	Cross Default.  (i)	 	 	75	 
	 
	 	10.13.	 	Breach of Guaranty	 	 	75	 
	 
	 	10.14.	 	Reserved;	 	 	75	 
	 
	 	10.15.	 	Invalidity	 	 	75	 
	 
	 	10.16.	 	Licenses	 	 	75	 
	 
	 	10.17.	 	Seizures	 	 	75	 
	 
	 	10.18.	 	Operations	 	 	76	 
	 
	 	10.19.	 	Pension Plans	 	 	76	 
	 
	 	 	 	 	 	 	 	 
	XI	 	LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT	 	 	76	 
	 
	 	11.1.	 	Rights and Remedies	 	 	76	 
	 
	 	11.2.	 	Agent’s Discretion	 	 	78	 
	 
	 	11.3.	 	Setoff	 	 	78	 
	 
	 	11.4.	 	Rights and Remedies not Exclusive	 	 	78	 
	 
	 	11.5.	 	Allocation of Payments After Event of Default	 	 	78	 
	 
	 	 	 	 	 	 	 	 
	XII	 	WAIVERS AND JUDICIAL PROCEEDINGS	 	 	79	 
	 
	 	12.1.	 	Waiver of Notice	 	 	79	 
	 
	 	12.2.	 	Delay	 	 	79	 
	 
	 	12.3.	 	Jury Waiver	 	 	79	 
	 
	 	 	 	 	 	 	 	 
	XIII	 	EFFECTIVE DATE AND TERMINATION	 	 	80	 
	 
	 	13.1.	 	Term	 	 	80	 
	 
	 	13.2.	 	Termination	 	 	80	 






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	XIV	 	REGARDING AGENT	 	 	80	 
	 
	 	14.1.	 	Appointment	 	 	80	 
	 
	 	14.2.	 	Nature of Duties	 	 	81	 
	 
	 	14.3.	 	Lack of Reliance on Agent and Resignation	 	 	81	 
	 
	 	14.4.	 	Certain Rights of Agent	 	 	82	 
	 
	 	14.5.	 	Reliance	 	 	82	 
	 
	 	14.6.	 	Notice of Default	 	 	82	 
	 
	 	14.7.	 	Indemnification	 	 	82	 
	 
	 	14.8.	 	Agent in its Individual Capacity	 	 	83	 
	 
	 	14.9.	 	Delivery of Documents	 	 	83	 
	 
	 	14.10.	 	Borrowers’ Undertaking to Agent	 	 	83	 
	 
	 	14.11.	 	No Reliance on Agent’s Customer Identification Program	 	 	83	 
	 
	 	14.12.	 	Other Agreements	 	 	83	 
	 
	 	 	 	 	 	 	 	 
	XV	 	BORROWING AGENCY	 	 	84	 
	 
	 	15.1.	 	Borrowing Agency Provisions	 	 	84	 
	 
	 	15.2.	 	Waiver of Subrogation	 	 	84	 
	 
	 	 	 	 	 	 	 	 
	XVI	 	MISCELLANEOUS	 	 	85	 
	 
	 	16.1.	 	Governing Law	 	 	85	 
	 
	 	16.2.	 	Entire Understanding	 	 	85	 
	 
	 	16.3.	 	Successors and Assigns; Participations; New Lenders	 	 	87	 
	 
	 	16.4.	 	Application of Payments	 	 	89	 
	 
	 	16.5.	 	Indemnity	 	 	89	 
	 
	 	16.6.	 	Notice	 	 	90	 
	 
	 	16.7.	 	Survival	 	 	92	 
	 
	 	16.8.	 	Severability	 	 	92	 
	 
	 	16.9.	 	Expenses	 	 	92	 
	 
	 	16.10.	 	Injunctive Relief	 	 	93	 
	 
	 	16.11.	 	Consequential Damages	 	 	93	 
	 
	 	16.12.	 	Captions	 	 	93	 
	 
	 	16.13.	 	Counterparts; Facsimile Signatures	 	 	93	 
	 
	 	16.14.	 	Construction	 	 	93	 
	 
	 	16.15.	 	Confidentiality; Sharing Information	 	 	93	 
	 
	 	16.16.	 	Publicity	 	 	94	 
	 
	 	16.17.	 	Certifications From Banks and Participants; USA PATRIOT Act	 	 	94	 







v









 







REVOLVING CREDIT

AND

SECURITY AGREEMENT




     Revolving Credit and Security Agreement dated as of July 19, 2006 among KITTY HAWK, INC., a
corporation organized under the laws of the State of Delaware (“Holdings”), KITTY HAWK CARGO, INC.,
a corporation organized under the laws of the State of Delaware (“Cargo”), KITTY HAWK AIRCARGO,
INC., a corporation organized under the laws of the State of Texas (“Aircargo”), KITTY HAWK GROUND,
INC., a corporation organized under the laws of the State of Delaware (“Ground”) (Holdings, Cargo,
Aircargo and Ground, each a “Borrower”, and collectively “Borrowers”), the financial institutions
which are now or which hereafter become a party hereto (collectively, the “Lenders” and
individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in
such capacity, the “Agent”).



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




	I	 	DEFINITIONS.





     1.1. Accounting Terms. As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this Agreement, accounting
terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined
in Section 1.2 to the extent not defined, shall have the respective meanings given to them under
GAAP; provided, however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms shall be defined in
accordance with GAAP as applied in preparation of the audited financial statements of Borrowers for
the fiscal year ended December 31, 2005.



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



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



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



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



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



 









 





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



     “Aircraft” means aircraft, airframes, engines and related parts that each Borrower and
its Subsidiaries own or hold pursuant to operating leases.



     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the higher of
(i) the Base Rate in effect on such day and (ii) the Federal Funds Open Rate in effect on such day
plus 1/2 of 1%.



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



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



     “Asset Purchase Agreement” shall mean the Asset Purchase Agreement including all
exhibits and schedules thereto dated May 10, 2006, as amended, among Holdings, Ground and Sellers.



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



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



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



     “Books and Records” shall have the meaning set forth in Section 4.5(b) hereof.



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



     “Borrowers on a Consolidated Basis” shall mean the consolidation of the accounts or
other items of Holdings and its direct and indirect Subsidiaries in accordance with GAAP.



     “Borrowers’ Account” shall have the meaning set forth in Section 2.8.



     “Borrowing Agent” shall mean Holdings.



2









 





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



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



     “Capital Expenditures” shall mean expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto
which have a useful life of more than one year, including the total principal portion of
Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital
expenditures.



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



     “Cash Equivalents” shall mean (a) securities issued or fully guaranteed or insured by
the United States Government or any agency thereof having maturities of not more than six (6)
months from the date of acquisition; (b) certificates of deposit, time deposits, repurchase
agreements, reverse repurchase agreements, or bankers’ acceptances, having in each case a tenor of
not more than six (6) months, issued by any Lender, or by any U.S. commercial bank or any branch or
agency of a non-U.S. bank licensed to conduct business in the U.S. having combined capital and
surplus of not less than $250,000,000; (c) commercial paper of an issuer rated at least A-1 by
Standard & Poor’s Corporation or P-1 by Moody’s Investors Service Inc. and in either case having a
tenor of not more than six (6) months and (d) money market mutual funds provided that substantially
all of the assets of such fund are comprised of securities of the type described in clauses (a)
through (c).



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



     “Change of Control” shall mean (a) during any period of twelve consecutive calendar
months, individuals who at the beginning of such period constituted the board of directors (or
individuals performing similar functions) of Holdings (together with any new directors whose
election by the board of directors of Holdings or whose nomination for election by the holders of
Equity Interests of Holdings was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office, (b) any of Cargo, Aircargo or
Ground ceases to be a wholly-owned Subsidiary of Holdings, (c) any person or group of persons
(within the meaning of the Securities Exchange Act of 1934) who are not Original Owners shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under
the Securities Exchange Act of 1934) of 30% or more of the Equity Interests of Holdings



3









 







having the
right to vote for the election of directors (or individuals performing similar functions) of
Holdings under ordinary circumstances (including, for purposes of the calculation of percentage
ownership, any Equity Interests into which any Equity Interests of Holdings held by any of the
Original Owners are convertible or for which any such Equity Interests of Holdings or of any other
Person may be exchanged and any Equity Interests issuable to such Original Owners upon exercise of
any warrants, options or similar rights which may at the time of calculation be held by such
Original Owners), or (d) any merger or consolidation of or with Holdings or any Borrower or sale of
all or substantially all of the property or assets of Holdings or any Borrower (it being understood
that the sale by Holdings of any Equity Interests of any Borrower shall be deemed a sale of
substantially all of Holding’s assets). For purposes of this definition, “control of Holdings”
shall mean the power, direct or indirect, by contract or otherwise to vote 50% or more of the
Equity Interests having ordinary voting power for the election of directors (or the individuals
performing similar functions) of either Holdings other than in connection with the solicitation of
proxies by Holdings in connection with an annual or special meeting of Holdings.



     “Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments,
including all net income, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation and property taxes, custom
duties, liens and claims of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts, imposed by any taxing or other authority, domestic or
foreign (including the Pension Benefit Guaranty Corporation or any environmental agency or
superfund), upon the Collateral, any Borrower or any of its Affiliates.



     “Closing Date” shall mean July 19, 2006 or such other date as may be agreed to by the
parties hereto.



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



     “Collateral” shall mean and include:



          (a) all Receivables;




          (b) all Equipment;




          (c) all General Intangibles;




          (d) all Inventory;




          (e) all Investment Property;




          (f) all Real Property;




          (g) all Subsidiary Stock;




          (h) the Leasehold Interests;




4









 








          (i) all of each Borrower’s right, title and interest in and to, whether now owned or hereafter
acquired and wherever located, (i) its respective goods and other property; (ii) all of each
Borrower’s rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other
lienor, including stoppage in transit, setoff, detinue, replevin, reclamation and repurchase; (iii)
all additional amounts due to any Borrower from any Customer relating to the Receivables; (iv)
other property, including warranty claims, relating to any goods securing the Obligations; (v) all
of each Borrower’s contract rights, rights of payment which have been earned under a contract
right, instruments (including promissory notes), documents, chattel paper (including electronic
chattel paper), warehouse receipts, deposit accounts, letters of credit and money; (vi) all
commercial tort claims (whether now existing or hereafter arising); (vii) if and when obtained by
any Borrower, all real and personal property of third parties in which such Borrower has been
granted a lien or security interest as security for the payment or enforcement of Receivables;
(viii) all letter of credit rights (whether or not the respective letter of credit is evidenced by
a writing); (ix) all supporting obligations; and (x) all licenses and permits to the extent
Borrowers may grant a security interest in the same in accordance with Applicable Laws and (xi) any
other goods, personal property or real property now owned or hereafter acquired in which any
Borrower has expressly granted a security interest or may in the future grant a security interest
to Agent hereunder, or in any amendment or supplement hereto or thereto, or under any other
agreement between Agent and any Borrower;




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




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




     Notwithstanding anything herein to the contrary, in no event shall the Collateral include (a)
any permit, contract or license to which any Borrower is a party or any of its rights or interests
thereunder if and for so long as the grant of such security interest shall constitute or result in
(i) the abandonment, invalidation or unenforceability of any right, title or interest of any
Borrower therein or (ii) in a breach or termination pursuant to the terms of, or a default under,
any such permit, contract or license (other than to the extent that any such term would be rendered
ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or
any successor provision or provisions) of any relevant jurisdiction or any other applicable law
(including any state or federal bankruptcy laws) or principles of equity), provided however that
the Collateral shall include and such security interest shall attach immediately at such time as
the condition causing such abandonment, invalidation or
unenforceability shall be remedied and to the extent severable, shall attach immediately to
any portion of such permit, contract or license that does not result in any of the consequences
specified in (i) or (ii) above, or (b) any Leased Property.



5









 





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



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



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



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



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



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



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



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



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



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



     “Defaulting Lender” shall have the meaning set forth in Section 2.23(a) hereof.



6









 





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



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



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



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



     “Drawing Date” shall have the meaning set forth in Section 2.12(b) hereof.



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



     “Earnings Before Interest and Taxes” shall mean for any period the sum of (i) net
income (or loss) of Borrowers on a Consolidated Basis for such period (excluding extraordinary
gains and losses), plus (ii) all interest expense of Borrowers on a Consolidated Basis for such
period, plus (iii) all charges against income of Borrowers on a Consolidated Basis for such period
for federal, state and local taxes actually paid.



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



     “Eligible Receivables” shall mean and include each Receivable of Borrowers on a
Consolidated Basis arising in the Ordinary Course of Business and which Agent, in its sole credit
judgment, shall deem to be an Eligible Receivable, based on such considerations as Agent may from
time to time deem appropriate in its Permitted Discretion. A Receivable shall not be deemed
eligible unless such Receivable is subject to Agent’s first priority perfected security interest
and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other
documentary evidence satisfactory to Agent in its Permitted Discretion. In addition, no Receivable
shall be an Eligible Receivable if:



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




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




          (c) fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible
Receivables hereunder. Such percentage may, in Agent’s Permitted Discretion, be increased or
decreased from time to time subject to prior notice to the Borrowing Agent with respect to any such
decrease of such percentage;




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




          (e) the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or call a meeting of its creditors, (ii) admit in writing its inability,




7









 







or be
generally unable, to pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;




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




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




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




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




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




          (k) the Receivables of the Customer exceed a credit limit determined by Agent, in its
Permitted Discretion, to the extent such Receivable exceeds such limit and for which Agent has
given Borrowing Agent at least 3 Business Days prior written notice of the establishment of any
such credit limit;




          (l) the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, or
represents a progress billing or is otherwise contingent upon Borrowing Agent’s completion of any
further performance, the Customer is also a creditor or supplier of a Borrower or the Receivable is
contingent in any respect or for any reason;




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




          (n) the rendition of services has been disputed;





8









 








          (o) such Receivable is not payable to the applicable Borrower; or




          (p) such Receivable is not otherwise satisfactory (other than for the reasons set forth in (a)
through (o) above) to Agent as determined in good faith by Agent in the exercise of its discretion
in a reasonable manner. For the avoidance of doubt, Receivables arising from the disposition of
Saleable Equipment shall not constitute Eligible Receivables.




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



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



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



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



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



     “Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto the interest rate per annum determined by Agent by dividing (the
resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the
rate of interest determined by Agent in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the average of the London interbank offered rates
for U.S. Dollars quoted by the British Bankers’ Association as set forth on Moneyline Telerate (or
appropriate successor or, if British Banker’s Association or its successor ceases to provide such
quotes, a comparable replacement determined by Agent) display page 3750 (or such other display page
on the Moneyline Telerate system as may replace display page 3750) two (2) Business Days prior to
the first day of such Interest Period for an amount comparable to such Eurodollar Rate Loan and
having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to
1.00 minus the Reserve Percentage. The Eurodollar Rate may also be expressed by the following
formula:



9









 





Average of London interbank offered rates quoted by BBA as shown on

Eurodollar Rate =Moneyline Telerate Service display page 3750 or appropriate successor

1.00 — Reserve Percentage.




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



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



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



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



     “Executive Officers” means Section 16 executive officers of Holdings determined in
connection with the Exchange Act.



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



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



     “Federal Funds Open Rate” shall mean the rate per annum determined by the Agent in
accordance with its usual procedures (which determination shall be conclusive absent manifest
error) to be the “open” rate for federal funds transactions as of the opening of business for
federal funds transactions among members of the Federal Reserve System arranged by federal funds
brokers on such day, as quoted by Garvin Guybutler Corporation, any successor entity thereto, or
any other broker selected by the Agent, as set forth on the applicable Telerate display page;
provided, however; that if such day is not a Business Day, the Federal Funds Open Rate for such day
shall be the “open” rate on the immediately preceding Business Day, or if no such rate shall be
quoted by a Federal funds broker at such time, such other rate as determined by the Agent in
accordance with its usual procedures.



     “Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal
period, the ratio of (a) EBITDA plus net cash proceeds of any equity issuance of Holdings’ Equity



10









 







Interest within twelve (12) months of the Closing Date minus Capitalized Expenditures made
during such fiscal period which are not funded by borrowed money (other than proceeds of Revolving
Advances) minus cash dividends and distributions minus cash taxes paid during such period to (b)
all Senior Debt Payments plus all Subordinated Debt Payments made plus payments under Capitalized
Lease Obligations during such period.



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



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



     “GAAP” shall mean generally accepted accounting principles in the United States of
America that are recognized as such by the American Institute of Certified Public Accountants or by
the Financial Accounting Standards Board or through other appropriate boards or committees thereof,
and that are consistently applied for all periods, after the date hereof, so as to properly reflect
the financial position of Borrowers, except that any accounting principle or practice required to
be changed by the Financial Accounting Standards Board (or other appropriate board or committee of
the said Board) in order to continue as a generally accepted accounting principle or practice may
be so changed.



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



     “Governmental Acts” shall have the meaning set forth in Section 2.17.



     “Governmental Body” shall mean any nation or government, any state or other political
subdivision thereof or any entity, authority, agency, division or department exercising the
legislative, judicial, regulatory or administrative functions of or pertaining to a government,
including, without limitation, the SEC.



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



     “Guarantor Security Agreement” shall mean any security agreement executed by any
Guarantor in favor of Agent securing the Guaranty of such Guarantor.



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



11









 





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



     “Hazardous Substance” shall mean, without limitation, any flammable explosives, radon,
radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or
Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of the New York State
Environmental Conservation Law or any other applicable Environmental Law and in the regulations
adopted pursuant thereto.



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



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



     “Indebtedness” of a Person at a particular date shall mean all obligations of such
Person which in accordance with GAAP would be classified upon a balance sheet as liabilities
(except capital stock and surplus earned or otherwise) and in any event, without limitation by
reason of enumeration and without duplication, shall include all indebtedness, debt and other
similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any,
due at the required prepayment dates of such indebtedness, and all indebtedness secured by a Lien
on assets owned by such Person, whether or not such indebtedness actually shall have been created,
assumed or incurred by such Person, but shall exclude, all monetary obligations of such Person due
under any operating lease of Leased Property. Any indebtedness of such Person resulting from the
acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured
thereby, whether or not actually so created, assumed or incurred. Notwithstanding anything to the
contrary contained herein, the Series B Preferred Stock of Holdings shall not constitute
Indebtedness.



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



     “Intellectual Property” shall mean property constituting under any Applicable Law a
patent, patent application, copyright, trademark, service mark, trade name, mask work, trade secret
or license or other right to use any of the foregoing (excluding any commercial “off-the-shelf”
software license such as certain “shrink-wrap” licenses and any other licenses which are
nonexclusive, terminable and available to the public at a standard price).



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



12









 





     “Intellectual Property Security Agreement” shall mean that certain Intellectual
Property Security Agreement, dated as of the date hereof, executed by Borrowers in favor of Agent,
together with all amendments, restatements or other modifications thereof.



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



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



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



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



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



     “Leasehold Interests” shall mean all of each Borrower’s right, title and interest in
and to the premises located at the addresses set forth on Schedule 1.1.



     “Leased Property” shall mean any Aircraft, Aircraft parts and engines, trucks,
trailers and equipment subject to an operating lease or consignment agreement of any Borrower, with
such Borrower as lessee or consignee, as applicable.



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



     “Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which the Agent confirms meets the following
requirements: such Interest Rate Hedge (i) is documented in a standard International Swap Dealer
Association Agreement, (ii) provides for the method of calculating the reimbursable amount of the
provider’s credit exposure in a reasonable and customary manner, and (iii) is entered into for
hedging (rather than speculative) purposes. The liabilities of any Borrower to the provider of any
Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be “Obligations” hereunder,
guaranteed obligations under any Guaranty and secured obligations under any Guarantor Security
Agreement and otherwise treated as Obligations for purposes of



13









 







each of the Other Documents. The Liens securing the Hedge Liabilities shall be pari passu with
the Liens securing all other Obligations under this Agreement and the Other Documents.



     “Lending Office” means, as to any Lender, the office or offices of such Lender (or an
affiliate of such Lender) described as such in such Lender’s “Administrative Questionnaire”
delivered to Agent, or such other office or offices as a Lender may from time to time notify
Borrower and Agent.



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



     “Letter of Credit Borrowing” shall have the meaning set forth in Section 2.12(d).



     “Letter of Credit Sublimit” shall mean $5,000,000.00.



     “Letters of Credit” shall have the meaning set forth in Section 2.9.



     “License Agreement” shall mean any agreement between any Borrower and a Licensor
pursuant to which such Borrower is authorized to use any Intellectual Property in connection with
such Borrower’s business operations.



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



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



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



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



     “Lockbox Agreement” shall have the meaning set forth in Section 4.15(h).



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



     “Material Adverse Effect” shall mean a material adverse effect on (a) the business or
financial condition, results of operations, assets or properties of Borrowers and Guarantors on a
consolidated basis, (b) Borrowers’ ability to duly and punctually pay or perform the Obligations



14









 







in accordance with the terms thereof, (c) the value of the Collateral taken as a whole, or
Agent’s Liens on the Collateral or the priority of any such Lien on a consolidated basis, or (d)
the validity or enforceability of this Agreement and the Other Documents.



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



     “Maximum Revolving Advance Amount” shall mean $20,000,000.00.



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



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



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



     “Note(s)” shall mean the Revolving Credit Note together with all extensions,
increases, decreases, renewals, amendments, supplements, modifications, substitutions and
replacements thereto and thereof.



     “Obligations” shall mean any and all loans, advances, debts, liabilities, obligations,
covenants and duties owing by any Borrower to Lenders or Agent or to any other direct or indirect
subsidiary or affiliate of Agent or any Lender of any kind or nature, present or future (including
any interest or other amounts accruing thereon after maturity, or after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to
any Borrower, whether or not a claim for post-filing or post-petition interest or other amounts is
allowed in such proceeding), howsoever created, arising or existing, whether direct or indirect
(including those acquired by assignment or participation), absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated,, under or in connection with this Agreement, the Notes, the Letters of
Credit or any Other Document and any amendments, extensions, renewals or increases of any of the
foregoing, and including all costs and expenses of Agent and any Lender incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise in connection with
any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all
obligations of any Borrower to Agent or Lenders to perform acts or refrain from taking any action



     “Ordinary Course of Business” shall mean with respect to any Borrower, the ordinary
course of such Borrower’s business as conducted on the Closing Date.



15









 





     “Original Owner” shall mean Lloyd I. Miller, III, Bryant R. Riley, Bonanza Master
Fund, Ltd., Paul J. Solit, Resurgence Asset Management, L.L.C., Tontine Capital Partners, L.P.,
Dane Andreef, Gryphon Master Fund, L.P., and Everest Capital Limited.



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



     “Out-of-Formula Loans” shall have the meaning set forth in Section 15.2(b).



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



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



     “Participation Advance” shall have the meaning set forth in Section 2.12(d).



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



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



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



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



     “Permitted Discretion” shall mean, with respect to any Person, a determination or
judgment made by such Person in good faith and in the exercise of reasonable (from the perspective
a secured asset-based lender) credit or business judgment.



16









 





     “Permitted Encumbrances” shall mean (a) Liens in favor of Agent for the benefit of
Agent and Lenders; (b) Liens for taxes, assessments or other governmental charges not delinquent or
Properly Contested; (c) Liens disclosed in the financial statements referred to in Section 5.5, the
existence of which Agent has consented to in writing; (d) deposits or pledges to secure obligations
under worker’s compensation, social security or similar laws, or under unemployment insurance; (e)
deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of
money), leases, statutory obligations, surety, appeal and customs bonds, performance bonds and
other obligations of like nature arising in the Ordinary Course of Business; (f) Liens arising by
virtue of the rendition, entry or issuance against any Borrower or any Subsidiary, or any property
of any Borrower or any Subsidiary, of any judgment, writ, order, or decree for so long as each such
Lien (a) is in existence for less than 30 consecutive days after it first arises or is being
Properly Contested and (b) is at all times junior in priority to any Liens in favor of Agent
(except only with respect to federal income taxes and property taxes that have priority as a matter
of applicable state law); (g) carriers, warehouseman’s, repairman’s mechanics’, workers’,
materialmen’s or other like Liens arising in the Ordinary Course of Business with respect to
obligations which are overdue or which are being contested in good faith by the applicable
Borrower; (h) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase
price thereof, provided that (x) any such lien shall not encumber any other property of any
Borrower and (y) the aggregate amount of Indebtedness secured by such Liens incurred as a result of
such purchases during any fiscal year shall not exceed the amount provided for in Section 7.6; (i)
Liens created in the ordinary course of business in favor of banks and other financial institutions
over credit balances of any bank account of any Borrower held at such banks or financial
institutions; (j) any interest or title of a lessor under any lease entered into by any Borrower in
the ordinary course of business and covering only the assets so leased; and (k) Liens disclosed on
Schedule 1.2.



     “Permitted Indebtedness” shall have the meaning set forth in Section 7.8 hereof.



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



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



     “Pledge Agreement” shall mean, individually and collectively, each Pledge Agreement
executed by a Borrower in favor of Agent.



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



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



17









 





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



     “Properly Contested” shall mean, in the case of any Indebtedness or Lien, as
applicable, of any Person (including any taxes) that is not paid as and when due or payable by
reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the
amount thereof, (i) such Indebtedness or Lien, as applicable, is being properly contested in good
faith by appropriate proceedings promptly instituted and diligently conducted; (ii) such Person has
established appropriate reserves as shall be required in conformity with GAAP; (iii) the
non-payment of such Indebtedness will not have a Material Adverse Effect and will not result in the
forfeiture of any assets of such Person; (iv) the enforcement of such Lien is stayed during the
period prior to the final resolution or disposition of such dispute; (v) if such Indebtedness or
Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a
Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment,
writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such
contest is abandoned, settled or determined adversely (in whole or in part) to such Person, such
Person forthwith pays such Indebtedness and all penalties, interest and other amounts due in
connection therewith.



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



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



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



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



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



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



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



     “Reimbursement Obligation” shall have the meaning set forth in Section 2.12(b)hereof.



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



18









 





     “Reportable Event” shall mean a reportable event described in Section 4043(c) of ERISA
or the regulations promulgated thereunder.



     “Required Lenders” shall mean Lenders holding at least fifty-one percent (51%) of the
Advances and, if no Advances are outstanding, shall mean Lenders holding fifty-one percent (51%) of
the Commitment Percentages; provided, however, if there are fewer than three (3) Lenders, Required
Lenders shall mean all Lenders.



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



     “Revolving Advances” shall mean extensions of credit by Lenders to Borrowers under
Article II (other than Letters of Credit).



     “Revolving Credit Note” shall mean, collectively, the promissory notes referred to in
Section 2.1(a) hereof, as they may be increased, amended, extended, modified or replaced from time
to time.



     “Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the then
applicable Alternate Base Rate with respect to Domestic Rate Loans and (b) the sum of the
Eurodollar Rate plus two and three-quarters percent (2.75%)with respect to Eurodollar Rate Loans.



     “Saleable Equipment” shall mean all Aircraft parts, engines and supplies, trucks and
trailers, and parts and supplies related thereto.



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



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



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



     “Sellers” shall mean Air Container Transport, Inc., Anthony J. Bonino and Philip E.
Scherer.



     “Senior Debt Payments” shall mean and include all cash actually expended by any
Borrower to make interest payments on any Advances hereunder, plus (b) payments for all fees,
commissions and charges set forth herein and with respect to any Advances, plus (c) capitalized
lease payments, plus (d) payments with respect to any other Indebtedness for borrowed money.



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



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     “Subordinated Debt Payments” shall mean and include all cash actually expended to make
payments of principal and interest on debt which is subordinated in right of payment to Senior Debt
Payments.



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



     “Subsidiary Stock” shall mean all of the issued and outstanding Equity Interests of
any Subsidiary owned by any Borrower (not to exceed 65% of the Equity Interests of any Foreign
Subsidiary).



     “Tangible Net Worth” shall mean, at a particular date, (a) the aggregate amount of all
assets of Borrowers on a Consolidated Basis as may be properly classified as such in accordance
with GAAP consistently applied excluding such other assets as are properly classified as intangible
assets under GAAP, less (b) the aggregate amount of all liabilities of Borrowers on a Consolidated
Basis.



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



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



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



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



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



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



20









 





     “Trigger Notice” shall have the meaning set forth in Section 4.15(h).



     “Undrawn Availability” at a particular date shall mean an amount equal to (a) the
lesser of (i) the Formula Amount plus cash subject to a control agreement in favor of, or on
deposit with, Agent and Cash Equivalents with respect to which Agent has first priority perfected
lien or (ii) the Maximum Revolving Advance Amount plus cash subject to a control agreement in favor
of, or on deposit with, Agent and Cash Equivalents with respect to which Agent has first priority
perfected lien, minus (b) the sum of (i) the outstanding amount of Revolving Advances plus (ii) all
amounts due and owing to any Borrower’s trade creditors which are 60 days or more past due, plus
(iii) fees and expenses for which Borrowers are liable but which have not been paid or charged to
Borrowers’ Account.



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



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



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



     “Wells Fargo” shall mean Wells Fargo Bank, National Association, acting through its
Wells Fargo Business Credit operating division, successor by merger to Wells Fargo Business Credit,
Inc., a Minnesota corporation.



     “Wells Fargo Facility” shall mean that certain $15,000,000 line of credit facility as
evidenced by the that certain Credit and Security Agreement dated as of March 22, 2004, a First
Amendment to Credit and Security Agreement dated as of January 31, 2005, a Second Amendment to
Credit and Security Agreement dated as of November 10, 2005, a Third Amendment to Credit and
Security Agreement dated as of March 15, 2006 between Holdings and Wells Fargo.



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



     1.4. Certain Matters of Construction.
The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or subdivision. All references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to,



21









 







this Agreement. Any pronoun used shall be deemed to
cover all genders. Wherever appropriate in the context, terms used herein in the singular also
include the plural and vice versa. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Agent is a party, including
references to any of the Other Documents, shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof. All references herein to the time of day
shall mean the time in New York, New York. Whenever the words “including” or “include” shall be
used, such words shall be understood to mean “including, without limitation” or “include, without
limitation”. A Default or Event of Default shall be deemed to exist at all times during the period
commencing on the date that such Default or Event of Default occurs to the date on which such
Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a
Default, is cured within any period of cure expressly provided for in this Agreement; and an Event
of Default shall “continue” or be “continuing” until such Event of Default has been waived in
writing by the Required Lenders. Any Lien referred to in this Agreement or any of the Other
Documents as having been created in favor of Agent, any agreement entered into by Agent pursuant to
this Agreement or any of the Other Documents, any payment made by or to or funds received by Agent
pursuant to or as contemplated by this Agreement or any of the Other Documents, or any act taken or
omitted to be taken by Agent, shall, unless otherwise expressly provided, be created, entered into,
made or received, or taken or omitted, for the benefit or account of Agent and Lenders. Wherever
the phrase “to the best of Borrowers’ knowledge” or words of similar import relating to the
knowledge or the awareness of any Borrower are used in this Agreement or Other Documents, such
phrase shall mean and refer to (i) the actual knowledge of an Executive Officer of any Borrower or
(ii) the knowledge that an Executive Officer would reasonably be expected to have or obtain in the
normal discharge of his assigned duties and responsibilities. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or otherwise within the
limitations of, another covenant shall not avoid the occurrence of a default if such action is
taken or condition exists. In addition, all representations and warranties hereunder shall be
given independent effect so that if a particular representation or warranty proves to be incorrect
or is breached, the fact that another representation or warranty concerning the same or similar
subject matter is correct or is not breached will not affect the incorrectness of a breach of a
representation or warranty hereunder.




	II  ADVANCES, PAYMENTS.





     2.1. Revolving Advances.



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




               (i) up to 85%, subject to the provisions of Section 2.1(c) hereof (“Receivables Advance
Rate”), of Eligible Receivables, minus



22









 





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



               (iii) such reserves as Agent may reasonably deem proper and necessary from time to time.



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



          (b) Revolving Advances. Each Lender, severally and not jointly, will make Revolving
Advances to Borrower in aggregate amounts outstanding at any time not greater than such Lender’s
Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the aggregate
amount of outstanding Letters of Credit or (y) the Formula Amount.




          (c) Discretionary Rights. The Receivables Advance Rate may be increased or decreased
by Agent at any time and from time to time in the exercise of its Permitted Discretion. Each
Borrower consents to any such increases or decreases and acknowledges that decreasing the
Receivables Advance Rate or increasing or imposing reserves may limit or restrict Advances
requested by Borrowing Agent. The rights of Agent under this subsection are subject to the
provisions of Section 16.2(b).




     2.2. Procedure for Revolving Advances Borrowing. 



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




          (b) Notwithstanding the provisions of subsection (a) above, in the event any Borrower desires
to obtain a Eurodollar Rate Loan, Borrowing Agent shall give Agent written notice by no later than
10:00 a.m. (New York time) on the day which is three (3) Business Days prior to the date such
Eurodollar Rate Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which
shall be a Business Day), (ii) the type of borrowing and the amount
on the date of such Advance to be borrowed, which amount shall be for at least $1,000,000 and
if greater, be an integral multiple of $100,000, and (iii) the duration of the first Interest
Period therefor. Interest Periods for Eurodollar Rate Loans shall be for one, two, three or six
months; provided, if an Interest Period would end on a day that is not a Business Day, it shall end
on the next succeeding Business Day unless such day falls in the next succeeding calendar month in
which case the Interest Period shall end on the next preceding Business Day. No Eurodollar Rate
Loan shall be made available to any Borrower during the continuance of a Default or an Event of
Default. After giving effect to each requested Eurodollar Rate Loan, including those




23









 







which are
converted from a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more than
five (5) Eurodollar Rate Loans, in the aggregate.




          (c) Each Interest Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar
Rate Loan is made and shall end on such date as Borrowing Agent may elect as set forth in
subsection (b)(iii) above provided that the exact length of each Interest Period shall be
determined in accordance with the practice of the interbank market for offshore Dollar deposits and
no Interest Period shall end after the last day of the Term.




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



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




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




          (f) Each Borrower shall indemnify and defend Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders may sustain or
incur as a consequence of any prepayment, conversion of or any default

24









 








by any Borrower in the
payment of the principal of or interest on any Eurodollar Rate Loan or failure by any Borrower to
complete a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice
thereof has been given, including, but not limited to, any interest payable by Agent or Lenders to
lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder.
A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by
Agent or any Lender to Borrowing Agent shall be conclusive absent manifest error.




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




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



     2.4. Reserved.



     2.5. Maximum Advances. The aggregate balance of Revolving Advances outstanding at any
time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount less the



25









 







aggregate
Maximum Undrawn Amount of all issued and outstanding Letters of Credit or (b) the Formula Amount.



     2.6. Repayment of Advances.



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




          (b) Each Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other
items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the
date received. In consideration of Agent’s agreement to conditionally credit Borrowers’ Account as
of the Business Day on which Agent receives those items of payment, each Borrower agrees that, in
computing the charges under this Agreement, all items of payment shall be deemed applied by Agent
on account of the Obligations one (1) Business Day after (i) the Business Day Agent receives such
payments via wire transfer or electronic depository check or (ii) in the case of payments received
by Agent in any other form, the Business Day such payment constitutes good funds in Agent’s
account. Agent is not, however, required to credit Borrowers’ Account for the amount of any item
of payment which is unsatisfactory to Agent and Agent may charge Borrowers’ Account for the amount
of any item of payment which is returned to Agent unpaid.




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




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




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



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



26









 







exceptions thereto within thirty (30) days after such statement is
received by Borrowing Agent. The records of Agent with respect to the loan account shall be
conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and
of payments applicable thereto.



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



     2.10. Issuance of Letters of Credit.



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




          (b) Each Letter of Credit shall, among other things, (i) provide for the payment of sight
drafts, other written demands for payment, or acceptances of usance drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the
documents described therein and (ii) have an expiry date not later than twenty-four (24)
months after such Letter of Credit’s date of issuance and in no event later than the last day of
the Term. Each standby Letter of Credit shall be subject either to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No.
500, and any amendments or revision thereof adhered to by the Issuer (“UCP 500”) or the
International Standby Practices (ISP98-International Chamber of Commerce Publication Number 590)
(the “ISP98 Rules”), as determined by Agent, and each trade Letter of Credit shall be subject to
UCP 500.




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




     2.11. Requirements For Issuance of Letters of Credit.




27









 







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




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




     2.12. Disbursements, Reimbursement.



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




          (b) In the event of any request for a drawing under a Letter of Credit by the beneficiary or
transferee thereof, Agent will promptly notify Borrowing Agent. Provided that Borrowing Agent
shall have received such notice, the Borrowers shall reimburse (such obligation to reimburse Agent
shall sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon, New York
time on each date that an amount is paid by Agent under any Letter of Credit (each such date, a
“Drawing Date”) in an amount equal to the amount so paid by Agent. In the event Borrowers fail to
reimburse Agent for the full amount of any drawing under any Letter of Credit by 12:00 Noon, New
York time, on the Drawing Date, Agent will promptly notify each Lender thereof, and Borrowers shall
be deemed to have requested that a Domestic Rate Loan be made by the Lenders to be disbursed on the
Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the
lesser of Maximum Revolving Advance Amount or the Formula Amount (less outstanding Revolving
Advances at such time) and subject to Section 8.2 hereof. Any notice given by Agent pursuant to
this Section 2.12(b) may be oral if immediately confirmed in writing; provided that the lack of
such an immediate confirmation shall not affect the conclusiveness or binding effect of such
notice.




28









 








          (c) Each Lender shall upon any notice pursuant to Section 2.12(b) make available to Agent an
amount in immediately available funds equal to its Commitment Percentage of the amount of the
drawing, whereupon the participating Lenders shall (subject to Section 2.12(d)) each be deemed to
have made a Domestic Rate Loan to Borrowers in that amount. If any Lender so notified fails to
make available to Agent the amount of such Lender’s Commitment Percentage of such amount by no
later than 2:00 p.m., New York time on the Drawing Date, then interest shall accrue on such
Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender
makes such payment (i) at a rate per annum equal to the Federal Funds Rate during the first three
days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to
Domestic Rate Loans on and after the fourth day following the Drawing Date. Agent will promptly
give notice of the occurrence of the Drawing Date, but failure of Agent to give any such notice on
the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date
shall not relieve such Lender from its obligation under this Section 2.12(c), provided that such
Lender shall not be obligated to pay interest as provided in Section 2.12(c) (i) and (ii) until and
commencing from the date of receipt of notice from Agent of a drawing.




          (d) With respect to any unreimbursed drawing that is not converted into a Domestic Rate Loan
to Borrowers in whole or in part as contemplated by Section 2.12(b), because of Borrowers’ failure
to satisfy the conditions set forth in Section 8.2 (other than any notice requirements) or for any
other reason, Borrowers shall be deemed to have incurred from Agent a borrowing (each a “Letter of
Credit Borrowing”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and
payable on demand (together with interest) and shall bear interest at the rate per annum applicable
to a Domestic Rate Loan. Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be
deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall
constitute a “Participation Advance” from such Lender in satisfaction of its Participation
Commitment under this Section 2.12.




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




     2.13. Repayment of Participation Advances.



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




          (b) If Agent is required at any time to return to any Borrower, or to a trustee, receiver,
liquidator, custodian, or any official in any insolvency proceeding, any portion of the




29









 







payments made by Borrowers to Agent pursuant to Section 2.13(a) in reimbursement of a payment
made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent,
forthwith return to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.




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



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



     2.16. Nature of Participation and Reimbursement Obligations. Each Lender’s obligation
in accordance with this Agreement to make the Revolving Advances or Participation Advances as a
result of a drawing under a Letter of Credit, and the obligations of Borrowers to reimburse Agent
upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms of this Section 2.16 under all circumstances,
including the following circumstances:



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



               (ii) the failure of any Borrower or any other Person to comply, in connection with a Letter of
Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving
Advance, it being acknowledged that such conditions are not required for the making of a Letter of
Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section
2.12;



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



               (iv) any claim of breach of warranty that might be made by Borrower or any Lender against the
beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment,
counterclaim, crossclaim, defense or other right which any Borrower or any Lender may have at any
time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or
the proceeds thereof (or any Persons for whom any such transferee may be



30









 







acting), Agent or any Lender or any other Person, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated transaction (including any underlying
transaction between any Borrower or any Subsidiaries of such Borrower and the beneficiary for which
any Letter of Credit was procured);



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



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



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



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



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



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



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



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



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



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



     2.17. Indemnity. In addition to amounts payable as provided in Section 16.5, each
Borrower hereby agrees to protect, indemnify, defend, pay and save harmless Agent and any of
Agent’s Affiliates that have issued a Letter of Credit from and against any and all claims,



31









 







demands, liabilities, damages, taxes, penalties, interest, judgments, settlements, losses,
costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and
allocated costs of internal counsel) which the Agent or any of Agent’s Affiliates may incur or be
subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other
than as a result of (A) the gross negligence or willful misconduct of the Agent as determined by a
final and non-appealable judgment of a court of competent jurisdiction or (B) the wrongful dishonor
by the Agent or any of Agent’s Affiliates of a proper demand for payment made under any Letter of
Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto Governmental Body (all such acts or omissions herein
called “Governmental Acts”).



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



     Without limiting the generality of the foregoing, Agent and each of its Affiliates (i) may
rely on any oral or other communication believed in good faith by Agent or such Affiliate to have
been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor
any presentation if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a previously



32









 







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



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



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



     2.20. Manner of Borrowing and Payment.



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




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




          (c) (i) Notwithstanding anything to the contrary contained in Sections 2.20(a) and (b) hereof,
commencing with the first Business Day following the Closing Date, each borrowing of Revolving
Advances shall be advanced by Agent and each payment by any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent. On or before 1:00
p.m., New York time, on each Settlement Date




33









 







commencing with the first Settlement Date following the Closing Date, Agent and Lenders shall
make certain payments as follows: (I) if the aggregate amount of new Revolving Advances made by
Agent during the preceding Week (if any) exceeds the aggregate amount of repayments applied to
outstanding Revolving Advances during such preceding Week, then each Lender shall provide Agent
with funds in an amount equal to its applicable Commitment Percentage of the difference between (w)
such Revolving Advances and (x) such repayments and (II) if the aggregate amount of repayments
applied to outstanding Revolving Advances during such Week exceeds the aggregate amount of new
Revolving Advances made during such Week, then Agent shall provide each Lender with funds in an
amount equal to its applicable Commitment Percentage of the difference between (y) such repayments
and (z) such Revolving Advances.




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



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



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




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




34









 







owing under this paragraph (e) shall be conclusive, in the absence of manifest error. If such
amount is not in fact made available to Agent by such Lender within three (3) Business Days after
such Settlement Date, Agent shall be entitled to recover such an amount, with interest thereon at
the rate per annum then applicable to such Revolving Advances hereunder, on demand from Borrowers;
provided, however, that Agent’s right to such recovery shall not prejudice or otherwise adversely
affect Borrowers’ rights (if any) against such Lender.




     2.21. Mandatory Prepayments.



          (a) Subject to Section 4.3 hereof, when any Borrower sells or otherwise disposes of any
Collateral, Borrowers shall repay the Advances in an amount equal to the net cash proceeds of such
sale (i.e., gross cash proceeds less the reasonable costs of such sales or other dispositions),
such repayments to be made promptly but in no event more than one (1) Business Day following
receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. The foregoing shall not be deemed to be implied consent to any such sale or transaction
otherwise prohibited by the terms and conditions hereof. Such repayments shall be applied to the
Advances in such order as Agent may determine, subject to Borrowers’ ability to reborrow Revolving
Advances in accordance with the terms hereof.




     2.22. Use of Proceeds.



          (a) Borrowers shall apply the proceeds of Advances to (i) repay existing indebtedness owed to
Wells Fargo, (ii) pay fees and expenses relating to this transaction, and (iii) provide for its
working capital needs (including Capital Expenditures permitted hereunder) and reimburse drawings
under Letters of Credit.




          (b) Without limiting the generality of Section 2.22(a) above, neither the Borrowers, the
Guarantors nor any other Person which may in the future become party to this Agreement or the Other
Documents as a Borrower or Guarantor, intends to use nor shall they use any portion of the proceeds
of the Advances, directly or indirectly, for any purpose in violation of the Trading with the Enemy
Act.




     2.23. Defaulting Lender.



          (a) Notwithstanding anything to the contrary contained herein, in the event any Lender (x) has
refused (which refusal constitutes a breach by such Lender of its obligations under this Agreement)
to make available its portion of any Advance or (y) notifies either Agent or Borrowing Agent that
it does not intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement) (each, a “Lender
Default”), all rights and obligations hereunder of such Lender (a “Defaulting Lender”) as to which
a Lender Default is in effect and of the other parties hereto shall be modified to the extent of
the express provisions of this Section 2.23 while such Lender Default remains in effect.




          (b) Advances shall be incurred pro rata from Lenders (the “Non-Defaulting Lenders”) which are
not Defaulting Lenders based on their respective Commitment Percentages, and no Commitment
Percentage of any Lender or any pro rata share of any Advances required to be advanced by any
Lender shall be increased as a result of such Lender Default. Amounts




35









 







received in respect of principal of any type of Advances shall be applied to reduce the
applicable Advances of each Lender (other than any Defaulting Lender) pro rata based on the
aggregate of the outstanding Advances of that type of all Lenders at the time of such application;
provided, that, Agent shall not be obligated to transfer to a Defaulting Lender any
payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder (including any principal, interest or fees).
Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, re-lend to a Borrower the amount of such payments received or retained
by it for the account of such Defaulting Lender.




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




          (d) Other than as expressly set forth in this Section 2.23, the rights and obligations of a
Defaulting Lender (including the obligation to indemnify Agent) and the other parties hereto shall
remain unchanged. Nothing in this Section 2.23 shall be deemed to release any Defaulting Lender
from its obligations under this Agreement and the Other Documents, shall alter such obligations,
shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice
any rights which any Borrower, Agent or any Lender may have against any Defaulting Lender as a
result of any default by such Defaulting Lender hereunder.




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




III INTEREST AND FEES.




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



36









 





     3.2. Letter of Credit Fees.



          (a) Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees for each Letter
of Credit for the period from and excluding the date of issuance of same to and including the date
of expiration or termination, equal to the average daily face amount of each outstanding Letter of
Credit multiplied by two and one-half percent (2.5%) per annum, such fees to be calculated on the
basis of a 360-day year for the actual number of days elapsed and to be payable quarterly in
arrears on the first day of each quarter and on the last day of the Term, and (y) to the Issuer, a
fronting fee of one quarter of one percent (0.25%) per annum, together with any and all
administrative, issuance, amendment, payment and negotiation charges with respect to Letters of
Credit and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in connection
with any Letter of Credit, including in connection with the opening, amendment or renewal of any
such Letter of Credit and any acceptances created thereunder and shall reimburse Agent for any and
all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the “Letter
of Credit and Acceptance Fees”). All such charges shall be deemed earned in full on the date when
the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the
termination of this Agreement for any reason. Any such charge in effect at the time of a
particular transaction shall be the charge for that transaction, notwithstanding any subsequent
change in the Issuer’s prevailing charges for that type of transaction. All Letter of Credit Fees
and Acceptance Fees payable hereunder shall be deemed earned in full on the date when the same are
due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of
this Agreement for any reason.




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




     3.3. Closing Fee and Facility Fee.



          (a) Closing Fee. Upon the execution of this Agreement, Borrowers shall pay to Agent
for the ratable benefit of Lenders a closing fee of $100,000.00 less that portion of the deposit of
$60,000.00 heretofore paid by Borrowers to Agent remaining after application of such fee to
out-of-pocket expenses. After the Closing Date, upon Borrowing Agent’s request, Agent shall
deliver to Borrowing Agent a written report itemizing such out-of-pocket expenses in reasonable
supporting detail.




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          (b) Facility Fee. If, for any month during the Term, the average daily unpaid balance
of the Revolving Advances and undrawn amount of any outstanding Letters of Credit for each day of
such month does not equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent
for the ratable benefit of Lenders a fee at a rate equal to three-eights of one percent (.375%) per
annum on the amount by which the Maximum Revolving Advance Amount exceeds such average daily unpaid
balance. Such fee shall be payable to Agent in arrears on the first day of each month with respect
to the previous month.




     3.4. Collateral Evaluation Fee and Collateral Monitoring Fee.



          (a) Collateral Evaluation Fee. Borrowers shall pay Agent a collateral evaluation fee
equal to $1,500.00 per month commencing on the first day of the month following the Closing Date
and on the first day of each month thereafter during the Term. The collateral evaluation fee shall
be deemed earned in full on the date when same is due and payable hereunder and shall not be
subject to rebate or proration upon termination of this Agreement for any reason.




          (b) Collateral Monitoring Fee. Borrowers shall pay to Agent on the first day of each
month following any month in which Agent performs any collateral monitoring — namely any field
examination, collateral analysis or other business analysis, the need for which is to be determined
by Agent and which monitoring is undertaken by Agent or for Agent’s benefit — a collateral
monitoring fee in an amount equal to $750.00 per day for each person employed to perform such
monitoring, plus all costs and disbursements incurred by Agent in the performance of such
examination or analysis. After the Closing Date, upon Borrowers’ request, Agent shall deliver to
Borrowers a written report itemizing such out-of-pocket expenses in reasonable supporting detail.




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



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



     3.7. Increased Costs. In the event that any Applicable Law, treaty or governmental
regulation, or any change therein or in the interpretation or application thereof, or compliance by
any Lender (for purposes of this Section 3.7, the term “Lender” shall include Agent or any Lender
and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent
or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with



38









 







any request or directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority, shall:



          (a) subject Agent or any Lender to any tax of any kind whatsoever with respect to this
Agreement or any Other Document or change the basis of taxation of payments to Agent or any Lender
of principal, fees, interest or any other amount payable hereunder or under any Other Documents
(except for changes in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);




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




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




     and the result of any of the foregoing is to increase the cost to Agent or any Lender of
making, renewing or maintaining its Advances hereunder by an amount that Agent or such Lender deems
to be material or to reduce the amount of any payment (whether of principal, interest or otherwise)
in respect of any of the Advances by an amount that Agent or such Lender deems to be material,
then, in any case Borrowers shall promptly pay Agent or such Lender, upon its demand, such
additional amount (other than, in each case, any amount attributable to taxes pursuant to Section
3.10) as will compensate Agent or such Lender for such additional cost or such reduction, as the
case may be, provided that the foregoing shall not apply to increased costs which are reflected in
the Eurodollar Rate, as the case may be. Agent or such Lender shall certify the amount of such
additional cost or reduced amount to Borrowing Agent, and such certification shall be conclusive
absent manifest error.



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



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




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




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



39









 




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




     3.9. Capital Adequacy.



          (a) In the event that Agent or any Lender shall have determined that any Applicable Law, rule,
regulation or guideline regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Body, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.9, the term “Lender” shall include Agent or any Lender and
any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request or
directive regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of reducing the rate of
return on Agent or any Lender’s capital as a consequence of its obligations hereunder to a level
below that which Agent or such Lender could have achieved but for such adoption, change or
compliance (taking into consideration Agent’s and each Lender’s policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from time to time,
Borrowers shall pay upon demand to Agent or such Lender such additional amount or amounts as will
compensate Agent or such Lender for such reduction. In determining such amount or amounts, Agent
or such Lender may use any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to Agent and each Lender regardless of any possible contention of
invalidity or inapplicability with respect to the Applicable Law, regulation or condition.




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




     3.10. Gross Up for Taxes. If any Borrower shall be required by Applicable Law to
withhold or deduct any taxes from or in respect of any sum payable under this Agreement or any of
the Other Documents to Agent, or any Lender, assignee of any Lender, or Participant (each,
individually, a “Payee” and collectively, the “Payees”), (a) the sum payable to such Payee or
Payees, as the case may be, shall be increased as may be necessary so that, after making all
required withholding or deductions, the applicable Payee or Payees receives an amount equal to the
sum it would have received had no such withholding or deductions been made (the “Gross-Up
Payment”), (b) such Borrower shall make such withholding or deductions, and (c) such Borrower shall
pay the full amount withheld or deducted to the relevant taxation authority or



40









 







other authority in accordance with Applicable Law. Notwithstanding the foregoing, no Borrower
shall be obligated to make any portion of the Gross-Up Payment that is attributable to any
withholding or deductions that would not have been paid or claimed had the applicable Payee or
Payees properly claimed a complete exemption with respect thereto pursuant to Section 3.11 hereof.
Notwithstanding anything herein to the contrary, Borrowers shall not be obligated to withhold or
deduct, with respect to Agent, or any Lender: (a) taxes imposed on or measured on the overall net
income (however denominated) if Agent or such Lender, and franchise taxes imposed on it (in lieu of
net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of
which such recipient is organized or in which its principal office is located or, in the case of
any Lender, in which its applicable Lending Office is located; and (b) any branch profits taxes
imposed by the United States or any similar tax imposed by any other jurisdiction in which any
Borrower is located.



     3.11. Withholding Tax Exemption.



          (a) Each Payee that is not incorporated under the Laws of the United States of America or a
state thereof (and, upon the written request of Agent, each other Payee) agrees that it will
deliver to Borrowing Agent and Agent two (2) duly completed appropriate valid Withholding
Certificates (as defined under §1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”))
certifying its status (i.e., U.S. or foreign person) and, if appropriate, making a claim of
reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty or an
exemption provided by the Code. The term “Withholding Certificate” means a Form W-9; a Form
W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required
under §1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in §1.871-14(c)(2)(v) of
the Regulations; or any other certificates under the Code or Regulations that certify or establish
the status of a payee or beneficial owner as a U.S. or foreign person.




          (b) Each Payee required to deliver to Borrowing Agent and Agent a valid Withholding
Certificate pursuant to Section 3.11(a) hereof shall deliver such valid Withholding Certificate as
follows: (A) each Payee which is a party hereto on the Closing Date shall deliver such valid
Withholding Certificate at least five (5) Business Days prior to the first date on which any
interest or fees are payable by any Borrower hereunder for the account of such Payee; (B) each
Payee shall deliver such valid Withholding Certificate at least five (5) Business Days before the
effective date of such assignment or participation (unless Agent in its sole discretion shall
permit such Payee to deliver such Withholding Certificate less than five (5) Business Days before
such date in which case it shall be due on the date specified by Agent). Each Payee which so
delivers a valid Withholding Certificate further undertakes to deliver to Borrowing Agent and Agent
two (2) additional copies of such Withholding Certificate (or a successor form) on or before the
date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any
event requiring a change in the most recent Withholding Certificate so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably requested by Borrowing
Agent or Agent.




     3.12. Lending Offices. Each Lender agrees that, as promptly as practicable after
Lender becomes aware of the occurrence of an event or the existence of a condition that would
entitle such Lender to receive payments under Section 3.10, it will, to the extent not inconsistent



41









 







with the internal policies of such Lender and any applicable legal or regulatory restrictions,
use reasonable efforts to (a) make, issue, fund or maintain its Advances, through another office of
such Lender, or (b) take such other measures as such Lender may deem reasonable, if as a result
thereof the additional amounts which would otherwise be required to be paid to such Lender pursuant
to Section 3.10 would be materially reduced and if, as determined by such Lender in its sole
discretion, the making, issuing, funding or maintaining of such Advances through such other office
or in accordance with such other measures, as the case may be, would not otherwise adversely affect
such Advances or the interests of such Lender; provided, such Lender will not be obligated
to utilize such other office pursuant to this Section 3.12 unless Borrowers agree to pay all
incremental expenses incurred by such Lender as a result of utilizing such other office as
described above.



IV COLLATERAL




     4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby assigns, pledges and
grants to Agent for its benefit and for the ratable benefit of each Lender a continuing security
interest in and to and Lien on all of its Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located. Each Borrower shall mark its Books and Records as may
be necessary or appropriate to evidence, protect and perfect Agent’s security interest and shall
cause its financial statements to reflect such security interest. Each Borrower shall promptly
provide Agent with written notice of all commercial tort claims having an amount in controversy in
excess of $150,000, such notice to contain the case title together with the applicable court and a
brief description of the claim(s). Upon delivery of each such notice, such Borrower shall be
deemed to hereby grant to Agent a security interest and lien in and to such commercial tort claims
and all proceeds thereof.



     4.2. Perfection of Security Interest. Each Borrower shall take all action that may be
necessary, or that Agent may request, so as at all times to maintain the validity, perfection,
enforceability and priority of Agent’s security interest in and Lien on the Collateral or to enable
Agent to protect, exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted Encumbrances, (ii)
obtaining Lien Waiver Agreements, (iii) delivering to Agent, endorsed or accompanied by such
instruments of assignment as Agent may specify, and stamping or marking, in such manner as Agent
may specify, any and all chattel paper, instruments, letters of credits and advices thereof and
documents evidencing or forming a part of the Collateral, (iv) entering into warehousing, lockbox
and other custodial arrangements satisfactory to Agent, and (v) executing and delivering financing
statements, control agreements, instruments of pledge, mortgages, notices and assignments, in each
case in form and substance satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent’s security interest and Lien under the Uniform Commercial Code
or other Applicable Law. By its signature hereto, each Borrower hereby authorizes Agent to file
against such Borrower, one or more financing, continuation or amendment statements pursuant to the
Uniform Commercial Code in form and substance satisfactory to Agent (which statements may have a
description of collateral which is broader than that set forth herein). All charges, expenses and
fees Agent may incur in doing any of the foregoing, and any local taxes relating thereto, shall be
charged to Borrowers’ Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at Agent’s option,



42









 







shall be paid to Agent for its benefit and for the ratable benefit of Lenders immediately upon
demand.



     4.3. Disposition of Collateral. Each Borrower will safeguard and protect all
Collateral for Agent’s general account and make no disposition thereof whether by sale, lease or
otherwise except (a) the sale or other transfer (including the installation on leased Aircraft,
trucks and trailers) of Saleable Equipment in the Ordinary Course of Business and (b) the
disposition or transfer of obsolete and worn-out Equipment in the Ordinary Course of Business
during any fiscal year having an aggregate fair market value of not more than $2,000,000.00 and
only to the extent that (i) the net cash proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Agent’s first priority security interest or (ii) the net
cash proceeds of which are remitted to Agent to be applied pursuant to Section 2.21.



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



     4.5. Ownership of Collateral.



          (a) With respect to the Collateral, at the time the Collateral becomes subject to Agent’s
security interest: (i) each Borrower shall be the sole owner of and fully authorized and able to
sell, transfer, pledge and/or grant a first priority security interest in each and every item of
the its respective Collateral to Agent; and, except for Permitted Encumbrances, the Collateral
shall be free and clear of all Liens and encumbrances whatsoever; (ii) each document and agreement
executed by each Borrower or delivered to Agent or any Lender in connection with this Agreement
shall be true and correct in all respects; (iii) all signatures and endorsements of each Borrower
that appear on such documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (iv) each Borrower’s Equipment and Inventory shall be located as set
forth on Schedule 4.5 and shall not be removed from such location(s) without the prior written
consent of Agent, except (i) with respect to the sale or other transfer of Saleable Equipment to
the extent permitted in Section 4.3 hereof and (ii) with respect to the operation of each
Borrower’s business in the Ordinary Course of Business.




          (b) (i) There is no location at which any Borrower has any Inventory (except for Inventory in
transit) other than those locations listed on Schedule 4.5; (ii) Schedule 4.5 hereto




43









 







contains a correct and complete list, as of the Closing Date, of the legal names and addresses
of each warehouse at which Inventory of any Borrower is stored; none of the receipts received by
any Borrower from any warehouse states that the goods covered thereby are to be delivered to bearer
or to the order of a named Person or to a named Person and such named Person’s assigns; (iii)
Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of the chief
executive office of each Borrower; and (iv) Schedule 4.5 hereto sets forth a correct and complete
list as of the Closing Date of the location, by state and street address, of all Real Property
owned or leased by each Borrower, together with the names and addresses of any landlords. With
respect to any books and records in connection with any Collateral or in any way relating thereto
or evidencing the Collateral (collectively, the “Books and Records”) which are located at a leased
location, such Books and Records shall only be located in and at such locations for which Agent has
received an executed landlord agreement in form and substance satisfactory to Agent.




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



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



44









 







consistently applied in the opinion of such independent public accountant as shall then be
regularly engaged by Borrowers.



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



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



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



     4.11. Insurance. The assets and properties of each Borrower at all times shall be
maintained in accordance with the requirements of all insurance carriers which provide insurance
with respect to the assets and properties of such Borrower so that such insurance shall remain in
full force and effect. Each Borrower shall bear the full risk of any loss of any nature whatsoever
with respect to the Collateral. At each Borrower’s own cost and expense in amounts and with
carriers acceptable to Agent, each Borrower shall (a) keep all its insurable properties and
properties in which such Borrower has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and
for such amounts, as is customary in the case of companies engaged in businesses similar to such
Borrower’s including business interruption insurance; (b) maintain a policy in such amounts as is
customary in the case of companies engaged in businesses similar to such Borrower insuring against
larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who
may either singly or jointly with others at any time have access to the assets or funds of such
Borrower either directly or through authority to draw upon such funds or to direct generally the
disposition of such assets; (c) maintain public and product liability insurance



45









 







against claims for personal injury, death or property damage suffered by others; (d) maintain
all such worker’s compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which such Borrower is engaged in business; (e) furnish Agent with (i) copies of
all policies and evidence of the maintenance of such policies by the renewal thereof at least
thirty (30) days before any expiration date, and (ii) except with respect to Leased Property,
appropriate loss payable endorsements in form and substance satisfactory to Agent, naming Agent as
a co-insured and loss payee as its interests may appear with respect to all insurance coverage
referred to in clauses (a), and (c) above, and providing (A) that all proceeds thereunder shall be
payable to Agent, (B) no such insurance shall be affected by any act or neglect of the insured or
owner of the property described in such policy, and (C) that such policy and loss payable clauses
may not be cancelled, amended or terminated unless at least thirty (30) days’ prior written notice
is given to Agent. In the event of any loss thereunder, the carriers named therein hereby are
directed by Agent and the applicable Borrower to make payment for such loss to Agent and not to
such Borrower and Agent jointly. If any insurance losses are paid by check, draft or other
instrument payable to any Borrower and Agent jointly, Agent may endorse such Borrower’s name
thereon and do such other things as Agent may deem advisable to reduce the same to cash. Agent is
hereby authorized to (i) upon the occurrence and continuance of an Event of Default, adjust and
compromise claims under insurance coverage referred to in clauses (a), and (b) above and (ii)
consent, in its Permitted Discretion, to each proposed settlement in excess of $1,000,000.00 of
claims under insurance coverage referred to in clauses (a), and (b) above. All loss recoveries
received by Agent upon any such insurance may be applied to the Obligations, in such order as Agent
in its sole discretion shall determine. Any surplus shall be paid by Agent to Borrowers or applied
as may be otherwise required by law. Any deficiency thereon shall be paid by Borrowers to Agent,
on demand.



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



     4.13. Payment of Taxes. Each Borrower will pay, when due, all taxes, assessments and
other Charges lawfully levied or assessed upon such Borrower or any of the Collateral including
real and personal property taxes, assessments and charges and all franchise, income, employment,
social security benefits, withholding, and sales taxes unless being contested in good faith by
appropriate proceedings diligently conducted and for which adequate reserves have been provided in
accordance with GAAP. If any tax by any Governmental Body is or may be imposed on or as a result
of any transaction between any Borrower and Agent or any Lender which Agent or any Lender may be
required to withhold or pay or if any taxes, assessments, or other Charges remain unpaid after the
date fixed for their payment, or if any claim shall be made which, in Agent’s or any Lender’s
opinion, may possibly create a valid Lien on the Collateral, Agent may without notice to Borrowers
pay the taxes, assessments or other Charges and each Borrower hereby agrees to indemnify, defend
and hold harmless Agent and each Lender in respect thereof. Agent will not pay any taxes,
assessments or Charges to the extent that any applicable Borrower has contested or disputed those
taxes, assessments or Charges in good faith, by expeditious protest, administrative or judicial
appeal or similar proceeding provided that any related tax lien is stayed and sufficient reserves
are established to the reasonable satisfaction of



46









 







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



     4.14. Payment of Leasehold Obligations. Each Borrower shall at all times pay, when
and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise
comply, in all material respects, with all other terms of such leases and keep them in full force
and effect and, at Agent’s request will provide evidence of having done so.



     4.15. Receivables.



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




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




          (c) Location of Borrowers. Each Borrower’s chief executive office is located at the
location set forth on Schedule 4.15(c). Until written notice is given to Agent by Borrowing Agent
of any other office at which any Borrower keeps its records pertaining to Receivables, all such
records shall be kept at such executive office.




          (d) Collection of Receivables. Until any Borrower’s authority to do so is terminated
by Agent (which notice Agent may give at any time following the occurrence and during the
continuance of an Event of Default or a Default, each Borrower will, at such Borrower’s sole cost
and expense, but on Agent’s behalf and for Agent’s account, collect as Agent’s property and in
trust for Agent all amounts received on Receivables, and shall not commingle such collections with
any Borrower’s funds or use the same except to pay Obligations. At such time, each Borrower shall
deposit in the Lockbox Account or, upon request by Agent, deliver to Agent, in original form and on
the date of receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and other
evidences of Indebtedness.




47









 








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




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




          (g) No Liability. Neither Agent nor any Lender shall, under any circumstances or in
any event whatsoever, have any liability for any error or omission or delay of any kind occurring
in the settlement, collection or payment of any of the Receivables or any instrument received in
payment thereof, or for any damage resulting therefrom. Agent may, without notice or consent from
any Borrower, upon the occurrence and during the continuance of an Event of Default sue upon or
otherwise collect, extend the time of payment of, compromise or settle for




48









 







cash, credit or upon any terms any of the Receivables or any other securities, instruments or
insurance applicable thereto and/or release any obligor thereof. Agent is authorized and empowered
to accept the return of the goods represented by any of the Receivables, without notice to or
consent by any Borrower, all without discharging or in any way affecting any Borrower’s liability
hereunder.




     (h) Establishment of a Lockbox Account, Dominion Account. Borrowers shall maintain a
lockbox account (the “Lockbox Account”) with a bank acceptable to Agent (the “Lockbox
Bank”), and shall execute with the Lockbox Bank an agreement in form and substance acceptable
to Agent in its Permitted Discretion (the “Lockbox Agreement”), and such other agreements
related thereto as Agent may require. Neither Agent nor any Lender assumes any responsibility
for such Lockbox Account arrangement, including any claim of accord and satisfaction or release
with respect to deposits accepted by any Lockbox Bank thereunder. Borrower shall ensure that all
receivables of Borrowers, Guarantors and their Subsidiaries and proceeds of all other Collateral
are paid and delivered directly from account debtors and other Persons into the Lockbox Account.
The Lockbox Agreement shall provide that, at all times prior to the delivery of a Trigger Notice
(as hereinafter defined), the Lockbox Bank will transfer all funds paid into the Lockbox Account
into Borrowers’ operating depository account. The Lockbox Agreement shall further provide that upon
receipt of written notice (“Trigger Notice”) from the Agent at any time after (i) the
average daily Undrawn Availability for thirty (30) consecutive days is less than $10,000,000.00 or
(ii) the occurrence and during the continuance of an Event of Default, the Lockbox Bank will
immediately, and on a daily basis thereafter, transfer all funds paid into the Lockbox Account into
a depository account maintained by Agent at such bank as Agent may communicate to Borrowers from
time to time (the “Concentration Account”). All funds deposited in such Concentration
Account shall immediately become the property of Agent, for the benefit of the Lenders, and shall
be used to satisfy Obligations due and owing to Agent and the Lenders. If the average daily
Undrawn Availability for thirty (30) consecutive days is greater than or equal to $15,000,000.00
following the delivery by Agent of a Trigger Notice to the Lockbox Bank and no Event of Default is
in existence at such time, Agent may instruct the Lockbox Bank to again transfer all funds paid
into the Lockbox Account into Borrowers’ operating depository account. To the extent that any such
receivables collections or other proceeds of Collateral are not sent directly to the Lockbox
Account but are received by any Borrower or any Guarantor or Affiliate of any Borrower, such
collections and proceeds shall be held in trust for the benefit of Agent and Lenders and
immediately remitted (and in any event within two (2) Business Days), in the form received, to the
Lockbox Bank for immediate transfer to the Lockbox Account; provided, however, upon written request
of Agent after the occurrence and during the continuance of an Event of Default, such collections
and proceeds will be immediately remitted (and in any event within two (2) Business Days) in the
form received to the Concentration Account. All deposit accounts and investment accounts of each
Borrower and its Subsidiaries are set forth on Schedule 4.15(h).



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





49










 







     4.16. Reserved.



     4.17. Maintenance of Equipment. Subject to the limitations set forth in Section
6.5(c), the Equipment shall be maintained in good operating condition and repair (reasonable wear
and tear excepted) and all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment shall be maintained and preserved. No Borrower
shall use or operate the Equipment in violation in any material respect of any law, statute,
ordinance, code, rule or regulation. Each Borrower shall have the right to sell Equipment to the
extent set forth in Section 4.3 hereof.



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



     4.19. Environmental Matters. 



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




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




          (c) Borrowers shall (i) employ in connection with the use of the Real Property appropriate
technology necessary to maintain material compliance with any applicable Environmental Laws and
(ii) dispose of any and all Hazardous Waste generated at the Real Property only at facilities and
with carriers that to Holding’s knowledge do not have invalid permits under RCRA and any other
applicable Environmental Laws. Borrowers shall use their best efforts to obtain certificates of
disposal, such as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the transport or disposal
of any Hazardous Waste generated at the Real Property.




          (d) In the event any Borrower obtains, gives or receives notice of any Release or threat of
Release of a reportable quantity of any Hazardous Substances at the Real Property (any such event
being hereinafter referred to as a “Hazardous Discharge”) or receives any written notice of
violation, request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous Discharge or
violation of Environmental Laws affecting the Real Property or any Borrower’s interest therein





50









 







(any
of the foregoing is referred to herein as an “Environmental Complaint”) from any Person, including
any state agency responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection Agency (any such person
or entity hereinafter the “Authority”), then Borrowing Agent shall, within five (5) Business Days,
give written notice of same to Agent detailing facts and circumstances of which any Borrower is
aware giving rise to the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in and Lien on the Real Property and the
Collateral and is not intended to create nor shall it create any obligation upon Agent or any
Lender with respect thereto.




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




          (f) Borrowers shall respond promptly to any Hazardous Discharge or Environmental Complaint and
take all necessary action in order to safeguard the health of any Person and to avoid subjecting
the Collateral or Real Property to any Lien. If any Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or any Borrower shall fail to comply with any of the
requirements of any Environmental Laws, Agent on behalf of Lenders may, but without the obligation
to do so, for the sole purpose of protecting Agent’s interest in the Collateral: (A) give such
notices or (B) enter onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise deal with any such
Hazardous Discharge or Environmental Complaint. All reasonable costs and expenses incurred by
Agent and Lenders (or such third parties) in the exercise of any such rights, including any sums
paid in connection with any judicial or administrative investigation or proceedings, fines and
penalties, together with interest thereon from the date expended at the Default Rate for Domestic
Rate Loans constituting Revolving Advances shall be paid upon demand by Borrowers, and until paid
shall be added to and become a part of the Obligations secured by the Liens created by the terms of
this Agreement or any other agreement between Agent, any Lender and any Borrower.




          (g) Promptly upon the written request of Agent from time to time, Borrowers shall provide
Agent, at Borrowers’ expense, with an environmental site assessment or environmental audit report
prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any Hazardous Substances found
on, under, at or within the Real Property. Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee the clean-up of such
Hazardous Discharge shall be acceptable to




51









 







Agent. If such estimates, individually or in the
aggregate, exceed $100,000, Agent shall have the right to require Borrowers to post a bond, letter
of credit or other security reasonably satisfactory to Agent to secure payment of these costs and
expenses.




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




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




     4.20. Financing Statements. Except as respects the financing statements filed by
Agent and the financing statements described on Schedule 1.2, no financing statement covering any
of the Collateral or any proceeds thereof is on file in any public office.



V REPRESENTATIONS AND WARRANTIES.




     Each Borrower represents and warrants as follows:



     5.1. Authority. Each Borrower has full power, authority and legal right to enter into
this Agreement and the Other Documents and to perform all its respective Obligations hereunder and
thereunder. This Agreement and the Other Documents have been duly executed and delivered by each
Borrower, and this Agreement and the Other Documents constitute the legal, valid and binding
obligation of such Borrower enforceable in accordance with their terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors’ rights generally or general principles of equity. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such Borrower’s corporate
powers, have been duly authorized by all necessary corporate action, are not in contravention of
such Borrower’s by-laws or certificate of incorporation, (b) will not conflict with or violate in
any material respect any law or regulation, or any judgment, order or decree of any Governmental
Body, (c) will not require the Consent of any Governmental Body or any other Person, except those
Consents set forth on Schedule 5.1 hereto, all of which will have been duly obtained, made or
compiled prior to the Closing Date and which are in full force and effect and (d) will not result
in the creation of any Lien except Permitted Encumbrances upon any asset of such Borrower under the
provisions of any agreement, charter document, instrument, by-law or other instrument to which such
Borrower is a party or by which it or its



52









 







property is a party or by which it may be bound,
including under the provisions of the Asset Purchase Agreement.



     5.2. Formation and Qualification.



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




          (b) The only Subsidiaries of Holdings and each Borrower are listed on Schedule 5.2(b).




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



     5.4. Tax Returns. Each Borrower’s federal tax identification number is set forth on
Schedule 5.4. Except as set forth on Schedule 5.4, each Borrower has filed all federal, state and
local tax returns and other reports each is required by law to file and has paid all taxes,
assessments, fees and other governmental charges that are due and payable except those which are
being contested in good faith by appropriate proceedings diligently conducted and for which
adequate reserves have been provided in accordance with GAAP. Except as set forth on Schedule 5.4,
federal, state and local income tax returns of each Borrower have been examined and reported upon
by the appropriate taxing authority or closed by applicable statute and satisfied for all fiscal
years prior to and including the fiscal year ending December 31, 2005. The provision for taxes on
the books of each Borrower is adequate for all years not closed by applicable statutes, and for its
current fiscal year, and no Borrower has any knowledge of any deficiency or additional assessment
in connection therewith not provided for on its books.



     5.5. Financial Statements.



          (a) The pro forma balance sheet of Borrowers on a Consolidated Basis (the “Pro Forma Balance
Sheet”) furnished to Agent on the Closing Date reflects the consummation of the transactions
contemplated by the Asset Purchase Agreement and under this Agreement (collectively, the
“Transactions”) and is accurate, complete and correct and fairly reflects the financial condition
of Borrowers on a Consolidated Basis as of the Closing Date after giving effect to the
Transactions, and has been prepared in accordance with GAAP, consistently applied by Holdings. The
Pro Forma Balance Sheet has been certified as accurate, complete and correct in all material
respects by the President and Chief Financial Officer of Holdings. All financial statements
referred to in this subsection 5.5(a), including the related schedules and notes thereto,




53









 







have been
prepared, in accordance with GAAP, except as may be disclosed in such financial statements.




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




          (c) The consolidated and consolidating balance sheets of Holdings described in the Form 10-K
annual report of Holdings as of December 31, 2005, and the related statements of
income, changes in stockholder’s equity, and changes in cash flow for the period ended on such
date, all accompanied by reports thereon containing opinions without qualification by independent
certified public accountants, copies of which have been delivered to Agent, have been prepared in
accordance with GAAP, consistently applied (except for changes in application in which such
accountants concur and present fairly the financial position of Borrowers at such date and the
results of their operations for such period. Since December 31, 2005 there has been no change in
the condition, financial or otherwise, of Holdings as shown on the consolidated balance sheet as of
such date and no change in the aggregate value of machinery, equipment and Real Property owned by
Holdings, except changes in the Ordinary Course of Business or due to the consummation of the
Transactions, none of which individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect.




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



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



          (a) Each Borrower has duly complied with, and its facilities, business, assets, property,
leaseholds, Real Property and Equipment are in compliance in all material respects with, the
provisions of the applicable Federal Occupational Safety and Health Act, the Environmental
Protection Act, RCRA and all other Environmental Laws; there have been no material outstanding
citations, notices or orders of non-compliance issued to any Borrower or relating to its business,
assets, property, leaseholds or Equipment under any such laws, rules or regulations.




          (b) Each Borrower has been issued all material required federal, state and local licenses,
certificates or permits relating to all applicable Environmental Laws.




          (c) (i) There are currently no visible signs of releases, spills, discharges, leaks or
disposal (collectively referred to as “Releases”) of Hazardous Substances at, upon, under or




54









 







within
any Real Property or any premises leased by any Borrower that have not been remediated in
accordance with Environmental Laws; (ii) there are no underground storage tanks or polychlorinated
biphenyls on the Real Property or any premises leased by any Borrower; (iii) neither the Real
Property nor any premises leased by any Borrower has been used, to the knowledge of any Borrower,
as a treatment, storage or disposal facility of Hazardous Waste that have not been remediated in
accordance with Environmental Laws; and (iv) no Hazardous Substances are present on the Real
Property or any premises leased by any Borrower, excepting such quantities as are handled or used
in accordance with applicable manufacturer’s instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of the commercial business of any
Borrower or of its tenants.




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



          (a) Before and after giving effect to the Transactions and the Funding of each Advance made
pursuant to this Agreement, each Borrower is and will be solvent, able to pay its debts as they
mature, has and will have capital sufficient to carry on its business and all businesses in which
it is about to engage, and (i) as of the Closing Date, the fair present saleable value of its
assets, calculated on a going concern basis, is in excess of the amount of its liabilities and (ii)
subsequent to the Closing Date, the fair saleable value of its assets (calculated on a going
concern basis) will be in excess of the amount of its liabilities.




          (b) Except as disclosed in Schedule 5.8(b), no Borrower has (i) any pending or threatened
litigation, arbitration, actions or proceedings which could reasonably be expected to result in a
Material Adverse Effect, and (ii) any liabilities or indebtedness for borrowed money other than the
Obligations.




          (c) No Borrower is in violation of any applicable statute, law, rule, regulation or ordinance
in any respect which could reasonably be expected to have a Material Adverse Effect. No Borrower
is in violation of any order of any court, Governmental Body or arbitration board or tribunal which
could reasonably be expected to result in a Material Adverse Effect.




          (d) No Borrower nor any member of the Controlled Group maintains or contributes to any Plan
other than those listed on Schedule 5.8(d) hereto. (i) No Plan has incurred any “accumulated
funding deficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code,
whether or not waived, and each Borrower and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of ERISA in respect of each Plan; (ii)
each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in
effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of
the Code and the trust related thereto is exempt from federal income tax under Section 501(a) of
the Code; (iii) neither any Borrower nor any member of the Controlled Group has incurred any
liability to the PBGC other than for the payment of premiums, and there are no premium payments
which have become due which are unpaid; (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute
proceedings under Title IV of ERISA to terminate any Plan; (v) at this time, the current value of
the assets of each Plan exceeds the present value of the accrued benefits and other liabilities of
such Plan and neither any Borrower nor any member of the Controlled Group knows of any facts or
circumstances




55









 







which would materially change the value of such assets and accrued benefits and other
liabilities; (vi) neither any Borrower nor any member of the Controlled Group has breached any of
the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan; (vii)
neither any Borrower nor any member of a Controlled Group has incurred any liability for any excise
tax arising under Section 4972 or 4980B of the Code, and no fact exists which could give rise to
any such liability; (viii) neither any Borrower nor any member of the Controlled Group nor any
fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited transaction” described in
Section 406 of the ERISA or Section 4975 of the Code nor taken any action which would constitute or
result in a Termination Event with respect to any such Plan which is subject to ERISA; (ix) each
Borrower and each member of the Controlled Group has made all contributions due and payable with
respect to each Plan; (x) there exists no event described in Section 4043(b) of ERISA, for which
the thirty (30) day notice period has not been waived; (xi) neither any Borrower nor any member of
the Controlled Group has any fiduciary
responsibility for investments with respect to any plan existing for the benefit of persons
other than employees or former employees of any Borrower and any member of the Controlled Group;
(xii) neither any Borrower nor any member of the Controlled Group maintains or contributes to any
Plan which provides health, accident or life insurance benefits to former employees, their spouses
or dependents, other than in accordance with Section 4980B of the Code; (xiii) neither any Borrower
nor any member of the Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of
1980 and there exists no fact which would reasonably be expected to result in any such liability;
and (xiv) no Plan fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of
fiduciary duty or for any failure in connection with the administration or investment of the assets
of a Plan, except in each case that could not reasonably be expected to result in a Material
Adverse Effect.




     5.9. Patents, Trademarks, Copyrights and Licenses. All material patents, patent
applications, trademarks (other than common law trademark rights), trademark applications, service
marks, service mark applications, copyright applications, tradenames and assumed names owned or
utilized by any Borrower are set forth on Schedule 5.9, are, except to the extent not material to
the conduct of the business of the Borrowers, valid and have been duly registered or filed with all
appropriate Governmental Bodies and, to Borrowers’ knowledge, constitute all of the intellectual property rights which are
necessary for the operation of its business (other than any commercial “off-the-shelf” software
license such as certain “shrink-wrap” licenses and any other intellectual property licenses which
are nonexclusive, terminable and available to businesses at a market price); there is no objection
to or pending challenge to the validity of any such intellectual property rights which are material
to the conduct of the business of the Borrowers and no Borrower is aware of any grounds for any
such challenge, except as set forth in Schedule 5.9 hereto. Each material patent, patent
application, patent license, trademark, trademark application, trademark license, service mark,
service mark application, service mark license, copyright application and copyright license owned
by any Borrower and all trade secrets used by any Borrower consist of original material or property
developed by such Borrower or was lawfully acquired by such Borrower from the proper and lawful
owner thereof. Each of such items has been maintained so as to preserve the value thereof from the
date of creation or acquisition thereof, except to the extent not material to the conduct of the
business of the Borrowers.



56









 





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



     5.11. Reserved.



     5.12. No Default. No Borrower is in default in the payment or performance of any of
its contractual obligations which could reasonably be expected to have a Material Adverse Effect,
and no Default has occurred.



     5.13. No Burdensome Restrictions. No Borrower is party to any contract or agreement
the performance of which could have a Material Adverse Effect. Each Borrower has heretofore made
available to Agent or filed with the SEC true and complete copies of all material contracts (as
defined in Item 6.01 of the Securities Act of 1933) to which it is a party or to which it or any of
its properties is subject. No Borrower has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether now owned or
hereafter acquired, to be subject to a Lien which is not a Permitted Encumbrance.



     5.14. No Labor Disputes. No Borrower is involved in any labor dispute; there are no
strikes or walkouts or union organization of any Borrower’s employees threatened or in existence
and no labor contract is scheduled to expire during the Term other than as set forth on Schedule
5.14 hereto.



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



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



     5.17. Disclosure. No representation or warranty made by any Borrower in this
Agreement or in the Asset Purchase Agreement, or in any financial statement, report, certificate or
any other document furnished in connection herewith or therewith contains any untrue statement of
fact or omits to state any fact necessary to make the statements herein or therein not misleading;
provided, that the Agent and the Lenders acknowledge that any financial information furnished to
the Agent and/or the Lenders as it relates to future events is not to be viewed as fact and that
actual results during the period or periods covered by such financial information may differ from
the projected results set forth therein by a material amount. There is no fact known to any
Borrower or which reasonably should be known to such Borrower which such Borrower has not disclosed
to Agent in writing or disclosed in its reports filed with the SEC with respect to



57









 







the transactions
contemplated by the Asset Purchase Agreement or this Agreement which could reasonably be
expected to have a Material Adverse Effect.



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



     5.19. Swaps. No Borrower is a party to, nor will it be a party to, any swap agreement
whereby such Borrower has agreed or will agree to swap interest rates or currencies unless same
provides that damages upon termination following an event of default thereunder are payable on an
unlimited “two-way basis” without regard to fault on the part of either party.



     5.20. Conflicting Agreements. No provision of any mortgage, indenture, or other
material contract, agreement, judgment, decree or order binding on any Borrower or affecting the
Collateral conflicts with, or requires any Consent which has not already been obtained to, or would
in any way prevent the execution, delivery or performance of, the terms of this Agreement or the
Other Documents.



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



     5.22. Business and Property of Borrowers. Upon and after the Closing Date, Borrowers
do not propose to engage in any business other than providing expedited and deferred freight and
transportation services and activities necessary to conduct the foregoing. On the Closing Date,
each Borrower will own or lease all the property and possess all of the rights and Consents
necessary for the conduct of the business of such Borrower.



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



     5.24. Anti-Terrorism Laws.



          (a) General. Neither any Borrower nor any Affiliate of any Borrower is in violation
of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law.





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




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



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



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



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



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



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



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



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



     5.26.
Federal Securities Laws. Neither any Borrower (other than Holdings) nor any of its Subsidiaries (i) is required to file
periodic reports under the Exchange Act, (ii) has any securities registered under the Exchange Act
or (iii) has filed a registration statement that has not yet become effective under the Securities
Act.



     5.27. Internal Controls and Procedures. The Borrowers maintain accurate Books and
Records and internal accounting controls which provide reasonable assurance that (i) all
transactions to which the Borrowers (or any of them) are a party or by which their properties are
bound are executed with management’s authorization; (ii) the reported accountability of the
Borrowers’ assets are compared with existing assets at regular intervals; (iii) access to the
Borrowers’ assets is permitted only in accordance with management’s authorization; and (iv) all
transactions to which the Borrowers (or any of them) are a party or by which their properties are



59









 







bound are recorded as necessary to permit preparation of the financial statements of the Borrowers
in accordance with GAAP.



VI AFFIRMATIVE COVENANTS.




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



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



     6.2. Conduct of Business and Maintenance of Existence and Assets. (a) Conduct
continuously and operate actively its business according to good business practices and maintain
all of its properties useful or necessary in its business in good working order and condition
(reasonable wear and tear excepted and except as may be disposed of in accordance with the terms of
this Agreement), including all material licenses, patents, copyrights, design rights, tradenames,
trade secrets and trademarks and take all actions necessary to enforce and protect the validity of
any intellectual property right or other right included in the Collateral; (b) keep in full force
and effect its existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could reasonably be expected to
have a Material Adverse Effect; and (c) make all such reports and pay all such franchise and other
material taxes and license fees and do all such other acts and things as may be lawfully required
to maintain its rights, licenses, leases, powers and franchises under the laws of the United States
or any political subdivision thereof, unless the same are being contested in good faith by
appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are
being maintained by the applicable Borrower.



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



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



     6.5. Financial Covenants.



          (a) Net Worth. Cause to be maintained Tangible Net Worth in an amount equal to, (a)
as of December 31, 2006, for the fiscal year then ended, not less than the sum of (A) Tangible Net
Worth reported on Holdings’ Form 10-Q filed with the SEC for the period ended June 30, 2006 plus
(B) the product of (i) the net income of Borrowers on a Consolidated Basis from July 1, 2006
through December 31, 2006 multiplied by (ii) 0.75 less (C) any cash dividends




60









 







permitted by this
Agreement and (b) as of the last day of each fiscal year thereafter, for the fiscal year then
ended, not less than the sum of (A) Tangible Net Worth as of the last day of the fiscal year ended
twelve months prior plus (B) the product of (i) the net income of Borrowers on a Consolidated Basis
multiplied by (ii) 0.75 less (C) any cash dividends permitted by this Agreement.




          (b) Fixed Charge Coverage Ratio. Cause to be maintained a Fixed Charge Coverage Ratio
of not less than 1.00 to 1.00, measured (a) as of September 30, 2006, for the fiscal quarter then
ended, (b) as of December 31, 2006, for the two fiscal quarters then most recently ended, (c) as of
March 31, 2007, for the three fiscal quarters then most recently ended, and (d) as of the last day
of each fiscal quarter thereafter, for the four fiscal quarters then most recently ended; provided,
however, that for purposes of this covenant, the calculation of “Fixed Charge Coverage Ratio” will
exclude, until such time the average daily Undrawn Availability for thirty (30) consecutive days
fails to equal at least $5,000,000.00, Aircraft maintenance Capital Expenditures made in the
Ordinary Course of Business.




          (c) Capital Expenditures. Not make or cause to be made Capital Expenditures made
during such fiscal period which are not funded by borrowed money (other than proceeds of Revolving
Advances) in excess of $3,000,000.00 in the aggregate, for any fiscal year; excluding however,
until such time the average daily Undrawn Availability for thirty (30) consecutive days fails to
equal at least $5,000,000.00, Aircraft maintenance Capital Expenditures made in the Ordinary Course
of Business.




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



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



     6.8. Standards of Financial Statements. Cause all financial statements referred to in
Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to which GAAP is applicable to be
complete and correct in all material respects (subject, in the case of interim financial
statements, to normal year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and disclosed therein).



     6.9. Exercise of Rights. Enforce all of its rights under the Asset Purchase Agreement
to seek indemnification and pursue all remedies available to it with diligence and in good faith in



61









 







connection with the enforcement of any such rights unless otherwise deemed unnecessary in its
reasonable business judgment.



VII NEGATIVE COVENANTS.




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



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



          (a) (i) Enter into any merger, consolidation or other reorganization with or into any other
Person, (ii) acquire all or substantially all of the assets, a line of business, operational
division, or unit of any Person, (iii) acquire the Equity Interests of any Person or (iv) permit
any other Person to consolidate with or merge with it, without the prior written consent of Agent,
in the exercise of its sound business judgment.




          (b) Sell, lease, transfer or otherwise dispose of any of its properties or assets, except (i)
dispositions of Saleable Equipment and other Equipment to the extent expressly permitted by Section
4.3 and (ii) any other sales or dispositions expressly permitted by this
Agreement, without the prior written consent of Agent, in the exercise of its sound business
judgment.




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



     7.3. Guarantees. Become liable upon the obligations or liabilities of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders) except (a) as
disclosed on Schedule 7.3, (b) guarantees made in the Ordinary Course of Business up to an
aggregate amount of $250,000 and guarantees or contingent liabilities of any Borrower in respect of
Indebtedness permitted under Section 7.8 and (c) the endorsement of checks in the Ordinary Course
of Business.



     7.4. Investments. Purchase or acquire obligations of any Person, except Cash
Equivalents, unless otherwise consented to by Agent in the exercise of its sound business judgment.



     7.5. Loans. Make advances, loans or extensions of credit to any Person, including any
Parent, Subsidiary or Affiliate, except with respect to (a) the extension of commercial trade
credit in connection with the performance of services and sale of Saleable Equipment in the
Ordinary Course of Business, (b) loans to its employees in the Ordinary Course of Business not to
exceed the aggregate amount of $100,000 at any time outstanding and (c) promissory notes received
from account debtors if permitted to be taken by Agent to avoid a loss, or help ensure collection
of past due, doubtful, restructured or extended accounts, provided that such promissory notes are
delivered and duly assigned (whether by endorsement or allonge) to Agent.



     7.6. Purchase Money Indebtedness; Capitalized Leases. Shall not incur purchase money
Indebtedness and Capitalized Lease Obligations in an aggregate amount not to exceed $4,000,000.00
in any given fiscal year.



62









 





     7.7. Dividends. Declare, pay or make any dividend or distribution on any shares of
the common stock or preferred stock of any Borrower (other than dividends or distributions payable
in its stock, or split-ups or reclassifications of its stock) or apply any of its funds, property
or assets to the purchase, redemption or other retirement of any common or preferred stock, or of
any options to purchase or acquire any such shares of common or preferred stock of any Borrower
except that so long as (a) a notice of termination with regard to this Agreement shall not be
outstanding, (b) no Event of Default or Default shall have occurred, and (c) the purpose for such
purchase,
redemption or dividend shall be as set forth in writing to Agent at least ten (10) days prior
to such purchase, redemption or dividend and such purchase, redemption or dividend shall in fact
be used for such purpose, Borrowers shall be permitted to pay dividends to Holdings, to pay (y)
professional fees, franchise taxes and other Ordinary Course of Business operating expenses
(excluding salaries and other employee compensation) incurred by Holdings solely in its capacity as
parent corporation of Borrowers and (z) quarterly dividends on the Series B Preferred Stock of
Holdings; provided, however, that after giving effect to the payment of any such dividends there
shall not exist any Event of Default or Default and provided, further, that the aggregate amount of
all dividends paid under clause (z) above in any 12 month period does not exceed $1,630,000.00.



     7.8. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
(exclusive of trade debt) except in respect of (i) Indebtedness to Lenders; (ii) Indebtedness
incurred for Capital Expenditures permitted under Section 7.6 hereof; and (iii) Indebtedness
assumed under the Asset Purchase Agreement, if any.



     7.9. Nature of Business. Substantially change the nature of the business in which it
is presently engaged, nor except as specifically permitted hereby purchase or invest, directly or
indirectly, in any assets or property other than in the Ordinary Course of Business for assets or
property which are useful in, necessary for and are to be used in its business as presently
conducted.



     7.10. Transactions with Affiliates. Except as set forth on Schedule 7.10, unless
expressly permitted under this Agreement, directly or indirectly, purchase, acquire or lease any
property from, or sell, transfer or lease any property to, or otherwise enter into any transaction
with, any Affiliate, except (A) transactions which are (i) in the Ordinary Course of Business or
(ii) disclosed to Agent and on an arm’s-length basis on terms and conditions no less favorable than
terms and conditions which would have been obtainable from a Person other than an Affiliate or (B)
the sale of Equity Interests of Holdings.



     7.11. Subsidiaries.



          (a) Form any Subsidiary unless (i) such Subsidiary expressly joins in this Agreement as a
borrower and becomes jointly and severally liable for the obligations of Borrowers hereunder, under
the Notes, and under any other agreement between any Borrower and Lenders and (ii) Agent shall have
received all documents, including legal opinions, it may reasonably require to establish compliance
with each of the foregoing conditions.




          (b) Enter into any partnership, joint venture or similar arrangement.





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     7.12.
Fiscal Year and Accounting Changes. Change its fiscal year from December 31 or make any change (i) in accounting treatment and
reporting practices except as required by GAAP or (ii) in tax reporting treatment except as
required by law.



     7.13. Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s credit on any
purchases or for any purpose whatsoever or use any portion of any Advance in or for any business
other than such Borrower’s business as conducted on the date of this Agreement.



     7.14. Amendment of Articles of Incorporation, By-Laws. Amend or modify any material
term or material provision of its Articles of Incorporation or By-Laws unless required by law,
without prior the consent of Agent, such consent not to be unreasonably withheld.



     7.15. Compliance with ERISA. (i) (x) Maintain, or permit any member of the Controlled
Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled
Group to become obligated to contribute, to any Plan, other than those Plans disclosed on Schedule
5.8(d), (ii) engage, or permit any member of the Controlled Group to engage, in any non-exempt
“prohibited transaction”, as that term is defined in section 406 of ERISA and Section 4975 of the
Code, (iii) incur, or permit any member of the Controlled Group to incur, any “accumulated funding
deficiency”, as that term is defined in Section 302 of ERISA or Section 412 of the Code, (iv)
terminate, or permit any member of the Controlled Group to terminate, any Plan where such event
could result in any liability of any Borrower or any member of the Controlled Group or the
imposition of a lien on the property of any Borrower or any member of the Controlled Group pursuant
to Section 4068 of ERISA, (v) assume, or permit any member of the Controlled Group to assume, any
obligation to contribute to any Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or
permit any member of the Controlled Group to incur, any withdrawal liability to any Multiemployer
Plan; (vii) fail promptly to notify Agent of the occurrence of any Termination Event, (viii) fail
to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of
ERISA or the Code or other Applicable Laws in respect of any Plan, (ix) fail to meet, or permit any
member of the Controlled Group to fail to meet, all minimum funding requirements under ERISA or the
Code or postpone or delay or allow any member of the Controlled Group to postpone or delay any
funding requirement with respect of any Plan.



     7.16. Prepayment of Indebtedness. At any time, directly or indirectly, prepay any
Indebtedness (other than to Lenders), or repurchase, redeem, retire or otherwise acquire any
Indebtedness of any Borrower.



     7.17. Anti-Terrorism Laws. No Borrower shall, until satisfaction in full of the
Obligations and termination of this Agreement, nor shall it permit any Affiliate or agent to:



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




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




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          (c) Engage in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the
Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law. Borrower shall
deliver to Lenders any certification or other evidence requested from time to time by any Lender in
its sole discretion, confirming Borrower’s compliance with this Section.




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



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



     7.20. Other Agreements. Enter into any material amendment, waiver or modification of
the Asset Purchase Agreement or any related agreements.



VIII CONDITIONS PRECEDENT.




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



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




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




          (c) Corporate Proceedings of Borrowers. Agent shall have received a copy of the
resolutions in form and substance reasonably satisfactory to Agent, of the Board of Directors of
each Borrower authorizing (i) the execution, delivery and performance of this Agreement, the Notes,
each Other Document, any related agreements and the Asset Purchase Agreement (collectively the
“Documents”) and (ii) the granting by each Borrower of the security interests in and liens upon the
Collateral in each case certified by the Secretary or an Assistant Secretary of each Borrower as of
the Closing Date; and, such certificate shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded as of the date of such certificate;





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




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




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




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




          (h) Good Standing Certificates. Agent shall have received good standing certificates
for Holdings, each Borrower and each other Guarantor dated not more than ten (10) days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of Holdings’, each
Borrower’s and each Guarantor’s jurisdiction of incorporation and where the failure to qualify as a
foreign corporation could reasonably be expected to have a Material Adverse Effect;




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




          (j) No Litigation. (i) No litigation, investigation or proceeding before or by any
arbitrator or Governmental Body, other than litigation, investigations and proceedings disclosed in
reports filed by Holdings with the SEC, shall be continuing or threatened against Holdings or any
Borrower or against the officers or directors of Holdings or any Borrower (A) in connection with
this Agreement, the Other Documents or any of the transactions contemplated thereby and




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which, in
the reasonable opinion of Agent, is deemed material or (B) which could, in the reasonable opinion
of Agent, have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other
order of any nature materially adverse to Holdings or any Borrower or the conduct of its business
or inconsistent with the due consummation of the Transactions shall have been issued by any
Governmental Body;




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




          (l) Collateral Examination. Agent shall have completed Collateral examinations and
received appraisals, the results of which shall be satisfactory in form and substance to Lenders,
of the Receivables, Inventory, General Intangibles, Real Property, Leasehold Interest and Equipment
of each Borrower and all Books and Records in connection therewith;




          (m)
Fees. Agent shall have received all fees payable to Agent and Lenders on or prior to the Closing
Date hereunder, including pursuant to Article III hereof and received payment of all expenses
reimbursable to Agent pursuant to this Agreement;




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




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




          (p) Reserved.




          (q) Environmental Questionnaire. Agent shall have received from Holdings responses to
Agent’s environmental questionnaire, which responses shall be in form and substance satisfactory to
Agent in its sole discretion, with respect to all Real Property owned or leased by Holdings or any
Borrower;




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




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




          (t) Consents. Agent shall have received any and all Consents necessary to permit the
effectuation of the transactions contemplated by this Agreement and the Other Documents; and, Agent
shall have received such Consents and waivers of such third parties as might assert claims with
respect to the Collateral, as Agent and its counsel shall deem necessary;





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          (u) No Adverse Material Change. (i) since December 31, 2005, there shall not have
occurred any event, condition or state of facts which could reasonably be expected to have a
Material Adverse Effect and (ii) no
representations made or information supplied to Agent or Lenders shall have been proven to be
inaccurate or misleading in any material respect;




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




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




          (x) Closing Certificate. Agent shall have received a closing certificate signed by
the Chief Financial Officer of Holdings and each Borrower dated as of the date hereof, stating that
(i) all representations and warranties set forth in this Agreement and the Other Documents are true
and correct (other than immaterial inaccuracies, if any) on and as of such date, (ii) Holdings and
Borrowers are on such date in compliance with all the terms and provisions set forth in this
Agreement and the Other Documents and (iii) on such date no Default or Event of Default has
occurred or is continuing;




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




          (z) Undrawn Availability. After giving effect to the initial Advances hereunder,
Borrowers shall have Undrawn Availability of at least $8,000,000.00;




          (aa) Compliance with Laws. Agent shall be reasonably satisfied that each Borrower is
in compliance in all material respects with all pertinent federal, state, local or territorial
regulations, including those with respect to the Federal Occupational Safety and Health Act, the
Environmental Protection Act, ERISA and the Trading with the Enemy Act;




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




          (cc) Existing Financings. (i) The Wells Fargo Facility shall be terminated; (ii) all
loans and obligations of the Borrowers with respect to the Wells Fargo Facility or any other
secured financing facility shall be paid or satisfied in full utilizing the proceeds of the
initial Revolving Loans to be made under this Agreement; (iii) all of Wells Fargo’s or any other
secured creditor’s commitments to lend or make other extensions of credit shall be terminated; (iv)
Agent shall have received all documents or instruments necessary to release and/or terminate all
security interests and liens securing indebtedness evidenced by any other financing facility,
including, but not limited to, the Wells Fargo Facility; (v) Borrowers shall have made arrangements
satisfactory to Agent in its sole discretion to cancel any letters of credit outstanding under the
Wells Fargo Facility or under another secured credit facility; and (vi) Agent shall have





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been authorized by Wells Fargo or any other secured creditor to terminate and/or release all
liens and security interests in favor of Wells Fargo in connection with the Wells Fargo Facility or
of any such secured creditor.




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


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



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



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




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



IX INFORMATION AS TO BORROWERS.




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



     9.1. Disclosure of Material Matters. Promptly upon learning thereof, report to Agent
all matters materially affecting the value, enforceability or collectibility of the Collateral on
an aggregate basis.



     9.2. Schedules. Deliver to Agent on or before the fifteenth (15th) day of each month,
unless such day is not a Business Day in which case it shall be the next succeeding Business Day,
as and for the prior month (a) accounts receivable ageings inclusive of reconciliations to the
general ledger, (b) accounts payable schedules inclusive of reconciliations to the general ledger,
and (c) a Borrowing Base Certificate in form and substance satisfactory to Agent (which shall be
calculated as of the last day of the prior month and which shall not be binding upon Agent or
restrictive of Agent’s rights under this Agreement). In addition, each Borrower will deliver to
Agent at such intervals as Agent may require: (i) confirmatory assignment schedules, (ii) copies
of Customer’s invoices, (iii) evidence of shipment or delivery, and (iv) such further schedules,



69









 




documents and/or information regarding the Collateral as Agent may require including trial
balances and test verifications. Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable and do whatever it may deem reasonably
necessary to protect its interests hereunder. The items to be provided under this Section are to
be in form satisfactory to Agent and executed by each Borrower and delivered to Agent from time to
time solely for Agent’s convenience in maintaining records of the Collateral, and any Borrower’s
failure to deliver any of such items to Agent shall not affect, terminate, modify or otherwise
limit Agent’s Lien with respect to the Collateral.




     9.3. Environmental Reports. Furnish Agent, at such times as Agent shall request, a
certificate signed by the President of Borrowing Agent stating, to the best of his knowledge, that
each Borrower is in compliance in all material respects with all federal, state and local
Environmental Laws. To the extent any Borrower is not in compliance with the foregoing laws, the
certificate shall set forth with specificity all areas of non-compliance and the proposed action
such Borrower will implement in order to achieve full compliance.



     9.4. Litigation. Promptly notify Agent in writing of any claim, litigation, suit or
administrative proceeding affecting any Borrower, Holdings or any Guarantor, whether or not the
claim is covered by insurance, and of any litigation, suit or administrative proceeding, which in
any such case affects the Collateral or which could reasonably be expected to have a Material
Adverse Effect.



     9.5. Material Occurrences. Promptly notify Agent in writing upon the occurrence of
(a) any Event of Default or Default; (b) any event, development or circumstance whereby any
financial statements or other reports furnished to Agent fail in any material respect to present
fairly, in accordance with GAAP consistently applied, the financial condition or operating results
of any Borrower as of the date of such statements; (c) any accumulated retirement plan funding
deficiency which, if such deficiency continued for two plan years and was not corrected as provided
in Section 4971 of the Code, could subject any Borrower to a tax imposed by Section 4971 of the
Code; (d) each and every default by any Borrower which might result in the acceleration of the
maturity of any Indebtedness, including the names and addresses of the holders of such Indebtedness
with respect to which there is a default existing or with respect to which the maturity has been or
could be accelerated, and the amount of such Indebtedness; and (e) any other development in the
business or affairs of any Borrower, Holdings or any Guarantor, which could reasonably be expected
to have a Material Adverse Effect; in each case describing the nature thereof and the action
Borrowers propose to take with respect thereto.



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



     9.7. Annual Financial Statements. Furnish Agent within ninety (90) days after the end
of each fiscal year of Holdings and each Borrower, financial statements of Holdings and each
Borrower on a consolidating and consolidated basis including, but not limited to, statements of
income and stockholders’ equity and cash flow from the beginning of the current fiscal year to the
end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared in
accordance with GAAP applied on a basis consistent with prior practices, and in reasonable



70









 




detail and reported upon without qualification by an independent certified public accounting
firm selected by Borrowers and satisfactory to Agent (the “Accountants”). The report of the
Accountants shall be accompanied by a statement of the Accountants certifying that (i) they have
caused this Agreement to be reviewed, (ii) in making the examination upon which such report was
based either no information came to their attention which to their knowledge constituted an Event
of Default or a Default under this Agreement or any related agreement or, if such information came
to their attention, specifying any such Default or Event of Default, its nature, when it occurred
and whether it is continuing, and such report shall contain or have appended thereto calculations
which set forth Borrowers’ compliance with the requirements or restrictions imposed by Sections
6.5, 7.4, 7.5, 7.6, 7.7 and 7.8 hereof. In addition, the reports shall be accompanied by a
Compliance Certificate.




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



     9.9. Monthly Financial Statements. Furnish Agent within thirty (30) days after the
end of each month (other than the last month of any fiscal quarter), an unaudited balance sheet of
Holdings and Borrowers on a consolidated and consolidating basis and unaudited statements of income
and stockholders’ equity and cash flow of Holdings and Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the fiscal year to the
end of such month and for such month, prepared on a basis consistent with prior practices and
complete and correct in all material respects, subject to normal and recurring year end adjustments
that individually and in the aggregate are not material to Borrowers’ business. The reports shall
be accompanied by a Compliance Certificate.



     9.10. Other Reports. Furnish Agent as soon as available, but in any event within ten
(10) days after the issuance thereof, with copies of such financial statements, reports and returns
as each Borrower shall send to its stockholders.



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



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     9.12. Projected Operating Budget. Furnish Agent, no later than thirty (30) days prior
to the beginning of each Borrower’s fiscal years commencing with fiscal year 2007, a month by month
projected operating budget and cash flow of Borrowers on a consolidated and consolidating basis for
such fiscal year (including an income statement for each month and a balance sheet as at the end of
the last month in each fiscal quarter), such projections to be accompanied by a certificate signed
by the President or Chief Financial Officer of each Borrower to the effect that such projections
have been prepared on the basis of sound financial planning practice consistent with past budgets
and financial statements and that such officer has no reason to question the reasonableness of any
material assumptions on which such projections were prepared.



     9.13. Variances From Operating Budget. Furnish Agent at such times as Agent shall
request, a written report summarizing all material variances from budgets submitted by Borrowers
pursuant to Section 9.12 and a discussion and analysis by management with respect to such
variances.



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



     9.15. ERISA Notices and Requests. Furnish Agent with immediate written notice in the
event that (i) any Borrower or any member of the Controlled Group knows or has reason to know that
a Termination Event has occurred, together with a written statement describing such Termination
Event and the action, if any, which such Borrower or any member of the Controlled Group has taken,
is taking, or proposes to take with respect thereto and, when known, any action taken or threatened
by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) any
Borrower or any member of the Controlled Group knows or has reason to know that a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred together with a
written statement describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding
waiver request has been filed with respect to any Plan together with all communications received by
any Borrower or any member of the Controlled Group with respect to such request, (iv) any increase
in the benefits of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled Group was not
previously contributing shall occur, (v) any Borrower or any member of the Controlled Group shall
receive from the PBGC a notice of intention to terminate a Plan or to have a trustee appointed to
administer a Plan, together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter from the Internal
Revenue Service regarding the qualification of a Plan under Section 401(a) of the Code, together
with copies of each such letter; (vii) any Borrower or any member of the Controlled Group shall
receive a



72









 




notice regarding the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to make a required
installment or any other required payment under Section 412 of the Code on or before the due date
for such installment or payment; (ix) any Borrower or any member of the Controlled Group knows that
(a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.




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



     9.17. SEC Information. Promptly upon their becoming available, copies of: (i) all
financial statements, reports, notices and proxy statements made publicly available by Holdings or
any Borrower to its security holders; (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by Holdings and any Borrower with any securities
exchange or with the SEC or any governmental or private regulatory authority; and (iii) all press
releases and other statements made available by Holdings and any Borrower to the public concerning
material changes or developments in the business of any such Person, but only if Agent is unable to
obtain all such information and materials from the SEC.



X EVENTS OF DEFAULT.




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



     10.1. Nonpayment. Failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant to the terms of
this Agreement or by notice of intention to prepay, or by required prepayment or failure to pay any
other liabilities or make any other payment, fee or charge provided for herein when due or in any
Other Document;



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



     10.3. Financial Information. Failure by any Borrower to (i) furnish financial
information when due or when requested in accordance with terms of this Agreement, or (ii) permit
the inspection of its books or records in accordance with terms of this Agreement;



     10.4. Judicial Actions. Issuance of a notice of Lien, levy, assessment, injunction or
attachment against any Borrower’s Receivables or against a material portion of any Borrower’s other
property which is not stayed or lifted within thirty (30) days;



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     10.5. Noncompliance. Except as otherwise provided for in Sections 10.1, 10.3 and
10.5(ii), (i) failure or neglect of any Borrower or any Guarantor to perform, keep or observe any
term, provision, condition, covenant herein contained, or contained in any Other Document or any
other agreement or arrangement, now or hereafter entered into between any Borrower or any
Guarantor, and Agent or any Lender, or (ii) failure or neglect of any Borrower to perform, keep or
observe any term, provision, condition or covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3,
6.4, 9.4 or 9.6 hereof which is not cured within ten (10) days from the occurrence of such failure
or neglect;



     10.6. Judgments. Any judgment or judgments are rendered against any Borrower or any
Guarantor for an aggregate amount in excess of $250,000 or against all Borrowers or Guarantors for
an aggregate amount in excess of $500,000 and (i) enforcement proceedings shall have been commenced
by a creditor upon such judgment shall not have been vacated, discharged, stayed, or bonded pending
appeal within thirty (30) days from the date of entry thereof;



     10.7. Bankruptcy. Any Borrower or any Guarantor shall (i) apply for, consent to or
suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any
state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or
insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief
of debtors, (vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any petition
filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for
the purpose of effecting any of the foregoing;



     10.8. Inability to Pay. Any Borrower or any Guarantor shall admit in writing its
inability, or be generally unable, to pay its debts as they become due or cease operations of its
present business;



     10.9. Affiliate Bankruptcy. Any Affiliate or any Subsidiary of any Borrower, or any
Guarantor, shall (i) apply for, consent to or suffer the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all
or a substantial part of its property, (ii) admit in writing its inability, or be generally unable,
to pay its debts as they become due or cease operations of its present business, (iii) make a
general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief
of debtors, (vii) acquiesce to, or fail to have dismissed, within sixty (60) days, any petition
filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for
the purpose of effecting any of the foregoing;



     10.10. Material Adverse Effect. Any change which has a Material Adverse Effect as
determined in Agent’s Permitted Discretion;



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     10.11. Lien Priority. Any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected Lien having a first
priority interest;



     10.12. Cross Default. (i) A default of the payment obligations of any Borrower under
any other agreement (other than in respect of Indebtedness) in excess of $250,000 individually or
in excess of $1,000,000 in the aggregate to which it is a party shall occur which default is not
cured within any applicable grace period; or (ii) a default in the payment of the principal of or
interest on any Indebtedness in excess of $1,000,000 in aggregate principal amount or under any
instrument or agreement under or subject to which any such Indebtedness has been issued or the
occurrence of an event which under the provisions of any such instrument or agreement would with or
without the lapse of time or the giving of notice, or both, constitute an event of default
thereunder;



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



     10.14. Reserved;




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



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



     10.17. Seizures. Any material portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or any Guarantor or the title and rights of any Borrower, any
Guarantor or any Original Owner which is the owner of any material portion of the Collateral shall
have become the subject matter of claim, litigation, suit or other proceeding which might, in the
opinion of Agent, upon final determination, result in impairment or loss of the security provided
by this Agreement or the Other Documents;



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     10.18. Operations. Any Borrower’s or any Guarantor’s business operations are
interrupted at any time for more than three (3) consecutive days, unless such Borrower or Guarantor
shall (i) be entitled to receive for such period of interruption, proceeds of business interruption
insurance sufficient to assure that its per diem cash needs during such period is at least equal to
its average per diem cash needs for the consecutive three month period immediately preceding the
initial date of interruption and (ii) receive such proceeds in the amount described in clause (i)
preceding not later than thirty (30) days following the initial date of any such interruption;
provided, however, that notwithstanding the provisions of clauses (i) and (ii) of this section, an
Event of Default shall be deemed to have occurred if such Borrower or Guarantor shall be receiving
the proceeds of business interruption insurance for a period of thirty (30) consecutive days; or



     10.19. Pension Plans. An event or condition specified in Sections 7.15 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or condition, together
with all other such events or conditions, any Borrower or any member of the Controlled Group shall
incur, or in the opinion of Agent be reasonably likely to incur, a liability to a Plan or the PBGC
(or both) which, in the reasonable judgment of Agent, would have a Material Adverse Effect.



XI  LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.




     11.1. Rights and Remedies.




          (a) Upon the occurrence of and during the continuation of (i) an Event of Default pursuant to
Section 10.7 all Obligations shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed terminated; (ii) any of the other Events of
Default and at any time thereafter (such default not having previously been cured), at the option
of Required Lenders all Obligations shall be immediately due and payable and Lenders shall have the
right to terminate this Agreement and to terminate the obligation of Lenders to make Advances and
(iii) a filing of a petition against any Borrower in any involuntary case under any state or
federal bankruptcy laws, all Obligations shall be immediately due and payable and the obligation of
Lenders to make Advances hereunder shall be terminated other than as may be required by an
appropriate order of the bankruptcy court having jurisdiction over such Borrower. Upon the
occurrence of any Event of Default, Agent shall have the right to exercise any and all rights and
remedies provided for herein, under the Other Documents, under the Uniform Commercial Code and at
law or equity generally, including the right to foreclose the security interests granted herein and
to realize upon any Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process. Agent may enter any of any
Borrower’s premises or other premises without legal process and without incurring liability to any
Borrower therefor, and Agent may thereupon, or at any time thereafter, in its discretion without
notice or demand, take the Collateral and remove the same to such place as Agent may deem advisable
and Agent may require Borrowers to make the Collateral available to Agent at a convenient place.
With or without having the Collateral at the time or place of sale, Agent may sell the Collateral,
or any part thereof, at public or private sale, at any time or place, in one or more sales, at such
price or prices, and upon such terms, either for cash, credit or future delivery, as Agent may
elect. Except as to that part of the Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily




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sold on a recognized market, Agent shall give Borrowers reasonable notification of such sale
or sales, it being agreed that in all events written notice mailed to Borrowing Agent at least ten
(10) days prior to such sale or sales is reasonable notification. At any public sale Agent or any
Lender may bid for and become the purchaser, and Agent, any Lender or any other purchaser at any
such sale thereafter shall hold the Collateral sold absolutely free from any claim or right of
whatsoever kind, including any equity of redemption and all such claims, rights and equities are
hereby expressly waived and released by each Borrower. In connection with the exercise of the
foregoing remedies, including the sale of Inventory, Agent is granted a perpetual nonrevocable,
royalty free, nonexclusive license and Agent is granted permission to use all of each Borrower’s
(a) trademarks, trade styles, trade names, patents, patent applications, copyrights, service marks,
licenses, franchises and other proprietary rights which are used or useful in connection with
Inventory for the purpose of marketing, advertising for sale and selling or otherwise disposing of
such Inventory and (b) Equipment for the purpose of completing the manufacture of unfinished goods.
The cash proceeds realized from the sale of any Collateral shall be applied to the Obligations in
the order set forth in Section 11.5 hereof. Noncash proceeds will only be applied to the
Obligations as they are converted into cash. If any deficiency shall arise, Borrowers shall remain
liable to Agent and Lenders therefor.




          (b) To the extent that Applicable Law imposes duties on the Agent to exercise remedies in a
commercially reasonable manner, each Borrower acknowledges and agrees that it is not commercially
unreasonable for the Agent (i) to fail to incur expenses reasonably deemed significant by the Agent
to prepare Collateral for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against
Customers or other Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Customers and other Persons
obligated on Collateral directly or through the use of collection agencies and other collection
specialists, (v) to advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as any Borrower, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers
to assist in the disposition of Collateral, whether or not the Collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of
assets of the types included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail
markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi)
to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection
or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by the Agent, to obtain the
services of other brokers, investment bankers, consultants and other professionals to assist the
Agent in the collection or disposition of any of the Collateral. Each Borrower acknowledges that
the purpose of this Section 11.1(b) is to provide non-exhaustive indications of what actions or
omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of remedies
against the Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this




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Section 11.1(b). Without limitation upon the foregoing, nothing contained in this Section
11.1(b) shall be construed to grant any rights to any Borrower or to impose any duties on Agent
that would not have been granted or imposed by this Agreement or by Applicable Law in the absence
of this Section 11.1(b).




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



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



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



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



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



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




     THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable
attorneys’ fees) of each of the Lenders in connection with enforcing its rights under this
Agreement and the Other Documents or otherwise with respect to the Obligations owing to such
Lender;



     FOURTH, to the payment of all of the Obligations consisting of accrued fees and interest;




     FIFTH, to the payment of the outstanding principal amount of the Obligations (including the
payment or cash collateralization of any outstanding Letters of Credit);



     SIXTH, to all other Obligations and other obligations which shall have become due and payable
under the Other Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FIFTH”
above; and



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



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



XII WAIVERS AND JUDICIAL PROCEEDINGS




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



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



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



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XIII EFFECTIVE DATE AND TERMINATION.




     13.1. Term. This Agreement, which shall inure to the benefit of and shall be binding
upon the respective successors and permitted assigns of each Borrower, Agent and each Lender, shall
become effective on the date hereof and shall continue in full force and effect until July 19, 2009
(the “Term”) unless sooner terminated as herein provided. Borrowers may terminate this Agreement
at any time upon ninety (90) days’ prior written notice upon payment in full of the Obligations.
In the event the Obligations are prepaid in full prior to the last day of the Term (the date of
such prepayment hereinafter referred to as the “Early Termination Date”), Borrowers shall pay to
Agent for the benefit of Lenders an early termination fee in an amount equal to (x) $200,000.00 if
the Early Termination Date occurs on or after the Closing Date to and including the date
immediately preceding the first anniversary of the Closing Date, (y) $100,000.00 if the Early
Termination Date occurs on or after the first anniversary of the Closing Date to and including the
date immediately preceding the Term.



     13.2. Termination. The termination of the Agreement shall not affect any Borrower’s,
Agent’s or any Lender’s rights, or any of the Obligations having their inception prior to the
effective date of such termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or Obligations have been fully and
indefeasibly paid, disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed hereunder shall continue
in full force and effect, notwithstanding the termination of this Agreement or the fact that
Borrowers’ Account may from time to time be temporarily in a zero or credit position, until all of
the Obligations of each Borrower have been indefeasibly paid and performed in full after the
termination of this Agreement or each Borrower has furnished Agent and Lenders with an
indemnification satisfactory to Agent and Lenders with respect thereto. Accordingly, each Borrower
waives any rights which it may have under the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be required to send such
termination statements to each Borrower, or to file them with any filing office, unless and until
this Agreement shall have been terminated in accordance with its terms and all Obligations have
been indefeasibly paid in full in immediately available funds. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination hereof until all
Obligations are indefeasibly paid and performed in full.



XIV REGARDING AGENT.




     14.1. Appointment. Each Lender hereby designates PNC to act as Agent for such Lender
under this Agreement and the Other Documents. Each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and the Other Documents and
to exercise such powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto and Agent shall hold all Collateral, payments of principal and
interest, fees (except the fees set forth in Sections 3.3(a) and 3.4), charges and collections
(without giving effect to any collection days) received pursuant to this Agreement, for the ratable
benefit of Lenders. Agent may perform any of its duties hereunder by or through its agents or
employees. As to any matters not expressly provided for by this Agreement (including collection of
the Note) Agent shall not be required to exercise any



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discretion or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding; provided, however, that Agent shall not
be required to take any action which exposes Agent to liability or which is contrary to this
Agreement or the Other Documents or Applicable Law unless Agent is furnished with an
indemnification reasonably satisfactory to Agent with respect thereto.




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



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



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



     Any such successor Agent shall succeed to the rights, powers and duties of Agent, and the term
“Agent” shall mean such successor agent effective upon its appointment, and the former Agent’s
rights, powers and duties as Agent shall be terminated, without any other or further act or deed on
the part of such former Agent. After any Agent’s resignation as Agent, the provisions of this
Article XIV shall inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.



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



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



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



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



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damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from
Agent’s gross (not mere) negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment).




     14.8. Agent in its Individual Capacity. With respect to the obligation of Agent to
lend under this Agreement, the Advances made by it shall have the same rights and powers hereunder
as any other Lender and as if it were not performing the duties as Agent specified herein; and the
term “Lender” or any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with any Borrower as if
it were not performing the duties specified herein, and may accept fees and other consideration
from any Borrower for services in connection with this Agreement or otherwise without having to
account for the same to Lenders.



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



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



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



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



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Documents shall be taken in concert and at the direction or with the consent of Agent or
Required Lenders.




XV  BORROWING AGENCY.




     15.1. Borrowing Agency Provisions.



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




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




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




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




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XVI MISCELLANEOUS.




     16.1. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applied to contracts to be performed wholly within the State
of New York, without regard to conflict of laws principles (other than section 5-1401 of the New
York General Obligation Law). Any judicial proceeding brought by or against any Borrower with
respect to any of the Obligations, this Agreement, the Other Documents or any related agreement may
be brought in any court of competent jurisdiction in the State of New York, United States of
America, and, by execution and delivery of this Agreement, each Borrower accepts for itself and in
connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of
the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by registered mail
(return receipt requested) directed to Borrowing Agent at its address set forth in Section 16.6 and
service so made shall be deemed completed five (5) days after the same shall have been so deposited
in the mails of the United States of America, or, at the Agent’s option, by service upon Borrowing
Agent which each Borrower irrevocably appoints as such Borrower’s Agent for the purpose of
accepting service within the State of New York. Nothing herein shall affect the right to serve
process in any manner permitted by law or shall limit the right of Agent or any Lender to bring
proceedings against any Borrower in the courts of any other jurisdiction. Each Borrower waives any
objection to jurisdiction and venue of any action instituted hereunder and shall not assert any
defense based on lack of jurisdiction or venue or based upon forum non conveniens. Each Borrower
waives the right to remove any judicial proceeding brought against such Borrower in any state court
to any federal court. Any judicial proceeding by any Borrower against Agent or any Lender
involving, directly or indirectly, any matter or claim in any way arising out of, related to or
connected with this Agreement or any related agreement, shall be brought only in a federal or state
court located in the County of New York, State of New York.



     16.2. Entire Understanding.



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




          (b) The Required Lenders, Agent with the consent in writing of the Required Lenders, and
Borrowers may, subject to the provisions of this Section 16.2 (b), from time to time enter into
written supplemental agreements to this Agreement or the Other Documents executed by Borrowers, for
the purpose of adding or deleting any provisions or otherwise changing,

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varying or waiving in any
manner the rights of Lenders, Agent or Borrowers thereunder or the conditions, provisions or terms
thereof of waiving any Event of Default thereunder, but only to the extent specified in such
written agreements; provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:




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



               (ii) extend the maturity of any Note or the due date for any amount payable hereunder, or
decrease the rate of interest or reduce any fee payable by Borrowers to Lenders pursuant to this
Agreement; provided, however, that only the consent of the Required Lenders shall
be necessary to waive any obligation of Borrowers to pay the Default Rate.



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



               (iv) release any Collateral during any calendar year (other than in accordance with the
provisions of this Agreement) having an aggregate value in excess of $2,500,000.



               (v) change the rights and duties of Agent.



               (vi) permit any Revolving Advance to be made if after giving effect thereto the total of
Revolving Advances outstanding hereunder would exceed the Formula Amount for more than sixty (30)
consecutive Business Days or exceed one hundred and five percent (105%) of the Formula Amount.



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



               (viii) release all or substantially all of the Guarantors.



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



     In the event that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such Lender shall not respond or reply to Agent in writing within five (5) days of delivery of such
request, such Lender shall be deemed to have consented to the matter that was the subject of the
request. In the event that Agent requests the consent of a Lender pursuant to this Section 16.2
and such consent is denied, then PNC may, at its option, require such Lender to assign its interest
in the Advances to PNC or to another Lender or to any other Person designated by the Agent (the
“Designated Lender”), for a price equal to (i) the then outstanding principal amount thereof plus
(ii) accrued and unpaid interest and fees (but not including any fees payable with



86









 







respect to the
termination of this Agreement before the expiration of the Term) then due such Lender, which
interest and fees shall be paid when collected from Borrowers. In the event PNC elects to require
any Lender to assign its interest to PNC or to the Designated Lender, PNC will so notify such
Lender in writing within forty five (45) days following such Lender’s denial, and such Lender will
assign its interest to PNC or the Designated Lender no later than five (5) days following receipt
of such notice pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the
Designated Lender, as appropriate, and Agent.



     Notwithstanding (a) the existence of a Default or an Event of Default, (b) that any of the
other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied or
(c) any other provision of this Agreement, Agent may at its discretion and without the consent of
the Required Lenders, voluntarily permit the outstanding Revolving Advances at any time to exceed
the Formula Amount by up to ten percent (10%) for up to thirty (30) consecutive Business Days (the
“Out-of-Formula Loans”). If Agent is willing in its sole and absolute discretion to make such
Out-of-Formula Loans, such Out-of-Formula Loans shall be payable on demand and shall bear interest
at the Default Rate; provided that, if Lenders do make Out-of-Formula Loans, neither Agent nor
Lenders shall be deemed thereby to have changed the limits of Section 2.1(a). For purposes of this
paragraph, the discretion granted to Agent hereunder shall not preclude involuntary overadvances
that may result from time to time due to the fact that the Formula Amount was unintentionally
exceeded for any reason, including, but not limited to, Collateral previously deemed to be
“Eligible Receivables” becomes ineligible, collections of Receivables applied to reduce outstanding
Revolving Advances are thereafter returned for insufficient funds or overadvances are made to
protect or preserve the Collateral. In the event Agent involuntarily permits the outstanding
Revolving Advances to exceed the Formula Amount by more than ten percent (10%), Agent shall use its
efforts to have Borrowers decrease such excess in as expeditious a manner as is practicable under
the circumstances and not inconsistent with the reason for such excess. Revolving Advances made
after Agent has determined the existence of involuntary overadvances shall be deemed to be
involuntary overadvances and shall be decreased in accordance with the preceding sentence.



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



     16.3. Successors and Assigns; Participations; New Lenders.



          (a) This Agreement shall be binding upon and inure to the benefit of Borrowers, Agent, each
Lender, all future holders of the Obligations and their respective successors and

87









 








assigns, except
that no Borrower may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of Agent and each Lender.




          (b) Each Borrower acknowledges that in the regular course of commercial banking business one
or more Lenders (an “Originating Lender”) may at any time and from time to time sell participating
interests in the Advances to other financial institutions (each such transferee or purchaser of a
participating interest, a “Participant”; provided, however, provided, however, (i)
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 and Agent 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
Documents; and (iv) no Lender shall transfer or grant any participating interest under which the
Participant shall have rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any Other Document except to the extent such amendment, consent or waiver
would require unanimous consent of the Lenders. Each Participant may exercise all rights of
payment (including rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Participant were the direct holder thereof
provided that Borrowers shall not be required to pay to any Participant more than the amount which
it would have been required to pay to the Originating Lender which granted an interest in its
Advances or other Obligations payable hereunder to such Participant had such Originating Lender
retained such interest in the Advances hereunder or other Obligations payable hereunder and in no
event shall Borrowers be required to pay any such amount arising from the same circumstances and
with respect to the same Advances or other Obligations payable hereunder to both such Originating
Lender and such Participant. Each Borrower hereby grants to any Participant a continuing security
interest in any deposits, moneys or other property actually or constructively held by such
Participant as security for the Participant’s interest in the Advances.




          (c) Any Lender may with the consent of Agent (and provided no Default or Event of Default has
occurred and is continuing, Borrower Agent) which shall not be unreasonably withheld or delayed
sell, assign or transfer all or any part of its rights under this Agreement and the Other Documents
to one or more additional banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a “Purchasing Lender”, and
together with each Participant, each a “Transferee” and collectively the “Transferees”), in minimum
amounts of not less than $5,000,000, pursuant to a Commitment Transfer Supplement, executed by a
Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for recording. Upon
such execution, delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall
be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the
rights and obligations of a Lender thereunder with a Commitment Percentage as set forth therein,
and (ii) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer
Supplement, be released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such

88









 








transferor Lender under this Agreement and the Other Documents. Each Borrower
hereby consents to the addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of
the rights and obligations of such transferor Lender under this Agreement and the Other Documents.
Borrowers shall execute and deliver such further documents and do such further acts and things in
order to effectuate the foregoing.




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




          (e) Each Borrower authorizes each Lender to disclose to any Transferee and any prospective
Transferee any and all financial information in such Lender’s possession concerning such Borrower
which has been delivered to such Lender by or on behalf of such Borrower pursuant to this Agreement
or in connection with such Lender’s credit evaluation of such Borrower.




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



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



89









 




disbursements of any kind or nature whatsoever (including fees and disbursements of counsel)
asserted against or incurred by any of the indemnitees described above in this Section 16.5 by any
Person under any Environmental Laws or similar laws by reason of any Borrower’s or any other
Person’s failure to comply with laws applicable to solid or hazardous waste materials, including
Hazardous Substances and Hazardous Waste, or other Toxic Substances. Additionally, if any taxes
(excluding taxes imposed upon or measured solely by the net income of Agent and Lenders, but
including any intangibles taxes, stamp tax, recording tax or franchise tax) shall be payable by
Agent, Lenders or Borrowers on account of the execution or delivery of this Agreement, or the
execution, delivery, issuance or recording of any of the Other Documents, or the creation or
repayment of any of the Obligations hereunder, by reason of any Applicable Law now or hereafter in
effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for payment of) all such
taxes, including interest and penalties thereon, and will indemnify and hold the indemnitees
described above in this Section 16.5 harmless from and against all liability in connection
therewith.




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



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




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




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




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




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





90









 








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




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




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



	 	 	 	 	 	 	 
	 	 	(A)	 	If to Agent or PNC at:
	 
	 	 	 	 	 	 
	 	 	 	 	PNC Bank, National Association
	 	 	 	 	2100 Ross Avenue, Suite 1850
	 	 	 	 	Dallas, Texas 75201
	 

	 	 	 	Attention:
	 	Relationship Manager (Kitty Hawk)
	 

	 	 	 	Telephone:
	 	(214) 871-1200
	 

	 	 	 	Facsimile:
	 	(214) 871-2015
	 
	 	 	 	 	 	 
	 	 	 	 	with a copy to:
	 
	 	 	 	 	 	 
	 	 	 	 	PNC Bank, National Association
	 	 	 	 	Two Tower Center Boulevard
	 	 	 	 	Floor 21
	 	 	 	 	East Brunswick, New Jersey 08816
	 

	 	 	 	Attention:
	 	Josephine Griffin
	 

	 	 	 	Telephone:
	 	(732) 220-4388
	 

	 	 	 	Facsimile:
	 	(732) 220-4394
	 
	 	 	 	 	 	 
	 	 	 	 	with an additional copy to:
	 
	 	 	 	 	 	 
	 	 	 	 	Patton Boggs LLP
	 	 	 	 	2001 Ross Avenue, Suite 3000
	 	 	 	 	Dallas, Texas 75201
	 

	 	 	 	Attention:
	 	Kate K. Moseley
	 

	 	 	 	Telephone:
	 	(214) 758-1500
	 

	 	 	 	Facsimile:
	 	(214) 758-1550
	 
	 	 	 	 	 	 
	 	 	(B)	 	If to a Lender other than Agent, as specified on the signature
pages hereof






91









 






	 	 	 	 	 	 	 
	 	 	(C)	 	If to Borrowing Agent or any Borrower:
	 
	 	 	 	 	 	 
	 	 	 	 	c/o Kitty Hawk, Inc.
	 	 	 	 	1515 West 20th Street
	 	 	 	 	P.O. Box 612787
	 	 	 	 	DFW International Airport, Texas 75261
	 

	 	 	 	Attention:
	 	Steven E. Markhoff, Esq.
	 

	 	 	 	Telephone:
	 	972-456-2328
	 

	 	 	 	Facsimile:
	 	972-456-2309
	 
	 	 	 	 	 	 
	 	 	 	 	with a copy to:
	 
	 	 	 	 	 	 
	 	 	 	 	Haynes and Boone, LLP
	 
	 	 	 	 	 	 
	 	 	 	 	901 Main Street, Suite 3100
	 
	 	 	 	 	 	 
	 	 	Dallas, Texas 75202 Attention:           Garrett A. DeVries, Esq.
	 	 	Telephone:      214-651-5614
	 	 	Facsimile:        214-200-0428





     16.7. Survival. The obligations of Borrowers under Sections 2.2(f), 3.7, 3.8, 3.9,
4.19(h), and 16.5 and the obligations of Lenders under Section 14.7, shall survive termination of
this Agreement and the Other Documents and payment in full of the Obligations.



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



     16.9. Expenses. All documented out-of-pocket costs and expenses including, without
limitation, all search, audit, appraisal, recording, professional and filing fees and expenses and
reasonable attorneys’ fees (including the allocated costs of in-house counsel) and all other
expenses and disbursements incurred by Agent on its behalf or on behalf of Lenders and Lenders (a)
in all efforts made to enforce payment of any Obligation or effect collection of any Collateral, or
(b) in connection with the entering into, documenting, negotiating, structuring, reviewing and
closing this Agreement and the modification, amendment, administration, monitoring, and enforcement
of this Agreement or any consents or waivers hereunder and all related agreements, documents and
instruments, or (c) in instituting, monitoring, maintaining, preserving, enforcing and foreclosing
on Agent’s security interest in or Lien on any of the Collateral, or monitoring, maintaining,
preserving or enforcing any of Agent’s or any Lender’s rights hereunder and under all related
agreements, documents and instruments, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any actions or proceedings arising out of or relating to Agent’s or any
Lender’s transactions with any Borrower, Holdings or any Guarantor, or (e) in connection with any
advice given to Agent or any Lender with respect to its rights and obligations under this Agreement
and all related agreements, documents and instruments, may be charged to Borrowers’ Account and
shall be part of the Obligations.



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



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



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



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



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



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



93









 







more of its Affiliates (in connection with this
Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender
and each Borrower hereby authorizes each Lender to share any information delivered to such Lender
by such Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such
Lender, it being understood that any such Subsidiary or Affiliate of any Lender receiving such
information shall be bound by the provisions of this Section 16.15 as if it were a Lender
hereunder. Such authorization shall survive the repayment of the other Obligations and the
termination of this Agreement.



     16.16. Publicity. Each Borrower and each Lender hereby authorizes Agent to make
appropriate announcements of the financial arrangement entered into among Borrowers, Agent and
Lenders, including announcements which are commonly known as tombstones, in such publications and
to such selected parties as Agent shall in its sole and absolute discretion deem appropriate.



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




94










 







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



	 	 	 	 	 	 	 	 
	 	 	 	 	BORROWERS:
	 
	 	 	 	 	 	 
	ATTEST:	 	 	 	KITTY HAWK, INC.
	 	 	 	 	a Delaware corporation
	 
	 	 	 	 	 	 
	/s/ James R. Kupferschmid

	 	 	 	By:
	 	/s/ Robert W. Zoller
	 

	 	 	 	 	 	 
	 	 	 	 	Name: Robert W. Zoller
	 	 	 	 	Title: President and CEO
	 
	 	 	 	 	 	 
	ATTEST:	 	 	 	KITTY HAWK CARGO, INC.
	 	 	 	 	a Delaware corporation
	 
	 	 	 	 	 	 
	/s/ James R. Kupferschmid

	 	 	 	By:
	 	/s/ Robert W. Zoller
	 

	 	 	 	 	 	 
	 	 	 	 	Name: Robert W. Zoller
	 	 	 	 	Title: President and CEO
	 
	 	 	 	 	 	 
	ATTEST:	 	 	 	KITTY HAWK AIRCARGO, INC.
	 	 	 	 	a Texas corporation
	 
	 	 	 	 	 	 
	/s/ James R. Kupferschmid

	 	 	 	By:
	 	/s/ Robert W. Zoller
	 

	 	 	 	 	 	 
	 	 	 	 	Name: Robert W. Zoller
	 	 	 	 	Title: President and CEO
	 
	 	 	 	 	 	 
	ATTEST:	 	 	 	KITTY HAWK GROUND, INC.
	 	 	 	 	a Delaware corporation
	 
	 	 	 	 	 	 
	/s/ James R. Kupferschmid

	 	 	 	By:
	 	/s/ Robert W. Zoller
	 

	 	 	 	 	 	 
	 	 	 	 	Name: Robert W. Zoller
	 	 	 	 	Title: President and CEO






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	 	PNC BANK, NATIONAL ASSOCIATION,
	 

	 	as Lender and as Agent
	 
	 	 
	 

	 	By:  /s/ Kay Snyder                                                    
	 

	 	Name:   Kay Snyder
	 

	 	Title:     Relationship
Manager






[SIGNATURE PAGE TO CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	STATE OF TEXAS

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF DALLAS

	 	 	)	 	 	 






     On this ___day of ___, 2006, before me personally came
___, to me known, who, being by me duly sworn, did depose and say that
s/he is the ___of Kitty Hawk, Inc., the corporation described in and which executed
the foregoing instrument; and that s/he signed her/his name thereto by order of the board of
directors of said corporation.



                                                            

Notary Public




	 	 	 	 	 	 	 
	STATE OF TEXAS

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF DALLAS

	 	 	)	 	 	 






     On this ___day of ___, 2006, before me personally came
___, to me known, who, being by me duly sworn, did depose and say that
s/he is the ___of Kitty Hawk Cargo, Inc., the corporation described in and which
executed the foregoing instrument; and that s/he signed her/his name thereto by order of the board
of directors of said corporation.



                                                            

Notary Public




	 	 	 	 	 	 	 
	STATE OF TEXAS

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF DALLAS

	 	 	)	 	 	 






     On this ___day of ___, 2006, before me personally came
___, to me known, who, being by me duly sworn, did depose and say that
s/he is the ___of Kitty Hawk Aircargo, Inc., the corporation described in and which
executed the foregoing instrument; and that s/he signed her/his name thereto by order of the board
of directors of said corporation.



                                                            

Notary Public




[SIGNATURE PAGE TO CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	STATE OF TEXAS

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF DALLAS

	 	 	)	 	 	 






     On this ___day of ___, 200_, before me personally came
___, to me known, who, being by me duly sworn, did depose and say that
s/he is the ___of Kitty Hawk Ground, Inc., the corporation described in and which
executed the foregoing instrument; and that s/he signed her/his name thereto by order of the board
of directors of said corporation.



                                                            

Notary Public




[SIGNATURE PAGE TO CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	STATE OF TEXAS

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF DALLAS

	 	 	)	 	 	 






     On this ___day of ___, 2006, before me personally came
___, to me known, who, being by me duly sworn, did depose and say that
s/he is the ___of PNC Bank, National Association, the national association
described in and which executed the foregoing instrument; and that s/he signed her/his name thereto
by order of the board of directors of said corporation.



                                                            

Notary Public




[SIGNATURE PAGE TO CREDIT AGREEMENT]




 









 





LIST OF EXHIBITS AND SCHEDULES




	 	 	 
	Exhibits
	 	 
	 
	 	 
	Exhibit 1.2

	 	Borrowing Base Certificate
	Exhibit 2.1(a)

	 	Revolving Credit Note
	Exhibit 5.5(b)

	 	Financial Projections
	Exhibit 8.1(k)

	 	Financial Condition Certificate
	Exhibit 16.3

	 	Commitment Transfer Supplement
	 
	 	 
	Schedules
	 	 
	 
	 	 
	Schedule 1.1

	 	Leasehold Interests
	Schedule 1.2

	 	Permitted Encumbrances
	Schedule 1.4

	 	Executive Officers of Borrowers
	Schedule 4.5

	 	Equipment and Inventory Locations
	Schedule 4.15(c)

	 	Chief Executive Office Locations
	Schedule 4.15(h)

	 	Deposit and Investment Accounts
	Schedule 4.19

	 	Real Property
	Schedule 5.1

	 	Consents
	Schedule 5.2(a)

	 	States of Qualification and Good Standing
	Schedule 5.2(b)

	 	Subsidiaries
	Schedule 5.4

	 	Federal Tax Identification Number
	Schedule 5.6

	 	Prior Names
	Schedule 5.7

	 	Environmental
	Schedule 5.8(b)

	 	Litigation
	Schedule 5.8(d)

	 	Plans
	Schedule 5.9

	 	Intellectual Property, Source Code Escrow Agreements
	Schedule 5.10

	 	Licenses and Permits
	Schedule 5.14

	 	Labor Disputes
	Schedule 7.3

	 	Guarantees
	Schedule 7.8

	 	Permitted Indebtedness