Exhibit
10-31


 


EXECUTION COPY




 





 


 


CREDIT AND SECURITY AGREEMENT


 


dated as of


 


February 28, 2003


 


among


 


UFP TECHNOLOGIES,
INC.,


 


MOULDED FIBRE
TECHNOLOGY, INC.,


 


SIMCO INDUSTRIES,
INC.


 


and


 


SIMCO AUTOMOTIVE
TRIM, INC.,


 


as joint and
several borrowers,


 


the GUARANTORS 

from time to time party hereto,


 


and


 


FLEET CAPITAL
CORPORATION,


 


as Lender




 





 

















 


TABLE OF CONTENTS


 


	
  ARTICLE 1

  	
   

  	
  DEFINITIONS

  
	
   

  	
   

  
	
  1.1

  	
  Defined Terms

  
	
   

  	
   

  
	
  1.2

  	
  Terms Generally

  
	
   

  	
   

  
	
  1.3

  	
  Accounting
  Terms; GAAP

  
	
   

  	
   

  
	
  1.4

  	
  Joint and Several
  Obligations; Designated Financial Officers

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  THE CREDITS

  
	
   

  	
   

  
	
  2.1

  	
  Revolving Loans

  
	
   

  	
   

  
	
  2.2

  	
  Term Loans

  
	
   

  	
   

  
	
  2.3

  	
  Eurodollar
  Borrowings

  
	
   

  	
   

  
	
  2.4

  	
  Letters of
  Credit

  
	
   

  	
   

  
	
  2.5

  	
  Expiration, Termination or Reduction of
  Revolving Credit Commitment

  
	
   

  	
   

  
	
  2.6

  	
  Payments

  
	
   

  	
   

  
	
  2.7

  	
  Prepayment
  of Loans

  
	
   

  	
   

  
	
  2.8

  	
  Fees

  
	
   

  	
   

  
	
  2.9

  	
  Increased Costs

  
	
   

  	
   

  
	
  2.10

  	
  Taxes

  
	
   

  	
   

  
	
  ARTICLE 3

  	
   

  	
  GUARANTEE
  BY GUARANTORS

  
	
   

  	
   

  
	
  3.1

  	
  The Guarantee

  
	
   

  	
   

  
	
  3.2

  	
  Obligations Unconditional

  
	
   

  	
   

  
	
  3.3

  	
  Reinstatement

  
	
   

  	
   

  
	
  3.4

  	
  Subrogation

  
	
   

  	
   

  
	
  3.5

  	
  Remedies

  
	
   

  	
   

  
	
  3.6

  	
  Instrument for the
  Payment of Money

  
	
   

  	
   

  
	
  3.7

  	
  Continuing
  Guarantee

  
	
   

  	
   

  
	
  3.8

  	
  General Limitation on
  Amount of Obligations Guaranteed

  
	
   

  	
   

  
	
  ARTICLE 4

  	
   

  	
  THE COLLATERAL

  
	
   

  	
   

  
	
  4.1

  	
  Grant of Security Interest

  
	
   

  	
   

  
	
  4.2

  	
  Special Warranties and
  Covenants of the Credit Parties

  
	
   

  	
   

  
	
  4.3

  	
  Collection
  of Proceeds of Accounts Receivable

  
	
   

  	
   

  
	
  4.4

  	
  Fixtures, etc.

  



 


i

















 


	
  4.5

  	
  Right of
  Lender to Dispose of Collateral, etc.

  
	
   

  	
   

  
	
  4.6

  	
  Right
  of Lender to Use and Operate Collateral, etc.

  
	
   

  	
   

  
	
  4.7

  	
  Proceeds
  of Collateral

  
	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  	
   

  
	
  5.1

  	
  Organization;
  Powers

  
	
   

  	
   

  
	
  5.2

  	
  Authorization;
  Enforceability

  
	
   

  	
   

  
	
  5.3

  	
  Governmental
  Approvals; No Conflicts

  
	
   

  	
   

  
	
  5.4

  	
  Financial
  Condition; No Material Adverse Change

  
	
   

  	
   

  
	
  5.5

  	
  Properties

  
	
   

  	
   

  
	
  5.6

  	
  Litigation and
  Environmental Matters

  
	
   

  	
   

  
	
  5.7

  	
  Compliance with Laws
  and Agreements

  
	
   

  	
   

  
	
  5.8

  	
  Investment and
  Holding Company Status

  
	
   

  	
   

  
	
  5.9

  	
  Taxes

  
	
   

  	
   

  
	
  5.10

  	
  ERISA

  
	
   

  	
   

  
	
  5.11

  	
  Disclosure

  
	
   

  	
   

  
	
  5.12

  	
  Capitalization

  
	
   

  	
   

  
	
  5.13

  	
  Subsidiaries

  
	
   

  	
   

  
	
  5.14

  	
  Material
  Indebtedness, Liens and Agreements

  
	
   

  	
   

  
	
  5.15

  	
  Federal Reserve Regulations

  
	
   

  	
   

  
	
  5.16

  	
  Solvency

  
	
   

  	
   

  
	
  5.17

  	
  Force Majeure

  
	
   

  	
   

  
	
  5.18

  	
  Accounts
  Receivable

  
	
   

  	
   

  
	
  5.19

  	
  Labor and Employment
  Matters

  
	
   

  	
   

  
	
  5.20

  	
  Bank Accounts

  
	
   

  	
   

  
	
  ARTICLE 6

  	
   

  	
  CONDITIONS

  
	
   

  	
   

  
	
  6.1

  	
  Effective Time

  
	
   

  	
   

  
	
  6.2

  	
  Each
  Extension of Credit

  
	
   

  	
   

  
	
  ARTICLE 7

  	
   

  	
  AFFIRMATIVE
  COVENANTS

  
	
   

  	
   

  
	
  7.1

  	
  Financial
  Statements and Other Information

  
	
   

  	
   

  
	
  7.2

  	
  Notices of Material Events

  



 


ii

















 


	
  7.3

  	
  Existence; Conduct of
  Business

  
	
   

  	
   

  
	
  7.4

  	
  Payment
  of Obligations

  
	
   

  	
   

  
	
  7.5

  	
  Maintenance of
  Properties; Insurance

  
	
   

  	
   

  
	
  7.6

  	
  Books and Records;
  Inspection Rights

  
	
   

  	
   

  
	
  7.7

  	
  Fiscal Year

  
	
   

  	
   

  
	
  7.8

  	
  Compliance
  with Laws

  
	
   

  	
   

  
	
  7.9

  	
  Use of Proceeds

  
	
   

  	
   

  
	
  7.10

  	
  Certain
  Obligations Respecting Subsidiaries

  
	
   

  	
   

  
	
  7.11

  	
  ERISA

  
	
   

  	
   

  
	
  7.12

  	
  Environmental Matters;
  Reporting

  
	
   

  	
   

  
	
  7.13

  	
  Matters
  Relating to Additional Real Property Collateral

  
	
   

  	
   

  
	
  7.14

  	
  Cash Deposits/Bank Accounts

  
	
   

  	
   

  
	
  ARTICLE 8

  	
   

  	
  NEGATIVE
  COVENANTS

  
	
   

  	
   

  
	
  8.1

  	
  Indebtedness

  
	
   

  	
   

  
	
  8.2

  	
  Liens

  
	
   

  	
   

  
	
  8.3

  	
  Contingent
  Liabilities

  
	
   

  	
   

  
	
  8.4

  	
  Fundamental Changes;
  Asset Sales

  
	
   

  	
   

  
	
  8.5

  	
  Investments; Hedging
  Agreements

  
	
   

  	
   

  
	
  8.6

  	
  Restricted Junior Payments

  
	
   

  	
   

  
	
  8.7

  	
  Transactions with
  Affiliates

  
	
   

  	
   

  
	
  8.8

  	
  Restrictive
  Agreements

  
	
   

  	
   

  
	
  8.9

  	
  Sale-Leaseback Transactions

  
	
   

  	
   

  
	
  8.10

  	
  Certain Financial Covenants

  
	
   

  	
   

  
	
  8.11

  	
  Lines of
  Business

  
	
   

  	
   

  
	
  8.12

  	
  Other
  Indebtedness

  
	
   

  	
   

  
	
  8.13

  	
  Modifications of
  Certain Documents

  
	
   

  	
   

  
	
  ARTICLE 9

  	
   

  	
  EVENTS OF DEFAULT

  
	
   

  	
   

  
	
  9.1

  	
  Events of
  Default

  
	
   

  	
   

  
	
  9.2

  	
  Receivership

  
	
   

  	
   

  
	
  ARTICLE 10

  	
   

  	
  MISCELLANEOUS

  



 


iii

















 


	
  10.1

  	
  Notices

  
	
   

  	
   

  
	
  10.2

  	
  Waivers;
  Amendments

  
	
   

  	
   

  
	
  10.3

  	
  Expenses; Indemnity;
  Damage Waiver

  
	
   

  	
   

  
	
  10.4

  	
  Successors
  and Assigns

  
	
   

  	
   

  
	
  10.5

  	
  Survival

  
	
   

  	
   

  
	
  10.6

  	
  Counterparts;
  Integration; References to Agreement; Effectiveness

  
	
   

  	
   

  
	
  10.7

  	
  Severability

  
	
   

  	
   

  
	
  10.8

  	
  Right of Setoff

  
	
   

  	
   

  
	
  10.9

  	
  Subordination by Credit
  Parties

  
	
   

  	
   

  
	
  10.10

  	
  Governing
  Law; Jurisdiction; Consent to Service of Process

  
	
   

  	
   

  
	
  10.11

  	
  WAIVER
  OF JURY TRIAL

  
	
   

  	
   

  
	
  10.12

  	
  Headings

  
	
   

  	
   

  
	
  10.13

  	
  Confidentiality

  



 


iv

















 


CREDIT AND SECURITY AGREEMENT


 


THIS CREDIT AND SECURITY AGREEMENT dated as of
February 28, 2003 (this “Agreement”) is by and among UFP Technologies,
Inc., a Delaware corporation, Moulded Fibre Technology, Inc., a Maine
corporation, Simco Industries, Inc., a Michigan corporation, and Simco
Automotive Trim, Inc., a Michigan corporation, as joint and several borrowers,
the guarantors from time to time party hereto, and FLEET CAPITAL CORPORATION,
as Lender.


 


The parties hereto agree
as follows:


 


ARTICLE 1


 


Definitions


 


1.1                                 Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:


 


“Accounts
Receivable/Loan Reconciliation Report” means a certificate signed by a
Designated Financial Officer in substantially the form of Exhibit B-3  annexed hereto.


 


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


 


“Additional Mortgage
Policies” has the meaning assigned to such term in Section 7.13(a)(vii).


 


“Additional Mortgaged
Property” means any Real Property Asset that is now owned or leased, or
hereinafter acquired, by the Credit Parties, which the Lender determines to
acquire a Mortgage on following the Closing Date.


 


“Adjusted Base Rate”
means, for any day, a rate per annum equal to the greater of (a) the Prime Rate
in effect on such day, and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%.  Any
change in the Adjusted Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective from and including the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.


 


“Advance Request”
means a written request signed by a Designated Financial Officer for a
Borrowing in accordance with subsection 2.1(b), in substantially the form
of Exhibit B-5 annexed hereto.


 


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


 


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


 


	
  Class of Loans

  	
   

  	
  Applicable
  Margin (% per annum)

  	
   

  	
  Applicable

  Unused Fee Rate

  (% per annum)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Base Rate
  Loans

  	
   

  	
  Eurodollar
  Loans

  	
   

  	
   

  
	
  Revolving
  Loans

  	
   

  	
  0

  	
  %

  	
  2.25

  	
  %

  	
  .25

  	
  %

  
	
  Term
  Loan

  	
   

  	
  .25

  	
  %

  	
  2.50

  	
  %

  	
  Not Applicable

  	
   

  



 


1

















 


and (b)   for any Payment Period (as defined below)
other than the Initial Payment Period, the respective rates indicated below for
Loans of such Type opposite the applicable Fixed Charge Coverage Ratio
indicated below (or as provided in the final paragraph of this definition, for
part of a Payment Period):


 


	
  Fixed Charge

  Coverage Ratio

  	
   

  	
  Applicable
  Margin (% per annum)

  	
   

  	
  Applicable

  Unused Fee Rate

  (% per annum)

  	
   

  
	
   

  	
  Revolving
  Loans

  	
   

  	
  Term Loan

  	
   

  	
   

  
	
   

  	
  Base Rate

  Loans

  	
   

  	
  Eurodollar

  Loans

  	
   

  	
  Base Rate

  Loans

  	
   

  	
  Eurodollar

  Loans

  	
   

  	
   

  
	
  Greater
  than or equal to 1.50 to 1.00

  	
   

  	
  0

  	
  %

  	
  1.75

  	
  %

  	
  0

  	
  %

  	
  2.00

  	
  %

  	
  .25

  	
  %

  
	
  Greater
  than 1.25 to 1.0 but less than 1.50 to 1.00

  	
   

  	
  0

  	
  %

  	
  2.00

  	
  %

  	
  0

  	
  %

  	
  2.25

  	
  %

  	
  .25

  	
  %

  
	
  Less
  than or equal to 1.25 to 1.00

  	
   

  	
  0

  	
  %

  	
  2.25

  	
  %

  	
  .25

  	
  %

  	
  2.50

  	
  %

  	
  .25

  	
  %

  



 


For purposes hereof, a “Payment
Period” means (i) initially, the period commencing on the Closing Date to and
including the fifth Business Day after the date of delivery of the financial
statements required by subsection 7.1(b) and the Compliance Certificate
required by subsection 7.1(c) for the fiscal period of the Credit Parties ended
September 30, 2003 (the “Initial Payment Period”), and (ii) thereafter,
the period commencing on the day immediately succeeding the last day of the
prior Payment Period to but not including the fifth Business Day after the
earlier of (x) the due date of the next Compliance Certificate required to be
delivered by the Borrowers to the Lender pursuant to subsection 7.1(c)
concurrently with the delivery by the Borrowers of the financial statements
required by subsection 7.1(b) to be delivered to the Lender for the
periods ended March 31st, June 30th, September 30th and December 31st of each
year, or (y) the date of the actual receipt by the Lender of such Compliance
Certificate.  Subject to and in
accordance with the final paragraph of this definition, the Applicable Margin
and Applicable Unused Fee Rate shall be effective for each Payment Period (or
in the circumstances described in the final paragraph of this definition, such
portion of a Payment Period).


 


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


 


Anything in this
Agreement to the contrary notwithstanding, the Applicable Margin and Applicable
Unused Fee Rate shall be the rates effective during the Initial Payment Period
as provided for above if the Compliance Certificate required to be delivered by
subsection 7.1(c) and the financial statements required by subsection 7.1(b),
respectively, shall not be delivered within five Business Days after the same
shall be due (but only with respect to the portion of such Payment Period prior
to the delivery of such certificate).


 


2

















 


“Available Funds” means all deposits in the
Controlled Accounts which have been made by 2:00 p.m., Boston, Massachusetts time,
on a Business Day, or such later time as the Lender and the Cash Management
Bank shall have expressly consented to.


 


“Base Rate” when
used in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, bear(s) interest at a rate determined by
reference to the Adjusted Base Rate.


 


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


 


“Borrower” means
(a) UFP Technologies, Inc., Moulded Fibre Technology, Inc., Simco Industries,
Inc., and Simco Automotive Trim, Inc., individually, and (b) all of UFP
Technologies, Inc., Moulded Fibre Technology, Inc., Simco Industries, Inc., and
Simco Automotive Trim, Inc., collectively, as joint and several borrowers.


 


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


 


“Borrowing Base”
means, at the relevant time of reference thereto, an amount determined by the
Lender by reference to the most recent Borrowing Base Certificate/Collateral
Update Certificate delivered to the Lender pursuant to Section 2.1(b)
which is equal to the sum of:


 


(a)          85% of Eligible
Accounts, plus


 


(b)         the lesser of:


 


(i)  the sum of:


 


(A) 50%
of Eligible Raw Material Inventory, plus


 


(B) 50%
of Eligible Finished Goods Inventory, and


 


(ii)  $3,500,000, minus


 


(c)          reserves for foreign
exchange and interest rate derivative exposure and such other reserves as the
Lender in its reasonable credit judgment  shall deem appropriate from time to time;


 


In determining the
Borrowing Base from time to time, the Lender may, but shall not be required to,
rely upon reports or analyses generated by the Credit Parties (including,
without limitation, Borrowing Base Certificates/Collateral Update Certificates)
and reports or analyses generated by or on behalf of the Lender.  Notwithstanding anything to the contrary set
forth herein, the Lender may in its reasonable credit judgment at any time and
from time to time, adjust the percentages of Eligible Accounts, Eligible Raw
Materials Inventory, Eligible Finished Goods Inventory and undrawn amount of
Documentary LCs included within the Borrowing Base.


 


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


 


3

















 


“Business Day”
means any day that is not a Saturday, Sunday or other day on which commercial
banks in Boston, Massachusetts are authorized or required by law to remain
closed; provided
that, when used in connection with a Eurodollar Loan, the term “Business Day”
shall also exclude any day on which banks are not open for dealings in U.S.
dollar deposits in the London interbank market.


 


“Capital Expenditures”
means, for any period, the sum for the Credit Parties (determined on a
consolidated basis without duplication in accordance with GAAP) of the
aggregate amount of expenditures made or liabilities incurred during such
period (including the aggregate amount of Capital Lease Obligations incurred
during such period) to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
computed in accordance with GAAP; provided that such term shall not include
any such expenditures in connection with any replacement or repair of Property
affected by a Casualty Event.


 


“Capital Lease
Obligations” of any Person means the obligations of such Person to pay rent
or other amounts under any lease of (or other arrangement conveying the right
to use) real or personal property, or a combination thereof, which obligations
are required to be classified and accounted for as capital leases on a balance
sheet of such Person under GAAP, and the amount of such obligations shall be
the capitalized amount thereof determined in accordance with GAAP.


 


“Cash Management Bank”
means Fleet National Bank, in its capacity as the provider of cash management
services to the Credit Parties.


 


“Casualty Event”
means, with respect to any Property of any Person, any loss of or damage to, or
any condemnation or other taking of, such Property for which such Person or any
of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation
award or other compensation.


 


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


 


“Change of Control”
means (a) any event, transaction or occurrence as a result of which a majority
of the seats (other than vacant seats) on the board of directors of any Credit
Party shall be occupied by Persons who were neither (i) nominated by the board
of directors of UFP nor (ii) appointed by directors so nominated; or (b) the
failure of UFP to own, directly or indirectly through one or more Subsidiaries,
100% of the outstanding capital stock of each of the other Credit Parties; or
(c) the sale of all or substantially all of the business or assets of any
Credit Party; or (d) R. Jeffrey Bailly and/or Ronald J. Lataille shall for any
reason cease to serve in their present capacities as officers of the Borrower
and the Borrower shall fail within six (6) months of the date that R. Jeffrey
Bailly and/or Ronald J. Lataille cease to serve in such capacities, to retain
replacements for R. Jeffrey Bailly and/or Ronald J. Lataille who have comparable
industry experience and are reasonably acceptable to the Lender.


 


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


 


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


 


4

















 


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


 


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


 


“Collateral Update
Certificate” means a certificate signed by a Designated Financial Officer,
in substantially the form of Exhibit B-2 annexed hereto.


 


“Compliance
Certificate” means a certificate signed by a Designated Financial Officer,
in substantially the form of Exhibit D annexed hereto, (a) certifying as
to whether a Default has occurred and, if a Default has occurred, specifying
the details thereof and any action taken or proposed to be taken with respect
thereto, (b) setting forth reasonably detailed calculations demonstrating
compliance with Section 8.10, and  (c) stating whether any change in GAAP or
in the application thereof has occurred since the date of the audited financial
statements referred to in Section 5.4 and, if any such change has
occurred, specifying the effect of such change on the financial statements accompanying
such certificate.


 


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


 


“Control Agreement”
means with respect to any Controlled Account, an agreement in accordance with
Section 4.3(b), in form and substance satisfactory to the Lender, executed and
delivered by the Credit Parties, the depository institution at which such
Controlled Account is maintained and the Lender at the Effective Time and
thereafter in accordance with Section 7.14, as such agreement may be
amended, supplemented or otherwise modified from time to time.


 


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


 


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


 


“Credit Parties”
(i) until such time as any acquired or newly created Subsidiary of the
Borrowers shall become a Subsidiary Guarantor of the Obligations of the
Borrowers hereunder, the Borrowers; and (ii) from and after such time as any
acquired or newly created Subsidiary of the Borrowers shall become a Subsidiary
Guarantor of the Obligations of the Borrowers hereunder, the Borrowers and all
Subsidiary Guarantors.


 


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


 


5

















 


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


 


“Disclosed Matters”
means the actions, suits and proceedings and the environmental matters
disclosed in Schedule 5.6.


 


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


 


“EBITDA” means,
for any period, (a) the net income of the Credit Parties (determined on a
consolidated basis without duplication in accordance with GAAP) for such
period, plus (b) to the extent deducted in calculating net income
(i) income taxes accrued during such period, (ii) interest and fees in
respect of Indebtedness (including amounts accrued or paid in respect of
Hedging Agreements) during such period (whether or not actually paid in cash
during such period), and (iii) depreciation and amortization accrued for
such period, minus (c) to the extent such items were added in
calculating net income (i) extraordinary or unusual gains during such period
and (ii) proceeds received during such period in respect of Casualty Events and
Dispositions.


 


“Effective Time”
means the time specified in a written notice from the Lender when the
conditions specified in Section 6.1 are satisfied (or waived in accordance
with Section 10.2).


 


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


 


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


 


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


 


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


 


6

















 


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


 


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


 


(vi)                              the
account debtor is credit worthy and not experiencing financial difficulties
that could affect the collectability of the account;


 


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


 


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


 


(ix)                                the
account receivable is not subject to any Lien of any kind except for the Lien
of the Lender securing the obligations of the Credit Parties under this
Agreement;


 


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


 


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


 


(xii)                             the
account receivable is not owing from an account debtor from whom twenty-five
percent (25%)  or more of the dollar amount of all accounts receivable are
deemed ineligible under clause (x) above;


 


(xiii)                          the total
unpaid accounts receivable owing from such account debtor do not exceed twenty
percent (20%)  of all Eligible Accounts;


 


(xiv)                         the
account receivable constitutes Collateral in which the Lender has a First
Priority Lien securing the Obligations of the Credit Parties under this
Agreement;


 


(xv)                            the
Credit Parties have not made an agreement with the account debtor to extend the
time of payment of the subject account receivable;


 


(xvi)                         the account debtor is not located in Minnesota
(or any other jurisdiction which adopts a statute or other requirement with
respect to which any Person that obtains business from within such jurisdiction
or is otherwise subject to such jurisdiction’s tax law must file a “Business
Activity Report” (or other applicable report) or make any other required
filings in a timely manner in order to enforce its claims in such
jurisdiction’s courts or arising under such jurisdiction’s laws); provided,
that accounts receivable which would be Eligible Accounts but for the terms of
this clause (xvi) shall nonetheless be deemed to be Eligible Accounts if the
Credit Parties have filed a “Business Activity Report” (or other applicable
report) with the applicable


 


7

















 


state
office or are qualified to do business in such jurisdiction and, at the time
the account receivable was created, was qualified to do business in such
jurisdiction or had on file with the applicable state office a current
“Business Activity Report” (or other applicable report); and


 


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


 


provided, however, that (A) the Lender may
in its reasonable credit  judgment
exclude particular accounts from the definition of Eligible Accounts and may
impose additional and/or more restrictive eligibility or valuation criteria
than those set forth above as preconditions for any account to be deemed to be
an Eligible Account hereunder, and (B) an account deemed to be an Eligible
Account at any one point in time may be excluded by the Lender in its
reasonable credit judgment at a future point in time.


 


“Eligible Inventory”
means inventory of the Credit Parties recorded on the books and records of the
Credit Parties in the ordinary course of the business operations of the Credit
Parties valued on a first in first out basis at the lower of (a) the fair
market value of such inventory, or (b) the cost charged by suppliers which are
not Affiliates of the Credit Parties, which inventory satisfies each of the
following requirements:


 


(i)                                     is
in good and merchantable condition and is not work in process;


 


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


 


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


 


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


 


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


 


(vi)                              has
not remained in the possession of the Credit Parties for more than 180-days  or
has not otherwise been determined by the Lender in its reasonable credit
judgment to constitute slow-moving inventory;


 


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


 


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


 


(ix)                                has
not been sold to any Person;


 


(x)                                   does
not constitute raw materials specifically printed for a customer with the
Customer’s name or Customer’s trademarks;


 


8

















 


(xi)                                does
not constitute customer labels; and


 


(xii)                             constitutes
Collateral in which the Lender has a First Priority Lien securing the
obligations of the Credit Parties under this Agreement;


 


provided, however, that (A) the aggregate
amount of Eligible Inventory shall be computed net of such reserves for slow
moving and other ineligible inventory as the Lender shall deem appropriate, (B)
the Lender may in its reasonable credit judgment exclude particular items of
inventory from the definition of Eligible Inventory and may impose additional
and/or more restrictive eligibility or valuation criteria than those set forth
above as preconditions for any item of inventory to be deemed to be Eligible
Inventory hereunder, and (C) inventory deemed to be Eligible Inventory at any
one point in time may be excluded by the Lender in its reasonable credit
judgment at a future point in time.


 


“Eligible Finished Goods Inventory” means that
portion of Eligible Inventory consisting of finished goods.


 


“Eligible Raw Materials Inventory” means that portion
of Eligible Inventory consisting of raw materials.


 


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


 


“Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of any Credit Party directly or indirectly resulting from or
based upon (a) violation of any Environmental Law, (b) the generation, use,
handling, transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.


 


“Equipment Term Loan”
means the $5,000,000  Equipment Term Loan to be made by the
Lender to the Borrowers at the Effective Time.


 


“Equipment Term Loan
Maturity Date” means February 28, 2008, or such earlier date as provided in
Section 2.7 or Section 9.1.


 


“Equipment Term Note”
means the promissory note, substantially in the form of Exhibit A-2
annexed hereto, issued by the Borrowers in favor of the Lender and evidencing
the Equipment Term Loan.


 


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


 


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


 


9

















 


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


 


“ERISA Event” means (a) a “reportable event”,
as defined in Section 4043 of ERISA or the regulations issued thereunder for
which the notice requirement has not been waived with respect to any Pension
Plan, (b) the existence with respect to any Pension Plan of an “accumulated
funding deficiency” (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived, (c) the filing pursuant to Section 412(d) of the
Code or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Pension Plan, (d) the incurrence by any
Credit Party or any ERISA Affiliate of any liability under Title IV of ERISA with
respect to the termination of any Pension Plan, (e) the receipt by any Credit
Party or any ERISA Affiliate from the PBGC or 
plan administrator of any notice relating to an intention to terminate
any Pension Plan or Pension Plans or to appoint a trustee to administer any
Pension Plan, or (f) the receipt by any Credit Party or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from any Credit Party or
any ERISA Affiliate of any notice of Withdrawal Liability or a determination that
a Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.


 


“Eurodollar” when
used in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Eurodollar Rate.


 


“Eurodollar Interest
Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrowers may elect; provided, that (i) if any Eurodollar
Interest Period would end on a day other than a Business Day, such Eurodollar
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Eurodollar Interest Period shall end on the next preceding
Business Day and (ii) any Eurodollar Interest Period that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Eurodollar Interest
Period) shall end on the last Business Day of the last calendar month of such
Eurodollar Interest Period.  For
purposes hereof, the date of a Borrowing initially shall be the date on which
such Borrowing is made and thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.  Notwithstanding the foregoing, if any Eurodollar Interest Period
for any Revolving Credit Borrowing would otherwise end after the Revolving
Credit Maturity Date, such Eurodollar Interest Period shall end on the
Revolving Credit Maturity Date.


 


“Eurodollar Rate”
means, with respect to any Eurodollar Borrowing for any Eurodollar Interest
Period, the rate appearing on Dow Jones Markets Page 3750 (or on any successor
or substitute page of such Service, or any successor to or substitute for such
Service, providing rate quotations comparable to those currently provided on
such page of such Service, as determined by the Lender from time to time for
purposes of providing quotations of interest rates applicable to U.S. dollar
deposits in the London interbank market) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Eurodollar Interest
Period, as the rate for U.S. dollar deposits with a maturity comparable to such
Eurodollar Interest Period.  In the
event that such rate is not available at such time for any reason, then the “Eurodollar
Rate” with respect to such Eurodollar Borrowing for such Eurodollar
Interest Period shall be the average of the rates at which U.S. dollar deposits
of $5,000,000, and for a maturity comparable to such Eurodollar Interest Period,
are offered by four major banks in the London interbank


 


10

















 


market as selected by the
Lender in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Eurodollar Interest Period.


 


“Eurodollar Request”
means a written request signed by a Designated Financial Officer for the
conversion of Base Rate Loans into Eurodollar Loans or for the continuation of
an existing Eurodollar Loan for an additional Eurodollar Interest Period in
accordance with Section 2.3, in substantially the form of Exhibit B-4
annexed hereto.


 


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


 


“Excess Availability”
means, as of any date of determination thereof, the difference between (a) the
lesser of (i) the Revolving Credit Commitment at such time and (ii) the
Borrowing Base at such time, and (b) the Revolving Credit Exposure at such
time.


 


“Excluded Taxes”
means, with respect to the Lender, the Issuing Lender or any other recipient of
any payment to be made by or on account of any Obligation hereunder, (a)
income, net worth or franchise taxes imposed on (or measured by) its net income
or net worth by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of the Lender, in which its lending office is located
or in which it is taxable solely on account of some connection other than the
execution, delivery or performance of this Agreement or the receipt of income
hereunder, and (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which any Borrower
is located.


 


“Existing Debt”
means (i) Indebtedness of the Credit Parties existing as of the Effective Time
which is being repaid in full with the proceeds of the Loans made by the Lender
at the Effective Time and (ii) Indebtedness of the Credit Parties existing as
of the Effective Time which is permitted to remain outstanding after the
Effective Time under Section 8.1 and is listed on Schedule 8.1 hereto.


 


“Federal Funds
Effective Rate” means, for any day, the weighted average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average (rounded upwards, if necessary, to the next
1/100 of 1%) of the quotations for such day for such transactions received by
the Lender from three Federal funds brokers of recognized standing selected by
it.


 


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


 


“Fixed
Charge Coverage Ratio” means, for any period, the ratio of (a) (i) EBITDA
of the Credit Parties for such period minus (ii) the aggregate amount of
all Non-Financed Capital Expenditures during such period minus (iii) the
aggregate amount paid, or required to be paid (without duplication), in cash in
respect of the current portion of all income taxes for such period minus
(iv) the aggregate amount of dividends and distributions permitted to be paid
under Section 8.6 and actually paid in cash during such period to (b) the sum
for the Credit Parties (determined on a consolidated basis without duplication
in accordance with GAAP), of (i) the aggregate amount of Interest Expense for
such period and (ii) the aggregate amount of regularly scheduled payments of
principal in respect of Indebtedness for borrowed money (including the
principal component of any payments in respect of Capital Lease Obligations)
paid or required to be paid during such period.  For purposes of calculating Fixed Charge Coverage Ratio, the
Credit Parties shall be permitted to offset (without duplication) the income
taxes described in subsection


 


11

















 


(iii)
above with state or federal income tax refunds received by the Credit Parties
during such period, but only in an amount less than or equal to the amount
described in subsection (iii) for such period.


 


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


 


“Governmental
Authority” means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.


 


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


 


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


 


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


 


“Hazardous Materials
Indemnity Agreement” means the Hazardous Materials Indemnity Agreement
substantially in the form of Exhibit F annexed hereto, executed and
delivered by the Credit Parties at the Effective Time, as such agreement may be
amended, supplemented or otherwise modified from time to time.


 


“Hedging Agreement”  means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price
hedging arrangement.


 


“Indebtedness”
means, for any Person, without duplication: (a) obligations created, issued or
incurred by such Person for borrowed money (whether by loan, advance, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and
accrued expenses and deferred taxes incurred and paid, in the ordinary course
of business; (c) Capital Lease Obligations of such Person; (d) obligations of
such Person


 


12

















 


in respect of Hedging
Agreements; and (e) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for the account of such Person. 
The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such Person’s
ownership interest in or other relationship with such entity, except to the
extent the terms of such Indebtedness provide that such Person is not liable
therefor.


 


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


 


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


 


“Interest Expense”
means, for any period, the sum, without duplication, for the Credit Parties
(determined on a consolidated basis without duplication in accordance with
GAAP), of the following: (a) all interest in respect of Indebtedness during
such period, but excluding capitalized debt acquisition costs (including fees and
expenses related to this Agreement) plus (b) the net amounts payable (or
minus the net amounts receivable) in respect of Hedging Agreements
accrued during such period (whether or not actually paid or received during
such period) excluding reimbursement of legal fees and other similar
transaction costs and excluding payments required by reason of the early
termination of Hedging Agreements in effect on the date hereof plus (c)
all fees, including letter of credit fees and expenses, (but excluding
reimbursement of legal fees) incurred in respect of Indebtedness during such
period.


 


“Investment”
means, for any Person: (a) the acquisition (whether for cash, Property,
services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership, limited liability company or other ownership interests
or other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any “short sale” or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, loan or
other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement, contingent
or otherwise, to resell such Property to such Person, but excluding any such
advance, loan or extension of credit representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business
provided that in no event shall the term of any such inventory or supply
advance, loan or extension of credit exceed 180 days); or (c) the entering into
of any Guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person.  Notwithstanding the foregoing, Capital
Expenditures shall not be deemed “Investments” for purposes hereof.


 


“IP Collateral”
means, collectively, the Collateral relating to intellectual property rights of
the Credit Parties hereunder or under any other Loan Document.


 


“Issuing Lender”
means Fleet National Bank, an Affiliate of the Lender, in its capacity as an
issuer of Letters of Credit hereunder.


 


“Landlord Waiver and
Consent” means, with respect to any Leasehold Property, a letter,
certificate or other instrument in writing from the lessor under the related
lease, in form approved by the Lender in its sole discretion, including the
form of Landlord Waiver and Consent in substantially the form of Exhibit H
annexed hereto.


 


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


 


13

















 


“LC Sublimit”
means a sublimit of the Revolving Credit Commitment available for the issuance
of Letters of Credit for the account of the Borrowers in an aggregate maximum
amount available to be drawn equal to $1, 500,000.


 


“Leasehold Property”
means any leasehold interest of any Credit Party as lessee under any lease of
real property, other than any such leasehold interest designated from time to
time by the Lender in its sole discretion as not being required to be included
in the Collateral and not being of material importance to the business or operations
of the Credit Parties.


 


“Lender” means
Fleet Capital Corporation or any other party which becomes a lender hereunder.


 


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


 


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


 


“Loan Documents”
means this Agreement, the Revolving Credit Note, the Equipment Term Note, the
Real Estate Term Note, the Control Agreements, the Mortgages, the Stock Pledge
Agreement, the Hazardous Materials Indemnity Agreement, and any other
instruments or documents executed and delivered or to be delivered to the
Lender from time to time pursuant to this Agreement, as the same may be
supplemented and amended from time to time in accordance with their respective
terms.


 


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


 


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


 


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


 


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


 


“Material Indebtedness”
means Indebtedness (other than the Loans or Letters of Credit), including,
without limitation, obligations in respect of one or more Hedging Agreements,
in an aggregate principal amount exceeding  $50,000. 
For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of any Person in respect of a Hedging Agreement at
any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that such Person would be required to pay if such Hedging Agreement
were terminated at such time.


 


14

















 


“Material Leasehold
Property” means a Leasehold Property reasonably determined by the Lender to
be of material value as Collateral or of material importance to the operations
of the Credit Parties.


 


“Material Owned
Property” means any real property owned by any Credit Party that is
reasonably determined by the Lender to be of material value as Collateral or of
material importance to the operations of the Credit Parties following the
Closing Date.


 


“Material Rental
Obligations” means obligations of the Credit Parties to pay rent under any
one or more operating leases with respect to any real or personal property that
is material to the business of the Credit Parties.


 


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


 


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


 


“Mortgaged Property”
has the meaning assigned to such term in subsection 6.1(f)(i).


 


“Net Cash Payments”
means,


 


(a)                                  with
respect to any Casualty Event, the aggregate amount of cash proceeds of
insurance, condemnation awards and other compensation received by the Credit
Parties in respect of such Casualty Event net of (i) reasonable expenses
incurred by the Credit Parties in connection therewith and (ii) contractually
required repayments of Indebtedness to the extent secured by a Lien on such
property and (iii) any income and transfer taxes payable by the Credit Parties
in respect of such Casualty Event;


 


(b)                                 with
respect to any Disposition, the aggregate amount of all cash payments received
by the Credit Parties directly or indirectly in connection with such
Disposition, whether at the time of such Disposition or after such Disposition
under deferred payment arrangements or Investments entered into or received in
connection with such Disposition, net of (i) the amount of any legal, title,
transfer and recording tax expenses, commissions and other fees and expenses
payable by the Credit Parties in connection therewith, (ii) any Federal, state
and local income or other Taxes estimated to be payable by the Credit Parties
as a result thereof, (iii) any repayments by the Credit Parties of Indebtedness
to the extent that such Indebtedness is secured by a Lien on the property that
is the subject of such Disposition and the transferee of (or holder of a Lien
on) such property requires that such Indebtedness be repaid as a condition to
the purchase of such property, and (iv) any repayments by the Credit Parties to
minority stockholders if and to the extent permitted hereby; and


 


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


 


15

















 


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


 


“Obligations”
means (a) the aggregate outstanding principal balance of and all interest on
the Loans made by the Lender to the Borrowers (including any interest accruing
after the commencement of any proceeding by or against any Borrower under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, and
any other interest that would have accrued but for the commencement of such
proceeding, whether or not any such interest is allowed as a claim enforceable
against any Borrower in any such proceeding), and (b) all LC Disbursements,
overdraft obligations, fees, costs, charges, expenses and other obligations
from time to time owing to the Lender, the Issuing Lender, the Cash Management
Bank, or any other Affiliate of the Lender by the Credit Parties hereunder or
under any other Loan Document or in respect of any Hedging Agreement, cash
management agreement, operating or deposit account, or other banking product
from time to time made available to the Credit Parties by the Lender, the
Issuing Lender, the Cash Management Bank or any other Affiliate of the Lender.


 


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


 


“Patents” means
all patents issued or assigned to and all patent applications made by the
Credit Parties and, to the extent that the grant of a security interest does
not cause a breach or termination thereof, all exclusive and nonexclusive
licenses to the Credit Parties from third parties or rights to use patents
owned by such third parties, including, without limitation, the patents, patent
applications and licenses listed on Schedule 5.5 hereto, along with any
and all (a) inventions and improvements described and claimed therein, (b)
reissues, divisions, continuations, extensions and continuations-in-part
thereof, (c) income, royalties, damages, claims and payments now and hereafter due
and/or payable under and with respect thereto, including, without limitation,
damages and payments for past or future infringements thereof, (d) rights to
sue for past, present and future infringements thereof, and (e) any other
rights corresponding thereto throughout the world.


 


“Pension Plan”
means any Plan that is a defined benefit pension plan subject to the provisions
of Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA, and in respect of which any Credit Party or any ERISA Affiliate is (or,
if such plan were terminated, would under Section 4069 of ERISA be deemed
to be) an “employer” as defined in Section 3(5) of ERISA.


 


“Permitted Investments”
means:


 


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


 


(b)                                 investments
in commercial paper maturing within 270 days from the date of acquisition
thereof and having, at such date of acquisition, the highest credit rating
obtainable from Standard and Poor’s Ratings Service or from Moody’s Investors
Service, Inc.;


 


16

















 


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


 


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


 


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


 


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


 


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


 


“Permitted Liens”
has the meaning set forth in Section 8.2.


 


“Person” means any
natural person, corporation, limited liability company, trust, joint venture,
association, company, partnership, Governmental Authority or other entity.


 


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


 


“Post-Default Rate”
means, a rate per annum equal to the Adjusted Base Rate plus the
Applicable Margin plus two percent (2%).


 


“Prime Rate” means
the rate of interest per annum publicly announced from time to time by Fleet
National Bank, as its prime rate for commercial loans in effect at its
principal office in Boston, Massachusetts, which rate is not necessarily the
lowest rate charged by Fleet National Bank to its most preferred customers;
each change in the Prime Rate shall be effective from and including the date
such change is publicly announced as being effective.


 


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


 


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


 


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


 


“Real Estate Term Loan”
means the $2,500,000 Real Estate Term Loan to be made by the Lender to the
Borrowers at the Effective Time.


 


17

















 


“Real Estate Term Loan
Maturity Date” means February 28, 2008, or such earlier date as provided in
Section 2.7 or Section 9.1.


 


“Real Estate Term Note”
means the promissory note, substantially in the form of Exhibit A-3
annexed hereto, issued by the Borrowers in favor of the Lender and evidencing
the Real Estate Term Loan.


 


“Real Property Asset”
means, at any time of determination, any and all real property owned or leased
by the Credit Parties.


 


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


 


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


 


“Related Parties”
means, with respect to any specified Person, such Person’s Affiliates and the
respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.


 


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


 


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


 


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


 


“Revolving Credit
Commitment” means the commitment of the Lender to make Revolving Loans as
such commitment may be reduced from time to time pursuant to Section 2.5.  The original maximum amount of the Revolving
Credit Commitment is equal to $12,000,000.


 


“Revolving Credit
Exposure” means at any time the sum of (a) the outstanding principal amount
of Revolving Loans at such time and (b) the Total LC Exposure at such time.


 


“Revolving Credit
Maturity Date” means February 28, 2006.


 


“Revolving Credit Note”
means the promissory note, substantially in the form of Exhibit A-1
annexed hereto, issued by the Borrowers in favor of the Lender.


 


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


 


18

















 


“Senior Liabilities”
means, as at any time of determination thereof, (a) the aggregate amount of all
indebtedness, liabilities and other obligations of the Credit Parties
(determined on a consolidated basis in accordance with GAAP) at such time minus
(b) the aggregate principal amount of Subordinated Indebtedness at such time.


 


 “Solvency Certificate” means a
certificate in substantially the form of Exhibit J annexed hereto
executed by the Chief Financial Officer of the Borrowers and delivered to the
Lender on the Closing Date.


 


“Special Counsel”
means Palmer & Dodge LLP, in its capacity as special counsel to Fleet
Capital Corporation, as Lender of the credit facilities contemplated hereby.


 


“Stock Pledge
Agreement” means the Stock Pledge Agreement in substantially the form of Exhibit
E annexed hereto executed by UFP and delivered to the Lender on the Closing
Date with respect to the capital stock of each of the Credit Parties owned by
UFP or its Subsidiaries, as the same may be modified or amended from time to
time with the consent of the Lender.


 


“Subordinated
Indebtedness” means any Indebtedness of the Credit Parties incurred after
the Closing Date with the consent of the Lender that by its terms (or by the
terms of the instrument under which it is outstanding and to which appropriate
reference is made in the instrument evidencing such Subordinated Indebtedness)
is made subordinate and junior in right of payment to the Loans and to the
other Obligations of the Credit Parties by provisions in form and substance
reasonably satisfactory to the Lender and Special Counsel.


 


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


 


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


 


“Tangible Net Worth”
means, at any time, an amount for the Credit Parties (determined on a
consolidated basis without duplication in accordance with GAAP) equal to (a)
the book net worth of the Credit Parties at such time, minus (b) the
aggregate amount at such time of all investments in, and all receivables, fees,
loans and other amounts due from, Affiliates, minus (c) the total
book value at such time of all intangible assets, including without limitation,
such items as goodwill, customer lists, Patents, Copyrights and Trademarks, and
rights (including rights under licenses) with respect to the foregoing, minus
(d) the total book value at such time of all deferred tax assets net of
deferred tax liabilities recorded on the books of the Credit Parties.


 


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


 


 “Term Loans” means, collectively, the
Equipment Term Loan and the Real Estate Term Loan.


 


19

















 


“Term Notes”
means, collectively, the Equipment Term Note and the Real Estate Term Note.


 


“Total Gross
Availability” means, at any time, the lesser of (i) the Borrowing Base at
such time and (ii) the Revolving Credit Commitment at such time.


 


“Total LC Exposure”
means, at any time, the sum of (a) 100% of the aggregate undrawn amount of all
outstanding standby and documentary Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrowers at such time.


 


“Total Voting Power”
means, with respect to any Person, the total number of votes which holders of
securities having the ordinary power to vote, in the absence of contingencies,
are entitled to cast in the election of directors of such Person.


 


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


 


“Type” when used
in reference to any Loan or Borrowing, refers to whether the rate of interest
on such Loan, or on the Loans comprising such Borrowing, is determined by
reference to the Eurodollar Rate or the Adjusted Base Rate.


 


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


 


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


 


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


 


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


 


“Withdrawal Liability”
means liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.


 


1.2                                 Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter
forms.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to


 


20

















 


have the same meaning and
effect as the word “shall”.  Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not
to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.


 


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


 


1.4                                 Joint and Several Obligations; Designated
Financial Officers.


 


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


 


(b)                                 Each
Credit Party hereby authorizes each of the Designated Financial Officers listed
in Schedule 1.4 hereto to act as agent for each Credit Party and to
execute and deliver on behalf of each Credit Party such notices, requests,
waivers, consents, certificates and other documents, and to take any and all
actions required or permitted to be delivered or taken by any Credit Party
hereunder.  The Borrowers may replace
any of the Designated Financial Officers listed in Schedule 1.4 hereto
or add any additional Designated Financial Officers by delivering written
notice to the Lender specifying the names of each new Designated Financial
Officer and the offices held by each such Person.  Each Credit Party hereby agrees that any such notices, requests,
waivers, consents, certificates and other documents executed, delivered or sent
by any Designated Financial Officer and any such actions taken by any
Designated Financial Officer shall bind each Credit Party.


 


ARTICLE 2


 


The Credits


 


2.1                                 Revolving Loans.


 


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


 


21

















 


(ii) the Borrowing Base
at such time.  Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrowers
may borrow, prepay and reborrow Revolving Loans.


 


(b)                                 Funding
of Revolving Loans. Not later than 3:30 p.m. Boston, Massachusetts time, on
each Business Day, the Lender shall, subject to the conditions of the Agreement
(but without any further written notice required), make a Revolving Loan to the
Borrower in an amount equal to the amount necessary to pay items to be drawn on
the Controlled Accounts maintained with the Cash Management Bank that day after
giving effect to all Available Funds to be deposited to such Controlled
Accounts on that day, by crediting such amount to one or more accounts of the
Borrower maintained with the Cash Management Bank.  To request the funding of any other Revolving Loan hereunder, the
Borrower shall deliver to the Lender not later than 1:00 p.m., Boston,
Massachusetts time, by facsimile or electronic mail transmission, an Advance
Request in substantially the form of Exhibit B-5 hereto, and setting
forth all of the information required to be set forth therein including,
without limitation, the Total Gross Availability as set forth in the most
recent Collateral Update Certificate/Borrowing Base Certificate delivered to
Lender, and the amount of the Revolving Loan requested.  Upon receipt of such Advance Request and
provided that no Default or Event of Default shall have occurred and be
continuing or shall result therefrom, not later than 3:30 p.m. Boston,
Massachusetts time on the date such Advance Request is delivered to the Lender,
the Lender shall make a Revolving Loan to the Borrower in an amount equal to
the amount set forth in such Advance Request by crediting such amount to one or
more accounts of the Borrower maintained with the Lender; provided that
Revolving Loans made to finance the reimbursement of an LC Disbursement under
any Letter of Credit as provided in Section 2.4(e) shall be remitted by the
Lender to the Issuing Lender.


 


(c)                                  Interest
on Revolving Loans.  Subject to Section
2.3 hereof, each Revolving Loan made to the Borrowers by Lender hereunder shall
bear interest at a rate per annum equal to the Adjusted Base Rate plus the
Applicable Margin.  Notwithstanding the
foregoing, (i) all Revolving Loans which are not paid when due shall
automatically bear interest until paid in full at the Post-Default Rate, (ii)
during the period when any Event of Default of the type described in
clauses (g), (h) or (i) of Section 9.1 shall have occurred and be
continuing, the principal of all Revolving Loans hereunder shall automatically
bear interest, after as well as before judgment, at the Post-Default Rate,
(iii) if there shall occur and be continuing any Event of Default (other
than an Event of Default of the type described in clauses (g), (h) or (i)
of Section 9.1), following written notice delivered to the Borrowers from
the Lender, the principal of all Revolving Loans hereunder shall bear interest,
after as well as before judgment, at the Post-Default Rate during the period
beginning on the date such Event of Default first occurred, and ending on the
date such Event of Default is cured or waived. 
Accrued interest on each Revolving Loan shall be payable in arrears on
the first day of each month; provided that interest accrued at the
Post-Default Rate shall be payable on demand, and all accrued interest on
Revolving Loans shall be payable upon expiration of the Revolving Credit
Availability Period.  All interest
hereunder shall be computed on the basis of a year of 360 days, and in each
case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).


 


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


 


(e)                                  Loan
Account.  The Lender shall maintain in
accordance with its usual practice an account evidencing the indebtedness of
the Borrowers to the Lender resulting from each Revolving


 


22

















 


Loan made by the Lender,
including the amounts of principal and interest payable and paid to the Lender
from time to time hereunder.  The
entries made in the account maintained pursuant to this subsection 2.1(e) shall
be prima facie evidence of the existence and amounts of the obligations
recorded therein; provided that the failure of the Lender to maintain such
account or any error therein shall not in any manner affect the obligation of
the Borrowers to repay the Revolving Loans in accordance with the terms of this
Agreement.


 


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


 


2.2                                 Term Loans.


 


(a)                                  Funding
of the Term Loans.  Subject to the terms
and conditions set forth herein, the Lender agrees to fund the full amount of
the Term Loans at the Effective Time. 
Principal amounts of the Term Loans that have been repaid or prepaid may
not be reborrowed.


 


(b)                                 Interest
on the Term Loans.  Subject to Section
2.3 hereof, the outstanding principal amount of the Term Loans shall bear
interest at a rate per annum equal to the Adjusted Base Rate plus the
Applicable Margin.  Notwithstanding the
foregoing, (i) any portion of the Term Loans which is not paid when due shall
automatically bear interest until paid in full at the Post-Default Rate, (ii)
during the period when any Event of Default of the type described in
clauses (g), (h) or (i) of Section 9.1 shall have occurred and be
continuing, the outstanding principal balance of the Term Loans shall
automatically bear interest, after as well as before judgment, at the
Post-Default Rate, (iii) if there shall occur and be continuing any Event
of Default (other than an Event of Default of the type described in clauses (g),
(h) or (i) of Section 9.1), following written notice delivered to the
Borrowers from the Lender, the outstanding principal balance of the Term Loans
shall bear interest, after as well as before judgment, at the Post-Default Rate
during the period beginning on the date such Event of Default first occurred,
and ending on the date such Event of Default is cured or waived.  Accrued interest on the outstanding
principal balance of the Term Loans shall be payable in arrears on the first
day of each month; provided that interest accrued at the
Post-Default Rate shall be payable on demand, and all accrued interest on the
(x) Equipment Term Loan shall be payable on each date that any portion of the
principal of the Equipment Term Loan shall be payable hereunder and on the Equipment
Term Loan Maturity Date, and (y) Real Estate Term Loan shall be payable on each
date that any portion of the principal of the Real Estate Term Loan shall be
payable hereunder and on the Real Estate Term Loan Maturity Date.  All interest hereunder shall be computed on
the basis of a year of 360 days, and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).


 


(c)                                  Repayment
of Term Loans.


 


(i)                                     Equipment
Term Loan.  The Borrowers hereby
unconditionally promise to pay to the Lender monthly principal installments in
respect of the Equipment Term Loan on the first day of each month commencing
May 1, 2003  equal in amount to 70,000.00 each month.  To the extent not previously paid, the Term
Loan shall be due and payable in full on the Term Loan Maturity Date.


 


(ii)                                  Repayment
of Real Estate Term Loan.  The
Borrowers hereby unconditionally promise to pay to the Lender monthly principal
installments in respect of the Real Estate Term Loan on the first day of each
month commencing May 1, 2003 equal in amount to $14,000.00 each month. To the
extent not previously paid, the Term Loan shall be due and payable in full on
the Term Loan Maturity Date.


 


23

















 


(d)                                 Loan
Account.  The Lender shall maintain in
accordance with its usual practice an account evidencing the indebtedness of
the Borrowers to the Lender in respect of the Term Loan, including the amounts
of principal and interest payable and paid to the Lender from time to time
hereunder.  The entries made in the
account maintained pursuant to this subsection  2.2(d) shall be prima
facie evidence of the existence and amounts of the obligations recorded therein;
provided
that the failure of the Lender to maintain such account or any error therein
shall not in any manner affect the obligation of the Borrowers to repay the
Term Loan in accordance with the terms of this Agreement.


 


(e)                                  Term
Note.  Prior to the Closing Date, the
Borrowers shall prepare, execute and deliver to the Lender the Term Notes
evidencing the Borrowers’ obligations in respect of the Term Loans.


 


2.3                                 Eurodollar Borrowings.


 


(a)                                  General.  The entire principal balance of the Term
Loans and each Revolving Loan initially shall be a Base Rate Loan.  Thereafter, the Borrowers may elect to
convert all or any portion of the Term Loans or any portion of the outstanding
Revolving Loans to a Eurodollar Borrowing. 
The Borrowers may elect different options for continuations and
conversions with respect to different portions of the affected Borrowing, in
which case the Loans comprising each such portion shall be considered a
separate Borrowing.  The Borrowers shall
not be permitted to select any Eurodollar Interest Period for any Eurodollar
Borrowing that ends after the Revolving Credit Maturity Date, the Equipment
Term Loan Maturity Date or the Real Estate Term Loan Maturity Date.


 


(b)                                 Interest
on Eurodollar Borrowings.  Each
Eurodollar Borrowing shall bear interest during the applicable Eurodollar Interest
Period at a rate per annum equal to the Eurodollar Rate plus the Applicable
Margin.  Notwithstanding the foregoing,
(i) all Eurodollar Borrowings which are not paid when due shall automatically
be converted into Base Rate Borrowings and shall bear interest until paid in
full at the Post-Default Rate, (ii) during the period when any Event of Default
of the type described in clauses (g), (h) or (i) of Section 9.1 shall
have occurred and be continuing, all Eurodollar Borrowings shall automatically
be converted into Base Rate Borrowings and shall bear interest, after as well
as before judgment, at the Post-Default Rate, (iii) if there shall occur
and be continuing any Event of Default (other than an Event of Default of the
type described in clauses (g), (h) or (i) of Section 9.1), following
written notice delivered to the Borrowers from the Lender, all Eurodollar
Borrowings shall automatically be converted into Base Rate Borrowings and shall
bear interest, after as well as before judgment, at the Post-Default Rate
during the period beginning on the date such Event of Default first occurred,
and ending on the date such Event of Default is cured or waived.  Accrued interest on each Eurodollar
Borrowing shall be payable in arrears on the first day of each month and on the
last Business Day of the Eurodollar Interest Period applicable to such
Eurodollar Borrowing; provided that interest accrued at the
Post-Default Rate shall be payable on demand. 
All interest hereunder shall be computed on the basis of a year of 360
days, and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).


 


(c)                                  Procedure
for Requesting Eurodollar Borrowings. 
To request that any portion of the Term Loan or the outstanding Revolving
Loans be converted into a Eurodollar Borrowing, or, to request that any
Eurodollar Borrowing continue as a Eurodollar Borrowing for an additional
Eurodollar Interest Period, the Borrowers shall submit to the Lender a
Eurodollar Request, in substantially the form of Exhibit B-4 hereto and
setting forth all of the information required to be set forth therein, by
electronic mail or facsimile transmission, not later than 1:00 p.m., Boston,
Massachusetts time, three Business Days before the date of the proposed
conversion or continuation of such Borrowing. 
Each such Eurodollar Request made by the Borrowers shall be
irrevocable.  Subject to the provisions
of subsection 2.3(f) and provided that no Default or Event of Default shall
have occurred and be continuing, upon receipt of a Eurodollar Request, the
Lender shall on the requested date of conversion or continuation (i) convert
the


 


24

















 


Base Rate Loan requested
to be converted into a Eurodollar Loan for the Eurodollar Interest Period set
forth in such Eurodollar Request and/or (ii) continue the Eurodollar Loan
requested to be continued as a Eurodollar Loan for the additional Eurodollar
Interest Period set forth in such Eurodollar Request.


 


(d)                                 Incomplete
Eurodollar Requests.  If any Eurodollar
Request is incomplete in any respect, then such Eurodollar Request shall be
void and the Borrowing which was the subject matter of such Eurodollar Request
shall continue as a Base Rate Borrowing. 
If, with respect to any existing Eurodollar Borrowing, the Borrowers
fail to deliver a Eurodollar Request to continue such Eurodollar Borrowing at
least three Business Days prior to the expiration of the Eurodollar Interest
Period for such existing Eurodollar Borrowing, such Eurodollar Borrowing shall
automatically convert to a Base Rate Borrowing at the expiration of such
Eurodollar Interest Period.


 


(e)                                  Limit
on Eurodollar Borrowings.  At the
commencement of each Eurodollar Interest Period for a Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount at least equal to $250,000 or
any greater multiple of $100,000. 
Borrowings of more than one Type and Class may be outstanding at the
same time; provided
that there shall not at any time be more than a total of five (5) Eurodollar
Borrowings outstanding.


 


(f)                                    Alternate
Rate of Interest.  If prior to the
commencement of any Eurodollar Interest Period for a Eurodollar Borrowing, the
Lender determines that (i) adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Eurodollar Interest Period, (ii) the
Eurodollar Rate for such Eurodollar Interest Period will not adequately and
fairly reflect the cost to the Lender of making or maintaining Eurodollar
Borrowings, or (iii) as a result of any Change in Law it is unlawful or
impossible for the Lender to make or maintain any Eurodollar Borrowing; then in
each case the Lender shall give notice thereof to the Borrowers as promptly as
practicable thereafter and, until the Lender notifies the Borrowers that the
circumstances giving rise to such notice no longer exist, any Eurodollar
Request submitted by the Borrowers shall be ineffective; provided that if as a result
of a Change in Law the Lender is prohibited from maintaining any outstanding
Eurodollar Borrowing, upon notice from the Lender, the Borrowers shall
immediately (A) convert such Eurodollar Borrowing to a Base Rate Loan, or (B)
repay such Eurodollar Borrowing in full, together with all interest accrued
thereon and all fees and other amounts payable to the Lender hereunder (in
either case, subject to the provisions of subsection 2.3(g) of this Agreement
with respect to redeployment costs).


 


(g)                                 Break
Funding Payments.  In the event of (i)
the payment of any principal of any Eurodollar Loan other than on the last day
of the Eurodollar Interest Period applicable thereto (including as a result of
an Event of Default), (ii) the conversion of any Eurodollar Loan other than on
the last day of the Eurodollar Interest Period applicable thereto, or (iii) the
failure to borrow, convert, continue or prepay any Eurodollar Loan on the date
specified in any notice delivered pursuant hereto (regardless of whether such
notice is permitted to be revocable and is revoked in accordance herewith),
then, in any such event, the Borrowers shall compensate the Lender for the
loss, cost and expense attributable to such event, as determined by the Lender
in a manner consistent with its customs and practices.  In the event that the Lender is entitled to
receive compensation pursuant to this subsection 2.3(g), the Lender shall
deliver a certificate to the Borrowers setting forth the amount or amounts that
the Lender is entitled to receive, and the Borrowers shall pay such amount or
amounts within three (3) days after receipt of such certificate.


 


2.4                                 Letters of Credit.


 


(a)                                  General.  Subject to the terms and conditions set
forth herein, in addition to the Revolving Loans provided for in
Section 2.1, any Borrower may request the issuance of Letters of Credit
for its own account by the Issuing Lender, in a form reasonably acceptable to
the Issuing Lender, at any time and from time to time during the Revolving
Credit Availability Period.  Letters of
Credit issued 


 


25

















 


hereunder shall constitute utilization of the Revolving Credit
Commitment.  In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by any Borrower to, or entered into by any Borrower with, the Issuing
Lender relating to any Letter of Credit, the terms and conditions of this
Agreement shall control.


 


(b)                                 Notice
of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of
Credit (or the amendment, renewal or extension of an outstanding Letter of
Credit), the Borrowers shall deliver to the Issuing Lender and the Lender by
electronic or facsimile transmission (reasonably in advance of the requested
date of issuance, amendment, renewal or extension) a letter of credit
application in the form required by the Issuing Lender.  A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or extension
of each Letter of Credit, the Borrowers shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the Total LC Exposure at such time shall not exceed the LC
Sublimit, and (ii) the Revolving Credit Exposure at such time shall not
exceed the lesser of (A) the Revolving Credit Commitment at such time, and (B)
the Borrowing Base at such time.


 


(c)                                  Expiration
Date.  Each Letter of Credit shall
expire (without giving effect to any extension thereof by reason of an
interruption of business) at or prior to the close of business on the earlier
of (i) the date 365 days, in the case of standby Letters of Credit, or 180
days, in the case of documentary Letters of Credit, after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, 365 days or 180 days, as applicable, after such renewal or extension) provided
that any such standby Letter of Credit may provide for automatic extensions
thereof to a date not later than 365 days beyond its current expiration date,
and (ii) the date that is thirty Business Days prior to the Revolving Credit
Maturity Date.  No Letter of Credit may
be extended beyond the date that is thirty Business Days prior to the Revolving
Credit Maturity Date.


 


(d)                                 Reimbursement.  If the Issuing Lender shall make any LC
Disbursement in respect of a Letter of Credit, the Borrowers shall reimburse
(each, a “Reimbursement Obligation”) the Issuing Lender in respect of
such LC Disbursement by paying to the Lender for the account of the Issuing
Bank an amount equal to such LC Disbursement not later than 1:00 p.m., Boston,
Massachusetts time, on (i) the Business Day that the Borrowers receive notice
of such LC Disbursement, if such notice is received prior to 11:00 a.m.,
Boston, Massachusetts time, or (ii) the Business Day immediately following the
day that the Borrowers receive such notice, if such notice is not received
prior to such time, provided that, subject to the conditions
to borrowing set forth herein, payment of each such Reimbursement Obligation
shall be made through the automatic funding of a Base Rate Borrowing in an
amount equal to the amount of such Reimbursement Obligation, and the Borrowers
hereby irrevocably authorize and direct the Lender to take such actions as may
necessary to effectuate such automatic funding of such Base Rate
Borrowings.  To the extent that any such
Reimbursement Obligation is paid through the automatic funding of a Base Rate
Borrowing, the Borrowers’ obligation to make such payment shall be discharged
and replaced by the resulting Base Rate Borrowing.  If the Borrowers cannot satisfy the conditions to borrowing set
forth herein such that the payment of any Reimbursement Obligation cannot be
made through the automatic funding of a Base Rate Borrowing and the Borrowers
shall fail to make such payment when due, the Lender shall promptly pay to the
Issuing Lender the unreimbursed portion of the LC Disbursement.  Promptly following receipt by the Lender of
any payment from the Borrowers pursuant to this paragraph, the Lender shall
distribute such payment to the Issuing Lender.


 


(e)                                  Obligations
Absolute.  The Borrowers’ obligation to
reimburse LC Disbursements as provided in subsection 2.4(d) shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit, or any


 


26

















 


term or provision
therein, (ii) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect, (iii) payment by the Issuing
Lender to the beneficiary under a Letter of Credit against presentation of a
draft or other document that does not comply strictly with the terms of such
Letter of Credit and (iv) any other event or circumstance whatsoever (other
than gross negligence or willful misconduct of the Issuing Lender), whether or
not similar to any of the foregoing, that might, but for the provisions of this
Section 2.4, constitute a legal or equitable discharge of the Borrowers’
obligations hereunder.


 


(f)                                    Interim
Interest.  If the Issuing Lender shall
make any LC Disbursement in respect of any Letter of Credit, and if the
Borrowers cannot satisfy the conditions to borrowing set forth herein such that
payment of the Reimbursement Obligation resulting from such LC Disbursement
cannot be made through the automatic funding of a Base Rate Borrowing, then,
unless the Borrowers shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made, the unpaid amount thereof shall bear interest,
for each day from and including the date such LC Disbursement is made to but
excluding the date that the Borrowers reimburse such LC Disbursement, at the
rate per annum then applicable to Base Rate Loans; provided that, if the
Borrowers fail to reimburse such LC Disbursement when due pursuant to
subsection 2.4(d), then interest calculated at the Post-Default Rate shall
accrue on the unpaid amount thereof. 
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Lender, except that interest accrued on and after the date of payment
by the Lender pursuant to subsection 2.4(d) shall be for the account of the
Lender to the extent of the payment.


 


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


 


2.5                                 Expiration, Termination or Reduction of Revolving Credit Commitment.


 


(a)                                  Expiration
of Revolving Credit Commitment.  Unless
previously terminated, the Revolving Credit Commitment shall expire at the
close of business on the Revolving Credit Maturity Date.


 


(b)                                 Reduction
of Revolving Credit Commitment.  The
Borrowers may at any time and from time to time reduce the Revolving Credit
Commitment; provided
that (i) each reduction of the Revolving Credit Commitment shall be in an
amount that is at least equal to $500,000 or any greater multiple of $100,000,
and (ii) the Borrowers shall not reduce the Revolving Credit Commitment if,
after giving effect to any concurrent repayment, the total Revolving Credit
Exposure would exceed the total Revolving Credit Commitment.  The Borrowers shall notify the Lender of any
election to reduce the Revolving Credit Commitment at least three Business Days
prior to the effective date of such reduction, specifying the effective date
thereof.  Each notice of reduction of
the Revolving Credit Commitment shall be irrevocable.  Each reduction of the Revolving Credit Commitment shall be
permanent.


 


27

















 


(c)                                  Optional
Termination of Revolving Credit Commitment. 
Subject to the provisions of subsection 2.5(d), the Borrowers shall have
the right at any time to terminate the Revolving Credit Commitment.  The Borrowers shall notify the Lender of any
election to terminate the Revolving Credit Commitment under this subsection
2.5(c) in writing at least ninety (90) days prior to the effective date of such
termination, specifying the effective date thereof.  Each notice of termination of the Revolving Credit Commitment
shall be irrevocable.  Any termination
of the Revolving Credit Commitment shall be permanent.


 


(d)                                 Termination
Fee.  In connection with any termination
of the Revolving Credit Commitment, the Borrowers shall (i) repay the entire
principal balance of, and all accrued interest and fees owing with respect to,
the Revolving Loans and the Term Loans, and (ii) pay to the Lender, a
termination fee equal to the applicable amount set forth below:


 


	
  Period during which

  Termination Date Occurs

  	
   

  	
  Applicable
  Termination Fee

  	
   

  
	
  Prior
  to the first anniversary of the Closing Date

  	
   

  	
  $

  	
  180,000

  	
   

  
	
  On
  or after the first anniversary of the Closing Date but prior to the second
  anniversary of the Closing Date

  	
   

  	
  $

  	
  60,000

  	
   

  
	
  From
  and after the second anniversary of the Closing Date

  	
   

  	
  $

  	
  0

  	
   

  



 


Notwithstanding the
foregoing, the Borrowers shall not be obligated to pay the fee described in
Section 2.5(d)(ii) if the credit facilities contemplated hereby are being
transferred to an Affiliate of the Lender for their respective remaining terms
or are refinanced by the Lender in connection with a “going private”
transaction.


 


2.6                                 Payments.


 


(a)                                  Payments
Generally.  The Borrowers shall be
obligated to make each payment required to be made by the Borrowers hereunder
(whether of principal, interest, fees or reimbursement of LC Disbursements, or
otherwise) to Lender at its offices in Boston, Massachusetts, prior to 3:00
p.m., Boston, Massachusetts time, on the date when due (except that if any
payment shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension).  All payments shall be
made in immediately available funds, in U.S. dollars without set-off or
counterclaim.  Any amounts received
after such time on any date may, in the discretion of the Lender, be deemed to
have been received on the next succeeding Business Day for purposes of
calculating interest thereon. 
Notwithstanding anything to the contrary set forth herein, subject to
the conditions to the funding of Revolving Loans set forth herein, all payments
of interest, fees and any other amounts due to be paid by the Borrowers
hereunder shall be made through the automatic funding of Base Rate Revolving
Loans in amounts equal to the amounts of such interest, fees or other amounts
due to be paid by the Borrowers hereunder, and the Borrowers hereby irrevocably
authorize and direct the Lender to take such actions as may be necessary to
effectuate such automatic funding of Base Rate Revolving Loans, and, upon
funding of any such Base Rate Revolving Loan, the Borrowers’ obligation to make
such payment shall be discharged and replaced by the resulting Base Rate
Revolving Loan.  The Borrowers expressly
acknowledge and agree that (i) the Lender may, in its sole discretion,
effectuate the automatic funding of a Revolving Loan pursuant to this
subsection 2.6(a) even though at the time of, or after giving effect to, the
funding of such Revolving Loans the Revolving Credit Exposure exceeds the
lesser of (x) the


 


28

















 


Revolving Credit
Commitment and (y) the Borrowing Base, and (ii) if any one or more of the conditions
to the funding of Revolving Loans cannot be satisfied and the Lender, in its
sole discretion, refuses to fund a Base Rate Revolving Loan in an amount
sufficient to satisfy the amount of any interest, fees or other amounts due
hereunder, the Borrowers shall remain obligated to pay the full amount of such
interest, fees or other amounts as and when the same shall become due.


 


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


 


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


 


2.7                                 Prepayment of Loans.


 


(a)                                  Optional
Prepayments of Loans.  The Borrowers
shall have the right at any time and from time to time to prepay the Revolving
Loans in whole or in part, subject to the payment of any amounts due under
subsection 2.3(g) and, if the Revolving Credit Commitment is terminated,
subsection 2.5(d).  The Borrowers shall
have the right at any time and from time to time to prepay the Term Loan in
whole or in part, subject to prior notice in accordance with
subsection 2.7(d) and subject to the payment of any amounts due under
subsection 2.3(g) and, if the Term Loan is repaid in full, subsection 2.5(d),
and provided that each such prepayment of the Term Loan shall be in an amount
that is at least equal to $250,000 or any greater multiple of $100,000.


 


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


 


(i)                                     Incurrence
of Debt.  Without limiting the obligation
of the Borrowers to obtain the consent of the Lender to any incurrence of
Indebtedness not otherwise permitted hereunder, the Borrowers agree, on the
closing of any incurrence of Indebtedness by any Credit Party (other than
Indebtedness permitted pursuant to Section 8.1) to prepay the Loans
hereunder (and provide cash collateral for Total LC Exposure as specified in
subsection 2.4(g)), and the Revolving Credit Commitment hereunder shall be
subject to automatic reduction, upon the date of such incurrence of
Indebtedness, in an aggregate amount equal to 100% of the amount of the Net
Cash Payments from such incurrence of Indebtedness received by any Credit
Party, such prepayment and reduction to be effected in each case in the manner
and to the extent specified in subsection 2.7(c) below.


 


(ii)                                  Sale
or Offering of Securities.  The
Borrowers agree on the closing of any offering or sale of equity securities by
any Credit Party, to prepay the Loans hereunder (and provide cash collateral
for Total LC Exposure as specified in subsection 2.4(g)), upon the date of such
sale or offering of securities, in an aggregate amount equal to 100% of the
amount of Net


 


29

















 


Cash Payments from such
offering of securities received by any such Credit Party such prepayment to be
effected in each case in the manner and to the extent specified in
subsection 2.7(c) below.


 


(iii)                               Sale
of Assets.  Without limiting the
obligation of the Borrowers to obtain the consent of the Lender to any
Disposition not otherwise permitted hereunder, the Borrowers agree, on the date
of any Disposition by any Credit Party, to prepay the Loans hereunder (and
provide cash collateral for Total LC Exposure as specified in
subsection 2.4(g)), and the Revolving Credit Commitment hereunder shall be
subject to automatic reduction, upon the date of such Disposition, in an
aggregate amount equal to 100% of the amount of such Net Cash Payments from
such Disposition received by any Credit Party on the date of such Disposition,
such payment and reduction to be effected in each case and in the manner and to
the extent specified in subsection 2.7(c) below.  Notwithstanding the forgoing, the Borrowers shall not be required
to make any prepayment of the Loans under this subsection 2.7(b)(iii) with
respect to the first $10,000 of aggregate Net Cash Payments received by the
Credit Parties from Dispositions after the Effective Time to the extent 100% of
such Net Cash Payments are utilized to replace the assets disposed of by the
Credit Parties in the Disposition within 90 days of each such Disposition.


 


(iv)                              Proceeds
of Casualty Events.  Upon the
receipt by the Lender or the Credit Parties of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any property of the Credit Parties, the Borrowers shall prepay the
Loans (and provide cash collateral for Total LC Exposure as specified in
subsection 2.4(g)), and the Revolving Credit Commitment shall be subject
to automatic reduction, in an aggregate amount equal to 100% of the Net Cash
Payments from such Casualty Event, such prepayment and reduction to be effected
in each case in the manner and to the extent specified in subsection 2.7(c)
below; provided
that if there shall occur a Casualty Event and the aggregate market value of
all property affected by such Casualty Event shall be less than $25,000, and
if, at the time proceeds of insurance in respect of such Casualty Event are
received, no Event of Default shall have occurred and be continuing, the
Borrowers shall be entitled to utilize such insurance proceeds (in an amount
not in excess of $25,000) to repair or replace the property affected by such
Casualty Event within 90 days (it being understood that if proceeds of insurance
intended to be applied to repair or replace property are not in fact applied
within 90 days after receipt thereof, then such proceeds shall be applied to
the prepayment of Loans, cover for Total LC Exposure and reduction of the
Revolving Credit Commitment as provided in this clause (iv) at the expiration
of such 90 day period).


 


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


 


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


 


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


 


(iii)                               third,
after the Term Loan has been repaid in full, the amount of any mandatory
prepayment shall be applied to repay Revolving Loans, and, second, to provide
cash collateral for Total LC Exposure as specified in Section 2.4(g), with
a corresponding permanent


 


30

















 


reduction in the
Revolving Credit Commitment (except that no such corresponding permanent
reduction in the total Revolving Credit Commitment shall be required in
connection with any prepayment pursuant to subsection 2.7(b)(ii) above).


 


(d)                                 Notification
of Certain Prepayments.  The Borrowers
shall notify the Lender by telephone (confirmed by telecopy) of any voluntary
prepayment of any Eurodollar Loan not later than 1:00 p.m., Boston,
Massachusetts time, three Business Days before the date of such
prepayment.  The Borrowers shall notify
the Lender of any mandatory prepayment of the Loans pursuant to subsection
2.7(b) hereunder as soon as practicable. 
Each such notice shall be irrevocable and shall specify the prepayment
date and the principal amount of each Borrowing or portion thereof to be
prepaid.


 


(e)                                  Prepayments
Accompanied by Interest.  All
prepayments of the Term Loans shall be accompanied by accrued interest through
the date of prepayment.


 


2.8                                 Fees.


 


(a)                                  Closing
Fee.  The Borrowers shall pay to the
Lender on the Closing Date a closing fee in an amount equal to $48,750.


 


(b)                                 Unused
Fee.  The Borrowers shall pay to the
Lender unused fees in respect of the Revolving Credit Commitment, in an
aggregate amount equal to the product of (x) the Applicable Unused Fee Rate,
multiplied by (y) the daily average unused amounts of the Revolving Credit
Commitment during the period from and including the date on which the Effective
Time shall occur to but excluding the date on which the Revolving Credit
Commitment terminates.  Accrued unused
fees shall be payable monthly in arrears on the first day of each month and on
the date on which the Revolving Credit Commitment terminates.  All unused fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).


 


(c)                                  Letter
of Credit Fees.  The Borrowers shall pay
with respect to Letters of Credit issued hereunder the following fees:


 


(i)                                     with
respect to each documentary or standby Letter of Credit issued hereunder, a fee
to the Lender which shall accrue at a rate per annum equal to (x) the
Applicable Margin for Eurodollar Rate Revolving Loans multiplied by (y)
the average daily amount of outstanding Letters of Credit during the period
from and including the Closing Date to but excluding the date on which there
shall no longer be any Letters of Credit outstanding hereunder, and


 


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


 


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


 


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2.9                                 Increased Costs.


 


(a)                                  If
any Change in Law shall:


 


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


 


(ii)                                  impose
on the Lender or the Issuing Lender or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by the Lender or
any Letter of Credit;


 


and the result of any of
the foregoing shall be to increase the cost to the Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any
such Loan) or to increase the cost to the Issuing Lender of issuing or
maintaining any Letter of Credit or to reduce the amount of any sum received or
receivable by the Lender or the Issuing Lender hereunder (whether of principal,
interest or otherwise), then the Borrowers will pay to the Lender or the
Issuing Lender, as the case may be, such additional amount or amounts as will
compensate the Lender or the Issuing Lender, as the case may be, for such
additional costs incurred or reduction suffered.


 


(b)                                 If
the Lender or the Issuing Lender reasonably determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the
rate of return on the Lender’s or the Issuing Lender’s capital or on the
capital of the Lender’s or the Issuing Lender’s holding company, if any, as a
consequence of this Agreement or the Loans made by the Lender, or the Letters
of Credit issued by the Issuing Lender, to a level below that which the Lender
or the Issuing Lender or the Lender’s or the Issuing Lender’s holding company
could have achieved but for such Change in Law (taking into consideration the
Lender’s or the Issuing Lender’s policies and the policies of the Lender’s or
the Issuing Lender’s holding company with respect to capital adequacy), then
from time to time the Borrowers will pay to the Lender or the Issuing Lender,
as the case may be, such additional amount or amounts as will compensate the
Lender or the Issuing Lender, or the Lender’s or the Issuing Lender’s holding
company, for any such reduction suffered.


 


(c)                                  A
certificate of the Lender or the Issuing Lender setting forth the amount or
amounts necessary to compensate the Lender or the Issuing Lender or its holding
company, as the case may be, as specified in subsections 2.9(a) or 2.9(b) above
shall be delivered to the Borrowers and shall be conclusive so long as it
reflects a reasonable basis for the calculation of the amounts set forth
therein and does not contain any manifest error.  The Borrowers shall pay the Lender or the Issuing Lender the
amount shown as due on any such certificate within 10 days after receipt
thereof.


 


(d)                                 Failure
or delay on the part of the Lender or the Issuing Lender to demand compensation
pursuant to this Section 2.9 shall not constitute a waiver of the Lender’s
or the Issuing Lender’s right to demand such compensation; provided that the Borrowers
shall not be required to compensate the Lender or the Issuing Lender pursuant
to this Section 2.9 for any increased costs or reductions incurred more
than six months prior to the date that Lender or the Issuing Lender, as the
case may be, notifies the Borrowers of the Change in Law giving rise to such
increased costs or reductions and of Lender’s or the Issuing Lender’s intention
to claim compensation therefor; provided  further that, if the Change
in Law giving rise to such increased costs or reductions is (i) retroactive and
(ii) occurred within such six-month period, then the six-month period referred
to above may be extended to include the period of retroactive effect thereof,
but in no event any period prior to the Closing Date.


 


32

















 


2.10                           Taxes.


 


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


 


(b)                                 In
addition, the Borrowers shall pay all Other Taxes to the relevant Governmental
Authority in accordance with applicable law.


 


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


 


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


 


ARTICLE 3


 


Guarantee
by Guarantors


 


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


 


3.2                                 Obligations Unconditional.  The obligations of the Guarantors under
Section 3.1 are absolute and unconditional irrespective of the value,
genuineness, validity, regularity or enforceability of this Agreement, the
other Loan Documents or any other agreement or instrument referred to herein or
therein, or any substitution, release or exchange of any other guarantee of or
security for any of the Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 3.2 that the obligations of
the Guarantors hereunder shall be absolute and unconditional under any and all
circumstances.  Without limiting the
generality of the


 


33

















 


foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of the Guarantors hereunder which shall remain absolute
and unconditional as described above:


 


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


 


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


 


(iii)                               the
maturity of any of the Obligations shall be accelerated, or any of the
Obligations shall be modified, supplemented or amended in any respect, or any
right hereunder or under the other Loan Documents or any other agreement or
instrument referred to herein or therein shall be waived or any other guarantee
of any of the Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or


 


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


 


The Guarantors hereby
expressly waive diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that the Lender or the Issuing Lender
exhaust any right, power or remedy or proceed against the Borrowers hereunder
or under the other Loan Documents or any other agreement or instrument referred
to herein or therein, or against any other Person under any other guarantee of,
or security for, any of the Obligations.


 


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


 


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


 


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


 


34

















 


payable by the Borrowers)
shall forthwith become due and payable by the Guarantors for purposes of
Section 3.1.


 


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


 


3.7                                 Continuing Guarantee.  The guarantee in this Article 3 is a
continuing guarantee, and shall apply to all Obligations whenever arising.


 


3.8                                 General Limitation on Amount of
Obligations Guaranteed.  In
any action or proceeding involving any state or non-U.S. corporate law, or any
state or Federal or non-U.S. bankruptcy, insolvency, reorganization or other
law affecting the rights of creditors generally, if the obligations of the
Guarantors under Section 3.1 would otherwise be held or determined to be
void, invalid or unenforceable, or subordinated to the claims of any other
creditors, on account of the amount of its liability under Section 3.1,
then, notwithstanding any other provision hereof to the contrary, the amount of
such liability shall, without any further action by the Guarantors, Lender, or
other Person, be automatically limited and reduced to the highest amount that
is valid and enforceable and not subordinated to the claims of other creditors
as determined in such action or proceeding.


 


ARTICLE 4


 


The
Collateral


 


4.1                                 Grant of Security Interest.  As
security for due and punctual payment and performance of the Obligations, each
Credit Party hereby grants to the Lender (for the ratable benefit of the
Lender, the Issuing Lender and the Cash Management Bank) a continuing security
interest in and lien on all tangible and intangible property and assets of such
Credit Party, whether now owned or existing or hereafter acquired or arising,
together with any and all additions thereto and replacements therefor and
proceeds and products thereof (collectively referred to for purposes of this
Article 4 as “Collateral”), including without limitation the
property described below:


 


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


 


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


 


(c)                                  all
Patents of such Credit Party;


 


(d)                                 all
Trademarks of such Credit Party;


 


(e)                                  all
Copyrights of such Credit Party;


 


35

















 


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


 


(g)                                 all
rights under all present and future vendor or customer contracts and all franchise,
distribution, design, consulting, construction, engineering, management and
advertising and related agreements;


 


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


 


all other personal
property, including, without limitation, all present and future accounts,
accounts receivable, cash, cash equivalents, deposits, deposit accounts, loss
carry back, tax refunds, insurance proceeds, premiums, rebates and refunds,
choses in action, investment property, securities, partnership interests,
limited liability company interests, contracts, contract rights, general
intangibles (including without limitation, all customer and advertiser mailing
lists, intellectual property, patents, copyrights, trademarks, trade secrets,
trade names, domain names, goodwill, customer lists, advertiser lists, catalogs
and other printed materials, publications, indexes, lists, data and other
documents and papers relating thereto, blueprints, designs, charts, and
research and development, whether on paper, recorded electronically or
otherwise), all websites (including without limitation, all content, HTML
documents, audiovisual material, software, data, hardware, access lines,
connections, copyrights, trademarks, patents and trade secrets relating to such
websites) and domain names, any information stored on any medium, including
electronic medium, related to any of the personal property of such Credit
Party, all financial books and records and other books and records relating, in
any manner, to the business of such Credit Party, all proposals and cost
estimates and rights to performance, all instruments and promissory notes,
documents and chattel paper, and all debts, obligations and liabilities in
whatever form owing to such Credit Party from any person, firm or corporation
or any other legal entity, whether now existing or hereafter arising, now or
hereafter received by or belonging or owing to such Credit Party; and all
guaranties and security therefor, and all letters of credit and other
supporting obligations in respect of such debts, obligations and liabilities.


 


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


 


4.2                                 Special Warranties and Covenants of the
Credit Parties.  Each Credit
Party hereby warrants and covenants to the Lender that:


 


(a)                                  Such
Credit Party has delivered to the Lender a Perfection Certificate in substantially
the form of Exhibit C hereto. 
All information set forth in such Perfection Certificate is true and
correct in all material respects and the facts contained in such Perfection
Certificate are accurate in all material respects as of the date of this
Agreement.  Each Credit Party agrees to
supplement its Perfection Certificate promptly after obtaining information
which would require a correction or addition to such Perfection Certificate.


 


(b)                                 No
Credit Party will change its jurisdiction of organization, principal or any
other place of business, or the location of any Collateral from the locations
set forth in the Perfection Certificate delivered by such Credit Party, or make
any change in its name or conduct its business operations under any fictitious
business name or trade name, without, in any such case, at least thirty (30)
days’ prior written notice to the Lender; provided that the inventory of such
Credit Party may be in the possession of manufacturers or processors in any
jurisdiction in which all necessary UCC financing statements have


 


36

















 


been filed by the Lender
and with respect to which the Lender has received waiver letters from all
landlords, warehousemen and processors in form and substance acceptable to
Lender.


 


(c)                                  Except
for Collateral that is obsolete or no longer used in their business, the Credit
Parties will keep the Collateral in good order and repair (normal wear
excepted) and adequately insured at all times in accordance with the provisions
of Section 7.5.  The Credit Parties will
pay promptly when due all taxes and assessments on the Collateral or for its
use or operation, except for taxes and assessments permitted to be contested as
provided in Section 7.4.  Following the
occurrence and during the continuance of an Event of Default, the Lender may at
its option discharge any taxes or Liens to which any Collateral is at any time
subject (other than Permitted Liens), and may, upon the failure of the Credit
Parties to do so in accordance with this Agreement, purchase insurance on any
Collateral and pay for the repair, maintenance or preservation thereof, and
each Credit Party agrees to reimburse the Lender on demand for any payments or
expenses incurred by the Lender pursuant to the foregoing authorization and any
unreimbursed amounts shall constitute Obligations for all purposes hereof.


 


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


 


(e)                                  To
the extent, if any, that such Credit Party’s signature is required therefor,
each Credit Party will promptly execute and deliver to the Lender such
financing statements and amendments thereto, certificates and other documents
or instruments as may be necessary to enable the Lender to perfect or from time
to time renew the security interest granted hereby, including, without
limitation, such financing statements and amendments thereto, certificates and
other documents as may be necessary to perfect a security interest in any
additional Collateral hereafter acquired by such Credit Party or in any
replacements or proceeds thereof.  Each
Credit Party authorizes and appoints the Lender, in case of need, to execute
such financing statements, certificates and other documents pertaining to the
Lender’s security interest in the Collateral in its stead if such Credit
Party’s signature is required therefor and such Credit Party fails to so
execute such documents, with full power of substitution, as such Debtor’s
attorney in fact.


 


(f)                                    Each
Credit Party hereby irrevocably authorizes the Lender, at any time and from
time to time, to file in any jurisdiction financing statements and amendments
thereto that (i) indicate the Collateral (x) as all assets of such Credit Party
or words of similar effect, regardless of whether any particular asset falls
within the scope of Article 9 of the Uniform Commercial Code of the
Commonwealth of Massachusetts or such jurisdiction or (y) as being of an equal
or lesser scope or with greater detail and (ii) which contain any other
information required by Article 9 of the Uniform Commercial Code (including
Part 5 thereof) for the sufficiency or filing office acceptance of any
financing statement or amendment, including whether (A) any Credit Party is an
organization, the type of organization and any organization identification
number issued to such Credit Party and (B) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as-extracted collateral
or timber to be cut, a sufficient description of the real property to which the
Collateral relates.  The Credit Parties
agree to furnish any such information to the Lender promptly upon request.  Each Credit Party also ratifies its
authorization for the Lender to have filed in any Uniform Commercial Code
jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.


 


(g)                                 Each
Credit Party agrees that it will join with the Lender in executing and, at its
own expense, will file and refile, or permit the Lender to file and refile such
other documents (including, without limitation, this Agreement and licenses to
use software and other property protected by copyright), in such offices
(including, without limitation, the PTO, the United States Copyright Office,
and appropriate state patent, trademark and copyright offices), as the Lender
may reasonably deem necessary or appropriate, wherever required or permitted by
law in order to perfect and preserve the rights


 


37

















 


and interests granted to
the Lender in Patents, Trademarks and Copyrights hereunder.  Each Credit Party will give the Lender
notice of each office at which records of such Credit Party pertaining to all
intangible items of Collateral are kept. 
Except as may be provided in such notice, the records concerning all
intangible Collateral are and will be kept at the address shown in the
respective Perfection Certificate for such Credit Party as the principal place
of business of such Credit Party.


 


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


 


(i)                                     The
Credit Parties shall, annually by the end of the first calendar quarter
following the previous calendar year, provide written notice to the Lender of
all applications for registration of Patents, Trademarks or Copyrights, to the
extent such applications exist, made during the preceding calendar year.  The Credit Parties shall file and prosecute
diligently all applications for registration of Patents, Trademarks or
Copyrights now or hereafter pending that would be necessary to the business of
the Credit Parties to which any such applications pertain, and to do all acts,
in any such instance, necessary to preserve and maintain all rights in such
registered Patents, Trademarks or Copyrights unless such Patents, Trademarks or
Copyrights are not material to the business of the Credit Parties, as
reasonably determined by the Credit Parties consistent with prudent and
commercially reasonable business practices. 
Any and all costs and expenses incurred in connection with any such
actions shall be borne by the Credit Parties. 
Except in accordance with prudent and commercially reasonable business
practices, the Credit Parties shall not abandon any right to file a Patent,
Trademark or Copyright application or any pending Patent, Trademark or
Copyright application or any registered Patent, Trademark or Copyright, in each
case material to its business, without the consent of the Lender.


 


(j)                                     The
domain name servers used in connection with the domain names of the Credit
Parties and all other relevant information pertaining to such domain names, and
the administrative contacts used in connection with the registration of such
domain names are identified on Schedule 4.2 hereof.  No Credit Party will change such domain name
servers without 10 days’ prior notice to the Lender.  No Credit Party will cause a change in the identity of any domain
name administrative contact without 10 days’ prior notice to the Lender.


 


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


 


(l)                                     To
the extent any Credit Party shall, now or at any time hereafter, hold or
acquire any promissory note or other instrument or tangible chattel paper, such
Credit Party will promptly notify the Lender thereof and, at the request and
option of the Lender, such Debtor will deliver such promissory note or other
instrument or tangible chattel paper to the Lender to be held as Collateral
hereunder, together with an endorsement thereof reasonably satisfactory in form
and substance to the Lender.


 


38

















 


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


 


(n)                                 No Credit Party holds any commercial tort claims,
as defined in Article 9 of the Uniform Commercial Code, except as indicated in
the Perfection Certificate attached hereto as Exhibit C.  If any of the Credit Parties shall at any
time acquire a commercial tort claim, such Credit Party shall immediately
notify the Lender in a writing signed by such Credit Party of the brief details
thereof and grant to the Lender in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance reasonably satisfactory to the Lender.


 


(o)                                 If any Credit Party has accounts receivable in
respect of which the account debtor is located in Minnesota, the Credit Parties
represent and warrant that the applicable Credit Party has filed and shall file
all legally-required Notice of Business Activities Reports and comparable
reports with the appropriate government authorities.


 


4.3                                 Collection of Proceeds of Accounts
Receivable.


 


(a)                                  On
or before the Closing Date, the Credit Parties shall (i) direct all of their
account debtors to make all payments on accounts receivable of the Credit
Parties directly to post office boxes (each a “Lock Box” and
collectively the “Lock Boxes”) under the control of the Cash Management
Bank, (ii) establish accounts (each a “Controlled Account” and
collectively the “Controlled Accounts”) in the Lender’s name for the
benefit of the Borrowers with the Cash Management Bank, into which all payments
received in the Lock Boxes shall be deposited, and into which the Credit
Parties will immediately deposit all payments made for inventory or services
sold or rendered by the Credit Parties and received by the Credit Parties in
the identical form in which such payments were made, whether by cash or check,
and (iii) cause each Subsidiary and Affiliate, and any other Person acting for
or in concert with the Credit Parties that receives any monies, checks, notes,
drafts or other payments relating to or as proceeds of accounts receivable or
other Collateral, to receive and hold such items in trust for, and as the sole
and exclusive property of, the Lender and, immediately upon receipt thereof,
shall remit the same (or cause the same to be remitted) in hand to the
Controlled Accounts; provided that, for purposes of
administrative convenience, the Lender may in its reasonable discretion, permit
the Credit Parties from time to time to maintain one or more accounts with one
or more financial institutions other than the Cash Management Bank and with
such maximum cash balances as the Lender deems appropriate, and for which the
Credit Parties may, at the discretion of the Lender, be permitted to have
direct access.


 


(b)                                 Each
Credit Party acknowledges that the Cash Management Bank is an Affiliate of the
Lender and that the Cash Management Bank and the Lender are parties to cash
management agreements that confirm that the Lender has dominion and control
over all accounts of the Credit Parties or the Lender maintained by the Cash
Management Bank, and all funds from time to time held in such accounts.  The Borrowers, the Lender and the Cash
Management Bank hereby agree that the Cash Management Bank shall comply with
any instructions originated by the Lender directing disposition of funds in
such accounts without further consent of the Borrowers.  Each Credit Party agrees to enter into such
Lockbox Agreements and Control Agreements with the Cash Management Bank and the
Lender as the Lender may reasonably request. 
Each Credit Party also agrees to cause each financial institution other
than the Cash Management Bank with which a Lock Box and/or Controlled Account
has been established to, enter into a Lockbox Agreement and/or Control
Agreement, as applicable, confirming that the


 


39

















 


amounts on deposit in
such Lock Box and/or Controlled Account, as applicable, are the property of and
are under the control of the Lender, that such financial institution has no
right to setoff against such Lock Box or Controlled Account or against any
other account maintained by such financial institution into which the contents
of such Controlled Account are transferred, and that upon written notice from
the Lender, such financial institution shall wire, or otherwise transfer in
immediately available funds in a manner satisfactory to the Lender, funds
deposited in the Controlled Account on a daily basis as such funds are
collected.


 


(c)                                  The
Credit Parties agree to pay all reasonable fees, costs and expenses which the
Credit Parties incur in connection with opening and maintaining a Lock Box and
Controlled Account.  All of such fees,
costs and expenses which remain unpaid pursuant to any Lock Box or Control
Agreement with the Credit Parties, to the extent same shall have been paid by
the Lender hereunder, shall constitute Loans hereunder, shall be payable to the
Lender by the Credit Parties upon demand, and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder.  All checks, drafts, instruments and other
items of payment or proceeds of Collateral delivered to the Lender or the Cash
Management Bank in kind shall be endorsed by the Credit Parties, to the Lender,
and, if that endorsement of any such item shall not be made for any reason, the
Lender and the Cash Management Bank are each hereby irrevocably authorized to
endorse the same on behalf of the Credit Parties.  For the purpose of this subsection 4.3(c), each Credit Party
irrevocably hereby makes, constitutes and appoints the Lender (and all Persons designated
by the Lender for that purpose, including, without limitation, the Cash
Management Bank) as such Credit Party’s true and lawful attorney and
agent-in-fact (i) to endorse the name of the such Credit Party upon said items
of payment and/or proceeds of Collateral of the Credit Parties and upon any
chattel paper, document, instrument, invoice or similar document or agreement
relating to any account receivable of the Credit Parties or goods pertaining
thereto; (ii) to take control in any manner of any item of payment or proceeds
thereof; (iii) to have access to any Lock Box or postal box into which any mail
of the Credit Parties is deposited; and (iv) open and process all mail
addressed to the Credit Parties and deposited therein.


 


(d)                                 The
Lender (and all Persons designated by the Lender for such purpose, including,
without limitation, the Cash Management Bank) may, at any time and from time to
time after the occurrence and during the continuance of an Event of Default,
whether before or after notification to any account debtor and whether before
or after the maturity of any of the Obligations, (i) enforce collection of any
accounts receivable or contract rights of the Credit Parties by suit or
otherwise; (ii) exercise all of the rights and remedies of the Credit Parties
with respect to proceedings brought to collect any accounts receivable; (iii)
surrender, release or exchange all or any part of any accounts receivable of
the Credit Parties, or compromise or extend or renew for any period (whether or
not longer than the original period) any indebtedness thereunder; (iv) sell or
assign any account receivable of the Credit Parties upon such terms, for such
amount and at such time or times as the Lender deems advisable; (v) prepare,
file and sign the names of the Credit Parties on any proof of claim in
bankruptcy or other similar document against any account debtor indebted on an
account receivable of the Credit Parties; and (vi) do all other acts and things
which are necessary, in the Lender’s sole discretion, to fulfill the
Obligations of the Credit Parties under this Agreement and to allow the Lender
to collect the accounts receivable.  In
addition to any other provision hereof or in any of the other Loan Documents,
the Lender may at any time on or after the occurrence of an Event of Default,
at the sole expense of the Credit Parties, notify any parties obligated on any
of the accounts receivable of the Credit Parties to make payment directly to
the Lender of any amounts due or to become due thereunder.


 


4.4                                 Fixtures, etc. 
It is the intention of the parties hereto that (except for Collateral
located on any Mortgaged Property) none of the Collateral shall become fixtures
and each Credit Party will take all such reasonable action or actions as may be
necessary to prevent any of the Collateral from becoming fixtures.  Without limiting the generality of the
foregoing, each Credit Party will, if requested by the


 


40

















 


Lender, use commercially reasonable efforts to obtain waivers of Liens,
in form satisfactory to the Lender, from each lessor of real property on which
any of the Collateral is or is to be located to the extent requested by the
Lender.


 


4.5                                 Right of Lender to Dispose of Collateral, etc.   Upon the occurrence of any Event of Default,
such Event of Default not having previously been waived, remedied or cured, but
subject to the provisions of the Uniform Commercial Code or other applicable
law, in addition to all other rights under applicable law and under the Loan
Documents, the Lender shall have the right to take possession of the Collateral
and, in addition thereto, the right to enter upon any premises on which the
Collateral or any part thereof may be situated and remove the same
therefrom.  The Lender may require the
Credit Parties to make the Collateral (to the extent the same is moveable)
available to the Lender at a place to be designated by the Lender or transfer
any information related to the Collateral to the Lender by electronic
medium.  Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, the Lender will give the Credit
Parties at least seven (7) days’ prior written notice of the time and place of
any public sale thereof or of the time after which any private sale or any
other intended disposition thereof is to be made.  Any such notice shall be deemed to meet any requirement hereunder
or under any applicable law (including the Uniform Commercial Code) that
reasonable notification be given of the time and place of such sale or other
disposition.


 


4.6                                 Right of Lender to Use and Operate Collateral, etc.  Upon the occurrence and during the
continuance of any Event of Default, subject to the provisions of the Uniform
Commercial Code or other applicable law, the Lender shall have the right and
power (a) to take possession of all or any part of the Collateral, and to
exclude the Credit Parties and all persons claiming under the Credit Parties
wholly or partly therefrom, and thereafter to hold, store, and/or use, operate,
manage and control the same, and (b) to grant a license to use, or cause to be
granted a license to use, any or all of the Patents, Trademarks and Copyrights
(in the case of Trademarks, along with the goodwill associated therewith), but
subject to the terms of any licenses. 
Upon any such taking of possession, the Lender may, from time to time,
at the expense of the Credit Parties, make all such repairs, replacements,
alterations, additions and improvements to and of the Collateral as the Lender
may deem proper.  In any such case the
Lender shall have the right to manage and control the Collateral and to carry
on the business and to exercise all rights and powers of the Credit Parties in
respect thereto as the Lender shall deem best, including the right to enter
into any and all such agreements with respect to the operation of the
Collateral or any part thereof as the Lender may see fit; and the Lender shall
be entitled to collect and receive all rents, issues, profits, fees, revenues
and other income of the same and every part thereof.  Such rents, issues, profits, fees, revenues and other income
shall be applied to pay the expenses of holding and operating the Collateral
and of conducting the business thereof, and of all maintenance, repairs,
replacements, alterations, additions and improvements, and to make all payments
which the Lender may be required or may elect to make, if any, for taxes,
assessments, insurance and other charges upon the Collateral or any part
thereof, and all other payments which the Lender may be required or authorized
to make under any provision of this Agreement (including legal costs and
reasonable attorneys’ fees).  The Lender
shall apply the remainder of such rents, issues, profits, fees, revenues and
other income as provided in  Section 4.7.


 


4.7                                 Proceeds of Collateral. 
After deducting all reasonable costs and expenses of collection,
storage, custody, sale or other disposition and delivery (including reasonable
legal costs and attorneys’ fees) and all other charges against the Collateral,
the Lender shall apply the residue of the proceeds of any such sale or
disposition to the Obligations in accordance with the terms hereof  and
any surplus shall be returned to the Credit Parties or to any Person or party
lawfully entitled thereto.  In the event
the proceeds of any sale, lease or other disposition of the Collateral are
insufficient to pay all of the Obligations in full, the Credit Parties will be
liable for the deficiency, together with interest thereon at the Post-Default
Rate, and the cost and expenses of collection of such deficiency, including (to
the extent permitted by law), without limitation, reasonable attorneys’ fees,
expenses and disbursements.


 


41

















 


ARTICLE 5



Representations
and Warranties


 


Each Credit Party
represents and warrants to the Lender and the Issuing Lender as to itself and
each other Credit Party, that:


 


5.1                                 Organization; Powers.  Each
Credit Party has been duly formed or organized and is validly existing and in
good standing under the laws of its jurisdiction of organization.  Each Credit Party has all requisite power
and authority to carry on its business as now conducted and is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required, except where the failure to have such power or
authority or to be so qualified or in good standing, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.


 


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


 


5.3                                 Governmental Approvals; No
Conflicts.  The borrowing of
the Loans and the grant of the security interests pursuant to the Loan
Documents (a) do not require any consent or approval of, registration or filing
with, or any other action by, any Governmental Authority which has not been
obtained, except as disclosed on Schedule 5.3, (b) will not violate any
applicable law, policy or regulation or the organizational documents of the
Credit Parties or any order of any Governmental Authority, (c) will not violate
or result in a default under any indenture, agreement or other instrument
binding upon the Credit Parties, or any assets, or give rise to a right
thereunder to require any payment to be made by the Credit Parties, and such
violation or default or right to payment would have a Material Adverse Effect,
and (d) except for the Liens created by the Loan Documents, will not result in
the creation or imposition of any Lien on any asset of the Credit Parties.


 


5.4                                 Financial Condition; No Material Adverse Change.


 


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


 


(i)                                     the
consolidated balance sheets and statements of operations, shareholders’ equity
and cash flows of the Credit Parties, as of and for the fiscal years ended
December 31, 1999, and December 31, 2000, and December 31, 2001, audited and
accompanied by an opinion of the Credit Parties’ independent public
accountants;


 


(ii)                                  the
draft audited consolidated balance sheet and statements of operations,
shareholder’s equity and cash flows of the Credit Parties, as of and for the
fiscal year ended December 31, 2002, certified by a Designated Financial
Officer that such financial statements fairly present the financial condition
of the Credit Parties as at such date and the results of the operations of the
Credit Parties for the period ended on such date and that all such financial
statements, including the related schedules and notes thereto have been
prepared in all material


 


42

















 


respects in accordance
with GAAP applied consistently throughout the periods involved, except as
disclosed on Schedule 5.4; and


 


(iii)                               the
management summary of operations of the Credit Parties for the 12 month period
ended on December 31, 2002, set forth on a monthly basis, certified by a
Designated Financial Officer that such summary of operations fairly presents
the financial condition of the Credit Parties as at such date and for the
periods specified therein;


 


(iv)                              the
projected consolidated balance sheets, statements of operations and cash flows,
and projected Excess Availability for the Credit Parties on a monthly basis for
fiscal year 2003 .


 


Except as disclosed on Schedule 5.4,
such financial statements (except for the projections) present fairly, in all
material respects, the respective consolidated financial position and results
of operations and cash flows of the respective entities as of such respective
dates and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of such unaudited or pro forma
statements.  The projections were
prepared by the Credit Parties in good faith and were based on assumptions that
were reasonable when made.


 


(b)                                 Except
as disclosed on Schedule 5.4, since December 31, 2001, there has
been no material adverse change in the business, assets, operations or
condition, financial or otherwise, of the Credit Parties from that set forth in
the December 31, 2001 financial statements referred to in clause (i) of paragraph
(a) above.


 


(c)                                  None
of the Credit Parties has on the date hereof any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized
or anticipated losses from any unfavorable commitments in each case that are
material, except as referred to or reflected or provided for in the balance
sheets as at the end of their respective fiscal years ended December 31, 2001,
referred to above, as provided for in Schedule 5.4 annexed hereto,
or as otherwise permitted pursuant to this Agreement, or as referred to or
reflected or provided for in the financial statements described in this
Section 5.4.


 


5.5                                 Properties.


 


(a)                                  Each
Credit Party has good and marketable title to, or valid, subsisting and
enforceable leasehold interests in, all its Property material to its
business.  All machinery and equipment
of the Credit Parties is in good operating condition and repair (ordinary wear
and tear excepted), and all necessary replacements of and repairs thereto have
be made so as to preserve and maintain the value and operating efficiency of
such machinery and equipment.  As of the
date hereof, Schedule 5.5 annexed hereto contains a true, accurate
and complete list of (i) all owned equipment and all leased equipment, and (ii)
all equipment leases (together with all amendments, modifications, supplements,
renewals or extensions of any thereof). 
Except as specified in Schedule 5.5, each agreement listed
in clause (ii) of the immediately preceding sentence is in full force and
effect and the Borrowers have no knowledge of any default that has occurred and
is continuing thereunder, and each such agreement constitutes the legal, valid
and binding obligation of each applicable Credit Party, enforceable against
such Credit Party in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles.


 


(b)                                 Set
forth on Schedule 5.5 hereto is a complete list of all Patents,
Trademarks and Copyrights.  Each Credit
Party owns, or is licensed to use, all Patents, Trademarks and Copyrights and


 


43

















 


other intellectual property material to its business (“Proprietary
Rights”), and to the knowledge of the Borrowers, the use thereof by the
Credit Parties does not infringe upon the rights of any other Person, except
for any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.


 


(c)                                  Schedule
5.5 clearly identifies all Patents, Trademarks and Copyrights that have
been duly registered in, filed in or issued by the PTO or the United States
Register of Copyrights (collectively, the “Registered Proprietary Rights”).  The Registered Proprietary Rights have been
properly maintained and renewed in accordance with all applicable provisions of
law and administrative regulations in the United States, as applicable.  The Credit Parties have taken commercially
reasonable steps to protect their Registered Proprietary Rights and to maintain
the confidentiality of all Proprietary Rights that are not generally in the
public domain.


 


(d)                                 As
of the date hereof, Schedule 5.5 annexed hereto contains a true,
accurate and complete list of (i) all Real Property Assets, whether owned or
leased, and (ii) all leases, subleases or assignments of leases (together with
all amendments, modifications, supplements, renewals or extensions of any
thereof) affecting each Leasehold Property, regardless of whether such Credit
Party is the landlord or tenant (whether directly or as an assignee or
successor in interest) under such lease, sublease or assignment.  Except as specified in Schedule 5.5,
each agreement listed in clause (ii) of the immediately preceding sentence is
in full force and effect and the Borrowers have no knowledge of any default
that has occurred and is continuing thereunder, and each such agreement
constitutes the legal, valid and binding obligation of each applicable Credit
Party, enforceable against such Credit Party in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors’ rights generally
or by equitable principles.


 


5.6                                 Litigation and Environmental Matters.


 


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


 


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


 


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


 


5.7                                 Compliance with Laws and Agreements.  Except as set forth on Schedule 5.7,
each Credit Party is in compliance with all laws, regulations, policies and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding


 


44

















 


upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.


 


5.8                                 Investment and Holding Company Status.  No Credit Party is (a) an “investment
company” as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended, (b) a “holding company” as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935, as amended or
(c) a “bank holding company” as defined in, or subject to regulation under, the
Bank Holding Company Act of 1956, as amended.


 


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


 


5.10                           ERISA.  Except as
set forth on Schedule 5.10, no Credit Party has any Pension Plans.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be expected
to result in a Material Adverse Effect. 
No Credit Party has a present intention to terminate any Pension Plan
with respect to which any Credit Party would incur a cost of more than $100,000
to terminate such Plan, including amounts required to be contributed to fund
such Plan on Plan termination and all costs and expenses associated therewith,
including without limitation attorneys’ and actuaries’ fees and expenses in
connection with such termination and a reasonable estimate of expenses and
settlement or judgment costs and attorneys’ fees and expenses in connection
with litigation related to such termination.


 


5.11                           Disclosure.  As of
the Effective Time, the Credit Parties have disclosed to the Lender all
material agreements, instruments and corporate or other restrictions to which
any Credit Party is subject after the Effective Time, and all other matters
known to the Credit Parties, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.  The organizational structure of the Credit
Parties is as set forth on Schedule 5.12 annexed hereto.  The information, reports, financial
statements, exhibits and schedules furnished at or prior to the Effective Time
in writing by or on behalf of the Credit Parties to the Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Loan Documents or included herein or therein or delivered pursuant hereto or
thereto, at the Effective Time, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which
they were made, not materially misleading. 
All written information furnished after the Effective Time by the Credit
Parties to the Lender in connection with this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of pro-forma
information and projections) prepared in good faith based on reasonable
assumptions, on the date as of which such information is stated or
certified.  There is no fact known to
the Credit Parties that could reasonably be expected to have a Material Adverse
Effect that has not been disclosed herein, in the other Loan Documents or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Lender for use in connection with the transactions
contemplated hereby or thereby.


 


5.12                           Capitalization.  As of the Effective Time, the capital
structure and ownership of the Credit Parties are correctly described on Schedule 5.12.  As of the Effective Time, the authorized,
issued and outstanding capital stock of the Credit Parties consists of the
capital stock described on Schedule 5.12, all of which is duly and
validly issued and outstanding, fully paid and nonassessable.  Except as set forth on Schedule 5.12,
as of the date hereof, (x) there are no outstanding Equity Rights with


 


45

















 


respect to any Credit Party and, (y) there are no outstanding
obligations of any Credit Party to repurchase, redeem, or otherwise acquire any
shares of capital stock of or other interest in any Credit Party, nor are there
any outstanding obligations of any Credit Party to make payments to any Person,
such as “phantom stock” payments, where the amount thereof is calculated with
reference to the fair market value or equity value of any Credit Party.


 


5.13                           Subsidiaries.


 


(a)                                  Set
forth on Schedule 5.13 is a complete and correct list of all
Subsidiaries of the Credit Parties as of the date hereof, together with, for
each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary,
(ii) each Person holding ownership interests in such Subsidiary and (iii) the
nature of the ownership interests held by each such Person and the percentage
of ownership of such Subsidiary represented by such ownership interests.  Except as disclosed in Schedule 5.13,
(x) each Credit Party and its respective Subsidiaries owns, free and clear of
Liens (other than Liens permitted hereunder), and has the unencumbered right to
vote, all outstanding ownership interests in each Person shown to be held by it
in Schedule 5.13, (y) all of the issued and outstanding capital
stock of each such Person organized as a corporation is validly issued, fully
paid and nonassessable and (z) there are no outstanding Equity Rights with
respect to such Person.


 


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


 


5.14                           Material Indebtedness, Liens and
Agreements.


 


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


 


(b)                                 Schedule 5.14
hereto is a complete and correct list, as of the date of this Agreement, of
each Lien (other than the Liens in favor of the Lender) securing Indebtedness
of any Person and covering any property of the Credit Parties, and the
aggregate Indebtedness secured (or which may be secured) by each such Lien and
the Property covered by each such Lien is correctly described in the
appropriate part of Schedule 5.14.


 


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


 


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


 


46

















 


5.15                           Federal Reserve Regulations.  No Credit Party is engaged principally or as
one of its important activities in the business of extending credit for the
purpose of purchasing or carrying margin stock (as defined in Regulation U
of the Board).  The making of the Loans
hereunder, the use of the proceeds thereof as contemplated hereby, and the
security arrangements contemplated by the Loan Documents, will not violate or
be inconsistent with any of the provisions of Regulations T, U, or X of the
Board of Governors of the Federal Reserve System.


 


5.16                           Solvency.  As of
the Effective Time and after giving effect to the initial Loans hereunder and
the other transactions contemplated hereby:


 


(a)                                  the
aggregate value of all properties of the Credit Parties at their present fair
saleable value on a going concern basis (i.e., the amount that may be realized
within a reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the latter
as the amount that could be obtained for such properties within such period by
a capable and diligent businessperson from an interested buyer who is willing
to purchase under ordinary selling conditions), exceed the amount of all the
debts and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of the Credit Parties;


 


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


 


(c)                                  the
Credit Parties will have, on a consolidated basis, sufficient cash flow to
enable them to pay their debts as they mature.


 


5.17                           Force Majeure.  Since December 31, 2001, the business,
properties and other assets of the Credit Parties have not been materially and
adversely affected in any way as the result of any fire or other casualty,
strike, lockout or other labor trouble, embargo, sabotage, confiscation,
contamination, riot, civil disturbance, activity of armed forces or act of God.


 


5.18                           Accounts Receivable.  The Lender may rely, in determining which
accounts receivable are Eligible Accounts, on all statements and
representations made by the Credit Parties with respect to such accounts
receivable.  Unless otherwise indicated
to the Lender in writing:


 


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


 


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


 


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


 


(d)                                 Each
account receivable, and the Lender’s security interest therein, is not, and
will not (by voluntary act or omission of the Credit Parties) be in the future,
subject to any offset, Lien, deduction, defense, dispute, counterclaim or any
other adverse condition except for disputes resulting in returned goods where
the amount in controversy is deemed by the Lender to be immaterial, and each
such


 


47

















 


account receivable is absolutely owing to one of the Credit Parties and
is not contingent in any respect or for any reason;


 


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


 


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


 


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


 


5.19                           Labor and Employment Matters.


 


(a)                                  Except
as set forth on Schedule 5.19 as of the Effective Time, and
thereafter with respect to which such would have a Material Adverse Effect, (A)
no employee of the Credit Parties is represented by a labor union, no labor
union has been certified or recognized as a representative of any such
employee, and the Credit Parties do not have any obligation under any
collective bargaining agreement or other agreement with any labor union or any
obligation to recognize or deal with any labor union, and there are no such
contracts or other agreements pertaining to or which determine the terms or
conditions of employment of any employee of the Credit Parties; (B) there are
no pending or threatened representation campaigns, elections or proceedings;
(C) the Credit Parties do not have knowledge of any strikes, slowdowns or work
stoppages of any kind, or threats thereof, and no such activities occurred
during the 24-month period preceding the date hereof; (D) no Credit Party has
engaged in, admitted committing or been held to have committed any unfair labor
practice; and (E) there are no controversies or grievances between any Credit
Party and any of its employees or representatives thereof.


 


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


 


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


 


5.20                           Bank Accounts.  Schedule 5.20 lists all banks and
other financial institutions at which any Credit Party maintains deposits
and/or other accounts as of the Closing Date, and such Schedule correctly
identifies the name and address of each depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number.


 


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ARTICLE 6



Conditions


 


6.1                                 Effective Time.  The obligations of the Lender to make
Revolving Loans and Term Loans, and of the Issuing Lender to issue Letters
of Credit hereunder shall not become effective until the date on which each of
the following conditions is satisfied (or waived in accordance with
Section 10.2):


 


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


 


(b)                                 Notes.  The Lender shall have received a duly
completed and executed Revolving Credit Note, a duly completed and executed
Equipment Term Note, and a duly completed and executed Real Estate Term Note.


 


(c)                                  Organizational
Structure.  The corporate organizational
structure, capitalization and ownership of the Credit Parties, shall be as set
forth on Schedules 5.12 and 5.13 annexed hereto.  The Lender shall have had the opportunity to
review, and shall be satisfied with, the Credit Parties’ state and federal tax
assumptions, and the ownership, capital, organization and structure of the
Credit Parties.


 


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


 


(e)                                  Security
Interests in Personal and Mixed Property. 
The Lender shall have received evidence satisfactory to it that the
Credit Parties shall have taken or caused to be taken all such actions,
executed and delivered or caused to be executed and delivered all such
agreements, documents and instruments and made or caused to be made all such
filings and recordings (other than filings or recordings to be made by the
Lender on or after the Closing Date) that may be necessary or, in the opinion
of the Lender, desirable in order to create in favor of the Lender, valid and
(upon such filing and recording) perfected First Priority security interests in
the entire personal and mixed property Collateral.


 


(f)                                    Mortgage;
Etc.  The Lender shall have received
from the Credit Parties fully executed and notarized Mortgages, in the form of Exhibit
G, in proper form for recording in all appropriate places in all applicable
jurisdictions, encumbering each parcel of Material Owned Property existing as
of the Closing Date that is designated as a “Mortgaged Property” on Schedule
1.1 hereto (each such parcel, a “Mortgaged Property”), together with
mortgagee title insurance policies or commitments therefor, and copies of all
surveys, deeds, title exception documents, flood hazard certificates and other
documents as the Lender may reasonably require.


 


(g)                                 Leases;
Landlord’s Waivers and Consents.  In the
case of each Material Leasehold Property existing as of the Closing Date,
copies of the lease, and all amendments thereto, between the Credit Party and
the landlord or tenant party thereto, together with a Landlord’s Waiver and
Consent with respect thereto and where required by the terms of any lease, the
consent of the mortgagee, ground lessor or other party.


 


49

















 


(h)                                 Hazardous
Materials Environmental Indemnity.  A
Hazardous Materials Indemnity Agreement from the Credit Parties with respect to
the indemnification of the Lender for any liabilities that may be imposed on or
incurred by any of them as a result of any Hazardous Materials that may be
located on any Real Property Asset.


 


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


 


(j)                                     Evidence
of Insurance.  The Lender shall have
received certificates from the Credit Parties’ insurance brokers that all
insurance required to be maintained pursuant to Section 7.5 is in full
force and effect and that the Lender has been named as additional insured or
loss payee thereunder to the extent required under Section 7.5.


 


(k)                                  Necessary
Governmental Permits, Licenses and Authorizations and Consents; Etc.  The Credit Parties shall have obtained all
other permits, licenses, authorizations and consents from all other
Governmental Authorities and all consents of other Persons with respect to
Material Indebtedness, Liens and material agreements listed on Schedule 5.14
(and so identified thereon) annexed hereto, in each case that are necessary or
advisable in connection with the transactions contemplated by the Loan
Documents, and each of the foregoing shall be in full force and effect, in each
case other than those the failure to obtain or maintain which, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.  No action,
request for stay, petition for review or rehearing, reconsideration or appeal
with respect to any of the foregoing shall be pending, and the time for any
applicable Governmental Authority to take action to set aside its consent on
its own motion shall have expired.


 


(l)                                     Existing
Debt; Liens.  The Lender shall have
received evidence that all principal, interest, and other amounts owing in
respect of all Existing Debt of the Credit Parties (other than Indebtedness
permitted to remain outstanding in accordance with Section 8.1 hereof)
will be repaid in full as of the Effective Time, and that with respect to all
Indebtedness permitted to remain outstanding in accordance with Section 8.1
hereof, any defaults or events of default existing as of the Closing Date with
respect to such Indebtedness will be cured or waived immediately following the
funding of the initial Loans.  The
Lender shall have received evidence that as of the Effective Time, the Property
of the Credit Parties is not subject to any Liens (other than Liens permitted
to remain outstanding in accordance with Section 8.2 hereof).


 


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


 


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


 


50

















 


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


 


(p)                                 No
Material Adverse Change.  There shall
have occurred no material adverse change (in the reasonable opinion of the Lender)
in the businesses, operations, properties (including tangible properties), or
conditions (financial or otherwise), assets, liabilities or income of the
Credit Parties.


 


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


 


(r)                                    Borrowing
Base and Collateral Update Certificates. 
A Designated Financial Officer shall have executed and delivered to the
Lender a Borrowing Base Certificate substantially in the form of Exhibit B-1
annexed hereto, which Borrowing Base Certificate shall show Excess Availability
under the Revolving Credit Commitment of not less than $1,000,000 (after giving
effect to the payment of all sums and expenses, the issuance of all Letters of
Credit and the funding of all Loans to be paid, issued or funded at the
Effective Time), and a Collateral Update Certificate substantially in the form
of Exhibit B-2 annexed hereto.


 


(s)                                  Lockbox
Accounts/Controlled Accounts.  The
Credit Parties shall have established such Lock Box Accounts and Controlled
Accounts with the Cash Management Bank as required in accordance with Section
4.3 hereof, and shall have entered into all Lockbox Agreements and/or Control
Agreements as shall be required by the Lender.


 


(t)                                    Inspection,
Audit and Appraisal.  The Lender shall
have (i) discussed the business and operations of the Credit Parties with the
senior management of the Credit Parties, (ii) inspected the facilities of the
Credit Parties, (iii) conducted an audit of the books and records of the Credit
Parties and (iv) received appraisal reports and other information regarding the
assets of the Credit Parties as the Lender may require conducted by auditors satisfactory
to the Lender, and the results of such meeting, inspection, audit and
appraisals shall be in form, scope and substance satisfactory to the Lender in
its sole discretion.


 


(u)                                 Fees
and Expenses.  The Lender and the
Issuing Lender shall have received all fees and other amounts due and payable
to such Person and Special Counsel at or prior to the Effective Time,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.


 


(v)                                 Other
Documents.  The Lender shall have
received all material contracts, instruments, opinions, certificates,
assurances and other documents as the Lender or Special Counsel shall have
reasonably requested and the same shall be reasonably satisfactory to each of
them.


 


6.2                                 Each Extension of Credit.  The obligation of the Lender to make a Loan
on the occasion of any Borrowing, and of the Issuing Lender to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:


 


51

















 


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


 


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


 


(c)                                  Excess
Availability.  The Borrowers’ shall
have Excess Availability of not less than $1 after giving effect to the funding
of such requested Loan or the issuance of such requested Letter of Credit.


 


ARTICLE 7




Affirmative
Covenants


 


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


 


7.1                                 Financial Statements and Other Information.  The Credit Parties will furnish to the
Lender:


 


(a)                                  as
soon as available and in any event within 90 days after the end of each fiscal
year of the Credit Parties:


 


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


 


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


 


(b)                                 as
soon as available and in any event within (x) 45 days after each December 31st,
March 31st, June 30th and September 30th, and (y) 30 days after the end of each
other month:


 


(i)                                     consolidated
statements of operations, shareholders’ equity and cash flows of the Credit
Parties for such month and for the period from the beginning of the respective
fiscal year to the end of such month, and the related consolidated balance
sheets of the Credit


 


52

















 


 Parties as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated figures
for the corresponding period in the preceding fiscal year, and the
corresponding figures for the forecasts most recently delivered to the Lender
for such period, and


 


(ii)                                  a
certificate of a Designated Financial Officer, which certificate shall state
that said financial statements referred to in the preceding clause (i) fairly
present in all material respects the consolidated financial condition and
results of operations of the Credit Parties, in each case in accordance with
GAAP, consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments and the omission of footnotes);


 


(c)                                  as
soon as available and in any event (i) simultaneously with the delivery of the
monthly financial statements delivered pursuant to subsection 7.1(b) above, a
Compliance Certificate duly executed by a Designated Financial Officer with
respect to such monthly financial statements, and (ii) within 90 days after the
end of each fiscal year, a Compliance Certificate duly executed by a Designated
Financial Officer with respect to the annual financial statements delivered
pursuant to subsection 7.1(a) above;


 


(d)                                 as
soon as available and in any event simultaneously with the delivery of the
monthly financial statements delivered pursuant to subsection 7.1(b) above a
management summary of operations of the Credit Parties for such month, certified
by a Designated Financial Officer that such summary of operations fairly
presents the financial condition of the Credit Parties for such month;


 


(e)                                  within
five days after the same are sent or filed, copies of all financial statements
and reports which the Credit Parties send to the holders of any public equity
securities and all periodic financial statements, final registration statements
(excluding exhibits) and reports which the Company or the Borrower may make to,
or file with, the Securities and Exchange Commission;


 


(f)                                    as
soon as available and in any event within three (3) days after the end of each
week with respect to such week (or more frequently if requested by the Lender),
(i) a Collateral Update Certificate in the form attached hereto as Exhibit
B-2,


 


(g)                                 as
soon as available and in any event within twenty (20) days after the end of
each month with respect to such month (or more frequently if requested by the
Lender), (i) a Borrowing Base Certificate in the form attached hereto as Exhibit
B-1, (ii) an Accounts Receivable/Loan Reconciliation Report in the form
attached hereto as Exhibit B-3, (iii) a summary of inventory by type and
location, (iv) an accounts receivable aging report, and (v) such other
information relating to the Collateral as the Lender shall reasonably request,
in each case, accompanied by such supporting detail and documentation as the
Lender shall reasonably request;


 


(h)


 


(i)                                     as
soon as available and in any event prior to the end of each fiscal year of the
Credit Parties, statements of forecasted consolidated income and cash flows for
the Credit Parties for each fiscal quarter in the immediately succeeding fiscal
year and a forecasted consolidated balance sheet of the Credit Parties as of
the last day of each fiscal quarter in such succeeding fiscal year, and a
comparison of the projected Excess Availability as of the last day of each
fiscal quarter in such succeeding fiscal year with the Excess Availability as
of the last day of each fiscal quarter in the current fiscal year, together
with supporting assumptions which were reasonable when made, all prepared in
good faith in reasonable detail and consistent with the Credit Parties’ past
practices in preparing projections and otherwise reasonably satisfactory in
scope to the Lender;


 


53

















 


(j)                                     as
soon as available and in any event prior to March 1 of each year, statements of
forecasted consolidated income and cash flows for the Credit Parties for each
fiscal month in the current fiscal year and a forecasted consolidated balance
sheet of the Credit Parties as of the last day of each fiscal month in such
fiscal year, and a comparison of the projected Excess Availability as of the
last day of each fiscal month in such fiscal year with the Excess Availability
as of the last day of each fiscal month in the immediately prior fiscal year,
together with supporting assumptions which were reasonable when made, all
prepared in good faith in reasonable detail and consistent with the Credit Parties’
past practices in preparing projections and otherwise reasonably satisfactory
in scope to the Lender;


 


(k)                                  as
soon as available and in any event no later than 1:00 p.m. (Boston time) on
each day that the Borrowers make any request for any Borrowing hereunder, an
Advance Request in the form attached hereto as Exhibit B-5.


 


(l)                                     promptly
upon receipt thereof, copies of all management letters and accountants’ letters
received by the Credit Parties; and


 


(m)                               promptly
following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Credit Parties, or
compliance with the terms of this Agreement, as the Lender may reasonably
request.


 


7.2                                 Notices of Material Events.  The Credit Parties will furnish to the
Lender prompt written notice of the following:


 


(a)                                  the
occurrence of any Default;


 


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


 


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


 


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


 


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


 


7.3                                 Existence; Conduct of Business.  Each Credit Party shall do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation, dissolution or any
discontinuance or sale of such business permitted under Section 8.4.


 


7.4                                 Payment of Obligations.  Each Credit Party shall pay its obligations,
including Tax liabilities, that, if not paid, could result in a Material
Adverse Effect before the same shall become delinquent or in default, except
where (a) the validity or amount thereof is being contested in good faith


 


54

















 


by appropriate proceedings, (b) such Credit Party has set aside on its
books adequate reserves with respect thereto in accordance with GAAP, which
reserves shall be acceptable to Lender, and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.


 


7.5                                 Maintenance of Properties; Insurance.  Each Credit Party shall (a) keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear excepted, and (b) maintain
insurance, with financially sound and reputable insurance companies, as may be
required by law and such other insurance in such amounts and against such risks
as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations, including, without
limitation, business interruption and product liability insurance.  Without limiting the generality of the foregoing,
the Credit Parties will maintain or cause to be maintained replacement value
casualty insurance on the Collateral under such policies of insurance, in each
case with such insurance companies, in such amounts, with such deductibles, and
covering such terms and risks as are at all times satisfactory to the Lender in
its commercially reasonable judgment. 
All general liability and other liability policies with respect to the
Credit Parties shall name the Lender as an additional insured thereunder as its
interests may appear, and all business interruption and casualty insurance
policy shall contain a loss payable clause or endorsement, satisfactory in form
and substance to the Lender that names the Lender as the loss payee thereunder.  All policies of insurance shall provide for
at least 30 days prior written notice to the Lender of any modifications or
cancellation of such policy.


 


7.6                                 Books and Records; Inspection Rights.  Each Credit Party shall keep proper books of
record and account in which entries are made of all dealings and transactions
in relation to its business and activities which fairly record such
transactions and activities.  Each
Credit Party shall permit any representatives designated by the Lender to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants as frequently as the Lender deems appropriate provided
that, so long as no Default has occurred and is continuing, all such visits
shall be on reasonable prior notice, at reasonable times during regular
business hours of such Credit Party, and provided further that after the occurrence
and during the continuance of any Default, the Lender may visit at any reasonable
times.  The Borrowers shall reimburse
the Lender for all examination and inspections costs, internal costs at the
rate of $850  per man-day, plus all out-of-pocket expenses incurred in
connection with such inspections.  The
Credit Parties will permit independent appraisers and environmental consultants
selected by the Lender to visit the properties of the Credit Parties and
perform appraisals and examinations of the inventory, equipment and Real
Property Assets of the Credit Parties at such times and with such frequencies
as the Lender shall reasonably request. The Borrowers shall reimburse the
Lender for all fees, costs and expenses charged by such independent appraisers
and environmental consultants for each such appraisal and examination.


 


7.7                                 Fiscal Year.  To
enable the ready and consistent determination of compliance with the covenants
set forth in Section 8.10 hereof, the Credit Parties shall not change
their current fiscal year or current method of determining the last day of the
first three fiscal quarters in each fiscal year without the prior written
consent of the Lender.


 


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


 


55

















 


7.9                                 Use of Proceeds.  The proceeds of the Loans will be used only
for (i) the refinancing of existing indebtedness, (ii) fees and expenses
incurred in connection with the transactions contemplated by this Agreement,
and (iii) for general corporate and working capital purposes (including Capital
Expenditures) of the Credit Parties.  No
part of the proceeds of any Loan will be used, whether directly or indirectly,
for any purpose that entails a violation of any of the Regulations of the
Board, including Regulations T, U and X.


 


7.10                           Certain Obligations Respecting Subsidiaries.  Each Credit Party will, and will cause each
of its Subsidiaries to, take such action from time to time as shall be
necessary to ensure that the percentage of the issued and outstanding shares of
capital stock of any class or character owned by it in any Subsidiary on the
date hereof is not at any time decreased, other than by reason of transfers to
another Credit Party.


 


7.11                           ERISA.  Except where a failure to comply with any of
the following, individually or in the aggregate, would not or could not
reasonably be expected to result in a Material Adverse Effect, (i) the Credit
Parties will maintain, and cause each ERISA Affiliate to maintain, each Plan in
compliance with all applicable requirements of ERISA and of the Code and with
all applicable rulings and regulations issued under the provisions of ERISA and
of the Code and (ii) the Credit Parties will not and, to the extent authorized,
will not permit any of the ERISA Affiliates to (a) engage in any transaction
with respect to any Plan which would subject any Credit Party to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, (b) fail to make full payment when due of all
amounts which, under the provisions of any Plan, any Credit Party or any ERISA
Affiliate is required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency (as such term is defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, with respect to
any Pension Plan or (c) fail to make any payments to any Multiemployer Plan
that any Credit Party or any of the ERISA Affiliates may be required to make
under any agreement relating to such Multiemployer Plan or any law pertaining
thereto.


 


7.12                           Environmental Matters; Reporting.  The Credit Parties will observe and comply
with, and cause each Subsidiary to observe and comply with all Environmental
Laws to the extent non-compliance could reasonably be expected to have a
Material Adverse Effect.  The Credit
Parties will give the Lender prompt written notice of any violation as to any
Environmental Law by any Credit Party and of the commencement of any judicial
or administrative proceeding relating to Environmental Laws (a) in which an
adverse result would have a material adverse effect on any operating permits,
air emission permits, water discharge permits, hazardous waste permits or other
environmental permits held by any Credit Party, or (b) which will, or is likely
to, have a Material Adverse Effect on such Credit Party or which will require a
material expenditure by such Credit Party to cure any alleged problem or
violation.


 


7.13                           Matters Relating to Additional Real Property
Collateral.


 


(a)                                  From
and after the Effective Time, in the event that any Credit Party acquires any
Material Owned Property that the Lender determines is an Additional Mortgaged
Property or in the event that the Lender determines that any Real Property
Asset has become an Additional Mortgaged Property, the Borrowers shall deliver,
to the Lender, as soon as practicable after the Lender has notified the
Borrowers that a Real Property Asset is an Additional Mortgaged Property, fully
executed and notarized Mortgages (“Additional Mortgages”), in proper
form for recording in all appropriate places in all applicable jurisdictions,
encumbering the interest of the applicable Credit Party in such Additional
Mortgaged Property, together with mortgagee title insurance policies or
commitments therefor, and copies of all surveys, deeds, title exception documents,
flood hazard certificates and other documents as the Lender may reasonably
require copies of all deeds with respect to such Additional Mortgaged Property.


 


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


 


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


 


7.14                           Cash Deposits/Bank Accounts.  The Credit Parties shall take all actions
necessary to maintain, preserve and protect the rights and interests of the
Lender with respect to all cash deposits of the Credit Parties and all other
proceeds of Collateral and shall not, without the Lender’s prior written
consent, open any deposit or other bank account, or instruct any account debtor
to make payment to any account other than to an established dominion account,
Lock Box Account or other Controlled Account 
under the Lender’s control; provided that so long as no Default or
Event of Default shall have occurred and be continuing, the Credit Parties
shall be permitted to maintain payroll and accounts not subject to the Lender’s
control so long as the aggregate amount of funds on deposit in all such payroll
accounts does not materially exceed estimated payroll for the next payroll
period.


 


ARTICLE 8




Negative
Covenants


 


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


 


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


 


(a)                                  Indebtedness
created hereunder;


 


(b)                                 Existing
Debt on the Closing Date which is set forth in Schedule 8.1 and has
been designated on such schedule as Indebtedness that will remain outstanding
following the funding of the initial Loans, and any extension, renewal,
refunding or replacement of any such Indebtedness that does not increase the
principal amount thereof;


 


(c)                                  Intercompany
loans among the Credit Parties;


 


(d)                                 other
Indebtedness incurred after the Closing Date (determined on a consolidated
basis without duplication in accordance with GAAP) consisting of Capital Lease
Obligations and/or secured by Liens permitted under Section 8.2(h), in an
aggregate principal amount at any time outstanding not in excess of $5,000,000;
and


 


(e)                                  Guarantees
permitted under Section 8.3.


 


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8.2                                 Liens.  The Credit
Parties will not, and will not permit any Subsidiary to, create, incur, assume
or permit to exist any Lien on any Property or asset now owned or hereafter
acquired by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except (the following being
called “Permitted Liens”):


 


(a)                                  Liens
created hereunder or under the other Loan Documents;


 


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


 


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


 


(d)                                 landlords’,
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like
Liens, and vendors’ Liens imposed by statute or common law not securing the
repayment of Indebtedness, arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested in
good faith and by appropriate proceedings and Liens securing judgments
(including, without limitation, pre-judgment attachments) but only to the
extent for an amount and for a period not resulting in an Event of Default
under Section 9.1(j) hereof;


 


(e)                                  pledges
or deposits under worker’s compensation, unemployment insurance and other
social security legislation and pledges or deposits to secure the performance
of bids, tenders, trade contracts (other than for borrowed money), leases
(other than capital leases), utility purchase obligations, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;


 


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


 


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


 


(h)                                 Liens
on fixed or capital assets, including real or personal property, acquired,
constructed or improved by any Credit Party, provided that (A) such Liens
secure Indebtedness (including Capital Lease Obligations) permitted by
Section 8.1(d), (B) such Liens and the Indebtedness secured thereby
are incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement or were in effect at the time
the Credit Parties acquired the assets or stock, (C) the Indebtedness secured
thereby does not exceed the cost of acquiring, constructing or improving


 


58

















 


such fixed or capital assets, and (D) such security interests shall not
apply to any other property or assets of the Credit Parties.


 


8.3                                 Contingent Liabilities.  The Credit Parties will not Guarantee the
Indebtedness or other obligations of any Person, or Guarantee the payment of
dividends or other distributions upon the stock of, or the earnings of, any
Person, except:


 


(a)                                  endorsements
of negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business;


 


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


 


(c)                                  obligations
in respect of Letters of Credit.


 


8.4                                 Fundamental Changes; Asset Sales.


 


(a)                                  The
Credit Parties will not enter into any transaction of merger or consolidation
or amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution) without the prior written consent of the
Lender.  The Credit Parties will not
acquire any business or property from, or capital stock of, or other equity
interests in, or be a party to any acquisition of, any Person without the prior
written consent of the Lender, except for purchases of property to be used in
the ordinary course of business, Investments permitted under Section 8.5
and Capital Expenditures.  The Credit
Parties will not form or acquire any Subsidiary without the prior written
consent of the Lender.  The Credit
Parties will not issue or sell any of their capital stock or other equity
interests without the prior consent of the Lender (other than in connection
with Equity Rights issued or granted to members of the Credit Parties’ boards
of directors or employees consistent with the Credit Parties’ past business
practices).


 


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


 


(c)                                  Notwithstanding
the foregoing provisions of this Section 8.4:


 


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


 


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


 


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8.5                                 Investments; Hedging Agreements.


 


(a)                                  The
Credit Parties will not make or permit to remain outstanding any Investment,
except:


 


(i)                                     Investments
consisting of Guarantees permitted by Section 8.3(c) and Indebtedness
permitted by Section 8.1; Intercompany Indebtedness; and capital contributions
by any Credit Party to any other Credit Party;


 


(ii)                                  Permitted
Investments; and


 


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


 


(b)                                 The
Credit Parties will not enter into any Hedging Agreement without the prior
written consent of the Lender.


 


8.6                                 Restricted Junior Payments.  The Credit Parties will not declare or make
any Restricted Junior Payment at any time; provided, however, that any Credit
Party that is a Subsidiary of another Credit Party may pay dividends to such
Credit Party.


 


8.7                                 Transactions with Affiliates.  Except as expressly permitted by this
Agreement, the Credit Parties will not directly or indirectly (a) make any
Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise
dispose of any property to an Affiliate; (c) merge into or consolidate with an
Affiliate, or purchase or acquire property from an Affiliate; or (d) enter into
any other transaction directly or indirectly with or for the benefit of an
Affiliate (including, without limitation, guarantees and assumptions of
obligations of an Affiliate); provided that:


 


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


 


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


 


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


 


8.8                                 Restrictive Agreements.  The Credit Parties will not directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement (other than this Agreement) that prohibits, restricts or imposes
any condition upon (a) the ability of any Credit Party to create, incur or
permit to exist any Lien upon any of its property or assets, or (b) the ability
of any Credit Party that is a Subsidiary of another Credit Party to pay
dividends or other distributions with respect to any shares of its capital
stock or other equity interests or to make or repay loans or advances to any other
Credit Party or to Guarantee Indebtedness of any other Credit Party; provided
that (i) the foregoing shall not apply to restrictions and conditions imposed
by law or by this Agreement, (ii) the foregoing shall not apply to restrictions
and conditions existing on the date hereof identified on Schedule 8.8
(but shall apply to any extension or renewal of, or any amendment or
modification expanding the scope of, any such restriction


 


60

















 


or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of
stock or assets of a Subsidiary of a Credit Party pending such sale, provided
such restrictions and conditions apply only to the Subsidiary that is to be
sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any agreement relating
to secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness, and
(v) clause (a) of the foregoing shall not apply to customary provisions in
leases and other contracts (excluding license agreements) restricting the
assignment thereof.


 


8.9                                 Sale-Leaseback Transactions.   No Credit Party will directly or indirectly,
enter into any arrangements with any Person whereby such Credit Party shall
sell or transfer (or request another Person to purchase) any property, real,
personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property from any Person.


 


8.10                           Certain Financial Covenants.


 


(a)                                  Fixed
Charge Coverage Ratio.  Beginning on
December 31, 2003, the Credit Parties shall not permit the Fixed Charge
Coverage Ratio as of the end of each fiscal quarter for the period of four
fiscal quarters most recently ended to be less than 1:00 to 1.00.


 


(b)                                 Tangible
Net Worth.  The Credit Parties shall not
permit the Tangible Net Worth (determined on a consolidated basis without
duplication in accordance with GAAP) at any time during the periods set forth
below to be less than the required Tangible Net Worth set forth below opposite
such periods:


 


	
  Period

  	
   

  	
  Required Tangible Net Worth

  
	
  Effective Date
  through March 31, 2003

  	
   

  	
  $

  	
  3,500,000

  
	
   

  	
   

  	
   

  
	
  for each
  succeeding fiscal quarter of the Credit Parties

  	
   

  	
  The required Tangible
  Net Worth of the Credit Parties for the immediately preceding fiscal quarter plus
  33% of the quarterly net income of the Credit Parties for the current fiscal
  quarter; provided that the required Tangible Net Worth shall not be reduced
  by net losses of the Credit Parties

  



 


(c)                                  EBITDA.  The Credit Parties shall not permit EBITDA
for the periods set forth below to be less than the amount set forth opposite
such period below:


 


	
  Period

  	
   

  	
  Minimum EBITDA

  
	
  January
  1, 2003 through 

  March 31, 2003

  	
   

  	
  $

  	
  250,000

  
	
   

  	
   

  	
   

  
	
  January
  1, 2003 through 

  June 30, 2003

  	
   

  	
  $

  	
  1,000,000

  
	
   

  	
   

  	
   

  
	
  January
  1, 2003 through 

  September 30, 2003

  	
   

  	
  $

  	
  1,900,000

  



 


61

















 


(d)                                 Capital
Expenditures.  The Credit Parties shall
not, and shall not permit any Subsidiary to, make any Capital Expenditures
(including, without limitation, incurring any Capital Lease Obligations) which,
in the aggregate for the Credit Parties and all Subsidiaries, exceed $3,750,000
at any time during any fiscal year.


 


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


 


8.12                           Other Indebtedness.  The Credit Parties will not purchase,
redeem, retire or otherwise acquire for value, or set apart any money for a
sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any voluntary payment or prepayment
of the principal of or interest on, or any other amount owing in respect of any
Subordinated Indebtedness, except as may be consented to by the Lender.


 


8.13                           Modifications of Certain Documents.  The Credit Parties will not consent to any
modification, supplement or waiver of any of the provisions of any documents or
agreements evidencing or governing any Existing Debt.


 


ARTICLE 9




Events of Default


 


9.1                                 Events of Default.  The occurrence of any of the following
events shall be deemed to constitute an “Event of Default” hereunder:


 


(a)                                  the
Credit Parties shall fail to pay to the Lender, the Issuing Lender, the Cash
Management Bank or any other Affiliate of the Lender, any principal of or
interest on any Loan or any Reimbursement Obligation in respect of any LC
Disbursement or any other Obligation of the Credit Parties to the Lender, the
Issuing Lender, the Cash Management Bank or any other Affiliate of the Lender
when the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof, by acceleration of such due or
prepayment date, or otherwise;


 


(b)                                 any
representation or warranty made or deemed made by or on behalf of any Credit
Party or any Subsidiary in or in connection with this Agreement, any of the
other Loan Documents or any amendment or modification hereof or thereof, or in
any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement, any of the other Loan
Documents or any amendment or modification hereof or thereof, shall prove to
have been incorrect in any material respect when made or deemed made;


 


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


 


62

















 


(d)                                 the
Credit Parties shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement (other than those specified in clauses
(a), (b) or (c) of this Section 9.1) or any other Loan Document, and such
failure shall continue unremedied for a period of 30 days after notice thereof
from the Lender to the Credit Parties;


 


(e)                                  the
Credit Parties shall fail to make any payment (whether of principal, interest
or otherwise and regardless of amount) in respect of (x) any Material Indebtedness
when and as the same shall become due and payable, after giving effect to any
grace period with respect thereto, or (y) any Material Rental Obligation when
and as the same shall become due and payable, after giving effect to any grace
period with respect thereto, except with respect to Material Rental Obligations
where (i) the payment thereof is being contested in good faith by appropriate
proceedings, (ii) such Credit Party has set aside on its books adequate
reserves with respect thereto in accordance with GAAP, which reserves shall be
acceptable to Lender, and (iii) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse
Effect;


 


(f)                                    any
event or condition occurs that results in (i) any Material Indebtedness of any
Credit Party becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its
or their behalf to cause such Material Indebtedness to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity, or (ii) the lease with respect to any Material Rental
Obligation of any Credit Party being terminated prior to its scheduled
expiration date or that enables or permits (with or without the giving of
notice, the lapse of time or both) the counterparty to such lease to cause such
lease to be terminated prior to its scheduled expiration date;


 


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


 


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


 


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


 


(j)                                     a
final judgment or judgments for the payment of money (x) in excess of $100,000
in the aggregate (exclusive of judgment amounts fully covered by insurance
where the insurer has admitted liability in respect of such judgment) or (y) in
excess of $250,000 in the aggregate (regardless of insurance coverage), shall
be rendered by one or more courts, administrative tribunals or other bodies
having jurisdiction against any Credit Party and the same shall not be
discharged (or provision shall not be made for such discharge), bonded, or a
stay of execution thereof shall not be


 


63

















 


procured, within 60 days from the date of entry thereof and the
relevant Credit Party shall not, within said period of 60 days, or such longer
period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal;


 


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


 


(l)                                     there
shall occur any Change of Control;


 


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


 


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


 


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


 


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


 


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


 


64

















 


9.2                                 Receivership.  Without limiting the generality of the foregoing or limiting in
any way the rights of the Lender hereunder or under the other Loan Documents or
otherwise under applicable law, at any time after (i) the entire principal
balance of any Loan shall have become due and payable (whether at maturity, by
acceleration or otherwise) and (ii) the Lender shall have provided to the
Borrowers not less than ten (10) days’ prior written notice of its intention to
apply for a receiver, the Lender shall be entitled to apply for and have a
receiver appointed under state or federal law by a court of competent jurisdiction
in any action taken by the Lender to enforce its rights and remedies hereunder
and under the other Loan Documents in order to manage, protect, preserve, sell
and otherwise dispose of all or any portion of the Collateral and continue the
operation of the business of the Credit Parties, and to collect all revenues
and profits thereof and apply the same to the payment of all expenses and other
charges of such receivership, including the compensation of the receiver, and
to the payment of the Loans and other fees and expenses due hereunder and under
the Loan Documents as aforesaid until a sale or other disposition of such
Collateral shall be finally made and consummated.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH CREDIT PARTY
HEREBY IRREVOCABLY CONSENTS TO AND WAIVES ANY RIGHT TO OBJECT TO OR OTHERWISE
CONTEST THE APPOINTMENT OF A RECEIVER AS PROVIDED ABOVE.  EACH CREDIT PARTY (I) GRANTS SUCH WAIVER AND
CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE IMPLICATIONS THEREOF WITH COUNSEL,
(II) ACKNOWLEDGES THAT (A) THE UNCONTESTED RIGHT TO HAVE A RECEIVER APPOINTED
FOR THE FOREGOING PURPOSES IS CONSIDERED ESSENTIAL BY THE LENDER IN CONNECTION
WITH THE ENFORCEMENT OF ITS RIGHTS AND REMEDIES HEREUNDER AND UNDER THE OTHER
LOAN DOCUMENTS, AND (B) THE AVAILABILITY OF SUCH APPOINTMENT AS A REMEDY UNDER
THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING THE LENDER TO
MAKE THE LOANS TO THE BORROWERS; AND (III) AGREES TO ENTER INTO ANY AND ALL
STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN
CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE LENDER IN
CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE RECEIVER OVER ALL
OR ANY PORTION OF THE COLLATERAL.  THE
LENDER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS SECTION 9.2 SHALL BE
DEEMED TO CONSTITUTE A WAIVER OF THE RIGHT OF CREDIT PARTIES TO FILE FOR
PROTECTION UNDER TITLE 11 OF THE UNITED STATES CODE AT ANY TIME.


 


ARTICLE 10




Miscellaneous


 


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


 


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


 


(b)                                 if
to the Lender, to Fleet Capital Corporation, One Federal Street, Mail Stop MA
DE 10307X, Boston, Massachusetts 02110, Attention: Daniel Corcoran, Senior Vice
President (Fax no.:  (617-654-1167),
with a copy to Palmer & Dodge LLP, 111 Huntington Avenue, Boston, MA
02199-7613, Attention:  David L.
Ruediger (Fax no. (617-227-4420).


 


65

















 


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


 


10.2                           Waivers; Amendments.


 


(a)                                  No
failure or delay by the Lender, the Issuing Lender, the Cash Management Bank or
any Affiliate of the Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. 
The rights and remedies of the Lender, the Issuing Lender, the Cash
Management Bank and all Affiliates of the Lender hereunder and under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have.  No
waiver of any provision of this Agreement or consent to any departure by any
Credit Party or Subsidiary therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section 10.2, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.  Without
limiting the generality of the foregoing, the making of a Loan or issuance of a
Letter of Credit shall not be construed as a waiver of any Default, regardless
of whether the Lender or the Issuing Lender may have had notice or knowledge of
such Default at the time.


 


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


 


10.3                           Expenses; Indemnity; Damage Waiver.


 


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


 


(b)                                 The
Credit Parties jointly and severally agree to indemnify the Lender, the Issuing
Lender, the Cash Management Bank, each Affiliate of the Lender and each Related
Party of any of the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee and settlement costs, incurred
by


 


66

















 


or asserted against any Indemnitee arising out of, in connection with,
or as a result of (i) the execution or delivery of this Agreement, the other
Loan Documents or any agreement or instrument contemplated hereby, the
performance by the parties hereto and thereto of their respective obligations
hereunder or thereunder or the consummation of the transactions contemplated
hereby or any other transactions contemplated hereby or thereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Lender to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned, leased or
operated by any Credit Party or any Subsidiary, or any Environmental Liability
related in any way to any Credit Party or any Subsidiary, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee.


 


(c)                                  To
the extent permitted by applicable law, none of the Credit Parties shall
assert, and each Credit Party hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, the other Loan Documents or any
agreement or instrument contemplated hereby or thereby, the transactions
contemplated hereby, any Loan or Letter of Credit or the use of the proceeds
thereof.


 


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


 


10.4                           Successors and Assigns.


 


(a)                                  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted
hereby, except that no Credit Party may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Lender
(and any attempted assignment or transfer without such consent shall be null
and void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of the
Lender, the Issuing Lender and the Cash Management Bank) any legal or equitable
right, remedy or claim under or by reason of this Agreement.


 


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


 


(c)                                  The
Lender may at any time and from time to time, sell participations to one or
more banks or other entities (a “Participant”) in all or a portion of
the Lender’s rights and obligations under this Agreement (including all or a
portion of the Revolving Credit Commitment and the Loans owing to it); provided
that (i) the Lender’s obligations under this Agreement shall remain unchanged,
(ii) the Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations and (iii) the Borrowers shall continue to
deal solely and directly with the Lender in connection with the Lender’s rights
and obligations under this Agreement. 
The Borrowers agree that each Participant shall be entitled to the
benefits of this Agreement to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this
Section 10.4; provided that a


 


67

















 


Participant shall not be entitled to receive any greater payment under
this Agreement than the Lender would have been entitled to receive with respect
to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrowers’ prior written
consent.


 


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


 


(e)                                  The
Lender may furnish any information concerning any Credit Party, any Subsidiary
in the possession of the Lender from time to time to assignees and participants
(including prospective assignees and participants) subject, however, to and so
long as the recipient agrees in writing to be bound by, the provisions of
Section 10.13.  In addition, the
Lender may furnish any information concerning any Credit Party, any Subsidiary,
any Affiliate in the Lender’s possession to any Affiliate of the Lender,
subject, however, to the provisions of Section 10.13.  The Credit Parties shall assist the Lender
in effectuating any assignment or participation pursuant to this
Section 10.4 in whatever manner the Lender reasonably deems necessary,
including participation in meetings with prospective transferees.


 


10.5                           Survival.  All
covenants, agreements, representations and warranties made by the Credit
Parties and Subsidiaries herein and in the other Loan Documents, and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement and the other Loan Documents, shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the other Loan Documents and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Lender or the Issuing Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect so long as the principal
of or any accrued interest on any Loan or any fee or any other Obligation
payable under this Agreement or the other Loan Documents is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Revolving
Credit Commitment has not expired or terminated.  The provisions of Sections 2.9, 2.10 and 10.3 shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Revolving Credit Commitment or the
termination of this Agreement or any other Loan Document or any provision
hereof or thereof.


 


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


 


68

















 


10.7                           Severability.  Any provision of this Agreement held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.


 


10.8                           Right of Setoff.  Each Credit Party hereby grants to the
Lender, the Cash Management Bank and each Affiliate of the Lender that from
time to time maintains any deposit accounts, holds any funds or otherwise
becomes indebted to the Credit Parties a security interest in all deposits
(general or special, time or demand, provisional or final) and funds at any
time held and other indebtedness at any time owing by the Lender, the Cash
Management Bank or any such Affiliate of the Lender to or for the credit or the
account of any Credit Party as security for the Obligations, and the Credit
Parties hereby agree that if an Event of Default shall have occurred and be
continuing, the Lender, the Cash Management Bank and each Affiliate of the
Lender are hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) or other funds at any time held
and other indebtedness at any time owing by the Lender, the Cash Management
Bank or any Affiliate of the Lender to or for the credit or the account of any
Credit Party against any and all of the Obligations, irrespective of whether or
not the Lender shall have made any demand under this Agreement and although any
of the Obligations may be unmatured. 
The rights of the Lender, the Cash Management Bank and each Affiliate of
the Lender under this Section 10.8 are in addition to any other rights and
remedies (including other rights of setoff) which the Lender, the Cash
Management Bank or any Affiliate of the Lender may have.


 


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


 


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


 


(a)                                  This
Agreement shall be construed in accordance with and governed by the law of The
Commonwealth of Massachusetts.


 


(b)                                 Each
party hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the courts of The Commonwealth of
Massachusetts and of the United States District Court for the District of
Massachusetts, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
Massachusetts court (or, to the extent permitted by law, in such Federal
court).  Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be


 


69

















 


conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  Nothing in this Agreement shall affect any right that the Lender,
the Issuing Lender or the Cash Management Bank may otherwise have to bring any
action or proceeding relating to this Agreement against any Credit Party, any
Subsidiary or its properties in the courts of any jurisdiction.


 


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


 


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


 


10.11                     WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.


 


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


 


10.13                     Confidentiality.  The Lender agrees to keep confidential
information obtained by it pursuant hereto and the other Loan Documents
confidential in accordance with the Lender’s customary practices and agrees
that it will only use such information in connection with the transactions
contemplated by this Agreement and not disclose any of such information other
than (a) to the Lender’s employees, representatives, directors, attorneys,
auditors, agents, professional advisors, trustees or Affiliates who are advised
of the confidential nature of such information or to any direct or indirect
contractual counterparty in swap agreements or such contractual counterparty’s
professional advisor (so long as such contractual counterparty or professional
advisor to such contractual counterparty agrees to be bound by the provisions
of this Section 10.13), (b) to the extent such information presently is or
hereafter becomes available to the Lender on a non-confidential basis from any
source of such information that is in the public domain at the time of
disclosure, (c) to the extent disclosure is required by law (including
applicable securities law), regulation, subpoena or judicial order or process (provided
that notice of such requirement or order shall be promptly furnished to the
Borrowers unless such notice is legally prohibited) or requested or required by
bank, securities, insurance or investment company regulators or auditors or any
administrative body or commission to whose jurisdiction the Lender may be
subject, (d) to any rating agency to the extent required in connection with any
rating to be assigned to the Lender, (e) to assignees or participants or
prospective assignees or participants who agree to be bound by the provisions
of this Section 10.13, (f) to the extent required in connection with any
litigation between any Credit Party


 


70

















 


and the Lender with respect to the Loans or this Agreement and the
other Loan Documents or (g) with the Borrowers’ prior written consent.


 


71

















 


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


 


	
   

  	
  BORROWERS

  
	
   

  	
   

  
	
   

  	
  UFP TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MOULDED FIBRE
  TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIMCO INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIMCO AUTOMOTIVE TRIM,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


72

















 


	 
	
   

  	
  LENDER

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
   

  	 

	
   

  	
  FLEET CAPITAL
  CORPORATION,

  
	
   

  	
   as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ISSUING LENDER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEET NATIONAL BANK,

  
	
   

  	
   as Issuing Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASH MANAGEMENT BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEET NATIONAL BANK,

  
	
   

  	
   as Cash Management Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					



 


73

















 


SCHEDULES &
EXHIBITS


 


	
  Schedule 1.1

  	
   

  	
  Material Owned
  Properties

  
	
  Schedule 1.4

  	
   

  	
  Designated Financial
  Officers

  
	
  Schedule 4.2

  	
   

  	
  Websites and Domain
  Names

  
	
  Schedule 5.3

  	
   

  	
  Governmental Approvals;
  No Conflicts

  
	
  Schedule 5.4

  	
   

  	
  Financial Condition; No
  Material Adverse Changes

  
	
  Schedule 5.5

  	
   

  	
  Properties; Proprietary
  Rights; Real Property Assets

  
	
  Schedule 5.6

  	
   

  	
  Litigation and
  Environmental Matters

  
	
  Schedule 5.7

  	
   

  	
  Compliance with Laws
  and Agreements

  
	
  Schedule 5.9

  	
   

  	
  Taxes

  
	
  Schedule 5.10

  	
   

  	
  Pension Plans

  
	
  Schedule 5.12

  	
   

  	
  Organizational
  Structure; Capitalization

  
	
  Schedule 5.13

  	
   

  	
  Subsidiaries

  
	
  Schedule 5.14

  	
   

  	
  Material Indebtedness,
  Liens and Agreements

  
	
  Schedule 5.19

  	
   

  	
  Labor and Employment
  Matters

  
	
  Schedule 5.20

  	
   

  	
  Bank Accounts

  
	
  Schedule 8.1

  	
   

  	
  Existing Indebtedness

  
	
  Schedule 8.7

  	
   

  	
  Transactions with
  Affiliates

  
	
  Schedule 8.8

  	
   

  	
  Restrictive Agreements

  
	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
   

  	
  Form of Revolving
  Credit Note

  
	
  Exhibit A-2

  	
   

  	
  Form of Equipment Term
  Note

  
	
  Exhibit A-3

  	
   

  	
  Form of Real Estate
  Term Note

  
	
  Exhibit B-1

  	
   

  	
  Form of Borrowing Base
  Certificate

  
	
  Exhibit B-2

  	
   

  	
  Form of Collateral
  Update Certificate

  
	
  Exhibit B-3

  	
   

  	
  Form of Accounts
  Receivable/Loan Reconciliation Report

  
	
  Exhibit B-4

  	
   

  	
  Form of Eurodollar
  Request

  
	
  Exhibit B-5

  	
   

  	
  Form of Advance Request

  
	
  Exhibit C

  	
   

  	
  Form of Perfection
  Certificate

  
	
  Exhibit D

  	
   

  	
  Form of Compliance
  Certificate

  
	
  Exhibit E

  	
   

  	
  Form of Stock Pledge
  Agreement

  
	
  Exhibit F

  	
   

  	
  Form of Hazardous
  Materials Indemnity Agreement

  
	
  Exhibit G

  	
   

  	
  Form of Mortgage

  
	
  Exhibit H

  	
   

  	
  Form of Landlord Waiver
  & Consent

  
	
  Exhibit I

  	
   

  	
  Form of Opinion of
  Counsel to the Borrower

  
	
  Exhibit J

  	
   

  	
  Form of Solvency
  Certificate

  



 


74