Exhibit 10.1


 


AMENDED AND RESTATED FINANCING AND SECURITY
AGREEMENT


by and among


 


OPTELECOM-NKF, INC.,


OPTELECOM-NKF HOLDING B.V.,


OPTELECOM-NKF,  B.V.


OPTELECOM-NKF S.L.,


 OPTELECOM UK LIMITED,


and


OPTELECOM-NKF LIMITED


 


as Obligors


 


and


 


MANUFACTURERS AND TRADERS TRUST COMPANY,
Lender


 


Dated: June 25, 2008


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
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AMENDED AND RESTATED FINANCING AND SECURITY
AGREEMENT


 


THIS AMENDED AND RESTATED FINANCING AND
SECURITY AGREEMENT (this “Agreement”) is made as of June 25, 2008, by and
among (a) OPTELECOM-NKF, INC., a corporation organized under the laws of
the State of Delaware (the “U.S. Borrower”); (b) OPTELECOM-NKF HOLDING,
B.V., a private company with limited liability organized and existing under the
laws of The Netherlands (the “Dutch Borrower”)(the U.S. Borrower and the Dutch
Borrower each being sometimes called a “Borrower” and both of them being
collectively called the “Borrowers”); (c) OPTELECOM-NKF,  B.V., a private company with limited
liability organized and existing under the laws of The Netherlands (“NKF”); (d) OPTELECOM-NKF
S.L., a private company with limited liability organized and existing under the
laws of Spain (the “Spanish Subsidiary”); (e) OPTELECOM UK LIMITED, a
company organized and existing under the laws of England and Wales; and (f) OPTELECOM-NKF
LIMITED, a company organized and existing under the laws of England and Wales
(each a “U.K. Subsidiary” and collectively, the “U.K. Subsidiaries”)(the U.S.
Borrower, the Dutch Borrower, the U.K. Subsidiaries, the Spanish Subsidiary and
each Additional Obligor (hereinafter defined) being each sometimes call an “Obligor”
and all of them collectively, the “Obligors”); and MANUFACTURERS AND TRADERS
TRUST COMPANY, a New York State banking corporation (the “Lender”).


 


RECITALS


 


A.            Subject
to that certain Amended and Restated Financing and Security Agreement dated as
of March 8, 2005 (the “Original Financing Agreement”), by and among the
U.S. Borrower, NKF, the UK Subsidiaries, 
the Spanish Subsidiary and the Bank, the Bank made certain revolving
credit facilities and term loans available to the U.S. Borrower and NKF.


 


B.            The Obligors have requested the Lender to restructure the
credit facilities and term loans made available to the U.S. Borrower and NKF so
that following such restructure the indebtedness of the Obligors to the Bank
will consist of: (i) a revolving credit facility in the maximum principal
amount of Five Million Dollars ($5,000,000) to be made available to the U.S.
Borrower for the purpose of obtaining letters of credit and financing the U.S.
Borrower’s working capital needs, (ii) a revolving credit facility in the
maximum principal amount of the Euro Currency Equivalent (hereinafter defined)
of Five Million Dollars ($5,000,000) to be made available to the Dutch Borrower
in Dollars for the purpose of obtaining letters of credit and financing the
Dutch Borrower’s working capital needs, and (iii) a term loan in the
maximum principal amount of Four Million One Hundred Ninety Five Thousand Sixty
Five Dollars and Sixty Cents ($4,195,065.60) to be made available to the Dutch
Borrower for the purpose of purchasing all of the outstanding the stock of NKF
from the U.S. Borrower.


 


C.            The Lender is willing restructure the Obligors’
indebtedness to the Bank in order to make such credit facilities and term loans
available to the Borrowers upon the terms and subject to the conditions set
forth in this Agreement.


 

















 


AGREEMENTS


 


                NOW, THEREFORE, in consideration of the
premises and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Obligors and the Bank hereby amend and
restate the Original Financing Agreement in its entirety to read as follows;
provided that (a) the Original Financing Agreement shall continue in full
force and effect as amended and restated by this Agreement, and (b) nothing
herein contained shall be construed to cancel, extinguish, release, discharge
or constitute a novation of the obligations and liabilities of the Obligors
under the Original Financing Agreement, all of which shall continue in full
force and effect as amended hereby, and are ratified and confirmed by the
Obligors by their execution and delivery of this Agreement:


 


ARTICLE I

DEFINITIONS


 


Section 1.1             Certain
Defined Terms.


 


As used in this Agreement, the
terms defined in the Preamble and Recitals hereto shall have the respective
meanings specified therein, and the following terms shall have the following
meanings:


 


“Account” individually and “Accounts”
collectively mean all presently existing or hereafter acquired or created
accounts (as defined in the Maryland Uniform Commercial Code-Secured
Transactions), accounts receivable, receivables arising out of the use of a
credit or charge card or information contained on or for use with the card, contract
rights, notes, drafts, instruments, acceptances, chattel paper, leases and
writings evidencing a monetary obligation or a security interest in, or a lease
of, goods, all rights to receive the payment of money or other consideration
under present or future contracts, or by virtue of merchandise sold or leased,
services rendered, loans and advances made or other considerations given, by or
set forth in or arising out of any present or future chattel paper, note,
draft, lease, acceptance, writing, bond, insurance policy, instrument, document
or general intangible, and all extensions and renewals of any thereof, all
rights under or arising out of present or future contracts, agreements or
general interest in goods which gave rise to any or all of the foregoing,
including all commercial tort claims (as defined in the Maryland Uniform
Commercial Code-Secured Transactions), other claims or causes of action now
existing or hereafter arising in connection with or under any agreement or
document or by operation of law or otherwise, all collateral security of any
kind, Supporting Obligations, letter-of-credit rights (as defined in the
Maryland Uniform Commercial Code-Secured Transactions) and letters of credit
given by any Person with respect to any of the foregoing, all books and records
in whatever media (paper, electronic or otherwise) recorded or stored, with
respect to any or all of the foregoing and all equipment and general
intangibles necessary or beneficial to retain, access and/or process the
information contained in those books and records, and all proceeds (cash and
non-cash) of the foregoing.


 


“Account Debtor” means any
Person who is obligated on a Receivable and “Account Debtors” means
collectively, all Persons who are obligated on the Receivables.


 

















 


“Additional Obligor” means each
Subsidiary of the Obligors which has executed and delivered an Additional
Obligor Joinder Supplement and has otherwise complied with the provisions of Section 6.2.2
(Subsidiaries).


 


“Additional Obligor Joinder
Supplement” shall mean an Additional Obligor Joinder Supplement in
substantially the form attached hereto as EXHIBIT A, with the blanks
appropriately completed and executed and delivered by the Additional Obligor,
the U.S. Borrower and the Lender.


 


“Affiliate” means, with respect
to any designated Person, any other Person, (a) directly or indirectly
controlling, directly or indirectly controlled by, or under direct or indirect
common control with the Person designated, (b) directly or indirectly
owning or holding five percent (5%) or more of any equity interest in such
designated Person, or (c) five percent (5%) or more of whose stock or
other equity interest is directly or indirectly owned or held by such
designated Person.  For purposes of this
definition, the term “control” (including with correlative meanings, the terms “controlling”,
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting securities or
other equity interests or by contract or otherwise.


 


“Agreement” means this
Financing and Security Agreement, as amended, restated, supplemented or
otherwise modified in writing in accordance with the provisions of Section 8.2
(Amendments; Waivers).


 


“Aggregate Revolving Loan Cap”
means Five Million Dollars ($5,000,000). 
“Applicable Interest Rate” means (a) the LIBOR Rate, or (b) the
Base Rate.


 


“Applicable Margin” means the
applicable percentage per annum added, as set forth in Section 2.6.1
(Applicable Interest Rates), to the LIBOR Base Rate or the Base Rate to then
constitute the Applicable Interest Rate.


 


“Assessments” has the meaning
set forth in Section 2.7.5 (Payments).


 


“Asset Coverage Ratio” means, as
of any one time, the ratio of (a) the sum of (i) the amount of the
U.S. Borrowing Base, plus (ii) the amount of the Dutch Borrowing Base,
minus (iii) any Unused Availability, to (b) the total aggregate
outstanding amount of the Credit Facility.


 


“Asset Disposition” means the
disposition of any or all of the Assets of any Obligor, whether by sale, lease,
transfer or other disposition (including any such disposition effected by way
of merger or consolidation) other than (a) transfers from one Obligor to
another, (b) sales of Inventory, (c) licensing of Patents, Trademarks
and/or Copyrights, and (d) dispositions of worn, used, surplus or obsolete
Equipment made in the ordinary course of business, in each case prior to the
occurrence of a Default which is continuing.


 

















 


“Assets” means at any date all
assets that, in accordance with GAAP consistently applied, should be classified
as assets on a consolidated and consolidating balance sheet of the U.S.
Borrower.


 


“Bankruptcy Code” means with
respect to the U.S. Borrower and any other Obligor located with the United
State of America, the United States Bankruptcy Code, with respect to any
Obligor located within the United Kingdom, any similar Laws in effect in the
United Kingdom, with respect to any Obligor located within The Netherlands, any
similar Laws in effect in The Netherlands, all as amended from time to time,
and any successor Laws.


 


“Base Rate” means the sum of (a) the
Prime Rate plus (b) the Applicable Margin.


 


“Base Rate Loan” means any Loan
for which interest is to be computed with reference to the Base Rate.


 


“Borrower” means each Person
defined as a Borrower in the preamble of this Agreement and, “Borrowers” means
the collective reference to both Persons defined as “Borrower” in the preamble
to this Agreement.


 


“Business Day” means for all
purposes other than as covered by clauses (b) and (c) below, (a) any
day other than a Saturday, Sunday or other day on which commercial banks in the
State and in the State of New York are authorized or required to close, (b) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Dollar LIBOR Loans, any day which is a Business Day
described in clause (a) and which is also a day for trading by and between
banks in Dollar deposits are being carried on in the London interbank market,
or (c) if the applicable Business Day relates to a Dutch Revolving Loan,
any day in which trading by and between banks in Euro deposits are being
carried on in the London interbank market.


 


“Calculation Date” means the
date the U.S. Borrower furnishes to the Lender the annual financial statements
referred to in Section 6.1.1 (Financial Statements).


 


“Capital Expenditure” means an
expenditure (whether payable in cash or other property or accrued as a
liability) for Fixed or Capital Assets, including, without limitation, the
entering into a Capital Lease.


 


“Capital Lease” means with
respect to any Person any lease of real or personal property, for which the
related Lease Obligations have been or should be, in accordance with GAAP
consistently applied, capitalized on the balance sheet of that Person.


 


“Cash Equivalents” means (a) securities
with maturities of one year or less from the date of acquisition issued or
fully guaranteed or insured by the United States Government or any agency
thereof, (b) certificates of deposit with maturities of one (1) year
or less from the date of acquisition of, or money market accounts maintained
with, the Lender, any Affiliate of the Lender, or any other domestic commercial
bank having capital and surplus in excess of One Hundred Million Dollars
($100,000,000.00) or such other domestic financial institutions or 


 

















 


domestic brokerage houses to the extent
disclosed to, and approved by, the Lender, (c) commercial paper of a
domestic issuer rated at least either A-2 by Standard & Poor’s
Corporation (or its successor) or P-2 by Moody’s Investors Service, Inc.
(or its successor) with maturities of six (6) months or less from the date
of acquisition, and (d) repurchase obligations with a term of not more
than seven (7) days for underlying securities of the types described in
clause (a) or deposits of the type described in clause (b) above
entered into with a bank meeting the qualifications described in clause (b) above.
 In addition, with respect to each
Non-U.S. Obligor, Cash Equivalents shall also mean (a) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by the national government or any agency thereof or any agency thereof
in which jurisdiction such Non-U.S. Obligor is organized and existing and (b) certificates
of deposit with maturities of one (1) year or less from the date of
acquisition of, or money market accounts maintained with a commercial bank or
financial institution reasonably acceptable to the Lender; provided that the
Lender has a first priority lien on, and security interest in, all of such
Non-U.S. Obligor’s rights, title and interest in and to such Cash
Equivalents.  In addition, with respect
to each Non-U.S. Obligor, Cash Equivalents shall also mean (a) securities
with maturities of one year or less from the date of acquisition issued or
fully guaranteed by the national government or any agency thereof in which
jurisdiction such Non-U.S. Obligor is organized and existing and (b) certificates
of deposit with maturities of one (1) year or less from the date of
acquisition of, or money market accounts maintained with a commercial bank or
financial institution in which jurisdiction such Non-U.S. Obligor is organized
and existing and which is reasonably acceptable to the Lender.


 


“Chattel Paper” means chattel
paper (as defined in the Maryland Uniform Commercial Code-Secured
Transactions), together with, writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods; any
returned, rejected or repossessed goods covered by any such writing or writings
and all proceeds (in any form including, without limitation, accounts, contract
rights, documents, chattel paper, instruments and general intangibles) of such
returned, rejected or repossessed goods; and all proceeds (cash and non-cash)
of the foregoing.


 


“Change of Control” shall be
deemed to have occurred (a) with respect to the U.S. Borrower if (i) the
acquisition by any Person, or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934) of 51% or
more of the outstanding shares of voting stock of the U.S. Borrower, or (ii) if
a majority of the members of the board of directors of the U.S. Borrower are
not Continuing Directors, or (b) with respect any other Obligor, if the
U.S. Borrower shall at any time not own directly or indirectly, beneficially
and of record, 100% (on a fully diluted basis) of the outstanding Equity of
such Obligor.


 


“Closing Date” means the
Business Day, in any event not later than June 25, 2008, on which the
Lender shall be satisfied that the conditions precedent set forth in Section 5.1
(Conditions to the Initial Advance) have been fulfilled or otherwise waived by
the Lender in accordance with this Agreement.


 


“Collateral” means all property
of each and every Obligor subject from time to time to the Liens of this
Agreement, any of the Security Documents and/or any of the other Financing 


 

















 


Documents, together with any and all cash and
non-cash proceeds and products thereof, including, without limitation, the
collateral pledged by the U.S. Borrower and the Dutch Collateral.


 


“Collateral List” and “Collateral
Lists” have the meanings described respectively in Section 3.3 (Collateral
Lists).


 


“Commitment” means the U.S.
Revolving Credit Commitment, the Dutch Revolving Credit Commitment and the
Dutch Term Loan Commitment, as the case may be, and “Commitments” means the
collective reference to the U.S. Revolving Credit Commitment, the Dutch
Revolving Credit Commitment and the Dutch Term Loan Commitment.


 


“Commonly Controlled Entity”
means an entity, whether or not incorporated, which is under common control
with any Obligor within the meaning of Section 414(b) or (c) of
the Internal Revenue Code.


 


“Compliance Certificate” means
a periodic Compliance Certificate described in Section 6.1.1 (b) (Financial
Statements).


 


“Continuing Directors” means,
as of any date of determination, any member of the board of directors of the
U.S. Borrower who (a) was a member of such board of directors on the
Closing Date or (b) was nominated for election or elected to such board of
directors with the approval of a majority of the Continuing Directors who were
members of such board at the time of such nomination or election.


 


“Copyrights” means and
includes, in each case whether now existing or hereafter arising, all of each
Obligor’s rights, title and interest in and to (a) all copyrights, rights
and interests in copyrights, works protectable by copyright, copyright
registrations, copyright applications, and all renewals of any of the
foregoing, (b) all income, royalties, damages and payments now or hereafter
due and/or payable under any of the foregoing, including, without limitation,
damages or payments for past, current or future infringements of any of the
foregoing, (c) the right to sue for past, present and future infringements
of any of the foregoing, and (d) all rights corresponding to any of the
foregoing throughout the world.


 


“Credit Facility” means the
U.S. Revolving Credit Facility, the Dutch Revolving Credit Facility and the
Dutch Term Loan, which are extended pursuant to this Agreement, and “Credit
Facilities” means collectively the U.S. Revolving Credit Facility, the Dutch
Revolving Credit Facility and the Dutch Term Loan and any and all other credit
facilities now or hereafter extended under or secured by this Agreement.


 


“Current Letter of Credit
Obligations” has the meaning described in Section 2.5.5 (Payments of
Letters of Credit).


 


“Default” has the meaning set
forth in Section 7.1 (Events of Default).


 

















 


“Documents” means all documents
of title, whether now existing or hereafter acquired or created, and all
proceeds (cash and non-cash) of the foregoing.


 


“Dollar”, “Dollars” and “$”
mean the lawful currency of the United States of America.


 


“Dollar Currency Equivalent”
means, on any date of determination, the amount of Dollars which results from
the sale of a given amount in Euros, determined at the rate of exchange quoted
generally by the Lender to its customers as the market rate of foreign exchange
for the sale of Euros for Dollars.


 


“Dollar Interest Period” means
as to any Dollar LIBOR Loan, the period commencing on and including the date
such Dollar LIBOR Loan is made (or on the effective date of the U.S. Borrower’s
election to convert any Base Rate Loan to a Dollar LIBOR Loan in accordance
with the provisions of this Agreement) and ending on and including the day
which is one (1) month, two (2) months, three (3) months or six (6) months
thereafter, as selected by the U.S. Borrower in accordance with the provisions
of this Agreement, and thereafter, each period commencing on the last day of
the then preceding Interest Period for such Dollar LIBOR Loan and ending on and
including the day which is one (1) month, two (2) months, three (3) months
or six (6) months thereafter, as selected by the U.S. Borrower, in
accordance with the provisions of this Agreement; provided, however that:


 


(a)           the first day of any Dollar Interest Period shall be a
Business Day;


 


(b)           if any Dollar Interest Period would end on a day that is
not a Business Day, such Dollar 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 Dollar Interest Period shall end
on the next preceding Business Day; and


 


(c)           no Dollar Interest Period shall extend beyond the U.S.
Revolving Credit Termination Date.


 


“Dollar LIBOR Loan” means any
Loan for which interest is to be computed with reference to the Dollar LIBOR
Rate.


 


“Dollar LIBOR Rate” means for
any Dollar Interest Period with respect to any Dollar LIBOR Loan, the interest
rate per annum (rounded up, if necessary, to the nearest 1/16 of 1%) equal to
the per annum rate of interest at which deposits in Dollars are obtained by
dividing (i) the rate fixed by the British Bankers Association for Dollar
deposits in the London Interbank Eurodollar Market at approximately 11:00 a.m.  (London time) (or as soon thereafter as
practicable), two Business Days before the first day of the applicable Dollar
Interest Period, in an amount equal to the aggregate principal amount outstanding
on the first day of the Dollar Interest Period, as determined by the Lender
from any broker, quoting service or commonly available source utilized by the
Lender, by (ii) a percentage equal to 100% minus the stated maximum rate
of all reserves required to be maintained against “Eurocurrency Liabilities” as
specified in Regulation D (or against any other category of liabilities which
includes deposits by reference to which the interest rate on Dollar LIBOR Loans
is determined or any category of extension of 


 

















 


credit or other assets which includes loans
by a non-United States’ office of a bank to United States residents) to any
member bank of the Federal Reserve System.


 


“Dutch Borrower” means the
Person defined as the Dutch Borrower in the preamble of this Agreement.


 


“Dutch Borrowing Base” has the
meaning described in Section 2.3.3 (Dutch Borrowing Base).


 


“Dutch Borrowing Base
Deficiency” has the meaning described in Section 2.3.3 (Dutch Borrowing
Base).


 


“Dutch Borrowing Base Report”
has the meaning described in Section 2.3.4 (Dutch Borrowing Base Report).


 


“Dutch Collateral” means the
collective reference to all property of all Non-U.S. Obligors from time to time
subject to the Liens of this Agreement, the Dutch Security Documents and the
other Financing Documents, together with any and all cash and non-cash proceeds
and products thereof.


 


“Dutch Obligations” means the
principal of the Dutch Revolving Loan, the Dutch Term Loan and any Letters of
Credit issued for the account of the Dutch Borrower and all of the obligations
of the Non-U.S. Obligors hereunder and under the Financing Documents, together
with any interest thereon, Fees, Enforcement Costs and indemnifications
attributable thereto.


 


“Dutch Revolving Credit
Commitment” means the agreement of the Lender relating to the making of the
Dutch Revolving Loan Advance subject to and in accordance with the provisions
of this Agreement.


 


“Dutch Revolving Credit
Commitment Period” means the period of time from the Closing Date to the
Business Day preceding the Dutch Revolving Credit Termination Date.  “Dutch Revolving Credit Committed Amount” is
at any one time the Euro Currency Equivalent of Five Million Dollars
($5,000,000).


 


“Dutch Revolving Credit
Expiration Date” means April l, 2009.


 


“Dutch Revolving Credit
Facility” means the facility established by the Lender pursuant to Section 2.3
(Dutch Revolving Credit Facility).


 


“Dutch Revolving Credit
Termination Date” means the earlier of (a) the Dutch Revolving Credit
Expiration Date, or (b) the date on which the Dutch Revolving Credit
Commitment is terminated pursuant to Section 7.2.1 (Acceleration,
Termination) or otherwise.


 


“Dutch Revolving Loan” means
the aggregate of all the Dutch Revolving Loan Advances.


 

















 


“Dutch Revolving Loan Account”
has the meaning described in Section 2.3.8 (Dutch Revolving Loan Account).


 


“Dutch Revolving Loan Advance”
and “Dutch Revolving Loan Advances” have the meanings described in Section 2.3.1
(Dutch Revolving Credit Facility).


 


“Dutch Revolving Loan Mandatory
Prepayment” and “Dutch Revolving Loan Mandatory Prepayments” have the meanings
described in Section 2.3.6 (Mandatory Prepayments of Dutch Revolving
Loan).


 


“Dutch Revolving Loan Optional
Prepayment” and “Dutch Revolving Loan Optional Prepayments” have the meanings
described in Section 2.3.7 (Optional Prepayments of Dutch Revolving Loan).


 


“Dutch Security Documents”
means collectively any assignment, pledge agreement, guaranty trust agreement,
security agreement, mortgage, deed of trust, deed to secure debt, indenture,
debenture, charge, financing statement and any similar instrument, document or
agreement under or pursuant to which a Lien is now or hereafter granted to, or
for the benefit of, the Lender on any property of the Dutch Borrower or the
other Non-U.S. Obligors to secure all or any portion of the Dutch Obligations,
including, without limitation, Deed of Disclosed and Undisclosed Pledge of
Rights, Deed of Undisclosed Pledge of Moveable Assets, Deed of Disclosed Pledge
of Bank Accounts, all as the same may from time to time be amended, restated,
supplemented or otherwise modified.


 


“Dutch Term Loan” has the
meanings described in Section 2.4.1 (Dutch Term Loan Commitment).


 


“Dutch Term Loan Commitment”
means the agreement of the Lender to make the Dutch Term Loan in accordance
with the provisions of this Agreement.


 


“`Dutch Term Loan Committed
Amount” means Four Million One Hundred Ninety Five Thousand Sixty Five Dollars
and Sixty Cents ($4,195,065.60).


 


“Dutch Term Loan Scheduled
Payment” means the amount of the payment on the Dutch Term Loan which the Dutch
Borrower is required to make on each Dutch Term Loan Scheduled Payment Date in
accordance with Section 2.4.3 (Dutch Term Loan Installment Payments) of
this Agreement.


 


“Dutch Term Loan Scheduled
Payment Date” means the first day of each month, commencing July, 2008.


 


“Dutch Term Loan Mandatory
Prepayment” and “Dutch Term Loan Mandatory Prepayments” have the meanings
described in Section 2.4.4 (Mandatory Prepayments of Dutch Term Loan).


 

















 


“Dutch Term Loan Maturity Date”
means the earlier of April 1, 2011 or the date the Dutch Term Loan is
accelerated under Section 7.2.1 (Acceleration, Termination).


 


“Dutch Term Loan Optional
Prepayment” and “Dutch Term Loan Optional Prepayments” have the meanings
described in Section 2.4.5 (Optional Prepayments of Dutch Term Loan).  “EBITDA” means as to the U.S. Borrower and
its consolidated Subsidiaries for any period of determination thereof, the sum
of (a) net income, plus (b) interest expense, plus (c) tax
provisions, plus (d) depreciation plus (e) amortization of assets for
such period, in accordance with GAAP consistently applied.


 


“Eligible Dutch Receivable”
means each Eligible Receivable of the Dutch Borrower, “Eligible Dutch
Receivables” means all Eligible Receivables of the Dutch Borrower.


 


“Eligible Inventory” means all
Inventory of the U.S. Borrower held for sale in the ordinary course of
business, valued in Dollars at the lowest of the net purchase cost or net
manufacturing cost, any ceiling prices which may be established by any Law of
any Governmental Authority or prevailing market value, excluding, however, any
Inventory which consists of:


 


(a)           any Inventory located outside of the United States;


 


(b)           any Inventory of the U.S. Borrower in which the Lender has
not properly perfected the Liens of the Lender under this Agreement, free and
clear of all other Liens;


 


(c)           any Inventory not owned by the U.S. Borrower, which is
subject to any retention of title in the seller or which is not in the actual
possession of the U.S. Borrower;


 


(d)           unless expressly waived in writing by the Lender in each
instance, any Inventory in the possession of a bailee, warehouseman, consignee
or similar third party, except to the extent that such bailee, warehouseman,
consignee or similar third party has entered into an agreement with the Lender
in which such bailee, warehouseman, consignee or similar third party consents
and agrees to the Lender’s Lien on such Inventory and to such other terms and
conditions as may be reasonably required by the Lender;


 


(e)           any Inventory located on premises leased or rented to the
U.S. Borrower or otherwise not owned by the U.S. Borrower, unless the Lender
has received a waiver and consent from the lessor, landlord and/or owner in
form and substance reasonably satisfactory to the Lender and from any mortgagee
of such lessor, landlord or owner to the extent required by the Lender;


 


(f)            any Inventory, the sale or other disposition of which has
given rise to a Receivable;


 


(g)           any Inventory which fails to meet all standards and
requirements imposed by any Governmental Authority over such Inventory or its
production, storage, use or sale;


 

















 


(h)           work-in-process, supplies, displays, packaging and
promotional materials;


 


(i)            any Inventory as to which the Lender determines in the
exercise of its reasonable and good faith discretion at any time is not in good
condition or is defective, unmerchantable, post-seasonal, slow moving or
obsolete; and


 


(j)            any Inventory which the Lender in the reasonable and good
faith exercise of its discretion has deemed to be ineligible because the Lender
otherwise considers the collateral value to the Lender to be impaired or its
ability to realize such value to be insecure.


 


“Eligible Receivable” and “Eligible
Receivables” mean, at any time of determination thereof, the unpaid portion of
each Account valued in Dollars with respect to the U.S. Borrower and valued in
Euros with respect to the Non-U.S. Obligors (net of any returns, discounts,
claims, credits, charges, accrued rebates or other allowances, offsets,
deductions, counterclaims, disputes or other defenses and reduced by the
aggregate amount of all reserves, limits and deductions provided for in this
definition and elsewhere in this Agreement, but including interest or time
value of money fees payable to the extent such amounts are insured under the
Obligors’ receivables insurance policy acceptable to the Lender the proceeds of
which have been assigned to the Lender pursuant to an assignment acknowledged
by the insurer); provided that each Account conforms and continues to conform
to the following criteria to the satisfaction of the Lender:


 


(a)           the Account arose in the ordinary course of the business
of the Obligor owed on such Account, from a bona fide outright sale of
Inventory by such Obligor, or from services performed by such Obligor;


 


(b)           the Account is a valid, legally enforceable obligation of
the Account Debtor and requires no further act on the part of any Person under
any circumstances to make the Account payable by the Account Debtor;


 


(c)           the Account is based upon an enforceable order or
contract, written or oral, for Inventory shipped or for services performed, and
the same were shipped or performed in accordance with such order or contract;


 


(d)           if the Account arises from the sale of Inventory, the
Inventory the sale of which gave rise to the Account has been shipped or
delivered to the Account Debtor on an absolute sale basis and not on a bill and
hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or
return basis, or on the basis of any other similar understanding;


 


(e)           if the Account arises from the performance of services,
such services have been fully rendered (or have been rendered to the extent
necessary to create a valid and binding unconditional obligation of the Account
Debtor for payment of the portion of the Account included in the computation of
Eligible Receivables) and do not relate to any warranty claim or obligation;


 

















 


(f)            the Account is evidenced by an invoice or other
documentation in form acceptable to the Lender, dated no later than the date of
shipment in the case of the sale of goods, or dated promptly (but in no event
later than the last day of the billing cycle during which the services were
completed) after completion of the performance of services, and containing only
terms normally offered by the Obligor owed on such Account;


 


(g)           the amount shown on the books of the Obligor owed on such
Account and on any invoice, certificate, schedule or statement delivered to the
Lender is owing to such Obligor, and no partial payment has been received
unless reflected with that delivery;


 


(h)           the Account is either (i) not outstanding more than
ninety (90) days from the date of the invoice therefor or past due more than
sixty (60) days after its due date, which shall not be later than sixty (60)
days after the invoice date or (ii) is secured by a letter of credit,
guaranty or banker’s acceptance having terms and from such issuer as are
acceptable to the Lender in its sole and absolute discretion (which letter of
credit, guaranty or banker’s acceptance is subject to an irrevocable assignment
of proceeds in favor of the Lender, unless otherwise approved by the Lender) or
(iii) is insured under a receivables insurance policy acceptable to the Lender,
the proceeds of which have been assigned to the Lender pursuant to an
assignment acknowledged by the insurer;


 


(i)            unless insured under the applicable Obligor’s receivables
insurance policy acceptable to the Lender, the proceeds of which have been assigned
to the Lender pursuant to an assignment acknowledged by the insurer, the
Account is not owing by an Account Debtor or group of affiliated Account
Debtors whose then existing Accounts owing to the applicable Obligor exceed in
the aggregate fifty percent (50%) of the total Eligible Receivables of all the
Obligors in the aggregate;


 


(j)            unless insured under the applicable Obligor’s receivables
insurance policy acceptable to the Lender, the proceeds of which have been
assigned to the Lender pursuant to an assignment acknowledged by the insurer,
the Account is not owing by any Account Debtor for which the Lender has deemed
fifty percent (50%) or more of such Account Debtor’s other Accounts due to such
Obligor to be non-Eligible Receivables;


 


(k)           the Account Debtor has not returned, rejected or refused
to retain, or otherwise notified any Obligor of any dispute concerning, or
claimed nonconformity of, any of the Inventory or services from the sale or
furnishing of which the Account arose, provided, that if such Account otherwise
meets the conditions for inclusion among the Eligible Receivables, such
Account, minus the amount of the Account attributable to returned, rejected,
refused, disputed or claimed non-conforming Inventory, may be included among
the Eligible Receivables;


 


(l)            the Account is not subject to any present or contingent
(and no facts exist which are the basis for any future) offset, claim,
deduction or counterclaim, dispute or defense in law or equity on the part of
such Account Debtor, or any claim for credits, allowances, or adjustments by
the Account Debtor because of returned, inferior, or damaged Inventory or
unsatisfactory services, or for any other reason including, without limitation,
those arising on 


 

















 


account of a breach of any express or implied
representation or warranty, provided, if such Account otherwise meets the
conditions for inclusion among the Eligible Receivables, such Account, minus
the amount of the claim, may be included among the Eligible Receivables;


 


(m)          the Account Debtor is not a Subsidiary or Affiliate of any
Obligor or an employee, officer, director or shareholder of any Obligor;


 


(n)           unless insured under the applicable Obligor’s receivables
insurance policy acceptable to the Lender, the proceeds of which have been
assigned to the Lender pursuant to an assignment acknowledged by the insurer,
the Account Debtor is not incorporated or primarily conducting business or
otherwise located in any jurisdiction outside of (i) the United States of
America, Canada, or (ii) with respect to an Account Debtor of the Non-U.S.
Obligors only, any member state of the European Union;


 


(o)           the Account Debtor with respect to such Account is not
insolvent or the subject of any bankruptcy or insolvency proceedings of any
kind;


 


(p)           unless the actions required by Section 6.1.17
(Government Accounts) have been taken, the Account Debtor is not a Governmental
Authority;


 


(q)           none of the Obligors is indebted in any manner to the
Account Debtor (as creditor, lessor, supplier or otherwise), with the exception
of customary credits, warranty obligations, adjustments and/or discounts given
to an Account Debtor by any Obligor in the ordinary course of its business,
provided, if such Account otherwise meets the conditions for inclusion among
the Eligible Receivables, such Account, minus the amount of the indebtedness,
may be included among the Eligible Receivables;


 


(r)            the Account does not arise from services under or related
to any warranty obligation of any Obligor or out of service charges, finance charges
or other fees for the time value of money;


 


(s)           the Account is not evidenced by chattel paper or an
instrument of any kind, unless the original of such chattel paper or instrument
has been furnished to the Lender as collateral and security for the Obligations
and is not secured by any letter of credit or receivables insurance policy, the
proceeds of which have not been assigned to the Lender pursuant to an
assignment accepted and acknowledged by the issuer or insurer;


 


(t)            the title of the applicable Obligor to the Account is
absolute and is not subject to any prior assignment, claim, Lien, or security
interest, except Permitted Liens;


 


(u)           no bond or other undertaking by a guarantor or surety has
been or is required to be obtained, supporting the performance of any Obligor
in respect of any of such Obligor’s agreements with the Account Debtor;


 

















 


(v)           no bond or other undertaking by a guarantor or surety has
been or is required to be obtained, supporting the Account and any of the
Account Debtor’s obligations in respect of the Account;


 


(w)          the applicable Obligor, has the full and unqualified right
and power to assign and grant a security interest in, and Lien on, the Account
to the Lender as security and collateral for the payment of the Obligations and/or
the Dutch Obligations, as appropriate;


 


(x)            if included in the U.S. Borrowing Base, the Account is
subject to a Lien in favor of the Lender, which Lien is perfected as to the
Account by the filing of financing statements and which Lien upon such filing
constitutes a first priority security interest and Lien, or, if included in the
Dutch Borrowing Base, the Account is subject to a Lien in favor of the Lender
which Lien constitutes a first priority security interest and Lien;


 


(y)           the Inventory giving rise to the Account was not, at the
time of the sale thereof, subject to any Lien, except those in favor of the
Lender; and


 


(z)            the Lender in the reasonable and good faith exercise of
its discretion has not deemed the Account ineligible because of uncertainty as
to the creditworthiness of the Account Debtor or because the Lender otherwise
considers the collateral value of such Account to the Lender to be impaired or
its ability to realize such value to be insecure.


 


“Eligible Spanish Receivable”
means each Eligible Receivable of the Spanish Subsidiary which has been sold by
the Spanish Subsidiary to the Dutch Borrower subject to and in accordance with
that certain Receivables Purchase Agreement, by and between the Spanish
Subsidiary and the Dutch Borrower, and “Eligible Spanish Receivables” means all
Eligible Receivables of the Spanish Subsidiary which have been sold by the
Spanish Subsidiary to the Dutch Borrower subject to and in accordance with that
certain Receivables Purchase Agreement, by and between the Spanish Subsidiary
and the Dutch Borrower.


 


“Eligible U.K. Receivable”
means each Eligible Receivable of the U.K. Subsidiaries, and “Eligible U.K.
Receivables” means all Eligible Receivables of the U.K. Subsidiaries.


 


“Eligible U.S. Receivable”
means each Eligible Receivable of the U.K. Subsidiaries, and “Eligible U.S.
Receivables” means all Eligible Receivables of the U.S. Borrower.


 


“Enforcement Costs” means all
out-of-pocket expenses, charges, costs and fees whatsoever (including, without
limitation, reasonable outside attorney’s fees and expenses) of any nature
whatsoever paid or incurred by or on behalf of the Lender in connection with (a) the
creation, collection and enforcement of any or all of the Obligations, this
Agreement and/or any of the other Financing Documents, and (b) the
creation, perfection, collection, maintenance, preservation, defense,
protection, realization upon, disposition, sale or enforcement of all or any
part of the Collateral, including, without limitation, those costs and expenses
more specifically enumerated in Section 3.6 (Costs) and/or Section 8.9
(Enforcement Costs).  The Lender
understands and agrees that Non-U.S. Obligors shall be liable only for payment
of those Enforcement Costs which relate solely to the Dutch Obligations.


 
















 


“Equipment” means all
equipment, machinery, computers, chattels, tools, parts, machine tools,
furniture, furnishings, fixtures and supplies of every nature, presently
existing or hereafter acquired or created and wherever located, whether or not
the same shall be deemed to be affixed to real property, together with all
accessions, additions, fittings, accessories, special tools, and improvements
thereto and substitutions therefor and all parts and equipment which may be
attached to or which are necessary or beneficial for the operation, use and/or
disposition of such personal property, all licenses, warranties, franchises and
general intangibles related thereto or necessary or beneficial for the
operation, use and/or disposition of the same, together with all Accounts,
Chattel Paper, Instruments and other consideration received by any Obligor on
account of the sale, lease or other disposition of all or any part of the
foregoing, and together with all rights under or arising out of present or
future Documents and contracts relating to the foregoing and all proceeds (cash
and non-cash) of the foregoing.


 


“Equity” means at any date as
to the U.S. Borrower and its consolidated Subsidiaries the total of capital
stock (except treasury stock and net of any note receivable received upon the
issuance of any shares of capital stock) and contributed capital, as determined
on a consolidated basis in accordance with GAAP consistently applied, after
eliminating all inter-company items.


 


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


 


“Euro,” “Euros” and “€” mean
the lawful currency of the European Monetary Union of which The Netherlands is
a member.


 


“Euro Currency Equivalent”
means, on any date of determination, the amount of Euros which results from the
sale of a given amount in Dollars, determined at the rate of exchange quoted
generally by the Lender to its customers as the market rate of foreign exchange
for the sale of Dollars for Euros.


 


“Euro Interest Period” means as
to any Euro LIBOR Loan, the period commencing on and including the date such
Euro LIBOR Loan is made and ending on and including the day which is one (1) month,
two (2) months or three (3) months thereafter, as selected by the
Dutch Borrower in accordance with the provisions of this Agreement, and
thereafter, each period commencing on the last day of the then preceding Euro
Interest Period for such Euro LIBOR Loan and ending on and including the day
which is one (1) month, two (2) months or three (3) months
thereafter, as selected by the Dutch Borrower in accordance with the provisions
of this Agreement; provided, however, that:


 


(a)           the first date of any Euro Interest Period shall be a
Business Day;


 


(b)           if any Euro Interest Period would end on a day that is not
a Business Day, such Euro 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 Euro Interest Period shall end on
the next preceding Business Day; and


 

















 


(c)           no Euro Interest Period shall extend beyond the Dutch
Revolving Credit Termination Date.


 


“Euro LIBOR” means for any Euro
Interest Period with respect to any Euro LIBOR Loan, the rate per annum
(rounded upward, if necessary, to the nearest next 1/100 of 1%) equal to the
daily London Interbank Offered Rate for Euro deposits for a term comparable to
the applicable Euro Interest Period as determined by the Lender (taking into
account any reserves applicable to the Lender for Euro LIBOR Loans) at or about
11:00 A.M. (London time) two Business Days prior to the first Business Day
of the Euro Interest Period.


 


“Euro LIBOR Loan” means any
Loan for which interest is to be computed with reference to the Euro LIBOR
Rate.


 


“Euro LIBOR Rate” means for any
Euro Interest Period with respect to any Euro LIBOR Loan, (a) the Euro
LIBOR, plus (b) the Applicable Margin.


 


“Event of Default” has the
meaning described in Section 7.1 (Events of Default).


 


“Excess Cash Flow” means for
any fiscal year of the U.S. Borrower, an amount equal to the U.S. Borrower’s
consolidated EBITDA less the U.S. Borrower’s total consolidated Fixed Charges
as shown on the annual financial statements for such period, furnished to the
Lender in accordance with Section 6.1.1 (Financial Statements).


 


“Fees” means the collective
reference to each fee payable to the Lender under the terms of this Agreement
or under the terms of any of the other Financing Documents, including, without
limitation, the Revolving Credit Unused Line Fees, the Origination Fee, and any
and all Letter of Credit Fees.


 


“Financing Documents” means at
any time collectively this Agreement, the Security Documents (including the
Dutch Security Documents), any and all Letter of Credit Documents and any other
instrument, agreement or document previously, simultaneously or hereafter
executed and delivered by any Obligor, any guarantor and/or any other Person,
singly or jointly with another Person or Persons, evidencing, securing,
guarantying any of the foregoing or otherwise in connection with this
Agreement, any of the Security Documents (including any of the Dutch Security
Documents), any of the Credit Facilities, and/or any of the Obligations.


 


“Fixed Charges” means for any
period of determination, the sum of (a) the scheduled or required payments
(including, without limitation, principal and interest) on all Indebtedness for
Borrowed Money of the U.S. Borrower and its consolidated Subsidiaries; (b) all
taxes paid in cash by the U.S. Borrower and its consolidated Subsidiaries; and (c) all
Capital Expenditures made by the U.S. Borrower and its consolidated
Subsidiaries.


 


“Fixed Charge Coverage Ratio”
means, as to the U.S. Borrower and its consolidated Subsidiaries, for any
period of determination, the ratio of EBITDA plus Non Cash Stock
Option/Restricted Stock Expense to Fixed Charges.


 

















 


“Fixed or Capital Assets” of a
Person at any date means all assets which would, in accordance with GAAP
consistently applied, be classified on the balance sheet of such Person as
property, plant or equipment at such date.


 


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


 


“General Intangibles” means all
general intangibles (as defined in the Maryland Uniform Commercial Code-Secured
Transactions) of every nature, whether presently existing or hereafter acquired
or created, and without implying any limitation of the foregoing, further means
all books and records, commercial tort claims, other claims (including, without
limitation, all claims for income tax and other refunds), payment intangibles,
Supporting Obligations, choses in action, causes of action in tort or equity,
contract rights, judgments, customer lists, software, Patents, Trademarks,
licensing agreements, rights in intellectual property, goodwill (including
goodwill of any Obligor’s business symbolized by and associated with any and
all Trademarks, trademark licenses, Copyrights and/or service marks), royalty
payments, licenses, letter-of-credit rights, letters of credit, contractual
rights, the right to receive refunds of unearned insurance premiums, rights as
lessee under any lease of real or personal property, literary rights,
Copyrights, service names, service marks, logos, trade secrets, amounts
received as an award in or settlement of a suit in damages, deposit accounts,
interests in joint ventures, general or limited partnerships, or limited
liability companies or partnerships, rights in applications for any of the
foregoing, books and records in whatever media (paper, electronic or otherwise)
recorded or stored, with respect to any or all of the foregoing, all Supporting
Obligations with respect to any of the foregoing, and all equipment and general
intangibles necessary or beneficial to retain, access and/or process the
information contained in those books and records, and all proceeds (cash and
non-cash) of the foregoing.


 


“Governmental Authority” means
any nation or government, any state or other political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any department,
agency or instrumentality thereof.


 


“Hazardous Materials” means (a) any
“hazardous waste” as defined by the Resource Conservation and Recovery Act of
1976, as amended from time to time, and regulations promulgated there under; (b) any
“hazardous substance” as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder; and (c) any substance the presence of
which on any property now or hereafter owned, acquired or operated by any of
the Obligors is prohibited by any Law similar to those set forth in this
definition, including, without limitation, any Law which requires special
handling in the collection, storage, treatment or disposal of a substance.


 


“Hazardous Materials
Contamination” means the contamination (whether presently existing or occurring
after the date of this Agreement) by Hazardous Materials of any property owned,
operated or controlled by any of the Obligors or for which any of the Obligors
has responsibility, including, without limitation, improvements, facilities,
soil, ground water, air or other elements on, or of, any property now or
hereafter owned, acquired or operated by any of 


 

















 


the Obligors, and any other contamination by
Hazardous Materials for which any of the Obligors is, or is claimed to be,
responsible.


 


“Indebtedness for Borrowed
Money” of a Person means at any time the sum at such time of (a) Liabilities
of such Person for borrowed money or for the deferred purchase price of
property or services, (b) any obligations of such Person in respect of
letters of credit, banker’s or other acceptances or similar obligations issued
or created for the account of such Person, (c) Lease Obligations of such
Person with respect to Capital Leases, (d) all liabilities secured by any
Lien on any property owned by such Person, to the extent attached to such
Person’s interest in such property, even though such Person has not assumed or
become personally liable for the payment thereof, (e) Indebtedness for
Borrowed Money of third parties which is being guarantied by such Person or
which is secured by the property of such Person; and (f) the net exposure
of such Person under any obligations, liabilities or indebtedness, contingent
or otherwise, under or in connection with, any Interest Rate/Currency
Protection Agreement and other similar agreements and arrangements; but
excluding current trade and other accounts payable in the ordinary course of
business in accordance with customary trade terms and which are not overdue (as
determined in accordance with customary trade practices) or which are being
disputed in good faith by such Person and for which adequate reserves are being
provided on the books of such Person in accordance with GAAP., and (g) Subordinated
Indebtedness of a Person.


 


“Instrument” means a negotiable
instrument (as defined in the Maryland Uniform Commercial Code-Negotiable Instruments),
a “certificated security” (as defined in the Maryland Uniform Commercial
Code-Investment Securities), or any other writing which evidences a right to
payment of money and is not itself a security agreement or lease and is of a
type which is in the ordinary course of business transferred by delivery with
any necessary endorsement.  “Insured
Eligible Dutch Receivable” means an Eligible Dutch Receivable which has been
insured in a manner acceptable to the Lender in its reasonable discretion, by
an insurance company acceptable to the Lender in its reasonable discretion,
which insurance policy has been assigned to the Lender pursuant to an
assignment of insurance acceptable to the Lender in its reasonable discretion.


 


“Insured Eligible Spanish
Receivables” means an Eligible Spanish Receivable which has been insured under
an insurance policy of the Dutch Borrower in a manner acceptable to the Lender
in its reasonable discretion, by an insurance company acceptable to the Lender
in its reasonable discretion, which insurance policy has been assigned to the
Lender pursuant to an assignment of insurance acceptable to the Lender in its
reasonable discretion.


 


“Insured Eligible U.K.
Receivables” means an Eligible U.K. Receivable which has been insured in a manner
acceptable to the Lender in its reasonable discretion, by an insurance company
acceptable to the Lender in its reasonable discretion, which insurance policy
has been assigned to the Lender pursuant to an assignment of insurance
acceptable to the Lender in its reasonable discretion.


 


“Interest Payment Date” means
the dates provided for the payment of interest on the Loans in Section 2.6.5
(Payment of Interest).


 

















 


“Interest Period” means a
Dollar Interest Period or a Euro Interest Period.


 


“Interest Rate Election Notice”
has the meaning described in Section 2.6.2 (Selection of Interest Rates).


 


“Interest Rate/Currency
Protection Agreement” means, for any Person, interest rate swap, cap, floor or
collar agreements, currency agreements, currency spot, foreign exchange and
forward contracts or similar arrangement between such Person and one or more
financial institutions providing for the transfer or mitigation of interest or
currency risks either generally or under specific contingencies.


 


“Interest Rate/Currency
Protection Reserve” means at any time of determination, the aggregate of the
obligations to the Lender of any or all of the Obligors under all Interest  Rate/Currency
Protection Agreements to which any Obligor is a party in the event of a
termination of any such Interest Rate/Currency Protection Agreements on an
estimated “marked-to market” basis.


 


“Internal Revenue Code” means
the Internal Revenue Code of 1986, as amended from time to time, and the Income
Tax Regulations issued and proposed to be issued thereunder.  “Inventory” means all inventory of each
Obligor and all right, title and interest of each Obligor in and to all of its
now owned and hereafter acquired goods, merchandise and other personal property
furnished under any contract of service or intended for sale or lease,
including, without limitation, all raw materials, work-in-progress, finished
goods and materials and supplies of any kind, nature or description which are
used or consumed in any Obligor’s business or are or might be used in connection
with the manufacture, packing, shipping, advertising, selling or finishing of
such goods, merchandise and other licenses, warranties, franchises, general
intangibles, personal property and all documents of title or documents relating
to the same and all proceeds (cash and non-cash) of the foregoing.


 


“Investment Property” means
investment property (as such term is defined by the Maryland Uniform Commercial
Code-Secured Transactions) together with each Security, whether certificated or
uncertificated, security entitlement, securities account, commodity contract or
commodity account, and all proceeds (cash and non-cash) of, and Supporting
Obligations with respect to, the foregoing.


 


“IP Pledges” means collectively
(a) that certain Amended and Restated  Collateral
Assignment of Trademarks as Security dated the Closing Date from the U.S.
Borrower to the of the Lender, as the same may from time to time be amended,
restated, supplemented or otherwise modified; and (b) that certain Amended
and Restated  Collateral Assignment of Patents
as Security dated the Closing Date from the U.S. Borrower to the of the Lender,
as the same may from time to time be amended, restated, supplemented or
otherwise modified.  The IP Pledges are
part of the Security Documents.


 


“Item of Payment” means each
check, draft, cash, money, instrument, item, and other remittance in payment or
on account of payment of the Receivables or otherwise with respect to any
Collateral, including, without limitation, cash proceeds of any returned, rejected
or 


 

















 


repossessed goods, the sale or lease of which
gave rise to a Receivable, and other proceeds of Collateral; and “Items of
Payment” means the collective reference to all of the foregoing.  “Laws” means all ordinances, statutes, rules,
regulations, orders, injunctions, writs, or decrees of any Governmental
Authority.


 


“Lease Obligations” of a Person
means for any period the rental commitments of such Person for such period
under leases for real and/or personal property (net of rent from subleases
thereof, but including taxes which such Person, as the lessee, is obligated to
pay under the terms of said leases, except to the extent that such taxes are
payable by sublessees).


 


“Lender” means the Person
defined as the Lender in the preamble of this Agreement.  “Letter of Credit” and “Letters of Credit”
shall have the meanings described in Section 2.5.1 (Letters of Credit).


 


“Letter of Credit Agreement”
means the collective reference to each letter of credit application and
agreement substantially in the form of the Lender’s then standard form of
application for letter of credit or such other form as may be approved by the
Lender, executed and delivered by the U.S. Borrower or the Dutch Borrower in
connection with a request for the issuance of a Letter of Credit, as the same
may from time to time be amended, restated, supplemented or modified; and “Letter
of Credit Agreements” means all of the foregoing in effect at any time and from
time to time.


 


“Letter of Credit Cash
Collateral Account” has the meaning described in Section 2.5.3 (Terms of
Letters of Credit).


 


“Letter of Credit Documents”
means any and all drafts under or purporting to be under a Letter of Credit,
any Letter of Credit Agreement, and any other instrument, document or agreement
executed and/or delivered by the U.S. Borrower or the Dutch Borrower or any
other Person under, pursuant to or in connection with a Letter of Credit or any
Letter of Credit Agreement.


 


“Letter of Credit Fee” and “Letter
of Credit Fees” have the meanings described in Section 2.5.2 (Letter of
Credit Fees).


 


“Letter of Credit Obligations”
means the collective reference to all Obligations of U.S. Borrower and the
Dutch Borrower with respect to the Letters of Credit and the Letter of Credit
Agreements.


 


“Liabilities” means at any date
all liabilities that in accordance with GAAP consistently applied should be
classified as liabilities on a balance sheet of the U.S. Borrower and its
consolidated Subsidiaries.


 


“LIBOR Base Rate” means the
Dollar LIBOR Rate or the Euro LIBOR, as applicable.


 


“LIBOR Loan” means a Dollar
LIBOR Loan or a Euro LIBOR Loan, as applicable.


 

















 


“LIBOR Rate” means the Dollar
LIBOR Rate or the Euro LIBOR Rate, as applicable.


 


“Lien” means any mortgage, deed
of trust, deed to secure debt, grant, pledge, security interest, assignment,
encumbrance, judgment, lien, hypothecation, provision in any instrument or
other document for confession of judgment, cognovit or other similar right or
remedy, claim or charge of any kind, whether perfected or unperfected,
avoidable or unavoidable, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code or equivalent Law of any jurisdiction, excluding the
precautionary filing of any financing statement by any lessor in a true lease
transaction, by any bailor in a true bailment transaction or by any consignor
in a true consignment transaction under the Uniform Commercial Code or
equivalent Law of any jurisdiction or the agreement to give any financing
statement by any lessee in a true lease transaction, by any bailee in a true
bailment transaction or by any consignee in a true consignment transaction.


 


“Loan” means each of the U.S.
Revolving Loan, the Dutch Revolving Loan or the Dutch Term Loan, as the case
may be, and “Loans” means the collective reference to the U.S. Revolving Loan,
the Dutch Revolving Loan, and the Dutch Term Loan.


 


“Loan Notice” means an oral,
e-mail or facsimile transmission notice provided by the U.S. Borrower to the
Lender of a requested U.S. Revolving Loan Advance or an e-mail or facsimile
transmission notice provided by the Dutch Borrower to the Lender of a requested
a Dutch Revolving Loan Advance, which in either event shall be directed to the
parties at the addresses provided in Section 8.1 (Notices) but without
providing copies to the other parties listed in that Section.


 


“Material Adverse Effect” means
an effect, either in any case or in the aggregate, which results in a material
adverse change (a) in the business, prospects, condition, properties,
assets, affairs or operations of either Borrower, (b) in the right or
ability of either Borrower to carry on a substantial portion of its operations
as now conducted or proposed to be conducted, or (c) to a material part of
the value of, or the ability of the Lender to realize upon, the Collateral,
including, without limitation, the Dutch Collateral.


 


“Multi-employer Plan” means a
Plan which is a Multi-employer plan as defined in Sections 3(37) and 4001(a)(3) of
ERISA.


 


“Non Cash Stock Option/Restricted Stock
Expense” means for any period the amount of the stock based compensation
line item on the U.S. Borrower’s statement of cash flow prepared in accordance
with GAAP consistently applied.


 


“Non-U.S. Obligor means” each
of the U.K. Subsidiaries, the Spanish Subsidiary, NKF and the Dutch Borrower,
the “Non-U.S. Obligors” means all of U.K. Subsidiaries, the Spanish Subsidiary,
NKF and the Dutch Borrower collectively;


 


“Non-U.S. Stock Pledge
Agreements” means, collectively, the Stock Pledge Agreements executed by
Non-U.  S.  Obligors.


 

















 


“Obligations” means all present
and future indebtedness, duties, obligations, and liabilities, whether now
existing or contemplated or hereafter arising, of any one or more of the
Obligors to the Lender under, arising pursuant to, in connection with and/or on
account of the provisions of this Agreement, each Security Document, and/or any
of the other Financing Documents, the Loans, and/or any of the Credit
Facilities including, without limitation, the principal of, and interest on,
late charges, the Fees, Enforcement Costs, and prepayment fees (if any), letter
of credit fees or fees charged with respect to any guaranty of any letter of
credit; also means all other present and future indebtedness, liabilities and
obligations, whether now existing or contemplated or hereafter arising, of any
one or more of the Obligors to the Lender or its Affiliates with respect to the
Interest Rate/Currency Protection Agreements, deposit or other cash management
or credit services of any nature whatsoever regardless of whether such debts,
obligations and liabilities be direct, indirect, primary, secondary, joint,
several, joint and several, fixed or contingent; and also means any and all
renewals, extensions, substitutions, amendments, restatements and
rearrangements of any such debts, obligations and liabilities.


 


“Obligor” means each Person
defined as an Obligor in the preamble of this Agreement and, and “Obligors”
means the collective reference to all Persons defined as “Obligors” in the
preamble to this Agreement.


 


“Origination Fee” has the
meaning described in Section 2.7.2 (Origination Fee).


 


“Outstanding Letter of Credit
Obligations” has the meaning described in Section 2.5.3 (Terms of Letters
of Credit).


 


“Patents” means and includes,
in each case whether now existing or hereafter arising, all of each Obligor’s
rights, title and interest in and to (a) any and all patents and patent applications,
(b) any and all inventions and improvements described and claimed in such
patents and patent applications, (c) reissues, divisions, continuations,
renewals, extensions and continuations-in-part of any patents and patent
applications, (d) income, royalties, damages, claims and payments now or
hereafter due and/or payable under and with respect to any patents or patent
applications, including, without limitation, damages and payments for past and
future infringements, (e) rights to sue for past, present and future
infringements of patents, and (f) all rights corresponding to any of the
foregoing throughout the world.


 


“Patriot Act means the USA
Patriot Act (Title III of Pub.  L.  107-56 (signed into law October 26,
2001)).


 


“PBGC” means the Pension
Benefit Guaranty Corporation.         `


 


“Permitted Liens” means: (a) Liens
for Taxes which are not delinquent or which (i) are being diligently
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of an Obligor, and (ii) are
not, and will not be with appropriate filing, the giving of notice and/or the
passage of time, entitled to priority over any Lien of the Lender as to any
pre-existing Obligation to the Lender(except the Lien created under the
Subordinated Obligations Documents); (b) deposits or pledges to secure
obligations 


 

















 


under workers’ compensation, social security
or similar laws, or under unemployment insurance in the ordinary course of
business; (c) Liens securing any or all of the Obligations; (d) judgment
Liens to the extent the entry of such judgment does not constitute a Default or
an Event of Default under the terms of this Agreement or result in the sale or
levy of, or execution on, any of the Collateral; (e) statutory liens of
landlords, carriers, warehousemen, mechanics, materialmen and other similar
liens imposed by law, which are incurred in the ordinary course of business for
sums not more than thirty (30) days delinquent or which are being contested in
good faith; (f) liens against cash deposits to secure the performance of
tenders, statutory obligations, surety, customs bonds, bids, government
contracts, performance bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money); (g) deposits made in the
ordinary course of business to secure liability to insurance carriers; (h) Purchase
Money Security Interests; provided that the aggregate outstanding Liabilities
secured by any such Liens does not exceed Five Hundred Thousand Dollars ($500,000)
per annum; and (i) any other Liens existing as of the Closing Date which
are set forth on Schedule 4.1.21 attached hereto and made a part hereof.


 


“Person” means and includes an
individual, a corporation, a partnership, a joint venture, a limited liability
company or partnership, a trust, an unincorporated association, a Governmental
Authority, or any other organization or entity.


 


“Plan” means any pension plan
that is covered by Title IV of ERISA and in respect of which any Obligor or a
Commonly Controlled Entity is an “employer” as defined in Section 3 of
ERISA.


 


“Post-Default Rate” means when
used with respect to Obligations, a per annum interest rate equal to the
Applicable Interest Rate plus 2% per annum.”


 


“Post-Expiration Date Letter of
Credit” and “Post-Expiration Date Letters of Credit” have the meanings
described in Section 2.5.3 (Terms of Letters of Credit).


 


“Prepayment” means a U.S.
Revolving Loan Mandatory Prepayment, a U.S. Revolving Loan Optional Prepayment,
a Dutch Revolving Loan Mandatory Prepayment, a Dutch Revolving Loan Optional
Prepayment, a Dutch Term Loan Mandatory Prepayment or a Dutch Term Loan
Optional Prepayment, as the case may be, and “Prepayments” mean collectively
all U.S. Revolving Loan Mandatory Prepayments, all U.S. Revolving Loan Optional
Prepayments, all Dutch Revolving Loan Mandatory Prepayments, all Dutch
Revolving Loan Optional Prepayments, all Dutch Term Loan Mandatory Prepayments
and all Dutch Term Loan Optional Prepayments.


 


“Prime Rate” means the floating
and fluctuating per annum rate of interest announced by the Lender from time to
time as its prime rate of interest.  The
Prime Rate does not necessarily represent the lowest rate of interest charged
by the Lender to borrowers.


 


“Purchase Agreement” means that
certain Share Purchase Agreement dated March 8, 2005 by and among the U.S.
Borrower, the Dutch Borrower, NKF Vastgoed B.V. 
and the Seller.  “Purchase
Agreement Documents” means collectively the Purchase Agreement and any and all 


 

















 


other agreements, documents or instruments
(together with any and all amendments, modifications, and supplements thereto,
restatements thereof, and substitutes therefore) previously, now or hereafter
executed and delivered by any or all of the Obligors, the Seller, or any other
Person in connection with the Purchase Agreement Transaction, including
(without limitation) all agreements relating to the debt incurred in favor of
the Seller in consideration for a portion of the purchase price under the
Purchase Agreement.


 


“Purchase Agreement Rights”
means collectively, the U.S. Borrower’s right, title and interest in, to, and
under, the Purchase Agreement and all of the Purchase Agreement Documents.


 


“Purchase Agreement Transaction”
means the stock purchase transaction contemplated by the provisions of the
Purchase Agreement.


 


“Purchase Money Security
Interest” means a purchase money security interest, attaching at the time of
acquisition, in Equipment acquired after the date of this Agreement; provided,
however, that (a) the indebtedness secured by any such security interest
shall not exceed 100% of the cost of the Equipment covered plus finance
charges, fees, costs and expenses (including attorneys fees) of documentation,
perfection, collection and enforcement, (b) each such security interest
shall attach only to the Equipment so acquired for the purchase money for that
Equipment, and (c) the acquisition to which any such security interest
relates shall not result in a Default or Event of Default under this Agreement.


 


“Receivable” means each Obligor’s
now owned and hereafter owned, acquired or created Accounts, Chattel Paper,
General Intangibles and Instruments; and “Receivables” means all of each
Obligor’s now or hereafter owned, acquired or created Accounts, Chattel Paper,
General Intangibles and Instruments, and all cash and non-cash proceeds and
products thereof.


 


                “Refinance Indebtedness”
has the meaning described in Section 6.1.28 (Extension of Subordinated
Debt).


 


“Reportable Event” means any of
the events set forth in Section 4043(c) of ERISA or the regulations
thereunder.


 


“Responsible Officer” means for
each Obligor, its chief executive officer or president or any vice president
or, with respect to financial matters, its chief financial officer, treasurer
or comptroller.


 


“Revolving Credit Unused Line
Fee” and “Revolving Credit Unused Line Fees” have the meanings described in Section 2.1.9
(Revolving Credit Unused Line Fee).


 


“Securities” means the
collective reference to each and every certificated or uncertificated security
(as such term is defined by the Maryland Uniform Commercial Code-Investment
Securities), and all proceeds (cash and non-cash) of the foregoing.


 

















 


“Security Documents” mean
collectively any assignment, pledge agreement, security agreement, mortgage,
deed of trust, deed to secure debt, financing statement and any similar
instrument, document or agreement under or pursuant to which a Lien is now or
hereafter granted to, or for the benefit of the Lender on any real or personal
property of any Person to secure all or any portion of the Obligations, all as
the same may from time to time be amended, restated, supplemented or otherwise
modified, including, without limitation, this Agreement, the IP Pledges, the
Stock Pledge Agreements, the Dutch Security Documents, and any assignment of
any letter of credit, banker’s acceptance or receivables insurance policy
securing Receivables.


 


“Seller” means Draka Holding,
N.V., the Seller under the Purchase Agreement.


 


“Senior Debt Leverage Ratio”
means, as to the U.S. Borrower and its consolidated Subsidiaries, for any
period of determination, the ratio of (a) the outstanding Obligations to (b) EBITDA.


 


“Spanish Subsidiary” means the
Person defined as the Spanish Subsidiary in the preamble of this Agreement.


 


“State” means the State of
Maryland.


 


“Stock Pledge Agreements”
means, collectively, those certain pledge, assignment and security agreements
dated the Closing Date hereof from the U.S. Borrower over the shares in the
U.K. Subsidiaries, the Spanish Subsidiary and the Dutch Borrower, each for the
benefit of the Lender, as the same may from time to time be amended, restated,
supplemented or otherwise modified.


 


“Subordinated Note” means that
certain Subordinated Promissory Note dated March 8, 2005, made by the U.S.
Borrower payable to the Seller in the principal amount of Nine Million Euro (€9,000,000),
as the same has been amended subject to The First Amendment to Subordinated
Promissory Note dated as of June 25, 2008, and as the same may be further
amended from time to time.


 


“Subordinated Obligations”
means the debt obligations of the U.S. Borrower under the Subordinated Note.


 


“Subordinated Obligations
Documents” means the Subordinated Note, and any and all agreements, documents
or instruments now or at any time evidencing, securing, guarantying or
otherwise executed and delivered in connection with the Subordinated
Obligations, as the same may from time to time be amended, restated,
supplemented or modified.


 


“Subordinated Indebtedness”
means all Indebtedness incurred at any time by any Obligor which is in amounts,
subject to repayment terms, and subordinated to the Obligations, as set forth
in one or more written agreements, all in form and substance satisfactory to
the Lender in its sole and absolute discretion.


 

















 


“Subsidiary” means with respect
to any Obligor, any corporation, partnership, joint venture, limited liability
company or other business entity of which more than 50% of the outstanding
capital stock or other interests having ordinary voting power to elect a
majority of the board of directors or other governing body of such entity
(irrespective of whether at the time securities or interests of any other class
or classes of such entity shall or might have voting power upon the occurrence
of any contingency) is at the time, directly or indirectly, beneficially owned
by any Obligor, and “Subsidiaries” means all such entities collectively.


 


“Supporting Obligation” means a
letter-of-credit right, secondary obligation, or obligation of a secondary
obligor, or secondary obligation that supports the payment or performance of an
account, chattel paper, a document, a general intangible, an instrument, or
investment property.


 


“Taxes” means all taxes and
assessments whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character (including all penalties or interest
thereon), which at any time may be assessed, levied, confirmed or imposed by
any Governmental Authority on any or all of the Obligors or any of their
properties or assets or any part thereof or in respect of any of its or their
franchises, businesses, income or profits.


 


“Trademarks” means and includes
in each case whether now existing or hereafter arising, all of each Obligor’s
right, title and interest in and to (a) any and all trademarks (including
service marks), trade names and trade styles, and applications for registration
thereof and the goodwill of the business symbolized by any of the foregoing, (b) any
and all licenses of trademarks, service marks, trade names and/or trade styles,
whether as licensor or licensee, (c) any renewals of any and all
trademarks, service marks, trade names, trade styles and/or licenses of any of
the foregoing, (d) income, royalties, damages and payments now or
hereafter due and/or payable with respect thereto, including, without
limitation, damages, claims, and payments for past, present and future
infringements thereof, (e) rights to sue for past, present and future
infringements of any of the foregoing, including the right to settle suits
involving claims and demands for royalties owing, and (f) all rights corresponding
to any of the foregoing throughout the world.


 


“Unused Availability” means, at
any one time, the amount of the U.S. Borrowing Base in excess of the
outstanding amount of the U.S. Revolving Loan Advances.


 


“U.K. Subsidiary” means each of
the Persons defined as the U.K. Subsidiary in the preamble of this Agreement,
and “U.K. Subsidiaries” means the collective reference to all Persons defined
as “U.K. Subsidiaries” in the preamble to this Agreement.


 


“Uniform Commercial Code”
means, unless otherwise provided in this Agreement, the Maryland Uniform
Commercial Code.


 


“U.S. Borrower” means the
Person defined as the U.S. Borrower in the preamble of this Agreement.


 

















 


“U.S. Borrowing Base” has the
meaning described in Section 2.1.3 (U.S. Borrowing Base).


 


“U.S. Borrowing Base Deficiency”
has the meaning described in Section 2.1.3 (U.S. Borrowing Base).


 


“U.S. Borrowing Base Report”
has the meaning described in Section 2.1.4 (U.S. Borrowing Base Report).


 


“U.S. Obligations” means the
principal of the U.S. Revolving Loan and any Letters of Credit issued for the
account of the U.S. Borrower and any other obligations of the U.S. Borrower
hereunder and under the Financing Documents, together with any interest
thereon, Fees, Enforcement Costs and indemnifications attributable thereto.


 


“U.S. Revolving Credit Commitment”
means the agreement of the Lender relating to the making of the U.S. Revolving
Loan Advances subject to and in accordance with the provisions of this
Agreement.


 


“U.S. Revolving Credit
Commitment Period” means the period of time from the Closing Date to the
Business Day preceding the U.S. Revolving Credit Termination Date.


 


“U.S. Revolving Credit
Committed Amount” means Five Million Dollars ($5,000,000).


 


“U.S. Revolving Credit
Expiration Date” means April 1, 2009.


 


“U.S. Revolving Credit Facility”
means the facility established by the Lender pursuant to Section 2.1 (U.S.
Revolving Credit Facility).


 


“U.S. Revolving Credit
Termination Date” means the earlier of (a) the U.S. Revolving Credit
Expiration Date, or (b) the date on which the U.S. Revolving Credit
Commitment is terminated pursuant to Section 7.2.1 (Acceleration,
Termination) or otherwise.


 


“U.S. Revolving Loan” means the
aggregate of all the U.S. Revolving Loan Advances.  “U.S. Revolving Loan Account” has the meaning
described in Section 2.1.8 (U.S. Revolving Loan Account).


 


“U.S. Revolving Loan Advance”
and “U.S. Revolving Loan Advances” have the meanings described in Section 2.1.1
(U.S. Revolving Credit Facility).


 


“U.S. Revolving Loan Mandatory
Prepayment” and “U.S. Revolving Loan Mandatory Prepayments” have the meanings
described in Section 2.1.6 (Mandatory Prepayments of U.S. Revolving Loan).


 


“U.S. Revolving Loan Optional
Prepayment” and “U.S. Revolving Loan Optional Prepayments” have the meanings
described in Section 2.1.7 (Optional Prepayments of U.S. Revolving Loan).


 

















 


Section 1.2             Accounting,
Terms and Other Definitional Provisions.


 


Unless otherwise defined
herein, as used in this Agreement and in any certificate, report or other document
made or delivered pursuant hereto, accounting terms not otherwise defined
herein, and accounting terms only partly defined herein, to the extent not
defined, shall have the respective meanings given to them under GAAP, as
consistently applied to the applicable Person. 
Unless otherwise defined herein, all terms used herein which are defined
by the Uniform Commercial Code shall have the same meanings as assigned to them
by the Uniform Commercial Code unless and to the extent varied by this
Agreement.  The words “hereof’, “herein”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, subsection, schedule and exhibit references
are references to articles, sections or subsections of, or schedules or
exhibits to, as the case may be, this Agreement unless otherwise
specified.  As used herein, the singular
number shall include the plural, the plural the singular and the use of the
masculine, feminine or neutral gender shall include all genders, as the context
may require.  Reference to any one or
more of the Financing Documents shall mean the same as the foregoing may from
time to time be amended, restated, substituted, extended, renewed, supplemented
or otherwise modified.  Reference in this
Agreement and the other Financing Documents to the “Obligor”, the “Obligors”, “each
Obligor” or otherwise with respect to any one or more of the Obligors shall
mean each and every Obligor and any one or more of the Obligors and, subject to
Section 2.9 (Limitations on Joint and Several Liability for Obligations)
hereof, jointly and severally subject to the limitations set forth herein,
unless a specific Obligor is expressly identified.


 


Section 1.3             Dutch
Terms


 


In this Agreement, where it
relates to the Dutch Borrower, a reference to:


 


a.             a Lien includes any mortgage (hypotheek),
pledge (pandrecht), retention of title
arrangement (eigendomsvoorbehoud), privilege (voorrecht), right of retention (recht van
retentie), right to reclaim goods (recht van
reclame), and, in general, any right in rem (beperkt
recht), created for the purpose of granting security (goederenrechtelijk zekerheidsrecht);


 


b.             the terms receiver, trustee or liquidator (and any of
those terms) include curator and bewindvoerder;


 


c.             the terms bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation (and any of those terms)
include faillissement, failliet verklaard, ontbonden, surséance van betaling, suréance verleend; and


 


d.             the term attachment includes beslag.


 
















 


ARTICLE II


THE CREDIT
FACILITIES


 


Section 2.1             The
U.S. Revolving Credit Facility.


 


2.1.1        U.S. Revolving Credit
Facility.


 


(a)           Subject to and upon the provisions of this Agreement and
relying upon the representations and warranties herein set forth, the Lender
agrees at any time and from time to time to make advances (each a “U.S.
Revolving Loan Advance” and collectively, the “U.S. Revolving Loan Advances”)
to the U.S. Borrower and to issue Letters of Credit for the account of the U.S.
Borrower from the date hereof until the U.S. Revolving Credit Termination Date
in an aggregate principal amount at any time outstanding not to exceed the
lesser of (i) the U.S. Revolving Credit Committed Amount or (ii) the
U.S. Borrowing Base, provided however that at no time may the sum of (i) the
aggregate outstanding amount of the U.S. Revolving Loan Advances and Letters of
Credit issued for the account of the U.S. Borrower, plus (ii) the
aggregate outstanding amount of the Euro Currency Equivalent of the Dutch
Revolving Loan Advances and Letters of Credit issued for the account of the
Dutch Borrower exceed the Aggregate Revolving Loan Cap; provided further, that
the sum of the Outstanding Letter of Credit Obligations shall not at any time
exceed Five Hundred Thousand Dollars ($500,000.00).


 


(b)           Each U.S. Revolving Loan Advance shall be made and repaid
in Dollars.


 


(c)           Each U.S. Revolving Loan Advance, except as hereinafter
provided, may, at the option of the U.S. Borrower be incurred and maintained as
and/or converted into a Base Rate Loan or a LIBOR Loan, provided that all U.S.
Revolving Loan Advances made as part of the same borrowing shall, unless
otherwise specifically provided herein, consist of U.S. Revolving Loan Advances
of the same type.


 


2.1.2        Procedure for Making U.S.
Revolving Loan Advances.


 


The U.S. Borrower may borrow
under the U.S. Revolving Credit Facility on any Business Day.  U.S. Revolving Loan Advance shall be
deposited to a demand deposit account of the U.S. Borrower with the Lender or
shall be otherwise applied as directed by the U.S. Borrower, which direction
the Lender may require to be in writing. 
Not later than 1:00 p.m.  (prevailing U.S. Eastern Time) two (2) Business Days
prior to the date of the requested borrowing, the U.S. Borrower shall give the
Lender a Loan Notice of the amount and (if requested by the Lender) the purpose
of the requested borrowing.  Each Loan
Notice shall be irrevocable.


 


In addition, the U.S. Borrower
hereby irrevocably authorizes the Lender at any time without further request
from or notice to the U.S. Borrower, to make U.S. Revolving Loan Advances to
cover debit balances in the U.S. Revolving Loan Account, principal of, and/or
interest (if not paid when due) on, any Loan, the Obligations (including,
without limitation, the Dutch Obligations), and/or Enforcement Costs, prior to,
on, or after the termination of other advances under this Agreement, regardless
of whether the outstanding principal amount of the 


 

















 


U.S. Revolving Loan Advance which the Lender
may advance hereunder causes the U.S. Revolving Credit Committed Amount to be
exceeded.


 


2.1.3        U.S. Borrowing Base.


 


As used in this Agreement, the
term “U.S. Borrowing Base” means at any time, an amount equal to the aggregate
of (a) the sum of eighty-five percent (85%) of Eligible U.S. Receivables, plus
(b) thirty percent (30%) of the amount of Eligible Inventory, less (c) the
Interest Rate/Currency Protection Reserve for the U.S. Borrower, less (d) the
amount of any Dutch Borrowing Base Deficiency which has not been paid, less (e) the
amount of any reserve which the Lender in its reasonable and good faith
discretion deems appropriate to cover any potential U.S. Borrowing Base
Deficiency which the Lender determines, in its reasonable and good faith
discretion based upon information previously provided by the Borrowers or
obtained from the Lender’s auditors, may have occurred since the most recent
U.S. Borrowing Base Report was provided by the U.S. Borrower.


 


The U.S. Borrowing Base shall
be computed based on the U.S. Borrowing Base Report most recently delivered to
the Lender.  In the event the U.S.
Borrower fails to furnish a U.S. Borrowing Base Report required by Section 2.1.4
(U.S. Borrowing Base Report), or in the event the Lender reasonably determines
that a U.S. Borrowing Base Report is no longer accurate in any material
respect, the Lender may, in its sole and absolute discretion exercised from
time to time and without limiting other rights and remedies under this
Agreement, suspend the making of or limit making U.S. Revolving Loan
Advances.  The U.S. Borrowing Base shall
be subject to reduction by the amount of any Receivable or any Inventory which
was included in the U.S. Borrowing Base but which the Lender reasonably
determines fails to meet the respective criteria applicable from time to time
for Eligible U.S. Receivables or Eligible Inventory.


 


If at any time the total of the
aggregate principal amount of the U.S. Revolving Loan and the Outstanding
Letter of Credit Obligations of the U.S. Borrower exceeds an amount equal to
the U.S. Borrowing Base, a borrowing base deficiency (“U.S. Borrowing Base
Deficiency”) shall exist.  Each time a
U.S. Borrowing Base Deficiency exists, the U.S. Borrower shall provide a
current U.S. Borrowing Base Report demonstrating that a U.S. Borrower Base
Deficiency does not exist any longer, or at the sole and absolute discretion of
the Lender exercised from time to time shall pay the U.S. Borrowing Base
Deficiency ON DEMAND to the Lender from time to time.


 


Without implying any limitation
on the Lender’s discretion with respect to the U.S. Borrowing Base, the
criteria for Eligible U.S. Receivables and for Eligible Inventory contained in
the respective definitions of Eligible U.S. Receivables and of Eligible
Inventory are in part based upon the business operations of the U.S. Borrower
existing on or about the Closing Date and upon information and records
furnished to the Lender by the U.S. Borrower. 
If at any time or from time to time hereafter, the business operations
of the U.S. Borrower changes in any material respect or such information and
records furnished to the Lender is incorrect or misleading in any material
respect, the Lender in its reasonable and good faith discretion, may at any
time and from time to time during the duration of this Agreement change such
criteria or 


 

















 


add new
criteria.  The Lender shall communicate
such changed or additional criteria to the U.S. Borrower from time to time
either orally or in writing prior to the application thereof.


 


2.1.4        U.S. Borrowing Base
Report.


 


The U.S. Borrower shall furnish
to the Lender no less frequently than once per month, as of the twentieth
calendar day after the end of the previous month, and at such other times as
may reasonably be requested by the Lender, a report of the U.S. Borrowing Base
(each a “U.S. Borrowing Base Report”; collectively, the “U.S. Borrowing Base
Reports”) in the form required from time to time by the Lender, appropriately
completed and duly signed.  The U.S.
Borrowing Base Report shall contain the amount and payments on the Receivables
of the U.S. Borrower, the value of Inventory owned by the U.S. Borrower, and
the calculations of the U.S. Borrowing Base, all in such detail, and
accompanied by such supporting and other information, as the Lender may from
time to time reasonably request.  Upon
the Lender’s request and periodically upon the creation of any Receivables by
the U.S. Borrower, or at such intervals as the Lender may reasonably require,
the U.S. Borrower shall provide the Lender with such further schedules,
documents and/or information regarding its Receivables and Inventory as the
Lender may reasonably require.  The items
to be provided under this subsection shall be in form satisfactory to the
Lender, and certified as true and correct by a Responsible Officer, and
delivered to the Lender from time to time solely for the Lender’s convenience
in maintaining records of the Collateral. 
The U.S. Borrower’s failure to deliver any of such items to the Lender
shall not affect, terminate, modify, or otherwise limit the Liens of the Lender
in the Collateral.


 


2.1.5        Promise to Pay U.S.
Revolving Loan.


 


For value received, the U.S.
Borrower promises to pay to the order of the Lender, on the U.S. Revolving
Credit Termination Date, the aggregate outstanding amount of all U.S. Revolving
Loan Advances.  Additionally, the U.S.
Borrower promises to pay to the order of the Lender interest on the outstanding
aggregate principal amount (calculated on a daily basis) of all U.S. Revolving Loan
Advances in the manner, and at the times, as herein set forth.  To the extent the outstanding aggregate
amount of U.S. Revolving Loan Advances plus the amount of the Outstanding
Letter of Credit Obligations of the U.S. Borrower exceeds the U.S. Revolving
Credit Committed Amount as limited by the U.S. Borrowing Base and the Aggregate
Revolving Loan Cap, the U.S. Borrower promises to pay such excess on demand.


 


2.1.6        Mandatory Prepayments
of U.S. Revolving Loan.


 


Subject to the limitations and
fees of Section 2.6.4 (Indemnity), the U.S. Borrower shall make the
mandatory prepayments (each a “U.S. Revolving Loan Mandatory Prepayment” and
collectively, the “U.S. Revolving Loan Mandatory Prepayments”) of the U.S.
Revolving Loan at any time and from time to time in such amounts requested by
the Lender pursuant to Section 2.1.3 (U.S. Borrowing Base) of this
Agreement in order to cover (a) any U.S. Borrowing Base Deficiency and (b) any
excess in the total aggregate principal amounts of U.S. Revolving Loan and
Outstanding Letter of Credit Obligations of the U.S. Borrower over the U.S.
Revolving Credit Committed Amount as limited by the U.S. Borrowing Base and the
Aggregate Revolving Loan Cap.


 

















 


2.1.7        Optional Prepayments of
U.S. Revolving Loan.


 


Subject to the limitations and
fees of Section 2.6.4 (Indemnity), the U.S. Borrower shall have the option
at any time and from time to time to prepay (each a “U.S. Revolving Loan
Optional Prepayment” and collectively the “U.S. Revolving Loan Optional
Prepayments”) the U.S. Revolving Loan, in whole or in part without premium or
penalty.


 


2.1.8        U.S. Revolving Loan
Account.


 


The Lender will establish and
maintain a loan account on its books (the “U.S. Revolving Loan Account”).  The Lender will (a) debit (i) the
principal amount of each U.S. Revolving Loan Advance made by the Lender
hereunder as of the date made, (ii) the amount of any interest accrued on
the U.S. Revolving Loan as and when due, and (iii) any other amounts due
and payable by the U.S. Borrower to the Lender from time to time under the
provisions of this Agreement in connection with the U.S. Revolving Loan,
including, without limitation, Enforcement Costs, Fees and late charges, and (b) credit
all payments made by the U.S. Borrower to the Lender on account of the U.S.
Revolving Loan as of the date made.  All
credit entries to the U.S. Revolving Loan Account are conditional and shall be
readjusted as of the date made if final and indefeasible payment is not
received by the Lender in cash or solvent credits.


 


Any and all periodic or other
statements or reconciliations, and the information contained in those
statements or reconciliations, of the U.S. Revolving Loan Account shall
constitute an account stated between the Lender and the U.S. Borrower, absent
manifest error, unless the Lender receives specific written objection thereto
from a U.S. Borrower within sixty (60) Business Days after such statement or
reconciliation shall have been sent by the Lender.  Any and all periodic or other statements or
reconciliations, and the information contained in those statements or
reconciliations, of the U.S. Revolving Loan Account shall be final, binding and
conclusive upon the U.S. Borrower in all respects, absent manifest error,
unless the Lender receives specific written objection thereto from the U.S.
Borrower within thirty (30) Business Days after such statement or
reconciliation shall have been sent by the Lender.


 


2.1.9        Revolving Credit Unused
Line Fee, Monitoring Fee.


 


The U.S. Borrower shall pay to
the Lender a monthly revolving credit facility fee (collectively, the “Revolving
Credit Unused Line Fees” and individually, a “Revolving Credit Unused Line Fee”)
in an amount equal to twenty-five one hundredths of one percent (0.25%) per
annum of the average daily unused and undisbursed portion of the U.S. Revolving
Credit Committed Amount in effect from time to time accruing during each
calendar month minus the average daily disbursed portion of the Dutch
Revolving Credit Committed Amount.  At
any time during which the Senior Debt Leverage Ratio is greater than 2:1, the
Revolving Credit Unused Line Fee shall be increased to an amount equal to
thirty-seven and one-half hundredths of one percent (0.375%) per annum of the
average daily unused and undisbursed portion of the U.S. Revolving Credit
Committed Amount minus the average daily disbursed portion of the Dutch
Revolving Credit Committed Amount.  The
accrued and unpaid portion of the Revolving Credit Unused Line Fee shall be
paid by the U.S. Borrower to the Lender on the first day of each 


 

















 


month, commencing
on the first such date following the date hereof, and on the U.S. Revolving
Credit Termination Date.  The U.S.
Borrower agrees to pay to the Lender a borrowing base monitoring fee in the
amount of $150 per month (covering both the Dutch Borrowing Base and the U.S. Borrowing
Base) payable in advance on the first day of each calendar month.


 


Section 2.2             Reserved.


 


Section 2.3             The
Dutch Revolving  Credit Facility.


 


2.3.1        Dutch Revolving Credit
Facility.


 


(a)           Subject to and upon the provisions of this Agreement and
relying upon the representations and warranties herein set forth, the Lender
agrees at any time and from time to time to make advances (each a “Dutch
Revolving Loan Advance” and collectively, the “Dutch Revolving Loan Advances”)
to the Dutch Borrower and to issue Letters of Credit for the account of the
Dutch Borrower from the date hereof until the Dutch Revolving Credit
Termination Date in an aggregate principal amount at any time outstanding not
to exceed the lesser of (i) the Dutch Revolving Credit Committed Amount or
(ii) the Dutch Borrowing Base, provided however that at no time may the
sum of (i) the aggregate outstanding amount of the Euro Currency
Equivalent of the Dutch Revolving Loan Advances and Letters of Credit issued
for the account of the Dutch Borrower, plus (ii) the aggregate outstanding
amount of the U.S. Revolving Loan Advances and Letters of Credit issued for the
account of the U.S. Borrower exceed the Aggregate Revolving Loan Cap; provided
further, that the sum of the Outstanding Letter of Credit Obligations shall not
at any time exceed Five Hundred Thousand Dollars ($500,000.00).


 


(b)           Each Dutch Revolving Loan Advance, except as hereinafter
provided, shall be made and repaid in Euros.


 


(c)           Each Dutch Revolving Loan Advance, except as hereinafter
provided, shall be incurred and maintained as a LIBOR Loan.


 


2.3.2        Procedure for Making
Dutch Revolving Loan Advances.


 


The Dutch Borrower may borrow
under the Dutch Revolving Credit Facility on any Business Day.  The Dutch Revolving Loan Advances shall be
deposited to a demand deposit account of the Dutch Borrower with the Lender or
shall be otherwise applied as directed by the Dutch Borrower, which direction
the Lender may require to be in writing. 
Not later than 1:00 p.m.  (prevailing U.S. Eastern Time) three (3) Business Days
prior to the date of the requested borrowing, the Dutch Borrower shall give the
Lender a Loan Notice of the amount and (if requested by the Lender) the purpose
of the requested borrowing.  Each Loan
Notice shall be irrevocable.


 


In addition, the Dutch Borrower
hereby irrevocably authorizes the Lender at any time without further request
from or notice to the Dutch Borrower, to make Dutch Revolving Loan Advances to
cover debit balances in the Dutch Revolving Loan Account, principal of, and/or 


 

















 


interest on (if not paid when due), any of
the Dutch Obligations and/or Enforcement Costs, prior to, on, or after the
termination of other advances under this Agreement, regardless of whether the
outstanding principal amount of the Dutch Revolving Loan which the Lender may
advance hereunder exceeds the Dutch Revolving Credit Committed Amount.


 


2.3.3        Dutch Borrowing Base.


 


As used in this Agreement, the
term “Dutch Borrowing Base” means at any time, an amount equal to sixty percent
(60%) of Eligible Dutch Receivables (other than Insured Eligible Dutch
Receivables), plus seventy percent (70%) of Insured Eligible Dutch Receivables,
plus seventy percent (70%) of Insured Eligible U.K. Receivables, plus seventy
percent (70%) of Insured Eligible Spanish Receivables, plus any Unused
Availability, less (a) the Interest Rate/Currency Protection Reserve for
the Dutch Borrower, less (b) the amount of any U.S. Borrowing Base
Deficiency which has not been paid, less (c) the amount of any reserve
which the Lender in its reasonable and good faith discretion deems appropriate
to cover any potential Dutch Borrowing Base Deficiency which the Lender
determines, in its reasonable and good faith discretion based upon information
previously provided by the Borrowers or obtained from the Lender’s auditors,
may have occurred since the most recent Dutch Borrowing Base Report was
provided by the Dutch Borrower.


 


The Dutch Borrowing Base shall
be computed based on the Dutch Borrowing Base Report most recently delivered to
the Lender.  In the event the Dutch
Borrower fails to furnish a Dutch Borrowing Base Report required by Section 2.3.4
(Dutch Borrowing Base Report), or in the event the Lender reasonably determines
that a Dutch Borrowing Base Report is no longer accurate in any material
respect, the Lender may, in its sole and absolute discretion exercised from
time to time and without limiting other rights and remedies under this
Agreement, suspend the making of or limit Dutch Revolving Loan Advances.  The Dutch Borrowing Base shall be subject to
reduction by the amount of any Receivable which was included in the Dutch
Borrowing Base but which the Lender reasonably determines fails to meet the
respective criteria applicable from time to time for Eligible Dutch Receivables.


 


If at any time the total of the
aggregate principal amount of the Dutch Revolving Loan and the Outstanding
Letter of Credit Obligations of the Dutch Borrower exceeds an amount equal to
the Dutch Borrowing Base, a borrowing base deficiency (“Dutch Borrowing Base
Deficiency”) shall exist.  Each time a
Dutch Borrowing Base Deficiency exists, the Dutch Borrower shall provide a
current Dutch Borrowing Base Report demonstrating that a Dutch Borrower Base
Deficiency does not exist any longer, or at the sole and absolute discretion of
the Lender exercised from time to time shall pay the Dutch Borrowing Base
Deficiency ON DEMAND to the Lender from time to time.


 


Without implying any limitation
on the Lender’s discretion with respect to the Dutch Borrowing Base, the
criteria for Eligible Dutch Receivables contained in the respective definitions
of Eligible Dutch Receivables are in part based upon the business operations of
the Dutch Borrower existing on or about the Closing Date and upon information
and records furnished to the Lender by the Dutch Borrower.  If at any time or from time to time
hereafter, the business operations of the Dutch Borrower changes in any
material respect or such information 


 

















 


and records
furnished to the Lender are incorrect or misleading in any material respect,
the Lender in its reasonable and good faith discretion, may at any time and
from time to time during the duration of this Agreement change such criteria or
add new criteria.  The Lender shall
communicate such changed or additional criteria to the Dutch Borrower from time
to time either orally or in writing prior to the application thereof.


 


2.3.4        Dutch Borrowing Base
Report.


 


The Dutch Borrower shall
furnish to the Lender no less frequently than once per month, as of the
twentieth calendar day after the end of the previous month, and at such other
times as may reasonably be requested by the Lender, a report of the Dutch
Borrowing Base (each a “Dutch Borrowing Base Report”; collectively, the “Dutch
Borrowing Base Reports”) in the form required from time to time by the Lender,
appropriately completed and duly signed. 
The Dutch Borrowing Base Report shall contain the amount and payments on
the Receivables of the Dutch Borrower and the calculations of the Dutch
Borrowing Base, all in such detail, and accompanied by such supporting and
other information, as the Lender may from time to time reasonably request.  Upon the Lender’s request and periodically
upon the creation of any Receivables by the Dutch Borrower, or at such
intervals as the Lender may reasonably require, the Dutch Borrower shall
provide the Lender with such further schedules, documents and/or information
regarding its Receivables as the Lender may reasonably require.  The items to be provided under this
subsection shall be in form satisfactory to the Lender, and certified as true
and correct by a Responsible Officer, and delivered to the Lender from time to
time solely for the Lender’s convenience in maintaining records of the
Collateral.  The Dutch Borrower’s failure
to deliver any of such items to the Lender shall not affect, terminate, modify,
or otherwise limit the Liens of the Lender in the Collateral.


 


2.3.5        Promise to Pay Dutch
Revolving Loan.


 


For value received, the Dutch
Borrower promises to pay to the order of the Lender, on the Dutch Revolving
Credit Termination Date, the aggregate outstanding amount of all Dutch
Revolving Loan Advances.  Additionally,
the Dutch Borrower promises to pay to the order of the Lender interest on the
outstanding aggregate principal amount (calculated on a daily basis) of all
Dutch Revolving Loan Advances in the manner, and at the times, as herein set
forth.  To the extent the outstanding
aggregate amount of Dutch Revolving Loan Advances plus the amount of the
Outstanding Letter of Credit Obligations of the Dutch Borrower exceeds the
Dutch Revolving Credit Committed Amount as limited by the Dutch Borrowing Base
and the Aggregate Revolving Loan Cap, the Dutch Borrower promises to pay such
excess on demand.


 


2.3.6        Mandatory Prepayments
of Dutch Revolving Loan.


 


Subject to the limitations and
fees of Section 2.6.4 (Indemnity), the Dutch Borrower shall make the
mandatory prepayments (each a “Dutch Revolving Loan Mandatory Prepayment” and
collectively, the “Dutch Revolving Loan Mandatory Prepayments”) of the Dutch
Revolving Loan at any time and from time to time in such amounts requested by
the Lender pursuant to Section 2.3.3 (Dutch Borrowing Base) of this
Agreement in order to cover (a) any Dutch Borrowing Base Deficiency and (b) any
excess in the total aggregate principal amount of the 


 

















 


Dutch Revolving Loan and the Outstanding
Letter of Credit Obligations of the Dutch Borrower over the Dutch Revolving
Credit Committed Amount as limited by the Dutch Borrowing Base and the
Aggregate Revolving Loan Cap.


 


2.3.7        Optional Prepayments of
Dutch Revolving Loan.


 


Subject to the limitations and
fees of Section 2.6.4 (Indemnity), the Dutch Borrower shall have the
option at any time and from time to time to prepay (each a “Dutch Revolving
Loan Optional Prepayment” and collectively the “Dutch Revolving Loan Optional
Prepayments”) the Dutch Revolving Loan, in whole or in part without premium or
penalty.


 


2.3.8        Dutch Revolving Loan
Account.


 


The Lender will establish and
maintain a loan account on its books (the “Dutch Revolving Loan Account”).  The Lender will (a) debit (i) the
principal amount of each Dutch Revolving Loan Advance made by the Lender
hereunder as of the date made, (ii) the amount of any interest accrued on
the Dutch Revolving Loan as and when due, and (iii) any other amounts due
and payable by the Dutch Borrower to the Lender from time to time under the
provisions of this Agreement in connection with the Dutch Revolving Loan,
including, without limitation, Enforcement Costs, Fees and late charges, and (b) credit
all payments made by the Dutch Borrower to the Lender on account of the Dutch
Revolving Loan as of the date made.  All
credit entries to the Dutch Revolving Loan Account are conditional and shall be
readjusted as of the date made if final and indefeasible payment is not
received by the Lender in cash or solvent credits.


 


Any and all periodic or other
statements or reconciliations, and the information contained in those
statements or reconciliations, of the Dutch Revolving Loan Account shall
constitute an account stated between the Lender and the Dutch Borrower, absent
manifest error, unless the Lender receives specific written objection thereto
from a Dutch Borrower within sixty (60) Business Days after such statement or
reconciliation shall have been sent by the Lender.  Any and all periodic or other statements or
reconciliations, and the information contained in those statements or
reconciliations, of the Dutch Revolving Loan Account shall be final, binding
and conclusive upon the Dutch Borrower in all respects, absent manifest error,
unless the Lender receives specific written objection thereto from the Dutch
Borrower within thirty (30) Business Days after such statement or
reconciliation shall have been sent by the Lender.


 


Section 2.4             The
Dutch Term Loan.


 


2.4.1        Dutch Term Loan
Commitment.


 


Subject to and upon the
provisions of this Agreement, the Lender agrees to make a loan (the “Dutch Term
Loan”) to the Dutch Borrower on the Closing Date in the principal amount of the
Dutch Term Loan Committed Amount.


 

















 


2.4.2        Promise to Pay Dutch
Term Loan.


 


For value received, the Dutch
Borrower promises to pay to the order of the Lender the Dutch Term Loan
Committed Amount or so much thereof as shall be advanced by the Lender
hereunder in the manner, and at the times, as herein set forth.  Additionally, the Dutch Borrower promises to
pay to the order of the Lender interest on the outstanding principal amount
(calculated on a daily basis) of the Dutch Term Loan in the manner, and at the
times, as herein set forth.


 


2.4.3        Dutch Term Loan
Installment Payments.


 


The Dutch Borrower shall pay to
the Lender the principal amount of the Dutch Term Loan in thirty-four (34)
consecutive installments payable commencing on the first Dutch Term Loan
Scheduled Payment Date after the advance of the Dutch Term Loan, and continuing
on each Dutch Term Loan Scheduled Payment Date thereafter; consisting of
thirty-three (33) equal installments of principal in the amount of One Hundred
Twenty-Seven Thousand One Hundred Twenty Three Dollars and Twenty Cents
($127,123.20) and ONE (1) FINAL INSTALLMENT on the Dutch Term Loan
Maturity Date in an amount equal to the outstanding principal amount of the
Dutch Term Loan at that time together with all other amounts outstanding
hereunder including, without limitation, accrued interest, costs and expenses.


 


2.4.4        Mandatory Prepayments
of Dutch Term Loan.


 


Subject to the limitations and
fees of Section 2.6.4 (Indemnity), in addition to the payment of principal
of the Dutch Term Loan described above, the Dutch Borrower shall make mandatory
prepayments (each a “Dutch Term Loan Mandatory Prepayment” and collectively the
“Dutch Term Loan Mandatory Prepayments”) of the Dutch Term Loan annually.  Each Dutch Term Loan Mandatory Prepayment
shall be in the amount of twenty-five (25%) percent of the Excess Cash Flow for
the then preceding fiscal year and shall be payable on the Calculation
Date.  The Dutch Borrower shall pay to
the Lender on the date of each Dutch Term Loan Mandatory Prepayment accrued
interest to such date on the amount prepaid. 
Each Dutch Term Loan Mandatory Prepayment shall be applied to the
balloon payment due at Dutch Term Loan Maturity Date and then to principal
against the principal installments in the inverse order of their maturity.  Notwithstanding the foregoing, if (a) during
the fiscal year prior to the Calculation Date, the U.S. Borrower’s Asset
Coverage Ratio was equal to or greater than one to one (1 to 1) as of the end
of any four consecutive months, (b) as of the end of the U.S. Borrower’s
fiscal year prior to the Calculation Date, the U.S. Borrower’s Asset Coverage
Ratio was equal to or greater than one to one (1 to 1) , and (c) as of the
end of the month of January immediately prior to the Calculation Date, the
U.S. Borrower’s Asset Coverage Ratio was equal to or greater than one to one (1
to 1), then the Dutch Borrower shall need not pay to the Lender any Dutch Term
Loan Mandatory Prepayment that would otherwise be due.


 


2.4.5        Optional Prepayments of
Dutch Term Loan.


 


Subject to the limitations and
fees of Section 2.6.4 (Indemnity), the Dutch Borrower may, at its option,
at any time and from time to time, prepay (each a “Dutch Term Loan Optional 


 

















 


Prepayment” and collectively the “Dutch Term
Loan Optional Prepayments”) the Dutch Term Loan, in whole or in part, upon five
(5) Business Days prior written notice, specifying the date and amount of
prepayment.  The amount to be so prepaid,
together with interest accrued thereon to date of prepayment, shall be paid by
the Dutch Borrower to the Lender on the date specified for such
prepayment.  Partial Dutch Term Loan
Optional Prepayments shall be in an amount not less than $50,000 and shall be
applied first to all accrued and unpaid interest on the principal of the Dutch
Term Loan, then to the balloon payments due at maturity and then to principal
against the principal installments in the inverse order of their maturity.


 


Section 2.5             Letter of Credit.


 


2.5.1        Obtaining Letters of
Credit.


 


Subject to and upon the
provisions of this Agreement, and as a part of each of the U.S. Revolving
Credit Commitment and the Dutch Revolving Credit Commitment, each of the U.S.
Borrower and the Dutch Borrower may obtain standby and commercial letters of
credit (as the same may from time to time be amended, supplemented or otherwise
modified, each a “Letter of Credit” and collectively the “Letters of Credit”)
from the Lender from time to time from the Closing Date until the Business Day
preceding the U.S. Revolving Credit Termination Date and the Dutch Revolving
Credit Termination Date (as applicable) for the permitted uses for the U.S.
Revolving Loan and the Dutch Revolving Loan (as applicable).  The U.S. Borrower or the Dutch Borrower (as
applicable) will not be entitled to obtain a Letter of Credit unless (a) the
U.S. Borrower or the Dutch Borrower (as applicable) would then be able to
obtain a U.S. Revolving Loan or a Dutch Revolving Loan (as applicable) from the
Lender in an amount not less than the proposed face amount of the Letter of
Credit requested, and (b) the sum of the then Outstanding Letter of Credit
Obligations (including the amount of the requested Letter of Credit) does not
exceed in the aggregate Five Hundred Thousand Dollars ($500,000).


 


2.5.2        Letter of Credit Fees.


 


In connection with each Letter
of Credit, the U.S. Borrower or the Dutch Borrower (as applicable) shall pay to
the Lender a letter of credit fee (each a “Letter of Credit Fee” and
collectively the “Letter of Credit Fees”) in an amount equal to the Applicable
Margin (determined at the time the Letter of Credit is issued) for LIBOR Loans
under the U.S. Revolving Credit Facility or the Dutch Revolving Credit Facility
(as applicable), calculated on a per annum basis and on the basis of actual
number of days elapsed in a year of 360 days, of the stated amount of each such
Letter of Credit without regard for provisions contained in the Letter of
Credit that may give rise to a reduction in the stated amount thereof unless
such reduction has actually occurred. 
The Letter of Credit Fees shall be paid upon the opening of each Letter
of Credit and upon each anniversary thereof, if any.


 


2.5.3        Terms of Letters of
Credit; Post-Expiration Date Letters of Credit.


 


Each Letter of Credit shall (a) be
opened pursuant to a Letter of Credit Agreement and (b) expire on a date
not later than the Business Day preceding the U.S. Revolving Credit Expiration
Date or the Dutch Revolving Credit Expiration Date (as applicable); provided,
however, if any 


 

















 


Letter of Credit does have an expiration date
later than the Business Day preceding the U.S. Revolving Credit Expiration Date
or the Dutch Revolving Credit Expiration Date (as applicable) (each a “Post-Expiration
Date Letter of Credit” and collectively, the “Post-Expiration Date Letters of
Credit”), effective as of the Business Day preceding the U.S. Revolving Credit
Expiration Date or the Dutch Revolving Credit Expiration Date (as applicable)
and without prior notice to or the consent of the U.S. Borrower or the Dutch
Borrower (as applicable), the Lender shall make a U.S. Revolving Loan Advance
or a Dutch Revolving Loan Advance (as applicable) for the account of the U.S.
Borrower or the Dutch Borrower (as applicable) in the aggregate face amount of
all such Letters of Credit.  The Lender
shall deposit the proceeds of such advances into one or more non-interest
bearing accounts with and in the name of the Lender and over which the Lender
alone shall have exclusive power of access and withdrawal (collectively, the “Letter
of Credit Cash Collateral Account”).  The
Letter of Credit Cash Collateral Account is to be held by the Lender, as
additional collateral and security for any Letter of Credit Obligations
relating to the Post-Expiration Date Letters of Credit.  The U.S. Borrower and the Dutch Borrower
hereby assign, pledge, grant and set over to the Lender a first priority
security interest in, and Lien on, all of the funds on deposit in the Letter of
Credit Cash Collateral Account, together with any and all proceeds (cash and
non-cash) and products thereof as additional collateral and security for the
Letter of Credit Obligations relating to the Post-Expiration Date Letters of
Credit.  The U.S. Borrower and the Dutch
Borrower acknowledge and agree that the Lender shall be entitled to fund any
draw or draft on any Post-Expiration Date Letter of Credit from the monies on
deposit in the Letter of Credit Cash Collateral Account without notice to or
consent of the U.S. Borrower or the Dutch Borrower.  The U.S. Borrower and the Dutch Borrower
further acknowledge and agree that the Lender’s election to fund any draw or
draft on any Post-Expiration Date Letter of Credit from the Letter of Credit
Cash Collateral shall in no way limit, impair, lessen, reduce, release or
otherwise adversely affect the Letter of Credit Obligations under or relating
to the Post-Expiration Date Letters of Credit. 
At such time as all Post-Expiration Date Letters of Credit have expired
and all Letter of Credit Obligations relating to the Post-Expiration Date
Letters of Credit have been paid in full, the Lender agrees to apply the amount
of any remaining funds on deposit in the Letter of Credit Cash Collateral
Account to the then unpaid balance of the Obligations under the U.S. Revolving
Credit Facility and/or the Dutch Revolving Credit Facility in such order and
manner as the Lender shall determine in its sole and absolute discretion in
accordance with the provisions of this Agreement.


 


Each Letter of Credit shall be
issued in a stated amount at least equal to One Hundred Thousand Dollars
($100,000) or the Euro Currency Equivalent thereof.  The aggregate face amount of all Letters of
Credit at any one time outstanding and issued by the Lender pursuant to the
provisions of this Agreement, including, without limitation, any and all
Post-Expiration Date Letters of Credit, plus the amount of any unpaid Letter of
Credit Fees and unpaid letter of credit fronting fees accrued or scheduled to
accrue thereon, and less the aggregate amount of all drafts issued under or
purporting to have been issued under such Letters of Credit that have been paid
by the Lender and for which the Lender has been reimbursed by the U.S. Borrower
or the Dutch Borrower (as applicable) in full in accordance with Section 2.5.5
(Payments of Letters of Credit) below and the Letter of Credit Agreements, and
for which the Lender has no further obligation or commitment to restore all or
any portion of the amounts drawn and reimbursed, is herein called the “Outstanding
Letter of Credit Obligations”.


 

















 


2.5.4        Procedures for Letters
of Credit.


 


The U.S. Borrower or the Dutch
Borrower (as applicable) shall give the Lender written notice at least five (5) Business
Days prior to the date on which the U.S. Borrower or the Dutch Borrower (as
applicable) desires the Lender to issue a Letter of Credit.  Such notice shall be accompanied by a duly
executed Letter of Credit Agreement specifying, among other things: (a) the
name and address of the intended beneficiary of the Letter of Credit, (b) the
requested face amount of the Letter of Credit, (c) whether the Letter of
Credit is to be revocable or irrevocable, (d) the Business Day on which
the Letter of Credit is to be opened and the date on which the Letter of Credit
is to expire, (e) the terms of payment of any draft or drafts that may be
drawn under the Letter of Credit, and (f) any other terms or provisions
the U.S. Borrower or the Dutch Borrower desire to be contained in the Letter of
Credit.  Such notice shall also be
accompanied by such other information, certificates, confirmations, and other
items as the Lender may require to assure that the
Letter of Credit is to be issued in accordance with the provisions of this
Agreement and a Letter of Credit Agreement. 
In the event of any conflict between the provisions of this Agreement
and the provisions of a Letter of Credit Agreement, the provisions of this
Agreement shall prevail and control unless otherwise expressly provided in the
Letter of Credit Agreement.  Upon (x) receipt
of such notice, (y) payment of all Letter of Credit Fees and all other
Fees payable in connection with the issuance of such Letter of Credit, and (z) receipt
of a duly executed Letter of Credit Agreement, the Lender shall process such
notice and Letter of Credit Agreement in accordance with its customary
procedures and open such Letter of Credit on the Business Day specified in such
notice.


 


2.5.5        Payments of Letters of
Credit.


 


The U.S. Borrower and the Dutch
Borrower (as applicable) hereby promise to pay to the Lender, ON DEMAND and in
Dollars or the Euro Currency Equivalent thereof (as applicable), the following
that are herein collectively referred to as the “Current Letter of Credit
Obligations”:


 


(a)           the amount that the Lender has paid or will be required to
pay under each draft or draw on a Letter of Credit (upon presentment of such
draft or draw by the beneficiary of such Letter of Credit), whether such demand
be in advance of the Lender’s payment or for reimbursement for such payment;


 


(b)           any and all charges and expenses that the Lender has paid
or incurred relative to the Letter of Credit and/or such draws or drafts; and


 


(c)           interest on the amounts described in (a) and (b) not
paid by the U.S. Borrower or the Dutch Borrower (as applicable) as and when due
and payable under the provisions of (a) and (b) above from the day
the same are due and payable until paid in full at a rate per annum equal to
the then current highest rate of interest on the U.S. Revolving Loan or the
Dutch Revolving Loan (as applicable).


 


In addition, the U.S. Borrower
or the Dutch Borrower (as applicable) hereby promise to pay any and all other
Letter of Credit Obligations as and when due and payable in accordance 


 

















 


with the
provisions of this Agreement and the Letter of Credit Agreements.  The obligation of the U.S. Borrower or the
Dutch Borrower (as applicable) to pay Current Letter of Credit Obligations and
all other Letter of Credit Obligations shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment that the U.S. Borrower or the Dutch Borrower (as applicable)
or any other account party may
have or have had against the beneficiary of such Letter of Credit, the Lender
or any other Person, including, without limitation, any defense based on the
failure of any draft or draw to conform to the terms of such Letter of Credit,
any draft or other document proving to be forged, fraudulent or invalid, or the
legality, validity, regularity or enforceability of such Letter of Credit, any
draft or other documents presented with any draft, any Letter of Credit
Agreement, this Agreement, or any of the other Financing Documents, all whether
or not the Lender had actual or constructive knowledge of the same, and
irrespective of any Collateral, security or guarantee therefor or right of
offset with respect thereto and irrespective of any other circumstances
whatsoever that constitutes, or might be construed to constitute, an equitable
or legal discharge of the U.S. Borrower and the Dutch Borrower (as applicable)
for any Letter of Credit Obligations, in bankruptcy or otherwise; provided,
however,  that the U.S. Borrower and the Dutch Borrower (as
applicable) shall not be obligated to reimburse the Lender for any wrongful
payment under such Letter of Credit made as a result of the Lender’s gross
negligence or willful misconduct as determined by a final non-appealable order
by a court of competent jurisdiction. 
The obligation of the U.S. Borrower or the Dutch Borrower (as
applicable) to pay the Letter of Credit Obligations shall not be conditioned or
contingent upon the pursuit by the Lender or any other Person at any time of
any right or remedy against any Person which may be or become liable in respect
of all or any part of such obligation or against any Collateral, security or
guarantee therefor or right of offset with respect thereto.


 


The Letter of Credit
Obligations shall continue to be effective, or be reinstated, as the case may
be, if at any time payment of all or any portion of the Letter of Credit
Obligations is rescinded or must otherwise be restored or returned by the
Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Person, or upon or as a result of the appointment of a
receiver, intervenor, or conservator of, or trustee or similar officer for, any
Person, or any substantial part of such Person’s property, all as though such
payments had not been made.


 


2.5.6        Change in Law;
Increased Cost.


 


If any change in any law or
regulation or in the interpretation thereof by any court or other Governmental
Authority charged with the administration thereof shall either (a) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against Letters of Credit issued by the Lender, or (b) impose on the
Lender any other condition regarding this Agreement or any Letter of Credit,
and the result of any event referred to in clauses (a) or (b) above
shall be to increase the cost to the Lender of issuing, maintaining or
extending the Letter of Credit or the cost to the Lender of funding any
obligation under or in connection with the Letter of Credit (which increase in
cost shall be the result of the Lender’s appropriate allocation of the
aggregate of such cost increases resulting from such events), then, upon demand
by the Lender, the U.S. Borrower and the Dutch Borrower (as applicable) shall
immediately pay to the Lender from time to time as specified by the Lender,
additional 


 

















 


amounts which shall be sufficient to
compensate the Lender for its allocable portion of such increased cost,
together with interest on each such amount from the date demanded until payment
in full thereof at a rate per annum equal to the then highest current rate of
interest on the U.S. Revolving Loan or the Dutch Revolving Loan (as
applicable).  A certificate as to such
increased cost incurred by the Lender, submitted by the Lender to the U.S.
Borrower and/or the Dutch Borrower (as applicable) shall be conclusive, absent
manifest error.


 


2.5.7        General
Letter of Credit Provisions.


 


The U.S. Borrower and the Dutch
Borrower (as applicable) hereby instruct the Lender to pay any draft complying
with the terms of any Letter of Credit irrespective of any instructions of the
U.S. Borrower or the Dutch Borrower or any other Person to the contrary.  The U.S. Borrower and the Dutch Borrower (as
applicable) assume all risks of the acts and omissions of the beneficiary and
other users of any Letter of Credit.  The
Lender and its branches, Affiliates and/or correspondents shall not be
responsible for, and the U.S. Borrower and the Dutch Borrower (as applicable)
hereby indemnify and hold the Lender and its branches, Affiliates and/or
correspondents harmless from and against, all liability, loss and expense
(including attorney’s fees and costs) incurred by the Lender and/or its
branches, Affiliates and/or correspondents relative to and/or as a consequence
of (a) any failure by the U.S. Borrower or the Dutch Borrower (as
applicable) to perform the agreements hereunder and under any Letter of Credit
Agreement, (b) any Letter of Credit Agreement, this Agreement, any Letter
of Credit and any draft, draw and/or acceptance under or purported to be under
any Letter of Credit, (c) any action taken or omitted by the Lender and/or
any of its branches, Affiliates and/or correspondents at the request of the
U.S. Borrower or the Dutch Borrower (as applicable), (d) any failure or
inability to perform in accordance with the terms of any Letter of Credit by
reason of any control or restriction rightfully or wrongfully exercised by any de
facto or de jure Governmental Authority, group or individual
asserting or exercising governmental or paramount powers, and/or (e) any
consequences arising from causes beyond the control of the Lender and/or any of
its branches, Affiliates and/or correspondents.


 


The Lender and its branches,
Affiliates and/or correspondents, shall not be liable or responsible in any
respect for any (a) error, omission, interruption or delay in
transmission, dispatch or delivery of any one or more messages or advices in
connection with any Letter of Credit, whether transmitted by cable, telegraph,
mail or otherwise and despite any cipher or code that may be employed, and/or (b) action,
inaction or omission which may be taken or suffered by it or them in good faith
or through inadvertence in identifying or failing to identify any beneficiary
or otherwise in connection with any Letter of Credit, provided, however,
that the foregoing shall not apply in connection with the Lender’s gross
negligence or willful misconduct as determined by a final non-appealable order
by a court of competent jurisdiction.


 


Any Letter of Credit may be
amended, modified or revoked only upon the receipt by the Lender from the U.S.
Borrower or the Dutch Borrower (as applicable) and the beneficiary (including
any transferee and/or assignee of the original beneficiary) of a written
consent and request therefor.


 
















 


If any Laws, order of court
and/or ruling or regulation of any Governmental Authority of the United States
(or any state thereof) and/or any country other than the United States permits
a beneficiary under a Letter of Credit to require the Lender and/or any of its
branches, Affiliates and/or correspondents to pay drafts under or purporting to
be under a Letter of Credit after the expiration date of the Letter of Credit,
the U.S. Borrower or the Dutch Borrower (as appropriate) shall reimburse the
Lender for any such payment pursuant to provisions of Section 2.5.6
(Change in Law; Increased Cost).


 


Except as may otherwise be
specifically provided in a Letter of Credit or Letter of Credit Agreement, the
laws of the State of Maryland and the Uniform Customs and Practice for
Documentary Credits, 1993 Revision, International Chamber of Commerce
Publication No. 500 or the International Standby Practices, International
Chamber of Commerce Publication No. 590, as applicable, shall govern the
Letters of Credit.  The Laws, rules,
provisions and regulations of the Uniform Customs and Practice for Documentary
Credits and the International Standby Practices, as applicable, are hereby
incorporated by reference.  In the event
of a conflict between the Uniform Customs and Practice for Documentary Credits
or the International Standby Practices and the laws of the State of Maryland,
the Uniform Customs and Practice for Documentary Credits or the International
Standby Practices, as applicable, shall prevail.


 


Section 2.6             Interest.


 


2.6.1        Applicable Interest
Rates.


 


(a)           Each
Loan shall bear interest as follows:


 


(i)            the U.S. Revolving Loan shall bear
interest until maturity (whether by acceleration, declaration, extension or
otherwise) at the Base Rate or the LIBOR Rate, as selected and specified by the
U.S. Borrower in an Interest Rate Election Notice furnished to the Lender in
accordance with the provisions of Section 2.6.2 (Selection of Interest
Rates), plus the Applicable Margin.


 


(ii)           the Dutch Revolving Loan and the
Dutch Term Loan shall each bear interest until maturity (whether by
acceleration, declaration extension or otherwise) at the LIBOR Rate plus the
Applicable Margin.


 


(b)           The
Applicable Margin for each of the Credit Facilities shall be as follows:


 


(i)            U.S. Revolving Loan


 


	
   

  	
   

  	
  Applicable Margin

  	
   

  	
  Applicable Margin

  	
   

  
	
  Senior Debt Leverage Ratio

  	
   

  	
  For LIBOR Loans

  	
   

  	
  For Base Rate Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  <l:1

  	
   

  	
  1.75

  	
  %

  	
  0

  	
  %

  
	
  <1.5:1
  and >1:1

  	
   

  	
  2.0

  	
  %

  	
  0

  	
  %

  
	
  <2:1
  and >1.5:1

  	
   

  	
  2.25

  	
  %

  	
  0.25

  	
  %

  
	
  > 2:1

  	
   

  	
  2.75

  	
  %

  	
  0.5

  	
  %

  



 

















 


(ii)           Reserved


 


(iii)          Dutch Revolving Loan


 


	
   

  	
   

  	
  Applicable Margin

  	
   

  
	
  Senior Debt Leverage Ratio

  	
   

  	
  For LIBOR Loans

  	
   

  
	
  <1:1

  	
   

  	
  1.75

  	
  %

  
	
  <1.5:1
  and >1:1

  	
   

  	
  2.0

  	
  %

  
	
  <2:1
  and >1.5:1

  	
   

  	
  2.25

  	
  %

  
	
  > 2:1

  	
   

  	
  2.75

  	
  %

  



 


(iv)          Dutch Term Loan


 


	
   

  	
   

  	
  Applicable Margin

  	
   

  
	
  Senior Debt Leverage Ratio

  	
   

  	
  For LIBOR Loans

  	
   

  
	
  <1:1

  	
   

  	
  2.25

  	
  %

  
	
  <1.5:1
  and >1:1

  	
   

  	
  2.5

  	
  %

  
	
  <2:1
  and >1.5:1

  	
   

  	
  2.75

  	
  %

  
	
  > 2:1

  	
   

  	
  3.25

  	
  %

  



 


(c)           Notwithstanding
the foregoing, following the occurrence and during the continuance of a
Default, at the option of the Lender and upon written notice to the Obligors,
all Loans and all other Obligations shall bear interest at the Post-Default
Rate.


 


2.6.2        Selection of Interest
Rates.


 


(a)           The
U.S. Borrower may select the initial Applicable Interest Rate or Applicable
Interest Rates and Dollar Interest Periods applicable to the U.S. Revolving
Loan and the Dutch Borrower may select the initial Euro Interest Periods
applicable to the Dutch Revolving Loan and the Dutch Term Loan.


 


(b)           From
time to time after the date of this Agreement as provided in this Section, by
delivery of a proper and timely Interest Rate Election Notice furnished to the
Lender in accordance with the provisions of subsection (e), the U.S. Borrower
may select the Applicable Interest Rate or Applicable Interest Rates and Dollar
Interest Periods for any U.S. Revolving Loan, and the Dutch Borrower may select
the Euro Interest Periods for any Dutch Revolving Loan and the Dutch Term Loan.


 


(c)           The
selection of an Applicable Interest Rate and/or an Interest Period, the
election to convert an Applicable Interest Rate and/or an Interest Period to
another Applicable Interest Rate or Interest Period, and any other adjustments
in an interest rate are subject to the following limitations:


 


(i)            the
U.S. Borrower shall not at any time select or change to an Interest Period that
extends beyond the U.S. Revolving Credit Expiration Date for the U.S. Revolving



 

















 


Loan Advances, and the Dutch
Borrower shall not at any time select or change to an Interest Period that
extends beyond the Dutch Revolving Credit Expiration Date for the Dutch
Revolving Loan Advances and the Dutch Term Loan Maturity Date for the Dutch
Term Loan;


 


(ii)           except as otherwise provided in Section 2.6.4
(Indemnity), no change from the LIBOR Rate to the Base Rate shall become
effective on a day other than a Business Day and on a day which is the last day
of the then current Interest Period, no change of an Interest Period shall
become effective on a day other than the last day of the then current Interest
Period, and no change from the Base Rate to the LIBOR Rate shall become
effective on a day other than a day which is a Business Day;


 


(iii)          any Applicable Interest Rate change
for any Loan to be effective on a date on which any principal payment on
account of such Loan is scheduled to be paid shall be made only after such
payment shall have been made;


 


(iv)          no more than five (5) different
LIBOR Rates may be outstanding at any time and from time to time with respect
to the U.S. Revolving Loan and no more than five (5) different LIBOR Rates
may be outstanding at any time and from time to time with respect to each of
the Dutch Revolving Loan and the Dutch Term Loan;


 


(v)           the first date of each Interest
Period shall be a Business Day;


 


(vi)          as of the effective date of a
selection, if a Default exists, the Lender may determine not to accept
selection, election or adjustment; and


 


(vii)         the minimum principal amount of a
Dollar LIBOR Loan shall be One Hundred Thousand Dollars ($100,000) and the
minimum principal amount of a Euro LIBOR Loan shall be the Euro Currency
Equivalent of One Hundred Thousand Dollars ($100,000).


 


(d)           If
a request for a U.S. Revolving Loan Advance is not accompanied by an Interest
Rate Election Notice or does not otherwise include a selection of an Applicable
Interest Rate and, if applicable, an Interest Period, or if, after having made
a selection of an Applicable Interest Rate and, if applicable, an Interest
Period, the U.S. Borrower or the Dutch Borrower, as applicable, fail or are not
otherwise entitled under the provisions of this Agreement to continue such
Applicable Interest Rate or Interest Period, the U.S. Borrower shall be deemed
to have selected the Base Rate and the Dutch Borrower shall be deemed to have
elected a one (1) month Euro Interest Period, until such time as the U.S.
Borrower or the Dutch Borrower, as appropriate, have selected a different
Applicable Interest Rate and specified an Interest Period in accordance with,
and subject to, the provisions of this Section.


 


(e)           The
Lender will not be obligated to make Loans, to convert the Applicable Interest
Rate on Loans to another Applicable Interest Rate, or to change Interest
Periods, unless the Lender shall have received an irrevocable written or
telephonic notice (an “Interest Rate Election Notice”) from the U.S. Borrower
or the Dutch Borrower, as appropriate, specifying the following information:


 

















 


(i)            the amount to be borrowed or
converted;


 


(ii)           a selection of the Base Rate or the
LIBOR Rate as to any U.S. Revolving Loans;


 


(iii)          the length of the Interest Period if
the Applicable Interest Rate selected is the LIBOR Rate; and


 


(iv)          the requested date on which such
election is to be effective.  Any
telephonic notice must be confirmed by written notice or e-mail within three (3) Business
Days.  Each Interest Rate Election Notice
under the U.S. Revolving Credit Facility must be received by the Lender not
later than 1:00 p.m. (prevailing U.S. Eastern Time) on the Business Day of
any requested borrowing or conversion in the case of selection of the Base Rate
and not later than 1:00 p.m. (prevailing U.S. Eastern Time) on the third
Business Day before the effective date of any requested borrowing or
conversation in the case of a selection of the LIBOR Rate.  Each Interest Rate Election Notice under the
Dutch Revolving Credit Facility or the Dutch Term Loan must be received by the
Lender by 1:00 p.m.  (prevailing
U.S. Eastern Time) not later than three (3) Business Day prior to the
proposed date of funding or converting the applicable Euro LIBOR Loan.


 


2.6.3        Inability to Determine
Dollar LIBOR Rate or Euro LIBOR Rate.


 


In the event that (a) the
Lender shall have determined that, by reason of circumstances affecting the
London inter-bank market, adequate and reasonable means do not exist for
ascertaining the Dollar LIBOR Rate or Euro LIBOR Rate for any Interest Period
with respect to a Loan which is to be made as a LIBOR Loan or (b) the
Lender shall determine that the Dollar LIBOR Rate or Euro LIBOR Rate for any
Interest Period with respect to a Loan to be made as a LIBOR Loan does not
adequately and fairly reflect the cost to the Lender of funding or converting
such Loan, the Lender shall give telephonic or written notice of such
determination to the appropriate Borrower at least one (1) day prior to
the proposed date for funding of such Loan. 
If such notice is given, any Dollar LIBOR Loan shall accrue interest at
the Base Rate plus the Applicable Margin and any Euro LIBOR Loan shall accrue
interest at the rate certified by the Lender to be the rate at which it
currently offers loans in Euros to its best customers.


 


2.6.4        Indemnity.


 


The Obligors agree to indemnify
and reimburse the Lender and to hold the Lender harmless from any loss, cost
(including administrative costs) or expense (including, without limitation, any
such loss or expense arising from the reemployment of funds obtained by the
Lender to maintain any LIBOR Loan or from fees payable to terminate the
deposits from which such funds were obtained) which the Lender has sustained or
incurred as a consequence of (a) a default by either of the Borrowers in
payment when due of the principal amount of or interest on any LIBOR Loan,
including any mandatory prepayments, (b) the failure of either of the
Borrowers to make, or convert the Applicable Interest Rate of, a Loan after
either of the Borrowers has given a Loan Notice or an Interest Rate Election
Notice, (c) the failure of either of the Borrowers to make any prepayment
of a LIBOR Loan after the Borrowers have given notice 


 

















 


of such intention to make such a prepayment,
and/or (d) the making by either of the Borrowers of a prepayment of a
LIBOR Loan on a day which is not the last day of the Interest Period for such LIBOR Loan.  The Lender agrees to provide the applicable
Borrower with a written certification as to any amounts payable to the Lender
under this Section including the manner and method of calculating such
amounts.


 


2.6.5        Payment of Interest.


 


(a)           Unpaid and accrued interest on any advance of the Loans
shall be paid (i) at the end of each Interest Period for any LIBOR Rate
Loan, (ii) monthly, in arrears, on the first day of each calendar month,
commencing on the first such date after the date of this Agreement, and on the
first day of each calendar month thereafter, for any Base Rate Loan and (iii) at
maturity (whether by acceleration, declaration, extension or otherwise) (each
an “Interest Payment Date”).


 


(b)           Notwithstanding the foregoing, any and all unpaid and
accrued interest on any Base Rate Loan converted to a LIBOR Loan or prepaid
shall be paid immediately upon such conversion and/or prepayment, as
appropriate.


 


Section 2.7             General
Financing Provisions.


 


2.7.1        Consideration; Obligors’
Representative.


 


Each of the Obligors hereby
represents and warrants to the Lender that each of them will derive benefits,
directly and indirectly, from each Loan and each Letter of Credit, both in
their separate capacity and as a member of the integrated group to which each
of the Obligors belongs and because the successful operation of the integrated
group is dependent upon the continued successful performance of the functions
of the integrated group as a whole, because (a) this financing is enabling
the consummation by the U.S. Borrower and the Seller of the Purchase Agreement
Transaction, (b) the terms of the consolidated financing provided under this
Agreement are more favorable than would otherwise would be obtainable by the
Obligors individually, and (c) the Obligors’ additional administrative and
other costs and reduced flexibility associated with individual financing
arrangements which would otherwise be required if obtainable would
substantially reduce the value to the Obligors of the financing.  The Obligors in the discretion of their
respective managements are to agree among themselves as to the allocation of
the proceeds of Loans and the benefits of the Letters of Credit, except that
all Loans made to the Dutch Borrower are to be made to and retained by the
Dutch Borrower.


 


For administrative convenience,
each Obligor hereby irrevocably appoints the U.S. Borrower as such Obligor’s
attorney-in-fact, with power of substitution (with the prior written consent of
the Lender in the exercise of its sole and absolute discretion), in the name of
the U.S. Borrower or in the name of the respective Obligor or otherwise to take
any and all actions with respect to this Agreement, the other Financing
Documents, the Obligations and/or the Collateral (including, without
limitation, the proceeds thereof) as the U.S. Borrower may so elect from time
to time, including, without limitation, actions to (i) request advances
under the Loans, apply for and direct the benefits of Letters of Credits, and
direct the Lender to disburse or credit the proceeds of any Loan directly to an
account of the U.S. Borrower or the Dutch 


 

















 


Borrower (as appropriate), any one or more of
the Obligors or otherwise, which direction shall evidence the making of such
Loan and shall constitute the acknowledgement by each of the Obligors of the
receipt of the proceeds of such Loan or the benefit of such Letter of Credit, (ii) enter
into, execute, deliver, amend, modify, restate, substitute, extend and/or renew
this Agreement, any Additional Obligors Joinder Supplement, any other Financing
Documents, security agreements, mortgages, deposit account agreements,
instruments, certificates, waivers, letter of credit applications, releases,
documents and agreements from time to time, and (iii) endorse any check or
other item of payment in the name of such Obligor.  The foregoing appointment is coupled with an
interest, cannot be revoked without the prior written consent of the Lender,
and may be exercised from time to time through the U.S. Borrower’s duly
authorized officer, officers or other Person or Persons designated by the U.S.
Borrower to act from time to time on behalf of the U.S. Borrower.


 


Each of the Obligors hereby
irrevocably authorizes the Lender to make Loans to either or both of the
Borrowers, and hereby irrevocably authorizes the Lender to issue or cause to be
issued Letters of Credit for the account of the U.S. Borrower or the Dutch Borrower
(as appropriate), pursuant to the provisions of this Agreement upon the
written, oral or telephone request of any one or more of the Persons who is
from time to time a Responsible Officer of the U.S. Borrower under the
provisions of the most recent certificate of corporate resolutions and/or
incumbency on file with the Lender and also upon the written, oral or telephone
request of any one of the Persons who is from time to time a Responsible
Officer of the U.S. Borrower under the provisions of the most recent
certificate of corporate resolutions and/or incumbency on file with the Lender.


 


In the absence of the Lender’s
gross negligence or willful misconduct, the Lender assumes no responsibility or
liability for any errors, mistakes, and/or discrepancies in the oral,
telephonic, written or other transmissions of any instructions, orders,
requests and confirmations between the Lender and the Obligors in connection
with the Credit Facilities, any Loan, any Letter of Credit, or any other
transaction in connection with the provisions of this Agreement.  Without implying any limitation on the joint
and several nature of the Obligations, the Lender agrees that, notwithstanding
any other provision of this Agreement, the Obligors may create reasonable
inter-company indebtedness between or among the Obligors with respect to the
allocation of the benefits and proceeds of the advances and Credit Facilities
under this Agreement, except that the Dutch Revolving Loan and the Dutch Term
Loan shall be made to and retained by the Dutch Borrower and shall not be
allocated or reallocated to any other Obligor. 
The Obligors agree among themselves, and the Lender consents to that
agreement, that each Obligor shall have rights of contribution from all of the
other Obligor to the extent such Obligor incurs Obligations in excess of the
proceeds of the Loans received by, or allocated to purposes for the direct
benefit of, such Obligors.  All such
indebtedness and rights shall be, and are hereby agreed by the Obligors to be,
subordinate in priority and payment to the indefeasible repayment in full in
cash of the Obligations, and, unless the Lender agrees in writing otherwise,
shall not be exercised or repaid in whole or in part until all of the
Obligations have been indefeasibly paid in full.  The Obligors agree that all of such
inter-company indebtedness and rights of contribution are part of the
Collateral and secure the Obligations. 
Each Obligor hereby waives all rights of counterclaim, recoupment and
offset between or among themselves arising on account of that indebtedness and
otherwise.  Each 


 

















 


Obligor shall not evidence the inter-company
indebtedness or rights of contribution by note or other instrument, and shall not secure such indebtedness
or rights of contribution with any Lien or security.


 


2.7.2        Origination Fee.


 


The U.S. Borrower shall pay to
the Lender on or before the Closing Date a loan restructuring in the amount of
$5,000.00 (the “Origination Fee”), which shall be fully deemed to be earned and
is non-refundable.


 


2.7.3        Field Examination Fees.


 


The Lender reserves the right
to charge the Obligors for any and all out- of-pocket expenses reasonably
incurred in connection with the performance of field examinations.


 


2.7.4        Computation of Interest
and Fees.


 


All applicable Fees and
interest shall be calculated on the basis of a year of 360 days for the actual
number of days elapsed.  Any change in
the interest rate on any of the Obligations resulting from a change in the Base
Rate shall become effective as of the opening of business on the day on which
such change in the Base Rate is announced.


 


2.7.5        Payments.


 


All payments to be made by the
U.S. Borrower to the Lender under this Agreement or any of the other Financing
Documents shall be made in Dollars and all payments to be made by the Dutch
Borrower to the Lender under this Agreement or any of the other Financing
Documents shall be made in Euros (other than payments made on the Dutch Term
Loan and unless otherwise agreed to or required by any Lender), without set-off
or counterclaim and free and clear of, and without deduction for or on account
of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions, withholdings or restrictions or conditions
of any nature whatsoever now or hereafter imposed, levied, collected, withheld
or assessed against any of the Obligors, other than income and franchise taxes
imposed on the Lender (such non-excluded items, the “Assessments”).  If any Assessments are imposed and required
to be withheld from any such payment, the Obligors shall (a) increase the
amount of such payment so that the Lender will receive a net amount (after
giving effect to the payment of such additional amount and to the deduction of
all Assessments) equal to the amount due hereunder, and (b) pay such
Assessments to the appropriate taxing authority for the account of the Lender
and, as promptly as possible thereafter, send the Lender, an original receipt
(or a copy thereof that has been stamped by the appropriate taxing authority to
certify payment) showing payment thereof, together with such additional
documentary evidence as the Lender may from time to time reasonably
require.  If any of the Obligors fails to
perform its obligations to the Lender under parts (a) or (b) of the preceding
sentence, the Obligors (subject to the limitations of Section 2.9
(Limitations on Joint and Several Liability for Obligations)) shall indemnify
the Lender for any such Assessments that are paid by the Lender, plus all
incremental Assessments, interest or penalties that may become payable as a
consequence of such failure.


 

















 


2.7.6        Liens; Setoff.


 


The U.S. Borrower hereby grants
to the Lender a continuing Lien in order to secure all of the Obligations upon
any and all monies, securities, and other property of the U.S. Borrower and the
proceeds thereof, now or hereafter held or received by or in transit to, the
Lender, and/or any Affiliate of the Lender, from or for the U.S. Borrower, and
also upon any and all deposit accounts (general or special) and credits of the
U.S. Borrower, if any, with the Lender or any Affiliate of the Lender, at any
time existing, excluding any deposit accounts held by the U.S. Borrower in its
capacity as trustee for Persons who are Affiliates of the U.S. Borrower.  The Dutch Borrower hereby grants to the
Lender a continuing Lien in order to secure all of the Dutch Obligations upon
any and all monies, securities, and other property of the Dutch Borrower and
the proceeds thereof, now or hereafter held or received by or in transit to,
the Lender and/or any Affiliate of the Lender, from or for the Dutch Borrower,
and also upon any and all deposit accounts (general or special) and credits of
the Dutch Borrower, if any, with the Lender or any Affiliate of the Lender, at
any time existing, excluding any deposit accounts held by the Dutch Borrower in
its capacity as trustee for Persons who are Affiliates of the Dutch
Borrower.  Without implying any
limitation on any other rights the Lender may have under the Financing
Documents or applicable Laws, during the continuance of a Default, the Lender,
as appropriate and subject to the provisions of this Section, is hereby
authorized by the Obligors at any time and from time to time, without notice to
the Obligors, to set off, appropriate and apply any or all items hereinabove
referred to against all Obligations then outstanding (whether or not then due),
all in such order and manner as shall be determined by the Lender in its sole
and absolute discretion.


 


2.7.7        Requirements of Law.


 


In the event that the Lender
shall have determined reasonably and in good faith that (a) the adoption
of any Laws regarding capital adequacy, or (b) any change therein or in
the interpretation or application thereof or (c) compliance by the Lender
or any corporation controlling the Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
central bank or Governmental Authority, does or shall have the effect of
reducing the rate of return on the capital of the Lender or any corporation
controlling the Lender, as a consequence of the obligations of the Lender
hereunder to a level below that which the Lender or any corporation controlling
the Lender would have achieved but for such adoption, change or compliance (taking
into consideration the policies of the Lender and the corporation controlling
the Lender, with respect to capital adequacy) by an amount deemed by the Lender
to be material, then from time to time, after submission by the Lender to the
Borrowers of a written request therefor and a statement of the basis for such
determination, the Borrowers shall pay to the Lender such additional amount or
amounts in order to compensate for such reduction, except that the Dutch
Borrower shall only be required to pay such
amounts if and to the extent they affect the Lender as a result of the
Dutch Obligations.  Notwithstanding any provision
contained herein to the contrary, the Lender agrees that it shall not apply the provisions of this Section to
either of the Borrowers if it shall not at the time be the general policy or
practice of the Lender to apply provisions similar to those of this Section 


 

















 


to other borrowers in substantially similar
circumstances under substantially comparable provisions of other credit agreements.


 


Section 2.8             Guaranty.


 


(a)           Subject
to the limitations on liability of the Non-U.S. Obligors as set forth in Section 2.9
(Limitations on Joint and Several Liability for Obligations) with respect to
all other Obligations, each Obligor hereby unconditionally and irrevocably,
guarantees to the Lender:


 


(i)            the due and punctual payment in full
(and not merely the collectibility) by the other Obligors of the Obligations,
including unpaid and accrued interest thereon, in each case when due and
payable, all according to the terms of this Agreement and the other Financing
Documents;


 


(ii)           the due and punctual payment in full
(and not merely the collectibility) by the other Obligors of all other sums and
charges which may at any time be due and payable in accordance with this
Agreement or any of the other Financing Documents;


 


(iii)          the due and punctual performance by
the other Obligors of all of the other terms, covenants and conditions
contained in the Financing Documents; and


 


(iv)          all the other Obligations of the other
Obligors; provided, however, that the guaranty of the Non-U.S. Obligors shall
apply only to the Dutch Obligations and not to the U.S. Obligations.


 


(b)           The
obligations and liabilities of each Obligor as a guarantor under this Section shall
be absolute and unconditional and joint and several (subject to the limitations
of Section 2.9 (Limitations on Joint and Several Liability for
Obligations), irrespective of the genuineness, validity, priority, regularity
or enforceability of this Agreement or any of the Financing Documents or any
other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or guarantor.  Each
Obligor in its capacity as a guarantor expressly agrees that the Lender may, in
its sole and absolute discretion, without notice to or further assent of any of
the Obligors and without in any way releasing, affecting or in any way
impairing the joint and several obligations and liabilities of such Obligors as
guarantors hereunder:


 


(i)            waive compliance with, or any
defaults under, or grant any other indulgences under or with respect to any of
the Financing Documents;


 


(ii)           modify, amend, change or terminate
any provisions of any of the Financing Documents;


 


(iii)          grant extensions or renewals of or
with respect to the Credit Facilities or any of the other Financing Documents;


 

















 


(iv)          effect any release, subordination,
compromise or settlement in connection with this Agreement or any of the other
Financing Documents;


 


(v)           agree to the substitution, exchange,
release or other disposition of the Collateral or any part thereof, or any
other collateral for the Loan or to the subordination of any lien or security
interest therein;


 


(vi)          make advances for the purpose of
performing any term, provision or covenant contained in this Agreement or any
of the other Financing Documents with respect to which any Obligor shall then
be in default;


 


(vii)         make future advances pursuant to this
Agreement or any of the other Financing Documents;


 


(viii)        assign, pledge, hypothecate or otherwise
transfer the Commitments, the Obligations, this Agreement or any of the other
Financing Documents or any interest therein, all as and to the extent permitted
by the provisions of this Agreement;


 


(ix)           deal in all respects with the other
Obligors as if this Section were not in effect;


 


(x)            effect any release, compromise or
settlement with any of the other Obligors, whether in their capacity as a
Obligor or as a guarantor under this Section, or any other guarantor; and


 


(xi)           provide debtor-in-possession
financing or allow use of cash collateral in proceedings under the Bankruptcy
Code, it being expressly agreed by all Obligors that any such financing and/or
use would be part of the Obligations.


 


(c)           The
obligations and liabilities of each Obligor as guarantor under this Section shall
be joint and several (subject to the limitations of Section 2.9
(Limitations on Joint and Several Liability for Obligations)), primary, direct
and immediate, shall not be subject to any counterclaim, recoupment, set off,
reduction or defense based upon any claim that a Obligor may have against any
one or more of the other Obligors, the Lender and/or any other guarantor and
shall not be conditional or contingent upon pursuit or enforcement by the
Lender of any remedies it may have against the Obligors with respect to this
Agreement or any of the other Financing Documents, whether pursuant to the
terms thereof or by operation of law. 
Without limiting the generality of the foregoing, the Lender shall not
be required to make any demand upon any of the Obligors, or to sell the
Collateral or otherwise pursue, enforce or exhaust its or their remedies
against the Obligors or the Collateral either before, concurrently with or
after pursuing or enforcing its rights and remedies hereunder.  Any one or more successive or concurrent
actions or proceedings may be brought against each Obligor under this Section either
in the same action, if any, brought against any one or more of the Obligors or
in separate actions or proceedings, as often as the Lender may deem expedient
or advisable.  Without limiting the
foregoing, it is specifically understood that any modification, limitation or
discharge of any of the liabilities or obligations of any one or more of the
Obligors, any other guarantor or any obligor under any of 


 

















 


the Financing Documents, arising out of, or
by virtue of, any bankruptcy, arrangement, reorganization or similar proceeding
for relief of debtors under federal or state law initiated by or against any
one or more of the Obligors, in their respective capacities as borrowers and
guarantors under this Section, or under any of the Financing Documents shall
not modify, limit, lessen, reduce, impair, discharge, or otherwise affect the
liability of the U.S. Borrower or each Non-U.S. Obligor under this Section in
any manner whatsoever, and this Section shall remain and continue in full
force and effect.  It is the intent and
purpose of this Section that each Obligor shall and does hereby waive all
rights and benefits which might accrue to any other guarantor by reason of any
such proceeding, and the Obligors agree that they shall be liable for the full
amount of the obligations and liabilities under this Section, regardless of,
and irrespective to, any modification, limitation or discharge of the liability
of any one or more of the Obligors, any other guarantor or any obligor under
any of the Financing Documents, that may result from any such proceedings.


 


Without limiting the foregoing,
each Obligor, as guarantor under this Section, hereby unconditionally, jointly
and severally, irrevocably and expressly waives:


 


(i)            presentment and demand for payment
of the Obligations and protest of non-payment;


 


(ii)           notice of acceptance of this Section and
of presentment, demand and protest thereof;


 


(iii)          notice of any default hereunder or any
of the other Financing Documents and notice of all indulgences;


 


(iv)          notice of any increase in the amount
of any portion of or all of the indebtedness guaranteed by this Section;


 


(v)           demand for observance, performance or
enforcement of any of the terms or provisions of this Agreement or any of the
other Financing Documents;


 


(vi)          all errors and omissions in connection
with the Lender’s administration of all indebtedness guaranteed by this
Section, except errors and omissions resulting from acts of gross negligence or
willful misconduct;


 


(vii)         any right or claim of right to cause a
marshalling of the assets of any one or more of the other Obligors;


 


(viii)        any act or omission of the Lender which
changes the scope of the risk as guarantor hereunder; and


 


(ix)           all other notices and demands
otherwise required by law which the Obligors may lawfully waive.


 

















 


(d)           Within
ten (10) days following any request of the Lender so to do, each Obligor
will furnish the Lender and such other Persons as the Lender may direct with a
written certificate, duly acknowledged stating in detail whether or not any
credits, offsets or defenses exist with respect to this Section.


 


Section 2.9             Limitations
on Joint and Several Liability for Obligations.


 


Notwithstanding anything herein
or in any of the other Financing Documents to the contrary, the obligations and
liabilities of one or more of the Obligors shall be limited as and to the
extent provided in this Section, as follows:


 


(a)           the Dutch Borrower and the other Non-U.S. Obligors, as
guarantors and pledgors of collateral, shall not be liable for payment of the
U.S. Obligations;


 


(b)           NKF and the Spanish Subsidiary, as guarantors and pledgors
of collateral, shall not be liable for payment of the Dutch Obligations arising
from, and on account of, the Dutch Term Loan; and


 


(c)           the U.S. Borrower shall be liable for all of the
Obligations, including, without limitation, the Dutch Obligations.


 


ARTICLE
III

THE COLLATERAL


 


Section 3.1             Debt
and Obligations Secured.


 


Subject to the limitations set
forth in Section 2.9 (Limitations on Joint and Several Liability for
Obligations), all property and Liens assigned, pledged or otherwise granted
under or in connection with this Agreement (including, without limitation,
those under Section 3.2 (Grant of Liens) below) or any of the Financing
Documents shall secure (a) the payment of all of the Obligations,
including, without limitation, any and all outstanding Dutch Obligations and
Letter of Credit Obligations and (b) the performance, compliance with and
observance by the Obligors of the provisions of this Agreement and all of the
other Financing Documents or otherwise under the Obligations.  The Lender and the Obligors agree that the
granting clauses of this ARTICLE III are intended to grant Liens on the assets
of the U.S. Borrower only and not assets of the Non-U.S. Obligors.  The Dutch Security Documents and the Stock
Pledge Agreements are intended to grant Liens on the assets of the Non-U.S.
Obligors to the Lender.  Any and all
references to Collateral included elsewhere in this Agreement (other than in Section 3.2
(Grant of Liens)) are intended to include and govern the Collateral of all of
the Obligors, whether the Liens on such Collateral arise under the provisions
of this Agreement or under any of the other Security Documents (including the
Dutch Security Documents).


 


Section 3.2             Grant
of Liens.


 


For the purpose of securing the
obligations, the U.S. Borrower hereby assigns, pledges and grants to the Lender
and agrees that the Lender shall have a perfected and continuing 


 

















 


security interest in, and Lien on, (a) all
of the U.S. Borrower’s Accounts, Inventory, Chattel Paper, Documents,
Instruments, Equipment, Securities, and General Intangibles, Purchase Agreement
Rights, whether now owned or existing or hereafter acquired or arising, (b) all
returned, rejected or repossessed goods, the sale or lease of which shall have
given or shall give rise to an Account or Chattel Paper, (c) all insurance
policies relating to the foregoing, (d) all books and records in whatever
media (paper, electronic or otherwise) recorded or stored, with respect to the
foregoing and all equipment and general intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records, (e) all of the U.S. Borrower’s other personal property of any
kind or nature whatsoever, and (f) all cash and non-cash proceeds and
products of the foregoing.  The U.S.
Borrower further agrees that the Lender shall have in respect thereof all of
the rights and remedies of a secured party under the Uniform Commercial Code as
well as those provided in this Agreement, under each of the other Financing
Documents and under applicable Laws.  The
Obligors hereby agree to indemnify the Lender and hold the Lender harmless from
any and all claims, actions, suits, losses, damages, costs, expenses, fees,
obligations and liabilities that may be incurred by or imposed upon the Lender
by virtue of the assignment of and Lien on each of the Obligor’s rights, title
and interest in, to, and under the Purchase Agreement and the Purchase
Agreement Documents.  The Obligors agree
that neither the assignment to the Lender nor any other provision contained in
this Agreement or any of the other Financing Documents shall impose on the
Lender any obligation or liability of any of the Obligors under the Purchase
Agreement and/or under any of the Purchase Agreement Documents.


 


Section 3.3             Collateral
Lists.


 


On or prior to the Closing Date,
each of the Obligors shall deliver to the Lender a certified list (each a “Collateral
List” and, collectively the “Collateral List”) which shall contain such
information with respect to each Obligor’s business and real and personal
property as the Lender may require and shall be certified by a Responsible
Officer of each Obligor all in the form provided to the Obligors by the
Lender.  Without implying any limitation
on any other provision of this Agreement, each Obligor, as appropriate, shall
furnish to the Lender an update of the information contained in each respective
Collateral List at any time and from time to time as may be necessary to make
the information contained in such Collateral List complete and correct in all
material respects and at other times as may reasonably be requested by the
Lender.  Such updates shall be deemed to
be included in the definition of “Collateral List.”


 


Section 3.4             Personal
Property.


 


The Obligors acknowledge and
agree that it is the intention of the parties to this Agreement that the Lender
shall have a first priority, perfected Lien (or its Dutch equivalent), in form
and substance satisfactory to the Lender and its counsel, on all of each
Obligor’s personal property of any kind and nature whatsoever, whether now owned
or hereafter acquired, subject only to the Permitted Liens, if any.  In furtherance of the foregoing:


 

















 


3.4.1        Securities, Chattel
Paper, Promissory Notes, etc.


 


(a)           On the Closing Date and without implying any limitation on
the scope of Section 3.2 (Grant of Liens), each Obligor shall deliver to
the Lender all originals of all of each Obligor’s Letters of Credit,
Securities, Chattel Paper, Documents and Instruments and, if the Lender so
requires, shall execute and deliver and use reasonable efforts to cause the
issuer of any letters of credit or other Supporting Obligations to execute and
deliver, a separate pledge, assignment and security agreement in form and
content acceptable to the Lender, which pledge, assignment and security
agreement shall assign, pledge and grant a Lien to the Lender on all of each
Obligor’s letters of credit, Securities, Chattel Paper, Documents and
Instruments, subject to the limitations set forth in Section 2.9
(Limitations on Joint and Several Liability for Obligations) and subject to the
limitations on the pledge of the capital stock set forth in the Stock Pledge
Agreements.


 


(b)           In the event that any of the Obligors shall acquire after
the Closing Date any Letters of Credit, Securities, Chattel Paper, Documents or
Instruments, each such Obligor shall promptly so notify the Lender and deliver
the originals of all of the foregoing to the Lender promptly and in any event
within ten (10) days of each acquisition.


 


(c)           All Letters of Credit, Securities, Chattel Paper,
Documents and Instruments shall be delivered to the Lender endorsed and/or
assigned as required by the pledge, assignment and security agreement and/or as
the Lender may require and, if applicable, shall be accompanied by blank
irrevocable and unconditional stock or bond powers.


 


3.4.2        Patents, Copyrights and
Other Property Requiring Additional Steps to Perfect.


 


On the Closing Date and without
implying any limitation on the scope of Section 3.2 (Grant of Liens), the
Obligors shall take all actions requested by the Lender in order to perfect a
first priority assignment of all United States and Dutch Patents, Copyrights,
Trademarks, customer lists or any other type or kind of intellectual property
acquired by any of the Obligors after the Closing Date, subject to the limitations
set forth in Section 2.9 (Limitations on Joint and Several Liability for
Obligations).


 


Section 3.5             Record
Searches.


 


As of the Closing Date and
thereafter at the time any Financing Document is executed and delivered by the
Obligors pursuant to this Section, the Lender shall have received, in form and
substance satisfactory to the Lender, such Lien or record searches with respect
to all of the Obligors and/or any other Person, as appropriate, and the
property covered by such Financing Document showing that the Lien of such
Financing Document will be a perfected first priority Lien on the property
covered by such Financing Document subject only to Permitted Liens or to such
other matters as the Lender may approve.


 

















 


Section 3.6             Costs.


 


Subject to the limitations set
forth in Section 2.9 (Limitations on Joint and Several Liability for
Obligations), the Obligors agree to pay, as part of the Enforcement Costs and
to the fullest extent permitted by applicable Laws, on demand all costs, fees
and expenses incurred by the Lender in connection with the taking, perfection,
preservation, protection and/or release of a Lien on the Collateral, including,
without limitation:


 


(a)           fees and expenses of counsel incurred by the Lender in
preparing, reviewing, negotiating and finalizing the Financing Documents in
connection with their execution (including, without limitation, attorneys’ fees
incurred in connection with preparing, reviewing, negotiating, and finalizing
any amendments and supplements thereto);


 


(b)           all filing and/or recording taxes or fees;


 


(c)           all costs of Lien and record searches;


 


(d)           attorneys’ fees in connection with all legal opinions
required;


 


(e)           appraisal and/or survey costs; and


 


(f)            all related closing or Enforcement Costs, fees and
expenses.


 


Section 3.7             Release.


 


Upon the payment and
performance of all Obligations of the Obligors and all obligations and
liabilities of any other Person under this Agreement and all other Financing
Documents, the termination and/or expiration of all of the Commitments, all
Letters of Credit and all Outstanding Letter of Credit Obligations, upon the
Obligors’ request and at the Obligor’ sole cost and expense, the Lender shall
release and/or terminate any Financing Document but only if and provided that
there is no commitment or obligation (whether or not conditional) of the Lender
to re-advance amounts which would be secured thereby and/or no commitment or
obligation of the Lender to issue any Letter of Credit or return or restore any
payment of any Current Letter of Credit Obligations.


 


Section 3.8             Inconsistent
Provisions.


 


In the event that the
provisions of any Financing Document directly conflict with any provision of
this Agreement, the provisions of this Agreement govern.


 


Section 3.9             Ranking
of Lien Priorities.


 


Notwithstanding anything herein
or in any of the other Financing Documents to the contrary, the Lender agrees
that the Dutch Collateral shall secure only the Dutch Obligations and shall not
secure any of the other Obligations.  The
Collateral, other than the Dutch Collateral, shall secure first payment and
performance of all Obligations under and relating to the U.S. 


 

















 


Revolving Credit Facility and then shall
secure payment and performance of the Dutch Obligations.


 


Section 3.10           Authorization
to File Financing Statements.


 


The security interest created
by this Agreement shall be perfected by the filing of financing statements
which fully comply with the Uniform Commercial Code-Secured Transactions, as
adopted in the state of Delaware.         For
purposes of the Uniform Commercial Code-Secured Transactions, the U.S. Borrower
hereby authorize the Lender to file all financing statements covering the
Collateral in any appropriate jurisdiction, and to amend any financing
statements previously filed to more consistently identify the Collateral
pledged by the U.S, Borrower.


 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES


 


Section 4.1             Representations
and Warranties.


 


The Obligors for themselves and
for each other represent and warrant to the Lender as follows:


 


4.1.1        Subsidiaries.


 


As of the Closing Date, the
Dutch Borrower is the Wholly Owned Subsidiary of the U.S. Borrower.  NKF is the Wholly Owned Subsidiary of the
Dutch Borrower.  Optelecom UK Limited is
the Wholly Owned Subsidiary of the Dutch Borrower.  Optelecom-NKF Limited is owned ninety-nine
and eighty-nine one hundredths percent (99.89%) by the U.S. Borrower and eleven
one hundredths percent (.11%) by Optelecom UK Limited.  As of the Closing Date, the Spanish
Subsidiary is the Wholly Owned Subsidiary of NKF.  Optelecom-NKF S.A.S. is a Wholly Owned
Subsidiary of NKF, which subsidiary has no material assets.  The Obligors have no Subsidiaries other than
as disclosed in this Section.  At all
times after the Closing Date, the Obligors have only those Subsidiaries permitted
by the terms of this Agreement.


 


4.1.2        Good Standing.


 


Each Obligor and its
Subsidiaries, if any (a) is a corporation duly organized, existing and in
good standing under the laws of the jurisdiction of its incorporation, (b) has
the corporate power to own its property and to carry on its business as now
being conducted, and (c) is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned by
it therein or in which the transaction of its business makes such qualification
necessary, except where such failure to qualify would not cause a Material
Adverse Effect.


 
















 


4.1.3        Power
and Authority.


 


Each Obligor has full power and
authority to execute and deliver this Agreement, and the other Financing
Documents to which it is a party, to make the borrowings under this Agreement,
and to incur and perform the Obligations whether under this Agreement, the
other Financing Documents or otherwise, all of which have been duly authorized
by all proper and necessary corporate action. 
No consent or approval of shareholders or any creditors of any Obligor,
and no consent, approval, filing or registration with or notice to any
Governmental Authority on the part of any Obligor, is required as a condition
to the execution, delivery, validity or enforceability of this Agreement, of
the other Financing Documents, or the performance by any Obligor of the
Obligations, except for consents, approvals, filings, registrations and notices
that shall be received, given or accomplished on or before the Closing Date and
except for filings necessary for perfection of Liens in favor of the Lender.


 


4.1.4        Binding
Agreements.


 


This Agreement and the other
Financing Documents executed and delivered by the Obligors have been properly
executed and delivered and constitute the valid and legally binding obligations
of the Obligors and are fully enforceable against each of the Obligors in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applications affecting the
rights and remedies of creditors and secured parties, and general principles of
equity regardless of whether applied in a proceeding in equity or at law.


 


4.1.5        No
Conflicts.


 


Neither the execution, delivery
and performance of the terms of this Agreement or of any of the other Financing
Documents executed and delivered by any Obligor nor the consummation of the
transactions contemplated by this Agreement will conflict with, violate or be
prevented by (a) any Obligor’s charter or bylaws or other organizational
and operational documents, (b) any existing mortgage, indenture, contract
or agreement binding on any Obligor or affecting its property, or (c) any
Laws, except where such conflict would not cause a Material Adverse Effect.


 


4.1.6        No
Defaults, Violations.


 


(a)           No Default or Event of Default has occurred and is
continuing.


 


(b)           None of the Obligors nor any of their Subsidiaries is in
default under or with respect to any obligation under any existing mortgage,
indenture, contract or agreement binding on it or affecting its property in any
respect which default would cause a Material Adverse Effect.


 

















 


4.1.7        Compliance
with Laws.


 


Except as set forth in Schedule
4.1.7, to the knowledge of each Obligor, neither such Obligor nor any of its
Subsidiaries is in violation of any applicable Laws (including, without
limitation, any Laws relating to employment practices, to environmental,
occupational and health standards and controls, the foreign assets control
regulations of the United States Treasury Department or order, writ,
injunction, decree or demand of any court, arbitrator, or any Governmental
Authority affecting such Obligor; any Subsidiary or any of their respective
properties, the violation of which, considered in the aggregate, would cause a
Material Adverse Effect.


 


4.1.8        Margin
Stock.


 


None of the proceeds of the
Loans will be used, directly or indirectly, by any Obligor for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any “margin
security” within the meaning of Regulation G (12 CFR Part 207), or “margin
stock” within the meaning of Regulation U (12 CFR Part 221), of the Board
of Governors of the Federal Reserve System or for any other purpose which might
make the transactions contemplated in this Agreement a “purpose credit” within
the meaning of said Regulation G or Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any
of such statutes.


 


4.1.9        Investment
Company Act, Margin Securities.


 


No Obligor is an investment
company within the meaning of the Investment Company Act of 1940, as amended,
nor is it, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company within the meaning of said Act.  None of the Obligors is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying “margin security” within the meaning of
Regulation G (12 CFR Part 207), or “margin stock” within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System.


 


4.1.10      Litigation.


 


Except as otherwise disclosed
on Schedule 4.1.10 attached to and made a part of this Agreement, there are no
proceedings, actions or investigations pending or, so far as any Obligor knows,
threatened before or by any court, arbitrator or any Governmental Authority
which, in any one case or in the aggregate, if determined adversely to the
interests of any Obligor, would have a Material Adverse Effect.


 


4.1.11      Financial
Condition.


 


The financial statements of the
U.S. Borrower and its Subsidiaries (other than the Dutch Borrower) for the
period ended December 31, 2007, are complete and correct and fairly
present 


 

















 


the financial position of the U.S. Borrower
and its Subsidiaries (other than the Dutch Borrower) and the results of their
operations and transactions in their surplus accounts as of the date and for
the period referred to and have been prepared in accordance with GAAP applied
on a consistent basis throughout the period involved.  Except as has been disclosed on Schedule
4.1.11, there are no material liabilities, direct or indirect, fixed or
contingent, of the U.S. Borrower or its Subsidiaries (other than the Dutch
Borrower) as of the date hereof which are not reflected in such financial
statements or in the notes thereto. 
There has been no adverse change in any material respect in the
financial condition or operations of the U.S. Borrower or its
Subsidiaries(other than the Dutch Borrower) since the date of such financial
statements and to the Obligors’ knowledge no such adverse change is pending or
threatened.  To the Obligors’ knowledge,
no Obligor has guaranteed the obligations of, or made any investment in or
advances to, any Person, except as disclosed in such financial statements.  The representations and warranties contained
in this Section shall also cover financial statements of the Obligors
furnished from time to time to the to the Lender pursuant to Section 6.1.1
(Financial Statements) (subject to normal year-end adjustments in the case of
interim statements and the absence of footnotes in the case of interim
statements).


 


4.1.12      Reserved.


 


4.1.13      Full
Disclosure.


 


The financial statements
referred to in Section 4.1.11 (Financial Condition), the representations
and warranties of the Obligors in the Financing Documents (including, without limitation,
this Agreement), and the statements, reports or certificates furnished by any
Obligor in connection with the Financing Documents (a) do not contain any
untrue statement of a material fact and (b) when taken in their entirety,
do not omit any material fact necessary to make the statements contained
therein not misleading.  As of the
Closing Date, there is no fact known to any Obligor which such Obligor has not
disclosed to the Lender in writing prior to the date of this Agreement with
respect to the transactions contemplated by the Financing Documents which would
have a Material Adverse Effect.


 


4.1.14      Indebtedness
for Borrowed Money.


 


Except for the Obligations and
as set forth in Schedule 4.1.14, and as otherwise expressly permitted by this
Agreement, none of the Obligors has Indebtedness for Borrowed Money.  The Lender has received photocopies of all
promissory notes evidencing any Indebtedness for Borrowed Money set forth in
Schedule 4.1.14, together with any and all subordination agreements, other
agreements, documents, or instruments securing, evidencing, guarantying or
otherwise executed and delivered in connection therewith.


 


4.1.15      Taxes.


 


Except as disclosed on Schedule
4.1.15, each of the Obligors and their Subsidiaries have filed all returns,
reports and forms for Taxes which, to the knowledge of the Obligors, are
required to be filed, and has paid all Taxes as shown on such returns or on any
assessment received by it, to the extent that such Taxes have become due,
unless and to the extent only that 


 

















 


such Taxes, assessments and governmental
charges are currently contested in good faith and by appropriate proceedings by
a Obligor, such Taxes are not the subject of any Liens other than Permitted
Liens, and adequate reserves therefor have been established as required under
GAAP.  All tax liabilities of the
Obligors were as of the date of audited financial statements referred to in Section 4.1.11
(Financial Condition), and are now, adequately provided for on the books of the
Obligors and their Subsidiaries, as appropriate.


 


4.1.16      ERISA.


 


With respect to any “pension
plan” as defined in Section 3(2) of ERISA, which plan is now or
previously has been maintained or contributed to by any one or more of the
Obligors and/or to any Obligor’s knowledge by any Commonly Controlled Entity: (a) no
“accumulated funding deficiency” as defined in Code §412 or ERISA §302 has
occurred, whether or not that accumulated funding deficiency has been waived; (b) no
Reportable Event has occurred which would have a Material Adverse Effect; (c) no
termination of any plan subject to Title IV of ERISA has occurred which would
have a Material Adverse Effect; (d) no Obligor, nor to any Obligor’s
knowledge any commonly controlled entity (as defined under ERISA), has incurred
a “complete withdrawal” within the meaning of ERISA §4203 from any
Multi-employer Plan; (e) no Obligor, nor to any Obligor’s knowledge any
commonly controlled entity, has incurred a “partial withdrawal” within the
meaning of ERISA §4205 with respect to any Multi-employer Plan; and (f) no
Multi-employer Plan to which any Obligor or to any Obligor’s knowledge any
Commonly Controlled Entity has an obligation to contribute is in “reorganization”
within the meaning of ERISA §4241 nor has notice been received by any Obligor
or any commonly controlled entity that such a Multi-employer Plan will be
placed in “reorganization”.


 


4.1.17      Title
to Properties.


 


Except for leased property,
each of the Obligors has good title to all of its respective properties,
including, without limitation, the Collateral and, as of the date of the
balance sheets, the properties and assets reflected in the balance sheets
described in Section 4.1.11 (Financial Condition) subject to the Permitted
Liens.  Except for leased property, each
Obligor has legal, enforceable and uncontested rights to use freely such
property and assets subject to the Permitted Liens.


 


4.1.18      Patents,
Trademarks, Etc.


 


Each of the Obligors owns,
possesses, or has the right to use all necessary Patents, licenses, Trademarks,
Copyrights, permits and franchises to own its properties and to conduct its
business as now conducted, without known conflict with the rights of any other
Person.  Any and all obligations to pay
royalties or other charges with respect to such properties and assets are
properly reflected on the financial statements furnished from time to time and
described in Section 4.1.11 (Financial Condition).


 

















 


4.1.19      Employee
Relations.


 


Except as disclosed on Schedule
4.1.19 attached hereto and made a part hereof, as of the Closing Date, (a) no
Obligor nor any of the Obligor’s employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election
is pending with respect to the employees of any Obligor and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Obligor, (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best
knowledge of the Obligors after due inquiry, threatened between any Obligor and
its employees, and (d) except as set forth on Schedule 4.1.19, no Obligor
thereof is subject to an employment contract, severance agreement, commission
contract, consulting agreement or bonus agreement which provides for anything
other than reasonable compensation for services rendered.  Hours worked and payments made to the
employees of any one or more of the Obligors have not been in violation of the
Fair Labor Standards Act, if applicable, in any material respect or, to the
extent the violation of which would result in a Material Adverse Effect, any
other applicable Law dealing with such matters. 
All material payments due from any one or more of the Obligors or for
which any claim may be made against any Obligor, on account of wages and
employee and retiree health and welfare insurance and other benefits have been
paid or accrued as a liability on its books in accordance with applicable
Laws.  The consummation of the
transactions contemplated by this Agreement or any of the other Financing
Documents will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining
agreement to which any Obligor is a party or by which it is bound.


 


4.1.20      Presence
of Hazardous Materials or Hazardous Materials Contamination.


 


Except as disclosed to the
Lender in writing prior to the Closing Date or as disclosed in Schedule 4.1.20,
to the best of each Obligor’s knowledge, (a) no Hazardous Materials are
located on any real property owned, controlled or operated by any Obligor or
for which any Obligor is, or is claimed to be, responsible, except for
reasonable quantities of necessary supplies for use by a Obligor in the
ordinary course of its business and stored, used, managed after use and
disposed of in compliance in all material respects with applicable Laws or in
an amount and manner which would not have a Material Adverse Effect; and (b) no
property owned, controlled or operated by any Obligor or for which any Obligor
has, or is claimed to have, responsibility, to the knowledge of the Obligors,
has ever been used as a manufacturing or dump site for Hazardous Materials nor
is affected by Hazardous Materials Contamination at any other property in
either case, in any manner which would cause a Material Adverse Effect.


 


4.1.21      Perfection
and Priority of Collateral.


 


Subject to the limitations set
forth in Section 2.9 (Limitations on Joint and Several Liability for
Obligations), the Lender has, or upon execution and recording of this Agreement
and the Security Documents will have, and will continue to have as security for
the Obligations, a valid and perfected Lien (or its Dutch equivalent) on and
security interest in all Collateral, free of all other Liens, claims and rights
of third parties whatsoever except Permitted Liens, including, without
limitation, those described on Schedule 4.1.21.


 

















 


4.1.22      Places
of Business and Location of Collateral.


 


The information contained in
each Collateral List is complete and correct except to the extent that such
information is amended or supplemented by the applicable Obligor.  Each Collateral List completely and
accurately identify the address of (a) the place of incorporation and the
chief executive office of each Obligor, (b) any and each other place of
business of each Obligor, (c) the location of all books and records
pertaining to the Collateral, (d) organizational identification numbers,
and (e) each location, other than the foregoing, where any of the
Collateral is located.  The U.S. Borrower
is only incorporated in the State of Delaware.


 


4.1.23      Business
Names and Addresses.


 


Except as disclosed in Schedule
4.1.23, in the twelve (12) years preceding the date hereof, no Obligor has
changed its name, identity or corporate structure, has conducted business under
any name other than its current name, and has not conducted its business in any
jurisdiction other than those disclosed within the Collateral Lists.


 


4.1.24      Equipment.


 


All Equipment of each Obligor
is personalty and is not and will not be affixed to real estate in such manner
as to become part of such real estate. 
No equipment is held by any Obligor on a sale on approval basis.


 


4.1.25      Inventory.


 


Except as disclosed in Schedule
4.1.25, as of the Closing Date and except to the extent from time to time
disclosed in U.S. Borrowing Base Reports and Dutch Borrowing Base Reports
provided to the Lender, the Inventory of the Obligors is (a) of good and
merchantable quality, free from defects, (b) not stored with a bailee,
warehouseman, carrier, or similar party, (c) except as permitted by Section 6.2.8
(Liens), not on consignment, sale on approval, or sale or return, and (d) located
at the places of business set forth on the Collateral Lists.  No goods offered for sale by any Obligor are
consigned to or held on sale or return terms by that Obligor.


 


4.1.26      Accounts.


 


Except as disclosed in Schedule
4.1.26 or as disclosed in the U.S. Borrowing Base Report or Dutch Borrowing
Base Report, with respect to all Accounts and to the best of the Obligors’
knowledge (a) they are genuine, and in all respects what they purport to
be, and are not evidenced by a judgment, an Instrument, or Chattel Paper
(unless such judgment has been assigned and such Instrument or Chattel Paper
has been endorsed and delivered to the Lender; (b) they represent bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices, purchase orders and other contracts relating
thereto, and the underlying transaction therefor is in accordance with all
applicable Laws; (c) the amounts shown on the respective Obligor’s books
and records, with respect thereto are actually and absolutely owing to that
Obligor and are not contingent or subject to reduction for any reason other
than regular discounts, credits or adjustments allowed by that Obligor in the
ordinary course of its business; 


 

















 


(d) no payments have been or shall be
made thereon except payments turned over to the Lender by the Obligors; (e) all
Account Debtors thereon have the capacity to contract; and (f) the goods
sold, leased or transferred or the services furnished giving rise thereto are
not subject to any Liens except the security interest granted to the Lender by
this Agreement and/or any of the Security Documents, and Permitted Liens.


 


4.1.27      Compliance
with Eligibility Standards.


 


Except as disclosed in Schedule
4.1.27, to the best of the Obligors’ knowledge in the exercise of diligence,
each Account and all Inventory included in the calculation of the Borrowing
Base or the Dutch Borrowing Base does, as of the time of the most recent
Borrowing Base Report and Dutch Borrowing Base Report, as appropriate, meet and
comply with all of the standards for Eligible U.S. Receivables, Eligible
Inventory, Insured Eligible Spanish Receivables, Insured Eligible U.K.
Receivables, Eligible Dutch Receivables and Insured Eligible Dutch Receivables,
as appropriate.  With respect to those
Accounts which the Lender has deemed Eligible U.S. Receivables, Insured
Eligible Spanish Receivables, Insured Eligible U.K. Receivables, Eligible Dutch
Receivables or Insured Eligible Dutch Receivables (a) there are no facts,
events or occurrences known to any Obligor which in any way impair the
validity, collectibility or enforce ability thereof or tend to reduce the
amount payable thereunder; and (b) there are no proceedings or actions
known to any Obligor which are threatened or pending against any Account Debtor
which might result in any material adverse change in the U.S. Borrowing Base or
in the Dutch Borrowing Base.


 


4.1.28      Stock.


 


No Obligor has issued any
option or similar type of beneficial ownership interest, warrant, convertible
or non-convertible bonds or any other right which may entitle the holder
thereof to any shares of such Obligor.


 


4.1.29      Reserved.


 


4.1.30      Centre
of Main Interest.


 


The Dutch Borrower and NKF have
their centre of main interest, within the meaning of Council Regulation (EC) No. 1346/2000
of 29 May 2000 on Insolvency Procedures, in the Netherlands and that it
has not been subjected to any one or more of the insolvency and winding-up
proceedings listed in Annex A or Annex B to the Regulation in any EU Member
State other than in the Netherlands.


 


Section 4.2             Survival;
Updates of Representations and Warranties.


 


All representations and
warranties contained in or made under or in connection with this Agreement and
the other Financing Documents shall survive the Closing Date, the making of any
advance under the Loans, the issuance of any Letter of Credit and extension of
credit made hereunder, and the incurring of any other Obligations and shall be
deemed to have been made at the time of each request for, and again at the time
the making of, each advance under the Loans 


 

















 


and/or the issuance of each Letter of Credit,
except that the representations and warranties which relate to financial
statements which are referred to in Section 4.l.11 (Financial Condition),
shall also be deemed to cover financial statements furnished from time to time
to the Lender pursuant to Section 6.1.1 (Financial Statements).


 


ARTICLE V

CONDITIONS PRECEDENT


 


Section 5.1             Conditions
to the Initial Advance.


 


The making of the initial
advance under the Loans are subject to the fulfillment on or before the Closing
Date of the following conditions precedent in a manner satisfactory in form and
substance to the Lender:


 


5.1.1        Organizational
Documents - Obligors.


 


The Lender shall have received
for each Obligor:


 


(a)           for the U.S. Borrower, a certificate of good standing
certified by the Secretary of State, of the State of Delaware;


 


(b)           for the U.S. Borrower, a certificate of qualification to
do business for the U.S. Borrower certified by the Secretary of State or other
Governmental Authority of each state in which the U.S.  Borrower’s business requires such
qualification, except for those states where the failure to so qualify would
not cause a Material Adverse Effect;


 


(c)           a certificate dated as of the Closing Date by the
Secretary, Managing Director or Manager (as applicable) of each Obligor
covering:


 


(i)            true and complete copies of such
Obligor’s corporate charter, bylaws, other organizational and operational
documents, and all amendments thereto;


 


(ii)           true and complete copies of the
resolutions of its Board of Directors and, in the case of the Non-U.S.
Obligors, their shareholders, authorizing as appropriate (A) the
execution, delivery and performance of the Financing Documents and the Purchase
Agreement Documents, (B) the borrowings hereunder, (C) the granting
of the Liens contemplated by this Agreement and the Financing Documents to
which such Obligor is a party, and (D) the Purchase Agreement Transaction;


 


(iii)          the incumbency, authority and
signatures of the officers of such Obligor authorized to sign this Agreement
and the other Financing Documents to which such Obligor is a party;


 


(iv)          the identity of such Obligor’s current
directors or managers, as the case may be, common stockholders and other equity
holders for each Obligor other than the U.S. 


 

















 


Borrower whose shares are
publicly traded, as well as their respective percentage ownership interests;
and


 


(v)           in the case of the Dutch Borrower, (a) the
corporate purpose of the transactions described in the Financing Documents, and
(b) the use of proceeds of the Credit Facilities in compliance with Dutch
Financial Assistance Law.


 


5.1.2        Approval
of Dutch Borrower’s Works Council.


 


The Lender shall have received
evidence of the approval by NKF’s Works Council of the transactions described
in the Financing Documents.


 


5.1.3        Opinions
of Obligors’ Counsel.


 


The Lender shall have received
the favorable opinions of the U.S. Borrower’s counsel, Lender’s U.K.
counsel,  Lender’s Spanish counsel and
NKF’s and the Dutch Borrower’s counsel addressed to the Lender in form
satisfactory to the Lender, the Lender’s U.S. Counsel and Lender’s Dutch
counsel.


 


5.1.4        Consents,
Licenses, Approvals, Etc.


 


The Lender shall have received
copies of all consents, licenses and approvals, required in connection with the
execution, delivery, performance, validity and enforceability of the Financing
Documents and the Purchase Agreement Documents and such consents, licenses and
approvals shall be in full force and effect.


 


5.1.5        Financing
Documents and Collateral.


 


Each Obligor shall have
executed and delivered the Financing Documents to be executed by it, and shall
have delivered original Chattel Paper, Instruments, Securities, and related
Collateral and all opinions, and other documents contemplated by ARTICLE III
(The Collateral).


 


5.1.6        Other
Financing Documents.


 


In addition to the Financing
Documents to be delivered by the Obligors, the Lender shall have received the
Financing Documents duly executed and delivered by Persons other than the
Obligors, including (without limitation) an assignment to the Lender of all
existing receivables insurance policies acknowledged by the insurer.


 


5.1.7        Other
Documents, Etc.


 


The Lender shall have received
such other certificates, opinions, documents and instruments confirmatory of or
otherwise relating to the transactions contemplated hereby as may have been
reasonably requested by the Lender.


 

















 


5.1.8        Payment
of Fees and Reimbursements.


 


The Lender shall have received
payment of any Fees due on or before the Closing Date, and the lender shall
have received reimbursement for all out-of-pocket expenses related to the
closing of the Credit Facilities, including, without limitation, reasonable
attorneys’ fees.


 


5.1.9        Collateral
Lists.


 


Each of the Obligors shall have
delivered the Collateral Lists required under the provisions of Section 3.3
(Collateral Lists) duly executed by a Responsible Officer of each such Obligor.


 


5.1.10      Recordings
and Filings.


 


Each Obligor shall have: (a) executed
and delivered all Financing Documents in form and in sufficient number for
filing, registration, and recording in each office in each jurisdiction in
which such filings, registrations and recordations are required, and (b) delivered
such evidence as the Lender may deem satisfactory that all necessary filing
fees and all recording and other similar fees, and all Taxes and other expenses
related to such filings, registrations and recordings will be or have been paid
in full.


 


5.1.11      Receivables
Insurance Policy.


 


The Obligors have provided to
the Lender a copy of all existing receivables insurance policies.


 


5.1.12      Evidence
of Insurance.


 


The Lender shall have received
evidence of insurance coverage of the Obligors satisfying the requirements of Section 6.1.8
(Insurance) and Section 6.1.20 (Insurance With Respect to Equipment and
Inventory).


 


5.1.13      Reserved.


 


5.1.14      Bailee
Acknowledgements.


 


The Lender shall have received
an agreement acknowledging the Liens of the Lender from each bailee,
warehouseman, consignee or similar third party, if any, which has possession of
any of the Collateral, which agreements must be reasonably acceptable to the
Lender and its counsel in their sole and absolute discretion.


 


5.1.15      Field
Examination.


 


The Lender shall have completed
a field examination and audit of the U.S. Borrower’s and the Dutch Borrower’s
business, operations and income, the results of which field 


 

















 


examination and audit shall be in all
respects acceptable to the Lender in its sole and absolute discretion and shall
include reference discussions with key customers and vendors.


 


5.1.16      Equipment
Appraisal.


 


The Lender shall have received
an appraisal of the Equipment owned by the U.S. Borrower in form and substance
satisfactory to the Lender.


 


5.1.17      Reserved.


 


5.1.18      Subordinated
Obligations Documents.


 


The Lender shall have received
and approved copies of the fully executed Subordinated Note and other
Subordinated Obligations Documents, all of which must be in form and content
acceptable to the Lender.


 


5.1.19      Subordinated
Obligations.


 


The Lender shall have received
a copy of an executed amendment to the Subordinated Note, amending Section 6(a)(ii) of
the Subordinated Note to include the Dutch Term Loan under the definition of “Senior
Indebtedness” in the Subordinated Note. 
The Lender shall have received a copy of (a) an authorization by
the Seller to the transfer shares of Optelecom UK Limited and NKF to the Dutch
Borrower under Section 8.2(c) of the Subordinated Note; (b)  a
consent to the collateral assignment of the U.S. Borrower’s rights under the
Purchase Agreement to the Lender pursuant to this Agreement; and (c) a
release of that certain Deed of Pledge of Shares in NKF Electronics B.V. dated March 8,
2005, by U.S. Borrower to the Seller, together with the collateral pledged
thereunder in a manner acceptable to the Lender in all respects.  The Lender shall have received a copy of a
Deed of Pledge of Shares in thirty-Five percent (35%) of the outstanding shares
the Dutch Borrower by the U.S. Borrower to the Seller, in a form and substance
acceptable to the Lender in all respects.


 


5.1.20      Purchase
Agreement Transaction.


 


There have been no modifications
to the Purchase Agreement Documents since their execution and delivery.


 


Section 5.2             Conditions
to all Extensions of Credit.


 


The making of all advances
under the Loans and the issuance of each Letter of Credit is subject to the
fulfillment of the following conditions precedent in a manner satisfactory in
form and substance to the Lender.


 


5.2.1        Borrowing
Base.


 


The U.S. Borrower and the Dutch
Borrower shall have furnished all U.S. Borrowing Base Reports and Dutch
Borrowing Base Reports required by Section 2.1.4 (U.S. Borrowing Base 


 

















 


Report) and Dutch Borrowing Base Reports
required by Section 2.3.4 (Dutch Borrowing Base Report), there shall exist
no U.S. Borrowing Base Deficiency or Dutch Borrowing Base Deficiency, and as
evidence thereof, the Obligors shall have furnished to the Lender such reports,
schedules, certificates, records and other papers as may be requested by the
Lender.


 


5.2.2        Default.


 


There shall exist no Event of
Default (including, without limitation, an Event of Default under Section 7.1.14
(Material Adverse Effect)) or Default hereunder, and none shall arise
immediately before and immediately after the making of the advance.


 


5.2.3        Representations
and Warranties.


 


The representations and
warranties of the Obligors contained among the provisions of each of this
Agreement shall be true in all material respects and with the same effect as
though such representations and warranties had been made at the time of the
making of, and of the request for, each advance under the Loans and the
issuance of each Letter of Credit, except that the representations and
warranties which relate to financial statements which are referred to in Section 4.1.11
(Financial Condition), shall also be deemed to cover financial statements
furnished from time to time to the Lender pursuant to Section 6.1.1
(Financial Statements) and except to the extent such representations were made
only as of a specific date.


 


5.2.4        Legal
Matters.


 


All legal documents incident to
each advance under the Loans and each issuance of the Letters of Credit shall
be reasonably satisfactory to counsel for the Lender.


 


ARTICLE VI

COVENANTS OF THE OBLIGORS


 


Section 6.1             Affirmative
Covenants.


 


So long as any of the
Obligations (or any the Commitments therefor) shall be outstanding hereunder,
the Obligors agree jointly and severally with the Lender as follows (except
with the prior written consent of the Lender):


 


6.1.1        Financial
Statements.


 


(a)           Annual Statements. 
The Obligor shall furnish to the Lender as soon as it is filed with the
U.S. Securities and Exchange Commission, a copy of the annual 10-K Report of
the U.S. Borrower and its Subsidiaries.


 


(b)           Quarterly Statements and Quarterly Compliance
Certificates.  The Obligors shall furnish
to the Lender (i) as soon as available, but in no event more than
forty-five (45) days after the close of each fiscal quarter, balance sheets and
income statements of the Dutch Borrower and 


 

















 


the consolidated and consolidating balance
sheet and income statements of the U.S. Borrower; (ii) as soon as it is
filed with the U.S. Securities and Exchange Commission, a copy of the quarterly
10-Q report of the U.S. Borrower and its Subsidiaries and (iii) within
thirty (30) days of the filing of each 10-Q Report, a Compliance Certificate,
in substantially the form attached to this Agreement as EXHIBIT B, containing a
detailed computation of each financial covenant in this Agreement and a
certification that no change has occurred to the information contained in the
Collateral Lists (except as set forth on any schedule attached to the
certification), all as prepared and certified by a Responsible Officer of the
U.S. Borrower and accompanied by a certificate of that officer stating whether
any event has occurred which constitutes a Default or an Event of Default hereunder,
and, if so, stating the facts with respect thereto.


 


(c)           Monthly
reports.  The U.S. Borrower and the Dutch
Borrower shall furnish to the Lender on an individual basis, within twenty (20)
days after the end of each month or more frequently if requested by the Lender (i) a
U.S. Borrowing Base Report or a Dutch Borrowing Base Report, as applicable, and
(ii) a report containing the following information:


 


(1)           a detailed aging schedule of all
Receivables by Account Debtor, in such detail, and accompanied by such
supporting information required to establish the eligibility of Receivables
under the U.S. Borrowing Base or the Dutch Borrowing Base (as applicable), as
the Lender may from time to time reasonably request;


 


(2)           for the U.S. Borrower only, a detailed
report of Inventory containing such supporting information required to
establish the eligibility of Inventory under the U.S. Borrowing Base; and


 


(3)           such other information as the Lender
may reasonably request.


 


(d)           Additional Reports and Information.  The Obligors shall furnish to the Lender,
such additional information, reports or statements as the Lender may from time
to time reasonably request.


 


6.1.2        Reports
to SEC and to Stockholders.


 


The U.S. Borrower shall furnish
to the Lender, promptly upon the filing or making thereof, at least one (1) copy
of all financial statements, reports, notices and proxy statements sent by the
U.S. Borrower to its stockholders, and of all regular and other reports filed
by any Borrower with any securities exchange or with the Securities and
Exchange Commission.


 


6.1.3        Recordkeeping,
Rights of Inspection, Field Examination, Etc.


 


(a)           Each of the Obligors shall, and shall cause each of its
Subsidiaries to, maintain (i) a system of accounting in accordance with
GAAP and (ii) proper books of record and account in which entries full,
true and correct in all material respects are made of all dealings and
transactions in relation to its properties, business and activities.


 

















 


(b)           Each of the Obligors shall, and shall cause each of its
Subsidiaries to, permit authorized representatives of the Lender to visit and
inspect the properties of each of the Obligors, to review, audit, check and
inspect the Collateral at any time with or without notice, to review, audit,
check and inspect each of the Obligor’s other books of record at any time with
or without notice and to make abstracts and photocopies thereof, and to discuss
the affairs, finances and accounts of each Obligor and its Subsidiaries, with
the officers, directors, employees and other representatives of such Obligor
and its Subsidiaries and their respective accountants, all at such times during
normal business hours and other times and as often as the Lender may reasonably
request.


 


(c)           Each of the Obligors hereby irrevocably authorizes and
directs all accountants and auditors employed by any of the Obligors at any
time prior to the repayment in full of the Obligations to discuss freely with
the Lender any information they may have concerning the financial status and
business operations of any or all of the Obligor.


 


(d)           Any and all out-of-pocket costs and expenses reasonably
incurred by, or on behalf of, the Lender in connection with the conduct of any
of the foregoing shall be part of the Enforcement Costs and shall be payable to
the Lender upon demand.  The Obligors
acknowledge and agree that such expenses may include, but shall not be limited
to, any and all out-of-pocket reasonable costs and expenses (no airfare other
than “coach”) of the Lender’s employees and Lender in, and when, traveling to
any of the Obligor’s facilities.


 


6.1.4        Corporate
Existence.


 


Each of the Obligors shall
maintain, its corporate existence in good standing in the jurisdiction in which
it is incorporated and in each other jurisdiction where it is required to
register or qualify to do business if the failure to do so in such other
jurisdiction would have a Material Adverse Effect.


 


6.1.5        Compliance
with Laws.


 


Each of the Obligors shall
comply with all applicable Laws, including, without limitation, the Patriot Act
and the foreign assets control regulations of the United States Treasury
Department, and observe the valid requirements of Governmental Authorities, the
noncompliance with or the nonobservance of which would have a Material Adverse
Effect.


 


6.1.6        Preservation
of Properties.


 


Each of the Obligors will, and
will cause each of its Subsidiaries to, at all times (a) maintain,
preserve, protect and keep its properties which are material in value or are
necessary for the conduct of its business, whether owned or leased, in good
operating condition, working order and repair (ordinary wear and tear
excepted), and from time to time will make all proper repairs, maintenance,
replacements, additions and improvements thereto needed to maintain such properties
in good operating condition, working order and repair, and (b) do or cause
to be done all things necessary to preserve and to keep in full force and
effect its material franchises, leases 


 

















 


of real and personal property, trade names,
patents, trademarks and permits which are necessary for the orderly continuance
of its business.


 


6.1.7        Line
of Business.


 


Each of the Obligors will
continue to engage substantially only in the business of the manufacture,
production, marketing, distribution and sale of advanced communication
platforms that transport data, video, and audio over networks.


 


6.1.8        Insurance.


 


Each of the Obligors will, at
all times, maintain with B+ or better by A.M.  Best Company insurance companies such
insurance as is required by applicable Laws and such other insurance, in such
amounts, of such types and against such risks, hazards, liabilities, casualties
and contingencies as are usually insured against in the same geographic areas
by business entities engaged in the same or similar business.  In the event an insurance company’s rating at
any time falls below B+ or better by A.M. Best Company, the Obligors will
replace the insurance company at the next policy renewal date or, if the Lender
determines that the insurance company is financially unsound, the Obligors will
use their best and continuous efforts to replace the insurance company at the
earliest possible date.  Without limiting
the generality of the foregoing, each Obligor will keep adequately insured all
of its property against loss or damage resulting from fire or other risks
insured against by extended coverage and maintain public liability insurance
against claims for personal injury, death or property damage occurring upon, in
or about any properties occupied or controlled by it, or arising in any manner
out of the businesses carried on by it, all in such amounts not less than the
Lender shall reasonably determine from time to time based on the foregoing
standard.  Each of the Obligors has
delivered to the Lender (and will deliver thereafter on each date there is a
material change in the insurance coverage) a certificate of a Responsible
Officer of that Obligor containing a detailed list of the insurance then in
effect and stating the names of the insurance companies, the types, the amounts
and rates of the insurance, dates of the expiration thereof and the properties
and risks covered thereby.  Within thirty
(30) days after notice in writing from the Lender, the Obligors shall obtain
such additional insurance as the Lender may reasonably request.


 


6.1.9        Taxes.


 


Except to the extent that the
validity or amount thereof is being contested in good faith and by appropriate
proceedings, each of the Obligors will pay and discharge all Taxes prior to the
date when any interest or penalty would accrue for the nonpayment thereof.  Each of the Obligors shall furnish to the
Lender at such times as the Lender may require proof satisfactory to the Lender
of the making of payments or deposits required by applicable Laws including,
without limitation, payments or deposits with respect to amounts withheld by
any of the Obligors from wages and salaries of employees and amounts
contributed by any of the Obligors on account of federal and other income or
wage taxes and amounts due under the Federal Insurance Contributions Act, as
amended, or under any similar laws of any jurisdiction in which any Non-U.S.
Obligor is operating and existing.


 

















 


6.1.10      ERISA.


 


The U.S. Borrower will, and
will cause each of its Affiliates to, comply in all material respects with the
funding requirements of ERISA with respect to employee pension benefit plans
for its respective employees.  The U.S.
Borrower will not permit with respect to any employee benefit plan or plans
covered by Title IV of ERISA (a) any prohibited transaction or
transactions under ERISA or the Internal Revenue Code, which would result in a
Material Adverse Effect, or (b) any Reportable Event if, upon termination
of the plan or plans with respect to which one or more such Reportable Events
shall have occurred, there is or would be any material liability of the U.S.
Borrower or any of its Affiliates to the PBGC which would result in a Material
Adverse Effect.  Upon the Lender’s
request, the U.S. Borrower will deliver to the Lender a copy of the most recent
actuarial report, financial statements and annual report completed with respect
to any “defined benefit plan”, as defined in ERISA.  The Non-U.S. Obligors agree to comply in all
material respects with any similar Laws of any jurisdiction in which they are
operating and existing.


 


6.1.11      Notification
of Events of Default and Adverse Developments.


 


Each of the Obligors shall
promptly notify the Lender upon obtaining knowledge of the occurrence of:


 


(a)           any Event of Default;


 


(b)           any Default;


 


(c)           any litigation instituted or threatened against any of the
Obligors or any of their Subsidiaries and of the entry of any judgment or Lien
(other than any Permitted Liens) against any of the assets or properties of any
of the Obligors where the claims against any Obligor exceed One Hundred
Thousand Dollars ($100,000) or the Euro Currency Equivalent thereof and are not
covered by insurance;


 


(d)           any event, development or circumstance whereby the
financial statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operational
results of any of the Obligors or any of their respective Subsidiaries;


 


(e)           any judicial, administrative or arbitral proceeding
pending against any of the Obligors or any of their respective Subsidiaries and
any judicial or administrative proceeding known by any of the Obligors to be
threatened against any Obligor which, if adversely decided, would have a
Material Adverse Effect;


 


(f)            the receipt by any of the Obligors of any notice, claim
or demand from any Governmental Authority which alleges that any Obligor is in
violation of any of the material terms of, or has failed to comply in any
material respect with any applicable Laws regulating its operation and
business, including, but not limited to, the Occupational Safety and Health Act
and 


 

















 


the Environmental Protection Act or similar
laws of any jurisdiction in which any Non-U.S. Obligor is operating and
existing;


 


(g)           any other development in the business or affairs of any of
the Obligors or any of their Subsidiaries which has had, or which the senior
management of any of the Obligors believes will have, a Material Adverse
Effect; and in each case describing in detail reasonably satisfactory to the
Lender the nature thereof and the action the Obligors propose to take with
respect thereto.


 


6.1.12      Hazardous
Materials, Contamination.


 


Each of the
Obligors agrees to:


 


(a)           give notice to the Lender reasonably promptly upon
acquiring knowledge of the presence of any Hazardous Materials or any Hazardous
Materials Contamination on any property owned, operated or controlled by any
Obligor or for which any Obligor is, or is claimed to be, responsible (provided
that such notice shall not be required for Hazardous Materials which are placed
or stored on such property in accordance with applicable Laws in the ordinary
course of the Obligor’s line of business described in Section 6.1.7 (Line
of Business) or which would not have a Material Adverse Effect), with a full
description thereof;


 


(b)           promptly comply in all material respects with any Laws
requiring the removal, treatment or disposal of Hazardous Materials or
Hazardous Materials Contamination and, upon the written request of the Lender,
provide the Lender with satisfactory evidence of such compliance; and


 


(c)           as part of the Obligations, defend, indemnify and hold
harmless the Lender and its agents, employees, trustees, successors and assigns
from any and all claims which may now or in the future (whether before or after
the termination of this Agreement) be asserted as a result of the presence of
any Hazardous Materials or any Hazardous Materials Contamination (except as a
result of the gross negligence or willful misconduct of the Lender or its
agents, employees, trustees, successors and assigns) on any property owned,
operated or controlled by any Obligor for which any Obligor is, or is claimed
to be, responsible; subject, however, to the limitations set forth in the next
sentence.  Each Obligor acknowledges and
agrees that this indemnification shall survive the termination of this
Agreement and the Commitments and the payment and performance of all of the
other Obligations; provided, however, that this indemnification shall not apply
to any claims resulting from the ownership, operation or other conduct of any
subsequent owner, operator or lessee with respect to any such property which
may be asserted after the termination of this Agreement.


 


6.1.13      Disclosure
of Significant Transactions.


 


Each of the Obligors shall
deliver to the Lender a written notice describing in reasonable detail each
transaction by it involving the purchase, sale, lease, or other acquisition or
loss or casualty to or disposition of an interest in Fixed or Capital Assets
which exceeds Two Hundred Thousand
Dollars ($200,000) or the Euro Currency Equivalent thereof, said 


 

















 


notices to be delivered to the Lender within
thirty (30) days of the occurrence of each
such transaction.


 


6.1.14      Financial
Covenants.


 


(a)           Fixed Charge Coverage Ratio.  The U.S. Borrower will maintain, on a
consolidated basis and tested as of the last day of each of the U.S. Borrower’s
fiscal quarters for the four (4) quarter period ending on that date, a
Fixed Charge Coverage Ratio of not less than 1.15 to 1.0.


 


(b)           Senior Debt Coverage Ratio.  The U.S. Borrower will maintain, on a
consolidated basis and tested as of the last day of each of the U.S. Borrower’s
fiscal quarters for the four (4) quarter period ending in that date, a
Senior Debt Leverage Ratio of not greater than 2.5 to 1.0.


 


6.1.15      Collection
of Receivables.


 


Until a Default shall have
occurred and be continuing and the Lender shall have notified the Obligors of
the revocation of such privilege, the Obligors and their Subsidiaries shall at
their own expense have the privilege for the account of, and in trust for, the
Lender of collecting their Receivables and receiving in respect thereto all
Items of Payment and shall otherwise completely service all of the Receivables
including (a) the billing, posting and maintaining of complete records
applicable thereto, (b) the taking of such action with respect to the
Receivables, as each of the Obligors and each of the Subsidiaries may deem
advisable; and (c) the granting, in the ordinary course of business, to
any Account Debtors rebates, refunds or adjustments, and may accept, in
connection therewith, the return of goods, the sale or lease of which shall
have given rise to a Receivable and may take such other actions relating to the
settling of any Account Debtor’s claim as may be commercially reasonable.  The Lender may, at its option, at any time or
from time to time after and during the continuance of a Default hereunder,
revoke the collection privilege given in this Agreement to the Obligors and
each of the Subsidiaries by either giving notice of its assignment of, and Lien
on the Collateral to the Account Debtors or giving notice of such revocation to
the Obligors.  The Lender shall not have
any duty to, and the Obligors hereby release the Lender from all claims of loss
or damage caused by the delay or failure to, collect or enforce any of the
Receivables or to preserve any rights against any other party with an interest
in the Collateral.


 


6.1.16      Assignments
of Receivables.


 


Subject to the limitations set
forth in Section 2.9 (Limitations on Joint and Several Liability for
Obligations), each of the Obligors will, following a Default which is
continuing, promptly, upon request, execute and deliver to the Lender written
assignments, in form and content acceptable to the Lender, of specific Receivables
or groups of Receivables; provided, however, the Lien and/or security interest
granted to the Lender under this Agreement shall not be limited in any way to
or by the inclusion or exclusion of Receivables within such assignments.  Receivables so assigned shall secure payment
of the Obligations and are not sold to the Lender whether or not any assignment
thereof, which is separate from this Agreement, is 


 

















 


in form absolute.  The Obligors agree that neither any
assignment to the Lender nor any other provision contained in this Agreement or
any of the other Financing Documents shall impose on the Lender any obligation
or liability of any Obligor with respect to that which is assigned and the
Obligors hereby agree (subject to the limitations set forth in Section 2.9
(Limitations on Joint and Several Liability for Obligations)) jointly and
severally to indemnify the Lender and hold the Lender harmless from any and all
claims, actions, suits, losses, damages, costs, expenses, fees, obligations and
liabilities which may be incurred by or imposed upon the Lender by virtue of
the assignment of and Lien on any Obligor’s rights, title and interest in, to,
and under the Collateral.


 


6.1.17      Government
Accounts.


 


Each of the Obligors will
promptly notify the Lender if any of the Receivables arise out of contracts
with the United States or with any other Governmental Authority, and, as
appropriate, execute any instruments and take any steps reasonably required by
the Lender in order that all moneys due and to become due under such contracts
shall be assigned to the Lender and notice thereof given to the Governmental
Authority under the Federal Assignment of Claims Act or any other applicable
Laws.


 


6.1.18      Notice
of Returned Goods, etc.


 


Each of the Obligors will promptly
notify, and will cause the Subsidiaries to promptly notify, the Lender of the
return, rejection or repossession of any goods sold or delivered in respect of
any Receivables, and of any claims made in regard thereto to the extent that
the aggregate purchase price of any such goods in any given calendar month
exceeds in the aggregate One Hundred Thousand Dollars ($100,000) or the Euro
Currency Equivalent thereof for such month.


 


6.1.19      Inventory.


 


With respect to the Inventory,
the U.S. Borrower and the Dutch Borrower will: (a) as soon as possible
upon demand by the Lender from time to time, prepare and deliver to the Lender
designations of Inventory specifying the cost of Inventory and such other
matters and information relating to the Inventory as the Lender may reasonably
request; (b) keep correct and accurate records itemizing and describing
the kind, type, quality and quantity of Inventory, the cost therefor and the
selling price thereof, all of which records shall be available to the officers,
employees or agents of the Lender upon demand in accordance with the terms
hereof for inspection and copying thereof; and (c) except for incidental,
short-term storage or as disclosed on Schedule 6.1.19, not store any Inventory
with an aggregate value in excess of the One Hundred Thousand Dollars
($100,000) with a bailee, warehouseman or similar Person without the Lender’s
prior written consent, which consent shall not be unreasonably withheld and may
be conditioned on prior to storage (i) the filing of appropriate financing
statements in the jurisdiction in which such warehouse or other facility is
located, (ii) delivery by the bailee, warehouseman or similar Person to
the Lender of (A) warehouse receipts, in form acceptable to the Lender, in
the name of the Lender evidencing the storage of Inventory and the interests of
the Lender therein and (B) an acknowledgment of receipt of notice of the
Liens of the Lender in each Borrower’s Inventory, and (iii) other
reasonable conditions.


 

















 


6.1.20      Insurance
With Respect to Equipment and Inventory.


 


Each of the Obligors will (a) maintain
and cause each of its Subsidiaries to maintain hazard insurance with fire and
extended coverage and naming the Lender as additional insured with loss payable
to the Lender as its interest may appear on the Equipment and Inventory in an
amount at least equal to the lesser amount of the outstanding principal amount
of the Obligations or the fair market value of the Equipment and Inventory (but
in any event sufficient to avoid any co-insurance obligations) and with a
specific endorsement to each such insurance policy pursuant to which the
insurer agrees to give the Lender at least thirty (30) days written notice
before any alteration or cancellation of such insurance policy and that no act or
default of any of the Obligors shall affect the right of the Lender to recover
under such policy in the event of loss or damage; (b) file, and cause each
of its Subsidiaries to file, with the Lender, upon its request, a detailed list
of the insurance then in effect and stating the names of the insurance
companies, the amounts and rates of the insurance, dates of the expiration
thereof and the properties and risks covered thereby; and (c) within
thirty (30) days after notice in writing from the Lender, obtain, and cause
each of its Subsidiaries to obtain, such additional insurance as the Lender may
reasonably request.  Unless a Default has
occurred and is continuing, if net insurance proceeds aggregate less than
$200,000 or the Euro Currency Equivalent thereof, they must be applied to the
restoration or replacement of the damaged property in which case such proceeds
shall be held by the Lender as additional security for the Obligations.  If a Default has occurred and is continuing
or either (i) the cost to replace, repair or restore the damaged property
or (ii) the net insurance proceeds aggregate $200,000 or the Euro Currency
Equivalent thereof or more, the Lender shall determine, in its sole discretion,
the manner in which net insurance’ proceeds are to be applied.  Unless a Default has occurred and is
continuing, the Obligors shall have the right to settle any insurance claim not
exceeding $200,000 or the Euro Currency Equivalent thereof, and the Lender
shall have the right to settle for the Obligors any insurance claim in excess
of $200,000 or the Euro Currency Equivalent thereof or any amount during the
continuance of a Default.


 


6.1.21      Maintenance
of the Collateral.


 


The Obligors will maintain the
Collateral in good working order, saving and excepting ordinary wear and tear,
and will not permit anything to be done to the Collateral that may materially
impair the value thereof.


 


6.1.22      Equipment.


 


No Obligor shall hold any,
Equipment on a sale on approval basis. 
Each Obligor hereby declares its intent that, notwithstanding the means
of attachment, no goods of such Obligor hereafter attached to any realty shall
be deemed a fixture, which declaration shall be irrevocable, without the Lender’s
consent, until all of the Obligations have been paid in full and all of the
Commitments have been terminated or have expired.


 
















 


6.1.23      Defense
of Title and Further Assurances.


 


At their expense, the Obligors
will defend the title to the Collateral (and any part thereof), and will
immediately execute, acknowledge and deliver any financing statement, renewal,
affidavit, deed, assignment, continuation statement, security agreement,
certificate or other document which the Lender may require in order to perfect,
preserve, maintain, continue, protect and/or extend the Lien or security
interest granted to the Lender under this Agreement, under any of the other
Financing Documents and the first priority of that Lien, subject only to the
Permitted Liens.  The Obligors will from
time to time do whatever the Lender may reasonably require by way of obtaining,
executing, delivering, and/or filing financing statements, landlords’ or
mortgagees’ waivers, notices of assignment and other notices and amendments and
renewals thereof and the Obligors will take any and all steps and observe such
formalities as the Lender may require, in order to create and maintain a valid
Lien upon, pledge of, or paramount security interest in, the Collateral,
subject to the Permitted Liens.  The
Obligors shall pay to the Lender on demand all taxes, costs and expenses
incurred by the Lender in connection with the preparation, execution, recording
and filing of any such document or instrument. 
To the extent that the proceeds of any of the Accounts or Receivables of
any of the Obligors is expected to become subject to the control of, or in the
possession of, a party other than the Obligors or the Lender, the Obligors
shall cause all such parties to execute and deliver on the Closing Date
security documents, financing statements or other documents as requested by the
Lender and as may be necessary to evidence and/or perfect the security interest
of the Lender in those proceeds.  The
Obligors agree that a copy of a fully executed security agreement and/or
financing statement shall be sufficient to satisfy for all purposes the
requirements of a financing statement as set forth in Article 9 of the
applicable Uniform Commercial Code.  Each
Obligor hereby irrevocably appoints the Lender as that Obligor’s
attorney-in-fact, with power of substitution, in the name of the Lender or in
the name of that Obligor or otherwise, for the use and benefit of the Lender,
but at the cost and expense of the Obligors and without notice to the Obligors,
to execute and deliver any and all of the instruments and other documents and
take any action which the Lender may require pursuant to the foregoing provisions
of this Section 6.1.23.


 


6.1.24      Business
Names, Locations.


 


Each Obligor will notify and
cause each of the Subsidiaries to notify the Lender not less than thirty (30)
days prior to (a) any change in the name under which such Obligor or the
applicable Subsidiary conducts its business, (b) any change of the
location of the chief executive office of the applicable Obligor or Subsidiary,
(c) any change in the jurisdiction of incorporation of any Obligor or
Subsidiary, and (d) the opening of any new place of business or the
closing of any existing place of business, and any change in the location of
the places where the Collateral, or any part thereof, or the books and records,
or any part thereof, are kept.


 


6.1.25      Subsequent
Opinion of Counsel as to Recording Requirements.


 


In the event that any Obligor
shall transfer its jurisdiction of incorporation or principal place of business
or the office where it keeps its records pertaining to the Collateral, upon the
Lender’s request, the Obligors will provide to the Lender a subsequent opinion
of counsel as to 


 

















 


the filing, recording and other requirements
with which the Obligors and their Subsidiaries have complied to maintain the
Lien and security interest in favor of the Lender in the Collateral.


 


6.1.26      Use
of Premises and Equipment.


 


The Obligors agree that until
the Obligations are fully paid and all of the Commitments have been terminated
or have expired, the Lender (a) after and during the continuance of a
Default, may use the Obligors’ owned or leased lifts, hoists, trucks and other
facilities or equipment for handling or removing the Collateral; and (b) in
connection with the Lender’s right to inspect the Collateral and exercise
rights and remedies during a Default, shall have, and are hereby granted, a
right of ingress and egress to the places where the Collateral is located, and
may proceed over and through any Obligor’s owned or leased property.


 


6.1.27      Protection
of Collateral.


 


The Obligors agree that the
Lender may at any time following a Default which is continuing take such steps
as the Lender deems reasonably necessary to protect the interest of the Lender
in, and to preserve the Collateral, including, the hiring of such security
guards or the placing of other security protection measures as the Lender deems
appropriate, may employ and maintain at any of the Obligors’ premises a
custodian who shall have full authority to do all acts necessary to protect the
interests of the Lender in the Collateral and may lease warehouse facilities to
which the Lender may move all or any part of the Collateral to the extent
commercially reasonable.  The Obligors
agree to cooperate fully with the Lender’s efforts to preserve the Collateral
and will take such actions to preserve the Collateral as the Lender may
reasonably direct.  All of the reasonable
expenses of the Lender of preserving the Collateral, including any reasonable
expenses relating to the compensation and bonding of a custodian, shall be part
of the Enforcement Costs.


 


6.1.28      Extension
of Subordinated Debt.


 


The U.S. Borrower by September 8,
2009, shall: (a)  cause the maturity of the Subordinated Note to be
extended in accordance to its original terms until a date not sooner than September 8,
2011, except that the interest rate payable under the Subordinated Note may be
modified to a reasonable market rate (at the time of such extension); or (b) refinance
the debt evidence by the Subordinated Note with new indebtedness (the “Refinance
Indebtedness”), provided that: (i) the Borrower can demonstrate
that the Borrower’s pro forma Fixed Charge Coverage Ratio for the four (4) quarters
immediately following such refinance (based upon the U.S. Borrower’s financial
statements for the four (4) quarters immediately prior to such refinance
adjusted to reflect any change in interest expense resulting from the
refinance) would be not less than 1.25 to 1, (ii) on the date of such
refinance the representations and warranties of the Obligors contained herein
shall be true in all material respects, except that the representations and
warranties which relate to financial statements which are referred to in Section 4.1.11
(Financial Condition) of this Agreement, shall also be deemed to cover
financial statements furnished from time to time to the Bank pursuant to Section 6.1.1
(Financial Statements) of this Agreement and except to the extent such
representations were made only as of a specific date, (iii) there shall
exist no Event of Default or Default hereunder (including, without limitation,
an 


 

















 


Event of Default under Section 7.1.14
(Material Adverse Effect)), and no Event of Default or Default will occur
immediately after such refinance, (iv) the amount the Refinance
Indebtedness should be the same amount as the Subordinated Indebtedness, (v) the
repayment of the Refinance Indebtedness will be subordinated to the
Obligations  in the same manner and to
the same extent as the Subordinated Obligations; (vi) the Refinance
Indebtedness shall be secured by no additional collateral than the collateral
securing the Subordinated Indebtedness; and (vii) the Refinance
Indebtedness shall accrue interest at a reasonable market rate (at the time of
such refinance) and the Refinance Indebtedness shall otherwise (other than
interest rate) be subject to terms no more favorable to the lender of the
Refinance Indebtedness as the terms of the Subordinated Indebtedness are to the
Seller.


 


Section 6.2             Negative
Covenants.


 


So long as any of the
Obligations or the Commitments shall be outstanding hereunder, the Obligors
agree with the Lender, that without the prior written consent of the Lender:


 


6.2.1        Merger,
Acquisition or Sale of Assets.


 


None of the Obligors will enter
into any merger except as permitted by Section 6.2.6 (Stock of
Subsidiaries)) or consolidation or amalgamation, windup or dissolve itself (or
suffer any liquidation or dissolution), or make any Asset Disposition except
for sales permitted by Section 6.2.16 (Disposition of Collateral).  Any consent of the Lender to the disposition
of any assets not specifically permitted hereby may be conditioned on a
specified use of the proceeds of disposition.


 


6.2.2        Subsidiaries.


 


None of the Obligors will
create or acquire any Subsidiaries other than Subsidiaries approved by the
Lender in the exercise of its reasonable discretion, which approval shall be
conditioned, among other things, on the execution and delivery of an Additional
Obligor Joinder Supplement and such other Financing Documents as the Lender may
require.


 


6.2.3        Purchase
or Redemption of Securities, Dividend Restrictions.


 


Except as otherwise provided
for herein, none of the Obligors (a) will purchase, redeem or otherwise
acquire any shares of its capital stock or warrants now or hereafter
outstanding, declare or pay any dividends thereon (other than stock dividends),
apply any of its property or assets to the purchase, redemption or other
retirement of, set apart any sum for the payment of any dividends on, or for
the purchase, redemption, or other retirement of, make any distribution by
reduction of capital or otherwise in respect of, any shares of any class of
capital stock of any Obligor, or any warrants, permit any Subsidiary to
purchase or acquire any shares of any class of capital stock of, or warrants
issued by, any Obligor, make any distribution to stock holders or set aside any
funds for any such purpose, except for (i) dividends by any Subsidiary of
the Obligor to a Obligor, (ii) payments under the Subordinated Note which
are expressly permitted under its terms or payments under the Subordinated Note
which are expressly permitted by the ender in writing and (iii) payment of
amounts required for any repurchase, redemption or other 


 

















 


acquisition for value of any capital stock or
options held by any member of any Obligor’s management or employees pursuant to
any management equity subscription agreement or stock option agreement or
similar agreement or otherwise upon their death, disability, retirement or
termination of employment or departure from the Board of Directors (provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired capital stock or options shall not exceed One Hundred Thousand Dollars
($100,000) or the Euro Currency Equivalent thereof in any twelve month period),
and (b) will not prepay, voluntarily purchase or voluntarily redeem any
Indebtedness for Borrowed Money other than the Obligations, unless such
prepayment is not prohibited by the terms of the subordination applicable to
the Subordinated Indebtedness.


 


6.2.4        Indebtedness.


 


None of the Obligors will
create, incur, assume or suffer to exist any Indebtedness for Borrowed Money or
permit any Subsidiary to do so, except:


 


(a)           the Obligations;


 


(b)           Indebtedness for Borrowed Money secured by Permitted
Liens;


 


(c)           Capital Leases permitted by the terms of this Agreement;


 


(d)           Subordinated Indebtedness;


 


(e)           Indebtedness for Borrowed Money of the Obligors to
non-related entities described on Schedule 4.1.14 (Indebtedness for Borrowed
Money);


 


(f)            Liabilities under Interest Rate/Currency Protection
Agreements entered into in the ordinary course of business with respect to
permitted Indebtedness for Borrowed Money or short-term currency needs and not
for speculative purposes;


 


(g)           additional Indebtedness for Borrowed Money not exceeding
in the aggregate One Hundred Thousand Dollars ($100,000) or the Euro Currency
Equivalent thereof;


 


(h)           indebtedness under loans permitted by Section 6.2.16(b)(i) (Disposition
of Collateral); and


 


(i)            intercompany transactions classified as loans, advances
and all past-due trade accounts payable by one or more of the Obligors to any
other Obligor.


 


6.2.5        Investments,
Loans and Other Transactions.


 


Except as otherwise provided in
this Agreement, none of the Obligors will or will permit any of the
Subsidiaries to, (a) make, assume, acquire or continue to hold any
investment in any real property (unless used in connection with their business
and treated as a Fixed or Capital Asset of any Obligor) or any Person, whether
by stock purchase, capital contribution, acquisition of indebtedness of such
Person, acquisition of all or substantially all the assets of any Person, or 


 

















 


otherwise (including, without limitation,
investments in any joint venture or partnership), (b) guaranty or
otherwise become contingently liable for the Liabilities or obligations of any
Person, or (c) make any loans or advances, or otherwise extend credit to
any Person, except:


 


(i)            any advance to an officer or employee of any Obligor for
travel or other business expenses in the ordinary course of business, provided
that the aggregate amount of all such advances by all of the Obligors (taken as
a whole) outstanding at any time shall not exceed in the aggregate One Hundred
Thousand Dollars ($175,000) or the Euro Currency Equivalent thereof;


 


(ii)           any advance to an officer or employee of any Obligor for
housing purposes, provided that the aggregate amount of all such advances by
all of the Obligors (taken as a whole) outstanding at any time shall not exceed
in the aggregate One Hundred Thousand Dollars ($100,000) or the Euro Currency Equivalent
thereof;


 


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


 


(iv)          any investment in Cash Equivalents, which are pledged to
the Lender as collateral and security for the Obligations;


 


(v)           trade credit extended to customers in the ordinary course
of business; and


 


(vi)          advance payment guarantees by any Obligor of progress
payments made by the purchasers of products manufactured by any of the
Obligors, the obligations under which do not exceed in the aggregate not
exceeding in the aggregate One Hundred Thousand Dollars ($100,000) or the Euro
Currency Equivalent thereof at any one time outstanding.


 


6.2.6        Stock
of Subsidiaries.


 


None of the Obligors will sell
or otherwise dispose of any shares of capital stock of any Subsidiary (except
in connection with a merger or consolidation of any one Obligor into any of the
other Obligors).


 


6.2.7        Subordinated
Indebtedness.


 


None of the Obligors will, or
will permit any Subsidiary to, make any payment of principal of, or interest
on, the Subordinated Obligations or any other Subordinated Indebtedness if such
payment is not permitted by the terms of the Subordinated Note, by terms
applicable to such other Subordinated Indebtedness or is not permitted by the
terms of this Agreement.


 


6.2.8        Liens.


 


Each Obligor agrees that it (a) will
not create, incur, assume or suffer to exist any Lien upon any of its
properties or assets, whether now owned or hereafter acquired, or permit any
Subsidiary so to do, except for Liens securing the Obligations and Permitted
Liens, (b) will not 


 

















 


agree to, assume or suffer to exist any
provision in any instrument or other document for confession of judgment,
cognovit or other similar right or remedy, (c) will not allow or suffer to
exist any Permitted Liens, except permitted purchase money Liens and Liens
under the Subordinated Obligations Documents, to be superior to Liens securing
the Obligations, (d) without the prior written consent of the Lender (which
consent shall not be unreasonably withheld but may be conditioned on the
execution and delivery of an intercreditor agreement reasonably satisfactory to
the Lender), will not enter into any contracts for the consignment of goods,
will not execute or suffer the filing of any financing statements or the
posting of any signs giving notice of consignments, and will not, as a material
part of its business, engage in the sale of goods belonging to others, and (e) will
not allow or suffer to exist the failure of any Lien described in the Security
Documents to attach to, and/or remain at all times perfected, as applicable,
on, any of the property described in the Security Documents.


 


6.2.9        Transactions
with Affiliates.


 


Except as permitted in Section 6.2.3
(Purchase or Redemption of Securities, Dividend Restrictions) or in Section 6.2.13
(Compensation), none of the Obligors nor any of their Subsidiaries will enter
into or participate in any transaction with any Affiliate on terms which are
not fair and reasonable and which are no less favorable than would be obtained
in a comparable arms-length transaction with a Person who is not an Affiliate.


 


6.2.10      ERISA
Compliance.


 


None of the Obligors nor any
Commonly Controlled Entity shall: (a) engage in or permit any “prohibited
transaction” (as defined in ERISA); (b) cause any “accumulated funding
deficiency” as defined in ERISA and/or the Internal Revenue Code; (c) terminate
any pension plan in a manner which could result in the imposition of a lien on
the property of any Obligor pursuant to ERISA; (d) terminate or consent to
the termination of any Multi-employer Plan; or (e) incur a complete or
partial withdrawal with respect to any Multi-employer Plan, which with respect
to any of the events set forth in clauses (a) through (e) would cause
a Material Adverse Effect.


 


6.2.11      Prohibition
on Hazardous Materials.


 


None of the Obligors shall
place, manufacture or store or permit to be placed, manufactured or stored any
Hazardous Materials on any property owned, operated or controlled by any
Obligor or for which any Obligor is responsible other than Hazardous Materials
placed, manufactured or stored on such property in compliance in all material
respects with applicable Laws in the ordinary course of a Obligor’s business
expressly described in this Agreement.


 


6.2.12      Method
of Accounting; Fiscal Year.


 


Each Obligor agrees that:


 


it shall not change the method
of accounting employed in the preparation of any financial statements furnished
to the Lender under the provisions of Section 6.1.1 (Financial
Statements), 


 

















 


unless required to conform to GAAP and on the
condition that the Obligors’ accountants shall furnish such information as the
Lender may request to reconcile the changes with the Obligors’ prior financial
statements; and


 


it will not change its fiscal
year from a year ending on December 31.


 


6.2.13      Compensation.


 


None of the Obligors will pay
any bonuses, fees, compensation, commissions, salaries, drawing accounts, or
other payments (cash and non-cash), whether direct or indirect, to any
stockholders of any Obligor, or any Affiliate of any Obligor, other than
reasonable compensation for actual services rendered by stockholders in their
capacity as officers or employees, except for, (a) reasonable director’s
fees, (b) reasonable and customary indemnification of officers, directors,
employees and consultants, and (c) the reimbursement of reasonable travel
and other out-of-pocket expenses reasonably incurred by the Obligors’ directors
in the performance of their duties with respect to the Obligors.


 


6.2.14      Transfer
of Collateral.


 


None of the Obligors nor any of
their Subsidiaries will transfer, or permit the transfer, to another location
of any of the Collateral or the books and records related to any of the
Collateral unless the notice required by Section 6.1.24 (Business Names;
Locations) has been given and, if required, the Liens of the Lender have been
perfected by filing in that location.


 


6.2.15      Sale
and Leaseback.


 


None of the Obligors nor any of
their Subsidiaries will directly or indirectly enter into any arrangement to
sell or transfer all or any substantial part of its fixed assets and thereupon
or within one year thereafter rent or lease the assets so sold or transferred.


 


6.2.16      Disposition
of Collateral.


 


None of the Obligors will sell,
discount, allow credits or allowances, transfer, assign, extend the time for
payment on, convey, lease, assign, transfer or otherwise dispose of the
Collateral, except, prior to a Default which is continuing (a) dispositions
that are not Asset Dispositions, and (b) the sale of unnecessary or
obsolete Equipment, but only if the proceeds of the sale of such Equipment are (i) used
to purchase other Equipment with a transaction or book value not to exceed in
the aggregate, in any twelve (12) month period, Two Hundred Thousand Dollars
($200,000) or the Euro Currency Equivalent thereof or (ii) immediately
turned over to the Lender for application to the Obligations in such order as
the Lender may determine in the exercise of its sole and absolute discretion.


 


6.2.17      Amendments
or Modification to Charter Documents.


 


None of the Obligors shall
permit any amendment or modification to their Charter Documents or to the
Charter Documents of any of their Subsidiaries.


 

















 


ARTICLE
VII


DEFAULT
AND RIGHTS AND REMEDIES


 


Section 7.1             Events
of Default.


 


The occurrence of any one or
more of the following events shall constitute a default under the provisions of
this Agreement, and the term “Default” shall mean, whenever it is used in this
Agreement, any one or more of the following events after giving effect to the
giving of notice, the lapse of time, or both, as herein provided (and the term “Event
of Default” as used herein means one or more of the following events, whether
or not any requirement for the giving of notice, the lapse of time, or both has
been satisfied):


 


7.1.1        Failure
to Pay.


 


The failure of the Obligors to
pay any of the Obligations as and when due and payable in accordance with the
provisions of this Agreement and/or any of the other Financing Documents, and,
except in the case of the failure to make any payment of principal and in the
case of the failure to pay any Obligation at its maturity (whether by
acceleration or otherwise) or when due on demand, such failure continues
uncured for a period of five (5) Business Days.


 


7.1.2        Breach
of Representations and Warranties.


 


Any representation or warranty
made in this Agreement or in any report, statement, schedule, certificate,
opinion (including any opinion of counsel for any Obligor), financial statement
or other document furnished in connection with this Agreement, any of the other
Financing Documents, or the Obligations, is false or misleading when made (or,
if applicable, when reaffirmed) in any material respect.


 


7.1.3        Failure
to Comply with Certain Covenants.


 


The failure of the Obligors to
perform, observe or comply with any of the provisions of Section 6.1.1
(Financial Statements) and Section 6.1.2 (Reports to SEC and Stockholders)
of this Agreement or of Section 6.2 (Negative Covenants) of this
Agreement.


 


7.1.4        Failure
to Comply with Other Covenants.


 


The failure of the Obligors to
perform, observe or comply with any of the provisions of this Agreement other
than those covered by Section 7.1.1 (Failure to Pay), Section 7.1.2
(Breach of Representations and Warranties) and Section 7.1.3 (Failure to
Comply with Certain Covenants) of this Agreement, and such failure is not cured
to the satisfaction of the Lender within a period of thirty (30) days.


 

















 


7.1.5        Default
Under Other Financing Documents.


 


The occurrence of a default (as
defined and described therein) under the provisions of any of the other
Financing Documents which is not cured within applicable cure periods, if any;
or to the extent there is no default defined in such Financing Document a
material failure to perform under such Financing Document.


 


7.1.6        Insolvency.


 


If the U.S. Borrower on a
consolidated basis shall become insolvent and/or admit its inability to pay its
debts as they mature.


 


7.1.7        Bankruptcy.


 


If proceedings in Bankruptcy,
or for reorganization of any or all of the Obligors, or for the readjustment of
any or all of the Obligor’s debts, under the United States Bankruptcy Code (as
amended), or in the case of the Dutch Borrower having filed a notice under
section 36 of the Tax Collection Act of the Netherlands (Invorderingswet
1990) or section 16d of the Social Insurance Co-ordination Act of
the Netherlands (Coördinatiewet Sociale Verzekeringen) or any part thereof, or
under any other applicable laws, whether state or federal, for the relief of
debtors, now or hereafter existing, shall be commenced against or by any or all
of the Obligors and, except with respect to any such proceedings instituted by
any or all of the Obligors, shall not be discharged within sixty (60) days of
their commencement.


 


7.1.8        Receivership.


 


A receiver or trustee shall be
appointed for any or all of the Obligors or for any substantial part of any or
all of the Obligor’s assets, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of any or all of the Obligors
and, except with respect to any such appointments requested or instituted by
any of the Obligors, such receiver or trustee shall not be discharged within
sixty (60) days of his or her appointment, and, except with respect to any such
proceedings instituted by the Borrower, such proceedings shall not be
discharged within sixty (60) days of their commencement.


 


7.1.9        Judgment.


 


One or more judgments or
decrees shall be entered against any or all of the Obligors involving in the
aggregate liability in excess of Two Hundred Thousand Dollars ($200,000), and
all such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within thirty (30) days after the entry thereof.


 


7.1.10      Execution;
Attachment.


 


Any execution or attachment
shall be levied against the Collateral, or any part thereof, and such execution
or attachment shall not be set aside, discharged or stayed within thirty (30)
days after the same shall have been levied.


 

















 


7.1.11      Default
Under Other Borrowings.


 


Default shall be made with
respect to any Indebtedness for Borrowed Money of any Obligor (other than the
Loans) for an amount in excess of Two Hundred Thousand Dollars ($200,000) in
the aggregate if the effect of such default is to accelerate the maturity of
such Indebtedness for Borrowed Money or to permit the holder or obligee thereof
or other party thereto to cause such Indebtedness for Borrowed Money to become
due prior to its stated maturity.


 


7.1.12      Unenforceable
Liens.


 


If the Lender in good faith
reasonably determines a material portion of the Lender’s Liens on the
Collateral is invalid or unenforceable, or if Lender reasonably determines that
it does not have the lien position on the Collateral that was contemplated
under the terms of this Agreement and the other Financing Documents.


 


7.1.13      Challenge
to Agreements.


 


Any Obligor or any guarantor
shall challenge the validity and binding effect of any provision of any of the
Financing Documents or shall state its intention to make such a challenge of
any of the Financing Documents or any of the Financing Documents shall for any
reason (except to the extent permitted by its express terms) cease to be
effective or to create a valid and perfected first priority Lien (except for
Permitted Liens) on, or security interest in, any of the Collateral purported
to be covered thereby.


 


7.1.14      Material
Adverse Effect.


 


An event has occurred which has
a Material Adverse Effect.


 


7.1.15      Change
in Control.


 


The occurrence of any Change of
Control.


 


7.1.16      Liquidation,
Termination, Dissolution.


 


Any Obligor shall liquidate,
dissolve or terminate its existence without the prior written consent of the
Lender.


 


7.1.17      Suit
by Seller.


 


If the Seller should bring suit
or other legal action for breach of contract or non-performance under the
Purchase Agreement following the U.S. Borrower’s failure to pay the amount in
excess of Two Hundred Thousand Dollars ($200,000) of any Cash Tax Benefit (as
such term is defined in the Purchase Agreement) due under the terms of the
Purchase Agreement 


 

















 


determined by an accounting firm (acceptable
to the Lender in its reasonable discretion) on the date when due in accordance
with the terms of the Purchase Agreement.


 


Section 7.2             Remedies.


 


Upon the occurrence of a
Default, the Lender may, in the exercise of its or their sole and absolute
discretion from time to time, at any time thereafter exercise any one or more
of the following rights, powers or remedies:


 


7.2.1        Acceleration,
Termination.


 


The Lender may (i) declare
the Commitments and the Credit Facilities and any obligation or commitment of
the Lender hereunder to make Loans to the Borrowers or to issue Letters of
Credit for the account of the Borrowers to be terminated, whereupon the same
shall forthwith terminate, and (ii) declare the unpaid principal amount of
the Loans, together with accrued and unpaid interest thereon, and all other
Obligations then outstanding to be immediately due and payable, whereupon the
same shall become and be forthwith due and payable by the Obligors to the
Lender, without presentment, demand, protest or further notice of any kind, all
of which are expressly waived by the Obligors; provided, that, in the case of
any Default referred to in Section 7.1.6 (Insolvency), Section 7.1.7
(Bankruptcy), and 7.1.8 (Receivership) above, the Commitments and the Credit
Facilities and any obligation or commitment of the Lender hereunder to make
Loans to the Borrowers Obligors or to issue Letters of Credit for the account of
the Borrowers shall immediately and automatically terminate and the unpaid principal amount of the Loans,
together with accrued and unpaid interest thereon, and all other Obligations
then outstanding shall be automatically and immediately due and payable by the
Obligors to the Lender without notice, presentment, demand, protest or other
action of any kind, all of which are expressly waived by the Obligors.


 


7.2.2        Uniform
Commercial Code.


 


The Lender shall have all of
the rights and remedies of a secured party
under the applicable Uniform Commercial Code and other applicable
Laws.  Upon the occurrence and during the
continuation of a Default, to the extent permitted under applicable law, upon
demand by the Lender, the Obligors shall assemble the Collateral and make it
available to the Lender at a place designated by the Lender.  Upon the occurrence and during the
continuation of a Default, the Lender may without notice from time to time
enter upon any Obligor’s premises to take possession of the Collateral, to
remove it, to render it unusable, to process it or otherwise prepare it for
sale, or to sell or otherwise dispose of it. 
Upon the occurrence and during the continuation of a Default, at the
Lender’s direction, the Obligors shall cease to process, prepare for sale, sell
or otherwise dispose of the Collateral.


 


Any written notice of the sale,
disposition or other intended action by the Lender with respect to the
Collateral which is sent by regular mail, postage prepaid, to the Obligors at
the address set forth in Section 8.1 (Notices) of this Agreement, or such
other address of the Obligors which may from time to time be shown on the
Lender’s records, at least ten (10) days prior to such sale, disposition
or other action, shall constitute commercially reasonable notice to 


 

















 


the Obligors. 
The Lender may alternatively or additionally give such notice in any
other commercially reasonable manner. 
Nothing in this Agreement shall require the Lender to give any notice
not required by applicable Laws.


 


If any consent, approval, or
authorization of any state, municipal or other Governmental Authority or of any
other Person or of any Person having any interest therein, should be necessary
to effectuate any sale or other disposition of the Collateral, the Obligors
agree to execute all such applications and other instruments, and to take all
other action, as may be required in connection with securing any such consent,
approval or authorization.


 


The Obligors recognize that the
Lender may be unable to effect a public sale of all or a part of the Collateral
consisting of Securities by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and other applicable Federal and state
Laws.  The Lender may, therefore, in its
discretion, take such steps as it may deem appropriate to comply with such Laws
and may, for example, at any sale of the Collateral consisting of securities
restrict the prospective bidders or purchasers as to their number, nature of
business and investment intention, including, without limitation, a requirement
that the Persons making such purchases represent and agree to the satisfaction
of the Lender that they are purchasing such securities for their account, for
investment, and not with a view to the distribution or resale of any
thereof.  The Obligors covenant and agree
to do or cause to be done promptly all such acts and things as the Lender may
request from time to time and as may be necessary to offer and/or sell the
securities or any part thereof in a manner which is valid and binding and in
conformance with all applicable Laws. 
Upon any such sale or disposition, the Lender shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral consisting
of securities so sold.


 


7.2.3        Standard
of Care.


 


To the extent that applicable
law may impose duties on the Lender to exercise remedies in a commercially
reasonable manner, the Obligors acknowledges and agrees that it is not
commercially unreasonable for the Lender (a) to fail to incur expenses
reasonably deemed significant by the Lender to prepare any of the Collateral
for disposition or otherwise to fail to complete raw material or work in
process into finished goods or other finished products for disposition, (b) to
fail to obtain third party consents for access to the Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of the
Collateral to be collected or disposed of, (c) to fail to exercise
collection remedies against account debtors or other Persons obligated on the
Collateral or to fail to remove liens or encumbrances on or any adverse claims
against the Collateral, (d) to exercise collection remedies against
account debtors and other Persons obligated on the Collateral directly or
through the use of collection agencies and other collection specialists, (e) to
advertise dispositions of the Collateral through publications or media of
general circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other Persons, whether or not in the same business as the Obligors, for
expressions of interest in acquiring all or any portion of the Collateral, (g) to
hire one or more professional auctioneers to assist in the disposition of the
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of the Collateral by utilizing Internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capability of doing so, or that match buyers 


 

















 


and sellers of assets, (i) to dispose of
assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, (k) to purchase insurance or credit enhancements
to insure the Lender against risks of loss, collection or disposition of
Collateral or to provide to the Lender a guaranteed return from the collection
or disposition of Collateral, or (1) to the extent deemed appropriate by
the Lender, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Lender in the collection or
disposition of any of the Collateral.


 


7.2.4        Specific
Rights With Regard to Collateral.


 


Upon the occurrence and during
the continuation of a Default, in addition to all other rights and remedies
provided hereunder or as shall exist at law or in equity from time to time, the
Lender may (but shall be under no obligation to), without notice to the
Obligors, and each Obligor hereby irrevocably appoints the Lender as its
attorney-in-fact, with power of substitution, in the name of the Lender and/or
in the name of any or all of the Obligors or otherwise, for the use and benefit
of the Lender, but at the cost and expense of the Obligors and without notice
to the Obligors:


 


(a)           request any Account
Debtor obligated on any of the Accounts to make payments thereon directly to
the Lender, with the Lender taking control of the cash and non-cash proceeds
thereof;


 


(b)           compromise, extend or
renew any of the Collateral or deal with the same as it may deem advisable;


 


(c)           make exchanges,
substitutions or surrenders of all or any part of the Collateral;


 


(d)           copy, transcribe, or
remove from any place of business of any Obligor all books, records, ledger
sheets, correspondence, invoices and documents, relating to or evidencing any
of the Collateral or without cost or expense to the Lender make such use of any
Obligor’s place(s) of business as may be reasonably necessary to
administer, control and collect the Collateral;


 


(e)           repair, alter or supply
goods if necessary to fulfill in whole or in part the purchase order of any
Account Debtor;


 


(f)            demand, collect,
receipt for and give renewals, extensions, discharges and releases of any of
the Collateral;


 


(g)           institute and prosecute
legal and equitable proceedings to enforce collection of, or realize upon, any
of the Collateral;


 


(h)           settle, renew, extend,
compromise, compound, exchange or adjust claims in respect of any of the
Collateral or any legal proceedings brought in respect thereof;


 


(i)            endorse or sign the
name of any Obligor upon any items of payment, certificates of title,
instruments, securities, stock powers, documents, documents of title, financing



 

















 


statements, assignments, notices or other
writing relating to or part of the Collateral and on any proof of claim in
bankruptcy against an Account Debtor;


 


(j)            notify the Post Office authorities to change the address
for the delivery of mail to the Obligors to such address or Post Office Box as
the Lender may designate and receive and open all mail addressed to any of the
Obligors (which the Lender reasonably believes to be related to an Account of
any of the Obligors; and


 


(k)           take any other action reasonably necessary to realize upon
or dispose of the Collateral or to carry out the terms of this Agreement.


 


The Obligors further
acknowledge and agree that following the occurrence and during the continuation
of a Default, the Lender, shall be entitled to enforce any and all rights and
remedies available to any or all of the Obligors under the Purchase Agreement
and/or under any or all of the Purchase Agreement Documents and/or applicable
Laws with respect to the Purchase Agreement Transaction, including (without
limitation) rights to indemnification for breach of representations, warranties
and covenants.


 


7.2.5        Application
of Proceeds.


 


Any proceeds of sale or other
disposition of the Collateral will be applied by the Lender to the payment
first of any and all Enforcement Costs, and thereafter to the Obligations in
such order and manner as the Lender may determine in its sole and absolute
discretion; provided that any proceeds of sale or other disposition of the
Dutch Collateral will be applied by the Lender only to the payment of the Dutch
Obligations in such order and manner as the Lender shall determine in its sole
and absolute discretion.  If the sale or
other disposition (by foreclosure, liquidation or otherwise) of the Collateral
fails to fully satisfy the Obligations, the Obligors shall remain liable to the
Lender for any deficiency, as appropriate, subject to the limitations provided
in Section 2.9 (Limitations on Joint and Several Liability for
Obligations).


 


7.2.6        Performance
by Lender.


 


If the Obligors shall fail to
pay the Obligations or otherwise fail to perform, observe or comply with any of
the conditions, covenants, terms, stipulations or agreements contained in this
Agreement or any of the other Financing Documents, the Lender without notice to
or demand upon the Obligors and without waiving or releasing any of the Obligations
or any Default or Event of Default, may following the occurrence and during the
continuation of a Default (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of the Obligors, and may enter upon the premises of the Obligors for
that purpose and take all such action thereon as the Lender may reasonably
consider necessary or appropriate for such purpose and each of the Obligors
hereby irrevocably appoint the Lender as its attorney-in-fact to do so, with
power of substitution, in the name of the Lender, or in the name of any or all
of the Obligors or otherwise, for the use and benefit of the Lender but at the
cost and expense of the Obligors and without notice to the Obligors.  All sums so paid or advanced by the Lender,
together with interest thereon from the date of payment, advance or incurring
until paid in full at the Post-Default Rate and all costs and expenses, shall
be deemed 


 

















 


part of the Enforcement Costs, shall be paid
by the Obligors to the Lender on demand, and shall constitute and become a part
of the Obligations.


 


7.2.7        Other
Remedies.


 


The Lender may from time to
time proceed to protect or enforce the rights of the Lender by an action or
actions at law or in equity or by any other appropriate proceeding, whether for
the specific performance of any of the covenants contained in this Agreement or
in any of the other Financing Documents, or for an injunction against the
violation of any of the terms of this Agreement or any of the other Financing
Documents, or in aid of the exercise or execution of any right, remedy or power
granted in this Agreement, the Financing Documents, and/or applicable
Laws.  The Lender is authorized to offset
and apply to all or any part of the Obligations all moneys, credits and other
property of any nature whatsoever of any or all of the Obligors now or at any
time hereafter in the possession of, in transit to or from, under the control
or custody of, or on deposit with, the Lender or any Affiliate of the Lender.


 


ARTICLE
VIII

MISCELLANEOUS


 


Section 8.1             Notices.


 


All notices, requests and
demands to or upon the parties to this Agreement shall be in writing, or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof,
including but not limited to, delivery by overnight mail or courier service, (b) five
(5) days after it shall have been deposited in the mail, first class,
certified or registered, with postage prepaid, or (c) in the case of
notice by a telecommunications device, when properly transmitted, in each case
addressed to the party to be notified as follows:


 


	
  Obligors:

  	
   

  	
  Optelecom-NKF, Inc.

  
	
   

  	
   

  	
  12920 Cloverleaf Center Drive

  
	
   

  	
   

  	
  Germantown, Maryland 20874

  
	
   

  	
   

  	
  Attention: Jim Armstrong

  
	
   

  	
   

  	
  Facsimile:

  
	
   

  	
   

  	
  E-mail:

  
	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  	
  Venable LLP

  
	
   

  	
   

  	
  8010 Towers Crescent Drive

  
	
   

  	
   

  	
  Suite 300

  
	
   

  	
   

  	
  Vienna, Virginia 22182

  
	
   

  	
   

  	
  Attention: George A. Chadwick, IV

  
	
   

  	
   

  	
  Facsimile: 703-821-8949

  
	
   

  	
   

  	
  E-mail: GAChadwick@Venable.com

  
	
   

  	
   

  	
   

  
	
  Lender:

  	
   

  	
  Manufacturers and Traders Trust Company

  
	
   

  	
   

  	
  1 Research Court, Suite 400

  
	
   

  	
   

  	
  Rockville, Maryland 20850

  
	
   

  	
   

  	
  Attention: Eric Goodwin

  
	
   

  	
   

  	
  Facsimile: 240-632-2621

  



 

















 


	
  with a copy
  to:

  	
   

  	
  William J. 
  Thomas

  
	
   

  	
   

  	
  Ober Kaler

  
	
   

  	
   

  	
  120 Baltimore Street

  
	
   

  	
   

  	
  Baltimore, Maryland 21202

  
	
   

  	
   

  	
  Facsimile: 410-385-3700

  



 


By written notice, each party to this
Agreement may change the address to which notice is given to that party,
provided that such changed notice shall include a street address to which
notices may be delivered by overnight courier in the ordinary course on any
Business Day.


 


Section 8.2             Amendments; Waivers.


 


This Agreement and the other
Financing Documents may not be amended, modified, or changed in any respect
except by an agreement in writing signed by the Lender and the Obligors.  No waiver of any provision of this Agreement
or of any of the other Financing Documents, nor consent to any departure by the
Obligors therefrom, shall in any event be effective unless the same shall be in
writing signed by the Lender.  No course
of dealing between the Obligor and the Lender and no act or failure to act from
time to time on the part of the Lender shall constitute a waiver, amendment or
modification of any provision of this Agreement or any of the other Financing Documents
or any right or remedy under this Agreement, under any of the other Financing
Documents or under applicable Laws. 
Without implying any limitation on the foregoing:


 


Any waiver or consent shall be
effective only in the specific instance, for the terms and purpose for which
given, subject to such conditions as the Lender may specify in any such
instrument.


 


No waiver of any Default or
Event of Default shall extend to any subsequent or other Default or Event of
Default, or impair any right consequent thereto.


 


No notice to or demand on the
Obligors in any case shall entitle the Obligors to any other or further notice
or demand in the same, similar or other circumstance.


 


No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant
or agreement of this Agreement or of any of the other Financing Documents, or
to exercise any right, power or remedy consequent upon a breach thereof, shall
constitute a waiver, amendment or modification of any such term, condition,
covenant or agreement or of any such breach or preclude the Lender from
exercising any such right, power or remedy at any time or times.


 
















 


By accepting payment after the
due date of any amount payable under this Agreement or under any of the other
Financing Documents, the Lender shall not be deemed to waive the right either
to require prompt payment when due of all other amounts payable under this
Agreement or under any of the other Financing Documents, or to declare a
default for failure to effect such prompt payment of any such other amount.


 


Section 8.3             Cumulative
Remedies.


 


The rights, powers and remedies
provided in this Agreement and in the other Financing Documents are cumulative,
may be exercised concurrently or separately, may be exercised from time to time
and in such order as the Lender shall determine, subject to the provisions of
this Agreement, and are in addition to, and not exclusive of, rights, powers
and remedies provided by existing or future applicable Laws.  In order to entitle the Lender to exercise
any remedy reserved to it in this Agreement, it shall not be necessary to give
any notice, other than such notice as may be expressly required in this
Agreement.  Without limiting the
generality of the foregoing and subject to the terms of this Agreement, the
Lender may, subject to the limitations set forth in Section 2.9
(Limitations on Joint and Several Liability for Obligations):


 


(a)           proceed against any one or more of the Obligors with or
without proceeding against any other Person (including, without limitation, any
guarantor) who may be liable (by endorsement, guaranty, indemnity or otherwise)
for all or any part of the Obligations;


 


(b)           proceed against any one or more of the Obligors with or
without proceeding under any of the other Financing Documents or against any
Collateral or other collateral and security for all or any part of the
Obligations;


 


(c)           without reducing or impairing the obligation of the
Obligors and without notice, release or compromise with any guarantor or other
Person liable (by endorsement, guaranty, indemnity or otherwise) for all or any
part of the Obligations under the Financing Documents or otherwise;


 


(d)           without reducing or impairing the obligations of the
Obligors and without notice thereof: (i) fail to perfect the Lien in any
or all Collateral or to release any or all the Collateral or to accept
substitute Collateral, (ii) approve the making of U.S. Revolving Loan
Advances and/or the Dutch Revolving Loan Advances under this Agreement, (iii) waive
any provision of this Agreement or the other Financing Documents, (iv) exercise
or fail to exercise rights of set-off or other rights, or (v) accept partial
payments or extend from time to time the maturity of all or any part of the
Obligations.


 


Section 8.4             Severability.


 


In case one or more provisions,
or part thereof, contained in this Agreement or in the other Financing
Documents shall be invalid, illegal or unenforceable in any respect under any
Law, then without need for any further agreement, notice or action:


 

















 


(a)           the validity, legality and enforceability of the remaining
provisions shall remain effective and. 
binding on the parties thereto and shall not be affected or impaired
thereby;


 


(b)           the obligation to be fulfilled shall be reduced to the
limit of such validity;


 


(c)           if such provision or part thereof pertains to repayment of
the Obligations then, at the sole and absolute discretion of the Lender, all of
the Obligations of the Obligors to the Lender shall become immediately due and
payable; and


 


(d)           if the affected provision or part thereof operates or
would prospectively operate to invalidate this Agreement in whole or in part,
then such provision or part thereof only shall be void, and the remainder of
this Agreement shall remain operative and in full force and effect.


 


Section 8.5             Assignments
and Participations by Lender.


 


The Lender may, without notice
to or consent of the Obligor, sell, dispose of, assign or transfer to any
Person or Persons, all or any part of the Obligations or all or any part of the
Financing Documents and each such Person or Persons shall have the right to
enforce the provisions of the Financing Documents and any of the Obligations as
fully as the Lender, provided that the Lender shall continue to have the
unimpaired right to enforce the provisions of the Financing Documents and any
of the Obligations as to so much of the Financing Documents and/or the
Obligations that it has not sold, assigned or transferred.  Additionally, the Lender may sell or grant to
any other Person or Persons participations in all or any part of the
Obligations or all or any part of the Financing Documents.  The Obligor will fully cooperate with the
Lender in connection with any such assignment and will execute and deliver such
consents and acceptances to any such assignment, amendments to this Agreement
in order to effect any such assignment (including, without limitation, the
appointment of the Lender as agent for itself and all assignees); provided,
that the Obligor’s indebtedness, obligations and liabilities under this
Agreement and the other Financing Documents will not be increased by reason of
any such assignment.  Any assignment of rights or transfer of
rights and/or Commitment by way of transfer of contract under this Agreement by
any participant lender must be in a (total) minimum amount of € 50,000 (or
equivalent) or the pro resto amount of such participant lender if less,
provided, however, that each participant lender at any time retains rights
and/or a Commitment in a (total) minimum amount of at least €50,000 (or
equivalent) or zero.


 


Section 8.6             Disclosure
of Information by Lender.


 


In connection with any sale,
transfer, assignment or participation by the Lender in accordance with Section 8.5
(Assignments and Participations by Lender), the Lender shall have the right to
disclose to any actual or potential purchaser, assignee, transferee or
participant all financial records, information, reports, financial statements
and documents obtained in connection with this Agreement and/or any of the
other Financing Documents or otherwise, provided that any such purchaser,
assignee, transferee or participant agrees to treat such information as confidential.


 

















 


Section 8.7             Successors
and Assigns.


 


This Agreement and all other
Financing Documents shall be binding upon and inure to the benefit of the
Obligors and the Lender and their respective successors and assigns, except
that the Obligors shall not have the right to assign their rights hereunder or
any interest herein without the prior written consent of the Lender.


 


Section 8.8             Continuing
Agreements.


 


All covenants, agreements,
representations and warranties made by the Obligors in this Agreement, in any
of the other Financing Documents, and in any certificate delivered pursuant
hereto or thereto shall survive the making by the Lender of the Loans and the
execution and delivery of this Agreement, shall be binding upon the Obligors
regardless of how long before or after the date hereof any of the Obligations
were or are incurred, and shall continue in full force and effect so long as
any of the Obligations are outstanding and unpaid.


 


Section 8.9             Enforcement
Costs.


 


Subject to the limitations set forth
in Section 2.9 (Limitations on Joint and Several Liability for
Obligations), the Obligors agree to pay to the Lender on demand all Enforcement
Costs, together with interest thereon from the date which is five (5) Business
Days after written notice of demand until paid in full at a per annum rate of
interest equal at all times to the Post-Default Rate.  Enforcement Costs shall be immediately due
and payable at the time advanced or incurred, whichever is earlier.  Without implying any limitation on the foregoing,
the Obligors agree, as part of the Enforcement Costs, to pay upon demand any
and all stamp and other Taxes and fees payable or determined to be payable in
connection with the execution and delivery of this Agreement and the other
Financing Documents and to save the Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay any Taxes or fees referred to in this Section.  The provisions of this Section shall
survive the execution and delivery of this Agreement, the repayment of the
other Obligations and shall survive the termination of this Agreement.


 


Section 8.10           Applicable
Law; Jurisdiction.


 


8.10.1      Applicable Law.


 


As a material inducement to the
Lender to enter into this Agreement, the Obligors acknowledge and agree that
the Financing Documents, including, this Agreement, shall be governed by the
Laws of the State, as if each of the Financing Documents and this Agreement had
each been executed, delivered, administered and performed solely within the
State even though for the convenience and at the request of the Obligors, one
or more of the Financing Documents may be executed elsewhere.  The Lender acknowledges, however, that
remedies under certain of the Financing Documents that relate to property
outside the State may be subject to the laws of the jurisdiction in which the
property is located.


 

















 


8.10.2      Submission to
Jurisdiction.


 


The Obligors irrevocably submit
to the jurisdiction of any state or federal court sitting in the State over any
suit, action or proceeding arising out of or relating to this Agreement or any
of the other Financing Documents.  Each
of the Obligors irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.  Final judgment
in any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon the Obligors and may be enforced in any court in
which the Obligors are subject to jurisdiction, by a suit upon such judgment,
provided that service of process is effected upon the Obligors in one of the
manners specified in this Section or as otherwise permitted by applicable
Laws.


 


8.10.3      Appointment of
Agent for Service of Process.


 


Each of the Non- U.S. Obligors
hereby irrevocably designates and appoints Harvard Business Services as that
Non-U.S. Obligor’s authorized agent to receive on such Non-U.S. Obligor’s
behalf service of any and all process that may be served in any suit, action or
proceeding of the nature referred to in this Section in any state or
federal court sitting in the State.  If
such agent shall cease so to act, each of the Non- U.S. Obligors shall
irrevocably designate and appoint without delay another such authorized agent
in the State satisfactory to the Lender and shall promptly deliver to the
Lender evidence in writing of such other agent’s acceptance of such appointment
and its agreement that such appointment shall be irrevocable.


 


8.10.4      Service of Process.


 


The Obligors hereby consent to
process being served in any suit, action or proceeding of the nature referred
to in this Section by (a) the mailing of a copy thereof by registered
or certified mail, postage prepaid, return receipt requested, to the Obligors
at the Obligors’ address designated in or pursuant to Section 8.1
(Notices), and (b) serving a copy thereof upon the agent, if any,
designated and appointed by each Obligor as the Obligor’s agent for service of
process by or pursuant to this Section. 
Each of the Obligors irrevocably agrees that such service (y) shall
be deemed in every respect effective service of process upon the Obligors in
any such suit, action or proceeding, and (z) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon the
Obligors.  Nothing in this Section shall
affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender otherwise to bring
proceedings against any or all of the Obligors in the courts of any
jurisdiction or jurisdictions.


 


Section 8.11           Duplicate
Originals and Counterparts; Counterpart Facsimile Execution.


 


This Agreement may be executed
in any number of duplicate originals or counterparts, each of such duplicate
originals or counterparts shall be deemed to be an original and all taken
together shall constitute but one and the same instrument.               For purposes of executing this
Agreement, a document signed and transmitted by facsimile machine or telecopier
is to be 


 

















 


treated as an original document.  The signature of any party thereon, for
purposes hereof, is to be considered as an original signature, and the document
transmitted is to be considered to have the same binding effect as an original
signature on an original document.  At
the request of any party, any facsimile or telecopy document is to be re-executed
in original form by the parties who executed the facsimile or telecopy
document.  No party may raise the use of
a facsimile machine or telecopier or the fact that any signature was
transmitted through the use of a facsimile or telecopier machine as a defense
to the enforcement of this Agreement or any amendment or other document
executed in compliance with this Section.


 


Section 8.12           Headings.


 


The headings in this Agreement
are included herein for convenience only, shall not constitute a part of this
Agreement for any other purpose, and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.


 


Section 8.13           No
Agency.


 


Nothing herein contained shall
be construed to constitute the Obligors as agents of any of the Lender for any
purpose whatsoever or to permit the Obligors to pledge any of the credit of the
Lender.  The Lender shall not be
responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and regardless of the cause
thereof other than through the Lender’s gross negligence or willful
misconduct.  The Lender shall not, by
anything herein or in any of the Financing Documents or otherwise, assume the
Obligors’ obligations under any contract or agreement assigned to the Lender,
and the Lender shall not be responsible in any way for the performance by the
Obligors of any of the terms and conditions thereof.


 


Section 8.14           Date
of Payment.


 


Should the principal of or
interest on the Loans become due and payable on other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day and in
the case of principal, interest shall be payable thereon at the rate per annum
specified herein during such extension.


 


Section 8.15           Entire
Agreement.


 


This Agreement and the other
Financing Documents are intended by the Lender and the Obligors to be a
complete, exclusive and final expression of the agreements contained
herein.  None of the Obligors or the
Lender shall hereafter have any rights under any prior agreements pertaining to
the matters addressed by this Agreement but shall look solely to this Agreement
for definition and determination of all of their respective rights, liabilities
and responsibilities under this Agreement.


 

















 


Section 8.16           Liability
of the Lender.


 


The Obligors hereby agree that
in the absence of the Lender’s gross negligence or willful misconduct, the
Lender shall not be chargeable for any mistake, act or omission of any
accountant, examiner, agency or attorney employed by the Lender in making
examinations or investigations or otherwise in perfecting, maintaining or
protecting upon any Lien or security interest or any other interest in the
Collateral or other security for the Obligations.


 


By inspecting the Collateral or
any other properties of any Obligor or by accepting or approving anything
required to be observed, performed or fulfilled by any Obligor or to be given
to the Lender pursuant to this Agreement or any of the other Financing
Documents, the Lender shall not be deemed to have warranted or represented the
condition, sufficiency, legality, effectiveness or legal effect of the same,
and such acceptance or approval shall not constitute any warranty or
representation with respect thereto by the Lender.


 


Section 8.17           Patriot
Act Notice.


 


The Each Lender hereby notifies
the Obligors that pursuant to the requirements of the Patriot Act, the Lender
is required to obtain, verify and record information that identifies the
Obligors, which information includes the name and address of the Obligors and
other information that will allow such Lender to identify the Obligors in
accordance with the Act.


 


Section 8.18           Waiver
of Trial by Jury.


 


EACH OF THE OBLIGORS AND THE
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH ANY OR
ALL OF THE OBLIGORS AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN
ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING
DOCUMENTS, OR (C) THE COLLATERAL. 
THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST
ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES
WHO ARE NOT PARTIES TO THIS AGREEMENT.


 


This waiver is knowingly,
willingly and voluntarily made by the Obligors and the Lender, and the Obligors
and the Lender hereby represent that no representations of fact or opinion have
been made by any individual to induce this waiver of trial by jury or to in any
way modify or nullify its effect.  The
Obligors and the Lender further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.


 


(Signatures Follow on Next Page)


 

















 


SIGNATURE PAGE FOR FINANCING AND SECURITY AGREEMENT


 


WITNESS WHEREOF, each of the
parties hereto have executed and delivered this Agreement under their
respective seals as of the day and year first written above.


 


	
  WITNESS OR ATTEST:

  	
   

  	
   

  	
  OPTELECOM-NKF, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WITNESS OR ATTEST:

  	
   

  	
   

  	
  OPTELECOM-NKF HOLDING, B.V.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WITNESS OR ATTEST:

  	
   

  	
   

  	
  OPTELECOM-NKF, B.V.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WITNESS OR ATTEST:

  	
   

  	
   

  	
  OPTELECOM-NKF S.L.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WITNESS OR ATTEST:

  	
   

  	
   

  	
  OPTELECOM UK LIMITED

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WITNESS OR ATTEST:

  	
   

  	
   

  	
  OPTELECOM-NKF LIMITED

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WITNESS OR ATTEST:

  	
   

  	
   

  	
  MANUFACTURERS AND TRADERS TRUST COMPANY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
  J. Eric Goodwin, Vice President

  
	
  (Name)

  	
   

  	
   

  	
   

  	
   

  
														



 

















 


LIST OF
EXHIBITS


 


A.            Additional
Obligor Joinder Supplement


 


B.            Form of
Compliance Certificate


 

















 


LIST OF SCHEDULES


 


	
  Schedule 4.1.7

  	
   

  	
  Compliance with Laws

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.10

  	
   

  	
  Litigation

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.11

  	
   

  	
  Financial Condition

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.14

  	
   

  	
  Indebtedness for Borrowed Money Schedule
  4.1.15 Taxes

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.19

  	
   

  	
  Employee Relations

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.20

  	
   

  	
  Hazardous Materials

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.21

  	
   

  	
  Permitted Liens

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.23

  	
   

  	
  Business Names and Addresses

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.25

  	
   

  	
  Inventory

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.26

  	
   

  	
  Accounts

  
	
   

  	
   

  	
   

  
	
  Schedule 4.1.27

  	
   

  	
  Compliance with Eligibility Standards

  
	
   

  	
   

  	
   

  
	
  Schedule 6.1.19

  	
   

  	
  Short-term Inventory Storage

  



 

















 


OBLIGORS’ DISCLOSURE SCHEDULES


 


THIS OBLIGOR DISCLOSURE
SCHEDULE is provided as of June 25, 2008, by Optelecom-NKF, Inc.  a Delaware corporation (the “U.S. Borrower”)
on behalf of all Obligors, pursuant to Article 4 of that certain Amended
and Restated Financing and Security Agreement dated as of June 25, 2008
among the U.S. Borrower, Optelecom-NKF Holding B.V., Optelecom UK Limited,
Optelecom-NKF Limited, Optelecom-NKF S.L., Optelecom-NKF B.V. and Manufacturers
and Traders Trust Company (the “Financing and Security Agreement”).  All capitalized terms used herein are defined
in the Financing and Security Agreement.


 


Schedule 4.1.7
- Compliance with Laws


 


None.


 


Schedule
4.1.10 – Litigation


 


None.


 


Schedule
4.1.11 - Financial Condition


 


None.


 


Schedule
4.1.14 - Indebtedness for Borrowed Money


 


None.


 


Schedule
4.1.15 – Taxes


 


None.


 


Schedule
4.1.19 - Employee Relations


 


Optelecom-NKF B.V. is subject
to collective bargaining agreements with FNY Bondgenoten and CNV Bedrijvenbond
in The Netherlands.


 


Schedule
4.1.20 - Hazardous Materials


 


None.


 


Schedule
4.1.21 - Permitted Liens


 


Purchase money security
interest dated March 23, 2007 held by Konica Minolta Business Solutions
U.S.A. for equipment purchased as more particularly described in a Financing
Statement filed with the Maryland State Department of Assessments and Taxation
on March 23, 2007.


 

















 


Schedule
4.1.23 - Business Names and Addresses


 


The name of the U.S. Borrower
was changed from Optelecom, Inc. on April 13, 2005.


 


The name of Optelecom-NKF
Limited was changed from Optelecom Europe Limited on August 8, 2005.  Optelecom-NKF Limited was originally
incorporated on April 13, 1994 as Canary Sound Limited.  The name was changed to Paragon Audio Visual
Limited on November 24, 1994.  The
name was subsequently changed to Optelecom Europe Limited on January 9,
2003.  The company was acquired by the
U.S. Borrower in 1997 and, except for the information above, the U.S. Borrower
has no relevant information for the period preceding the acquisition.


 


Optelecom UK Limited was
originally incorporated on September 2, 1997 as FCB 1257 Limited.  The name was changed to Optelecom UK Limited
on November 12, 1997.


 


The name of NKF was changed
from NKF Electronics B.V. on November 7, 2005.  NKF was originally incorporated on June 22,
2004 as Draka Beheer II B.V.  The name
was changed to NKF Electronics B.V.  on July 9,
2004.


 


The Name of the Spanish
Subsidiary was changed from NKF Electronics Iberica, S.L. on November 7,
2005.


 


Schedule
4.1.25 – Inventory


 


None.


 


Schedule
4.1.26 – Accounts


 


None.


 


Schedule
4.1.27 - Compliance with Eligibility Standards


 


None.


 


Schedule
6.1.19 - Short-term Inventory Storage


 


None.


 

















 


EXHIBIT A


 


ADDITIONAL OBLIGOR JOINDER SUPPLEMENT


 


THIS ADDITIONAL OBLIGOR JOINDER
SUPPLEMENT (this “Agreement”) is made this
           day of
                    ,
20      , by and among
                                                
(the “Additional Obligor”), OPTELECOM- NKF, INC., a corporation organized under
the laws of the State of Delaware (the “U.S. Borrower”), and MANUFACTURERS AND
TRADERS TRUST COMPANY, a New York State banking association (the “Lender”).


 


The U.S. Borrower has requested
that the Additional Obligor join the Financing Agreement (hereinafter defined)
as an Additional Obligor (as such term is defined in the Financing Agreement
(hereinafter defined)), and the Lender has agreed to permit the Additional
Obligor to do so, provided that, among other things, the Additional Obligor
execute and deliver this Agreement.


 


NOW, THEREFORE, for value
received the undersigned agree as follows:


 


l.              Reference is hereby made to the Financing and Security
Agreement dated as of June 25, 2008 (which Financing and Security
Agreement, as the same may from time to time be amended, restated, supplemented
or otherwise modified is herein called the “Financing Agreement”), by and among
the (a) the U.S. Borrower, Optelecom-NKF Holding, B.V.,  a private company with limited liability
organized and existing under the laws of The Netherlands, Optelecom-NKF,  B.V., a private company with limited
liability organized and existing under the laws of The Netherlands,
Optelecom-NKF S.L., a private company with limited liability organized and
existing under the laws of Spain, Optelecom UK Limited, a company organized and
existing under the laws of England and Wales, and Optelecom-NKF Limited, a
company organized and existing under the laws of England and Wales
(collectively, the “Existing Obligors”), and (b) the Lender.  Capitalized terms not otherwise defined in
this Agreement shall have the meanings given to them in the Financing
Agreement.


 


2.             (a)           The
Additional Obligor hereby acknowledges, confirms and agrees that, on and as of
the date of this Agreement, the Additional Obligor has become an “Additional
Obligor” (as that term is defined in the Financing Agreement), and, along with
the Existing Obligors, is included in the definition of “Obligor” under the
Financing Agreement and the other Financing Documents for all purposes thereof,
and as such, subject to the provisions of the Financing Agreement, shall be
jointly and severally liable, as provided in the Financing Documents, for all
Obligations thereunder (whether incurred or arising prior to, on, or subsequent
to the date hereof) and otherwise bound by all of the terms, provisions and
conditions thereof.  The Additional
Obligor shall not be entitled to borrow directly from the Lender under the
Credit Facilities.


 


[Note:
Include unless the Lender specifically agrees otherwise.] [(b) Without in any
way implying any limitation on any of the provisions of this Agreement, the
Financing Agreement or any of the other Financing Documents, the Additional
Obligor hereby assigns, pledges and grants to the Lender as security for 


 


A-1

















 


the Obligations and agrees that the Lender
shall have a perfected and continuing security interest in, and Lien on, (i) all
of the Additional Obligor’s Accounts, Inventory, Chattel Paper, Documents,
Instruments, Equipment, Securities, and General Intangibles, whether now owned
or existing or hereafter acquired or arising, (ii) all returned, rejected
or repossessed goods, the sale or lease of which shall have given or shall give
rise to an Account or Chattel Paper, (iii) all insurance policies relating
to the foregoing, (iv) all books and records in whatever media (paper,
electronic or otherwise) recorded or stored, with respect to the foregoing and
all equipment and general intangibles necessary or beneficial to retain, access
and/or process the information contained in those books and records, (v) all
other personal property of any kind or nature whatsoever, and (vi) all
cash and non-cash proceeds and products of the foregoing.] [Note: Include if
Additional Obligor is a U.S. Entity.] [The Additional Obligor further agrees
that the Lender shall have in respect thereof all of the rights and remedies of
a secured party under the Uniform Commercial Code as well as those provided in
this Agreement, under each of the other Financing Documents and under
applicable Laws.]


 


(c)           Without in any way implying any limitation on any of the
provisions of this Agreement, the Additional Obligor agrees to execute such
financing statements, instruments, and other documents as the Lender may
require.


 


3.             (a)           The
Additional Obligor hereby represents and warrants to the Lender that it will
derive benefits, directly and indirectly, from each Loan and each Letter of
Credit, both in its separate capacity and as a member of the integrated group
to which each of the Obligors belong and because the successful operation of
the integrated group is dependent upon the continued successful performance of
the functions of the integrated group as a whole, because (i) this financing
is enabling the consummation by the U.S. Borrower and the Seller of the
Purchase Agreement Transaction, (ii) the terms of the consolidated
financing provided under the Financing Agreement are more favorable than would
otherwise would be obtainable by the Obligors individually, and (iii) the
Obligors’ additional administrative and other costs and reduced flexibility
associated with individual financing arrangements which would otherwise be
required if obtainable would substantially reduce the value to the Obligors of
the financing.


 


(b)           The Additional Obligor hereby represents and warrants that
all of the representations and warranties contained in the Financing Documents
are true and correct on and as of the date hereof as if made on and as of such
date, both before and after giving effect to this Agreement, and that no Event
of Default or Default has occurred and is continuing or exists or would occur
or exist after giving effect to this Agreement.


 


4.  Guaranty.


 


(a)           Subject to the limitations on Liability of the Non-U.S
Obligors as set forth in Section 2.9 (Limitations on Joint and Several
Liability for Obligations) of the Financing Agreement, the Obligor hereby
unconditionally and irrevocably, guarantees to the Lender:


 


(i)            the due and punctual payment in full (and not merely the
collectibility) by the other Obligors of the Obligations, including unpaid and
accrued interest thereon, in each case 


 


A-2

















 


when due and payable, all according to the
terms of the Financing Agreement and the other Financing Documents;


 


(ii)           the due and punctual payment in full (and not merely the
collectibility) by the other Obligors of all other sums and charges which may
at any time be due and payable in accordance with the Financing Agreement or
any of the other Financing Documents;


 


(iii)          the due and punctual performance by the other Obligors of
all of the other terms, covenants and conditions contained in the Financing
Documents; and


 


(iv)          all the other Obligations of the other Obligors, subject to
the limitations on Liability of the Non-U.S Obligors as set forth in Section 2.9
(Limitations on Joint and Several Liability for Obligations) .


 


(b)           The obligations and liabilities of the Additional Obligor
as a guarantor under this paragraph 4 shall be absolute and unconditional and
joint and several, irrespective of the genuineness, validity, priority,
regularity or enforceability of the Financing Agreement or any of the Financing
Documents or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor.


 


(c)           The obligations and liabilities of the Additional Obligor,
as guarantor under this paragraph 4 shall be joint and several (subject to the
limitations of Section 2.9 (Limitations on Joint and Several Liability for
Obligations) of the Financing Agreement, primary, direct and immediate, shall
not be subject to any counterclaim, recoupment, set off, reduction or defense
based upon any claim that an Obligor may have against any one or more of the
other Obligors, the Lender and/or any other guarantor, and shall not be
conditional or contingent upon pursuit or enforcement by the Lender of any
remedies it may have against the Obligors with respect to the Financing
Agreement or any of the other Financing Documents, whether pursuant to the
terms thereof or by operation of law.


 


(d)           Without limiting the foregoing, the Additional Obligor, as
guarantor under this paragraph 4, hereby unconditionally, jointly and
severally, irrevocably and expressly waives:


 


(i)            presentment and demand for payment of the Obligations and
protest of non-payment;


 


(ii)           all defenses and discharges based on suretyship; and


 


(iii)          any right or claim of right to cause a marshalling of the
assets of any one or more of the Obligors;


 


5.             This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Maryland, without regard
to principles of choice of law.


 


A-3

















 


6.             WAIVER OF JURY TRIAL.


 


THE ADDITIONAL OBLIGOR HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH IT AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) THE
FINANCING AGREEMENT, OR (C) ANY OF OTHER THE FINANCING DOCUMENTS.


 


WITNESS the due execution
hereof as of the day and year first written above.


 


	
  WITNESS OR ATTEST

  	
   

  	
   

  	
  Additional Obligor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  OPTELECOM-NKF, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
   

  	
  MANUFACTURERS AND TRADERS TRUST

  COMPANY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
								



 


A-4

















 


EXHIBIT B


 


COMPLIANCE CERTIFICATE


 


This Compliance Certificate
dated as of
                    ,
200    , by OPTELECOM-NKF, INC.  (the “U.S. Borrower”) to MANUFACTURERS AND
TRADERS TRUST COMPANY, a New York State bank (the “Lender”), is delivered
pursuant to Section 6.1.1 (b) of that certain Amended and Restated
Financing and Security Agreement dated June 25, 2008 (which Financing and
Security Agreement, as the same may from time to time be amended, restated,
supplemented or otherwise modified is herein called the “Financing Agreement”),
by and among (a) the U.S. Borrower, (b) Optelecom-NKF Holding,
B.V.,  a private company with limited
liability organized and existing under the laws of The Netherlands, (b) Optelecom-NKF,  B.V., a private company with limited
liability organized and existing under the laws of The Netherlands, (c) Optelecom-NKF
S.L., a private company with limited liability organized and existing under the
laws of Spain, (d) Optelecom UK Limited, a company organized and existing
under the laws of England and Wales, and (e) Optelecom-NKF Limited, a
company organized and existing under the laws of England and Wales (the
entities set forth in sub-parts (a) through (e) each being sometimes
called an “Obligor” and all of them collectively, the “Obligors”); and the
Lender.  Unless otherwise specifically
defined herein, all terms defined by the provisions of the Financing Agreement
shall have the same meanings ascribed to such terms by the provisions of the
Financing Agreement when used herein.


 


The undersigned, being the duly
elected, qualified and acting
                              
of the U.S. Borrower, on behalf of the U.S. Borrower and solely in his or her
capacity as an officer of the Borrower, hereby certifies and warrants that:


 


1.             He or she is the
                                
of the U.S. Borrower and that, as such, he or she is authorized to execute this
certificate on behalf of the U.S. Borrower.


 


2.             As of
                                    ,
                            :


 


(a)           No change has occurred to the information contained in the
Collateral Lists except changes described on Attachment 1 hereto;


 


(b)           No event has occurred which constitutes a Default or an
Event of Default except a Default or an Event of Default described on
Attachment 2 hereto


 


(c)           U.S. Borrower’s Asset Coverage Ratio was
         to 1.0 as computed on
Attachment 3 hereto;


 


(d)           The U.S. Borrower’s Fixed Charge Coverage Ratio was
         to 1.0 as computed on
Attachment 4 hereto;


 


(e)           The U.S. Borrower’s Senior Debt Leverage Ratio was to 1.0
as computed on Attachment 5 hereto.


 


B-1

















 


IN WITNESS WHEREOF, the undersigned has
executed and delivered this certificate, this
              
day of                             ,
20      .


 


	
  WITNESS OR ATTEST:

  	
   

  	
   

  	
  OPTELECOM-NKF, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  
	
  (Name)

  	
   

  	
   

  	
  (Name)

  	
  (Title)

  
								



 


B-2