Exhibit 4.1


 


Execution Version


 




 





 


CONN-SELMER, INC.


 


and


 


STEINWAY, INC.,


 


as Borrowers


 


 


	
   

  



 


 


LOAN AND SECURITY AGREEMENT


 


Dated
as of October 5, 2010


 


$100,000,000


 


 


	
   

  



 


 


CERTAIN FINANCIAL INSTITUTIONS,


 


as
Lenders


 


and


 


BANK OF AMERICA, N.A.,


 


as
Administrative Agent, Sole Bookrunner, Co-Lead Arranger and Co-Syndication
Agent


 


HARRIS N.A.,


 


as Documentation Agent


 


BMO CAPITAL MARKETS,


 


as
Co-Lead Arranger


 


and


 


WELLS FARGO BANK, NATIONAL ASSOCIATION,


 


as
Co-Lead Arranger and Co-Syndication Agent


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
  Section 1.

  	
  DEFINITIONS; RULES OF CONSTRUCTION

  	
  1

  
	
  1.1.

  	
  Definitions

  	
  1

  
	
  1.2.

  	
  Accounting Terms

  	
  28

  
	
  1.3.

  	
  Uniform Commercial Code

  	
  28

  
	
  1.4.

  	
  Certain Matters of Construction

  	
  28

  
	
  Section 2.

  	
  CREDIT
  FACILITIES

  	
  29

  
	
  2.1.

  	
  Commitment

  	
  29

  
	
  2.2.

  	
  Reserved

  	
  30

  
	
  2.3.

  	
  Letter of Credit Facility

  	
  31

  
	
  Section 3.

  	
  INTEREST,
  FEES AND CHARGES

  	
  33

  
	
  3.1.

  	
  Interest

  	
  33

  
	
  3.2.

  	
  Fees

  	
  34

  
	
  3.3.

  	
  Computation of Interest, Fees,
  Yield Protection

  	
  34

  
	
  3.4.

  	
  Reimbursement Obligations

  	
  35

  
	
  3.5.

  	
  Illegality

  	
  35

  
	
  3.6.

  	
  Inability to Determine Rates

  	
  35

  
	
  3.7.

  	
  Increased Costs; Capital Adequacy

  	
  36

  
	
  3.8.

  	
  Mitigation

  	
  36

  
	
  3.9.

  	
  Funding Losses

  	
  37

  
	
  3.10.

  	
  Maximum Interest

  	
  37

  
	
  Section 4.

  	
  LOAN
  ADMINISTRATION

  	
  37

  
	
  4.1.

  	
  Manner of Borrowing and Funding
  Loans

  	
  37

  
	
  4.2.

  	
  Defaulting Lender

  	
  39

  
	
  4.3.

  	
  Number and Amount of LIBOR Loans; Determination of Rate

  	
  39

  
	
  4.4.

  	
  Borrower Agent

  	
  39

  
	
  4.5.

  	
  One Obligation

  	
  39

  
	
  4.6.

  	
  Effect of Termination

  	
  39

  
	
  Section 5.

  	
  PAYMENTS

  	
  40

  
	
  5.1.

  	
  General Payment Provisions

  	
  40

  
	
  5.2.

  	
  Repayment of Loans

  	
  40

  
	
  5.3.

  	
  Reserved

  	
  40

  
	
  5.4.

  	
  Payment of Other Obligations

  	
  40

  
	
  5.5.

  	
  Marshaling; Payments Set Aside

  	
  40

  
	
  5.6.

  	
  Post-Default Allocation of Payments

  	
  40

  
	
  5.7.

  	
  Application of Payments

  	
  41

  
	
  5.8.

  	
  Loan Account; Account Stated

  	
  41

  
	
  5.9.

  	
  Taxes

  	
  42

  
	
  5.10.

  	
  Lender Tax Information

  	
  42

  
	
  5.11.

  	
  Nature and Extent of Each
  Borrower’s Liability

  	
  43

  
	
  Section 6.

  	
  CONDITIONS
  PRECEDENT

  	
  45

  
	
  6.1.

  	
  Conditions Precedent to Initial
  Loans

  	
  45

  
	
  6.2.

  	
  Conditions Precedent to All
  Credit Extensions

  	
  46

  
	
  Section 7.

  	
  COLLATERAL

  	
  47

  
	
  7.1.

  	
  Grant of Security Interest

  	
  47

  
	
  7.2.

  	
  Lien on Deposit Accounts; Cash Collateral

  	
  48

  
	
  7.3.

  	
  Negative Pledge

  	
  48

  
	
  7.4.

  	
  Other Collateral

  	
  48

  
	
  7.5.

  	
  No Assumption of Liability

  	
  49

  



 

















 


	
  7.6.

  	
  Further Assurances

  	
  49

  
	
  Section 8.

  	
  COLLATERAL
  ADMINISTRATION

  	
  49

  
	
  8.1.

  	
  Borrowing Base Certificates

  	
  49

  
	
  8.2.

  	
  Administration of Accounts

  	
  49

  
	
  8.3.

  	
  Administration of Inventory

  	
  50

  
	
  8.4.

  	
  Administration of Equipment

  	
  51

  
	
  8.5.

  	
  Administration of Deposit Accounts

  	
  51

  
	
  8.6.

  	
  General Provisions

  	
  51

  
	
  8.7.

  	
  Power of Attorney

  	
  52

  
	
  Section 9.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  53

  
	
  9.1.

  	
  General Representations and
  Warranties

  	
  53

  
	
  9.2.

  	
  Complete Disclosure

  	
  58

  
	
  Section 10.

  	
  COVENANTS
  AND CONTINUING AGREEMENTS

  	
  58

  
	
  10.1.

  	
  Affirmative Covenants

  	
  58

  
	
  10.2.

  	
  Negative Covenants

  	
  61

  
	
  10.3.

  	
  Fixed Charge Coverage Ratio

  	
  64

  
	
  Section 11.

  	
  EVENTS OF
  DEFAULT; REMEDIES ON DEFAULT

  	
  64

  
	
  11.1.

  	
  Events of Default

  	
  64

  
	
  11.2.

  	
  Remedies upon Default

  	
  65

  
	
  11.3.

  	
  License

  	
  66

  
	
  11.4.

  	
  Setoff

  	
  66

  
	
  11.5.

  	
  Remedies Cumulative; No Waiver

  	
  66

  
	
  Section 12.

  	
  AGENT

  	
  67

  
	
  12.1.

  	
  Appointment, Authority and Duties of Agent

  	
  67

  
	
  12.2.

  	
  Agreements Regarding Collateral and Field Examination
  Reports

  	
  68

  
	
  12.3.

  	
  Reliance By Agent

  	
  68

  
	
  12.4.

  	
  Action Upon Default

  	
  68

  
	
  12.5.

  	
  Ratable Sharing

  	
  69

  
	
  12.6.

  	
  Indemnification of Agent Indemnitees

  	
  69

  
	
  12.7.

  	
  Limitation on Responsibilities of
  Agent

  	
  69

  
	
  12.8.

  	
  Successor Agent and Co-Agents

  	
  69

  
	
  12.9.

  	
  Due Diligence and Non-Reliance

  	
  70

  
	
  12.10.

  	
  Replacement of Certain Lenders;
  Administrative Agent

  	
  70

  
	
  12.11.

  	
  Remittance of Payments and Collections

  	
  71

  
	
  12.12.

  	
  Agent in its Individual Capacity

  	
  71

  
	
  12.13.

  	
  Agent Titles

  	
  72

  
	
  12.14.

  	
  No Third Party Beneficiaries

  	
  72

  
	
  Section 13.

  	
  BENEFIT
  OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

  	
  72

  
	
  13.1.

  	
  Successors and Assigns

  	
  72

  
	
  13.2.

  	
  Participations

  	
  72

  
	
  13.3.

  	
  Assignments

  	
  73

  
	
  Section 14.

  	
  MISCELLANEOUS

  	
  74

  
	
  14.1.

  	
  Consents, Amendments and Waivers

  	
  74

  
	
  14.2.

  	
  Indemnity

  	
  74

  
	
  14.3.

  	
  Notices and Communications

  	
  75

  
	
  14.4.

  	
  Performance of Borrowers’
  Obligations

  	
  75

  
	
  14.5.

  	
  Credit Inquiries

  	
  75

  
	
  14.6.

  	
  Severability

  	
  76

  
	
  14.7.

  	
  Cumulative Effect; Conflict of
  Terms

  	
  76

  
	
  14.8.

  	
  Counterparts

  	
  76

  
	
  14.9.

  	
  Entire Agreement

  	
  76

  
	
  14.10.

  	
  Relationship with Lenders

  	
  76

  



 


ii

















 


	
  14.11.

  	
  No Advisory or Fiduciary
  Responsibility

  	
  76

  
	
  14.12.

  	
  Confidentiality

  	
  76

  
	
  14.13.

  	
  Certifications Regarding Indentures

  	
  77

  
	
  14.14.

  	
  GOVERNING LAW

  	
  77

  
	
  14.15.

  	
  Consent to Forum

  	
  77

  
	
  14.16.

  	
  Waivers by Borrowers

  	
  77

  
	
  14.17.

  	
  Patriot Act Notice

  	
  78

  



 


LIST OF EXHIBITS AND SCHEDULES


 


	
  Exhibit A

  	
  Revolver Note

  
	
  Exhibit B

  	
  Assignment and Assumption

  
	
  Exhibit C

  	
  Assignment Notice

  
	
   

  	
   

  
	
  Schedule C-1

  	
  Commitments of Lenders

  
	
  Schedule E-1

  	
  Ineligible Assignees

  
	
  Schedule P-1

  	
  Existing Liens

  
	
  Schedule 7.3

  	
  Permitted Property
  Transfers

  
	
  Schedule 8.5

  	
  Deposit Accounts

  
	
  Schedule 8.6.1

  	
  Business Locations

  
	
  Schedule 9.1.4

  	
  Names and Capital
  Structure

  
	
  Schedule 9.1.11

  	
  Patents, Trademarks,
  Copyrights and Licenses

  
	
  Schedule 9.1.14

  	
  Environmental Matters

  
	
  Schedule 9.1.15

  	
  Restrictive Agreements

  
	
  Schedule 9.1.16

  	
  Litigation

  
	
  Schedule 9.1.18

  	
  Pension Plans

  
	
  Schedule 9.1.20

  	
  Labor Contracts

  
	
  Schedule 10.2.17

  	
  Existing Affiliate
  Transactions

  



 


iii

















 


LOAN AND SECURITY AGREEMENT


 


THIS LOAN
AND SECURITY AGREEMENT is dated as of October 5, 2010, among CONN-SELMER, INC., a Delaware corporation (“Conn-Selmer”),
and STEINWAY, INC., a Delaware corporation (“Steinway”
and together with Conn-Selmer, collectively, “Borrowers”), the financial
institutions party to this Agreement from time to time as lenders
(collectively, “Lenders”), and BANK OF
AMERICA, N.A., a national
banking association, as agent for the Lenders (“Agent”).


 


R E C I T A L S:


 


Borrowers have requested
that Lenders provide a credit facility to Borrowers to finance their mutual and
collective business enterprise.  Lenders
are willing to provide the credit facility on the terms and conditions set
forth in this Agreement.


 


NOW,
THEREFORE, for valuable consideration hereby acknowledged,
the parties agree as follows:


 


SECTION 1.        DEFINITIONS;
RULES OF CONSTRUCTION


 


1.1.         Definitions.  As used herein, the following terms have the
meanings set forth below:


 


Account: all of the
accounts, contract rights, instruments, documents, chattel paper, general
intangibles relating to accounts, drafts and acceptances, and all other forms
of obligations owing to an Obligor, arising out of or in connection with the
sale or lease of Inventory or the rendition of services.


 


Account Debtor: the account
debtor with respect to any Account and/or the prospective purchaser of goods,
services or both or with respect to any contract or other arrangement with an
Obligor pursuant to which such Obligor is to deliver any personal property or
perform any services in the ordinary course of business.


 


Affiliate: with respect
to any Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with
the Person specified.  “Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled”
have correlative meanings.


 


Agent: as defined in
the preamble hereto.


 


Agent Indemnitees: Agent and its
officers, directors, employees, Affiliates, agents and attorneys.


 


Agent Professionals: attorneys,
accountants, appraisers, auditors, business valuation experts, environmental
engineers or consultants, turnaround consultants, and other professionals and
experts retained by Agent.


 


Allocable Amount: as defined in
Section 5.11.3.


 


Anti-Terrorism Laws: any laws
relating to terrorism or money laundering, including the Patriot Act.


 


Applicable Law: all laws,
rules, regulations and governmental guidelines applicable to the Person,
conduct, transaction, agreement or matter in question, including all applicable
statutory law, common law and equitable principles, and all provisions of
constitutions, treaties, statutes, rules, regulations, orders and decrees of
Governmental Authorities.


 

















 


Applicable
Margin: with respect to any Type of Loan, the
margin set forth below, as determined by the Average Excess Availability for
the immediately preceding Fiscal Quarter:


 


	
  Level

  	
   

  	
  Average Excess Availability

  	
   

  	
  Base Rate

  Loans

  	
   

  	
  LIBOR

  Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  > $35,000,000

  	
   

  	
  0.75%

  	
   

  	
  1.75%

  	
   

  
	
  II

  	
   

  	
  > $15,000,000
  < $35,000,000

  	
   

  	
  1.00%

  	
   

  	
  2.00%

  	
   

  
	
  III

  	
   

  	
  <
  $15,000,000

  	
   

  	
  1.25%

  	
   

  	
  2.25%

  	
   

  



 


Until
the date that is six (6) months from the Closing Date, margins shall be
determined as if Level I were applicable. 
Thereafter, the margins shall be subject to increase or decrease upon
receipt by Agent pursuant to Section 10.1.2
of the financial statements and corresponding Compliance Certificate for the
last Fiscal Quarter, which change shall be effective on the first day of the
calendar month following receipt.  If, by
the first day of a month, any financial statements and Compliance Certificate
due in the preceding month have not been received, then, at the option of Agent
or Required Lenders, the margins shall be determined as if Level III were
applicable, from such day until the day following actual receipt thereof.


 


ArkivMusic: ArkivMusic,
LLC, a New York limited liability company.


 


Asset Disposition: a sale,
lease, license, consignment, transfer or other disposition of Property of an
Obligor (other than Steinway Hall), including a disposition of Property (other
than Steinway Hall) in connection with a sale-leaseback transaction or synthetic
lease.


 


Assignment and Assumption: an assignment
and assumption agreement entered into by a Lender and an Eligible Assignee
(with the consent of any party whose consent is required by Section 13) and accepted by Agent, in the form of Exhibit B.


 


Availability Reserve: the sum
(without duplication) of (a) the Inventory Reserve; (b) the Rent and
Charges Reserve; (c) the LC Reserve; (d) the Bank Product Reserve; (e) all accrued
Royalties, whether or not then due and payable by a Borrower or Subsidiary
Guarantor; (f) the aggregate amount of liabilities secured by Liens
upon Collateral that are senior to Agent’s Liens (but imposition of any such
reserve shall not waive an Event of Default arising therefrom); and (g) such
additional reserves, in such amounts and with respect to such matters, as Agent
in its Credit Judgment may elect to impose from time to time.


 


Average Excess Availability: for any
Fiscal Quarter, the average Excess Availability for such Fiscal Quarter.


 


Bank of America: Bank of
America, N.A., a national banking association, and its successors and assigns.


 


Bank of America Indemnitees: Bank of
America and its officers, directors, employees, Affiliates, agents and
attorneys.


 


Bank Product: any of the
following products, services or facilities extended to any Borrower or
Subsidiary by a Lender or any of its Affiliates: (a) Cash Management
Services; (b) products under Hedging Agreements; (c) commercial
credit card and merchant card services; and (d) leases and other banking
products or services as may be requested by any Borrower or Subsidiary, other
than Letters of Credit; provided,
however, that for any of the foregoing to be included as an “Obligation”
for purposes of a distribution under Section 5.6.1,
the applicable Secured Party and Obligor must have previously provided written
notice to Agent of (i) the existence of such Bank Product, (ii) the
maximum dollar amount of obligations arising thereunder to be included as a
Bank Product Reserve (“Bank Product


 


2

















 


Amount”), and (iii) the methodology to be used by such parties in
determining the Bank Product Debt owing from time to time.  The Bank Product Amount may be changed from
time to time upon written notice to Agent by the Secured Party and Obligor.  No Bank Product Amount may be established or
increased at any time that a Default or Event of Default exists, or if a
reserve in such amount would cause an Overadvance.


 


Bank Product Amount: as defined in
the definition of Bank Product.


 


Bank Product Debt: Debt and
other obligations of an Obligor relating to Bank Products.


 


Bank Product Reserve: the aggregate
amount of reserves established by Agent from time to time in its discretion in
respect of Bank Product Debt, which shall be at least equal to the sum of all
Bank Product Amounts.


 


Bankruptcy Code: Title 11 of
the United States Code.


 


Base Rate: for any day,
a per annum rate equal to the greater of (a) the Prime Rate in effect on
such day; or (b) the Federal Funds Rate in effect on such day, plus 0.50%.


 


Base Rate Loan: any Loan that
bears interest based on the Base Rate.


 


Board of Governors: the Board of
Governors of the Federal Reserve System.


 


Borrowed Money: with respect
to any Obligor, without duplication, its (a) Debt that (i) arises
from the lending of money by any Person to such Obligor, (ii) is evidenced
by notes, drafts, bonds, debentures, credit documents or similar instruments, (iii) accrues
interest or is a type upon which interest charges are customarily paid
(excluding trade payables owing in the Ordinary Course of Business), or (iv) was
issued or assumed as full or partial payment for Property; (b) Capital
Leases; (c) reimbursement obligations with respect to letters of credit;
and (d) guaranties of any Debt of the foregoing types owing by another
Person.


 


Borrower Agent: as defined in
Section 4.4.


 


Borrowers: as defined in
the preamble hereto.


 


Borrowing: a group of
Loans of one Type that are made on the same day or are converted into Loans of
one Type on the same day.


 


Borrowing Base: on any date
of determination, an amount equal to the lesser of (a) the aggregate
amount of the Commitments, minus the LC Reserve; or (b) the sum of:


 


(i)            up to eighty
percent (80%) of the then Eligible Accounts of the Borrowers and Subsidiary
Guarantors, other than Accounts constituting Dealer Notes; plus


 


(ii)           up to the lesser of
(A) 50% of the then Eligible Accounts of the Borrowers and Subsidiary
Guarantors, constituting  Dealer Notes
and (B) $5,000,000; plus;


 


(iii)          up to the sum of (A) in
the case of Steinway grand pianos, the sum of (1) eighty-five percent
(85%) of the Current Wholesale Value of all finished and near-finished pianos, (2) seventy-five
percent (75%) of the Current Wholesale Value of Concert and Artist Bank Pianos,
and (3) seventy percent (70%) of the Current Wholesale Value of all
Factory Returns; (B) in the case of Steinway upright pianos, the sum of (1) sixty-five
percent (65%) of the Current Wholesale Value of all finished and near-finished
pianos, and (2) fifty percent (50%) of the Current Wholesale Value of all
Factory Returns; (C) in the case of Boston and Essex grand pianos, the


 


3

















 


sum
of (1) sixty-five percent (65%) of the Standard Cost Value of all finished
pianos, and (2) fifty percent (50%) of the Standard Cost Value of all
Factory Returns; and (D) in the case of Boston and Essex upright pianos,
the sum of (1) fifty percent (50%) of the Standard Cost Value of all
finished pianos, and (2) forty percent (40%) of the Standard Cost Value of
all Factory Returns; plus


 


(iv)          up to fifty percent
(50%) of the cost of the Eligible Inventory of Steinway constituting raw
materials; plus


 


(v)           up to sixty-five
percent (65%) of the cost of Eligible Inventory of the Borrowers and Subsidiary
Guarantors (other than Steinway) constituting finished goods; plus


 


(vi)          up to twenty-five
percent (25%) of the cost of Eligible Inventory of the Borrowers and Subsidiary
Guarantors (other than Steinway) constituting raw materials; plus


 


(vii)         up to the lesser of (A) $7,500,000
and (B) twenty-five percent (25%) of the cost of Eligible Inventory of the
Borrowers and Subsidiary Guarantors constituting work-in-process; and minus


 


(viii)        the Availability
Reserve.


 


The
Borrowing Base in effect at any time shall be the Borrowing Base as shown on
the Borrowing Base Certificate and the reconciliation reports delivered by the
Borrowers pursuant to Section 8.1
of this Agreement; provided, however, that if Borrowers shall fail to
deliver a Borrowing Base Certificate when required pursuant to Section 8.1, the amounts calculated with respect to the
Eligible Accounts and the Eligible Inventory shall be zero until such Borrowing
Base Certificate is delivered.


 


Borrowing Base Certificate: a
certificate, in form and substance consistent with Borrowers’ past practice and
reasonably satisfactory to Agent, by which Borrowers certify calculation of the
Borrowing Base.


 


Boston Pianos: pianos
designed by Steinway, manufactured by an OEM and marketed under the Boston
piano line.


 


Business Day: any day other
than a Saturday, Sunday or other day on which commercial banks are authorized
to close under the laws of, or are in fact closed in Massachusetts, and if such
day relates to a LIBOR Loan, any such day on which dealings in Dollar deposits
are conducted between banks in the London interbank Eurodollar market.


 


Capital Expenditures: for any
period, each expenditure made or committed to be made by an Obligor during such period which, in conformity with
GAAP, is included in “additions to property, plant and equipment” or comparable
items reflected in the consolidated statement of cash flows of Parent and its
consolidated Subsidiaries, excluding expenditures made or committed to be made
in respect of Concert and Artist Bank Pianos.


 


Capital Lease: any lease of
property, real or personal, the obligations of the lessee in respect of which
are required in accordance with GAAP to be capitalized on a balance sheet of
the lessee.


 


Cash Collateral: cash, and any
interest or other income earned thereon, that is delivered to Agent to Cash
Collateralize any Obligations.


 


Cash Collateral Account: a demand
deposit, money market or other account established by Agent at such financial
institution as Agent may select in its discretion, which account shall be
subject to Agent’s Liens for the benefit of Secured Parties.


 


4

















 


Cash Collateralize: the delivery of
cash to Agent, as security for the payment of Obligations, in an amount equal
to (a) with respect to LC Obligations, 105% of the aggregate LC Obligations, and (b) with
respect to any inchoate, contingent or other Obligations (including
Obligations arising under Bank Products), Agent’s good faith estimate of the amount due
or to become due, including all fees and other amounts relating to such
Obligations.  “Cash Collateralization”
has a correlative meaning.


 


Cash Equivalents: (a) (i) marketable
obligations issued or unconditionally guaranteed by, and backed by the full
faith and credit of, the United States government or (ii) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case, maturing within 12 months
of the date of acquisition; (b) certificates of deposit, time deposits and
bankers’ acceptances maturing within 12 months of the date of acquisition, and
overnight bank deposits, in each case which are issued by a commercial bank
organized under the laws of the United States or any state or district thereof,
rated “investment grade” (or better) by a nationally recognized rating agency
at the time of acquisition, and (unless issued by a Lender) not subject to
offset rights; (c) repurchase obligations with a term of not more than 30
days for underlying investments of the types described in clauses (a) and (b) entered
into with any bank meeting the qualifications specified in clause (b); (d) commercial
paper rated “investment grade” (or better) by a nationally recognized rating
agency, and maturing within nine months of the date of acquisition; and (e) shares
of any money market fund that has substantially all of its assets invested
continuously in the types of investments referred to above, has net assets of
at least $500,000,000 and is rated as “investment grade” (or better) by a
nationally recognized rating agency. 
Notwithstanding the foregoing, Cash Equivalents shall exclude mortgage
securities of any kind or any derivative thereof.


 


Cash Management Services: any services
provided from time to time by Bank of America or any of its Affiliates to any
Obligor in connection with operating, collections, payroll, trust, or other
depository or disbursement accounts, including automated clearinghouse,
e-payable, electronic funds transfer, wire transfer, controlled disbursement,
overdraft, depository, information reporting, lockbox and stop payment
services.


 


Cash Trigger Period: the period (a) commencing
on any day that either (i) a Default or an Event of Default occurs or (ii) Excess
Availability during the preceding 5 consecutive days has been less than the
product of (A) the aggregate amount of the Commitments multiplied by (B) seventeen and
one-half percent (17.5%), and (b) continuing until the day on which no
Event of Default exists and Excess Availability at all times during the
preceding 30 consecutive days has been greater than the product of (i) the
aggregate amount of the Commitments multiplied by
(ii) seventeen and one-half percent (17.5%).


 


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


 


Change in Law: the occurrence, after the
date hereof, of (a) the adoption or taking effect of any law, rule,
regulation or treaty; (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any
Governmental Authority; or (c) the making or issuance of any request,
guideline or directive (whether or not having the force of law) by any
Governmental Authority.


 


Change of Control: any time that (i) a
Borrower fails to be a wholly-owned Subsidiary of an Obligor, (ii) any
Person or “group” (within the meaning of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended) shall have acquired after the
Closing Date the voting power to elect a majority of the Board of Directors of
an Obligor; or (iii) any event or condition that would constitute a “Change
of Control” as defined in the Senior Notes Indenture.


 


Claims: all
liabilities, obligations, losses, damages, penalties, judgments, proceedings,
interest, costs and expenses of any kind (including remedial response costs,
reasonable attorneys’ fees and


 


5

















 


Extraordinary Expenses) at
any time (including after Full Payment of the Obligations, resignation or
replacement of Agent, or replacement of any Lender) incurred by or asserted
against any Indemnitee in any way relating to (a) any Loans, Letters of
Credit, Loan Documents, or the use thereof or transactions relating thereto, (b) any
action taken or omitted to be taken by any Indemnitee in connection with any
Loan Documents, (c) the existence or perfection of any Liens, or
realization upon any Collateral, (d) exercise of any rights or remedies
under any Loan Documents or Applicable Law, or (e) failure by any Obligor
to perform or observe any terms of any Loan Document, in each case including
all costs and expenses relating to any investigation, litigation, arbitration
or other proceeding (including an Insolvency Proceeding or appellate
proceedings), whether or not the applicable Indemnitee is a party thereto.


 


ClickPoint: ClickPoint
Software, LLC, a Delaware limited liability company.


 


Closing Date: as defined in Section 6.1.


 


Code: the Internal
Revenue Code of 1986, as amended from time to time.


 


Collateral: all Property
described in Section 7.1, all
Property described in any Security Documents as security for any Obligations,
and all other Property that now or hereafter secures (or is intended to secure)
any Obligations; provided that the term “Collateral” shall not include:  (w) Steinway Hall or any proceeds
thereof (including proceeds from the sale, assignment or transfer of Steinway
Hall); (x) any contract, license, agreement, instrument, document, permit
or franchise that validly prohibits, restricts or requires the consent not
obtained of a third party for the creation by such Borrower of a security
interest in such contract, license, agreement, instrument, document, permit or
franchise (or in any rights or property obtained by such Borrower under such
contract, license, agreement, instrument, document, permit or franchise) except
to the extent such prohibition, restriction or consent requirement would be
rendered ineffective with respect to the creation of the security interest
hereunder pursuant to Sections 9-406, 9-407, 9-408 and 9-409 of the UCC;
provided that, at such time as the condition causing such limitation shall be
remedied, whether by contract, change of law or otherwise, the contract,
license, lease, agreement, instrument, document, permit or franchise shall
immediately be included in the Collateral, and any security interest that would
otherwise be granted herein shall attach immediately to such contract, license,
lease, agreement, instrument, document, permit or franchise, or to the extent
severable, to any portion thereof that does not result in such limitation, (y) any
“intent-to-use” application for registration of a Mark filed pursuant to Section 1(b) of
the Lanham Act, 15 U.S.C. § 1051, prior to the filing of a “Statement of Use”
pursuant to Section 1(d) of the Lanham Act or of an “Amendment to
Allege Use” pursuant to Section 1(c) of the Lanham Act with respect
thereto, solely to the extent, if any, that and solely during the period, if
any, in which, the grant of a security interest therein would impair the
validity or enforceability of any registration that issues from such
intent-to-use application under applicable federal law, and (z) the Voting
Equity Interests of any Foreign Subsidiary constituting more than 65% of the
total combined voting power of all Voting Equity Interests of such Foreign
Subsidiary; provided that, notwithstanding anything to the contrary set forth
herein, the Collateral shall include any proceeds (and the right to receive
proceeds, including from the sale, assignment or transfer of any such assets),
substitutions or replacements of any such assets excluded from the Collateral
pursuant to the foregoing clauses (x), (y) and (z) (unless such
proceeds, substitutions or replacements would constitute assets specifically
covered by the foregoing clauses (x), (y) and (z)).


 


Commitment: as to each
Lender, means its obligation to participate in LC Obligations pursuant to Section 2.3 and make Loans to the Borrowers pursuant to
Section 2.1 in an aggregate
principal amount at any one time outstanding not to exceed the amount set forth
opposite such Lender’s name on Schedule
C-1 under the caption
“Revolver Commitment” or opposite such capitation in the Assignment and
Assumption pursuant to which such Lender becomes a party hereto, as applicable,
as such amount may be adjusted from time to time in accordance with this
Agreement.  The aggregate amount of the
Lenders’ Commitments is $100,000,000 (“Commitments”).


 


6
















 


Commitment Termination Date: the earliest
to occur of (a) the Termination Date; (b) the date on which Borrowers
terminate the Commitments pursuant to Section 2.1.4;
or (c) the date on which the Commitments are terminated pursuant to Section 11.2.


 


Compliance Certificate: a
certificate, in form and substance satisfactory to Agent, by which Borrowers
certify compliance with Section 10.3, list all outstanding Bank Products
and calculate the applicable Level for the Applicable Margin.


 


Concert and Artist Bank Pianos:  all pianos held by Steinway or a Steinway
dealer, including without limitation, those located at a performance venue,
which are available for rental by performers.


 


Conn-Selmer:  as defined in the preamble hereto.


 


Conn-Selmer Dealer Notes: notes made by
Conn-Selmer dealers in favor of
Conn-Selmer or any Subsidiary thereof, that evidence indebtedness owing by such
dealers to Conn-Selmer or such Subsidiary for extensions of credit made by
Conn-Selmer or such Subsidiary to dealers to acquire Conn-Selmer’s musical
instruments.


 


Consolidated Cash Flow:  for
Parent and its consolidated Subsidiaries, consolidated net income determined in
accordance with GAAP (a) before deducting the following items (without any
duplication): (i) Interest Expenses and financing charges, (ii) income
taxes, (iii) depreciation, (iv) amortization, (v) gains or
losses from early extinguishment of debt or other infrequent and unusual items,
(vi) cost of sales associated with the step-up of inventory upon
acquisition, and (vii) stock based compensation and all other non-cash
charges; and (b) (i) minus unfinanced Capital Expenditures and
(ii) Capital Expenditures financed with proceeds of the Loans, in each
case determined in accordance with GAAP. 
Notwithstanding the foregoing, Interest Income shall not be
included in Consolidated Cash Flow.


 


Contingent Obligation: any
obligation of a Person arising from a guaranty, indemnity or other assurance of
payment or performance of any Debt, lease, dividend or other obligation (“primary
obligations”) of another obligor (“primary obligor”) in any manner,
whether directly or indirectly, including any obligation of such Person under
any (a) guaranty, endorsement, co-making or sale with recourse of an
obligation of a primary obligor; (b) obligation to make take-or-pay or
similar payments regardless of nonperformance by any other party to an
agreement; and (c) arrangement (i) to purchase any primary obligation
or security therefor, (ii) to supply funds for the purchase or payment of
any primary obligation, (iii) to maintain or assure working capital,
equity capital, net worth or solvency of the primary obligor, (iv) to
purchase Property or services for the purpose of assuring the ability of the
primary obligor to perform a primary obligation, or (v) otherwise to
assure or hold harmless the holder of any primary obligation against loss in
respect thereof.  The amount of any
Contingent Obligation shall be deemed to be the stated or determinable amount
of the primary obligation (or, if less, the maximum amount for which such
Person may be liable under the instrument evidencing the Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability
with respect thereto.


 


Covenant Trigger Period: the period (a) commencing
on any day that either (i) a Default or an Event of Default occurs or (ii) Excess
Availability is less than the product of (A) the aggregate amount of the
Commitments multiplied by (B) fifteen
percent (15%), and (b) continuing until the day on which no Event of
Default exists and Excess Availability at all times during the preceding 30
consecutive days has been greater than the product of (i) the aggregate
amount of the Commitments multiplied by
(ii) fifteen percent (15%).


 


Credit Judgment: Agent’s judgment exercised in good faith, based
upon its consideration of any factor that it believes (a) could adversely
affect the quantity, quality, mix or value of Collateral (including any
Applicable Law that may inhibit collection of an Account), the enforceability
or priority of Agent’s Liens, or the amount that Agent and Lenders could
receive in liquidation of any Collateral; (b) suggests


 


7

















 


that any collateral report or financial information
delivered by any Obligor is incomplete, inaccurate or misleading in any
material respect; (c) materially increases the likelihood of any
Insolvency Proceeding involving an Obligor; or (d) creates or could result
in a Default or Event of Default.  In
exercising such judgment with respect to (a) through (d) hereof,
Agent may consider any factors that could increase the credit risk of lending
to Borrowers on the security of the Collateral (other than such factors that
are attributable to general economic conditions).


 


Current Wholesale Value:  for any piano at any time, the wholesale
price of such piano as published in good faith by Parent or its Subsidiaries at
such time, or if such price is not so published, the wholesale price of such
piano as reasonably determined by Agent.


 


CWA: the Clean
Water Act (33 U.S.C. §§ 1251 et  seq.).


 


Dealer Note Purchase Party:  any entity that purchases any of the Dealer
Notes from Conn-Selmer or Steinway pursuant to a Dealer Note Purchase
Agreement, and its successors and assigns.


 


Dealer Note Purchase
Agreement:  any note
purchase and repurchase agreements, or similar agreements entered into between
a Dealer Note Purchase Party and Conn-Selmer or Steinway, in form and substance
acceptable to Agent (which consent shall not be unreasonably withheld), which
provide for principal Debt  in an amount
outstanding not to exceed $15,000,000, in the aggregate, at any time.


 


Dealer Notes: the
collective reference to the Conn-Selmer Dealer Notes and the Steinway Dealer
Notes.


 


Debt: of any Person
at any date, without duplication, (a) all indebtedness of such Person for
borrowed money (whether by loan or the issuance and sale of debt securities) or
for the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other indebtedness of such
Person which is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under Capital Leases, (d) all obligations of
such Person in respect of letters of credit, acceptances or similar instruments
issued or created for the account of such Person, (e) all liabilities
secured by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment thereof, and (f) all
Contingent Obligations.


 


Default: an event or
condition that, with the lapse of time or giving of notice, would constitute an
Event of Default.


 


Default Rate: for any
Obligation (including, to the extent permitted by law, interest not paid when
due), 2% plus the interest rate otherwise applicable thereto.


 


Defaulting Lender: any Lender
that (a) fails to make any payment or provide funds to Agent or any
Borrower as required hereunder or fails otherwise to perform its obligations
under any Loan Document, and such failure is not cured within one Business Day,
or (b) is the subject of any Insolvency Proceeding.


 


Deposit Account Control Agreements: the Deposit Account control agreements to be
executed by each institution maintaining a Deposit Account for an Obligor, in
favor of Agent, for the benefit of Secured Parties, as security for the
Obligations.


 


Distribution: any
declaration or payment of a distribution, interest or dividend on any Equity
Interest (other than payment-in-kind); or any purchase, redemption, or other
acquisition or retirement for value of any Equity Interest.


 


Dollars: lawful money
of the United States.


 


8

















 


Dominion Account: a special account established by Borrowers at
Bank of America or another bank acceptable to Agent in its Credit Judgment,
over which Agent has exclusive control for withdrawal purposes.


 


Eligible Account: all Accounts
of a Borrower or Subsidiary Guarantor, arising in the Ordinary Course of
Business, evidencing the sale of goods and services by such Borrower or
Subsidiary Guarantor and which Agent, in its Credit Judgment, shall deem to be
an Eligible Account, based upon such considerations as the Agent may from time
to time deem appropriate. Without in any way limiting the foregoing, (i) in
general, unless otherwise determined by Agent as aforesaid, an Account shall
not constitute an Eligible Account unless it is subject to a perfected, first
priority Lien in favor of Agent for the ratable benefit of the Lenders, is free
and clear of all Liens other than Permitted Encumbrances and is evidenced by an
invoice or other document satisfactory to Agent, and (ii) no Account of an Account Debtor  shall be an Eligible Account if:


 


(a)   such
Account arises out of a sale made by a Borrower or Subsidiary Guarantor to an
Affiliate of such Borrower or Subsidiary Guarantor or to a Person controlled by
an Affiliate of such Borrower or Subsidiary Guarantor or such Account Debtor is
such Borrower’s or Subsidiary Guarantor’s creditor or supplier;


 


(b)   more
than sixty (60) days have elapsed from the due date of such Account;


 


(c)   (i) with
respect to Accounts of a Borrower or Subsidiary Guarantor other than
Conn-Selmer, more than ninety (90) days have elapsed from the invoice date of
each such Account, and (ii) solely with respect to Accounts of
Conn-Selmer, more than three hundred and five (305) days have elapsed from the
invoice date of each such Account;


 


(d)   fifty
percent (50%) or more of the aggregate account balance of Accounts due from
such Account Debtor is more than sixty (60) days past due;


 


(e)   any
covenant, representation or warranty contained in this Agreement with respect
to such Account has been breached in a material manner;


 


(f)    Agent
is not and continues not to be satisfied with the credit standing of such
Account Debtor, or the Agent otherwise believes, in its Credit Judgment, that
collection of such Account is insecure or that such Account may not be paid by
reason of such Account Debtor’s financial inability to pay (and in the absence
of an Event of Default which is continuing, at Borrowers’ request therefor,
Agent agrees to advise Borrowers of the reasons for its making any such
judgment);


 


(g)   such
Account Debtor has asserted any dispute, offset or counterclaim against the
related Borrower or Subsidiary Guarantor, such Account or any other Account due
from such Account Debtor to such Borrower or Subsidiary Guarantor, or such
Account is or could reasonably be expected to become subject to any offset,
deduction, defense, dispute, or counterclaim, or is contingent in any respect
or for any reason, but only to the extent of the amount in dispute;


 


(h)   such
Account Debtor resides outside the continental United States, Alaska, Hawaii,
the U.S. Virgin Islands and/or Puerto Rico, unless the sale is covered by a
letter of credit or credit insurance in form and substance acceptable to the
Agent in its Credit Judgment, or unless such Account (in U.S. Dollars) is due
from an entity located in Canada or a territory of the United States;


 


9

















 


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


 


(j)    such
Account Debtor is the United States of America, any state or any department,
agency or instrumentality of any
of them, unless the related
Borrower or Subsidiary Guarantor assigns its right to payment of such Account
to the Agent for the ratable benefit of the Lenders pursuant to the Federal
Assignment of Claims Act of 1940, as amended, or has otherwise complied with
all other applicable statutes or ordinances;


 


(k)   any
of the following events occur or conditions exist with respect to the goods
giving rise to such Account: (i) if such goods have not been shipped to such Account Debtor,
or (ii) if so shipped, have subsequently not been delivered to such
Account Debtor, or (iii) if so delivered, have not been accepted by such
Account Debtor, or (iv) if such Account otherwise does not represent a
final sale, or (v) such goods have been repossessed;


 


(l)    the
amount of all Accounts of such Account Debtor exceeds any credit limit
determined by Agent, in its Credit Judgment, to the extent that the amount of
such Account exceeds such limit;


 


(m)  such
Account Debtor has commenced or has had commenced against it a case under any
federal, state or other bankruptcy or insolvency laws, as now constituted or
hereafter amended, or made an assignment for the benefit of creditors, or if a
decree or order for relief has been entered by a court having jurisdiction in
the premises in respect of such Account Debtor in an involuntary case under any
state or federal bankruptcy laws, as now constituted or hereafter amended, or if any other petition or other
application for relief under any state or federal bankruptcy law has been filed
against such Account Debtor, or if such Account Debtor has failed, suspended
business, ceased to be solvent, called a meeting of its creditors (in order to
discuss financial insolvency or lack of liquidity), or consented to or suffered
a receiver, trustee, liquidator or custodian to be appointed for it or for all
or a significant portion of its assets or affairs;


 


(n)   the
related Borrower or Subsidiary Guarantor has made any agreement with such
Account Debtor for any deduction therefrom, except for discounts or allowances
made in the ordinary course of business for prompt payment, all of which
discounts or allowances shall be reflected in the calculation of the face value
of each respective invoice related thereto; or


 


(o)   such
Account is not payable to the related Borrower or Subsidiary Guarantor;


 


notwithstanding the
foregoing, Eligible Accounts may include in addition to any Account of any
Borrower or Subsidiary Guarantor constituting an Eligible Account hereunder,
Dealer Notes pledged to Agent, satisfactory to Agent in its Credit Judgment,
and otherwise qualifying as Eligible Accounts hereunder having an aggregate
outstanding principal amount at any time of up to $20,000,000, that mature up
to two years from the execution thereof. 
Notwithstanding anything to the contrary herein, the Steinway Dealer
Notes shall not constitute Eligible Accounts until such time that such notes
are deemed Eligible Accounts by Agent, in its Credit Judgment.  Agent shall require that the Steinway Dealer
Notes, among other things, be subject to a field examination and audit (and
such examination and audit be reasonably acceptable to the Required Lenders) in
order to determine whether such notes shall be considered Eligible Accounts.


 


Eligible Assignee: a Person that
is (a) a Lender or a U.S.-based Affiliate of a Lender that is a deposit-taking financial
institution regulated by the Federal Deposit Insurance Company  (provided, that, subject to clause (c) hereof,
any assignment to any Lender or any Affiliate of a Lender resulting in such
Lender and its Affiliates having Commitments greater than or equal to
$50,000,000 in the aggregate shall


 


10

















 


require the approval of
Borrowers (which approval may be withheld in Borrowers’ discretion)); (b) any
other deposit-taking  financial institution approved by Agent and
Borrowers (which approval by Borrowers shall not be unreasonably withheld or
delayed, and shall be deemed given if no objection is made within five Business
Days after notice of the proposed assignment), that is organized under the laws
of the United States or any state or district thereof, has total assets in
excess of $5 billion, extends asset-based lending facilities in its ordinary
course of business and whose becoming an assignee would not constitute a
prohibited transaction under Section 4975 of the Code or any other Applicable Law, that
is regulated by the Federal Deposit Insurance Company, and that is not a
competitor of the Obligors or an Affiliate of such a competitor (provided,
that, subject to clause (c) hereof, any financial institution and its
Affiliates set forth on Schedule E-1
shall be deemed an Eligible Assignee only with the prior written approval of
the Borrowers (which approval may be withheld in Borrowers’ discretion)); and (c) during
any Event of Default, any Person acceptable to Agent in its discretion, provided
that in no event shall an Obligor or any of its respective Affiliates be an
Eligible Assignee.


 


Eligible Inventory: all Inventory
of a Borrower or Subsidiary Guarantor consisting of (i) Boston Pianos,
Essex Pianos, Steinway Pianos, Factory Returns, Concert and Artist Bank Pianos,
near-finished pianos, and raw materials of Steinway, and (ii) raw
materials, work-in-process and finished goods of any Borrower or Subsidiary
Guarantor, in each case which is in good and saleable condition and located at
such Borrower’s or Subsidiary Guarantor’s places of business or at the
Collateral locations described on Schedule 8.6.1
(except when in transit to or from such locations) and which is not, in Agent’s
Credit Judgment, obsolete, damaged, slow-moving or unmerchantable, and which
Agent, in its Credit Judgment, shall deem Eligible Inventory, based upon such
considerations as Agent may from time to time deem appropriate.  In general, unless otherwise determined by
Agent as referenced above, Inventory shall not constitute Eligible
Inventory if it is on consignment to any consignee and unless it is subject to
a perfected, first priority Lien in favor of Agent for the ratable benefit of
the Lenders, is free and clear of all Liens other than Permitted Encumbrances
and conforms to all standards imposed by any Governmental Authority, division
or department thereof which has regulatory authority over such goods or the use
or sale thereof.


 


Enforcement Action: any action to enforce any Obligations or Loan
Documents or to realize upon any Collateral (whether by judicial action,
self-help, notification of Account Debtors, exercise of setoff or recoupment,
or otherwise).


 


Environmental Laws: all
Applicable Laws relating to public health (but excluding occupational safety
and health, to the extent regulated by OSHA) or the protection or pollution of
the environment, including CERCLA, RCRA and CWA.


 


Environmental Notice: a written notice from any Governmental Authority
or other Person of any possible noncompliance with, investigation of a possible
violation of, litigation relating to, or potential fine or liability under any
Environmental Law, or with respect to any Environmental Release, environmental
pollution or hazardous materials, including any complaint, summons, citation,
order, claim, demand or request for correction, remediation or otherwise.


 


Environmental Release: a release as
defined in CERCLA or under any other Environmental Law.


 


Equity Interest: the interest
of any (a) shareholder in a corporation; (b) partner in a partnership
(whether general, limited, limited liability or joint venture); (c) member
in a limited liability company; or (d) other Person having any other form
of equity security or ownership interest.


 


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


 


11

















 


ERISA Affiliate: any trade or
business (whether or not incorporated) under common control with an Obligor
within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).


 


ERISA Event: (a) a
Reportable Event with respect to a Pension Plan; (b) a withdrawal by any
Obligor or ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by any Obligor or ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan
is in reorganization; (d) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) any Obligor or ERISA Affiliate
fails to meet any funding obligations with respect to any Pension Plan or
Multiemployer Plan, or requests a minimum funding waiver; (f) an event or
condition which constitutes grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multiemployer Plan; (g) a determination that any Pension Plan is
considered to be an at-risk plan or that any Multiemployer Plan is in
endangered or critical status within the meaning of Sections 430, 431 and 432
of the Code, or Sections 303, 304 and 305 of ERISA; or (h) the imposition
of any liability under Title IV of ERISA, other than for PBGC premiums due but
not delinquent under Section 4007 of ERISA, upon any Obligor or ERISA
Affiliate.


 


Essex
Pianos:  pianos designed by Steinway,
manufactured by an OEM and marketed under the Essex piano line all of which are
finished goods or Factory Returns.


 


Event of Default: as defined in Section 11.1; provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.


 


Excess Availability: at any time,
the amount equal to the Borrowing Base minus the principal balance of all
Loans.


 


Excluded Account: Deposit Accounts used solely
for (a) funding payroll or segregating payroll taxes or (b) segregating
401k contribution or contributions to an employee stock purchase plan and other
health and benefit plans.


 


Excluded Tax: with respect to Agent, any
Lender, Issuing Bank or any other recipient of a payment to be made by or
on account of any Obligation, (a) taxes imposed on or measured by its
overall net income (however denominated), and franchise taxes imposed on it (in
lieu of net income taxes), by the jurisdiction (or any political subdivision
thereof) under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable Lending Office is located; (b) any branch profits taxes imposed
by the United States or any similar tax imposed by any other jurisdiction in
which Borrower Agent is located; (c) any backup withholding tax required
by the Code to be withheld from amounts payable to a Lender that has failed to
comply with Section 5.10; and (d) in
the case of a Foreign Lender, any United States withholding tax that is (i) required
pursuant to laws in force at the time such Lender becomes a Lender (or
designates a new Lending Office) hereunder, or (ii) attributable to such
Lender’s inability (other than as a result of a Change in Law) to comply with Section 5.10, except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from Borrowers with respect to such withholding tax.


 


Extraordinary Expenses: all
reasonable costs, expenses or advances that Agent may incur during a Default or
Event of Default, or during the pendency of an Insolvency Proceeding of an
Obligor, including those relating to (a) any audit, inspection,
repossession, storage, repair, appraisal, insurance, manufacture, preparation
or advertising for sale, sale, collection, or other preservation of or
realization upon any


 


12

















 


Collateral; (b) any
action, arbitration or other proceeding (whether instituted by or against
Agent, any Lender, any Obligor, any representative of creditors of an Obligor
or any other Person) in any way relating to any Collateral (including the
validity, perfection, priority or avoidability of Agent’s Liens with respect to
any Collateral), Loan Documents, Letters of Credit or Obligations, including
any lender liability or other Claims; (c) the exercise, protection or
enforcement of any rights or remedies of Agent in, or the monitoring of, any
Insolvency Proceeding; (d) settlement or satisfaction of any taxes,
charges or Liens with respect to any Collateral; (e) any Enforcement
Action; (f) negotiation and documentation of any modification, waiver,
workout, restructuring or forbearance with respect to any Loan Documents or
Obligations; and (g) Protective Advances. 
Such costs, expenses and advances include transfer fees, Other Taxes,
storage fees, insurance costs, permit fees, utility reservation and standby
fees, legal fees, appraisal fees, brokers’ fees and commissions, auctioneers’
fees and commissions, accountants’ fees, environmental study fees, wages and
salaries paid to employees of any Obligor or independent contractors in
liquidating any Collateral, and travel expenses.


 


Factory Returns:  pianos bearing the Steinway, Steinway &
Sons, Essex or Boston name brands that have been returned to Steinway and are
in near-new, good and merchantable condition.


 


FATCA:  Sections 1471 through 1474 of Code and
any United States Treasury regulations thereunder or official governmental
interpretations thereof.


 


Federal Funds Rate: (a) the
weighted average of interest rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on the
applicable Business Day (or on the preceding Business Day, if the applicable
day is not a Business Day), as published by the Federal Reserve Bank of New
York on the next Business Day; or (b) if no such rate is published on the
next Business Day, the average rate (rounded up, if necessary, to the nearest
1/8 of 1%) charged to Bank of America on the applicable day on such
transactions, as determined by Agent.


 


Fee Letter: the fee letter agreement between Agent and
Borrowers.


 


Fiscal Quarter: each period of three months, commencing on
the first day of a Fiscal Year.


 


Fiscal Year: the fiscal year of Parent and its Subsidiaries
for accounting and tax purposes, ending on December 31 of each year.


 


Fixed Charge Coverage Ratio: the ratio, for any period determined on a
consolidated basis for Parent and its Subsidiaries for the most recent four
Fiscal Quarters, of (a) Consolidated Cash Flow for such period, to (b) Fixed
Charges for such period.


 


Fixed Charges: for any
period, with respect to Parent and its Subsidiaries on a consolidated basis, an
amount equal to the sum of (i) cash Interest Expense for such period, plus
(ii)) taxes paid by any of them during such period, plus (iii) all
regularly scheduled payments of principal on any Debt of Parent and its
Subsidiaries existing on or after the Closing Date and any Capital Leases,
payable by any of them during such period.


 


FLSA: the Fair
Labor Standards Act of 1938.


 


Foreign Lender: any Lender
that is organized under the laws of a jurisdiction other than the laws of the
United States, or any state or district thereof.


 


Foreign Plan: any employee
benefit plan or arrangement (a) maintained or contributed to by any
Obligor or Subsidiary that is not subject to the laws of the United States; or (b) mandated
by a government other than the United States for employees of any Obligor or
Subsidiary.


 


13

















 


Foreign Subsidiary: a Subsidiary that is a “controlled foreign
corporation” under Section 957 of the Code, such that a guaranty by such
Subsidiary of the Obligations or a Lien on the assets of such Subsidiary to
secure the Obligations would result in material tax liability to Borrowers.


 


Full Payment: with respect to any Obligations, (a) the
full and indefeasible cash payment thereof, including any interest, fees and
other charges accruing during an Insolvency Proceeding (whether or not allowed
in the proceeding); (b) if such Obligations are LC Obligations or inchoate
or contingent in nature, Cash Collateralization thereof (or delivery of a
standby letter of credit acceptable to Agent in its discretion, in the amount
of required Cash Collateral); and (c) a release of any
Claims of Obligors against Agent, Lenders and Issuing Bank arising on or before
the payment date.  No Loans shall be deemed to
have been paid in full until all Commitments related to such Loans have expired
or been terminated.


 


GAAP: generally
accepted accounting principles in effect in the United States from time to
time.


 


GE: GE Commercial
Distribution Finance Corporation.


 


GE Guarantees:  guarantees in favor of GE by Steinway on
behalf of certain dealers to permit such dealers to obtain inventory floor
financing from GE.


 


Governmental Approvals: all
authorizations, consents, approvals, licenses and exemptions of, registrations
and filings with, and required reports to, all Governmental Authorities.


 


Governmental Authority: any federal,
state, municipal, foreign or other governmental department, agency, commission,
board, bureau, court, tribunal, instrumentality, political subdivision, or
other entity or officer exercising executive, legislative, judicial, regulatory
or administrative functions for or pertaining to any government or court, in
each case whether associated with the United States, a state, district or
territory thereof, or a foreign entity or government.


 


Guarantor Payment: as defined in
Section 5.11.3.


 


Guarantors: Parent and
the Subsidiary Guarantors.


 


Guarantor Security Agreement:  each Guarantor Security Agreement executed by
a Guarantor in favor of Agent.


 


Guaranty: each guaranty
agreement executed by a Guarantor in favor of Agent.


 


Hedging Agreement: an agreement
relating to any swap, cap, floor, collar, option, forward, cross right or
obligation, or combination thereof or similar transaction, with respect to
interest rate, foreign exchange, currency, commodity, credit or equity risk.


 


Incremental Commitments:  shall mean, with respect to the Incremental
Facility, and as to each Lender, its obligation, if any, to (a) make Loans
consisting of Incremental Loans to the Borrowers pursuant to Section 2.1.7, and (b) purchase participations in
LC Obligations, in an aggregate principal amount at any one time outstanding
not to exceed the amount set forth under the heading “Incremental Commitment”
opposite such Lender’s name on Schedule C-1 or
in the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable, in each case, as such amount may be adjusted from time
to time in accordance with this Agreement.


 


Incremental Facility:  shall mean the aggregation of Incremental
Commitments of one or more Lenders which are made available to the Borrowers
and become effective on the same date pursuant to the Incremental Loan
Amendment.


 


Incremental Loan:  as defined in Section 2.1.7.


 


14

















 


Incremental Loan Amendment:  as defined in Section 2.1.7.


 


Indemnified Taxes: Taxes other
than Excluded Taxes.


 


Indemnitees: Agent
Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and Bank of
America Indemnitees.


 


Insolvency Proceeding: any case or
proceeding commenced by or against a Person under any state, federal or foreign
law for, or any agreement of such Person to, (a) the entry of an order for
relief under the Bankruptcy Code, or any other insolvency, debtor relief or
debt adjustment law; (b) the appointment of a receiver, trustee,
liquidator, administrator, conservator or other custodian for such Person or
any part of its Property; or (c) an assignment or trust mortgage for the
benefit of creditors.


 


Insurance Assignment: each
collateral assignment of insurance pursuant to which an Obligor assigns to
Agent, for the benefit of Secured Parties, such Obligor’s rights under key-man
life, business interruption or other insurance policies as Agent deems
appropriate, as security for the Obligations.


 


Intellectual Property: all
intellectual and similar Property of a Person, including inventions, designs,
patents, copyrights, trademarks, service marks, trade names, trade secrets,
confidential or proprietary information, customer lists, know-how, software and
databases; all embodiments or fixations thereof and all related documentation,
applications, registrations and franchises; all licenses or other rights to use
any of the foregoing; and all books and records relating to the foregoing.


 


Intellectual Property Claim: any claim or
assertion (whether in writing, by suit or otherwise) that a Borrower’s or
Subsidiary’s ownership, use, marketing, sale or distribution of any Inventory,
Equipment, Intellectual Property or other Property violates another Person’s
Intellectual Property.


 


Intellectual Property Security Agreement: each intellectual property security
agreement pursuant to which an Obligor grants to Agent, for the benefit of
Secured Parties, a Lien on such Obligor’s interests in Intellectual Property,
as security for the Obligations.


 


Interest Expense:  for any period, any and all interest expenses
and finance charges which Parent and its Subsidiaries, on a consolidated basis,
have in accordance with GAAP paid in cash or cash equivalents or are obligated
to pay in cash or cash equivalents during such period, including without
limitation any such amounts under this Agreement, and less Interest Income and
service charge income for such period (provided that Agent, in its
reasonable discretion exercised in good faith, is satisfied with the accounting
treatment afforded to such Interest Income and service charge income and that
such treatment is consistent with Parent’s prior practices), but excluding for
all purposes interest expense with respect to Senior Notes Refinancing Debt
solely for the period commencing on the date such interest expense begins to
accrue and ending upon the earlier of (a) forty (40) days after the date
such interest expense begins to accrue, and (b) the date the Senior Notes
existing on the Closing Date are paid or defeased in full with the proceeds of
such Senior Notes Refinancing Debt.


 


Interest Income:  for the relevant period(s) of time, any
interest income as recognized by Parent and its Subsidiaries in accordance with
GAAP.


 


Interest Period: as defined in
Section 3.1.3.


 


Inventory: as defined in
the UCC, including all goods intended for sale, lease, display or
demonstration; all work in process; and all raw materials, and other materials
and supplies of any kind that are or could be used in connection with the
manufacture, printing, packing, shipping, advertising, sale, lease or
furnishing of such goods, or otherwise used or consumed in an Obligor’s
business (but excluding Equipment).


 


15

















 


Inventory Reserve: reserves
established by Agent to reflect factors that may negatively impact the Value of
Inventory, including change in salability, obsolescence, seasonality, theft,
shrinkage, imbalance, change in composition or mix, markdowns and vendor
chargebacks.


 


Investment: any
acquisition of all or substantially all assets of a Person; any acquisition of
record or beneficial ownership of any Equity Interests of a Person; or any
advance, loan or capital contribution to or other investment in a Person.


 


IRS: the United
States Internal Revenue Service.


 


Issuing Bank: Bank of
America or an Affiliate of Bank of America.


 


Issuing Bank Indemnitees: Issuing Bank
and its officers, directors, employees, Affiliates, agents and attorneys.


 


LC Application: an application by Borrower Agent to Issuing Bank
for issuance of a Letter of Credit, in form and substance satisfactory to
Issuing Bank.


 


LC Conditions: the following conditions necessary for issuance
of a Letter of Credit: (a) each of the conditions set forth in Section 6; (b) after giving effect to such issuance,
total LC Obligations do not exceed the Letter of Credit Subline, no Overadvance
exists and, if no Loans are outstanding, the LC Obligations do not exceed the
Borrowing Base (without giving effect to the LC Reserve for purposes of this
calculation); (c) the expiration date of such Letter of Credit is (i) no
more than 365 days from issuance, in the case of standby Letters of Credit, (ii) no
more than 120 days from issuance, in the case of documentary Letters of Credit,
and (iii) at least 20 Business Days prior to the Termination Date; (d) the
Letter of Credit and payments thereunder are denominated in Dollars; and (e) the
purpose and form of the proposed Letter of Credit is satisfactory to Agent and
Issuing Bank in their reasonable discretion.


 


LC Documents: all documents, instruments and agreements
(including LC Requests and LC Applications) delivered by Borrowers or any other
Person to Issuing Bank or Agent in connection with issuance, amendment or
renewal of, or payment under, any Letter of Credit.


 


LC Obligations: the sum (without duplication) of (a) all
amounts owing by Borrowers for any drawings under Letters of Credit; (b) the
stated amount of all outstanding Letters of Credit; and (c) all fees and
other amounts owing with respect to Letters of Credit.


 


LC Request: a request for issuance of a Letter of Credit, to
be provided by Borrower Agent to Issuing Bank, in form satisfactory to Agent
and Issuing Bank.


 


LC Reserve: the aggregate of all LC Obligations, other than (a) those
that have been Cash Collateralized; and (b) if no Default or Event of
Default exists, those constituting charges owing to the Issuing Bank.


 


Lease Debt:  Debt and
other obligations of an Obligor relating to Capital Leases or operating leases
and owed to a Lender or any of its Affiliates.


 


Lender Indemnitees: Lenders and
their officers, directors, employees, Affiliates, agents and attorneys.


 


Lenders: as defined in
the preamble to this Agreement, including Agent in its capacity as a provider
of Swingline Loans and any other Person who hereafter becomes a “Lender” pursuant
to an Assignment and Assumption.


 


16
















 


Lending Office: the office designated as
such by the applicable Lender at the time it becomes party to this Agreement or
thereafter by notice to Agent and Borrower Agent.


 


Letter of Credit: any standby or documentary letter of credit issued by
Issuing Bank for the account of a Borrower, or any indemnity, guarantee,
exposure transmittal memorandum or similar form of credit support issued by
Agent or Issuing Bank for the benefit of a Borrower.


 


Letter of Credit Subline: $25,000,000.


 


LIBOR: for any
Interest Period with respect to a LIBOR Loan, the per annum rate of interest
(rounded up, if necessary, to the nearest 1/8th of 1%), determined by Agent at
approximately 11:00 a.m. (London time) two Business Days prior to
commencement of such Interest Period, for a term comparable to such Interest
Period, equal to (a) the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or other commercially available source
designated by Agent); or (b) if BBA LIBOR is not available for any reason,
the interest rate at which Dollar deposits in the approximate amount of the
LIBOR Loan would be offered by Bank of America’s London branch to major banks
in the London interbank Eurodollar market. 
If the Board of Governors imposes a Reserve Percentage with respect to
LIBOR deposits, then LIBOR shall be the foregoing rate, divided by 1 minus the
Reserve Percentage.


 


LIBOR Loan: a Loan that
bears interest based on LIBOR.


 


License: any license or agreement under which an Obligor
is authorized to use Intellectual Property in connection with any manufacture,
marketing, distribution or disposition of Collateral, any use of Property or
any other conduct of its business.


 


Licensor: any Person from whom an Obligor obtains the right
to use any Intellectual Property.


 


Lien: any Person’s
interest in Property securing an obligation owed to, or a claim by, such
Person, whether such interest is based on common law, statute or contract,
including liens, security interests, pledges, hypothecations, statutory trusts,
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Property.


 


Lien Waiver: an agreement,
in form and substance reasonably satisfactory to Agent, by which (a) for
any material Collateral located on leased premises, the lessor waives or
subordinates any Lien it may have on the Collateral, and agrees to permit Agent
to enter upon the premises and remove the Collateral or to use the premises to
store or dispose of the Collateral; (b) for any Collateral held by a
warehouseman, processor, shipper, customs broker or freight forwarder, such
Person waives or subordinates any Lien it may have on the Collateral, agrees to
hold any Documents in its possession relating to the Collateral as agent for
Agent, and agrees to deliver the Collateral to Agent upon request; and (c) for
any Collateral held by a repairman, mechanic or bailee, such Person
acknowledges Agent’s Lien, waives or subordinates any Lien it may have on the Collateral,
and agrees to deliver the Collateral to Agent upon request.


 


Loan: a loan made
pursuant to Section 2.1, and
any Swingline Loan, Overadvance Loan or Protective Advance.


 


Loan Account: the loan
account established by each Lender on its books pursuant to Section 5.8.


 


Loan Documents: this
Agreement, Other Agreements and Security Documents.


 


Loan Year: each 12 month
period commencing on the Closing Date and on each anniversary of the Closing
Date.


 


17

















 


Margin Stock: as defined in
Regulation U of the Board of Governors.


 


Marks: any trademarks and service marks now held or hereafter acquired by an
Obligor which are registered in the United States Patent and Trademark Office,
or in any other similar office or agency of the United States or any state
thereof or any political subdivision thereof, or in any similar office or
agency in foreign jurisdictions, and any application for such trademarks and
service marks, as well as any unregistered marks used by an Obligor and trade
dress, including logos, proprietary icons, designs, trade names, trade styles,
company names, corporate names, business names, fictitious business names and
other business or source identifiers in connection with which any of such registered
or unregistered marks are used, and including all common law rights therein,
and registrations and applications for registration therefor, all rights
provided by international treaties or conventions with respect to the
foregoing, and all renewals of any of the foregoing, and all goodwill
associated therewith.


 


Material Adverse Effect: the effect of
any event or circumstance with respect to any Obligor that, taken alone or in
conjunction with other events or circumstances, has or could be reasonably
expected to have a material adverse effect on (a) the business,
operations, Properties, prospects or condition (financial or otherwise) of such
Obligor, on the value of any material Collateral, on the enforceability of any
Loan Documents, or on the validity or priority of Agent’s Liens on any
Collateral (subject to Permitted Encumbrances); (b) the ability of such
Obligor to perform any obligations under the Loan Documents, including
repayment of any Obligations; or (c) the ability of Agent or any Lender to
enforce or collect any Obligations or to realize upon any Collateral.


 


Material Contract: any agreement
or arrangement to which any Obligor is party (other than the Loan Documents) (a) that
is deemed to be a material contract under any securities law applicable to such
Obligor, including the Securities Act of 1933; (b) for which breach,
termination, nonperformance or failure to renew could reasonably be expected to
have a Material Adverse Effect; or (c) that relates to Subordinated Debt,
or Debt in an aggregate amount of $500,000 or more.


 


Maximum Incremental Amount: $25,000,000.


 


MMAS: Music Matters
After School, Inc., a Delaware corporation.


 


Multiemployer Plan: any employee
benefit plan of the type described in Section 4001(a)(3) of ERISA, to
which any Obligor or ERISA Affiliate makes or is obligated to make
contributions, or during the preceding five plan years, has made or been
obligated to make contributions.


 


Net Proceeds: with respect
to an Asset Disposition, proceeds (including, when received, any deferred or
escrowed payments) received by a Borrower or Subsidiary in cash from such
disposition, net of (a) reasonable and customary costs and expenses
actually incurred in connection therewith, including legal fees and sales
commissions; (b) amounts applied to repayment of Debt secured by a
Permitted Lien senior to Agent’s Liens on Collateral sold; (c) transfer or
similar taxes; (d) reserves for Borrowers’ reasonable estimate of income
or similar taxes payable in cash and arising from such Asset Disposition; and (e) reserves
for indemnities, until such reserves are no longer needed.


 


Non-Guarantor Subsidiary: Vincent Bach,
Steinway & Sons and its Subsidiaries, Clickpoint, Boston Piano GmbH
and its Subsidiaries, Steinway & Sons Far East LLC, Steinway &
Sons Japan, Ltd., and any Subsidiary of Conn-Selmer or Steinway that is
not formed or incorporated under the laws of any state of the United States of
America.


 


Note: any
promissory note executed by Borrowers in favor of a Lender in the form of Exhibit A, which shall be in the
amount of such Lender’s Commitment and shall evidence the Loans made by such
Lender.


 


18

















 


Notice of Borrowing: a Notice of
Borrowing to be provided by Borrower Agent to request a Borrowing of Loans, in
form satisfactory to Agent.


 


Notice of
Conversion/Continuation: a Notice of Conversion/Continuation to be
provided by Borrower Agent to request a conversion or continuation of any Loans
as LIBOR Loans, in form satisfactory to Agent.


 


NYCIDA: the New York
City Industrial Development Agency.


 


Obligations: all (a) principal
of and premium, if any, on the Loans, (b) LC Obligations and other
obligations of Obligors with respect to Letters of Credit, (c) interest,
expenses, fees and other sums payable by Obligors under Loan Documents, (d) obligations
of Obligors under any indemnity for Claims, (e) Extraordinary Expenses, (f) Bank
Product Debt, (g) Lease Debt and (h) other Debts, obligations and
liabilities of any kind owing by Obligors pursuant to the Loan Documents,
whether now existing or hereafter arising, whether evidenced by a note or other
writing, whether allowed in any Insolvency Proceeding, whether arising from an
extension of credit, issuance of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, and whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, or joint or several.


 


Obligor: each Borrower
and each Guarantor (including Parent).


 


OEM: an original
equipment manufacturer.


 


Ordinary Course of Business: the ordinary
course of business of any Borrower or Subsidiary, consistent with past
practices and undertaken in good faith.


 


Organic Documents: with respect
to any Person, its charter, certificate or articles of incorporation, bylaws,
articles of organization, limited liability agreement, operating agreement,
members agreement, shareholders agreement, partnership agreement, certificate
of partnership, certificate of formation, voting trust agreement, or similar
agreement or instrument governing the formation or operation of such Person.


 


OSHA: the
Occupational Safety and Hazard Act of 1970.


 


O.S. Kelly: The O.S.
Kelly Company, an Ohio corporation.


 


Other Agreement: each Note; LC
Document; Fee Letter; Lien Waiver; Borrowing Base Certificate, Compliance
Certificate, financial statement or report delivered hereunder; Post-Closing
Side Letter; or other document, instrument or agreement (other than this
Agreement or a Security Document) now or hereafter delivered by an Obligor or
other Person to Agent or a Lender in connection with any transactions relating
hereto.


 


Other Taxes: all present
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies arising from any payment made under any Loan Document
or from the execution, delivery or enforcement of, or otherwise with respect
to, any Loan Document.


 


Overadvance: as defined in
Section 2.1.5.


 


Overadvance Loan: a Base Rate
Loan made when an Overadvance exists or is caused by the funding thereof.


 


Parent:  Steinway Musical Instruments, Inc., a
Delaware corporation.


 


Participant: as defined in
Section 13.2.


 


19

















 


Patriot Act: the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272
(2001).


 


Payment Item: each check,
draft or other item of payment payable to a Borrower or Subsidiary Guarantor,
including those constituting proceeds of any Collateral.


 


PBGC: the Pension
Benefit Guaranty Corporation.


 


Pension Act: the Pension
Protection Act of 2006.


 


Pension Funding Rules: the rules of
the Code and ERISA regarding minimum required contributions (including any
installment payment thereof) to Pension Plans and set forth in, with respect to
plan years ending prior to the effective date of the Pension Act, Section 412
of the Code and Section 302 of ERISA, each as in effect prior to the
Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436 of the Code
and Sections 302, 303, 304, and 305 of ERISA.


 


Pension Plan: any employee
pension benefit plan (as such term is defined in Section 3(2) of
ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
and is sponsored or maintained by any Obligor or ERISA Affiliate or to which
the Obligor or ERISA Affiliate contributes or has an obligation to contribute,
or in the case of a multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the preceding five plan years.


 


Permitted Acquisition
Conditions:  any
Proposed Acquisition as to which each of the following conditions have been
satisfied:


 


(a)                                  Excess
Availability (during the 90 day period prior to such Proposed Acquisition and
after giving effect thereto) shall be greater than the product of (a) the
aggregate amount of the Commitments multiplied by
(b) twenty percent (20%); and


 


(b)                                 prior to the
date of such Proposed Acquisition, the Agent shall have received a certificate
executed by a Senior Officer of the Borrowers demonstrating that the Fixed
Charge Coverage Ratio was not less than 1.10 to 1.00 (i) for the period of
four Fiscal Quarters most recently ended and (ii) on a pro forma basis for
the one year period following such Proposed Acquisition.


 


Permitted Acquisition:  any Proposed Acquisition:


 


(a)                                  with respect to
which: each of the following conditions have been satisfied:


 


(i)                                     at the time of
such Proposed Acquisition and after giving effect thereto, no Default or Event
of Default shall have occurred and be continuing; and


 


(ii)                                  either (A) the
sum of all amounts payable in connection with such Proposed Acquisition shall
not exceed $5,000,000; or (B) the Permitted Acquisition Conditions have
been met; or


 


(b)                                 approved in
advance by Agent with the consent of the Required Lenders.


 


Permitted Asset Disposition: as long as no
Default or Event of Default exists and all Net Proceeds are remitted to Agent
or deposited in a Deposit Account of a Borrower that is subject to a Deposit
Account Control Agreement in favor of the Agent, an Asset Disposition that is (a) a
sale of Inventory in the Ordinary Course of Business; (b) a disposition of
Equipment that, in the aggregate during any 12 month period, has a fair market
or book value (whichever is more) of $10,000,000 or less; (c) a


 


20

















 


disposition of Inventory
that is obsolete, unmerchantable or otherwise unsalable in the Ordinary Course
of Business; (d) termination of a lease of real or personal Property that
is not necessary for the Ordinary Course of Business, could not reasonably be
expected to have a Material Adverse Effect and does not result from an Obligor’s
default; or (e) approved in writing by Agent and Required Lenders.


 


Permitted Contingent Obligations: Contingent
Obligations (a) arising from endorsements of Payment Items for collection
or deposit in the Ordinary Course of Business; (b) arising from Hedging Agreements permitted
hereunder; (c) existing on the Closing Date (including Contingent Obligations
under the Senior Notes Documents), and any extension or renewal thereof that
does not increase the amount of such Contingent Obligation when extended or
renewed; (d) incurred in the Ordinary Course of Business with respect to surety,
appeal or performance bonds, or other similar obligations; (e) arising
from customary indemnification obligations in favor of purchasers in
connection with dispositions of Equipment permitted hereunder; (f) arising
under the Loan Documents; (g) GE Guarantees from time to time outstanding
having a maximum liability at any one time outstanding not to exceed
$2,000,000; or (h) in an aggregate amount of $100,000 or less at any time.


 


Permitted Distribution
Conditions:  any
Distributions, or payments (whether voluntary or mandatory, or a prepayment,
redemption, retirement, defeasance or acquisition) with respect to any
Subordinated Debt or Borrowed Money, and as to which each of the following
conditions have been satisfied:


 


(a)                                  at the time of
such Distribution or payment, as applicable, and after giving effect thereto,
no Default or Event of Default shall have occurred and be continuing;


 


(b)                                 Excess
Availability (during the 90 day period prior to such Distribution or payment,
as applicable, and after giving effect thereto) shall be greater than the
product of (a) the aggregate amount of the Commitments multiplied by (b) twenty
percent (20%); and


 


(c)                                  prior to the
date of such Distribution or payment, as applicable, the Agent shall have
received a certificate executed by a Senior Officer of the Borrowers
demonstrating that the Fixed Charge Coverage Ratio was not less than 1.10 to
1.00 for the period of four Fiscal Quarters most recently ended.


 


Permitted Encumbrances: shall mean the following only:


 


(a)                                  Liens (other than any Lien imposed under ERISA or any Environmental Laws)
for taxes, assessments or governmental charges or levies not yet delinquent, or
thereafter payable without penalty or interest not in excess of $5,000,000 in
the aggregate, if being contested in good faith and by appropriate proceedings
promptly initiated and diligently conducted, if such reserve or other
appropriate provision, if any, as shall be required by GAAP, shall have been
made therefor and enforcement thereof is stayed;


 


(b)                                 Liens (other than any Lien imposed under ERISA) of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business for sums not yet due or being contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted, if such
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor and enforcement thereof is stayed;


 


(c)                                  Liens (other than any Lien imposed under ERISA) incurred or deposits made
in the ordinary course of business (including without limitation surety bonds
and appeal bonds), in connection with workers’ compensation, unemployment
insurance and other types of social security benefits, or to secure the
performance of tenders, bids, leases, contracts, statutory obligations, surety
and appeal bonds, performance and return-of-money bonds and similar


 


21

















 


obligations
(exclusive of Debt for money borrowed) or arising as a result of progress
payments under government contracts;


 


(d)                                 Subject to all of the pertinent limitations contained in this Agreement,
Liens first arising subsequent to the Closing Date to secure the payment of all
or any part of the purchase price of assets, provided that any such Lien only
attaches to the assets being acquired and does not extend to any other asset;


 


(e)                                  Easements (including without limitation reciprocal easement agreements
and utility agreements), rights of way, covenants, consents, reservations,
encroachments, variations and other similar restrictions, charges and
encumbrances (whether or not recorded), building restrictions, zoning laws and
other statutes, laws, rules, regulations, ordinances and restrictions and other
similar encumbrances incurred in the ordinary course of business, which do not
secure Debt or the deferred purchase price of any asset and which do not
interfere with the ordinary conduct of the business of any of the Obligors or
any of their Subsidiaries and which do not materially detract, in the Agent’s
reasonable discretion exercised in good faith, from the value of the property
to which they attach or materially impair the utility or use thereof by an
Obligor or its Subsidiaries;


 


(f)                                    Liens on file in the Uniform Commercial Code records to the limited
extent and to those Persons specifically listed on Schedule P-1 hereto, each of which are to be limited to
securing only obligations of an Obligor to the pertinent lienholder outstanding
as of the Closing Date, in an amount in each instance not to exceed the dollar
limitation also set forth on said Schedule;


 


(g)                                 Liens in favor of Agent for the ratable benefit of the Lenders;


 


(h)                                 The rights of any Dealer Note Purchase Party with respect to any accounts
financed by it pursuant to any Dealer Note Purchase Agreement;


 


(i)                                     any rights of any Person in respect of Steinway Hall;


 


(j)                                     the right, title and interest of NYCIDA to the property located at 19th and Steinway Place pursuant to (i) the
Guaranty Agreement, dated as of June 1, 1999 from Steinway to the NYCIDA, (ii) the
PILOT Escrow Agreement, dated as of June 1, 1999, by and among Steinway,
the NYCIDA and the United States Trust Company and (iii) the Lease
Agreement, dated as of June 1, 1999 between Steinway and the NYCIDA; and


 


(k)                                  other Liens securing Debt outstanding in an aggregate principal amount
not to exceed $5,000,000.


 


Nothing
contained in this definition, in this Agreement or elsewhere, however, shall or
shall be deemed, however, to recognize or establish any Lien priority or any
other right or entitlement of any Person claiming or entitled to a Permitted
Encumbrance hereunder. Wherever it appears, the term “Permitted Encumbrances”
shall only signify that the existence thereof does not breach this Agreement.
Notwithstanding any such permitted item(s), Agent for the ratable benefit of
the Lenders shall therefore at all times have a first and paramount Lien in all
Collateral.


 


Permitted Investment
Conditions:  any
proposed Investment as to which the following conditions have been satisfied:


 


22

















 


(a)                                  Excess
Availability (during the 90 day period prior to such proposed Investment and
after giving effect thereto) shall be greater than the product of (a) the
aggregate amount of the Commitments multiplied by
(b) twenty percent (20%); and


 


(b)                                 prior to the
date of such proposed Investment, the Agent shall have received a certificate
executed by a Senior Officer of the Borrowers demonstrating that the Fixed
Charge Coverage Ratio was not less than 1.10 to 1.00 (i) for the period of
four Fiscal Quarters most recently ended and (ii) on a pro forma basis for
the one year period following such proposed Investment.


 


Permitted Investment:  any proposed Investment:


 


(a)                                  with respect to
which: each of the following conditions have been satisfied:


 


(i)                                     at the time of such proposed
Investment and after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing; and


 


(ii)                                  either (A) the sum of
all amounts payable in connection with such proposed Investment shall not
exceed $5,000,000; or (B) the Permitted Investment Conditions have been
met; or


 


(b)                                 approved in
advance by Agent with the consent of the Required Lenders.


 


Person: any
individual, corporation, limited liability company, partnership, joint venture,
joint stock company, land trust, business trust, unincorporated organization,
Governmental Authority or other entity.


 


Plan: any employee
benefit plan (as such term is defined in Section 3(3) of ERISA)
established by an Obligor.


 


Pledge Agreement: any Pledge
Agreement executed by an Obligor in favor of Agent.


 


Post-Closing Side Letter: that certain
letter agreement dated as of the Closing Date among Borrowers and Agent.


 


Prime Rate: the rate of
interest announced by Bank of America from time to time as its prime rate.  Such rate is set by Bank of America on the
basis of various factors, including its costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below such rate.  Any change in such rate announced by Bank of
America shall take effect at the opening of business on the day specified in
the public announcement of such change.


 


Pro Rata: with respect
to any Lender, a percentage (carried out to the ninth decimal place) determined
(a) while Commitments are outstanding, by dividing the amount of such
Lender’s Commitment by the aggregate amount of all Commitments; and (b) at
any other time, by dividing the amount of such Lender’s Loans and LC
Obligations by the aggregate amount of all outstanding Loans and LC
Obligations.


 


Properly Contested: with respect
to any obligation of an Obligor, (a) the obligation is subject to a bona
fide dispute regarding amount or the Obligor’s liability to pay; (b) the
obligation is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently pursued; (c) appropriate reserves have
been established in accordance with GAAP; (d) non-payment could not have a
Material Adverse Effect, nor result in forfeiture or sale of any assets of the
Obligor; (e) no Lien is imposed on assets of the Obligor, unless bonded
and stayed to the satisfaction of Agent; and (f) if the


 


23

















 


obligation results from
entry of a judgment or other order, such judgment or order is stayed pending
appeal or other judicial review.


 


Property: any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.


 


Proposed Acquisition:  the proposed acquisition by any Obligor of a
portion of, all, or substantially all of the assets or a portion of, all, or
substantially all of the stock of any Proposed Acquisition Target, or the
merger of any Proposed Acquisition Target with or into any Obligor with the
Obligor being the surviving corporation or such surviving corporation becoming
an Obligor.


 


Proposed Acquisition Target:  any Person, other than an Obligor, the
proposed assets to be acquired or any operating division thereof subject to a
Proposed Acquisition.


 


Protective Advances: as defined in
Section 2.1.6.


 


Purchase Money Debt: (a) Debt
(other than the Obligations) for payment of any of the purchase price of fixed
assets; (b) Debt (other than the Obligations) incurred within 10 days
before or after acquisition of any fixed assets, for the purpose of financing
any of the purchase price thereof; and (c) any renewals, extensions or
refinancings (but not increases) thereof.


 


Purchase Money Lien: a Lien that
secures Purchase Money Debt, encumbering only the fixed assets acquired with
such Debt and constituting a Capital Lease or a purchase money security
interest under the UCC.


 


RCRA: the Resource
Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).


 


Real Estate: all right,
title and interest (whether as owner, lessor or lessee) in any real Property or
any buildings, structures, parking areas or other improvements thereon.


 


Refinancing Conditions: the following
conditions for Refinancing Debt:  (a) it
is in an aggregate principal amount that does not exceed the principal amount
of the Debt being extended, renewed or refinanced; (b) it has a final
maturity no sooner than, and a weighted average life no less than, the Debt
being extended, renewed or refinanced; (c) it is subordinated to the
Obligations at least to the same extent, if any, as the Debt being extended,
renewed or refinanced; (d) the representations, covenants and defaults
applicable to it are either (1) no less favorable to the Obligors taken as
a whole in all material respects than those applicable to the Debt being
extended, renewed or refinanced, or (2) customary and market, in either case as certified in writing to Agent by
a Senior Officer of Borrower Agent in good faith; (e) no additional
Lien is granted to secure it; (f) no additional Person other than an
Obligor is obligated on such Debt; and (g) upon giving effect to it, no
Default or Event of Default exists.


 


Refinancing Debt: Borrowed
Money that is the result of an extension, renewal or refinancing of Debt
permitted under Section 10.2.1(b),
(d) or (f).


 


Register: as defined in Section 13.3.3.


 


Reimbursement Date: as defined in Section 2.3.2.


 


Rent and Charges Reserve: the aggregate of (a) all past due rent
and other amounts owing by an Obligor to any landlord, warehouseman, processor,
repairman, mechanic, shipper, freight forwarder, broker or other Person who
possesses any Collateral or could assert a Lien on any Collateral; and (b) a
reserve equal to three months rent and other charges that could be payable to
any such Person, unless it has executed a Lien Waiver.


 


24

















 


Report: as defined in
Section 12.2.3.


 


Reportable Event: any of the
events set forth in Section 4043(c) of ERISA, other than events for
which the 30 day notice period has been waived.


 


Required Lenders: (i) at
any time there are two (2) or fewer Lenders (subject to Section 4.2), all of the Lenders, (ii) at
any time there are three (3) or more Lenders, two (2) or more Lenders
having aggregate Commitments that exceed 50% of the aggregate Commitments of
all Lenders and (iii) if the Commitments have terminated, at any time
there are three (3) or more Lenders, two (2) or more Lenders having
Loans in excess of 50% of all outstanding Loans.


 


Reserve Percentage: the reserve
percentage (expressed as a decimal, rounded up to the nearest 1/8th of 1%)
applicable to member banks under regulations issued from time to time by the
Board of Governors for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve requirement) with respect
to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”).


 


Restricted Investment: any
Investment by Parent or its Subsidiaries (other than a Non-Guarantor
Subsidiary), other than (a) Investments in Subsidiaries to the extent
existing on the Closing Date; (b) Cash Equivalents that are subject to
Agent’s Lien and control, pursuant to documentation in form and substance
satisfactory to Agent in its Credit Judgment; and (c) loans and advances
permitted under Section 10.2.7.


 


Restrictive Agreement: an agreement
(other than a Loan Document) that conditions or restricts the right of any
Borrower or other Obligor to incur or repay Borrowed Money, to grant Liens on
any assets, to declare or make Distributions, to modify, extend or renew any
agreement evidencing Borrowed Money, or to repay any intercompany Debt.


 


Royalties: all
royalties, fees, expense reimbursement and other amounts payable by a Borrower
under a License.


 


Secured Parties: Agent, Issuing
Bank, Lenders and providers of Bank Products.


 


Security Documents: the
Guaranties, the Guarantor Security Agreements, Intellectual Property Security
Agreements, Insurance Assignments, Deposit Account Control Agreements, Pledge
Agreements, and all other documents, instruments and agreements now or
hereafter securing (or given with the intent to secure) any Obligations.


 


Senior Notes: those certain
unsecured senior notes issued by Parent in the aggregate principal face amount
of $175,000,000 pursuant to the Senior Notes Indenture, and any guarantees of
the Senior Notes and any refinancing of the same with senior notes or
subordinated notes that are issued by Parent, and any subsequent refinancings
thereof that comply with the terms hereof, provided that (i) such refinancing
is on such customary terms and conditions as are then available in the market
for issuers of similar credit profile, (ii) the amount of such refinancing
is in a principal amount not to exceed (A) $306,000,000 plus (B) unpaid
accrued interest on such indebtedness being refinanced plus (C) premiums,
penalties, fees and expenses actually incurred by Parent or the guarantors in
connection with the refinancing thereof, (iii) such refinanced notes shall
have a final stated maturity, that is no earlier than the date that is twelve
(12) months after the Termination Date of this Agreement, (iv) the
representations, covenants and defaults applicable to it are either (1) no
less favorable to Parent and its Subsidiaries taken as a whole in all material
respects than those applicable to the Senior Notes being refinanced, or (2) customary and market, in either case as
certified in writing to Agent by a Senior Officer of Borrower Agent in good
faith; (v) no additional Person other than an Obligor is obligated
on such Debt; and (vi) after giving effect thereto, no Default or Event of
Default exists.


 


25

















 


Senior Notes Documents: the
collective reference to the Senior Notes and the Senior Notes Indenture.


 


Senior Notes Indenture: that certain
Indenture, dated as of February 23, 2006, among the Senior Notes Parties
and the Senior Notes Trustee, as amended, supplemented or otherwise modified
from time to time, including any Indenture executed in connection with a
refinancing of the Senior Notes issued thereunder.


 


Senior Notes Parties: Parent,
Conn-Selmer, Steinway, O.S. Kelly, MMAS and ArkivMusic.


 


Senior Notes Refinancing
Debt: any Debt incurred by any of the Obligors to refinance or repay, in
whole or in part, the Senior Notes or any obligations under the Senior Notes
Documents, provided (a) such Debt is consistent with the requirements for
refinancing the Senior Notes as specified in the definition of “Senior Notes,” (b) the
money so raised is set aside in an escrow or segregated account maintained by
the Borrowers or Parent for such payment or defeasance of Senior Notes and/or
such obligations as soon as practical thereafter, and (c) such Debt shall
no longer be Senior Notes Refinancing Debt upon such payment or defeasance (but
shall be deemed to be Senior Notes pursuant to the definition thereof).


 


Senior Notes Trustee: The Bank of
New York Trust Company, N.A., as Trustee for the holders of the Senior Notes
pursuant to the Senior Indenture, and any successors or assigns of such
Trustee.


 


Senior Officer: the chairman
of the board, president, chief executive officer, chief financial officer or
executive vice president of a Borrower or, if the context requires, an Obligor.


 


Settlement Report: a report
delivered by Agent to Lenders summarizing the Loans and participations in LC
Obligations outstanding as of a given settlement date, allocated to Lenders on
a Pro Rata basis in accordance with their Commitments.


 


Solvent: as to any
Person, such Person (a) owns Property whose fair salable value is greater
than the amount required to pay all of its debts (including contingent,
subordinated, unmatured and unliquidated liabilities); (b) owns Property
whose present fair salable value (as defined below) is greater than the
probable total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person as they become absolute and matured; (c) is
able to pay all of its debts as they mature; (d) has capital that is not
unreasonably small for its business and is sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage; and (e) is not “insolvent” within the meaning of Section 101(32)
of the Bankruptcy Code; and (f) has not incurred (by way of assumption or
otherwise) any obligations or liabilities (contingent or otherwise) under any
Loan Documents, or made any conveyance in connection therewith, with actual
intent to hinder, delay or defraud either present or future creditors of such
Person or any of its Affiliates.  “Fair
salable value” means the amount that could be obtained for assets within a
reasonable time, either through collection or through sale under ordinary
selling conditions by a capable and diligent seller to an interested buyer who
is willing (but under no compulsion) to purchase.


 


Standard Cost Value:  shall mean, the standard invoice cost paid by
any Borrower or Subsidiary Guarantor to an OEM for a Boston Piano and/or an
Essex Piano, excluding (a) inventory revaluation, if any, and (b) freight
and delivery charges.


 


Steinway:  as defined in the preamble hereto.


 


Steinway & Sons:  Steinway and Sons, a New York corporation.


 


26

















 


Steinway Dealer Loans: loans made by
Steinway to Steinway dealers for start-up costs or for other purposes (other
than those of the type evidenced by the Steinway Dealer Notes) in an aggregate
amount not to exceed $10,000,000 for all Steinway dealers


 


Steinway Dealer Notes: notes made by
Steinway dealers in favor of Steinway, that evidence the indebtedness owing by
such dealer to Steinway, for extensions of credit made by Steinway to dealers
in an amount not to exceed $15,000,000 in the aggregate for all such Steinway
dealers, to acquire Steinway’s pianos and other musical instruments.


 


Steinway Hall:  any and all buildings, structures, or
fixtures, additions, enlargements, extensions, modifications, repairs,
replacements and improvements thereto, owned by Steinway and located at 109
West 57th Street, New York, New York.


 


Steinway Pianos:  all finished and near-finished Steinway
pianos, which term shall exclude Factory Returns, Concert and Artist Bank
Pianos, Boston Pianos and Essex Pianos.


 


Subordinated Debt: Debt incurred
by an Obligor that is expressly subordinate and junior in right of payment to
Full Payment of all Obligations, and is on terms (including maturity, interest,
fees, repayment, covenants and subordination) satisfactory to Agent in its
Credit Judgment.


 


Subsidiary: any entity at
least 50% of whose voting securities or Equity Interests is owned by an Obligor
or any combination of Obligors (including indirect ownership by an Obligor
through other entities in which such Obligor directly or indirectly owns 50% of
the voting securities or Equity Interests).


 


Subsidiary Guarantors: O.S. Kelly,
MMAS, ArkivMusic and each other Subsidiary who guarantees payment or
performance of any Obligations.


 


Swingline Loan: any Borrowing
of Base Rate Loans funded with Agent’s funds, until such Borrowing is settled
among Lenders or repaid by Borrowers.


 


Taxes: all present
or future taxes, levies, imposts, duties, deductions, withholdings (including
backup withholding), assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.


 


Termination Date: October 5, 2015.


 


Transferee: any actual or
potential Eligible Assignee, Participant or other Person acquiring an interest
in any Obligations.


 


Trigger Period:  the period (a) commencing on any day
that either (i) a Default or an Event of Default occurs or (ii) Excess
Availability is less than the product of (A) the aggregate amount of the
Commitments multiplied by (B) twenty
percent (20%), and (b) continuing until the day on which no Event of Default
exists and Excess Availability at all times during the preceding 30 consecutive
days has been greater than the product of (i) the aggregate amount of the
Commitments multiplied by (ii) twenty
percent (20%).


 


Type: any type of a
Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same interest option
and, in the case of LIBOR Loans, the same Interest Period.


 


UCC: the Uniform
Commercial Code as in effect in The Commonwealth of Massachusetts or, when the
laws of any other jurisdiction govern the perfection or enforcement of any
Lien, the Uniform Commercial Code of such jurisdiction.


 


27
















 


Unfunded
Pension Liability: the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension
Plan’s assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 or 430 of the Code for the
applicable plan year as reflected in the most recent actuarial report for such
Pension Plan.


 


Upstream Payment: a
Distribution by a Subsidiary of an Obligor to such Obligor.


 


Value: (a) for
Inventory, its value determined on the basis of the lower of cost or market,
calculated on a first-in, first-out basis, and excluding any portion of cost
attributable to intercompany profit among the Obligors and their Affiliates;
and (b) for an Account, its face amount, net of any returns, rebates,
discounts (calculated on the shortest terms), credits, allowances or Taxes
(including sales, excise or other taxes) that have been or could be claimed by
the Account Debtor or any other Person.


 


Vincent Bach: shall mean
Vincent Bach International, Ltd.,
an English corporation.


 


Voting Equity Interests: of any Person
shall mean all classes of Equity Interests of such Person entitled to vote.


 


1.2.                            Accounting Terms.  Under the Loan Documents (except as otherwise
specified herein), all accounting terms shall be interpreted, all accounting
determinations shall be made, and all financial statements shall be prepared,
in accordance with GAAP applied on a basis consistent with the most recent
audited financial statements of Parent and its Subsidiaries delivered to Agent
before the Closing Date and using the same inventory valuation method as used
in such financial statements, except for any change required or permitted by
GAAP if Parent’s certified public accountants concur in such change, the change
is disclosed to Agent, and Section 10.3
is amended in a manner reasonably satisfactory to Required Lenders to take into
account the effects of the change.


 


1.3.                            Uniform Commercial Code.  As used herein, the following terms are
defined in accordance with the UCC in effect in The Commonwealth of
Massachusetts from time to time:  “Chattel
Paper,” “Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General
Intangibles,” “Goods,” “Instrument,” “Investment Property,” “Letter-of-Credit Right”
and “Supporting Obligation.”


 


1.4.                            Certain Matters of Construction.  The terms “herein,” “hereof,” “hereunder” and
other words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. 
Any pronoun used shall be deemed to cover all genders.  In the computation of periods of time from a
specified date to a later specified date, “from” means “from and including,”
and “to” and “until” each mean “to but excluding.”  The terms “including” and “include” shall
mean “including, without limitation” and, for purposes of each Loan Document,
the parties agree that the rule of ejusdem
generis shall not be applicable to limit any provision.  Section titles appear as a matter of
convenience only and shall not affect the interpretation of any Loan
Document.  All references to (a) laws
or statutes include all related rules, regulations, interpretations, amendments
and successor provisions; (b) any document, instrument or agreement
include any amendments, waivers and other modifications, extensions or renewals
(to the extent permitted by the Loan Documents); (c) any section mean,
unless the context otherwise requires, a section of this Agreement; (d) any
exhibits or schedules mean, unless the context otherwise requires, exhibits and
schedules attached hereto, which are hereby incorporated by reference; (e) any
Person include successors and assigns; (f) time of day mean time of day at
Agent’s notice address under Section 14.3.1;
or (g) discretion of Agent, Issuing Bank or any Lender means the
Credit Judgment of such Person.  All
calculations of Value, fundings of Loans, issuances of Letters of Credit and
payments of Obligations shall be in Dollars and, unless the context otherwise
requires, all determinations (including calculations of Borrowing Base and
financial covenants) made from time to time under the Loan Documents shall be
made in light of the circumstances existing at such time.  Borrowing Base calculations shall be consistent
with historical methods of valuation and calculation, and otherwise
satisfactory to Agent (and not necessarily calculated in accordance with
GAAP).  Borrowers shall have


 


28

















 


the
burden of establishing any alleged negligence, misconduct or lack of good faith
by Agent, Issuing Bank or any Lender under any Loan Documents.  No provision of any Loan Documents shall be
construed against any party by reason of such party having, or being deemed to
have, drafted the provision.  Whenever
the phrase “to the best of Borrowers’ (or other Obligor’s) knowledge” or words
of similar import are used in any Loan Documents, it means actual knowledge of a Senior Officer,
or knowledge that a Senior Officer would have obtained if he or she had engaged in
good faith and diligent performance of his or her duties, including reasonably
specific inquiries of employees or agents and a good faith attempt to ascertain
the matter to which such phrase relates.


 


	
  SECTION 2.

  	
  CREDIT FACILITIES

  
	
   

  	
   

  
	
  2.1.

  	
  Commitment.

  



 


2.1.1.                     Loans.  Each Lender agrees, severally on a Pro Rata
basis up to its Commitment, on the terms set forth herein, to make Loans to
Borrowers from time to time through the Commitment Termination Date.  The Loans may be repaid and reborrowed as
provided herein.  In no event shall
Lenders have any obligation to honor a request for a Loan if the unpaid balance
of Loans outstanding at such time (including the requested Loan) would exceed
the Borrowing Base.


 


2.1.2.                     Notes.  The Loans made by each Lender and interest accruing
thereon shall be evidenced by the records of Agent and such Lender.  At the request of any Lender, Borrowers shall
deliver a Note to such Lender.


 


2.1.3.                     Use of Proceeds.  The proceeds of Loans shall be used by
Borrowers solely (a) to satisfy existing Debt; (b) to pay fees and
transaction expenses associated with the closing of this credit facility; (c) to
pay Obligations in accordance with this Agreement; and (d) for working
capital and other lawful corporate purposes of Borrowers not otherwise prohibited
by this Agreement.


 


2.1.4.                     Voluntary Reduction or Termination of Commitments.


 


(a)                                  The Commitments shall terminate on the Termination Date, unless sooner
terminated in accordance with this Agreement. 
Upon at least 45 days prior written notice to Agent at
any time, Borrowers may, at their option, terminate the Commitments and this
credit facility.  Any notice of
termination given by Borrowers shall be irrevocable.  On the termination date, Borrowers shall make
Full Payment of all Obligations.


 


(b)                                 Borrowers may permanently reduce the Commitments, on a Pro
Rata basis for each Lender, upon at least 45 days prior written notice to
Agent, which notice shall specify the amount of the reduction and shall be
irrevocable once given.  Each reduction shall be in a minimum amount
of $5,000,000, or an increment of $1,000,000 in excess thereof.


 


2.1.5.                     Overadvances.  If the aggregate Loans exceed the Borrowing
Base (“Overadvance”) at any time, the excess amount shall be payable by
Borrowers within one (1) Business Day after  demand by
Agent, but all such Loans shall nevertheless constitute Obligations secured by
the Collateral and entitled to all benefits of the Loan Documents.  Unless its authority has been revoked in
writing by Required Lenders, Agent may require Lenders to honor requests for
Overadvance Loans and to forbear from requiring Borrowers to cure an
Overadvance, (a) when no other Event of Default is known to Agent, as long
as (i) the Overadvance does not continue for more than 30 consecutive days
(and no Overadvance may exist for at least five consecutive days thereafter
before further Overadvance Loans are required), and (ii) the Overadvance
is not known by Agent to exceed 10% of the Borrowing Base at any time while such
Overadvance is outstanding; and (b) regardless of whether an Event
of Default exists, if Agent discovers an Overadvance not previously known by it
to exist, as long as from the date of such discovery the Overadvance (i) is
not increased by more than $1,000,000, and (ii) does not continue for


 


29

















 


more
than 30 consecutive days.  In no event
shall Overadvance Loans be required that would cause the outstanding Loans and
LC Obligations to exceed the aggregate Commitments.  Any funding of an Overadvance Loan or
sufferance of an Overadvance shall not constitute a waiver by Agent or Lenders
of the Event of Default caused thereby. 
In no event shall any Borrower or other Obligor be deemed a beneficiary
of this Section nor authorized to enforce any of its terms.


 


2.1.6.                     Protective
Advances.  Agent shall
be authorized, in its discretion, at any time that any conditions in Section 6 are not satisfied, and
without regard to the aggregate Commitments, to make Base Rate Loans (“Protective
Advances”) (a) up to an aggregate amount of $5,000,000 outstanding at
any time, if Agent deems such Loans necessary or desirable to preserve or
protect Collateral, or to enhance the collectibility or repayment of
Obligations; or (b) to pay any other amounts chargeable to Obligors under
any Loan Documents, including costs, fees and expenses.  Each Lender shall participate in each
Protective Advance on a Pro Rata basis. 
Required Lenders may at any time revoke Agent’s authority to make
further Protective Advances by written notice to Agent.  Absent such revocation, Agent’s determination
that funding of a Protective Advance is appropriate shall be conclusive.


 


2.1.7.                     Incremental
Facility.  Except as
set forth below, so long as no Default or Event of Default has occurred and is
continuing, at any one time prior to the Commitment Termination Date, Borrowers
may request, pursuant to the procedure set forth in this Section 2.1.7,
the addition of the Incremental Facility, which shall be added to and increase
the original aggregate amount of the Commitments and pursuant to which the
Borrowers may request incremental Loans (each, an “Incremental Loan”)
pursuant to Section 2.1.1; provided,
however, that the sum of all Incremental Commitments shall not exceed
the Maximum Incremental Amount.  Borrowers shall give Agent not less than
thirty (30) days prior written notice of their request for the Incremental
Facility.  The Incremental Facility
shall:


 


(i)                                     have such upfront fee as may
be agreed by the Borrowers and the Lender(s) providing such Incremental
Loans pursuant to the provisions of this Section 2.1.7;
and


 


(ii)                                  except as specifically
provided in this Section 2.1.7, otherwise have
all of the same terms and conditions as the Loans.


 


In addition, unless
otherwise specifically provided in this Agreement, all references in the Loan
Documents to Loans shall be deemed, as the context requires, to include
references to Incremental Loans made pursuant to this Agreement.  Borrowers shall have no obligation to offer
to existing Lenders the opportunity to subscribe to the Incremental Facility,
and no existing Lender will have an obligation to make an Incremental Loan
unless and until it expressly commits to do so in writing.  Borrowers shall have the right to cause the
Incremental Loans to be made by a new Lender identified by Borrowers that is an
Eligible Assignee and is reasonably acceptable to Agent, provided that any such
new Lender shall be required to comply with Section 13.3.  Incremental Commitments in respect of
Incremental Loans shall become Commitments under this Agreement pursuant to (y) an
amendment (each, an “Incremental Loan Amendment”) to this Agreement
executed by the Borrowers, each Lender or other financial institution approved
by the Agent (which approval shall not be unreasonably withheld) agreeing to
provide such Incremental Commitment (and no other Lender shall be required to
execute such amendment) and the Agent, and (z) any amendments to the other
Loan Documents (executed by the relevant Obligor and Agent only) as the Agent
shall reasonably deem appropriate to effect such purpose.  Notwithstanding anything to the contrary
contained herein, the effectiveness of such Incremental Loan Amendment shall be
subject to the satisfaction of the conditions set forth in Sections
6.2(a), (b) and (c), unless waived by Agent.


 


2.2.         Reserved.


 


30

















 


2.3.         Letter
of Credit Facility.


 


2.3.1.                     Issuance of
Letters of Credit.  Issuing
Bank agrees to issue Letters of Credit from time to time until 30 days prior to
the Termination Date (or until the Commitment Termination Date, if earlier), on
the terms set forth herein, including the following:


 


(a)                                  Each Borrower acknowledges that Issuing Bank’s willingness to issue any
Letter of Credit is conditioned upon Issuing Bank’s receipt of a LC Application
with respect to the requested Letter of Credit, as well as such other
instruments and agreements as Issuing Bank may customarily require for issuance
of a letter of credit of similar type and amount.  Issuing Bank shall have no obligation to
issue any Letter of Credit unless (i) Issuing Bank receives a LC Request
and LC Application at least three Business Days prior to the requested date of
issuance; (ii) each LC Condition is satisfied; and (iii) if a
Defaulting Lender exists, such Lender or Borrowers have entered into
arrangements satisfactory to Agent and Issuing Bank to eliminate any funding
risk associated with the Defaulting Lender. 
If Issuing Bank receives written notice from a Lender at least five
Business Days before issuance of a Letter of Credit that any LC Condition has
not been satisfied, Issuing Bank shall have no obligation to issue the
requested Letter of Credit (or any other) until such notice is withdrawn in
writing by that Lender or until Required Lenders have waived such condition in
accordance with this Agreement.  Prior to
receipt of any such notice, Issuing Bank shall not be deemed to have
knowledge of any failure of LC Conditions.


 


(b)                                 Letters of Credit may be requested by a Borrower only (i) to support
obligations of such Borrower incurred in the Ordinary Course of Business; or (ii) for
other purposes as Agent and Lenders may approve from time to time in
writing.  The renewal or extension of any
Letter of Credit shall be treated as the issuance of a new Letter of Credit,
except that delivery of a new LC Application shall be required at the
discretion of Issuing Bank.


 


(c)                                  Borrowers assume all risks of the acts, omissions or misuses of any
Letter of Credit by the beneficiary.  In
connection with issuance of any Letter of Credit, none of Agent, Issuing
Bank or any Lender shall be responsible for the existence, character, quality,
quantity, condition, packing, value or delivery of any goods purported to be
represented by any Documents; any differences or variation in the character,
quality, quantity, condition, packing, value or delivery of any goods from that
expressed in any Documents; the form, validity, sufficiency, accuracy,
genuineness or legal effect of any Documents or of any endorsements thereon;
the time, place, manner or order in which shipment of goods is made; partial or
incomplete shipment of, or failure to ship, any goods referred to in a Letter
of Credit or Documents; any deviation from instructions, delay, default or
fraud by any shipper or other Person in connection with any goods, shipment or
delivery; any breach of contract between a shipper or vendor and a Borrower;
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or
otherwise; errors in interpretation of technical terms; the misapplication by a
beneficiary of any Letter of Credit or the proceeds thereof; or any
consequences arising from causes beyond the control of Issuing Bank, Agent or
any Lender, including any act or omission of a Governmental Authority.  The rights and remedies of Issuing Bank under
the Loan Documents shall be cumulative. 
Issuing Bank shall be fully subrogated to the rights and remedies of
each beneficiary whose claims against Borrowers are discharged with proceeds of
any Letter of Credit.


 


(d)                                 In connection with its administration of and enforcement of rights or
remedies under any Letters of Credit or LC Documents, Issuing Bank shall
be entitled to act, and shall be fully protected in acting, upon any
certification, documentation or communication in whatever form reasonably
believed by Issuing Bank, in good faith, to be genuine and correct and to have
been signed, sent or made by a proper Person. 
Issuing Bank may consult with and employ legal counsel, accountants and
other experts to advise it concerning its obligations, rights and remedies, and
shall be entitled to act upon, and shall be fully protected in any action taken
in good faith reliance upon, any advice given by such experts.  Issuing Bank may employ agents and
attorneys-in-fact in connection with any matter relating to Letters of Credit
or LC Documents, and shall not be liable for the negligence or misconduct of
agents and attorneys-in-fact selected with reasonable care.


 


31

















 


2.3.2.                     Reimbursement;
Participations.


 


(a)                                  If Issuing Bank honors any request for payment under a Letter of
Credit, Borrowers shall pay to Issuing Bank, on the same Business Day if
Borrower Agent shall have received written or telephonic notice of such drawing
prior to 12:00 noon (Boston local time)
on such date and otherwise on the Business Day immediately following the date
on which such request for payment is honored (such date “Reimbursement Date”),
the amount paid by Issuing Bank under such Letter of Credit, together with interest at the
interest rate for Base Rate Loans from the Reimbursement Date until payment by
Borrowers.  The obligation of Borrowers
to reimburse Issuing Bank for any payment made under a Letter of Credit shall
be absolute, unconditional, irrevocable, and joint and several, and shall be
paid without regard to any lack of validity or enforceability of any Letter of
Credit or the existence of any claim, setoff, defense or other right that
Borrowers may have at any time against the beneficiary.  Whether or not Borrower Agent submits a
Notice of Borrowing, Borrowers shall be deemed to have requested a Borrowing of
Base Rate Loans in an amount necessary to pay all amounts due Issuing Bank on
any Reimbursement Date and each Lender agrees to fund its Pro Rata share of
such Borrowing whether or not the Commitments have terminated, an Overadvance
exists or is created thereby, or the conditions in Section 6 are satisfied.


 


(b)                                 Upon issuance
of a Letter of Credit, each Lender shall be deemed to have irrevocably and
unconditionally purchased from Issuing Bank, without recourse or warranty, an
undivided Pro Rata interest and participation in all LC Obligations relating to
the Letter of Credit.  If Issuing Bank
makes any payment under a Letter of Credit and Borrowers do not reimburse such
payment on the Reimbursement Date, Agent shall promptly notify Lenders and each
Lender shall promptly (within one Business Day) and unconditionally pay to
Agent, for the benefit of Issuing Bank, the Lender’s Pro Rata share of such
payment.  Upon request by a Lender, Issuing
Bank shall furnish copies of any Letters of Credit and LC Documents in its
possession at such time.


 


(c)                                  The obligation
of each Lender to make payments to Agent for the account of Issuing Bank in
connection with Issuing Bank’s payment under a Letter of Credit shall be
absolute, unconditional and irrevocable, not subject to any counterclaim,
setoff, qualification or exception whatsoever, and shall be made in accordance
with this Agreement under all circumstances, irrespective of any lack of
validity or unenforceability of any Loan Documents; any draft, certificate or
other document presented under a Letter of Credit having been determined to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or the existence of any
setoff or defense that any Obligor may have with respect to any Obligations.  Issuing Bank does not assume any
responsibility for any failure or delay in performance or any breach by any
Borrower or other Person of any obligations under any LC Documents.  Issuing Bank does not make to Lenders any
express or implied warranty, representation or guaranty with respect to the
Collateral, LC Documents or any Obligor. 
Issuing Bank shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties contained in, or for the
execution, validity, genuineness, effectiveness or enforceability of any LC
Documents; the validity, genuineness, enforceability, collectibility, value or
sufficiency of any Collateral or the perfection of any Lien therein; or the
assets, liabilities, financial condition, results of operations, business,
creditworthiness or legal status of any Obligor.


 


(d)                                 No Issuing Bank
Indemnitee shall be liable to any Lender or other Person for any action taken
or omitted to be taken in connection with any LC Documents except as a result
of its actual gross negligence or willful misconduct.  Issuing Bank shall not have any liability to
any Lender if Issuing Bank refrains from any action under any Letter of Credit
or LC Documents until it receives written instructions from Required Lenders.


 


2.3.3.                     Cash Collateral.  If any LC Obligations, whether or not then
due or payable, shall for any reason be outstanding at any time (a) that
an Event of Default exists, (b) that Excess Availability is less than
zero, (c) after the Commitment Termination Date, or (d) within 20
Business Days prior to the


 


32

















 


Termination
Date, then Borrowers shall, at Issuing Bank’s or Agent’s request, Cash
Collateralize the stated amount of all outstanding Letters of Credit and pay to
Issuing Bank the amount of all other LC Obligations.  If Borrowers fail to
provide any Cash Collateral as required in this Section 2.3.3, Lenders may
(and shall upon direction of Agent) advance, as Loans, the amount of the Cash
Collateral required (whether or not
the Commitments have terminated, an Overadvance exists or the conditions in Section 6 are satisfied).


 


	
  SECTION 3.

  	
  INTEREST, FEES AND
  CHARGES

  
	
   

  	
   

  
	
  3.1.

  	
  Interest.

  



 


3.1.1.                     Rates and
Payment of Interest.


 


(a)                                  The Obligations shall bear interest (i) if a Base Rate Loan, at
the Base Rate in effect from time to time, plus the Applicable Margin; (ii) if
a LIBOR Loan, at LIBOR for the applicable Interest Period, plus the Applicable
Margin; and (iii) if any other Obligation (including, to the extent
permitted by law, interest not paid when due), at the Base Rate in effect from
time to time, plus the Applicable Margin for Base Rate Loans.  Interest shall accrue from the date the Loan
is advanced or the Obligation is incurred or payable, until paid by
Borrowers.  If a Loan is repaid on the
same day made, one day’s interest shall accrue.


 


(b)                                 During an
Insolvency Proceeding with respect to any Borrower, or during any other Event
of Default if the Required Lenders in their discretion so elect, Obligations
shall bear interest at the Default Rate (whether before or after any
judgment).  Each Borrower acknowledges
that the cost and expense to the Required Lenders due to any such Event of
Default are difficult to ascertain and that the Default Rate is a fair and
reasonable estimate to compensate Agent and the Required Lenders for such
additional cost and expense.


 


(c)                                  Interest
accrued on the Loans shall be due and payable in arrears, (i) on the first
day of each month; (ii) on any date of prepayment, with respect to the
principal amount of Loans being prepaid; and (iii) on the Commitment
Termination Date.  Interest accrued on
any other Obligations shall be due and payable as provided in the Loan
Documents and, if no payment date is specified, shall be due and payable on demand. 
Notwithstanding the foregoing, interest accrued at the Default Rate
shall be due and payable on demand.


 


3.1.2.                     Application of
LIBOR to Outstanding Loans.


 


(a)                                  Borrowers may
on any Business Day, subject to delivery of a Notice of
Conversion/Continuation, elect to convert any portion of the Base Rate Loans
to, or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR
Loan.  During any Default or Event of
Default, Agent may (and shall at the direction of Required Lenders) declare
that no Loan may be made, converted or continued as a LIBOR Loan.


 


(b)                                 Whenever
Borrowers desire to convert or continue Loans as LIBOR Loans, Borrower Agent
shall give Agent a Notice of Conversion/Continuation,
no later than 11:00 a.m. (Boston local time) at least one (1) Business
Day before the requested conversion or continuation date.  Promptly after receiving any such notice,
Agent shall notify each Lender thereof. 
Each Notice of Conversion/Continuation shall be irrevocable, and shall
specify the amount of Loans to be converted or continued, the conversion or
continuation date (which shall be a Business Day), and the duration of the
Interest Period (which shall be deemed to be 30 days if not specified).  If, upon the expiration of any Interest
Period in respect of any LIBOR Loans, Borrowers shall have failed to deliver a
Notice of Conversion/Continuation, they shall be deemed to have elected to
convert such Loans into Base Rate Loans.


 


33
















 


3.1.3.       Interest Periods.  In connection with the making, conversion or
continuation of any LIBOR Loans, Borrowers shall select an interest period (“Interest
Period”) to apply, which interest period shall be 30, 60, or 90 days; provided,
however, that:


 


(a)           the Interest
Period shall commence on the date the Loan is made or continued as, or
converted into, a LIBOR Loan, and shall expire on the numerically corresponding
day in the calendar month at its end;


 


(b)           if any Interest
Period commences on a day for which there is no corresponding day in the
calendar month at its end or if such corresponding day falls after the last
Business Day of such month, then the Interest Period shall expire on the last
Business Day of such month; and if any Interest Period would expire on a day
that is not a Business Day, the period shall expire on the next Business Day;
and


 


(c)           no Interest Period shall extend beyond the
Termination Date.


 


3.1.4.       Interest Rate Not
Ascertainable.  If Agent
shall determine in its Credit Judgment that on any date for determining LIBOR,
due to any circumstance affecting the London interbank market, adequate and
fair means do not exist for ascertaining such rate on the basis provided
herein, then Agent shall immediately notify Borrowers of such determination.  Until Agent notifies Borrowers that such
circumstance no longer exists, the obligation of Lenders to make LIBOR Loans
shall be suspended, and no further Loans may be converted into or continued as
LIBOR Loans.


 


3.2.         Fees.


 


3.2.1.       Unused Line Fee.  Borrowers shall pay to Agent, for the Pro
Rata benefit of Lenders, a fee equal to 0.25% per annum times the amount by
which the Commitments exceed the average daily balance of Loans and stated
amount of Letters of Credit during any month.  Such
fee shall be payable in arrears, on the first day of each month and on
the Commitment Termination Date.


 


3.2.2.       LC Facility Fees.  Borrowers shall pay (a) to Agent, for
the Pro Rata benefit of Lenders, a fee equal to the Applicable Margin in effect
for LIBOR Loans times the average daily stated amount of Letters of Credit,
which fee shall be payable monthly in arrears, on the first day of each month; (b) to
Agent, for its own account, a fronting fee equal to 0.125% per annum on the
stated amount of each Letter of Credit, which fee shall be payable monthly in
arrears, on the first day of each month; and (c) to Issuing Bank, for its
own account, all customary charges associated with the issuance, amending,
negotiating, payment, processing, transfer and administration of Letters of
Credit, which charges shall be paid as and when incurred.  During an Event of Default, the fee payable
under clause (a) shall be increased by 2% per annum.


 


3.2.3.       Closing and Arrangement Fees.  Borrowers shall pay to Agent, for the Pro
Rata benefit of Lenders, (a) a closing fee of $300,000, and (b) an
arrangement fee of $150,000, which shall be paid concurrently with the funding
of the initial Loans hereunder.


 


3.2.4.       Agent Fees.  In consideration of Agent’s syndication of
the Commitments and service as Agent hereunder, Borrowers shall pay to Agent,
for its own account, the fees described in the Fee Letter.


 


3.3.         Computation of Interest, Fees, Yield Protection.  All interest, as well as fees
and other charges calculated on a per annum basis, shall be computed for the
actual days elapsed, based on a year of 360 days.  Each determination by Agent of any interest,
fees or interest rate hereunder shall be final, conclusive and binding for all
purposes, absent manifest error.  All
fees shall be fully earned when due and shall not be subject to rebate, refund
or proration.  All fees payable under Section 3.2 are


 


34

















 


compensation
for services and are not, and shall not be deemed to be, interest or any other
charge for the use, forbearance or detention of money.  A certificate as to amounts payable by
Borrowers under Section 3.4, 3.6, 3.7,
3.9 or 5.9, submitted to Borrower Agent by Agent or the affected
Lender, as applicable, shall be final, conclusive and binding for all purposes,
absent manifest error, and Borrowers shall pay such amounts to the appropriate
party within 10 days following receipt of the certificate.


 


3.4.         Reimbursement
Obligations.  Borrowers shall reimburse Agent for all
Extraordinary Expenses.  Borrowers shall
also reimburse Agent for all reasonable legal, accounting, appraisal,
consulting, and other fees, costs and expenses incurred by it in connection
with (a) negotiation and preparation of any Loan Documents, including any
amendment or other modification thereof; (b) administration of and actions
relating to any Collateral, Loan Documents and transactions contemplated
thereby, including any actions taken to perfect or maintain priority of Agent’s
Liens on any Collateral, to maintain any insurance required hereunder or to
verify Collateral; and (c) subject to the limits of Section 10.1.1(b), each inspection,
audit or appraisal with respect to any Obligor or Collateral, whether prepared
by Agent’s personnel or a third party. 
All legal, accounting and consulting fees shall be charged to Borrowers
by Agent’s professionals at their full hourly rates, regardless of any reduced
or alternative fee billing arrangements that Agent, any Lender or any of their
Affiliates may have with such professionals with respect to this or any other
transaction.  If, for any reason (including inaccurate reporting on financial
statements or a Compliance Certificate), it is determined that a higher
Applicable Margin should have applied to a period than was actually applied,
then the proper margin shall be applied retroactively and Borrowers shall
immediately pay to Agent, for the Pro Rata benefit of Lenders, an amount equal
to the difference between the amount of interest and fees that would have
accrued using the proper margin and the amount actually paid.  All amounts payable by Borrowers under this Section shall
be due on demand.


 


3.5.         Illegality.  If any Lender determines that any Applicable
Law has made it unlawful, or that any Governmental Authority has asserted that
it is unlawful, for any Lender or its applicable Lending Office to make,
maintain or fund LIBOR Loans, or to determine or charge interest rates based
upon LIBOR, or any Governmental Authority has imposed material restrictions on
the authority of such Lender to purchase or sell, or to take deposits of,
Dollars in the London interbank market, then, on notice thereof by such Lender
to Agent, any obligation of such Lender to make or continue LIBOR Loans or to
convert Base Rate Loans to LIBOR Loans shall be suspended until such Lender
notifies Agent that the circumstances giving rise to such determination no
longer exist.  Upon delivery of such
notice, Borrowers shall prepay or, if applicable, convert all LIBOR Loans of
such Lender to Base Rate Loans, either on the last day of the Interest Period
therefor, if such Lender may lawfully continue to maintain such LIBOR Loans to
such day, or immediately, if such Lender may not lawfully continue to maintain
such LIBOR Loans.  Upon any such
prepayment or conversion, Borrowers shall also pay accrued interest on the
amount so prepaid or converted.


 


3.6.         Inability to Determine Rates.  If Required Lenders notify Agent for any
reason in connection with a request for a Borrowing of, or conversion to or
continuation of, a LIBOR Loan that (a) Dollar deposits are not being
offered to banks in the London interbank Eurodollar market for the applicable
amount and Interest Period of such Loan, (b) adequate and reasonable means
do not exist for determining LIBOR for the requested Interest Period, or (c) LIBOR
for the requested Interest Period does not adequately and fairly reflect the
cost to such Lenders of funding such Loan, then Agent will promptly so notify
Borrower Agent and each Lender. 
Thereafter, the obligation of Lenders to make or maintain LIBOR Loans
shall be suspended until Agent (upon instruction by Required Lenders) revokes
such notice.  Upon receipt of such
notice, Borrower Agent may revoke any pending request for a Borrowing of,
conversion to or continuation of a LIBOR Loan or, failing that, will be deemed
to have submitted a request for a Base Rate Loan.


 


35

















 


3.7.         Increased Costs; Capital Adequacy.


 


3.7.1.       Change in Law.  If any Change in Law shall:


 


(a)           impose modify
or deem applicable any reserve, special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or for the
account of, or credit extended or participated in by, any Lender (except any
reserve requirement reflected in LIBOR) or Issuing Bank;


 


(b)           subject any
Lender or Issuing Bank to any Tax with respect to any Loan, Loan Document,
Letter of Credit or participation in LC Obligations, or change the basis of
taxation of payments to such Lender or Issuing Bank in respect thereof (except
for Indemnified Taxes or Other Taxes covered by Section 5.9 and the imposition of, or any change in the
rate of, any Excluded Tax payable by such Lender or Issuing Bank); or


 


(c)           impose on any
Lender or Issuing Bank or the London interbank market any other condition, cost
or expense affecting any Loan, Loan Document, Letter of Credit or participation
in LC Obligations;


 


and the result thereof shall
be to increase the cost to such Lender of making or maintaining any LIBOR Loan
(or of maintaining its obligation to make any such Loan), or to increase the
cost to such Lender or Issuing Bank of participating in, issuing or maintaining
any Letter of Credit (or of maintaining its obligation to participate in or to
issue any Letter of Credit), or to reduce the amount of any sum received or
receivable by such Lender or Issuing Bank hereunder (whether of principal,
interest or any other amount) then, upon request of such Lender or Issuing
Bank, Borrowers will pay to such Lender or Issuing Bank, as applicable, such
additional amount or amounts as will compensate such Lender or Issuing Bank, as
applicable, for such additional costs incurred or reduction suffered.


 


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


 


3.7.3.       Compensation.  Failure or delay on the part of any Lender or
Issuing Bank to demand compensation pursuant to this Section shall not
constitute a waiver of its right to demand such compensation, but Borrowers
shall not be required to compensate a Lender or Issuing Bank for any increased
costs incurred or reductions suffered more than six months prior to the date
that the Lender or Issuing Bank notifies Borrower Agent of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or
Issuing Bank’s intention to claim compensation therefor (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the six-month period referred to above shall be extended to include the
period of retroactive effect thereof).


 


3.8.         Mitigation.  If any
Lender gives a notice under Section 3.5
or requests compensation under Section 3.7,
or if Borrowers are required to pay additional amounts with respect to a Lender
under Section 5.9, then such
Lender shall use reasonable efforts to designate a different Lending Office or
to assign its rights and obligations hereunder to another of its offices,
branches or Affiliates, if, in the judgment of such Lender, such designation or
assignment (a) would eliminate the need for such notice or reduce amounts
payable or to be withheld in the future, as applicable; and (b) would not
subject the Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to it.


 


36

















 


Borrowers
shall pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.


 


3.9.         Funding Losses.  If for any reason (other than
default by a Lender) (a) any Borrowing of, or conversion to or
continuation of, a LIBOR Loan does not occur on the date specified therefor in
a Notice of Borrowing or Notice of Conversion/Continuation (whether or not
withdrawn), (b) any repayment or conversion of a LIBOR Loan occurs on a
day other than the end of its Interest Period, or (c) Borrowers fail to
repay a LIBOR Loan when required hereunder, then Borrowers shall pay to Agent
its customary administrative charge and to each Lender all losses and expenses
that it sustains as a consequence thereof, including loss of anticipated
profits and any loss or expense arising from liquidation or redeployment of
funds or from fees payable to terminate deposits of matching funds.  Lenders shall not be required to purchase
Dollar deposits in the London interbank market or any other offshore Dollar
market to fund any LIBOR Loan, but the provisions hereof shall be deemed to
apply as if each Lender had purchased such deposits to fund its LIBOR Loans.


 


3.10.       Maximum Interest.  Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under
the Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by Applicable Law (“maximum rate”).  If Agent or any Lender shall receive interest
in an amount that exceeds the maximum rate, the excess interest shall be
applied to the principal of the Obligations or, if it exceeds such unpaid principal,
refunded to Borrowers.  In determining
whether the interest contracted for, charged or received by Agent or a Lender
exceeds the maximum rate, such Person may, to the extent permitted by
Applicable Law, (a) characterize any payment that is not principal as an
expense, fee or premium rather than interest; (b) exclude voluntary
prepayments and the effects thereof; and (c) amortize, prorate, allocate
and spread in equal or unequal parts the total amount of interest throughout
the contemplated term of the Obligations hereunder.


 


SECTION 4.         LOAN
ADMINISTRATION


 


4.1.         Manner of Borrowing and Funding Loans.


 


4.1.1.       Notice of Borrowing.


 


(a)           Whenever
Borrowers desire funding of a Borrowing of Loans, Borrower Agent shall give
Agent a Notice of Borrowing.  Such notice
must be received by Agent no later than 11:00 a.m. (Boston local time) (i) on
the Business Day of the requested funding date, in the case of Base Rate Loans,
and (ii) at least one Business Day prior to the requested funding date, in
the case of LIBOR Loans.  Notices
received after 11:00 a.m. (Boston local time) shall be deemed received on
the next Business Day.  Each Notice of
Borrowing shall be irrevocable and shall specify (A) the amount of the
Borrowing, (B) the requested funding date (which must be a Business Day), (C) whether
the Borrowing is to be made as Base Rate Loans or LIBOR Loans, and (D) in
the case of LIBOR Loans, the duration of the applicable Interest Period (which
shall be deemed to be 30 days if not specified).


 


(b)           Unless payment
is otherwise timely made by Borrowers, the becoming due of any Obligations
(whether principal, interest, fees or other charges, including Extraordinary Expenses, LC
Obligations, Cash Collateral and Bank Product Debt) shall be deemed to
be a request for Base Rate Loans on the due date, in the amount of such
Obligations.  The proceeds of such Loans
shall be disbursed as direct payment of the relevant Obligation.  In addition, Agent may, at its option, charge
such Obligations against any operating, investment or other account of a
Borrower maintained with Agent or any of its Affiliates.


 


(c)           If Borrowers establish a controlled
disbursement account with Agent or any Affiliate of Agent, then the
presentation for payment of any check or other item of payment drawn on such
account at a time when there are insufficient funds to cover it shall be deemed
to be a request for


 


37

















 


Base Rate Loans on the date of such presentation,
in the amount of the check and items presented for payment.  The proceeds of such Loans may be disbursed
directly to the controlled disbursement account or other appropriate account.


 


4.1.2.       Fundings by Lenders.  Each Lender shall timely honor its Commitment
by funding its Pro Rata share of each Borrowing of Loans that is properly
requested hereunder.  Except for
Borrowings to be made as Swingline Loans, Agent shall endeavor to notify
Lenders of each Notice of Borrowing (or deemed request for a Borrowing) by 12:00
noon (Boston local time) on the proposed funding date for Base Rate Loans or by
3:00 p.m.
(Boston local time) at least one Business Days before any proposed funding of
LIBOR Loans.  Each Lender shall fund to
Agent such Lender’s Pro Rata share of the Borrowing to the account specified by
Agent in immediately available funds not later than 2:00 p.m. (Boston
local time) on the requested funding date, unless Agent’s notice is received
after the times provided above, in which event Lender shall fund its Pro Rata
share by 11:00 a.m. (Boston local time) on the next Business Day.  Subject to its receipt of such amounts from
Lenders, Agent shall disburse the proceeds of the Loans as directed by Borrower
Agent.  Unless Agent shall have received
(in sufficient time to act) written notice from a Lender that it does not
intend to fund its Pro Rata share of a Borrowing, Agent may assume that such
Lender has deposited or promptly will deposit its share with Agent, and Agent
may disburse a corresponding amount to Borrowers.  If a Lender’s share of any Borrowing or of
any settlement pursuant to Section 4.1.3(b) is
not received by Agent, then Borrowers agree to repay to Agent on demand the amount of such share, together with interest
thereon from the date disbursed until repaid, at the rate applicable to the Borrowing.


 


4.1.3.       Swingline Loans; Settlement.


 


(a)           Agent may, but
shall not be obligated to, advance Swingline Loans to Borrowers, up to an
aggregate outstanding amount of $10,000,000 unless the funding is specifically
required to be made by all Lenders hereunder. 
Each Swingline Loan shall constitute a Loan for all purposes, except
that payments thereon shall be made to Agent for its own account.  The obligation of Borrowers to repay
Swingline Loans shall be evidenced by the records of Agent and need not be evidenced by
any promissory note.


 


(b)           To facilitate
administration of the Loans, Lenders and Agent agree (which agreement is solely
among them, and not for the benefit of or enforceable by any Borrower) that
settlement among them with respect to Swingline Loans and other Loans may take
place on a date determined from time to time by Agent, which shall occur at
least once each week.  On each settlement
date, settlement shall be made with each Lender in accordance with the
Settlement Report delivered by Agent to Lenders.  Between settlement dates, Agent may in its
discretion apply payments on Loans to Swingline Loans, regardless of any
designation by Borrower or any provision herein to the contrary.  Each Lender’s obligation to make settlements
with Agent is absolute and unconditional, without offset, counterclaim or other
defense, and whether or not the
Commitments have terminated, an Overadvance exists or the conditions in Section 6 are satisfied.  If, due to an Insolvency Proceeding with
respect to a Borrower or otherwise, any Swingline Loan may not be settled among
Lenders hereunder, then each Lender shall be deemed to have purchased from
Agent a Pro Rata participation in each unpaid Swingline Loan and shall transfer
the amount of such participation to Agent, in immediately available funds,
within one Business Day after Agent’s request therefor.


 


4.1.4.       Notices.  Each Borrower authorizes Agent and Lenders to
extend, convert or continue Loans, effect selections of interest rates, and
transfer funds to or on behalf of Borrowers based on telephonic or e-mailed
instructions.  Borrowers shall confirm
each such request by prompt delivery to Agent of a Notice of Borrowing or
Notice of Conversion/Continuation, if applicable, but if it differs in any
material respect from the action taken by Agent or Lenders, the records of
Agent and Lenders shall govern.  Neither
Agent nor any Lender shall have any liability for any loss suffered by a
Borrower as a result of Agent or any Lender acting upon its understanding of
telephonic or e-mailed instructions from a


 


38

















 


person
believed in good faith by Agent or any Lender to be a person authorized to give
such instructions on a Borrower’s behalf.


 


4.2.         Defaulting Lender.  Agent may (but shall not be required to), in
its discretion, retain any payments or other funds received by Agent that are
to be provided to a Defaulting Lender hereunder, and may apply such funds to
such Lender’s defaulted obligations or readvance the funds to Borrowers in
accordance with this Agreement.  The
failure of any Lender to fund a Loan, to make any payment in respect of LC Obligations
or to otherwise perform its obligations hereunder  shall not relieve any other Lender of its
obligations, and no Lender shall be responsible for default by another
Lender.  Lenders and Agent agree (which
agreement is solely among them, and not for the benefit of or enforceable by
any Borrower) that, solely for purposes of determining a Defaulting Lender’s
right to vote on matters relating to the Loan Documents and to share in
payments, fees and Collateral proceeds thereunder, a Defaulting Lender shall
not be deemed to be a “Lender” until all its defaulted obligations have been
cured.


 


4.3.         Number
and Amount of LIBOR Loans; Determination of Rate.  Each Borrowing of LIBOR Loans
when made shall be in a minimum amount of $1,000,000, plus any increment of
$500,000 in excess thereof.  No more than
five (5) Borrowings of LIBOR Loans may be outstanding at any time, and all
LIBOR Loans having the same length and beginning date of their Interest Periods
shall be aggregated together and considered one Borrowing for this
purpose.  Upon determining LIBOR for any
Interest Period requested by Borrowers, Agent shall promptly notify Borrowers
thereof by telephone or electronically and, if requested by Borrowers, shall
confirm any telephonic notice in writing.


 


4.4.         Borrower Agent.  Each Borrower hereby designates Parent (“Borrower
Agent”) as its representative and agent for all purposes under the Loan
Documents, including requests for Loans and Letters of Credit, designation of
interest rates, delivery or receipt of communications, preparation and delivery
of Borrowing Base and financial reports, receipt and payment of Obligations,
requests for waivers, amendments or other accommodations, actions under the
Loan Documents (including in respect of compliance with covenants), and all
other dealings with Agent, Issuing Bank or any Lender.  Borrower Agent hereby accepts such
appointment.  Agent and Lenders shall be
entitled to rely upon, and shall be fully protected in relying upon, any notice
or communication (including any notice of borrowing) delivered by Borrower
Agent on behalf of any Borrower.  Agent
and Lenders may give any notice or communication with a Borrower hereunder to
Borrower Agent on behalf of such Borrower. 
Each of Agent, Issuing Bank and Lenders shall have the right, in
its discretion, to deal exclusively with Borrower Agent for any or all purposes
under the Loan Documents.  Each Borrower
agrees that any notice, election, communication, representation, agreement or
undertaking made on its behalf by Borrower Agent shall be binding upon and
enforceable against it.


 


4.5.         One Obligation.  The Loans, LC Obligations and other
Obligations shall constitute one general obligation of Borrowers and (unless
otherwise expressly provided in any Loan Document) shall be secured by Agent’s
Lien upon all Collateral; provided, however, that Agent and each
Lender shall be deemed to be a creditor of, and the holder of a separate claim
against, each Borrower to the extent of any Obligations jointly or severally
owed by such Borrower.


 


4.6.         Effect
of Termination.  On the effective date of any termination of
the Commitments, all Obligations shall be immediately due and payable, and any Lender may
terminate its and its Affiliates’ Bank Products (including, only with the
consent of Agent, any Cash Management Services) upon ninety (90) days prior
written notice to Borrower Agent. 
All undertakings of Borrowers and the other Obligors contained in the
Loan Documents shall survive any termination, and Agent shall retain its Liens
in the Collateral and all of its rights and remedies under the Loan Documents
until Full Payment of the Obligations. 
Notwithstanding Full Payment of the Obligations, Agent shall not be
required to terminate its Liens in any Collateral unless, with respect to any
damages Agent may incur as a result of the dishonor or return of Payment Items
applied to Obligations, Agent receives (a) a written agreement, executed
by Borrowers and any Person whose advances are used in whole or in part to
satisfy the Obligations,


 


39

















 


indemnifying
Agent and Lenders from any such damages; or (b) such Cash Collateral as
Agent, in its discretion, deems necessary to protect against any such
damages.  Sections 2.3, 3.4, 3.6, 3.7, 3.9, 5.5,  5.9, 5.10, 12, 14.2 and this  Section, and the obligation of each
Obligor and Lender with respect to each indemnity given by it in any Loan Document,
shall survive Full Payment of the Obligations and any release relating to this
credit facility.


 


SECTION 5.         PAYMENTS


 


5.1.         General Payment Provisions.  All payments of Obligations shall be made in
Dollars, without offset, counterclaim or defense of any kind, free of (and
without deduction for) any Taxes, and in immediately available funds, not later
than 12:00 noon (Boston local time) on the due date.  Any payment after such time shall be deemed
made on the next Business Day.  Any
payment of a LIBOR Loan prior to the end of its Interest Period shall be
accompanied by all amounts due under Section 3.9.  Any prepayment of Loans shall be applied
first to Base Rate Loans and then to LIBOR Loans.


 


5.2.         Repayment
of Loans.  Loans shall be due and payable in full on the
Termination Date, unless payment is sooner required hereunder.  Loans may be prepaid from time to time,
without penalty or premium.  If any Asset
Disposition includes the disposition of Accounts or Inventory, then Net
Proceeds equal to the greater of (a) the net book value of such Accounts
and Inventory, or (b) the reduction in the Borrowing Base upon giving
effect to such disposition, shall be applied to the Loans.  Notwithstanding anything herein to the
contrary, if an Overadvance exists, Borrowers shall, on the sooner of Agent’s
demand or the first Business Day after any Borrower has knowledge thereof,
repay the outstanding Loans in an amount sufficient to reduce the principal
balance of Loans to the Borrowing Base.


 


5.3.         Reserved.


 


5.4.         Payment of Other Obligations.  Obligations other than Loans, including LC Obligations and
Extraordinary Expenses, shall be paid by Borrowers as provided in the
Loan Documents or, if no payment date is specified, on demand.


 


5.5.         Marshaling; Payments Set Aside.  None of Agent or Lenders shall be under any
obligation to marshal any assets in favor of any Obligor or against any
Obligations.  If any payment by or on
behalf of Borrowers is made to Agent, Issuing Bank or any Lender, or Agent, Issuing
Bank or any Lender exercises a right of setoff, and such payment or the
proceeds of such setoff or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by Agent, Issuing Bank or such
Lender in its discretion) to be repaid to a trustee, receiver or any other
Person, then to the extent of such recovery, the Obligation originally intended
to be satisfied, and all Liens, rights and remedies relating thereto, shall be revived
and continued in full force and effect as if such payment had not been made or
such setoff had not occurred.


 


5.6.         Post-Default
Allocation of Payments.


 


5.6.1.       Allocation.  Notwithstanding anything herein to the
contrary, during an Event of Default, monies to be applied to the Obligations,
whether arising from payments by Obligors, realization on Collateral, setoff or
otherwise, shall be allocated as follows:


 


(a)           first, to all costs
and expenses, including Extraordinary Expenses, owing to Agent;


 


(b)           second, to all
amounts owing to Agent on Swingline Loans;


 


(c)           third, to all
amounts owing to Issuing Bank on LC Obligations;


 


40

















 


(d)           fourth, to all
Obligations constituting fees (excluding amounts relating to Bank Products);


 


(e)           fifth, to all
Obligations constituting interest (excluding amounts relating to Bank
Products);


 


(f)            sixth, to provide
Cash Collateral for outstanding Letters of Credit;


 


(g)           seventh, to all other
Obligations, other than Bank Product Debt and Lease Debt;


 


(h)           eighth, to Bank
Product Debt; and


 


(i)            last, to Lease
Debt.


 


Amounts shall be applied to
each category of Obligations set forth above until Full Payment thereof and
then to the next category.  If amounts
are insufficient to satisfy a category, they shall be applied on a pro rata
basis among the Obligations in the category. 
Amounts distributed with respect to any Bank Product Debt shall be the
lesser of the applicable Bank Product Amount last reported to Agent or the
actual Bank Product Debt as calculated by the methodology reported to Agent for
determining the amount due.  Agent shall
have no obligation to calculate the amount to be distributed with respect to
any Bank Product Debt, but may rely upon written notice of the amount (setting
forth a reasonably detailed calculation) from the Secured Party.  In the absence of such notice, Agent may
assume the amount to be distributed is the Bank Product Amount last reported to
it.  The allocations set forth in this Section are
solely to determine the rights and priorities of Agent and Lenders as among
themselves, and may be changed by agreement among them without the consent of
any Obligor.  This Section is not
for the benefit of or enforceable by any Borrower.


 


5.6.2.       Erroneous Application.  Agent shall not be liable for any application
of amounts made by it in good faith and, if any such application is
subsequently determined to have been made in error, the sole recourse of any
Lender or other Person to which such amount should have been made shall be to
recover the amount from the Person that actually received it (and, if such
amount was received by any Lender, such Lender hereby agrees to return it).


 


5.7.         Application of Payments.  The ledger balance in the main Dominion
Account as of the end of a Business Day shall be applied to the Obligations at
the beginning of the next Business Day, during any Cash Trigger Period.  If, as a result of such application, a credit
balance exists, the balance shall not accrue interest in favor of Borrowers and
shall be made available to Borrowers as long as no Default or Event of Default
exists.  Each Borrower irrevocably waives
the right to direct the application of any payments or Collateral proceeds, and
agrees that Agent shall have the continuing, exclusive right to apply and
reapply same against the Obligations, in such manner as Agent deems advisable.


 


5.8.         Loan
Account; Account Stated.


 


5.8.1.       Loan Account.  Agent shall maintain in accordance with its
usual and customary practices an account or accounts (“Loan Account”)
evidencing the Debt of Borrowers resulting from each Loan or issuance of a
Letter of Credit from time to time.  Any
failure of Agent to record anything in the Loan Account, or any error in doing
so, shall not limit or otherwise affect the obligation of Borrowers to pay any
amount owing hereunder.  Agent may
maintain a single Loan Account in the name of Borrower Agent, and each Borrower
confirms that such arrangement shall have no effect on the joint and several
character of its liability for the Obligations.


 


41

















 


5.8.2.       Entries Binding.  Entries made in the Loan Account shall
constitute presumptive evidence of the information contained therein.  If any information contained in the Loan Account
is provided to or inspected by any Person, then such information shall be
conclusive and binding on such Person for all purposes absent manifest error,
except to the extent such Person notifies Agent in writing within 30 days after
receipt or inspection that specific information is subject to dispute.


 


5.9.         Taxes.


 


5.9.1.       Payments Free of Taxes.  Unless otherwise required by Applicable Law,
all payments by Obligors of Obligations shall be free and clear of and without
reduction for any Taxes.  If Applicable
Law requires any Obligor or Agent to withhold or deduct any Tax (including
backup withholding or withholding Tax), the withholding or deduction shall be
based on information provided pursuant to Section 5.10
and Agent shall pay the amount withheld or deducted to the relevant
Governmental Authority.  If the
withholding or deduction is made on account of Indemnified Taxes or Other
Taxes, the sum payable by Borrowers shall be increased so that Agent, Lender or
Issuing Bank, as applicable, receives an amount equal to the sum it would have
received if no such withholding or deduction (including deductions applicable
to additional sums payable under this Section) had been made.  Without limiting the foregoing, Borrowers
shall timely pay all Other Taxes to the relevant Governmental Authorities.


 


5.9.2.       Payment.  Borrowers shall indemnify, hold harmless and
reimburse (within 10 days after demand therefor) Agent, Lenders and Issuing
Bank for any Indemnified Taxes or Other Taxes (including those attributable to
amounts payable under this Section) withheld or deducted by any Obligor or
Agent, or paid by Agent, any Lender or Issuing Bank, with respect to any
Obligations, Letters of Credit or Loan Documents, whether or not such Taxes
were properly asserted by the relevant Governmental Authority, and including
all penalties, interest and reasonable expenses relating thereto.  A certificate as to the amount of any such
payment or liability delivered to Borrower Agent by Agent, or by a Lender or
Issuing Bank (with a copy to Agent), shall be conclusive, absent manifest
error.  As soon as practicable after any
payment of Taxes by a Borrower, Borrower Agent shall deliver to Agent a receipt
from the Governmental Authority or other evidence of payment satisfactory to
Agent.


 


5.10.       Lender Tax Information.


 


5.10.1.     Status of Lenders.  Each Lender shall deliver documentation and
information to Agent and Borrower Agent, at the times and in form required by
Applicable Law or reasonably requested by Agent or Borrower Agent, sufficient
to permit Agent or Borrowers to determine (a) whether or not payments made
with respect to Obligations are subject to Taxes, (b) if applicable, the
required rate of withholding or deduction, and (c) such Lender’s
entitlement to any available exemption from, or reduction of, applicable Taxes
for such payments or otherwise to establish such Lender’s status for
withholding tax purposes in the applicable jurisdiction.


 


5.10.2.     Documentation.


 


(a)   If a Borrower
is resident for tax purposes in the United States, any Lender that is a “United
States person” within the meaning of section 7701(a)(30) of the Code shall
deliver to Agent and Borrower Agent IRS Form W-9 or such other
documentation or information prescribed by Applicable Law or reasonably
requested by Agent or Borrower Agent to determine whether such Lender is
subject to backup withholding or information reporting requirements.  If any Foreign Lender is entitled to any
exemption from or reduction of withholding tax for payments with respect to the
Obligations, it shall deliver to Agent and Borrower Agent, on or prior to the
date on which it becomes a Lender hereunder (and from time to time thereafter
upon request by Agent or Borrower Agent, but only if such Foreign Lender is
legally entitled to do so), (a) IRS Form W-8BEN claiming eligibility
for benefits of an income tax treaty to which the


 


42

















 


United States is a party; (b) IRS Form W-8ECI; (c) IRS Form W-8IMY
and all required supporting documentation; (d) in the case of a Foreign
Lender claiming the benefits of the exemption for portfolio interest under
section 881(c) of the Code, IRS Form W-8BEN and a certificate
showing such Foreign Lender is not (i) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (ii) a “10 percent shareholder” of
any Obligor within the meaning of section 881(c)(3)(B) of the Code, or (iii) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the
Code; or (e) any other form prescribed by Applicable Law as a basis for
claiming exemption from or a reduction in withholding tax, together with such
supplementary documentation necessary to allow Agent and Borrowers to determine
the withholding or deduction required to be made.


 


(b)   If a payment
made to any Lender under any Loan Document would be subject to United States
federal withholding Tax imposed by FATCA if such Lender fails to comply with
the applicable reporting requirements of FATCA (including those contained in
Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to Agent (i) a certification signed by the chief
financial officer, principal accounting officer,  treasurer or controller
of such Lender and (2) other documentation reasonably requested by Agent sufficient
for Agent to comply with its obligations under FATCA and to determine that such
Lender has complied with such applicable reporting requirements to the extent
required to obtain the maximum available exemption from any United States
federal withholding Tax that is available to payments received by or on behalf
of such Lender.


 


5.10.3.     Lender Obligations.  Each Lender and Issuing Bank shall promptly
notify Borrowers and Agent of any change in circumstances that would change any
claimed Tax exemption or reduction.  Each
Lender and Issuing Bank shall indemnify, hold harmless and reimburse (within 10
days after demand therefor) Borrowers and Agent for any Taxes, losses, claims,
liabilities, penalties, interest and expenses (including reasonable attorneys’
fees) incurred by or asserted against a Borrower or Agent by any Governmental
Authority due to such Lender’s or Issuing Bank’s failure to deliver, or
inaccuracy or deficiency in, any documentation required to be delivered by it
pursuant to this Section.  Each Lender and
Issuing Bank authorizes Agent to set off any amounts due to Agent under this Section against
any amounts payable to such Lender or Issuing Bank under any Loan Document.


 


5.11.       Nature and Extent of Each Borrower’s Liability.


 


5.11.1.     Joint and Several Liability.  Each Borrower agrees that it is jointly and
severally liable for, and absolutely and unconditionally guarantees to Agent
and Lenders the prompt payment and performance of, all Obligations and all
agreements under the Loan Documents. 
Each Borrower agrees that its guaranty obligations hereunder constitute
a continuing guaranty of payment and not of collection, that such obligations
shall not be discharged until Full Payment of the Obligations, and that such
obligations are absolute and unconditional, irrespective of (a) the
genuineness, validity, regularity, enforceability, subordination or any future
modification of, or change in, any Obligations or Loan Document, or any other
document, instrument or agreement to which any Obligor is or may become a party
or be bound; (b) the absence of any action to enforce this Agreement
(including this Section) or any other Loan Document, or any waiver, consent or
indulgence of any kind by Agent or any Lender with respect thereto; (c) the
existence, value or condition of, or failure to perfect a Lien or to preserve
rights against, any security or guaranty for the Obligations or any action, or
the absence of any action, by Agent or any Lender in respect thereof (including
the release of any security or guaranty); (d) the insolvency of any
Obligor; (e) any election by Agent or any Lender in an Insolvency
Proceeding for the application of Section 1111(b)(2) of the
Bankruptcy Code; (f) any borrowing or grant of a Lien by any other
Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code
or otherwise; (g) the disallowance of any claims of Agent or any Lender
against any Obligor for the repayment of any Obligations under Section 502
of the Bankruptcy Code or otherwise; or (h) any other action or circumstances
that might


 


43

















 


otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except Full Payment of all Obligations.


 


5.11.2.     Waivers.


 


(a)           Each Borrower
expressly waives all rights that it may have now or in the future under any
statute, at common law, in equity or otherwise, to compel Agent or Lenders to
marshal assets or to proceed against any Obligor, other Person or security for
the payment or performance of any Obligations before, or as a condition to,
proceeding against such Borrower.  Each
Borrower waives all defenses available to a surety, guarantor or accommodation
co-obligor other than Full Payment of all Obligations.  It is agreed among each Borrower, Agent and
Lenders that the provisions of this Section 5.11
are of the essence of the transaction contemplated by the Loan Documents and
that, but for such provisions, Agent and Lenders would decline to make Loans
and issue Letters of Credit.  Each
Borrower acknowledges that its guaranty pursuant to this Section is
necessary to the conduct and promotion of its business, and can be expected to
benefit such business.


 


(b)           Agent and
Lenders may, in their discretion, pursue such rights and remedies as they deem
appropriate, including realization upon Collateral or any Real Estate by
judicial foreclosure or non-judicial sale or enforcement, without affecting any
rights and remedies under this Section 5.11.  If, in taking any action in connection with
the exercise of any rights or remedies, Agent or any Lender shall forfeit any
other rights or remedies, including the right to enter a deficiency judgment
against any Borrower or other Person, whether because of any Applicable Laws
pertaining to “election of remedies” or otherwise, each Borrower consents to
such action and waives any claim based upon it, even if the action may result
in loss of any rights of subrogation that any Borrower might otherwise have
had.  Any election of remedies that results
in denial or impairment of the right of Agent or any Lender to seek a
deficiency judgment against any Borrower shall not impair any other Borrower’s
obligation to pay the full amount of the Obligations.  Each Borrower waives all rights and defenses
arising out of an election of remedies, such as nonjudicial foreclosure with
respect to any security for the Obligations, even though that election of
remedies destroys such Borrower’s rights of subrogation against any other
Person.  Agent may bid all or a portion
of the Obligations at any foreclosure or trustee’s sale or at any private sale,
and the amount of such bid need not be paid by Agent but shall be credited
against the Obligations.  The amount of
the successful bid at any such sale, whether Agent or any other Person is the
successful bidder, shall be conclusively deemed to be the fair market value of
the Collateral, and the difference between such bid amount and the remaining
balance of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this Section 5.11,
notwithstanding that any present or future law or court decision may have the
effect of reducing the amount of any deficiency claim to which Agent or any
Lender might otherwise be entitled but for such bidding at any such sale.


 


5.11.3.     Extent of Liability;
Contribution.


 


(a)           Notwithstanding
anything herein to the contrary, each Borrower’s liability under this Section 5.11 shall be limited to the
greater of (i) all amounts for which such Borrower is primarily liable, as
described below, and (ii) such Borrower’s Allocable Amount.


 


(b)           If any Borrower
makes a payment under this Section 5.11
of any Obligations (other than amounts for which such Borrower is primarily
liable) (a “Guarantor Payment”) that, taking into account all other
Guarantor Payments previously or concurrently made by any other Borrower,
exceeds the amount that such Borrower would otherwise have paid if each
Borrower had paid the aggregate Obligations satisfied by such Guarantor
Payments in the same proportion that such Borrower’s Allocable Amount bore to
the total Allocable Amounts of all Borrowers, then such Borrower shall be
entitled to receive contribution and indemnification payments from, and to be
reimbursed by, each other Borrower for the amount of such excess, pro rata based
upon their respective Allocable Amounts in effect immediately prior to such
Guarantor Payment.  The “Allocable
Amount” for any Borrower shall be the


 


44

















 


maximum amount that could
then be recovered from such Borrower under this Section 5.11 without rendering such payment voidable
under Section 548 of the Bankruptcy Code or under any applicable state
fraudulent transfer or conveyance act, or similar statute or common law.


 


(c)           Nothing
contained in this Section 5.11
shall limit the liability of any Borrower to pay Loans made directly or
indirectly to that Borrower (including Loans advanced to any other Borrower and
then re-loaned or otherwise transferred to, or for the benefit of, such
Borrower), LC Obligations relating to Letters of Credit issued to support such
Borrower’s business, and all accrued interest, fees, expenses and other related
Obligations with respect thereto, for which such Borrower shall be primarily
liable for all purposes hereunder.  Agent
and Lenders shall have the right, at any time in their discretion, to condition
Loans and Letters of Credit upon a separate calculation of borrowing
availability for each Borrower and to restrict the disbursement and use of such
Loans and Letters of Credit to such Borrower.


 


5.11.4.     Joint Enterprise.  Each Borrower has requested that Agent and
Lenders make this credit facility available to Borrowers on a combined basis,
in order to finance Borrowers’ business most efficiently and economically.  Borrowers’ business is a mutual and
collective enterprise, and the successful operation of each Borrower is
dependent upon the successful performance of the integrated group.  Borrowers believe that consolidation of their
credit facility will enhance the borrowing power of each Borrower and ease
administration of the facility, all to their mutual advantage.  Borrowers acknowledge that Agent’s and
Lenders’ willingness to extend credit and to administer the Collateral on a
combined basis hereunder is done solely as an accommodation to Borrowers and at
Borrowers’ request.


 


5.11.5.     Subordination.  Each Borrower hereby subordinates any claims,
including any rights at law or in equity to payment, subrogation,
reimbursement, exoneration, contribution, indemnification or set off, that it
may have at any time against any other Obligor, howsoever arising, to the Full
Payment of all Obligations.


 


SECTION 6.         CONDITIONS
PRECEDENT


 


6.1.         Conditions Precedent to Initial Loans.  In addition to the conditions
set forth in Section 6.2,
Lenders shall not be required to fund any requested Loan, issue any Letter of Credit, or
otherwise extend credit to Borrowers hereunder, until the date (“Closing
Date”) that each of the following conditions has been satisfied:


 


(a)           Notes shall
have been executed by Borrowers and delivered to each Lender that requests
issuance of a Note.  Each other Loan
Document shall have been duly executed and delivered to Agent by each of the
signatories thereto, and each Obligor shall be in compliance with all terms
thereof.


 


(b)           Agent shall
have received acknowledgments of all filings or recordations necessary to
perfect its Liens in the Collateral, as well as UCC and Lien searches and other
evidence satisfactory to Agent that such Liens are the only Liens upon the
Collateral, except Permitted Encumbrances.


 


(c)           Agent shall
have received duly executed agreements establishing each Dominion Account and
related lockbox, in form and substance, and with financial institutions,
satisfactory to Agent.


 


(d)           Agent shall
have received certificates, in form and substance satisfactory to it, from a
knowledgeable Senior Officer of each Borrower certifying that, after giving
effect to the initial Loans and transactions hereunder, (i) such Borrower
is Solvent; (ii) no Default or Event of Default exists; (iii) the
representations and warranties set forth in Section 9
are true and correct; and (iv) such Borrower has complied with all
agreements and conditions to be satisfied by it under the Loan Documents.


 


45
















 


(e)           Agent shall
have received a certificate of a duly authorized officer of each Obligor,
certifying (i) that attached copies of such Obligor’s Organic Documents
are true and complete, and in full force and effect, without amendment except
as shown; (ii) that an attached copy of resolutions authorizing execution
and delivery of the Loan Documents is true and complete, and that such
resolutions are in full force and effect, were duly adopted, have not been
amended, modified or revoked, and constitute all resolutions adopted with
respect to this credit facility; and (iii) to the title, name and
signature of each Person authorized to sign the Loan Documents.  Agent may conclusively rely on this
certificate until it is otherwise notified by the applicable Obligor in
writing.


 


(f)            Agent and
Lenders shall have received a written opinion of Milbank, Tweed, Hadley &
McCloy LLP, as well as any local counsel to the Obligors, in form and substance
satisfactory to Agent.


 


(g)           Agent shall
have received copies of the charter documents of each Obligor, certified by the
Secretary of State or other appropriate official of such Obligor’s jurisdiction
of organization.  Agent shall have
received good standing certificates for each Obligor, issued by the Secretary
of State or other appropriate official of such Obligor’s jurisdiction of
organization and each jurisdiction where such Obligor’s conduct of business or
ownership of Property necessitates qualification.


 


(h)           Agent shall
have received copies of policies or certificates of insurance for the insurance
policies carried by Borrowers, all in compliance with the Loan Documents.


 


(i)            Agent shall
have completed its business, financial and legal due diligence of Obligors with
results satisfactory to Agent.  No
material adverse change in the financial condition of any Obligor or in the
quality, quantity or value of any Collateral shall have occurred since December 31,
2009, as determined by Agent in its discretion.


 


(j)            Borrowers shall
have paid all fees and expenses required to be paid to Agent and Lenders on the
Closing Date.


 


(k)           Agent shall
have received a Borrowing Base Certificate prepared as of August 31,
2010.  Upon giving effect to the initial
funding of Loans and issuance of Letters of Credit, and the payment by
Borrowers of all fees and expenses incurred in connection herewith as well as
any payables stretched beyond their customary payment practices, Excess
Availability shall be at least $50,000,000.


 


6.2.         Conditions Precedent to All Credit Extensions.  Agent, Issuing Bank and
Lenders shall not be required to fund any Loans, arrange for issuance of any
Letters of Credit or grant any other accommodation to or for the benefit of
Borrowers, unless the following conditions are satisfied:


 


(a)           No Default or
Event of Default shall exist at the time of, or result from, such funding,
issuance or grant;


 


(b)           The
representations and warranties of each Obligor in the Loan Documents shall be
true and correct in all material respects (without duplication of any
materiality qualifier contained therein) on the date of, and upon giving effect
to, such funding, issuance or grant (except for representations and warranties
that expressly relate to an earlier date);


 


(c)           No event shall
have occurred or circumstance exist that has or could reasonably be expected to
have a Material Adverse Effect;


 


(d)           With respect to
issuance of a Letter of Credit, the LC Conditions shall be satisfied; and


 


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(e)           In the case of
a requested Borrowing of Loans the proceeds of which are to be used to purchase
or carry any Margin Stock, the Borrower Agent shall deliver to Agent a
certificate executed by a Senior Officer of Borrowers accompanying the relevant
Notice of Borrowing setting forth in reasonable detail the basis upon which the
Borrowers have made the representation set forth in the second sentence of Section 9.1.23 together with (if so requested by Agent)
a duly completed Form U-1 or Form G-3 satisfactory to Agent in its
Credit Judgment.


 


Each request (or deemed
request) by Borrowers for funding of a Loan, issuance of a Letter of Credit or
grant of an accommodation shall constitute a representation by Borrowers that
the foregoing conditions are satisfied on the date of such request and on the
date of such funding, issuance or grant. 
As an additional condition to any funding, issuance or grant, Agent
shall have received such other information, documents, instruments and
agreements as it deems appropriate in connection therewith.


 


SECTION 7.         COLLATERAL


 


7.1.         Grant of Security Interest.  To secure the prompt payment and performance
of all Obligations, each Borrower hereby grants to Agent, for the benefit of
Secured Parties, a continuing security interest in and Lien upon all Property
of such Borrower, including all of the following Property, whether now owned or
hereafter acquired, and wherever located (but shall not include the Property
excluded from the definition of Collateral):


 


(a)           all Accounts;


 


(b)           all Chattel
Paper, including electronic chattel paper;


 


(c)           all Commercial
Tort Claims, including those shown on Schedule 9.1.16;


 


(d)           all Deposit
Accounts;


 


(e)           all Documents;


 


(f)            all General
Intangibles, including Intellectual Property;


 


(g)           all Goods,
including Inventory, Equipment and fixtures;


 


(h)           all Instruments;


 


(i)            all Investment
Property;


 


(j)            all
Letter-of-Credit Rights;


 


(k)           all Supporting
Obligations;


 


(l)            all monies,
whether or not in the possession or under the control of Agent, a Lender, or a
bailee or Affiliate of Agent or a Lender, including any Cash Collateral;


 


(m)          all accessions
to, substitutions for, and all replacements, products, and cash and non-cash
proceeds of the foregoing, including proceeds of and unearned premiums with
respect to insurance policies, and claims against any Person for loss, damage
or destruction of any Collateral; and


 


(n)           all books and
records (including customer lists, files, correspondence, tapes, computer
programs, print-outs and computer records) pertaining to the foregoing.


 


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7.2.         Lien on Deposit Accounts; Cash Collateral.


 


7.2.1.       Deposit Accounts.  To further secure the prompt payment and
performance of all Obligations, each Borrower hereby grants to Agent, for the
benefit of Secured Parties, a continuing security interest in and Lien upon all
amounts credited to any Deposit Account of such Borrower, including any sums in
any blocked or lockbox accounts or in any accounts into which such sums are
swept.  Each Borrower hereby authorizes
and directs each bank or other depository to deliver to Agent, upon request,
all balances in any such Deposit Account maintained by such Borrower, without
inquiry into the authority or right of Agent to make such request.


 


7.2.2.       Cash Collateral.  Any Cash Collateral may be invested, at Agent’s
discretion, in Cash Equivalents, but Agent shall have no duty to do so,
regardless of any agreement or course of dealing with any Obligor, and shall
have no responsibility for any investment or loss.  Each Borrower hereby grants to Agent, for the
benefit of Secured Parties, a security interest in all Cash Collateral held
from time to time and all proceeds thereof, as security for the Obligations,
whether such Cash Collateral is held in a Cash Collateral Account or elsewhere.  Agent may apply Cash Collateral to the
payment of any Obligations, in such order as Agent may elect, as they become
due and payable.  Each Cash Collateral
Account and all Cash Collateral shall be under the sole dominion and control of
Agent.  No Borrower or other Person
claiming through or on behalf of any Borrower shall have any right to any Cash
Collateral, until Full Payment of all Obligations.


 


7.3.         Negative
Pledge.  Each Borrower covenants
that, until Full Payment of the Obligations, such Borrower shall not, and shall
not permit its Subsidiaries to, without the consent of Agent:


 


(a)           except as set
forth in Schedule 7.3,  directly
or indirectly, sell, assign, exchange, convey, lease, sublease, pledge,
subordinate, alienate, hypothecate, gift, devise or otherwise transfer or grant
any option with respect to any real Property owned by such Borrower or its
Subsidiaries (other than Steinway Hall), whether voluntarily or by operation of
law; or


 


(b)           directly or
indirectly, create or suffer to exist any mortgage, deed of trust, lien,
security interest or other charge or encumbrance against, in or with respect to
any real Property owned by such Borrower or its Subsidiaries (other than
Steinway Hall), whether voluntarily or by operation of law, except for
Permitted Encumbrances.


 


7.4.         Other Collateral.


 


7.4.1.       Commercial Tort Claims.  Borrowers shall promptly notify Agent in
writing if any Borrower has a Commercial Tort Claim (other than, as long as no
Default or Event of Default exists, a Commercial Tort Claim for less than
$1,000,000), shall promptly amend Schedule 9.1.16
to include such claim, and shall take such actions as Agent deems appropriate
to subject such claim to a duly perfected, first priority Lien in favor of
Agent (for the benefit of Secured Parties).


 


7.4.2.       Certain After-Acquired
Collateral.  Borrowers
shall promptly notify Agent in writing if, after the Closing Date, any Borrower
obtains any interest in any Collateral consisting of Deposit Accounts, Chattel
Paper, Documents, Instruments, Intellectual Property, Investment Property or
Letter-of-Credit Rights (other than, as long as no Default or Event of Default
exists, such Collateral with a value of less than $1,000,000) and, upon Agent’s
request, shall promptly take such actions as Agent deems appropriate to effect
Agent’s duly perfected, first priority Lien upon such Collateral, including
using its commercially reasonable efforts to obtain any appropriate possession,
Deposit Account Control Agreement or Lien Waiver.  If any Collateral (other than, as long as no
Default or Event of Default exists, such Collateral with a value of less than
$1,000,000) is in the possession of a third party, at Agent’s request,
Borrowers shall use commercially reasonable efforts to obtain an acknowledgment
that such third party holds the Collateral for the benefit of Agent.


 


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7.5.         No Assumption of Liability.  The Lien on Collateral
granted hereunder is given as security only and shall not subject Agent or any
Lender to, or in any way modify, any obligation or liability of Borrowers
relating to any Collateral.


 


7.6.         Further Assurances.  Promptly upon request,
Borrowers shall deliver such instruments, assignments, title certificates, or
other documents or agreements, and shall take such actions, as Agent deems
appropriate under Applicable Law to evidence or perfect its Lien on any
Collateral, or otherwise to give effect to the intent of this Agreement.  Without limiting the foregoing, at the
request of Agent the Borrowers shall deliver, or cause to be delivered, to
Agent all Dealer Notes (other than, as long as no Default or Event of Default
exists, Dealer Notes with an outstanding principal balance of less than
$500,000 in the aggregate), which Dealer Notes shall be in a suitable form for
transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance sufficient to
effectively pledge such Dealer Notes to Agent in accordance with the terms
hereof.  Each Borrower authorizes Agent
to file any financing statement that indicates the Collateral as “all assets”
or “all personal property” of such Borrower, or words to similar effect, and
ratifies any action taken by Agent before the Closing Date to effect or perfect
its Lien on any Collateral.


 


SECTION 8.         COLLATERAL
ADMINISTRATION


 


8.1.         Borrowing Base Certificates.  By the 20th day of each month, Borrowers
shall deliver to Agent (and Agent shall promptly deliver same to Lenders) a
Borrowing Base Certificate prepared as of the close of business of the previous
month, and at such other times as Agent may request.  All calculations of Excess Availability in
any Borrowing Base Certificate shall originally be made by Borrowers and
certified by a Senior Officer, provided that Agent may from time to time review
and adjust any such calculation (a) to reflect its reasonable estimate of
declines in value of any Collateral, due to collections received in the
Dominion Account or otherwise; (b) to adjust advance rates to reflect
changes in dilution, quality, mix and other factors affecting Collateral; and (c) to
the extent the calculation is not made in accordance with this Agreement or
does not accurately reflect the Availability Reserve.


 


8.2.         Administration
of Accounts.


 


8.2.1.       Records and Schedules of
Accounts.  Each
Borrower shall, and shall cause its Subsidiaries to, keep accurate and complete
records of its Accounts, including all payments and collections thereon, and
shall submit to Agent sales, collection, reconciliation and other reports in form
satisfactory to Agent, on such periodic basis as Agent may request.  Each Borrower shall also provide to Agent, on
or before the 20th day of each month, a detailed aged trial balance of all
Accounts as of the end of the preceding month, specifying each Account’s
Account Debtor name and address, amount, invoice date and due date, showing any
discount, allowance, credit, authorized return or dispute, and including such
proof of delivery, copies of invoices and invoice registers, copies of related
documents, repayment histories, status reports and other information as Agent
may reasonably request.  If Accounts in
an aggregate face amount of $1,000,000 or more cease to be Eligible Accounts,
Borrowers shall notify Agent of such occurrence promptly (and in any event
within one Business Day) after any Borrower has knowledge thereof.


 


8.2.2.       Taxes.  If an Account of any Borrower or Subsidiary
thereof includes a charge for any Taxes (other than Taxes to the extent being
Properly Contested), Agent is authorized, in its discretion, to pay the amount
thereof to the proper taxing authority for the account of such Borrower or
Subsidiary and to charge Borrowers therefor; provided,
however, that neither Agent nor Lenders
shall be liable for any Taxes that may be due from Borrowers or its
Subsidiaries or with respect to any Collateral.


 


8.2.3.       Account Verification.  Whether or not a Default or Event of Default
exists, Agent shall have the right at any time during regular business hours,
in the name of Agent, any designee of Agent or any Borrower or Subsidiary
thereof, to verify the validity, amount or any other matter relating to


 


49

















 


any
Accounts of Borrowers or such Subsidiaries by mail, telephone or otherwise;
provided that so long as no Event of Default has occurred and is continuing, no
more than one (1) such verification process shall be paid for by the
Borrowers or any other Obligor during any twelve (12) month period.  Borrowers shall, and shall cause their
Subsidiaries to, cooperate fully with Agent in an effort to facilitate and
promptly conclude any such verification process.


 


8.2.4.       Maintenance of Dominion
Account.  Borrowers shall maintain
Dominion Accounts pursuant to lockbox or other arrangements acceptable to Agent
in its Credit Judgment.  Borrowers shall
obtain an agreement (in form and substance satisfactory to Agent) from each
lockbox servicer and Dominion Account bank, establishing Agent’s control over
and Lien in the lockbox or Dominion Account, which may be exercised by Agent
during any Cash Trigger Period, requiring immediate deposit of all remittances
received in the lockbox to a Dominion Account, and waiving offset rights of
such servicer or bank, except for customary administrative charges.  If a Dominion Account is not maintained with
Bank of America, Agent may, during any Cash Trigger Period, require immediate
transfer of all funds in such account to a Dominion Account maintained with
Bank of America.  Agent and Lenders
assume no responsibility to Borrowers for any lockbox arrangement or Dominion
Account, including any claim of accord and satisfaction or release with respect
to any Payment Items accepted by any bank.


 


8.2.5.       Proceeds of Collateral.  Borrowers shall, and shall cause their
Subsidiaries to, request in writing and otherwise take all necessary steps to
ensure that all payments on Accounts or otherwise relating to Collateral are
made directly to a Dominion Account (or a lockbox relating to a Dominion
Account).  If any Borrower or Subsidiary
thereof receives cash or Payment Items with respect to any Collateral, it shall
hold same in trust for Agent and promptly (not later than the next Business
Day) deposit same into a Deposit Account subject a Deposit Account Control
Agreement.


 


8.3.         Administration
of Inventory.


 


8.3.1.       Records and Reports of
Inventory.  Each
Borrower shall, and shall cause its Subsidiaries to, keep accurate and complete
records of its Inventory, including costs and daily withdrawals and additions,
and shall submit to Agent inventory and reconciliation reports in form
reasonably satisfactory to Agent, on such periodic basis as Agent may
request.  Each Borrower shall, and shall
cause its Subsidiaries to, conduct a physical inventory at least once per
calendar year (and on a more frequent basis if requested by Agent when an Event
of Default has occurred and is continuing) and periodic cycle counts consistent
with historical practices, and shall provide to Agent a report based on each
such inventory and count promptly upon completion thereof, together with such
supporting information as Agent may reasonably request.  Agent may participate in and observe each
physical count at its own cost and expense (provided, that such cost and
expense shall be paid by Borrowers if an Event of Default exists).


 


8.3.2.       Returns of Inventory.  No Borrower or Subsidiary thereof shall
return any Inventory to a supplier, vendor or other Person, whether for cash,
credit or otherwise, unless (a) such return is in the Ordinary Course of
Business; (b) no Default, Event of Default or Overadvance exists or would
result therefrom; (c) Agent is promptly notified if the aggregate Value of
all Inventory returned in any month exceeds $500,000; and (d) any payment
received by such Borrower or Subsidiary for a return is promptly remitted to
Agent for application to the Obligations.


 


8.3.3.       Acquisition, Sale and
Maintenance.  Each
Borrower shall, and shall cause its Subsidiaries to, take all steps to assure
that all Inventory is produced in accordance with Applicable Law, including the
FLSA.  Any Inventory acquired or accepted
by any Borrower or Subsidiary thereof on consignment or approval shall be
properly identified on its books and records and segregated from the Inventory
of such Borrower or Subsidiary.  Each
Borrower shall, and shall cause its Subsidiaries to, use, store and maintain
all Inventory with reasonable care and caution, in accordance with applicable


 


50

















 


standards
of any insurance and in conformity with all Applicable Law, and shall make
current rent payments (within applicable grace periods provided for in leases)
at all locations where any Collateral is located.


 


8.4.         Administration
of Equipment.


 


8.4.1.       Records and Schedules of
Equipment.  Each
Borrower shall, and shall cause its Subsidiaries to, keep accurate and complete
records of its Equipment, including kind, quality, quantity, cost, acquisitions
and dispositions thereof, and shall submit to Agent, on such periodic basis as
Agent may request, a current schedule thereof, in form reasonably satisfactory
to Agent.  Promptly upon request,
Borrowers shall, and shall cause its Subsidiaries to, deliver to Agent evidence
of their ownership or interests in any Equipment.


 


8.4.2.       Dispositions of Equipment.  No Borrower shall, and shall cause its
Subsidiaries not to, sell, lease or otherwise dispose of any Equipment, without
the prior written consent of Agent, other than (a) a Permitted Asset
Disposition; and (b) replacement of Equipment that is worn, damaged or
obsolete with Equipment of like function and value, if the replacement
Equipment is acquired substantially contemporaneously with such disposition and
is free of Liens (other than purchase money Liens and Liens in favor of the
Secured Parties).


 


8.4.3.       Condition of Equipment.  The Equipment is in good operating condition
and repair, and all necessary replacements and repairs have been made so that
the value and operating efficiency of the Equipment is preserved at all times,
reasonable wear and tear excepted.  Each
Borrower shall, and shall cause its Subsidiaries to, ensure that the Equipment
is mechanically and structurally sound, and capable of performing the functions
for which it was designed, in accordance with manufacturer specifications.


 


8.5.         Administration of Deposit
Accounts.  Schedule 8.5 sets
forth all Deposit Accounts maintained by Borrowers, including all Dominion
Accounts.  Within 180 days of the Closing
Date, each Borrower shall take all actions necessary to establish Agent’s
control of each such Deposit Account (other than (a) any Excluded Account
and (b) any individual account containing not more than $100,000 at any
time; provided that at no time shall the Obligors maintain accounts containing
in excess of $2,500,000 in the aggregate at any time that are not subject to
the control of Agent) and, in connection therewith, shall cause each depository
bank for each such Deposit Account to execute a Deposit Account Control
Agreement in form and substance satisfactory to Agent.  Obligors shall be the sole account holders of
each Deposit Account and shall not allow any other Person (other than Agent) to
have control over a Deposit Account or any Property deposited therein.  Each Borrower shall promptly notify Agent of any
opening or closing of a Deposit Account and, with the consent of Agent, will
amend Schedule 8.5 to reflect same.


 


8.6.         General
Provisions.


 


8.6.1.       Location of Collateral.  All tangible items of Collateral, other than
Inventory in transit, shall at all times be kept by the Obligors at the business
locations set forth in Schedule 8.6.1,
except that the Obligors may (a) make sales or other dispositions of
Collateral in accordance with Section 10.2.6;
and (b) move Collateral to another location in the United States, upon
thirty (30) Business Days prior written notice to Agent.


 


8.6.2.       Insurance of Collateral;
Condemnation Proceeds.


 


(a)           Each Borrower
shall maintain or cause to be maintained insurance with respect to the
Collateral, covering casualty, hazard, theft, malicious mischief, flood and other
risks, in amounts, with endorsements and with insurers (with a Best Rating of
at least A7, unless otherwise approved by Agent)


 


51

















 


satisfactory to Agent.  All proceeds under each policy shall be
payable to Agent.  From time to time upon
request, Borrowers shall deliver to Agent the originals or certified copies of
its insurance policies and updated flood plain searches.  Unless Agent shall agree otherwise, each
policy shall include satisfactory endorsements (i) showing Agent as loss
payee; (ii) requiring 30 days prior written notice to Agent in the event
of cancellation of the policy for any reason whatsoever; and (iii) specifying
that the interest of Agent shall not be impaired or invalidated by any act or
neglect of any Borrower or the owner of the Property, nor by the occupation of
the premises for purposes more hazardous than are permitted by the policy.  If any Borrower fails to provide and pay for
any insurance, Agent may, at its option, but shall not be required to, procure
the insurance and charge Borrowers therefor. 
Each Borrower agrees to deliver to Agent, promptly as rendered, copies
of all reports made to insurance companies. 
While no Event of Default exists, Borrowers may settle, adjust or compromise
any insurance claim, as long as the proceeds are delivered to Agent.  If an Event of Default exists, only Agent
shall be authorized to settle, adjust and compromise such claims.


 


(b)           Any proceeds of insurance (other than proceeds
from workers’ compensation or D&O insurance) and any awards arising from
condemnation of any Collateral shall be paid to Agent.  Any such proceeds or awards that relate to
Inventory shall be applied to payment of the Loans, and then to any other
Obligations outstanding.  Subject to
clause (c) below, any proceeds or awards that relate to Equipment or Real
Estate shall be applied first to the Loans and then to other Obligations.


 


(c)           If requested by Borrowers in writing within 15
days after Agent’s receipt of any insurance proceeds or condemnation awards
relating to any loss or destruction of Equipment or Real Estate, Borrowers may
use such proceeds or awards to repair or replace such Equipment or Real Estate
(and until so used, the proceeds shall be held by Agent as Cash Collateral) as
long as (i) no Default or Event of Default exists; (ii) such repair
or replacement is promptly undertaken and concluded, in accordance with plans
satisfactory to Agent; (iii) replacement buildings are constructed on the
sites of the original casualties and are of comparable size, quality and
utility to the destroyed buildings; (iv) the repaired or replaced Property
is free of Liens, other than Permitted Encumbrances that are not Purchase Money
Liens; (v) Borrowers comply with disbursement procedures for such repair
or replacement as Agent may reasonably require; and (vi) the aggregate
amount of such proceeds or awards from any single casualty or condemnation does
not exceed $500,000.


 


8.6.3.       Protection of Collateral.  Upon the occurrence and during the
continuation of an Event of Default, all expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping any Collateral, all
Taxes payable with respect to any Collateral (including any sale thereof), and
all other payments required to be made by Agent to any Person to realize upon
any Collateral, shall be borne and paid by Borrowers.  Agent shall not be liable or responsible in
any way for the safekeeping of any Collateral, for any loss or damage thereto
(except for reasonable care in its custody while Collateral is in Agent’s
actual possession), for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency or other Person
whatsoever, but the same shall be at Borrowers’ sole risk.


 


8.6.4.       Defense of Title to
Collateral.  Each
Borrower shall at all times defend its title to Collateral and Agent’s Liens
therein against all Persons, claims and demands whatsoever, except Permitted
Encumbrances.


 


8.7.         Power of Attorney.  Each Borrower hereby irrevocably constitutes
and appoints Agent (and all Persons designated by Agent) as such Borrower’s
true and lawful attorney (and agent-in-fact) for the purposes provided in this
Section.  Agent, or Agent’s designee,
may, without notice and in either its or a Borrower’s name, but at the cost and
expense of Borrowers:


 


(a)           Endorse a
Borrower’s name on any Payment Item or other proceeds of Collateral (including
proceeds of insurance) that come into Agent’s possession or control; and


 


52

















 


(b)           During an Event
of Default, (i) notify any Account Debtors of the assignment of their
Accounts, demand and enforce payment of Accounts by legal proceedings or
otherwise, and generally exercise any rights and remedies with respect to
Accounts; (ii) settle, adjust, modify, compromise, discharge or release
any Accounts or other Collateral, or any legal proceedings brought to collect
Accounts or Collateral; (iii) sell or assign any Accounts and other
Collateral upon such terms, for such amounts and at such times as Agent deems
advisable; (iv) collect, liquidate and receive balances in Deposit
Accounts or investment accounts, and take control, in any manner, of proceeds
of Collateral; (v) prepare, file and sign a Borrower’s name to a proof of
claim or other document in a bankruptcy of an Account Debtor, or to any notice,
assignment or satisfaction of Lien or similar document; (vi) receive, open
and dispose of mail addressed to a Borrower, and notify postal authorities to deliver
any such mail to an address designated by Agent; (vii) endorse any Chattel
Paper, Document, Instrument, bill of lading, or other document or
agreement relating to any Accounts, Inventory or other Collateral; (viii) use
a Borrower’s stationery and sign its name to verifications of Accounts and
notices to Account Debtors; (ix) use information contained in any data
processing, electronic or information systems relating to Collateral; (x) make
and adjust claims under insurance policies; (xi) take any action as may be
necessary or appropriate to obtain payment under any letter of credit, banker’s
acceptance or other instrument for which a Borrower is a beneficiary; and (xii) take
all other actions as Agent deems appropriate to fulfill any Borrower’s obligations
under the Loan Documents.


 


SECTION 9.         REPRESENTATIONS
AND WARRANTIES


 


9.1.         General Representations and Warranties.  To induce Agent and Lenders to
enter into this Agreement and to make available the Commitments, Loans and
Letters of Credit, each Borrower represents and warrants that:


 


9.1.1.       Organization and
Qualification.  Each
Borrower and Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.  Each Borrower and Subsidiary is duly
qualified, authorized to do business and in good standing as a foreign
corporation in each jurisdiction where failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.


 


9.1.2.       Power and Authority.  Each Obligor is duly authorized to execute,
deliver and perform its Loan Documents. 
The execution, delivery and performance of the Loan Documents have been
duly authorized by all necessary action, and do not (a) require any
consent or approval of any holders of Equity Interests of any Obligor, other
than those already obtained; (b) contravene the Organic Documents of any
Obligor; (c) violate or cause a default under any Applicable Law or
Material Contract; or (d) result in or require the imposition of any Lien
(other than Permitted Encumbrances) on any Property of any Obligor.


 


9.1.3.       Enforceability.  Each Loan Document is a legal, valid and
binding obligation of each Obligor party thereto, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights
generally.


 


9.1.4.       Capital Structure; Debt.


 


(a)           Schedule 9.1.4 shows, for each Borrower and Subsidiary Guarantor,
its name, its jurisdiction of organization, its authorized and issued Equity
Interests, the holders of its Equity Interests, and all agreements binding on
such holders with respect to their Equity Interests.  Except as disclosed on Schedule 9.1.4, in the five years preceding
the Closing Date, no Borrower or Subsidiary Guarantor has acquired any
substantial assets from any other Person nor been the surviving entity in a
merger or combination.  Each Borrower has
good title to its Equity Interests in its Subsidiaries, subject only to Agent’s
Lien, and all such Equity Interests are duly issued, fully paid and
non-assessable.  There are no


 


53

















 


outstanding purchase
options, warrants, subscription rights, agreements to issue or sell,
convertible interests, phantom rights or powers of attorney relating to Equity
Interests of any Borrower or Subsidiary.


 


(b)           As of the
Closing Date, the aggregate accounts payable and/or accrued expenses of each
Borrower and Subsidiary are not materially different from the aggregate
accounts payable and/or accrued expenses set forth on the interim balance sheet
of each Borrower and Subsidiary, dated August 31, 2010, supplied to the
Agent and the Lenders. Without limiting the foregoing, (a) in the case of
Conn-Selmer, as of the Closing Date the only Debt which may become due from Conn-Selmer (as well
as from any other Obligor) to a Dealer Note Purchase Party or its assignees
shall arise under or in connection with the Dealer Note Purchase Agreement; and
(b) in the case of Parent, as of the Closing Date the only Debt due or
which may become due from Parent (as well as from any other Obligor) to the
holders of the Senior Notes are evidenced by the Senior Notes in an aggregate
principal amount of $175,000,000, which are in substantially the form heretofore
provided to the Agent. Except for the Debt referred to in subsections (a) and
(b) immediately set forth above, Debt of any Obligor to any other Obligor,
refinancings permitted pursuant to the terms of this Agreement, the capital
expenditures, Capital Leases and purchase money obligations permitted under Section 10.2.1 of this Agreement and the Obligations to
the Lenders arising from time to time under this Agreement, no Obligor has or
shall have during the term of this Agreement, any long term Debt with a
maturity of one year or more.


 


9.1.5.       Title to Properties;
Priority of Liens.  Each
Borrower and Subsidiary has good and marketable title to (or valid leasehold
interests in) all of its Real Estate, and good title to all of its personal
Property, including all Property reflected in any financial statements
delivered to Agent or Lenders, in each case free of Liens except Permitted
Encumbrances.  Each Borrower and
Subsidiary has paid and discharged all lawful claims that, if unpaid, could
become a Lien on its Properties, other than Permitted Encumbrances.  All Liens of Agent in the Collateral are duly
perfected, first priority Liens, subject only to Permitted Encumbrances that
are expressly allowed to have priority over Agent’s Liens.


 


9.1.6.       Accounts.  Agent may rely, in determining which Accounts
are Eligible Accounts, on all statements and representations made by Borrowers
with respect thereto.  Borrowers warrant,
with respect to each Account at the time it is shown as an Eligible Account in
a Borrowing Base Certificate, that:


 


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


 


(b)           it arises out
of a completed, bona fide sale
and delivery of goods in the Ordinary Course of Business, and substantially in
accordance with any purchase order, contract or other document relating
thereto;


 


(c)           it is for a sum
certain, maturing as stated in the invoice covering such sale, a copy of which
has been furnished or is available to Agent on request;


 


(d)           it is not
subject to any offset, Lien (other than Agent’s Lien), deduction, defense,
dispute, counterclaim or other adverse condition except as arising in the
Ordinary Course of Business and disclosed to Agent; and it is absolutely owing
by the Account Debtor, without contingency in any respect;


 


(e)           no purchase
order, agreement, document or Applicable Law restricts assignment of the
Account to Agent (regardless of whether, under the UCC, the restriction is
ineffective), and the applicable Borrower or Subsidiary Guarantor is the sole
payee or remittance party shown on the invoice;


 


(f)            no extension,
compromise, settlement, modification, credit, deduction or return has been
authorized with respect to the Account, except discounts or allowances granted
in the Ordinary


 


54

















 


Course of Business for
prompt payment that are reflected on the face of the invoice related thereto
and in the reports submitted to Agent hereunder; and


 


(g)           to the best of
Borrowers’ knowledge, (i) there are no facts or circumstances that are
reasonably likely to impair the enforceability or collectibility of such
Account; (ii) the Account Debtor had the capacity to contract when the
Account arose, continues to meet the applicable Borrower’s or Subsidiary
Guarantor’s customary credit standards, is Solvent, is not contemplating or
subject to an Insolvency Proceeding, and has not failed, or suspended or ceased
doing business; and (iii) there are no proceedings or actions threatened
or pending against any Account Debtor that could reasonably be expected to have
a material adverse effect on the Account Debtor’s financial condition.


 


9.1.7.       Financial Statements.  The consolidated and consolidating balance
sheets, and related statements of income, cash flow and shareholder’s equity,
of Parent and Subsidiaries that have been and are hereafter delivered to Agent
and Lenders, are prepared in accordance with GAAP, and fairly present the
financial positions and results of operations of Parent and Subsidiaries at the
dates and for the periods indicated.  All
projections delivered from time to time to Agent and Lenders have been prepared
in good faith, based on reasonable assumptions in light of the circumstances at
such time.  Since December 31, 2009,
there has been no change in the condition, financial or otherwise, of any
Borrower or Subsidiary that could reasonably be expected to have a Material
Adverse Effect.  No financial statement
delivered to Agent or Lenders at any time contains any untrue statement of a
material fact, nor fails to disclose any material fact necessary to make such
statement not materially misleading. 
Each Borrower and Subsidiary is Solvent.


 


9.1.8.       Surety Obligations.  No Borrower or Subsidiary is obligated as
surety or indemnitor under any bond or other contract that assures payment or
performance of any obligation of any Person, except as permitted hereunder.


 


9.1.9.       Taxes.  Each Borrower and Subsidiary has filed all
federal, state and local tax returns and other reports that it is required by
law to file, and has paid, or made provision for the payment of, all Taxes upon
it, its income and its Properties that are due and payable, except to the
extent being Properly Contested.  The
provision for Taxes on the books of each Borrower and Subsidiary is adequate
for all years not closed by applicable statutes and for its current Fiscal
Year.


 


9.1.10.     Brokers.  There are no brokerage commissions, finder’s
fees or investment banking fees payable in connection with any transactions
contemplated by the Loan Documents.


 


9.1.11.     Intellectual Property. Each Borrower
and Subsidiary owns or has the lawful right to use all material Intellectual
Property necessary for the conduct of its business, without conflict with any
rights of others.  There is no pending
or, to any Borrower’s knowledge, threatened Intellectual Property Claim with
respect to any Borrower, any Subsidiary or any of their Property (including any
Intellectual Property).  Except as
disclosed on Schedule 9.1.11, no
Obligor pays or owes any Royalty or other compensation to any Person with
respect to any Intellectual Property. 
All Intellectual Property owned, used or licensed by, or otherwise
subject to any interests of, any Obligor is shown on Schedule 9.1.11.


 


9.1.12.     Governmental Approvals.  Each Borrower and Subsidiary has, is in
compliance with, and is in good standing with respect to, all Governmental
Approvals necessary to conduct its business and to own, lease and operate its
Properties.  All necessary import, export
or other licenses, permits or certificates for the import or handling of any
goods or other Collateral have been procured and are in effect, and Borrowers
and Subsidiaries have complied with all foreign and domestic laws with respect
to the shipment and importation of any goods or Collateral, except where
noncompliance could not reasonably be expected to have a Material Adverse
Effect.


 


55
















 


9.1.13.               Compliance with Laws.  Each Borrower and Subsidiary has duly
complied, and its Properties and business operations are in compliance, in all
material respects with all Applicable Law, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect.  There have been no citations, notices or
orders of material noncompliance issued to any Borrower or Subsidiary under any
Applicable Law.  No Inventory has been
produced in violation of the FLSA.


 


9.1.14.               Compliance with Environmental Laws.  Except as disclosed on Schedule 9.1.14, no Borrower’s or
Subsidiary’s past or present operations, Real Estate or other Properties are
subject to any federal, state or local investigation to determine whether any
remedial action is needed to address any environmental pollution, hazardous
material or environmental clean-up, except for any such environmental
remediation that would not reasonably be expected to have a Material Adverse
Effect.  No Borrower or Subsidiary has
received any material Environmental Notice, except for any Environmental Notice
that has been fully resolved without any further liability or obligation to a
Borrower or a Subsidiary.  To the
knowledge of Borrowers, no Borrower or Subsidiary has any contingent liability
with respect to any Environmental Release, environmental pollution or hazardous
material on any Real Estate now or previously owned, leased or operated by it,
except for any such contingent liability that would not reasonably be expected
to have a Material Adverse Effect.


 


9.1.15.               Burdensome Contracts.  No Borrower or Subsidiary is a party or
subject to any contract, agreement or charter restriction that could reasonably
be expected to have a Material Adverse Effect. 
No Borrower or Subsidiary is party or subject to any Restrictive
Agreement, except as shown on Schedule 9.1.15.  No such Restrictive Agreement prohibits the
execution, delivery or performance of any Loan Document by an Obligor.


 


9.1.16.               Litigation.  Except as shown on Schedule 9.1.16, there are no proceedings or investigations
pending or, to any Borrower’s knowledge, threatened against any Borrower or
Subsidiary, or any of their businesses, operations, Properties, prospects or
conditions, that (a) relate to any Loan Documents or transactions
contemplated thereby; or (b) could reasonably be expected to have a
Material Adverse Effect  Except as shown
on such Schedule, no Obligor has a Commercial Tort Claim (other than, as long
as no Default or Event of Default exists, a Commercial Tort Claim for less than
$100,000).  No Borrower or Subsidiary is
in default with respect to any order, injunction or judgment of any
Governmental Authority.


 


9.1.17.               No Defaults.  No event or circumstance has occurred or
exists that constitutes a Default or Event of Default.  No Borrower or Subsidiary is in default, and
no event or circumstance has occurred or exists that with the passage of time
or giving of notice would constitute a default, under any Material Contract or
in the payment of any Borrowed Money. 
There is no basis upon which any party (other than a Borrower or
Subsidiary) could terminate a Material Contract prior to its scheduled
termination date.


 


9.1.18.               ERISA.  Except as disclosed on Schedule 9.1.18:


 


(a)                                  Each Plan is in
compliance in all material respects with the applicable provisions of ERISA,
the Code, and other federal and state laws. 
Each Plan that is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the IRS or an
application for such a letter is currently being processed by the IRS with
respect thereto and, to the knowledge of Borrowers, nothing has occurred which
would prevent, or cause the loss of, such qualification.


 


(b)                                 There are no
pending or, to the knowledge of Borrowers, threatened claims, actions or
lawsuits, or action by any Governmental Authority, with respect to any Plan
that could reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan
that has resulted in or could reasonably be expected to have a Material Adverse
Effect.


 


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(c)                                  (i) No
ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) the Obligors and
each ERISA Affiliate have met all applicable requirements under the Pension
Funding Rules in respect of each Pension Plan, and no waiver of the
minimum funding standards under the Pension Funding Rules has been applied
for or obtained; (iv) as of the most recent valuation date for any Pension
Plan, the funding target attainment percentage (as defined by Section 430(d)(2) of
the Code) is sixty percent (60%) or higher, and neither the Obligors nor any ERISA
Affiliate knows of any facts or circumstances that could reasonably be expected
to cause the funding target attainment percentage for any such plan to drop
below sixty percent (60%) as of the most recent valuation date; (v) no
Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA); (vi) no
Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 or 4243 of
ERISA with respect to a Multiemployer Plan; and (vi) no Obligor or ERISA Affiliate
has engaged in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.


 


(d)                                 With respect to
any Foreign Plan, (i) all employer
and employee contributions required by law or by the terms of the Foreign Plan
have been made, or, if applicable, accrued, in accordance with normal
accounting practices; (ii) the fair market value of the assets of each
funded Foreign Plan, the liability of each insurer for any Foreign Plan funded
through insurance, or the book reserve established for any Foreign Plan,
together with any accrued contributions, is sufficient to procure or provide
for the accrued benefit obligations with respect to all current and former
participants in such Foreign Plan according to the actuarial assumptions and
valuations most recently used to account for such obligations in accordance
with applicable generally accepted accounting principles; and (iii) it has
been registered as required and has been maintained in good standing with
applicable regulatory authorities.


 


9.1.19.               Trade Relations.  There exists no actual or threatened
termination, limitation or modification of any business relationship between
any Borrower or Subsidiary and any customer or supplier, or any group of
customers or suppliers, who individually or in the aggregate are material to
the business of such Borrower or Subsidiary. 
There exists no condition or circumstance that could reasonably be
expected to impair the ability of any Borrower or Subsidiary to conduct its business
at any time hereafter in substantially the same manner as conducted on the
Closing Date.


 


9.1.20.               Labor Relations.  Except as described on Schedule 9.1.20, no Borrower or Subsidiary
Guarantor is party to or bound by any collective bargaining agreement,
management agreement or consulting agreement. 
Except as would not reasonably be expected to constitute a Material
Adverse Effect, there are no material grievances, disputes or controversies
with any union or other organization of any Borrower’s or Subsidiary’s
employees, or, to any Borrower’s knowledge, any asserted or threatened strikes,
work stoppages or demands for collective bargaining.


 


9.1.21.               Payable Practices.  No Borrower or Subsidiary has made any
material change in its historical accounts payable practices from those in
effect on the Closing Date.


 


9.1.22.               Not a Regulated Entity.  No Obligor is (a) an “investment company”
or a “person directly or indirectly controlled by or acting on behalf of an
investment company” within the meaning of the Investment Company Act of 1940;
or (b) subject to regulation under the Federal Power Act, the Interstate
Commerce Act, any public utilities code or any other Applicable Law regarding
its authority to incur Debt.


 


9.1.23.               Margin Stock.  No Borrower or Subsidiary is engaged,
principally or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.  The making of the Loans and the use of
proceeds thereof will comply with the provisions of Regulations U or X issued
by the Board of Governors.


 


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9.1.24.               Securities Laws.  The execution and delivery of this Agreement
and the other Loan Documents to which any Obligor is a party by it will not
directly or indirectly violate or result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto.


 


9.2.                            Complete Disclosure.  No Loan Document contains any untrue
statement of a material fact, nor fails to disclose any material fact necessary
to make the statements contained therein not materially misleading.  There is no fact or circumstance that any
Obligor has failed to disclose to Agent in writing that could reasonably be
expected to have a Material Adverse Effect.


 


SECTION 10.                     COVENANTS
AND CONTINUING AGREEMENTS


 


10.1.                     Affirmative Covenants.  As long as any Commitments or Obligations are
outstanding, each Borrower shall, and with respect to this Section 10.1,
shall cause each other Obligor to:


 


10.1.1.               Inspections; Appraisals.


 


(a)                                  Permit Agent
from time to time, subject (except when a Default or Event of Default exists)
to reasonable notice and normal business hours, to visit and inspect the
Properties of any Borrower or Subsidiary, inspect, audit and make extracts from
any Borrower’s or Subsidiary’s books and records, and discuss with its
officers, employees, agents, advisors and independent accountants such Borrower’s
or Subsidiary’s business, financial condition, assets, prospects and results of
operations.  Lenders may participate in
any such visit or inspection, at their own expense; provided, however,
the Agent will not conduct more than one such inspection, audit or examination
per Fiscal Year so long as (i) no Default or Event of Default has occurred
and is continuing and (ii) no Loans or Letters of Credit are outstanding
or have been outstanding during the prior twelve (12) month period.  Neither Agent nor any Lender shall have any
duty to any Borrower to make any inspection, nor to share any results of any
inspection, appraisal or report with any Borrower.  Borrowers acknowledge that all inspections,
appraisals and reports are prepared by Agent and Lenders for their purposes,
and Borrowers shall not be entitled to rely upon them.


 


(b)                                 Reimburse Agent
for all charges, costs and expenses of Agent in connection with (i) examinations
of any Obligor’s books and records or any other financial or Collateral matters
as Agent deems appropriate, no more than one time per Fiscal Year; provided, however, that there
shall be no reimbursement if such inspection occurs when (i) no Default or
Event of Default has occurred and is continuing and (ii) no Loans or
Letters of Credit are outstanding or have been outstanding during the prior
twelve (12) month period; and (ii) appraisals of Inventory up to one time per
Fiscal Year; provided, however, that if an examination or
appraisal of Inventory, Equipment or Real Estate is initiated during a Trigger
Period, all charges, costs and expenses therefor shall be reimbursed by
Borrowers without regard to such limits. 
Subject to and without limiting the foregoing, Borrowers specifically
agree to pay Agent’s then standard charges for each day that an employee of
Agent or its Affiliates is engaged in any examination activities, and shall pay
the standard charges of Agent’s internal appraisal group.  This Section shall not be construed to
limit Agent’s right to conduct examinations or to obtain appraisals at any time
in its discretion, or to use third parties for such purposes.


 


10.1.2.               Financial and Other Information.  Keep adequate records and books of account
with respect to its business activities, in which proper entries are made in
accordance with GAAP reflecting all financial transactions; and furnish to
Agent and Lenders:


 


(a)                                  as soon as
available, and in any event within 90 days after the close of each Fiscal Year,
balance sheets as of the end of such Fiscal Year and the related statements of
income, cash flow and shareholders’ equity for such Fiscal Year, on
consolidated and consolidating bases for Parent and its Subsidiaries, which
consolidated statements shall be audited (and reported on without


 


58

















 


qualification)
by a firm of independent certified public accountants of recognized standing
selected by Borrowers and reasonably acceptable to Agent, and shall set forth
in comparative form corresponding figures for the preceding Fiscal Year and
other information acceptable to Agent;


 


(b)                                 as soon as
available, and in any event within 30 days after the end of each month (but
within 45 days after the last month in each of the first three Fiscal Quarters
in a Fiscal Year and within 60 days after the last month in a Fiscal Year), unaudited
balance sheets as of the end of such month and the related statements of income
and cash flow for such month and for the portion of the Fiscal Year then
elapsed, on consolidated and consolidating bases for Parent and its
Subsidiaries, setting forth in comparative form corresponding figures for the
preceding Fiscal Year and certified by the chief financial officer of Borrower
Agent as prepared in accordance with GAAP and fairly presenting the financial
position and results of operations for such month and period, subject to normal
year-end adjustments and the absence of footnotes;


 


(c)                                  concurrently
with delivery of financial statements under clauses (a) and (b) above,
or more frequently if requested by Agent while a Default or Event of Default
exists, a Compliance Certificate executed by the chief financial officer of
Borrower Agent;


 


(d)                                 concurrently
with delivery of financial statements under clause (a) above, copies of
all management letters and other material reports submitted to Borrowers by
their accountants in connection with such financial statements;


 


(e)                                  not later than 90
days after the beginning of each Fiscal Year, projections of Borrowers’
consolidated balance sheets, results of operations, cash flow and Excess
Availability for such Fiscal Year, month by month;


 


(f)                                    at Agent’s
request, a listing of each Borrower’s trade payables, specifying the trade
creditor and balance due, and a detailed trade payable aging, all in form
satisfactory to Agent;


 


(g)                                 promptly after
the sending or filing thereof, copies of any proxy statements, financial
statements or reports that any Borrower has made generally available to its
shareholders; copies of any regular, periodic and special reports or
registration statements or prospectuses that any Borrower files with the
Securities and Exchange Commission or any other Governmental Authority, or any
securities exchange; and copies of any press releases or other statements made
available by a Borrower to the public concerning material changes to or
developments in the business of such Borrower;


 


(h)                                 promptly after
the sending or filing thereof, copies of any annual report to be filed in
connection with each Plan or Foreign Plan;


 


(i)                                     such other
reports and information (financial or otherwise) as Agent may request from time
to time in connection with any Collateral or any Borrower’s, Subsidiary’s or
other Obligor’s financial condition or business;


 


(j)                                     by no later
than the last Business Day of each month, a report listing the amount of
outstanding Dealer Notes purchased by a Dealer Note Purchase Party, if
applicable, during such month; and


 


(k)                                  as soon as
available, and in any event within 120 days after the close of each Fiscal
Year, financial statements for each Guarantor which is not a direct or indirect
Subsidiary of Parent, in form and substance reasonably satisfactory to Agent.


 


59

















 


10.1.3.               Notices.


 


(a)                                  Notify Agent
and Lenders in writing, promptly after a Borrower’s obtaining knowledge
thereof, of any of the following that affects an Obligor:  (a) the threat or commencement of any
proceeding or investigation, whether or not covered by insurance, which could
reasonably be expected to have a Material Adverse Effect; (b) any pending
or threatened labor dispute, strike or walkout, or the expiration of any
material labor contract; (c) any default under or termination of a
Material Contract (including any Dealer Notes, any Dealer Note Purchase
Agreement, GE Guarantees, and the Senior Notes Documents); (d) the
existence of any Default or Event of Default; (e) any judgment in an
amount exceeding $350,000; (f) the assertion of any Intellectual Property
Claim, which could reasonably be expected to have a Material Adverse Effect; (g) any
violation or asserted violation of any Applicable Law (including ERISA, OSHA,
FLSA, or any Environmental Laws), which could reasonably be expected to have a
Material Adverse Effect; (h) any Environmental Release by an Obligor or on
any Property owned, leased or occupied by an Obligor where such Environmental
Release would reasonably be expected to have a Material Adverse Effect; or
receipt of any Environmental Notice; (i) the occurrence of any ERISA
Event; (j) the discharge of or any withdrawal or resignation by Borrowers’
independent accountants; (k) any opening of a new office or place of
business, at least 30 days prior to such opening; or (l) any investigation
or possible investigation or other inquiry by the Securities and Exchange
Commission (or comparable agency in any applicable non-U.S. jurisdiction)
regarding the financial or other operational results of any Obligor or any
Subsidiary thereof.


 


(b)                                 Borrowers
shall, at their option, provide Agent with proposed revised schedules to this
Agreement at any time there shall be a material change in the information
disclosed on Schedule 8.5 (Deposit Accounts), Schedule 8.6.1 (Business Locations), Schedule
9.1.4 (Names and Capital Structure), Schedule
9.1.11 (Patents, Trademarks, Copyrights and Licenses), Schedule 9.1.16 (Litigation), Schedule
9.1.18 (Pension Plans), or Schedule 9.1.20
(Labor Contracts).  If such proposed
revised schedules are acceptable to Agent in its Credit Judgment in all
respects and do not arise out of events or conditions prohibited by this
Agreement or the other Loan Documents, Agent will distribute the same to each
Lender, whereupon such schedules shall replace the applicable existing
schedules and this Agreement shall be automatically modified accordingly
without any further action by Borrowers, Agent or Lenders.


 


10.1.4.               Landlord and Storage Agreements.  Upon request, provide Agent with copies of
all existing agreements, and promptly after execution thereof provide Agent
with copies of all future agreements, between an Obligor and any landlord,
warehouseman, processor, shipper, bailee or other Person that owns any premises
at which any Collateral may be kept or that otherwise may possess or handle any
Collateral.


 


10.1.5.               Compliance with Laws.  Comply with all Applicable Laws, including
ERISA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws regarding
collection and payment of Taxes, and maintain all Governmental Approvals
necessary to the ownership of its Properties or conduct of its business, unless
failure to comply (other than failure to comply with Anti-Terrorism Laws) or
maintain could not reasonably be expected to have a Material Adverse
Effect.  Without limiting the generality
of the foregoing, if any Environmental Release occurs at or on any Properties
of any Borrower or Subsidiary, it shall act promptly and diligently to
investigate and report to Agent and, to the extent required by Environmental
Laws, all appropriate Governmental Authorities the extent of, and to make
appropriate remedial action to the extent required for compliance with
Environmental Laws to eliminate, such Environmental Release, whether or not
directed to do so by any Governmental Authority.


 


10.1.6.               Taxes.  Pay and discharge all Taxes prior to the date
on which they become delinquent or penalties attach, unless such Taxes are
being Properly Contested.


 


10.1.7.               Insurance.  In addition to the insurance required hereunder
with respect to Collateral, maintain insurance with insurers (with a Best
Rating of at least A7, unless otherwise approved by Agent) satisfactory to
Agent, (a) with respect to the Properties and business of Borrowers and


 


60

















 


Subsidiaries of such type (including product liability, workers’
compensation, larceny, embezzlement, or other criminal misappropriation
insurance), in such amounts, and with such coverages and deductibles as are
customary for companies similarly situated; and (b) business interruption
insurance in an amount not less than $15,000,000, with deductibles and subject to an Insurance
Assignment satisfactory to Agent.


 


10.1.8.               Licenses.  Keep each License affecting any Collateral
(including the manufacture, distribution or disposition of Inventory) or any
other material Property of Borrowers and Subsidiaries in full force and effect;
promptly notify Agent of any proposed modification to any such License, or
entry into any new License, in each case at least 30 days prior to its
effective date; pay all Royalties when due; and notify Agent of any default or
breach asserted by any Person to have occurred under any License.


 


10.1.9.               Future Subsidiaries.  Promptly notify Agent upon any Person becoming
a Subsidiary and, if such Person is not a Foreign Subsidiary or an “Unrestricted
Subsidiary” (as such term is defined in the Senior Notes Indenture), which
under the terms of the Senior Notes Indenture is required to become a “Guarantor”
thereunder, and such Person has assets or liabilities or both in excess of
$500,000, cause it to guaranty the Obligations in a manner satisfactory to
Agent, and to execute and deliver such documents, instruments and agreements
and to take such other actions as Agent shall require to evidence and perfect a
Lien in favor of Agent (for the benefit of Secured Parties) on all assets of
such Person, including delivery of such legal opinions, in form and substance reasonably
satisfactory to Agent, as it shall deem appropriate.


 


10.1.10.         Senior Notes.  On or before January 1, 2014, refinance,
or cause to be refinanced, the Senior Notes in accordance with the terms of
this Agreement (which refinancing may include repayment of the Senior Notes to
the extent permitted by the terms of this Agreement); provided, that this
covenant shall be deemed satisfied in the event the sum of the amount of
unrestricted cash of the Obligors plus Excess Availability, in each case as of January 1,
2014, is equal to or greater than the amount necessary to refinance the Senior
Notes in accordance with the terms of this Agreement.  Notwithstanding any other provision of this
Agreement or any of the Loan Documents, the Obligors shall have the
unconditional right to refinance any or all of the Senior Notes or any
obligations under the Senior Notes Documents, and to incur Senior Notes
Refinancing Debt, and to take all actions incident thereto, provided that, to
the extent applicable, all such actions are consistent with and not in
violation of (a) the requirements for refinancing the Senior Notes as
specified in the definition of “Senior Notes” and (b) the requirements
specified in the definition of “Senior Notes Refinancing Debt”.


 


10.2.                     Negative Covenants.  As long as any Commitments or Obligations are
outstanding, each Borrower shall not, and shall cause each other Obligor not
to:


 


10.2.1.               Permitted Debt.  Create, incur, guarantee or suffer to exist
any Debt , except:


 


(a)                                  the
Obligations;


 


(b)                                 Subordinated
Debt;


 


(c)                                  Debt owed to a
Dealer Note Purchase Party pursuant to the Dealer Note Purchase Agreement in a
maximum amount outstanding not to exceed $15,000,000;


 


(d)                                 Borrowed Money
(other than the Obligations), but only to the extent outstanding on the Closing
Date and not satisfied with proceeds of the Loans;


 


(e)                                  Bank Product
Debt;


 


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(f)                                    Debt that is in existence when a Person
becomes a Subsidiary or that is secured by an asset when acquired by Parent or
a Subsidiary thereof, as long as such Debt was not incurred in contemplation of
such Person becoming a Subsidiary or such acquisition, and does not exceed
$1,000,000  in
the aggregate at any time;


 


(g)                                 Permitted
Contingent Obligations (provided that in no event shall an Obligor become
liable for a Contingent Obligation in respect of a Non-Guarantor Subsidiary);


 


(h)                                 Purchase Money
Debt secured only by a Purchase Money Lien in an aggregate amount not to exceed
$1,000,000 at any time;


 


(i)                                     the Senior
Notes and the Senior Notes Refinancing Debt;


 


(j)                                     Refinancing Debt
as long as each Refinancing Condition is satisfied; and


 


(k)                                  Debt that is
not included in any of the preceding clauses of this Section, is not secured by
a Lien and does not exceed $1,500,000 in the aggregate at any time.


 


10.2.2.               Limitation on Liens.  Create or suffer to exist any
Liens or claims upon or against any of its Property or assets now owned or
hereafter acquired, except Permitted Encumbrances.


 


10.2.3.               Reserved.


 


10.2.4.               Distributions; Upstream Payments.  At any time that the Permitted Distribution
Conditions are not satisfied, declare or make any Distributions, except
Upstream Payments; or create or suffer to exist any encumbrance or restriction
on the ability of a Subsidiary to make any Upstream Payment, except for
restrictions under the Loan Documents, under Applicable Law or in effect on the
Closing Date as shown on Schedule 9.1.15.


 


10.2.5.               Restricted Investments.  Make any Restricted Investment other than
Permitted Acquisitions and Permitted Investments.


 


10.2.6.               Disposition of Assets.  Make any Asset Disposition, except a
Permitted Asset Disposition, a disposition of Equipment under Section 8.4.2, or a transfer of
Property by any Obligor to any other Obligor.


 


10.2.7.               Loans.  Make any loans or other advances of money to
any Person, except (a) advances to an officer or employee for salary,
travel expenses, commissions and similar items in the Ordinary Course of
Business; (b) prepaid expenses and extensions of trade credit made in the
Ordinary Course of Business; (c) deposits with financial institutions
permitted hereunder; (d) Steinway Dealer Loans in an aggregate amount not
to exceed $15,000,000 for all Steinway dealers; (e) Permitted Investments;
and (f) as long as no Event of Default exists, intercompany loans by an
Obligor to another Obligor or by an Obligor to a Non-Guarantor Subsidiary.


 


10.2.8.               Restrictions on Payment of Certain Debt.  Make any payments (whether voluntary or
mandatory, or a prepayment, redemption, retirement, defeasance or acquisition)
with respect to any (a) Subordinated Debt, except regularly scheduled
payments of principal, interest and fees, but only to the extent permitted
under any subordination agreement relating to such Debt (and a Senior Officer
of Borrower Agent shall certify to Agent, not less than five Business Days
prior to the date of payment, that all conditions under such agreement have
been satisfied); or (b) Borrowed Money (other than the Obligations, but
including Debt under the Senior Notes) prior to its due date under the
agreements evidencing such Debt as in effect from time to time, provided that
payments in respect of the foregoing shall be permitted if the Permitted
Distribution Conditions have been met.


 


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10.2.9.               Fundamental Changes.  Merge, combine or consolidate with any
Person, or liquidate, wind up its affairs or dissolve itself, in each case
whether in a single transaction or in a series of related transactions, except
for mergers or consolidations of a wholly-owned Subsidiary with another wholly-owned
Subsidiary or into a Borrower; change its name or conduct business under any
fictitious name; change its tax, charter or other organizational identification
number; or change its form or state of organization.


 


10.2.10.         Subsidiaries.  Form or acquire any
Subsidiary after the Closing Date, except in accordance with Sections 10.1.9 and 10.2.5; or
permit any existing Subsidiary to issue any additional Equity Interests except
director’s qualifying shares.


 


10.2.11.         Organic Documents.  Amend, modify or otherwise change any of its
Organic Documents as in effect on the Closing Date, other than modifications to
the Organic Documents of Parent that could not reasonably be expected to have
an adverse effect on the interests of the Lenders.


 


10.2.12.         Tax Consolidation.  File or consent to the filing of any
consolidated income tax return with any Person other than the Obligors and
Subsidiaries thereof.


 


10.2.13.         Accounting Changes.  Make any material change in accounting
treatment or reporting practices, except as required by GAAP and in accordance
with Section 1.2; or change
its Fiscal Year.


 


10.2.14.         Restrictive Agreements.  Become a party to any Restrictive Agreement,
except a Restrictive Agreement (a) in effect on the Closing Date; (b) relating
to secured Debt permitted hereunder, as long as the restrictions apply only to
collateral for such Debt; or (c) constituting customary restrictions on
assignment in leases and other contracts.


 


10.2.15.         Hedging Agreements.  Enter into any Hedging Agreement, except to
hedge risks arising in the Ordinary Course of Business and not for speculative
purposes and except for Permitted Investments.


 


10.2.16.         Conduct of Business.  Engage in any business, other than (a) its
business as conducted on the Closing Date and any activities incidental thereto
and (b) in connection with any Permitted Acquisitions and Permitted
Investments.


 


10.2.17.         Affiliate Transactions.  Enter into or be party to any transaction
with an Affiliate, except (a) transactions contemplated by the Loan Documents;
(b) payment of reasonable compensation to officers and employees for
services actually rendered, and loans and advances permitted by Section 10.2.7; (c) payment of
customary directors’ fees and indemnities; (d) transactions solely among
Obligors; (e) transactions with Affiliates, as shown on Schedule 10.2.17; and (f) transactions
with Affiliates, upon fair and reasonable terms fully disclosed to Agent and no
less favorable than would be obtained in a comparable arm’s-length transaction
with a non-Affiliate.


 


10.2.18.         Plans.  Become party to any Multiemployer Plan or
Foreign Plan, other than any in existence on the Closing Date.


 


10.2.19.         Amendments to Subordinated Debt.  Amend, supplement or otherwise modify any
document, instrument or agreement relating to any Subordinated Debt, if such
modification (a) increases the principal balance of such Debt, or
increases any required payment of principal or interest; (b) accelerates
the date on which any installment of principal or any interest is due, or adds any
additional redemption, put or prepayment provisions; (c) shortens the
final maturity date or otherwise accelerates amortization; (d) increases
the interest rate; (e) increases or adds any fees or charges; (f) amends
the subordination provisions of any such document, instrument or agreement or (g) modifies
any covenant in


 


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a manner or adds any representation, covenant
or default that is more onerous or restrictive in any material respect for any
Borrower or Subsidiary, or that is otherwise materially adverse to any
Borrower, any Subsidiary or Lenders.


 


10.2.20.         Amendments to Senior Notes.  Amend, supplement or otherwise modify the
Senior Note Indenture in any manner that (a) is inconsistent with other provisions
of this Agreement (including, without limitation, the requirements for
refinancing the Senior Notes as specified in the definition of “Senior Notes”)
or (b) results in the Obligations not constituting permitted Debt under Section 4.7  (c) of the
Senior Note Indenture.


 


10.3.                     Fixed
Charge Coverage Ratio.  During any Covenant Trigger Period, Borrowers
shall maintain a Fixed Charge Coverage Ratio of at least 1.1 to 1.0.


 


SECTION 11.                     EVENTS
OF DEFAULT; REMEDIES ON DEFAULT


 


11.1.                     Events of Default.  Each of the following shall be an “Event
of Default” hereunder, if the same shall occur for any reason whatsoever,
whether voluntary or involuntary, by operation of law or otherwise:


 


(a)                                  A Borrower
fails to pay any Obligations when due (whether at stated maturity, on demand,
upon acceleration or otherwise);


 


(b)                                 Any
representation, warranty or other written statement of an Obligor made in
connection with any Loan Documents or transactions contemplated thereby is
incorrect or misleading in any material respect when given;


 


(c)                                  A Borrower
breaches or fail to perform any covenant contained in Section 7.3, 7.6, 8.2.4, 8.2.5, 8.6.2, 10.1.1(a), 10.2, or 10.3;


 


(d)                                 An Obligor
breaches or fails to perform any other covenant contained in any Loan
Documents, and such breach or failure is not cured within 30 days (or, solely
with respect to the covenants contained in Section 10.1.2,
within 15 days) after a Senior Officer of such Obligor has knowledge thereof or
receives notice thereof from Agent, whichever is sooner;


 


(e)                                  A Guarantor
repudiates, revokes or attempts to revoke its Guaranty; an Obligor or third
party denies or contests the validity or enforceability of any Loan Documents
or Obligations, or the perfection or priority of any Lien granted to Agent; or
any Loan Document ceases to be in full force or effect for any reason (other
than a waiver or release by Agent and Lenders);


 


(f)                                    Any breach or
default of an Obligor occurs under any document, instrument or agreement to
which it is a party or by which it or any of its Properties is bound, relating
to any Debt (other than the Obligations) in excess of $1,000,000, if the maturity of or any
payment with respect to such Debt may be accelerated or demanded due to such
breach;


 


(g)                                 Any final
non-appealable judgment or order for the payment of money is entered against an
Obligor in an amount that exceeds, individually or cumulatively with all
unsatisfied judgments or orders against all Obligors, $1,000,000 (net of any insurance
coverage therefor acknowledged in writing by the insurer) unless a stay of
enforcement of such judgment or order is in effect, by reason of a pending
appeal or otherwise, and such Obligor shall have not made payment in
satisfaction of such judgment or order within thirty (30) days from the date of
entry of such judgment or order;


 


(h)                                 A loss, theft,
damage or destruction occurs with respect to any Collateral if the amount not
covered by insurance exceeds $10,000,000;


 


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(i)                                     An Obligor is
enjoined, restrained or in any way prevented by any Governmental Authority from
conducting any material part of its business; an Obligor suffers the loss,
revocation or termination of any material license, permit, lease or agreement
necessary to its business; there is a cessation of any material part of an
Obligor’s business for a material period of time; any material Collateral or
Property of an Obligor is taken or impaired through condemnation; an Obligor
agrees to or commences any liquidation, dissolution or winding up of its
affairs; or an Obligor is not Solvent;


 


(j)                                     An Insolvency
Proceeding is commenced by an Obligor; an Obligor makes an offer of settlement,
extension or composition to its unsecured creditors generally; a trustee is
appointed to take possession of any substantial Property of or to operate any
of the business of an Obligor; or an Insolvency Proceeding is commenced against
an Obligor and:  the Obligor consents to
institution of the proceeding, the petition commencing the proceeding is not
timely contested by the Obligor, the petition is not dismissed within 30 days
after filing, or an order for relief is entered in the proceeding;


 


(k)                                  An ERISA Event
occurs with respect to a Pension Plan or Multiemployer Plan that has resulted
or could reasonably be expected to result in liability of an Obligor to a
Pension Plan, Multiemployer Plan or PBGC in excess of $2,000,000 in the
aggregate; an Obligor or ERISA Affiliate fails to pay when due any installment
payment with respect to its withdrawal liability under Section 4201 of
ERISA under a Multiemployer Plan; or any event similar to the foregoing occurs
or exists with respect to a Foreign Plan;


 


(l)                                     Any event of
default occurs under any GE Guarantees or the Senior Notes Documents, which
event of default has not been cured during any applicable grace period;


 


(m)                               An Obligor or
any of its Senior Officers is criminally convicted for (i) a felony
committed in the conduct of the Obligor’s business, or (ii) violating any
state or federal law (including the Controlled Substances Act, Money Laundering
Control Act of 1986 and Illegal Exportation of War Materials Act) which, in
either case, could lead to forfeiture of any material Property or any
Collateral; or


 


(n)                                 A Change of
Control occurs; or


 


(o)                                 Any event
occurs or condition exists that has a Material Adverse Effect.


 


11.2.                     Remedies upon Default.  If an Event of Default described in Section 11.1(j) occurs with respect to any
Borrower, then to the extent permitted by Applicable Law, all Obligations shall
become automatically due and payable and all Commitments shall terminate,
without any action by Agent or notice of any kind.  In addition, or if any other Event of Default
exists, Agent may in its discretion (and shall upon written direction of
Required Lenders) do any one or more of the following from time to time:


 


(a)                                  declare any
Obligations immediately due and payable, whereupon they shall be due and
payable without diligence, presentment, demand, protest or notice of any kind,
all of which are hereby waived by Borrowers to the fullest extent permitted by
law;


 


(b)                                 terminate,
reduce or condition any Commitment, or make any adjustment to the Borrowing
Base;


 


(c)                                  require Obligors to Cash Collateralize LC Obligations, Bank Product Debt
and other Obligations that are contingent or not yet due and payable, and, if
Obligors fail promptly to deposit such Cash Collateral, Agent may (and shall
upon the direction of Required Lenders) advance the required Cash Collateral as
Loans (whether or not an Overadvance exists or is created thereby, or the
conditions in Section 6
are satisfied); and


 


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(d)                                 exercise any
other rights or remedies afforded under any agreement, by law, at equity or
otherwise, including the rights and remedies of a secured party under the
UCC.  Such rights and remedies include
the rights to (i) take possession
of any Collateral; (ii) require Borrowers to assemble Collateral, at
Borrowers’ expense, and make it available to Agent at a place designated by
Agent; (iii) enter any premises where Collateral is located and store
Collateral on such premises until sold (and if the premises are owned or leased
by a Borrower, Borrowers agree not to charge for such storage); and (iv) sell
or otherwise dispose of any Collateral in its then condition, or after any
further manufacturing or processing thereof, at public or private sale, with such
notice as may be required by Applicable Law, in lots or in bulk, at such
locations, all as Agent, in its discretion, deems advisable.  Each Borrower agrees that 10 days notice of
any proposed sale or other disposition of Collateral by Agent shall be reasonable.  Agent shall have the right to conduct such
sales on any Obligor’s premises, without charge, and such sales may be
adjourned from time to time in accordance with Applicable Law.  Agent shall have the right to sell, lease or
otherwise dispose of any Collateral for cash, credit or any combination
thereof, and Agent may purchase any Collateral at public or, if permitted by
law, private sale and, in lieu of actual payment of the purchase price, may set
off the amount of such price against the Obligations.


 


11.3.                     License.  At any time during an Event of Default, Agent
shall be granted, automatically and without further action on the part of
Borrowers or Agent, an irrevocable, non-exclusive license or other right to
use, license or sub-license (without payment of royalty or other compensation
to any Person) any or all Intellectual Property of Borrowers, computer hardware
and software, trade secrets, brochures, customer lists, promotional and
advertising materials, labels, packaging materials and other Property, in
advertising for sale, marketing, selling, collecting, completing manufacture
of, or otherwise exercising any rights or remedies with respect to, any
Collateral.  Each Borrower’s rights and
interests under Intellectual Property shall inure to Agent’s benefit.


 


11.4.                     Setoff.  At any time during an Event of Default, Agent, Issuing
Bank, Lenders, and any of their Affiliates are authorized, to the fullest
extent permitted by Applicable Law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final, in whatever
currency) at any time held and other obligations (in whatever currency) at any
time owing by Agent, Issuing Bank, such Lender or such Affiliate to or for
the credit or the account of an Obligor against any Obligations, irrespective
of whether or not Agent, Issuing Bank, such Lender or such Affiliate shall
have made any demand under this Agreement or any other Loan Document and
although such Obligations may be contingent or unmatured or are owed to a
branch or office of Agent, Issuing Bank, such Lender or such Affiliate
different from the branch or office holding such deposit or obligated on such
indebtedness.  The rights of Agent, Issuing
Bank, each Lender and each such Affiliate under this Section are in addition
to other rights and remedies (including other rights of setoff) that such
Person may have.


 


11.5.                     Remedies
Cumulative; No Waiver.


 


11.5.1.               Cumulative Rights.  All agreements, warranties, guaranties,
indemnities and other undertakings of Borrowers under the Loan Documents are
cumulative and not in derogation of each other. 
The rights and remedies of Agent and Lenders are cumulative, may be
exercised at any time and from time to time, concurrently or in any order, and
are not exclusive of any other rights or remedies available by agreement, by
law, at equity or otherwise.  All such
rights and remedies shall continue in full force and effect until Full Payment
of all Obligations.


 


11.5.2.               Waivers.  No waiver or course of dealing shall be
established by (a) the failure or delay of Agent or any Lender to require
strict performance by Borrowers with any terms of the Loan Documents, or to
exercise any rights or remedies with respect to Collateral or otherwise; (b) the
making of any Loan or issuance of any Letter of Credit during a Default, Event
of Default or other failure to satisfy any conditions precedent; or (c) acceptance
by Agent or any Lender of any payment or performance by an Obligor under any
Loan Documents in a manner other than that specified therein.  It is


 


66

















 


expressly acknowledged by Borrowers that any failure to satisfy a
financial covenant on a measurement date shall not be cured or remedied by
satisfaction of such covenant on a subsequent date.


 


SECTION 12.                     AGENT


 


12.1.                     Appointment,
Authority and Duties of Agent.


 


12.1.1.               Appointment and Authority.  Each Lender appoints and designates Bank of
America as Agent hereunder.  Agent may,
and each Lender authorizes Agent to, enter into all Loan Documents to which
Agent is intended to be a party and accept all Security Documents, for Agent’s
benefit and the Pro Rata benefit of Lenders. 
Each Lender agrees that any action taken by Agent or Required Lenders in
accordance with the provisions of the Loan Documents, and the exercise by Agent
or Required Lenders of any rights or remedies set forth therein, together with
all other powers reasonably incidental thereto, shall be authorized by and
binding upon all Lenders.  Without
limiting the generality of the foregoing, Agent shall have the sole and
exclusive authority to (a) act as the disbursing and collecting agent for
Lenders with respect to all payments and collections arising in connection with
the Loan Documents; (b) execute and deliver as Agent each Loan Document,
including any intercreditor or subordination agreement, and accept delivery of
each Loan Document from any Obligor or other Person; (c) act as collateral
agent for Secured Parties for purposes of perfecting and administering Liens
under the Loan Documents, and for all other purposes stated therein; (d) manage,
supervise or otherwise deal with Collateral; and (e) take any Enforcement
Action or otherwise exercise any rights or remedies with respect to any
Collateral under the Loan Documents, Applicable Law or otherwise.  The duties of Agent shall be ministerial and
administrative in nature, and Agent shall not have a fiduciary relationship
with any Lender, Secured Party, Participant or other Person, by reason of any
Loan Document or any transaction relating thereto.  Agent alone shall be authorized to determine
whether any Accounts or Inventory constitute Eligible Accounts or Eligible
Inventory, or whether to impose or release any reserve, and to exercise its
Credit Judgment in connection therewith, which determinations and judgments, if
exercised in good faith, shall exonerate Agent from liability to any Lender or
other Person for any error in judgment.


 


12.1.2.               Duties.  Agent shall not have any duties except those
expressly set forth in the Loan Documents. 
The conferral upon Agent of any right shall not imply a duty on Agent’s
part to exercise such right, unless instructed to do so by Required Lenders in
accordance with this Agreement.


 


12.1.3.               Agent Professionals.  Agent may perform its duties through agents
and employees.  Agent may consult with
and employ Agent Professionals, and shall be entitled to act upon, and shall be
fully protected in any action taken in good faith reliance upon, any advice
given by an Agent Professional.  Agent
shall not be responsible for the negligence or misconduct of any agents,
employees or Agent Professionals selected by it with reasonable care.


 


12.1.4.               Instructions of Required Lenders.  The rights and remedies conferred upon Agent
under the Loan Documents may be exercised without the necessity of joinder of
any other party, unless required by Applicable Law.  Agent may request instructions from Required
Lenders with respect to any act (including the failure to act) in connection
with any Loan Documents, and may seek assurances to its satisfaction from
Lenders of their indemnification obligations under Section 12.6 against all Claims that could be incurred by
Agent in connection with any act.  Agent
shall be entitled to refrain from any act until it has received such
instructions or assurances, and Agent shall not incur liability to any Person
by reason of so refraining.  Instructions
of Required Lenders shall be binding upon all Lenders, and no Lender shall have
any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting in accordance with the instructions of Required
Lenders.  Notwithstanding the foregoing,
instructions by and consent of all Lenders shall be required to the extent
described in Section 14.1.1,
and in no event shall Required Lenders, without the prior written consent of
each Lender, direct Agent to accelerate and demand payment of Loans held by one
Lender without accelerating and demanding payment of all other Loans, nor to
terminate the Commitments of one Lender without terminating the


 


67

















 


Commitments of all Lenders.  In
no event shall Agent be required to take any action that, in its opinion, is
contrary to Applicable Law or any Loan Documents or could subject any Agent
Indemnitee to personal liability.


 


12.2.                     Agreements
Regarding Collateral and Field Examination Reports.


 


12.2.1.               Lien Releases; Care of
Collateral.  Lenders
authorize Agent to release any Lien with respect to any Collateral (a) upon
Full Payment of the Obligations; (b) that is the subject of an Asset
Disposition which Borrowers certify in writing to Agent is a Permitted Asset
Disposition or a Lien which Borrowers certify is a Permitted Lien entitled to
priority over Agent’s Liens (and Agent may rely conclusively on any such
certificate without further inquiry); (c) that does not constitute a
material part of the Collateral; or (d) with the written consent of all
Lenders.  Lenders authorize Agent to
subordinate its Liens to any Purchase Money Lien permitted hereunder.  Agent
shall have no obligation to assure that any Collateral exists or is owned by a
Borrower, or is cared for, protected or insured, nor to assure that Agent’s
Liens have been properly created, perfected or enforced, or are entitled to any
particular priority, nor to exercise any duty of care with respect to any
Collateral.


 


12.2.2.               Possession of Collateral.  Agent and Lenders appoint each Lender as
agent (for the benefit of Secured Parties) for the purpose of perfecting Liens
in any Collateral held or controlled by such Lender, to the extent such Liens
are perfected by possession or control. 
If any Lender obtains possession or control of any Collateral, it shall
notify Agent thereof and, promptly upon Agent’s request, deliver such Collateral
to Agent or otherwise deal with it in accordance with Agent’s instructions.


 


12.2.3.               Reports.  Agent shall promptly forward to each Lender,
when complete, copies of any field audit, examination or appraisal report
prepared by or for Agent with respect to any Obligor or Collateral (“Report”).  Each Lender agrees (a) that neither Bank
of America nor Agent makes any representation or warranty as to the accuracy or
completeness of any Report, and shall not be liable for any information
contained in or omitted from any Report; (b) that the Reports are not
intended to be comprehensive audits or examinations, and that Agent or any
other Person performing any audit or examination will inspect only specific
information regarding Obligations or the Collateral and will rely significantly
upon Borrowers’ books and records as well as upon representations of Borrowers’
officers and employees; and (c) to keep all Reports confidential and
strictly for such Lender’s internal use, and not to distribute any Report (or
the contents thereof) to any Person (except to such Lender’s Participants,
attorneys and accountants) or use any Report in any manner other than
administration of the Loans and other Obligations; provided that, so long as no
Event of Default then exists, the Borrowers shall be entitled to receive copies
of any Reports relating solely to appraisals if the expense of producing such
Reports is borne in full by the Obligors. 
Each Lender agrees to indemnify and hold harmless Agent and any other
Person preparing a Report from any action such Lender may take as a result of
or any conclusion it may draw from any Report, as well as from any Claims
arising as a direct or indirect result of Agent furnishing a Report to such
Lender.


 


12.3.                     Reliance By Agent.  Agent shall be entitled to rely, and shall be
fully protected in relying, upon any certification, notice or other
communication (including those by telephone, telex, telegram, telecopy or
e-mail) believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person, and upon the advice and statements of Agent
Professionals.


 


12.4.                     Action Upon Default.  Agent shall not be deemed to have knowledge
of any Default or Event of Default unless it has received written notice from a
Lender or Borrower specifying the occurrence and nature thereof.  If any Lender acquires knowledge of a Default
or Event of Default, it shall promptly notify Agent and the other Lenders
thereof in writing.  Each Lender agrees
that, except as otherwise provided in any Loan Documents or with the written
consent of Agent and Required Lenders, it will not take any Enforcement Action,
accelerate Obligations under any Loan Documents, or exercise any right that it
might otherwise have under Applicable Law to credit bid at foreclosure sales,
UCC sales or 


 


68

















 


other similar dispositions of Collateral.  Notwithstanding the foregoing, however, a
Lender may take action to preserve or enforce its rights against an Obligor
where a deadline or limitation period is applicable that would, absent such
action, bar enforcement of Obligations held by such Lender, including the
filing of proofs of claim in an Insolvency Proceeding.


 


12.5.                     Ratable Sharing.  If any Lender shall obtain any payment or reduction
of any Obligation, whether through set-off or otherwise, in excess of its share
of such Obligation, determined on a Pro Rata basis or in accordance with Section 5.6.1, as applicable, such
Lender shall forthwith purchase from Agent, Issuing Bank and the other
Lenders such participations in the affected Obligation as are necessary to
cause the purchasing Lender to share the excess payment or reduction on a Pro
Rata basis or in accordance with Section 5.6.1,
as applicable.  If any of such payment or
reduction is thereafter recovered from the purchasing Lender, the purchase
shall be rescinded and the purchase price restored to the extent of such
recovery, but without interest.  No
Lender shall set off against any Dominion Account without the prior consent of Agent.


 


12.6.                     Indemnification
of Agent Indemnitees.  EACH LENDER
SHALL INDEMNIFY AND HOLD HARMLESS AGENT INDEMNITEES, TO THE EXTENT NOT
REIMBURSED BY OBLIGORS (BUT WITHOUT LIMITING THE INDEMNIFICATION OBLIGATIONS OF
OBLIGORS UNDER ANY LOAN DOCUMENTS), ON A PRO RATA BASIS, AGAINST ALL CLAIMS
THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY AGENT INDEMNITEE, PROVIDED
THE CLAIM RELATES TO OR ARISES FROM AN AGENT INDEMNITEE ACTING AS OR FOR AGENT
(IN ITS CAPACITY AS AGENT). 
In Agent’s discretion, it may reserve for any such Claims made against
an Agent Indemnitee, and may satisfy any judgment, order or settlement relating
thereto, from proceeds of Collateral prior to making any distribution of
Collateral proceeds to Lenders.  If Agent
is sued by any receiver, bankruptcy trustee, debtor-in-possession or other
Person for any alleged preference or fraudulent transfer, then any monies paid
by Agent in settlement or satisfaction of such proceeding, together with all
interest, costs and expenses (including attorneys’ fees) incurred in the
defense of same, shall be promptly reimbursed to Agent by each Lender to the
extent of its Pro Rata share.


 


12.7.                     Limitation on Responsibilities of Agent.  Agent shall not be liable to
Lenders for any action taken or omitted to be taken under the Loan Documents,
except for losses directly and solely caused by Agent’s gross negligence or
willful misconduct.  Agent does not
assume any responsibility for any failure or delay in performance or any breach
by any Obligor or Lender of any obligations under the Loan Documents.  Agent does not make to Lenders any express or
implied warranty, representation or guarantee with respect to any Obligations,
Collateral, Loan Documents or Obligor. 
No Agent Indemnitee shall be responsible to Lenders for any recitals,
statements, information, representations or warranties contained in any Loan
Documents; the execution, validity, genuineness, effectiveness or
enforceability of any Loan Documents; the genuineness, enforceability,
collectibility, value, sufficiency, location or existence of any Collateral, or
the validity, extent, perfection or priority of any Lien therein; the validity,
enforceability or collectibility of any Obligations; or the assets,
liabilities, financial condition, results of operations, business,
creditworthiness or legal status of any Obligor or Account Debtor.  No Agent Indemnitee shall have any obligation
to any Lender to ascertain or inquire into the existence of any Default or
Event of Default, the observance or performance by any Obligor of any terms of
the Loan Documents, or the satisfaction of any conditions precedent contained
in any Loan Documents.


 


12.8.                     Successor
Agent and Co-Agents.


 


12.8.1.               Resignation; Successor Agent.  Subject to the appointment and acceptance of
a successor Agent as provided below, Agent may resign at any time by giving at
least 30 days written notice thereof to Lenders and Borrowers.  Upon receipt of such notice, Required Lenders
shall have the right to appoint a successor Agent which shall be (a) a
Lender or an Affiliate of a Lender; or (b) a commercial bank that is
organized under the laws of the United States or any state or district thereof,
has


 


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a combined capital surplus of at least $200,000,000 and (provided no
Default or Event of Default exists) is reasonably acceptable to Borrowers.  If no successor agent is appointed prior to
the effective date of the resignation of Agent, then Agent may appoint a successor
agent from among Lenders.  Upon acceptance
by a successor Agent of an appointment to serve as Agent hereunder, such
successor Agent shall thereupon succeed to and become vested with all the
powers and duties of the retiring Agent without further act, and the retiring
Agent shall be discharged from its duties and obligations hereunder but shall
continue to have the benefits of the indemnification set forth in Sections 12.6 and 14.2.  Notwithstanding any Agent’s resignation, the
provisions of this Section 12
shall continue in effect for its benefit with respect to any actions taken or
omitted to be taken by it while Agent. 
Any successor to Bank of America by merger or acquisition of stock or
this loan shall continue to be Agent hereunder without further act on the part
of the parties hereto, unless such successor resigns as provided above.


 


12.8.2.               Separate Collateral Agent.  It is the intent of the parties that there
shall be no violation of any Applicable Law denying or restricting the right of
financial institutions to transact business in any jurisdiction.  If Agent believes that it may be limited in
the exercise of any rights or remedies under the Loan Documents due to any
Applicable Law, Agent may appoint an additional Person who is not so limited,
as a separate collateral agent or co-collateral agent.  If Agent so appoints a collateral agent or
co-collateral agent, each right and remedy intended to be available to Agent
under the Loan Documents shall also be vested in such separate agent.  Every covenant and obligation necessary to
the exercise thereof by such agent shall run to and be enforceable by it as
well as Agent.  Lenders shall execute and
deliver such documents as Agent deems appropriate to vest any rights or
remedies in such agent.  If any
collateral agent or co-collateral agent shall die or dissolve, become incapable
of acting, resign or be removed, then all the rights and remedies of such
agent, to the extent permitted by Applicable Law, shall vest in and be
exercised by Agent until appointment of a new agent.


 


12.9.                     Due Diligence and Non-Reliance.  Each Lender acknowledges and agrees that it
has, independently and without reliance upon Agent or any other Lenders, and
based upon such documents, information and analyses as it has deemed
appropriate, made its own credit analysis of each Obligor and its own decision
to enter into this Agreement and to fund Loans and participate in LC Obligations
hereunder.  Each Lender has made
such inquiries concerning the Loan Documents, the Collateral and each Obligor
as such Lender feels necessary.  Each
Lender further acknowledges and agrees that the other Lenders and Agent have
made no representations or warranties concerning any Obligor, any Collateral or
the legality, validity, sufficiency or enforceability of any Loan Documents or
Obligations.  Each Lender will,
independently and without reliance upon the other Lenders or Agent, and based
upon such financial statements, documents and information as it deems
appropriate at the time, continue to make and rely upon its own credit
decisions in making Loans and participating in LC Obligations, and in taking or
refraining from any action under any Loan Documents.  Except for notices, reports and other
information expressly requested by a Lender, Agent shall have no duty or
responsibility to provide any Lender with any notices, reports or certificates
furnished to Agent by any Obligor or any credit or other information concerning
the affairs, financial condition, business or Properties of any Obligor (or any
of its Affiliates) which may come into possession of Agent or any of Agent’s
Affiliates.


 


12.10.              Replacement of Certain Lenders; Administrative Agent.


 


12.10.1.                         Replacement of Certain
Lenders.  If a Lender (a) is a
Defaulting Lender, or (b) fails to give its consent to any amendment,
waiver or action for which consent of all Lenders was required and Required
Lenders consented, then, in addition to any other rights and remedies that any
Person may have, Agent may, by notice to such Lender within 180 days after such
event, require such Lender to assign all of its rights and obligations under
the Loan Documents to Eligible Assignee(s) specified by Agent, pursuant to
appropriate Assignment and Assumption(s) and within 20 days after Agent’s
notice.  Agent is irrevocably appointed
as attorney-in-fact to execute any such Assignment and Assumption if the Lender
fails to execute same.  Such Lender shall
be entitled to receive, in cash, concurrently with such


 


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assignment, all amounts owed to it under the Loan Documents, including
all principal, interest and fees through the date of assignment (but excluding
any prepayment charge).


 


12.10.2.                         Replacement of Agent.  Anything herein to the contrary
notwithstanding, if at any time the Required Lenders determine that the Person
serving as Agent (a) is the subject of an Insolvency Proceeding, (b) has
failed in its capacity as a Lender, to make loans to any Borrower as required
hereunder, and such failure is not cured within one Business Day, or (c) has
failed, in its capacity as Agent, to give effect to and implement any
amendment, waiver or action for which consent of Required Lenders was required
and Required Lenders (other than Agent, in its capacity as a Lender) consented,
then the Required Lenders may by notice to the Borrowers and such Person remove
such Person as Agent and, in consultation with the Borrowers, appoint a
replacement Agent in accordance with Section 12.8.1.  Such removal will, to the fullest extent
permitted by applicable law, be effective on the earlier of (i) the date a
replacement Agent is appointed and (ii) the date 30 days after the giving
of such notice by the Required Lenders (regardless of whether a replacement
Agent has been appointed).


 


12.11.              Remittance
of Payments and Collections.


 


12.11.1.                         Remittances Generally.  All payments by any Lender to Agent shall be
made by the time and on the day set forth in this Agreement, in immediately
available funds.  If no time for payment
is specified or if payment is due on
demand by Agent and request for payment is made by Agent by 11:00 a.m.
(Boston local time)  on a Business Day, payment shall be made by Lender
not later than 2:00 p.m. (Boston local time)  on such day, and if
request is made after 11:00 a.m. (Boston local time), then payment shall
be made by 11:00 a.m. (Boston local time) on the next Business Day.  Payment by Agent to any Lender shall be made
by wire transfer, in the type of funds received by Agent.  Any such payment shall be subject to Agent’s
right of offset for any amounts due from such Lender under the Loan Documents.


 


12.11.2.                         Failure to Pay.  If any Lender fails to pay any amount when
due by it to Agent pursuant to the terms hereof, such amount shall bear
interest from the due date until paid at the rate determined by Agent as
customary in the banking industry for interbank compensation.  In no event shall Borrowers be entitled to
receive credit for any interest paid by a Lender to Agent, nor shall any
Defaulting Lender be entitled to interest on any amounts held by Agent pursuant
to Section 4.2.


 


12.11.3.                         Recovery of Payments.  If Agent pays any amount to a Lender in the
expectation that a related payment will be received by Agent from an Obligor
and such related payment is not received, then Agent may recover such amount
from each Lender that received it.  If
Agent determines at any time that an amount received under any Loan Document
must be returned to an Obligor or paid to any other Person pursuant to
Applicable Law or otherwise, then, notwithstanding any other term of any Loan
Document, Agent shall not be required to distribute such amount to any
Lender.  If any amounts received and
applied by Agent to any Obligations are later required to be returned by Agent
pursuant to Applicable Law, each Lender shall pay to Agent, on demand, such Lender’s Pro Rata share of the amounts
required to be returned.


 


12.12.              Agent in its Individual Capacity.  As a Lender, Bank of America shall have the
same rights and remedies under the other Loan Documents as any other Lender,
and the terms “Lenders,” “Required Lenders” or any similar term shall include
Bank of America in its capacity as a Lender. 
Each of Bank of America and its Affiliates may accept deposits from,
maintain deposits or credit balances for, invest in, lend money to, provide
Bank Products to, act as trustee under indentures of, serve as financial or
other advisor to, and generally engage in any kind of business with, Obligors
and their Affiliates, as if Bank of America were any other bank, without any
duty to account therefor (including any fees or other consideration received in
connection therewith) to the other Lenders. 
In their individual capacity, Bank of America and its Affiliates may
receive information regarding Obligors, their Affiliates and their Account
Debtors (including information subject to confidentiality obligations), and
each Lender agrees


 


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that Bank of America and its Affiliates shall be under no obligation to
provide such information to Lenders, if acquired in such individual capacity
and not as Agent hereunder.


 


12.13.              Agent Titles.  Each
Lender, other than Bank of America, that is designated (on the cover page of
this Agreement or otherwise) by Bank of America as an “Agent” or “Arranger” of
any type shall not have any right, power, responsibility or duty under any Loan
Documents other than those applicable to all Lenders, and shall in no event be
deemed to have any fiduciary relationship with any other Lender.


 


12.14.              No Third Party Beneficiaries.  This Section 12
is an agreement solely among Lenders and Agent, and shall survive Full Payment
of the Obligations.  This Section 12 does not confer any rights
or benefits upon Borrowers or any other Person. 
As between Borrowers and Agent, any action that Agent may take under any
Loan Documents or with respect to any Obligations shall be conclusively
presumed to have been authorized and directed by Lenders.


 


SECTION 13.                     BENEFIT
OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS


 


13.1.                     Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that (a) no Borrower shall have the right
to assign its rights or delegate its obligations hereunder without the prior
written consent of the Agent and each Lender; and (b) no Lender shall have
the right to assign its rights or delegate its obligations or otherwise
transfer any of its rights or obligations hereunder except (i) by way of
participation in accordance with Section 13.2, or (ii) to an assignee in
accordance with the provisions of Section 13.3
(and any other
attempted assignment or transfer by any party hereto shall be null and
void).  Agent may treat the Person which
made any Loan as the owner thereof for all purposes until such Person makes an
assignment in accordance with Section 13.3.  Any authorization or consent of a Lender
shall be conclusive and binding on any subsequent transferee or assignee of
such Lender.


 


13.2.                     Participations.


 


13.2.1.               Permitted
Participants; Effect.  Any Lender
may, in the ordinary course of its business and in accordance with Applicable
Law, at any time sell to a financial institution (“Participant”) a
participating interest in the rights and obligations of such Lender under any
Loan Documents.  Despite any sale by a
Lender of participating interests to a Participant, such Lender’s obligations
under the Loan Documents shall remain unchanged, such Lender shall remain
solely responsible to the other parties hereto for the performance of such obligations,
such Lender shall remain the holder of its Loans and Commitments for all
purposes, all amounts payable by Borrowers shall be determined as if such
Lender had not sold such participating interests, and Borrowers and Agent shall
continue to deal solely and directly with such Lender in connection with the
Loan Documents.  Each Lender shall be
solely responsible for notifying its Participants of any matters under the Loan
Documents, and Agent and the other Lenders shall not have any obligation or liability
to any such Participant.  A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 5.9 unless Borrowers
agree otherwise in writing.


 


13.2.2.               Voting Rights.  Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, waiver or other
modification of any Loan Documents other than that which forgives principal,
interest or fees, reduces the stated interest rate or fees payable with respect
to any Loan or Commitment in which such Participant has an interest, postpones
the Commitment Termination Date or any date fixed for any regularly scheduled
payment of principal, interest or fees on such Loan or Commitment, or releases
any Borrower, Guarantor or substantial portion of the Collateral.


 


13.2.3.               Benefit of Set-Off.  Borrowers agree that if amounts outstanding
under this Agreement are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have a right of set-off in respect of


 


72

















 


its participating interest in amounts owing under this Agreement to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement; provided
that in purchasing such participating interest, such Participant shall be
deemed to have agreed to share with the Lenders the proceeds thereof as
provided in Section 13.4 as fully as if it were a Lender under this
Agreement.


 


13.3.                     Assignments.


 


13.3.1.               Permitted Assignments.  A Lender may, at any time and from time to
time, assign to an Eligible Assignee any of its rights and obligations under
this Agreement and the other Loan Documents; provided, that (a) each
assignment is of a constant, and not a varying, percentage of the transferor
Lender’s rights and obligations under the Loan Documents and, in the case of a
partial assignment, is in a minimum principal amount of $10,000,000 and
integral multiples of $5,000,000 in excess of that amount; (b) except in
the case of an assignment in whole of a Lender’s rights and obligations, the
aggregate amount of the Commitments retained by the transferor Lender is at
least $15,000,000 (unless otherwise agreed by Agent in its discretion); and (c) the
assigning Lender shall deliver to Agent, for its acceptance and recording in
the Register, an Assignment and Assumption with appropriate completions
executed by such Eligible Assignee, such assigning Lender (and in the case of
an Eligible Assignee that is not then a Lender or an Affiliate thereof, by the
Agent).  Nothing herein shall limit the
right of a Lender to pledge or assign any rights under the Loan Documents to (i) any
Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors and any Operating Circular
issued by such Federal Reserve Bank, or (ii) counterparties to swap
agreements relating to any Loans; provided, however, that any payment
by Borrowers to the assigning Lender in respect of any Obligations assigned as
described in this sentence shall satisfy Borrowers’ obligations hereunder to
the extent of such payment, and no such assignment shall release the assigning
Lender from its obligations hereunder.


 


13.3.2.               Effect; Effective Date.  Upon delivery to Agent of an Assignment and
Assumption and a processing fee of $3,500 (unless otherwise agreed by Agent in
its discretion), (i) the assignment shall become effective as specified in
the notice, if it complies with this Section 13.3 and (ii) the Agent shall record
the information contained therein in the Register and give notice of such
assumption and recordation to the Lenders and the Borrowers.  From such effective date, the Eligible
Assignee shall for all purposes be a Lender under the Loan Documents, and shall
have all rights and obligations of a Lender thereunder.  Upon consummation of an assignment, the
transferor Lender, Agent and Borrowers shall make appropriate arrangements for
issuance of replacement and/or new Notes, as applicable.  The transferee Lender shall comply with Section 5.10 and deliver, upon
request, an administrative questionnaire satisfactory to Agent.


 


13.3.3.               Register.  The Agent shall maintain at its address shown
on the signature pages hereof a copy of each Assignment and Assumption
delivered to it and a register (the “Register”) for the recordation of
the names and addresses of the Lenders and the Commitments of, and principal
amounts of the Loans owing to, each Lender from time to time.  The entries in the Register shall be
conclusive, in the absence of manifest error, and the Obligors, the Agent and
the Lenders may treat each Person whose name is recorded in the Register as the
owner of a Loan or other obligation hereunder as the owner thereof for all
purposes of this Agreement and the other Loan Documents, notwithstanding any
notice to the contrary. The Register shall be available for inspection by the
Obligors or any Lender at any reasonable time and from time to time upon
reasonable prior notice.


 


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SECTION 14.                     MISCELLANEOUS


 


14.1.                     Consents,
Amendments and Waivers.


 


14.1.1.               Amendment.  No modification of any Loan Document,
including any extension or amendment of a Loan Document or any waiver of a
Default or Event of Default, shall be effective without the prior written
agreement of the Required Lenders and each Obligor party to such Loan Document;
provided, however, that


 


(a)                                  without the
prior written consent of Agent, no modification shall be effective with respect
to any provision in a Loan Document that relates to any rights, duties or
discretion of Agent;


 


(b)                                 without the
prior written consent of Issuing Bank, no modification shall be effective with
respect to any LC Obligations or Section 2.3;


 


(c)                                  without the
prior written consent of each affected Lender, no modification shall be
effective that would (i) increase the Commitment of such Lender; or (ii) reduce
the amount of, or waive or delay payment of, any principal, interest or fees
payable to such Lender; and


 


(d)                                 without the
prior written consent of all Lenders (except a Defaulting Lender as provided in
Section 4.2), no modification
shall be effective that would (i) extend the Termination Date; (ii) alter
Section 5.6, 7.1 (except to add Collateral) or 14.1.1; (iii) amend the definition of
Borrowing Base (or any defined term used in such definition), Pro Rata or
Required Lenders; (iv) increase any advance rate, or increase total
Commitments; (vi) release Collateral with a book value greater than
$10,000,000 during any calendar year, except as currently contemplated by the
Loan Documents; (vii) release any Obligor from liability for any
Obligations, if such Obligor is Solvent at the time of the release; or (viii) waive
any Event of Default under Section 11.1(n).


 


14.1.2.               Limitations.  The agreement of Borrowers shall not be
necessary to the effectiveness of any modification of a Loan Document that
deals solely with the rights and duties of Lenders, Agent and/or Issuing Bank
as among themselves.  Only the consent of
the parties to the Fee Letter or any agreement relating to a Bank Product shall
be required for any modification of such agreement, and any non-Lender that is
party to a Bank Product agreement shall have no right to participate in any
manner in modification of any other Loan Document.  Any waiver or consent granted by Agent or
Lenders hereunder shall be effective only if in writing and only for the matter
specified.


 


14.1.3.               Payment for Consents.  No Borrower will, directly or indirectly, pay
any remuneration or other thing of value, whether by way of additional
interest, fee or otherwise, to any Lender (in its capacity as a Lender
hereunder) as consideration for agreement by such Lender with any modification
of any Loan Documents, unless such remuneration or value is concurrently paid,
on the same terms, on a Pro Rata basis to all Lenders providing their consent.


 


14.2.                     Indemnity.  EACH
BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS (AS DEFINED HEREIN) THAT
MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING
CLAIMS ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE, AS A RESULT OF, OR
ARISING OUT OF, OR IN ANY WAY RELATED TO OR BY REASON OF, (A) THE
EXECUTION, DELIVERY OR PERFORMANCE OF ANY LOAN DOCUMENT, (B) THE USE OF
PROCEEDS OF THE LOANS, (C) THE GRANT OF ANY LIEN IN ANY PROPERTY OR ASSETS
OF ANY OBLIGOR, (D) THE EXERCISE OF ANY INDEMNITEE’S RIGHTS AND REMEDIES
(INCLUDING FORECLOSURE) UNDER ANY AGREEMENTS CREATING ANY SUCH LIEN, AND
(E) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR
PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY (INCLUDING ANY INVESTIGATION OF, PREPARATION FOR, OR DEFENSE
OF ANY PENDING OR THREATENED CLAIM, INVESTIGATION, LITIGATION OR
PROCEEDING) AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO. 
In no event shall any party to a Loan Document have


 


74

















 


any obligation thereunder to indemnify or hold harmless an Indemnitee
with respect to a Claim that is determined in a final, non-appealable judgment
by a court of competent jurisdiction to result from the gross negligence or
willful misconduct of such Indemnitee.


 


14.3.                     Notices
and Communications.


 


14.3.1.               Notice Address.  Subject to Section 4.1.4,
all notices and other communications by or to a party hereto shall be in
writing and shall be given to any Borrower, at Borrower Agent’s address shown
on the signature pages hereof, and to any other Person at its address
shown on the signature pages hereof (or, in the case of a Person who
becomes a Lender after the Closing Date, at the address shown on its Assignment
and Assumption), or at such other address as a party may hereafter specify by
notice in accordance with this Section 14.3.  Each such notice or other communication shall
be effective only (a) if given by facsimile transmission, when transmitted
to the applicable facsimile number, if confirmation of receipt is received; (b) if
given by mail, three Business Days after deposit in the U.S. mail, with
first-class postage pre-paid, addressed to the applicable address; or (c) if
given by personal delivery, when duly delivered to the notice address with
receipt acknowledged.  Notwithstanding
anything to the contrary in this Section 14.3.1,
no notice to Agent pursuant to Section 2.1.4,
2.3, 3.1.2, or 4.1.1
shall be effective until actually received by the individual to whose attention
at Agent such notice is required to be sent. 
Any written notice or other communication that is not sent in conformity
with the foregoing provisions shall nevertheless be effective on the date
actually received by the noticed party. 
Any notice received by Borrower Agent shall be deemed received by all Borrowers.


 


14.3.2.               Electronic
Communications; Voice Mail.  Electronic mail and internet websites may be
used only for routine communications, such as financial statements, Borrowing
Base Certificates and other information required by Section 10.1.2,
administrative matters, distribution of Loan Documents for execution, and
matters permitted under Section 4.1.4.  Agent and Lenders make no assurances as to
the privacy and security of electronic communications.  Electronic and voice mail may not be used as
effective notice under the Loan Documents.


 


14.3.3.               Non-Conforming
Communications.  Agent and
Lenders may rely upon any notices purportedly given by or on behalf of any
Borrower even if such notices were not made in a manner specified herein, were
incomplete or were not confirmed, or if the terms thereof, as understood by the
recipient, varied from a later confirmation. 
Each Borrower shall indemnify and hold harmless each Indemnitee from any
liabilities, losses, costs and expenses arising from any telephonic communication
given by or on behalf of a Borrower.


 


14.4.                     Performance of Borrowers’ Obligations.  Agent may, in its discretion at
any time and from time to time, at Borrowers’ expense, pay any amount or do any
act required of a Borrower under any Loan Documents or otherwise lawfully
requested by Agent to (a) enforce any Loan Documents or collect any
Obligations; (b) protect, insure, maintain or realize upon any Collateral;
or (c) defend or maintain the validity or priority of Agent’s Liens in any
Collateral, including any payment of a judgment, insurance premium, warehouse
charge, finishing or processing charge, or landlord claim, or any discharge of
a Lien.  All payments, costs and expenses
(including Extraordinary Expenses) of Agent under this Section shall be
reimbursed to Agent by Borrowers, on demand, with
interest from the date incurred to the date of payment thereof at the Default
Rate applicable to Base Rate Loans.  Any
payment made or action taken by Agent under this Section shall be without
prejudice to any right to assert an Event of Default or to exercise any other
rights or remedies under the Loan Documents.


 


14.5.                     Credit Inquiries.  Each Borrower hereby authorizes Agent and
Lenders (but they shall have no obligation) to respond to usual and customary
credit inquiries from third parties concerning any Borrower or Subsidiary.


 


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14.6.       Severability.  Wherever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be valid under Applicable
Law.  If any provision is found to be
invalid under Applicable Law, it shall be ineffective only to the extent of
such invalidity and the remaining provisions of the Loan Documents shall remain
in full force and effect.


 


14.7.       Cumulative
Effect; Conflict of Terms.  The provisions of the Loan Documents are
cumulative.  The parties acknowledge that
the Loan Documents may use several limitations, tests or measurements to
regulate similar matters, and they agree that these are cumulative and that
each must be performed as provided. 
Except as otherwise provided in another Loan Document (by specific
reference to the applicable provision of this Agreement), if any provision
contained herein is in direct conflict with any provision in another Loan
Document, the provision herein shall govern and control.


 


14.8.       Counterparts.  Any Loan Document may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract.  This Agreement shall become effective when
Agent has received counterparts bearing the signatures of all parties
hereto.  Delivery of a signature page of
any Loan Document by telecopy or other electronic means shall be effective as
delivery of a manually executed counterpart of such agreement.


 


14.9.       Entire
Agreement.  Time is of
the essence of the Loan Documents.  The
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof, and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.


 


14.10.     Relationship
with Lenders.  The
obligations of each Lender hereunder are several, and no Lender shall be
responsible for the obligations or Commitments of any other Lender.  Amounts payable hereunder to each Lender
shall be a separate and independent debt. 
It shall not be necessary for Agent or any other Lender to be joined as
an additional party in any proceeding for such purposes.  Nothing in this Agreement and no action of
Agent or Lenders pursuant to the Loan Documents shall be deemed to constitute
Agent and Lenders to be a partnership, association, joint venture or any other
kind of entity, nor to constitute control of any Borrower.


 


14.11.     No
Advisory or Fiduciary Responsibility.  In connection with all aspects of each
transaction contemplated by any Loan Document, Borrowers acknowledge and agree
that (a)(i) this credit facility and any related arranging or other
services by Agent, any Lender, any of their Affiliates or any arranger are arm’s-length
commercial transactions between Borrowers and such Person; (ii) Borrowers
have consulted their own legal, accounting, regulatory and tax advisors to the
extent they have deemed appropriate; and (iii) Borrowers are capable of
evaluating and understanding, and do understand and accept, the terms, risks
and conditions of the transactions contemplated by the Loan Documents; (b) each
of Agent, Lenders, their Affiliates and any arranger is and has been acting
solely as a principal in connection with this credit facility, is not the
financial advisor, agent or fiduciary for Borrowers, any of their Affiliates or
any other Person, and has no obligation with respect to the transactions
contemplated by the Loan Documents except as expressly set forth therein; and (c) Agent,
Lenders, their Affiliates and any arranger may be engaged in a broad range of
transactions that involve interests that differ from those of Borrowers and
their Affiliates, and have no obligation to disclose any of such interests to
Borrowers or their Affiliates.  To the
fullest extent permitted by Applicable Law, each Borrower hereby waives and
releases any claims that it may have against Agent, Lenders, their Affiliates
and any arranger with respect to any breach or alleged breach of agency or
fiduciary duty in connection with any aspect of any transaction contemplated by
a Loan Document.


 


14.12.     Confidentiality.  Each of Agent, Lenders and Issuing Bank
agrees to maintain the confidentiality of all Information (as defined below),
except that Information may be disclosed (a) to its Affiliates, and to its
and their partners, directors, officers, employees, agents, advisors and
representatives (provided such Persons are informed of the confidential nature
of the Information and instructed to keep it


 


76

















 


confidential);
(b) to the extent requested by any governmental, regulatory or
self-regulatory authority purporting to have jurisdiction over it or its
Affiliates; (c) to the extent required by Applicable Law or by any
subpoena or other legal process; (d) to any other party hereto; (e) in
connection with any action or proceeding, or other exercise of rights or
remedies, relating to any Loan Documents or Obligations; (f) subject to an
agreement containing provisions substantially the same as this Section, to any
Transferee or any actual or prospective party (or its advisors) to any Bank
Product; (g) with the consent of Borrower Agent; or (h) to the extent
such Information (i) becomes publicly available other than as a result of
a breach of this Section or (ii) is available to Agent, any Lender, Issuing
Bank or any of their Affiliates on a nonconfidential basis from a source other
than Borrowers.  Notwithstanding the
foregoing, Agent and Lenders, will not, without the written consent of Borrower
Agent, publish or disseminate general information describing this credit
facility, including the names and addresses of Borrowers and a general
description of Borrowers’ businesses, or use Borrowers’ logos, trademarks or
product photographs in advertising materials. 
As used herein, “Information” means all information received from
an Obligor or Subsidiary relating to it or its business that is identified as
confidential when delivered.  Any Person
required to maintain the confidentiality of Information pursuant to this Section shall
be deemed to have complied if it exercises the same degree of care that it
accords its own confidential information. 
Each of Agent, Lenders and Issuing Bank acknowledges that (i) Information
may include material non-public information concerning an Obligor or
Subsidiary; (ii) it has developed compliance procedures regarding the use
of material non-public information; and (iii) it will handle such material
non-public information in accordance with Applicable Law, including federal and
state securities laws.


 


14.13.     Certifications
Regarding Indentures.  Borrowers
certify to Agent and Lenders that neither the execution or performance of the
Loan Documents nor the incurrence of any Obligations by Borrowers violates the
Senior Notes Indenture, including, without limitation, Section 4.7 thereof.  Borrowers further certify that the
Commitments and Obligations constitute permitted indebtedness under Section 4.7(c) of
the Senior Notes Indenture.  Agent may
condition Borrowings, Letters of Credit and other credit accommodations under
the Loan Documents from time to time upon Agent’s receipt of evidence that the
Commitments and Obligations continue to constitute permitted indebtedness under
the Senior Notes Indenture at such time.


 


14.14.     GOVERNING LAW.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS,
UNLESS OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT
GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).


 


14.15.     Consent to Forum.  EACH
BORROWER HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR
STATE COURT SITTING IN OR WITH JURISDICTION OVER THE COMMONWEALTH OF
MASSACHUSETTS, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY WAY TO ANY
LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY IT
SOLELY IN ANY SUCH COURT.  EACH BORROWER
IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE
REGARDING SUCH COURT’S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR
INCONVENIENT FORUM.  EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES
IN SECTION 14.3.1. 
Nothing herein shall limit the right of Agent or any Lender to bring
proceedings against any Obligor in any other court, nor limit the right of any
party to serve process in any other manner permitted by Applicable Law.  Nothing in this Agreement shall be deemed to
preclude enforcement by Agent of any judgment or order obtained in any forum or
jurisdiction.


 


14.16.     Waivers by Borrowers.  To the fullest extent permitted
by Applicable Law, each Borrower waives (a) the right to trial by jury
(which Agent and each Lender hereby also waives) in any proceeding or dispute
of any kind relating in any way to any Loan Documents, Obligations or


 


77

















 


Collateral;
(b) presentment, demand, protest, notice of presentment, default,
non-payment, maturity, release, compromise, settlement, extension or renewal of
any commercial paper, accounts, documents, instruments, chattel paper and guaranties
at any time held by Agent on which a Borrower may in any way be liable, and
hereby ratifies anything Agent may do in this regard; (c) notice prior to
taking possession or control of any Collateral; (d) any bond or security
that might be required by a court prior to allowing Agent to exercise any
rights or remedies; (e) the benefit of all valuation, appraisement and
exemption laws; (f) any claim against Agent or any Lender, on any theory
of liability, for special, indirect, consequential, exemplary or punitive
damages (as opposed to direct or actual damages) in any way relating to any
Enforcement Action, Obligations, Loan Documents or transactions relating
thereto; and (g) notice of acceptance hereof.  Each Borrower acknowledges that
the foregoing waivers are a material inducement to Agent and Lenders entering
into this Agreement and that Agent and Lenders are relying upon the foregoing
in their dealings with Borrowers.  Each
Borrower has reviewed the foregoing waivers with its legal counsel and has knowingly
and voluntarily waived its jury trial and other rights following consultation
with legal counsel.  In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.


 


14.17.     Patriot
Act Notice.  Agent and Lenders hereby notify Borrowers
that pursuant to the requirements of the Patriot Act, Agent and Lenders are
required to obtain, verify and record information that identifies each
Borrower, including its legal name, address, tax ID number and other
information that will allow Agent and Lenders to identify it in accordance with
the Patriot Act.  Agent and Lenders will
also require information regarding each personal guarantor, if any, and may
require information regarding Borrowers’ management and owners, such as legal
name, address, social security number and date of birth.


 


[Remainder
of page intentionally left blank; signatures begin on following page]


 


78

















 


IN WITNESS
WHEREOF, this Agreement has been executed and delivered as
of the date set forth above.


 


	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  CONN-SELMER, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  
	
   

  	
  Name: 

  	
  Dennis M. Hanson

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  600 Industrial Parkway

  
	
   

  	
   

  	
  Elkhart, IN 46516

  
	
   

  	
   

  	
  Attn: Mary Ann Erwin

  
	
   

  	
   

  	
  Facsimile: (574) 295-5405

  
	
   

  	
   

  	
   

  
	
   

  	
  For purposes of notice,
  send a copy to:

  
	
   

  	
   

  
	
   

  	
   

  	
  800 South Street,
  Suite 305

  
	
   

  	
   

  	
  Waltham, MA 02453

  
	
   

  	
   

  	
  Attn: Dennis Hanson

  
	
   

  	
   

  	
  Facsimile: (781) 894-9803

  
	
   

  	
   

  
	
   

  	
  STEINWAY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  
	
   

  	
  Name: 

  	
  Dennis M. Hanson

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  One Steinway Place

  
	
   

  	
   

  	
  Long Island City, NY 11105

  
	
   

  	
   

  	
  Attn: John DiSalvo

  
	
   

  	
   

  	
  Facsimile: (718) 267-3345

  
	
   

  	
   

  
	
   

  	
  For purposes of notice,
  send a copy to:

  
	
   

  	
   

  
	
   

  	
   

  	
  800 South Street,
  Suite 305

  
	
   

  	
   

  	
  Waltham, MA 02453

  
	
   

  	
   

  	
  Attn: Dennis Hanson

  
	
   

  	
   

  	
  Facsimile: (781) 894-9803

  
				



 


[ SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT ]


 

















 


	
   

  	
  AGENT AND LENDERS:

  
	
   

  	
   

  
	
   

  	
  BANK OF
  AMERICA, N.A.,

  
	
   

  	
  as Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher M. O’Halloran

  
	
   

  	
  Name: Christopher M. O’Halloran

  
	
   

  	
  Title: Senior Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  225 Franklin Street

  
	
   

  	
   

  	
  MA1-225-02-05

  
	
   

  	
   

  	
  Boston, MA 02110

  
	
   

  	
   

  	
  Attn: Christopher M.
  O’Halloran

  
	
   

  	
   

  	
  Facsimile: (312) 453-6319

  
	
   

  	
   

  
	
   

  	
  HARRIS
  N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Scolaro

  
	
   

  	
  Name: Michael Scolaro

  
	
   

  	
  Title: Managing Director

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  111 W. Monroe Street

  
	
   

  	
   

  	
  20th Floor East

  
	
   

  	
   

  	
  Chicago, IL 60603

  
	
   

  	
   

  	
  Attn: Anjanette D. Winners

  
	
   

  	
   

  	
  Facsimile: (312) 765-1641

  
	
   

  	
   

  
	
   

  	
  WELLS
  FARGO BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert Storer

  
	
   

  	
  Name: Robert Storer

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  101 Federal Street, Suite 2020

  
	
   

  	
   

  	
  Boston, MA 02110

  
	
   

  	
   

  	
  Attn: Robert Storer

  
	
   

  	
   

  	
  Facsimile: (617) 723-0647

  
				



 


[ SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT ]


 

















 


EXHIBIT A


to


Loan
and Security Agreement


 


NOTE


 




	
  [Date]

  	
   

  	
  $

  	
   

  	
  [City,
  State of Governing Law]

  






 


CONN-SELMER, INC., a Delaware corporation, and STEINWAY, INC.,
a Delaware corporation (collectively, “Borrowers”), for value
received, hereby unconditionally promise to pay, on a joint and several basis,
to the order of
                                                        
(“Lender”), the principal sum of
                                                        
DOLLARS
($                      ),
or such lesser amount as may be advanced by Lender as Loans and owing as LC
Obligations from time to time under the Loan Agreement described below,
together with all accrued and unpaid interest thereon.  Terms are used herein as defined in the Loan
and Security Agreement dated as of                     ,
20    , among Borrowers, Bank of America, N.A., as Agent,
Lender, and certain other financial institutions, as such agreement may be
amended, modified, renewed or extended from time to time (“Loan Agreement”).


 


Principal
of and interest on this Note from time to time outstanding shall be due and
payable as provided in the Loan Agreement. 
This Note is issued pursuant to and evidences Loans and LC Obligations
under the Loan Agreement, to which reference is made for a statement of the
rights and obligations of Lender and the duties and obligations of
Borrowers.  The Loan Agreement contains
provisions for acceleration of the maturity of this Note upon the happening of
certain stated events, and for the borrowing, prepayment and reborrowing of amounts
upon specified terms and conditions.


 


The holder of this Note is
hereby authorized by Borrowers to record on a schedule annexed to this Note (or
on a supplemental schedule) the amounts owing with respect to Loans and LC
Obligations, and the payment thereof. 
Failure to make any notation, however, shall not affect the rights of
the holder of this Note or any obligations of Borrowers hereunder or under any
other Loan Documents.


 


Time is of the essence of
this Note.  Each Borrower and all
endorsers, sureties and guarantors of this Note hereby severally waive demand,
presentment for payment, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, diligence in collecting, the bringing of
any suit against any party, and any notice of or defense on account of any extensions,
renewals, partial payments, or changes in any manner of or in this Note or in
any of its terms, provisions and covenants, or any releases or substitutions of
any security, or any delay, indulgence or other act of any trustee or any
holder hereof, whether before or after maturity.  Borrowers jointly and severally agree to pay,
and to save the holder of this Note harmless against, any liability for the
payment of all costs and expenses (including without limitation reasonable
attorneys’ fees) if this Note is collected by or through an attorney-at-law.


 


In no contingency or event
whatsoever shall the amount paid or agreed to be paid to the holder of this
Note for the use, forbearance or detention of money advanced hereunder exceed
the highest lawful rate permitted under Applicable Law.  If any such excess amount is inadvertently
paid by Borrowers or inadvertently received by the holder of this Note, such
excess shall be returned to Borrowers or credited as a payment of principal, in
accordance with the Loan Agreement.  It
is the intent hereof that Borrowers not pay or contract to pay, and that the
holder of this Note not receive or contract to receive, directly or indirectly
in any manner whatsoever, interest in excess of that which may be paid by Borrowers
under Applicable Law.


 


This Note shall be governed
by the laws of The Commonwealth of Massachusetts, without giving effect to any
conflict of law principles (but giving effect to federal laws relating to
national banks).


 

















 


IN WITNESS
WHEREOF, this Note is executed as of the date set forth above.


 


 


	
  Attest:

  	
   

  	
  CONN-SELMER, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
  [Seal]

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
  STEINWAY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
  [Seal]

  	
   

  	
   

  	
  Title:

  



 


2

















 


EXHIBIT B


to


Loan
and Security Agreement


 


ASSIGNMENT AND ASSUMPTION


 


Reference is made to the
Loan and Security Agreement dated as of
              ,
20    , as amended (“Loan Agreement”), among CONN-SELMER, INC. and STEINWAY, INC.
(collectively, “Borrowers”), BANK OF
AMERICA, N.A., as agent (“Agent”) for the financial
institutions from time to time party to the Loan Agreement (“Lenders”),
and such Lenders.  Terms are used herein
as defined in the Loan Agreement.


 


(“Assignor”) and
                                                  
                          
(“Assignee”) agree as follows:


 


1.             Assignor hereby assigns to Assignee and Assignee hereby
purchases and assumes from Assignor (a) a principal amount of
$                
of Assignor’s outstanding Loans and
$                      
of Assignor’s participations in LC Obligations, and (b) the amount
of
$                    
of Assignor’s Commitment (which represents
        % of the total Commitments)
(the foregoing items being, collectively, the “Assigned Interest”),
together with an interest in the Loan Documents corresponding to the Assigned
Interest.  This Agreement shall be
effective as of the date (“Effective Date”) indicated in the
corresponding Assignment Notice delivered to Agent, provided such Assignment
Notice is executed by Assignor, Assignee, Agent and Borrower Agent, if
applicable.  From and after the Effective
Date, Assignee hereby expressly assumes, and undertakes to perform, all of
Assignor’s obligations in respect of the Assigned Interest, and all principal,
interest, fees and other amounts which would otherwise be payable to or for
Assignor’s account in respect of the Assigned Interest shall be payable to or
for Assignee’s account, to the extent such amounts accrue on or after the
Effective Date.


 


2.             Assignor (a) represents that as of the date hereof,
prior to giving effect to this assignment, its Commitment is
$                    
and, the outstanding balance of its Loans and participations in LC Obligations
is
$                    ;
(b) makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Loan Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Agreement or any
other instrument or document furnished pursuant thereto, other than that
Assignor is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; and (c) makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of Borrowers or the performance by Borrowers of their
obligations under the Loan Documents.  [Assignor is attaching  the Note[s] held by it and requests that Agent
exchange such Note[s] for new Notes payable to Assignee [and Assignor].]


 


3.             Assignee (a) represents and warrants that it is
legally authorized to enter into this Assignment and Assumption; (b) confirms
that it has received copies of the Loan Agreement and such other Loan Documents
and information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment and Assumption; (c) agrees that
it shall, independently and without reliance upon Assignor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents; (d) confirms that it is an Eligible Assignee; (e) appoints
and authorizes Agent to take such action as agent on its behalf and to exercise
such powers under the Loan Agreement as are delegated to Agent by the terms
thereof, together with such powers as are incidental thereto; (f) agrees
that it will observe and perform all obligations that are required to be
performed by it as a “Lender” under the Loan Documents; and (g) represents
and warrants that the assignment evidenced hereby will not result in a
non-exempt “prohibited transaction” under Section 406 of ERISA.


 

















 


4.             This Agreement shall be governed by the laws of The
Commonwealth of Massachusetts.  If any provision is
found to be invalid under Applicable Law, it shall be ineffective only to the
extent of such invalidity and the remaining provisions of this Agreement shall
remain in full force and effect.


 


5.             Each notice or other communication hereunder shall be in
writing, shall be sent by messenger, by telecopy or facsimile transmission, or
by first-class mail, shall be deemed given when sent and shall be sent as
follows:


 


(a)                                 If to Assignee,
to the following address (or to such other address as Assignee may designate
from time to time):


 


 


(b)                                 If to Assignor,
to the following address (or to such other address as Assignor may designate
from time to time):


 


 


Payments hereunder shall be
made by wire transfer of immediately available Dollars as follows:


 


If to Assignee, to the
following account (or to such other account as Assignee may designate from time
to time):


 


	
   

  
	
   

  
	
  ABA No.

  
	
   

  
	
  Account No.

  
	
  Reference:

  



 


If to Assignor, to the
following account (or to such other account as Assignor may designate from time
to time):


 


	
   

  
	
   

  
	
  ABA No.

  
	
   

  
	
  Account No.

  
	
  Reference:

  



 


2

















 


IN WITNESS
WHEREOF, this Assignment and Assumption is executed as of
                          .


 


 


	
   

  	
   

  
	
   

  	
  (“Assignee”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (“Assignor”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  



 


3
















 


EXHIBIT C


to


Loan
and Security Agreement


 


ASSIGNMENT NOTICE


 


Reference is made to (1) the
Loan and Security Agreement dated as of
              ,
20    , as amended (“Loan Agreement”), among CONN-SELMER, INC. and STEINWAY, INC.
(collectively, “Borrowers”), BANK OF
AMERICA, N.A., as agent (“Agent”) for the financial
institutions from time to time party to the Loan Agreement (“Lenders”),
and such Lenders; and (2) the Assignment and Assumption dated as of
                        ,
20     (“Assignment Agreement”), between
                                    
(“Assignor”) and
                                        
(“Assignee”).  Terms are used
herein as defined in the Loan Agreement.


 


Assignor hereby notifies
Borrowers and Agent of Assignor’s intent to assign to Assignee pursuant to the
Assignment Agreement (a) a principal amount of
$                
of Assignor’s outstanding Loans and
$                      
of Assignor’s participations in LC Obligations, and (b) the amount
of
$                    
of Assignor’s Commitment (which represents
        % of the total Commitments)
(the foregoing items being, collectively, the “Assigned Interest”),
together with an interest in the Loan Documents corresponding to the Assigned
Interest.  This Agreement shall be
effective as of the date (“Effective Date”) indicated below, provided
this Assignment Notice is executed by Assignor, Assignee, Agent and Borrower
Agent, if applicable.  Pursuant to the
Assignment Agreement, Assignee has expressly assumed all of Assignor’s obligations
under the Loan Agreement to the extent of the Assigned Interest, as of the
Effective Date.


 


For purposes of the Loan
Agreement, Agent shall deem Assignor’s Commitment to be reduced by
$                  ,
and Assignee’s Commitment to be increased by $                  .


 


The address of Assignee to
which notices and information are to be sent under the terms of the Loan
Agreement is:


 


 


The address of Assignee to
which payments are to be sent under the terms of the Loan Agreement is shown in
the Assignment and Assumption.


 


This Notice is being
delivered to Borrowers and Agent pursuant to Section 13.3
of the Loan Agreement.  Please
acknowledge your acceptance of this Notice by executing and returning to
Assignee and Assignor a copy of this Notice.


 


IN WITNESS
WHEREOF, this Assignment Notice is executed as of
                          .


 


	
   

  	
   

  
	
   

  	
  (“Assignee”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  



 

















 


	
   

  	
   

  
	
   

  	
  (“Assignor”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  



 


ACKNOWLEDGED AND AGREED,


AS OF THE DATE SET FORTH
ABOVE:


 


BORROWER
AGENT:*


 


[CONN-SELMER, INC.]


 


 


	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  



 






* No signature required if
Assignee is a Lender, U.S.-based Affiliate of a Lender or Approved Fund, or if
an Event of Default exists.


 


 


BANK OF
AMERICA, N.A.,


as Agent


 


 


	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  



 


2